LOCKHEED MARTIN CORP Q3 FY2024 earnings call

• Demand for Lockheed Martin systems and services remains robust across all business areas, with a record backlog of over $165 billion and a book-to-bill ratio of 1.3 in Q3. • Delivered 48 F-35 aircraft in Q3, expect to deliver 90 - 110 in 2024. TR-3 flight testing has 95% of combat capabilities validated. • Investing heavily in autonomy, AI, and other digital technologies. For example, Lockheed Martin AI Center and RMS conducted teaming scenarios with uncrewed systems. • Signed a teaming agreement with General Dynamics for production of solid rocket motors, starting in 2025 at GD's facility in Arkansas. • Expanded international collaborations for indigenous military capability development in countries like Australia, Germany, Poland, and India.

Aeronautics: Third quarter sales declined 3% year-over-year, primarily due to lower F-35 volume. Segment operating profit decreased 2%. Missiles & Fire Control: Sales up 8% year-over-year, driven by production ramps on precision fires programs. Segment operating profit increased 15%, margins at 14.4%. Rotary & Mission Systems: Sales increased 6% to $4.4 billion, operating profit comparable to prior year. Space: Sales decreased slightly year-over-year, operating profit increased 5% compared to Q3 2023.

• Estimates sales of approximately $71.25 billion for 2024, reflecting 5% growth over 2023. • Increase segment operating profit expectation to approximately $7.475 billion. • Increase earnings per share forecast by $0.30 to approximately $26.65. • Estimate free cash flow of approximately $6.2 billion for 2024. • Expect F-35 Lot 18-19 to be awarded this year. Anticipate $325 million of full-year losses on MFC classified program. No pension contribution assumed in 2024.

• Delay in F-35 Lot 18-19 negotiations could shift about 3% or $2 billion of sales into 2025 with associated impacts to profit and free cash flow. • Uncertainty regarding the recognition of additional losses in the MFC classified program. • Uncertainty in offsetting pension contribution headwinds through working capital reductions alone.

Q: Circling back on tactical fighter world, how is Lockheed thinking about Increment 2 of CCA and interplay between man and unmanned systems?

A: James Taiclet said they are preserving optionality, investing in autonomy, AI, etc., and Skunk Works is working on both parent and child aspects of CCA. Jay Malave added the multiyear outlook accounts for investment in such areas.

Q: On MFC margin, do last two quarters suggest better operating performance or is it accounting volatility?

A: Jay Malave said MFC's performance is better than prior year excluding classified program losses, with profit adjustments showing growth. Accounting is based on assessment of facts and circumstances and probability, with 2025 baseline assumption of losses between $250 million to $300 million.

Q: On CCA autonomy and ARRW classified contract, update?

A: James Taiclet said they are investing in autonomy, AI, etc., and can't detail CCA competition. Jay Malave said ARRW is a classified program with incremental risk, meeting scheduled objectives but at higher cost due to aggressive pricing.