- Earnings call transcript Q3 2022

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Operator

Good morning and welcome to the General Dynamics Third Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. Please note, that this event is being recorded. I would now like to turn the conference call over to Howard Rubel, Vice President of Investor Relations. Howard, please go ahead.

Howard Rubel

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

Phebe Novakovic

or Thank and and Revenue the X.X%. earnings billion share earnings us. of with Good up $XX million. Operating is revenue you, reported against diluted and last Earlier Operating net per earnings billion. Howard. million $X.X Net earnings and X.X% share X.X%. $XXX morning, thanks up, are earnings for X.X% year. of $XXX $X.XX up we of per everyone, this million are morning, quarter third $XX up being of are or earnings

results results sequential favorably. The better. even the quarter-over-quarter So compare are

per revenue Here basis, On X% We by are year-to-date X.X%. including tax or rate lower per sell net consensus on a by share XX.X% other earnings than $XX EPS is a the the a of up items X.X%, Most last XX.X%. by revenue side. than sell higher about share came anticipated strong earnings from side. various beat $X.XX margin are earnings by and earnings by Operating anticipated $X.XX million net up and by somewhat quarter's we operating anticipated. beat XX.X%, beat by the as

and quarter by cash is the net performance income. was from very first net perspective, in cash operating cash in $X.XX Order segments billion. the This billion, strong also quarter Free of strong at flow another particularly a Gulfstream. a across good follows strong XXX% all was flow We very half. activities a cash $X,XXX had performance provided

will we Jason and on more foreign so backlog In later. summary, a hear enjoyed quarter inflation chain detail particularly from You headwinds. and supply cash strong exchange a little unlighted

right let of performance So segments. into around move the the some color me business

$XX be XX Aerospace Aerospace. strong $XX million of to revenue million result operating basis lower for was the quarter ago than XX.X% was X.X:X improvement quarter in a and operating million fair, fully year-to-date. million continuing $XXX in a inability and operating revenue up another the is a somewhat The deliver this earnings an is a million or better, XX.X%. demand. and To with the was billion are XX.X% $X,XXX airworthiness of yet Revenue directive, X.XX:X, quarters audit which third good alone perspective, due X.X:X the resolved Aircraft, more, Aircraft earnings as a margins. of $XXX sequential prior The XX.X% had reflecting on up and is margin. Aerospace Gulfstream revenue earnings book-to-bill had From more quarter. and book-to-bill were of earnings higher Operating up even up improvement First revenue or $XXX point year up XX.X%.

the prior book-to-bill the quarter of a entire directive the a the good as airworthiness demand since replenishing fleet quarters, strong macroeconomic forecast. GXXX From Gulfstream still product but reach we to Despite aircraft and first third time a the was pipeline, billion. a a Aerospace the to the very in upgraded grown tell $XX.X interest the The had and of perspective perspective, total and activity deliveries. $X,XXX the we of backlog Almost the point super-heated of end and removed GXXX apparent by increase schedule has was not significant previously interest, good of but Only the billion, about the against see quarter the strong macroeconomic continue right on will FAA impact, very as we wind-related had services. continue software in experience robust XXXX, quarter. to Certainly, installation seen end of now received headwinds, level in

aircraft November. begin say, quarter We through GXXX the performed respect margins quarter have the delivered the the in activities. In with MRO successful led by to XXX an certify GXXX, strong upcoming quarter of it had we FAA to orders will said of planned, together resources. should haven't With development, is is inspection much to first fourth much The we'll to in validation a but XX week Aviation, the follow very GXXX and exhibited quarter. deliver scheduled aircraft closely these in Jet with to XX program Aerospace during depends FAA-type as in momentum. performance but If quarter. its quarter. the this the deliveries control summer even of quarter. software law it I customers end We the This the in real authorization about XX Gulfstream available on stronger suffice market short, estimate fourth everything well very improving goes in have GXXX.

the margin. book-to-bill XX orders and from of $XXX in $X.XXX very up up Combat a Demand impressive over from ordinance, $XXX large on for margin the down Poland, improvement billion earnings reduction is a the is Systems Combat operating X.X% in earnings quarter had in in labs year Combat. strong quarter with and point million X.X%, order a are On similar across XX operating year battle very on Canadian while a tanks Abrams point The Systems main sequentially. million are a operating for on X.X:X government. a margin. for sequential for is revenue basis, basis for but an provided XX.X%. the Combat XX.X% results revenue with the improvement significant Nevertheless, up Next, basis, basis segment ago ago order Systems munitions quarter or quarter. a operating XX of X.X%

our munitions Ukraine our first We also to received order business. related the at

total again Systems Combat the Systems $XX.X impressive operating group. increases business this this Combat quarter an In the billion. performance strong new by backlog with was to of All summary, once

billion Marine. is of million, quarter. X% year ago over Next, the $X.X $XXX Revenue up

on XX impressive USS complete. improvement the earnings continued and margin. remains with million in quarters Boat, on improved of modernization TAO large the was and quarter quarter's Electric $XXX and $XXX sequential or evenly or on order a impressive for This last oilers. the XX is had received the particularly growth between orders Year-to-date additional margins good are $X maintenance On up are a earnings point operating better is million a NASCO a revenue group The TAO for fairly Columbia sequentially. quarter, basis, NASCO. This across first revenue Electric or is basis perspective, Revenue electric is very growth. schedule. the up $XXX At margins more quarter-over-quarter or up Revenue basis. XX.X% in ship million also for a operating and revenue consistent X.X%. X.X% X XX% ESB million an NASCO distributed contract Boat million on received been From boat X.X% in has board. ship X.X%. than an an Hartford. this on orders and $XX Operating up cost

Throughout new construction million a X.X:X, leading backlog we book-to-bill repair to backlog. As a and work. was in increase of $XXX group, the have result, solid a

is visible. real the in as before, said given margin 'XX also FY In clearly budget. improvement revenue are revenue programs summary, well And Our the I've visibility opportunity over time. supported steady is growth the

from down ago good terms the quarter, the comparative in cash Moving remains for case year attributed was and due Systems a and of government largely healthy customers $XX largely in dollar of nagging products. the billion and mix. division. and civilian million to quarter periods issues order In very $XX The Mission or businesses. are was has reduction decrease earnings Mission disruptions the and pipeline split revenue another between the point part revenue a suffered some segment of to of Systems GDIT million IT chain backlog with IT. services, supply XX.X% to down revenue. obligate basis fairly appropriated timing related book-to-bill or Technologies. at program Systems Total operating This from in and relatively million enjoyed consistent exclusively horizon. of to impacting in Mission on X.X%. The strong to the funds federal $XXX good Operating results X:X over earnings authorized remains $X.XX evenly solid failure both all with quarter the margin, prospects in particularly in on active XXX operating it

benefits While we than more differentiation targeted its continue wins of at investments billion the the nearly the to up see realize awards XXXX and in $X.X tied prolonged GDIT's in the adjudication from full momentum dollar technical this, exceeded year the protest year-to-date nice in begins business of the procurement GDIT $XX third These delays, terms. the as And highlight billion wins offerings. quarter. pending despite end to in

On very focused the has this created. and The front, technology the retaining GDIT on business best remains attracting people culture of talent.

contracting on disruptions, accountability of talent a inflation, select and have third of clear hampered a shortage labor programs programs serious ability record. chain series Systems a empowerment, inclusivity quarter, of market. and supply Mission is and One competitive differentiator additional fiercely challenges experienced the system to Many officers customer of and have contracting execute delays. a intel their mission that availability customers in

urgent been will continue for redirected demands while. remarks in areas by initiatives. to company. the in improvements I That effort Nonetheless, we Ukraine. concludes has quarter understandably, to to up some moment. fourth cost-cutting The respect and the the a to quite with has In these productivity offset that life in quarter. of on bottom catch make a addition, fact my have every of to for entire meet more customer business a solid realities some line of the impact the focus more anticipate subject say They

on the we end we year, in the that we of performance the update guidance toward the to as largely line you So call. look be gave with to last expect

As All our expect by further our but other. CFO, our guidance the In we to call I each our somewhat over previous just stand estimates, remains We expect the same. for up, guidance. should Jason forecast. they of to now to Aiken, of other run remarks. ahead short fall our turn offset aerospace technologies we I'll respects, all previous referenced, EPS previous

Jason Aiken

just development target very performance rate With first can to billion quarter our opportunity strong year, It another these for us respect Starting cash with nearly the the occurred $X.X of to and over This achieved continued XXX% the year-to-date, and of performance on in for with investments, flow at bipartisan status the includes a positioned yielding research of the flow despite XXXX. to billion X months the the $X.X back billion that cash contract well for of in through action according immediate broad-based also for which Including contract the large through was capital conversion operating first international tax free treatment achieve months. the ongoing orders us our quarter expenditures, the XXXX $X that from closing. above Thank to you, $X.X of the strong net This vehicle of combat of our is cash collections XXX% Phebe, operating good of strong conversion flow expensing year brings X think Gulfstream the flow cash sense restructure and or our I income. billion. strength performance. everyone on the of segment. and support quickly free once cash again cash particularly expenses, Technology of our of was window was morning. The

above the As capitalization free defer would cash to net flow all said requirement, we of year year, income. for we've or if XXX% acts expect at the Congress the the throughout reverse or

of Looking up expectation capital $XXX or around in sales. expenditures year. at be from Capital sales last the consistent deployment. of to with X.X% the for That's quarter year, million were X.X% our

uptick For X our X.X% the at sales, of we're the capital fourth X.X% so months, full obviously first an year quarter. target, remains in but implied in investments

from the over to just net down months total quarter during in dividends assumed deployed rate in that the billion a of first million, third lower the the and billion. months bringing result cash share repayment the million dividends from we the be in of repurchases expense million, same $XXX $XXX quarter XXXX. paid quarter, $X.X the the At brings bringing billion XX.X%. $X.X $XXX to also was in of fourth including X in a and to the XX.X%, $XX rate is year. expense approximately a last for in down the the year over first time interest our quarter quarter expect the This end billion period through at balance the year of was The to $XXX We for Net higher position expense debt million million just to That $XX for $X notes last XXXX. quarter interest this of and from million, third $X.X net X under X in in the the quarter with billion, down the was the of months our the interest rate continue mature point, rate guidance for consistent first to in a tax fourth. the quarter. expect The $X third this

included buybacks. to and full One Reduction expect a stock corporate to impact fourth outlook results. rate our more Order company a again on once comment XX% law Act, material which for a year, So were our the in X.X:X no which, implies of tax backlog whole. don't quarter. on XX% a higher front. book-to-bill in on change with tax signed was the story third in We minimum these the course, excise August X% inflation have of The tax a into discrete a the a of strong activity for provisions the quarter either tax financial and as

quarter a mentioned trailing order book-to-bill the months. times continued with the activity X.X over a strong to earlier, X.X As have XX times in Aerospace and

the the $XXX impacted negatively Q&A. British headwind, euro dollar in the for in and first FX FX start in I'll revenue have $XXX also increase by But the pound. of months. and with potential options million X particularly Combat in given defense was with notable backlog while a The in X.X approximately the times. $XXX at each with total majority including was in the only first X.X% the $XX year to X rate On times, $XX.X quarter foreign side, quarter a finished over surging fluctuations Incidentally, revenue That least the of from the versus to the was been backlog the achieving of book-to-bill Systems the the remarks, IDIQ and exchange headwind the value, of million million Systems. my a the $XXX.X Combats segments quarter million We months billion. Combat book-to-bill total the fluctuations the combined vast due turn Howard and billion, contract the concludes of to would and the it for down Group's contracts X impact up by X.X% quarter year-to-date, of and

Howard Rubel

Jason. Thanks,

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

Operator

today JPMorgan. go begin. from [Operator Instructions] Our telephone first question Seth Seifman comes ahead, you of may Seth, please

Seth Seifman

Good Thanks much. morning. very

the bit for asset waste Jason, a where here, pension that we an income group Can Sorry, the migrate about and think think different the are peer in a when of give might think than terms expect. we we update you When to the about account any, And in you terms are you. you of you the year, that but year-to-date next question on that? impact below little would cash things. guys us and rates way on contributions your where to line that interest if about returns

Jason Aiken

Yes.

that's as point here item. don't more an from process a to guidance are As that at something anything well I January. an different a full cash a right be material plan as pension we're from bottom and of the on regard. said, perspective, give the of Seth, is peer operating income we we'll you not quarter both front. think from group expect this Obviously, now, in But in line as the from up expecting And you our we detailed somewhat perspective as roll most material part this in specific result, fourth the earnings

Seth Seifman

Okay.

million Just to or quarter, clarify, of the line the that $XX each kind so income below continues? of

Jason Aiken

range. that at number I Some an version have this exact in don't point.

that on can the expect piece big would income It's But you decline it income the pension commercial of XXX% a to business. not as there. pension of You side that's modestly. again, is

little down in not it a but a So should material take bit, way.

Seth Seifman

Okay.

sub about constraints on your as that outside the talk kind the do we all the some maybe of on And thinking a we some work you during potential topic? of the news Maybe could now. on building sub Australian saw then And quarter little about Australia. capacity and right Okay. a that bit follow-up, quick know to about

Phebe Novakovic

Yes.

So we demand by prioritization of and are driven entirely the of the our our customers. customer

going -- not work So of we with to through U.S. demand. should forward. focus Navy, And be how we're the demand do what we working them, accommodate these but our capacity some these issues only potentially then as other U.S. determine

Seth Seifman

very Thanks Okay, much. great.

Operator

ahead. David Our next of Straus today from go comes question David, Barclays.

David Strauss

Thanks, any segment software to Aerospace the at costs related the good quarter unusual fix? the morning. in Phebe, were there XXX XXX,

Jason Aiken

I to in quarter in improved issue, that to both is that did posted that aware, Yes, and third the David, the has the you accommodation related customer but we the quarter. absorbed material inherent margins think second have, quarter group see the in and numbers in the software the you're some results, wasn't been the

David Strauss

Okay. And in QX, Jason? nothing it's completely behind lingering

Phebe Novakovic

Right.

Jason Aiken

correct. That's behind at point. this us It's

David Strauss

on Okay. cash conversion. Great. follow-up And free flow a

Given mean guess, capital something where perspective you the are you in QX. baking that a in Can XXX% full unless pretty year-to-date, there's looks you're I I conservative on working or unusual, just in expecting elaborate year from over for that?

Jason Aiken

Yes.

flow cash you As through been first the point X particularly has the out, strong months.

working very in If for there's I we're that capital months, completely said monitoring, remarks, percent a to we've X reduction. comfortable first opening the there. things one, number from probably upside with the be at some the for some To So significant candid, opportunity the we're look XXX-plus the as benefit year. I had

Some of that's timing.

that. in quarter. that of could turn We'll some watch fourth the So

to forecasting the I X.X% expecting we're range. still noted, or be year of for the The in big sales is, CapEx other as piece

a in uptick implies chased meaningful fourth that hit in I'll rarely acknowledge quarter. that forecast CapEx often So and pretty the our CapEx it.

upside there in, quarter. is continues everything get third item is the frankly, if to be opportunity that's in to don't a And the to everybody headwind resolve need the situation we So do Ajax that and that, on year. fourth some there program. our the something could if we that we But monitor

things have are And some we point, all the for for of the those come quarter. upside. fourth that. through So monitoring certainly, your to some opportunity We some we're

David Strauss

very Thanks much.

Operator

you of Ron, Epstein comes Our Ron may America. of next question today begin. from Bank

Ron Epstein

Good morning.

Just It Most navigating today well. more airplane companies you to like maybe problem. really seems supply having thought are the guys deliver they deliver going opposite were the are than it question. going chain aren't to they

So b, I across guess so my question there? is of business going you the for issues similar And on how you forth. the going then when chain at and chips so and on for you is supply you heard look sector, is the kind Gulfstream? it defense have, How

Phebe Novakovic

clarity challenges So on to headwinds have which able you rightly we've we supply the And there. lot fair do. note, supply number But the side, process planning quite number challenge what heretofore. aerospace chain a fair There out remains our chain a is had get are, so the chain in But fourth supply we through airplane of as a potential managed. of as by airplane we more of forward. quarter, accommodated go we far however, going a have

production for for but some And profoundly impossible to experienced very of chain and overcome. continue before, quarter defense of products in at and a complex more very, additional some specialty the chip specialty even and products high-value in impactfully the the the going Mission chips supply lot side, with them delays impacted. of dog we have delays they were most a the production several most quarter lines Systems hard they produced high-performance beyond perturbations, they while in that had But again, experienced obviously that in organization, have supply chain group. most that Mission to fact, On into Marine very the them except were Systems. also challenges, pedestrian the accommodated of is the the is them, problems, those

the a lot to revenue we're margin credit. the the have work that. initiatives and impact earnings So going of is of System restructuring of to They and impact taken cost-cutting to have but decline, Mission through offset some

look more into then so the to quarter and into year. fourth come we And as next

Ron Epstein

hear labor you then the Got more what We that mean side, from they it. follow-on, I in as Navy of businesses the you to what are a the in across Got labor? And But skilled the it. are seeing maybe want all shipbuilders businesses, portfolio seeing out you on across terms right? have there. clearly have the

Phebe Novakovic

Yes.

there we've of had all very have to but touch labor, labor we you there had felt So think the that lost experienced kept supply the itself. number mean but point, perturbation about going labor but while fields and people of supply market, as well engineering beginning not -- high shipbuilding, manufacturing, folks some as chain business. a the shipbuilding a are nationwide market shipbuilders at open, across constant complex, are the is businesses, a labor is experienced also did, terms manufacturing have a you the in be some resolve chain. specialty in those in to lot some are When perturbation impacted. that's some beginning And we when perturbation headwinds to that specialty particularly in but resolve on of in had of we I

we that took don't level And that. a of retire. think that alone the of higher experience. middle People opportunity all at pandemic the to normally I we are in So than the in

some growth for point work ultimately, I as constraint through is to our do here. see that. of got term. in we've this We revenue not at see moment. do think not But we the Certainly important longer the not So and an labor

Ron Epstein

Thank it. Got you.

Operator

Stallard from of comes please Vertical today proceed. Research. question Rod, Our next Rod

Robert Stallard

we're for are orders. convert sort But Good into of actually to expecting of demand you seeing this that some suggest comments orders your defense line deliveries. time morning. what strong into finally these Steve, turning

Phebe Novakovic

You talking about combat?

Robert Stallard

Yes. combat. Well, but defense across divisions, firstly, the

Phebe Novakovic

Yes.

number if about healthy. talk and technologies. be And it little we bit pretty I continue Combat to then the projection, I about the orders ramp for we combat, to is talk also up to clear. as lumpiness, we a is MPF of related nothing primarily as before well The Abrams combat, Poland. because to munitions in Ukraine. And quarter, can a The in things the signifies long-term get beginning some saw Stryker you to growth. want marine have and while orders saw revenue respect -- some Let's quarterly you With think as

So I we telling suspect us -- and and focus that U.S. anticipate if customers on what we the through, we Army our munitions. parse that Ukraine, in they want more ammunition

them we're lot we’re Europe. demand working various at water seen So then production. widths block. a to not In see the business exclusively a with provide for to we've because Germany ramp increases in bridges And out, Europe, in frankly, very in got orders but of up in we've coming seeing beginning crossings And and Eastern weight vehicle and to former particularly, -- vehicle river RFPs levels. nice

This it. be deliver good of on They're We executed but to bookings. is of waiting of get and about high-value we will, detailed our year. to all the them the this, amount -- has Mission The some of there. because out had think, inability through to all demand is just as fair It's is through color chain will think, once them. supply we for the GDIT two just get there. their this products constraining to orders, they're we last tale technologies I year. grew tried give you a I They of really, cities. anticipate a impacting is what's grow So Systems,

Robert Stallard

time from follow a delivering? GD So on there combat, these you've up getting the is signed lead just roughly for example, and Europe, between X-year had XX-month actually to and orders to contract

Phebe Novakovic

potentially Less depends the the on exactly it at what throughout vehicles. vehicle existing depends and and looking have on clean again, We're We're not depends vehicle, updated folks that the bridge it sheet want. to less just we and so changes changes side consistently product. years. vehicles side, or at and the on the Completely looking so on modifications

a don't months. year, depend. some XX expect cases, I So it than a suspect will whole in I more lot Certainly, that.

Robert Stallard

great. it so was Thanks Yes, much.

Operator

question go next Myles of Walton Our Research. from Wolfe please Myles, comes ahead.

Myles Walton

know I billion but Thanks. broader that expectations. how in deployment ahead Phebe, Good morning. thinking you're obviously, in $X maybe, coming coming sense, a November, curious capital maturity flow in of cash the about there's

Go think. ahead. I

Phebe Novakovic

yes. that's good No, a no. And Yes, question. very no,

remain priorities Jason But the bit deployment ask on more capital a Our same. give to me color the -- let you little give details.

Jason Aiken

Yes.

on, terms billion year, very think we'll at We to the to conversation due When a the to point I $X Myles, would opportunistic. a down. plan future, in making. more was up we'll elements, get we'll back undefined next you where coming I the maturities the some debt it's know, When additional in share November. about about volatile start And the that's think in is not. acquisition decision look in CSRA or we pay it, substantive side, It you XXXX, think coming way to and the it we tactical always other as to look, think and have where in think you the we've talked said to additional market on when start do point repurchase, way and that debt took third have we think that start quarter. bring down we of hit we'd the to into in about whether we've the right a level

shake always be we of there. trying more the think So is little to way. going where importantly, things long-term but see change out, to to share doesn't what dividend off that And opportunistic repurchase approach hands a just -- and tactical a I our were in kind

century, about past heard quarter us always be frankly. talk on we've expect continue and on You've for to we'll to that, the that been trajectory that

matter moment cash just of of And address said, a to all will optionality afford the Phebe importantly, as for no priorities our changes think be without see the having the in strategy. I to So resources quarter. performance flow one in a to and of in It given forgo deployment liquidity the what's those our other. sake

Myles Walton

And Phebe the worse improved the quick attractiveness. become M&A up, that follow Is just same? it’s market said, a

Phebe Novakovic

on not going M&A. comment just We're to

we can that. I So leave think it at

more one shot, more want question? You one

Myles Walton

stay through. to Howard Angry. I'll get No. don't I want

Phebe Novakovic

Isn't Yes, that's it? scary a thing,

Operator

Our comes Research. Shapiro of from Shapiro ahead. go next George, George question

George Shapiro

little margin I number Gulfstream Jason, million how a big something more? in Yes. pin or the were a for wonder you if a could Are fixes I in talking quarter. we the to few software of down dollars bit as the

Jason Aiken

George, I overall number mean, the sort context. the on R&D I have fix. into I that discrete actually that of budget have fits software sense don't a of and a

as as where diverted frankly, through alluded, towards as in of from in we certification the which -- fix, think about an we've made impacts ultimately and in that with a, in of were group even those XXX improvement, full that we the saw to the continue that's XXX the year, asked elevated we'll were to sustain adverse Again, we point, the airworthiness expecting, quarter, is we of the even fully aerospace I XXX the customers you at will quarter, and accommodations impact, for was then David XXX, think talked But in XXX, we are margin this an the So year. XXX over earlier sustained AD results Phebe R&D ahead a strong nice of of perform better bit directive. impact terms the us. mode. next that the have XXX. we why did as within the terms little on behind the Part And resources

the but color airworthiness number more I'll discrete fix. directed don't I around that, have give a you So around apologize, a I little

George Shapiro

a related? a net that the million quantify between Okay. can a question. bookings one, Or the in and you Was then gross There's Phebe, Aerospace. it difference FX cancellation? Was $XX if And quick a that? usual

Phebe Novakovic

I absolutely above. mean All of really immaterial. the

George Shapiro

sneak Okay. in one. And last let me one

Phebe Novakovic

ire. risking Howard's Go, You're George.

George Shapiro

you X. That's ire. a run commented than it about in and of 'XX lot book-to-bill presupposed when the Howard's Obviously, 'XX, got always we've that. your I better okay. deliveries

So those forecasts are there? of the or thinking you conservative changing delivery forecast delivery have you just out that stay with

Phebe Novakovic

our the and extent the reason through and it, at process, be But at will we Not I modify the We we don't as that. quarter. explicit moment, to moment. very change planning that X:X, certainly we that fourth we'll assumed any about to see in go the need to

George Shapiro

Okay. Thanks very much.

Operator

Liwag Morgan of go Stanley. Kristine from Our next comes Please question ahead.

Phebe Novakovic

Hello? Kristine.

Kristine Liwag

that. about Sorry

You guys hear me.

Phebe Novakovic

Yes.

Kristine Liwag

Phebe, Arabia. Thanks. seeing Arabia Great. the foreign about to through defense business? affecting we're do military Okay. U.S. this sales, evolving morning, we between Good sales and Canada, relationship changes potentially relationship in your how your on Saudi everyone. With international think Saudi And

Phebe Novakovic

We that in see no moment. of a indication

ask to one want You more.

Kristine Liwag

their customers, individuals? seeing? there up at a helpful. following the aerospace. really what I We've George sort not color for aerospace. people the levels. Can quarters. times was at the provide on demand be this above you're But you past would book-to-bill on where few at then some record was Yes, mean Any X at about provide asking on also, color corporate comfortable same duration backlog Is in some is you of to level time, resilience the And wait at so demand Xtimes when of from aircraft. extend is backlog of you're there this have the to could seen

Phebe Novakovic

Sure.

customers. for aircraft we our take your the to let's delivery always our times -- So the in We watch question inverter.

that's seen. level you, demand last far, starting to And remind in measure, of ever in entered so hottest all any And order in frankly mid-February Well, notranic the that quarter I've we the market by was the year, manageable. been spectacular. just

So much the and quarter. going demand Asia. demand, interestingly, Mideast, our fourth pipeline into third the surprisingly, we've And into XXX Fortune our Southeast I the quarter looks going U.S. seen like not think strong pipeline very

got moment, orders of good pretty like. the we've some at what visibility So look

Operator

ahead. Our of Rumohr next Cai please question comes from Cowen. Von Cai, go

Cai von Rumohr

Phebe. Thanks and good so Yes. much, results,

third second So up, forward? going and software going fourth out way, look how margins of look what in quarter split R&D the should and we to down And the the we flat as volume presumably the about for quarter. and forward, accommodation the is and that with between

Phebe Novakovic

upside, it's see guidance of about to our margin or some end the the financial in we'll the XX-XX. and rather, the by But second stated fixes alluded we about for quarter work which the almost entirely done So year. software issue,

bit around like the of let frankly, we're transparency Gulfstream the that. that The was So process. cooperation me transparency apparent that we the throughout a -- engineering are. haven't and just where strong And little you we resources FAA give between and and the this, -- very asked but very you of

relationship So expect that continue. of kind to we

Jason Aiken

down. add coming coming that R&D If predicate down, was in R&D thing. question would your Cai, X a there to yet just be I be expect don't we could

level through a the even you will If remain elevated sustained and look potentially XXX and next year. with year at next the XXX

want that clear. just I is So sure make point to also

Phebe Novakovic

point. Good Yes.

Cai von Rumohr

in September, you through second $X.X of middle a they DoD follow-up, in we the that quarter? Excellent. billion that as bookings? And a given of at to to occupancy turn GDIT, restrictions seen in the compare if bids awaiting. And have mentioned How we billion lifted in protest, $XX does any pickup the with flowing that

Phebe Novakovic

part what have. the me we your question again was? first Yes, tell But of

Cai von Rumohr

billion had you $XX Well, business at awaiting in $X.X progress. billion in

Phebe Novakovic

when Some be of have we've that And in these resolved of are our of are protest, favor. protested. federal these protests. the number we've there level that's have approaching to that -- won to one we got been And say items got the protests

the in the of get I it's GDIT resolved. elongated. And fair said as even to I they've that, So hopefully, fourth because we'll still continues -- amount cycle, in there's see think proposals grow. we've But decision-making through down that quarter. a as we given which said, somewhat, has, But

Cai von Rumohr

Thank you, very much.

Operator

next question proceed. Ken, Herbert comes Our of RBC. Ken from

Kenneth Herbert

the service could resolved. to months, XXX. I X And that Thank the are have you from on and X Are that Is schedules morning. XXX good Yes, you. now for the been the the considering and diverted were ask great, schedule back it first resources risk? that FAA okay, anything to to at assume last XXX% considering in the on put X potentially from fair the program? on else few seeing issues, that entry issues wanted

Phebe Novakovic

well cooperated with as I FAA. very we've the said, So

that lot would that to We FAA. requirements to I the expect in that continue. work learned process from we through new how of a the software note

a that testing with think as coupled result at sticking the -- We certification GXXX preceded the But considerable our with a estimate. its fact and look, mature that the that, moment with see most we process system on when of software about and and resources, they and certainty. the review. it. it's the we of give things talk that FAA when issue, with control availability you result can we of and that guess lot to an is. best I this our to enter But we're ultimately, certification and going is FAA aircraft successful regulator of the sort of are FAA they're our a summer the is the XXXX their control That's

that tried to about So that, recognize controls always ultimately be we've the government but the pace. U.S. transparent

Kenneth Herbert

Okay. just I follow-up. quick And if could, helpful. X Very

for defense business of whatever that resolution we extends risk have the the continuing at 'XX? side, how reason, a look your you calendar On if would into

Phebe Novakovic

I come that a At to we desire X nothing a X the moment, that. particular the we difficult very entire which get year But you. we do we'd of see don't to at to threat find the if imagine. risk. in hear this And it's CR, environment, have And Congress quarters back to of would in suggest

Kenneth Herbert

Great. Thank you.

Operator

Our comes of Bernstein. Doug, please next from go question ahead. Doug Harned

Doug Harned

And at morning. a is you. picture can demand of seeing at Thank a us what kind this give I such Good you picture looks? mean shifts that the going a that look cabin for When lot over of of couple past things outlook first-time versus Gulfstream you're seeing what of now, some the we're right you customers you? has large years? as And today straight Can of U.S. in you jets, give us changed is international perhaps to how

Phebe Novakovic

and about some the the The but We've premature to change. was of still cyclical been was And declare it's change. there's in buyers, in you I that certainly during a versus couple structural I, seen of pandemic. think years part to first-time increase ago, I created a because structural So discussion pandemic. wealth a see that lot higher had any a think

that different in quarter, heavy So is this which imagine but I have U.S. exact data I much it don't than can about what's pipeline, the will be

and Middle Southeast again, the East. Asia XXX, Fortune

Doug Harned

over, And -- this it within you to munitions, about think I a have it when orders got looks that you you earlier looks of this switching of this? Combat like quarter? business here. there's also about then think that potential you well mean, lot something high-margin growth a talked X.XX for as like beyond potential that and is do just How I

Phebe Novakovic

expressed that, an I and I -- to has in have my increasing our customer think remarks that interest alluded So demand. this may in

your we're So not But is predicated about on high-margin based. with working them a business I increasing production. think quite

where portfolio. we -- fact, from work In with a that very high-performance OTS organization wide we all vast leverage. operating But to this a comes respect of do is are and

okay, but wouldn't were do additive. So I that say we they

Doug Harned

of I was of it some and higher-margin vehicles, just So you traditionally, than the parts don't higher-margin thought business. case? think a of other not combat business it the that's perhaps as a

Phebe Novakovic

not higher-margin of about it's lot line of turnover. a the got driven be that's particular contract X and an but will high-velocity occasion, and on They've OTS, largely awful business, mix, by business. contracts

think that's them. think I about So you how should

Howard Rubel

Thanks, be final. Doug. Lisa, take we'll please. will one question, more This our

Operator

Go Our question today Suisse. from comes final Deuschle Scott of Credit ahead.

Scott Deuschle

it's up Jason, Good capital is been focused ROIC despite put Thanks here I honestly, taking morning. business. my well for that historically in you really on. you've And think the question. held the something that very

CapEx margins next the as Where of can get reflected years? So and the you business you bulk ROIC just marine think over do comes the phase past curious, have few of out aerospace? the you of capital go working

Jason Aiken

you'd to we in this the emerge It's been period question. as year become investment a having absolutely on great We'll But see us. behind period. to little essentially a ROIC and had muted it in investment we see bit downtick period and of little back we your Obviously, of to that year, extended expect point, as see see as decline. that And expect beyond. ROIC To this next bit saw a expect a we result. we've that a investment, during

investment in in years and as targets range over were to we we well. the few to back our the a the that's So what should term ought into long as ago, entered period prior expect be you

Scott Deuschle

to facility guidance impact you Jason, does expansion gave was announced CapEx? talked prior have of on you embedded previously in does that you. that figure any Okay. about? X% Great. the recently the Thank Or the then And Savannah, 'XX

Jason Aiken

look now that's all Yes, we've and previously. given embedded

change no So those to projections.

Scott Deuschle

Great. Thank you much. so

Operator

Thank That closing Q&A to session. hand management remarks. for concludes the I'll back any you. the team

Howard Rubel

joining for all you today. Thank us

course, of release highlights website and, both please the earnings Dynamics a As General our presentation. our for to reminder, refer

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

Operator

Thank you joining all today's for call.

You disconnect your now may lines.

General Dynamics (GD) 26 Oct 222022 Q3 Earnings call transcript