Financial Data and Key Metrics Changes - Revenue for 2025 was $21.9 billion, representing a 5% organic growth, with adjusted segment operating margin at 15.8%, up 40 basis points [16] - Non-GAAP EPS increased to $10.73, an 11% rise over 2024, while adjusted free cash flow grew to $2.8 billion, over 20% increase [16] - For Q4, revenue was $5.6 billion, up 6% organically, with a segment operating margin of 15.7%, also up 40 basis points [16] Business Line Data and Key Metrics Changes - Communications Systems (CS) generated $5.7 billion in revenue for 2025, with a margin of 25.2%, reflecting 4% growth and 50 basis points margin expansion [17] - Integrated Mission Systems (IMS) reported $6.6 billion in revenue, achieving 8% organic growth with a margin of 12.2% [17] - Space and Airborne Systems (SAS) delivered $6.9 billion in revenue, with a margin of 12.3% [18] - Aerojet Rocketdyne (AR) achieved 12% organic revenue growth, exceeding $2.8 billion with a margin of 12.5% [19] Market Data and Key Metrics Changes - The company ended 2025 with a record backlog exceeding $38 billion and a Book-to-Bill ratio of 1.3 [11] - Key awards included a $2.2 billion contract from South Korea for airborne early warning jets and an $850 million contract for 18 satellites for missile defense [12][14] Company Strategy and Development Direction - The company is focusing on evolving its business model, aligning its portfolio with defense priorities, and pursuing strategic partnerships to drive growth [4][5] - Plans include an IPO for the Missile Solutions business in the second half of 2026, with the Department of War as an anchor investor [5][20] - The company aims to enhance production capacity for missile systems and solid rocket motors to meet increasing demand [8][10] Management's Comments on Operating Environment and Future Outlook - Management highlighted a complex and rapidly evolving defense environment, emphasizing the need for speed and execution [8] - The company anticipates continued double-digit growth for the Missile Solutions business, driven by strong demand signals [30] - Guidance for 2026 includes revenue expectations of $23 billion to $23.5 billion, with a 7% organic growth rate at the midpoint [20] Other Important Information - The company has reorganized its business segments from four to three to better align technology and business models [5] - The LHX NeXt program has exceeded its $1 billion savings commitment one year ahead of schedule [14] Q&A Session Summary Question: Long-term agreements for Missile Solutions - Management confirmed ongoing discussions with the Department of War regarding long-term agreements and expressed optimism about the potential for significant growth in the Missile Solutions business [26][27][30] Question: CapEx expectations - Management indicated a planned increase in CapEx to about 2.5% of sales for 2026, with a focus on modernizing production capabilities [32][33] Question: Government stake in Missile Solutions - Management clarified that the government is expected to hold a single-digit ownership stake in the Missile Solutions business [40] Question: Revenue outlook for RemainCo - Management projected solid mid-single-digit growth for RemainCo, with expectations for increased defense budgets to drive further growth [46][49] Question: Tactical radios funding - Management acknowledged reductions in funding for tactical radios but expressed optimism about future growth opportunities in this area [60][76]

Core Insights - Lockheed Martin is significantly increasing the production of THAAD interceptors from 96 per year over the next seven years, in collaboration with the Department of War [2] - A new Munitions Acceleration Center is being established in Camden, Arkansas, to enhance workforce capabilities in advanced manufacturing and robotics [1] Investment and Production Expansion - Lockheed Martin has invested over $7 billion since President Trump's first term, with approximately $2 billion allocated for munitions production acceleration [5] - The company plans a multibillion-dollar investment over the next three years to expand production and modernize over 20 facilities across multiple states [5] - The THAAD framework agreement is the second of its kind, following a recent agreement for PAC-3 MSE interceptors [5] Job Creation and Manufacturing Growth - Lockheed Martin is creating tens of thousands of high-quality American jobs in manufacturing, engineering, and skilled trades to meet rising production demands [5] - Since 2016, deliveries of six critical munitions have increased by over 220%, with a projected additional increase of 245% to support PAC-3 and THAAD capabilities [5] - Manufacturing jobs have grown by over 60% since President Trump's first term, with an additional ~50% growth projected by 2030 [5]

Core Viewpoint - L3Harris is undergoing a significant restructuring that involves spinning off its missile solutions and rocket engine divisions, which will lead to the creation of two new defense companies focused on missile and rocket engine production [2][6][10]. Group 1: Investment and IPO Plans - The investment phase of L3Harris's restructuring is set to occur in the first quarter of 2026, with the missile solutions division expected to go public in the second half of 2026 [1]. - The Department of Defense plans to invest $1 billion in L3Harris's missile solutions business through the purchase of preferred stock [2]. Group 2: Business Divisions and Acquisitions - L3Harris will retain a minority interest in Rocketdyne, which is being sold to AE Industrial Partners, characterized as an acquisition [3]. - AE Industrial Partners will acquire a 65% stake in L3Harris's space propulsion and power systems business, previously part of Aerojet Rocketdyne [4]. - The missile solutions division produces motors for military missiles, while Rocketdyne focuses on non-military rocket engines [7][9]. Group 3: Financial Projections and Market Impact - The combined annual revenue for Rocketdyne and the missile solutions business is projected to be approximately $9.3 billion, with an operating profit of over $1.1 billion [10]. - Post-restructuring, L3Harris is expected to retain about $12.3 billion in business and $2.2 billion in operating profit, resulting in a smaller but more profitable company [10]. - The restructuring is anticipated to enhance L3Harris's stock value, making it a more attractive investment option [11].

Core Insights - L3Harris Technologies, Inc. (LHX) has proposed a partnership with the U.S. Department of War (DoW) to enhance its production capacity for solid rocket motors, crucial for U.S. and allied missile systems [2][4] Partnership Details - The DoW will invest $1 billion in L3Harris' Missile Solutions business through a convertible preferred security, which will convert into common equity upon an IPO planned for the second half of 2026 [3] - This partnership aims to secure government-backed capital, reducing funding risk and supporting the scale-up of high-priority missile programs such as PAC-3, THAAD, Tomahawk, and Standard Missile [4][5] Strategic Benefits - The partnership strengthens L3Harris' position in the U.S. defense industrial base, enhances growth prospects, and aligns the company with U.S. defense acquisition priorities [5] - The planned IPO will create a focused propulsion company, improving operational execution and transparency while allowing L3Harris to maintain a controlling stake [5] Industry Trends - Aerospace and defense companies are increasingly forming partnerships to accelerate growth, enhance capabilities, and strengthen market positions, particularly in high-investment areas like missile systems and advanced propulsion [6] - Other companies in the sector, such as Lockheed Martin and RTX Corporation, are also pursuing strategic partnerships to expand operations and integrate new technologies [7][8][10] Stock Performance - L3Harris shares have increased by 30.7% over the past six months, outperforming the industry growth of 11.6% [12]

Core Insights - Recent military actions in Venezuela have brought attention to defense and oil stocks, with L3Harris Technologies Inc (NYSE:LHX) being a potential beneficiary due to its defense focus [1] - Members of Congress have purchased LHX stock, indicating potential insider interest in defense spending and military actions [2][5] Company Developments - L3Harris Technologies plans to spin off its missile business into a separate public company, which will focus on defense platforms and missiles such as Tomahawk and THAAD [3] - The U.S. Defense Department is investing $1 billion in the separated missile company through convertible preferred securities, which will convert to common stock at the anticipated IPO in the second half of 2026 [4] Stock Performance - L3Harris stock reached an all-time high of $361.59, currently trading at $347.59, reflecting a 62.5% increase over the past 52 weeks [6] Congressional Involvement - Specific members of Congress have made significant purchases of LHX stock, with Rep. Richard McCormick, Rep. Gil Cisneros, and Sen. Markwayne Mullin all holding shares [7] - These members serve on various defense committees, raising potential concerns about conflicts of interest regarding their investments in defense companies [5][8]

INVESTOR UPDATE PRESENTATION January 13 , 2026 L3HARRIS Investor Update Call 1 L3HARRIS ACCELERATES THE 'ARSENAL OF FREEDOM' New company capital deployment focused on growth (CAPEX and R&D), no dividend or share repurchase expected in the near -term L3HARRIS Investor Update Call 2 SRM – Solid Rocket Motors, EO/IR – Electro -Optical / Infrared, ISR – Intelligence Surveillance and Reconnaissance 1Sector includes the Space Propulsion and Power Systems majority stake that will be sold as previously announced on ...

Summary of Lockheed Martin Conference Call Company Overview - **Company**: Lockheed Martin - **Industry**: Aerospace and Defense Key Points and Arguments Financial Performance and Guidance - Lockheed Martin expects **4% to 5% revenue growth** in 2025, with a backlog projected at **$167 billion** and **$6.7 billion** in free cash flow for the current year [6][6][6] - For 2026, the company anticipates **$7 billion** in free cash flow, excluding pension cash contributions [6][6][6] - The company plans to return **$6 billion** to shareholders in 2025, split between dividends and share repurchases [6][6][6] Operational Focus - The leadership emphasizes a strong focus on **financial and operational performance**, with multiple overseas and domestic visits to inspect production lines and engage with customers [5][5][5] - Lockheed Martin's products are reportedly performing well in real battlefield conditions, increasing demand from both U.S. and international customers [7][7][7] Government Relations and Defense Environment - The current administration is noted for its focus on **speed and effectiveness** in defense procurement, with an openness to change legacy processes [9][9][9] - Lockheed Martin has a strong relationship with the government, which is seen as a net benefit for the company and the defense industry [11][11][11] Budget and Growth Opportunities - The Department of Defense's modernization budget is expected to increase by over **20%** year-over-year in fiscal year 2026, which aligns with Lockheed Martin's expectations of low to mid-single-digit growth through 2027 [16][16][16] - New budget elements, such as Navy programming for PAC-3 munitions, present significant opportunities for Lockheed Martin [17][17][17] Golden Dome Initiative - The **Golden Dome** initiative is tailored for Lockheed Martin, involving key space sensors and integrated air and missile defense systems [19][19][19] - The company is positioned as a leader in integrated air and missile defense, with advanced technologies and systems in place [20][20][20] F-35 Program Insights - The normalized production rate for the F-35 program is expected to be **156 units per year**, with a backlog of **311 F-35s** as of Q2 [26][29][29] - Lockheed Martin has successfully won every fighter jet competition involving the F-35 over the past few years, indicating strong international demand [28][28][28] International Market Growth - Lockheed Martin anticipates that its international business will grow at least as fast as its U.S. business, driven by increasing international defense budgets [42][42][42] - The company has established a global production and operations network to support international sales and sustainment [40][40][40] Emerging Technologies and Partnerships - Lockheed Martin is open to partnerships with emerging tech companies to enhance capabilities and integrate new technologies into defense systems [53][53][53] - The company has made significant investments in venture companies to leverage digital technology and innovation [55][55][55] Future Opportunities - Key areas of focus for the next 12 months include air power strategy, munitions gap, and submarine combat systems [59][61][61] - The company aims to optimize cost and capability across all players in the industry, emphasizing collaboration with other defense contractors [60][60][60] Additional Important Content - Lockheed Martin has committed to transparency regarding classified programs and has reinvigorated its review processes to ensure accurate assessments [44][46][46] - The company is addressing cash flow headwinds from pension contributions and tariffs, with expectations of recovery over time [48][49][49] This summary encapsulates the key insights and strategic directions discussed during the Lockheed Martin conference call, highlighting the company's operational focus, financial outlook, and market opportunities.

Core Insights - Lockheed Martin's Q2 2025 results were significantly impacted by program charges, leading to a decline in operating profit, GAAP earnings per share, and free cash flow projections for 2026 [7][9][36] - The company reported total losses of $1.8 billion across legacy programs, with a notable $950 million charge related to a classified Aeronautics program due to cost overruns and execution risks [5][7][9] - Despite these challenges, Lockheed Martin reaffirmed its full-year sales guidance of $73.75 billion to $74.75 billion, supported by strong underlying demand for key systems like the F-35 and PAC-3 [7][10][47] Financial Performance - Q2 2025 sales reached $18.2 billion, comparable year-over-year, driven by growth in Missile and Fire Control, F-35 production, and Strategic Missiles [5][30] - Free cash flow for Q2 2025 was a usage of $150 million, influenced by working capital headwinds and delayed F-35 Lot 18/19 awards [5][38] - The company returned $1.3 billion to shareholders through dividends and share repurchases in Q2 2025 [9][39] Segment Performance - Aeronautics sales increased by 2% year-over-year, with a mid-single-digit increase in profit when excluding the classified program losses [6][40] - Missiles and Fire Control sales rose 11%, with a 6% increase in segment operating profit [42] - Rotary and Mission Systems sales fell 12% due to program losses, while Space segment sales increased by 4% year-over-year [43][44] Program Challenges - Significant program charges included $950 million for a classified Aeronautics program, $570 million for the Canadian Maritime Helicopter Program, and $95 million for the Turkish Utility Helicopter Program [9][34] - Management acknowledged ongoing execution risks and emphasized the need for aggressive oversight reforms and customer engagement on problematic programs [7][10][14] - The company is focused on restructuring contracts and enhancing capabilities to mitigate risks associated with these programs [16][62] Future Outlook - Free cash flow for 2026 is projected to decline to around $6 billion, reflecting increased investment demands and ongoing development challenges [5][49] - Lockheed Martin anticipates significant backlog increases in the second half of 2025, driven by upcoming contracts across multiple programs [10][46] - The company remains committed to returning at least $6 billion per year to shareholders through dividends and share repurchases [49][50]

Financial Data and Key Metrics Changes - The company reported sales of $18 billion for the second quarter, with a year-over-year increase and a sequential increase from the first quarter [6][22] - Segment operating profit was $570 million, impacted by $1.8 billion in total charges, primarily from legacy programs [23][28] - Free cash flow usage was $150 million, affected by timing items and delays in contract awards [29][30] Business Line Data and Key Metrics Changes - Aeronautics sales increased by 2% year-over-year to $7.4 billion, primarily due to higher F-35 production, offset by a $950 million loss on a classified program [31] - Missiles and Fire Control (MFC) sales rose 11% to $3.4 billion, driven by higher volumes on tactical missile programs [32] - Rotary and Mission Systems (RMS) sales declined 12% to $4 billion, primarily due to losses from the Canadian Maritime Helicopter Program and Turkish Utility Helicopter Program [34] - Space sales increased by 4% year-over-year, driven by higher volumes in Commercial Civil Space and Strategic and Missile Defense [35] Market Data and Key Metrics Changes - The U.S. government's focus on national defense is expected to lead to increased munition spending, with significant orders anticipated in the second half of the year [15][16] - The U.S. Navy's FY26 budget request includes plans to purchase PAC-3 missiles for the first time, indicating a shift in defense spending priorities [16] Company Strategy and Development Direction - The company is focusing on enhancing program management and performance, particularly in light of recent losses in legacy programs [8][27] - There is an emphasis on restructuring contracts to mitigate risks while meeting national security objectives [47] - The company is committed to investing in advanced technologies and production capabilities to support future growth opportunities [17][20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges faced in legacy programs but expressed confidence in the long-term prospects for growth and value creation [27][40] - The company reaffirmed its sales guidance for 2025, expecting a solid backlog and significant awards in the second half of the year [37][41] Other Important Information - The IRS has asserted a $4.6 billion additional income tax liability related to a tax accounting method change, which the company is contesting [28][70] - The company plans to maintain a disciplined capital deployment strategy, returning at least $6 billion per year to shareholders [40] Q&A Session Summary Question: Concerns about derisking problem programs - Management reassured that a new program review team with broader expertise has been established to monitor classified aeronautics programs more rigorously [44][46] Question: Rationale behind significant charges - The company explained that the charges were necessary due to newly discovered cost increases and the need to reassess longstanding assumptions [52][54] Question: Impact of tax liability on cash flow - Management indicated that the tax liability would have a significant impact on cash flow, with an estimated $500 million cash usage tied to the Arrow classified program this year [56][70] Question: F-35 program status and international orders - Management expressed confidence in the F-35's role in modern warfare and its continued demand, despite recent budget cuts [90]

Financial Data and Key Metrics Changes - The company reported sales of $18 billion for the second quarter, with a year-over-year increase in sales of 2% [20][30] - Segment operating profit was $570 million, significantly impacted by $1.8 billion in total charges, including $1.6 billion related to legacy programs [21][27] - Free cash flow usage was $150 million, affected by delays and tariff impacts [28] Business Line Data and Key Metrics Changes - Aeronautics sales increased by 2% year-over-year to $7.4 billion, primarily due to higher F-35 production volumes, offset by a $360 million loss from classified programs [30][31] - Missiles and Fire Control (MFC) sales rose 11% to $3.4 billion, driven by higher volumes in tactical and strike missile programs [32] - Rotary and Mission Systems (RMS) sales declined 12% to $4 billion, primarily due to losses from the Canadian Maritime Helicopter Program (CMHP) and Turkish Utility Helicopter Program (TUHP) [34] - Space sales increased 4% year-over-year, driven by higher volumes in Commercial Civil Space and Strategic and Missile Defense [35] Market Data and Key Metrics Changes - The U.S. government's focus on national defense is expected to lead to increased munition spending in the coming years, with significant orders anticipated for PAC-3 missiles and other munitions [12][13] - The U.S. Navy's FY26 budget request includes plans to purchase PAC-3 missiles for the first time, indicating a shift in defense spending priorities [13] Company Strategy and Development Direction - The company is focusing on enhancing program management and performance, particularly in light of recent losses in legacy programs [5][6] - There is a commitment to restructuring contracts to mitigate risks while meeting national security objectives [46][47] - The company is investing in advanced technologies and production capabilities to meet heightened demand for its products [4][12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges faced in classified programs and emphasized the importance of rigorous oversight and transparency in addressing these issues [44][49] - The company remains confident in the long-term prospects for its programs, particularly the F-35, which is seen as essential for U.S. and allied national security [90] - The outlook for 2025 includes reaffirmed sales guidance of $73.75 billion to $74.75 billion, with expectations for continued growth in the second half of the year [37] Other Important Information - The company recognized a $4.6 billion tax liability related to a tax accounting method change, which is currently under dispute with the IRS [27][70] - The company plans to return approximately $6 billion to shareholders annually through dividends and share repurchases [40] Q&A Session Summary Question: Concerns about derisking problem programs - Management reassured that a new program review team with broader expertise has been established to monitor classified programs more rigorously, aiming to reduce risks and identify issues promptly [44][46] Question: Explanation for significant charges - The significant charges were attributed to new discoveries of cost increases and the need for a comprehensive reassessment of program assumptions, which had not been evident previously [52][53] Question: Impact of tax liability on cash flow - The tax liability is expected to have a minimal cash impact this year, with a projected cash usage of $500 million related to the Arrow classified program [55][70] Question: F-35 procurement and international orders - Management expressed confidence in the F-35's continued relevance and strong international demand, despite recent budget cuts [60][90] Question: Golden Dome program opportunities - While no contracts have been finalized for the Golden Dome initiative, management indicated strong potential for future backlog growth related to this program [81][84]