Lockheed Martin Corp. 2026 Q3 Earnings Call

Please go ahead. Thank you, Sarah, and good morning.

I'd like to welcome everyone to our third quarter 2026 earnings conference call. Joining me today on the call are Jim Taiclet, our Chairman, President, and Chief Executive Officer, and Evan Scott, our Chief Financial Officer. Statements made today that are not historical fact are considered forward-looking statements and are made pursuant to the safe harbor provisions of federal securities laws. Actual results may differ materially from those projected in the forward-looking statements. Please see Lockheed Martin's SEC filings for a description of some of the factors that may cause actual results to differ materially from those in the forward-looking statements. We've posted slides on our website today that we plan to address during the call to supplement our comments. These slides also include information regarding non-GAAP measures that may be used in today's call.

Please access our website at www.lockheedmartin.com and click on the Investor Relations link to view and follow the slides and see definitions and reconciliations for non-GAAP measures. With that, I'll turn the call over to Jim.

Thank you, Mark. Good morning, everyone. Lockheed Martin delivered another quarter of strong program performance, growing both sales and profit by double digits, reflecting execution to the plan that we previously laid out for you. We generated $3 billion of free cash flow in the quarter and grew our backlog to another record, $292 billion. The momentum in our business is accelerating, giving us confidence to raise our full-year expectations for sales, earnings, and cash again this quarter. Evan will cover the specifics shortly. These results are a product of the investments we made in recent years that are now delivering across our entire portfolio, from autonomous aircraft and next-generation air dominance to homeland missile defense, hypersonics, and the command and control that connects it all.

We are innovating faster with the best technologies available, providing integrated capabilities across every domain to answer a defense sector demand that appears permanent, resulting in a business that is resilient through any budget cycle. Munitions are a major part of that story, but they are far from the only engine of our growth. I also want to start by acknowledging the recent F-35 multi-year announcement, which cements its role as the free world's key front-line fighter for years ahead, and again, a continuing growth engine for Lockheed Martin. This agreement solidifies the path to 850 U.S. aircraft over a 10-year span, which will be further augmented by sales to our allies, achieving a total production at 156 aircraft per year for 10 years. This landmark agreement also enables sustainment and future development to be more effective and efficient for our customers.

Staying ahead of the threat has always been our mission, and today, we are doing it faster than ever. Over the last couple of quarters, I have explained how we are transforming Lockheed Martin, and this quarter proved it again as our increased speed of innovation showed up in every part of our business. At Skunk Works, the Vectis team went from first drawing to wind tunnel testing in under 2 months, released the first production part in 8 months, and have flight demonstrations scheduled for next year. This progress gave me confidence to green-light an increase, and now we will build five Vectis aircraft with our own investment. That puts us in position to offer a proven, production-ready autonomous aircraft as our customers define their future requirements.

At MFC, our Precision Strike Missile Increment 2 went from flight tests in March and August to a $1.2 billion production contract within the same year. That compresses what has traditionally been a multi-year path from testing to production, getting a new maritime strike capability to the Army sooner and allowing the value of our development work to be realized years earlier than normal. This production award further builds on the Department of War's broader investment in quadrupling PrSM production. Our space team recently completed a key solid rocket motor test for the Next Generation Interceptor program, keeping that program on track for fielding by 2030, strengthening the homeland missile defense, and advancing a program essential to the nation's future.

At RIMPAC, an exercise in the Pacific, our RMS team and Saildrone went from concept to a live-fire missile launch from an unmanned surface vessel in less than 6 months, putting proven weapons on a commercial autonomous platform and extending Lockheed Martin's capability onto an entirely new class of systems. This commercial mindset throughout our company is changing how we build as well. Partnerships are becoming a key part of how we move faster, and we are extending them all through our supply chain and beyond. GM Defense, for example, delivered its first PAC-3 components to us in under 1 month from the initial contract. That adds capacity at a terrific supplier at a pace our traditional supply base couldn't match on its own, and in helping us deliver more interceptors sooner without an increase in our own capital investment.

Last week, we announced the expansion of our Grand Prairie, Texas, manufacturing footprint to more than 735,000 square feet. The expansion includes additional capability and capacity for automation and digital manufacturing, and will also bring on board a Hadrian highly automated production machine cell to supply components across our missile programs in a manufacturing-as-a-service contract. The discipline that gets capability to our customers faster also strengthens our business. When we shorten the path from development to production, we accelerate the economic return on that work. When we invest ahead of requirements, we enter competitions for the next generation of programs already well-positioned. When we partner with commercial manufacturers and tech companies, we scale in a way that keeps our investment efficient as demand grows. Delivering programs faster is only part of the equation. The greater value comes from how these capabilities work together.

Our platforms are central to Lockheed Martin, but they also form a foundation for the broader role we play, one that may be unmatched in the world, and that is driving interoperability and integration across platforms and domains to give our customers an advantage no single platform can provide on its own. This role builds on decades of mission integration experience, connecting aircraft, missiles, earth and space-based sensors, and command and control into theater-level deterrence across land, sea, air, space, and cyber. It is a very deliberate plan, and the mission technology roadmaps we established several years ago and continue to evolve guide our development ahead of formal requests for proposals. We just don't wait for them anymore. We're not just building product before customers ask for it.

We work alongside them to understand where their missions are headed so that we are ready with complete, proven solutions when they need them. Part of that is recognizing that our customers don't need to choose between exquisite platforms and affordable mass. They need both integrated, so each makes the other one more effective. We can bring them together in a way few others can. Some examples. At Valiant Shield, our RMS team used our software-driven command and control system, powered by CommandIQ, and connecting long-range missiles, integrated air and missile defense, and remote targeting, drawing on commercial sector data and using AI to recommend specific target engagements. The RMS team is building on that work in Guam, where we developed an AI-enabled battle management prototype for the Guam defense system.

We were selected by the Missile Defense Agency to move its missile defense modeling and simulation to the cloud. In Australia, we were awarded an $800 million contract for the next tranche of AIR 6500, which is its joint air battle management system, demonstrating that our integration expertise is in demand from our allies as well. This is what it means to be the premier defense technology company, delivering proven platforms that work alongside autonomous systems enabled by AI and the best commercial technologies available. Lockheed Martin's depth of experience innovating and integrating these capabilities sets us apart. Speed gets capability into the field sooner, and integration makes it much more effective. Deterrence from conflict also depends on having it at scale. Nowhere do these demands converge more than in munitions, and that is where our operating model is actually moving the fastest.

Our munitions business is transforming to deliver at wartime speed and scale. That shift now extends beyond interceptors into air dominance. This quarter, we signed a framework agreement with the Department of War to accelerate production of the Joint Advanced Tactical Missile, our next-generation air dominance missile. Known as JATM, this is the product of years of collaboration with the Air Force and the Navy and the kind of long-term commitment that takes time to show its full value and enables us to further accelerate production ahead of a multi-year contract, so there is no delay when the contract is signed. Australia has already committed to become this program's first international customer, an early sign of demand that broadens the program's long-term opportunity and strengthens the case for the capacity we are building today. Our interceptor franchises are scaling just as quickly.