Earnings call transcript Q4 2022

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Operator

Good morning, and welcome to the General Dynamics Q4 2022 Conference Call. All participants will be in listen only mode. Please note, this event is being recorded.

I would now like to turn the call 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 With accompany Investor disclosures measures, investorrelations.gd.com. this Novakovic. Web introduction are on these the webcast, page turn over comparable about release of the site, press additional and to measures, including which the For to complete, I’d our and Relations our Phebe reconciliation Chief my non-GAAP GAAP see slides that call Officer, Executive available Chairman

Phebe Novakovic

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

consensus. even with So compare most sequential consistent and sell very our better. are The side forecast are the respects results and in favorably results quarter-over-quarter

last by XX% revenue and by Here, $XXX we EPS earnings improvement. beat or $XX earnings million or million quarter's a million by Net X.X%, operating $XXX by or XX.X%. $X.XX, X.X%

quarter would final revenue the be, is it earnings. in that the and strongest promised our both As year for

the sequential was nice margins, and quarter quarter net the return It earnings on In a throughout improved fact, over of earnings improvement. share, sales previous steady progression operating per year.

X.X% billion, fully of we had $XX.X up of net up $X.XX, increase. of $XX.XX, earnings diluted per For a and earnings X.X% billion, the full up X.X%, share revenue year, $X.X

the difficult the side. solid better in was our was a year and consistent environment. also a It with reasonably So than forecast sell overall, year very modestly

overall order and activity, the detail the on performance ask in and to Jason our quarter cash backlog very me Let provide strong year.

Jason Aiken

were activity with backlog a estimated Marine total backlog Order million X.X:X which Yes. Aerospace a total year. strong includes finished the at with fluctuations of Thank good be an of times $XX.X $XXX backlog you, again a and year Phebe, the the that rate for exchange very in groups the year-end a to activity led $XXX and company Order morning. the and contract note IDIQ full Systems. options time nearly and of in impact for for billion. once and the way. I book-to-bill the ratio billion continued fourth all quarter a X.X by and high vast with nearly story should majority contracts foreign reducing headwind, value, Combat the We

year. of operating XXX% the and the $X.X of another ahead of with quarter conversion flow year. Turning expenditures, the income. $X.X target flow It which solid XXX%, operating After slightly cash cash nearly performance our of quarter for to flow cash a billion, cash our the for us $XXX net billion the for cash to million, for our year rate was of capital was free of year brings

the particularly As on its performance. performance once previous year the cash cash Gulfstream Technologies discussed outstanding strength activity the strong delivered calls, throughout order on of again and enjoyed Group

ongoing progress expenditures constraints on cash treatment Ajax potential in anticipated of outcome tax the collections you as congressional action the fourth talked uptick resumption we with of when facility in and R&D we expenditures; quarter; to the our cash through said, in pending the the UK; investments. in program of October, the an That discussed three we of capital timing on

was a though discuss flow we receive net expectations. consistent out slightly were headwinds perspective fourth in the compound in quarter from it cash performance requirement from remedy than The and growth in despite to I'll expected quarter, we not R&D XXXX payments of a has the capitalize strong we elevated, out free investments very resume through XXXX. had expect call. the any but did annual to not act with now costs, in share UK, grown to fact free that turns point capital the that lighter later a XX% flow should I out, terms cash detail a As and result rounds more little payments discussed. I at year the Congress better cash also rate per this did our from a

Phebe Novakovic

Jason. Thanks,

Now paying context the in quarter-over-quarter comparisons business let out straightforward that set the and press sequential annual and to the the rather quarter me of segment, the release. in review modest attention are

in revenue represents revenue First, of a well $X.X This and earnings of strong million. story along Gulfstream Aviation. in overall earnings The sequential X.X% a year-over-year an is of increase in as the found had Aerospace. strength Aerospace basis. and improvement continuing the and the aerospace Gulfstream sequential increase a improvement billion continuing business $XXX the X% In of for with on Jet demand in and quarter, as service aircraft,

revenue this we deliveries earnings on attractive had aircraft For helped $X.XX even XXXX. The billion margins higher basis quarter had aircraft. XX. both and both prior deliver in when quarter-over-quarter than as into revenue quarter in and slipped we are the was comparison on aircraft Gulfstream driven revenue up somewhat the the is of Earnings earnings Jet year, three to $XXX fourth year, service first planned from a higher though we Gulfstream by we full quarter were to only at one in Aviation. increase did by delivered delivered deliver because the million XX revenue plan and more Fourth quarter in also year. the

less for our As for side and generally year, revenue than a quarter earnings somewhat anticipated forecast. but the result, consistent by are aerospace the and the sell with

X.X alone. Aerospace Orders To times give you in Gulfstream over demand the book-to-bill and strong. XX% times orders of adjustments was book-to-bill little remained third the new net after I for settlement should result throughout quarter the aerospace years, backlog X.X year few was a staggering were year. and Aerospace the XXX Gulfstream and case up also done, past aerospace the the from $X.X up the aircraft margins point quarter-over-quarter as improved at a times. quarter orders quarter. in a in of a XXX color, arbitration. $X The backlog X.X said out the over received years. billion, two past XX% that The default billion consistently more All in and is XXXX over in

strong pace. We At midyear year, is a points development, In we XX at an margin, XX.X% solid earnings. the into we revenue go pipeline but to short, depends margin on and we on which told upcoming with this revenue to much were we the a will resources. activity As led basis better certify million $X.X new FFA the sales than finished to on spot operating to operating year forecast operating of about and expect with XX.X%. actually estimate XXXX, a in and more it summer $XX respect you GXXX respect margin. With operating available around billion remains sales of

is strong in forward XXXX operating to and We in more improved surprises. get we aerospace So very for In the in Gulfstream deliveries significant collaborative very plan margin, the that the into far, a increase summary, performance has look guidance. according at and with proceeding exhibited been effort as and to but quarter no year. about

margin We also improvement expect continued and Jet. growth at

with Combat Systems powerful slow Combat start After finished a Next, a fourth Systems. relatively to quarter. year, the

The XX.X% in XXXX year is quarter. earnings Combat's a is demand or as particular better. all strong the up good with Firepower, international the million Abrams times, million a Revenue the consistent operating Mobile revenue XX.X% strength highest By Not From wonderful international munition opportunity in XX driven on the in million proved XXXX XX.X% good we we earnings of and and as quarter. order the of and the and on strong quarter across group $XXX business. earnings had point over $XXX fairly fourth for increase was X.X Operating as driven OTS lower. you XX.X% from margin very is annual tank sequential order OTS In was battle provided margin a revenue way, quarter growing and Canada. rounds. in year up continued a it's largely of Systems Combat activity revenue comparisons the by XX.X% a forward. Revenue margin. its of basis Revenue the in enjoyed an operating book-to-bill fact, on forecast Abrams Protected years. orders strong up of and side of third $XX with and higher In with surprising, one very the well somewhat operating in perspective, demand the more had and the history strength are large even performance a up lines short, earnings billion, alone main this MPS, of its pipeline are revenue earlier growth than of business for captured had a are in margin. the $X.XX performance go by year. earnings or artillery for and of the are little quarter, up the ago XX Poland Combat in fourth operating

quarter. $X grown group. XXXX, Marine ever billion an than compound grown billion about Systems A ago, year. is the growth year is here. compound the have earnings Systems X.X% and X% annual revenue is in a $XXX Marine Earnings million $X,XXX the up for billion full full with revenue less this over sequentially story X.X% increase XXXX, the X.X% X.X% up are and this ago $XX has per million of a Marine quarter Once X.X% assistance $XXX growth was rate. XXXX maybe growth $XXX Revenue and again, in rate from also Operating year to off Marine in Systems. X.X% year. for annual highest The perspective Fourth earnings continues. over XXXX revenue little full of the the up from average X.X% for to year. million sequentially year up of of in

In a to strong addition, contract times book-to-bill, X.X Colombia. Marine generating $X.X receipt the billion had modification quarter, in the orders of a including

We revenue, you came anticipated on million. and Our predicted the about year of billion, and on last of operating $XXX earnings in lower July that of earnings. operating margin forecasted of margin a in the forecast X.X% for $XX.X little above operating revenue right to

income the XXXX. So provide our expense Jason little for you outlook other a will Technologies perspective of to give new responsibility, balance sheet, on items, with and group, close his on going bit color I is and a

Jason Aiken

the the The held had environment. of of up and X% prior year a very fourth the supply and a year an a whole the logjam The of operating the was the impressive $XXX was $X.XX ability were product very technologies quarter Systems' were over group some quarter sequentially, up a billion of challenging was million earnings the solid in of main XX%. fourth finish its to quarter. up overcome Mission deliver performance up to Operating that third and as over some about quarter X.X% of XXXX end sequentially. in strong Revenue and up at of chain the X% driver

these resolved, us quarter through been to optimism way the gives While have for issues reason starting not good completely this. see that their performance they're fourth

rate Systems and year growth just in Breaking of was grew highest as X.X% the respect Earnings in XXXX, on trend end than result GDIT the the emerge received the the new CSRA mix of the capture GDIT work CSRA revenue chain a a single digits, For in in down since reported good headwinds in service the down X.X% highest X.X% than shift reasons of the billion With customer notwithstanding XX down, year, over to XXXX. margin low but for once point a contraction revenue year of slightly and year. had any ongoing Mission facing. excess position $XX.X margin the its more they've group to as backlog, X.X solicitations the billion X.X% them finished in billion of up award book-to-bill and the were year product up awards a representing was to that with pushing to $X.XX Mission down XX% putting higher been the XXXX. year, during acquisition. GDIT ever X% recurring supply Technologies acquisition And Mission since after despite almost from strong XX%, a the the discussed. Systems an from was again earnings, for to between its year, Systems protests. right solid times $XX basis a and

deployment give turn XXXX. over I $XXX to slightly Capital some to Starting particulars higher turning expectation That full you guidance With due noted, that, back for in XXXX. to year. or quarter to it billion with At fourth timing. full Phebe year the I'll capital elevated were the brings financial our of million the sales, at as expenditures for are of X.X% before X.X% expenditures, sales. us than to of strictly our original capital in $X.X

capital We X.X% in to continuing to back historic to start expenditures step trend levels. down below XXXX towards expect and

within $X.X that contributed We in $XXX expect plans, $XX just made with of a to share. approximately over shares of fully to market the month years. under also in quarter, $XXX the modest $X million respect plan's eliminating and bringing shifted and billion Concurrently, one more approximately us paid than our $XXX thus we that gap our per or and we was the discount bringing voluntary plan year million million the pension two to any funds increase XXXX repurchased the a to billion past to to which million for $X.X billion, funding risk hedge XXX,XXX $XXX of we plans, volatility includes XXXX. of in million funding the rate year With to contribution the at mix investment associated dividends liabilities, the for quarter This in this commercial stock fourth had X shares full in fluctuations. we

our of in the pension investment in However, will income lower be mix, change result XXXX. a as

Following $XXX nonoperating income noncash this corporate roughly our be XXXX approximately other our from $XXX we $XX for million million approximately to income activity, expect expense million, a derisking be and reduction operating XXXX. to in of combined

plans, anticipated we rates pension of the discount Speaking income are benefited end as from of on had the liabilities higher pension mark-to-market higher our measuring income, year. at which fourth other quarter for than nonqualified the

fixed quarter. net this, a debt a of billion year. last with $X down rate of notes the fourth we repaid in $X.X over the $XXX from year of and balance also We ended After position approximately all cash billion, $X.X million billion

XXXX. billion maturing We have of $X.XX debt in

to expect interest interest maturities, Our XXXX our XXXX. bringing expense period. $XXX scheduled compares debt expense the in That decisions with quarter $XX fourth to the million in remain net was million. interest to million, with $XXX essentially for million Pending the and year to $XX XXXX full in respect the consistent respective we expense

to guidance. XX.X% year taxes. We an with rate fourth which Turning effective XX%, tax income our to the rate quarter, had full in brings consistent our

range, full of I per versus XXXX of cash effective Ajax as the receipts Looking cash XXXX foreign XXX% first ahead earnings higher mentioned is respect reflecting we taxes a on $X.XX. in free negative in in we the total better The increase the assuming with to And than net comparable our of XXXX, below-the-line expect XXX%, expect the outlook the on sum earlier. strong tax to XXXX, diluted levels XX%, around these finally, items quarter, to conversion for impact share XXXX earnings. to be flow, rate a year in roughly following resumption to

my remarks. back I'll That turn to concludes Phebe. it over

Phebe Novakovic

Thanks, Jason.

range low in at last $X.X to be expected XXXX and up billion our has be provide Continuing we Systems, year, we've steady XX% XX.X%. expect in margin billion revenue XX%. the XXXX, me up QX. at the let performance with of and once forecast group we for the extent our to billion, gave operating all in demand a of to high war revenue in had only company-wide in we of the their to In $X.X but begun slightly of environment sooner billion. this around in be XXXX to resulting XX% over Aerospace had signals Since could XXX, anticipated. expected business. down decline demand To 'XX international $X.X planning $XX.X particularly we order again our additional XX.X%. been some including end to strong at with our growth convert a the groups then, time revenue XXXX point. see we horizon. the we operating in will XXX see forecast January and a reliable up improved revenue armaments XXXX, growing seeing return with of consistent following just around to Ukraine, opportunity XXXX, latter in color of in backlog a those with In outlook tank the in modest to for order in award digit this year, towards the demand, hold is expect result of end We're clearly signals that anticipated than basis particularly threat roll-up. business better be activity, than our again between the the manifest at and Combat This munition little in activity you is order points some for single the XXXX, multiyear outlook later changed. start The the and around then saw to MPF Margin into So and the deliveries in from is came part a each which Poland, Gulfstream

on a journey, growth noted averaging million I Group Marine remarkable year. has a $XXX As earlier, been

time Our million to outlook of unchanged. $XXX over per remains $XXX million year

some However, supply the Virginia the program annual constraints variability of chain will year. this drive

We revenue around growth a $XXX at essentially their operating XXXX and X.X%. $XX.X group's anticipate to the XXXX a at flat remain million well as result, will rate margin a As return at for year. billion XXXX in

in continue color little the behind We consistent expect To of XX they revenue billion half challenged lingering a first be been digit however, pace past this low you year $XX.X for chain the to outlook, with three supply Particularly in will years. the the perspective. they've Mission range grow past the at dealing in work of $XX.X billion through with a a will GDIT from the to Systems, single give months. the group. revenue Technologies as issues

shift industry with will with As resulting operating than albeit yield range, an lower sustaining performance, margin result, their X.X% group's in stronger slightly the would volume compared XXXX. slightly the revenue XXXX. mix, lower down activity their The a revenue be in but service leading hardware

of XX.X%, anticipate to company $XX.XX X%. XXXX. XXXX, for similar to $XX.X increase diluted recent to margins a So see from in we margin to pattern up sequential a share. $XX.XX throughout year. goes approximately years operating a the billion of forecast fully per range with all of what we On revenue, We basis, and basis of quarterly seen operating XX billion expect revenue in wide, points we've to an This expect almost increases $XX.X up

guidance this always, As It option the to Beating our hold operations. purely must share EPS assumes shares avoid buy forecast to the deployment effective we dilution come only and enough from from count from capital. the of is steady operating plan outperforming exercises.

Let me close with an observation.

must comes the It from Our of environment this unpredictable as our operating is in financing be it government. of forecast plan. conservative

However, In spending. defense short, than opportunity I risk forecast. in more see the suggests threat increases environment our in

With turn Q&A. that, Howard it to over to start the I'll

Howard Rubel

Thanks, Phebe.

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

Operator

Instructions]. [Operator

comes first Walton Myles Our Wolf question from with Research.

Myles Walton

the a and the expect of sort in new 'XX activity there. front operating about similar? the of cash. CFO XXX%, of on relatively pick versus you've on maybe we segment obviously, repurchase for you act and or lot and things. to could role excess got 'XX Should your couple with 'XX And capital at One, hoping focus how roles Jason, responsibilities you maybe touch intend on the deployment to then think you was you a between I balancing up

Jason Aiken

Myles, at respect opportunity. to your responsibility I first think the looking question, new with that and

look their confidence and it's I in highest I them foremost, And history important accomplished in and excellent frankly, and are businesses When these mention role, this recent and remember transformation, think teams. that going First back to to And through over look less period I that this this have don't Marzilli, COVID. really is level by change run two the Chris of presidents. ahead a not any business market helps become to remarkable steer dynamic. I as of

to is emphasis. and that sustainable really frankly, to continue really and finding also cash focus continuing the be bottom the line focus think earnings sure trajectory, as on a will to their growth but make our I on top the always that line, So businesses way

balancing terms tenth In of honored have this dual year CFO. to my two, the role the in responsibility, and humbled entering as I'm fortunately

feel I about ability to both time. So handle the same at confident the

Phebe Novakovic

our our where maintain to our shares respect prudent. We'll dividend to capital we'll with invest continue deployment, we'll business continue repurchase in to So accordingly. and

any priorities don't So see execution. our least at big the for change in I

Operator

from Barclays. comes next Our question David Strauss with

David Strauss

out. guidance then XXX mentioned to Was preference, Phebe, you're you touch could you're doesn't that deliveries -- And customer talking that related? supply that you was on -- appear your deliveries three was it chain slipped prior going now XXX. that year, this

it hold? makeup last And there. the still for that So forecasted Does 'XX thing, deliveries. seem think XXX, then any doesn't you I

Phebe Novakovic

that So We confident forward we into same. quarter. them and let customer of three the in past respect we was going international issue this make it in year our slipped and we an get that couldn't production are With year, two noted, One time I deliveries. can airplanes trajectory simply had, me go preferences to that remains as just next the this were completed order. have for

and and right So we're track, we're on get directionally we there. comfortable

Operator

from comes question with JPMorgan. Seth next Seifman Our

Seth Seifman

the what whether certain deterioration are is deliveries little it's kind or we could Boat. of marine a supply And in talk in should to sense or hiring that schedules. at more you there for get Electric bit milestones metrics, be if further looking a of wonder of chain risk the firming any about and and things what challenges terms also I specifically, particular

Phebe Novakovic

a on but aspects of that on discontinuity a I impacts many we had of few our into We United and workforce. disproportionate workers. lives, States that experienced went posit business and throughout lasting variants schedule the variants. we truth. these dependent, Virginia. COVID think profound have experienced a large abnormally particularly the retirement that with labor a revenue. We something the scheduled third is also about In Virginia impact Electric deconstruct COVID to manpower had let's anticipated heavily So on had effect we Boat additional of not on had one is also

with helping and who's by really working a address and fixed engaged quite are been chain to incremental Navy shipbuilding in detailed the develop on active and the We over how improvements plan issues a list time. these supply are and action

do the see at So what workforce. we the moment? We see in stabilization

we've better I the dynamics think across immediately did nation, of got labor out we little than a bit coming COVID.

additional some what have the been. also of We have in experience challenges

for considerable two this So see the issues to a to year further last note And ought to Boat. bit we're to base us of velocity that submarines that a involved the schedules. good for notwithstanding coming the look deliver I all going will this of around the be more way and I thing material chance the dig a into at would give funds year. it, and despite year, two the Industrial Submarine Electric

milestones the until maintaining difficult identify hands. So delivery in shipbuilding, cadence think I customers' are of is to of in much But really important. the ship you that get

ships to the remainder of variance working Block So that as some that ensure of on X said, closely on X Block with very just get could the the the ships. we I we're back and Navy schedule

Seth Seifman

today discussion just press schedule the up? up Columbia about How's -- of follow has to discussion and maybe the that. holding trade specifically then And Virginia. on been our Most the

Phebe Novakovic

first contract on done XX% and are about schedule. we're the ship the ahead we So of

Operator

question with next Peter comes from Our Baird. Arment

Peter Arment

How CapEx on you a to about maybe just Just you just in in stay Difficulty]? on and Seth's maybe just CapEx [Technical what line things unveiled expect of [ACAS], further it. question might base, profile lot Marine. start just particular, written the Maybe Phebe, there's you just industrial could just step-up thinking be get about been and should to on mentioned we any are the -- plans the there?

Phebe Novakovic

many us you calls just this. they with to to lead to earlier on I've our think Not how to Navy we and have, in said of from of I respond we'll on And our respect person, all as customer want take [ACAS].

and course, Navy an whatever So series support intergovernmental we is of of this forward. going is will, discussions really the agreements and plan

Peter Arment

And follow-up, just as on chain. maybe in supply quick just a general the just

marine do You and stabilized? of if what's constraints Has gotten it going on talked just the you -- about this Mission in is, of the is kind is Systems. think what And some worse it's issues or marketplace? the it at in [submission] actually

Jason Aiken

So I the other business, think with have driven. of availability what labor So on Systems, we're microelectronics, some unlike respect really of which to is focus are and it here, we of chips about workforce to really talking is right? Mission the which parts heavily and

really issues is nice or that's workarounds, parts certifying for Mission developing of on. Finding obviously, did first Mission us this right? Systems So sourcing, industries when the really, broader just so alternate much an issue a us aerospace than job these and side. in Systems impacting and defense surfaced, substitute And I think

were plus minus. So our the come work the expectation kind through on it, this of chain all hump of through over clear those predicated would of year it, that within, the of top call a these we've of the or become actions get supply way we're But not always that list to frankly, the sources at some for supply. continued it's as priority and

longer expected, XX going saw so with new we a even and they times of were we of with priorities. anywhere where bottlenecks as longer from going capacity months, to demand team than that our That with whole the could set key as lead to suppliers and to the persist includes XX the well were reliability really procuring they when were have key tactics. improve to to and or working forecasting giving them new XX with confidence allocate additional adapted components in that us were So we somewhat normal dealing the this

So and all of place underway. that is in

some those imagine, of longer to things yield little might you results. take As a

corrective to So actions, need place, of plan takes just before all that's of to we second side second a to the kind roll and like why feel But this the we hold. through they've we're of and into in half expecting it's in great they've got half year. to that all see good taken but of do that be that other out sort toward this, year this the to likely get back come

Operator

comes question Ron Bank next of with from Our Epstein America.

Ron Epstein

Navy this bit land remarks that like past, about bigger it we different on been about -- a systems. seems the the impact Army little for payer of always the and talked of the that the a a potentially Ukraine systems business? the learning logic You've lesson have was view, that land Maybe prepared and Air Ukraine now point out in potentially what are for your could bill in strategic does have from the the kind of has your implications Force. a Is

Phebe Novakovic

both you they're So in challenges has air war services the World either II, funded. Army Navy Air post modern relatively environment cold at say, gets over, as tend or threat issue in materially And a preparedness, hot War get problems, and the noted, funded which war, strategic the to and tactical when funding look changed. the if got we've this Force I I'd is challenges an where tactical the the

show into orders. we've room order demand as number those a more our room our So some our And capabilities. more and in we've of interest go has converts backlog begun into and in Army increased up see in but this to as actual in land that forces and of grow driven there got book, to to

business down but I all in think of done Switzerland, been wrote well Luxembourg. European what's the a contracts, on Europe, we lot because Denmark, a number going a Romania, about going securing active that's -- Sweden, They've in what expect forward countries. has way, Poland, I increasingly quite when So historically vehicle Spain, of a Germany, combat our on recently and those basis. both By in on

So are the I closer feel threat, the think urgent you to funding your the requirements. more you

output, kind our So increase all Combat the is with By changed of our Systems of all for we've we working overarching been last and to the plan. the this four, say, expectations need ammunition exactly Army have a way, of months five is on projectile growth. that three, and which for to

really demand that environment products drives for threat So and now. as seeing defense we've always we're positive, some the of

Operator

Gursky comes with question from next Citi. Jason Our

Jason Gursky

seat, about to been of think the know into opportunity for I make revenue. curious want might just and time, investments small either in technologies I'm the products accelerate Group. I a of or amount in processes the settle as take you but your to Jason, seat kinds new order to a you to you've in that or want know [BD] ask Technologies the you to you maybe question services in

taking over of your change get that in group. needs Just the you on group might kind and of impressions leadership now the there what with first

Jason Aiken

Systems, are trying the portfolio. model that companies So lot to the services balanced is a federal about together, as there to group been technologies in That of I way elements and out other well have IT of quite some peer set and think for this get a GDIT set the as of hardware offerings taken the traditional to. and and comprehensive offerings a well that of that currently between Mission time, think and we are capability is cyber, between

And have in game. so play don't up I that as necessarily to we much catch think

refine there's enhance I to portfolio. and the opportunities think always

I a As earlier, to stop going mentioned being this environment. not is dynamic

will capabilities, always, invest to We as the that continue to in internally case. have be technology new are, continued

you know the bolt-on I'll possibility right about would know, speculate We're always M&A. There's for acquisitions. if were say going Phebe say to now. I she talking As what not

there this it, have I GDIT's space to in the acquired would IT look of the our the size you and in brought Systems and space. peers, There at Mission of have acquisitions we have face note, XX companies nothing up group we a transformed if in federal that call essentially way, some and main small been but been taken on XX that group, by not point couple that top that XXXX I business. have of time, -- in those We've six during competitor since CSRA with or the bolt-ons since any. the five GDIT services done capability done

it's in others suit. the the of following lot put industry. so interesting happened consolidation are that a see to in of the I and activity a of And in very good lot lot behaving a ourselves But aftermath think we and stead the of see that's how we others

the but continue think don't So massive we'll on planned we a have in maintaining sea to change in there's market. ahead, I what position leading focus our

Operator

with Cai from question Cowen. next von Rumohr Our comes

Cai von Rumohr

your second a in you software was my at the with was So and up warranty sequentially understanding bit margin some the quarter associated Gulfstream little charges yet had and third and GXXX XXX.

any a were better bit aerospace? the So reason in what margins Were -- weren't other there there the

Phebe Novakovic

good. pretty are margins darn The

We you. we told performed had what have

pleased I pretty so the R&D. that. with note one we that would headwinds were And is of

we'll that from that result you. the a the very we some then And than as those have has FAA unwind. had are increased margins and directive and work driven and requirements I to to begin additional will [MAX] required So think better of in R&D. the strong our the anticipated new to But of been airworthiness see guidance that continue

Cai von Rumohr

see they bps the from start margins you've Can over been. things do where guide can to go? to Systems where where back they Jason, Mission Mission And sort were? Once down is you for out, go XXX Systems margins

Jason Aiken

want sure as five XX% So the prior those CSRA past Since you're think given the of it, the, or you group. we the saying thirds, look back to two because in frankly, for margin technologies used on the margin it's really But guidance side I and acquisition, group. don't business businesses low business to think IT more our -- lion's basis. usually unit what to or specific averaged X.X% technologies give the you're within over the to whole to between we will, became, consistent a fairly I XX% saying, -- of a and combined when range, share, the call of used the you if group. make group digit services be years the acquired we've business I sort margin of if CSRA, the the double We largest

a of that low the right with see a effort what COVID, that we significant embarked integration steady come the first for several had is of footsteps just to of through nice they've impacts seeing now, couple continue. we've digit years on growth moment of now the where single for So expect and the trajectory we're shift GDIT that in now on really years followed immediately really

think, Mission issues Systems chain a bit. in is the As have moment with the well addressed, dealing supply I down been, their is volume that

what mix So margin, margin, terms of a aggregate in group's the in we're the the is seeing between really than nothing shift more two.

increased of and the side with product that's the the of the business side on the lower So hardware business. service volumes and

to overlook this comes which do a as harvest level, on see continuing these through that's back to the the on margins Systems gets And an expect -- through to see growth aggregate and to own that not issues, basis tick shouldn't grows. GDIT and ought Mission the is on as margin its they way, we track its once So back happen fact up. come you by it improve

I think their before, acquired highest as margin company the earnings I said CSRA highest they business and their a since had to contribution we ever.

a the and influence and think, So level we over is will help direction, that through supply headed come time. ought see XX% to issues everything, mix, right trend chain to Systems I the got in up the the toward Mission at back just

Operator

Alembic Skibitski Our next Global. from with Pete question comes

Pete Skibitski

talked flat and in seemed earlier 'XX year, to following added like on money you for was about of the to international set bit Congress that the Stryker budget. and a Ron's the outlook it but Abrams question for this on combat quite Just demand, and

think when to kind convert give expectation of the any is for you you? demand us -- a after can or actually XXXX begin begins to of the when that So sense reasonable CAGR things you

Phebe Novakovic

think I digit single what growth. we're is at So looking now low

that, you that's see our know best customer. we'll planning anything So in if we time in that that our let consultation with moment certainly over accelerates the

Operator

comes question next Our from Jefferies. Sheila Kahyaoglu with

Sheila Kahyaoglu

XX budget is when segments. whole, it, flat line as and on think delta How as growth and The to pretty have the business the guiding three the good you're EBIT think portfolio you in that top defense programs about the some and you on and do EBIT a you up all there. When up resumes? budget overall perspective it Maybe about catches well.

Phebe Novakovic

I think that's in So more 'XX.

I that just portfolio. and an strong extremely I as look, Virginia. One is question the But it's a defense across big backlog issues look executing of have of the now portfolio, we said, there, way at the executing,

of this frankly So Virginia the focused I'm to mention worried on the That on, to cover think performance. us that we chain. on our on, defense too in of with out operating But the [EB], improve execution, to one some aerospace earlier. There on be things not are to is growth and the should at general, to that the one and thing all of at that I focused we're can we do about respect side. is ability I side nor supply more perturbations coming continue provides neglected

about comes. think really to the comes this backlog got all I it So as of execution. Growth support We've when it.

the like position And in, so I we're frankly.

Sheila Kahyaoglu

ask it. then don't processes? I certification one provided us Can on I And the update you if an more. you GXXX GXXX, could give know if

Phebe Novakovic

after we convert And six very has well FAA. change about with to that, be will going expect GXXX the GXXX get in And that. So this certified see relationship the the months -- still summer. so any the we been don't

all So forward finishing processes. to we are look continuing the to certification

focus, resources to -- FAA outside them, complete ability of is control, this I given will a on they other that is that but Now demands and the our have tell lot their far so that you so all good.

Operator

with comes question RBC. from Ken next Our Herbert

Phebe Novakovic

I guess, him. we lost

Ken Herbert

I growth outlook that. little making you investments What's in you're muted. about really I within of as that good that Aerospace, in part guide? business? growth the Sorry business. a aerospace talk to wanted services in was And 'XX about ask, services can first for bit the the

Phebe Novakovic

to the when invest moment, digit service pretty We see nothing in really capacity. that expect outstanding we side. growth more the And prudently -- single our But at continue need we're low regard. for service we in

reasonable we growth. see the You've capacity steady what as to accommodate got

Ken Herbert

summer. a just on And quick this the certification XXX clarification

time commented you your sort a FAA the frame? of ongoing would risk this or summer is risks risk the and or some support you're of around capacity mean you you is uncertainty out closely I your or retirement to lot that with As associated with -- characterize you're visibility like that? feel and obviously, working control. do through there I this is substantial still of guess, How FAA of that well

Phebe Novakovic

managing portfolio I done requirements. of FAA has and multifaceted its complex and think job the a good series a

the And certification. is so believe sticking we reasonable for expectation are what far, we to a

Operator

from with comes Robert Research. Vertical question Stallard next Our

Robert Stallard

couple Just ones of Phebe. quick a from me,

what flow tanks. First get to have Abrams in then particularly staffing or for you XXXX looks secondly, aerospace Jason, cash And of point they're on guidance? book-to-bill all, of like your At other going just form issue? in does Ukraine, assumed some in an sort capacity for it what become

Phebe Novakovic

vehicle Staffing an of issue is plenty and wheeled. tracked both not here. side, combat capacity the There is on

we within to the government of to some with the that are developing, contracts bilateral it's they intends base the the to US agreements industrial -- well to capacity So respect extent can execute these any that of accommodate.

Jason Aiken

as And relates second and predicates a to going assumed much X:X for then, aerospace forecast. a book-to-bill, Rob, our it return question, the we've into respect cash to one flow your XXXX, book-to-bill with of to that like is

obviously, that provide could outperform, some they extent the to So upside.

Operator

with Deuschle Scott question next Our from comes Suisse. Credit

Scott Deuschle

how the latest year? in wondering prepared trends the there, from the the if And it could comment I and Gulfstream individual year for receivable you're expect you a the just at Ajax touched down and pipeline Jason, both then your Phebe, much what this you on unbilled if of depth burn I was and you remarks. buyers. could end in balance was identify to on that seeing you more corporate at on sales bit buyers a bit curious of was the

Phebe Novakovic

I With active, individuals. Mid picked public also remains I up. corporate it our East been strong. net very pipeline, worth America both respect just remains high to and private say companies, slow. Europe noted that that would has

Southeast Asia, been let's active. increasingly say, China, has not

demand in all got our offerings of of all across we've aircraft. a good our So

Jason Aiken

expect at unbilled, to the that good this reason how before we want resume collect needless specifics do of question, second your that's to of But now. to $X.X have end on my Ajax I say, it billion we ongoing year, of don't those expect of discussions cash with mentioned that's year, to remarks, as stand receipts the get then roughly into this much I part as to end the the where is the quarter. And customer. relates in we right to

down. unbilled balance we'll so to And come that start see

Howard Rubel

Operator, question, take We'll this up. please then Rubel. more we'll is and wrap the call one Mr.

Operator

with final Robert Research. comes Spingarn from Our Melius question

Robert Spingarn

When XXX XXX XXX. much like the it would XX R&D Gulfstream incremental Phebe, to is to into once and the that earlier question would the for entry an expect margins we might XX? back how don't what look at that's and going I or decline, service use, I know on would happens? imagine

Phebe Novakovic

performing begin an to go So I company. strong down R&D have And think look, to the extremely Gulfstream operationally is expect year. high we at of we end next

operating the and shop And in And of engineering. discipline so I as our floor, has our chain, think incremental we improvement in margins efficiency supply have really on demonstrated improved. all that

have improve margin that parsing clarity. So and very not will we get going But we to specifics but we're there's we're comfortable upward into opportunity, steadily time, I until over think repeatedly. good

Robert Spingarn

just And at point? as a still in the in earlier. what's the process over system of they on that years, there at their or peers after you Are FAA, talked past stone it happened is discovery set a is they process about evolve the this clarification couple

Phebe Novakovic

how requirements than answer. what our are question and of that can I And to broader we a to all have that's has that matured significantly. we a execute FAA understanding the What you new with is think I'm think tell I able clear Yes, relationship relationship working them. the very and

Robert Spingarn

Okay, much. thank you very

Howard Rubel

today And thank call. on joining all us for you this

Web to and for outlook. a the please release, Dynamics refer General As quarter the fourth site highlights earnings reminder, presentation

be reached at office later I you my Operator? have (XXX) can XXX-XXXX. today on questions, additional If any

Operator

further concludes conference. no for presentation. at Thank this are which you today's time, attending questions today's There

disconnect. may You now

General Dynamics (GD) 25 Jan 232022 Q4 Earnings call transcript