Earnings call transcript Q4 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Fourth Quarter 2022 HII Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference call is being recorded. Instructions] [Operator

like of call you Investor now Thomas, to may hand President Vice Relations. to would over the Christie begin. I Ms. Thomas,

Christie Thomas

the earnings Operator, fourth you, and morning, Welcome Thank good quarter call. conference to XXXX everyone. HII

Joining our and me Vice and CEO; Kastner, Executive President CFO. Stiehle, today call Tom Chris the President on are and

Harbor As historical and our Safe considered or expectations of facts are to any statements provision company’s statements pursuant today made law. forward-looking reminder, securities are a that not made forward-looking are federal estimates the

differ Forward-looking uncertainties statements are that could subject to risks cause and actual results materially. to

additional For refer to to that cause results, differ filings. SEC actual information results factors regarding our expected materially from could

and today, their Also will in Chris Tom to certain refer remarks non-GAAP measures.

the slides see measures, are to comparable at webcast, Relations which For GAAP that on this reconciliations the the Investor ir.hii.com. available website these please accompany of metrics

I With Chris to to CEO, call the and that, President would our like Chris? over Kastner. turn

Chris Kastner

Good quarter for Thanks, Christie. thank on earnings XXXX our you us joining call. morning, everyone. And fourth

I the demonstrated able a year to that throughout tough dedication were team commitment It for results gratitude deliver was HII thank in outstanding XXXX. their and entire like express my solid through and we a consistent their environment. for performance to that First, would pretty contributions economic

to and three million segments XXXX, million. for in tremendous grew we beyond. and record $XXX sales reported billion XXXX we foundation for flow The turn quarter and sales our continued backlog drive billion, of XXXX, continues In in earnings all the cash of across and our demand for $XX of let’s the the Now the growth of a three products of to highlights setting presentation. year earnings and on the of page free net $XXX $XX.X

we XXX her one XXX III XXX after trials. quarter, the DDG completed trials and builder’s H. DDG Sutcliffe At completed Jack quarter Flight ship on delivered fourth just DDG Lenah Higbee the Lucas, Ingalls, in first

Our DDG on fabrication Sam XX Nunn. DDG team XXX also started

and In the and fourth our fabrication awarded LHA were design for America construction contract line, in billion detailed amphibious the class. product amphibious started warship Fallujah, ship we big deck a $X.X X

in Zumwalt-class modernization destroyers. Arkansas, News to Also a quarter, XXX missile we Little we the sponsors At for for in period Ingalls, January, keel advanced were for the X. guided the contract ship Newport planning honoring at fourth awarded Rock authenticated the SSN

to Virginia-class remain the continue and cost on boats. schedule We focused risk objectives reducing meeting and on

conditioning into Kennedy main, CVN test As fire for well program. are coming is to life. aircraft potable water, nuclear and carrier, air the as XX ventilation systems such Distributed

EMALS Combat the track testing The progressing Catapult is XXXX on Systems later expect in to program Test enter her system, as program this which quarter. began planned test we through remains we and and into

XX complete of complex Washington, XX% are we the CVN USS later we And near overhaul and as finally, for year. planned re-delivery refueling George this

At business of the solid achieved billion, we one-third of of pipeline qualified. is XXXX, with year-over-year growth revenue year for all a potential Mission $XX over we ended groups business which Technologies, robust growing and with the

Mission and Decisive record. of UUV contract, Forces Operations Actions XXX Mission and Distributed the the Mobility Significant included, contract small program Technology the wins as in XXXX as Navy selection Services U.S. Remus Air

and growth our full HII an strategy. turn towards Mission can we integration Alion perspective, our with our From integrated operational into the we have Technologies and complete, attention team executing

Moving slide on to four.

improve performance. platform and continue provides a XXXX of the to second XXXX confidence year for all ship of say to quarter the and major to cost milestones and all our that maintaining are I we This highlighted we proud for back providing of am XXXX. in the met Shipbuilding are in last milestones our We the XXXX growing we milestones. demonstrates that solid schedules

Jersey New include move aboard News Newport SSN crew CVN as XXX off of planned planned well and and as on at milestones XXXX XX. of planned XXX anticipated XX the planned of re-delivery float CVN Notable Massachusetts, SSN the delivery

deliver DDG Bougainville are expected Calhoun while Ingalls, to Jr. XXX, LHA year, At NSC XX this is and M. to Richard launch. XX X forecast all LPD McCool

to In milestones, Technologies Shipbuilding continued that resulting of several see be the pipeline, large to growth opportunity year. our these the award first addition Mission half expects the decisions expect to we including in from made

to Now focus operational I would our discuss areas. like

importantly, am our Our These and we that to employee good in the top a and skills training workforce development. strategies. have and hiring, and for priority remains confident plans strategies center retention gaining development I had operational around hiring our year. start traction and leadership are as

personnel similar a over time, XXXX, hiring attendance to same together in improving rate time at over productivity, expect craft After our performance. X,XXX hiring in while and XXXX, drive the we

inflation, have and our through conditions. Regarding we installation contracting some terms

of our However, have non-programmatic impacted elements inflation across all us of programs.

have the we closely suppliers possible and finally, And chain stabilizing supply to customers best worked is schedules. with achieve the our and

most years. continue being notwithstanding labor impacts for abate, our the and opportunity few stabilize inflation and the chain supply to have and believe performance over we next we risk, as summarize significant improved To

are an to and fiscal Appropriations aircraft Columbia-class Authorization DDGs, Bills. total the missile carrier attack Defense Defense program, Ford-class DDG and legislation Virginia-class with ballistic C. Turning John including overhaul and support and Shipbuilding, CVN a of III X pieces nuclear strongly XX Flight Stennis. Both we passage the and authority submarines, additional refueling XXXX environment, XX complex pleased programs of ship for three the year budget submarine the funding of for the enactment of

for ships. LHA naval of a Both fleet The Bills in no of Authorization FY language Appropriations Act XX also continue XX assault XXXX. a amphibious procurement and requiring operational a than XX, XX and for less DDG LPD third and Defense including LHA amphibious provide includes and funding Authorization XX X funding advanced warships, XX new LPD minimum

working see to administration the budget congressional and to continue support on fiscal forward We programs. our President’s look XXXX We the bipartisan year Congress for with request.

I to over results the have move on Tom few call we turn on Q&A. to a for before will additional comments then I some guidance, that, our financial and remarks with So, and

Tom Stiehle

XXXX. also year Thanks, Today, outlook will provide and an fourth I and good Chris, and review morning. for our briefly results quarter full

For more to morning refer detail issued and earnings website. the the posted segment this release results, to please our on

our quarter fourth consolidated results of presentation. slide on the five with Beginning

Our record of same X% compared last to year. all $X.X approximately driven increased three fourth billion This the quarter revenues year-over-year to was HII. period at revenue higher for segments, by leading quarterly revenue growth

the to primarily segment of lower to period. operating in of prior $XXX The decreased for X.X%, $XX quarter year margin million XX.X% in fourth Operating income. and million or operating the XXXX from margin income decrease operating compared of the X.X% quarter of due income was by

compared $X.XX the compared the $XXX in earnings million, per fourth in $XXX quarter the were previous year. were million to Diluted of earnings the Net XXXX. quarter quarter in in to fourth $X.XX, of the quarter share

Moving $XX.X to was were billion The XX.X% our three of six, increase by year consolidated full along results Alion with driven all increase the revenues revenue. of the a segments, year, from at an year-over-year for year on for full slide XXXX. growth

all The was taxes the more as income a margin million driven was was Operating and by operating improvement million income operating at income X.X%. growth of non-current well favorable in year X.X% to for $XXX operating three and This FAS/CAS XXXX. operating income state and of margin compares year-over-year $XXX as adjustment. segments, operating

$XX.XX diluted million, to per earnings year. the to were $XXX $XXX earnings and Net in $XX.XX, XXXX the compared million compared share were previous in year for

lower to program programs, on $X.X XXXX Moving increased or NSC partially and X.X% in Ingalls’ by by XXXX, slide million from revenues. revenues of revenues offset higher DDG $XX billion primarily seven. LHA driven the

XX.X% Ingalls’ XXXX on operating well and risk price LPD in both income to were by year. favorable retirement million results primarily XXXX. risk of margin partially and million of the offset XX.X%, program, driven $XXX contract last estimates and $XXX compared as program lower the from retirement by DDG These on clauses, as higher improved adjustment changes

billion $X.X At services. revenue support primarily from aircraft Newport News, or revenues lower carriers partially to million a submarines, X.X% $XXX due naval offset XXXX, XXXX by increased in both by nuclear revenues in higher and of

C. complex refueling overhaul USS the offset CVN driven Miller of the of volumes and the CVN Washington Increased Stennis aircraft USS were XX on the the and and XX lower carrier Gerald revenues R. CVN refueling George of partially construction XX, CVN higher USS volumes and by overhaul Enterprise and John by on XX Doris

CVN XX. Ford

to by lower volumes offset revenue Virginia-class, on was Virginia-class volumes Columbia-class higher the due Submarine and on IV on partially the growth boats. the Block Block boats V

were Newport X.X% News XXXX $XXX X.X%. margin operating and the income of of $XXX relatively million consistent million in of margin XXXX performance and of with

adjustment USS from facilities, VCS to on program, estimates CVN lower contract and incentives price program Washington overhaul compared XXXX. XX as contract the in capital Columbia-class of submarine changes on well favorable the refueling risk retirement the George by partially as clauses, offset the included and results XXXX

of the retirement performance the with year-over-year consistent was limited below year the X.X% expectations risk provided as XXXX, of margin half for improvement, our Shipbuilding XXXX of but back opportunities.

rates, supply non-programmatic the of Continued inflation contributed progress. all labor challenges, impact high including and chain slower to margin disruption attrition

At from billion XX.X% in to $XX of of XXXX. third the quarter million million Technologies’ by revenues primarily operating Mission or XXXX. of million increased of Alion XXXX, $X.X operating income in $XXX Technologies, the $XX acquisition driven compares income Mission of

to as acquisition due of higher acquisition. approximately of of results joint purchased million amortization included as approximately higher million to well XXXX. from by assets Alion of in XXXX, venture, in partially purchased growth the offset $XX of XXXX compared intangibles Alion equity drivers the intangible income Primary are Alion-related amortization XXXX a in $XX

method also adjustment approximately an note share equity $XX non-cash will XXXX valuation fourth results related million and included that of $X.XX I per a approximately downward the or to investment. quarter

adjusting Mission X.X%, margin Technologies’ and XXXX downward out valuation consistent with XXXX was onetime EBITDA performance. EBITDA X.X% the margin in adjustment, was

with of eight. deployment approximately Turning We liquidity slide balance to on $XXX $X a cash million of billion. and XXXX ended capital

expectations, I on cash accelerate was and fourth free significantly $XXX This has to our XXXX operations will above cash direct of generated able in a Free expectation from the quarter were cash a detail million. several which cash for cash in impact we free moment. our collection flow, more XXXX million as large discuss events. in flow prior flow XXXX $XXX was was

$XXX I bottom X.X% am end of of the the capital pleased at very in expenditures to revenues net report that were guidance or the XXXX range. million

Cash our plans other benefit totaled pension in and postretirement million to contributions $XX XXXX.

the total During paid $XXX for dividends or bringing of $X.XX $XX we quarter, year the share million. million dividends fourth per to paid

approximately approximately $XX Over the aggregate of million. cost an shares we XXXX, repurchased course of at XXX,XXX

to on for slide and updated outlook Moving and post-retirement benefits. pension our nine

Our improved provided rates in the the outlook in November, from XXXX discount time. that modestly update we increase given has since for

about for returns or XX.X% expected third quarter. of XXXX update compared Asset to our negative as the in

discount consistent for have offset returns rate. asset negative the experienced the through update, higher down Expectations FAS updated more is partially benefit update been last XXXX. of considerably from in has QX the the XXXX come given with our and recognition XXXX the impact immediate by of This

provided have initial also XXXX of our We an review expectations.

to the $X.X $X.X growth time, acknowledges for Turning challenges XX continue outlook range while and discussed. expect billion XXXX, we our our current billion X% have uncertainties XXXX to around over to slide approximately of Shipbuilding particularly we environment, the labor of outlook

between incremental margin target For the XXXX, that we as we improvement, but have of current Shipbuilding expect X%, challenges pace to margin tempered X.X% operating progress. the continue and acknowledge

of $X.X year-over-year. For XXXX Mission revenue X% growth Technologies, billion, approximately we organic expect of approximately

of EBITDA and X% margins between X.X%. margins of operating and expect We between and X% X.X%

In of is $XXX assets approximately $XXX Mission intangible million, of Technologies. to to is which attributable XXXX, expected total amortization purchased million

X% be We to of capital expenditures approximately XXXX sales. expect

Mission modest Moving given revenue performance benefited from growth material Shipbuilding, first first the quarter of and XXXX, which normal we expect for quite fourth in to overall on quarter for expectations the favorable strong seasonality timing. quarter for the be Technologies to

Additionally, year, the first we X%. margin be expect and segment weakest Technology the the margin Mission operating Mission quarter to operating the of Technologies near with near Shipbuilding mentioned and milestones timing given the operating Shipbuilding the seasonality, of program results X%

currently no employees today based chain, impact a to assumes and and at best that we degradation our supply our plan. pace able further staffing hire from to we most outlook continue the The retain in are on to abate, are continue inflation is that importantly, information that non-programmatic supports providing and have we

provided have with number we updated your Additionally, of other for discrete modeling. a on XX, assist items to outlook our slide

of we tax this free update flow cash an expectations XX, amortization treatment slide third we in assumes on Section On presented purposes have -- the updated would If and current reaffirming deferred repealed, quarter, R&D through provided million $X.X an in for we else cost XXXX, this view is XXXX XXX opportunity consistent data remains the over equal, our or how the place all of target. in outlook are there with billion $XXX the and be approximately XXXX. total

million $XXX year XXXX cash our outperformed significantly flow free of accelerating difference, by along of expectation we this the flow COVID-XX expectations. the earlier, now free planned into noted have impacted I cash repayment with collections. As approximately XXXX timing This delay

Consistent the fourth of year free cash XXXX the expect with of our an outflow $XXX be weakest is quarter XXXX million the to the million. of of the into $XXX normal flow first to likely seasonality, we quarter collections given be will pull-forward of and

free XXXX XXXX. expansion benefit unchanged, burdened from Our and will remains potential flow cash as repayment, expectation be compared growth, by will COVID-XX margin it as for to continued topline not

we Additionally, capital see percentage sales expect a to working of XXXX. as sub-X% levels in

through after reaffirming our acquisition are repayment pace this our of $XXX loan debt free debt to commitment remainder to XXXX. on the XXXX, focused about which capital on shareholders our the We million allocation substantially return cash priorities to retire flow year Alion bond in all is planned and paydown, term and

remarks, a from HII planned the the accomplished across critical I and important to we Shipbuilding budget year, timely and my work milestones was Technologies. it doubt our meeting challenging all am under work proud the at business, that no completed team of Mission the but close To of was entire successfully integration

in results that well deliver entered and meaningful cash driving execution our all progress well were which to ahead in across profitable free segments of are and growth. Across we resulted XXXX, We on the enterprise, flow projections. intent made positioned XXXX growth

With will remarks for that, turn over before questions. take back we your to call some I final the Chris

Chris Kastner

our beyond. summary, customers, are to in on critical results Thanks, almost backlog and of Tom. XXXX to of in in we believe we executing positioned importance In markets billion consistent while XXXX we and well $XX grow delivered

employees, We to make all benefit our will strategic for our long-term that creating shareholders, continue long-term value decisions customers stakeholders. and of

the to turn Q&A. call will for over I Christie Now

Christie Thomas

Chris. Thanks,

as As on will over one a queue I and the follow-up Q&A. get limit through the everyone as many to Operator, we reminder call, turn can so people initial yourself please the one to question you possible. to manage it to

Operator

today comes Walton Instructions] from Research. [Operator Wolfe you. question Please Our Myles. Thank go ahead, first from Myles

Your line is now open.

Myles Walton

Good Thanks. morning.

Chris Kastner

Hi, Myles.

Myles Walton

a margin high first one, X% plus this business? a at maybe still The level, is Shipbuilding

Chris Kastner

Yeah. we got come Newport obviously COVID and through is and that. challenging of Definitely. still strides. some ships great have that times working I is believe we News have some are through Ingalls with that north making that

I the Block transitioning issue two can the years years delivered simply operating system, boats on Newport getting over three the work And and in V. to work think a next biggest we IV News is Block the and

continue it’s absolutely, not business. yeah, am give for performance a but from when here. So, happen, to going I X% do forecast I improve a to that’s going to to expect

Myles Walton

to as or to a do. through confidence have to Do it? any have come don’t then, that And million plug for execute on you earlier have doing bit to until guess, is in to deployment the or million it’s Okay. plan $XXX what little repurchase, of Tom, do you for $XXX share I XXXX wait capital XXXX Chris sights cash you terms I know, in against XXXX, flow big

Tom Stiehle

is Myles, Yeah. Tom. this

math through the the given haven’t number, bridges capital where flow we the -- an way. exact and as as have obviously, free yourself fall the long margin work expectations we numbers given of the revenue well and as expansion, you on capital, with expense cash working the the are, you if that then We that

after flow on stand is given back all free over to our XXXX. to buy share is guided the haven’t year, to will the back behind be continue to We to excess we in anticipate repayment see as that schedule. So portioned going price. how through as ourselves we XXXX, shareholders cash we debt commitment -- the be generated. work value the we really that cash shares We But

Myles Walton

clarification, non-programmatic one And is inflation? just then what

Chris Kastner

Yeah.

So related of what the stuff end the didn’t you Myles. we than insurance example of an actuals the the that towards expenses -- that, I give will that right. to didn’t we that It’s year medical just benefits, like we forecast, premiums, get higher were

Tom Stiehle

expense tight marketing seen And we have [ph].

Myles Walton

you. Thank right. All

Tom Stiehle

Sure. Yeah.

expenses tight overhead it’s So us. for

Myles Walton

Thank you.

Operator

Thank you.

from question next go Robert. Please ahead, comes Melius from Robert Research. Our Spingarn

now line Your is open.

Robert Spingarn

morning. Good Hi.

Chris Kastner

morning, Good Rob.

Tom Stiehle

Good morning.

Robert Spingarn

noted some and to if Mission as Technologies. has into look talked between that that News lot your give there? does I like shipyards see job margins thing about you Ingalls factor the two granularity number us a if how labor you Chris, seems could to I have and XXx and the constraint wanted is we Newport at the openings One it the of postings, splits

Chris Kastner

Not really. to and X,XXX plan competitive market. I stable, pretty industry in also year will rates a attendance the attrition. year in about standard add with not over positive throughout shipbuilders -- is are throughout Mission only attrition time, very Technologies adding some then indications the hiring, there We but and really

So there indicators. are positive some

it relate necessarily wouldn’t margin. I to back

Newport separately. back necessarily relate than Ingalls. We But year this margin, that I to no. out News more that hire don’t will break wouldn’t

Robert Spingarn

to Okay. And X% the a expand programs? more that, and then to topline growth be fund training just upside if and to appropriated follow-up could there as Congress the apprenticeship capacity funds shipyard

Chris Kastner

But labor. constraint Yeah. the is

Our are be grow X% the project add need how few to over years. to how conservative but is excess upside? and going we -- facilitized Yes, course. really shipyards and of are next that -- But of in to labor we there we

Robert Spingarn

labor labor is help asking Yeah. and I The the faster. am train guess they to I benefit you you attract get ship... can faster

Chris Kastner

And development and are involved and of there’s support. we actively workforce enough, both state infrastructure with Interesting the in for are to initiatives at federal government states a help in federal both Yeah. workforce the communicating lot level that development. that and

Robert Spingarn

Chris. Okay. Thanks,

Chris Kastner

Sure.

Operator

Thank you.

from next Scott Credit Our Suisse. ahead. from Deuschle go Please question comes

open. now is line Your

Scott Deuschle

Good morning. Hey.

Chris Kastner

Good morning, Scott.

Scott Deuschle

net-net Tom, to year-over-year what’s in Just did there? negative the on CVN interpret in release QX? comparison press the trying EAC XX a book Thanks.

Tom Stiehle

Yeah.

step individual up are was adjustments, give on you nothing on up, to actual tell you so don’t color any provide on significant either on margin some I would program. or we to there down rates that, any individual the program. step booking -- So the backs

answer the to So is question your that. on no

the tell although down net that has, not it News would far I that is, we the upside that normally would you as as Newport it’s you was at seeing see. of a there function adjustments having it really effect are the

little range little is kind is enough saw and bound pressure programs costs, the adjustments, overhead of CVN XX where higher called K. a on the draw you labor, it EAC to timing if So overhead on of immune saw out not we what not was a effect milestones significant a of because just the they But the that bit there on not downside short of in absorption on it’s little on as you see to and as a bit well. the all bit

Chris Kastner

Scott, I’d also add that…

Scott Deuschle

Okay.

Chris Kastner

… CVN and XX that a is amazing. program week EMALS year, I It’s in is the and compartment year. topside the begun. for their essentially out. started program. The test they They up had met there built equipment pretty solid last commitments pretty has was test

got of have they momentum. So a bit

but lot the front volume in four lot a reference, I call they right? last commitments hate big them, of have are of to on executing on They cloud but work their year. They this that -- game in have got of yards is program. work. are week They met XX every use for high hopes for a is but football I a what dust, I success weekend, of

Scott Deuschle

you. were and on in QX what then And in XXXX Chris, gross attrition what QX? this, sequentially I Great. but missed and how net just headcount sorry, curious Shipbuilding additions relative Thank the business to then, trended the in if were the,

Chris Kastner

Yeah.

year. it we as through better gotten better heads, throughout about year don’t specific January but as and in move got it’s here. We well. number added the trend I better the the have attrition did So X,XXX

showing this levels, need stability in back only to the pre-pandemic and inflation. standpoint, and what stabilized pretty what it’s chain It’s up not to but it’s not supply -- organizations call also a definitely bit but It’s labor Shipbuilding of I that’s execute. from a we

Scott Deuschle

guys. Appreciate it. Thanks,

Chris Kastner

Sure.

Tom Stiehle

Thanks, Scott.

Operator

Thank you.

Global. next question Our comes Please from Pete ahead. from Alembic Skibitski go

open. is now line Your

Pete Skibitski

Hey. Good morning, guys.

Chris Kastner

Hi.

Pete Skibitski

you to it’s guys kind on are potential upside milestones to still wondering, just that guys that that that’s I of just It to you eaten going is the about have the at some price, situation fixed back is has XXXX, sounds like and a XXXX, on up was the big But happen. contract going big going for my way it? retirement, Just risk was project. right recollection to labor Kennedy, risk think

Chris Kastner

up wouldn’t front with we the necessarily complex really EAC a deal all I of it’s there’s the lot that of very we eating I in say work and upside. conservative how would are us. say in

So I would eating all up the it’s upside. not say necessarily

Pete Skibitski

Okay.

VCS Just muscle Block Is just two kind a over the IV follow-up bigger kind next -- relief Does Block anything you is mover IV than margin lot of to that, years? roll-off in a that Newport wise? of else? is give the the that News, more

Chris Kastner

Block give definitely more we moving delivered us V. Block will after a confidence forward transition IV It those lot boats get and into

Pete Skibitski

combination on it’s just Block -- been is that your but Chris, of fair? kind a your schedule. unusually that of such all And that’s impacts door IV aggressive the Is on obviously, had why Okay. side, that, programs, a labor kind

Chris Kastner

in Block pretty on IV boats. We impacted impact Well, expectations material reduced which XXXX, had by right? remember, back those profit was most our COVID, the really a

need So them. need get get them delivered. we to just We to through

The program get Newport boat of are and News to pretty cooperation schedules those between senior now a Navy really electric schedules. right program and through lot stable

V. then will just we them Block get and to we transition into need through So

Tom Stiehle

could V, Block IV that, has IV your XXXX. to hop been COVID Chris, or that so I on in if on question Pete, with too. XXXX, yeah, of

So those some it’s contracts run costs. long with EACs rate, in additional had the have

and system give there. just we us pressure to the One, boat also those a done two-fold. portfolio But then boats learned, have IV News, Block and it’s you list in come it’s getting those lessons the on the time metrics think Newport that the mix that about the the on at talked learning I down alleviates there’s -- boats operating the curve, so there.

are with all is the a have, of you go line there, the the unit-to-unit same it’s line serial with the production modules boats go then from personnel. some truly programs most It production and will

the has then and of through potential. V, which getting profit that kind higher lifts IV Block benefit So

Newport And will News. at portfolio the preponderance We mix of take the the end of year. it over crossed last then

Block sales is V and the IV. now between IV in already and V So proportion now more

to natural potential Block to on going is improvement learning V accomplished and being Port’s and then progression So portfolio. be affecting there’s learning the of higher for that profit a be going with boats New

Pete Skibitski

guys. Thanks, it. Got

Tom Stiehle

Thanks.

Operator

our David next Strauss comes Thank Barclays. question from go you. from Please David. And ahead,

line Your is open. now

David Strauss

Good Thanks. morning.

Chris Kastner

Good morning.

David Strauss

$XXX that $XXX looking correct go number are us XXXX, the XXXX. you maybe or cash I have sorry, you for had cash, I past in to how in Tom, like in back you bridge around similar $XXX and at then have but capital guess, in could us a question capital. -- in quarter. working gets the you from CapEx for are in guess, mean what asked working big little I obviously bit that working fourth of looks million in XXXX there? Looks like is I you capital relatively a million the improvement And it for that, else I your help assuming million, to neutral into guide XXXX, help,

Tom Stiehle

Sure. will working break last points I through Yes. I that. hit to I hit. on percentage that capital as I the have will want walk several you I down.

we there. of So slide PowerPoint presentation updated on the XX have

million, cash to $XXX against at with $XXX $XXX we million in million and finished re-guide XXXX. million, the $XXX that you finished pretty of midyear $XXX of down an $XXX million to flow the we expectation to start $XXX we then free million, year QX we healthy million kind with healthy pulled told So at

million right We and million expectations little $XXX pulls have so to ahead we taken ahead we Obviously, bit million. million $XXX discussed $XXX XXXX here $XXX have of our to the now, pull $XXX reset down last hedge of a time million or midpoint that we of expectation. and we that because the

You in just XX% -- of X.X% of working we right, XXXX quarters capital, were and last we you quarter ago, are at finished range of the XX.X%, to up at your working were we point capital. a couple

of just been ships, As four launches we workload we the we have in see cash five-year half going years cadence deliveries to and the half that’s the front we three more saw the the and the what flow on here. are last and years, have that over exactly back the or commitment free guiding of

at three to look XXXX. see from are you chart, XXXX five in deliveries will If in deliveries that the going you we milestone

We also three have launches XXXX. in

So following that up we and year. the then of two And year deliveries we that’s XXXX. that, perspective three a kind have launches it and going pretty big on in forward to take

there, flow will lot us rid go of free retention helping working activity a as forward. which cash leading So that and we continue have the of we the capital, lift getting the in

Also, up finished working it would just as we at that, on much you tell capital, as I a X.X% will bit. grow little

We have had. have a that advancements we on couple incentives got of

So working we will go from in X.X% to XXXX. X.X-ish about capital

couple capital re-guided deliveries of there. in of working headwinds in more hurts. a So XXXX from slight helped slightly rise so We on CapEx X.X% dollars X%, to

but will finish right? around with is $XXX which we $XXX deliveries and see million, repay working to all us, mind you, And XXXX capital about million. COVID, So things launches, up against those right now two has

confidence going The on with way I where look at it and you that. we give are

million, the million out million a that $XXX We $XXX $XXX million, straight averages about commitment, the million and years have in against now that stick $XXX to BSC five-year year three $XXX you whole need. at

running are revenue for and retention we behind first So the was there but expansion. grant with years, margin we natural a three knew with

now. we they board we them And I have onboard first the contribution was happy XXXX Alion made. for with year. had also on the

and the they the If I Alion in for contribution Alion with and on billion with to am recall, happy be took we will made XXXX you XXXX, $X.X billion board $X XXXX.

XXXX As stay flat to we XXXX. look -- going right, EBITDA from margin forward,

XXXX. expansion into margin some foreshadowing are We

the we margin guidance gave incrementally We in we have revenue now topline in the higher you expect guiding growing continue XXXX. million into we Shipbuilding that right will and $XXX and

cash had, ask million, how make you And you we to out, million free flow it $XXX a two $XXX free have be $XXX $XXX That repayment are to as flow. at the to $XXX had the three timeframe, sense cash million FICA actually and $XXX and $XXX normalize of the which of look XXXX for was helped really but north million the also benefit in and million. to has million we million release, if years we I’d it COVID how get million out take it, that the marching had the that $XXX also things

and is how million million The to million first $XXX really repay of I million. $XXX million FICA XXXX $XXX three is the the has So is years, look $XXX about in the $XXX million million. $XXX $XXX it. of at million the $XXX

$XX normalized there’s now another and throw you $XX that million. of a that’s XXXX million FICA for So million for XXXX, that, in in $XXX $XXX million $XXX that’s about too, million,

normalize So have at XXXX more with gave look for million have match is $XXX million and seen $XXX-ish a I only have year we year. I you of we COVID repay, $XXX FICA it’s million, guide this it, The last for million because to what $XXX because COVID the repay. of $XXX really to we like million

on front burn cash. $XXX year with have a down of it’s and to pulling So top that’s risk another million the million and in midpoint, me year the of I $XXX

am three years. average I comfortable million $XXX of with So by in passed how margin first the

see is to, to piece we X the do how last And about going working get you we then down. is $XXX to on up that swing points capital the million get how

X.X% XXXX $XX.X million, XXXX topline X the finished for we swing of going will below million. down earlier, points then mid-Xs margin in mentioned about I to and is we X% of $XXX be for As XXXX, against it’s the and

have So midpoint $XXX I growth got million. million, because $XXX revenue million at $XXX and of you $XXX is expansion. the margin million we still plus

numbers comfortable we I The with where am are right play So quite now. out.

you down questions, afterwards, we that our further. -- any you break you have can can as we have for If calls

David Strauss

kind That’s there, which not Technologies, about follow-up is those Okay. what look are out well at Chris, Thank those as we of margin services of services term? Mission do kind right on lot business. your this How guess for you we of And the the companies as a below longer that. pitch detail. just I you EBITDA typical a and way I typical see is of XX.X%. think to kind of mean

Thanks. there? I about think margin, So guess, those potential EBITDA how do the we

Chris Kastner

David. Thanks, Yeah.

have vast of remember the to cost that work that majority plus. You is

think you a and a that lower do arrangement. of have solutions percentage. price for we as that upside would into So opportunity sort more I EBITDA present fixed there’s move indicate would

not for now, there something evaluating. to right are and better are is going improvement get than that to opportunity that’s that We say we but prepared it’s

David Strauss

you. Thank

Tom Stiehle

Thanks.

Operator

Thank you.

Harned Our go comes ahead. from next from question Doug AllianceBernstein. Please

is line Your now open.

Doug Harned

Thank Great. Good you. morning.

Chris Kastner

Good morning.

Tom Stiehle

Good morning.

Doug Harned

still there. I and certainly the that a this had that benefit, the Massachusetts out you what New flowing was Jersey to you have take and the to News Columbia-class go quarter. So if want That QX want X.X%. I understand margin to Newport follows got And I through back is X.X%

Newport so work much Block in margin you charges And how past taken this, overhang that the have would of those where what past, low a I mean, on have of I to IV of due News in the is charges. call, done you kind the

So then up? should under expect step when out those, you a from we get

Chris Kastner

related there. to up. Tom absolutely Well, There’s yeah, are Doug, an and we jump boats so overhang we this that should is with I margin start dealing IV and Block expect Chris. a step will in can then

to we think need get XXXX up they being be as go conservative, Now that performance, I schedules we right, need Go delivered. are up labor to the now. we to because But working overhang need guided and to we sure IV, execute. make previously, ahead, so we and Cost right consistent on said on very we relative day. are get Block you those I every Tom. haven’t trained those And are shows beyond them and

Tom Stiehle

I and can and sales. So XXXX, QX here talked on I Colombia on board back hop coming Sure. took If Block in that, that’s you we with what tell would back of the IV portfolio right? of about we the

new a along right program stock contract. booking across that now that’s that’s So

change change, has pushed I change have some and to unadjudicated in through the system. that still proposed get

we until RC that’s So to conservative definitized. XX both that That’s very is too unadjudicated are contracts. are XX changes and as those type infancy boat in going on increase, cost

as that portfolio little has it. of higher level see we the just So a bit

lastly, said upside as good a as completion, I think, we earlier, then, down its forward, as And burn there XX Chris potential performance go for with marches here. to there’s risk additional

where ships want line. us bit booking overhead, of think pushing are a see conservatively as right too in I now, think situation I milestones, to right labor. So we the drag down find prudently many are just over a little we the ourselves we on goal on not to And ships now

Those and forward. two potential that move the the will Block in for portfolio as the as Block assist think, well V as XXXX mix of each we I deliveries I mentioned small is and XXXX, margin list, IV with gets in

out profitability portfolio of assist XX the and maturity and the program with mature at year, think will will here well. as a Columbia XX focus this of I

Doug Harned

of then the just there’s have if a raised. So past I charges -- are other a is IV, overhang contributor, things number of but Block you other there still it right, these

together you number a I sort of they boat that mention Virginia-class. of it’s Can through when deal Dynamics work talk to -- similar related blend how sort through. that if they the you their General about labor call problems of and been shipyards the QX time things they and working you and did over you somewhat how to work issues… attrition and and wondered changed working electric are did across of highlighted these have together how just with are So with issues

Chris Kastner

Yeah.

Doug Harned

all of inflation, these things. … sorts

Chris Kastner

important closely an Newport for Thank Doug. how the that in and executed. very question, one. you they when team, work The News what together EV gets work It’s understanding and work, that work

if Their yards they efficiently together. the deliver there’s done be very all are So there work issues closely to aligned labor of the movement and objectives working it’s most are between IV Block where boats. could completely

aligned Everybody those from delivered. are the of plate executive as force. deck I also all well. all all Navy the to in It’s our and is senior get And boats IV to Block would objectives is engaged the add

say Colombia, managed not outsourcing to staffed other, our effectively is we and only production get ensure are to Newport execution And and but schedules. Block sort between each I will that And that IV we working working on on working of meet is any News a fully that hard very ensure are there. we -- that we

Doug Harned

Thank Very Okay. good. you.

Chris Kastner

Sure.

Operator

Thank you.

question from ahead. Gautam next Cowen. comes Khanna from Please go Our

now open. Your line is

Chris Kastner

Gautam, are there. mute, Gautam? you out on Are you

Operator

are from getting we the not audio line. Unfortunately, any

next the next ahead. from So Shapiro to from move George question. Please go question we Research. our Shapiro And comes on will

Your now is open. line

George Shapiro

Yes. Good morning.

Tom Stiehle

Good morning, George.

George Shapiro

the I Shipbuilding was you X.X%. were X.X% up early and you to curious looking X% did third wound quarter that for with you November, call margins in when

what So business? missed just be would predictable that I of somewhat Shipbuilding wondering you here in because two months, sort thought

Tom Stiehle

and of to Yeah. talked the year guided remaining the and half a XX QX that for was had over we year. year, the half back weeks that had and the X% year of drag the in of we even just that. It that about We strong the end the the at lane thought first X% of was we we

of labor of and little yards through go then we EAC the at the the flow about, where and would there’s that as shortfall drag and how a bit medical we a drove we through we there, couple on a cost look thought performance take or overheads the a issues we overhead on actually land. hit shortfall the talked But boat non-programmatic on just cost and that saw, that of

X% did But rolled home. the the there We So want and the a see guide stay call, bit how as that thought on we little kind to call if a I could out. on of I just on you X.X% focused it we the up, of saying year get at to was plays EACs was drag.

another then it, that and some perspective, From both same the inflation previous type the here. overall, supply this year, if with chain, you of a the about and effects of say and this last drag with had we on then I think George, inflation, News upfront, demands X.X% COVID year, one. big X.X% hiring year question, performance the about would to Newport year

the would home point, team far on flattish News So it. and as get your Newport came am I quite But we we in thought accomplished as a we that comfortable Newport News than little to QX what with expected. promise

George Shapiro

And quarter? EACs did give the you Tom, for the

Tom Stiehle

That We but were saw net have I upsides $XX tremendous can. the for perspective, $XX them, didn’t No. million. -- have at yeah. a But I yet, gross million. from the that were Not was million, gross what a just the downside. we quarter referenced unfavorable a did, Newport was didn’t we of News. $XX I favorable just

at News, Technologies. And Mission Neutral Newport XXX% basically effectively, of about and that was Ingalls

So Newport it divisions unfavorable XX now. was quiet net the of a other at down News that of corporation for saw and the two

George Shapiro

very much. Thanks Okay.

Tom Stiehle

George. Thanks,

Operator

Thank you.

comes Seth from from Seth. Seifman Our next JPMorgan. question ahead, Please go

open. is line now Your

Seth Seifman

much very Thanks morning. and good Hey.

Chris Kastner

morning, Seth. Good

Seth Seifman

that or about some if that that Does up little Is of of expecting for Xs of and yard and Newport opportunity Just the good low you we on for the some maybe in associated basis upside midpoint of typically some the do way should just How qualitatively, think being for margins the think there’s the points bit be a you Tom, of know on maybe segment expansion in overall guidance. mean improvement Ingalls? to talked given that to each the up you the points we or maybe follow margins. XX more potential one-timers in But at that question, at import this milestones follow -- the there are headwinds guys news shipyards. with year? basis Shipbuilding that morning. Maybe don’t to kind I XX are XXXX. about to guide News XXXX up

Chris Kastner

into News expect don’t can I will don’t we get details thank saying We will by better So you shipyards. guide the Newport be then year. that. and start do this But firmly for Tom and I

I think well. they very system operating are executing their

I think more stable. labor is

stable. the think more is I supply chain

momentum I think the team News this is has Newport do I to think going better some year. and

add are as well. they So, Ingalls, that, Thomas, with stable you want anything I about to think, pretty

Tom Stiehle

done guide are ships what know they overheads, three same but talked team, things they XX.X, historical you we the last a with those have that They about, building, division, from operating production. leadership. strong that the a we portfolio years, am pressures basically don’t but perspective, labor for under there XX, are finding XX.X by very I the

So I well. they are would perform historically, think continue to going

yard years. last chain We But over stability the performance stabilization way News COVID Colombia. in think as Ford that perspective, fight a and expectation some inflation, had back just can both schedule little in two the the Newport and We and pressure, it now is new from talked that better. supply you a here technology in stabilization perform see see our with I they hiring and through hiring. booking XXXX, we some about here, bit that started of and And can

that So we go I forward expect to increase the as here year would too. in

Seth Seifman

quick to Great. so and question similar allowance I was you said, then up in think valuation type X.X% what’s driving Mission like on real And it a follow ex on in there the XXXX Okay. maybe Technology, EBITDA XXXX? margin Great. of down the

Tom Stiehle

the guide. just are We being on conservative probably

a quarter X.X%. of had with out So we it, X.X% was the impairment it

X% quarters at X.X%. Last said, And I Xs as Mission unadjusted Xs. from right was the had Technology have it -- was X.X% adjusted now. was low to low year the anywhere We to

just function it’s a think of I So net base. sales

has and fixed have people there. pipeline year-over-year right good right have pipeline is strategy. think a costs on the semi-variable operation. more with the and mature. board grown The we We It’s sized We the

is done I And and HII That time. mentioned my under it and I can on family, performance. in the that into behind think with the bids, Technologies integration focus Mission was as the that execution us, pipeline, with completely on budget notes, team

Obviously, couple want of see conservative. a of that division year. the is to think more X% just to last we I X.X% out dollars So being

units had growth We year-over-year right growth guiding are Mission and from X% each did XXXX business see to in grow now. XXXX the Technologies We them. of to

all So are positive signs. those

When and I if on hit, X.X% seeing would be I of going it. expect the waiting over that we awards X% the just the are end is to not range, think to the sales happen. upper

Seth Seifman

Great. Thank you very much.

Chris Kastner

Seth. Thanks,

Operator

next is ahead. Thank you. from question Cowen. The go Gautam Please Khanna from

Your line is now open.

Gautam Khanna

Hey.

I Sorry you about hear me. hope can that.

Chris Kastner

Thanks. Yeah. No.

you, had we Now Gautam.

Gautam Khanna

some Great. us the I give milestones through Thanks. of could on Great. year. color you the if the curious just timing Hey. was

month tell move of should the there’s to if be watching… anything has we or things like, in potential If that’s the out you December us can that

Chris Kastner

Yeah.

Just…

Gautam Khanna

happened … in terms the of way QX things [ph]

Chris Kastner

already pretty XXXX the and I QX, XX, then that across was is in QX mentioned excuse light. Sure. pretty Gautam. QX. Tom look QX me, milestones, yeah, but XX, think, you Sure, LPD When at evenly distributed CVN The

year. the at of that’s the So end

Mississippi, in but the of to team the We of got end we in one confidence one watch. a that’s down year. So the lot that’s and have the will the towards

Gautam Khanna

on quarter then to... And you. on VCS, Thank respect just with incremental from Okay. schedule anything curious last

Chris Kastner

schedule the Pretty really. Not a standpoint from program. stable VCS on

construction We it’s the day. getting movement they stable. are I to it They team. but that after got here team have the hand pretty every and to it program are team, there, learning and and

stable. it’s pretty We So to been on. stay need

Tom Stiehle

one-off has and and when see launch milestones, and Chris XXXX about that talked XXXX. sell will that rhythm program, in XXXX in one saw we the of the that in you

So we are working it.

Gautam Khanna

last that in we anything the can material, talk as consistent point, in just you but to aggregate kind anything, on about that? VCS yeah, us program assume And on never that of can Okay. catch-ups can there with tell XXX respect you negative call you about or it or negative marks out were can anything

Tom Stiehle

was the which programs, was in to was mean down to significant the nothing really that, Newport here. of the sprinkled they on News at and I keel really highlight highlight but net -- the over there here. keel mentioned just I Nothing kind

Gautam Khanna

Okay. guys. Thank you,

Chris Kastner

right, Gautam. All

Operator

Thank you.

Noah Our question Goldman from Poponak ahead, go Sachs. comes final today Please from Noah.

now line open. Your is

Noah Poponak

Hi. Good everyone. morning,

Chris Kastner

joining. for Thanks Noah. Hi,

Noah Poponak

that is to margins appreciate business so statement if to and pieces. and there just I it out the flow and Yeah. history, while have detail pretty a of look Sure. forward. gave for on kind there I a ranged I opportunity the grow long lot Tom, you a the going topline $XXX sort appreciate of business you the and at are and recognize million just expand the million But some $XXX zoom to margin. and breakdown stable flow cash all cash back of moving

kind in stable. the that to I there working $XXX going $XXX million $XXX as million sort working a you million, said of neutral. -- predictable, million CapEx The a free sustainable the part statement reason is that of is eventually guess, expect It in earlier recurring not should that base pretty of some other million? business midpoint flow $XXX about capital. sustainable flow, sounded pretty the engine like think forward of of or think I is therefore, cash the looks cash and of net pension that making up you of $XXX think working I And XXXX change looks capital

Tom Stiehle

Yeah.

a study and time that hitting former the now. with that’s So great caveat, right are it’s the So former question point -- it’s a the we all and right? we

been We have impacted.

that. statement, have repays were COVID, tripped If after we you to you in the Obviously… I’d the things XXXX, happening. up XXXX and million. are COVID $XXX you at cash million payments and to and those normalize $XXX couple of from have A the look tell flow XXXX, FICA

Noah Poponak

Okay.

Tom Stiehle

COVID. Shipbuilding window, we this dropped have in through as run prior kind has of … to the margin

So we that’s going there have have place. that The incremental growth here when through backlog shown in and forward least working ourselves expect crunch, with you revenue kind with X% are improvement. fighting and we of back this labor the we get we at

So out. I that can you model think

launch we sell carry the in what Block -- forward, rhythm rhythm X% working go in XX, Build to the on be annually, two range X% the we right that, with capital the are off The as is by of and V and VCS, X, that yards are X. following Columbia doing I DDG boat behind a we believe Build will good program both the now,

the think on yard timing when to down of portfolios we and going are each on the so. in are they out I settling pop So the mix

now is pop the like with with Mission because expect. what of Alion down. down sales traditionally water numbers and We would in we have That past, the more little to gets told bit, you in a kind X% a X% of Shipbuilding the Technology base

in Shipbuilding to down X% in or for corporation the range were ourselves we say, in about, think, X.X% QX of QX We the We XXXX, If XXXX. now I were the just from we finished go X.X% at the X% just normalize the in to of sales, to X.X% in first XX for we in go XX%, XX%. as X% talked working highlighting, We range at see that of we we to and traditional were are at have will XXXX. Shipbuilding of right, for were you capital. the X% that we That’s year so. what Shipbuilding years in at XXXX,

as are our with we to have Mission normal sales is we sales off X% the we performing in of are including of backlog, are selling Technology or low end is And ships that’s adding at the we work, a the as schedule, think my long on rhythm timely. either Shipbuilding being which although subside, range. I so all sustainable

I have is we think and think the going what incremental in margin are revenue the we coming that revenue that offsets years. -- to an

going of that start a still now million am I is the rate run So north I a $XXX be couple inflection bullish to point of years run. to that on kind and XXXX think in of from is

Noah Poponak

Okay. flow a $XXX in is guess, cease capital I get about working of few XXXX goal, cash The million have working million to positive midpoint you then the capital, million to once capital $XXX if to north $XXX in years, change of working the flow. you

of knows So what it’s XXXX going but that. directionally not would exactly mean, have million, be, I who to sort

get you grows, the that a back $XXX from over time down -- there as step business is to then So as million? XXXX and

Chris Kastner

Yeah. Noah, we are not discuss. going to

Noah Poponak

You not. are

Chris Kastner

We a benefit numbers, not to to logic to free if stay okay. we are right you going capital is get it. think cash not But going The down I is And are now. your forecast working those going XXXX business from with grow.

it get margin to You are going have to growth from and improvement.

of there. your $XXX So free do continue But to definitely XXXX in then million believe from is sound. I get logic and we grow going that to north cash think is

Tom Stiehle

I COVID walk tell I how we out see from you going $XXX-ish with us $XXX XXXX $XXX there that with stick will to the million to So through in telling of numbers, $XXX can right? is incrementally guide going normalize another COVID-adjusted, that’s million And million year, the I $XXX XXXX capital and to XXXX. you that lot are of you the of working then million. the million this a get because we am

what’s So just rate. that say is the run

at… looking are you think I

Noah Poponak

Okay.

Tom Stiehle

right you it and on guidance… will provide the way we model … how

Noah Poponak

Okay.

Tom Stiehle

for … a year XXXX that. from

Chris Kastner

Yeah.

Noah Poponak

when could on time but stable? do that’s situation, you on then, much your with time amount you in. you of labor, And people to I think labor amount unpredictable, on the but it, need unprecedented I development pretty normal -- time something but -- close been on get spent to the you hiring to time Chris, get in it’s churn maybe you obviously, guess the how you you business, do of and to Great. some just and just it, are it’s more of an the something guess spent how have

Chris Kastner

the shipyards of than ago, year pivot absolutely the that’s stable was hard training, the the it’s they to leadership put hiring, work, Well, now testament Yeah. more who have it a really And increase training. to increase kind in were a okay?

better. it’s So absolutely

I don’t a lost you if was have a done, people swath we large know ever in generational workforce There through right? our pretty where change COVID. of

are retraining happening. foreman workforce we and general a foreman retraining So that’s and superintendence and and construction

the And is potential learning thing can ships. best the greatest do we and delivering

five learned continue to been that, learn year. a to going you have We a to are have and this are lot. you deliver lot they Once going through

I made it’s have ever think done, think progress. you So we great I think have from only don’t I improvement but here.

Noah Poponak

Thanks for time. the Okay.

Chris Kastner

Yeah. Thanks, Noah.

Tom Stiehle

Okay.

Operator

would closing Mr. like session Q&A back now our for today. to the I concludes This Kastner call any remarks. to you. Thank for over hand

Chris Kastner

will the I Thanks hard I am team hard moving stakeholders our all forward. work the by all and doing Thank for you of off in the proud joining are creation pay for for we work put call. value again the and today. joining confident am

Operator

call. today’s conclude does That conference you. Thank

disconnect. now may You

Huntington Ingalls Industries (HII) 9 Feb 232022 Q4 Earnings call transcript