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General Dynamics reported a powerful first quarter for 2026, exceeding consensus expectations with an EPS of $4.10 on revenue of $13.5 billion. The company’s performance was highlighted by a record-breaking total backlog of $131 billion and a 48% year-over-year increase in contract value. Aerospace delivered a record 38 aircraft, with the G800 program showing early margin strength. Marine Systems saw a 21% revenue jump, fueled by the Columbia and Virginia-class submarine programs and improved shipyard throughput. Combat Systems benefited from high munitions demand, while Technologies capitalized on AI and cyber contracts. The company demonstrated exceptional cash flow, generating $2 billion in free cash flow, a 174% conversion rate. Consequently, management raised full-year EPS guidance to a range of $16.45 to $16.55. While geopolitical tensions in the Middle East caused a slight slowdown in aerospace orders in that region, overall demand remains durable. Capital expenditures are being ramped up to meet Navy demand, and the company remains focused on operational efficiency and supply chain stabilization. Net debt was reduced by $1.3 billion, and the company maintains its long-standing commitment to dividend growth.

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Full Earnings Call Transcript — Q1 • 2026-04-29

Operator: Good morning, and welcome to the General Dynamics First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Nicole Shelton, Vice President of Investor Relations. Please go ahead.
Nicole Shelton: Thank you, operator, and good morning, everyone. Welcome to the General Dynamics First Quarter 2026 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. On the call today are Danny Deep, President; and Kim Kuryea, Chief Financial Officer. I will now turn the call over to Danny.
Danny Deep: Thank you, Nicole. Good morning, everyone, and thanks for being with us. The first thing I'll note is that our Chairman and CEO, Phebe Novakovic, had a family illness that required her absence. So I'll be conducting today's call along with Kim. At the very outset of these remarks, let me share with you our view that this was a very powerful quarter in all respects. Earlier today, we reported earnings of $4.10 per diluted share on revenue of $13.5 billion, operating earnings of $1.420 billion and net earnings of $1.125 billion. These results compare quite favorably to the year ago quarter, which in and of itself, was a very good quarter. For example, revenue was up 10.3% and importantly, operating earnings are up 12% and net earnings are up 13.2%. As a result, earnings per diluted share are up $0.44, 12% on more than a year ago quarter. The operating margin for the entire company was 10.5%, a 10 basis point improvement over a year ago quarter, which coupled with the revenue growth, led to very strong earnings growth. While Aerospace and Marine led the way on revenue increases, each of the other 2 segments enjoyed revenue increases as well. A similar pattern is true with respect to operating earnings. Each of the segments demonstrated better performance led by Marine Systems with a 26.4% increase from improved operating performance across all of our shipyards coupled with the revenue increase. We beat consensus by $0.43 in the quarter on more revenue and better operating margins than expected by the sell side. In short, this performance exceeded our own expectations. We also had a terrific quarter from a cash flow perspective together with strong order intake, which led to a larger backlog, which Kim will discuss in greater detail in a moment. From our perspective, we have opened the year on a very positive note. At this point, let me ask Kim Kuryea, our CFO, to provide details on our superb cash flow, order activity and solid backlog before I come back with segment observations.
Kimberly Kuryea: Thank you, Danny, and good morning. Let me start by addressing our outstanding cash performance during the first quarter. The first quarter was a very strong start to the year with operating cash flow of $2.2 billion. We got out of the gate with our business units overwhelmingly exceeding their planned cash flow and driving operating working capital down. Compared to the first quarter of 2025, capital expenditures were up over 40% to $203 million. While capital expenditures were around 1.5% of sales in the quarter, we continue to expect capital expenditure between 3.5% and 4% of sales for the full year. You should expect the profile of our investment to grow each quarter as we continue to invest, especially in our shipyards to accelerate production and meet demand. After considering capital expenditures, our free cash flow for the quarter was just shy of $2 billion, yielding a cash conversion rate in the quarter of 174%. We continue to expect a free cash flow conversion rate of 100% of net income for the year, but the strong cash acceleration into the first quarter results in a profile that will look a little different than what I provided in January. We now expect the first quarter to represent the largest quarter of free cash flow with positive cash flow in each of the remaining quarters, supporting our continued efforts to drive cash to the left. Also in the quarter, we paid dividends of approximately $400 million and repurchased about $200 million of our common stock to cover dilution. After adding it all up, we ended the quarter with a cash balance of $3.7 billion and a net debt position of $4.4 billion, down $1.3 billion from last quarter. Moving now to orders and backlog. Our order activity and backlog continued to be a strong story and a highlight for us in the first quarter. We received over $26 billion of orders achieving an overall book-to-bill ratio of 2:1 even as revenue grew by over 10% from the year ago quarter. The robust demand across our portfolio resulted in total backlog of $131 billion, an impressive 48% increase over last year and 11% higher than just a quarter ago. Total estimated contract value, which includes options and IDIQ contracts, ended the quarter at another record level of $188 billion, a 33% increase from last year. Now some final areas -- some final items in my area to address. We have $500 million of notes coming due in both June and August 2026 for a total of $1 billion. Our plan assumes that the $1 billion will be refinanced, but this is something that we will continue to evaluate throughout the year. Turning to interest. Our net interest expense in the quarter was $69 million compared to $89 million in the respective 2025 period. The decrease is due almost entirely to the interest we paid for commercial paper borrowings in the first quarter of 2025. Wrapping up with income taxes. Our effective tax rate in the first quarter of 2026 was 17.8%, generally consistent with our full year guidance of 17.5%. Danny, that concludes my remarks. I'll turn it back over to you.
Danny Deep: Thanks, Kim. Now I'll review the financial performance for each of the groups. First, Aerospace. Aerospace did very well in the quarter. It had revenue of $3.3 billion and operating earnings of $493 million with a 15% operating margin. Revenue was $253 million more than last year's first quarter, an 8.4% increase. To give you a little perspective here, the increase was driven by 2 more aircraft deliveries and higher services revenue at both Gulfstream and Jet Aviation. The 38 deliveries in the quarter are exactly as planned. Operating earnings of $493 million are up $61 million driven in part by the increased revenue, but most importantly, by a 70 basis point improvement in operating margin. The comparison with last year's first quarter is particularly instructive from my point of view, the number of deliveries is similar, but up by 2 in the quarter, neither quarter was significantly burdened by tariff costs and neither has any unusual items of significance. As a result, the improvement quarter-over-quarter comes from a lot of measurable improvements across the entire business. From an operational perspective, we are off to a strong start to the year and as I mentioned, with 38 deliveries in the quarter, that happens to be the highest number of deliveries for any first quarter in Gulfstream history. We see durable productivity improvements on the G700 and 800 in both manufacturing and completions. Performance on the G800 has been a particular standout. This quarter, they delivered with very good gross margins. In fact, it was better than the G650s that it replaced which delivered in the first quarter of 2025, quite remarkable given how recently G800s have entered into service. In fact, we will deliver only our 25th G800 this coming quarter, so very positive, given how early we are in that program. Turning to market demand. We had a 1.2 book-to-bill in the quarter with 17 more airplane orders than the year ago quarter. We were on our way to a spectacular quarter, but numerous transactions slowed at the end of the quarter as a result of the conflict in the Middle East. The book-to-bill over the trailing 12 months is 1.3x. So we see very active interest across all models in the U.S., but some cautious concern for some customers in the Middle East. We are also off to a solid start in the first month of this quarter. In summary, the aerospace team had a special quarter operational. So let's move on to the defense businesses. First, Combat Systems. Combat Systems had revenue of $2.28 billion up almost 5% over the year ago quarter. Earnings of $310 million are up 6.5%. Margins at 13.6% are up 20 basis points against the year ago quarter. The increased revenue performance was at Ordnance and Tactical Systems and European Land Systems. We also experienced good order performance at 0.9:1 book-to-bill given the third and fourth quarters of 2025 book-to-bill of 2x and 4.3x, respectively. In fact, on a trailing 12-month basis, the book-to-bill has been 2.1x. Demand for Combat Systems products is strong, driven primarily by U.S. allies. Wheeled and tracked vehicles are up, reflecting the increased threat environment. In addition, ordinance and tactical systems continue to lead this group's growth with particularly strong growth in munitions. What is encouraging for Combat is during this period of recapitalization and transition to next-generation platforms for our U.S. land force customers is the breadth of this portfolio with both international vehicles as well as our munitions group that continue to provide a nice growth outlook with very solid margins. Turning to Marine Systems. Once again, our shipbuilding units are demonstrating strong revenue growth. Revenue has continued to increase to reflect increased demand and importantly, increased throughput across all of our shipyards. This quarter's growth of 21% was driven primarily by the Columbia and Virginia class programs, followed by the oiler at NASCO. Repair volume has also increased at both our East and West Coast repair yard. Of significance, earnings improved 26.4% on improved productivity in each of our shipyards. As you know, to support this growth, we have made significant investments in each of our shipyards, particularly at Electric Boat, and we will continue to invest as we go forward to support the additional demand we see. Turning to operating performance. Momentum is building at each of our shipyards at Electric Boat on the Columbia program, we have seen a 29% increase in the number of hours earned as compared to first quarter 2025. And while we still have areas in the supply chain where we need an increased cadence, we have seen a marked improvement versus first quarter a year ago. For sequence critical material, we have seen a 52% increase in the number of items received as compared to this time period last year. At [indiscernible] Iron Works, the DDG51 program continues to improve in both efficiency and schedule. And at NASCO, we'll deliver the final expeditionary sea-based ship this summer with capacity to support additional TAOs or other auxiliary -- or commercial programs. And finally, technologies. This group also experienced growth in revenue and earnings, albeit not at the pace of the other segments. Revenue of $3.6 billion was an increase of 4.2% over the first quarter of 2025. Both businesses contributed to the growth of Mission Systems led the way with an 11.7% increase. Operating earnings of $339 million were up 3.4% over the year-ago quarter. Operating margins decreased 10 basis points from 9.6% to 9.5%. The group's order activity was also encouraging with a book-to-bill of 1.3x for the quarter and 1.2x for the trailing 12 months. This segment continues to compete very well in its markets with win and capture rates between 80% and 90%. For GDIT, we're seeing strong demand for our AI and cyber capabilities. Q1 orders exceeded our internal plans across the portfolio with particular strength in defense. And despite elongated procurement cycles and fewer customer adjudications, GDIT ended the quarter with a 5% increase in the backlog as compared to year-end 2025, which is encouraging given their near record revenue this quarter. Mission Systems had a strong quarter from an operational standpoint with a 50 basis point expansion in margins as compared to a year ago, driven by a favorable product mix and their broader transition away from legacy programs to highly differentiated systems. So to wrap things up, while we historically have not updated our guidance after the first quarter, given our strong start, we thought it would be prudent to revise our EPS guidance to reflect our performance thus far and its implication for the full year. As a reminder, in January, we told you to assume an EPS range of $16.10 to $16.20. Our updated guidance for 2026 would be an EPS range of $16.45 to $16.55. Looking at the year from a quarterly perspective, the first and fourth quarters would represent the high points, favoring the fourth quarter given its typical increased volume with the second and third quarters trailing a bit on expected mix. As is our long-standing practice, we will refresh our internal forecast in detail during the second quarter and elaborate more on the specifics by segment on the July call. Nicole, back to you.
Nicole Shelton: Thank you, Danny. [Operator Instructions].
Operator: [Operator Instructions] We'll take our first question from Robert Stallard at Vertical Research.
Robert Stallard: Danny, I was wondering if you could comment on the supply chain situation. You seem to have touched on it a little bit in marine, but I was wondering how you're getting on across the broader group, whether there are any tight points that you're trying to address?
Danny Deep: Yes. I would say, broadly speaking, as it relates to the supply chain for the whole Marine Group, we have seen an increased cadence on time, deliveries are up. I think we're not seeing the same number of quality issues that we saw in the previous year. I think we still see some areas in the supply chain where we need to get the cadence up, and those problems tend to be where we have complex components or complex systems where there are just single sources of supply. But broadly speaking, we are seeing improvements.
Robert Stallard: Okay. And then a quick follow-up. It looks like the Ajax program is back in testing again in the U.K. Maybe for Kim, I was wondering if there had been any accounting or financial implications of the stoppage there the restart?
Kimberly Kuryea: No, they have not. Everything is business as usual from an Ajax perspective.
Operator: We'll move next to Kristine Liwag at Morgan Stanley.
Kristine Liwag: When we look at the fiscal '27 budget request from the White House, there's a fairly large step-up in shipbuilding dollars, you guys have talked about the tightness in labor historically and the supply chain issues in marine. But I was wondering, as you look at the significant step-up in opportunities, are there things that General Dynamics could do to capture more of this growth sooner. It seems like there's more of an urgency to rebuild our Navy.
Douglas Harned: Yes. Like, as you can imagine, the lead times for producing these ships pretty extensive. And I think what we see in the budget is good support for the programs that are already in work and certainly, it helps the volume. But we don't anticipate that any of these awards are going to change dramatically the number of ships that we have to produce in the immediate term.
Kristine Liwag: And then also when we look at that fourth projection by number of shifts, you've got your traditional programs, but then there's also some of these smaller surface vehicles and smaller unmanned undersea vehicles. I was wondering can you talk about the opportunities for that and is there a way for you to capture more of that smaller end market, especially if we're looking at higher volumes.
Danny Deep: Yes. So we have been investing in the unmanned undersea platforms for a number of years with our Mission Systems group through Bluefin. So we're, I think, poised well to participate in the growth in that market. As far as smaller ships on the surface combatant side, we don't really see that. We're going to focus on what we do at NASCO, with oilers and sealift and sub-tenders and at Bath Iron Works with DDG51s and the next destroyer that's out there. But we don't anticipate moving into the smaller ship surface wise.
Operator: Next, we'll go to Peter Arment at Baird.
Peter Arment: Danny, maybe if you could give some comments on just any impacts you've seen out of the Middle East, whether it's affecting Gulfstream or whether you've had any other impacts more favorably, I guess, on the munitions side of things. So maybe just some overall color of any early -- any feedback from Middle East operations.
Danny Deep: Sure. So let me just maybe focus on aerospace initially. As I think we said in our comments, we were having a spectacular quarter from an order standpoint across the board here in the United States as well as the Middle East and then as the conflict started to take form. We saw some slowing in order intake in the Middle East. So certainly impacted on the order side, albeit still pretty robust. From a supply side, as you can imagine, some of what we get from that part of the world is impacted, and it's really a labor force issue. So all of the airplanes that we delivered in the first quarter of 2026, we actually had those airplanes in inventory ready for completion prior to the conflict. So I mean, we're watching that, but certainly, world events could impact supply there. From a demand side, on the defense side, I mean, it's a little early. We're certainly in plenty of discussions with a number of customers where we've had long-standing relationships, but we haven't necessarily matured those opportunities to the point where I can comment that we see increased demand. But I think a lot will depend on how long this goes and what sort of demand we see in terms of refilling their inventories.
Peter Arment: I appreciate that. And just a quick follow-up. Just you mentioned Columbia construction is progressing. Can you just give us the latest of like [ where you ] are on kind of the first haul and where things are progressing otherwise?
Danny Deep: Sure. Really positive momentum on Colombia. All the major modules we received by the end of last year, and so we're in the process of integrating and assembling those in one of our larger yards and expect to have a real key milestone achieved by the end of this year and on a path to deliver that first boat in -- by the end of 2028. So excellent progress in the last 6 or 9 months on the Columbia program and on the path to deliver.
Operator: Our next question comes from Seth Seifman at JPMorgan.
Seth Seifman: I wanted to ask about Aerospace. And I know you said you weren't refreshing guidance within the segments. But the first quarter came in nicely ahead of the expectation for the year on margin rate. The reasons for that, that you mentioned seem to be fairly enduring. Are there particular things we should be watching for that would be pushing margin down going forward? Or has Gulfstream, in particular, maybe aerospace more broadly, you kind of gotten over the hump with regard to some of these supply chain challenges and margin headwinds that you faced.
Danny Deep: Yes. Look, I think, as you know, we had a pretty strong quarter at Aerospace and Gulfstream specifically. I think you'll see some mix movement in the second and third quarter, but certainly as planned, and then you'll see a really strong fourth quarter. From a delivery standpoint, we should expect that second quarter will be very similar to first quarter and then the third and fourth will be our highest, and that's per plan. So I think all of those things give us some optimism about where we are in aerospace in terms of margins and to use your word, certainly durable.
Seth Seifman: Okay. Okay. Excellent. And then maybe in combat, if you could talk a little bit about the facility in [ Mesquite ]. I know I think the release talked about some goodness in artillery and you mentioned OTS in your comments. If we've been reading the trade press over the past couple of months, there's been some customer concerns expressed about Mesquite and the ramp-up there. How should we be thinking about the the risks and the opportunities around that facility.
Danny Deep: Yes. So I think as you've seen the customer put out a recent release on that. We've reached agreement with the Army customer on the path forward for that facility. We are very well aligned. We expect that we will be in production next year and producing artillery rounds for them and for the foreseeable future. So we have a very, very good path forward with the customer. And as I said, we're well aligned. So just think about that happening and coming online next year.
Operator: Next, we'll move to Ken Herbert at RBC.
Kenneth Herbert: I just wanted to follow up on the aerospace comments. It sounds like, Danny, when you think about some of the production coming out of Israel on some of your programs, how has that been impacted and is that a potential risk as we think about sort of the next few quarters?
Danny Deep: Yes. So as I mentioned, all of the airplanes that we delivered in Q1, we had received a fair bit ago, and we're -- we completed them over the quarter and delivered. So we weren't impacted this quarter. I think we could see a small impact the longer this goes on. They're still producing those airplanes ready for us to complete, but we could see some minor impact. And as you know, that's on the G280.
Kenneth Herbert: Great. And then maybe, Kim, really nice cash generation in the quarter. Can you give any comments maybe around any onetime advances or other items that could have been supported some of the upside in the quarter and how we think about specifically then the progression here into the second and third quarter as cash steps down relative to the strong first quarter.
Kimberly Kuryea: Sure. First, let me start out with -- and I think I mentioned in my remarks that it was really outperformance on our own expectations across the business units. If we think of our 10 business units, I think they all exceeded expectations. And so that was really great performance. When I think about customer advances specifically, they sort of come with the business. So it wasn't anything of terrible significance from that standpoint. And certainly, anything that we got from an advanced standpoint was planned. So I would say this was more outperformance against our expectations for the quarter, which does mean moving some of the cash from second quarter into the first quarter. So as I mentioned, cash will be positive, but down in the quarters to follow, but very strong for the year. And we're certainly looking at the cash conversion rate for the year in terms of is it possible that we could exceed 100%, and we'll see where we go there, too.
Operator: We'll move next to Ron Epstein at Bank of America.
Ronald Epstein: So Danny, a quick question for you. We've seen, I guess, the DOW putting pressure on some contractors to make investments for, how do I say, the promise of future volume. Have you seen that? Have you guys had to make some investments upfront? And how are you handling that, particularly in the munitions and the defense consumable area?
Danny Deep: Yes. So in particular, for munitions, we have been investing. We've been investing in artillery capability, solid rocket motors, energetics and some of the down components to support the missile primes. So we have been doing that and are continuing to do that, and we're fully committed to making sure that we're part of the solution as it relates to the munitions issue. And as you know well, we've been investing for a long time on the marine side, and we anticipate that continuing for a number of years. So I don't know that I would necessarily say that we saw pressure from the administration. I think we've been investing because we see that the demand is there and the need is there and the threat environment is dictating that, and that has been happening for a while with us.
Ronald Epstein: Got you. Got you. And then maybe just shifting to marine. There's been discussion about this from class battleship. When would you expect some more details on that, a possible down select or -- as outsiders looking in, when do you think we could learn more about it?
Danny Deep: Yes. Look, I think we're in the very early stages of that. We're working with the partner on doing some of the detailed design now. I know that the administration wants to move as quickly as possible on it. And -- but it's just a little early now for us to be able to define exact time lines, but we're part of that process today, but it's in the early stages.
Operator: We'll take our next question from David Strauss at Wells Fargo.
David Strauss: I wanted to ask about Mission Systems. I think, Dan, I heard you said it was up around 12% in the quarter. I think the business has been flat to down for quite a while. Now you had some programs rolling off. What was driving the -- what's driving the growth there? And maybe touch on the growth outlook from here and what that might mean for margins overall for technologies.
Danny Deep: Yes. Look, I think Mission Systems has done an excellent job of transitioning from what we term legacy programs into very highly differentiated systems that are in demand. And if you look at where they have invested and focus a lot of their attention over the last several years. And as they look forward, it's in areas that are very much aligned with the administration's priorities. So I think strategic deterrent unmanned systems, proliferated space and contested space, encryption, modernization, next-generation command and control and precision munitions. So I think all of those things given the alignment with some of the administration's priorities and where Mission Systems has focused their attention, it bodes well for them in the future. And I'm not sure that margins were at 12.6% that you mentioned, but we'll come back to you, I think they're even a little higher than that. So -- and we're continuing to be bullish about where we think they can be.
David Strauss: I was -- I think you said the growth at Mission Systems [indiscernible] above 12%, yes, that's right.
Danny Deep: Yes. Yes. The growth -- sorry, the growth was at 12%. That's right. And -- yes, and we feel good about the growth in that part of the portfolio going forward based on all the things I just mentioned.
David Strauss: Okay. Great. And Kim. In terms of the CapEx step-up this year, your updated thoughts on your ability to kind of recover that through working capital over the near term?
Kimberly Kuryea: Yes. I mean it's certainly -- as we continue to invest throughout the year, it certainly has an impact on our cash flow, and that's what we're evaluating as it impacts the quarter, but we're certainly driving to get our working capital off the balance sheet to offset the increase in CapEx.
Operator: We'll take our next question from Myles Walton at Wolfe Research.
Myles Walton: Danny, you mentioned 1Q representing the highest output for [indiscernible] at Aerospace. And so where does capacity currently fit for large cabin production at this point on an annual basis. I noticed in the fourth quarter of last year, you had a pretty material step-up in CapEx. And so I imagine you're expanding capacity. So maybe if you can just update us on the trajectory to get to whatever capacity you're targeting?
Danny Deep: Yes. So from a demand and backlog standpoint, certainly, we have enough of that to increase production on the long range and the ultra long-range family of airplanes. I think the issue here really is the supply chain and their ability to ramp up as quickly. And so in terms of overall capacity, we're putting it in place because the demand is there and it's just a matter of when the supply chain can ramp up to support that.
Myles Walton: Okay. And in your tariff outlook, is it still contemplating $40 million or north thereof after the Supreme Court and 232 and all the other changes that have taken place?
Danny Deep: Yes. I think when you referenced the $41 million, you're talking about what we reported in the fourth quarter of 2025. And so as we mentioned in the remarks, when you make a comparison of first quarter 2025 to first quarter of 2026, neither of those 2 quarters had any tariffs to speak of. And then we only assumed a very modest amounts or included a very modest amount of recovery in the first quarter. So really nothing material. And then going forward as it relates to these [indiscernible] tariffs, we haven't assumed anything different.
Operator: Next, we'll move to Sheila Kahyaoglu at Jefferies.
Sheila  Kahyaoglu: Danny, really strong start across the businesses. Is it fair to say that the 2% EPS raise is primarily related to aerospace and the 15% margins versus the 14% guide. And maybe how much of that came from 800 accretion versus maybe services, onetime items with fuel?
Danny Deep: Yes. I think the increase in guidance is for what we see today. I mean, I think as we mentioned in the remarks, we'll have more fidelity in the second quarter to share the contribution to that increase came from more than aerospace, also from marine and a little bit from technology. So the the expectation for aerospace is that we will continue to execute the way we're executing and we'll see what that means for the second quarter.
Sheila  Kahyaoglu: Okay. And then sticking to Aerospace, just a follow-up. Two business jet OEMs have called out supply chain issues, Honeywell more publicly. Maybe if you could just talk about you're still growing deliveries 25% year-over-year in aerospace. Should we expect any cadence changes to deliveries for the rest of the year for these jets?
Danny Deep: For us specifically, I think you should expect second quarter to look a lot from a cadence and delivery standpoint, a lot like what you just saw in the first quarter. And then third and fourth quarter will be higher and the fourth quarter will be our strongest both from a mix and a margin standpoint. So from a supply chain perspective, as I mentioned, they're keeping up for us.
Operator: Next, we'll move to John Godyn at Citi.
John Godyn: First, Marine Systems alignment with the $1.5 trillion budget, extremely clear. Can you elaborate a bit more on combat systems and technologies just in light of the priorities proposed in the $1.5 trillion.
Danny Deep: Yes. As you mentioned, I think it's very clear where the Marine programs sit in the base budget, and we're encouraged by that. As far as combat goes, there's good support for where we are in the munition space. And as far as combat vehicles goes, they're really in a period of transition, the Army and even the Marine Corp to some extent. And so there's a fair bit of development activity going on. And so during this period, and speak specifically to next-generation main battle tank with [ M13 ] or we'll see some lower volumes on the current version of the tank. And as it relates to [ Stryker ] program, for example, those rates are down, although that vehicle and that platform continues to be versatile and used in a number of different applications, those rates won't replace what we had seen historically, but certainly supported from an RDT&E standpoint for the programs that we're pursuing and that includes M13 and advanced reconnaissance vehicle for the Marine Corps. From a technology standpoint, the areas we see good alignment in the budget. And as you can imagine, in their space, there are a lot more line items to look at. But in the areas, whether it's cyber and space and some of the areas I mentioned earlier for Mission Systems, we see good support in the budget for programs that we are heavily involved in.
John Godyn: Great. And just changing gears on capital returns and appetite for buyback. Obviously, that was sort of an interesting topic last quarter for a lot of the companies. But as we sit here today, you guys are executing well. The stock is still kind of down on the year. we'll see how this all plays out. But maybe you could just kind of remind us what the appetite and the view on buybacks may be if you continue to execute well this year and the stock is -- lags the market.
Danny Deep: Yes. So as you know, share repurchases are highly sensitive subject in this current environment. And so I think in this atmosphere, it behooves us to continue to be cautious, and that's -- that's exactly what we've been. And as Kim mentioned, we only acquired shares to address dilution. And that's really dilution from our compensation programs, and we think that's just fair to all that are concerned. In terms of dividends, we have -- and we remain committed to paying our dividend. We've increased it for 29 straight years and really think it's part of our investment identity and part of our value proposition. So that's sort of how we see it. But we'll continue to be cautious and as we move forward.
Operator: Next, we'll go to Doug Harned at Bernstein.
Douglas Harned: Your -- in marine, you had a large increase in revenues, which you attributed mainly to Virginia Class and Columbia class. But can you separate what items led to that growth, such as sort of mix pricing, throughput improvement, additional labor funding or some specific milestones. How should we think about where that growth is coming from?
Danny Deep: Yes. Look, I think you should think about it as a story of throughput. And I think both in terms of labor output, and so more earned hours as well as material. So both of those things. But I think what drives it? I mean, obviously, there's always a mix change quarter-to-quarter. But what has been driving that growth is throughput and that throughput is both labor and material.
Douglas Harned: So when you look at the throughput now, how do you see this as sort of getting on the way to the goal of, say, 2 deliveries per year for Virginia class, that target that's been so difficult to progress against over time.
Danny Deep: Sorry, can you repeat that? How are we doing towards the delivery of 2 per year? Is that the question?
Douglas Harned: Yes, it is. Progressing towards that, yes.
Danny Deep: Yes. So we are progressing towards that. I won't get into the specific rates that we're currently producing at. But suffice to say that it's up significantly over last year already. And the path to 2 Virginias and 1 Columbia per year. I can't predict the exact timing, but we are on the way there. And certainly, that is the target. But I don't think it's prudent to get into specific rates over this call.
Nicole Shelton: So Audra, I think we have time for one more question.
Operator: And that question will come from Scott Mikus at Melius Research.
Scott Mikus: Jim, very nice results. Just a couple of quick questions on Colombia [indiscernible] 2, Virginia Block VI contract. Just wondering when you're expecting that to be awarded and then also going back to Rob's question earlier on the supply chain in, is there any change that you or the Navy could dual source the steam turbine on the Columbia program to improve supply chain resilience?
Danny Deep: Yes. So as it relates to Block VI and [indiscernible] 2, we have had and have been in ongoing and detailed discussions with the Navy on that, and we'll update you in more detail when we have something to report, but that continues to proceed, and we're in detailed discussions, and we've only assumed that it will come in due course. As it relates to -- sorry, remind me your second question?
Scott Mikus: Is there a possibility that you or the Navy could seek to dual source the steam turbine on the Columbia [indiscernible] just to improve supply chain resilience.
Danny Deep: Yes. Look, I think there's been some activity with the Navy over the last several years on adding some capacity to be able to build turbine generators. And so they've been the focus of that activity, and I think that is -- as I mentioned, some of the challenges with single-source suppliers, you can conclude which some of those are, that's an area that is very critical to the overall success of the of the submarine enterprise. So the Navy has been working on that for a little while now.
Nicole Shelton: Well, thank you, everyone, for joining our call today. Please refer to the General Dynamics website for the first quarter earnings release and highlights presentation. If you have additional questions, I can be reached at (703) 876-3152.
Operator: And this concludes today's conference call. Thank you for your participation. You may now disconnect.