Jason Aiken: So keep in mind, Ron, when we talk about merging those businesses, they still remain 2 independent and stand-alone operating units within our model. So not really anything to think about from a cost synergy perspective, I think the way to think about that is more of a revenue synergy point of view in that what we talked about is — those 2 businesses are seeing a real convergence on a number of fronts within their markets, what their customers are interested in procuring in terms of end-to-end solutions that include the IT service side, software solutions as well as hardware as well as where their competitors are going in the market to address those demands. So bringing those 2 businesses together has put us on a good footing to address that market and those demands.
And that’s what we’re seeing, and you’re seeing that in the positive order performance in the quarter and book-to-bill, capture rates, win rates and so on. So all of that gives us good confidence in terms of the trajectory of the outlook that we see for each of those businesses.
Ronald Epstein: Got it. Got it. And then maybe just one quick follow-on. How much of the free cash flow in the quarter can be attributed to AJAX?
Phebe Novakovic: Yes. So we have factored the net of payments to the supply chain, which has been very patient through this whole period into our estimates for the year.
Jason Aiken: Yes. So I want to make sure I understood your question correctly. It was a roughly GBP 480 million payment that was received. And to Phebe’s point, that the net impact of that after paying out supply chain elements on the program, all of that’s factored into the outlook that we have for the year. So that 105-ish percent conversion rate for the year that we talked about is now intact and all that much more certain based on the activity in the first quarter.
Operator: Your next question comes from the line of Pete Skibitski from Alembic Global.
Peter Skibitski: The issues on the Virginia supply chain, it seems like it’s been a little bit of a black box. So just — I was wondering if I can get more detail. Does it relate to multiple suppliers? And can you give us a sense of what parts are involved? And then are we feeling good that as the mix shifts to the Block 5 that margins will improve there?
Phebe Novakovic: So it’s multiple suppliers, some large and some small. And we have, again, continued to work with the Navy to address the challenges that they all have faced. And even though you have different sized businesses, many of them have been confronted with the same labor dysfunctions that we saw coming out of COVID. The Navy has been providing as well as the Congress been and providing funding to address some of the challenges within the industry — some Marine industrial base, and we’re hopeful that over time, that will resolve. And we’ll continue to see, I believe, improvement as we get into Block 5 and the supply chain stabilizes, but we’ve got ways to go there. And I think importantly, and this is the way we certainly think about it, Electric Boat just has to get better and faster to overcome any unexpected additional future supply chain challenges that may hit us.
But we’re not going to get into listing parts. This is an enormous supply chain. You can imagine with thousands of suppliers all over the nation.
Peter Skibitski: That’s fair. And kind of one follow-up Phebe. How is the — how are you judging the pace of hiring and the labor risk kind of through the midterm at EB, just given the kind of the huge increases in volume that are required there?
Phebe Novakovic: So again, coming out of COVID, I think we all felt a little bit of the labor constraint. But one of the reasons that we saw increased revenue in this quarter was extremely strong throughput coming out of as a result of robust hiring that they have executed and the training of those workers so that they hit the ground running, and we’re able to have additional — execute additional throughput up at So we consider that a good bellwether for our ability to continue to hire to meet our needs.
Operator: Your next question comes from the line of Robert Spingarn from Melius Research.
Robert Spingarn: Phebe, Combat has been discussed throughout the call, but just a couple of quick things. Would you — is it fair to assume that the book-to-bill will continue to be above 1 for this year and beyond, just given the strength? And then the second part of this is, as armament munition sales grow will they be margin accretive or dilutive to the overall segment?
Phebe Novakovic: So when you look at historically Combat orders, they tend to be pretty lumpy. I think the important way to think about it is the underlying credit could exist, let’s say, it is an increasingly insecure and threat-driven environment, and that will drive additional orders, when those execute, will be a little bit lumpy, but we have — we expect to see a continued demand, including on the munition side. But we have planned in — for our plan this year, we’ve executed, we’ve anticipated margins that are pretty consistent with what they’ve been doing. It’s just executing, operating, ensuring that we’ve got operating leverage, including on these new facilities that we’re putting in place. But recall, this is a group that has extremely strong operating leverage and based on their efficiency and blocking and tackling on the shop floor. So we’ll expect to see margins continue.
Howard Rubel: And operator, we’ll take this one last question, please, and then we’ll wrap up the call.
Operator: Certainly, your final question comes from the line of Cai von Rumohr from TD Cowen.
