Lockheed Martin [LMT] first quarter sales grew slightly from $15 billion last year to $15.1 billion this year on the strength of 16 percent sales growth in the space sector, which saw a $400 million revenue increase from about $2.6 billion last year to nearly $3 billion this year.

Operating profit in the space business area increased from $252 million to $280 million, the company said.

Jay Malave, Lockheed Martin’s chief financial officer, said during an Apr. 18 company earnings call that the space business area’s increased first quarter sales were “driven by strong growth on the Next Generation Interceptor and classified programs.”

Of the $400 million increase in the space business area, $185 million was for NGI, $170 million

was for classified programs and the Next Generation Overhead Persistent Infrared geosynchronous satellite program, and $55 million for Orion for NASA’s Artemis program, Lockheed Martin said.

The space business area’s operating profit was up 13 percent, partially offset by $45 million of lower equity earnings from Lockheed Martin’s investment in United Launch Alliance (ULA)–lower equity earnings “due to lower launch volume and an increase in new product development costs,” Lockheed Martin said. ULA is a joint venture formed by Lockheed Martin and Boeing [BA].

As other companies, Lockheed Martin continues to face supply chain bottlenecks.

During the Apr. 18 earnings call, Robert Stallard of Vertical Research Partners asked for an update.

“Ultimately, the supply chain delivered, for the most part,” Malave replied. “There are still some pockets of it. Where it was impacting the most was at MFC [Missiles and Fire Control] and RMS [Rotary and Mission Systems]. Both of them have some continuing, lingering issues that continue to plague us. The on-time delivery performance really didn’t get any better from Q4 [the fourth quarter of 2022] and really what we saw in the back half of last year. As we expected when we reset expectations in the second quarter of 2022, we’re really not expecting any kind of significant recovery until the end of the year as we go into 2024.”

CEO Jim Taiclet said that Lockheed Martin is moving to implement a company-wide approach to supply chain management to pool aggregate demand for parts, rather than a business area-specific approach, as done previously.

U.S. Army leaders have said that rocket motors are a pacing item for the Guided Multiple Launch Rocket System (GMLRS), used by Ukraine in its struggle to repel the Russian invasion.

For tactical and strike missile programs under MFC, Lockheed Martin on Apr. 18 reported lower sales of $60 million, compared to last year, due to lower GMLRS production.

Lockheed Martin’s two rocket motor suppliers for GMLRS are Aerojet Rocketdyne‘s [AJRD] Solid Rocket Motor Center of Excellence in Camden and Northrop Grumman‘s [NOC] Allegany Ballistics Laboratory (ABL) in Rocket Center, W.Va. ABL was formerly part of Orbital ATK, which Northrop Grumman bought in 2018.

The Army is looking to save nearly $150 million in fiscal 2024 through awarding multi-year procurement contracts for GMLRS and the Patriot Advanced Capability-3 missile (Defense Daily, April 13).

Malave said on Apr. 18 that Lockheed Martin plans to increase PAC-3 production from 450 annually to 550 annually by 2026 and to increase Javelin production from 2,000 per year to more than 3,500 by 2026 and “ultimately to 4,000.”

For the first quarter of 2023, compared to last year, sales at Lockheed Martin Aeronautics fell $132 million from $6.4 billion last year to about $6.3 billion this year.

“The decrease was primarily attributable to lower net sales of $335 million for the F-35 program due to lower volume on production contracts,” Lockheed Martin said. “This decrease was partially offset by higher sales of $135 million on classified programs due to higher volume and $70 million for the F-16 program due to higher production and sustainment volume.”

The F-35 has accounted for 27 percent of the company’s annual sales.

“For the year, we expect F-35 deliveries to be lower than previously anticipated due to software maturation with the Tech Refresh 3 program and hardware delivery timing,” Malave said on Apr. 18. “We will refine the impacts as the year progresses but do not expect a change to Aero’s 2023 sales and profit ranges.”

Taiclet said on the Apr. 18 earnings call that “a fraction of [F-35] deliveries will be impacted” but that the company expects “little to no revenue impact from any potential delivery delays.”

JP Morgan analyst, Seth Seifman, asked during the Apr. 18 earnings call whether investors “are kind of fortunate” that the Lockheed Martin Sikorsky and Boeing [BA] Defiant X coaxial rigid rotor helicopter had not won the Army’s Future Long Range Assault Aircraft (FLRAA) competition, given the Government Accountability Office’s (GAO) estimate that the Sikorsky bid was 45 percent lower than Bell’‘s [TXT] winning V-280 Valor offering.

The GAO said that the Sikorsky and Boeing Defiant X proposal was $3.6 billion lower than the Bell V-280 Valiant but that the Army deemed the Sikorsky/Boeing FLRAA bid “unacceptable” in critical evaluation areas (Defense Daily, Apr. 14).

“While I will acknowledge that the [Lockheed Martin/Boeing FLRAA] proposal did include aggressive pricing, a significant amount of our offering included efficiencies made possible by facets of 1LMX,” Malave said on Apr. 18 in response to Seifman’s question. “Our adoption of 1LMX model-based and digital thread enhancements significantly improved our cost competitiveness, and we expect that to continue in the future. The business case itself was favorable, and that’s what enabled the pricing that we were able to offer.”

Lockheed Martin has teamed with Microsoft [MSFT] on the 1LMX effort, which is to use digital engineering to transform Lockheed Martin’s business practices (Defense Daily, Nov. 16, 2022). Microsoft’s Azure Government Secret cloud is to be the foundation of 1LMX.