Noah Poponak: You talked about Pentagon terms of trade and contract structure here, and you mentioned NGI as cost plus development. But you also mentioned they asked for — to kind of see multiple contract structures. Curious what they asked to see, where you landed on those maybe interim windows between development and production. And then, Jay, the loss-making classified program in MFC, what year do you expect that to be profitable on an annual basis? And just to confirm, there’s one program in that position, correct, not more than one?
Jay Malave: Yes, that’s correct, Noah, just one program. And I think right now, our outlook would say probably in — if you’re — probably 2028 is where we would expect that to flip to positive. Again, it’s a question of the timing of the recognition of the losses, but if you assume kind of more linear approach from here on out to be about 2028. As far as NGI, just again, the different contracting vehicles are ranging anywhere from cost plus to fixed price incentive. There is no — the customer hasn’t selected exactly which vehicle wants to pursue. So there’s nothing actually under contract for the next phase or phases. Right now, we’re going to continue to perform under the current contract, as I mentioned. We got critical design review in 2025. We also, as part of this contract, we have to provide some test assets. And between now and then, I’m sure we’ll have discussions in terms of getting future phases on contract.
Jim Taiclet: Yes. And Noah, the principle behind what Jay and I are speaking to here is that we want to be agnostic ultimately from a risk-adjusted basis on whatever contract format that the government would like to employ in these matters. So if it’s going to be any kind of, I’ll say, a highest risk would be again, fixed price production on something that’s not been designed yet. We will put a high risk premium in the future and have on those kinds of requests of the government. And what’s interesting is they’re asking for multiple types on NGI. And that’s going to give them an opportunity to see what contract risk transfer to industry is now going to cost, at least in Lockheed Martin’s case because we will reply on that basis to say, if you want us to have this kind of contract, we have to have a risk premium that’s significantly higher than, let’s just say, a pure cost-based contract to give you the greatest contrast.
And that’s just the principle we’re going to use from now on. So if you want a certain price point as government, we will provide you a contract format that will get you that price. But if you want to shift more risk to industry, you’ll see a higher risk premium come back in our proposal, if you will. So that’s the principle we’re using and that we’ll continue to use.
Maria Ricciardone: Lois, I think we have time for one more question since we’re close to the top of the hour. So let’s take one more, and then we’ll be done.
Operator: Thank you. And next question will come from Rich Safran from Seaport Research Partners. Please go ahead.
Rich Safran: Good morning, thanks. Two-part — quick two-part question on C2BMC. I want to know if you could discuss the P&L impact in terms of timing and margins. Second and more broadly, I thought you might discuss a bit about how this fits with the — with your strategy for pulling in mission-centric programs and what the opportunity set there is?
Jay Malave: Okay. For timing, we’re — we’ve been under contract. This is a follow-on for us. And what I could do, Rich is I don’t recall off-hand exactly what the annual revenues are, but I got Maria follow-up on you. But this is, again, just a continuation of those activities there. And so no significant change I don’t think from a revenue standpoint or margin expectation at RMS for this.
Jim Taiclet: And so from the mission-centric approach, this is actually a pretty good example of that, Rich, in pulling through or extending existing programs, right? And so we’re trying to show is that you can map data flows through a full mission, right, which generally includes and now cyber, by the way, upfront. So you have a cyber-track, then you have to have a sensing capability. You then have to have a way to get sensor data, whether it comes from a satellite or a submarine back into the command and control system. Along with that, you have to have targeting and tracking quality data that comes from beyond just the sensing of an object that’s a target. You have to be able to track the target in a way that you can then guide a projectile to it and take it out or put a cyber-attack against it or laser or whatever the effector will be.
And so the term of art for that is not pretty. It’s called a kill chain. We want to put these chains together in diverse ways that are, again, anti-fragile, which means if you take out one link in that chain, you don’t eliminate your ability to complete the mission. And so that’s where we’re looking at data flows in addition to physical flows, if you will, right? And if we can help create an open architecture system that can provide multiple routes of data flows that can affect missions, then we will be able to have a head start on our platforms and designing to those. And that’s what we’re doing with Black Hawk for example. That’s what we’re doing using the C2BMC system. The LRDR radar and ultimately, the NGI missile will be based on a similar architecture.
We’d like that architecture to be common outside of Lockheed Martin as well as inside because that will open up more suppliers to us and also provide the government more competitive options. So this is all coming together, and I’m kind of glad you asked the question here at the end because it’s very intentional.
Jim Taiclet: Okay. Thanks, Maria. Thanks, everybody, on the call. I want to also express my appreciation to everybody at Lockheed Martin for their relentless focus on this operational execution I mentioned, driving innovation and excellence. And we’re all doing this in support of our customers. That’s the reason. We have a vision for 21st Century security that we think will keep deterrence high in an increasingly complex and threatening global environment. As a company, we have a strong backlog, as you heard. We’re driving operating discipline across the whole organization and this continuous improvement mindset we have. So all that’s designed to position our company for U.S. shareholders for future growth and attractive and reliable returns to shareholders over a long period of time. So thank you all again for joining us today, and we look forward to speaking with you on our next earnings call in July. Lois that concludes our call. Thanks.
Operator: Thank you. And ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using AT&T Teleconference. You may now disconnect.
