Lockheed Martin at Bank of America Conference: Strategic Growth and Innovation

On Wednesday, 14 May 2025, Lockheed Martin (NYSE:LMT) participated in the Bank of America Industrials, Transportation & Airlines Key Leaders Conference. The discussion, led by CFO Evan Scott, highlighted the company’s strategic focus on international growth, innovation, and cost management, while acknowledging challenges in certain business segments.

Key Takeaways

• Lockheed Martin anticipates international growth to surpass domestic growth, driven by increasing international budgets.
• The company is integrating new entrants in the defense industry as partners and competitors, adapting to commercial terms contracting.
• The F-35 program remains a priority, with upgrades planned to enhance capabilities cost-effectively.
• OneLMX, a digital transformation initiative, aims to boost efficiency and collaboration across business areas.
• Supply chain resiliency and tariff management are critical focuses amid global uncertainties.

Financial Results

• International Growth: Expected to outpace domestic growth, with a significant international backlog.
• F-35 Production and Deliveries: Continuation of a 156 yearly production rate, with deliveries expected between 170 to 190 units.
• Backlog: Includes 361 jets, with an additional 50 expected from Lot 19.
• OneLMX Investment: A multiyear vision with substantial investment to enhance digital operations.

Operational Updates

• International Markets: Growth observed in the Middle East, Europe, and Asia, with the Middle East leading.
• Golden Dome Project: Preparing for increased demand with anticipated formal requests for proposals.
• Missiles and Fire Control (MFC): Fastest growing segment, scaling production lines.
• Sikorsky: Watching the impact of Army realignment, with international demand growth.
• Space Sector: Challenges in Civil Space, but growth potential in military satellite and missile defense.

Future Outlook

• F-35 Upgrades: Aiming for 80% of sixth-generation capabilities at 50% of the cost.
• OneLMX Development: Focus on accelerating design to production speed and enhancing digital environments.
• Software as a Service: Preparing for market trends that separate hardware and software sales.

Q&A Highlights

• Budget Environment: Alignment with administration priorities and international budget strength.
• Golden Dome Strategy: Thoughtful customer approach with layered strategies.
• Commercial Terms Contracting: Welcomed for enabling faster partnerships.
• Army Realignment Impact: Monitoring effects on Sikorsky operations.
• NGI Capabilities: Positive customer feedback, exploring acceleration opportunities.

Lockheed Martin’s strategic focus on international expansion, innovation, and cost efficiency positions it well in a dynamic global market. For more detailed insights, refer to the full conference call transcript.

Full transcript - Bank of America Industrials, Transportation & Airlines Key Leaders Conference 2025:

Unidentified speaker, Interviewer: Morning. Our next session is with Evan Scott, the the chief financial officer of Lockheed Martin. So, Evan, thank you.

Evan Scott, Chief Financial Officer, Lockheed Martin: Yeah. Thanks for having me.

Unidentified speaker, Interviewer: Great to have you here. And I think you have a statement you gotta say first, and then and we can take on with it.

Evan Scott, Chief Financial Officer, Lockheed Martin: I appreciate it. I do. Thank you. So just start now, statements made today that are not historical fact are considered forward looking statements and are made pursuant to the safe harbor provisions of federal security law. Actual results may differ materially from those projected in the forward looking statements.

Please see Lockheed Martin’s SEC filings, including our 2024 form 10 k for description of some of the factors that may cause actual results to differ materially from those in the forward looking statements.

Unidentified speaker, Interviewer: Thank you. Cool. Yeah. Thank you. So it’s great to have you here.

So maybe a place to to start off is how how are you how are you all thinking about the budget environment and reconciliation and and what that what that all means and where where pretty means we’re lucky, where we could be going, that kind of thing.

Evan Scott, Chief Financial Officer, Lockheed Martin: Yeah. We we’ve seen a lot that’s encouraging the budget. I mean, it’s still obviously a fluid environment there, but we do see a lot of the administration’s priorities aligning with our capabilities. And so we’ll continue to watch closely as that progresses. I think given our strong backlog now, the good news for us is as we just continue to execute on our backlog, that continues to be a significant focus for us as we watch the budget environment develop.

And that’s certainly on the domestic side. And then, of course, we see some upward strength on the international budgets as well, which is encouraging.

Unidentified speaker, Interviewer: So maybe as a follow on to that, you know, there’s been, you know, given sort of the global geopolitical environment, some questions around European defense spending flowing to The US. But just in recent days, there’s been a ton of order activity in The Middle East. So what what are broadly your expectations for international for for Lockheed? Maybe even for the industry, but for Lockheed in particular.

Evan Scott, Chief Financial Officer, Lockheed Martin: Yeah. For us, I’d say, you know, we we see internationals growing faster. Both domestic international are considered we we see as growth for us in the the LRP period, but international faster. If you look at as a percentage of backlog, it’s a bigger percentage than our 2024 revenue for international. So we do see some upward strength there.

And probably in all kind of the three major regions, we see growth. Middle East, I think has been seen as our fastest growing area. And I think we’re seeing a lot be optimistic about based on some of the recent events that we’re seeing in the announcements. So it’s looking, I’d say, pretty strong in really Middle East, Europe, and Asia. See a lot of opportunity.

Unidentified speaker, Interviewer: Yeah. How do you and this is another question you you must be bombarded with. How do you think about Golden Dome and what it means and what it could be and that sort of thing?

Evan Scott, Chief Financial Officer, Lockheed Martin: Yeah. So this is one I have a lot of passion for just having worked at a lot in my prior role. And if you think about us culturally, one of the things that really motivates us is supporting our customers’ most important missions. And if you really think about it, there’s nothing more important than protecting the homeland. So as this architecture comes together, we see our customer being very thoughtful about how to proceed.

They’ve they’ve clearly pulse the entire industry on ideas and capabilities, and we, of course, have supported that process. And so they they, of course, will set that architecture, and then I expect it’s gonna move very fast. But if I had to think through what the architecture might look like, I kind of think of it in a series of layers. So you might expect to see a land layer, a sea layer, an air layer, and a space layer, then, of course, you’d want kind of the c two communication system to tie it all together. And so that’s and and the good news for us is we feel like we have very strong offerings in each one of those elements, each one of those layers and the communication tied together.

Because really, when you’re looking at a mission that important, in addition to the capabilities, resilience is typically the name of the game. Right? So you’re gonna want the multifaceted cross domain approach. I think as we anticipate the the formal RFPs to come out, the request for proposals for that as that solidifies, we’re doing some things to be ready. One is, of course, we wanna make sure our production lines are are are ready for that demand and it can scale.

So there’s there’s some smart things we could do on the front end there. There’s also just obviously a lot of dialogue that happens between potential partners, whether they’re new entrants or traditional players, just to make sure that if needed, we can come with a true, you know, American cross industry approach to satisfying this mission.

Unidentified speaker, Interviewer: Gotcha. How do you I mean, just broadly, how do you think about the new entrants? Are they a threat? Are they an opportunity? Or you know, how do you think about it?

Because when I come back to you, I’ll kinda get on my soapbox for a You have the Skunkworks. You guys have done some amazing stuff for a long time period of time that maybe the current environment doesn’t give you credit for. Mhmm. My opinion.

Evan Scott, Chief Financial Officer, Lockheed Martin: That’s kind.

Unidentified speaker, Interviewer: Agree. So how do you think about the new entrants and what they mean to Lockheed and the technical stuff that you guys can bring to the table?

Evan Scott, Chief Financial Officer, Lockheed Martin: Yeah, I think it’s a really important item. So I’ll give you maybe two different perspectives on the way I think about it. One is if if you look back from what Jim has set out with his vision for twenty first century security, if you go back to the original vision statement, it it relies around a concept that we see the threat environment dynamic, but certainly scaling higher. Right? If it’s gonna go any direction, it’s most likely to go higher.

Budgets will will scale as well, but it’s not realistic to think that budgets are gonna be able to scale necessarily at the pace of the threat. And so Jim’s vision is to say that there’s these commercial entrants that come in and bring additional capability. They also bring different sources of funding. So it becomes sort of a capability multiplier that allows the twenty first century security vision to come forward. That that’s the real basis of it.

So my mind, I think Jim foresaw this several years ago. And as these new entrants come in, we see them as being a key part of that overall infrastructure. I mean, they they have to be for to all work. So I I do think though to your point, and and it’s a fair one, there’s also a competitive dynamic that we’re aware of. They they bring a lot of excitement, different ways of doing business.

And so and and I lived this in my time with space a lot, and we we were certainly starting to see it at MFC as well. With these new entrants, there’ll be several. Candidly, some won’t continue to scale. Some will. I think some will be potential partners.

Some could be customers or suppliers, and some will competitors. But what I think is important in that whole equation is that we learn from all of them. I mean, the reality is we can continue to learn. We can continue to learn different models of doing business and innovating. To your point, we have an incredible history of innovation that we’re very proud of that will always be relevant to this nation and our allies.

But if there are new elements we can learn by partnering or observing, we absolutely will do that. And that’s what we intend to do.

Unidentified speaker, Interviewer: So one of the things that we’ve we’ve heard tossed around is, you know, commercial terms contracting and so on and so forth. Can Lockheed do that? I mean, the programs that you work on even viable under those kind of terms? I mean, how how do we think about, you know, prime contractor in a world where there might be a little push towards commercial terms contracting?

Evan Scott, Chief Financial Officer, Lockheed Martin: This is definitely one that continues to evolve as we know. Right? The the far rewrite as as we’re looking at it is continuing to take shape. So on one hand, I’d say it’s very welcoming for for sort of two I’ll say there’s two aspects that are that are very welcoming to us. One is even in our traditional contracts, which to your point wouldn’t typically follow the commercial model, there’s elements there that can be adjusted that unlock some additional speed, right, without any loss of of protection to to the government or the taxpayers that are just probably smart edits to make.

And with the customer really pushing on us appropriately so that says, hey, more capability sooner. What can you do Lockheed Martin? There has been a feedback process that says, these are things you could probably edit to unlock that speed. So the fact that we’re now seeing that come through, I’d say is very encouraging because this is something we we’ve been driving towards. I think it also allows to the point earlier about partnering with commercial entrants.

The far can be seen as intimidating. Right? We have decades and decades of experience navigating it. We have probably some of the best worldwide experts on navigating it. But somebody coming in that we wanna partner with, that may be seen as as less exciting.

So this does allow more partnerships that way as well. To your point specifically about can our products adjust to that model? I I I think depending on how much that model changes. I mean, you could see something very commercial coming, and we think we can evolve towards that. I also think there could be products that we scale that are specifically in that model.

And that might be because we started from scratch based on that, or because we’re developing different business models, whether it’s JVs or ventures that allow for us to fit very neatly into those acquisition models. So this is something also I think we’ve been preparing for for a while and had a a lot of ideas on how to scale it and be effective that way.

Unidentified speaker, Interviewer: Gotcha. Gotcha. And you mentioned JVs. So recently there was an announcement of JV with you guys and Rheinmetall. Can you speak to that a little bit?

And might we see more of that kind of thing going forward, particularly as Europe tries to grow out their industrial base? We do

Evan Scott, Chief Financial Officer, Lockheed Martin: think partnerships are very important part of our strategy. I I think, you know, particularly in Europe right now, we’re looking at potential partners. And when we look at who those players are that are very strong and aligned well with us, just capability wise, culturally wise, And Ryan Mattel is clearly one of those names that stands out. And so, you know, we had we’ve signed an MOU, and we we intend to work together. I think we still have work to go before we’re ready to announce anything kinda more broad than that.

Gotcha. But I’m I’m very excited about the potentials that that that could unlock for us. And, yes, to to your question, I do think you could see more of that as we look at potentially scaling more with international production operations. This gives us not only a way to scale further, but it helps address supply chain resiliency, all things that fit in. And and everything we do here, we do under the the support of our DOD customer.

Nothing like that can happen external without their support.

Unidentified speaker, Interviewer: Gotcha. Gotcha. And maybe maybe changing gears just a little bit, if you can speak to it. There was good momentum in the first quarter. Can you speak to so far what you’re seeing in

Evan Scott, Chief Financial Officer, Lockheed Martin: the second quarter? Sure. Yeah. We’re about halfway through the second quarter, and so one of the things I said in the earnings call is just committing to transparency. So I’ll give you, from my view, kind of the real time latest as we as we continue to look to close in the quarter.

On one hand, at the earnings call, we had talked about f 35 lot 19 being worded in the second half of the year. We actually see that has the potential to accelerate. What our customer is telling us now is to expect Lot 18 and Lot 19 to be combined into a single award. So on the plus side, that accelerates, think of roughly 150 jets of backlog potentially into the second quarter. However, the overall ward now is probably gonna happen later in the second quarter than if lot 18 had been a standalone.

And lot eighteen is a cash liquidation event. So it’s possible that liquidation event falls outside the quarter, putting a little bit of cash pressure on us in second quarter, which we then would come back neutral as pretty early in the third quarter with the expectation, again, lot eighteen and nineteen get awarded this quarter. The other element that I’m I’m tracking very closely is just as we look at through the Arrow classified program, we we are seeing some additional cost pressure there that where we go through a process. There’s particularly a program that complex. The the process takes time.

We wanna be right on it. But I think I’m seeing some some cost pressure that as we know more on that, we’ll we’ll update if we see any changes there.

Unidentified speaker, Interviewer: Gotcha. Gotcha. And can you speak to I mean, how’s missiles and fire control doing? I mean, that has been, you know, gangbusters. I mean, are you you continuing to see that into the second quarter?

Evan Scott, Chief Financial Officer, Lockheed Martin: I do. I continue to see really strong growth at MFC. And of course, we’re scaling across multiple production lines simultaneously. And so, know, the the way our supply chains have typically gone is any one element of that can slow you down. So what we have to do, of course, is have great visibility to that and be able to pivot quickly if we see any disruption in any element of that.

That said, I think we’re doing a great job with that. It continues to scale. It continues to be our fastest growing business area, and the MFC classified program is in really good shape from from everything I’ve seen just this quarter. And, of of course, I worked that very closely in my prior role. And so I think that has stabilized very nicely.

So all in all, I’m feeling very solid about MFC. And, of course, as you look at potential international opportunities, that missile and defense portfolio is is a very strong portfolio for us internationally, and I expect it will continue to be.

Unidentified speaker, Interviewer: Gotcha. Gotcha. And and from a supply chain perspective, how are things going? Maybe maybe starting with missiles and fire control. I know solid rocket boosters have been a challenge for everybody.

You know, how’s that going? And are there any other areas that are positive or maybe challenges?

Evan Scott, Chief Financial Officer, Lockheed Martin: Yeah. It’s I think overall going pretty well. I’ve seen in most all of these areas, our suppliers have partnered with us. So to the point, again, if there’s any one element that’s a slowdown, we we partner you know, typically, you’re gonna see Lockheed Martin people on the ground at those suppliers, which generally they welcome, and we partner, and we work through it very quickly. So I think that has been positive.

As a whole, I think we’ve seen pretty good performance from our suppliers this quarter. And so no major items to to to state today. As that progresses, particularly in ’2 q, if we see any elements on suppliers that are issues, that’s probably something I’ll I’ll state just to give that level of transparency.

Unidentified speaker, Interviewer: Gotcha. Gotcha. Gotcha. And then if if we shift to Sikorsky, how’s how’s that going? And do you expect positive or negative impact from the army realignment?

Right? And the army is kind of reorganizing things. Is that is that good for Sikorsky or not so good for Sikorsky? Is it too soon to tell?

Evan Scott, Chief Financial Officer, Lockheed Martin: I think that one is too soon to tell. We clearly, army is leading a modernization effort Yeah. And they’re looking to accelerate certain capabilities. I think one of the real strengths that Sikorsky has is a current production capability at scale that is of highly valuable both domestically and internationally. And so I think we continue to see international demand growth for that portfolio in addition to the domestic supply or production lines that are ramping in some areas like 53 k.

So I agree it’s definitely fluid, and we we still are watching that closely to see how the budget plays out. And so I’ll probably have more to state on that in in the coming quarters.

Unidentified speaker, Interviewer: Gotcha. Gotcha. And then how about space? How’s the space business? We were just recently out at the the space symposium or and seem pretty robust out there.

I mean and so what what do you guys see?

Evan Scott, Chief Financial Officer, Lockheed Martin: It is it is a really robust portfolio. And so I I think on the on the civil space side, clearly, there’s some some budget challenges there that we’re working through. We did just deliver the second Orion, which is really exciting given given the the future for how that will be used to advance spaceflight. But we do definitely see some pressure there. On the plus side, the military satellite, including some different domains than than we’ve typically seen, could continue to be a good upward lift, competitive, but but strong demand signal.

And then really where we see the biggest growth in space is on our our missile defense or strategic missile defense side. So think, of course, NGI, fleet ballistic missile, hypersonics. That’s a big part of the space portfolio, and it’s definitely the fastest growing element of it and it’s it’s got a lot of strength.

Unidentified speaker, Interviewer: Got it. Got it. I don’t know if you can speak to it. So just say you can if you How is NGI going? Is is that going okay?

Evan Scott, Chief Financial Officer, Lockheed Martin: NGI is, I’ll just say an incredibly impressive platform. I was there at space when we competed it for and won that program. And I just remember seeing that and and we knew it was gonna be very competitive against two incumbents. But it was one of those proposals that upon reviewing it at the time as the CFO of our space business, I was pretty confident that was gonna be a win for us. It is just such an impressive capability, and the capability per the cost is just really, really good for the country.

It is a new product. And so we’ll go through its development challenges. I think with a capability that exquisite, there are always gonna be trades that we can look at with our customer. So if the customer, for instance, decides speed is is a paramount, I I believe there’s gonna be things we will be able to look at to see how can we accelerate that if that’s seen as a need now capability, that that that might be something that we can continue to look at. So I think overall, it’s going well.

It’s it’s gonna be a tremendous capability for this country, and we’ll but we’ll keep updating if we see any movement there.

Unidentified speaker, Interviewer: Got it. And then what we haven’t talked about too much yet is f 35. Right? So it’s I would imagine in your in your role now, you’re probably getting a lot of f 35 questions. How is the program doing?

How should we think about production for this year? What can you say about future production? Is there anything you can say around international versus domestic mix? Anything like that.

Evan Scott, Chief Financial Officer, Lockheed Martin: Sure. F thirty five, I think is in is a really strong position right now. So a couple of things to point out there. One is now that we have over 1,100 delivered jets worldwide, we are getting a lot of feedback into how this jet is performing and it is really impressive. At Lockheed Martin, we think of the pilots as almost an extended part of our family.

And so protecting them and seeing them complete their missions and come back safe, there’s just nothing more important to us. And getting that feedback from the pilots has been very enriching. And so we continue to get that very good feedback about how important the f 35 is on so many different dynamics in the battlespace. I think in terms of production this year, we’re looking solid. I expect we’ll continue to see that one hundred and fifty six year production rate continue.

We’ve got line of sight for this year and the next few years on that. I think the deliveries are looking solid at the range we previously gave, one seventy to one ninety. We have a backlog of 361 jets in a mix, of course, of domestic and international. And as stated, we’ll look to add another close to a 50 or about a 50 with lot 19. So very, very strong backlog and continue to see that international demand function.

So to your question, the actual mix of domestic and international, we’ve seen the international tick up a bit in the last few lots. And after, you know, holding steady in the fiftieth, we could see it come up a little bit. But that is a a lever that our customer has available to them as we shape the optimal throughput of that f 35 line. So, overall, I I think it’s looking really good. We’ll continue to look at the budgets.

I mean, it’s it’s no secret that’s a big number in the budget. But I do think that given the importance of airpower, it’s one that will continue to be a priority.

Unidentified speaker, Interviewer: And then on the quarterly call, Jim talked about upgrades to the aircraft to next generation capability. Is there anything else you can say about that beyond what was said in the quarter?

Evan Scott, Chief Financial Officer, Lockheed Martin: This is this is a really nice focusing vision for us as a company. Right? Because if you think about our products and if you were to look at, say, the top 10 products of this company, they look there’s a lot on there that were the top 10 products decades previously. We have an incredible track record of continuing to innovate with our products, with customer support, just to continue to be relevant and very strong factor in the battle space. F 35, maybe more than any of those products, has the potential to have the longest tail in terms of being relevant to the battle space.

And it’s part because the incredible aircraft it is. It’s also because of the architecture allows for flexible investing of new technologies and including, you know, it is another opportunity to bring in relevant and sometimes even commercial technologies. So this jet will continue to innovate and be relevant. In terms of what Jim laid out, this gives us a very strong focusing vision for this aircraft. If the idea for us, what we’re driving towards, as he said, is 80% of the capability of of a sixth gen at 50% of the cost.

That gives us two key things we need to drive for. One is that rapid innovation of capability, which is what this jet can do and will do and has done, as well as cost takeout, which has gotta be a critical component. When we talk to our customers at all levels, they’re focused on, very focused on getting the most capability they can get for the dollars they have available. So attacking that cost side is such a key part of that equation. Clearly, the next gen capabilities is what people will talk about, but not to be lost is the absolute critical aspect of taking cost out of that platform, which we have done, we continue to do.

And if you look at some of the things we’re working on, we talk about one LMX, our big digital kind of revolution here. That continues to be a major factor as we continue to look at that production line. And so I think you will continue to see us talk about the progress on this. I know it’s important. It’s important to us.

It’s important to to our customers. And in the meantime, we’ve got a good focusing vision as we come out with a detailed plan on how to achieve that goal.

Unidentified speaker, Interviewer: And can you speak some more about OneLMX and the the digital platform and where that’s going?

Evan Scott, Chief Financial Officer, Lockheed Martin: Sure. OneLMX is is a really big bet for us. And it’s probably no secret why, but if you look at our company, of course, you’ve got four business areas and a corporate headquarters. But in each one of those business areas, you can imagine all the predecessor companies or industry that came together to create Lockheed Martin. Right?

You’re talking dozens of companies. And in some cases, they bring their own specific ledgers, systems. A lot of our systems are actually homegrown, which is not out of the ordinary for our industry where you have homegrown systems. And the idea of going completely common across all the company, bring all those heritage practices, systems, ledgers together into one seamless ledger where we operate completely seamlessly. You can move parts, material, people across any business area is really where we’re going as a company.

And it’s underpinned by a model based enterprise where we’re tracking parts and designs from the very beginning to the very end in sustainability all seamlessly. It’s an exciting vision. It’s a multiyear vision with a significant investment. But we’re continuing to make progress on it. We’re taking a business area by business area approach on it.

And we are on track, I think, with a with a really good process. So this is where we need to go as a company. Jim’s driving us to be digitally focused. And as a culture, we need to be one LM, operate seamlessly, and that’s what LMX unlocks for us.

Unidentified speaker, Interviewer: And as outsiders looking in, how how can we are there any milestones that we would recognize that, oh, yeah, they’re really kinda getting there as is there anything we could look for?

Evan Scott, Chief Financial Officer, Lockheed Martin: I think you’ll see it show up in a couple places. One is our products, you should expect to see more and more developed in a true future state digital environment. Know, some of these ideas, I mean, if you look at building a product, a first time build of a product on a production floor is a pretty darn big event in our industry, probably in in the industry. Right? This is the industry I know.

Now imagine if the folks on the floor have already built that product digitally several times before or modeled it such that the first time you’re actually putting hands on real physical product, it might be the twentieth time you’ve built this thing. Right? So I think you’re gonna see a speed from design to scale production faster. That’s one element. As part of our 1LMX journey, there’s also a cultural element in terms of how we work together.

Historically, as Lockheed Martin, that was probably an area for improvement in terms of how we fit together the pieces. So you should expect to see more Lockheed Martin capabilities on Lockheed Martin platforms, which I think just helps us all the way through as a company. So those are some key areas that that you should expect to see. And then ultimately, if we drive this efficiency and this working together, that unlocks additional budget for us. Right?

If with that efficiency comes some affordability. So we’d like to be able to take cost out of our products and reinvest in the business with additional funds for research and development. That’s the other element you should see, product generation.

Unidentified speaker, Interviewer: So it does seem kind of if I tie together some of the the things we’ve been talking about, one of the themes that has merged is speed. Right? Getting getting things done. For sure. Getting more stuff out the door.

Is that coming from the customer? Is that a company goal? Is it both? I mean, where’s where’s that coming from?

Evan Scott, Chief Financial Officer, Lockheed Martin: It’s coming from both maybe just in slightly different flavors that are now coming together as one. Right? So we have always viewed, to your question about how would you see this manifest itself, the easiest way that you can look before and after is speed. So we’ve always known that speed is gonna be a key metric we judge ourselves on, on our transformation journey. So we’ve been driving that way for many years now.

To your point on the customer, we are seeing an increased push from this customer set on speed in a couple different flavors. There’s always been, of course, the fastest you can get capability to the to the warfighter, the better. But now you even see an element that says, what is the fastest you can get with other variables being willing to trade. I’ll give you an example. We typically would design our products because they need to be able to survive in some cases for decades in any environment.

Right? And when you do that, obviously, the design elements that go into that are pretty strict. But what if you have a customer, which we do, that also says, hey, that’s nice. I’m always gonna need that. But what if I have what we talk about affordable mass?

The fastest you can go just to get mass in the battlefield, it doesn’t need to survive for twenty or thirty years. The challenge for us, and this is what we’re set out to do, is that we have to be able to manage both those models simultaneously. Right? You might see new entrants who come in and are optimized around speed. And you might see traditionals that are optimized around products that simply must work every time, no fail, and last for decades.

What we need to do to be successful, and this is what we’re doing, is have both those models working at the same time.

Unidentified speaker, Interviewer: Yeah. That makes a ton of sense. Now, when we think about the unmanned realm, is that more along the speed vector or the other vector?

Evan Scott, Chief Financial Officer, Lockheed Martin: I think you will see elements of both. So I think as we build products now, there has to be an autonomy element factored in, which could come from a couple different ways. It could be the platform itself or it could be one part of a broader infrastructure. We talk about this concept of crude on crude teaming where we invest a lot. Right?

And that’s I think a very powerful force multiplier that we see. And then when you come to unmanned, probably just like manned, you have layers of products. You might have the really fast build, attributable, affordable mass, and you may have the more exquisite that is not so fast to get to the battlefield, but but just as relevant, if not more, based on the mission.

Unidentified speaker, Interviewer: Got it. Got it. And then, you know, we only have a couple minutes left left, but I’ve maybe two more I can squeak in. How are you broadly thinking about software and the business? Right?

I mean, it it does seem like there’s a a shift in the market between hardware and software. And how are you thinking about that broadly at at Lockheed?

Evan Scott, Chief Financial Officer, Lockheed Martin: So traditionally for us, we have thought of the two as coming together. Right? You buy a platform, you get the software that comes with it. Now that software will continue to innovate. And you see that whether it’s Aegis or f 35 and sometimes even over the air updates just to always stay relevant and meet the current threats.

I think to to the point of your question, we are starting to see where those two can diverge Yeah. Where there may be an opportunity to sell hardware, but separate from that may be a software focused sale, and it could even be software as a service. So this is one of the business areas or business models that we’re looking to innovate on. What are those capabilities that might be appropriate to sell as a service because it allows the customer to get that capability quicker and allows for ongoing updates apart from the platform? So that is that is we see the market going there potentially, and we plan to be ready

Unidentified speaker, Interviewer: for it. Yeah. That makes that makes a ton of sense. And then maybe a a a good place to end up is supply chains. How’s that going right now?

Are there Are you having any particular challenges or not? I mean, broadly, how are how are supply chains?

Evan Scott, Chief Financial Officer, Lockheed Martin: I think there’s there’s a couple areas that we’re watching. One is for us, supply chain will always be critically important. So one of the things that is very key to Jim’s vision is that supply chain resiliency. Right? We talk about anti fragility.

And so that might be looking for additional sources for those key products that we have to scale. The other element that There’s a couple elements that are watch lists for us. One, of course, is the tariff environment that we’ve talked about. And I think we continue to make progress on that in terms of insight to the costs as they incur. We’ve set up capability to really have real time insight to that and partner with our customer about how best to handle those costs.

So we’re making progress there, and that stays fluid. The rare earth material, we’re watching that. I’d say the things that help us in that world, number one, because of our long cycle supply chain, we feel we’ve got all we need to execute this year, number one. And then number two is the fact that although we are a user of those materials, it’s not near to the degree of say commercial automotive might. We’re a little protected there in comparison.

And then thirdly, typically, it comes time to primes competing for same supply chain materials, there there there can be acquisition models where we get priority given the importance of our programs. And so it’s not to say it’s not a risk item. I just think that we’re in relatively good shape in comparison.

Unidentified speaker, Interviewer: Got it. And then maybe if we just unpack one last On the tariffs, you mentioned that you’re working with your customer on the best ways to to handle that. Can you elaborate on that at all?

Evan Scott, Chief Financial Officer, Lockheed Martin: Sure. So we still see tariffs not as a a cost or profit risk for us, but potentially a cash timing risk. Gotcha. So as we incur those costs, we’re gonna partner with our customer on how best to to work through that. And it could be contract adjustments.

And sometimes those can take a little longer. They can they can drive cost recovery to maybe outside the year if you’ve got to go through kind of a formal process. What we want to partner with our customer is, are there ways to do that quicker, more efficiently, and more globally to address that.

Unidentified speaker, Interviewer: Gotcha. Well, Evan, thank you so much. That a lot of

Evan Scott, Chief Financial Officer, Lockheed Martin: fun. Outstanding. Thanks so much for time, Ron. Great

Unidentified speaker, Interviewer: You bet.

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