Lockheed Martin Corporation (NYSE:LMT) Q4 2022 Earnings Call Transcript

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It will be able to handle more weapons. It will be able to upgrade electronic warfare capabilities. It will be able to accomplish more missions. So the basic functionality of the aircraft alone by itself is going to be elevated significantly by the insertion of this technology. And what is this technology? It’s an updated core processor. So the — basically the server for the airplane that it carries with it is going to the next-generation upgrade. The data storage is going to be vastly improved. And then the display is going to be modernized for the pilot, so what they see, how they interact with the jet and with other aircraft and systems around it. So those three things, right, data processing capability and speeds, data storage capacity, and the ability to interconnect with basically a modernized interface for the pilot along with the better capabilities they’re going to have to interact with other aircraft to other systems because of TR3 are all of the characteristics that you need for an edge compute node in a modern 5G Internet of Things system and architecture, right?

The three things are data storage, multi-cloud connection and processing power and speed. So we’ve actually killed two birds with one stone with TR3 here. On one hand, the aircraft is going to be much more capable in the kind of its traditional role. On the second hand, it’s going to be way more capable, perhaps uniquely capable, in sort of the network Internet of Things or Joint All-Domain Operations of the future, right? That’s what our customer calls that. So we have now the computing power and the capacity to serve as sort of the central aerial component of our 21st Century Security open architecture concept. And that’s really the two pieces of F-35, TR3. They’re super important. One is the airplane itself; and second, its ability to network with other systems and aircraft in an IoT-based architecture open architecture.

Jay, do you want to speak to that?

Jay Malave: Sure. To answer the question on add-ons, that is — will be — that will occur but not necessarily in 2023. If you think about it right now, we’re going to be introducing and cutting in new production, hardware and software on a full rate production program, which is a pretty aggressive schedule. And so what I would expect — and this is included in our sustainment revenue growth projections, we’ll see the retrofits on the existing fleet over time. And that will probably start beginning maybe sometime in 2024 and beyond, and its part of our mid-single-digit sustainment growth on the F-35.

Operator: Next, we’ll go to Matt Akers with Wells Fargo. Please go ahead.

Matt Akers: Good morning. Thanks for squeezing me in. I wanted to ask, I think you had mentioned some of the restocking of stuff Ukraine and you’ve got some orders there. How big is that for Lockheed Martin? And how should we think about sort of the timing? And how accretive that might be the growth maybe in ’24 and beyond?

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