General Dynamics (GD) 29 Jul 202020 Q2 Earnings call transcript

Good morning and welcome to the General Dynamics First Quarter 2020 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator instructions] Please note, this event is being recorded. I'd now like to turn the conference over to Howard Rubel, Vice President of Investor Relations. ahead. go Please

These and Dynamics Chad statements everyone. to company's Welcome today risks to Thank uncertainty. and quarter good XXXX General outlook. the regarding second our forward-looking are conference the subject represent some you, estimates morning, estimates call. made Any

information factors and call the in Novakovic. over our Chairman is Additional Executive the and Officer, XX-Q turn XX-K, regarding like With filings. to these Chief Phebe X-K that contained company's complete, I'd to

all. morning you, good Thank Howard and

address performance is me to company's I briefly discuss impact let Before the quarter, the in how continuing COVID-XX us.

screen a have proactive had instituting employees environment of and CDC one those fail. We professional Of continue and we safe which ensured adhering we encouraging locales have a guidelines, than employees cases to operate. have a than work XXX company-wide in who send our to-date rates to These half our globally people that and lower temperature the X%. way mandatory infection home distancing we create in XXX,XXX our mask over procedures less social for We policy.

you impacts As to later we continue expect second the around [indiscernible] incur most end my impact quarter. in be the million of which $XXX by estimate remarks. considerable [indiscernible] The would in addition that significant significant we program to appears

bills. well programs the the On all Congress congressional defense good news front supported in are funding of to our major with of respect markups the

in the the well remarks items release in my our in turn and we the non-recurring I and quarter. date to significant the that results to quarter, press operations on stated As will comparisons the exhibits the are focus

net on from diluted of performance release $XXX as Regarding of reported of earnings million billion press million. the my operating share $X.XX $X.XX and $XXX we per of company's you can income earnings quarter discern fully revenues second

against were down would less $XX.X% against The were $XXX earnings second earnings one and million and business of last the down modestly the or $XXX year down X% year-to-date. $XXX or was defense the ago side revenue million year. net expect was quarter very As quarter Operating million. down even

For remarks. and only which six aviation. with percent Most and of revenue impacted first the combat a half comment lower in in my and systems this particularly jet revenue GDIT are operating the and the is earnings down at in segment and defense half We by [SATCOM] our was aerospace basis in in revenue quarter and XX at a shortfall later on the will systems. earnings I of occurred declines of business X.X% along solid marine divestiture in considerable GDIT margin. systems first caused business down point in on the tenths the operating growth detail in mission systems our experience both challenges at by part mission

mission had However, improved growth significantly for operating the margins. operating the and on both systems earnings half quarter and

billion. want to Before COVID I the get then full operations year some on details and operating GDIT anticipating at our for and I aerospace the data forecast level the you impact particularly into give the Total of of of backlog $XX.X on strength $XX.X and of down last a backlog. end only billion moment $X.X spend the quarter. billion the against company's billion down resiliency is of Funded $X.X is of the backlog

of up quarter. last However, end total billion the is estimated contract value against $X.X

to only travel an its quarter XX mitigate the that is first quarter in difficult problem mix third as Gulfstream a also for $XXX time alone had an coupled Gulfstream related quarters $XX the in margins revenue loss reasonably the pipeline on disadvantaged and force X It our us this a $XX good aircrafts X.X% over $XX absorption quarter. than circumstances. year Let pre-owned managed a improve in in rests The a sales improved in million COVID estimated operating a a from difficulty aviation track earnings actions receiving inability concentrated important up where arrange for with resulting efficiencies reduction exacerbated struggled XX demonstration back contract and the other able delivery third a to to the economy, travel, million sales operating would this for of billion of with In quarter quarter. of revenue the X.X had impacts. book-to-bill an million result but is revenue severance. in From Further, they by highest jet jet on that optimism did. point million second the fourth margin. quarter of cost and with customers total was me At the to observe the throughout without ever. Much XX.X%. part $XX be redeveloping sales and million the year At benefit and paid activity of $X.XX before due environment ago. expect made to fears actually severance of of with to was by jet an with benefits same somewhat by the an with issue. getting sense operating order by telephone. inability related over a reduction aerospace we billion with may the billion preface, improved Gulfstream Much recall and by gives We and concerning this good largely give margin deliver sequential aerospace that a the of This charge restrictions. under fully steadily the quarter. Jet here. like reduced value about overhead this on up you incurred extremely the had $XX.X at second million in that charge flights aviation deliveries. taken loss will margin problem been operating $XX With to pre-owned in which X.X% driven the severance We perspective is aircraft. problem jet at have incurred We last point backlog revenue by and to year significant you operating the $XX total is a of perspective to feel

Europe the also interest Far see East. increased and in We

we say are the forecast systems up revenue the delivery on $X.XX forecast end to X.X% Finally, for holding XXX remarks. the last of these we about at you year. between Combat delivers have will billion, year quarter. of gave our that XXX and ago of I over quarter the more

but in largely our in impact our million margin mandatory or point manufacturing The ramifications Spain. However, Spanish was million to COVID-XX down sites shutdown operating Seville and were in basis to quarter of government. large operating a XXX in on the in basis attributed ELS a Trubia of as the $X two margin X.X% a of European the at at largest XXX degradation $XXX by point earnings temporary operation reduction result

We have levels. up pre-COVID since reopened and production are ramping to

at on for $X.X systems are $X.X activity orders order with the options We nice in of quarter $X.X contracts contract over in Combat had or billion mend IDIQ billion potential the ELS. value funded and billion. another in

a gun rocket, group strong X. ordinance to had in had book-to-bill from Our other of the order particularly book orders. and munition X.X higher a quarter business The

people and earlier, This a had a our the this Europe. $X.XX results. reflected margin work revenue of Information most here information driven our from contract. painful approximately legacy I and that million execution COVID-XX to We in of in in have there the an can't is is is operating get is charge $XX occurring programmatic quarter, do the billion by million of technology we of most by in earnings impact where defense GDIT As program indicated over of COVID-XX technology to experienced. our required impacted $XX business X.X% operating directly by

taken move seek relief have we charge While the we in will quarter forward. we a as contract aggressively

including the towards our essential earnings last As all number of some quarter their to closed a customers sites revenue previously will continue impacted noted do This of but and and to IT of customers mission classified the employees. so. end

services to IT of have of margin Some COVID-XX. stop highest hard a come programs because

the time IT a in book-to-bill, $X.XX first billion; has quarter to the that to the is failed is ever. backlog increased this it some note funded highest While one-to-one important to that achieve has

integrating have Another us $XXX quarters, fact is cash of been imputed its quarter information technology CSRA flow the in we has of in of for period tools. in free IT These making bidding the billion continues our cloud XXX% the new net been leveraging government bidding a We when about is significant produced of marine cash million cash data free in these power of enterprise It $X.X excess see win confident over of analytics, a supplied moving the fair performance. IT, as critical performance the that quarter nine aerospace of the worth and will we contributions net the opportunities. cash flow to remain acquisition opportunities unprecedented during imputed GDIT artificial observing income. have investments to and income. cyber groups. and Since cash stunning share

systems’ our in divestiture business. systems. mission of to to $XX revenue billion $X.XX part Mission due of Turning down quarter-over-quarter was million antenna ground-based the satellite

the basis earnings on quarter growth sequential were on in very systems also earnings point $X $XXX million against However, ago both margin. a basis. in year enjoyed XXX revenue Mission up of and improvement million strong operating

boats report significantly X.X. Iron improvement first ago solid. immaterial sequentially but a year-to-date of again over at earnings a are year $X.XX SATCOM generating smallest a For issues. only Bath margin. The leading up operating its orders result over periods $XXX in revenue continues against well at versus $XXX shipyard modestly the year's was to once an shift than backlog of to Mission work a X resulting to had million strike to good MS is first Bath marine orders point but was comparison is at modest half revenue billion of and employees our the particularly half our of basis. a a all a profits. against slightly the good were is our Works quarter In in to of is $X.XX more news across up million results. on the the well operating mixed on as many with failure and basis to to perform adjustments perspective down Electric book-to-bill revenue Earnings billion of story; the this of due % group, This NASSCO portfolio. order are performance $X.XX from less revenue XX up systems as in divestiture. last billion quarter There

So was negligible. its impact

potential that You two firm contract Of boats. value. announcement boat that including may an into for during billion cost the into went Submarine the the the $XXX Missile plus amount Columbia received recall first and contract program electric Ballistic quarter of the $XX.X the construction backlog remainder million

will defense Something in billion bills when passed the backlog This marine is by are important of growth Congress excess $XX the of year. XXXX into come story. group continuation an this firm later

our So now additional then give me Jason I turn the call over CFO, remarks you Aiken and let our guidance. updated will for

balance will balance quarter our and our position Phebe ended influenced start you, and some of sheet good with flow the Thank full $XXX of the earnings about generated and the net observations quarter cash billion. operations liquidity a with free by in pandemic. a morning. XXX% $X.X I cash conversion first of quarter We million following

during continue capital their to in advanced to to liquidity of Importantly, suppliers our approximately quarter support the we've compared excess flat essentially as with billion operating million working period. $X.X same remained advanced $XXX to even to income. the XX% the over this the XX% At customers we range expect to free of in our for year cash net point of by be flow us

debt just the notes approximately of As during over remainder than third paper the to of million from the billion with end in a billion $XX.X $XX $X.X billion. of of repaid down a us to quarter $X.X end the the matured balance commercial signaled of our year we total just that May expect and $XXX previously of first at That XX debt. with a plan for and repayment with net the quarter in in billion a outstanding leaves along net commercial billion debt paper quarter the about billion our over lower repay quarter months almost the We ago. balance

for from quarter We XXXX first for interest same was period this $XXX of we expenditures approximately $XXX declining essentially revenues. unchanged dividends investment to revenues $XXX typical the on that's the million of Our the in continued our interest quarter, reach year repurchase the to growth before couple in to the quarter did of XXXX. in the expense of XXXX. the shares capital $XXX million expense brings the expect years At in support versus of paid and million expect range. quarter the horizon second million capital the were deployment, million X% half the be for capital the X.X% still next expense or significant shipyards That approximately more our $XXX With respect we interest over not expenditures we stock. $XXX of year reflecting $XXX In point to our to to in our X% net million. the any million in for

this a the with Phebe As also our the year revenue reduce $XXX sale which quarter. the we This the the by earnings alluded mission of associated in half million systems offset approximately revenue. in will antenna for gain modest mission satellite divested resulted will systems second completed to segment for the in quarter systems business sale the but

was the the rate XX% Our effective rate first to tax bringing for in the XX.X%. quarter half

several that's somewhat rate to of a rate year We that a backlog earlier quarter wrap on time rate taxes to year We mid this first year on rate. credits. international fourth and below color quarter up we a from To little XX% points factors average second third the consistent with total outlook following color up $XX.X a a tax the the higher research a on increased effective expect quarter the including be put and few on over full full that quarter will half. XX% of and the with rate lower more now benefited $XXX.X fluctuations the The ongoing was exchange backlog in finished year in impact range I offset development first Phebe's income the expect the contract issue. of remarks with year months somewhat to comments. up which billion ago with the And concludes combat six was of million quarter. of last potential was experienced on and and will all-time the contracts note up construction over which turn back and I I systems by the value high some contract backlog of and an boosted the ago options in will in reduction foreign total IDIQ updates the Phebe backlog full first That this guidance $XXX including a over more than at a billion XX% closing and to item to it remarks. Columbia award for the my second the due year our is the

effort Now as granular end my updated significant let the give me best to of first uncertainty. do in an the as in you of forecast the as be an I promised possible quarter to midst at

forecast appears well. at you be fairly the to last quarter the given end holding aerospace Our to of

XX $XXX of gave forecast We is million XX that earnings days revenue expect $X.X operating and than days about ago. billion million I ago about than less billion $X.XX less $XX roughly in you

holding even its assuming of sales systems apparent. is $XXX but here Marine target is work the at now the everything million revenue are impact exception discussed. combat with has to earnings. Given it million more divested full-year the earnings its the strike also targets that an revenue for businesses systems systems forecast changes. is both modest at extended Bath. holding pressure these and We're of about and for earning $XXX holding of With revenue Jason defense very Mission respect our

and forecasted and revenue discussed million the million earnings $XXX $XXX between degradation identified on I has million $XX international GDIT charge reduction $XXX program in Finally, million previously. the of including

we earnings $XX.X billion. we EPS a an $XX.XX on the $XX $X.X in of well. All will billion we storm of quarter second reasonably all forecasted rolls annual quarter. at year This the weathered about reduction point company-wide had first basis the about be the of of of the of to operating analysts from a low see many the end $X.XX as what This and anticipated. the about So of revenue and to we

turn call earnings we've first remarks you quite can forma for solid provided with chart half company That with release as the the pro Howard COVID I Finally, back the my underlying are questions. absent will operations growth. EPS the from highlights and the to concludes of double-digit see

Thank you Phebe.

and to everyone has to a queue. one could we question you how reminder [Rafael] so to enter ask the follow-up participate. one As participants ask chance please remind that a participants

comes [Operator go Absolutely Please Robert Baird. sir. W. from question ahead. Peter first Instructions] with Today's Arment

Jason, Phebe last details quarter around of backlog. you of highlighted health lot the the a of Gulfstream just kind

I what You what could just also mentioned challenge quite you're of mentioned on you regarding us a expected you this couple kind of was there an quarter. defaults seeing that the the you customers regarding seeing and that on cycle? sales the update come back. might are know the health Maybe -- that you give

backlog in erosion. marked contrast up for pretty is backlog where significant to our strongly holding So the some experienced XXXX-XX which example is

impossible difficult but expressed airplanes customers contact as about needs the to in little We -- I constant a very had look the the going implied were it's who in While going requirements into telephone. demand over environment. sell fact and the is into question your in downturn bit they same this with same think our

So talk that. to a bit let me little you about

of itself economies of among As It's this to impacting summonses downturns, rebuild much Unlike to itself. driven closure see we've this anything we slowdowns by and driven in pipeline to world rebuilt or same. and isn't others. is our many our I force customers not previous in an by held one their and our is the we've our the interests sectors backlog economies exogenous said interesting entire the the continued downturn. backlog but We economy and an but this with the talk certainly continue

with predict the assurance world particularly to certainty hard recovery looks any very most is it that United believe including economic that I across the what States. level means and like that of So

we've too are at beginning would look demand to of the of that we it's recovery. we Gulfstream seen way to right appear the an tell slope be at soon when be increase in able now it to where what but So

just there in And Phebe any, or still Yes. to expected? as that as been any it is is a pickup defaults has there follow-up been holding

we I had think holding but well. expected five as quarter Holding the in darn but pretty up

We tech as or then two from defaults. seen I said I the all the this many through that other XX/XX. differentiates XXXX haven't and two of That bubble downturn lived the

Thank you.

next America. It today question next Please Rumohr go Epstein I Cai Please ahead. go with Our apologize. of Ron Well, our von Bank comes Cowen. comes from with like from looks ahead. question

guys. you because could an labor update Iron some at Works some good update Phebe us stuff what's there? morning us give Hey, and know on on you going was could Bath if disruption there I work

quite with appointed we working the closely So are mediator. federal

relationships it's I this I partners that would this but the at across quiet So have to best with one all them. we think many-many we our at strong This positive very time be working somewhat be appears unfortunately have exception. union respects decades-long company silent union in and time, note

So work as they we point case, given shipyard impact need had said quarter. the smart we're but I an their think the mediator, with immaterial just any best and of they the because the to in fact that to are we're at on nothing say I through sort working this all size and really

spending of impact it systems. that the on yet stimulate COVID Have on maybe spending? that impact doing are international on then their to countries for economies one the on business the the and portion be much COVID, you land of an that to they're impact of Got see an seen you expecting potentially some you follow-up much

Yes.

been about first impacts all talking I the of was we the think if see demand highly very production the slightest. On we in our terms demand, don't it programs mean those basis, were are So in going quarter, but being the respects, any pretty that our you're any nations of that talked interesting, what is and clear I that of threat a see vehicles it's long-held are performing in by forward these and in by customers. of much this you in international there's in about impacted in view allied has whether our not of demand, it's and that of threat the I still it's my in States my it's a that threat driven all the general I been about the or United dissipated. demand perception consensus think that really the have

adversaries In some our raised become, have questions. have fact arguably of additional potential

with lot We'll going fair a see overseas economic think any the to pending hearing forward pending I or see I grassroots a respect but So any level in amount cuts. stability our now. not markets, defense at on of right

von Cai And our Please Cowen. next question go today Rumohr comes from with ahead.

much. so Thanks Yes.

for any the little were and kind there So in $XX I the have back to I Gulfstream on a SG&A the through number your trouble was the quarter. severance, XXX/XXX go getting the mix, newer Phebe, rates of good R&D given a accrual or million big cut increased in programs in as of

had So are, lower in had quarter look we the R&D. severance. the We we

entirely We right remarks because expect we year doing deliver. and travel it customers to to really restrictions the a continue in of we're because several sizing that as in mix. I COVID There international the couldn't some as noted were result of, that related of of disadvantageous had my we XXXs

if So up helps? with the pre-owned sort add you'll see I you think gets you that along That of number. the to those

bit. Last little look -- you at question A when

the on I miss Cai, Come somehow. question

because disadvantageous the say lower? a the was mix? said and answered mean, What I is I lot I R&D severance I the it lower was you mean you no is that surprised was have guess it strong when that Well, trying given as did you to profit so as was am I

sorry. okay Well, I am misunderstood. I

So really a the in production humming fact level quite effective are nicely. operations are underlying and on we

we that consider think to this what be operationally the that's but I and pretty a a issues significant our reflected some -- performed company know costs. mix took We margin. in contribution. needed was know was we beautifully you been environment had to So some good to contribution in significant it that as we Like we've take. I a and charges

Any the where demand from you example, it interest from is in give for And net domestic, coming your just a products, of follow-up, corporate worth characterization is international, high at coming? be you quick buyers? terms us look color some when would great. For can

that. So some This East unmatched active. is just and the their We've uncertainty best this of with to pretty in quite Europe us to intense we the economic needs the business a the but position got very and as get but a the financial best are little customers any I customers get potential timing. nothing support though position. phase we slower In question back noted, of talk downturn remains strong quite execution the a and has with into the our same; we've the far the frequently order of in service to look, behind entered far has service, products great by about portfolio all industry and a States, the changed of by been and interest strongest been United

nothing when So went even see this the emerge can than forward to stronger orders of that given the expect basis, changed nature we we in on is in. that of materially out going we a

you. Thank

comes today with Seth Seifman go question next Our Please ahead. from JPMorgan.

guys it morning. as much on very Jason, of future you wondering and level appropriate percentage could potentially ideally if Dynamics I point express Hey was settle capital you for thanks and in General a that good some of working out what's sales? at can the across the

year. on about a at we're see what much this the sales it's I know aware probably combat that as think I'd seeing Yes. at a well clearly peg that We of I that particularly We'll beginning of point way next over so couple you're the state. group, at an program the as the years elevated don't three think in international percentage over systems continue accelerated the large more years. two this past in I it

of and then the is a capital level reducing big have in good working tailwind So to course terms that'll other Gulfstream. it of piece the

with to initial about and has that capital a the right inflection build and that pandemic reasonably a start that the schedule had of the production point the talked inflection you starting of of that at bit caused to test point we've a models As rate models that as when moves see seen the to we mode I comes this in delivery with move associated We associated the capital production ramp production down the free little them start see we've get you're with full articles to as cash that the see ought those the think improvements a year our to but capital, years. right favorable working with next working expecting little a working as come result some those the a turn. disruptions inventory to impact and combat performance well movers year with think compounding point then two having I that you the new with and muscle and that course to us big into in see two but naturally will been good in systems’ introducing happen and over next flow bit three to the as

right. All

very much. Thanks Okay.

comes with question ahead. Walton And today go UBS. our Myles Please next from

could to talking Thanks. about in talk Is XX% a way? you're pretty half, second Good ‘XX? robust second aerospace that obviously means bounce in transit to morning. what maybe road ‘XX map that Phebe, for the talk at this half maybe the implied you and margin back any about

the this frankly and So our year significantly we in the into margin will next charges and paid performance benefit quarter. by took for that

is benefit. that significant a So

that am more zero assuming of in also them. deliveries don't We advantageous abatement a see travel get we I restrictions get particularly to international or if mix we our worsening a

I deliveries operations our path well. to So a to performing clear implied we got are a as XX where XX we've said path

deliver of and We have to a plan those one every each airplanes.

So we're achievable. comfortable in the moment that steep trajectory quite is while

this reductions the cost benefit year's all rationalization going ‘XX margins. from will So and benefit ‘XX into clearly

half second maintain that is margins So [adequate] could maybe the -- ‘XX you into or

to benefit going ‘XX will lumpy they you little going a am to, not from I not that to parsing it's be we're start going them. and imagine can but Well,

All Thank you. right.

comes today Raviv from Jon go ahead. question next with our Citi. Please And

to though, then but Good you. allocation up morning. forward, that forward in all with talk shapes XXX% second the range brings what the towards and the consistent on coming should the of you how's going into capital the cash Thank better purchase question, and you kind any decision Hey. process [indiscernible] quarter can how this also capital get what get of about point? going is that more obviously things Jason, going you the rest up year and back allocation conversation following cash at generation that thought

see a, with some I ‘XX. and question ‘XX I the to relates cash you'll and That's as looked on the starting unwind so pattern working to unwind meaningful XXXX outlook year think fourth strong steady a to the think more this see third in think become quarters. performance do past look past for over capital some particularly that a of described fourth free expect years steep we and as the I It's and in quarter fourth that the years. us quite typical frankly in the to think capital I and So and I earlier to it a that working improvement over frankly of you'll even has couple more again, and in way several fairly frankly a into way similar cash quarter the it's the in see

unwinding next years been cash So really we really we've at back not of those above it the to up back all in to are free XXX% the only to working those to look get see of it couple elements it about and as capital. is but -- where the XXX% we flow underpinnings start expecting get

Phebe As answer will turn back that it to question. perhaps I to to capital deployment over it relates

respect that in not moment the most dividend we'll for now. periods you quarter hold So of is shares buy told the we'll the preserving liquidity With we've pat in great I think important honor as and We the years. continue for to to thing. did uncertainty in any

part the that one is dividend deployment repeatable predictable. Our and of capital is

to So I that's we're at all think capital going say moment. the about deployment

Thank you.

And our question Bernstein. next Doug go Harned comes ahead. with today from Please

the want I do the expect words, you Thank other about think you Gulfstream right get about medium morning. Good to get rate when you. the would demand you margins, flexibility in to re-emerges. that improved sizing take right longer talk to to how order operations you're when In a level term? certainly sizing this at up Phebe, but margins,

you do two how balance the So things?

on you give production in of a rate talk detail. given any a how let year, and me then little bit more can we we bit set little So color the in

fall and part process we had then XXXX of into production delivery on specifically the we in third of in this see we number number long depend have quarter a in all So the when that set our ‘XX our is were a it's the XXXX plan how been discipline demand multi, will we airplanes delivery for standing the the backlog talk it's time. into and The for ’XX, third sell long we for particularly airplanes in and we that if very of of and -- about ‘XX. of done rate in a have

but to in will our permanent. any look, of if speculate we've So about was is next increase are cut we instances scenario good that revenue time for and is under done costs sizing, case that think but when all right those I that around plan in opportunity way We've us that give schedule. many some to flexibility need don't any expect I our for soon come production got back too production to costs to just a some increases. it This year

something move up So would this to you is that hopefully margins allow higher.

wonder quickly that should manufacturing designs, GXXX, is other talk past to about better when about understand programs? if we we One of leveraging you a also, little that the GXXX new on think compare GXXX, margins rise the than you I processes how could and more these GXXX and the can the see things the you're

That I airplane. the of that. is modification would expect existing an a two other unlike

as the airplane. expect learned to We quite to learning build do before. lessons and you us type come how will done it which less apply can the on a we XXX can this We've XXX those well steep. all we obviously to So be curve know of down

comes And Strauss our next today David go question ahead. from Barclays. with Please

morning, everyone. Good Thanks.

Hi David.

or contracts actually need customer facilities Phebe, people to do the GDIT, business on access of proportion home? actually and just can work from what the

customers we've series to do that it as a for to it's got We've a but had let significant portion this years have about long-standing our good and in of of many-many relationships workforce been from underutilized with that either So area that put has classified home. workforce and partnership you XX% or which is idle work we way. a solid me impossible of is classified our

we this through employees customers bring So in prudently sort that on our sort as manage and back judiciously how we how of going depend all they and of then are. COVID forward environment we now where augment will

CARES Act Now covered costs by being with margins. now are but those the no right

depends So dilutive ultimately that it will and COVID eliminated. our can resolve margin but get they they've been some working that at steam of customers very been this uncertainties on and once when all believe back full the have to

guess of give pre-owned loss Thanks. going business was also you color rest does bit on about How situation exposure loss more could And I of this a Great. to and compared what I Okay. service jet? there? that as your guess, jet mitigate forward? little the to unique the that then the

other was jet So we so went severance there's headwind have quickly, out really given in disproportionately that nations tend impact any will that we to as our only more a was take a and schedule and fixed only about charges given That work. very not businesses. down can so costs That Revenue very, return. had the one-time which the but said higher I in they fast they by was absorption.

strict inventory pre-owned to think So with discipline the our of and pre-owned, structures. that. important And an of we that's respect very, I very element clearly very very, with

on we'll was know. you material forward So let see This going not in basis any this. a risk us I don't on the but quarter. having much expecting We're

you. Thank

today Wolfe Keay question comes Please from with Hunter Research. go next Our ahead.

and about little going Phebe, fractional you. Thank far jet it in is of Good thank so out talk bit this? Hey has you impacting any a market? forward how virus you. the morning. the changes impacted see landscape the biz How you can that potential

on any we talk this in do operators suggest evidence structural but no Look see about to that of We fractional forward be. would let there change businesses the basis market. the a see going not that simply don't we and

that and can on XXX -- clarify suggesting and Okay just margins one margins more just up squeeze Are margins. to about to XXX comment the peak exceed on you follow just I will the

we that's it this as put let's airplane too think is to early just little about declare a hoped but performing Everything better. exactly I fact in this victory way.

XXX on all hours in of character have all We outperforming indications, specifications. some that test in all is respects our over of airplane and it is

So premature to it's going how matter and of it's get us. understand but the say the juncture tests, color but we a we understand get this why as through it premature really and through for I timing very about this and we're those it think eclipse bit build this to certification to to does have we'll at airplane because to we that to margins associated but going going more say forward we that margins airplane be that with get in-service we little a the process good the this very airplane earnings closer is

Thank next with question Global. from Skibitski go you and Please comes Alembic Pete our ahead. today

Good morning guys.

morning. Good

some am there combat your half coming expecting and back relative at benefit half. potentially is Spanish margin mixed the you're the facilities Phebe, some is just like of expansion -- or first online it I looks that wondering

the at you our as always got we up half peak facilities systems the quite ramp but but European and last pattern accurately production. businesses land out at those So near really That's that year. it's in we've of point they're

respect behind to that. that's us with So

have under to and vehicle lost big track combat expect if of have Okay and those yet? the programs, they're I not contract when Morocco Spanish this just, but you

learned have we're backlog. decisions the and the will I to I a on be of to sovereign not addition had timing get but this speculate governments. that going it'll tell you Well, I nice to

you. enough. Okay. Thank Fair

will last This our upcoming operator then And we'll please. take one be one question. more

Vertical come today Stallard And final sir. Robert our go with ahead. Research. will Yes Please from question

so Thanks Good Yes. morning. much.

Good morning.

just seeing services of quick FBOs of I been you've or wondering secondly couple such terms the and of the Phebe, this aerospace. you cycle short if was recent more a pricing. of us aftermarket could months as then in tell some what division the trends on ones parts on in

in this you've how in what cycles, what versus held You the is versus you've pricing commented seen cycle down past? on seen up this time previous

answer me inverse let that Well, in the order.

have well really you pressure. we We seen know in as no price pricing degradation and consider

do We not and kind we of this change that doesn't have environment. So on in compete never price.

entirely holding shorter businesses driven So at and respect the our look FBO it's driven. pricing cycle up aerospace pretty volume those to the With are well. is volume really

the we airplanes quarter was these get It have the maintenance of we in couldn't of may people through It for a service well. hard year expect to on and models their only FBOs as rest scheduled will slightly. flying the but it for in So down the they the hours but mercurial mix Service; to did airplane nice do. services the of more Most better for some we was across improve get scheduled guys second all bit the -- of maintenance. performance but little the we of was some be travel.

to the hard So that will get resolve. airplane

Thank you.

you thank Operator now call you. joining end all this Thank and we for us today.

release website As second General highlights the earnings reminder quarter and Dynamics presentation. for a refer please our to

questions be XXX-XXX-XXXX. other I any can have reached you If

thank you attending conference We for call. Thank sir. today's concludes today's you This all presentation.

disconnect your You lines have and day. now a may wonderful