Lockheed Martin Corporation (LMT) Earnings Call Transcript & Summary

Thank you, everybody, for joining us. We're very excited to have the CEO and CFO of Lockheed Martin. Jim, Evan, thank you for joining us today. Truly appreciate it. I know you guys wanted to talk or mention the safe harbor. And then maybe make some prepared remarks, and then we'll jump into the questions.

Great. Thank you for that. So briefly, statements made today that are not historical facts are considered forward-looking statements and are made pursuant to the safe harbor provisions of the federal security laws. Actual results may differ materially from those projected in the forward-looking statements. Please see Lockheed Martin's 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.

Jim, please take it away. We'd love any remarks.

Good afternoon, everybody. Thanks, John. We're making great progress and getting really great traction on all three of our major strategic initiatives that we've had in place over the last 5 years. The first one is strengthening the resilience and the scalability of the defense production system, leading the way on that. And we've made some real milestones recently worth mentioning. One is we launched the first instance in one of our businesses of a new ERP system that is going to take us into the -- literally, the electronic age, everywhere from design through engineering to production to sustainment on a digital thread. That's being implemented right now. We started this about 3 or 4 years ago with a $6 billion effort over 8 years, and we're probably 60% of the way through that now. So that is in place. That's going to allow us to be faster, more efficient and with less quality concerns along the way. Another example is that we've entered into with the U.S. government, two framework agreements as we call them, to bring more commercial practices to major defense programs. And I think these are actually very much groundbreaking initiatives here with the government in place today. We got to get those programs to congressional approval, but we're all confident that that's going to happen. What this does is it takes the defense production system from 1 or 2 year time contracts that make it really tough to drive our supply chain in these cases, 7-year contracts with commitments and protections for industry along the way that will allow all of us, us and our suppliers and our cohorts as the major primes, to act more like commercial businesses, make more upfront investments with high confidence, make investments early in improvements on, again, production and sustainment and other ways that we can actually scale our profitability as well. And so we're basically cutting off the constraints of the federal acquisition regulation, the way it's been applied to these kind of programs and moving into an era of commercial level agreements for the industry, which will actually, I think, make us more effective for our government customer and make us more profitable and scalable and resilient as companies for our shareholders. So that's one area where I think we made really great progress recently. The second one is driving digital technology into defense missions. And when it comes to that kind of initiative, it's important to be able to have and contribute a decisive military advantage at a theater or a high scale level to really make a difference in national security missions. So for example, we're driving autonomy and AI into real defense missions like air superiority, where we showed that we can actually today and have today taken an F-22 production aircraft integrated some new technology into it with AI and autonomy controls that we've developed internally and our own R&D and controlled an actual working drone and create a drone wing man out of that today. We can do that now. And if we can scale it on F-22s and F-35s, which is our plans and whether it's existing or new collaborative combat aircraft, like we demonstrated already, then we will be able to bring major improvements to the air superiority mission for the U.S. Department of War. Another, I think, great example of this is we have a fully autonomous Black Hawk helicopter, actually more than one, which we can do missions such as wildfire fighting, search and rescue, contested logistics to the frontline and air evacuation of wounded soldiers without putting crews at risk, without having to worry about crew rest or downtime and actually doing it safer than if you had crews. So we're bringing autonomy and AI to real scalable missions. And the way you have to do that is to have the range, payload and survivability to operate in a really heavily contested environment to be able to prevent and deter those situations from happening. The third area is we focused on is growing our international business, and we've done that on two dimensions. One is our international sales are indeed growing faster than our domestic sales. We have a deployed force around the world is trying to bring the best of our technology to our allies. We're getting good support from the U.S. government in doing that. And also, we've scaled up our co-production and teaming on an industrial basis with some of our most important allies. We set up in Australia, a guided weapons installation with our Australian partners and industry. I just visited in Vesa, Germany production facility for center bodies of F-35s at Rheinmetall, and we just keep doing these co-production and co sustainment arrangements that actually feed back into international sales. So on all three of these big strategic dimensions, I think we're making excellent progress. And I'm very optimistic about the future for this company and really for our industry.

That's fantastic. There's a lot to dig into there. And it's also on the back of a very strong quarter. Evan, do you mind kind of recapping some of the momentum in the quarter?

Absolutely. Yes, the performance last year, the deliveries, everything we've done and the investments have set us up for a very strong year. So our total year guide continues to look strong and right in line with what we guided to in the earnings call. There are a few peculiarities in the first quarter this year. I just wanted to highlight that make it an unusual compared to last year. Last year, 1Q, we had some big nonrecurring events that drove up margins and revenue. And then this year, there's less weeks. So compare year-over-year, it's a bit of a tough compare on sales and margins. And then on cash flow, to Jim's point about our digital transformation, we're onboarding a new billing system, 1 of our units. And as any of these billing transformations that we've seen that usually drive some timing. Typically, our sales this quarter might get collected in the quarters to follow, all contained within the year. The full year cash guide continues to look right on, but we might have a negative free cash flow in the first quarter as a result.

Okay. Got it. Maybe we could get back to some of the bullish big picture themes, Jim, we've had this moniker of mega trends. All of these like missile defense space, all of these themes that are really driving a tremendous amount of growth across defense. I'd love to just kick it off and get your reaction to that. And maybe you could talk us through Lockheed's exposure to some of these big picture themes and the ones you're most excited about?

Sure. So we look at the world in terms of missions. I mean, I came from a technology and telecom background over the last 20 years or so before I joined the management team here at Lockheed Martin. And what we try to do in that industry is improve the service level of our offering, whether it's telecommunications or remote mapping, et cetera. Throughput of data through data centers. You're always trying to use hardware, firmware and software on a continuing basis to improve the level of service. Our services, if you will, in the aerospace and defense industry are things like air superiority. And the mission at the end of the day is to shoot down other aircraft while not being shut down yourself. And so that's where some of these notions of how do we drive digital technology into the superiority mission while producing the best products in the world, the best hardware in the world and then augmenting that hardware every 3 to 6 months with better firmware like TR3, it took a little while to get it out there, but it's better firmware. It enables that hardware to do more in connecting to software apps and networks outside the jet. And then that then enables that those software apps and networks they have their own improvements. They continue to roll on top of the better hardware, the better firmware, the better software. Then when you get a new aircraft like a Block IV version of F-35 out into the fleet, it's actually starting from a higher position as far as its ability to contribute to that mission. Same with surface warfare, for example, right? Control the sea lanes is very important. We've experienced that in the Red Sea, for example, where the Aegis combat system is sort of tried and true, radar, brand and control for ship defense. We encountered is the U.S. Navy and its merchant shippers that the Red Sea was being basically constrained by Houthi cruise missiles and slow flying drones that the EIS originally was not designed to detect. So what we did was we used our AI center in the United States, did overnight downloads of tracking data every night, ran it through the AI data fusion engine that we had and then over the air, using Starlink actually, got updates to the software overnight, which helped enable the Navy to stay in and defend the Red CC-link. So that's the kind of example in that mission. And then another one, which you kind of touched on was about 12 of these. I won't do all 12, but let's just pick integrated air and missile defense, which is Golden Dome. That is integrated air and missile defense. And the portions there that we are actually quite involved in and will be quite involved in under Golden Dome is the space-based sensing and tracking with satellites and geosynchronous, mid and then low orbit. We're involved in all those areas. Integrating that then with ground-based radars like LRDR, it's a long-range discriminating radar. It's not as big as a house. It's as big as a stadium. There's one up in Alaska right now that we turned on. That will improve the ground-up radar to improve the air missile defense mission, a great piece of hardware, but integrated them with the satellite data and then a fusion engine into something called C2-VMC, which is the command and control system, for missile defense that the United States uses. And then that integrates with aircraft and other radars, et cetera. And at the end of the day, if you really have to exercise this mission and a missile is coming at the United States or it's coming at Al Udeid Air Base in Qatar, that's when the PAC-3 missile, that THAAD missile, the next-generation interceptor for long-range ballistic missiles, where we're all involved in those systems will come into effect. And so we are essentially in every element of golden Dome, which at the end of the day, again, is the air and missile defense mission. And we're going to continue to use hardware improvements firmware improvements and then the connectivity through the network to apps and software to get better and better at that mission. And I think that will really be constructive to the notion of Golden Dome. Where you're rolling it out over a period of years. to defend the United States. And by the way, that applicability would be for Western Europe as well. It would be for Japan as well. And so this will be a scalable, repeatable mission set that we have as our company, it turns out most of the major ingredients, if you will.

Yes. There's a lot to follow up there. And definitely want to spend some time talking about how those flow through the different segments. But before we do, we've been asking one question of all of the primes, which is just a reaction of Trump's executive order and the performance reviews, what do you expect to come from those reviews?

So we welcome the focus on performance of the industry, accountability for us, but also what's come with that is, again, flexibility and an understanding if we have an escalating threat which we have, very rapid technology development and digital and physical technology in the 21st century, which is the fastest rate in human history and a -- not unlimited defense resource budget that the only way to actually solve that engineering equation is for the government to also change how it does business. And so both of these things are happening now, an industry, it's our responsibility to step up to that higher demand, faster time lines, quicker technology insertion, the inclusion of digital technology into these missions. That's our job, and we need to get better at it as an industry. And so we're welcoming that opportunity in that challenge in a way. I think our company is as professional as any, as capable and as skilled as any. And so we should be able to take advantage of the situation to improve ourselves and improve our performance for shareholders, too.

Got it. Maybe we can step through some of the segments. Aeronautics, just to kick it off. We can't talk about Aeronautics without talking about the F-35, I'd love just an update on the F-35.

Yes. So very strong deliveries last year, record deliveries for us. We see production continuing on at the traditional rate we've seen about 156 a year. and deliveries to likely mirror that. Low single-digit growth on production and some of that is due to lot 20 being awarded next year. If you look at our results historically, when we sign contracts, it typically comes with revenue and some of the costs that we're building doesn't turn to revenue until that contract signed. So that is why you see maybe a little lower growth in that 35 production, F-35 sustainment is pacing the growth we could even see approaching double-digit growth on F-35 sustainment. That, of course, continues not only as we're delivering planes, but we've seen some budget uplift on the sustainment mission. And we've -- we're looking to prefund that with some investment we've committed to as we and our customers are very well aligned in F-35 readiness. We see growth in Aeronox classified. That, of course, is dilutive in the near term. and that is one of the top drivers there as well as we see some submissions building on that side.

And from a kind of a strategic arc of the F-35, we're about 1,200, 1,300 aircraft built and deployed out of about 3,500 program of record, so about 1/3 of the way through the program. And F-35 as a contributor to the air dominance and then this the air strike mission, meaning air-to-ground attack mission that has both of those. We are going to do a couple of things in the strategic arc of the aircraft itself within that mission set. The first is we're modernizing based on the block the TR3 firmware what's called Block 4 hardware upgrades, so component upgrades. So this could be inclusive of engine upgrade replacement. It could include sensors like radars and distributed apertures. It will include communications beyond line of sight, et cetera. So all of those components, it's called the Block 4 hardware enhancement. At the same time, we've already got the firmware enhancement in place and the compute capability that we needed to do all of those improvements in sensors and systems on the jet now being produced. The next phase is going to be a commitment that I made to the U.S. government leadership, which was we think we can take a lot of our sixth generation skunkworks R&D, and port it into the F-35 right subsequent or alongside of this Block 4 improvement of subsystems. And so what we're talking about now is coatings for the aircraft. The geometry and the coatings of the air inlets and the exhaust of the engine. The notion of centers that we develop for and GAD that we can then port over into the F-35. And so during the next, again, 20 to 30 years of production there will be continuous improvements like we talked about for the Air Domino's mission, which will be delivered through that vehicle. And so at the end of the day, we will have highly capable aircraft that are getting improved all along the life cycle. And also, as Evan said, to have better essentially for an airline beyond time take off rate, we call it a mission-capable rate while we do that. And so that will increase the way I describe it to our senior government customers is we want to maximize the air combat power of the United States over, call it, a 20- to 30-year arc of time in the most resource-efficient way. And to do that, we have this pathway for F-35 that will basically be the linchpin of this strategy. It's also complemented by F '22, which we're upgrading kind of quietly with the Air Force, but it's going to be upgrading along the way, just the same. NGAD will kind of join it in a few years, which is the Boeing production. And we'll have fourth generation planes that are enabled like F-15s and F-16s and F-18s to do their missions because of the capabilities of the F-35 and the F-22 to clear the air space. The F-35, as a reminder, is the only production fifth-generation stealth aircraft in the free world. So this is a critical program for the United States and its allies. And again, there could be some innovative contracting methodologies that we could come to agreement with the U.S. government and our allied customers. to actually make the program perform even better.

Yes. And you mentioned it's a pivotal program for many of our allies as well. Can you talk a little bit about international demand for F-35 for the year?

So there's significant international participation. So there's 19 other countries that fly the F-35 or have ordered it. One of the biggest benefits of F-35, especially in Europe and everywhere is the interoperability of the data system. So the sensor data across F-35 seamlessly and without any pilot input is shared with other F-35s in the formation or even beyond line of sight and we're integrating satellite connections and others into this so that the F-35 is not only the most capable fighter plane, it's also the most capable aerial command and control and data networking node on essentially a 5G Internet of Things system. And so that allows the U.S. its allies to interface data and bring mission planning down to the command center integrating all of those aircraft data in a seamless way. And we're actually then taking those sensor data, sensor data sets. And some of those targets will be assigned in the F-35 and maybe in the formation you're in with 48 planes. Some could be signed to another formation and some could be sent to the command post and connected to a high Mars launcher to hit a certain target that the F-35Cs with a ground-based missile. And so what we're trying to do with all of this is to create a deterrent effect to any potential adversary to say we don't know how good the U.S. and its allies are going to be at defending themselves. So we're going to wait another day and see if we think we can have enough confidence to act. And our goal is to move those goalposts out every 3 to 6 months on every mission set, using all that technology so that we can -- we're in the aerospace and defense industry, I'll say, but we're in the business of deterrence. So we want to advance deterrents using these mission capability road maps with the best hardware, the best firmware, the best software, the best network that anyone has in the world and the U.S. will be the one that has it along with our allies.

Yes. Fantastic. Maybe we could switch gears a little bit to MFC. On the last earnings call, you talked about unprecedented demand for munitions, for critical munitions. We saw a year-over-year growth rate in MFC of high teens, 18% in the earlier remarks, you mentioned how there's multiyear visibility on some of these programs now. Can we connect the dots and just talk about what the multiyear revenue growth profile might look like for MFC?

Absolutely. So even before we considered these new framework deals, we were in a growth trajectory in MFC, growing double digits here as we're still scaling several of our munitions ongoing with the framework agreement signed positioning us for multiyear procurement signatures, we could see double-digit growth for the next -- through the end of the decade and likely beyond, potentially as high as the mid-teens in some years. So it is giving us long-term visibility to growth, highly -- potentially profitable accretive growth for -- through the end of the decade.

Got it. Very helpful. And maybe we can talk a little bit more about the framework agreements, and you've talked about how they need to be definitized. Maybe help us understand what the outlook looks like from here for converting them to actual sales.

And now that we have the framework agreement in place, the good news is that we can utilize these same agreements with some of our key suppliers in partnership with the Department of War. So that's the process we're in today, talking with our suppliers to get that aligned so that they also can have that 7-year visibility and make their corresponding investments to see the capacity across the industry. So we're working through that process now. We like to have both PAC-3 and THAAD signed in the first half of the year, which will allow us to start incurring some revenue this year and seeing the growth long term. The good news with this agreement, I think the framework is very fair for us. It creates incredible opportunity for us to invest and to really transform these production lines into something very different at the end of these 7 years. And we're very proud of the production capability we have today, but what we're going to have through the course of this contract by what enables is going to be something that takes it to the next level.

Yes. One of the questions that I get a lot is the margin profile of MFC as all of this is happening. And I think you guys flagged that there might be a little bit of dilution out of the gate, 20, 30 bps, if I remember correctly. And then MFC margins could make new highs. Do you mind just digging into that a little bit elaborating on what's going on there?

Sure. So the way that we do our profit recognition is we typically increase our profit rate over time through the life of a contract. As we make progress on risk burndowns, make deliveries, we'll increase that profit rate. So on the front end of the contract, we're booking at a slightly less profit. And since this is a 7-year contract, you can see why it might take a few years for it to reach the expected end margins on the actual reported margins. So that's why we signaled maybe a 20 to 30 basis point dilution at the MFC level. Of course, at the Lockheed Martin level, it's still accretive when you look at Lockheed Martin margins. And then long term, there's an opportunity to drive margins higher than traditional MFC margins. The way these contracts are established are to give us every opportunity to be successful because we're aligned with the Department of War that both of us want to be able to invest capabilities, to take cost out, transform and as rapidly as possible, give capability of the war fighter. So all the elements are there for us to increase margins and be successful here.

Yes. definitely aligned with the Department of War. We've also seen other structures to try to enhanced alignment with the Department of ore. What LHX is doing with Missile Solutions is a good example. I'm just kind of curious, you arrived at a different approach. Maybe you could just help us understand what alternatives you looked at? Did you consider a structure like LHX, pros and cons? Any color you're willing to offer?

I would say we did not consider any kind of structure like L3 Harris went through with their -- because basically solid rocket motor business, which was Aerojet Rocketdyne, which we actually publicly made a bid to purchase ourselves about 5 or 6 years ago now when I got to the company. That wasn't approved by antitrust. It was approved for LHX and they didn't have I guess, apparently the resource to manage the scaling themselves. We do. And if we were have had HRD inside of our company, we would just be doing. We have the scale and scope and the financial wherewithal to do exactly what we're talking about to deliver that growth path with internal investment and our own balance sheet, our own cash flow. And so we're committing to do that without having to joint venture spin-off, sell off part of the company.

Yes. Okay. Great. Maybe we can change gears a little bit to RMS. When I talk to investors by comparison, RMS is viewed as a little less exciting than everything that's going on in MFC and space. but people might be getting it wrong. Maybe you can just kind of give us a sense of the outlook for RMS from here.

Yes. There's a lot in RMS that we're excited about. We're currently in a growth trajectory for Sikorsky as we ramp up production on the 5300 helicopter. We continue to see some growth on Blackhawk helicopter as well. And then some of the elements that Jim mentioned, I think, are very important. When you look at terms of autonomy, C2 and the Golden Dome mission, which could very likely have components of ground-based radars, potentially even directed energy laser capabilities for defense and smaller scales. So we're excited about the autonomy investment and where RMS can go in a lot of cases, be the glue of those platforms, which is part of the value of Lockheed Martin. We have the ability to tie our platforms together in a cross-domain manner and RMS is the center point of that.

Yes. And part of the autonomy push and the AI push is taking a legacy platform that has the range payload and survivability in many cases to actually do real-world missions at scale in a battlefield environment. Well, the Black Hawk can live forever in a way because even though it's a legacy design, if the operation or the mission can be done by the U.S. Army, for example, without having to commit the human resource of all the pilots and all the crew rest and all the life support systems and all the search and rescue that you have to have if you've got human pilots doing missions, some of them you're going to want human pilots, what it has to do with lethal force or really highly sensitive missions like in Venezuela. You're going to want to have human pilots involved in that in human crews. But if you're doing something like an era evacuation from a hot landing zone, and you don't want to put the crew at risk, but you really want to go rescue that person that got injured one of your soldiers and get them back to the field hospital, you're going to be able to use that legacy Black Hawk to do something at lower cost and risk that you can do with even any new platform necessarily that you can build. So part of the goal of our autonomy and digital push is to make our legacy platforms as long-lived and is important and is valuable from a perspective of capability versus cost as we can. So Blackhawk, F-35, we put pods on F-6 teams that enable a lot of this capability, data networking and sensors that we invented many years after the F-16 was launched or even the latest version of Block 70, we put on a pod underneath it, and now that pod can connect to the F-35 datalink system. And therefore, now your fourth generation plane was designed in the '70s I actually tried to get out of pilot training in 1986, but didn't get it, but I got a net. But that age of an aircraft design can be on the modern battlefield and be effective. And so that's the push for digital technology from AI for autonomy and our company is in large part to make our big platform hardware more long-lived and more effective and more valuable.

Yes. Before we move on to space, just on RMS, I wanted to take the temperature on performance trends in general. There have been a couple of charges and just whatever you're willing to update.

Yes. So on our two international helicopter programs, first on the Turkey helicopter program, we've made great progress there with our partner, TAI and restructuring that agreement to something that is -- that works for both parties which is excellent. TAI has been a very long-term partner and customer for us. So this gives us a strong framework to continue to partner with them since Turkiye is a key part of the European Security Solution. On Canada helicopter, we continue to work that with the customer. We've delivered all the aircraft and now we're in the process of just looking at ways to restructure that contract going forward. Across the business, I'd say generally pleased with the performance on the 53,000. We didn't quite reach the ramp rates we'd like in 2025. So 2026, that will be a big focus for us to drive the ramp of 53,000 and get the performance that we expect out of that aircraft.

Okay. Great. Jim, I wanted to go back to Golden Dome and space. You're obviously so excited about it. You mentioned it in the earlier remarks. Can we just double-click on that?

Sure. So there's some classified space that will -- we expect to be a big part of Golden Dome based on the government's public statements. Secondly, this PAC-3 and THAAD, and I expect, again, there will be more systems rolling out from the Lockheed Martin and the Department of War in this vein. Part of the ramp to 2,000 PAC-3s a year may include Golden Dome. It may be on top of it. We don't know yet. But our ability under these framework agreements to scale up production faster than we could under the old cost-based federal acquisition regulation system is going to benefit Golden Dome in its deployment. And I think bring much of that business to the suppliers, not just Lockheed Martin, but those of us that have proven we can do this kind of hard science in space or from ground to air or ground to space or have resilient radars that can take out the jamming in the clutter and the electromagnetic battlefield that you have and still see the target. And if we can act like a commercial company because we can now, we will be able to compete with all of that legacy intellectual property and manufacturability. These things are not easy to make and the testing that goes into them. They're explosive warheads on these devices. And just alone managing that, using systems, safety systems, et cetera, there's art and science to those kinds of capabilities. So we are getting kind of our handcuffs taken off a bit to act late commercial companies. I think this is a real breakthrough for our industry. Our cohorts are signing up as well. Our suppliers are signing up as well. I think it's going to be constructive to them also. And if Golden Dome is going to be rolled out, it's going to have -- the industry is going to have to work differently and we're set up now to do that. So coincidentally, this particular administration has put out some big targets for munitions production for a homeland defense integrated air missile defense system that's never been considered before, but they're also doing enabling steps that makes industry more capable of delivering. And there'll be new entrants and there'll be commercial tech companies that are involved, and that will be really great. But again, you have to have the hardware the scale hardware, the firmware and the software and the networking capability to do these kinds of missions. And they are no fail missions. These devices have to work when they're called upon. We want to send out our soldiers and sailors and marines and guardians with a high, high, high probability of getting them back safely after conducting these dangerous missions, and we want a big tent of all of Marshall in kind of all of the U.S. industry. But these large companies that have been in this business for decades, they have to -- I think, have to be part of the solution. If you want to have, again, decisive military advantage at a theater scale that deters a major power from taking an aggressive action. That's what it's going to take. It's going to take the start-up, it's going to take the new entrant. It's going to take the big tech companies, and I know there's always some controversy about who's in and who's out on the big tech companies. but we're working with a number of them like NVIDIA and Verizon and IBM together to pipeline some of their tech and some start-ups, tech into the missions that we want to do. And I'll give you one really quick example because I think it's kind of cool and interesting. There's a relatively small company called Saildrone. And what Saildrone does is build autonomous ships. And the ships are not 400 feet long, they're like 100 feet off, but they don't need any people on them. The issue was they didn't have any weapons on them either. So they're interesting, you could put sensors and they could float around and maybe you could have some kind of self-destruct mechanisms and things like that on there. But we teamed up with Saildrone and said, look, if you really want to make an effective ship that can have a decisive military advantage at a cheaper cost than a DDG, some kind of destroyer, cruiser or something that's going to have 800 people on it and all the systems that you need for the 800 people in a smaller form factor, that's harder to see. You need to put a Mark 41 missile launcher on it. And then you could put missiles into this ship send it out, you have to have a reliable command and control system that can't be cyber hack because you know what that missile being shot with no people on the ship in the wrong direction or the opposite direction. And if you can put that system together, with -- we don't make autonomous ships of this size. But this company does. They don't make and can't ever probably get to Mark 41 launcher equivalent, which has been tested over decades with the U.S. government and found to be safe for a whole range of weapons. We got married on this issue, and now we're going to deploy a really effective drone ship together that can make if it's bought in large enough numbers, a decisive military advantage in like the Pacific theater. And that's how industry should start working together better.

Yes. I think I have time for one more question. I'll wrap a couple into one, but I wanted to make sure we had a chance to talk about the CapEx outlook versus capital returns to investors. And obviously, there's some complexity there. But maybe you could just talk about funding all the organic growth versus returning capital. How do you think about it?

The same way we have -- certainly, since I've been here and probably before that, which is a disciplined and dynamic capital allocation program depending on the circumstances at that time, right? We have a lot of growth opportunity and request and demand in front of us that will underwrite on a risk-adjusted return basis. more capital expense investment. It will justify more R&D expenditure. It will justify accelerating this digital transformation because we'll get better benefits quicker with more demand. And so there are more investment opportunities than we've had in years that can be underwritten on a risk-adjusted ROI basis to benefit the shareholder. And that's our first priority. And it always has been, actually. And of course, we're going to then allocate a capital -- remain capital in ways that are most appropriate for that time. And so you haven't seen us change anything material yet in that regard. And we do things like share repurchase on an opportunistic manner. We always have. Right now, we've got a lot more opportunity on accretive growth as Evan was outlining. Than we have in a long, long time. So we'll keep every quarter making those capital allocation decisions based on the circumstances and the contracts we win and what gets definitized and what the schedules are. That's what you can expect from us is kind of more of the same.

Yes. It sounds like the dividend is intact though.

We're going to -- every quarter, we're going to assess all the inputs, and we'll make our capital allocation decision between us, yes.

Okay. Excellent. Well, we've run out of time here. This is a great conversation. Thank you for joining us. Jim, Evan, really appreciate it. Thank you for the time.