General Dynamics Corporation (NYSE:GD) Q1 2023 Earnings Call Transcript

Cai von Rumohr: Yes. So Phebe, I’m still a little confused about your statement that Q2 earnings should be the lowest because pretty clearly, it looks like Marine should be better absent the VCM charge. Combat usually is a little better. GDIT is stable. And you’ve highlighted Aerospace, but the volume is going to be higher than it was in the first quarter. Margins given where the volume was actually looked pretty good in the first quarter. So it would seem to imply a pretty steep drop-off in margins. Could you give us some color in terms of what is creating that situation? And is that something we should be worried about will continue in the third and fourth quarter?

Phebe Novakovic: I tried to be pretty clear that we do not anticipate any — at Gulfstream, the margin performance in these 2 first quarters replicating in third and fourth quarter. In fact, we see a fairly strong ramp to increase margins. These margins are aberrational and we do expect some additional perturbations on the supply chain and out of station work Gulfstream as well as mix issues. With respect to Marine systems, it’s material timing between first and second quarters. And in technologies, it’s transitioned from mature programs that are winding down and being replaced by some follow-on new starts. So in each one of these groups, we are seeing a convergence of in the quarter, particularly lower margins and lower earnings and sales than we typically see.

We usually have a steady build through the year. This is rather, as I said, aberrational, but we’ll get through this. And importantly, we don’t see these issues leading into third and fourth quarter, we anticipate a very strong third and fourth quarter, and that is unchanged.

Howard Rubel: Thank you for joining our call today. And as a reminder, please refer to the General Dynamics website for the first quarter earnings release and highlights presentation. If you have additional questions, I can be reached at 703-876-3117.

Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.