GD - Earnings call transcript Q4 2021 | General Dynamics Corporation

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Operator

Good morning and welcome to the General Dynamics Fourth Quarter and Full Year 2021 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Howard Rubel, Vice President of Investor Relations. Please go ahead.

Howard Rubel

good and Operator, you, morning, everyone. Thank the XXXX conference to General Dynamics year full and quarter call. fourth Welcome Any forward-looking statements Company's made today represent our outlook. estimates regarding the These and to subject estimates some are uncertainties. risks

Company's factors these information Additional XX-Q, X-K filings. XX-K, contained regarding and in is the

certain also financial will We non-GAAP measures. to refer

please which on disclosures measures, are the Relations these page available Web comparable about that site, slides additional measures, including on the For to accompany our investorrelations.gd.com. reconciliations non-GAAP GAAP see this webcast Investor

over would to Chairman like Executive to Phebe I call Officer, the Now, Chief our turn and Novakovic.

Phebe Novakovic

Good prior with morning, share Howard. $XXX Earlier net periods reported our sales press on quite my comparison we million in the of today are in straightforward briefly, guidance respect you $X.XX. of of revenue $XX.X segments. set of and results thank most earnings The diluted you, I'll fourth as with in consensus. quarter per release. The that and and our earnings thoughts business consistent billion, through out go some detail give rather I sell-side previous

it year would the is strongest quarter our be, final the of indicated, and both quarter revenue in we earnings. As

per a quarter fact, the sales improved earnings up to say prior return up up million, operating year. was margin, $XXX on share On earnings In over $X.XX. $XXX of operating the were It basis, net and quarter sequential progression suffice it earnings, earnings nice million, was improvements. sequential steady throughout a that and revenue

performance. all in solid So, good a with all, quarter operating

earnings diluted of value than up ended of of contract up with XXXX. from year, $X.XX For the better XXXX; and estimated had billion, fully consensus total net we of earnings share and billion, X.X% over total the backlog $X.XX $XX.X billion. X.X% modestly a $XXX.X and We revenue billion $XX.X of year $XX.XX, up full per

the The total was the $XX.X is that company about I'll comments. business Gulfstream. get business and the more powerful when by quarter to we order growth to in backlog the one-to-one billion. performance for by aerospace to segment strengthened significant of led Our have say book-to-bill year,

Our the Jason year backlog of comments quarter the and have cash XXX% year. subject on the more very rates XXX% of conversion this net fulsome in his performance for strong. income for the will The and quarter is is remarks. and

let to attention paying the each the well as sequential quarter-over-quarter year as turn provide colors Now me appropriately. in reviewing quarter some and comparisons to group context full and of and

large revenue over XX Aerospace of Aerospace. first aircraft, ago up the year quarter of So, which is cabin. the were on XX billion X.X% delivery of $X.X

delivery While our it flipped aircraft, of this the [ph] has one year, XXXX. was strongest quarter the fell expectation of into which short by

R&D. to year margins in variance XXXX. on better-than-anticipated year higher year The certification was and basis both for out that by Gulfstream million finished At margin with Aviation. a The quarter improved a year in on of GXXX operating For XXX than is of fewer $XX a were you around and aircraft, we operating and and of offset billion. a up margin. source the XX.X% though did earnings for service earnings reduction in was the are was that revenue with of we revenue. year, activity are the XX.X% driven Aerospace with In at extraordinary consensus. told by respect I orders is payment the for our GXXX ago We billion you most $XXX Aerospace the to very that operating in revenue Aerospace Aerospace ago margin, XXX also revenue margins from major The in slightly increase even though order revenue Gulfstream from an midyear boarded I accelerated $X.XX Aviation. but and the work and on earnings of the significant Nevertheless, frankly throughout was and the billion; resulting told quarter $X.XX can in X driven we Last the company forecast by modestly revenue expect $X.X said about nice full quarter, assistant year of also aircraft on should in the higher, increase better GXXX. quarter, by we the the quarter point spectacular. last margin. full Jet sum, costs of billion gross on earnings Gulfstream. launch was $X.X point helped difficulty] operating Fourth billion; X the R&D the third quarter and [Technical was million same net the close a operating to we of prior delivered The and story increase revenue be down true even results. year year that at earnings million million $X.XX $XX Jet important $XXX

quarter, the the and XXXX was good of This seen in continued the quarters through GXXX. were second Order was activity quarter. fourth with introduction we since significantly that in in Demand they quarter had mid-February red anything hot the and better. very third beyond turned

had multiples unit The XX and backlog billion Remember X.X Xx. it particulars. and X.X backlog for was quarter are in dollar me of X. Let terms, of in $X.X these significant a give alone book-to-bill over was group to the to year. added orders the that a deliveries. billion the into growth. increased very Aerospace Gulfstream Aerospace X $X.X to in an you This off denominated with translates denominator

As robust How will with it The problem the pace XXXX, you answer sales demand we current supplemented GXXXs in is needs by current in of brisk backlog brisk. new our be. backlog of not increase some and will pipeline building ready? buildup supply that the activity production production having increased a leaves to in the be previously 'XX, turned we and that is in continuing our demand the deliver remains but we Remember problem, also satisfy us where Well, Can activity the prebuild, do not in will. a a year, if the chain we Are manifest sales rich in GXXXs, 'XX production? down to go into support will us? and but nonetheless.

As out, the XX pull it which wings, we long turns in the ourselves. do is manufacturing

that You may [indiscernible] chain. of we wing the recall previously supply supply because integrated vertically in

We and fixtures. to what need another facility our do new wing and we modern do? So, need of acquire set tools to expand

this for be I'll This a robust question feel and implications the Gulfstream, leads is well. XXXX enduring will All and you of beyond. in later. for of this for 'XX comfortable guidance. place satisfy to are underway the the of given needs and our little to what guidance backlog 'XX Further, at giving address of as is anticipated with and look 'XX we 'XX a also what

front, test have new aircraft and are all test the X,XXX development X flying on product GXXX hours. flight over flight Finally,

We all have required completed XX% over of testing.

Next Combat point is billion on $XXX the Systems. Operating earnings million margin. quarter. quarter in Revenue XX a X.X% are ago $X.XX up of basis the of operating year off decrease in from $XX million

however, in highly XX.X% that point out, margin is me quarter the Let a respectable.

after $X.XX performance a is X.X% guidance billion strong $XX X.X% earlier the the XXXX. of for is way, billion up line By this the a $X.XX year we full the of $XXX increase. the Operating in year, For million, increase in growth and growth earnings moderate are year. with revenue in provided XXXX million, up in

Combat look the environment for we by As soften that the faced few increasingly next we budget years, Army. somewhat U.S forward the believe volume in will constrained

growth the in to combat War in critical remain Army see programs platform and our Abrams, While real contraction some we by may offset vehicles. international fight, part

will revenue has this Systems a had margin of positive strong has to as several now, environments. have. continued In short, strong go much good forward. order as opportunity pipeline We its group and had that very a Remember we constrained margins has activity margins growth of history we good and more continue revenue drive performance, for has always years Combat

Fourth Systems. the X% up Marine was Marine less billion quarter. ago Systems story $X.X revenue Next, of continues. quarter than The over year growth

Once earnings full this year revenue down year. the Similarly, operating for somewhat is and revenue but the are and year. sequentially X.X% highest up full in up for full of and again, quarter, ever sequentially earnings the for the above operating However, that X.X% is in we margin of and revenue anticipated $XX.X revenue X.X% billion, initial We about both million. margin. our In of operating earnings you, came group. the $XXX for guidance and predicted to operating Marine on and earnings of spot the

in lay continued well challenges COVID Our most to our that shipyards have path. of overcoming the perform

ceasing supply disruptions, chain continuing increasing throughout part shortages, commodity operate recently shortages, without to COVID, labor managing more prices. First, and and

and are on with together on to shipbuilding past from working protection report behind the improving well unions latter have and schedule Bath and workforce material we and concentrate very put long-term point, provide worked Importantly, us performance. our contracts escalation. the happy we I'm the that

and both improvement we to a As to particularly customer to these at ballistic missile size and we the it Suffice through increase very Navy deliver to V, backlog. poised that shareholders see result, on in invest significant increased are results, we scores. the for you'll EB submarine. they fleet to as to needy prepare see work demand our Block each from the Virginia has Columbia of in that this our as our continue yards, In customer, Bath say begun value our of large support to response

GDIT and Mission group Technologies of Finally, the which Systems. consists

the defense short specific and also said, locations and had you, systems. COVID-XX to that segment remind is the the remote accessing also to where Just employees with remotely. turn is and on in businesses. the Group have supply the commentary most With other that from It group have most chips the been components whose employees this impact have results impact most and from let's difficulty working participation of most from we key the this the that mission the customer

the improvement from billion For our X.X% last revenue point margin improvement of of us. is million a from earnings up quarter. discussed the earnings, growth in X.X%, a are basis in line came XX system or quarter, since the at strongest forecast. challenges on Margins point below Revenue operating X.X% ago very $XX full the are were have driven earnings by to only formation we the up XX however, and considered $XX.XX is million $XXX meet billion, up good earnings $XXX quarter, of part All year of that companies enabling guidance strength group. this GDIT. margin. the Technologies us group in X.X% with year performance Revenue by on The at operating up X.X% million, basis for had in of Operating are good guidance offset both but mission XX.X% margin. the our showed $X.XX

by to X a stronger X, many hard a leverage order Systems The did was significant job enjoyed challenging supply their very customers to lower that overcoming operating bit Mission driven and backup significant some by in the book-to-bill good good a shortages. supply of demand with environment. group nice orders satisfy working work little and quarter a very chain at of bit wins sites and little Systems. was So GDIT challenges, a a in pent-up of a very Mission chain

IT. to Turning

in Our margin of Fed in improvement the of 'XX at their drive And $X X% protests of outstanding. GDIT's to and Book-to-bill from end and year million at net the X.X%. than yearend XXX% help point of growth that of at 'XX. been Civilian division backlog sales billion a $XXX higher excess the was end a of and went the of light to income was particularly since was whopping dollar in snared GDIT's XXXX strong cash a wins as X in notable and 'XXXX. over the billion, $X.X This value acquisition, performance about at XXXX. XXXX had case end imputed XX Well basis is X.X GDIT the on

expect outside protest we will our control. is our protests favor, resolve While these timing in resolution

new As and into pipeline awaiting a bids, focus have decisions. on to customers we largely as digital 'XX, opportunities customer over work look $XX all we of healthy of modernization, pursue billion

a good expect for the business. we all, in all year So,

commentary additional turn the Jason to our Jason? for our me over with Let then year. Aiken, guidance return and for next now call CFO,

Jason Aiken

morning. and you, good Phebe, Thank

thing The first to cash our address the quarter and the I'd performance like is year. for

sales. of $X.X performance strong income you all see billion As generated can our exhibits, of cash our year us activity deployment order or that cash XX% segments. the a million the solid conversion XXX%. for performance XXX% activities. was of That's again from but fourth point, X.X% prior to reflective That the cash to and flow XXX% up rate robust full That capital in and year, the of than net company, capital from enabled the for of across flow resulted press free of That us $X.X in free ahead the four quarter to across million brings strong strong continue more XX% our performance $XXX in year. income, with at in net $XXX of and billion, we quarter or were To the Gulfstream. nicely particular, balanced release cash expenditures anticipated of

Systems CapEx and facilities unprecedented projects. those investments due strictly of our for the Of with the continues at support to for experiencing original drive phasing Group capital course, the timing sales X.X%. the of now is the decade of investments Marine growth year next plus. full of The below That's total expectation slightly elevated to X.X% the of is in

sales expenditures to our and before of somewhat in slightly to returning as investments range X% Navy's typical our more forecast at XXXX, for than support X.X% some peaked, submarine time we XXXX XXXX, capital While programs higher expect to in about remain elevated have beyond. we the

$XXX in as share. also billion to for stock shares over in respect contributed a to XX full fourth that to the year we bringing We $X.X the XXXX $X.X our million million of to shares quarter, million in to plans, year $XX expect approximately us in million result million dividends pension With bringing paid $XXX the quarter, the and under and just ARPA per of X.X in repurchased decrease just release. we funding $XXX at XXXX the we for billion,

the in conversion in plus range continue As expect beyond. we've to cash time, we generate XXXX and XXX% discussed to for some

approved of signed legislation to the see and beginning effective Our outlook proposed tax requirement, have amortization impact and purposes of Congress and of development called research but expenditures to wait the as date unfavorable it's capitalization and for under into the XXXX, for we'll law. assumes this if in law. delay There's by current

We expect the debt with of capitalization balance year conversion provision, billion, of ended paper commercial net below with deferral the cash a and a year a down R&D net position we ended is in with and free XXX% no there outstanding, flow range. from time Assuming since be cash $XX would our to first of billion $X.X XXXX. the million we've $XXX leaving billion the debt us last year $X.X approximately the

to May. expense reduction to the in the in $XXX is Our of and expense million, long-term periods. for quarter bringing XXX net million interest XXXX debt full That fourth the million. interest interest in respective was $XX the year-over-year due expense compares year back retirement $XXX billion The in million to of $X.X

$X to XXXX. in Our net next on based the declining in maturity a expect balance, of scheduled $XXX interest debt to is approximately we the quarter million And year. expense drop debt fourth billion this

guidance. the income the consistent to fourth taxes, for a Turning our rate effective and had in quarter XX.X% full we tax year previous with

discussed to once R&D lower assuming the Quarter rate backlog were first rate. the impacting remain legislation phasing items, certain be again year so the tax Looking rate forecast. to rate XX%. impacts story the quarterly activity the quarter full the full The quarter ahead X to remainder the other matter enacted cash taxes, strong the there's for of of X given impacted to and we company is the to the XXXX, not the perspective, a for will year. I year by tax higher due timing and rate with around naturally tax tax not fourth in year XXXX for be a ratio rate expect we effective expect From because also earlier no effective a legislation corporate The for rates. XXXX the that full

X.Xx way the year. with and a for the As in Phebe full quarter Aerospace order on the X.Xx group led mentioned, book-to-bill the activity

billion. remarks. guidance $XXX Phebe contracts and Group's to my give past back of for total GDIT wrap includes total As to and billion I'll a finished book-to-bill the concludes turn over group with which We quarter remarks. of in X X XX% of IDIQ X.Xx. was result, options contract $XX.X and to up a the Technologies and XXXX backlog estimated value year. that backlog it was up recorded over you a That within the

Phebe Novakovic

expectations will Thanks, to with your Jason. that, XXXX. for And I turn

forecasts business group revenue with XXXX we me roll about to So operating year. a over will let company-wide for X% then from margin Operating $X.X around expect XXXX up. our around provide Aerospace, initially around and by In up billion, 'XX XXX deliveries, be last XXX up X.X%. be

X test delivered. aircraft are driving year, we deliveries units forecast. only 'XX, in So, this were a here produced that is XXXX. about of XXX from up production more color We is anticipated completed fewer little Last than what considerably aircraft than aircraft delivered Well GXXX prior as deliver in XX completed periods demonstrators year. few and as a will of some are XXXX, either In that building aircraft. production GXXXs number not about and articles produced a test up were we that well all this

up to to in improvement ability approximately 'XX This issue points have to points. deliver will In we I at me remedied to XXXX airplanes, wing XX XXX revenue we billion deliver and the described growth. a with is 'XX, of XXX XXX 'XX. which ramp expect of airplanes, and more margin another supply be XX 'XX, driving quick leads XXXX, limited our $X.X for basis another margin in and up Finally, revenue by XXX earlier, In than another further 'XX expect 'XX. basis more over billion $X look around 'XX than around of

short, continuing the near-term to period, XXX over X basis earnings around of 'XX In billion So, demand. a 'XX. demand X fully We billion 'XX. higher of for In and is will $X.XX the margins. you, during impact expect timeframe, Mind revenue is expect revenue all growth a in expect book-to-bill it Aerospace modest to and XXXX that about favorably we If Systems, significant against by Combat $X.X we a year's in reduction this operating and this a none points reduction X-year growth notable heroic engine see over to 'XX XXXX. and of to from be $X.XX we up greater, billion, both of of assumptions supported assume range demand. revenue

at about is planned should Marine production in received. anticipated a 'XX Group anticipated long-term operating developmental resume be to approximately waterfront as improve growth margin billion, X.X%. to modules programs into in of have million of move should around Operating fashion. the period increase in be XX.X%. and $XX.X several orders submarine to same timely expect Groton $XXX the more our a later improves margin international expected the to We is is The Growth 'XX. expand which chain to here as and over supply delivers its efficiency The driver will work, revenue

Our is to in group in the margins upside opportunity biggest increase this period.

is We in to to around $XX.X of growth revenue a the expect This $XX range of in Technologies billion. X.X% X.X%. billion

We expect operating margins around XX%.

On to of XX.X%. share. about and up thereafter. quarterly quarters range to we all to approximate $XX.XX an years, play XXXX, a for progressively $X.XX to out we goes prior $XX This So, company-wide, of it expect EPS operating and a has to see diluted basis, margin billion $XX.X QX fully per forecast with expect revenue, of $XX.XX in like much billion stronger

from this shares yearend share option figures purely to seems enough from Let steady only avoid exercises. so me we provision, emphasize buy count is hold it assumes the operations as dilution that a to XX% with forecast tax and that

deployment last EPS the lower the achieving effective like guidance operating and beating our year, must from tax a rate come much So capital. effective of plan, outperforming

Howard Rubel

Phebe. Thanks,

to could to has Operator, chance one participants participants reminder, one ask a everyone follow-up, that we so please question As enter the a you remind queue. how and participate. to ask

Operator

go Ron from take We from question Instructions] Please America. our Epstein Bank [Operator ahead. of first

Ron Epstein

speakers]. Yes, good and [multiple morning, Phebe

Phebe Novakovic

Hi, Ron.

Ron Epstein

going I know questions. with to get Gulfstream you're bombarded

Systems not I'm I I Land everything in that. and international there. going how mean been right. does do the wanted Russia So, everybody in the on first, Systems going mean, else that yes, go -- Maybe what particularly to Land to headlines, Ukraine Europe? Eastern business, for your just in has I'll let with on that. at jump about

Phebe Novakovic

Europe time the that I high now, European on in speculation environment. threat any to for tension demand vehicles subsequent the and still is been combat has some impact But Well, considerable elevated Eastern advised level. given Eastern for tell you have just about at budgets the

a issue the So, for we resolution. U.S allies. hopeful a But security and peaceful are for is its that national

Ron Epstein

question, maybe a can. And back Got then I if it. And my Gulfstream. little I shift bit follow-on towards

Phebe Novakovic

Sure.

Ron Epstein

bottleneck re-outsourcing in You mentioned a to a to wing about remarks, you something the little keep? as you key you wing the look want it's guys your a in production. Have Or Because you've got prepared do bit wing? thought at part of plan. of

Phebe Novakovic

a production of And just then not in any. Outsourcing, we our efficiency a you question is the supply are add a problems good of expanding is internally to at chain wings, and on given which But us simply wing question the very This source. to touch of set equal facility we sort by tools. wing drove just frankly, wing production. another need

of risk So, that a a that that's set I provides opportunity for the program. lot frankly, think reduces and capability

Operator

question comes Please Rumohr von Cai ahead. next Cowen. The from go from

Cai von Rumohr

so good much, on results. congratulations Thanks and Yes. the

Phebe … So,

Phebe Novakovic

Thank you, Cai von.

Cai von Rumohr

bps do as there, margin calculated million net XX% XXX What was out forward? up uptick expect be the fourth exactly quarter. R&D in I a less incremental than haven't looks you I margin. going up … look to And it the $XX like

not So out get better how we to XXXX? it's come as

Phebe Novakovic

Well year, bit Jason R&D, next million be color. let to we $XXX but of about little a for expect you give

Jason Aiken

$XXX the R&D as the roughly as you'd in the flight million to increase progress, on Yes, so test program said, Phebe we XXXX as to for continue GXXX. Gulfstream expect

delta, margins be year for for XX% If group. would you the roughly for next normalize Aerospace that

from our the and the XXX think expect, continuing as margin. do Otherwise, in-production really to to particular, additive does margins on of the in be perspective. So XXX you'd incremental profit answer continue question incremental from that to see, kind group's we I airplanes

… So

Cai von Rumohr

one last … And the Sure.

Phebe Novakovic

It is a pretty years. margin good out in the

Cai von Rumohr

you are credit, R&D are. big assuming? how They

Jason Aiken

R&D in If assuming we're conversion is the XXX% said, deferred, is plus deferred we'll as be call we're So, I meaning persists, the credit the current credit the talking law in R&D range. range. deferral, law XXX% more without -- at existing looking

you So what on that kind a size of gives we're expecting.

Operator

Shapiro question George Research. go The from comes next Shapiro Please from ahead.

George Shapiro

the you four I Because deliveries deliver GXXXs you or about, in fourth are in the some quarter. 'XX know, Phebe, thought GXXX you status? Yes. what's spoke higher that they that the

Phebe Novakovic

I fourth certification that the think What with noted but about in expected said we some I XXXs little is we're the the certification. to the quarter which have, we'll the shortly going think the we the as and -- XXXs my I I XXXs, in have prebuild, remarks, way deliver shortly thereafter, thereafter

Jason Aiken

think XXX. in little that, color delivered on of we with the obviously the a early to that have And doesn't it, XXXs But certification George. about, talked XXXX, I there's were Phebe more replicate. of me, year said, XXX excuse -- also just and that part mean, fourth EIS you the about obviously, as quarter

year four in-production demonstrators, offset and the So, delivered that airplanes increases of some last an Phebe steady of and the otherwise as in that incremental is that XXX mentioned models, but well the decline we particularly all XXX. test as

So, you looking I in-production if in overall, in at the somewhere increase models. XX% in airplanes XXX XXX, and look we're at XXX, those XXX, think production year-over-year

on should that that give increase. color what's driving you So some

George Shapiro

There's net have one effectively between gross follow-up. Okay. orders. the a $XXX this when And orders, difference million then and you just

fact the the they that like cancellations, any there reflecting to there planes than would customers are later getting or get were some …? Now

Phebe Novakovic

particular any driver. was don't I think No, there

issues. three reason idiosyncratic for think but other cancellations, no particular than I have, We customer

Operator

go from Myles comes next The UBS. from Please ahead. question Walton

Myles Walton

could on Phebe, the comment you morning. Good Thanks. …

Phebe Novakovic

Good Myles. morning,

Myles Walton

at backlog … the or Thanks. imagine now your And the of time close skyline price and building lead on miles give lists an to environment large coming the you're impression for programs. of pretty the point? maybe all for out I cabin this us

Phebe Novakovic

pressure pricing some see. production to and like well that are. aircraft XX we are months wholesome, increases range more enjoyed or XX some pricing to that's or in XX quite months we And our XX and all comfortable -- times good within than that lead within where all we've the So, and prices are

Myles Walton

XXX, you versus give And XXX, differences can just the Okay, on great. in commonality on XXX accretive a be given assembly color demand And two one with particularly the the the platform. might there.

Phebe Novakovic

bit are enjoyed to enjoyed the quite The Yes, And of XXX we've fourth nice the XXX course, by a XXX always good margins. XXX in of little obviously the parade you give XXX. and or the good and there, XXX, so XXX, were just quarter, margins background are always the we've improving. followed

margins So, seeing at gross margins at the some level. nice very we're the operating airplane

Operator

comes Stallard next Vertical go Robert from question Research. The from Please ahead.

Robert Stallard

Thanks very some you the issues. on I getting much. and point supply if any can some whether maybe the us on chain wonder other just can better. across give company been some Phebe, obstacles they're clarity this at maybe of more you touch you've facing the

Phebe Novakovic

In year. benefited our reduction haven't chain chain, particular So, managed seen in were let production had me supply Combat, by group. go any Gulfstream, issues. group by they last At we've we think the supply and I

we're we've scheduled reported the key had the Mission chain, largely fulsomely challenges seen they they are. that We manifests chip particular, with material. shortages in Systems in pretty with Boat, variants. product some And Electric in other where quite comfortable So, Virginia on challenges submarine supply and

but reported shore that, with to widely can get we're Navy pretty to and that up the chain, we’ve kind Virginia normalized of we so work So, continuing schedules. supply

Robert Stallard

follow-up Myles's Okay. And on then lead maybe a Aerospace times. to question the

I jets? to think maybe else bit any we've their in that's said That is recent than in customers, long, seeing going saying months you some and a somewhere Are what what maybe longer too heard get essentially you're seeing, sounds XX case. you just years.

Phebe Novakovic

we're my want going demand, solid my I because go ramping up what XX see to said, And cancel we we're handful accommodate well, of to XX demand as only but say haven't. is And customers going order that because in elsewhere backlog go to airplane But a elsewhere, XX, cases. the nice faster. we a we No, backlog, frankly, I is any I'll haven't I'm and had that forward. production

So, we're in comfortable where are we times. quite our lead

Operator

question next Please The ahead. Melius comes from Spingarn Research. from go Robert

Robert Spingarn

Hi, good morning.

Phebe Novakovic

morning. Good

Robert Spingarn

programs, Just at supply risk with XXX? XXX, the for you can chain potential new into or got the we frame whether the aircraft you've the entry sticking that and labor, about covered point? think should slippage sticky service how -- And and to three XXX Phebe, this

Phebe Novakovic

seen engineering we of covered we forced prices Well say wage that. those [multiple we've Gulfstream, I the speakers]. have to labor with respect issues but don't been has at the any these pretty airplanes. here And with supply to increases stable as to delivery But labor, see some in offset some chain respect with increasing

Robert Spingarn

affecting labor affecting is all, On growth? at clearances or limiting it technologies

Phebe Novakovic

exposure mobility, to any So, industry, levels. company at GDIT, pre-pandemic nicely, tech challenges GDIT have the tech very but up their and particularly that is I got attrition holding will here, is large certainly has say in experts

but So, very own, a we're holding this is coveted mindful, many. workforce by and valuable our

Robert Spingarn

Okay, thank you.

Operator

question next is Doug from Please Harned go Bernstein. The ahead. from

Douglas Harned

the XXXX, you. diverse morning. complexity? described the of terms manage of to that at set just look pretty you And out pretty you this terms supply at you demand. Good when chain, high-class to in when that here both XXXX programs How get your point. and though, have Thank and a do At problem operations Gulfstream, a you in of

Phebe Novakovic

operating leverage. chain us. operations brought So, -- Gulfstream one the supply that strong managing one Gulfstream that good have we the is quite having And has along been of with and things thing very its many at

supply estimates that as operations. the our well of for own be manage able expect chain fully giving all what accounting we our you to we're So, as to

an So, quite challenge. comfortable operating not do that we have we're

Douglas Harned

out mix that in you not you're timeframe. with any get issues when no, additional really So, seeing this

Phebe Novakovic

No?

Operator

Kahyaoglu comes next The Please ahead. question Jefferies. go from from Sheila

Sheila Kahyaoglu

you. … I'll take a question Phebe, Thank guys. morning, Good

Phebe Novakovic

Hi, Sheila.

Sheila Kahyaoglu

wait Hi. I'll months. XX for in it. …

it because I'm the to going have EPS So, about and we a between 'XX. ask 'XX expansion lot is Aero of

I margins mix be could generous And I XXXX. should with if I you can't help square pricing so from just And with Aerospace wondering been that you've 'XX. So, a quite away bit was a tailwind. little but given comments, for your improved think

You a going accretive the have I away. you talked GXXX margins right the up previously being to XXX about XXX, And think curve.

And guided, about 'XX? can little square we know bit improvement maybe, 'XX what's a already how more? could And and into it that do think I about away if but changed? So you talk you you

Jason Aiken

see what's driving we I compare got probably lot the to mean, I outcome. Yes, building ultimate have think a basic the to blocks, of spreadsheets you've

single expenditures, development net from net is fluctuation the and the between that right, think in the from suppliers. biggest our R&D get programs offsets I issue we supporting the period-to-period probably time-to-time

mentioned I in -- from relative in 'XX. got million about increase before, $XXX we've R&D to As 'XX,

aggregate in you're XX for other as improvements along XX% that in you XXXX plus and for puts better, pricing XXX -- takes you the up if manufacturing lines XXXX. that There's XX.X from to So a normalize within that, little a the is know, to get to continue the at production come service year-over-year, margins better certainly XXX pace that obviously, an does are overall good margin which aircraft and business, group margins. in new margins and at to in dilutive continues while growth

into And so really in that's the terms puts think, of going I and XXXX. takes the story

can the we That 'XX. or 'XX line think 'XX XXX I and for get margins points gives you fact into with another Phebe a of to maybe we've trajectory a and But the top the details think think in some it's think that on XXX mid 'XX. that for about that basis teens returning compelling to I your I question -- kind basis story. high pretty your after time in pretty described, that you point it's group. I improvement combine When growth significant pretty about talked

Sheila Kahyaoglu

Can ask see into XXX. GXXX XXX for XXX? year. comes follow-up the Obviously, the R&D? So, after -- obviously, the When I XXX do just and peaks it shortly for on this the that in we play the the

see So, that you following similar of pattern. should a kind expect to

XXXX. I the think enters in XXX said we service

benefited XXX airplanes mind those airplane the is XXX with and engineered. from an the that XXX and significantly were in way the designed So, keep in commonality

won't we for but of you commitment and of play as a fits roughly our associated how to from ongoing R&D blip see that, year-to-year, see time X% over the to of quarter-to-quarter profile with within it this that's sales out. and R&D. much ought can all necessarily but it of So, Again, fluctuate

Operator

is go from Arment The next Peter Baird. from Please question ahead.

Peter Arment

doing seeing Jason. you a Yes. welders, yesterday Phebe, out about Pratt what a of know kind Nice in shortage I Good are Marine. having shortages talked I terms you they question there. that? some of how you're morning, give labor battling maybe Phebe, of commentary How to results. could the wanted about ask

Phebe Novakovic

worked programs them pretty So, local that state governments running. years provide robust to with many and our up for we training and still are have

rate largely an what anticipated, at accelerated the over this We are had hiring backlog. year we of because

These for hiring before. levels hiring levels are executed at of before have obviously constrained. In 'XX in we and terms seen COVID,

of as question all have They've but curves, can the we're and become get in we So, shipbuilders. trained new get that we And proficient obviously, got is of them get our we the more these training efficiency programs. about that once they your all thinking. as learning pretty comfortable them door, in veterans, and people go factored the

Peter Arment

a customer of it expand, characterize just are complete this Is just continues corporates just it? on -- -- that Are COVID you that. during like the Appreciate as period? to sounds a Aerospace. of how kind lot would the post-COVID seeing a And some renewing? of you It follow-up expansion base to kind

Phebe Novakovic

and additional to throughout we demand give on companies XXX color saw Fortune in well the as well bit private quite was United to little the as good as earlier, a begun increased world So, had the as see also companies. you that, States we to smaller of as a the of return rest

it's But and you're that's of any don't that we poking kinds see, the we portfolio if at structural terms robust I that of kind across also companies pretty what see of individuals see. change in the but So, speakers]. both [multiple here,

Operator

… The next question

Phebe Novakovic

ahead, I’m Go sorry.

Operator

go from -- Seth next Morgan. JP next from Please apologies, ahead. the comes Seifman The question

Seth Seifman

… much very thanks Hey,

Phebe Novakovic

Hi, Seth.

Seth Seifman

you if the more … comments and and give for good the details. guidance, could There morning. of and underlying also additional impact of completion of Maybe a could the about Aerospace services in timing CapEx wing the any couple dig assumptions capacity? I

Phebe Novakovic

order, I'll the negligible So, those in answer inverse almost CapEx.

timing a existing just to somewhat is in fixtures timing of the -- getting issue expanding and this and tools increased simply place an of building So, effectuate production. the

year volume assumptions expanding On with service on And And to fleet. grow have quite going nice 'XX growth as side, Gulfstream service we expect expect as the the we at forward Jet Aviation basis. well. see a well as naturally we service nice a those which to some have included

Seth Seifman

of appreciate to coverage remains $XX backlog kind and of you be about a confidence if If give earlier looking And conservative. just like thanks. look for, would support heard guess of at, you stable what aiming outlook X.Xx being out in as commentary follow-up, we any sort can at great. about you're the the multiyear characterization that other if that's Great, I XXXX. I other and outlook? the any of billion, guess, gives the And the in at definitely conservatism kind color that

Phebe Novakovic

way. assumed that, to this if guidance the and I prudent 'XX, a it's you planning what that I production on increase X book-to-bill. But we planning. for than better we'll is giving wanted explain think have so that's it purposes, Yes, based about accordingly. to What that for 'XX think are we was Clearly, that's and X

Operator

next The question from comes David … Strauss

Seth Seifman

-- just go ahead. maybe So

Phebe Novakovic

David?

Operator

Strauss The David next Barclays. from comes Please ahead. question from go

David Strauss

hear can me? Phebe, Okay. you

Phebe Novakovic

Yes. Loud and clear.

David Strauss

Okay.

you So, longer-term a Marine a I about ask us want Combat. little of outlook to give Gulfstream. for bit and

of the year, I you'd that, a were little at kind think, you in $XXX to this below million revenue forecasting Marine, end incremental expect Last bit previously you're that. high $XXX said year million year. a of

And of years. the low longer-term could maybe if had I thinking. couple Combat, then said growth update of kind kind you the on over on us So there next think of you

you're a talking about Now decline.

but you that So, pretty could good Combat? guys budget might much And still on what's view, guess, fiscal how to looks how the 'XX longer-term yet that the for it I things? influence be decided,

Phebe Novakovic

about talk let's Marine. So,

for million we $XXX said that the million that. We expected $XXX time have expect We range. to growth revenue some still in

-- don't is difficulty] budget. in army so in think later, workload have We a be Look, the on think I for we 'XX, little some stable, tax levels the budget O&M are increase our programs drop maintenance, the sufficient timing. while army early rather have that When we million articulated. ultimately I back. that relatively largely what in so that Combat or funded to But And particular, offs the anticipating on I pretty year. in some budget for fiscal well Next is a bit on [technical and $XXX we year that's we're just see go pressure OMB dramatic and decrease we're in very accounts, example. platform will the for funding pressures full will been expect like

growth a are years growth we estimate these of increased army as what of X% X% new of pressure. factoring So, for that factoring into returning orders this army as start. see couple anticipate and that is a number all lower We're into year, in all but between I international well our of come that we as

have think realistic So, we a balanced given view of I you and combat.

David Strauss

what terms for follow-up, quick A you're defense CR what in assuming year your -- what's you Okay. this into are baked of guidance?

Phebe Novakovic

prior given almost we So, material for year don't see portfolio CR, impact and nothing. the levels, our this particular a of all, funding

Operator

The ahead. next question from comes Barclays. go David from Strauss Please

David Strauss

You already you. Thank got me.

Phebe Novakovic

got already David. need I You’ve get to [indiscernible].

Operator

My apologies.

from Wells We have ahead. Please Akers Matt Fargo. go

Matt Akers

three required? possible? be year the further guys. feasible Could was class. What potentially Hi, on budget sort discussions of the you the some for comment There might on going that question. to Virginia and kind that investments Thanks time what how commentary is a around frame about of

Phebe Novakovic

investments ramping up moment, really required. actually the two-a-year we supply chain our ravages some on chain cadence to So, stabilized some before too, need be at I get doable. of is we've We would about talking navy supply need from But time and we adjust clearly, to to been customer COVID. It think, three. just the for think the to the that

Matt Akers

for meaningful 'XX. an the guess of you discussed thanks. then how of the outlook just international within flow what's impact latest large as receivable? you at I Gulfstream and also is prebuild big the Great, the details is that update can And on impact a cash And say that XXXX? couple that for Can you

Jason Aiken

Yes.

material side, Gulfstream headwind. we XXX the a ramp-up cash inventory, I see in and the year. think of a impact terms be on last as that we sold Phebe year, on extent test the that as mentioned, off the the not are the to that's prebuild of while having, -- again we particular, Obviously, XXX, nice on to the the wants in this producer Gulfstream mentioned, quite we the airplanes. we in not

cash. contributor it it on quite the still So, last but be will have year, nice it a won't did trajectory

a as that headwind. see don't So,

position, in international and to in line, talked some receive of program of in both for production a time side, the back program occurred as renegotiated on international is payments we vehicle that for the the about On contract that vehicle the XXXX. we've extension continue scheduled track. of Canadian That great and the remains terms performance the

So, place all that regard. good in a in

Howard Rubel

Please will we question. last go one Operator, take ahead.

Operator

Thank you.

So, our Safran final go Global. Richard question comes Please from from ahead. Seaport then

Richard Safran

you? Hi. Good morning, How are Howard. Phebe, Jason and

Phebe Novakovic

morning. Good

Richard Safran

in of is I that a you would you much I adjudicated higher of impressed come was assuming I'm Technologies, recompetes able asked with because bit that how of that Is it? me percent comment on recompetes? tell a is of And made. billion to that So, be all What 'XX? probability. $XX And by that it win

Phebe Novakovic

of not get work are affect new wins, these But that is Those the as recognized largely that decision cycle, as think $XX that and I billion in the but they they're customer the it's it. only any well significant. adjudicates to the timing and of also protests customer their we've

Richard Safran

to to quick just quarter comments Jason, heard reduction And get what would, I me opening to maturities, clear, extent longer of what just is overall very able were a as tell with your just fourth I is? do wanted the be And there? this about reduction here. And year? know, term, your your be could target Yes. when follow-up you debt. going And to you debt do think if you debt that you you might

Jason Aiken

billion this matures November in is year the that maturity this only $X year. of The Yes.

So, you've got that right.

go debt time. the in, debt net indicated going as In never debt offers to $X.X step goes. out zero that term, that we will we out back continue That a years were $X reasonable terms of that laddered the we to play the several We've over down to before the to next CSRA said, call the opportunity that essentially increments to us longer indicated obviously over we billion the it have billion had we've it, acquisition.

point open, the of in that it's that overarching where the frankly, sustain credit try have there's that, that's there's guiding we of and of target have with somewhere debt an mid-A So flexibility that to settle the compass that right period lot that. trajectory. And obviously, a really to sort rating. will go remaining a to decide factors if is continuing but sort on light And we around that, out around we into

Howard Rubel

to reminder, now refer which fourth our quarter you all earnings And outlook. joining our include will a today. for the for website thank presentation, our please Well, and release as our highlights call

Thank If you. you at be can XXX-XXX-XXXX. have any additional reached I Katie? questions,

Operator

for Thank now This call. you today's concludes all joining.

You may now disconnect your lines.

General Dynamics (GD) 26 Jan 222021 Q4 Earnings call transcript