Earnings call transcript Q1 2023

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the First Quarter 2023 HII Earnings Conference Call. [Operator Instructions] Please be advised that today's conference call is being recorded. [Operator Instructions].

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

Christie Thomas

and XXXX everyone. Earnings operator, HII to First Quarter Conference good you, Welcome morning, the Thank Call.

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

laws. a the are historical that of safe estimates expectations harbor facts made statements forward-looking securities company's not and our provisions any are statements considered made As reminder, or today forward-looking are pursuant federal to

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

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

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

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

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

Chris Kastner

you everyone, call. Good morning, Thanks, and today's Christie. joining thank us on for

to $XX I national a continuing in quarter backlog excellent in thank we nearly deliver our Technologies And support Mission start results markets employees XX,XXX of our services stay to reflect products to executing security. business that the support our First billion growing and year our customers. course as want good and for of on

believe consistent track Our milestones fundamentals delivering on our we prior shipbuilding fleet. for focus critically the remain priority schedules XXXX our XXXX and needed on to our a in expectations. continues that, With and be and the shipbuilding, driving with assets to

in through include these specifically the expected ship and of deliveries, XXXX year, As is quarters. and we fourth X discussed up pick the last X third ship and milestones launches quarter, to cadence the

construction we would schedule, to CVN the once will are Navy's contract change Navy a Kennedy operational allow period with we finalized, in the ship provide work capability this more delivery is this move the to post-shakedown and on dates closely crew XX at for a baseline aboard capable optimize And fleet. change more I pulls Ultimately, ship the into change adjust from will order availability note that the delivery. which the working to join accordingly.

on resulting Now the first first XXXX, first record XXXX. per line Page of quarter X our earnings $X.XX the growth let's for billion. from quarter revenue turn the X.X% was was Top of in in of from share quarter, the Diluted to presentation. results quarter $X.XX down of $X.X

approximately funded. New contract the awards were of $XX at results approximately during end the which the billion, of in currently $X.X is billion quarter which quarter, of backlog billion $XX

were critical Marines. detail, the continuing first at production line contract awarded we billion serial of In dock construction a product design transport the $X.X Ingalls, Navy U.S. for XX, quarter and amphibious this for the LPD and

were allowing to we contract major material X the X and News submarines next in recently commodity to and the advanced components awarded $XXX Newport News, Columbia-class. Newport procurement Columbia At million, advanced for bill begin purchase on the construction

plus of we Technologies, Finally, revenue X U.S.-Africa revenue quarter, the at enterprise X-year base program, press X.X% with saw Mission services to we Notably, provide over and $X.X the quarter this order for awarded margin quarter personnel the first were this and task a options, billion solutions Command. recovery, strong XXXX. growing

programs, as as Flight reflects continues which The in submarine Washington. attack under XXXX continued request President budget Columbia-class The the nuclear and destroyers. submarines The his and is fiscal Congress. budget submitted proposed in funding in by overhaul industrial budget base. investment aircraft investment activities to funding year X March, programs consideration carriers, Arlebird-class shipbuilding second Shifting well an now Virginia-class III the in our carrier refueling [forward-class] X aircraft submarine, request

not last of $XXX procurement these Congress year. the of included USS included funding programs the overhaul Boise. LPD Funding final for advanced side, maintenance the increment was the On or although request for for destroyer, a for third XX fiscal is DDG X, engineering ship million provided includes budget the program but LHA

We move with will customers the continue to work we through requirements Congress process. budget their and to our support as

shipbuilding, as AI, such and align warfare, capabilities the reflects in year XXXX Technologies CXISR continued Mission request capability with systems, fiscal the investments Beyond well electronic our cyber of enablers, advanced and technology autonomous which division.

hiring quarter, We at is labor year workforce approximately This craftsmen recovery post plan in over pace of reflects full rebuilding labor. X,XXX to women Turning stability hired and in of solid which our successfully and XX% the for X,XXX. our COVID. continued first

of workforce remain training hiring While focused and to our our is programs. we continue hiring, and retention trajectory, on development on the workforce positive a

workforce For of graduation example, our apprentice from strengthening apprentices News in March, and school, skilled leadership our the XXX we pipeline. Newport shipbuilding celebrated

health Moving seeing chain, our on are supply the update where to an times. lead stabilized of we

lead seen times activity. important risk We the in contracting creates manage we return future have to not a increased this these levels. our It reflect our pre-COVID only is not current programs also that but for

opportunities manage forward. a quarter to solid and with had sales time record positive, labor strong we've well award backlog but summary, and our first to the on as supply chain lead budget. start need defense these given certainly in visibility based progress long-term future continued risks In as XXXX we continue moving stabilization significant to is Seeing

meet fundamentals, emphasis We productivity customer are on maintaining to our driving we ensure commitments. our

financial over turn to now remarks Tom? Tom results. some will on our the for call And I

Tom Stiehle

review Thanks, first Chris, morning. quarter and Today, good results. I'll our briefly

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

X consolidated our the on with Beginning results of presentation. Slide

quarter year increased Newport at This a first compared quarter HII. attributable Our first same of $X.X for result was Mission to Technologies. billion last and Shipbuilding growth represents revenue increased X% News approximately record revenues to the and period

prior year by for $X was segment and period, the income to million prior of operating margin more largely more year lower a income. flat favorable favorable FAS/CAS offset million taxes in to quarter income period. essentially by income operating or state due from compared increase of increased noncurrent primarily operating and was $XXX adjustment The the from first X.X% of quarter the X% Operating operating XXXX, the

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

Slide of revenues LPD, on same X.X% from the last driven and Ingalls NSC decreased year or $XXX Ingalls LHA revenues in X. million retirement the offset partially programs. revenues. to in primarily X.X% million program period LHA higher on due Moving from by margin the year lower-risk quarter $XX the primarily DDG to of LPD million lower on and quarter $XX programs, income operating operating last the declined and of by

quarter very provided a Lauderdale, at Fort It LPD delivery clean is included important which of to XX, remember that of risk first retirement significant XXXX time. the that

period revenues last due Newport by aircraft increased News, $X.X to the and from services At of carrier X.X% revenues. in submarine or both support partially million year billion revenues, offset lower $XXX growth by same

operating million, was quarter enterprise margin risk was Segment last or $XX XXXX first down slightly to year quarter increase compared of X.X% News in the primarily $X of XXXX. of of Newport on CVN XX. retirement an due million unfavorable X.X% from operating income the first to

previously X.X%, quarter the X% in slightly we outlook first the margin for quarter. provided below was the operating Shipbuilding

full year is the unchanged. for outlook Our

XXXX our for of which As expected the we for milestones drive the XXXX. have year, performance noted concentrated second are will our previously, in half

includes cyber higher to At first the electronic training X.X% CXISR, volumes primarily virtual Mission million increased in growth solutions, live, by warfare which sustainment. mission-based well $XXX quarter fleet Technologies, businesses $XX driven of in our and revenues and of as million compared constructive and XXXX or as

amortization the million million in Mission include first in an operating first income purchased quarter of of to $XX Technologies the operating million $X compared last to year. year. of $XX results quarter Current $XX of intangibles compares income of last of million approximately

same X.X% last compared year. quarter Mission was the Technologies the EBITDA period for in margin first X% to

results first material the manufacturing as that quarter, provision Mission for to loss contract record a our relating a to a whole. During not Technologies issue was did a financial

Cash or cash Turning cash was free This of X.X% $X million compares used operations million of the X.X% in positively cash operations $XX net expenditures negative capital flow free used expenditures first to $XXX of XXXX. in X. quarter, and and million or revenues flow were the revenues, resulting net of Slide in $XX million. of of million, to $XX quarter negative by $XX of million by

to were million $XX in quarter. other contributions and plans our postretirement pension benefit the Cash

we During paid per $X.XX quarter, dividends of or the first share $XX million.

We cost approximately the aggregate also million. an of quarter XX,XXX at during repurchased approximately shares $X

on Moving Slide to X.

free cash cash through outlook track. continue flow free repayment, Our unchanged all shareholders allocation do to we which that our capital flow through on as highlight to XXXX planned priorities. substantially is distribute to debt after XXXX expect remains will I'll

X. Turning to Slide

We see the are XXXX color we guidance some on reaffirming second quarter up. shaping providing and our how

CVN with year to updated, make second reaffirming modification clear delivery the the the is outlook, milestones XXXX. are the our full once the moving for quarter discussing to our will that XX knowledge be want completed, remaining Before PSA guidance we that I including

We able XXXX that believe to XXXX, cash reach perspective and margin outlook both agreement and be we'll reflects neutral our is from and an to this. a

largely quarter, year, margin the be first quarter be Regarding the of consistent to in occur. when to shipbuilding which half expect shipbuilding second with consistent meaningful does is to shipbuilding milestones That and expect with revenue X%. the operating second results we approximately imply we our improvement

of For and Mission $XXX of margin Technologies, million we revenue X.X%. quarter operating expect second approximately

to $XXX million. for our flow approximately no second expect negative free We is quarter cash the to year. be change there expectation the Again,

predominantly fall and in our fourth with calendar forecasted over our quarters, year. will the both the normal cash third Our milestones cadence cash generation consistent and

in we our first call. results quarter summarize, To the were quarter expectations fourth the provided with on line largely

we We commitments milestones are full laid execution and and that guidance, we've pleased on reaffirm the out. remain to focused our year hitting and

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

Chris Kastner

Tom. Thanks,

point have growth, executing like things finally, to management and around XXXX focused remain And update on wrapping framework up, backlog which on emphasize that our employees, the shareholders. out our sustainability. would established and among positioning that for report, describes have I long-term strong I we we our which generate sustainability other Before successfully customers we for published value that governance like recently would will to and

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

Christie Thomas

you Instructions] turn Operator, it over to [Operator manage to the Chris. I Thanks, Q&A. will

Operator

Instructions] Harned line [Operator of question with the comes The Doug from first Bernstein.

Doug Harned

from? breakdown I'm to I X.X% good CVN there. Columbia-class coming across growth give Columbia-class, Can look interested, been What some And ramp, of the is, getting where would to that move as at Newport growth be X% sense on? above growth starts kind of there appear really News you now, you you've getting a us you programs. to can is we to and when expect at of the that Virginia-class, trajectory here say right

Chris Kastner

then previously, that said think, I've will and of in I here. -- the and me let to can the Newport Tom shipbuilding. step majority and Well, start growth Doug, in News then continue provide

and online But a and be more and then greater revenue comes aircraft then Columbia So X%? than could rate mix Sure. is the VI, full growth V right on that as there get the think of carriers into is our potential long-term we shipbuilding we Block basis, think a about to significant Block part X%. become way in

Tom Stiehle

in. Tom I'll It's here. And hop Doug. Sure,

did that. So I partially It offset [$XXX] support feel have there. think some by yes, XX], fleet It is Chris [XX up construction, driven the carrier XX was growth we was slightly in as says, that program, some Columbia-class underneath. million. But and about by comfortable just we good QX VCS

the that. capacity of run to kind have the We capability and

still I in labor by plans think it's have long that of the we term, and governed program here. yard kind though,

it way right on to So take a the I a at long-term look basis. think is X%

Doug Harned

XX. And then talk think -- still than on what surprised about there you you that CVN proceeding now? -- XX. then how unfavorable also -- XX sort happened it in because where was you CVN less me Can Can an of would adjustment Virginia-class right of there is on risk I unfavorable and you was the did

Tom Stiehle

Yes.

I'll take first. CVN the So XX

margin a full enterprise we took. up the little that profitability just be on there the that came Just color we that about the and at X.X%, we'd for thought backing at and was truck shipbuilding. bit X% We quarter on step-back of on majority

find on needing CVN to noted Now outsource ourselves, and panel that I right throughput unit remarks, offload we as front ourselves XX now. work capacity from we my and/or a work time and in the find

embarking project protection, outsourcing increase that There's to we wanted as that still So go additional in And up. that that. risk on many ship, conservatively. make on we sure and we ourselves we're early we ramp on just working to it's booked and out that the some that, that years to work it's as

embark shape lot is growing would it. you of a since dry keeling the I the that. last prudent of I'm cost. thought really that some It's that It's now. would again, take as proud we it is along. in tell just the dock balanced getting ship summer, with right we and coming at ship The steel team the approach of tremendously a to be directing, is what workout doing But additional on

Chris Kastner

Yes. stable year a for Yes, program, VCS Doug, quarters. VCS. after comment schedules the we been couple have sponsor and on for Saturday the XXX have the Massachusetts. being be of Sandberg are that. We'll XXX deliver pretty this the the year. christening VCS I'll actually, delivered for program with stable Sheryl on And will last

So you're then Massachusetts that, year And Block XXX then the It live. excuse out follow. deliver performing me. will that And And of invited. -- V all be streamed will well. is after will

So think I …

Difficulty] [Technical

Operator

gentlemen. and ladies me, Excuse

speaker with lost connection have on reconnect the line. as hold remain them. Please We we

your for you thank gentlemen, and ladies me, patience. Excuse

the back speakers the have line. Please proceed. We on

Chris Kastner

on? still were you Hello, Doug,

Doug Harned

I’m still Yes. on. Yes,

Chris Kastner

know when know the VCS Program. relative at you absolute fell don’t if don’t I were I off. to we

Doug Harned

transitions You schedule. through in milestones by who were unblocked full walking

So that’s that. at you where were

the you broke of think I off middle in that.

Chris Kastner

again. program be apologies where is there you'd order of not the risk. the that I we're I to retiring and the V phase at do on Block Yes. Block just [indiscernible] that, opportunity On think achieve V,

think apologize I Block So the line for And opportunity V. there's cutting out. I still in

Doug Harned

No. No problem.

Operator

line The next of Melius Spingarn from the question comes Research. with Rob

Rob Spingarn

industrial News, -- diverted the that to on Columbia with that potential need the or given to any submarine be to economic fixed from the customer mitigate to you Sticking with the industrial base any Virginia cost? Virginia base keep track Newport given priority to there and is are losses there, conversations if resources

Chris Kastner

Yes.

right regard. there that could our would view, say, Virginia-class I So now. solid point of is pretty be discussions from the on in potentially and our staffing Columbia-class the

don't I that. So anticipate

we expense right don't a that a we training saw year well, trending But anticipate attendance standpoint. as We're you of that a view. trending of the well. staffing good Attrition think labor start pretty point from I is had to is lot from now. well. comfortable a

Operator

line The JP next the from with question Morgan. Seth Seifman of comes

Seth Seifman

on I ask a to of look is variable here the so and bit of and has can we Wanted value I the fairly and -- the do kind different? think And 'XX, I a to then lot know underwrites, XXXX, seems one we each half little the milestones that in half it takes at the on given different. and that milestone milestones this this a a that, -- come there's XXXX that side of year us into about we although milestones. lot guess see of we how we the going half, trajectory half, the second guess, of margin expected first we in think, than second second the then, where how about could in, guess, based margin fewer look that so you're do about of year, than be expansion 'XX? that coming How yards little don't those than expected guess, in 'XX people think in in And looking the I lower half. margins the a for first higher with I the bit see

Tom Stiehle

the appreciate question there. I Sure. Yes.

that on QX. the So say we QX were foreshadowed QX going And outlook see in be the you the of X% way, back can we the half year, did for now milestones is for to that too. which

be to X% it comfortable of do feel half you against does the year Xs on and is the we upper -- in the X%, to and X% the that. going that, back So math with the

and there, EACs major in the milestones, other of I things We on or reason capital either in milestones they year There's can profitability. performance are too, what's right we top in we that have realize. tell that and incentives, we that or contract there, the are also of would other the the risk it's have on there. You factors changes although the back the that are affect you our half in there's whether mix opportunities that risks on the and more so potential. or they're areas, anticipate. either those opportunities, materialize we There's

that out EACs. plays at quarter do every that we So

and We of and X here. statement have condition, cost fluid ships are that we the X.X here those our both over the the there's could it's condition years that work especially RCOHs, This also for that in contracts. -- to contracts, do to change, pop be

So right flux in there's change there. that proposals are

little calls natural we as a you'll out, what cost talked recovery that -- see there's conservatively on unadjudicated a of And those see change. We about bit the is of We've things. performance. what several on the that the into already those contract recovery plays the And here true-ups to is EACs. book

as that scenes So that's milestones. the behind the of there's as elements just well happening

context for some XXXX. you gives that So

more still than XXXX, are there For milestones usual.

X We ourselves V that a the have Block the CVN we ago Block with gave work everything about launches. natural as there'll volumes. and XX. lift talked But deliveries be we on in page We're IV We've holding quarter through. caveat on a X you the past and

So that of to will here. deliveries the closer large ships that have sit we the

the new seen, roll And will inflection the lastly, as add impacts new from and we then us that production obviously, And learning. performance proceed go here, and and forward targets. give we've hit then contracts that will in by will with I'd point and inflationary quarters both that the as years that

As well. successive bills there's to natural follow-on shifts, lift more on in front this profitability up the we speed, get as on a experienced, workforce that

Seth Seifman

guys? you CVN That's that's there And I is want as I a sure is far with and the XX, and event program for talking a reaching neutral margin agreement as concerned really when finalized, estimates Great. you're make helpful. optimization The on as and Navy follow-up, to maybe understand. an for confirmation. a just cash that quick about

Tom Stiehle

more anticipated It's customer to it, benefit have just a and want to be in be of both have us more bit. the neutral. caveat that little functionality ship I capable, that We to be as latest to targets, that situate will work it to configuration. we'll through that. We'll statement scheduled, the adjust get we'll ourselves negotiations one takes on the more a the and we contract, And work.

the have books. that, cash-neutral we and the delivery get statement and Although running work our year, few and ship. we'll that's we through and the years will the the next of for margin- cost liquidation that And retention more of won't that be -- anticipate next release cash it's through

Chris Kastner

base think the contract the also shift. being deployment thing reduces done add, integrating it it's the PSA I a by could relative really because I into for Navy risk here the smart to

it it's real in the So very a definitized think -- We'll development. summer. participating we're that. We over get positive

Operator

The Wolfe line with Myles next question comes the Walton from of Research.

Myles Walton

Chris, I could hold the you thinking comment trials curious, that delivery accomplish obviously, to And sea you both you about you think delivery. back-end-loaded LPD there's for XX? actually to you're the the to be And the to And margin for on able the this delivery 'XX. where see aspect year? have trials time year? and I'm have trials material what's on for is the how need that would that this

Chris Kastner

It's volume last week good that the making It's to and QX engines work definitely lot really we in the on off mix. down ship. when let go really of delivery. a there. trials A progress, They're were

will and of course, team. that progress. confidence contingent labor this But So the that get make of Ingalls hit year, program LPD stable that I'm proud that to confident a of lot in optimistic LPD XX team very we're continue upon, to will cadence we continue stays to and start that done

Myles Walton

hiring labor. comment you you it on Okay. And as up where disciplines on just well? really Chris, in the perspective. a attrition right actually and labor And sound from is Could on showing pinch... the one good

Chris Kastner

it It is. Myles, Yes, is.

disciplines. the positive up as been And in it showing attrition is well. So has right

need You may or rigors in always welders having electricians. moments where you or shipbuilding time

balance a You labor But of bit. might art managing and the of be of shipbuilding. that's kind out

is of year. Team it. start very So we to taken effort, to far. lot focused a stay need It's lot it's thus it on a and but positive a of effort, the on is it, positive

Myles Walton

Great.

for one, that is that the I charge, last K? the squeeze a Tom, And that Mission quarter has was Technology one sorry, size absorbed that? And Q customer disclosed the mentioned can last in. think. you you Can same I in

Tom Stiehle

same Yes. time. issue that question we Appreciate last Myles. is there, Yes, had the the it

you a not improved customer disclose get the no, charge. now the And or I to charge when Q the financials. range itself. the note has material disclosure It's taken You'll wouldn't to that from top our we've a

see So you right? So in won't them come correct, yes. all the

Operator

Strauss The next question line comes Barclays. David with from the of

David Strauss

Chris, you that prepared in in 'XX. amphib was no your there funding fiscal mentioned remarks

ongoing back. update If money us Congress there you the mean reviews, then seem could these kind of status I we on just like there. are and always adds

Just kind stand things of where there?

Chris Kastner

amphibs is is it we they of understand us. customer issue, from pretty standpoint 'XX in We'll to follow on one of the and work Got have Congress ensure with through positive the to just but LPD back you importance XX. we'll ship a the follow Ingalls, budget, The get just as that a process. Yes. chance confidence mentioned, the and through high the that that for that budgetary process. to we'll the to have based XX law it the

David Strauss

of like? in Okay. idea as versus how baseline V Virginia-class next is what point -- your and I this some looks fo we of terms mean, Block the Tom, And we Block much give at Block transitions how lift Some of and that point can is sort there, Block potential today IV year are that over progress versus revenue where margin us you V, of an

Tom Stiehle

Yes.

the programs XX% we off and IV Block year, last of crossed accomplished the over at to find Block better than delivered, although go, of than XXX, with XXX V years for has in successive of XXX. revenue actually floating one So it, the more the XXX XXX as end sell-off then you

significantly more IV with Block So cost complete the books in is here.

is still now. than complete Block XX% right V less

V volume more of front me. of have that have and still mix a on So amount there's in a program large I there. I

the metal that there. the see about, to happening, serial we which pedal workforce, training talked production on labor, system cadence incorporated the at we -- operating getting As keeping that with I the down think, the

in to add additional Block I IV. profitability that's or real potential of V a think going all to

yet, it in program. because see obviously, early it's the don't You

of we're production in getting lot program, program. get volume going efficiency VCS that interest to we'll just VCS keep a the good from the And sales that. working the the So on

Operator

from of The the with Gautam line next comes Khanna Cowen. question

Chris Kastner

are Gautam, you may lost there? hear Operator, out still have Gautam. you We do us?

Operator

have I hear still you. I Yes, Gautam. don't

Chris Kastner

back Maybe come he'll in.

just If you Pete. go could maybe to

Operator

with The Global. question Skibitski the from Pete Alembic next comes line of

Pete Skibitski

think of of thinking to Kennedy us that targeting a point? the were Chris, X% the this margins contract this Is is shipbuilding return lot target at What stretch XXXX you so. still see that range that be now? and that I changes are Or reasonable there? going by you where to after -- or for labor going right a

Chris Kastner

Yes. commentary we I we that We're way give that this look this next for delivering the for I'm our with 'XX on don't to at want ships the of have comfortable year. stability milestones margins improvement and point. the guidance the year. comfortable

working on fundamentals through. coming teams challenges the day working we're significant are the within labor there shipbuilding every organizations The both still but and are challenges, through COVID labor

a X%-plus recover want I X%. to we'll predict on We to to fundamentals focus just X%, it when execute. continue is and don't I So business. to believe still the need

Tom Stiehle

day and every expansion with Chris. that The of with expect and we there every comment with The right through hard. that obviously shareholders Street anticipate it. we've fight We're not could I continue we that, if happy to week And We're margin. now. We'll being realistic have we are here. do We're is that and driving strategy we and too, shared where

attainable. that realistic is with we that definitely the get We ranges give

forecast profiles show we the that we and can The forecast We that meet Street. the and have plans, and our tell strategies

updated to happen. trajectory So keep we that we'll really up, needs every hard like have just every day quarter, to and the but you make we're go working

Pete Skibitski

while of for the under to getting contractual accomplish one back, And guys, [X-class] I in you shook term. in there play you it. Appreciate next Okay. in now big near bundle. another of remember still fifth was budget midterm, is wanted maybe Are a things to me, the that terms But last things out? budget? in contract. was that And looking talk think the one X-carrier And do nothing even were I the those carrier where doing the

Chris Kastner

budget. And the that do way in absolutely and together is still the saves buy the it them and to right know buying money think we it. Well, Navy we

We but that that been shown up have the -- carriers. we is way budget the believe hasn't that, acquire aircraft in yet, to of as -- hasn't right

on manifested So positive to budget, hasn't in the X-ship as with buy, working on work we'll a continue of yet. that the potentially but Navy and then

Tom Stiehle

on buy for front frame, a X there, looking a think time program playbook for buy in when from A buying focused XXXX it's here. And would -- of materially X financial turn we're be at get of -- comment From the time and the the in we centers, We on on. that's the X if it's last construction XXXX. -- that's carriers in not optimistically, AP would to strategy on sense right? mix looking a we we years time. But sets efficiency that. power used we're then what and X-year to XXXX, AP with that be It's buying yard efficiency for our customer, we

on. we're closely what working customer with that's our So

Operator

with Research. the Shapiro The of Shapiro George next line question comes from

George Shapiro

to chain wanted they that on Dynamics their call were in issues General I having supply commented ask, Virginia.

than And just and they was Block IV, charge I think explain experiencing if that. maybe. took I different it you Or more a for suppliers. V There's guess not that. you're could

Chris Kastner

That appropriate. in this Block and are phone V. with call. I quarter, not comment IV we program VCS I'm be both would Block on GD's the Well, can't where comfortable Yes.

GD's And comment to the on IV at. me but comfortable progressing we're our But Block delivery path then for said, on inappropriate I've we're Block call, the need we As transition we're V. where it with to down boats. to would be just

George Shapiro

you're issues? -- supply same the seeing not you're Is So that seeing chain it? not supply

Chris Kastner

we're need to than from standpoint, level into make issues higher it's chain supply but future take current seeing on definitely sure It stabilized pre-COVID. has board a our not a we time Well, I that the lead really. And across our we at stabilized but think bids. on EACs consideration only

from quarters a supply lead they there are they've a the issues, over but chain stabilized yes, of couple bit So time standpoint. last

Tom Stiehle

costs I'd here, EACs. And milestone cost been George. into We've and incorporated future add our schedule projected updated the the Right. have

over You've has been Newport that we those walked seen that charges and of COVID years have at some couple when News the started, last there about. know you

So look as that and from the into booked obviously, today. we're at The how perspective or the put give you with forecasts, to financial an both comfortable axles a in. in And we scheduling Chris the the every said, that chart milestone come EAC material reports going take and the are expected we I'll from XX weeks, ETC indices, we how reiterate costs a -- perspective. what's

George Shapiro

Okay. And break EACs can sectors? and between then, the Tom, quarter the for get net the the

Tom Stiehle

sir. Yes,

XX up early the gross of $X was has on down. up. up And Q, that know now MT and preponderance net favorable that the a was of is you'll the the up, outsourcing we of shipbuilding The $X Ingalls X, that -- is favorable a really, it's see that XX. million. And cumulatively million down of is there's that CVN The the X% you math had is the X that XX was in made up the obviously, $X now versus is. actually X. then what XX and of So News information. Newport revised discussion X, gross million, XX that's unfavorable disclosure

George Shapiro

of the quarter? one the 'XX last years what numbers? relatively more negative I your get of Can free similar in then then second the free drives flow X Okay. mention after you And can cash doubling one almost drives cash if what And flow in here. in

Tom Stiehle

Yes.

in year. guided a free at cycle we $XXX So XX. there's to flow, We minus $XXX minus that We million actually came cash beginning million. We the for have. at rhythm that in cash We the usually in of QX. had users a the a saw

probably collections So some QX better the we timing QX. minus and QX pull XXX just just QX. That's from in QX We're guiding actual now, QX had back to a for the combined the and ahead forecast. for

plan thought right be. still where we're we we would So on on

is in Street where if we're the add And ahead think that, we when QX and which perspective, slightly I look both I The of expectation, good. QX up

talked We've of it at X line about going free kind here, ways. the For revenue cash top flow the expansion. can of you forward like look X

here, their this had remarks, unit it haven't Mission X like line. QX. grew heard Technologies anti-Green the last -- We Technologies expanded QX, top in every question quarter. growth. a in grew X.X% one almost of X.X% X%, Mission from and but Year-over-year, on quarter you And business X.X% it

But good So there. well. really right bolsters we're seeing. a that's that like what I sign I think

We quarter. at We had talked this be X%, weighted X.X%. as The this mix X.X%. it talked about It came X.X% shipbuilding in at said, was growth we about Mission to X.X% and should X%. But was quarter. in long-term be we Technologies long-term growth

So numbers the out. the cases there playing are and

now systems, really lot understanding. and win And operations, units a I on support of think They've restructures the leave From X a you Technologies chosen, The perspective, finished of their I integrated them, and they're they just Mission has they're August. up this now coming behind with processes. execute the on business year focus would the work year, the in the team full-time go -- objective leadership's contract.

I really line growth. about So feel that good top

we've the X% expectation thesis of is normalize X.X%. X%. that, still shape, have the talked know I higher up. year. range that venture last there, the end joint And we in sale quarter, was expansion, that early saw in year. There's XX%. for When margins would about a pretty it. to this the It's place good of EBITDA had X% and We the X.X% that to it's guided out it get to we that And we in Technologies booking Mission that move XX% from the to Xs an low Margin

and think us. is in I real, the front line expansion bottom So of line is of both top the the

CapEx, our X% we've guided Managing here. to

get we've the and X X back. or come COVID, the years, to Xs that of the FICA the COVID upper over line. bottom for a almost last and adds X% off payments So We through the both and high adjustments

I think lift you'll see. there's that a natural

you were from billion easily you for perspective, Technologies vicinity look can taxes then the shipyard X% Mission to Technologies. that's throw take generates X%, just a the perspective, business with take annually, Macro to to the another about midpoint when X that math in of EBITDA in $X.X $XXX the growing Mission at the through a X% million just between at yards. we X.XX generating And X.XX

XXX XXX. So to

But 'XX being to happen there. the is about will $XXX going we'll cadence be we'll yards. us $XXX little the 'XX. get the -- That bit. we comfortable find plus a out-years. plus specifically step to $XXX We've 'XX that lift get as million forward in talked we will the to and the million up up And 'XX across expansion that initial the million growth from will then what working both with come of production to So I'm see margin, into capital get down of

Operator

with of The Gautam the next line Khanna question comes from Cowen.

Gautam Khanna

you guys? Can me hear

Chris Kastner

Thanks, Gautam. can. We

Gautam Khanna

on fit-up? just they to you wanted to what those the I published your the have A But agree guess relative delivery of dates right. dates best for Terrific. broadly as do And last expressed it. delivery those the gave delivery the moved to they with and number in time revised ships Ingalls fit-up. ask to dates, reasons in the why

Chris Kastner

Yes.

look there, different think And of that they Gautam, -- in the can the year, better I so specifically expressions. We seeing we impact of -- we're with is you're quarter delivery processes seeing what dates the deliveries or kind don't obviously, right? delivery. our what some the different X potentially at based indicators could and on our align, project risk of

think are objectives. different different just I So with there processes

but to going at. differences you're So with to from where time have we're time, we're comfortable

Tom Stiehle

I take look ships you'll comes Yes. and analyze that, times, we I'll might other That will boats every times, you we they out don't behind come a move. at year, see tell just it And at I'll it. -- at and and move. too.

date contract then for a move on years, they aggressively. stick they sometimes and And

on run the perspective, that into The customers programmatically the the we see our status the from milestones we're aligned Street. that you, schedules to milestones with of schedules tell our -- go can construction have we that we to, I We're from and programs. master and our aligned both our -- yards

the sure EACs. duration and EAC priced make in an And of understood the programs then perspective, from we to have

it's is here. the sequencing overly when ship boats available, not times, would I ships out when get concerned. of the to available, be the At the and is So test just is risks and crew opportunities, when

them. to here. the And information I XX the wouldn't but of a So every weeks that. our evaluated can and both is important, I updated dismiss They're yards. goes current schedules tell you lot into EACs aligned that are performance and

Gautam Khanna

-- That's I if GD a program? the But you catch-ups seem -- large on earlier when great schedule GD. 'XX, QX like quarter And was charge to the an And Virginia-class, up of just opine have reset, you're follow curious, class just going related could at I come you I'm know the talk kind to question on answer. program of to accounting? not the relative and about that just that if you announced on the curious Virginia since in will, COVID you much to about the differences HII. out way big a Or negative impacts had called was on on big quarter. it of after the on doesn't guys

Chris Kastner

Yes.

Block adjustments adjustments So significant IV to now. we've They had obviously, IV. and we, material with adjustment haven't program time and that enough the mention. was from made have just on been then Block we between But time, to a

if a EACs. we we around very make we have you our process disciplined We're have And do. adjustments, to know, -- as

had adjustment. of between We adjustments comfortable right where got on you've we're significant right there. now a then, material with So made very kind are and now. less it and smaller, We've we

Operator

the Poponak with from Sachs. comes question line Noah next of The Goldman

Noah Poponak

margin down be point, we this or should the at in guess, XXXX? up I shipbuilding to expect

Chris Kastner

I giving Well, XXXX issues, but for up. to improve. unforeseen both being formal yet. equal, chain not expect things I to it execute, barring it any or absolutely issues to yet, or I 'XX I giving labor supply guidance expect on we're all think shipyards macroeconomic But issues expect be not guidance

Tom Stiehle

to. told where to too. want it we I'll reiterate We've take that, you

We We them set plans transparent and you unforeseen fight environment tried that risks market under as because of we inflation and from behind creates incrementally to And haven't the the X years make opportunities. forward. you virus, labor ago headwinds ourselves of It through. X into a as find our our with other we have We through the share margin of be couple new of kind our COVID clearly, performance then got end and when But and them, kind back the of years to anticipate to just operate now. of market. we then forecasts, up, of we right got expand to possible. to we we if pop going work as and objectives inflation, that variants going told tightness the back the

Noah Poponak

XX it is schedule? more could specifics Is that. in moving that of CVN margin us the flow and you in that maintaining possible if remainder? more the And year-by-year Appreciate true how to cash some on on full the give Just while the remainder happens. just beyond aggregate give or detail

Chris Kastner

Yes.

that as mentioned his keep remarks, Tom -- in neutral. we So need to financially

that And that's change, Class so come as we X through the objective.

where cash an neutral on we in risk neutral So on place is margin working annualized place we keep or basis, basis of a and the from ensuring team annual kind in an a that were and today.

Noah Poponak

and flat in Okay. sequentially. But margin back little And Tom, lower got to XQ at the your you've you guide, year-over-year walked good quarter the MT. through it a

latest of I behind the your guess, what's that? longer-term margin segment? the Just maybe on then And thinking potential just what's

Tom Stiehle

Yes.

are shorter, duration online The where think that's in and out. programs we timing. see plays especially a turn for I how of quarters, quick that in is potential top conservative things and business being just that recompetes where when contract that on We'll nature. the and wins

just So I conservative. being it's think more us

for At XX.XX, year. run our position the for the that's we QX, X.X rate guided

business on then of and the far And in about a line So And feeling a has X.X% units growing a It's happening. had with that largest each quarters quarter that. MT that's it, great by is row is too. the that growth I'm good sign, of the X fantastic.

positive I there. there's really signs some good think So

of business and $XX plus working that overcommit, to a want proposals. proposal lot of don't We highly competitive. there, is billion There's

So of things either on when exercised. pieces half moving delayed get awarded of or lot option or that's or a year extended qualified,

how that So being plays we're on out. just conservative

we over Officer working of additions been think the from do -- the that and the I here, as Chief help team and those over has I that more there. executive the about mature S&D, we Technology rear-view have in restructuring focused mentioned Eric experience portfolio as all Tuning, will together there, mirror even

So that we as service a we'll push the more just to it, portfolio I a and products the and highly side, there. move lift has than cost-type -- contracts more the in although of do will for services, in anticipate it's see that I natural think lot technology have and profitability

next over we construct the that the and that we'll still EBITDA So guide was grow of the purchased to that and holds when X% up XX% couple you line, here gave we years. expectation

Chris Kastner

nature No. get mention I book -- you some when are between Technologies in would lumpy are there that margin. Mission the within you contracts QX, relatively when QX and

the So margin in from that's a standpoint. lower QX why guide

Operator

The Scott comes Deuschle from Credit with next of the line question Suisse.

Scott Deuschle

margin Tom, CVN for accommodate does like saw the on quarter back half this of risk we XX? guide the negative additional EACs

Tom Stiehle

coming rate. material opportunities So quarter, from of and forecast. very we then up the our we would that the our booking each schedule goes projections all I we through analysis, once cost, overheads, there, against labor that risks And that's into construct a of and with tell sets our update that update DAC existing you value come we evaluate going specific forward, question. costs, performance,

we'll of for the determination out here. and what And make ourselves to The a there, Street forecast from is

I you tell it. So potential either exceed to the always the that forecast there's would underrun or

XX CVN Specifically, outsourcing we accordingly. the on think we risk the book project

from half like So watch to we better to still to bleed. guidance The and that see I that think be we'll play that right us I the a risk holds anticipate the what would just X%, X% back standpoint. have out. But I'd in now plan If than between X%. better, you anything, do and to mitigation continue will I gave not

Scott Deuschle

outsourcing drove trying track attrition to increased help attrition the trends negative improved if did noted outsourcing and that needed and EAC? better. hiring you've you the reconcile the the understand Okay. on And I'm can with unplanned to Chris, you hiring just XX CVN then, do why

Chris Kastner

showed your it question. for be. And sense what our Yes. is put over That's projecting be year And going the just when the your up made estimate so, you're to and and it cost a We when last going risk plans. your you're the EACs. good into good needed realized that putting in labor outsourcing. together incorporate or is we really -- And workload to to so to, outsourcing finally plan, what rationalized

related. still the it's and do in XX. front, labor all that on all together, on positive we needed So Still but the it's mix to outsourcing

Scott Deuschle

kind understand inflation Okay. single-digit to And assuming X at high instead, question, to how rate business if a low another until picture. take of mechanically lot would I’m I then it’s single-digit billion price But last fixed X you still of the through bigger a $XX years. wage contracts, – priced mid- be and your the trying which backlog, just a to this burn can be I margin you X% assume would rate

Just to trying of understand chunk a cost... the mechanics that in works how

Chris Kastner

But we at do and Newport at EPA have labor start at And Ingalls. News. Tom Newport and News we pretty potentially, EPA have I Sure. protection then agreements in both some protection do here. and can place Ingalls remember, long-term

some mitigates that to it extent. So

A –Tom Stiehle

I’d Yes. too. on that comment front,

areas So whether the billion backlog. get of other or there’s funded, negotiated do exercised. it’s Only So yes, of finalized, that’s XX% we right? to have one, they’re there, going $XX

about workforce, we contracts. of contracts, paying XX% on our do front. what Two union do, have we’ve work we in so I past I’m the about the long is, lead procurement as agreements, said, know that Chris of talked Much advanced

the then in the those get large and we that and can make bids material fixed immediately sure advanced turned current get the proposal, price we locked So bids really contractors we into get both exercise on on procurement components. the use

provisions, cost EPS then recognized where be and XX-XX it’s which price on, cost XX-XX more News contracts the Newport contracts. will those cost The is guess, Ingalls type. fixed of Most have I

put play. contract with long-term there of for a lot on any that and an inflation expectation in on things So are was long I’m you was that before.

about Without that some realize or improve more adjustments, talk other These our exposure. material then headwinds that the try and still than to avenues to and contract workaround through. the could But risk fight and incentives, ways there’s EPA, maintain work-through, have we opportunity are get the we profitability.

Operator

back time. any over remarks. would to at now to this call the for like I any closing questions am not showing hand Kastner further Mr. I

Chris Kastner

your you engage with to to Thank today. you. Thank We in continuing of right. HII interest all forward All for you. look

Tom Stiehle

Thank you.

Operator

conference today's call. conclude does That

You disconnect your may now lines.

Huntington Ingalls Industries (HII) 4 May 232023 Q1 Earnings call transcript