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Operator
Good morning and welcome to the General Dynamics second quarter 2022 earnings call. My name is Brika and I will be your event specialist today. During the presentation, you will have the opportunity to ask a question by pressing star followed by one on your telephone keypads. Please note, you may ask one question and one follow up at this time. I now have the pleasure of handing the call over to our host, Howard Rebell, Vice President of Investor Relations, So, Howard, please go ahead.
Brika
Thank you, operator, and good morning, everyone.
Bill
Welcome to the General Dynamics second quarter 2022 conference call. Any forward-looking statements made today represent our estimates regarding the company's outlook. These estimates are subject to some risks and uncertainties. Additional information regarding these factors is contained in the company's 10-K, 10-Q, and 8-K filings. We will also refer to certain non-GAAP financial measures. For additional disclosures about these non-GAAP measures, including reconciliations to comparable GAAP measures, please see the slides that accompany this webcast. which are available on the investor relations page of our website, investorrelations.gd.com. With that completed, I would like to turn the call over to our Senior Vice President and Chief Financial Officer, Jason Aiken.
Jason Aiken
Thank you, Howard. Good morning, everyone, and thanks for being with us. Before we get started, I want to let you all know that our Chairman and Chief Executive Officer, Phoebe Novakovic, isn't able to join us this morning. She recently came down with COVID, but not to worry. She's on the mend and doing well, but she's asked me to cover today's call. With me is Bill Moss, our Vice President and Corporate Controller, who will cover some of the financial particulars that I would normally address. So with that, let's get into the results. Earlier this morning, we reported earnings of $2.75 per diluted share on revenue of $9.2 billion, operating earnings of $978 million, earnings before taxes of $923 million, and net income of $766 million. Revenue was essentially flat against the second quarter last year, but operating earnings were up $19 million. Earnings before taxes were up $42 million, and net earnings were up $29 million. Earnings per share were up 14 cents, a 5.4% increase. To be a little more granular, we enjoyed revenue increases at aerospace and marine systems, offset by declines at combat systems and technologies. We also had margin improvement in three of the four segments, which led to higher operating earnings and earnings before taxes against the year-ago quarter. From a slightly different perspective, we beat consensus by $0.03 per share on somewhat lower revenue but somewhat higher operating margin than anticipated by the sell side. This led to the modest earnings beat. On a year-to-date basis, revenue, for all practical purposes, was even with last year's first half. Similarly, operating earnings were essentially flat, but earnings before taxes were up $46 million, net earnings were up $51 million, and EPS was up $0.25. almost 5%. In the quarter, free cash flow of $435 million was 57% of net income. Cash flow from operating activities was 86% of net income. This was pretty good in light of the powerful first quarter cash. To that point, year-to-date free cash flow of $2.3 billion was 151% of net earnings. In summary, we had a solid quarter from an earnings perspective, and the year-to-date results give us a solid start to the year. So let me move right into some color around the performance of the business segments, have Bill add color around cash, backlog, taxes, and deployment of cash, and then I'll provide updated guidance. I'll try to keep my remarks brief to leave ample opportunity for questions. First, aerospace. Aerospace had revenue of $1.9 billion. operating earnings of $238 million, and a 12.7% operating margin. Revenue was $245 million more than the year-ago quarter, or 15.1%, largely as a result of higher service center sales at Gulfstream and higher service volume, particularly FBOs, at Jet Aviation. Operating earnings are up $43 million, or 22.1%, on a 70 basis point improvement in margins. So increased sales volume coupled with improved margins leads to very good operating leverage. We captured improved revenue on only 22 deliveries. We didn't deliver four G500 and 600s that were scheduled to deliver in the quarter. They've been deferred at customer request to the third quarter awaiting removal of the FAA wind directive. However, nine G500 and 600s in fact were delivered to customers in the quarter. So we delivered nine of the 13 that were planned in the quarter. From an order perspective, we did very well once again. In dollar terms, aerospace had a book to bill of 2 to 1. Gulfstream aircraft alone had a book to bill of 2.7 to 1, even stronger if expressed in unit terms. As previously discussed, sales activity truly accelerated in the middle of February 2021 and continued on to the second quarter of this year. The pipeline and sales activity remained strong as we enter this quarter. The Farnborough era show was a good one for us. From a new product perspective, the G500 and G600 continue to perform well. Margins are improving on a consistent basis and quality is superb. We're making good progress in the flight test of the software update for landing in high winds and expect removal of the FAA directive in mid-September. You may recall that last quarter we advised you of a risk of a three to six month delay for certification of the G700 to second quarter 2023 as a result of the time-consuming work on model-based software validation. As a result of the flight sciences engineering resources we needed to redeploy onto the work related to the G500 and 600 FAA limitation on landings and high wind conditions, the risk to the G700 schedule has become a reality. As we've previously advised, this will not adversely impact our financial plan for 2022 and 2023. We feel confident that the G800 will follow the G700 by about six months. Looking forward, we've planned 123 deliveries for the year, and we fully expect to do just that. Turning to defense, combat systems had revenue of $1.7 billion, down 12.3% over the year-ago quarter. Revenue was impacted by Ajax at both land systems and ELS, bomb bodies at OTS, and some program mix. Operating earnings of $245 million were off against last year's quarter by 7.9%, with a 70 basis point improvement in margins. Operating margin was a strong 14.7%. On a sequential basis, revenue was very similar to the first quarter, but operating earnings were up 7.9%, or $18 million, on a 110 basis point improvement in operating margin. For the first half, combat systems revenue was down 10.2%, and operating earnings were down only 7.5% on a 40 basis point improvement in margins. In June, Land Systems was awarded the Mobile Protected Firepower Contract, the first all-new combat vehicle for the Army in decades. The initial award for LRIP 1 was $410 million for 25 vehicles. The program of record for LRIP is $1.1 billion for 95 vehicles through 2026. The entire program requirement is 500 vehicles for more than $5 billion. The program fills a critical gap in the Army's Infantry Brigade Combat Force, and we expect to move out swiftly on the program. The quarter was very good for combat systems from an orders perspective with a 1.4 to 1 book-to-bill, leading to an increase in total backlog and estimated potential contract value. Demand for our products, particularly our combat vehicles, remained strong with Europe leading the way. International order opportunities for Abrams are particularly strong. This was an impressive operating performance once again by the Combat Systems Group in a constrained revenue environment. At Marine Systems, revenue of $2.65 billion was up $115 million over the year-ago quarter. It was flat sequentially, but up year-to-date. In the quarter, growth was led by Columbia, TAO, and repair work volume. For the first half, revenue was up $283 million, or 5.6%. This is very impressive continued growth. Operating earnings were $211 million in the quarter, essentially flat with the year-ago quarter as a result of a 30 basis point reduction in margin. The margin compression was the result of the impact on electric boat of additional schedule delays in the Virginia program from the supply chain as it struggles with recovering from COVID. EB is working closely with the Navy and suppliers, including embedding operating and engineering personnel on site to restore the necessary Virginia program cadence. Nonetheless, electric boats performance remains strong, and while still early in the Columbia first ship construction contract, the program remains on cost and schedule. Total backlog of almost $42 billion remains robust and is by far the largest of our operating groups. And lastly, technologies. The segment had revenue of $3 billion in the quarter, down $158 million from the year-ago quarter, or 5%. Two-thirds of the decline was attributed to mission systems, largely related to their continuing struggle with a shortage of chips, which continues to plague their ability to deliver certain products. On the other hand, operating earnings of $304 million were down only 4 million, or 1.3%, on a 40 basis point improvement in operating margin to 10.1%. EBITDA margin was an impressive 14.1%, including state and local taxes, which are a 50 basis point drag on that result. Operating performance at GDIT was particularly strong, 140 basis points better than the year-ago quarter. These are industry-leading margin figures. Technologies had a good order activity in the quarter, with book to bill of one-to-one and good order prospects on the horizon. Mission systems had nice orders for many of their product offerings, especially those impacted by the chip shortage. The IT pipeline remains healthy in most of our federal IT lines of business as the government continues to modernize and upgrade its mission support systems. GDIT has the opportunity to submit $35 billion in opportunities this year, including $17 billion in the third quarter, most of which represents new work. That concludes my remarks with respect to a solid quarter and first half. I'll now turn the call over to Bill for further remarks, and then I'll provide our updated guidance.
Howard
Thank you, Jason, and good morning. Starting with cash performance in the quarter, from an operating cash flow perspective, we generated over $650 million, which following our strong first quarter performance brings us to over $2.6 billion for the first six months of the year. This was achieved once again on the strength of the Gulfstream order book and additional collections on our large international combat vehicle contract. which continues to receive payments as scheduled according to the contract restructure that occurred in 2020. Including capital expenditures, our free cash flow was $435 million for the quarter and $2.3 billion year to date, yielding a conversion rate of 151% year to date. The strong performance so far reinforces our outlook for the year of free cash flow conversion at or above 100% of net income. And of course, as a reminder, that outlook assumes current law with respect to the tax treatment of research and development expenditures. If the Congress acts to defer or reverse the current capitalization requirement, we would expect free cash flow for the year at or above 110% of net income. Looking at capital deployment, capital expenditures were $224 million in the quarter, or 2.4% of sales. That's up from last year, consistent with our expectation to be around 2.5% of sales for the year. For the first six months, we're closer to 2% of sales, but 2.5% remains our full-year target. We also paid $349 million in dividends and spent approximately $800 million on the repurchase of 3.6 million shares. That brings year-to-date repurchases to 4.9 million shares for just shy of $1.1 billion. The net result at the end of the second quarter was a cash balance of $2.2 billion and a net debt position of $9.3 billion, down more than $2 billion from this time last year. As a result, net interest expense in the quarter was $95 million, down from $109 million in the second quarter of 2021. That brings the interest expense for the first half of the year to $193 million, down from $232 million for the same period in 2021. At this point, we continue to expect our interest expense for the year to be approximately $380 million, including the assumed repayment of a billion dollars of notes that mature in the fourth quarter. The tax rate in the quarter was 17%, bringing the rate for the first half to 15.6%. So no change to our outlook at 16% for the full year. But of course, that implies a rate in the mid-16% range for the second half of the year to arrive at that outcome. To shape that for you, we'd expect the rate to be somewhat lower in the third quarter and higher in the fourth. Order activity and backlog were once again a strong story in the second quarter with a 1.1 to 1 book to bill for the company as a whole. As Jason mentioned, order activity in aerospace led the way with a two times book to bill which is the fifth consecutive quarter the book to bill for the group has been 1.6 times or higher. As a result, aerospace backlog is up over $5 billion in the past year, an increase of almost 40%. During the quarter, we finalized negotiations on the restructure of the last of our arrangements with a fractional aircraft operator, which resulted in a roughly $300 million reduction in the aerospace backlog and a $900 million reduction in aircraft options. This action essentially clears our backlog of any exposure to fractional customers and has no impact on our production and revenue forecasts for 2022 and beyond. On the defense side, combat systems and technologies also had solid quarters with a 1.4 times and a one times book to bill respectively. The increase in the combat systems backlog was particularly notable given a headwind from foreign exchange rate fluctuations of over 200 million in the quarter and 300 million year to date. Incidentally, the FX fluctuations also negatively impacted combat's revenue by $65 million in the first half of the year as the Euro fell to near parity with the dollar. We finished the quarter with a total backlog of $87.6 billion, while total potential contract value, including options and IDIQ contracts, was $126 billion. That concludes my remarks. I'll turn it back over to Jason to give you an update on our guidance for 2022 and wrap-up remarks.
Jason Aiken
Thanks, Bill. Let me do my best to give you an updated forecast. The figures I'm about to give you are all compared to our January forecast, which I won't repeat. There is, however, a chart with respect to this that will be posted on our website, which should be helpful. In aerospace, we expect an additional $200 million of revenue with an operating margin around 12.9%, which is 10 basis points higher than we previously forecast. This will result in additional operating earnings. There could be some upside here if we can deliver out a few more planes in the year. With respect to the defense businesses, combat systems should be on the low end of our revenue range with an improvement of up to 50 basis points of operating margin, so total revenue of around $7.1 billion and operating margin around 15%. There's no change to marine systems revenue, but 30 basis points lower margin, so annual revenue of $10.8 billion with an operating margin around 8.3% for the reasons I've previously described to you. Technologies revenue will be in the middle of the forecast revenue range at the same operating margin, driven by GDIT with 3.5% year-over-year growth. So for the group, we expect annual revenue of around $12.9 billion with an operating margin around 10%. So on a company-wide basis, we see annual revenue at the higher end of our initial guidance and an overall operating margin around 10.8%, which is unchanged. This rolls up to EPS at the high end of our previous guidance range. In short, we expect only modest deviation from our initial guidance. That concludes my remarks and we'll be pleased to take your questions.
Bill
Thank you, Jason. As a reminder, we ask participants to ask one question and one follow-up so that everyone has a chance to participate. Operator, could you please remind participants how to enter the queue?
Operator
Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you change your mind, please press star two. We have our first question from Robert Stallard of Vertical Research. Please go ahead when you're ready, Robert.
Robert Stallard
Thanks so much. Good morning.
Jason Aiken
Good morning, Rob.
Robert Stallard
Jason, I'll kick it off with one for you. The big question we've been getting from folks is what the impact could be on business jet and the aerospace division from a slowdown in the global economy. And I was wondering if you could give us some perspectives on how this could play out and how aerospace is differently positioned from where it was, say, in 2007, 2008.
Jason Aiken
Yeah, so I think the most important point here, Rob, is the robust nature of the demand we've seen up to this point. the order activity that that's resulted in and the extended backlog that that provides us. Not to mention, frankly, and Bill spoke to this a little bit in terms of some of the cleanup in the quarter, but the durability of the backlog that continues to just increase the quality of that order book as we move forward. So obviously we can't predict when and what any type of slowdown will look like. There's a lot of talk out in the market about interest rates, inflation, the stock market, recession potential, and so on. To be completely frank with you, we have not yet seen any impact to that in terms of our order pipeline and the resulting order activity that we've seen. There just continues to be very strong customer demand. We're continuing to see that as we embark here into the third quarter. And so I think bottom line between the size of the backlog, the ongoing order activity, the durability of that backlog, which at this point is in excess of two and a half times our annual sales for the group, You know, notwithstanding the possibility of economic slowdown or similar conditions, we remain very confident and steadfast in our outlook for the next couple of years that we've provided in terms of 23, 24, and beyond.
Robert Stallard
Okay, thanks for that. And then as a follow-up, you mentioned the AJAX program in the Combat Systems Division. Could you give us an update of what the situation is there and how it's likely to pan out from here? Thank you.
Jason Aiken
Sure. So the program is proceeding. The vehicle tests are continuing, and they continue to confirm, frankly, the vehicle performance that we've seen to date. With respect to some of the things that the customer has been focused on when it comes to vibration in the vehicle, some concerns that emerged in some of the early customer trials have been addressed at this point, and we are working right now with the customer on securing appropriate communications gear. So I think The key here at this point is that this is going to really be all about how soon approvals can move through the system as we undergo this series of deliberate tests that take time, as would be the case on any new platform development program. Frankly, this is not inconsistent with experience that we would expect on any new platform development. But like I said, we continue to work with the customer, and they continue to assure us of their commitment to the program as well as of their need for this transformational capability. So, it's an ongoing path forward, continuing to make progress, and, you know, we expect to see ourselves to the other side of this testing and trials period soon enough and onward and upward with the program.
Operator
Thank you. We now have a question on the line from Seth Seisman of JPMorgan. Please go ahead when you're ready.
Seth Seisman
Hey, thanks very much, and good morning. Good morning, Seth. Good morning. You know, just to start off, I'm sure you've gotten this question a bunch of times, but, you know, with regard to moving forward on G500 and 600 and the landing restriction, it sounds like you're still on track to have that lifted this quarter. And just any color you can give on, you know, what gives you the confidence there given, you know, that Gulfstream, I think, has done all its work, but, you know, you're dependent on the FAA to, you know, to do their work.
Jason Aiken
No, you kind of summed it up nicely there, Seth. The fact is we have the software fix for this issue completed. It's been developed. It has been tested. It has been flown. And so we have great confidence in the efficacy of that software fix. And we are currently working with the FAA Gulfstream and the FAA working concurrently toward the initiative to get this airworthiness directive resolved. The program plan for that is to complete by or before mid-September. To your point, we are in part dependent on the resources of the FAA to make that happen, but they have been very good about this. They are committing the resources that we think are necessary, and the teams are working together, and right now everything seems to be right on track for resolution of this by the end of the third quarter.
Seth Seisman
Great. Thanks. And then just as a follow-up still in aerospace, this might be kind of a crude measure, but just looking at the revenue per aircraft in the quarter, it looks pretty strong, but obviously we don't necessarily have all the information about mix and price and stuff like that. Can you tell us what the service growth was to help us hone in on that? And then you mentioned a fractional settlement. Did that have any impact on the on the revenue in the quarter or any other backlog mechanics? Did those affect the revenue?
Jason Aiken
Yeah, so on the service side, we did see very strong growth in the quarter. That's continuing a trend that we've seen since we've been emerging from the pandemic, both including sort of flight hour ramp up as activity and flight activity picks up around the world, as well as FBO activity at our Jet Aviation business, particularly on the US side. So I think we had somewhere in excess of a 35% growth year over year in the quarter in service activity. And it's frankly that service activity that is driving the upside to the revenue and the outlook for the aerospace group for the year. As I mentioned earlier, we're still expecting our 123 aircraft deliveries for the year. So a couple hundred million dollars additional revenue for the year is coming from that service side of the business. And I know you referenced the cleanup we mentioned to the backlog, but I sort of missed the latter part of your question. Do you mind repeating what you were getting at there? I'm sorry, Seth. I hope he hasn't already dropped off the line. Perhaps you were getting at whether any of the cleanup in the backlog has affected any of the revenue or other aspects of the aerospace outlook. And the fact is, No, we're in good shape there. The cleanup, as I mentioned, or I think as Bill mentioned in the remarks, was related to an ongoing negotiation we had with our really last sizable fractional customer in that backlog. And we've come to a settlement with that customer, removed some of the airplanes and expired some of the options there. And none of that activity has any impact on the outlook for the business. So all forecasts remain intact.
Brika
Great. Thank you. Operator, I don't know if we have our next question on.
Operator
We now have our next question from David Strauss of Barclays. Your line is open, David.
David Strauss
Thanks. Good morning. Good morning, David. Jason, when we were down at Gulfstream back in June, I think you talked, you know, Gulfstream talked about being about 70% of the way through The software validation test on the 700. Can you just give us an update exactly where that where that stands today?
Jason Aiken
Yeah, I don't have an exact number on the update of 70%. Obviously, the progress on that software validation has been. slowed somewhat by the fact that we've had to divert common resources in terms of those flight sciences engineers over to the fix on the 500 and 600. So that, as I mentioned before, is really what's sort of affirming our risk on the slip of the 700 entry into service. So there's been some modest progress there, but call it in that 70 plus percent range remains where we are at this point. As soon as we get through that airworthiness directive resolution, we'll get those resources back on that program and moving forward to that updated EIS date.
David Strauss
Okay. And as a follow-up, can you update us on supply chain, any constraints you're kind of seeing on the Gulfstream side of things? I think when we were down there, it was discussed about some shortages on the engine side. How do you feel about the overall supply chain at Gulfstream and your ability to hit that 123 delivery number for the full year?
Jason Aiken
Yeah, so as you referenced, supply chain, definitely not to sugarcoat it, it's an ongoing issue for the industry. It's no surprise or no secret that I think the commercial aerospace industry has had a fragile supply chain even before COVID hit, so it's probably no surprise that that's only been exacerbated. And I'd say it's a daily battle. But that said, I think there's no team that I'd rather have tackle this issue than the Gulfstream team down there. They have people embedded throughout the supply chain, actively managing these issues with our partners to help them meet our commitments to our customers. And so I think while there can be issues from supplier to supplier and it's an active management activity that's going on, it's important to consider the impact of any part or subsystem or so on to the overall tack time of the airplane production process and ultimately the delivery schedule. So just because, let's say, a particular part may be missing its due on dock date doesn't necessarily mean that that's going to impact overall completion of the airplane or delivery of the customer between workarounds that our team has in other efforts to keep the overall aircraft flow moving, we don't see any impact to the delivery outlook that we have for the year. Obviously, these types of activities aren't optimal. We want to get this corrected, frankly, for the benefit of the entire ecosystem. But we continue to have great confidence in the team at Gulfstream to get through the challenge, and they'll meet their aircraft delivery forecast for the year.
David Strauss
Thanks very much.
Operator
Thank you for that. We now have the next question from Ron Epstein of Bank of America. Please go ahead when you're ready, Ron.
Ron Epstein
Yeah, hey, thank you. Good morning, everyone. Good morning. So, John, a question for you on, again, kind of maybe going back to the supply chain, but focusing a little bit more on defense. So it seems like at Gulfstream you guys are managing – the the constraints well you know we've heard from some of the engine producers the castings and forgings and things are tight and you're managing through that but it seems like you've got a lot more flexibility in your commercial business than you do in your defense business and one of the themes that seems to have emerged from this this quarter is that because of the way the defense contracting is done we continue to hear shortages of a b and c is there is there anything you guys can do about chip shortages, buying inventory ahead? Or are you just so constrained by, you know, the kind of the materials management acquisition rules that you can't do that? Because it seems like defense is just sort of fundamentally this sort of just-in-time business, but we're in sort of a just-in-case world, if you get the gist of my question.
Jason Aiken
Yeah, no, it's a great question, Ron. And I'll kind of break that down into two aspects of our business, sort of the short-term side and the long-term side. And the piece that we're Seeing a bigger issue in on the short term side and you referred to the chip shortage. It's really that the mission systems piece that we've talked about for some time now. And again, that's because these are quick turn orders their product driven. They're dependent on these chips and you got to get them out the door. And obviously, these are highly engineered, high end design engineering type products. So, to your point, the specifications are quite specific. That said, number one, I think the team is doing a tremendous job trying to develop workarounds. They are out there ordering parts in advance where they can. It's tough to get your spot in line because this is an issue affecting not just the industry but the broader economy, but they're doing their best they can on that front. They are also working to change designs, modify designs, accept alternate parts where they can, and be as nimble as they can on that front, but that obviously takes some time. I think importantly for that side of the business, this is just a timing issue. We've seen here, if you take, for example, the second quarter and the product that wasn't able to ship at the end of the quarter, we've seen the vast majority of that actually get shipped in the first month of the third quarter. So that is flowing through. It doesn't mean we're out of the woods yet. I think this is going to be something that's going to bug us for the balance of the year and maybe spill over a little into next year. But the fact is we've seen some of the strongest order activity from the customer in this area. So I think this is just a timing thing. We'll come through it, and the order demand is there so that this will continue to, you know, on into the balance of this year and beyond. So that's sort of on the short-term side of the business. The other big supply chain side that we're seeing, frankly, is a little bit different. It's on, frankly, the longest term, longest leg side of the business, and that's in the shipbuilding side. And really there it's less about supply. parts or material availability. It's about the availability of labor, the price and availability of skilled labor. And so we're seeing that really hit the supply chain for us. And for us, it's focused primarily on the Virginia class program. When you think of NASCO out on the West Coast and, frankly, the Columbia program at Electric Boat, those are all hitting this in stride. But on the Virginia program, the supply chain has stumbled a little bit more. And when you think about it, We had been working hard even prior to COVID to ramp up our resources on those programs to support two per year, Virginia, as well as the addition of Columbia. And we were making pretty good headwind on that. And then COVID hits and you take two steps back instead of, or at least a pause instead of needing to take two steps forward. So when you think about shipbuilding and the nature of that business, you know, a shock like that to the system can hit it quickly, but it just takes time for it to recover. And so that's what we're seeing. On the Virginia program is the supply chain is struggling to catch back up and sort of hit that cadence that they need to be on. But again, like Gulfstream, like Mission Systems, Electric Boat has got all the resources that we can bring to bear and all the sense of urgency to apply to that supply chain. And once we can get that schedule right, I think we'll be back on track. But in the meantime, that schedule extension brings cost. And that cost brings an impact to margins, and that's what's affecting our outlook for that business. So I'm trying to give you as complete an answer as I can on the supply chain as it hits the defense side. So that's sort of both ends of the spectrum from my perspective.
Ron Epstein
Yeah, got it. Thanks. And then maybe just one quick follow-up on combat. With all the awards that have been coming in and the activity in Europe, when would you expect that to flow through the business? Is that a 23 kind of thing? When would we expect to see that kind of at least on the top line?
Jason Aiken
Yeah, that's a good question. I want to take a step back and maybe give a little clarity on what we've seen through the first half of this year and then what that means for where we're going. Obviously, in the first half of the year, we're down notionally a little bit more than you would expect given our full year outlook. I think we're about 10% down year to date. If you do some quick checking, you'll see that what that's really a function of is that last year, our revenue per quarter was essentially consistent throughout the year, first quarter, second quarter, third quarter. which is really in contrast to the tried and true annual cycle that we see in combat systems. And we're, frankly, once again seeing this year, which is a sequential ladder, if you will, lowest in the first quarter, rising to the fourth quarter. So that created a little unusual headwind in terms of the year-over-year comparisons. But we're still, based on the way the second half plays out, still expecting to be at the low end of our revenue forecast. So what does that imply? That implies about a 3.5% growth in the second half versus the second half of last year, and I think that's eminently achievable by that group. But looking beyond that, to your point, there's a tremendous amount of activity in this market. Obviously, as I mentioned before, the NPF award is a big one for us. That's a whole new additive space in the infantry brigade combat structure there. And there's tremendous demand signals internationally, as you mentioned. Obviously, we're working toward... the tank opportunity in Poland. There's other international tank opportunities, as I mentioned before. And then you alluded to sort of demand generally internationally, and everybody has kind of this suspicion that everything going on in Eastern Europe is going to lead to significant growth on the defense side. And certainly we are seeing those demand signals. I think the key thing that we all have to keep in mind here is to keep in check our expectations with respect to timing. The demand signals are there. We are having regular dialogue and ongoing conversation with those customers about that interest. But it just takes time for interest to turn into budgets, to turn into appropriations, to turn into contracts, to turn into revenue. I think it's all consistent with our long-term outlook that by 2024 and beyond, we ought to see a nice uptick trajectory in combat systems. We're still talking low to mid single digit growth, but we ought to see an inflection point to growth out in that period. And all of that is supportive of this. But in the meantime, I just reiterate our emphasis that the focus and the story for combat systems is a margin one. And you've seen how well, once again, this group can perform on the margin side and be a really good cyclical no matter what's happening on the top line.
Operator
Thank you. The next question comes from Robert Spinghan of Milius Research. Your line is open, Robert.
Robert Spinghan
Hey, good morning. Morning. Jason, I just wanted to go back to labor and talk across all, you know, all the businesses. You know, where you stand, where obviously you said shipbuilding is a tough one, so maybe that's the most challenging area. But when you look across the businesses, what is the labor and talent acquisition situation?
Jason Aiken
Yeah, you touched on it, Rob. The shipbuilding side has been the toughest one. You know, we've seen that in Maine. We've seen that all over sort of the New England shipyards as we've tried to ramp up. And frankly, those are the two shipyards at EB and Bath. that we have the most opportunity to ramp up. And so it's not like a lot of other industries where you're hearing things about remote work and the ability to pull people from all over the country and all over the world. You've got to get shipbuilders in those states and in those regions to do that work. And so that's what presents the challenge. The good news is, as I mentioned, well before COVID, we had been ramping up and anticipating ramp up. And so we've had a lot of resources put in place, as well as great partnerships at the state and local levels to get the kind of trade schools and apprenticeships and so on to make that happen. So I think the resources are in place. We've just got to keep our flow moving through those processes, keep our training capabilities up and running, and we can catch back up with this. It's just going to take time. And, again, that's just sort of the nature of shipbuilding, and it's a challenge that those teams are up to. When you look on the other end of the spectrum, you know, I think it's all about GDIT, and obviously they are in a – hyper-competitive market for hyper-skilled talent. And that only gets more competitive all the time. I think the leading positions they have in their markets, the strong culture they have and continue to build with that workforce and the opportunities that they provide their workforce within the company continue to, I think, put them in a good position to compete and keep and grow that talent. I'm not going to sugarcoat it, though. It's a war for talent every day, and it's our job to keep up with that and punch above our weight and continue to retain and draw in the kind of talent they need to do that work as that business grows. So those are kind of the two ends of the spectrum. I think the other area that we monitor it closely is at Gulfstream. Obviously, with the growth they have, you need people to do that. not to underestimate the challenge that they have, but I think they've done a really good job of keeping up with it. And I don't see that as being as high a nailing item for Gulfstream in the moment. But it's nothing that we can take our eye off the ball on. They've got to keep at it, but I think they're up to that challenge as well.
Robert Spinghan
Okay. And then just as a follow-up, going specifically to electric boat and the focus on getting Columbia ramped up and the labor situation you just talked about there, have we seen any work packages move between Electric boat and Newport news in order to manage volumes and address labor shortages either for you or for them.
Jason Aiken
So, you know, Rob, I hate to give you this answer, but that's the kind of thing. I don't think I should probably get into too great a detail. We're obviously work very closely with them as our teaming partner on Virginia as well as as our subcontractor on Columbia. And it's a 3 part conversation between us. Newport and the Navy to make sure that we're doing everything we can to support that customer and the growth that they need. And I think that's the most important message is we're going to do everything we can to support that customer, and we're working together as a team to do that. And both sides, I think, have a mutuality around that that's very important and very supportive.
Robert Spinghan
Okay, fair enough. Thanks, Chris. Sure.
Operator
Thank you. We now have the next question on the phone lines from Doug Harden of Bernstein. Please go ahead when you're ready.
Doug Harden
Good morning. Thank you. Good morning. I wanted to see if you could give us a little bit of a picture on the mix of Gulfstream waters. In particular, the G650 has extended longer than I think you all first expected with strong demand. Can you give us a sense of what the mix is and then also how you're looking at – at G650 production over time?
Jason Aiken
Yeah, you're absolutely right. The G650 order activity continues to be robust, frankly, beyond even what we, I think, perhaps conservatively expected. I think we've said a couple times now in the past, and it continues to be the case, that the announcement of the G700 and the G800 have absolutely, for our market and our customers, clarified where we are with this family of aircraft. And it clarifies what the 650 is in terms of an opportunity for those customers. So that airplane, I think, continues to have legs to it. To make no mistake about it, the 800 is the replacement for the 650. And as the 800 comes into service, we will work the 650 out. There may be some modest overlap as we feather in from one to the other. But I think what this outsized demand on the 650 does is it gives us a lot of optionality. It gives us opportunity. If this demand environment continues with respect to our outlooks for 23 and 24, we'll have to see how that plays out. It's also giving us the optionality to deal with some of these issues we've talked about with the certification process. As the 700 slips, you know, we're not backtracking on our commitments to the uh, delivery units, the revenue and the earnings forecast that we've given for 22, 23 and 24. And frankly, the 650 demand is helping with that as well as the demand environment in general. And to that point, you kind of asked about the whole portfolio and I think there's some question and speculation out there among the community about this airworthiness directive and what that might mean for the 500 and 600. And I tell you, you know, again, we delivered the vast majority of the airplanes that we intended to this quarter. We expect that to be resolved by the end of the third quarter. And when you look at the order activity in the second quarter, I think the 500 and 600 represented about half the order activity that we had. So there's no signs of slowing down there. Our customers understand what this little bump in the road is. And so those platforms continue to be very well supported. So across the board, and I didn't even mention the G280, that continues to have great order demand. I think the mid-cabin space has really picked up in the aftermath of COVID. So really across the board in the portfolio, we see broad-based demand for our airplanes.
Doug Harden
Well, and then just as a follow-up, switching over to technologies, I mean, I know there's been – you've had challenges with award protests, and so there have been some difficulties. But this is something where we've been looking for growth for a long time. And if you look out over the next few years, I mean, how are you thinking about technologies in terms of a growth trajectory? Because we just haven't really seen it yet.
Jason Aiken
So obviously, this is a conversation we've been in for some time now. And I think if you look back, we had low single-digit growth last year. We're expecting modestly better growth this year. And as I reiterated earlier, our updated outlook for the year is spot on in the middle of our revenue forecast range we gave back in January. Obviously, we're off to a little bit of a slower start to the year, but I'd say a little bit of a slower start. And that's largely attributable to mission systems. I won't reiterate those issues, but we do believe that that is a timing issue for us. GDIT is flat for the first half, but we absolutely have a clear line of sight to growth for them in the second half. And so, look, I mean, what gives us confidence in this outlook? I think the way we look at it is not any one particular win or loss or one program or another. It's really about all of the key, what I think about as leading indicator data or statistics that are around a business that is made up of thousands of contracts across the portfolio. You're talking about order activity, win and capture rates on new as well as recompete business, book-to-bill, backlog, potential contract value, so on and so forth. And all of those metrics for us continue to support an outlook for this business of low- to mid-single-digit growth. I mean, you look at GDIT, for example. They had awards in the first half that were valued at about $7 billion, and that's significantly higher than the first half of last year, and the vast majority of that represents new work. So obviously, this can be frustrating, I think, for you all, and sometimes it is for us, given the particularly lumpy aspect of this business when it comes to the protest and delayed award adjudication process. So it can come in fits and starts. But we remain bullish on this, and we think, bottom line, we're talking about a low to mid-single-digit growth outlook. And frankly, as I think about it, you may have noticed a couple weeks after the quarter, we had that announcement of the Air Force European support contract, some $900-plus million opportunity. If that had happened a couple weeks earlier, it would be kind of a completely different conversation around the book to bill for the technologies group in the quarter. So that's just a one-off example. But it speaks to the point that while timing can be frustrating and lumpy and the pipeline can be a challenge to get through, it doesn't change our long-term outlook for this business.
Operator
Thank you. We now have Peter Armand of Baird. Please go ahead when you're ready, Peter.
Peter Armand
Thanks. Good morning, Jason. Good morning. Jason, maybe we'll get you just your updated thoughts on, you know, we've seen the markups from the defense budget working their way through the Senate and the House. You know, how is that, you know, impacting some of your defense business? And obviously there's been a focus on combat and technology, so kind of returning to growth and just kind of any color you can provide there that would be helpful.
Jason Aiken
Yeah, I think the two things that I'd point out, it's obviously still very early in that process, but bottom line, as you'd expect, shipbuilding remains extremely well supported. You can see the numbers there. And so that, I think, just continues to be supportive of our, you know, an underpinning of our outlook for the ongoing $400 million to $500 million a year growth in the marine systems business. So all positive there. I think the greater area of maybe anxiety or speculation is around combat systems and the Army budgets. We'll see where that goes. This is obviously something that ebbs and flows and has a lot higher beta in terms of an Army budget on an annual basis than on the Navy strategic side. But the fact is we can't ignore the fact that there's a significant amount of support among the Congress for increasing support. defense budget. So, you know, Abrams, Stryker, those continue to be very critical assets in the Army infrastructure, and we think there's continued support for those. And so while there's, you know, a lot of chatter around, are those going to decline and what's going to happen? Let's just see how it plays out. I think we'll have to stay tuned and see.
Peter Armand
Okay. And just as a quick follow-up, your thoughts on just any impact if we had a, you know, continuing resolution. Obviously, this is not, you guys have managed through a lot of continuing resolutions, so just thoughts on any impact there.
Jason Aiken
Yeah, I don't see any real high anxiety in the moment. It's obviously something, to your point, that we've learned to work with and work around. It's certainly not desirable by any stretch of the imagination, but it's almost become part of our annual reality. I think until these things get into a six-, seven-month-plus phase, type of situation, that's when it really starts to affect our shorter cycle business on the technology side, perhaps in the munitions side. But beyond that, we really don't see a significant impact at this point. Again, it's unfortunate we don't like it, but we've learned to try to operate around it.
Brika
Thank you.
Operator
We would now like to have the next question from Sheila Kayagula. from Jefferies. Please go ahead when you're ready.
Sheila Kayagula
Hi, good morning, guys. Thank you for the time, Jason and Howard.
Jason Aiken
Good morning, Sheila.
Sheila Kayagula
I wanted to maybe ask a shorter-term question to follow up on Doug's on technologies. You know, it was down 3% in the first half and up 10% growth in the second half implied with the guidance. GDIT seems to be doing well, like fairly flat. Can you maybe bridge us on mission and how you think about supply chain getting back to growing in the second half, timing of funding, because a lot of the GDIT peers have complained about that. Maybe you could just for just shorter term.
Jason Aiken
Yeah, you've touched on the key issues, but I think the biggest piece of it is what I mentioned before is that we're already seeing here in the third quarter our ability to catch back up on some of that delayed product shipment from the second quarter. We really got that balled up there toward the end of the second quarter, and that hampered the revenue. For the first half, but but we look I don't want to I want to sugarcoat the challenges mission systems is not out of the woods So, you know, they're going to fight and scrap their way But but they're seeing their way toward you know workarounds on that supply chain side And I have a good deal of confidence that they can they can get there On the GDI T side it is a frustrating environment in terms of the slow pace of the outlays frankly, we've seen that a bit on both the mission systems and GDI T sides and But I think, you know, the hill that they have to climb in the second half is not as high, and I think we've got a reasonable line of sight in terms of the work that's in the books, and they just got to go execute on that should get them there in the second half. They've just got a little bit of go-get to get in the second half. So I feel even greater confidence on the GDIT side.
Sheila Kayagula
Okay, thank you. And then I just wanted to ask a cleanup on aerospace. You know, when we think about the 123 delivery guide, How much of that includes and then given the raise was on service, how much of the services business is in the backlog?
Jason Aiken
So, I don't necessarily get into detailed order backlog and ordering cancellations on the on the on an aircraft by aircraft basis. I apologize. I'm going to have to punt on that 1, but on the service side. We typically don't have much in the way of service activity in the backlog. We have a very modest amount in the aerospace unfunded backlog category that is related to longer-term maintenance arrangements that we have with some larger customers. But the service activity across the board at Jet Aviation and Gulfstream is really a book-and-bill basis on a quarterly and annual basis, so sort of a one-to-one typically there.
Bill
Operator, we will just take one more question.
Operator
Thank you. We have the last question from . You may proceed with your question.
Kai
Yes, thanks so much. So orders at Gulfstream for aircraft, you mentioned about half in the quarter was for the 500, 600. You mentioned that the 650 is doing well. How is the 800? Because, you know, that's been introduced relatively lately. You now have a new competitor in the market that looks like they match you in range with four versus three sections. So, you know, how is the 800 doing?
Jason Aiken
You know, the demand for that aircraft is quite solid, Kai. It's doing well every quarter. Booking orders, I think – You know, between the fact that the 650 is still taking orders and the fact that the EIS for the 800 is still a good ways out, we're not expecting a massive surge in orders. As we start to move closer to that transition, you might expect it to pick up and shift more from the 650 to the 800. But right now, I'd tell you it's just good, solid order activity that is very much supportive of our EIS timing and our expectations for that airplane.
Kai
Terrific. And if you could give us a little bit more color in terms of the order potential for combat. You mentioned Europe is strong. You mentioned Abrams. How about the rest of your vehicles? How about the munitions business?
Jason Aiken
So the rest of the vehicles you have to think about are European land systems business. They have an extremely large installed base of wheeled and tracked combat vehicles. that on the one hand have a replacement cycle with them that offers some opportunity in the out years, as well as it provides incentive for those who are trying to bring up their level of defense spending to do so in a way that aligns with their allies. And if their allies are operating and fighting one particular platform or another, that's an incentive for those who are starting to spend up more to achieve commonality with those allies. So we think that puts us in good stead for these opportunities that are coming out of threats in Europe. Across the board, though, to be a little more specific, a lot of this stuff is either in the backlog or on the horizon. When you think about the Spanish 8x8 vehicle, you've got, again, the potential, or I shouldn't say the potential, the impending order for tanks out of Poland We're talking with Romania, Switzerland, all of those are sort of bread and butter countries are all looking at increased spending on a variety of platforms. So that plus just sort of this again, generic increased level of indicated interest across Europe, particularly Eastern Europe. I think it provides tremendous potential opportunity. It's just too early to try and count any of that and anticipate exactly when or what that looks like. Timing in Europe often can be a challenge, so it would probably be a bit of a fool's errand for me to try and get too specific around that. But we do see a good, robust environment to support it with combat. You're welcome.
Bill
And Break Operator, I think we are done with the question and answer period. And I thank everybody for joining the call today. And as a reminder, please refer to the General Dynamics website for the second quarter earnings release and highlights presentation, which will contain our earnings outlook. If you have any additional questions, I can be reached at 703-876-3117. Bricka, you can now indicate the call is over, please.
Operator
Thank you. That does conclude today's call. Thank you all again for joining. You may now disconnect your line.
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