General Dynamics(GD) - 2024 Q1 - Quarterly Results

First-Quarter 2024 Financial Results Overview Overall Financial Performance General Dynamics reported strong year-over-year growth in its first-quarter 2024 results, with revenue increasing by 8.6% to $10.7 billion and diluted EPS rising 9.1% to $2.88, indicating improved profitability Q1 2024 Key Financial Metrics (vs. Q1 2023) | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Revenue | $10.7 billion | $9.9 billion | +8.6% | | Operating Earnings | $1.0 billion | $0.9 billion | +10.4% | | Operating Margin | 9.7% | 9.5% | +20 bps | | Diluted EPS | $2.88 | $2.64 | +9.1% | Management Commentary The Chairman and CEO highlighted solid operating results, including growth in revenue, backlog, and margins, with the FAA certification of the Gulfstream G700 enabling customer deliveries and signaling a strong start to 2024 - The company delivered solid operating results, growing revenue and backlog while expanding margins[2] - A significant milestone was the recent FAA certification of the Gulfstream G700, allowing customer deliveries to begin[2] Cash Flow and Capital Deployment In Q1 2024, the company used $278 million in cash from operating activities due to working capital growth, with capital deployment including $159 million in capital expenditures, $361 million in dividends, and $105 million in share repurchases - Net cash used by operating activities was $278 million, driven by growth in operating working capital[2] Q1 2024 Capital Deployment | Activity | Amount (in millions) | | :--- | :--- | | Capital Expenditures | $159 | | Dividends Paid | $361 | | Share Repurchases | $105 | Backlog and New Orders The company-wide backlog grew 4.4% year-over-year to $93.7 billion with a consolidated book-to-bill ratio of 1-to-1, driven by strong orders in Aerospace, Combat Systems, and Technologies Backlog Summary (as of Q1 2024) | Metric | Value (in billions) | YoY Change | | :--- | :--- | :--- | | Total Backlog | $93.7 | +4.4% | | Total Estimated Contract Value | $134.0 | +4.4% | | Aerospace Backlog | $20.5 | +6.2% | - The consolidated book-to-bill ratio was 1-to-1 for the quarter[4] - Book-to-bill ratios were particularly strong in Aerospace (1.2-to-1), Combat Systems (1.6-to-1), and Technologies (1.2-to-1)[5][6] Consolidated Financial Statements Consolidated Statement of Earnings (Exhibit A) For the first quarter, revenue grew 8.6% to $10.73 billion, and operating earnings increased 10.4% to $1.04 billion, resulting in a 9.5% rise in net earnings to $799 million and a diluted EPS of $2.88 Q1 2024 Consolidated Statement of Earnings (in millions) | Line Item | Q1 2024 | Q1 2023 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $10,731 | $9,881 | 8.6% | | Operating earnings | $1,036 | $938 | 10.4% | | Net earnings | $799 | $730 | 9.5% | | Diluted EPS | $2.88 | $2.64 | 9.1% | Revenue and Operating Earnings by Segment (Exhibit B) Growth was driven by strong performance in Combat Systems, Marine Systems, and Aerospace, with revenue increases of 19.7%, 11.3%, and 10.1% respectively, while operating margins expanded in Aerospace and remained flat or slightly decreased in other segments Q1 2024 Revenue by Segment (YoY Change) | Segment | Revenue (in millions) | % Change | | :--- | :--- | :--- | | Aerospace | $2,084 | 10.1% | | Marine Systems | $3,331 | 11.3% | | Combat Systems | $2,102 | 19.7% | | Technologies | $3,214 | (0.8)% | Q1 2024 Operating Earnings by Segment (YoY Change) | Segment | Operating Earnings (in millions) | % Change | | :--- | :--- | :--- | | Aerospace | $255 | 11.4% | | Marine Systems | $232 | 10.0% | | Combat Systems | $282 | 15.1% | | Technologies | $295 | (1.3)% | Consolidated Balance Sheet (Exhibit C) As of March 31, 2024, total assets slightly increased to $55.2 billion, while cash and equivalents decreased to $1.0 billion, and inventories and unbilled receivables grew, with total debt and shareholders' equity remaining stable Key Balance Sheet Items (in millions) | Account | March 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Cash and equivalents | $1,036 | $1,913 | | Inventories | $9,589 | $8,578 | | Total assets | $55,246 | $54,810 | | Long-term debt | $8,752 | $8,754 | | Total shareholders' equity | $21,410 | $21,299 | Consolidated Statement of Cash Flows (Exhibit D) The company reported a net cash outflow from operating activities of $278 million, a significant shift from the prior year's inflow, primarily driven by increases in inventories and unbilled receivables, while net cash used in investing and financing activities remained consistent Q1 Cash Flow Summary (in millions) | Cash Flow Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash from operating activities | $(278) | $1,462 | | Net cash used by investing activities | $(182) | $(190) | | Net cash used by financing activities | $(416) | $(475) | | Net change in cash | $(877) | $796 | - The primary drivers for the negative operating cash flow were increases in inventories (a $1,011 million use of cash) and unbilled receivables (a $519 million use of cash)[22] Supplemental Data and Business Segment Details Additional Financial Information (Exhibit E) The company's debt-to-equity ratio remained stable at 43.2%, but free cash flow was negative $437 million for the quarter due to negative operating cash flow, leading to an increase in net debt to $8.2 billion Non-GAAP Free Cash Flow (in millions) | Line Item | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net cash from operating activities | $(278) | $1,462 | | Capital expenditures | $(159) | $(161) | | Free cash flow | $(437) | $1,301 | Key Financial Ratios | Metric | March 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Debt-to-equity | 43.2% | 43.5% | | Net Debt (in millions) | $8,223 | $7,348 | Backlog Details (Exhibit F) Total backlog at the end of Q1 2024 was $93.7 billion, with Marine Systems holding the largest share, and the total estimated contract value, including potential options, stood at $134.0 billion Backlog by Segment (Q1 2024, in millions) | Segment | Funded Backlog | Unfunded Backlog | Total Backlog | | :--- | :--- | :--- | :--- | | Aerospace | $19,564 | $981 | $20,545 | | Marine Systems | $29,711 | $14,415 | $44,126 | | Combat Systems | $14,923 | $686 | $15,609 | | Technologies | $8,976 | $4,478 | $13,454 | | Total | $73,174 | $20,560 | $93,734 | Significant Orders (Exhibit G) The defense segments secured numerous significant contracts in the first quarter, including major IDIQ contracts for ammunition and C4ISR systems, and substantial orders for combat vehicles and ship maintenance - Combat Systems: - IDIQ contract for medium-caliber ammunition for the U.S. Army with a maximum potential value of $3 billion (among two awardees)[43][45] - $1.3 billion from Austria for Pandur 6x6 wheeled combat vehicles (max potential value of $2 billion)[43][45] - Technologies: - Four IDIQ contracts from Canada for the Land C4ISR system with a maximum potential value of $1.3 billion[44][45] - $505 million in key contracts for classified customers (max potential value of $995 million)[44][45] - Marine Systems: - $310 million from the U.S. Navy for maintenance, modernization, and repair work on the USS Bataan[42][45] Aerospace Supplemental Data (Exhibit H) The Aerospace segment delivered 24 aircraft in Q1 2024, an increase from the prior year, and demonstrated strong demand with new orders of $2.4 billion, resulting in a book-to-bill ratio of 1.2-to-1 Gulfstream Aircraft Deliveries (units) | Cabin Size | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Large-cabin | 21 | 17 | | Mid-cabin | 3 | 4 | | Total | 24 | 21 | - The Aerospace segment achieved a book-to-bill ratio of 1.2x for the quarter, with orders of $2.426 billion against revenue of $2.084 billion[47]