Q3 2022 General Dynamics Corp Earnings Call

October 26, 2022

It's being recorded I would now like to turn the conference call over to Howard Rubel, Vice President of Investor Relations. Howard. Please go ahead. Thank you operator, and good morning, everyone. Welcome to the General Dynamics' third quarter 2022 conference call.

Any forward looking statements made today represent our estimates regarding the company's outlook. These estimates are subject to some risks and uncertainties.

Additional information regarding these factors is contained in the company's 10-K, 10-Q, and 8-K filings. We will also refer to certain non-GAAP financial measures for additional disclosures about these non-GAAP measures, including reconciliations to comparable GAAP measures. Please see the slides.

That accompany this webcast, which are available on the Investor Relations page of our website <unk>.

Investor Relations start Gd Dot com.

With that completed I turn the call over to our chairman and Chief Executive Officer Phebe Novakovic.

Thank you Howard good morning, everyone and thanks for being with US earlier. This morning, we reported earnings of $3 26.

Diluted share on revenue of 10 billion operating earnings of $1 1 billion and net earnings of $910 million.

Revenue is up 407 million or four 3% against the third quarter last year.

Operating earnings are up $18 million and one 7% net earnings are up four 9%.

And earnings per share are up six 2%, so the quarter over quarter results compare favorably.

The sequential results are even better here, we'd be at last quarter's revenue by eight 6% operating earnings by 12, 3% net earnings by 17, 8% and EPS by 18, 5%.

We beat consensus by <unk> 11 per share on somewhat higher revenue than anticipated by the sell side operating margin is about as anticipated most of the beat came from various other items, including a lower tax rate than anticipated by the sell side.

On a year to date basis net earnings are up $93 million or 4% and earnings per share are up 45% a strong five 5%.

We also had another very strong quarter from a cash perspective net cash flow provided by operating activities is $1 billion $280 million three.

Free cash flow was one 3 billion, 114% of net income.

This follows a very strong cash performance in the first half.

Order performance was good in the quarter across all segments, and particularly strong at Gulfstream.

You'll hear more detail on cash in backlog from Jason a little later.

In summary, we enjoyed a strong quarter, particularly so in light of supply chain foreign exchange and inflation headwinds.

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

First aerospace.

<unk> had revenue of $2 billion $350 million and operating earnings of $312 million with a 13, 3% operating margin.

Revenue was $281 million more than a year ago quarter up 13, 6% operating earnings of $50 million more up 19, 1% on higher revenue and a 60 basis point improvement in margins.

The sequential improvement is even better revenue was up $480 million or 25, 7% and operating earnings are up 74 million or 31, 1% to be fair. The prior quarter's revenue and earnings were somewhat lower as a result of the inability to deliver four aircraft due to.

The airworthiness directive, which was fully resolved in the third quarter from an order perspective. This was yet another good quarter, reflecting continuing strong demand. The aerospace book to Bill was 1.15 to one Gulfstream aircraft alone had a book to Bill of one three to one and 1.9 to one.

Year to date.

To put the point in perspective since the end of the third quarter of 2021 Aerospace total backlog has grown $4.362 billion to reach a very robust $19 1 billion.

Despite apparent macroeconomic headwinds we continue to experience a strong level of interest good activity and replenishing pipeline.

Certainly demand in the quarter was not a superheated as prior quarters, but still the book to Bill was very good against the significant increase in deliveries.

Only time will tell about the macroeconomic impact, but we continue to see strong interest in Gulfstream aircraft and services.

From a product perspective, the G 500, G 600 have now seen the FAA removed the wind related airworthiness directive right on the schedule, we had previously forecast.

Most of the entire fleet had received the installation of the upgraded software by the end of the quarter.

We have delivered 188 of these aircraft to customers through the end of the quarter. The G. 500 G 600, together led the quarter in orders followed closely by the G 650.

This is a very successful program with real market momentum.

With respect to G 700 development the control laws software validation is scheduled to begin FAA type inspection authorization. During the first week of November we estimate we will certify this upcoming summer, but much depends on available FAA resources.

Gulfstream had 35 deliveries in the quarter, if everything goes as planned we will deliver 40 to 41 aircraft in the fourth quarter.

I haven't said much about jet aviation, but suffice it to say it performed well in the quarter with improving margins and it's MRO activities and short aerospace exhibited very strong performance in the quarter and should have an even stronger fourth quarter next combat.

Combat systems had very similar results on a quarter over a year ago quarter basis, but was strong improvement sequentially.

Combat systems revenue of $1 $790 million is up two 5% from the year ago quarter earnings are down one 8% on a 60 basis point reduction in operating margin. Nevertheless, the operating margin in the quarter was an impressive 15, 2%.

On a sequential basis combat systems revenue was up $122 million or seven 3%. While operating earnings are up a very significant 10, 6% on a 50 basis point improvement in operating margin.

Demand across the segment provided a book to Bill of one three to one with a large order for Abrams main battle tanks for Poland.

Orders for $370 million for munitions and ordinance and an order for 39 lives from the Canadian government.

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

All of this increases the combat systems total backlog to $13 8 billion.

In summary, this was an impressive new business quarter with strong operating performance once again by the combat systems group.

Next marine revs.

Revenue of $2 8 billion is up 132 million, 5% over the year ago quarter.

This quarter's revenue growth was distributed fairly evenly between electric boat in Nashville.

Revenue was also up 118 million or four 5% sequentially year to date revenue was up $415 million or five 4%.

Revenue in this group has been up for the last 20 quarters on a quarter over quarter basis. This is very impressive continued consistent growth.

Operating earnings of $238 million in the quarter up 9 million or three 9%.

On operating margins of eight 6% on a sequential basis operating earnings of $27 million, an impressive 12, 8% on a 60 basis point improvement in margin.

At electric boat the Columbia first ship remains on cost and on contract schedule. The ship has more than 25% complete.

Nasco had a particularly good quarter with improved revenue and better margins across the board.

From an orders perspective electric boat received a large maintenance and modernization order for the U S. S. Hartford.

<unk> received orders for an additional ESB and two T. A L or lives as a result book to Bill was one one to one leading to a $400 million increase in backlog throughout the group, we have a solid backlog of new construction and repair work.

Programs are also well supported in FY 'twenty three budgets in summary revenue growth is clearly visible.

As I've said before the real opportunity given the steady revenue visibility is margin improvement overtime.

Moving to technologies. This segment has revenue of $3.071 billion in the quarter down 49 million from the year ago quarter, a one 6%.

The revenue decrease was fairly evenly split in dollar terms between mission systems and I T.

Mission systems suffered from nagging supply chain disruptions and the failure of some government customers to obligate funds for authorized and appropriated products.

In the case of <unk> services, it was largely timing and program mix.

Operating earnings of 285 million or down 42 million or 12, 8% on 120 basis point reduction in operating margin exclusively attributed emission systems and largely related to the issues impacting revenue.

Total backlog remains relatively consistent over all comparative periods with a book to bill of one to one in good order prospects on the horizon.

<unk> remains very active at both businesses.

J D. I T enjoyed another solid operating quarter with healthy earnings and particularly strong cash in part due to good results in the federal civilian division.

While we continue to see procurement delays GTI teeth year to date wins exceeded full year 2021 awards in dollar terms. These wins highlight the nice momentum in the business as <unk> begins to realize the benefits from targeted investments in the technical differentiation of its offerings and this despite the.

More than $3 5 billion tied up in prolonged protest and nearly 17 billion pending adjudication at the end of the third quarter.

On the people front <unk> remains focused on attracting and retaining the very best technology talent.

Culture. This business has created one of empowerment and accountability and inclusivity is a clear differentiator and a fiercely competitive talent market.

Mission systems experienced a series of challenges in the third quarter additional supply chain disruption inflation labor availability and select Intel programs and customer contracting delays.

Many mission system customers have a serious shortage of contracting officers that has hampered their ability to execute on programs of record.

In addition, quite understandably customer focus has been redirected in some areas to meet the more urgent demands of the Ukraine.

The business has offset some of the bottomline impact by productivity improvements and cost cutting initiatives. They will make every effort to catch up in the fourth quarter. Nonetheless, we anticipate these fact of life realities to continue for a while I'll have more to say on that subject in a moment.

That concludes my remarks with respect to a solid quarter for the entire company.

So as we look towards the end of the year, we expect performance to be largely in line with the updated guidance that we gave you on the last call as I just referenced we expect technologies to fall short of our previous estimates, but we expect aerospace to run somewhat ahead of our previous forecast all up they should offset each other.

<unk>.

In all other respects our guidance remains the same we stand by our previous EPS guidance I'll now turn the call over to our CFO , Jason Aiken for further remarks.

Thank you Phebe and good morning.

Starting with our cash performance. It was another strong quarter with operating cash flow of nearly $1 3 billion.

This was achieved once again on the strength of the Gulfstream orders and particularly strong cash performance from our technology segment.

This brings us to $3 9 billion of operating cash flow through the first nine months of the year, which also includes the ongoing collection on our large international combat vehicle contract. According to the contract restructure that occurred back in 2020.

Including capital expenditures, our free cash flow was just over $1 billion for the quarter and $3 $3 billion year to date, yielding a conversion rate of 137% through the first nine months.

The continued strong performance positions us very well to achieve our target for the year of free cash flow conversion at or above 100% of net income.

With respect to the status of the tax treatment of research and development expenses I think everyone consents that despite the broad based bipartisan support for immediate expensing of these investments the window of opportunity for action in 2022 was quickly closing as.

As we've said all throughout the year, if the Congress acts to defer or reverse the capitalization requirements. We would expect free cash flow for the year at or above 110% of net income.

Looking at capital deployment capital expenditures were $255 million in the quarter or two 6% of sales.

That's up from last year, consistent with our expectation to be around two 5% of sales for the year.

For the first nine months were at two 2% of sales, but two 5% remains our full year target. So obviously, an implied uptick in capital investments in the fourth quarter.

We also paid $345 million in dividends during the quarter, bringing the total deployed in dividends and share repurchases through the first nine months. So just over $2 1 billion.

The net result at the end of the third quarter with a cash balance of $2 5 billion and a net.

That position just under $9 billion down over $1 5 billion from this time last year.

Net interest expense in the quarter was $86 million down from 99 million in the third quarter of 2021.

That brings the interest expense for the first nine months of the year to $279 million down from 331 million for the same period in 2021.

At this point, we continue to expect our interest expense for the year to be approximately $380 million, including the assumed repayment of $1 billion of notes that mature in the fourth quarter.

The tax rate in the quarter was 14, 3%, bringing the rate for the first nine months of 15, 1%.

This is consistent with our guidance last quarter to expect a lower rate in the third quarter at a higher rate in the fourth so no change to our outlook of 16% for the full year, which of course implies a higher tax rate and the discrete fourth quarter.

One more comment on the tax front the inflation reduction Act, which was signed into law in August included a 15% corporate minimum tax and a 1% excise tax on stock buybacks.

We don't expect either of these provisions to have a material impact on our financial results.

Order activity and backlog were once again, a strong story in the quarter third quarter with a one one to one book to Bill for the company as a whole.

As mentioned earlier aerospace continued to have a strong order activity with a one two times book to Bill in the quarter and one six times over the trailing 12 months.

On the defense side, the combined book to Bill was one one times with each of the segments, achieving a book to bill of at least one times.

We finished the quarter with a total backlog of $88 8 billion, while total potential contract value, including options and <unk> contracts was $125 8 billion.

The increase in backlog was particularly notable given the headwind from foreign exchange rate fluctuations of approximately $275 million in the quarter and $650 million year to date with the vast majority of the impact in combat systems.

Incidentally, the FX fluctuations also negatively impacted combat revenue by $55 million in the quarter and $123 million in the first nine months of the year due to the surging dollar versus the euro and the British pound.

But for the FX headwind the combat systems group's revenue would've been up by five 6% in the quarter and down only three 9% through the first nine months.

That concludes my remarks, and I'll turn it over to Howard to start the Q&A.

Contracts was $125 8 billion.

Thanks, Jason as a room.

Reminder, we ask participants to ask one question and one follow up so that everyone has a chance to participate.

Greater could you please remind participants how to enter the queue.

Of course, if you wish to ask a question currently press star followed by one on your telephone keypad now Connie and limit your question to one and you may ask a follow up after.

Incidentally, the FX fluctuations also negatively impacted <unk> revenue by $55 million in the quarter and $123 million in the first nine months of the year due to the surging dollar versus the euro and the British pound, but.

We'll brief pool see what questions and now being registered.

Oh first telephone question today comes from Seth <unk> with J P. Morgan. Please go ahead you may begin.

But for the FX headwind the combat systems group's revenue would've been up by five 6% in the quarter and down only three 9% through the first nine months.

Oh, thanks, very much good morning.

Sorry, Jason to waste a question on pension here, but you guys are.

That concludes my remarks, and I'll turn it over to Howard to start the Q&A.

A little bit different than your peer group in terms of the way you account for things when we think about where interest rates and asset returns are year to date, and we think about the income below the line next year, where that might migrate to and when we think about the cash impact.

Thanks, Jason as a reminder, we ask participants to ask one question and one follow up so that everyone has a chance to participate.

Operator could you please remind participants how to enter the queue.

Of course, if you wish to ask a question press star followed by one on your telephone keypad now kindly limit your question to one and you may ask a follow up after.

If any in terms of the contributions that you would expect can you give us an update on that.

Yeah as you said so if we are somewhat different from most of the peer group in this regard and as a result.

Brief placebo questions being registered.

Oh first telephone question today comes from Seth Knifeman of Jpmorgan. Please go ahead you may begin.

Now, we're not expecting anything material from an income perspective on the pension front, obviously, that's something we'll roll up as part of our our full.

Oh thanks.

Thanks, very much good morning.

Sorry, Jason to waste a question on pension here, but you guys are.

<unk> plan process here in the fourth quarter and give you more specific detailed guidance in January but I think the bottom line is both from a from an earnings as well as from a cash perspective, we don't expect that at this point to be a material item.

Little bit different than your peer group in terms of the way that you account for things.

When we think about where interest rates and asset returns are year to date, and we think about the income below the line next year, where that might migrate to and when we think about the cash impact.

Okay, and then just to clarify the $40 million or so of income below the line.

Each quarter.

That kind of continues.

So some version in that range I don't have an exact number at this point you can expect it to decline as you would suspect modestly, but but again, that's not 100% pension income there.

If any in terms of the contributions that you would expect can you give us an update on that.

Yes, as you said Seth we are somewhat different from most of the peer group in this regard and as a result, right now we're not expecting anything material from an income perspective on the pension front, obviously, that's something we'll roll up as part of our operating plan process here in the fourth quarter and give you more specific.

Big piece of that is pension income.

On the commercial side of the business. So it should downtick, a little bit but not in a material way.

Okay. Okay, and then maybe as a quick follow up we saw some news up you'd be during the quarter about the Australian sub and.

Detailed guidance in January but I think the bottom line is both from a from an earnings as well as from a cash perspective, we don't expect that at this point to be a material item.

The potential to do some.

Some some work on that outside of Australia, and we all kind of know about the capacity constraints on sub building right now.

Okay, and then just to clarify the $40 million or so of income below the line.

Maybe could you talk a little bit about about your thinking on that on that topic.

Each quarter.

That kind of continues.

Yeah. So we are driven entirely by the demand of our customer and the prioritization of our customers. So we're working with them.

So some version in that range I don't have an exact number at this point you can expect it to decline as you would suspect modestly but but.

That's not 100% pension income there, it's a big piece of that is pension income.

Our U S Navy to determine what.

The focus should be going forward and as we work through this but some of these capacity issues and how do we accommodate not only U S demand, but potentially other demand.

On the commercial side of the business. So it should downtick, a little bit but not in a material way.

Okay. Okay, and then maybe as a quick follow up we saw some news during the quarter about the.

Okay, great. Thanks very much.

Australia and sub and.

The potential to do some some.

Thank you for your question. Our next question today comes from David Strauss Barclays. David Go ahead.

Some work on that outside of Australia, and we all kind of know about the capacity constraints on sub building right now.

Maybe could you talk a little bit about about your thinking on that on that topic.

Thanks, Good morning.

Hi.

I see.

Phebe, where there any unusual costs that are at the aerospace segment in the quarter related to the 500 600 software fix.

Yeah. So we are driven entirely by the demand of our customer and the prioritization of our customers, we're working with them.

Our U S Navy to determine.

Sure.

Yes, David we did have I think youre aware, some customer accommodation related to the software issue.

What the focus should be going forward and.

As we work through these some of these capacity issues and how do we accommodate not only U S demand, but potentially other demand.

Both in the second quarter and the third quarter wasn't material to the results, but that has been absorbed in the numbers that you see and.

Okay, great. Thanks very much.

Inherent in the improved margins that the group posted in the quarter.

Okay, and it's completely behind nothing lingering in Q4 days right.

Thank you for your question. Our next question today comes from David Strauss of Barclays. David Go ahead.

That's correct, it's behind us at this point.

Thanks, Good morning.

Okay, great and a follow up on free cash flow conversion.

Hi.

Yes.

Given given where you are year to date, I mean over 100% for the full year looks looks pretty conservative unless theres something unusual I guess from a working capital perspective that youre expecting in are baking in in Q4 can you just elaborate on that thanks.

Were there any unusual costs that are at the aerospace segment in the quarter related to the 500 600 software fix.

Yes, David we did have I think youre aware, some customer accommodation related to the software issue.

Yeah as you point out the cash flow has been particularly strong through the first nine months. So as I said in opening remarks, we're very comfortable with the 100 plus percent for the year to be completely candid, there's probably some opportunity for some upside there.

Both in the second quarter and the third quarter wasn't material to the results, but that has been absorbed in the numbers that you see and.

Inherent in the improved margins that the group posted in the quarter.

Okay, and it's completely behind nothing lingering in Q4 days right.

If I look at the things that we're monitoring number one through the first nine months, we've had a significant benefit from working capital reduction some of that is timing. So some of that could turn in the fourth quarter, we will watch that.

That's correct it is behind us at this point.

Okay, great and a follow up on free cash flow conversion.

The other big pieces as I noted, we're still expecting or forecasting capex for the year to be in the two 5% of sales range. So that implies a pretty meaningful uptick in capex in the fourth quarter.

Given given where you are year to date, I mean over 100% for the full year looks looks pretty conservative unless theres something unusual I guess from a working capital perspective that youre expecting or baking in in Q4 can you just elaborate on that thanks.

Ill acknowledge that we've often chased our capex forecast and rarely hit it so there could be some upside opportunity. There if we don't get everything in in the year, but if we do that that's a headwind in the fourth quarter and frankly, the third item is something.

Yes, as you pointed out the cash flow has been particularly strong through the first nine months. So as I said in the opening remarks, we're very comfortable with the 100 plus percent for the year to be completely candid, there's probably some opportunity for some upside there.

And that everybody continues to monitor that as we are.

Need to resolve our our situation on the Ajax program. So those are some of the things we're monitoring for the fourth quarter, we come through all that and certainly to your point, we have some opportunity for some upside.

If I look at the things that we're monitoring number one to the first nine months, we've had a significant benefit from working capital reduction some of Thats timing. So some of that could turn in the fourth quarter, we will watch that.

Thanks very much.

Yeah.

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

The other big pieces as I noted, we're still expecting or forecasting.

Capex for the year to be in the two 5% of sales range, so that implies a pretty meaningful uptick in capex in the fourth quarter.

Yes, good morning.

And maybe just maybe.

The supply chain question.

It seems like you guys are navigating it really.

I will acknowledge that we've often chased our capex forecast and rarely hit it. So there could be some upside opportunity. There if we don't get everything in in the year, but if we do that that's a headwind to the fourth quarter and frankly, the third item is something.

Really well.

Most airplane companies today are habit.

Are going to deliver more than they thought they were going to deliver the opposite problem. So I guess my question for you.

And that everybody continues to monitor that as we are.

How does the supply chain going.

Need to resolve or our.

Or golf space.

Our situation on the Ajax program. So those are some of the things we're monitoring for the fourth quarter, we come through all that and certainly to your point, we have some opportunity for some upside.

And then B when you look at the defense business, you have referred kind of across the sector. Some of our issues on chips and so on and so forth how's it going.

Thanks very much.

So we've had a fair number of supply chain challenges on the arrows, but a side, which we have accommodated comdata adhered to for but supply chain remains a potential challenge going forward and as we go through our planning process for <unk> in the fourth quarter, we get a lot more.

Yeah.

Okay.

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

Yes, good morning.

Maybe just maybe.

The supply chain question.

It seems like you guys are navigating it.

Charity airplane by airplane of what the supply chain is able to do.

Really well.

Most airplane companies today are having.

But we have so far managed there are however, as you've quite rightly note fair number of headwinds out there.

Aren't going to deliver more than they thought they were going to deliver the opposite problem. So I guess my question for you guys.

How is the supply chain going.

On the on the defense side, we have accommodated most of the supply chain perturbations, except obviously in the Marine group.

For golf Spin and then B when you look at the defense business, you have referred kind of across the sector. Some of our issues on chips and so on and so forth how is it going.

But most profoundly in the quarter and most impactful Lee is at mission systems and while they had dealt with a lot of the more pedestrian supply chain challenges specialty chips continue to you know.

Yes.

So we've had a fair number of supply chain challenges on the Arris side, which we haven't commented comedy that heretofore.

But supply chain remains a potential challenge going forward and as we go through our planning process for it in the fourth quarter, we get a lot more clarity airplane by airplane of what the supply chain is able to do that.

Dog them and and adult additional delays that they experienced in the quarter or very very hard for them in fact impossible for them to overcome.

No.

Vision systems is a very high performance organization and they have produced several high value complex products that have experienced delays before but again even.

But we have so far managed there are however, as you quite rightly note fair number of headwinds out there.

On the defense side, we have accommodated most of the supply chain part of patients, except obviously in the Marine group.

Even beyond some of the chip problems, some other specialty products going into that production.

But most profoundly in the quarter and most impactful is it at mission systems and while they had dealt with a lot of them are pedestrian supply chain challenges specialty chips continue to you know.

Production lines were also impacted so emission systems credit they have taken a lot of cost cutting and restructuring initiatives to offset the margin impact and earnings impact of the revenue decline, but we're going to have to work through some of that and so more to come.

Dog them and and adult additional delays that they experienced in the quarter or very very hard for them to possible for them to overcome.

We look into the fourth quarter and then into next year.

<unk>.

Got it got it and then maybe as a follow on.

Vision systems is a very high performance organization and they produce several high value complex products.

And the labor side, what are you seeing across the businesses right.

Clearly here, maybe that they wanted a more shipbuilders out there, but I mean, what are you seeing across all the businesses you have in the portfolio in terms of skilled labor.

<unk> experience delays before but again.

Even beyond some of the chip problems.

Some of the specialty products going into that production.

Yeah. So there are some across the businesses there are some specialty engineering and specialty fields that have had.

<unk> lines were also impacted so submissions. This is credit they have taken a lot of cost cutting and restructuring initiatives to offset the margin impact and earnings impact of the revenue decline, but we're going to have to work through some of that and so more to come.

Some headwinds on labor, but those are beginning to resolve in terms of manufacturing.

We had some preservation and is that a lot of perturbation in the labor market, but felt that particularly at.

Look into the fourth quarter and then into next year.

At Quonset point, but that's beginning to resolve itself.

Got it got it and then maybe as a follow on.

No.

Do you think about shipbuilding shipbuilding is a very complex high touch labor business and when you have a nationwide for the basin and the labor market, you're going to be impacted.

Labour side, what are you seeing across the businesses right.

Clearly here, maybe that they wanted to have more shipbuilders out there, but I mean, what are you seeing across all the businesses you have in the portfolio in terms of skilled labor.

Yeah. So there are some across the businesses there are some specialty engineering and specialty fields that have had some.

Meanwhile, we kept open not all of the supply chain did.

But we also.

<unk> lost a number of experienced shipbuilders as well as experienced.

Headwinds on labor, but those are beginning to resolve in terms of manufacturing.

People manufacturing folks in the supply chain. So all of that at a higher level than we normally experience and I don't think that we are alone in that people took the opportunity in the middle of the of the pandemic to retire. So we've got to work through some of that but ultimately we do not see and I think this isn't.

We had some perturbation in is that a lot of preservation and the labor market.

Felt that particularly at.

At Quonset point, but that's beginning to resolve itself.

When you think about shipbuilding shipbuilding is a very complex high touch labor business and when you have a nationwide perturbation in the labor market, you're going to be impacted.

The point here, we do not see labor as a constraint or a revenue growth at the moment certainly not in the longer term.

Got it thank you.

While we kept open not all of the supply chain dead.

Thank you. Our next question today comes from Rod Summit, That's cool research. Please proceed.

But we also.

<unk> lost a number of experienced shipbuilders as well as experienced.

Good morning.

But manufacturing folks in the supply chain. So all of that at a higher level than we normally experience and I don't think we're alone in that people took the opportunity in the middle of the pandemic to retire so we've got to work through some of that but.

Phoebe will comment suggests that we're finally seeing some of this strong defense demand turning into orders.

What sort of timeline are you expecting for these orders to actually convert into deliveries.

You're talking about combat.

Well across the defense divisions.

<unk>, we do not see and I think this is an important point here, we do not see labor is a constraint or a revenue growth at the moment certainly not in the longer term.

Especially coming out here.

Yeah, let's let's talk about combat because I think and then we can talk if you want a little bit about technologies and and.

Got it thank you.

Before I get to combat Marine is pretty clear.

The orders continue to be healthy the revenue projection, while you'll have some quarterly lumpiness. It signifies nothing for the long term growth with respect to combat.

Thank you. Our next question today comes from Ron Summit Research. Please proceed.

Good morning.

Phoebe will comment suggests that we're finally seeing some of this strong defense demand turning into orders, but what sort of timeline are you expecting for these orders to actually convert into deliveries.

We saw a number of things in the quarter, primarily Stryker and Abrams as well as MTF is beginning to ramp up as in Poland and we saw some munitions orders also related to the Ukraine. So I suspect that if we parse through.

Yeah.

You're talking about combat.

Well across the defense divisions.

Especially you coming back to you.

We focus in on the Ukraine.

Yeah, let's let's talk about combat because I think and then we can talk if you want a little bit about technologies and and.

Well sure, but we anticipate that U S army customers, telling us they want more ammunition in munitions and so we're working with them to ramp up production in Europe , we've seen demand for bridges.

Before I get to combat Marine is pretty clear.

The orders continue to be healthy the revenue projection, while you'll have some quarterly lumpiness. It signifies nothing for the long term growth with respect to combat them.

Frankly, a lot of water in Europe , and <unk> and we've got a very nice business in Germany that provides river crossings at various weapon and and weight levels and then we're seeing beginning to see increases in our vehicle orders and vehicle Rfps.

We saw a number of things in the Florida, primarily Stryker and Abrams.

As well as M. P. F is beginning to ramp up as in Poland, and we saw some munitions orders also related to the Ukraine. So I suspect that and if we parse through your focus in on the Ukraine.

Coming out.

<unk>, particularly but not exclusively in the former.

Eastern block.

So technology is really I think a tale of two cities G. D. I T has had good bookings. They grew last year, we anticipate them to grow. This year. This is all about mission systems as I think tried to give you a fair amount of detail color on whats impacting them.

We should probably anticipate that U S army customers, telling us they want more ammunition in munitions. So we're working with them to ramp up production in Europe , we've seen demand for bridges, because frankly, a lot of water in Europe , and <unk> and we've got a very nice business in Germany.

If you know the demand for their high value products.

Is out there it's just a.

Provides river crossings at various whips, and and and Lake levels and then we're seeing beginning to see increases in our vehicle orders and vehicle RFP is coming out.

The inability to deliver because of the supply chain is constraining some of the orders, but they're they're they're just waiting to be executed once we get through all of this and we will we will get through it.

So just to follow up on combat.

Particularly but not exclusively in the former.

And these orders you've had from Europe . For example is that roughly a 12 months to two year lead time between the contract getting signed and actually Gd delivering.

Stern block.

So technology is really I think a tale of two cities G D I T.

Completely depends on the product.

Good bookings they grew last year, we anticipate them to grow. This year. This is all about mission systems. Since I think tried to give you a fair amount of detail color on whats impacting them.

Less so on the inflation side and it and it depend and again myself potentially on the vehicle side. It just depends on the vehicle and exactly what modifications or changes folks want we're not looking at clean sheet vehicles looking at changes to existing vehicles that we have update.

If you know the demand for their high value products.

Is out there it's just a.

Inability to deliver because of the supply chain is constraining some of the orders, but they're they're just waiting to be executed once we get through all of this and we will we will get through it.

It consistently and.

Throughout the years.

So it'll depend I suspect a year.

In some cases 18 months.

So just to follow up on combat.

Certainly I don't expect a whole lot more than that.

And these orders you've had from Europe . For example is that roughly a 12 months to two year lead time between the contract getting signed and actually Gd delivering.

Yeah, that's great. Thanks, so much.

Yeah.

Thank you. Our next question comes from Myles Walton.

Completely depends on the product.

Research models. Please go ahead.

Less so on the mortgage side and it and it depend and again unless so potentially on the vehicle side. It just depends on the vehicle and exactly what modifications or changes folks want we're not looking at clean sheet vehicles looking at changes to existing vehicles that we have.

Thanks, Good morning.

I know that there is the $1 billion billion dollars maturity coming in November , but curious maybe phebe, how youre thinking about capital deployment in a broader sense, obviously cash flow coming in.

Ahead of expectations I think yeah.

Yeah, Yeah, no no no and that's a that's a very good question our capital deployment priorities remain the same but let me ask Jason to give you a little bit more color on the detail.

<unk>.

Distantly and.

Throughout the years.

So it'll depend I suspect a year in some cases 18 months.

I think the way to think about it miles we've talked about the $1 billion coming due in November we do plan to pay that down when you think on the debt side.

Certainly I don't expect a whole lot more than that.

Yeah, that's great. Thanks, so much.

Yeah.

Have additional maturities coming up in 2023, and that's where we've said we'll start to look.

Thank you. Our next question comes from Myles Walton.

Think back to the CSI acquisition and the additional debt we took on.

Research models. Please go ahead.

Thanks, Good morning.

We would bring it down to a point where at some undefined point in the future we'd start to think about whether we've hit the right level or not and I think when we get into next year, we'll start to have that conversation in a more sub.

I know that there is the $1 $1 billion maturity coming in November , but curious maybe phebe, how youre thinking about capital deployment in a broader sense, obviously cash flow coming in.

Substantive way.

And in terms of decision, making when you look at the other elements.

Ahead of expectations I think yeah, Yeah, no no no and that's a that's a very good question our capital deployment priorities remain the same but let me ask Jason to give you a little bit more color on the detail Yeah, I think the way to think about it miles we've talked about the $1 billion coming due in November we do.

Share repurchases you know is always tactical and opportunistic it was a very volatile market in the third quarter. So we were a little more hands off just kind of trying to see what where things shake out but that doesn't change our long term approach to share repurchase and a tactical and opportunistic way and I think importantly, the dividend is always going to be there you've always heard us talk about that.

To pay that down when you think on the debt side.

And we will continue to expect to be on that trajectory that we've been on for the past quarter century, frankly, so at Seabee said no changes in the deployment strategy it'll just be.

We'll have additional maturities coming up in 2023, and that's where we said we will start to look.

Think back to the <unk> acquisition and the additional debt we took on we.

A matter of whats in the moment in a given quarter and I think importantly, our cash flow performance and our liquidity resources afford us the optionality to address all of those priorities without having to.

We would bring it down to a point where at some undefined point in the future we'd start to think about whether we get the right level or not and I think when we get into next year, we'll start to have that conversation anymore.

Substantive way.

Forgo one for the sake of the other.

And in terms of decision, making when you look at the other elements.

And just a quick follow up so does the M&A market attractiveness has that improved become worse the same.

Yeah, we're just not going to comment on M&A. So I think we can leave it at that you want one more shot one more question.

Well I'll say them through.

Howard angry.

And we will continue to expect to be on that trajectory that we've been on for the past quarter century, frankly, so as <unk> said no changes in the deployment strategy it'll just be.

[laughter], Yeah, that's the scary thing.

[laughter].

Yeah.

Thank you. Our next question comes from George Shapiro of Shapiro Research Jewish but go ahead.

Yes.

Jason I was wondering if I can pin you down a little bit as to how big a number of the software fixes where in the margin for a gulfstream in a quarter, we're talking a few million dollars or so.

Forgo one for the sake of the other.

And I think just a quick follow up PV. So it is the M&A market attractiveness has that improved become worse the same.

More.

George I don't actually have a discrete number on the software fix I mean, I have a sense of the overall R&D budget and that sort of fits into that context. So I think as David asked earlier in terms of impacts to aerospace in the quarter you saw the nice margin improvement frankly, even a little bit ahead of where we were expecting which is why as phebe alluded. We think will the group will perform.

Yeah, we're just not going to comment on M&A. So I think we can leave it at that you want one more shot by more question.

No no no.

I'll stay up through I don't want to I don't want to Howard angry.

[laughter], Yeah, that's a scary.

Yeah.

Better for the full year, but even within those strong results in the quarter. We did have an impact an adverse impact in terms of the.

Yes.

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

The accommodations, we made with customers on the 500 600 airworthiness directive.

Yes.

Jason I was wondering if I can pin you down a little bit as to how big a number of the software fixes where in the margin for a gulfstream in a quarter, we're talking a few million dollars or something more.

Again, thats fully behind Us and we are in a at this point sustained elevated R&D mode part of that was the resources that were diverted from the 700 over to the 500 680, <unk> fix and that will sustain through next year as we've talked about as we continue towards certification of the 700 and then ultimately the eight hundreds so.

I'll give you a little more color around that but I apologize I don't have a discrete number around the airworthiness directive fixed.

Okay, and then a quick one maybe unusual question Theres, a 59 million difference between the gross and net bookings in aerospace was that a cancellation was FX related or you can.

Better for the full year, but even within those strong results in the quarter. We did have an impact an adverse impact in terms of the.

Quantify that.

All of the above I mean, it really absolutely a material.

The accommodations, we made with customers on the 500 600, airworthiness directive again thats fully behind US and we are in a at this point sustained elevated R&D mode part of that was the resources that were diverted from the 700 over to the 500 680, <unk> fix and that will sustain through next year as we've talked about it.

Yeah.

Okay.

Now let me sneak in one last one here.

Howard Zion.

Sure.

I always got Howard desire that's okay.

Uh huh.

We continued towards certification of the 700 and then ultimately the eight hundreds so I'll give you a little more color around that but I apologize I don't have a discrete number around the airworthiness directive fix.

When you commented about your deliveries in 'twenty, three and 'twenty four presuppose the book to Bill of one obviously, we've run a lot better than that so you're thinking of changing those delivery forecasts or just stay conservative with the delivery forecast that you have out there.

Okay, and then a quick one maybe unusual question Theres, a 59 million difference between the gross and net bookings in aerospace was that a cancellation was it FX related or if you can.

Not at the moment.

And one to one and at the moment I don't see any reason to change.

Quantify that.

Change that but as we go through our planning process if to the extent that we need to.

All of the above I mean, it really absolutely a material.

Modify it we certainly will and won't be.

Okay.

Now let me sneak in one last one here.

Very explicit about that in the fourth quarter.

Okay. Thanks very much.

Howard Zion.

Yeah.

I always got Howard desire that's okay.

Thank you. Our next question comes from Cristina <unk> with Morgan Stanley . Please go ahead.

Okay.

Christine.

Wow.

Hey, sorry, sorry about that Hello, Okay, you guys hear me.

Yes.

Okay, great. Thanks.

Not at the moment.

Thanks, and good morning, everyone.

One to one and at the moment I don't see any reason to change.

Phebe on International Defense sales are you seeing changes in relationship between the U S and in Saudi Arabia with your foreign military sale to Saudi Arabia through Canada, how do we think about this evolving a.

Change that but as we go through our planning process if to the extent that we need to.

Modify it we certainly will and won't be.

The explicit about that in the fourth quarter.

Relationship potentially affecting your business.

Okay. Thanks very much.

We see no indication of that in a moment.

Thank you. Our next question comes from Kristine <unk> with Morgan Stanley . Please go ahead.

Well right now I can do.

Yeah.

Following up on what George was asking about on aerospace I mean book to Bill was at one times at aerospace.

Christine.

Hello.

<unk> seen this above two times in the past few quarters, but at the same time. The backlog is at record levels can you provide some color on the demand resilience you're seeing.

Hey, sorry about that Hello, Okay, you guys hear me Hello.

Yes.

Okay great.

Thanks, and good morning, everyone.

Is this a demand from corporate customers individuals and then also is there some sort of level of backlog where you're comfortable at.

Phebe on International Defense sales are you seeing changes in the relationship between the U S and in Saudi Arabia with your foreign military sales to Saudi Arabia to Canada, how do we think about this evolving.

Not to extend the duration of when people have to wait for the aircraft any color you could provide there would be really helpful.

Relationship potentially affecting your business.

Sure. So let's take your question in the inverse order, we always watch the delivery times.

We see no indication of that in a moment.

For our aircraft to our customers and so far that's all been manageable, but just to remind you starting in mid February of last year.

Well right now I could do it.

Yeah.

Following up on what George was asking about on aerospace I mean book to Bill was at one times at aerospace.

We frankly, Ana the hottest and most frantic demand market that I've ever seen and and the order and the order level in the quarter was by any measure spectacular so we've seen.

<unk> seen this above two times in the past few quarters, but at the same time. The backlog is at record levels can you provide some color on the demand resilience you're seeing.

Is this a demand from corporate customers individuals and then also is there some sort of level of backlog where you're comfortable at.

Strong U S demand fortune 500 mid east.

South East Asia, and or demand and interestingly and I think not surprisingly our pipeline going into the fourth quarter looks very much like the pipeline going into the third quarter. So at the moment.

Now to extended duration of when people have to wait for the aircraft any color you could provide there would be really helpful.

Sure. So let's take care question and younger sort of we always watch the delivery times.

Hmm.

For our aircraft to our customers and so far that's all been manageable, but just to remind you starting in mid February of last year.

We've got some pretty good visibility of what orders look like.

Our next question comes from cave umbrella of carbon K. Please go ahead.

We frankly, Ana the hottest and those frantic demand market that I've ever seen and and the order and the order level in the quarter was by any measure spectacular so we've seen.

Yes, thanks, so much and good results.

How was the soft home was the software accommodation split between the second and third quarter and as we look going forward with that out of the way and presumably R&D flat to down.

Strong U S demand fortune 500 mid east.

Volume.

What should we look for about the margins in the fourth quarter and going forward.

So we'll see some margin upside, which we alluded to or about stated rather in our guidance two four for the year, but the software fixes world.

Hmm.

We've got some pretty good visibility of what orders look like.

Almost entirely done by the end of the second quarter and and the financial issue you know.

Our next question comes from cave umbrella of carbon K. Please go ahead.

Yes, thanks, so much and good results.

<unk>.

About 50 50, so we're.

How was the soft home was the software accommodation split between the second and third quarter and as we look going forward with that out of the way and presumably R&D flat to down.

We like where we are and frankly I haven't asked this but let me just give you a little bit of a transparency around that the.

The transparency the engineering resources that and the cooperation between USAA and Gulfstream was very strong and very apparent throughout that process.

Volume what should we look for about the margins in the fourth quarter and going forward.

So we'll see some margin upside, which we alluded to are now stated rather in our guidance two four for the year, but the software fixes were.

So we expect that kind of relationship to continue.

If I could add just one thing there was a predicate in Europe .

Predicating your question that R&D would be coming down we don't expect R&D to be coming down. If you look through next year with the 700 and the 800 will remain at a sustained and potentially even an elevated level next year. So I just want to make sure that point. That's also clear yeah. Good point.

Almost entirely done by the end of the second quarter ends.

And this financial issue.

You know it's about.

About 50 50, so we're.

We like where we are and frankly I haven't asked this but let me just give you a little bit of a transparency around that the the transparency the engineering resources that and the cooperation between USAA and Gulfstream was very strong and very apparent throughout that process.

Excellent and as a follow up if we turn to J D. You mentioned $3 5 billion in protest 17 billion bids awaiting how does that compare with the second quarter and given that they lifted.

Occupancy restrictions.

In the middle of September have we seen a pickup in any of that flowing through to bookings.

So we expect that kind of relationship to continue.

Yeah, we have.

If I could add just one thing I think there was a predicating you're predicating. Your question that R&D would be coming down we don't expect R&D to be coming down. If you look through next year with the 708 hundred will remain at a sustained and potentially even an elevated level next year. So I just want to make sure that point. That's also clear yeah. Good point.

But tell me again, what the first part of your question was.

Well you had 17 billion.

Yeah.

Hum.

Some of the protests have have resolved to our favor and these are when we say protest. These are items that we've won that have been protested and and we've got one now that's got to be approaching a federal level of number of protests.

Excellent and as a follow up if we turn to J D. You mentioned $3 $5 billion in protest 17 billion bids awaiting how does that compare with the second quarter and given that they lifted.

So hopefully we will get through that in the fourth quarter and I think it's down somewhat as I said, because they've resolved, but we still see a fair amount of our proposals and the decision, making cycle, which houses need fed elongated, but even given that <unk> continues to grow.

Occupancy restrictions.

In the middle of September have we seen a pickup in any of that flowing through to bookings.

Yeah, we have.

But tell me again, what the first part of your question was.

Yeah.

Well, you had 17 billion right.

Thank you very much.

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

Uh huh.

Some of the protests have had.

He's off to our favor and these are when we say protest. These are items that we've won that have been protested and and we've got one now that's got to be approaching the federal level of number of protests.

Yes, hi, good morning, Thank you.

Mhm I wanted to first ask on the schedule for the seven of the 800 is it fair to assume the resources that were diverted from the 700 are not 100%.

Back on that program and in the last few months, yes, considering considering issues, okay, great considering issues on the five and six have been resolved.

So hopefully we'll get through that in the fourth quarter and I think there's it's down somewhat as I said, because they've resolved, but we still see a fair amount of of our proposals and the decision making cycle, which has as we've said elongated.

Are you seeing anything else from the FAA that could potentially put entry and distributed into the service schedules at risk.

But even given that <unk> continues to grow.

So as I said, we've cooperated very well with the FAA, we expect that to continue I would note that we learned a lot in that process of how to work through the new software requirements from the FAA I think that cut.

Thank you very much.

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

Yes, hi, good morning, Thank you.

Mhm I wanted to first ask on the schedule for the seven of the 800 is it fair to assume the resources that were diverted from the 700 are not 100%.

With the fact that the G 700 is the most mature aircraft.

To enter the FAA certification process as a result of it.

Back on that program and in the last few months, yes, considering considering issues, okay, great considering issues on the five and six have been resolved.

Software system and considerable and successful testing that preceded FAA review.

Are you seeing anything else from the FAA that could potentially put entry and distributed into the service schedules at risk.

We see we're sticking with our at the moment with our our summer 2023, our estimate but look you know when we give you sort of our best guess on when this certification is that as a result of a lot of things that we control.

So as I said, we've cooperated very well with the FAA, we expect that to continue.

I would note that we learned a lot in that process of how to work through the new software.

And that way can talk about with certainty, but ultimately this is an FAA.

And from the FAA I think that coupled with the fact that the G. 700 is the most mature aircraft.

Issue and it's the availability of their resources and they are the regulator and theyre going to control. It. So we've always tried to be transparent about that but recognize that you know the U S government controls ultimately the pace.

To enter the FAA certification process as a result of it.

Software system and considerable and successful testing that preceded FAA review.

Okay very helpful and if I could just one quick follow up on the defense side, how would you look at the risk of your business. If for whatever reason, we have a continuing resolution that extends into calendar 'twenty three.

See we're sticking with our at the moment with our our summer 2023, our estimate but look you know when we give you sort of our best guess on when that certification is.

At the moment, we don't see a particular risk and if we've got three to four quarters and the entire year of ICR, which I find in the threat environment.

That's a result of a lot of things that we control and that way can talk about with certainty, but ultimately this is an FAA.

Very difficult to imagine and we'd have to come back at you, but nothing we here would suggest that it's the desire of Congress to do that.

Great. Thank you.

Our next question comes from Doug <unk> of Bernstein. Please go ahead.

Good morning, Thank you.

When you look at the demand Youre seeing at Gulfstream right now could you give us.

Kind of a picture of how this looks and what I mean is where.

At the moment, we don't see a particular risk.

We're seeing a lot of things such as first time customers going straight to large cabin jets.

And if we've got three to four quarters and the entire year of SCR, which I find in this threat environment.

Perhaps shifts in international versus U S.

You know very difficult to imagine and we'd have to come back at you, but nothing we here would suggest that it's the desire of Congress to do that.

Give us a picture of what that outlook is today for you and how does that change them over the past couple of years.

So I think you and I have a couple of years ago had a discussion about structural versus cyclical change and I still think it's premature to see any.

Great. Thank you.

Our next question comes from Doug <unk> of Bernstein. Please go ahead.

Hi, good morning, Thank you.

You know to declare that theres been a structural change we certainly seen some increase in first time buyers, but that was in part because a lot of work was created.

Excuse me when you look at the the demand Youre seeing at Gulfstream right now could you give us.

Kind of a picture of how this looks and what I mean is.

During the pandemic.

Pandemic.

We're seeing a lot of things such as first time customers going straight to large cabin jets.

The height of the pandemic, so I don't have.

Exact.

Data about what's in the pipeline, but I can't imagine that it'll be much different than than this quarter, which is heavy U S. Fortune 500.

Perhaps shifts in international versus U S.

Give us a picture of what that outlook is today for you and how does that change them over the past couple of years.

Again, southeast Asia, and the mid East.

So I think you and I had a couple of years ago had a discussion about structural versus cyclical change and I still think it's premature to see any.

Yes.

And then just switching over earlier when you talked about munitions.

This is something that also looks like it looks like Theres a lot of potential growth here. How do you think about this I mean, I think of it as a high margin business for you within combat and potential to have orders well beyond the $3 70 that you got this quarter.

To declare that theres been a structural change we certainly seen some increase in first time buyers, but that was in part because a lot of work was created.

During the pandemic.

Pandemic.

The height of the pandemic, so I don't have.

So and I think I may have alluded to this in my remarks that a customer has expressed an interest in increasing that demand. So we're working with them on.

Exact.

Data about what's in the pipeline, but I can't imagine that it'll be much different than this quarter, which is heavy U S. Fortune 500.

On.

Again, southeast Asia, and the mid East.

An increasing production, but I think your predicate about a high margin businesses is a not quite based in.

And then just switching over earlier when you talked about munitions.

In fact, we are.

O T S, where we do all of this work is a high performance organization with respect to operating leverage but that comes from a very wide and vast portfolio.

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

So and I think I may have alluded to this in my remarks that a customer has expressed an interest in increasing that demand. So we're working with them on.

Additives.

So you don't think of it as a higher margin business I just thought traditionally it was a higher margin business than perhaps some of the other parts of combat vehicles.

That's not the case.

Oh task on occasion will be a higher margin business, but that is largely about mix and it's not driven by one particular line of business they've got an awful lot of contracts in that.

On.

An increasing production, but I think there are predicate about a high margin businesses is not quite based in.

In fact, we are.

There are high velocity contract turnover so.

Oh T asset, where we do all of this work is a high performance organization with respect to operating leverage but that comes from a very wide and vast portfolio.

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

Okay very good.

Thanks, Doug Louisa will take one more question. Please this will be our final.

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

My final question today comes from Scott <unk> with Credit Suisse go ahead.

Additives.

Think of it as a higher margin business I just thought traditionally it was a higher margin business than perhaps some of the other parts of combat vehicles and.

Hey, good morning, Thank you for taking my question.

Jason I think ROIC is something that you've historically been very focused on and honestly, it's held up really well here just about the capital you're putting the business. So just curious as you get past the bulk of the Capex phase at Marine.

That's not the case.

Oh T F on.

Asia will be a higher margin business, but that is largely about mix and it's not driven by one particular line of business they've got an awful lot of contracts in that.

Working capital comes out of the business.

You have margins reflected aerospace.

Where do you think ROIC. So you can go over the next few years.

There are high velocity contract turnover.

That's a great question, obviously as we've been in this period of extended investment you'd expect to see ROIC.

So.

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

Okay very good.

Yeah.

It's become a little bit muted as a result, we saw a little bit of a downtick in that during that investment period, but as we emerge having have essentially an investment period behind us to your point, we absolutely expect to see ROIC back on the climb will see that this year and we expect to see it next year and beyond so our targets over the long term ought to be back in the range as we were in.

Thanks, Doug Louisa will take one more question. Please this will be our final.

Our final question today comes from Scott <unk> of Credit Suisse go ahead.

Hey, good morning, Thank you for taking my question.

Jason I think ROIC is something that you've historically been very focused on and honestly, it's held up really well here just with the capital you put in the business. So just curious as you get past the bulk of the Capex phase of marine.

Prior to the investment period, we entered into a few years ago and that's what you should expect as well.

Okay, Great and then Jason does the recently announced facility expansion of Savannah does that have any impact of the prior guidance you gave on 'twenty three capex or was that embedded in the 7% figure you previously talked about thank you.

Working capital comes out of the business.

Margins inflect at aerospace.

Where do you think ROIC. So you can go over the next few years.

That's a great question, obviously as we've been in this period of extended investment you would expect to see ROIC.

Yes, that's all embedded in the outlook, we've given previously so no change to to those projections.

Yeah.

It's become a little bit muted as a result, we saw a little bit of a downtick in that during that investment period, but as we emerge having had essentially an investment period behind us to your point, we absolutely expect to see.

Great. Thank you so much.

Yeah.

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

Thank you all for joining us today as a reminder, please refer to the general dynamics website.

Back on the Cline well see that this year and we expect to see it next year and beyond so our targets over the long term ought to be back in the range as we were in prior to the investment period, we entered into a few years ago and that's what you should expect as well.

For both our earnings release and of course, our highlights presentation. If you have any other questions I can be reached at 703 870 63117. Thank you.

Okay, Great and then Jason does the recently announced facility expansion of Savannah does that have any impact of the prior guidance you gave on 'twenty three capex or.

Thank you for joining today's call you may now disconnect your lines.

Is that embedded in that 2% figure you previously talked about thank you.

Yes, that's all embedded in the outlook, we've given previously so no change to to those projections.

Great. Thank you so much.

Yeah.

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

Thank you all for joining us today as a reminder, please refer to the general dynamics website.

For both our earnings release and of course, our highlights presentation. If you have any other.

<unk> I can be reached at 703 870 63117. Thank you.

Yeah.

Thank you for joining today's call you may now disconnect your lines.

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Q3 2022 General Dynamics Corp Earnings Call

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