Release Date: April 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Kim, can you clarify the G700 delivery expectation for the second quarter? Is it the 20 that are ready to go plus the 7 to 8 that will be ready at the end of this month?
A: (Phebe N. Novakovic - CEO) We have 50 to 52 airplanes that are going to deliver in about equal amounts of the 700 in the second through the fourth quarters.
Q: Phebe, I was hoping you could spend a moment maybe talking about the growth that Combat Systems is currently seeing in Europe and perhaps how you expect that to trend over the coming quarters.
A: (Phebe N. Novakovic - CEO) The growth in Europe is driven by the threat environment. We've seen increases in orders for combat, wheeled and tracked vehicles and significant bridge orders. We're also seeing increased orders coming out of various countries in Europe for Abrams through the FMS process. We see that demand signal continuing until the threat environment improves.
Q: Looking to marine. When we think about the expectation for the profit margin for the year and kind of where we started, are there kind of visible milestones that you see through the remainder of the year that bring that number higher? Or kind of is it a change in mix? Or kind of what drives the underlying margin improvement through the year?
A: (Phebe N. Novakovic - CEO) The increase in productivity at each of the shipyards and fewer disruptions from the supply chain are the two primary factors.
Q: Phebe, I was wondering if you could comment on the recently passed or soon to be signed supplemental and what implications that could have for the combat business, but also on the submarine side, what sort of additional funding could come from the U.S. Navy?
A: (Phebe N. Novakovic - CEO) On the submarine side, the preponderance of the funding in the supplemental is to help stabilize the industrial base, ensuring that we continue to drive order activity on a consistent and repeatable basis. In combat, there's a fair amount of ammo funding, which we had fully anticipated.
Q: Can we assume that G700 is accretive to the 15% full year guidance?
A: (Phebe N. Novakovic - CEO) This is ultimately going to be a very profitable program. But as I explained in my remarks, the first lot of 20 or so carries with it additional cost. We'll see those in largely in Q2. So think about Q2 as an increase in revenue of about $1 billion to $1.1 billion and in earnings of about $100 million to $110 million, and then progress nicely thereafter.
Q: Phebe, what's the framework for the pace of G700 deliveries beyond this year compared to this year? Not asking for quarterly numbers or anything like that, but just given this year's had some abnormalities compared to a recurring airplane.
A: (Phebe N. Novakovic - CEO) We never, except I think, on 1 or 2 occasions about 5, 6 years ago, give the future year expectations. But 700 is a very, very successful program, and it will continue to execute well.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
