Phebe N. Novakovic
Chairman and Chief Executive Officer at General Dynamics
Thank you, Howard. Good morning, everyone, and thanks for being with us.
As you can discern from our press release, we've reported earnings of $2.61 per diluted share on revenue of $9.4 billion, operating earnings of $908 million, and net earnings of $730 million. Revenue is flat against the first quarter last year; operating earnings are down $30 million, but net earnings are up $22 million.
Operating earnings were hurt by a significant expense at the corporate other line, which distorts the truly strong performance of the operating units. The improvement in net earnings was aided by less interest expense and a lower provision for income taxes against the year-ago quarter. Earnings per diluted share are up $0.13 or 5.2% year-over-year. The operating margin for the entire company was 9.7%, 30 basis points lower than the year-ago quarter. This was as anticipated in our earlier guidance to you, but also shaped by the aforementioned expense at the corporate other line.
From a slightly different perspective, we'd be consensus by $0.10 per share. We have roughly $400 million more in revenue than anticipated by the sell side and almost $20 million more in operating earnings. We also beat our own expectations, particularly so in Aerospace about which I will have more to say shortly.
As we indicated in our press release, cash from operating activities is just shy of $2 billion, about 270% of net income. After capital expenditures, free cash flow was $1.8 billion, 250% of net income. This is particularly impressive following a very strong cash performance in the fourth quarter of last year, and not at all typical for us in a first quarter. Obviously, we are off to a good start here.
This is, in important respect, a very strong quarter, a good foundation for the year. So, let me move right into some color around the performance of the business segments; have Jason add color around the spectacular cash performance, backlog, taxes, deployment of cash and the makeup of the corporate other line; then, we'll answer your questions.
First, Aerospace. Aerospace enjoyed another strong quarter. It had revenue of $1.9 billion and operating earnings of $243 million with a 12.8% operating margin. Revenue was $16 million ahead of last year's first quarter, despite the delivery of three fewer aircraft. Revenue was almost $180 million higher than anticipated by the sell side. The difference is almost entirely growth at Gulfstream services and Jet Aviation. Operating earnings of $243 million, or $23 million ahead of last year's first quarter, a 10.5% increase and well ahead of sell-side expectations. The 12.8% operating margin is 110 basis points higher than the year-ago quarter.
Here, the gross margin on delivered aircraft was slightly better, particularly the 500 that's fully offset by increased R&D spending. The improvement comes from higher service revenue, coupled with significantly better margin on that revenue. On the Gulfstream side of the service business, it was the result of an extremely attractive business mix. For Jet Aviation, it was strong performance at the FBOs in the United States. Aerospace also had another very strong quarter from an order perspective, with a book-to-bill of 1.7 to 1. Gulfstream aircraft orders alone had a book-to-bill of 2.1 to 1. The order activity at Gulfstream was strong across the board, but driven by orders for the 650.
Strong sales activity and customer interest continue so far this quarter as well. The U.S. market remains robust, with some slight improvement in Southeast Asia and the Middle East. China remains slow. The Russian invasion of the Ukraine has stopped activity in Eastern Europe and slowed activity in Western Europe. All of this, however, is trumped by the strength of the U.S. market. I should add that flight activity is increasing in Western Europe, including flights to the U.S. This is a good leading indicator of an improving market in Western Europe.
On the new product front, the G500 and G600 continue to perform well. Margins are improving on a steady basis and quality is superb. As of the end of the quarter, Gulfstream had over 160 of these aircraft in service, with support in the U.S., and Abrams interest from U.S., allies is increasing. Land Systems had a book-to-bill of 1.2 to 1. Orders in Europe were higher, primarily from negotiations that have been ongoing. The pipeline in Europe, however, has increased as nations are contemplating higher defense spending to respond to the threat.
Turning to Marine Systems - once again, our shipbuilding units are demonstrating impressive revenue growth. Let me begin with a little recent history. The first quarter of 2020 was up 9.1% against the first quarter of 2019; 2021 first quarter was up 10.6%; and first quarter of 2022 with a revenue of $2.7 billion is up 6.8% over 2021. The growth was led by Columbia-class construction and repair volume. We also enjoyed nice increases in T-AO and DDG-51 construction volume. I'm pleased that the growth is spread overall shipyards. Operating earnings of $211 million in the quarter, up $11 million or 5.5% on operating margins of 8%. We will strive to improve our operating margin, as we progress through the year. The total backlog of almost $43 billion remains robust and is the largest of our operating groups.
Finally, Technologies. This segment has revenue of almost $3.2 billion in the quarter, down $36 million from the year-ago quarter, about a 1% decrease. However, GDIT enjoyed a $55 million increase in net revenue quarter-over-quarter and a stunning $286 million sequentially. This was GDIT's highest revenue quarter in over two years. Operating earnings at $298 million are down $8 million, roughly 2.6% on a 9.4% operating margin; once again, GDIT was up $12 million quarter-over-quarter and $16 million [Phonetic] sequentially. Technologies' EBITDA margin was a strong 13.1%, including state and local taxes, which are a 50 basis point drag on that result. Total backlog grew $293 million sequentially and total estimated contract value grew $2.6 billion on the same basis. The book-to-bill for Technologies was 1.1 to 1, led by Mission Systems at 1.2 to 1 - a good indication that their growth will soon resume. GDIT had good order activity, with a 1 to 1 book-to-bill. Over 75% of this quarter's awards represented new business.
G700's flight test and certification program continues to progress well. We have five flight test aircraft that had completed over 2,800 flight hours. We also have conducted over 25,000 hours of laboratory-simulated flying. All structural testing is complete and all structural requirements have been met. The aircraft design, manufacturing and the overall program are very mature. The new Rolls-Royce Pearl 700 designed specifically to match the G700 aerodynamic to optimize speed, range, emission and fuel burn will be certified in the next few months. The engine is performing well and exceeding key performance parameters. Our final step toward entry into services to complete certification flying with the FAA. This is typically the most predictable part of our test program.
All of this has been achieved during a pandemic and a certification process made increasingly rigorous, due to industry events unrelated to Gulfstream. In that connection, this flight test process has a first-time requirement that was not part of our regional flight test plan or any prior development effort. It is a model-based developmental software validation and line-by-line examination of the plane software. The level of effort is considerable. Completing a 100% of the software validation is the impediment to finishing performance testing by the FAA in G800 first flight. I can assure you that the validation work to date has proceeded well and presented no surprises. It is just resource and time-intensive.
This leads me to some comments on the timing of certification. We continue to target certification of the G700 for the fourth quarter of this year, but the ultimate timing is dependent on the FAA. It seems prudent for us at this time to recognize the risk of a three to six-month slip in the process and to plan for it accordingly. If such a slip were to occur, we have offset any impact to our 2022 financial plan, with an increase of deliveries of current production aircraft. This would also not adversely impact 2023. It also remains our view that the G800 certification will follow the G700 by six to nine months. Gulfstream remains committed to a safe and comprehensive certification test program. Production of custom [Phonetic] G700 is underway and we are preparing for entry into service. We will deliver a mature high-quality aircraft.
Looking forward to next quarter, we expect to deliver 26 aircraft with rapid increases in the third and fourth quarters, as we have previously indicated. So far, supply chain issues have been in the news in this category. However, we expect an increasing number of issues in this regard later in the year, and believe we are on a path to work through them successfully.
In short, off to a very good start at Aerospace.
Next, Combat. Combat Systems has revenue of $1.68 billion, down 8% over the year-ago quarter. Earnings of $227 million are down 7%. The numbers are reasonably consistent with our outlook and sell-side expectations. Margins at 36% are a 20-basis-point improvement over the year-ago quarter, so strong operating performance. Stryker and Abrams have considerable support in the U.S., and Abrams' interest from U.S., allies is increasing. Land Systems had a book-to-bill of 1.2 to 1. Orders in Europe were higher, primarily from negotiations that have been ongoing. The pipeline in Europe, however, has increased, as nations are contemplating higher defense spending to respond to the threat.
Turning to Marine Systems - once again, our shipbuilding units are demonstrating impressive revenue growth. Let me begin with a little recent history. The first quarter of 2020 was up 9.1% against the first quarter of 2019; 2021 first quarter was up 10.6%; and first quarter of 2022 with a revenue of $2.7 billion is up 6.8% over 2021. The growth was led by Columbia-class construction and repair volume. We also enjoyed nice increases in T-AO and DDG-51 construction volume. I'm pleased that the growth is spread over all shipyards. Operating earnings are $211 million in the quarter, up $11 million or 5.5% on operating margins of 8%. We will strive to improve our operating margin, as we progress through the year. Total backlog of almost $43 billion remains robust and is the largest of our operating groups.
Finally, Technologies. This segment has revenue of almost $3.2 billion in the quarter, down $36 million from the year-ago quarter, about a 1% decrease. However, GDIT enjoyed a $55 million increase in net revenue quarter-over-quarter and a stunning $286 million sequentially. This was GDIT's highest revenue quarter in over two years. Operating earnings at $298 million are down $8 million, roughly 2.6% on a 9.4% operating margin; once again, GDIT was up $12 million quarter-over-quarter and $16 million [Phonetic] sequentially.
Technologies' EBITDA margin was a strong 13.1%, including state and local taxes, which are a 50-basis-point drag on that result. Total backlog grew $293 million sequentially and total estimated contract value grew $2.6 billion on the same basis. The book-to-bill for Technologies was 1.1 to 1, led by Mission Systems at 1.2 to 1, a good indication that their growth will soon resume. GDIT had good order activity with a 1 to 1 book-to-bill. Over 75% of the quarter's awards represented new business. So, good order activity in the quarter and good order prospects on the horizon.
GDIT alone submitted over $5 billion in the quarter, bringing the number of submitted proposals in the decision of [Indecipherable] to $29 billion. As you know, we never update guidance at this time of the year. We will, however, provide you a comprehensive update at the end of next quarter, as is our custom.
This concludes my remarks with respect to a very good quarter. I'll now turn the call over to our CFO, Jason Aiken, for further remarks, and then we'll take your questions.
