Phebe N. Novakovic
Chairman and Chief Executive Officer at General Dynamics
Thank you, Howard. Good morning, everyone, and thanks for being with us.
Earlier this morning, we reported earnings of $3.26 per diluted share on revenue of $10 billion, operating earnings of $1.1 billion, and net earnings of $902 million. Revenue is up $407 million or 4.3% against the third quarter last year. Operating earnings are up $18 million or 1.7%, net earnings are up 4.9% and earnings per share are up 6.2%. So the quarter-over-quarter results compare favorably. The sequential results are even better. Here, we beat last quarter's revenue by 8.6%, operating earnings by 12.3%, net earnings by 17.8% and EPS by 18.5%. We beat consensus by $0.11 per share on somewhat higher revenues than anticipated by the sell-side. Operating margin is about as anticipated. Most of the beat came from various other items, including a lower tax rate than anticipated by sell-side.
On a year-to-date basis, net earnings are up $93 million or 4% and earnings per share are up $0.45, a strong 5.5%. We also had another very strong quarter from a cash perspective. Net cash flow, provided by operating activities, is $1.280 billion. Free-cash flow was $1.03 billion, 114% of net income. This follows a very strong cash performance in the first half. Order performance was good in the quarter across all segments and particularly strong at Gulfstream. You will hear more detail on cash and backlog from Jason a little later.
In summary, we enjoyed a strong quarter, particularly so in light of supply chain, foreign exchange, and inflation headwinds.
So let me move right into some color around the performance of the business segments. First, Aerospace. Aerospace had revenue of $2.350 billion and operating earnings of $312 million with a 13.3% operating margin. Revenue was $281 million more than a year-ago quarter, up 13.6%, operating earnings of $50 million more up 19.1% on higher revenue and a 60 basis point improvement in margins. The sequential improvement is even better. Revenue is up $480 million or 25.7% and operating earnings are up $74 million or 31.1%. To be fair, the prior quarter's revenue and earnings were somewhat lower, as a result of the inability to deliver four aircraft, due to the Airworthiness Directive, which was fully resolved in the third quarter. From an order perspective, this was yet another good quarter, reflecting continuing strong demand. The Aerospace book-to-bill was 1.15 to 1. Gulfstream aircraft alone had a book-to-bill of 1.3 to 1 and 1.9 to 1 year-to-date.
The [Indecipherable] perspective, since the end of the third quarter of 2021, Aerospace total backlog has grown $4.362 billion to reach a very robust $19.1 billion. Despite apparent macroeconomic headwinds, we continue to experience a strong level of interest, good activity, and replenishing pipeline. Certainly, demand in the quarter was not as super-heated as prior quarters, but still the book-to-bill was very good against the significant increase in deliveries. Only time will tell about the macroeconomic impact, but we continue to see strong interest in Gulfstream aircraft and services. From a product perspective, the G500 and G600 have now seen the FAA remove the wind related Airworthiness Directive, right on the schedule we had previously forecast. Almost the entire fleet had received the installation of the upgraded software by the end of the quarter. We have delivered 188 of these aircraft to customers through the end o -the quarter. The G500, G600 together led the quarter in orders, followed closely by the G650. This is a very successful program with real market momentum.
With respect to G700 development, the Control Law software validation is scheduled to begin FAA type inspection authorization during the first week of November. We estimate we will certify this upcoming summer, but much depends on available FAA resources. Gulfstream had 35 deliveries in the quarter. If everything goes as planned, we will deliver 40 to 41 aircraft in the fourth quarter. I haven't said much about Jet Aviation, but suffice to say it performed well in the quarter with improving margins in its MRO activities. In short, Aerospace exhibited very strong performance in the quarter and should have an even stronger fourth quarter.
Next, Combat. Combat Systems had very similar results on the quarter over year-ago quarter basis, but was strong improvement sequentially. Combat Systems revenue of $1.790 billion is up 2.5% from the year-ago quarter. Earnings are down 1.8% on a 60 basis point reduction in operating margin. Nevertheless, the operating margin in the quarter is an impressive 15.2%. On a sequential basis, Combat Systems revenue was up $122 million or 7.3%, while operating earnings are up a very significant 10.6% on a 50 basis-point improvement in operating margin. Demand across the segment provided a book-to-bill of 1.3 to 1 with a large order for Abrams main battle tanks for Poland, orders for $370 million for munitions and ordnance and an order for 39 LAVs from the Canadian government. We also received our first order related to the Ukraine at our munitions business. All of this increases the Combat Systems total backlog to $13.8 billion. In summary this was an impressive new business quarter with strong operating performance once again by the Combat Systems group.
Next, Marine. Revenue of $2.8 billion is up $132 million, 5% over the year-ago quarter. This quarter's revenue growth was distributed fairly evenly between Electric Boat and NASSCO. Revenue was also up an $118 million [Phonetic] or 4.5% sequentially. Year-to-date revenue was up $415 million or 5.4%. Revenue in this group has been up for the last 20 quarters on a quarter-over-quarter basis. This is very impressive continued consistent growth. Operating earnings are $238 million in the quarter, up $9 million or 3.9% on operating margins of 8.6%. On a sequential basis, operating earnings up $27 million or an impressive 12.8% on a 60 basis point improvement in margin. At Electric Boat, the Columbia first ship remains on-cost and on-contract schedule. The ship is more than 25% complete. NASSCO had a particularly good quarter with improved TAO revenue and better margins across the board. From an orders perspective, Electric Boat received a large maintenance and modernization order for the USS Hartford. NASSCO received orders for an additional ESB and two TAO oilers. As a result, book-to-bill was 1.1 to 1, leading to a $400 million increase in backlog.
Throughout the Group, we have a solid backlog of new construction and repair work. Our programs are also well-supported in FY '23 budget. In summary, revenue growth is fairly visible. And as I've said before, the real opportunity given the steady revenue visibility is margin improvement over time.
Moving to Technologies. This segment had revenue of $3.071 billion in the quarter, down $49 million from the year-ago quarter or 1.6%. The revenue decrease was fairly evenly split in dollar terms between Mission Systems and IT. Mission Systems suffered from nagging suppl chain disruptions and the failure of some government customers to obligate funds for authorized and appropriated products. In the case of IT services, it was largely timing and program mix. Operating earnings of $285 million are down $42 million or 12.8% on 120 basis point reduction in operating margin, exclusively attributed to Mission Systems and largely related to the issues impacting revenue. Total backlog remains relatively consistent over all comparative periods with a book-to-bill of 1 to 1 and good prospects on the horizon. The pipeline remains very active at both businesses. GDIT enjoyed another solid operating quarter with healthy earnings and particularly strong cash, in part due to good results in the Federal Civilian division. While we continue to see procurement delays, GDIT's year-to-date wins exceeded full-year 2021 awards in dollar terms. These wins highlight the nice momentum in the business as GDIT begins to realize the benefits from targeted investments in the technical differentiation of its offerings and this, despite the more than $3.5 billion tied-up in prolonged protests and nearly $17 billion pending adjudication at the end of the third quarter.
On the people front, GDIT remains focused on attracting and retaining the very best technology talent. The culture of this business has created one of empowerment, accountability and inclusivity is a clear differentiator in a fiercely competitive talent market. Mission Systems experienced a series of challenges in the third quarter, additional supply chain disruptions, inflation, labor availability and select intel programs and customer contracting delays. Many Mission System customers have a serious shortage of contracting officers that have hampered their ability to execute on programs of record. In addition, quite understandably, customer focus has been redirected in some areas to meet the more urgent demands of the Ukraine.
The business has offset some of the bottom line impact by productivity improvements and cost-cutting initiatives. They will make every effort to catch up in the fourth quarter. Nonetheless, we anticipate these fact of life realities to continue for a while. I'll have more to say on that subject in a moment.
That concludes my remarks with respect to a solid quarter for the entire company. So as we look toward the end of the year, we expect performance to be largely in line with the update to guidance that we gave you on the last call. As I just referenced, we expect technologies to fall short of our previous estimates, but we expect aerospace to run somewhat ahead of our previous forecast. All up, they should offset each other. In all other respects, our guidance remains the same. We stand by our previous EPS guidance.
I'll now turn the call over to our CFO, Jason Aiken, for further remarks.
