Q2 2024 General Dynamics Corp Earnings Call

Operator: Good morning, and welcome to the General Dynamics second quarter 2024 earnings conference call. All participants will be in listen only mode.

Operator: Good morning and welcome to the General Dynamics' second quarter 2024 earnings conference call. All participants will be in listen-only mode. Please note the segment is being recorded. All lines have been placed on mute to prevent any background noise.

Operator: Please note this event is being recorded. All lines have been placed on mute to prevent any background noise. Speaker's Remarks. There will be a question and answer session. If you would like to ask a question during this time, simply press the star key followed by the number one on your telephone keypad.

Speaker Change: All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would.

Operator: After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press the start key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again.

Speaker Change: Like to ask a question during this time simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star one again.

Nicole Shelton: I would now like to turn the conference over to Nicole Shelton, Vice President and Investor Relations. Please go ahead.

Operator: If you would like to withdraw your question, press star 1 again. I would now like to turn the conference over to Nicole Shelton, Vice President of Investor Relations.

Speaker Change: I would now like to turn the conference over to Nicole Shelton Vice President of Investor Relations. Please go ahead.

Nicole Shelton: Thank you, operator, and good morning, everyone.

Nicole M. Shelton: Thank you, operator. And good morning, everyone. Welcome to the General Dynamics second quarter 2024 conference. Any forward-looking statements made today represent our estimates regarding the company's outlook, and these estimates are subject to some risks and uncertainties.

Speaker Change: You operator, and good morning, everyone welcome to the General dynamics second quarter 2024 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.

Nicole Shelton: Welcome to the General Dynamics' second quarter 2024 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 reconciliation to comparable GAAP measures. Please see the slides that accompany this webcast, which are available on the Investor Relations page of our website, investorrelations.gd.com.

Nicole M. Shelton: 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, InvestorRelations.gd.com. On the call today are Phebe Novakovic, Chairman and Chief Executive Officer, and Kim Kuryea, Chief Financial Officer. I will now turn the call over to Nicole. Thank you, Nicole. Good morning, everyone.

Speaker Change: 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 <unk>.

Speaker Change: Investor Relations page of our website Investor Relations got TV Dot com.

Nicole Shelton: On the call today are Phoebe Novakovic, Chairman and Chief Executive Officer, and Kim Korea, Chief Financial Officer.

Speaker Change: On the call today are Phebe, Novakovic, Chairman and Chief Executive Officer, and Kim Correa, Chief Financial Officer, I will now turn the call over to Phoebe.

Phebe Novakovic: I will now turn the call over to Phoebe. Thank you, Nicole. Good morning, everyone, and thanks for being with us.

Phebe N. Novakovic: And thanks for being with us. Earlier this morning, we reported earnings of $3.26 per diluted share on revenue of $11.98 billion, operating earnings of $1.16 billion, and net income of $905 million. We enjoyed revenue increases at each of our four business segments compared to the year-ago quarter. Across the company, revenue increased a strong 18%, with a 51% increase in our aerospace segment and a 10% increase in our defense segment. Strong Growth by Annie Stanton.

Phebe N. Novakovic: Thank you Nicole good morning, everyone and thanks for being with US earlier. This morning, we reported earnings of $3.26 per diluted share on revenue of $11. Nine 8 billion operating earnings of 1.1 dollars 6 billion and net income of $905 million.

Phebe Novakovic: Earlier this morning, we reported earnings of $3.26 per diluted share on revenue of $11.98 billion, operating earnings of $1.16 billion, and net income of $905 million. We enjoyed revenue increases at each of our four business segments compared to the year-ago quarter. Across the company, revenue increased to strong 18%, with a 51% increase in our aerospace segment and a 10% increase across our defense units. Strong growth by any standard. Importantly, operating earnings of $1.16 billion are up almost $200 million, or 20.2%, demonstrating solid operating leverage. Similarly, net earnings are up 21.6%, and earnings per share are up 21% over the year-ago quarter.

Speaker Change: We enjoyed revenue increases at each of our four business segments compared to the year ago quarter across the company revenue increased a strong 18% with a 51% increase in our aerospace segment and a 10% increase across our defense units.

Phebe N. Novakovic: Strong growth by any standard.

Phebe N. Novakovic: Importantly, operating earnings of $1.16 billion are up almost $200 million, or 20.2%, demonstrating solid operating leverage. Similarly, net earnings are up 21.6%, and earnings per share are up 21% over the year-ago quarter. You will note we missed street EPF consensus by two cents due entirely to the slip of four G700 deliveries from the last week in the quarter to the beginning of Q3. One has since been delivered, and three are imminent. From a different perspective, the sequential comparisons are also quite favorable.

Phebe N. Novakovic: Importantly, operating earnings of 1.16 billion are up almost 200 million or 22% demonstrating solid operating leverage.

Phebe N. Novakovic: Similarly, net earnings are up 21, 6% and earnings per share up 21% over the year ago quarter.

Phebe Novakovic: You will note we miss street EPS consensus by two cents due entirely to the slip of four G700 deliveries from the last week and the quarter to the beginning Q3. One has since been delivered three or a minute. From a different perspective, the sequential comparisons are also quite favorable. Revenue is up 1.2 billion, and operating earnings are up 120 million on steady margins. On a year-to-date basis, revenue of 22.7 billion is up 2.67 billion, or 13.3% over last year's first half. Operating earnings of nearly 2.2 billion are up 15.4%. Net earnings of 1.7 billion are up 15.6% despite a higher provision for income taxes.

Speaker Change: You'll note we missed street EPS consensus by <unk> <unk> due entirely to the slipped before G 700 deliveries from the last week in the quarter did the beginning Q3.

Speaker Change: One has since been delivered three or a minute.

Speaker Change: From a different perspective, the sequential comparisons are also quite favorable.

Phebe N. Novakovic: Revenue is up $1.2 billion, and operating earnings are up $120 million on steady margins. On a year-to-date basis, revenue of $22.7 billion is up $2.67 billion, or 13.3%, over last year's first half. Operating earnings of nearly $2.2 billion are up 15.4%, and net earnings of $1.7 billion are up 15.6% despite a higher provision for income tax. In a few minutes, our CFO, Kim Kuryea, will provide you with free cash flow for the first half and remainder of the year, strong continued order activity, and backlogs, as well as some additional relevant financial... But first, I will take you through each of the segments. We'll start with Dan.

Speaker Change: Revenue was up 1.2 billion and operating earnings are up $120 million on steady margins.

Speaker Change: On a year to date basis revenue of $22 7 billion is up to six 7 billion or 13, 3% over last year's first half.

Kimberly A. Kuryea: Operating earnings of nearly $2 2 billion or up 15, 4% net earnings of $1 7 billion or up 15, 6%. Despite a higher provision for income taxes in a few minutes, our CFO Kim Korea will provide you with free cash flow for the first half and remainder of the year, our strong continued order activity.

Phebe Novakovic: In a few minutes, our CFO, Kim Korea, will provide you with three cash flows for the first half and remainder of the year. Our strong continued order activity and backlog, as well as some additional relevant finance. of Social Information.

Speaker Change: And backlog as well as some additional relevant financial information.

Phebe Novakovic: But first, I will take you through each of the segments. We'll start with the aerospace. Let me give you some comparative numbers that will show the front end of a tremendous growth surge for aerospace that will progress favorably throughout the year. Then I will attempt to put all of this in some reasonable perspective for you. Aerospace had revenue of 2.94 billion in operating earnings of 319 million, with a 10.9% operating margin. Revenue is 987 million more than last year's second quarter, a remarkable 51% increase. The revenue increase was driven by additional new aircraft deliveries coupled with higher service revenue.

Speaker Change: First I will take you through each of the segments, we'll start with aerospace let me give you some comparative numbers that will show the front end of a tremendous growth surge for aerospace that will progress favorably throughout the year, then I will attempt to put all of this in some reasonable perspective for you.

Phebe N. Novakovic: Let me give you some comparative numbers that will show the front end of a tremendous growth surge for aerospace that will progress favorably throughout the year. Then I will attempt to put all of this in some reasonable perspective for you. Aerospace had revenue of $2.94 billion and operating earnings of $319 million with a 10.9% operating margin. Aerospace's revenue is $987 million more than last year's second quarter, a remarkable 51% increase. The revenue increase was driven by additional new aircraft deliveries coupled with higher service revenue.

Aerospace had revenue of $2 94 billion and operating earnings of $319 million with a 10, 9% operating margin revenue is $987 million more than last year's second quarter, a remarkable 51% increase.

Speaker Change: The revenue increase was driven by additional new aircraft deliveries, coupled with higher service revenue.

Phebe Novakovic: We delivered 37 aircraft, including 11 newly certified G700s in the quarter. This is four fewer than we expected to deliver, but more about that in a minute. Operating earnings of 319 million are at 83 million, 35% over the year-ago quarter. The 10.9% operating margin was 120 basis points lower than the year-ago quarter. This was driven by G700 deliveries that carried more than expected costs from three things. First retrofit, second attestation work related to the late arrival of parts, and three the extended certification period. This cost burden will affect 20th Lot One aircraft, which includes five test aircraft that will not deliver this year.

Phebe N. Novakovic: We delivered 37 aircraft, including 11 newly-certified GE 700s in the quarter. This is far fewer than we expected to deliver, but more about that in a minute. Operating earnings of $319 million were up $83 million, 35% over the year-ago quarter. The 10.9% operating margin was 120 basis points lower than a year ago. This was driven by G700 deliveries that carried more than expected costs from three things. First, the retrofit.

Speaker Change: We delivered 37 aircraft, including 11 newly certified <unk> seven hundreds in the quarter. This is for fewer than we expected to deliver but more about that in a minute operating earnings of $319 million up $83 million, 35% over the year ago quarter.

Speaker Change: The 10, 9% operating margin was 120 basis points lower than the year ago quarter.

Speaker Change: This was driven by <unk> 700 deliveries are carried more than expected costs from three things.

Speaker Change: First retrofit.

Phebe N. Novakovic: Second, attestation work related to the late arrival of parts, and third, the extended certification period. This cost burden will affect 20 Lot 1 aircraft, which includes five test aircraft that will not be delivered this year. So we are through the Lot 1 cost burden for this year within the next four deliveries. The good news is that margins on the G700 are expected to increase by 600 to 700 basis points in Lot 2, and by a similar increment in Lot 3. By the time we reach lot three production and delivery, we will have reached a steady state in terms of productivity and predictability. A few comments on predictability.

Speaker Change: I can't attestation work related to the late arrival of parts and three they extended certification period.

Speaker Change: This cost burden will affect 'twenty lot one aircraft, which includes five test aircraft that will not deliver this year.

Phebe Novakovic: So we are through the lot one cost burden for this year within the next four deliveries. The good news is that margins on the G700 are expected to increase by 600 to 700 basis points in lot two and by a similar increment in lot three. By the time we reach lot three production and deliveries, we will have reached a steady state in terms of productivity and predictability. A few comments on predictability. You might recall that I told you we expected to deliver 50 to 52 G700s this year, and that the deliveries would be more or less evenly divided over the last three quarters of the year, but we planned 15 for Q2 and delivered 11. So much for predictability.

Speaker Change: We are through a lot one cost burden for this year within the next four deliveries. The good news is that margins on the G. 700 are expected to increase by 600 to 700 basis points and lot two and Biosimilar increment and lot three.

Speaker Change: By the time, we reached a lot through production and deliveries. We will have reached a steady state in terms of productivity and predictability a.

Speaker Change: A few comments on predictability you might recall that I told you we expected to deliver 50 to 52 G. Seven hundreds this year and let the deliveries would be more or less evenly divided over the last three quarters of the year well. We've planned 15 for Q2 and delivered 11, so much for predictability.

Phebe N. Novakovic: You might recall that I told you we expected to deliver 50 to 52 G700s this year and that the deliveries would be more or less evenly divided over the last three quarters of the year. Well, we planned 15 for Q2 and delivered 11, so much for predictability. We actually had the remaining four completed and ready to go, but could not get through the pre-flight delivery testing in time. You might be surprised to learn that each G700 is flown through about 30 hours of tests before delivery. Two of the planes also needed a supplemental type certificate because of their very different cabin configuration.

Phebe Novakovic: We actually had the remaining four completed and ready to go, but could not get through the pre-flight delivery testing in time. You might be surprised to learn that each G700 is flown about 30 hours of tests before delivery. Two of the planes also needed a supplemental type certificate because of a very different cabin configuration. That wasn't done by the end of the quarter. All right, back to some numerical comparisons. The sequential numbers are equally impressive. Revenue is up 856 million, a strong 41% increase in operating earnings are up 64 million about 25%, affected by 130 basis point degradation and operating margins for the reason I just mentioned a moment ago.

Actually had the remaining four completed and ready to go but could not get through the pre flight delivery testing in time, you might be surprised to learn that each G. 700 has flown about 30 hours of tests before delivery.

Two of the planes also needed a supplemental type certificate because of the very different cabin configuration that wasn't done by the end of the quarter.

Phebe N. Novakovic: That wasn't done by the end of the quarter. All right, back to some numerical comparisons. The sequential numbers are equally impressive. Revenue is up $856 million, a strong 41% increase, and operating earnings are up $64 million, about 25%, affected by a 130 basis point degradation in operating margins for the reason I just mentioned a moment ago. You will see much stronger operating margins in the third quarter, followed by even better operating margin and related earnings in the fourth quarter. Separately, we still expect to deliver 50 to 52 G700s this year; look for about 16 in the third quarter and 23 to 25 in the fourth quarter.

Speaker Change: Alright back to some numerical comparisons.

Speaker Change: The sequential numbers are equally impressive revenue is up $856 million a strong 41% increase in operating earnings are up 64 million.

Speaker Change: 25% affected by a 130 basis point degradation in operating margins for the reason I just mentioned a moment ago.

Phebe Novakovic: You will see much stronger operating margins in the third quarter, followed by even better operating margin and related earnings in the fourth quarter. Separately, we still expected to deliver 50 to 52 G700s this year. Look for about 16 in the third quarter and 23 to 25 in the fourth quarter. Corp. From an order's perspective, we had a respectable quarter at 0.9 to 1 booked a bill in dollar terms. There are strong interest in a fair pipeline across the product mix. As I noted last quarter, bringing transactions to a close has elongated somewhat, as there is some caution while customers digest the impact of geopolitical events in general and the US presidential election in particular.

Speaker Change: We'll see much stronger operating margins in the third quarter, followed by even better operating margin and related earnings in the fourth quarter.

Speaker Change: Separately, we still expect to deliver 50 to 52 G. Seven hundreds this year look for about 16 in the third quarter and 23% to 25 in the fourth quarter.

Phebe N. Novakovic: From an order perspective, we had a respectable quarter at.9 to 1 book to bill in dollars. There's strong interest in a fair pipeline across the product. As I noted last quarter, bringing transactions to a close has elongated somewhat, as there is some caution while customers digest the impact of geopolitical events in general, and the U.S. presidential election in particular. The United States remains our strongest market, but the EU is improving. The Middle East shows very strong potential, and it is just a very recent development.

Speaker Change: From an orders perspective, we had a respectable quarter at <unk> nine to one book to Bill in dollar terms. There is strong interest in a third pipeline across the product mix.

Speaker Change: As I noted last quarter, bringing transactions to close has elongated somewhat as there is some caution while customers digest the impact of geopolitical events in general in the U S presidential election in particular.

Phebe Novakovic: The United States remains our strongest market, that the EU is improving. The Middle East shows very strong potential, and just very recently we have seen some improvement in China. The interest level of buyers and the exploration of accelerated to keep appreciation at the end of the year suggests a reasonably strong order intake in the second half of the year, particularly in the fourth quarter. We are pleased to have both G700 FAA and ASUS certifications behind us. The aerospace comparative revenue and earnings numbers in the quarter are very good by any reasonable standard, but still behind consensus, largely attributable to deliveries that did not make it to the wire.

Speaker Change: The United States remains our strongest market, but the he was improving the middle east shows very strong potential and just very recently, we have seen some improvement in China.

Phebe N. Novakovic: We have seen some improvement in China. The interest level of buyers and the expiration of accelerated depreciation at the end of the year suggest a reasonably strong order intake in the second half of the year, particularly in the fourth quarter. We are pleased to have both G700 FAA and EASA certifications behind us.

Speaker Change: The interest level buyers and the expiration of accelerated depreciation at the end of the year suggests a reasonably strong order intake in the second half of the year, particularly in the fourth quarter we.

Speaker Change: We are pleased to have both G 700, FAA and EASA certification is behind us.

Phebe N. Novakovic: The aerospace revenue and earnings numbers in the quarter are very good by any reasonable standard, but still behind consensus, largely attributable to deliveries that did not make it to the wire. In summary, the aerospace team had a very good quarter. It is handling the rapid increase in deliveries and revenue in a methodical and disciplined fashion. We look forward to a powerful second half with increasing revenue and earnings quarter over quarter, as we forecasted at the end of last year. Moving to the defense business as a whole, we once again saw strong growth and good operating performance across the portfolio. Let me walk you through each segment in turn. First, the Combat System.

The aerospace comparative revenue and earnings numbers in the quarter are very good by any reasonable standard, but still behind consensus largely attributable to the deliveries that did not make it to the wire in summary, the aerospace team had a very good quarter. It is handling the rapid increase in deliveries and revenue on a methodical.

Phebe Novakovic: In summer, the aerospace team had a very good quarter. It is handling the rapid increase in deliveries in revenue in a methodical and disciplined fashion.

Speaker Change: And disciplined fashion, we look forward to a powerful second half with increasing revenue and earnings quarter over quarter as we forecasted at the end of last quarter.

Phebe Novakovic: We look forward to a powerful second half with increasing revenue and earnings quarter over quarter, as we forecast it at the end of last quarter.

Phebe Novakovic: Moving to the defense businesses of Collective, we once again saw strong growth and good operating performance across the portfolio. Let me walk you through each segment in turn. First Combat Systems. Combat systems had revenue of almost 2.3 billion, up 19 percent over the year-ago quarter, with growth at each of the three business units. Earnings of 313 million are up almost 25 percent, and margins at 13.7 percent represent a 70 basis point increase over the Q2 last year and short very strong operating performance from combat systems. The increased revenue came from facilities expansion and artillery work in our ammo business, coupled with increases in international tank and vehicle sales and US Army programs of records.

Speaker Change: Moving to the defense business as a collective we once again saw strong growth and good operating performance across the portfolio. Let me walk you through each segment in turn.

Speaker Change: First combat systems combat systems had revenue of almost $2 3 billion up 19% over the year ago quarter with growth in each of the three business units earnings of 313 million are up almost 25% margins of 13, 7% represented a 70 basis point <unk>.

Phebe N. Novakovic: Combat Systems had revenue of almost $2.3 billion, up 19% over the year-ago quarter, with growth at each of the three big... Earnings of $313 million are up almost 25%, and margins at 13.7% represent a 70 basis point increase over Q2 last year. In short, very strong operating performance in combat. The increased revenue came from facilities expansion and artillery work in our ammo business coupled with increases in international tank and wheeled vehicle sales and U.S. Army programs of record. Each of the businesses increased earnings nicely, with particularly strong operating leverage in our international vehicle sales. On a sequential basis, revenue increased 8.8%, and earnings rose 11%.

Kris: Kris over the Q2 last year and short very strong operating performance from combat systems.

The increased revenue came from facilities expansion and artillery work in our animal business, coupled with increases in international tank and wheeled vehicle sales and U S. Army programs of record each of the businesses increased earnings nicely with particularly strong operating leverage in our international vehicle business on a sequential basis.

Phebe Novakovic: Each of the businesses increased earnings nicely, with particularly strong operating leverage in our international vehicle business. How does sequential basis revenue increased 8.8 percent and earnings rose 11 percent. Year-to-date revenue of about 4.4 billion is up 19.3 percent, and earnings of 595 million are almost 100 million or 20 percent. Combat saw robust order intake with over 3.4 billion awarded in Q2, resulting in a book the bill of 1.5 to 1 for the quarter. Orders came from across the portfolio, ranging from ammunition, the main battle tanks for the US Army, and wheeled vehicles from international customers.

Speaker Change: <unk> revenue increased eight 8% and earnings rose, 11% year to date revenue of about $4 4 billion is up 19, 3% and earnings of 595 million are up almost $100 million or 20%.

Phebe N. Novakovic: Year-to-date revenue of about $4.4 billion is up 19.3%, and earnings of $595 million are up almost $100 million, or $20. Combat saw robust order intake with over $3.4 billion awarded in Q2, resulting in a bill of $1.5 to $1 for the quarter. Orders came from across the portfolio, ranging from ammunition to main battle tanks for the U.S. Army and wheeled vehicles for an international customer. Demand remains steady, particularly for the Abrams main battle tank and international wheeled vehicles.

Speaker Change: <unk> saw robust order intake with over $3 4 billion awarded in Q2, resulting in a book to Bill of one five to one for the quarter.

Speaker Change: Orders came from across the portfolio ranging from ammunition to main battle tanks for the U S Army and wheeled vehicles for an international customer demand remained steady, particularly for the Abrams main battle tank and international wheeled vehicles, we expect demand for AMOLED or continue to rise for some time to come as we rapidly.

Phebe Novakovic: Demand remained steady, particularly for the Abrams main battle tank and international wheeled vehicles. We expect demand for ammo to continue to rise for some time to come as we rapidly increase production of artillery shells and components. All in all, a very strong growth and performance quarter for combat.

Phebe N. Novakovic: We expect demand for ammo to continue to rise for some time to come as we rapidly increase production of artillery shells and components. All in all, a very strong growth in performance quarter for combat. Turning to the Marines.

Speaker Change: <unk> production of artillery shells and components.

Speaker Change: All in all a very strong growth in performance quarter for combat systems.

Phebe Novakovic: and systems. Turning to marine systems. Once again, our shipbuilding group is demonstrating strong revenue growth. Marine systems revenue of $3.45 billion is up $394 million and will 13% against the year ago quarter. Columbia class construction and engineering volume drove the growth, while Virginia class and DDG-51 revenue also increased nicely. Operating earnings are $245 million and up $10 million over the year ago quarter, with a 60 basis point decrease in operating margins. Margons were impacted by continued delays to EB from the submarine industrial base, partially offset by improvement in DDG-51 performance at Bath and continued steady performance at Nascals.

Speaker Change: Turning to marine systems once again, our shipbuilding group is demonstrating strong revenue growth.

Phebe N. Novakovic: Once again, our shipbuilding group is demonstrating strong revenue. Marine Systems revenue of $3.45 billion is up $394 million, almost 13% against the year-ago quarter. Columbia class construction and engineering volume drove the growth, while Virginia class and DDG 51 revenue also increased. Operating earnings were $245 million, up $10 million over the year-ago quarter with a 60 basis point decrease in operating margin. Margins were impacted by continued delays to EB from the submarine industrial, although partially offset by improvement in DDG-51 performance at BATH and continued steady performance at NASCAR.

Speaker Change: Marine systems revenue of 345 billion is up 394 million almost 13% against the year ago quarter, Columbia class construction and engineering volume drove the growth, while Virginia class and DDG 51 revenue also increased nicely.

Speaker Change: Operating earnings are $245 million up $10 million over the year ago quarter with a 60 basis point decrease in operating margin margins were impacted by continued delays to E. B from the submarine industrial base, partially offset by improvement in DDG 51 performance at Bath and continued steady performer.

Speaker Change: At Nasco sequentially.

Phebe N. Novakovic: Sequentially, revenue increased 3.7% and earnings improved 5.6% in Q2, driven by volume EB as we saw some quarter-over-quarter improvement in supply chain deliveries to the yard and continued positive performance at NASSCO. Year-to-date marine revenue of $6.8 billion is up 12.1%, and earnings of $477 million are up $7.8 billion. As I noted a moment ago, although the supply chain is improving in places, EB continues to be impacted by late deliveries from the supply chain, which both delays schedules and impacts costs. Out-of-sequence work on multi-ton modules is time-consuming and expensive.

Phebe Novakovic: Sequentially, revenue increased 3.7% and earnings increased 5.6% in Q2. Driven by volume at EB, as we saw some quarter-over-quarter improvements, supply chain deliveries to the yard and continued positive performance at Nascals. Year to date, marine revenue of $6.8 billion is up 12.1%, and earnings of $477 million are up 7%. As I noted a moment ago, although the supply chain is improving in places, EB continues to be impacted by late deliveries from the supply chain, which both delay schedule and impact cost. At a sequence, work on multi-ton modules is kind of consuming and expensive. Our strategy, as you know, has been to increase our productivity to somewhat offset that impact.

Speaker Change: Sequentially revenue increased three 7% and earnings improved five 6% in Q2, driven by volume at UBS, we saw some quarter over quarter improvements supply chain deliveries to the yard and continued positive performance at nasco.

Speaker Change: Year to date Marine revenue of $6 8 billion is up 12, 1% and earnings of 477 million are up 7% as.

Speaker Change: As I noted a moment ago, although the supply chain is improving in places E. B continues to be impacted by late deliveries from the supply chain, which both delays schedule and impacts cost.

Speaker Change: Out of sequence work on multi ton modules is time consuming and expensive our strategy. As you know has been to increase our productivity to somewhat offset that impact to that and sort of put a significant measure of productivity continues to improve hiring is good and attrition is lower so all good signs.

Phebe N. Novakovic: Our strategy, as you know, has been to increase our productivity to somewhat offset that impact. To that end, throughput, a significant measure of productivity, continues to improve. Hiring is good, and attrition is lower, so these are all good signs. In summary, we are starting to see some momentum build in our shipyards to meet the delivery and repair requirements of our customer, the U.S. We anticipate that all of our yards are now well-positioned for slow but steady incremental margin growth over time with fewer perturbations. Finally, technology.

Phebe Novakovic: To that end, throughput a significant measure of productivity continues to improve; hiring is good and attrition is lower, so all good signs. In summary, we are starting to see some momentum builds in our sugars to meet the delivery and repair requirements of our customer, the U.S. Navy. We anticipate that all of our yards are now well positioned for slow but steady incremental margin growth over time, with fewer perturbations.

Speaker Change: Yeah.

In summary, we are starting to see some momentum build in our shipyards to meet the delivery and repair requirements of our customer the U S. Navy.

Speaker Change: Anticipate that all of our yards are now well positioned for slow, but steady incremental margin growth over time with fewer perturbations.

Phebe Novakovic: Finally, technologies. The group had another good quarter with revenue of nearly $3.3 billion, up 2.5% over the year quarter, and operating earnings at 320 million, up 13.1% on a 90-basis point improvement margin. This nice improvement operating performance was across both businesses. GDIT margins increased 40 basis points, and mission systems margins were up 130 basis points as they continue to recover from supply chain impacts experienced in 2023 and before. So, eventually, revenue is up 81 million or 2.5%, and operating earnings are up 8.5% on a 50 basis point improvement margin. And the story is much the same for the year to date, with revenue of 6.5 billion, up about 1%, and operating earnings of 615 million, up 5.7% against the first six months of last year.

Speaker Change: Finally technologies the group had another good quarter with revenue of nearly $3 $3 billion up two 5% over the year ago quarter and operating earnings of $320 million up 13, 1% on a 90 basis point improvement in margin.

Phebe N. Novakovic: The group had another good quarter with revenue of nearly $3.3 billion, up 2.5% over the year-ago quarter, and operating earnings of $320 million, up 13.1% on a 90 basis point improvement margin. This nice improvement in operating performance was across both businesses. GDIT margins increased 40 basis points, and emission systems margins were up 130 basis points as they continue to recover from supply chain impact.

Speaker Change: This nice improvement in operating performance was across both businesses G. D. I T margins increased 40 basis points and mission systems margins were up 130 basis points as they continue to recover from supply chain impacts experienced in 2023 and before sequentially.

Phebe N. Novakovic: Experience in 2023 and before. Sequentially, revenue is up 81 million, or 2.5%, and operating earnings are up 8.5% on a 50 basis point improvement in March. And the story is much the same for the year-to-date, with revenue of $6.5 billion, up about 1%, and operating earnings of $615 million, up 5.7%, against the first six months of last year. As a result, margins for the group were up 40 basis points year-to-date, to 9.4%. So all relevant comparisons this quarter show revenue and earnings growth and a margin expansion of both. Transcripts provided by Transcription Outsourcing, LLC.

Speaker Change: Sequentially revenue was up $81 million or two 5% and operating earnings are up eight 5% on a 50 basis point improvement in margin.

Speaker Change: And the story is much the same for the year to date with revenue of $6 5 billion up about 1% and operating earnings of $615 million.

Speaker Change: Five 7% against the first six months of last year as a result margins for the group were up 40 basis points year to date to nine 4%.

Phebe Novakovic: As a result, margins for the group were up 40 basis points here today to 9.4%. So, all relevant comparisons this quarter show revenue and earnings growth and a margin expansion of both businesses, positioning them well going forward. In short, GDIT is halving its industry-leading margins while consistently delivering year-over-year growth, while Mission Systems is delivering nice margin expansion as it transitions from some setting legacy probes. Grant. The group sees 3.3 billion in orders in the quarter, bringing the total 7.2 billion for the first six months. That results in a book-to-bill for the group of 1.0 for the quarter and 1.1 for the year to date.

Speaker Change: So all relevant comparisons this quarter show revenue and earnings growth and margin expansion at both businesses positioning them well going forward and short G. D. I T is holding its industry, leading margins, while consistently delivering year over year growth. While mission systems is delivering nice margin expansion as it transitions from Sun.

Letting legacy programs.

Phebe N. Novakovic: The group received $3.3 billion in orders in the quarter, bringing the total to $7.2 billion for the first six months. That results in a book-to-bill for the group of $1.0 for the quarter and $1.1 for the year to date. Total awards for the group in the first half were up 30% compared with the first six months of 2020. This is on the strength of win rates consistently around 80% for the group and capture rates at roughly 65%, both very strong for this industry.

Speaker Change: The group C $3 3 billion in orders in the quarter, bringing the total of $7 2 billion for the first six months that results in a book to Bill for the group of one point out for the quarter and one one for the year to date.

Phebe Novakovic: Total awards for the group in the first half were up 30% compared with the first six months of 2023. This is on the strength of win rates consistently around 80% for the group and capture rates at roughly 65%. Both members are very strong for this industry. Backlock was down slightly from the end of the first quarter due to the removal of backlock associated with an international investor in the quarter, but was up almost 200 million from a year ago. As importantly, the qualified pipeline remains very robust at over 120 billion, so the group is well positioned to continue its growth trajectory.

Speaker Change: Total awards for the group in the first half were up 30% compared with the first six months of 2023.

Speaker Change: This is on the strength of win rates consistently around 80% for the group and capture rates at roughly 65% both very strong for this industry.

Phebe N. Novakovic: Backlog was down slightly from the end of the first quarter due to the removal of backlog associated with an international divestiture in the quarter, but it was up almost $200 million from a year ago. As importantly, the qualified pipeline remains very robust at over $120 billion.

Speaker Change: Backlog was down slightly from the end of the first quarter due to the removal of backlog associated with an international divestiture in the quarter, but was up almost $200 million from a year ago.

Speaker Change: As importantly, the qualified pipeline remains very robust at over 120 billion. So the group is well positioned to continue its growth trajectory.

Kim Korea: Let me now turn the call over to Kim. Thank you, Phoebe, and good morning. I'll start with orders. We had a solid quarter from an orders perspective at $10 billion, with an overall book-to-bill ratio of 0.8 to 1 for the company. This was achieved in a quarter when revenue grew 18% over last year, and there were no significant shipbuilding contracts awarded. Aerospace had a book-to-bill of 0.9 to 1, while revenue grew over 40% sequentially with the initial deliveries of the G700. On the defense side of the business, combat systems did particularly well with a book-to-bill of 1.5 to 1, and technologies was 1 to 1.

Kimberly A. Kuryea: So the group is well positioned to continue its growth trajectory. Let me now turn the call over to Phebe. Thank you, Phebe, and good morning. I'll start with orders. We had a solid quarter from an orders perspective at $10 billion, with an overall book-to-bill ratio of.8 to 1 for the company. This was achieved in a quarter when revenue grew 18% over last year and there were no significant shipbuilding contracts awarded.

Speaker Change: Let me now turn the call over to Kim.

Kimberly A. Kuryea: Aerospace had a book-to-bill of 0.9 to 1, while revenue grew over 40% sequentially with the initial deliveries of the G700. On the defense side of the business, combat systems did particularly well with a book-to-bill of 1.5 to 1, and technologies was 1 to 1. We ended the quarter with a backlog of $91.3 billion, essentially even with where we were a year ago. Our total estimated contract value, which includes options and IDIQ contracts, ended the quarter at nearly $130 billion. Turning to our cash performance for the quarter, we generated $814 million of operating cash. After capital expenditures, our free cash flow was $613 million for the quarter, yielding a cash conversion rate of 68%.

Kim Correa: Thank you Phebe and good morning, I'll start with orders, we had a solid quarter from an orders perspective at $10 billion with an overall book to Bill ratio of <unk> eight to one for the company. This was achieved in a quarter when revenue grew 18% over last year and there were no significant shipbuilding contracts awarded.

Kim Correa: Aerospace had a book to Bill of 0.9 to one while revenue grew over 40% sequentially with the initial deliveries of the G 700 on.

Kim Correa: On the defense side of the business combat systems did particularly well with a book to Bill of one five to one and technologies with one to one.

Kim Korea: We ended the quarter with backlog of $91.3 billion, essentially even with where we were a year ago. Our total estimated contract value, which includes options and IDIQ contracts, ended the quarter at nearly $130 billion. Turning to our cash performance for the quarter, we generated $814 million of operating cash flow. After capital expenditures, our free cash flow with $613 million for the quarter, yielding a cash conversion rate of 68%. Technologies led the segments with strong cash flow generation in the quarter. When you consider the free cash flow through the first half of 2024, we are slightly positive at $176 million, and about $250 million ahead of what we had planned.

Kim Correa: We ended the quarter with backlog of $91 $3 billion, essentially even with where we were a year ago.

Kim Correa: Our total estimated contract value, which includes options and <unk> IQ contracts ended the quarter at nearly $130 billion.

Kim Correa: Turning to our cash performance for the quarter.

Kim Correa: We generated $814 million of operating cash flow after capital expenditures, our free cash flow was $613 million for the quarter, yielding a cash conversion rate of 68%.

Kimberly A. Kuryea: Technologies led the segments with strong cash flow generation in the quarter. When you consider free cash flow through the first half of 2024, we are slightly positive at $176 million and about $250 million ahead of what we had planned. After the planned slow start in the first half, we expect significant second-half growth. With the majority of the cash generated in the fourth quarter, we are still planning a cash conversion rate of around 100% for the year.

Kim Correa: Technologies led the segments with strong cash flow generation in the quarter.

Kim Correa: When you consider the free cash flow through the first half of 2024 were slightly positive at $176 million and about $250 million ahead of what we had planned.

Kim Korea: After the plan's flow start in the first half, we expect significant second half growth, with the majority of the cash generated in the fourth quarter. We are still planning a cash conversion rate around 100% for the year. So you may be wondering what's driving cash to be so backloaded this year. It's apparent from our balance sheet that we have been building up working capital in the first half of the year, which we expect to substantially unwind in the second half. One obvious driver of this is Gulf Stream with the ramp up for the certification of deliveries of the G700.

Kim Correa: After the planned slow start in the first half we expect significant second half growth with the majority of the cash generated in the fourth quarter. We are still planning a cash conversion rate around 100% for the year.

Kimberly A. Kuryea: So, you may be wondering what's driving cash to be so backloaded this year. It's apparent from our balance sheet that we have been building up working capital in the first half of the year, which we expect to substantially unwind in the second half of the year. One obvious driver of this is Gulfstream with the ramp-up for the certification and deliveries of the G700. The planned G700 deliveries in the second half are significant, which will reduce working capital. Another large contributor to the growth in working capital has been combat. They have several programs that pay at delivery.

Kim Correa: So you may be wondering what's driving cash to be so back loaded this year, it's apparent from our balance sheet that we have been building up working capital in the first half of the year, which we expect to substantially unwind in the second half.

Kim Correa: One obvious driver of this as Gulfstream with the ramp up for the certification of deliveries of the G 700 and.

Kim Korea: The plan G700 deliveries in the second half are significant, which will reduce working capital. Another large contributor to the growth in working capital has been combat systems. They have several programs that pay a delivery. Thus, we are buying material in the first half of the year that results in product deliveries and cash in the second half of the year. Combat is also subject to the timing of deposits on international programs, and the first half of the year has been a period of liquidating deposits received in prior process.

Kim Correa: The plan G 700 deliveries in the second half are significant which will reduce working capital.

Kim Correa: Other large contributor to the growth in working capital has been combat systems.

Kim Correa: They have several programs that pay out delivery. Thus we are buying material in the first half of the year that results in product deliveries and cash in the second half of the year.

Kimberly A. Kuryea: Thus, we are buying material in the first half of the year that results in product deliveries and cash in the second half of the year. However, combat is also subject to the timing of deposits on international programs, and the first half of the year has been a period of liquidating deposits received in prior programs. Now, turning to capital deployment. Capital expenditures were $201 million, or 1.7% of sales in the quarter.

Kim Correa: Combat is also subject to the timing of deposits on international program in the first half of the year has been a period of liquidating deposits received in prior periods.

Kim Korea: Period.

Kim Korea: Now, turning to capital deployment. Capital expenditures were $201 million, or 1.7% of sales in the quarter. Similar to last year, you should expect capital expenditures to be somewhat higher in the second half of the year and slightly above 2% of sales when the year wraps up. Also in the quarter, we paid $389 million in dividends and repurchased approximately 119,000 shares of stock for $34 million. Through the first half, we repurchased only a modest number of shares for a total of $139 million, driven largely by our 2024 cash profile. We ended the quarter with a cash balance of approximately $1.4 billion, and a net debt position of $7.9 billion, down over $300 million from last quarter.

Speaker Change: Now turning to capital deployment capital expenditures were $201 million or one 7% of sales in the quarter similar to last year, you should expect capital expenditures to be somewhat higher in the second half of the year and slightly above 2% of sales when the year wraps up.

Kimberly A. Kuryea: Similar to last year, you should expect capital expenditures to be somewhat higher in the second half of the year and slightly above 2% of sales when the year wraps up. Also, in the quarter, we paid $389 million in dividends and repurchased approximately 119,000 shares of stock for $34 million. Through the first half, we repurchased only a modest number of shares for a total of $139 million, driven largely by our 2024 cash program.

Speaker Change: Also in the quarter, we paid $389 million in dividends and repurchased approximately 119000 shares of stock for $34 million.

Through the first half, we repurchased only a modest number of shares for a total of $139 million driven largely by our 2024 cash profile.

Kimberly A. Kuryea: We ended the quarter with a cash balance of approximately $1.4 billion and a net debt position of $7.9 billion, down over $300 million from last. As a reminder, we have an additional $500 million of fixed rate notes. Our net interest expense in the quarter was $84 million compared to $89 million last year. That brings the interest expense for the first half of the year to $166 million, down from $180 million for the same period in 2023 on a lower debt balance. At this point, our expectation for interest expense for the year remains unchanged at approximately $320 million. Finally, the effective tax rate in the quarter was 17%, bringing the tax rate for the first half to 17.2%.

Speaker Change: We ended the quarter with a cash balance of approximately $1 4 billion and a net debt position of $7 $9 billion.

Speaker Change: Down over $300 million from last quarter.

Kim Korea: As a reminder, we have an additional $500 million of fixed-rate notes for the quarter that we plan to repay with cash on hand. Our net interest expense in the quarter was $84 million, compared to $89 million last year. That brings the interest expense for the first half of the year to $166 million, down from $180 million for the same period in 2023 on lower debt balances. At this point, our expectation for interest expense for the year remains unchanged at approximately $320 million. Finally, the effective tax rate in the quarter was 17%, bringing the tax rate for the first half to 17.2%.

Speaker Change: As a reminder, we have an additional $500 million of fixed rate notes mature fourth quarter that we plan to repay with cash on hand.

Speaker Change: Our net interest expense in the quarter was $84 million compared to $89 million last year that brings the interest expense for the first half of the year to $166 million down from $180 million for the same period in 2023 on lower debt balances.

Speaker Change: At this point, our expectation for interest expense for the year remains unchanged at approximately $320 million.

Speaker Change: Finally, the effective tax rate in the quarter was 17%.

Speaker Change: Bringing the tax rate for the first half to 17, 2%.

Kim Korea: This rate is a little lower than our outlook for the full year, which remains around 17.5%. For the second half of the year, we expect the rate to be lower in the third quarter, and then a bit higher in the fourth due to typical timing items. Phoebe, that concludes my remarks.

Kimberly A. Kuryea: This rate is a little lower than our outlook for the full year, which remains around 17.5%. For the second half of the year, we expect the rate to be lower in the third quarter and then a bit higher in the fourth due to typical timing. Phebe, that concludes my remarks. All right, thanks, Kim. Let me move on to give you an updated forecast for the year.

Speaker Change: This rate is a little lower than our outlook for the full year, which remains around 17, 5% for.

Speaker Change: For the second half of the year, we expect the rate to be lower in the third quarter, and then a bit higher than the fourth due to typical timing items.

Speaker Change: Phebe that concludes my remarks, I'll turn it back over to you.

Phebe Novakovic: I'll turn it back over to you.

Phebe Novakovic: All right, thanks, Kim. Let me move on to give you updated forecasts for the year. The figures I'm about to give you are all compared to our January forecast, which will be posted along with today's guidance on our website. In aerospace, we are sticking with our same earnings estimate, but we'll get there with higher revenue and about an 100-base point drop in margins for all the reasons I mentioned to you a few minutes ago. We are still holding to our delivery estimate of about 160 airplanes. With respect to the defense businesses, combat will have revenue of about 200 million higher than previously projected as a result of continued demand.

Phebe N. Novakovic: Alright, Thanks Kim.

Phebe N. Novakovic: Move on to give you updated forecast for the year.

Kimberly A. Kuryea: The figures I'm about to give you are all compared to our January forecast, which will be posted along with today's guidance on our website. For aerospace, we are sticking with our same earnings estimate, but we'll get there with higher revenue and about a 100 basis point drop in margins for all the reasons I mentioned a few minutes ago. We are still holding to our delivery estimate of about 160 airplanes.

So I'm about to give you our all compared to our January forecast, which will be posted along with today's guidance on our website.

Speaker Change: In aerospace we are sticking with our same earnings estimate, but we'll get there with higher revenue and about 100 basis point drop in margins for all the reasons I mentioned a few minutes ago.

Speaker Change: We are still holding to our delivery estimate of about 160 airplanes.

Phebe N. Novakovic: With respect to the defense businesses, combat will have revenue of about $200 million higher than previously projected as a result of continued demand. So look for total revenue of about $8.7 billion. Margin should be about the same.

Speaker Change: With respect to the defense businesses combat will have revenue of about 200 million higher than previously projected as a result of continued demand. So look for total revenue of about $8 7 billion margins should be about the same.

Phebe Novakovic: So look for total revenue about 8.7 billion. Margin should be about the same. All in, operating earnings will be up 30 million over the previous forecast. Marine systems revenue should be up 1 billion electric boat and somewhat at bat. So we will have annual revenue between 13.4 and 13.8 billion, with an operating margin around 7.4%, with operating earnings up around 45 million over the January forecast.

Phebe N. Novakovic: All in, operating earnings will be up $30 million over the previous four. Marine Systems revenue should be up $1 billion electric boat and somewhat at bat. So we will have annual revenue between $13.4 and $13.8 billion with an operating margin around 7.4% and operating earnings up around $45 million for Technologies. We are not changing our earlier guidance. On a company-wide basis, we see annual revenue up about $2 billion, with overall margins down about 30%. So total revenue of $47.8 million.

Speaker Change: <unk> operating earnings will be up $30 million over the previous forecast.

Speaker Change: Marine systems revenue should be up 1 billion electric boat in somewhat at Bath. So we will have annual revenue between 13.4, and $13 8 billion with an operating margin around seven 4% with operating earnings up around $45 million over the January forecast protect.

Phebe Novakovic: For technologies, we are not changing our earlier guidance to you. On a company-wide basis, we see annual revenue up about 2 billion with overall margins down about 30 justice points. So total revenue of 47.8 to 48.2 billion and operating earnings up modestly. All up, that indicates EPS guidance of $14.40 to $14.50, $5.00 over prior guidance. I will note that normally this time of year, we have solid insight into revenue and margin. In this growth environment, the upside has been difficult to predict with equal clarity.

Speaker Change: <unk>, we are not changing our earlier guidance to you.

Speaker Change: On a company wide basis, we see annual revenue up about 2 billion with overall margins down about 30 basis points.

Speaker Change: So total revenue of 47 to $48 2 billion and operating earnings up modestly.

Phebe N. Novakovic: $48.2 billion, and operating earnings were up modestly. All up, that indicates EPS guidance of $14.40 to $14.50, five cents over prior guidance. I will note that normally, this time of year, we have solid insight into revenue and margins. However, in this growth environment, the upside has been difficult to predict with equal clarity.

Speaker Change: All up that indicates EPS guidance of $14.40 to $14.55 over prior guidance.

Speaker Change: I will note that normally this time of year, we have solid insight into revenue and margin in this growth environment. The upside has been difficult to predict with equal clarity should anything materially change in Q3, I will give you another product guidance.

Phebe Novakovic: Should anything materially change in Q3D, I will give you another credit guidance.

Phebe N. Novakovic: Should anything materially change in Q3, I will give you another credit guide. That concludes my remarks, and we'll be happy to take your questions. As a reminder, we ask participants to ask one question and one follow-up so that everyone has a chance. Operator, could you please remind participants how to enter the...

Phebe Novakovic: That includes my remarks, and we'll be happy to take your questions.

Speaker Change: That concludes my remarks, and we'll be happy to take your questions.

Operator: Thank you, Phebe. As a reminder, we ask participants to ask one question and one follow-up so that everyone has a chance to participate.

Speaker Change: Thank you Phebe 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.

Operator: Operator, could you please remind participants how to enter the queue? Thank you.

Operator: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1.

Speaker Change: Thank you we will now begin the question and answer session. If you have dialed in I would like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue.

Operator: We will now begin the question and answer session. If you have dialed in, I would like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. As a reminder, we ask that you please limit yourself to one question and one follow-up until everyone has an opportunity to ask a question.

I would like to withdraw your question simply press Star one again.

Operator: As a reminder, we ask that you please limit yourself to one question and one follow-up to allow everyone an opportunity to ask. We'll go to our first question from David Strauss at Barker. Maureen, thanks for taking the question. Phoebe, on the G700, as I understand it, there are some issues that you have to fix with these pre-built airplanes.

Speaker Change: As a reminder, we ask that you. Please limit yourself to one question and one follow up to allow everyone an opportunity to ask a question.

David Strauss: We'll go to our first question from David Strauss at Barclays. Thanks for taking the question.

Speaker Change: We will go to our first question from David Strauss at Barclays.

Speaker Change: Yeah.

David Egon Strauss: Good morning, Thanks for taking my question.

David Strauss: Sure.

Phebe Novakovic: Phebe on the G700. As I understand, there are some issues that you have to fix with these pre-built airplanes. Can you just talk about what exactly the issue is, how far of the way you are through that and whether this is a stolen issue in terms of airplanes that are better on the line? Thanks. So very late in the certification process, we had a requirement to bind together some wires in the tail of the airplane. So relatively simple fix. For those airplanes that we had already built, we took the tails off; for those that we were building, we just didn't want to do that.

David Strauss: Phebe on the on the G 700, as I understand there are some issues that you have to fix with these prebuilt airplanes can you just talk about what exactly the issue is how far of the way you are through that and whether this is still an issue in terms of the airplanes that are better off.

Phebe N. Novakovic: Can you just talk about what exactly the issue is, how far you are through it, and whether this is still an issue in terms of airplanes that are on the line? Thanks. Very late in the certification process, we had a requirement to bind together some wires in the tail of the airplane. So, relatively simple fix. For those airplanes that we'd already built, we took the tails off. For those that we were building, we just didn't put them on.

Speaker Change: The line thanks.

Speaker Change: Sure. So very late in the certification process, we had a requirement to bind together some wires in the tail of the airplane.

Speaker Change: So relatively.

Speaker Change: Simple fix for those airplanes that we already have the belt, we took the tails off for those that we were building we just didn't put him on.

Speaker Change: So this is largely behind us and contributed.

Phebe Novakovic: So this is largely behind us and contributed to the cost impact on lot one. But I would note that it's extremely hard to discern anything meaningful, looking from the outside in here. This is, as I said, largely behind us and pretty late in the process and not particularly difficult to do.

Phebe N. Novakovic: So this is largely behind us, and it contributed to a bit to the cost impact on lot one. But you know, I would note that it's extremely hard to discern anything meaningful, looking from the outside in here. This is, as I said, largely behind us, and we're pretty late in the process, and Not Particularly Difficult to Do. Great. And so none of the slips relate to any kind of supply chain issues.

Contributed to the a bit to the cost impact.

Speaker Change: On lot one.

Speaker Change: But I would note that it's extremely hard to discern anything meaningful I'm looking from the outside in here.

Speaker Change: This is as I said largely behind us.

Speaker Change: Late in the process.

Speaker Change: And not particularly difficult to do.

Phebe Novakovic: Great. None of these slips relate to supply chain issues. It was more about just fixing the certification issue. Right.

Speaker Change: Great and so so none of the slips relate to kind of supply chain issues. It was more about just the 16 this certification issue.

Phebe N. Novakovic: It was more about just, you know, fixing this certification. Right? Think about the supply chain as more a question of cost than of delivery. Terrific. Thank you. We'll move next to Peter Arment at. Thanks. Good morning, Phoebe.

Phebe Novakovic: Think about the supply chain as more a question of costs than deliveries. Terrific.

Speaker Change: Think about the supply chain is more a question of cost then.

Speaker Change: Deliveries.

Speaker Change: Terrific. Thank you.

Peter Arment: Thank you. We'll move next to Peter Arment at Baird.

Speaker Change: Yeah.

Speaker Change: Well move next to Peter Arment at Baird.

Phebe N. Novakovic: Yeah, it's really encouraging to hear that the 50 to 52 is still intact for the G700. Maybe could you just touch upon, you know, expectations around bookings. I know you've talked about in the past about geopolitics and a lot of just, you know, volatility in the world. Just your thoughts on just, you know, bookings for the year. Thanks.

Phebe Novakovic: Thanks.

Peter J. Arment: Hey, Thanks, good morning, good morning.

Phebe Novakovic: Good morning, Phoebe. Good morning. Yeah, it's really encouraging to hear about the 50 to 52 is still intact for the G700. Maybe you could just touch upon expectations around bookings. I know you've talked about the past, about geopolitics and a lot of just volatility in the world. Just your thoughts on bookings for the year. So we tried to get you some color around that. In the remarks, I say that we typically see in any U.S. presidential election a slowdown around the election. And I think this won't be any different. But we do expect, as I noted in my remarks, a more robust fourth quarter because we've got the expiration.

Peter J. Arment: Yes, it's a really encouraging to hear about the 50 to 52 is still intact.

Speaker Change: 700, <unk>, maybe you could just touch upon.

Speaker Change: You know I think expectations around bookings I know you talked about in the past about geopolitics.

Speaker Change: Politics, and a lot of just volatility in the world.

Speaker Change: Your thoughts on just bookings for the year. Thanks.

Speaker Change: So we tried to give you some color around that.

Speaker Change: And our remarks, I'd say that.

Phebe N. Novakovic: In my remarks, I say that we typically see in any U.S. presidential election a slowdown around the election, and I think this won't be any different, but we do expect, as I noted in my remarks, a more robust fourth quarter because we've got the expiration of the accelerated depreciation, and the pipeline is quite good, and I gave you also some color around the geographical distribution there. So, all in all, there's quite a bit of interest in our airplane. It's Craig here.

Speaker Change: We typically see in any U S presidential election, a slowdown.

Speaker Change: Around the election, and I think this won't be any different but we do expect as I noted in my remarks.

More robust fourth quarter.

Because the we've got the expiration of the cited depreciation and mom and the pipeline is quite good and I gave you also some color around the geographical distribution. There. So all in all those quite a bit of interest and and our airplanes.

Phebe Novakovic: It's the celebration of the celebrated depreciation. And the pipeline is quite good. And I gave you also some color around the geographical distribution there. So all in all, there's quite a bit of interest in our complaints. It's great here.

Phebe N. Novakovic: Just as a quick follow-up, just your latest thoughts on just the G400. Is that still tracking to your kind of original plan? It is, and we ought to fly her very soon. We'll go next to Robert Spingarn at Melody. Say good morning. Morning, Phoebe. Maybe I'm sort of a two-parter on, in marine.

Speaker Change: It's Greg here, just as a quick follow up just.

Phebe Novakovic: Just as a quick follow-up, just your latest thoughts on just the D400. Is that still tracking to your kind of original plan? It is. And we ought to fly very soon.

Greg: Your latest thoughts on just the <unk> 400 or is that still tracking to your kind of original plan.

Speaker Change: It is and we ought to fly a very soon.

Greg: Okay.

Robert Spingarn: We'll go next to Robert Spingarn at Melius Research. Good morning. Morning.

Speaker Change: We'll go next to Robert Spingarn at Mail, Yes research.

Robert Michael Spingarn: Hey, good morning, good morning.

Speaker Change: <unk>.

Phebe Novakovic: Phoebe, maybe sort of a two-parter on Marine. I wanted to ask you first; you know, with the recent supplemental, there was money a little over three billion to help support the submarine industrial base. And you did mention last time that there were a few sole source suppliers of complex components that were causing some of the delays. So wondering if that money has gotten to them and is resolving the issue or if you had to qualify alternate sources. And then the longer term question is, you know, a decade ago, or maybe a little bit longer, the Marine was a 10% type margin business.

Speaker Change: Phebe maybe.

Robert Michael Spingarn: Sort of a two parter on on Marine I wanted to ask you first with the with the recent supplemental there was money a little over 3 billion to help support the submarine industrial base and you did mention last time that there were a few sole source suppliers of complex components that were causing some of the delays so I'm wondering.

Phebe N. Novakovic: I wanted to ask you first, you know, with the recent supplemental, there was money, a little over $3 billion, to help support the submarine industrial base. And you did mention last time that there were a few sole source suppliers of complex components that were causing some of the delays. So I was wondering if that money had gotten to them and is resolving the issue, or if you had to qualify alternate sources.

Robert Michael Spingarn: If that money has gotten to them and is resolving the issue where if you had to qualify alternate sources.

Phebe N. Novakovic: And then the longer-term question is, you know, a decade ago or maybe a little bit longer, the Marine was a 10%-type margin business. And given the supply chain issues, the impact on the shipbuilding workforce, you know, in the aftermath of COVID, is that a realistic target at some point in the future? And what might be the timing on that?

Robert Michael Spingarn: Then the longer term question as you know a decade ago or maybe a little bit longer no marine was a 10% type margin business and given the supply chain issues.

Phebe Novakovic: And given the supply chain issues, the impact to the shipbuilding workforce, you know, in the aftermath of COVID, you know, is that a realistic target, some point in the future? And what might be the timing on that? Thank you. Sure.

Robert Michael Spingarn: The impact of the shipbuilding workforce in the aftermath of Covid.

Speaker Change: Is that a realistic target some point the future and what.

Might be the timing on that.

Speaker Change: Yeah.

Phebe N. Novakovic: Thank you. Sure. So, let me take each part of your question in turn.

Speaker Change: Sure. So the let me take each part of your question in turn so.

Phebe Novakovic: So let me take each part of your question in turn. So the Navy, working quite closely with the Congress, allocated significant funding for the industrial bases you noted. That money has begun to flow, and it is intended for another, and it's targeted for a number of uses. One increased throughput to some facilitation, some training, increased hiring. And so it's been really critical, and we've been pushing very hard to get that money as fast as we possibly can into the supply chain to help stabilize them. And let me put it to you this way. There are some supply chain providers who are improving and improving quite nicely.

Speaker Change: The Navy working quite closely with the Congress allocated significant funding.

Phebe N. Novakovic: So the Navy, working quite closely with the Congress, allocated significant funding for the industrial base, as you noted. That money has begun to flow, and it is intended for another, and it's targeted for a number of uses. One, increased throughput to some facilitation, some training, and increased hiring. And so it's been really critical, and we've been pushing very hard to get that money as fast as we possibly can into the supply chain to help stabilize them. And let me put it to you this way.

Speaker Change: For the industrial base as you noted that money has begun to flow and it is intended for another and its targeted for a number of uses one increase throughput to some consolidation some training.

Speaker Change: Our increased hiring and so it's been really critical and we've been pushing very hard to get that money as fast as we possibly can into the supply chain to help stabilize them, we and let me put it to you. This way there are some supply.

Phebe N. Novakovic: There are some supply chain providers who are improving and improving quite nicely. However, we still have some challenges out there that are pretty well publicized. But we're continuing to work with the U.S. Navy on how, to the extent that those can be mitigated. So we continue to see cost impacts from late deliveries of out-of-sequence work, as I noted in my remarks, but we continue to be hopeful. We are hopeful that the additional funding that we're putting into the supply chain should help stabilize it over time. So with respect to your 10% margin, that certainly is our goal. But I think the supply chain has to stabilize. We've got to come down on our learning curves on Columbia.

Speaker Change: Supply chain providers, who are improving and improving quite nicely. We still have some challenges out there that are pretty well publicized.

Phebe Novakovic: We still have some challenges out there that are pretty well publicized, but we're continuing to work with the US Navy on how to the extent that those can be mitigated. So we continue to see cost impacts from late deliveries at a sequence work, as I noted in my remarks. But we continue to be hopeful. We are hopeful that the additional funding that we're putting into the supply chain should help stabilize over time.

Speaker Change: But we're continuing to work with the U S. Navy on how to the extent that those can be mitigated.

Speaker Change: So we continue to see a cost impacts from a late deliveries of out of sequence work as I noted in my remarks, but we continue to be hopeful we are hopeful that the additional funding that we're putting into the supply chain should help stabilize over time.

Phebe Novakovic: So, with respect to your 10% margin, that certainly is our goal. I'd say the supply chain has to stabilize. We've got to come down our learning curve from Columbia. Virginia throughput has to increase. So we will ultimately stabilize at the marine group. And I will notice, by the way, I think you mentioned something about the workforce. We have, in the last year or so, had no difficulty in hiring at our shipyards, and our training program has been pretty robust. So we've got shipbuilders coming out of that training program with a higher than typical level of proficiency.

Speaker Change: So with respect to your 10% margin that certainly is our goal I think the supply chain has to stabilize we've got to come down our learning curves on Colombia, a Virginia throughput has to increase so are we.

Phebe N. Novakovic: Virginia throughput has to increase. We will ultimately stabilize in the marine group. And I will notice, by the way, I think you mentioned something about the workforce. We have, in the last year or so, had no difficulty in hiring at our shipyards, and our training program has been pretty robust.

Speaker Change: We will ultimately stabilize at at in the Marine Group and I will notice by the way I think you mentioned something about the workforce.

Speaker Change: We have a in the last year or so had no difficulty in hiring at our shipyard and our training program has been pretty robust. So we've got shipbuilders coming out of that training program with a higher than typical level of proficiency.

Phebe N. Novakovic: So we've got shipbuilders coming out of that training program with a higher than typical level of proficiency. And our retention is also much better. So that gives us some confidence in the throughput and productivity capacity of the shipyards. But everything in shipbuilding is slow, so it's a small incremental improvement over time. But I think 10% is a reasonable goal over time, and there's no way to estimate that with any precision. But I'm not going to speculate. But it is; it is objective.

Phebe Novakovic: Our retention is also much better. So that gives us some confidence in the throughput and productivity capacity of the shipyards. But everything in shipbuilding is slow. So it's small incremental improvement over time. But I think 10% is a reasonable goal over time. And there's no way to estimate that, depending on precision. Not going to speculate. But it is objective.

Speaker Change: Our retention is also much better so.

Speaker Change: That gives us some confidence in the in the throughput and productivity our capacity of the shipyards, but everything in shipbuilding is slow so it's small incremental improvement over time, but I think 10% is a reasonable goal over time and there's no way to estimate that with any precision buckler macro to spec.

Speaker Change: Right, but it is it is objective.

Phebe Novakovic: Thank you very much.

Speaker Change: Thank you very much.

Speaker Change: Okay.

Kaivon Remor: We'll go next to Kaivon Remor at TD Cowan.

Speaker Change: We'll go next to Cai von anymore at T D Cowen.

Phebe N. Novakovic: Thank you very much. We'll go next to Kaivan Rumohr at TD. Yes, thanks so much, Phoebe. Good morning. Good morning. So, the tail issue at Gulfstream, does the required rework extend beyond the first 20 units in the first block? And should we be looking for a sequential build in terms of unit delivery so that I would assume then you have less first block impact in the third quarter than the second and even less or none in the fourth?

Kaivon Remor: Yes, thanks so much, TD.

Speaker Change: Yes, thanks, so much phebe and good morning.

Phebe Novakovic: Good morning. So the tail issue at Gulf Stream, does the required rework extend beyond the first 20 units in the first block. And should we be looking for sequential build in terms of unit delivery so that I would assume then you have less first block impact in the third quarter than the second and even less or none in the fourth. And therefore, you should see a strong lift in the margins sequentially. Is that that the way to look at it? Yes, so I tried to give you a lot of color of that in my remarks, but with respect to the binding of some of those wires in the tail, that's largely behind us.

Speaker Change: Good morning so.

Speaker Change: The total issue at Gulfstream does that does the required rework.

Beyond the first 20 units in the first block and should we be looking for a sequential build in terms of unit deliveries. So I would assume then you have less first block impact in the third quarter than the second and even less in.

Speaker Change: In the fourth.

Phebe N. Novakovic: And therefore, you should see a strong lift in the margins sequentially. Is that the way to look at it? Yes. So, I tried to give you a lot of color on that in my remarks, but with respect to the binding of some of those wires in the tail, that's largely behind us.

Speaker Change: Should see a strong lift in the <unk>.

Speaker Change: Margins sequentially, but the way to look at it yes. So what I tried to give you a lot of color of that in my remarks, but with respect to the the binding of some of those wires in the tail that's largely behind us.

Phebe N. Novakovic: And with respect to the margin trajectory, we see nice margin improvement in this quarter and then again in the fourth quarter. Think about the fourth quarter as being mid to high upper teens. Okay. And because of this rework, should we assume that the profitability on Block 2 for the G700 will be somewhat bigger than one might normally look for? I tried to give you that in my remarks, but this is really just one issue. Got it.

Speaker Change:

Phebe Novakovic: And with respect to the margin trajectory, we see nice margin improvement in this quarter and then again in the fourth quarter. Think about the fourth quarter is mid to high up routines. Okay, and because you know of this rework, should we assume that the profitability on block two for the G700 that the sequential step up from one to two will be somewhat bigger than one might normally look for. I tried to give you that in my remarks, but this is really a lot. One issue. Got it.

Speaker Change: And with respect to the margin trajectory, we've seen nice margin improvement and this quarter and then again in the fourth quarter to think about the fourth quarter is mid to high upper teens.

Speaker Change: Okay and because of this rework should we assume about the profitability.

Block two for the G 700 that the sequential step up from one to two will be somewhat bigger than one might normally look for.

Speaker Change: I tried to give you that in my remarks, but this was really a lot one issue.

Speaker Change: Got it thank you.

Phebe Novakovic: Thank you.

Jason Gersky: Our next question comes from Jason Gersky at City. Thank you. Good morning, everybody.

Phebe N. Novakovic: Thank you. Our next question comes from Jason Gursky at. Hey, good morning, everybody.

Speaker Change: Our next question comes from Jason Gursky at Citi.

Phebe N. Novakovic: Spend a few minutes talking about the services business at an aerospace company and just some of the trends that you're seeing there with the fleet utilization and what you're seeing in the competitive environment in that business as well. So on the service side, services, as we said before, will grow with the expansion of the fleet. Our objective is to get as much of the Gulf Stream working as possible, and we've got the vast preponderance of it already.

Jason Michael Gursky: Hey, good morning, everybody.

Phebe Novakovic: I think you guys want to spend a few minutes talking about the services business at an aerospace and just some of the trends that you're seeing there with the fleet utilization. And what you're seeing in the competitive environment in that business as well. So, on the service side, services, as we said before, will grow with the expansion of the fleet. Our objective is to get as much of the Gulf Stream work as possible, and we've got the vast preponderance of it already. Services is growing this year, and as is, by the way, special mission, which is driving a lot of the revenue increase.

Jason Michael Gursky: Phebe I was wondering if you could spend a few minutes talking about the services business.

Speaker Change: In aerospace and.

Jason Michael Gursky: Just some of the trends that you're seeing there with the fleet.

Jason Michael Gursky: Physician.

Speaker Change: What are you seeing in the competitive environment in that business as well.

Jason Michael Gursky: Yeah.

Speaker Change: So on the service side services as I said before will grow.

Speaker Change: With the expansion of the fleet.

Speaker Change: Our objective is to get as much of the Gulfstream work as possible and we've got the vast preponderance of it already.

Phebe N. Novakovic: Services are growing this year, as is, by the way, Special Mission, which is driving a lot of the revenue increase this year. But we should see nice, steady growth over time in the service sector. And there's no real difference, with respect to services, there's no real difference in any of the competitive environments.

Speaker Change: <unk> services is growing this year and as is by the way special mission, which is driving a lot of the revenue increase.

Phebe Novakovic: This year, but we should see nice steady growth over time and the service factor, and there's no real for with respect to services. There's no real difference in any of the competitive environment.

Speaker Change: This year, but we should see nice steady growth over time in the service sector.

Speaker Change: Sector and Theres no real for with respect to services, there's no real difference in any of the competitive environment.

Speaker Change: Yeah.

Phebe Novakovic: Okay, great. And then turning to technologies and maybe even a bit of your crystal ball on the pipeline and the outlook for bookings and book to build there. What was the environment look like there for you all over the next, I don't know, 12, 18 months on the pipeline and the outlook for book to build for the technologies business. So we continue to see a very active pipeline. I think the available market, the moment of over 120 billion, pretty robust and we've been winning our fair share and a little bit more than our fair share.

Phebe N. Novakovic: Okay, great. And then, turning to technologies, and maybe using a bit of your crystal ball on the pipeline and the outlook for bookings and book-to-bill there. What's the environment look like for you all over the next 12-18 months on the pipeline and the outlook for book-to-bill for the technologies business? So we continue to see a very active pipeline. I think the available market at the moment is over $120 billion, which is pretty robust. And we've been winning our fair share, a little bit more than our fair share.

Speaker Change: Okay, Great and then.

Speaker Change: Turning to technology, and maybe even a little bit of your crystal ball on that.

Speaker Change: Pipeline and the outlook for bookings and book to Bill there.

Speaker Change: What's the environment look like there for you all over the next 12 18 months on the on the pipeline and the outlook for <unk>.

Speaker Change: Book to Bill for the technologies business.

Speaker Change: So we continue to see a very active pipeline I think the.

Speaker Change: Available market at the moment is over 120 billion pretty robust.

Speaker Change: And we've been winning our fair share and little bit more than our fair share. So we.

Phebe Novakovic: We believe that over time that will continue as it has the last couple of years, drive services growth and frankly admission systems as well. So I think technology is positioned for nice, steady, slow growth, which is exactly what we have promised in the past and what we're delivering. The pretty steady.

Phebe N. Novakovic: So we believe that over time that will continue as it has in the last couple of years to drive services growth and, frankly, admission systems as well. So I think technology is positioned for nice steady slow growth, which is exactly what we have promised in the past and what we're delivering. It's a pretty study. We'll go next to George Shapiro at Shapiro Research.

Speaker Change: Believe that over time that will continue as it has.

Speaker Change: My last couple of years drive services growth and frankly at mission systems as well. So I think technology is is positioned for nice steady slow growth, which is exactly what we have promised in the past and what we're delivering.

Speaker Change: But pretty steady.

George Shapiro: We'll go next to George Shapiro. It's a pure research. Yes.

Speaker Change: We'll go next to George Shapiro with Shapiro research.

Speaker Change: Yeah.

Phebe N. Novakovic: Yes. Good morning. Hi George.

George D. Shapiro: Yes, good morning.

Phebe Novakovic: Good morning. Hi, George. See, I just wanted some clarification. You said that the pretty much all the costs were incorporated, yet you delivered 11. Five you said will won't be delivered till next year, but there's still four left. Is that's the four that you just delivered in the first week or so of the second of the third quarter? Yes. So the lot one consisted of, you know, about 20 or so airplanes. Five or test airplanes will deliver next year, but this year the lot one costs are going to be behind us imminently. We delivered one of the four.

Speaker Change: George.

Phebe N. Novakovic: Phebe, I just wanted some clarification. You said that the, uh... Pretty much all the costs were incorporated, yet you delivered 11, 5 of which you said wouldn't be delivered until next year, but there's still 4 left. Are those the 4 that you just delivered in the first week or so of the third quarter? Yes, so lot 1 consisted of about 20 or so airplanes, 5 are test airplanes they'll deliver next year, but this year the lot 1 costs are going to be behind us imminently. We've So I think we're in pretty good shape on that. Does that help you?

George D. Shapiro: So I just wanted some clarification you had said that the.

Speaker Change: Pretty much all the costs were incorporated yet you delivered 11, five you said, we won't be delivered till next year.

But there's still four left at all.

Speaker Change: That's the four that you just delivered in the first week or so of the second of the third quarter. Yeah. So there's a lot one consisted of.

Speaker Change: They're about 20 or so airplanes.

Speaker Change: All five are test airplanes felt deliver next year, but this year the lot one Pos or are going to be behind us imminently. We delivered one of the four and I tried to give you some color on the delivery process and.

Phebe Novakovic: And I tried to give you some color on the delivery process, and the other three are imminent here. So I think we're in pretty good shape on that. Does that help you? Yes. That helps.

Speaker Change: The other three are eminent here.

Speaker Change: So I think we're in pretty good shape on that does that help you.

Phebe N. Novakovic: Yeah, that helps. And then just a quick follow-up on a usual question. If I look at the gross bookings versus the net bookings from your backlog, there's like $171 million difference. Was that just forfeiture, cancellation, or currency related?

Speaker Change: That helps and then just a quick follow up my usual question. If I look at the gross bookings versus the net bookings from your backlog.

Phebe Novakovic: And then just a quick follow-up on usual question. If I look at the gross bookings versus the net bookings from your backlog, it's like $171 million difference. Was that just four-fature cancellation currency related? Do you have any comments on that? Nothing that I can put my finger on to be quite honest in the moment. Okay.

Speaker Change: $171 million difference was that just forfeiture cancellation currency related do you have any comments on that.

Phebe N. Novakovic: Do you have any comments on that? Nothing that I can put my finger on, to be quite honest at the moment. OK, and one last one, then after market growth in the quarter, at Gulfstream. Pretty good, pretty strong in the service business, and we expect it to continue to grow this year, which is driving a lot of the revenue increase along with the special mission, and we'll go next to Ken Herbert at RBC. Yeah, hi, Phebe.

Speaker Change: Nothing that I can put my finger on to be quite honest in a moment.

Speaker Change: Hum.

Speaker Change: Okay.

Phebe Novakovic: and Jen, one last one then. If you want to grow in the quarter, it's at Gulf Stream. Pretty good, pretty robust in the service business, and we expect it to continue to grow this year, which is driving a lot of revenue increase. Along with special mission.

Speaker Change: That's.

Speaker Change: One last one.

Speaker Change: Growth in the quarter.

Gulfstream.

Speaker Change: Where does that robust service business and we expect it to continue to grow this year, just driving a lot of the revenue increase along with special mission.

Ken Herbert: We'll go next to Ken Herbert at RBC. Yeah, hi Phoebe. Good morning.

Speaker Change: We'll go next to Ken Herbert at RBC.

Phebe N. Novakovic: Good morning. I wanted to see if you could make some comments on combat and, specifically, the outlook for bookings in Europe and other regions. But also, how should we think about the impact of the orders you're booking today on the backlog? And to what extent are they accretive to segment margins?

Kenneth George Herbert: Yes, hi, good morning.

Phebe Novakovic: I wanted to see if we can make some comments on combat and specifically the outlook for bookings in Europe and other regions. But also, how should we think about what the orders you're booking today, the impact on the backlog and to what extent are they accretive to segment margins or how creative could they be as some of the more recent bookings flow into the backlog of revenues? So the bookings continue to reflect the threat environment, both that they were driven in the quarter, both by international vehicle orders and US ammunition and Army programs of record.

Morning.

Speaker Change: I wanted to see if you could make some comments on combat and specifically the outlook for bookings.

Kenneth George Herbert: <unk>.

Speaker Change: Other regions, but also how should we think about the orders you are booking today.

Speaker Change: Impact on the backlog and to what extent are they accretive to segment margins or how accretive could they be as some of the more recent bookings flow into the backlog and revenues.

Phebe N. Novakovic: Or how accretive could they be, as some of the more recent bookings flow into the backlog of revenues? So, uh, the bookings continue to reflect the threat environment. Both, they were driven in the quarter by both international vehicle orders and U.S. ammunition and Army programs of record, and I think we'll see, as we're going forward, I'd say that Combat Systems is typically, as we've talked about in the past, probably a mid 14% margin business, but it'll have quarter variability, sometimes up around 15%. So it's really a question of mix.

Speaker Change: So our bookings continue to reflect the current environment.

Speaker Change: Hmm.

Speaker Change: Both they were driven in the quarter or both.

Speaker Change: By our international vehicle orders and U S ammunition and army programs of record.

Phebe Novakovic: And I think we'll see, as we're going forward, I'd say that that combat systems is typically, as we talked about in the past, probably a mid 14% margin business, but it'll have quarter variability, sometimes up around 15%. So it's really a question of mix. In the moment, we see an increase in what we call sustainment and think about repair and support, which tends to carry a little higher margin. And I didn't exactly ask this question, but I'll also answer it. As we move from the lower margin facilitation work to that higher margin throughput on, it's generated by the throughput on ammunition, you'll see a little bit of margin expansion there.

Speaker Change:

Speaker Change: And I think we will see.

Speaker Change: As we're going forward.

Speaker Change: Yeah.

I'd say that that.

Phebe N. Novakovic: At the moment, we see an increase in what we call sustainment, think about repair and support, which tends to carry a little higher margin. And you didn't exactly ask this question, but I'll sort of answer it. As we move from the lower margin facilitation work to the higher margin throughput on, it's generated by the throughput on ammunition, you'll see a little bit of margin expansion there. And just can you quantify the cash impact in the second half and the fourth quarter from the timing of some of the cash receipts on combat?

Combat systems is typically as we've talked about in the past probably a mid.

Speaker Change: 14% margin business, but it'll half quarter variability, sometimes up around 15%. So it's really a question of mix and the moment, we see in increased what we call Sustainment and think about repair and some.

Speaker Change: Port.

Speaker Change: Which tends to carry a little higher margin and I Didnt exactly asked this question, but I'll I'll try to answer it as we move from the lower margin facilitation work to that higher margin throughput.

Speaker Change: One that's generated by the throughput on ammunition, you'll see a little bit of margin expansion there.

Phebe Novakovic: And just can you, can you quantify the potassium impact in the second half and the fourth quarter from the timing of some of the cash receipts on combat? I don't think we've broken out cash for you by business group, but in Kim Pentegetia, a fair amount of color on what was going on. And third, and particularly the fourth quarter of unwinding, some of the pre-builds and combat with the deliveries of the vehicles and material.

And just can you can you quantify the cash impact in the second half in the fourth quarter from the timing of some of the cash receipts on combat.

Phebe N. Novakovic: I don't think we've broken out cash for you by business group, but I think Ken Punch gave you a fair amount of color on what was going on in the third and particularly the fourth quarter of unwinding some of the pre-builds and combat, with the deliveries of those vehicles and materials. We'll go next to Doug Harned at Bernstein.

Speaker Change: I don't think we've broken out cash for you by by business Group I think Kim tend to give you a fair amount of color on what was going on and.

Speaker Change: In the third and particularly the fourth quarter of unwinding.

Speaker Change: Some of the pre builds in Colombia and in combat.

Speaker Change: With the deliveries of those vehicles and material.

Speaker Change: Oh.

Doug Harned: We'll go next to Doug Harnett at Bernstein. Good morning, thank you. Hi, Doug. Hi, you know, if we look at Gulf Stream and kind of look through the current margin issues, and when you get out to 2026, you should be at a point where you've got a full portfolio of maturing aircraft. With commonality, and you know, if we go back to the days when you could get to those 18% and 20% type margin.

Speaker Change: We'll go next to Doug Harned at Bernstein.

Phebe N. Novakovic: Good morning. Thank you. Hi, you know, if we look at Gulfstream and kind of look through the current margin issues, and when you get out to 2026, you should be in a point where you've got a full portfolio of maturing aircraft commonality. And, you know, if we go back to the days when you could get to those 18 and 20% type margins, is there a way to think about the progression here?

Speaker Change: Okay.

Douglas Stuart Harned: Thank you.

Speaker Change: Thanks.

Okay.

Speaker Change: Hi.

Speaker Change: If we look at Gulfstream and kind of look through.

Speaker Change: The current margin issues and when you get out to 2026, you should be at a point, where you've got a full portfolio of maturing aircraft.

Speaker Change: Commonality.

Speaker Change: And if we go back to the days when you could get to those 18% to 20% type margins is there a way to think about the progression here. They are clearly near term issues you've got the G.

Phebe N. Novakovic: There are clearly near-term issues. You've got the G. 800-400. How do you see working through those, the implications for margins, and where you would come out when you're, what I would say, in more of a normalized mode?

800 400.

Speaker Change: How do you see working through those the implication for margins and where you would come out when you are what I would say more of a normalized mode.

Phebe N. Novakovic: I'd say there's good potential for higher margins along the lines that we have seen in the past, but exactly when at this point is hard to pinpoint. But I think we're pretty confident and pleased with the long-term margin for trajectory in aerospace for all the reasons that I think you quite cogently listed. And then, just changing gears, when you look at munitions, I know you're expanding capacity substantially, a lot of people look at the situation in Europe, we've got an election coming up, and when you look at the demand for munitions, if you run that out five, Because others are, you know, Rheinmetall and others are also ramping up here.

Speaker Change: I'd say there is a good.

Speaker Change: <unk> for for higher margins.

Speaker Change: Along the lines that we had seen in the past.

Phebe Novakovic: Ed Sheeran, Dr. Pat, but exactly when at this point is hard to pinpoint, but I think we're pretty confident and pleased with long-term margin trajectory at aerospace for all the reasons that I think you quite coagently listed. And then just changing gears, when you look at munitions, I know you're expanding capacity substantially. A lot of people look at the situation in Europe; we've got an election coming up, and when you look at the demand for munitions, if you run that out five, six, seven years, how do you see that? Because others are, you know, Ryan Vitale and others are also ramping up here.

Speaker Change: But exactly when at this point, it's hard to pinpoint, but I think we're pretty confident and pleased with.

Speaker Change: Long term margin.

Speaker Change: Trajectory it at AR.

Speaker Change: Aerospace for all the reasons that I think you quite Potently listed.

Speaker Change: And then just changing gears when you look at munitions.

Speaker Change: I know you're expanding capacity.

Speaker Change: Actually.

Speaker Change: Lot of a lot of people look at the situation in Europe, we've got an election coming up.

Speaker Change: When you look at the demand for munitions. If you run that out 567 years, how do you see that because others are Ryan Mittal and others are also ramping up here.

Phebe N. Novakovic: How do you see that extending over time? Well, it's hard to look into a crystal ball much past, you know, the planning period that we have. We anticipate for the next couple of years increased munitions orders as, you know, dictated by the threat environment, and we're pretty confident in that, so that's kind of how I look at it. It's awfully difficult to predict the threat environment with any kind of clarity other than pure speculation outside the next couple of years.

Phebe Novakovic: How do you see that extending over time? Well, it's hard to look into a crystal ball much past, you know, a planning period. But we anticipate for the next couple of years increase munitions orders as, you know, dictated by the threat environment. And we're pretty confident in that, so that's kind of how I look at it. It's awfully difficult to predict the threat environment with any kind of clarity, other than pure speculation, outside the next couple of years. Well, I was asking because as you think about this build out, and of what period of time are you looking at is what kind of what I was getting at in terms of growth.

Speaker Change: How do you see that extending over time.

Speaker Change: Well, it's hard to look into a crystal ball much past in our planning period.

Speaker Change: Right.

Speaker Change: But we are.

Speaker Change: We anticipate for the next couple of years increase munitions.

Speaker Change: <unk>.

Speaker Change: Orders are dictated by the threat environment.

Speaker Change: And where.

Speaker Change: We're pretty confident in that so that's kind of how I look at it it's awfully difficult to predict the threat environment.

With any kind of clarity other than pure speculation.

Speaker Change: Outside of the next couple of years.

Phebe N. Novakovic: Well, I was asking because as you think about this build out, what period of time are you looking at? That's kind of what I was getting at in terms of growth. Yeah, a couple of years.

Speaker Change: I was asking because if you think about this build out.

Speaker Change: What period of time or are you looking at as kind of what I was getting at in terms of yeah couple of years, if I wasn't clear on that I apologize, yeah, I'd say a couple of years of this.

Phebe Novakovic: Yeah, a couple of years. If I wasn't clear on that, I apologize. Yeah, I'd say a couple of years of this; I say three, three, four years max, somewhere along those lines. And then we'll see; I think there've been some profound lessons learned about the criticality of munitions and munitions. So I expect those to be incorporated in, you know, what most of my effort is thinking.

Phebe N. Novakovic: If I wasn't clear on that, I apologize. Yeah, I'd say a couple of years of this. I'd say three, three, four years, max, somewhere along those lines, and then we'll see.

Speaker Change #104: I would say three four years Max for more along those lines and then we'll see.

Phebe N. Novakovic: I think there have been some profound lessons learned about the criticality of munitions and ammunition. So I expect those to be incorporated in, you know, most land forces. Thank you. Okay. Very, very good. Thank you. I'll go next to Myles Walton at Wolfson.

Speaker Change #103: There've been some profound lessons learned about the criticality of.

Speaker Change #100: <unk> ammunition.

Speaker Change #100: So I expect those to be incorporated in.

Speaker Change: Most land forces thinking.

Phebe Novakovic: Okay, very, very good. Thank you.

Speaker Change: Okay very good thank you.

Myles Walton: We'll go next to mine, as well. I know we'll free search.

Speaker Change: We will go next to Myles Walton at Wolfe Research.

Phebe Novakovic: Thanks, good morning. I was wondering, Phoebe, you increase the sales at upstream, but no, no change in deliveries. Is that an AFP or a services-driven higher revenue base? A couple of things, including services, as I had noticed, increase in services and also an increase in special mission, which are kind of lumpy. As you know, we've talked about in the past. Okay, got it.

Phebe N. Novakovic: Thanks. Good morning. I was wondering, Phebe, you increase the sales that go upstream, but no, no change in delivery. Is that an ASP or a services-driven higher revenue base? A couple of things, including services, as I had noticed, an increase in services and also an increase in special missions, which are kind of lumpy, as you know and we've talked about in the past. Okay. And then just another more detailed question.

Myles Alexander Walton: Thanks. Good morning, I was wondering if maybe you increase the sales at Gulfstream, but no no change in deliveries is that an <unk> or a services driven higher revenue base.

Speaker Change #101: A couple of things.

Speaker Change #111: Of things, including services aside I had noticed increase in services and also an increase in special mission, which are kind of lumpy as you know and we've talked about in the past.

Phebe N. Novakovic: Thanks for the color on the unit improvement in margins. Are the unit quantities about 20 aircraft similar to lot one? And then, secondarily, when you move to the 800, the G800, should we anticipate a similar profile of profitability? Or do you think you'll make higher profits sooner on the 800 out of the gates?

Speaker Change #110: Okay got it and then just another detailed question. Thanks for the color on the unit improvement in margin or the unit quantities about 20 aircrafts, what one and then secondarily when you move to the 800 the G 800.

Phebe Novakovic: And then just another detailed question. Thanks for the color on the unit improvement in margins. Are the unit quantities about 20 aircraft? What are what? One, and then secondarily, when you move to the 800, the 800 should we anticipate a similar profile of profitability? Or do you think you'll be a higher profit sooner on the 800 out of the gate? Thanks. A planning purposes is a ladder, but that's probably all the clarity we've got at the moment. It all depends on the certification process, but we anticipate and think it reasonably anticipate that they'll come out of the gate very strong.

Speaker Change #107: Should we anticipate a similar profile of profitability or do you think you'll be a higher profit sooner on the $800. Okay. Thanks.

Phebe N. Novakovic: Thanks. Our planning purposes are the latter, um, but, uh... That's probably all the clarity we've got at the moment. It all depends on the certification process, but we anticipate, I think, and reasonably anticipate that they'll come out of the gate very strong. Okay, and where the quantity is about 20, a lot too.

Our planning purposes is a ladder.

Speaker Change #101: But.

Speaker Change #105: That's probably all the clarity we've got at the moment it all depends on the certification process, but we anticipate I think in reasonably anticipate that they'll come out of the gate very strong.

Phebe Novakovic: Okay. And where are the lot quantities about one thing? Yes. Okay. Thank you. Typical lot quantities.

Speaker Change #108: Okay, and where the lot quantities about <unk>.

Speaker Change #105: Yes.

Phebe N. Novakovic: Yeah. Thanks. Typical lot quantity. We'll go next to Scott Deuschle at Deutschle.

Speaker Change #106: Okay. Thanks, its typical lot quantities.

Speaker Change #108: Uh huh.

Scott Doychle: We'll go next to Scott Doychle at Deutsche Bank. Hey, good morning. One.

Speaker Change #108: We'll go next to Scott Deutsche <unk> at Deutsche Bank.

Phebe N. Novakovic: Hey, good morning. Morning, Phebe. Can you characterize the ramp-up at this new munitions facility in Texas you opened up during the quarter? I guess, you know, are you likely to exit 3Q at a relatively full run rate or is the ramp more gradual than that?

Scott Deutsche: Hey, good morning.

Speaker Change #108: John.

Phebe Novakovic: Phoebe, can you characterize the ramp up at this new munitions facility in Texas? You opened up during the quarter? I guess, you know, are you likely to exit three? You had a relatively full run rate, or is the ramp more gradual than that? Thank you. So we opened up the facility. The first line is running and producing as we anticipated. We are standing up lines three and four. So that's a material increase in the throughput at that facility, but it's a modern facility with a very strong and good workforce. So we're pretty encouraged that we will quickly come down our learning curves and produce at or above our plan.

Scott Deutsche: Phebe can you characterize the ramp up of this new munitions facility in Texas, you opened up during the quarter I guess are you likely to exit.

Relatively full run rate or is the ramp more gradual from that thank you.

Phebe N. Novakovic: So, we opened up the facility. The first line is running and producing as we anticipated. We are standing up lines three and four.

Speaker Change #114: So we opened up the facility.

Speaker Change #113: The first line is.

Speaker Change #115: Running and producing as we anticipated we are standing up lines three and four.

Phebe N. Novakovic: So that's a material increase in the throughput at that facility, but it's a modern facility with a very strong and good workforce. So we're pretty encouraged that we will quickly come down our learning curves and produce at or above our plan. Great. And Kim, just to clarify your earlier comments, are you expecting working capital to be a source of cash in three? Yes, but I would say that when you look at the cash profile for the rest of the year, most of that cash does come in the fourth quarter, so most of that working capital will unwind in the fourth quarter, not the third quarter. Okay, so modestly positive and 3Q.

Speaker Change #115: So that's a material increase in the throughput at that facility, but it's a modern facility.

Speaker Change #115: With a very strong and good workforce. So we're pretty encouraged that we will quickly come down our learning curves.

Speaker Change #116: Uh huh.

Speaker Change #116: And produce.

Speaker Change #116: At or above our plan.

Kim Korea: Great.

Speaker Change #116: Great and Tim just to clarify your earlier comments are you expecting working capital to be a source of cash in <unk>.

Kim Korea: And Kim, just to clarify your earlier comments, are you expecting working capital to be a source of cash in 3Q? Yes, but I would say that when you look at the cash profile for the rest of the year, most of that cash does come in the fourth quarter. So most of that working capital will unwind in the fourth quarter, not the third quarter. Okay, so modestly positive and 3Q. Yes.

Tim: Yes, but I would say that when you look at the cash profile for the rest of the year most of that cash does come in the fourth quarter. So most of that working capital will unwind in the fourth quarter not the third quarter.

Speaker Change #119: Okay. So a modestly positive in <unk>, yes. Thank.

Robert Stallard: Thank you.

Speaker Change #118: Thank you.

Phebe Novakovic: We'll move to our next question from Robert Stallard at Vertical Research. Thanks for watching. Good morning. Phoebe, a couple of physical questions for you.

Speaker Change #120: Well move to our next question from Robert Stallard at vertical research.

Kimberly A. Kuryea: Yes. Thank you. We'll move to our next question from Robert Stallard at Vertical Research. Thanks so much.

Phebe N. Novakovic: Good morning. Morning, Phoebe. A couple of things. First of all, in the U.S., if the Ukraine..., second in the UK.

Robert Alan Stallard: Thanks, so much good morning morning.

Phebe N. Novakovic: Phebe a couple of critical questions for you.

Phebe Novakovic: First of all, in the US, if the Ukraine supplemental work is at zero, what sort of risk could that present to a GD in the future? And then second in the UK, change of government over here. And whether there's any implications for Ajax or Huston line, thank you.

Robert Alan Stallard: First of all in the U S.

Speaker Change #122: Crane supplemental you can see it.

Robert Alan Stallard: Road.

Speaker Change #123: What sort of risks could that present to gd in the future and then secondly in the U K change of government over here, whether it has any implications for Ajax.

Speaker Change #124: Thank you.

Phebe Novakovic: Let's take that in the inverse order. Don't anticipate any particular changes in Ajax; the vehicle is performing extremely well. The UK army is pleased with it. So I think that that's a standard piece of kit for the UK army. With respect to the US, I think it's, you know, the Ukrainian supplemental certainly helped, but was not the only source of funding for munitions. And frankly, the munitions demand is a reality independent of I think a lot of other things, based on the lessons learned that most land forces, I believe, have incorporated at this point. So we expect that to continue.

Phebe N. Novakovic: Take that in the inverse order, don't anticipate any particular changes in Ajax, the vehicle is performing extremely well, the UK Army is pleased with it, so I think that that's a standard piece of kit for the UK Army. With respect to the U.S. I think that, You know, the Ukrainian supplemental certainly helped but was not the only source of funding for munitions. And frankly, the munitions demand is a reality independent of, I think, a lot of other things based on the lessons learned that most land forces, I believe, have incorporated at this point. So we expect that to continue. Our next question comes from Seth Seifman at J.P. Moore. And good morning.

Speaker Change #125: Take that in the inverse order don't anticipate any particular changes and Ajax of vehicle is performing extremely well.

Speaker Change #126: The UK Army is pleased with it.

Speaker Change #127: So I think that that's a standard piece of kit.

Speaker Change #127: For the UK Army.

Speaker Change #127: With respect to the U S.

Speaker Change #127:

Speaker Change #127: I think it's.

Speaker Change #127: The Ukrainian.

Speaker Change #128: Supplemental certainly helped but was not the only source of funding for our munitions and frankly the munitions demand is is a reality.

Speaker Change #128: Independent of it I think a lot of other things based on the lessons learned that most land forces I believe have incorporated at this point.

Speaker Change #128: So we expect that to continue.

Speaker Change #128: Yeah.

Phebe Novakovic: Okay.

Speaker Change #128: Okay. Thanks, so much.

Seth Seifman: Thanks a lot. Our next question comes from Seth Seifman and JP. Morgan.

Speaker Change #128: Our next question comes from Seth Theismann at J P. Morgan.

Yeah.

Phebe Novakovic: Good morning. One quick, one quick, a specific one on, on Gulf Stream, the, the out of station work you talked about due to late supplier deliveries. Is that behind us now as well? The supply chain has improved, but it is not completely healed yet. So I suspect we'll continue to have some out-of-station work.

Phebe N. Novakovic: One quick, one quick kind of specific question on Gulfstream: the out-of-station work you talked about due to late supplier deliveries, is that behind us now as well? The supply chain has improved, but it is not completely healed yet, so I suspect we'll continue to have some attestation work. And then more broadly, the comment you made at the end of the prepared remarks about potentially revisiting the guidance with the Q3 earnings, is that because of uncertainty in any particular area or just kind of broadly across the businesses? I think that in this growth environment, revenue has been harder for us to predict, and just the uh... input of uh... Contract Executions and the Impact of Contract Executions.

Seth Michael Seifman: Good morning.

Speaker Change #130: One quarter.

Seth Michael Seifman: One quick quite a specific one on on Gulfstream.

Speaker Change #131: The attestation work you talked about due to late supplier deliveries.

Speaker Change #132: That behind Us now.

Speaker Change #131: Well.

Speaker Change #133: They are supply chain has improved but it is not completely healed yet so I suspect we'll continue to have some attestation work.

Phebe Novakovic: Okay. And then, more broadly, the comment you made at the end of the prepared remarks about, you know, potentially revisiting the guidance with the Q3 earnings. Is that because of uncertainty in any particular area, or we're just kind of, you know, broadly across the businesses? I think that in this growth environment, revenues been harder for us to predict. And just the, the input of contract executions and the impact of contract executions. So that's why we have a little less clarity than we typically do at this point. This revenue is a bit harder for us to identify with kind of certainty that we typically can.

Speaker Change #134: Okay. Okay.

More broadly the comment you made at the end of the prepared remarks about.

Speaker Change #135: Potentially revisiting the guidance with the Q3 earnings is that because of <unk>.

Speaker Change #136: Certainty in any particular area or just kind of.

Speaker Change #137: Broadly across the businesses I think that in this growth environment.

Speaker Change #138: <unk> been harder for us to predict.

Speaker Change #139: And just the the input of.

Speaker Change #139: Contract executions and the impact of contract execution. So that's why we have a little less clarity than we typically do at this point.

Phebe N. Novakovic: So, that's why we have a little less clarity than we typically do at this point. This revenue is a bit harder for us to identify with the kind of certainty that we typically can. Okay, very good. Thanks very much.

Speaker Change #139: <unk> is revenue is a bit harder for us to two.

Speaker Change #139: To identify with.

The kind of certainty that we typically can.

Speaker Change #139: Okay.

Phebe Novakovic: Okay. Very good.

Speaker Change #139: Okay very good thanks very much.

Phebe Novakovic: Thanks very much.

Speaker Change #139: Uh huh.

Speaker Change #139: Yeah.

Ellen Page: Our next question comes from Ellen Page at Jeffries. Good morning. Thanks for the question. Just starting on the G700, you mentioned, Lux3 was at a city-state margin. How do we think about that relative to the G650, when it was that kind of peak margin? You know, I don't have that exact comparison, but these are going to be very healthy margins, as you can imagine on these airplanes. Okay. Thank you.

Phebe N. Novakovic: Our next question comes from Ellen Page at Jefferies. Good morning, thanks for the question. Starting on the, you mentioned Block 3 was at a steady-state margin. How do we think about that relative?

Speaker Change #139: Our next question comes from Alan Page at Jefferies.

Speaker Change #140: Oh good morning, Thanks for the question.

Just.

Alan Page: Starting on the G. 700, you mentioned block III was at a steady state margin, how do we think about that relative to the G 650.

Speaker Change #142: When it was that kind of peak margin.

Phebe N. Novakovic: You know, I don't have that exact comparison, but these are going to be very healthy margins, as you can imagine, on these airplanes. And then just moving to Maureen, as we think about the high growth, um, how do we think about that continuing into 2025 or so, this is, um, we continue to see a strong growth profile for the Marine Group for the foreseeable future, in fact, for some time to come, driven by, as noted before, the threat environment. So growth is continuing. Some years it'll be a higher rate of growth than others, but this is a growth trajectory. And next, we'll move to Noah Poponak at Goldman Sachs.

Speaker Change #143: You know I don't have that exact comparison, but these are going to be very healthy margins as you can imagine.

Speaker Change #143: And these airplanes.

Speaker Change #143: Okay.

Phebe Novakovic: And then just moving to Marina, as we think about the high growth this year, how do we think about that continuing into 2025? Or should we assume? So this is, we continue to see a strong growth profile for the marine group for the foreseeable future; in fact, for some time to come. Driven by, as I've noted before, for the threat environment. So growth is continuing. Some years it will be a higher rate of growth than others, but it is a growth trajectory.

Speaker Change #143: Thank you and then just moving to marine as we think about the high growth this year.

Speaker Change #144: How do we think about that continuing into 2025 or should we assume.

Speaker Change #145: So this is we continue to see a strong growth profile for the Marine group for the foreseeable future in fact for some time to come.

Speaker Change #145: Driven by as I noted before the threat environment.

Speaker Change #145: So growth is continuing.

Speaker Change #145: Some years, it'll be a higher rate of growth than others, but it is a growth trajectory.

Phebe Novakovic: Thank you.

Speaker Change #146: Thank you I'll leave it there.

Noah Popenak: I'll leave it there. And next one move to Noah Popenak at Goldman Sachs. Hi. Good morning, everyone. Good morning. Phoebe, I guess if I look at the funded backlog at Gold Stream, it's been relatively flatish over the last kind of year, year and a half. I know you have overall good demand for the new products, but how are you thinking about matching supply to demand as you're going to ramp deliveries here? Do you have visibility that the orders will keep pace with that? Do you have any concern about taking the, you know, the revenue run rate above the order rate?

Speaker Change #146: Yeah.

Speaker Change #145: Yeah.

Noah Poponak: And next we'll move to Noah <unk> at Goldman Sachs.

Phebe N. Novakovic: Hi, good morning, everyone. Morning, Phebe. I guess if I look at the funded backlog at Gulfstream... It's been relatively flattish over the last kind of... year, year and a half.

Noah: Hi, good morning, everyone.

Speaker Change #149: Good morning.

Speaker Change #150: I guess, if I look at the funded backlog.

Speaker Change #150: Stream ads.

Speaker Change #150: Relatively flattish over the last kind of.

Speaker Change #150: Year year and a half.

Phebe N. Novakovic: I know you have overall good demand for the new products, but how are you thinking about matching supply to demand as you're going to ramp deliveries here? Do you have visibility that the orders will keep pace with that? Do you have any concerns about taking...

Speaker Change #152: Yeah, I know you have overall good demand for the new products, but.

Speaker Change #153: How are you thinking about matching supply to demand as youre going to go to ramp deliveries here.

Speaker Change #154: Do you have visibility that the orders will keep pace with that do you have any concern about peaking.

Phebe N. Novakovic: The, you know, revenue run rate is above the order rate. So I think we've got a very balanced plan through this year, and the way we think about the market, certainly the pipeline supports that and has supported it. There's an awful lot of interest in these new airplanes, so I think we've planned accordingly, and I think, as I tried to give you some color in the remarks, the pipeline remains strong, and that's the best indicator of near-term future growth.

Speaker Change #154: The revenue run rate above the order rate.

Phebe Novakovic: So I think we've got a very balanced plan through this year, and the way we've seen, the way we think about the market, certainly the pipeline supports that and has supported it. There's an awful lot of interest in these new airplanes. So I think we've planned accordingly, and I think, as I tried to give you some color in the remarks, the pipeline remains strong, and that's the best indicator of near-term future growth. How far out into the future does the pipeline go in terms of your level of visibility and confidence, and what the order flow will look like?

Speaker Change #155: So I think we've got a very balanced plan through this year and and and the way we have seen the way we think about the markets certainly the pipeline supports that and and has supported it there's an awful lot of interest in these new airplanes.

Speaker Change #155: So I think we've we've planned accordingly, and I think as I tried to give you some color and in the remarks, the pipeline remains strong and that's the best indicator of near term future.

Speaker Change #155: Growth.

Speaker Change #155: Okay.

Phebe N. Novakovic: Okay. How far out into the future does the pipeline go in terms of your level of visibility? Transcribed by https://otter.ai. It doesn't stand to reason that the further out you go in the future, the less confident you are. That's actually, I think, a truism.

Speaker Change #156: How far out into the future.

Speaker Change #157: The pipeline go in terms of your level of visibility.

Speaker Change #158: And confidence in what the order flow will look like but it doesn't exaggerate it doesn't stand to reason that the further out you go in the future the.

Phebe Novakovic: Well, it doesn't stand to reason that the further out you go in the future, the less your confidence is; that's actually, I think, a truism. But for what we can see, where we like what we see in the pipeline.

Speaker Change #159: The less your confidence is that's actually I think a truism, but for what we can see where where are we like what we see in the pipeline.

Phebe N. Novakovic: But from what we can see, we like what we see in the pipeline. Okay. And Kim, did you apologize if I missed it? Did you provide a new free cash flow to net income conversion goal for the year? And then I guess just any comment on how to think about that next year if there are some abnormalities this year that reverse next year? So in terms of for this year, we're still targeting a Conversion Rate of Approaching 100%.

Kim Korea: Okay, and Kim, did you apologize if I missed it? Did you provide a new recast flow to that income conversion goal for the year? And then I guess just any comment on how to think about that next year, if there are some abnormalities this year that reverse next year. So, in terms of for this year, we're still targeting the conversion rate of approaching 100%. You know, obviously a lot of that cash is going to come in the fourth quarter of this year based on our profile this year. And honestly, we are still in the planning process for next year, so we're not at the point that we're ready to give any cash flow guidance for next year.

Speaker Change #158: Okay.

Speaker Change #158: And Tim did you apologize if I missed it could you provide a new.

Tim: Free cash flow to net income conversion goal for the year and then I guess just.

Speaker Change #160: Any comment on how to think about that next year. If there are.

Tim: Some abnormalities this year that could reverse next year.

Speaker Change #161: So in terms of for the year, we're still targeting the.

Speaker Change #162: Our conversion rate of approaching 100%.

Phebe N. Novakovic: You know, obviously, a lot of that cash is going to come in the fourth quarter of this year based on our profile this year, and honestly, we are still in the planning process for next year, so we're not at the point that we're ready to give any cash flow guidance for next year.

Speaker Change #167: You know obviously a lot of that cash is going to come in the fourth quarter of this year are based on our profile. This year and honestly we are still in the planning process for next year. So we're not at the point that we're ready to give any cash flow guidance for next year.

Kim Korea: Okay, thank you.

Speaker Change #170: Okay. Thank you.

Operator: So, Audra, I think we have time for just one more question. Thank you.

Kimberly A. Kuryea: Okay, thank you. So, Audra, I think we have time for just one more question. Thank you. That question comes from Matt Akers at Wells Fargo. Hey, good morning. Thanks for the question. There was a fire at the Camden, Arkansas facility. Can you guys comment on whether that was material at all?

Speaker Change #166: So Andre I think we have time for just one more question.

Speaker Change #166: Thank you that question comes from Matt Akers at Wells Fargo.

Matt Acres: That question comes from Matt Acres at Wells Fargo.

Matt Acres: Yeah, good morning. Thanks for the question. There was a fire at the Camden, Arkansas.

Phebe N. Novakovic: And if that is back online? Well, that was a tragedy for the individual, the family, and for us from a business perspective. It's a very small line.

Matt Akers: Hey, good morning, Thanks for that.

Speaker Change #163: There was a.

Fire.

Matt Akers: Arkansas facility can you guys comment if that was material at all.

Phebe Novakovic: So, do you guys comment if that was material at all and if that is back online at this point? Well, that was a tragedy for the individual, the family, and for us from a business perspective. It's a very small line. Got it.

Speaker Change #164: Cause back online at this point.

Speaker Change #173: Well that was a tragedy for the individual.

Speaker Change #164: The family and for Us.

Speaker Change #168: A business perspective, it's a very small line.

Phebe N. Novakovic: Thanks. And I guess it's a good comment on, I'll look at NASCO, you know, just between the repair work and I think you guys recently won the sub-tender work there, just kind of how you see the outlook for that yard. So NASCO's learning and performance on the TAO, the oiler, is going quite well. We're delivering the seventh of the eight class ESB. And repair continues to be pretty strong as the demand from the U.S. Navy continues to increase.

Got it thanks, I guess, if you could comment on that.

Phebe Novakovic: Thanks.

Phebe Novakovic: And I guess it's a good comment on maybe that I'll look at NASCO. You know, just between repair work and if you guys recently won the sub tender work there, just kind of how you see that. Look for that. So, NASCO learning and performance on the TAO, the oiler is going quite well. You were delivering the seventh of the eight-class ESB. And repair continues to be pretty strong as the demand from the U.S. Navy is increasing. Okay.

Speaker Change #169: We got in Moscow.

Speaker Change #171: Repair work and are you guys recently won the.

Tender work there just kind of how you see the outlook for that.

Speaker Change #175: So nasco learning and performance on the T. A L. The oiler is going quite well and we're delivering the seven of the eight class ESP.

Speaker Change #172: And repair continues to be pretty strong demand from the U S. Navy is increasing.

Phebe N. Novakovic: Great, well, thanks. Bye. Thank you everyone for joining our call today. As a reminder, please refer to the General Dynamics website for the second quarter earnings release and highlights presentation. If you have any additional questions, I can be reached at 703-876-3152. This does conclude today's conference call. Thank you for your participation.

Speaker Change #174: Okay well thanks.

Phebe Novakovic: Well, thank you.

Nicole Shelton: Thank you, everyone, for joining our call today. As a reminder, please refer to the General Dynamics website for the second quarter earnings release and highlights presentation. If you have any additional questions, I can be reached at 703-876-3152.

Speaker Change #176: Thank you everyone for joining our call today as a reminder, please refer to the general dynamics website for the second quarter earnings release and highlights presentation. If you have any additional questions I can be reached at 700 38763152.

Operator: This ends conclude today's conference call. Thank you for your participation. You may now...

Speaker Change #177: This does conclude today's conference call. Thank you for your participation you may now disconnect.

Speaker Change #177: Yeah.

Speaker Change #177:

Speaker Change #177: Yeah.