General Dynamics reports slow growth in IT, but strong margins

Jason Aiken, CFO and executive vice president, General Dynamics Corp.

Jason Aiken, CFO and executive vice president, General Dynamics Corp. General Dynamics

In its year-end financial report, General Dynamics said the IT services unit has some foundation for growth 2023 amid continuing challenges in the tech hardware division.

General Dynamics posted growth across the business in 2022, but the technologies segment that includes the GDIT services division reported just a slight revenue increase from 2021.

For the year, the technologies segment reported $12.5 billion in revenue that was flat compared to 2021. The company pegged GDIT’s revenue growth at 1.6% for 2022, a slower rate than the 2021 figure of 2.2%.

GDIT expects low-single digit revenue growth for the next several years.

Overall, the company reported revenue of $39.4 billion in 2022 to show a 2.4% increase from 2021. General Dynamics ended 2022 at an operating margin of 10.7%, compared to 10.8% for 2021.

General Dynamics does not break out margin figures for GDIT and Mission Systems, the company's IT hardware division.

But in an earnings call with investors Wednesday, Chief Financial Officer and new technologies segment leader Jason Aiken said GDIT achieved its highest operating margins since the acquisition of CSRA in 2018.

Aiken added the title of executive vice president of technologies to his CFO duties in December upon the retirement of Chris Marzilli. Aiken’s dual roles drew some questions during the company’s fourth quarter and year-end call with analysts.

One analyst asked about balancing the two roles. Aiken was quick to point out the division presidents already in place: Amy Gilliland at GDIT and Chris Brady at Mission Systems.

“The focus really is on continuing to make sure that the businesses continue to focus on their bottom line,” Aiken said.

GDIT and Mission Systems alike face challenges with supply chain disruptions and contract award decisions that get delayed and bid protests, Aiken said.

But 2022 was a solid year for building backlog. GDIT won $11 billion in awards, a number almost 20% higher than those in 2021 and representing what Aiken called "more new work than any year since the CSRA acquisition."

Aiken also shared his priorities for investments in GDIT and Mission Systems, a mix he described as strong given the IT services offerings and products.

But he doesn’t expect General Dynamics to make another large acquisition such as CSRA. That was a transformative move and he sees others in the market pursuing that type of activity.

GDIT has not made any purchases since the CSRA transaction, while Mission Systems has made two bolt-on acquisitions during that time.

“I think we put ourselves in a very good stead, and we see a lot of others following suit,” Aiken said. “We have continued to invest internally in new technology capabilities. That will continue to be the case."