GD - Earnings call transcript Q1 2022 | General Dynamics Corporation

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Operator

Hello, and welcome to the General Dynamics First Quarter 2022 Conference Call. My name is Alex, and I'll be coordinating the call today. [Operator Instructions]. I will now hand over to your host, Howard Rubel, Vice President of Investor Relations for General Dynamics. Over to you, Howard.

Howard Rubel

good and operator, you, morning, everyone. Thank the to General Dynamics call. conference XXXX quarter first Welcome made our today company's statements forward-looking Any represents outlook. estimates the regarding 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 would which of disclosures measures, I are that to the Relations these page available website, call our comparable about that investorrelations.gd.com. over completed, slides additional Executive Chairman measures, including on the For to turn the and accompany our With reconciliations Officer, like non-GAAP GAAP see this webcast, to Novakovic. Phebe Investor Chief

Phebe Novakovic

Thank everyone, morning, and us. being with you, Howard. thanks Good for

significant lower perspective, This consensus was line. at also $X.XX operating other million. ago discern we in per anticipated quarter the million other up quarter. and earnings were but expense and expense the entire earnings are performance from different can shaped share. guidance Operating company million. release, press net hurt taxes by of net earnings truly earnings Earnings improvement per interest you of the The a for operating earnings margin diluted the are up year-over-year. of we less than is first aforementioned a you, points at slightly revenue operating earnings million, lower year $X.XX on but diluted strong the beat $X.XX the are $XXX flat units. Operating earnings From down which was against by reported ago billion, aided per of distorts XX our expense the The provision As for $XX income share share a the Revenue year as net in last the $XXX $XX our was earlier $X.X by year. against by to corporate quarter. line corporate of or basis X.X% X.X%,

sell more side million in earnings. by revenue in and operating roughly than the $XX more anticipated $XXX We million have almost

I will particularly We our expectations, beat to also more own have aerospace, which say about shortly. so in

in performance not in we first year quarter was activities a for impressive income. strong net all about foundation quarter. in off important our fourth operating very a billion, from cash expenditures, good cash is Obviously, to in income. flow are XXX% we XXX% strong just indicated the start of good and of cash billion This As of following a shy press last quarter, us a and of free This net $X.X After $X release, a capital is year. the at very is respects, for here. typical particularly

corporate of we'll So the some color business let line the of performance around cash me Jason spectacular and cash of answer right the into add makeup performance, have your questions. backlog, the around color deployment taxes, move segments, then the other

almost year's year increase Aerospace. basis is difference operating was first First, three operating enjoyed million Services XX.X% the of $X.X margin Operating points anticipated the Gulfstream The or sell-side million the ahead quarter. ahead by aircraft. of higher million $XXX last million expectations. Aerospace entirely million Revenue almost revenue a margin. $XX was despite The sell-side. quarter. than strong a ago higher of with last and billion earnings growth and $XXX Jet quarter, Aviation. $XX XX.X% fewer is of earnings $XXX well XXX at year's ahead and XX.X% another operating It a first of of Revenue delivery had quarter of than

significantly service comes on coupled Here, delivered spending. revenue, the better, aircraft slightly was with better R&D gross on improvement from by XXX, particularly the but offset net increased margin margin fully higher revenue. The

business the Gulfstream of mix. an attractive result the extremely it was the of business, service side On

in orders for Western interest Strong Aerospace XXX. a sales of the by some had activity FBOs Russian the activity China Gulfstream in For perspective remains aircraft also strong at the X. and Southeast market of was The activity from as continues another orders to well. slow. Europe book-to-bill Jet very had quarter with far at activity Gulfstream The to but Aviation, invasion it the across United robust board, alone Middle strong quarter so customer order Eastern stopped East. has Ukraine driven Europe. and X.X remains was book-to-bill with improvement States. a the slowed in slight in U.S. performance The and this order an X. X.X strong of Asia

however, should the this, is strength Western market. of This to Europe, U.S. a the improving good U.S. the flight of of activity indicator Western by flights is increasing in is All an leading in I Europe. market trumped that add including

On basis a steady product quality GXXX new and GXXX Margins the on the and perform superb. to well. are front, continued improving is

in service interest will Abrams increasing. and from to as As quarter, book-to-bill ongoing. higher allies the have however, of in are XXX of of Orders X.X over the had nations in from end support aircraft Gulfstream in higher, The that contemplating were defense the is Land to spending pipeline threat. Europe to these Europe, Systems U.S. a has U.S. negotiations X. the primarily respond been increased has of

are shipbuilding Systems. Once impressive units revenue again, Marine to growth. Turning demonstrating our

recent little history. a with begin me Let

billion, was 'XX. first X.X% led first and quarter $X.X class XXXX by was The The the construction X.X% was with first Columbia of XXXX, over against revenue first quarter quarter XXXX XX.X%. In 'XX. volume. is of up up repair in growth the up of quarter

up over operating margins growth I'm pleased million also or in the construction in is the nice X.X% on increases We $XX of X%. are enjoyed DDG-XX Operating TAO million quarter, $XXX and spread earnings all shipyards. volume. that

and operating almost We our margin to operating the we groups. improve The year. largest backlog total as our will is progress $XX through robust strive the billion remains of of

decrease. has $XX X% $X.X a in million billion almost Finally, from quarter, quarter, This segment ago Technologies. year revenue about the the of down

certification quarter-over-quarter increase over two at $XX in X.X% quarter earnings highest quarter-over-quarter Operating $XX $XXX a was that $XX X, result. and million soon Technologies that a strong enjoyed again, billion taxes, million Mission well. in on stunning to GDIT's good X, Total sequentially. flight X.X a progress backlog by for continues GXXX margin activity good growth represented new drag indication grew their operating $XXX grew book-to-bill. $XXX the basis this awards $X program to million GDIT The was revenue and a basis. local roughly $X.X quarter's million, The and which one-to-one This GDIT state and on book-to-bill GDIT order X.X years. or million down sequentially. XX sequentially resume. estimated revenue a However, million are and a point of at with Over X.X% led value including business. Systems XX.X%, to was margin. XX% a million contract same up had Technologies was total will on Once EBITDA test

over five have that flight completed test flight We aircraft have X,XXX hours.

hours well all be fuel parameters. range, designed few We to line. overall The and next Rolls-Royce mature. structural optimize to speed, emission, specifically design, are Pearl performance have the conducted is over All GXXX in months. and requirements simulated manufacturing certified The have the The performing also will engine and of been match is aircraft the complete XX,XXX laboratory and burn aerodynamic key met. structural exceeding testing XXX program new very

our This service predictable with the program. of to is typically flying into complete entry toward step is most the part final FAA. test Our certification

prior that All of to has unrelated rigorous been validation the process not by It effort and due some impediment the first test plane This achieved first-time to connection, has of to resource test pandemic made and the part a to me certification. the presented no Completing assure was on of this and has well effort. a surprises. date is you proceeded events developmental certification software flight. comments In that Gulfstream. of validation, examination I and our level is of during process flight is FAA a time that model-based testing a finishing The the software a considerable. line-by-line timing requirement validation It development industry original software. any of increasingly the or slight can to intensive. plan leads just GXXX XXX% is performance work the

This certification timing us but to three recognize month this slip FAA. of year, slip preparing for of of continue view deliveries at the for program. GXXX accordingly. our and this for fourth such ultimate Production plan nine prudent aircraft. GXXX If to XXXX. of Gulfstream risk months. production target dependent impact also the seems a It certification the and we GXXX it for current remains with to our into the underway, It quarter We six are plan a GXXX remains to comprehensive time to service. not on the six customer we follow is would of is certification of to a will to the have in also test occur, impact process were and that safe any committed adversely entry an the the financial by to increase offset XXXX

We will deliver high-quality mature, a aircraft.

with quarter, aircraft we Looking in and forward XX the as to quarters to indicated. have rapid increases expect deliver third next we fourth previously

issues supply far, in chain So have category. been news the

we later an at and off in expect to In this them through start in a believe path we increasing a of year Aerospace. are However, successfully. work very issues the to good regard number short, on

Land increased a ongoing. primarily consistent are book-to-bill over so basis the are that to of and U.S. of to The have down down has XX a increasing. Earnings the and Systems respond Orders the year-ago negotiations in Combat are point pipeline as Europe, in The the X% reasonably over interest and or were Stryker allies support revenue considerable X%. million performance. Margins expectations. Europe Abrams with had from improvement strong been our of Systems nations operating sell-side from higher outlook at Combat. however contemplating spending is Next, numbers U.S. threat. have has $X.XX billion, X.X:X. year-ago Abrams defense higher, $XXX in quarter. XX.X% quarter,

revenue Marine Turning growth. shipbuilding our impressive again, demonstrating units Systems. to Once are

begin me a Let little history. with recent

XXXX revenue was XX.X%. repair XXXX, first X.X% And led over was The XXXX up volume. of first and up by construction up Columbia class of billion, the $X.X of first 'XX. The first quarter against X.X% is quarter was the growth 'XX. quarter quarter with

operating also growth million on all shipyards. margins enjoyed We Operating over or and the is pleased X.X% nice $XX volume. of up TAO are DDG-XX spread in million X%. quarter, that I'm construction in the earnings increases $XXX

operating and our strive to total backlog of margin is year. $XX operating of we billion remains The the through progress almost as our will improve the We largest groups. robust

has a the decrease. $XX quarter, segment year-ago billion X% This Technologies. about Finally, the of in million almost from revenue $X.X quarter, down

X.X:X, results. X.X:X XX led Total same sequentially highest estimated However, at and grew earnings quarter-over-quarter point Operating a EBITDA drag new contract million business. grew X.X% $XXX at GDIT roughly a X.X% will million was Systems a book-to-bill. technology the which revenue basis. quarter-over-quarter activity XX% $XXX growth backlog Mission for GDIT's and again, or strong had state The revenue two quarter is a million indication local good including that GDIT operating $XXX on quarter's GDIT This and was sequentially. Over enjoyed $X years. was over soon $XX resume. in $X.X a million XX.X%, on X:X book-to-bill a basis sequentially. million total stunning and that Once represented billion of the $XX order the increase $XX good Technologies in million, margin. on up value taxes, with their awards are by margin million down

$X horizon. the in GDIT protest quarter order on the decision the in billion. good the submitted or billion order activity quarter, proposals of So over in and the alone bringing $XX submitted good number prospects

we of know, year. update guidance the time this you never As at

and take comprehensive of custom. the the provide This to our my over however, Aiken, at your end a a questions. remarks update quarter. our next quarter will we'll CFO, is further very now for remarks turn We good with Jason as respect concludes I'll to call you then

Jason Aiken

you, morning. and good Phebe, Thank

first The in in is $XX quarter. address like high from of million I'd operating the the corporate the up thing million year-ago $XX to quarter, expense unusually is which

number similar of year, might $XXX expected expectation last a corporate in year. first around Given to full-year quarter have this expense million our you

by equity the plan, of resulted $XXX in non-cash a compensation quarters a associated expense terms some with impacted should the in a our you awards. result in onetime to was the the and those corporate of outlook item, year expense expect million. change This this lower remaining our full-year However, of to acceleration which was of

anomaly, consider excluding our the to the you of margins from this year-ago performance XX.X% operating segments in improved corporate the XX.X% expense quarter, If a this quarter. segment

Turning strongest cash to We our seen performance. time. we've first the in had quarter some

program large quarter this and vehicle cash large on first our due quarter, Following to Combat several part marked Systems. flow in years improvement progress Gulfstream of in negative international activity at was the the a at order free payments ongoing strong

capital nearly for operating $XXX a flow XXX%. was of XXX% billion we $X.X net of quarter, of million, of conversion free conversion rate $X of a generated rate flow the cash or cash For expenditures Including income. billion our

of of So or the for working at XXX% of the operating free our cash expectations, quarter reinforces which in our of was was performance net our favorable some the year well ahead above certainly outlook income. capital, timing conversion flow but

deployment, I still year. capital were in or consistent planning to X.X% at be X.X% quarter We're Looking capital sales, with for CapEx the which $XXX for the of mentioned of around expenditures million sales last is year.

at a repurchase the million, to shares $XXX $X.X ended down position. in the $X.X with from million of from per of down year. $XXX was After we expense in The increased the the a decrease average share. also Net in in XXXX $X.XX spent almost of net $X.X debt interest And of the $XXX We paid million million to billion per $XX last first and the quarter billion is share. $XXX in time XXXX. nearly balance cash below quarter dividend and position $X.X our quarter $X.X an quarterly first debt reduction last all billion this on X% we over $X.X year-end billion and due price dividends of billion, million this, about of the year

later our of activity compensation related more we'll in get November. from We our the associated the to in have closer consistent to notes outstanding another plans and expectations. have those about maturing equity XX% year, The and say we billion to maturity the at deductions, as tax debt $X with rate this timing benefited of quarter

to a whole. balance of for at company a X:X implies Order But, the that first So a of the arrive rate strong for that in story once our of again year a the activity XX% quarter with and to no change course, full-year. outlook for were outcome. the higher the book-to-bill as backlog

mentioned, the in the book-to-bill over also group XX Phebe which group the way the is X.Xx activity last for As a book-to-bill, with order led the months. the Aerospace

aerospace with while billion, past contract We of contracts has had result, backlog a almost a the options Systems total by and was and backlog $XXX book-to-bill, respectively. As finished including Technologies increased billion. also the IDIQ Xx in year. quarters solid with Combat value, quarter a X.Xx potential XX% and $XX.X a total

year. a for note EPS on Finally, quick our for expectations progression the balance of the

expect quarter for steps to above half first second be the year. quarter remarks. in it We $X.XX the the back my to significant turn the concludes that more I'll up the over you Howard, with second roughly of Q&A.

Howard Rubel

Jason. Thanks,

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

Operator

Thank you.

your line [Operator Q&A. Ron, America. of now Epstein of Instructions] from now begin Our is the for will question Ron We today Bank comes first open.

Mariana Perez Mora

Mariana Mora today. on for is This everyone. morning, Ron Good Perez

Phebe Novakovic

Hey, morning. good

of to endless. of just question, the an subject note noted Before you interesting have this And is into juxtaposition remarks. may air my in I'll the you your for capacity get technology some

nonetheless, go hope got the right, All So ahead. I message. you

Mariana Perez Mora

fine. We That's got but message, the we it. right, got

understand So you I color main drivers? please please how services. mentioned strong give those volumes help what know us more are on Could some And and us margins? you margins volumes on the were on at sustainable

Phebe Novakovic

in we in some strong margin gross good in a also at higher R&D had but We very R&D, had service So mix Gulfstream. margins. we and had particularly services performance a improvement

drove margins. mix that So

Mariana Perez Mora

services Did how in services? the change anything are sustainable And business? volumes the of

Phebe Novakovic

is our sticking you. hard that to guidance for But gave going the mix particular to we we're replicate. that to margin moment, that think be We

update our now. we'll at a the stick what the the quarter everybody, for remind wrap good to for it then analysis to and to and the Just off full with of detailed however. a end start, is of got company. But custom you rest whole prospects by up group year we've second with a the We're of our

Operator

Thank you.

Myles, open. question from now Myles comes of next Our is your Walton UBS. line

Myles Walton

something validation approach Or is this you're to it been plan to to? new... around certification, Phebe, recently that original having your certification was that is software the and after getting added agreed the the point where accomplish comment Thanks. on the you're that's just

Phebe Novakovic

No. we our process out result This laid are not originally was we independent certification when that And an had added of it's a events us. that contemplated plan. of

Myles Walton

I see.

also cash like know and the looks And Okay. pretty Canadian -- out? U.K. was favorable, then vehicle on combat we did free did Jason, about combat it pay the it case the is about vehicle. combat U.K. the sorry, vehicle, start the but But the flow, to unbilled

Jason Aiken

No.

As you that on continue ago. the a reset we receive steady payments international years to we of out, point program couple

pace. continues So that working We're the a U.K. customer side. issues the on with still through

year. see resolved to hope we later So that this

Operator

Thank you.

your Strauss next question David from Our comes line open. David, of Barclays. is now

David Strauss

touch could Phebe, while. think lowest at seen margins, marine X%, bit a the you I we've more Thanks. in a Great. on that's on little

the of I eventually past you've kind talked about that X% business in plus think getting margins.

can from happened and quarter exactly here get to the Thanks. above talk what So in you first the to X% level? progression that about

Phebe Novakovic

as So chain some as margin to curves those we be as we with work will Colombia. margin. a are as scheduling That down conservative compression. margins our over booking compressed at initial you issues well. a expect learning may stabilize the Virginia, before, Columbia we've And on time in But well-publicized recall, supply have we coupled noted driven

Jason Aiken

half mentioned we put mentioned quarter. shipyards. as to increase the of another point program, Columbia all of there. on three And while saw in Phebe than did David, growth, in The the she and bring add what just to the Columbia that, more program volume The

impacting too. the rates perspective, a on that those are aggregate program margin from mix early group, the for are margin just So

David Strauss

longer-term, it for to business still -- -- a business? production, the Phebe, X% think margin into can be this I and as XX% gets Colombia And into production you think mean Okay. do it you can further still outlook

Phebe Novakovic

Yes.

As on will schedule we Virginia contribute. get further into stabilize and the NASCO also and both production, Bath

that, we that are So is achievable. believe we fully and targeting that

Operator

you. Thank

Seth comes Seifman from is question from next Our your Seth, JPMorgan. line now open.

Seth Seifman

And very morning. good Thanks much.

Phebe Novakovic

Good morning.

Seth Seifman

mentioned Gulfstream, reinforced outlook you both for the for year the next this Phebe, year. guidance for and

that chain little that step-up headed you guess issues. that a XXXX supply then same a with mechanics GXXX at might those needs incremental some of in sort still If we're the kind to we'll deliveries that potentially out terms understand the of But supply there need significant And that I seeing can be in So I there that's walk you half to second time the be delivery given through outlook more? at deliveries. in issues bit qualitative see Gulfstream deliveries talked give a confidence about? you in of chain backfill the some things of those headwinds where

Phebe Novakovic

of to those And So supply with working those. as we we all don't the respect 'XX impacting through or 'XX estimates we are our chain, that you. see gave

on estimates along noted, backlog. this I has Gulfstream which as strong, our with quarter are on environment, Our continues been the demand predicated current into

insight going in or to we possible and increase that that supply pretty year. should the impact that I the year in to then got saw give transparent 'XX of manufacturing we've tell requirements. there's so we be then So comfortable no -- some look, will -- chain, slip noted address we're to those meet two were that if slip, both respect as you it, And that when remarks, slip, this how 'XX. capability a aircraft as with production to you wanted there as be But we my in to all either out-year from economic that potential we

Seth Seifman

the call for I Thank guess, talked on ask then you And about But of little you maybe as the addressing debt bit a next maybe. preview. a could Great. a mentioned Jason, we you. follow-up,

interest peers thinking of the We to Just the are about years. rates while. take repayment a one you're term role going there's to for in debt terms about generally, probably some now out the of structure and each debt think several you look things do of kind here year just for how your it saw that from want up? due How capital of you next where

Jason Aiken

Yes.

overarching I approach remains our this think unchanged. to

acquisition us to due with we We In credit We'll think, acquisition. we zero level intended that that mid-A this had continue later for play. our and to to the have get in can talked keeping remains that about been back elevated happens think the we see metrics and net to had after debt in the target rating come I to down, because year. essentially to bit expect you with debt to fact CSRA retire I long-term. What a to little get with but see that, intended that, we never the we that this line that bring and prior the post debt we want

now looking land. that's So place answer couple next to be where we're getting We evaluating, into going we're range of to become yet, going the probably conversation. to ahead an years the to is into that more the this of the but don't have

at this then again, that the credit to the year, debt we'll So see retire active is that of I at everything rating conversation. think, that but attended mid-A out. expect that But in that matures plays that more targeting we'll and this ahead ultimately, go we'll that. I and point be end where

Operator

you. Thank

Robert Our Vertical next open. now comes Robert, of Stallard Research. from line question your is

Robert Stallard

much. Thanks Good very morning.

Phebe Novakovic

morning. Good

Robert Stallard

GXXX going this for performance Whether too very you to customer impact take in my this you sort Are like it's has long get to any lead wondering strong demand? starting on jet? order was quarter. mentioned? jet, had on But Phebe, of specifically what I to people this mentioned the the is time sort of saying aerospace have the impact

Phebe Novakovic

lead successfully. No, we've managed that very times

not we demand, robust an see as even issue. do So present and that given the

Robert Stallard

pricing And the evolved last the over is how follow-up, months? just three environment a

Phebe Novakovic

and other pricing about you imagine as can kept the pricing, but reticent to Well, talk with pace load that are know, you factors. has economic we

Operator

Thank you.

Robert, your Our next question line Research. is comes Melius open. from from Spingarn Robert now

Robert Spingarn

morning. Good

Phebe Novakovic

morning. Good

Robert Spingarn

And what combat types to just what nations demand products those expect extent ask most? Phebe, from to of European a be I'm to ELS? you dig expect to to you little particularly Systems bit and products Combat and do from in hoping

Phebe Novakovic

forces, the at our environment and ordinance United well and in vehicle aligned be we But States I'm threat to here. recent I it business as suspect ahead in in see ELS. increase land rearming of careful our will our an should So along recapitalizing demand. drive And spending not the business, increased get both to as customers

Robert Spingarn

Do perhaps much technologies, or on side opportunity GDIT over the you see for in even mission there? maybe cyber

Phebe Novakovic

because be fighting could today's interoperability on networks environment, in war communication interoperability. There and some, clearly is critical reliable and

I have So there seen increased could so some that suspect be of not but any demand, we far.

Operator

Thank you.

from from line your question next comes is Our Doug Doug, Harned Bernstein. now open.

Douglas Harned

morning. you. Thank Good

Phebe Novakovic

Good morning.

Douglas Harned

Can look on to inflationary we're a you forward, perhaps you comment difficult environment. going inflation? obviously, When

affecting, you pressure how of Gulfstream on can the government you the and margins? side of on terms terms through? pass what customer In in side, could see What it both

Phebe Novakovic

of let inflationary a So across increases contract ways our architecture. portfolio in through because is company, the that address One me costs holistically varying in pressures we've actions. commodity dealt with and

substitutions cut Second to possible We've to costs of where then offset part we've other in areas increases substitutions. price commodity is had and the the possible, increases. and extent some

arrows mitigated So project And that as quiver a of the increased of margin result combination compression moment, a in not we at impact. has do any our prices.

Douglas Harned

on doing ability the some done have Are in pass see costs so before? through -- the to your -- offset would you price -- things your basically are you that it reduce that more not So increases? other of these Or ways? things is you

Phebe Novakovic

In you. cost a give contract protects of a of a cost from because contracts, a a the you you have that architecture somewhere reductions. increases the increases, capabilities strong between, things. find you cost to company is or operating it's offsetting you things with additional unpack and In expect I -- on that these offset before. resulted give had cuts other but of our impact that leverage these else, you cases, taking very you one can't -- to But got clear which largest ability anticipated you've has take of combination not inflationary in which very when tools can't I some distinction

that, it And you do then to products. but in can we substitutions. happen instances, product in critical And frequently, not That's historically done continuing so have we're have and can some particularly that. some

increases. it's used of I So we've offset think to panoply these weapons that that

Operator

Thank you.

from from next Kahyaoglu Our question Jefferies. is open. your is Sheila, Sheila line now

Sheila Kahyaoglu

Jason, Good you. morning, Howard. Thank Phebe,

'XX, profitability. the So terms ask dollar the is in I Gulfstream have time wanted Gulfstream deliveries? put you've to When to of that, about more do for given investment a push and XXXX, business how about of the profile since GXXX, of out the and we GXXX, magnitude XXX, the think for the you to 'XX heavy and of guidance in the about R&D with we Like Or Phebe, burden? FAA? time think work and it Or more a it in of amount? is just what's notification

Phebe Novakovic

saw that to quarter. we requirements know software set an time was plan. resources, new this we and new the you don't this walk want R&D Jason, if And we've I of that through, that? our requirements. add to accommodated to increase that because Well, as validation question anything have in in certainly we've noted, it's But of on a more it need you

Jason Aiken

mean we talked travels Phebe with course, about of sure is about risk, Yes, it's your time. the in nature a cost understand and risk that if I have process, both of just potential the the it but we time question. certification making to additional this effort undertake

on additional there's And tasks. the so accomplish goes the to occur burden have effort that that hours of to those man the

we time impact about from terms 'XX, talked 'XX, profile R&D some R&D change first the any I even that the margin spend don't of 'XX on you budget. aggregate the in either an Phebe of saw as the of we've business. what said, on So in in the it enough think pressure some it that And the about But quarter. has or think it to in of puts this the frame as rate is

to certified, as elevated again, elevated, where the this, more a 'XX level return effort the see run state then in once 'XX. XXX, will rate and step the in it XXX XXXX. an it remains shifts back So It of just sort XXX but get we're see somewhat recap year. down to notch the we then normal we this and we'll of remain And elevated will down more toward a beyond

Sheila Kahyaoglu

Marine. Okay, and has good the you think more technology. been then Technologies robust as of lot in portfolio? one maybe as I hasn't there, businesses a it about thinking are but say organic How growth on

So or of technology how portfolio a the business combined you Do do an any that? you it that as as think good businesses emission in overall? whole thoughts like about a to

Phebe Novakovic

on business. trimming the amount spent as in early well that IT both acquisition Mission in of we our portfolio a fair our as of Systems time after Yes, business CSRA,

we in was and of the one of have robustly lines mix going they're accounts. -- if business don't comparing the So engines, shipbuilding we this but that that know but very heard clearly, but and them as budget they're as we correct now. me of if right to your and submarine believe I'm complementary, We we I good believe that them reliably defense items the was marine few wrong, growth, grow are one as to questions like if that growth and of

has the growth But steady that that bottom the So as think Does been top line line. on Technologies the sense? really more our continued metric, in focus. make I hold importantly, wouldn't I

Sheila Kahyaoglu

Phebe. you, Thank

Operator

you. Thank

comes is question line Maugeri Wolfe next Our from from your open. Mike Mike, Research. now

Michael Maugeri

thank Hey, you.

some of Columbia retirements some has the sort to at sort maybe years, $XXX moderation coming commentary few last your been here. implies think of has for risk of growth class. million from revenue over $XXX been historically, annual I strong on Marine million through Growth

that at So mean, growth said, the with next of any sort good over that reason to moderate years there is think few Marine? I should

Phebe Novakovic

million on average. to continue we $XXX million year $XXX to project a No,

You'll trajectory. that see sales, growth, in the changes some driven largely material but perturbations by quarterly nothing

Michael Maugeri

with Got can pipeline some to sticking at are Marine, maybe Or from work then might hypersonic much of on DDG-XXXX, you. it, capacity additional for thank speak relate tapped there DDG-XX? we standpoint? upside there a pretty work out And to you sort the it as

Phebe Novakovic

different any Well, to yes, those predicates. shipboard materialize. of that weapon about are various been haven't yet on seen systems One, mixing talk kind lot there's of but platforms, two integrating a we of

question capacity. about a not And so is it

the at expanded the few our have years through we adequate Bath that and last capacity capital and We improvements deployment shipyards. and updated upgraded have in other frankly,

had demand support and maybe simply the of it's and to continued with haven't a DDG-XX the question U.S. surprises there. Navy, production. have They're respect of So we to out any Bath coming continuing

that we steady going be So to a forward. pace expect

Operator

Thank you.

Peter next line Peter, question your Arment comes Our from now open. from Baird. is

Peter Arment

and that? give about we've requests you saw to then And we Thanks, back your on consider on increasing expect good overall in 'XX as Combat. Maybe comment budget 'XX eventually about 'XX could curious this it's potentially I'm should the when just of thinking just just more thoughts your is what maybe backlog. pipeline comments the we're level of just how gotten event some GD the outlook, a circle we Jason. Thanks. high that now enacted and related with morning, faring Phebe request? just 'XX. and kind follow-up Should the a show for on was up we Phebe, regarding given

Phebe Novakovic

significant vehicle timing hard you're expectation specifically about in that the we in ordinance will were it's budgets demand land Combat, have But vehicles materialized If every to and they talking give to part, I increases. increase. that the the the for have will and about increase fact, most -- land forces in combat and projections not modernization, when, arms forces think

assumptions until see some of Abrams interest is we of quite bake So I I from about growth you interesting not things the the one level at seen that. think in really And that that same have say U.S. allies. it's any would premature the multiple to

So There -- see all from I But as don't see to our of to takes how customers time want there. I time. to out some we'll here, to get not full plays the ahead said, to out potential awards. have to get too far this are of that over allocation how funding threat

that not I think lot folks, from a us. just you'll of hear

Operator

Thank you.

from comes next now question Cai, line your Cowen. von from Cai is Our open. Rumohr

Cai von Rumohr

Thank you so much.

had recently the a of you the pay over grades hike a lower mid-contract Bath, five XX%. Phebe, So hike had pay wage XX where of

on Now there I concern labor assume should be there, what impact read issue, but is an boat you and too? that electric is cost that a could availability and comment is any across mix this on to

Phebe Novakovic

increase and ship attempt help faster. is manufacturing to workforce the wage the an stabilize build Bath So at

So this, ultimately and in turn, help margins. will competitiveness

well-publicized tend to cost existed. touch and of address And the the fully regional more any extent has they've impacted impact. we less So we by think that think shortages been some to can labor they I market be labor the

regarding given -- do we and So we workforce. react set business a then on Maine Maine take of each accordingly. was Bath in special of our basis lines the realities one of a case-by-case But circumstances and

Cai von Rumohr

switching Great, Gulfstream? impact bit, a and little the business have your Russian on at then what sanctions do gears

Phebe Novakovic

it up to are no So volume. environment show X% have the that we noted, additional this we Aviation airplanes this in before, But number as backlog with an cancellations. some think, of to backlog. Gulfstream less to been I European And we to anticipated expected of able and their that in the we quarter, locations. to were -- Russian respect Russia We've Jet manage With no at in they I demand had offset Jet able our than of deliveries was they had extent relatively obviously. few our impact,

not we moment. at see impact do the So an

Operator

you. Thank

next question from Our Wells is now Matt from open. comes your Matt, Fargo. line Akers

Matthew Akers

supply and I Thanks morning. these also a couple could awards ramp-up. Technologies, talk some Mission the of I on to the on good commented of how one, And new then timing they think of are start Systems, question. for those guess, impacts you you things. if some I just just chain on when wonder Hi, trending.

Phebe Novakovic

of were shortages kinds the the think a experiencing was third constraining in I with think the So that products. quarter, and of discussed, I that series quarter we again you, ability in we Mission Systems at the maybe of chip to starting deliver different some fourth

then for half GDIT, timing to at orders have as And new we typically the resulted worked go ought Mission and the issues that a chip So we contending from are to be time by of as a through Systems, tend And but quarter a we or lag quarter award deliveries of to of have -- largely revenue -- through result slower lag starts. pent-up shortages. new demand that, Mission the work forward. at those side we a year's that as upside on with now was Systems they last generated tend be to

then So show to awards some see of next begin we'll more increasing over larger the and quarter time. recent up

Matthew Akers

on I Gulfstream, a can I just how Thanks, up the recession? outlook all into gotten one your how mean sort a be do I've business you it's guess if if is if helpful. could you the do And this of people come are about questions economic customers could downturn? of think could and we I at sort that of sustainable resilient business we talk concerned this if with about have do be go

Phebe Novakovic

have heard think haven't the whole prologue we in this perturbations a pipeline, at that in we of cyclical. let's recovery but I what is that good repeatedly Gulfstream a here. is we've Gulfstream at economic past, the seen quick short pretty Well, what pass And And and lot a relatively demonstrated Gulfstream. is very

very think I job and effectively. to are cards that and our manage us, So so is the to dealt done we've play

better comfortable with the future But good ability we a of be probably quite estimate That the comfortable right. be we a Gulfstream's seems if to U.S. where get a it economy prize the to than we're at moment very cyclical. stand, can and you on Nobel support get So you and I'm continue to great can.

Operator

Thank you.

comes now Our from Kristine Morgan from Stanley. Kristine, next Liwag open. question is your line

Kristine Liwag

generational fiscal like safety triad request, seeing advanced we're the outsized systems class. growth. at Columbia a the in looking year budget investment benefiting we're the seeing capabilities Phebe, And nuclear 'XX Thanks. also seeing

at look have that with capabilities down, to portfolio, new you advanced in your to you of stable, more as appetite IT leverage a outsized significantly vertical the today? business the business to add not what's capture So has your come growth this may

Phebe Novakovic

like not potential of divestitures, we or we the acquisitions I positioned think triad. do advantage but to we are of where take recapitalization No, the discuss

You another question? want ask to

Kristine Liwag

talk and think business dividend versus particularly is of deployment M&A, maybe leverage How to you going additional following payments cash Understanding as where to the about we you're that what repurchases on yes should Great, want cash? generating the significant then. not capital be in amount priorities large flow? you're about free and about share for

Jason Aiken

in our articulated We way change the the priorities. earlier with year. a the I to that to us dividend increase. seen those increase no think we've We was shareholders and deployment earlier annual this fundamentally, rewarding capital first annual And return consecutive capital little quarter, there's last that share talked That the of a embarked pivot bit the And pretty year. significant I several do years. patient little as not disclose us on you've past XXth toward about there's really, and more we've attention the any you if in And that investments repurchases. something back is always and clear now of expect see we the over made making shifting And Phebe all, out that a should tactical opportunistic. it's M&A you front think been business continue we've anything. at said, way. the if in in opportunistic will,

kind how that's behave. of expect us should you So to

Howard Rubel

we'll one operator, And question, please. take more

Operator

Thank you.

Research. Shapiro Our Shapiro open. George, George today from for comes final line question from your is now

George Shapiro

to in due to Okay, in question guess you it cancellation wasn't said response Russia. had I quarter. from $XXX what the thanks. And million the Phebe, you before,

could you if tell us been? have might So where that

Phebe Novakovic

but clue wasn't cancellation. one I had was, it And it have We where no Russia.

George Shapiro

thanks. Okay,

Phebe Novakovic

Okay, got it? you

George Shapiro

were And in well? then $X Jason, the occur billion? year from quarter to first And also, you year's quarter, Thanks. contract the the last do as fine. more around which first expect that's Yes, this Canadian similar payments was to

Jason Aiken

similar this year in payment to the the levels Yes, are and quarter of last both the first for year, balance very year.

of program. similar. their we has should customer again, pattern since payments the be the recast consistent negotiated in that So pretty very that And been

Operator

closing to concludes That remarks. the today. for will you. back Rubel any I Q&A Thank Howard hand for

Howard Rubel

else Thank Alex. joining for today. thank everybody you, our And call

General for our reminder, to first As earnings refer please the quarter and website a presentation. highlights release Dynamics

attention (XXX) be today. Thank you you at much any I XXX-XXXX. reached questions, can your have If for very

Operator

today's joining call. for you Thank

disconnect. You may now

General Dynamics (GD) 27 Apr 222022 Q1 Earnings call transcript