Good day, and welcome, everyone, to the Lockheed Martin Q3 2023 earnings results conference call. Today's call is being recorded. At this time, for opening remarks and introductions, I would like to turn the call over to Maria Ricciardone Lee, Vice President of Investor Relations. Please go ahead. Thank you, Lois, and good morning. I'd like to welcome everyone to our Q3 2023 earnings conference call. Joining me today on the call are Jim Taiclet, our Chairman, President, and Chief Executive Officer, and Jay Malave, our Chief Financial Officer. Statements made in today's call that are not historical fact are considered forward-looking statements and are made pursuant to the safe harbor provisions of federal securities law. Actual results may differ materially from those projected in the forward-looking statements. Please see today's press release in our 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 posted charts on our website today that we plan to address during the call to supplement our comments. These charts 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 charts. With that, I'd like to turn the call over to Jim. Thanks, Maria, and good morning, everyone. Thank you all for joining us on our Q3 2023 earnings call. All of us on the line today are well aware that since our last call, the world is now seeing yet another terrible conflict. Everyone in our company remains dedicated to fully supporting the United States government's policy and efforts to deter aggression, restore security, and achieve peace. Today, I will first highlight our Q3 results as we pursue our vision of 21st century security, designed to support the U.S. Department of Defense strategy of integrated deterrence, and then I'll turn it over to Jay to provide additional detail before taking your questions. Starting on page 3 of the slides, sales increased 2% year-over-year to $16.9 billion, and backlog remains at historically high levels at $156 billion. EPS of $6.73 exceeded prior year, and free cash flow is a strong $2.5 billion. We returned approximately 100% of free cash flow to you, the shareholders, through dividends and share repurchases during the quarter. Earlier in October, we announced a $0.15 increase in our dividend, which reflects 5% growth and is the 21st consecutive year of dividend increases for Lockheed Martin. At the same time, our board also approved a $6 billion increase in our share repurchase authorization, bringing our total authorization to $13 billion, reconfirming our continued commitment to returning capital to shareholders. We are also reaffirming our full-year 2023 financial outlook for sales, profit, EPS, and free cash flow. Given the current status of the 2024 U.S. defense budget, global geopolitical tensions, and the macroeconomic environment, we will provide our expectations for our 2024 financial outlook during our full year 2023 earnings call in January. On the U.S. budget, though the specific trajectory of the future U.S. defense budget is still in process between the administration and Congress, the global threat landscape is increasingly elevated. Our robust backlog reflects the relevance and importance of the Lockheed Martin portfolio in elevating deterrence to great power, conflict involving the United States and its allies, and the solid positioning of our business to serve our domestic and international customers. From a process standpoint in government, the current continuing resolution, or CR, is in place through November 17. At that point, one of the following could occur: FY 2024 appropriations bills will be enacted, Congress will enact another partial or whole CR, or there could be a partial or full government shutdown. In any of these scenarios, there continues to be the option also for supplemental requests related to support Ukraine, Israel, and potentially Taiwan. As Congress continues to work through the FY 2024 appropriations bills, we are optimistic that there will be consistent support for the National Defense Strategy and funding for its priorities. In the meantime, we will continue to work with our customers and suppliers to minimize any potential disruptions due to the process. We will press on with executing our 21st Century Security strategy of building capacity, efficiency, and resilience into our production operations, driving advanced digital technologies to enhance Integrated Deterrence, and expanding our international business and operations. Turning to the F-35 program, we delivered 30 F-35 aircraft in the Q3, bringing the year-to-date total to 80 jets. Consistent with our announcement in September, we continue to expect to deliver a total of 97 aircraft this year, all in the Technology Refresh 2 or TR-2 configuration. We are producing F-35s at a rate of 156 per year and expect to continue at that pace while simultaneously working to finalize TR-3 software development and testing, and we recently began flight test evaluations of the next software release that encompasses major systems upgrades, such as improved radar, next-gen Distributed Aperture System, and weapons capability. As previously announced, we continue to expect to deliver the first TR-3 configured aircraft between April and June of 2024. The superior technological capabilities of the F-35 continue to generate strong interest, both domestically and internationally. In September, Denmark's first 4 locally based F-35 aircraft arrived on their home soil. Denmark's program of record calls for 27 F-35A aircraft. Also, in September, the Czech Republic chose to become part of the global F-35 Lightning II program, and the U.S. State Department approved a possible $5 billion more foreign military sale to South Korea for up to 25 F-35 joint strike fighters. Earlier in the quarter, Israel announced it will buy an additional 25 F-35s, which will add a third squadron and increase its F-35 fleet to 75 aircraft. Additionally, in August, Lockheed Martin was selected by the Australian Department of Defence as their strategic partner for their AIR 6500 Program, phase one. This transformational pathfinder program will deliver the broadest scope of joint all-domain operations, or JADO, in the free world and will completely revolutionize the way the Australian Defence Force operates. By connecting Australian systems and platforms that operate across air, space, land, sea, and cyber domains, we expect that AIR 6500 will set the blueprint for future military operations worldwide. This proven technology will provide greater situational awareness and defense against increasingly advanced air and missile threats, and enable significantly greater interoperability between Australia and allied nations. Lockheed Martin will lead this first phase, which will provide the core architecture and multi-domain integration for the program. This is just one recent win that demonstrates the business success of our 21st Century Security cornerstone, trusted and reliable battle management and command and control systems that integrate across multiple domains, military services, and allied forces. Late last year, Lockheed Martin also won the $500 million Defense of Guam award, and in late September, we were also awarded a potential seven-year, over $1 billion contract for systems engineering and software integration to the Integrated Combat System across the surface force portfolio of the U.S. Navy and Coast Guard. This will link together systems and software across the services in a JADO construct, and it not only enables faster decision-making and better capabilities, but also serves as a much more effective global deterrence strategy. Beyond these awards, we continue to develop 21st Century Security technologies to advance interoperability between Lockheed Martin product lines. The 5G.MIL hybrid base station that our engineers invented is a One LM initiative that includes teams at MFC and Aeronautics. We recently transferred data from a Sniper targeting pod that was set up in Orlando, Florida, to the Tactical Missile Simulation Lab in Grand Prairie, Texas, to provide real-time updates to a simulated missile in flight. This event significantly advanced efforts towards upcoming live fire demonstrations of cross-domain platforms operating in a joint environment that will fuse data from multiple sources across an open architecture. Also, Skunk Works partnered with the University of Iowa's Operator Performance Laboratory to demonstrate an AI-commanded jamming capability. In this, we successfully used artificial intelligence on two air systems to provide jamming support to a simulated strike against enemy air defenses. This demonstration showed how AI agents with high performance and reliable behavior can operate in close coordination with, and be controlled by, human-crewed aircraft. We also conducted a successful test of the prototype radio for the PAC-3 MSE missile that will enable communications with the SPY-1 radar, the key sensor in the Aegis Weapon System. This test, performed by a One LM team across MFC and RMS, paves the way for the design of a multi-frequency radio data link for PAC-3 MSE. In turn, that will enable the U.S. Navy, for the first time, to have the ability to integrate the state-of-the-art PAC-3 missile onto its warships and open up another opportunity for Lockheed Martin in the future. International interest in PAC-3 also remains strong, as demonstrated by our deepening partnership with Poland, which signed a letter of offer and acceptance for 644 PAC-3 MSEs and related equipment in the quarter. In our RMS business, Sikorsky's CH-53K helicopter is expected to grow meaningfully also over the coming years. In August, we won a $2.7 billion contract to build and deliver 35 additional CH-53K helicopters, and it's the largest procurement to date for this multi-mission aircraft. Another long-standing major Lockheed Martin program, this one in space, is also poised for significant growth ramp.... In late September, the Fleet Ballistic Missile Program won a $1.2 billion contract for the Navy's Trident II D5 life extension. For nearly seven decades, Lockheed Martin has supported the U.S. Navy as a critical partner for its mission to provide sea-based strategic deterrence. The Trident II D5 LE missile will be in service through the 2040s, maintaining the proven performance of the D5 system for significantly less cost to the government than of designing a new missile. Also, in our space business, Lockheed Martin's Next Generation Interceptor, or NGI program, executed its digital preliminary design review in partnership with the Missile Defense Agency customer. That happened on September 29th. During this review, the MDA assessed the NGI program's readiness and maturity to continue into the detailed design phase, confirming that our solution continues to meet the requirements for this crucial and demanding mission. Finally, the OSIRIS-REx sample return capsule touched down in the Utah desert on September 24th, returning NASA's first-ever sample from an asteroid after a 7-year mission, traveling approximately, believe this, 4 billion miles in space. The capsule holds material from Bennu, a carbon-rich asteroid, and scientists hope it will teach us more about the origins of organics that led to life on Earth, plus the mechanics behind overall planet formation. After release of the capsule, the spacecraft was set on a new course to investigate the asteroid Apophis, under the mission name OSIRIS-APEX. So with that interesting and exciting news, I'll turn it over, the call, to Jay, and join you later for questions. Jay? Thanks, Jim, and good morning, everyone. Today, I will walk you through our Q3 2023 financial results. I'll also provide an update to our full year 2023 guidance and offer a few comments on 2024. As I describe our results, please follow along with the web charts we have posted with our earnings release today. Starting on chart four, with consolidated sales and segment operating profit. Q3 sales increased 2% year-over-year, with 3 of the 4 business areas delivering growth. Segment operating profit was down 6% year-over-year due to lower net favorable profit adjustments and lower equity earnings, resulting in segment margins of 10.7%. Moving to earnings per share on chart 5, GAAP EPS was comparable year-over-year, with lower segment profit and higher net interest expense offset by favorable below-the-line items, including lower share count, lower tax rate, and fewer mark-to-market losses. On an adjusted basis, EPS was down $0.10 year-over-year, primarily due to the lower profit. Moving to cash flow on chart 6, our free cash flow was strong at over $2.5 billion in the quarter or 150% of net income, helped in part by our focus on working capital, primarily due to better collections at the end of the government fiscal year. Once again, we demonstrated our commitment to shareholders by returning 99% of our free cash flow through dividends and share repurchases this quarter. On a year-to-date basis, we've returned almost $5.3 billion or 116% of free cash flow. As Jim mentioned, our board approved a 5% increase to the quarterly dividend and an additional $6 billion in share repurchase authorization. These tools remain a key part of our total shareholder return strategy. Okay, moving to segment results and starting with Aeronautics on chart seven. Q3 sales at Aero decreased 5%, driven by lower volume on F-35, partially offset by higher volume in Skunk Works. F-35 production was down due to the previously mentioned lot 15 through 17 sales catch-up in the Q3 of 2022 and an overall more linear throughput this year. Both development and sustainment saw solid year-over-year growth in the quarter. Operating profit decreased 12% from the prior year due to the lower volume and lower net profit adjustments. On the F-16 program, international interest remains strong. We delivered the 2nd Block 70 aircraft to Bahrain in July, and in September, the 1st Block 70 aircraft for the Slovak Republic was unveiled at our facility in Greenville, South Carolina. The Slovak Republic will be the first European country to receive this newest and most capable version of the Fighting Falcon. Today's latest version, the Block 70/72, will be flown by six countries and counting. With a backlog of 126 aircraft as of the Q3, the F-16 program continues to play a crucial role in 21st century security missions for our international allies. It will be a key contributor to growth over the coming years. Shifting to Missiles and Fire Control on page 8. Sales increased 4% year-over-year, driven by higher sales volumes on munitions programs within Tactical Strike Missiles, partially offset by lower volume within Integrated Air and Missile Defense. Segment operating profit also increased 4% year-over-year due to the higher net profit adjustments. Margins were comparable at 13.5%. MFC has built a strong backlog, and we continue to see strong demand for our missiles and munitions, with allied nations seeking to improve their security posture amidst today's complex threat environment. This backlog provides a foundation for growth over the coming years across several of our product lines, including PAC-3, GMLRS, HIMARS, Javelin, and JASSM and LRASM. Turning to Rotary and Mission Systems on page nine. Sales were up 9% in the quarter, driven by higher volume across a handful of programs within our within our Integrated Warfare Systems and Sensors and C6ISR lines of business. Operating profit increased 2% due to higher sales volume and was partially offset by lower net profit adjustments. RMS backlog increased in the quarter, primarily due to the $2.7 billion CH-53K award, which is pictured, for Lots 7 and 8, the first full rate production lots as part of the U.S. Marine Corps 200 aircraft program of record. This significant contract bolsters Sikorsky and its partners, creates additional production efficiencies, and provides the U.S. Marine Corps with transformative capabilities. On chart 10, we continue to see strong growth across our space portfolio, with sales increasing 8% year-over-year, driven by higher volume on NGI, fleet ballistic missile, GPS, and Orion programs. Operating profit decreased 15%, as the benefit from higher sales volume was more than offset by lower net profit adjustments and lower equity earnings from United Launch Alliance. Space backlog grew slightly to over $30 billion at the end of the Q3, helped by the $800 million Transport Layer Tranche 2 award for 36 Beta Satellites. Transport Layer is part of the proliferated space architecture and will strengthen deterrence with more resilient space architectures for beyond line of sight targeting, data transport, and advanced missile detection and tracking. With this award, we will build and deliver a total of 88 data communication satellites to the Space Development Agency in support of their low Earth orbit constellations. Okay, now shifting to our 2023 expectations on page 11. For the full year, we're holding the outlook for sales, segment operating profit, earnings per share, and free cash flow. We've successfully driven and delivered more linear results in 2023 than prior years, which enables more efficient use of our capacity, but sets up for difficult compares to last year's Q4. In conjunction with our recent announcement of increased share repurchase authorization, we're increasing our share repurchase forecast for 2023 to $6 billion, provided there is not an extended shutdown scenario. These repurchases, along with dividends, are expected to return nearly 150% of our free cash flow to shareholders for the year. And between 2022 and 2023, we are on track to repurchase nearly 13% of our current market cap. We're also set to deliver mid-single-digit free cash flow for share growth in 2023, and we're positioning the company to continue that level of growth in the future. Okay, a few comments on 2024. While we don't have a formal outlook to share, I will provide a few directional markers as we see them today, barring any environmental setbacks. We still anticipate low single-digit sales growth as we convert our strong backlog position. As I previously mentioned, the backlog supports a higher growth rate, but the value chain remains constrained by extended lead times that have yet to compress. On segment margins, we expect the underlying business to be relatively flat year-over-year, but anticipate variability caused by the timing of impacts from the MFC classified program. And on free cash flow, we're following the budget process to determine whether it will have an impact on the timing of our program schedules and milestones, but are continuing to set internal targets that deliver mid-single digit growth in free cash flow per share. Okay, let's wrap it up. Results through the first three quarters have been solid, with a long-term demand environment that is favorable to Lockheed Martin's Twenty-first Century Security capabilities. Our focus on linearity and working capital is helping to drive more consistent sales and improved cash flow. We're maintaining our full year outlook while increasing our planned share repurchases, further demonstrating our commitment to shareholder returns. And finally, we're executing our twenty-first century security strategy through improving capacity and resilience in the defense enterprise, accelerating the adoption and insertion of twenty-first century digital technologies, and collaborating more closely with international partners and allies to improve security solutions. With that, Lois, let's open up the call for Q&A. Thank you. And ladies and gentlemen, if you wish to ask a question, please press one, then zero on your touchtone phone. You will hear an acknowledgment tone that you have been placed in the queue, and you may remove yourself from queue at any time by repeating the one-zero command. And if you're on a speakerphone, please pick up your handset before pressing the number. Please limit yourself to one question and reenter the queue for additional questions by pressing one then zero. And one moment for our first question. Again, if you do have a question, please press one then zero. Our first question will come from the line of Doug Harned from Bernstein. Please go ahead. Good morning. Thank you. Morning, Doug. I wanted to see if just we could understand the F-35 situation a little bit more. Now, the TR-3 deliveries of F-35, those are now expected at some point in Q2 next year, you know, but I think it's difficult for us to have, like, total confidence in that time frame. And what I'm trying to understand is, as you continue to produce F-35s, which will need software upgrades before delivery, you know, you're recognizing revenues on percent completion, so revenues should continue to be solid. But when you look at, say, a June delivery date, what's the impact on your production, recognition of revenues, earnings, and cash flow, you know, should that date move around? How should we think about the timing here? So Doug, on the timing on sales and the profits associated with the sales, the booking margin, I sure really shouldn't expect much variability with that. As we've mentioned, that really doesn't get impacted. What you could see, and what we are seeing today is that, our risk retirements are obviously dependent upon successful completion of the test program. And so, that could limit our ability to take profit adjustments on a lot 15 to 17 program. But as I've said, in the past, we are performing and expect to continue to perform profitability stronger on lot 15 to 17 than we did on lot 12 through 14. And so we might see some short-term limitations on our ability to take profit rate adjustments. We still expect and have confidence we'll derive higher profitability on this contract lot than the prior one. Thank you. The next question is from the line of Cai Von Rumohr from TD Cowen. Please go ahead. Yes, thanks so much. So, Jay, I think recently you made a comment about gravity on margins, and you haven't provided a guide for 2024, but I think one of the issues that kind of you'd mentioned had been the classified missile program at MFC, where you have some LRIP options coming up. Could you maybe give us some color in terms of the status of that and how that impacts, could impact next year, and any other items we should be watchful of that might exert gravity on margins? Thank you. Sure, Cai. Thanks. So yeah, I mean, that, that's the question we've talked about. It's been a headwind. It's something that we've talked about for the upcoming number of years, including next year. And in fact, we are seeing some of the headwind this year, and it really is dependent upon an analysis of really the timing of recognition of these losses. And there's certain things that need to be met from a performance standpoint on the program, and then it becomes an assessment on the probability of an option being exercised. And so there's just variability in that timing. It could be as early as, frankly, as this quarter, or into next quarter. What we could find ourselves in a situation is that we're recording multiple lots in 2024, which would put some downward pressure on next year's margin. So we'll have a better feel for that, next year, and it could be in the range of anywhere between 25-50 basis points, a headwind from where we are and where we end today, or this year from a margin perspective. So hopefully that provides a little bit of color on the impact of that program. As far as any others, you know, look, we, if you look at this year, we had lower profit adjustments this year. We expect there to be in the low 20s in 2023. We're evaluating what that means for 2024 in general. But again, I think as I mentioned in my prepared remarks, we're expecting the underlying business to be pretty much flattish, which would include recurring margins as well as profit rate adjustments in 2024. Yeah, and Kai, it's Jim. Just to add on the classified program, first of all, you know, given my Air Force pilot experience, I can tell you that this is a really important capability for the country. It should continue on as an important capability for many, many years and even decades, assuming the program is successful, which we think we're on track to be, and it'll be massively NPV positive over that longer time frame. So we're working our way through the schedule and the performance in the early phases of the contract, but at the end of the day, it, it'll be worth it for the country and the company. But we will keep you all updated, as Jay just did, on the path to get there. Thank you. And our next question is from the line of Kristine Liwag from Morgan Stanley. Please go ahead. Hey, good morning, everyone. So maybe an F-35 question. You know, we've seen a lot of new countries express interest in the F-35, and current partners like Israel have indicated plans to add to existing orders. But what are your thoughts on expanding capacity to meet all the international demand? And is there demand from the customers to potentially bring forward their deliveries? And should you increase capacity, what level of investments? So, Christine, it's Jim. I'll start off, and Jay can maybe speak to the required investment level. We're in sync with our joint program office customer, which represents the international cohort, indirectly, of the F-35 customer base and directly the U.S. services. We've all settled on the 156 per year rate as the joint investment that we're all willing to make, given the demand that's out there. There is the, you know, annual sort of slotting priorities discussion that happens within the Joint Program Office and the international partners, and that will keep the line full for many, many years. If we were to get significantly more international orders, that might motivate us jointly, and I mean us, meaning the government and industry, including our suppliers, by the way, to make an incremental investment. But I think that that would have to be a significant increase in the order book above what we see today. So, Jay, any other- Yeah, I mean, the investments, it's probably in the $low hundreds of millions. It's manageable. But again, to Jim's point, it needs to be coordinated with the customer. Thank you. Our next question is from the line of George Shapiro from Shapiro Research. Please go ahead. Yes, good morning. Jay, on the F-35, can you discuss a little bit where we stood in the quarter in terms of sustainment revenue versus production? Because the decremental margin on the production was pretty, was pretty high at 22%. And then I'll sneak in one other one, which is in RMS, the implication is that you'd have a 14% margin in Q4 to meet your guide, yet revenues would be relatively flat. So if you can just kind of tell us what's going on to cause that to occur? Thanks. Okay, I'll start with the second one first on RMS margins and then come back on the F-35. On the margins for RMS, you're right, George, we're expecting an increase in profitability there. It's really a twofold function of higher profit adjustments, and there are, and I think I've talked about this in the past, we do have some mixed benefits through some delivery program deliveries here in the Q4, which will give them some lift. As far as the F-35, just really from a sales perspective in the quarter, production was down pretty substantially, really close to 20%. Development was up quite substantially, and sustainment was up in the high teens. So with you know, solid there on sustainment, that's been strong all year long. We expect that to grow for the year around 10%. Thank you. Our next question is from the line of Ron Epstein. One moment, please. Lois, are you still there? Yes, one moment. We're opening his line. Okay. I'm sorry. The next person that we'll go to is, David Strauss from Barclays. Please go ahead. Hey, good morning, everyone. Morning, David. Jay, I think the IRS came out with some recent updated guidance around Section 174. Wanted to see what your interpretation of that was, whether it supported your position or your peers that are taking, you know, I think, higher levels of, or a higher hit associated with Section 174. And then, any updated thoughts on where pension might come out for you guys next year, given, you know, what appears to be much higher discount rates and, weak asset returns? Thanks. Sure. Thank you, David. The first one on the R&D capitalization, the draft guidelines that came out, we view those as promising. We believe that they support our position of continuing to deduct the costs associated with cost-plus contracts. Just as a reminder, we treat that and view it as a cost of sale, not really as an R&D activity. The risk is really borne by the acquirer of those services. The rights are short-lived, and they're also restricted. And so, we believe the draft language is, at least thus far, appears to be consistent with our approach, and so we view it positively. As far as pension, a couple of things going on with pension, and I'll go on to P&L. FAS pension will see a significant reduction next year. We're going to go from about $375 million of income in 2023, to about $50 million of loss in 2024. It's a function of two things. One is the returns, and the second is essentially the expiration of benefits that we're amortizing from the 2014 salary plan freeze. So those run out, and so we'll see a significant increase. As you know, that's pretty much non-cash, but it will affect EPS. On the cash side of it, we'll see a little bit of a slight reduction, anywhere between $25 million-$50 million reduction. But again, the biggest piece there is on FAS. From a cash contributions, you know, we talked about anywhere between $500 million-$1 billion of contributions required starting in 2025. Right now, given where things are, we would expect that to be in the higher range, if not higher, for 2025. If we stay where we are, it could trigger some contributions in 2024. But I will say, you know, you think about cash contributions to pension and what that means, you know, we've got an enviable position in our balance sheet, and we've demonstrated it willing to use it. So I wouldn't view that higher pension contributions as limiting, otherwise limiting our ability to continue our cash deployment strategies. And that's the key point. The next question is from the line of Ken Herbert from RBC Capital Markets. Please go ahead. Yeah. Hi, good morning, Jay and Jim. Maybe Jay, just to follow up on a comment you made in the prepared remarks. I think you made a comment around the buyback activity in the Q4, sort of dependent upon timing of the fiscal 2024 budget and whether or not there is a shutdown, potentially. Can you just talk about how you're thinking about the timing of the 2024 budget, but very specifically, if there's any sort of shutdown, how much does that put at risk sort of the buyback activity expected in the Q4? Or if it's very short, does that not impact it? I mean, maybe you can walk through how you're viewing sort of the risks around that and impact on the Q4 cash deployment. Sure. So, you know, year to date, we've done $3 billion with this new guide at $6 billion, that's $3 billion in the Q4. We're monitoring, you know, the status of the budget discussions and resolution of that. If we do find ourselves in a shutdown scenario, you know, it would cause us to take a pause and another relook at that share repurchase, and what we would probably do is just defer it. So it'd be more of an issue of timing versus anything else until such time that the budget gets cleared, clarified. So, you know, history tells us these things are fairly short-lived. We believe that we'll be able to get through it here in the Q4. If not, then it would just push probably into the Q1 and the like, and really won't see a meaningful impact there. But, you know, again, in a shutdown scenario, you just take a look at what does that mean? You know, it does, you know, you can't have new starts. It could be disruptive to programs. It could also put us in a situation where we're doing some self-funding to keep programs on track. And to the extent that occurs, it could be a limiting factor on share repurchase. Hey, Lois, are you still there? Yes, sir. I'm sorry. The next question will come from the line of Sheila Kahyaoglu from Jefferies. Please go ahead. One second. Sheila's line did drop from the Q&A, so we'll move to Rob Stallard. One moment. And he's from Vertical Research. Please go ahead. Thanks so much. Good morning. Good morning, Rob. Question for Jim or Jay. Actually, on the balance sheet, you noted that you're returning more than 100% of free cash flow to shareholders at the moment, but we do have this ongoing U.S. budget uncertainty, and you're going to put more money into the pension fund. So how sustainable do you think it is to be returning more than 100% to shareholders going forward? It's a good question. You know, if you look at, just the profile and it, with this incremental authorization that we have, the way we're looking at it is, you know, $6 billion here in 2023, $4 billion in 2024, and then essentially $3 billion in 2025 and $3 billion in 2026, which puts us, puts us equal to free cash flow in that ballpark, you know, assuming kind of a $6 billion placeholder, for free cash flow in those given years. And so that's the way we're, we're viewing it, Rob. So over time, over the next few years, it'll revert back to more of a 100% of free cash flow. But again, we'll look at it year by year. As you've seen in the last two years, we did increase it here in the Q4, and we'll continue to evaluate those opportunities as they present themselves, the reality of what happens with actual pension funding, what progress we make in our working capital reduction initiatives, and all those will go into the mix master and provide, you know, the information what we formally do in any given year. Thank you. The next question will come from the line of Richard Safran from Seaport Research Partners. Please go ahead. Thanks. Jim, Jay, Maria, good morning. How are you? Good morning. So, you know, if we take an optimistic scenario here on what happens with the budget outlook, I wanted to know if you could discuss the 2024 bookings and the opportunity set, both classified and unclassified. Again, you know, if we assume no shutdown and we assume we do get funding, I'm interested in what the major competitions are next year, as well as how you see backlog growth and the book to bill is better than one. You know, Richard, we, we've got a pretty decent line of sight to continuing growth in our backlog. There's a lot of activity happening in classified, which I can't speak to specifics about, but we do see some award decisions next year there. We'll continue to see orders strength in MFC over this time period. And we've talked about orders between 2023 and 2027 of $10 billion. We have not seen, excuse me, all of those orders come to fruition yet, so we would expect those to be continued opportunities for us. You know, we'll continue to have a lot F-35, so Lot 18 next year is probably something that we should probably consider bring, you know, coming into the backlog in 2024. As in addition to the performance-based logistics program on the F-35 program, you know, we've submitted our proposal to the customer. We continue to have dialogue, and we're cautiously optimistic that we can get under contract in the first half of next year. So those are some key, you know, some key awards to think about for 2024. Thanks. You're welcome. The next question is from the line of Sheila Kahyaoglu from Jefferies. Please go ahead. Hi, good morning. Can you guys hear me? Yeah, we can hear you fine, Sheila. Good morning. Thank you. Thank you so much. Thanks for taking the question. So just wanted to ask, Jim and Jay, you're a pretty confident management team, just given your big backlog, $150 billion. You're returning 150% to shareholders, which is a big number. So you've talked about low single digit growth and 11% margins for some time. So I just kind of wanted to know what's changed, given the backdrop is seemingly better. Is it just the budget uncertainty? Is it supply chain? Is it F-35? Maybe if you could just comment on that. Well, you know, not much has really changed, to be honest. You know, we've talked about low single digits for a while now. We, we, I, you know, I talked about that in my prepared remarks. On the margins, underlying margins, generally flattish. Because we could be in a situation next year where we have multiple lots of the classified program, that can cause some variability, but that doesn't fundamentally alter, you know, what we've been really talking about. Same thing with free cash flow. You know, we've been targeting mid-single digit free cash flow per share growth, and, and we still see a path there. We know there are some headwinds, whether it's pension and the like, but we still believe that, that we have a line of sight to be able to do that. And that's what we're gonna be working through on a year-by-year basis, and starting with 2024, and over the next couple of months, we'll work through, solidify our plans, and we'll present them formally to you in January. Yeah. In the longer term, there are some things that are changing significantly. One is the next, the global threat environment and the geopolitical situation's getting more concerning and challenging. That's refocusing the U.S. and certainly our allies around the world on national defense in increasing manner. The second big trend that's going on is, you know, the continued evolution of both physical and digital technology at a rate never seen before, sort of in human history, frankly. And so the opportunity for our company to take a leadership role in integrating those technologies, whether they're hypersonics, hypersonic defense, space technologies that are advanced, and as well as, you know, 5G, distributed cloud, artificial intelligence, we're investing in all those technologies to try to drive them in. And pull through, using this 21st century concept, the technology driving concept we have, is to pull through our platforms and enable them quickly on the open architecture that we're advocating for, that will be quickly and widely adoptable, making our platforms more compelling as we go forward in time. And then the third thing is, you know, the notion that we have a national defense strategy, and I think our allies are increasingly embracing, is international cooperation, which drives interoperability and also, linking command and control systems, all of which comport with our strategy. So I think there are some mega trends that are going on over a longer term that won't necessarily affect us quarter to quarter, as Jay was stating, but will give us opportunities that I think the company is uniquely positioned to take advantage of over the long term. Thank you. Our next question is from the line, Seth Seifman from JP Morgan. Please go ahead. Hey, thanks very much, and, good morning, everyone. Good morning. Good morning. Maybe, Jay, one quick housekeeping question, and then, you know, one broader question for both of you. The mid-single digit growth you talked about for free cash flow per share next year, did that assume any kind of pension contribution next year? And, you know, how big might that be or not? And then just more broadly, when you guys talk about seeking out additional suppliers of solid rocket motors, is that something for, you know, maybe developing hypersonics programs for late in the decade and into the 2030s? Or is that about replacing your suppliers on kind of, you know, today's existing programs? Thanks. Hi, Seth. Hey, I'll talk to solid rocket motors, and Jay can take the free cash flow per share, part of your question there. So our objective is to bring antifragility into our own supply chain, first, and to broadly apply that to the DoD in partnership with them as well. And so when it comes to solid rocket motors, I mean, we're actually starting with, you know, GMLRS, for example, you know, a legacy technology where we want to augment our existing supplier, you know, and have a dual source, frankly. And then that will extend into other systems, large and small, and legacy and advanced. So this is not a one-time objective. This is a broad, in a way, campaign-like approach to, you know, strengthening our own supply chain and enabling multiple sources, really for, you know, for even beyond our company, for our industry, which I think is important. So I do think that this is not a one-shot deal. We're in negotiations and discussions with a counterparty we think we can start us off with on this journey, but it's gonna be a long journey, and we'll probably have additional participants and programs as the years and even decades roll on. On the question of the free cash flow per share in 2024, Seth, you know, what I mentioned is that we're setting up internal targeting and internal actions to be able to arrive at that. An incremental pension contribution would obviously put pressure on that. And we'll go through that over the next coming months and determine what the out of what's possible and what our plans would be, and again, we'll present that in January. Thank you. The next question is from Myles Walton from Wolfe Research. Please go ahead. Thanks. Good morning. Hey, Jay, just a quick clarification, and then a question for Jim. The clarification on the, the margins for next year. 25-50 basis points of risk, I guess, is what you're saying on the MFC. Should we anticipate that there's a way around that, or is that the base case? And then, Jim, in the press release, you talk about digital services revenue over time, and I'm just curious, maybe you could touch on your vision of what digital services revenue is today and, where you want to take it over the next several years. So digital services will be a wide range, but we're starting with this notion of trusted, reliable mission systems engineering for command and control and battle management systems. That is a business we're already in, actually. It is largely digital already, and it's these kind of programs like Defense of Guam. We have a program in the UAE that's based on this technology as well, called Diamond Shield. We're using that core technology to then expand into other programs like AIR 6500. So we're already in that business. It's in, I think, the mid... The low to mid-single-digit billions at this point, and we're gonna try to ramp that up, in and of itself, add other technologies to that for networking and connecting, again, our platforms, as well as other platforms from other OEMs, to provide mission solutions for the DoD. So the digital and the physical technologies will ultimately come together in a way that can advance mission capability for our customers, you know, in, say, air-to-air combat, surface warfare, et cetera, and as you know, air and missile defense integration. Those kinds of missions, we want to advance every 3-6 months with a combination of digital and physical technologies of our own and from others, partners, et cetera, that we will work with. So this is a, you know, again, long-term, broad approach, but we've already got a very, very good starting point. That's material in the command and control and battle management systems that we have today and how we're augmenting them and modernizing those for the future. Okay, going back to the question on margins for next year. Just, you know, as I mentioned, underlying margins, and let me, for sake of clarity, margins excluding the impact of the MFC program, we expect to be flattish. The MFC programs, it'll provide a drag on the margins next year, and it's a question of timing. So it could be anywhere between 25-50 basis points, and again, we'll have a lot more clarity on that as we close out the year. Thank you. The next question is from the line of Noah Poponak from Goldman Sachs. Please go ahead. Hello, everyone. Good morning. Hi. Jay, I guess I also wanted to ask about margins, and you sort of did there, but I don't know if you would just state where you expect the MFC margin to shake out for the year, next year, or what it looks like in the quarters with the more concentrated losses. And then I just wondered if you could talk about how a little bit more about how this got here. I know you've talked about having the fixed price LRIPs, where with prices fixed a little while ago. Is that something that's been going on longer than I realized? I know you also, or my understanding is you also no-bid a missile program that was awarded recently because it had fixed-price development. Is the customer shifting the risk a little bit towards the contractor, or am I overreading what I'm seeing out there? Well, let me maybe take the second part of it and then circle back. There are really two different programs. The stand—I think you're referring to the Stand-in Attack Weapon award, and that was a fixed price development program that we decided not to pursue because of the risk posture of there. And, you know, each program and pursuit really stands on its own, and we review those individually. In this case, we thought the risk profile was just too much, and so we backed off. On this particular program, on the classified program, that was a cost-plus development program, so there really was not much risk associated with the development cycle. There are these production, low rate, initial production, lots that, that were priced pretty aggressively, and, and hence we're starting, we're gonna start to see the headwinds associated with that. You know, as Jim mentioned, these are, this will, would be a long-term program, and we know what it takes to make sure that, we, we provide, accretive NPV on these types of programs. And so we track that and monitoring that, and we're confident over the long term we'll be able to, to deliver that. So again, these are case-by-case types of situations that, that we pursue. You know, on, on the, we'll probably have to get back to you on the specific MFC margins for next year. I think we can back into, you know, 25-50 on the total company. You can back into what that impact is for MFC, but I just don't have it in front of me. Yeah. And, Noah, just to give you a context here, you know, the approach we're taking, and so, you know, no matter what the customer's initiative is on risk balancing or imbalancing. The approach that Jay and I are taking here, as we look at programs going forward and opportunities, is, you know, really a holistic one, where, you know, we do take the long-term total program value into account, but we also take, we'll take into account seriously short- and mid-term risk management. You know, especially when it comes to fixed price, either development or initial rate production, because if you look at the concept of fixed price, initial rate production on a program whose technology is not settled in the first place yet because development hasn't been done, we would ascribe a higher risk factor to that, I think, going forward here, based on both experience and just our own perspectives on these kinds of things. Okay, and Lois, I think we have time for one more as we approach the top of the hour. Thank you so much. I have a question that come from the line of Jason Gursky from Citi. Please go ahead. Yeah. Good morning, everybody. Jim, you mentioned in your prepared remarks the idea of a supplemental for Taiwan. I'm wondering if you wouldn't do us a favor and just kind of remind us of, you know, what you're shipping into Taiwan today, and in the context of a supplemental, what kinds of things do you think are gonna be in high demand and would lead to more revenue for you all? And then, Jay, related to international here, I was wondering if you could just give us a quick update on the margin profile of your international business, kind of writ large, today outside the F-35 program. If international is growing faster, is the expectation here that we would, all else being equal, see margin expansion in light of international historically being higher margin than domestic business? Thanks. So Jason, on Taiwan, I think the signature program that everybody's aware of is F-16 in both production and modernization. So that's ongoing. But we also provided a kind of comprehensive defense of Taiwan, like a defense of Guam, award we won last year, approach to integrating, you know, these digital technologies with the aircraft available that we provide and others, the missile systems that we provide, and others, and integrate them into sort of this porcupine approach to defending Taiwan, just like we're designing for Guam. So there could be a wide range of digital and physical products that would come with this over time. The U.S. government will help define with the Taiwanese government, what, when, and if any of those will be procured, and released for export to Taiwan through the FMS program and other vehicles. So I can't speak for the government as to what that will look like, but I think, you know, it's, again, a possibility that given the rising tensions, there could be supplementals for Taiwan, in addition to, as we said, Israel and Ukraine. On the international margins, historically, the margins have been higher than they are for U.S. government customers. But in this case, it's so what I would expect, the base business to continue this higher margin. But a lot of the incremental opportunities that we've been talking about are really going through Foreign Military Sales contracting, which are more like U.S. DoD-type margins. And so, while we will see kind of a net blended margin profile that's probably higher than the kind of base U.S. DoD, it will be limited. At least the incremental business is gonna be limited because they are FMS. All right. Great. Thanks, everybody. So I think we're at the top of the hour. I'll turn the call back over to Jim for some final thoughts. Sure. Thanks, Maria. Before we conclude today, I do wanna thank all of our employees around the world and across the country for their continued dedication to supporting our signature programs. They're going after new pursuits, advancing these digital technologies, and all that together will really enhance deterrence globally, and especially in the more sort of dangerous world we live in. I wanna really congratulate and thank our teams for everything they're doing. We also wanna make sure that you, the shareholders, are reminded yet again that everything we're doing here is designed to deliver a compelling value to you all for many years to come. You know, Jay and I really focus on free cash flow per share, along with the dividend, to make sure that you're getting a, like, an interesting return over time, and we're trying to expand the business as we go as well. So thank you again for joining us today. We look forward to speaking with all of you on our next earnings call in January. And Lois, that concludes the call for this, for this morning. Bye-bye. Thank you. Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T Event Conferencing. You may now disconnect.