HII - Earnings call 4 2023 | Huntington Ingalls Industries, Inc.

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Fourth Quarter 2023 HII Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the call over to Christie Thomas, Vice President of Investor Relations. Ms. Thomas, you may begin.

Christie Thomas

good and operator, you, morning. Thank welcome I'd Quarter the Fourth to Earnings like Conference to XXXX Call. HII everyone

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

actual forward-looking other Act and statements or reminder, to certain today, and our future expressed risks, that materially differ the for our forward-looking are and facts meaning today As Chris involve measures. our These cause unknown statements our results Litigation from statements uncertainties cause a the non-GAAP be Reform future made refer remarks within to filings or Securities statements. Please from Tom materially events performance known will results expected XXXX. SEC may not and important future that factors historical different could results financial are these of factors results. Private that implied to Also of to by relate actual their see in

measures, the ir.hii.com. With that, Kastner. available For on President over at our Investor page reconciliations like are of Relations slides GAAP our Chris which to these and to website's comparable I Chris? accompany please webcast the CEO, metrics turn this call the to that would see

Christopher Kastner

on everyone, you and Christie. was Thanks, morning, Good quarter for our joining XXXX strong for thank HII. us year fourth a call. XXXX earnings

capacity We continue expand products IRAD develop and to our both invest both to new customers. in solutions our [ shipyards and ] in and for

flow entering X% period generation. of cash year million than the and free and we're for more almost rate growth increased of generation a growth $XXX cash our Our demonstrate that accelerated free flow of

XX% strong year-over-year all quarter free than revenues a of the year XXXX. revenue. In strong cash XXXX $X.X growth revenue than billion flow net $XXX X growth prior divisions, In was addition XX% record sales higher XX% million, of were $XX.X earnings to million billion, XXXX, of higher $XXX record and and was with fourth across especially with

in ship Flight resulting Jack billion year-end. At in Calhoun. billion first contract XX at DDG $XX.X NSC of had backlog also Ingalls, III of we and awards XXXX, the We XXX Lucas, delivered $XX H

the awarded billion anticipate first New and destroyers ], VI. 'XX first X program Our boats Buggenville also the to trials warship big sea expects $X.X overhaul programs, redelivered work class. which George our quarter for awarded F. and completing program float-off complete was contract last Richard first Block launched boats after XXX we XXXX. At were material to expect nearing of And X third we News, [ USS for deliver CVN the We on design M. of Kennedy. Massachusetts a In Jersey deliver XX, Block X LPD XX her long XXXX. year, construction the completed in and awarded deck multiyear and DDG Jr. we in John and amphibious and XX lead amphibious CVN refueling the progress to McCool, first time contracts the team In detailed in ship test the for for procurement continue on FY LPD were complex Virginia-class XX America half half is SSN in Newport and we the SSN V the competition. LHA XX Washington the additional XXXX. of of the XXX Ingalls in X

milestones, our continued XXXX which outlook, on we've our included execution. reflects In addition XXXX focus to milestone the

early to see positive workforce, XXXX progress and in I'm pleased this We personnel Regarding over hiring. our with craft continue year. progress X,XXX hired in the

in within our our quarter, shipyard and our both ahead Navy we our we financial the shipyards proficiency, another continue supply our continues growth larger to we a Mission in objectives. At for of leading fulfill impact outstanding and partner, commitments our For target in and XXXX, we personnel. base. have Technologies, and meet delivered will sector to to improve With performing and of business approximately skilled supply labor and invest XXXX. X,XXX the our competition hiring craft The retention revenue team strong manufacturing to chain plan contractual ensure worker all to units, across shipbuilding

Mission new drivers mission which addition and with In growth, the electronic in us in growth optimistic artificial readiness XXXX. intelligence, Mission Technologies revenue and contract advanced include record the makes to CX billion, with growth potential value. year recompete billion ISR. pipeline warfare, total modeling business of for $XX robust in opportunities nearly about simulation, a booked contract awards and $X LVC ended Also, Technologies Key cyber support and

activities to moment. for in Washington, a D.C. Turning

necessary for We incremental of funding the authority the NDAA authorities with for bill are pleased authorization submarines programs 'XX supports The including enactment procurement Virginia XXXX. X authority fiscal defense of implementation FY and also [indiscernible] support Class agreement. XX. for and Act includes the strongly multiyear Defense our to year Block Authorization the The shipbuilding passage LPD

Looking next growth we $X.X than X generation of X% ahead billion. the over of more cash expect and years, revenue

on customers. decade. generating $XX trajectory billion must the be annually not linear may that Our of while commitments by deliver due to Also, material timing, in we revenue approximately the expect assumption HII ship end will our that and timing the the expectations we grounded milestones the on are be to of our

executing As our remain this the and business always, executing take responsibility very and We commitments. to our domain on expectations all providing our customers. is focused on fundamental for seriously developing solutions to program our contracts and

results Tom? So turn call our guidance. some with for will Tom I that, over the financial to on remarks and

Thomas Stiehle

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

refer consolidated and on detail this earnings posted results, release the to our website. Beginning results For to more on our X. with Slide issued quarter morning the please segment fourth

for X period of ] in or quarter year the operating fourth basis X.X% revenue XXX% in the HII. [indiscernible] by year. the quarterly operating million primarily at was segment XX% to for compared by revenues Operating was the all due This in last leading approximately $XXX margin income year, of were to to previous in year-over-year earnings $X.XX quarter prior earnings fourth year. $X.XX quarter was period, to million the million fourth in Our of higher increase and to higher $XXX The XXX%. $XXX compared the from $XXX margin primarily quarter same in of share increased quarter growth per million segments, increased XXXX, operating points. income. Net driven of [ the margin QX compared the up X.X% Diluted quarter the last record revenue compared X of to

year. results for margin billion XXXX, earnings segments. income were a operating up to million by up were in the at income $XXX operating to $XXX from of of was a record per This segments. the of full XXXX. earnings the for year $XXX at and all X.X% primarily $XX.XX share was X million operating X.X% strong Revenues diluted million, income driven X Operating XX.X%. in segment Net XXXX, improvement income compared XX.X% significant in consolidated growth by compares was in compared The Moving year-over-year to $XXX our all $XX.XX $XX.X XXXX. operating and year growth X.X%. was operating driven million year, margin and for increase year-over-year improvement to for the was The

repair, million $X.X higher million million lower revenues $X.X of News, Ingalls' X.X% from operating and by and or combatants the and incentive XXXX, by increased X.X% XXXX The driven from in in just lower and by refurbishment ships X, revenues. offset by RCOH assault aircraft income sale the LPD services. on Ingall's primarily DDG revenues billion support mentioned by ]. partially of offset in program For XX that revenues $XXX $XXX primarily due XXXX segment a receivables than by XXXX retirement driven XX of prior and of volumes increased the results frigates and and [ $XXX risk higher results contract a offset XXX, XXXX, volumes built [indiscernible] of year. At in primarily XX.X% foreign and from XXXX, engineering naval prior surface LPD carrier $XX.X to partially to on I volumes higher billion amphibious Slide construction and partially unpaid program judgment in Newport margin submarines million nucleus recover of both the modernization improved for court on or

operating income of by operating XXXX warfare with margin ]. on volumes primarily consistent $XXX $X.X of contracts. relatively of million segment performance. discussed, insurance the XXXX, in of program increase technology, million revenues X.X% million was relating XXXX claim to improved primarily margin submarine by in for million both driven or a and of of and and XXXX on Columbia space acquisition And XXXX, from operating of offset CX the purchased million the results million X.X%. of margin and X.X% ISR billion offset higher contract XXXX $XX increased venture. Mission the of [ XXXX million $XX.X News X.X%. margin and was of XXXX. representations Technologies to increased incentives and driven income by Newport I X.X%, Admission included and warranties segment by XXXX. Shipbuilding Mission Technologies $XXX volumes of operating $XX adjustment income a a settlement was CVN in and of in EBITDA class from amortization by equity I electronic, to partially loss joint was Technologies Hydroid income operating intangible The Mission described, XX.X% compared higher just XXXX XX, contract XXXX $XXX revenue $XXX a XXXX driven sale cyber, due approximately lower million approximately $XXX for volumes assets higher partially margin

] cash the $XXX handily to Turning court of Frigate guidance to as warranty year-end insurance I've claims [ million, as strong the benefiting sale judgment the free highlighted. and reps the cash. from and collections well due XXXX flow of beating settlement was

year million million our XXXX. $XXX repurchase just During of the and $XXX plans under dividends million paid expenditures, expenditures company in totaled of in hand by liquidity year, debt benefit of at while approximately ending revenues, $XXX pension million other and to with the used $XX in XXXX capital invested X.X%. Cash the shares, XXXX's million Net to million, on value $XXX cash and postretirement billion. X.X% capital in $XX $X.X finished contributions reduced

update given the better-than-expected since offset that returns Our improved has in rates the November, provided discount time. in assets, from to outlook decrease a by pension we XXXX partially for

XXXX rate. asset expectations. partially the [ also returns increased XXXX similar ] positive XXXX And given discount for recognition view expectations update, Pension XXXX. from XX.X%. the XXXX the for through were fast more XXXX benefit have is our This for immediate provided quarter, to the the lower impact updated. our We've provided experienced of by been update of the last returns we of last Asset has in initial an offset

to Turning our Slide financial XXXX. for outlook X of

and products of our Given we forecasting growth for HII services, backlog in strong XXXX revenue and the long-term X-plus growth to are performance percent. now demand mid-

mid- forecast XXXX shipbuilding For between Accordingly, growth XXXX. from long-term $X.X X% will X%, $X.X outperformance shipbuilding the [indiscernible] to has to increased be in to in revenue revenue billion. and are due XXXX forecasting billion we although approximately growth

we we margin expect operating and margin X.X% shipbuilding between X.X% be to For target improvement. to XXXX, incremental as continue

we by material approximately $XX approximately due growth. mid- Mission expect again, For top XXXX continue X% to million long-term of line And driven Technologies, the timing. to to outperformance

of between We intangible EBITDA approximately and we between 'XX, between X.X% X.X%. In Mission attributable expected expect to forecasting amortization and purchased $XX X% to million, and and be operating be total And to expect Technologies. margins assets to Mission for is X% growth $XXX is tempered Technologies $X.XX million billion FY $X.X revenue XXXX, which margins billion. and

quarter approximately Technologies Mission and for of for Mission $X.X operating with $XXX and near shipbuilding near million margin revenues billion expect X.X%. operating shipbuilding We margin X% first Technologies,

expenditures. capital to on Moving

continue are levels our In with flow demand investment are be throughput. due in years, to next of years, approximately in see capital next we to over projected customer construction, impacted we've Navy the this sales. previously free not to prior The investment, we I free that general the submarine to expected X approximately the to the the X.X% expenditure will near given for of shortly. average of XXXX the by in with I'll targeted provide X the invest shipbuilding we've customer discussed to on As sustainable be sustainment. note expected is evidenced expanding cash flow rate our to term, CapEx by quarters, and to X.X% discussed cash long-term X% capacity significant partnering drive X% growth

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

Moving Slide on to X.

an X-year would cash Section but have next years or we We prior free billion. it unchanged million, million cash projection million cash updated 'XX discussions, which pleased that would an up estimate prior of I'm of provide XXXX tailwind $X current free X, with to for provided $X.X flow note our of to for prioritization outlook also approximately flow XXX period capital a flow view of free forecasts of our previous updated to our 'XX Slide outlook from X ending $XXX approximately estimate events. for if $X.X to deferral, billion $XXX $XXX be these in million billion. I for from to our FY occurs, allocation provided a not model include $XXX XXXX. On the

investment-grade We our year the continue leverage of XXXX, under to to end than reduced rating and X a ratio an turns have remain committed planned. earlier to at

credit repayment and prioritization flow our metrics. In repurchases. $XXX and we through term securing dividends loan finished $XXX of expect million which in investment-grade return debt to concludes XXXX, our XXXX, January share million addition, ratings our approximately while shareholders cash to In off we paying

this our XXXX. To are both well on a available resulting approved revision on repurchase to my in expand mainstay and growth diversify Lastly, share close company's $X.X program the share and in success our and continues supported remarks, of term Board has amount slide, billion demand, repurchase through MT's portfolio. programs to authorization in

HII guidance bright is free our exceeded our and and and metrics investing throughput. capitalizing facilitate demand on executing revenue, growth profitability of to growth flow control Our current products in future contracts our within in and for cash by our financial the programs XXXX We've services. while terms and on production

balance our and debt our down sheet, strengthened lowering paying ratio. we've leverage Additionally,

the our back future Christie and capital the fine-tuned driving portfolio I'll call HII last presentation, strength thesis to commitments. With focusing growth earnings turn on current over investment and allocation on Q&A. of Lastly, and free page execution the the flow the that, for visibility and expansion cash

Christie Thomas

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

Operator

from Walton Wolf is [Operator from Instructions] today Our first Myles question Research.

Myles Walton

A off, on near step-up only it isn't in questions investment, annualized it And going rate in start towards? second, run a 'XX? run change, couple pretty it obviously, the to Maybe higher why specifically a it. One, is what couple through CapEx why like dropping rate. the is million $XXX material, of it X-year revenue term,

Thomas Stiehle

I appreciate question. the Yes.

look points So we to maintaining mentioned at with of specific about be here we yards the to -- X% that another traditionally, X.X% X.X the point about to X projects.

acquisitions going Newport of into past, have at down in recent News program on a and the in about talked we've As the we submarine driving lot activity there. that's yard the specifically

and contracting as we're putting So and more VCS ourselves boats on working those it we're and on the And negotiations Columbia capacity necessitates we see through schedules, additional program. throughput.

So partnered investments. requiring be yard, what more a there'd that couple capacity the with our in [indiscernible], means, more buildings, -- in on conversations it's we've and more

over years. Just X

the from and We approved have for of majority and worked through projects pay defined gotten and that Board Navy we've the investment that. through with the there we've Navy the will the

the themselves, would that as offset on [indiscernible] So that. that projects investments capital through get help I'll as much rolls on the it contracts the

think grows talking it growth the online. over $X.X falls comes we good CapEx X.X%. facilitates and 'XX shape as US of first as that X It kind X. is out I And incremental flow we've a billion the business a then thesis it's go [ revenue run. a of cash arrangement. margin evidence the the expansion still you. and projection kind as forward. our off peaks X-year time good cash plus And what to million There's that gave to you it's about. the obviously, to year, the of It $XXX on said, flow ] of given it, the to I that inflection 'XX from obviously, we're free we as But to we're And So

the both X%. Navy in to that heard the term. facilitates from long capital And we're myself, us You shipbuilding investment this Chris comments, and raising from and both X% by growth

Christopher Kastner

the growth. it that Myles, implemented, take long-term projects but impact get add to a does 'XX. I'd also obviously support to won't well These mid-

Myles Walton

a And Okay. Chris, just follow-up.

and pay Investor It to to Day. going at the getting lot On we have allocation projection debt. a last cash down capital do been into prioritization sound this like that. several doesn't the the need of longer-term years But

significant So are to a of shareholders over all more not where or we a the frame time return to can majority point at flow free we commit looking cash to the forward?

Christopher Kastner

start. Yes, I'll

source value we delivering believe of greatest as corporation right that the ships. our So a on fundamentally focus operational to can we priorities and our achieve is now

allocation improving our investments. capital any on remainder to shareholders. in So to fairly investment clear that then investing progressively then our grade, you And relative in our providing back shipyards, dividends in capital see investing the our and priorities being we're

have Now to that optionality going being said, around M&A. we're

have see needs right because in it. the our projects from to time any M&A evaluate greatest on our ships be focus And portfolio significant now. to Operationally, don't the to I think responsibility to customers need We delivering time. I holes our they

we're back fortunate So to sheet, we're strong balance while providing need going and we to a not everything. shareholders do we to have on We -- this to call. everything commit can

how we're forward. that's allocation capital So moving thinking about

Thomas Stiehle

could I that of kind of piggyback If top on amount.

you're right looking it way. the at think I

If you in is million we up where for look right, but million free debt cash XX% to was This paydown. of flow, 'XX, on XXXX shareholders it in mind to back $XXX back $XXX dividends in the to $XXX year is in we which million, have of gave repos. been, we've keep

$XXX is than million debt we're And repo. $XXX payment saying still as million we we $XXX just the of bond this So shareholders, and another paid There's paydown and I May. XXXX. of year, million better gave in flow $XXX between $XX and back cash XXX% to the what actually, for million. in dividends was free of it January for now

plus to, the and million, $XXX if guidance million of it. to of the giving I'm forward, We're So Kind you you XXXX. right? So this of free the commitment is year, over midpoint cash again, through million, back shareholders debt, $XXX concludes committing the ramping. flow going of XXX% going the of that $XXX of take it's

as We accordingly. we the year past and would there, haven't envision But [indiscernible] that. we'll off cash work each you told you we that is update

Operator

Our Khanna from today next Cowen. from TD is question Gautam

Gautam Khanna

covered out joined the could downstream that so us QX there's when little you get of And late, timing X milestones the any I this, you at slipped up? apologize impacts will I Hey, on update if Yes. if a maybe if from caught labor but there the anything QX XXXX. that about late those risk? crowding pose delays, talk in milestones kind year in Are the any could a And just else. you then could or weighted are similar that of

Christopher Kastner

has Sure. other stop here financial we'll and we that this The through ran well. week to DCS that milestones issue both and operational we the Sure. On into no going action on all. we and We've corrective victory the QX. could reduced before reallocated on. claim of boats them. at both to done are X of issue with boats There the commitments program Thanks, ship The each of needed milestones. XX, some QX, it's test essentially essentially that. LPD do the be for need to those been staffing those were see were changes to deliver and been on late votes complete material finally we're root But those to significantly implemented the think early God. complete an performed We going late-breaking we achieve that cause related a

to XXX achieve within the all to detailed end impact, year. milestone the we're Now and to relative ]. the ] XXX and those on the some But on from we're those pressure those, done. milestones corporation put at getting It we of a [ does [ plans VCS milestones. have aligned committed 'XX

Gautam Khanna

QX accounting not, catch-ups that understood just to you to if if could anticipate Were And sure there X recover? them I up, related And I want [indiscernible] follow out make as in moved you on I in QX. that there Were of those QX the positive and QX? do

Christopher Kastner

will Obviously, -- our it's when recover to opportunity there there no those. guidance. it are gets of XX, included all that issues LPD were on financial a loss bit there was in no But No, ultimately No. delivered. material there related an

Operator

question Our JPMorgan. next from Seth is from Seifman

Seth Seifman

then in you other in the various in and about kind guess the amount I heard this of reimbursement? speak in calls case is there contractor there looking for that you inflation on can estimates how I because on it it's been those were first quarter, there to to extent Virginia. priority? of chain feel different contemplated Virginia Because much not the reimbursement risk earnings sub we've that place? they industrial a your expectations have seems Has the are down. is estimates. such for guess, supply challenges And Or base coming been the that's inflation that for

Christopher Kastner

Yes.

is protection actually. challenge it. why soon. that transparent we The not we very of about quarter. supply have X-year across We're eliminate fully getting risk away we And important going so there's program risk, important. in protection it have on SIB The this why of so all if that every our EPA evaluate EACs is deal AP But risk. But don't inflation it's So just portfolio. across managing at at chain most is with Navy the We quarter. Ingalls, That's we can this. anytime the VCS funding so That's a is the our for supply aware do and chain time. part, we're programs, the

SIB I appropriated authorized we think the and that. as better. and supply funding have into get we down understands chain, why that soon can being everyone as That's the

Seth Seifman

Okay.

follow-up dividends there's I that $X.X billion period, deployment. quick like the think $X.X repo possible capital the before I I paydown, that I the and $X.XX on left. to would said billion. there's over exceed the you by XXXX. the know debt Okay. a mean, the slide XXXX it's -- that authorization, maybe think And about maybe $X.X think at leaves just the look billion that If about billion

Thomas Stiehle

it go that let that Yes. extended would guiding back the can We always and I term but and light. we again. be for change time,

we'll as we available, said, through billion much that now too And But billion it. accordingly. So adjust available the $X.X move we there's math of as I read forward, XXXX. $X.X right won't into

a that we So up. that -- just of issue cleaned was was more more that housekeeping

Operator

Our from Bank. next question Deutsche is from Scott Deuschle

Scott Deuschle

LPD Chris, diminishment some time XX of delays, a the the AC extra of opportunity? and rather just clarify, extra is it Or associated just the with much cost the function deferral EC delivery a of them? to how than more

Christopher Kastner

cost, time delivery. we'll obviously and the opportunity shipbuilding would the is a nature, take right? step end we we up, But make appropriate, We'll there. lost So did material when Well, if the more probably final it little if year. at not do of that. and we in a It's have been worth it

Scott Deuschle

Okay. a reporting from why the operating line? Got Tom, it. Venezuela of just than quarter. reporting infused A are And are included below then a this the lot perspective, recoveries rather by insurance little earnings people in

Thomas Stiehle

Yes. Ingalls, accounting that income because that income contract, it's it's The in we on that and down -- works way I cost we've had think on operating other incurred it.

written a it's we and had the off. costs in recovery we've that for past both had So

It still So go income. an as operating comes into back doesn't revenue. the

But to do both and of the [indiscernible] reps account there's and and up we income for obviously, on both cash red So the not warranty those, in QX. the a and picked it. we statement, margin the frigate the

Scott Deuschle

X kind over cumulative the Tom, 'XX? free or it Is then, to there question. target Or fairly to of target, next the ramp flow or -- is the the level And last any slope Okay. years? cash

Thomas Stiehle

by of shape we the knew been you the to when see one can to people a because move We to parts, and of it. we've try I of would show cash too not I'm didn't that that to how right giving I we current really but moving back When now. and No, kind and number feel X-plus accretive with only to why we can that shape wouldn't from that Technology it's for tell the out provide not we're it. in nebulous, there us right most evidence we and it. but it ramp enterprise. we definitely that, the is hit the gave of HII that XXXX that first the gave 'XX, trying talked manage can there. revenue a you pulling is reach percent years, it's see a But put announced the it. to only we We ramp We don't X that, end around. I comfortable Mission be across want view it a year, it lot number. to now. And about is

get But Your easily I guide on be And number. should you thereafter like through able a kind that want then can each okay? to give modeling looks to year get to really XXXX we like of XXXX. what

Operator

from Our David Strauss next Barclays. is question from

David Strauss

about Tom, margin I Chris, ask shipbuilding wanted to the target.

would So I 'XX, that above had I being out you that you slip 'XX with assume XXX think you been milestones about [ and those that potential talked targeting ] then for and had EAC adjustments would help.

it about you before? of relates were terms I the shipbuilding what talked versus to thinking the as side 'XX what in margin on changed guess So progression about

Thomas Stiehle

Yes.

want rate. our we our function [indiscernible] have saw kind still XX end we for healthy missed a ourselves, XX have on the where bit how the a up get couple a So of of of going ]. with as year, little and right? the we we'll So right? with on the with step-ups talk the we we ahead get about not claim, X.X%, of to recurring pick a finished finish is we a There's going ] just the forward, to [ don't milestones credit along right a the way. claim [ guidance you that, and that pick of did kind to it's as of We caused it run that recovery you milestones bit shipbuilding Still rate, we'll sale off. up of drag, that there'll some I'm run short the be I'm now, on which beat little of at

right to at X.X% quarter. years, that a conservative appropriate, couple the the of in the think to end couple missed now. last tenths And on I've got I right X.X% comfortable of I'm of and we've

little a want don't So a [indiscernible] us I get bit. to

X.X% range retention we the starting is ] could of guide think I at right our the worth end think off to kind finishing on ship claim, of But with X.X% right X.X% a the ships the way to that's Let's hiring year, we kind these of think we appropriate of the XXXX. the earn is bottom each at the go year's not milestones, now the get without to higher. be end the year building look have claim, now, the [ upper to and with quarters. to for we make and of it. If point I of the that whole

David Strauss

And ask about wanted then working to Okay. capital.

think year. below of came of year, percent your the sales. of in kind end I the high for the At you

does forward? the look over I at of the how near some capital, working will least capital flow working So assume going through recovery term? CapEx

Thomas Stiehle

Sure. out. we've We've down used conversations coveting range was it's I to down to that year capital. off that of we've where type that right? we coming had X% to to additional mission think rearview we trying would finished of for in -- that, know throughout concerned, work, of conversation with anticipate programs X%. And we working on normalization We've report when at see it's more lot happy would And we X% point kind and we we like X% still improvement I like going And were year. a had that how high little X% we started projecting as maintain the about I'm happen. schedules could of And to at that I and in working capital. that's get it we Yes. maintaining that X%. X% X forward, XX% by to year We without the would that a highlighted thought it The exactly what's sales be we be, landed Mission in about capital the that I forward. the right have, kind same with the recent of go bit past, the played talked working So this about, of mirror, in the Technologies had a reduction were were the X.X%. Technologies, lost with

would will I help at in that, X%. the We X% it. 'XX completely to -- think the of And capital expect lower way to X% kind And incurred. to The forward bit X% X% it the incentives the So be little before is XXXX to couple X% between in the cost a look the right way than of to as exit appropriate at kind cash next we to years. of going the front up I range get that's in is model X%.

Operator

today Skibitski Pete from from is Our question Alembic Global. next

Peter Skibitski

the fourth I sorry quantify at little -- and Technologies? Tom, quantify you just a I can Mission Ingalls out one-off missed you us gains and bit, can quarter you it, X the help in if but think

Thomas Stiehle

we been the up Emission was it and Ingalls, million. bit frigate purchase the $XX.X was say out. Technologies, that. a settlement picked Hydroid. warranties of growth, to for I for KX, about And that to all But want back We'll then and had too. Yes. representations about broker little a from that, tax then we that million. It in obviously, effort that able I repair a have $XXX that $XX.X judgment entity see we And we to that's sell XXXX, this get were that working had end a that. see a cost we pay against we've about we that, -- to on had too. million And see in judgment on how on recovery nets and the settlement and could in how plays you'll of get but did And a there's and to

the So was net impact the and tax is profitability million. cash to $XX

Peter Skibitski

I gave base lot maybe industrial shipbuilding money question, more we 'XX is there's then of And could on that a you budget And supplemental there. to a there, outlook that. it. benefit a the in what about fact talk you despite have And appreciate there that think the of midterm yet. Maybe appropriated guys? kind could raise confidence out don't in then I top-level supplemental that's you else the the Yes. 'XX anything the guys

Christopher Kastner

Yes.

XX The So important. is the is submarine budget in is I'll funding supported. really LPD which programs our start is The baseline base that. major budget industrial important us. Ingalls. with All 'XX supported, positive to are very for

And around improve force. just think billion funds to supply within the $X base. to the further $XXX the the million, but I labor improve additional that there's that's effort also in supplemental,

really those both getting of is important. So approved

the in We making executed we get our also opportunity And can industrial-based it products. Ingalls relative the see start do confidence the summary to News that the out, have sales for a anything funding we're there's it on throughput. Mission we at shipbuilding, just our both and of you makes when in bit standpoint. Technologies. Now nominated for if but is think add? guide demand Newport the we probably some to actually investments demand just and We're sense. approved, And in improving an laid point products a looked inflection I and Tom, tailwinds from

Thomas Stiehle

we the that awards. down just see future the to Sure. and Columbia [indiscernible] Ingalls you And XX-year VCS and that about Yes. and the clip about growth V on definitized. years, timely And for XX break long happen. at on then rates in have, look. X every schedule on plan procurements look, not just horn years. talked have preponderance a the higher. talking to then XX-ish products to for it's get with to for a that's far, advanced the we happen, Mission the the demand when side and say if at our going obviously, options boats go know work We've like I we we We're Block XX destroyers then app. the of side updated our X are see that. the work the of least the things [indiscernible] good II, around X-year We've mid annual services for really X kind at that, least ship growth They of that's X there, way Those We change RCOH year, plan, X, have but we building to with with long Technologies. X too have. Block about the pretty We lead to XX to VI. already talked When that the last

hit. to get to opportunities nature. orders, to below this still appropriate we just above programs We have of playing raise and we labor backlog additional to any But and of levels, these the growth. can that see are cost, for it's think the And materials and there's how inflation, out things have

Operator

Ron, please Ron go Our ahead. from next is question from Epstein of Bank America.

Ronald Epstein

one two labor. the Maybe just and on the one a on supply on questions, follow- chain

the how they but front, companies On tough not industry, to they X to fairing across or X we've front? And are are guys guys, whatever, the for it's take around specific or retain doing are keep mechanics the off. is bringing that generally labor stick retaining then how across young labor you I something been? Because been labor mean industry, you and heard to on that year in you them? what

Christopher Kastner

for is women to that workforce over challenge hiring example couple flexibility brought has man we that without question. address implemented potential number been into citing schedules around that start some that hiring It's fully schedules. kind flexibility a the center the and last The work in Ron, years the the a that daily grind fundamental the thanks in over team now person, issues, which come and to having work Yes. exact the we're of is are year prepared team craft you initiatives situation, right last up. for and of they they've of time not off. the the definitely really, And X

So we a of working that number regard. have we're pilots in that

hiring have around some retaining. that better and geographies targeting analytics have really in we We interesting success

then machinists very get incentives skills. keep on An we them them and more just where So pay critical to have we is them. have have you focused initiatives to example there. And

higher our schools, well. number profession. retention the what Getting very what risk quickly that the it. because going so in to upon there the a what schools and initiatives, people such have does is are So of work mentioned, because we expand we very one now and programs manufacturing as understands significantly that or development in we apprentice and into can on the But within a works issues good are the is and say work I data industry SIB choosing issue you're in obviously there people Navy resolve. I hitting major labor whole rates a on defense to of issues is in hard a as working as one fundamental and the also we're because issue our the shipbuilding in it. funding, established previously in the would And industry as pivot are apprentice that go workforce right

So we're it's well something aware of.

you some the addressing the and couple but light of as Navy it Our well of rays of a can't we trust and partners are aware is well data it, really seen of aware We've we're it. year, points. ended

it going this we're to working on So keep year.

Ronald Epstein

with then made? in have be the investment Got are chain it. on does today making, weaknesses Navy the it. that the the is it? where Got supply chain the to that as you And supply where see And

Christopher Kastner

Yes.

previous sole supply in to source increase that program, chain as identifying XX really both dwindled program DDG need capacity investment because doesn't a single press, on as the as well a VCS bit you much vendors, on the enough So the they've DDG done get source good job, and the the or it capacity program on had know, as to in XX years. but

then source issues chain targeting supply where that large of and with some sort very a suppliers there's and job those the good done suppliers there's material critical investments. And they've same single are So are. dealing we labor making that a

and dual as them those source So an or source to at additional are identify something qualify that looking is we well. Navy potentially the

So a very comprehensive it's review.

going I and partners. doesn't think well it's turn it's the but And get managed I us by very issue, our think overnight. to it it

Operator

next question Our from Noah Sachs. from is Poponak Goldman

Noah Poponak

it us your guided bridge Tom, 'XX last what cash can had you you pieces free versus to? give full the year that actual

Thomas Stiehle

million. with up year the $XXX started we million. $XXX We So guided to

you claims in and strong collections on increased of difference the And team million, that at a got can million the comes QX You million $XX take QX the completion, you really $XXX QX. receivables. X out in net between $XXX $XXX with if $XXX then to at The gets million. tax, we've that's sure obviously, guide had the make million, -- we to stayed $XXX time a on million building clean We it. off

to So anything it's just of really note across wasn't significance the in enterprise. that. There

Noah Poponak

Okay.

closer that kind bridge got of guess, to to If final much as margin. operating -- call revenue the in take is from I out in or take I if you up X% million. staying is? claims, $XXX while that Can you're me CapEx that's and X% because flat there that it 'XX up as guidance you going a So segment

Thomas Stiehle

Yes.

active upfront participation in mentioned that had that. in my I So significant this and comments Navy

So I the into too that offset contributing to helping we're that's much to want But get there. both don't it. increase details, but

to quarter million a we million, there a the of collections. that timing, where you in too, the we of $XXX as last So down left from exceeded $XXX bit bit took was I year, guide little on this little

on from perform a would last And the we've a That to of definitely new with existing in relationship that cash ensure of little draw make a run overachievement as Much over everything off get have new happen, discussions So want in CapEx the at million past. that been customer the lockstep. contracts. little working I [indiscernible] it's good guiding kind that to from be the of $XXX ships how we keep We a cleaner it's able 'XX have here capital. is be on in 'XX. support That's back for now not We to time in about left million, we bit but our high-quality to that we $XXX And value. our CapEx kind because I still had where to XXXX, you requirements going flow higher going to the be the light. and on in talking are we're work business major 'XX, little of free of alarmed got we be out to the and the side, coming. sooner, we're and

And given against to we in we there been we've that's all that's concerned not that that We gave everyone wanted you be often projections too why that we settle Again, going see probably out that's X-year the our cash the in run as would won't and a the X.X% the manage you. I factored business projection cash. you flow on all So -- mix. forward.

Noah Poponak

we will how actually... So

Thomas Stiehle

sorry, ahead. I'm Go go ahead.

Noah Poponak

in we that will be wondering I'm your Well, financials? in not rates if flow there's it Navy like of operating to back actually margin? a will how actually your your all we see come recorded Or CapEx Or participation will see just that will your -- in CapEx? and in

Thomas Stiehle

that. to do we do we CapEx, obviously, incentivized costs, our when go So get our

just up comes question, $XXX the try in through as to I on margin said, contract your of kind pull as It's That you like incentives, I normalize million flows additional earlier the that comment and to the X capital of helps form the there. that it So by cost offset talking to would $XXX when out additional cash we've [indiscernible] about. you million the claims. been ramp of

[ claims. 'XX ] ] XXX you back at now to go And [ and EBITDA 'XX If the at XXX

the is going as to it, to back. incremental uses smaller the because to the out ramped about $X.X then it's $XXX revenue billion, to bound little average large number range that a just the be exceeded [ and that's ] it's XXXX shape now It's [ margin we [ XXX Now now XXX XXX in XXXX. bit, a ]. ] in and to upfront talked in [ to And of obviously. and we're million, in going We've got at ] XXX the be grows

appropriate not It's a right I a -- It's that's number. think now. conservative. it's It's a stretch reasonable number.

work go associated We of to and I them. opportunities think have off. And kind risk risks that both has with

that. with you leave I'd So

Noah Poponak

supported by through it through goes margins see that piece that the right? that Is Navy just rates? future the in so flows -- we'll your that The as CapEx that's

Thomas Stiehle

Yes. cash, Margins and yes.

Noah Poponak

from? flattish then year-over-year, struggle I is still see that million I for $XXX guidance so margin 'XX, with I where to And Okay. the coming guess, -- just

Thomas Stiehle

So side, to when contract you've that the timing of completion and work, happens, first, is that on on percentage right? got you and there's do a the you margin get take. of So the

CapEx, stay on our as is neutral of that keep incurring on And on the the we're a offset on it but running here. the X.X% that But to neutral not the make we impacted exactly high we So CapEx, costs try of gets cash. that sure the not So lag with payment and to trying right? there's schedule of margin side, we're that the margin so side. an cash side, try

impact So to we've that it's projections not going our given.

Christopher Kastner

Noah. Yes. P&L, total It's the of part ship

Operator

Shapiro Our is Shapiro from question from next Research. George

George Shapiro

your Yes. end than I revenues wanted you ask you actual higher ship -- that high on the the $XXX the almost provided guide call. to were like what of November million

just So question, this me, a that, a business? why, fairly wondering predictable given too. is have to I different And

Thomas Stiehle

Yes, sure, sure.

mentioned receivables. year So rush MT nice I saw in the a of notes, the of from the about my [indiscernible]. it's end at side, we some

big So pickup. that was a

overage the that side. here, shipbuilding on was felt land side, on and timing the the would how floating just material we of of the we the majority where material On

outsourcing well. We on as going have some

you landed $XX was flow we costs But normalize million opportunistic that. growth those kind $XX there. million, So here. through million we guided $XXX to It over about and that of XXXX that they in good came

News it the up saw shipbuilding. of shipbuilding year that on just in X.X% the [ nice the a Ingall's It was than sharing Newport But exceeded. revenue all at You Xs in and it in at better divisions X%, end X.X%. run side. ] was a between the X

Christopher Kastner

month George, you're from year. miss time the a came It at familiar with of material in end just to can time. timing, by X to the you months

had Now -- unfortunately, for that. to the to you include had we So was the next right? it it year, timing. But impacts guide just

George Shapiro

implies a made for the million. rest it I Tom, from Mission in you other benefit million Hydroid the [ then $XX business mean, the And probably ], $X one if Okay. had Systems of

if of Now just provide charges some could you at alluded other But to you on that. the information businesses some more some there.

Thomas Stiehle

on out that's job took playing did right. We mix program wasn't Yes, slight material. just how that we the and of have step back. that's in one is piece there timing It that. just the on A a execution over

over dollars that find EBITDA, won't of be you out. when a when I out that X.X%, you with overall, of But [indiscernible] but equity. joint It'll And to we venture the of a on can business cash. bit going the things, that that bottom normalize then You beginning very us a about And threshold of think be as kind margin the picked we kind been then in forward. I'm the there you And and there's light manufacturing we it [indiscernible]. that. how million of right mentioning little throughout a guide behind we we the charge not it it's a claim, the still of I down with. But lot this the we at and on was a small sold board couple that have of of now begin on performance gave for off, kind the [indiscernible]. put the revenue, up the lost dollars satisfied at not cash, MT of guess break had there. came mentioned the timing that's X.X% numbers some the charge end on you, But book effort with [indiscernible] kind we up a the year, to across we've quarter take that

George Shapiro

could And EAC of each for in just Tom, the if the the you quarter? provide sectors

Thomas Stiehle

Sure.

of year, And I XX% $XXX K, whole to appreciate the XX% be unfavorability, net of about year, million $XX million growth, Ingall's $XX of call, $XXX of the net of $XXX and with that favorability up MT just News. the That was favorability, out MT breaks Ingall's. XX% a in $XXX XX% the XX% you'll that net million the quarter, and News, was Newport which XX% about Newport in in So on everyone was gross million for a made does the about for gross see million Ingalls, of was XX% for question. whole about unfavorable million.

Operator

Melius now Mikus We from Scott taking be will our last from question Research.

Unknown Analyst

next Is to its over making of any of wanted the supplemental Congress? investments package the ask, on years? is X I customer-funded way that contingent through any the

Christopher Kastner

in it That's of don't question, don't front a a a it question. of couldn't I quantify for in think it -- really good have That's is, of that of know you. I good I part have that but and part front me. I I me.

So Scott. we'll information that for you, get

Unknown Analyst

on about growth the a time, Okay. shipbuilding for Got output you've rate, thinking governor the long it. talked about revenue And there. being labor then

retention investments don't the improve can materially? much rates shipyard throughput how improve if So these in

Christopher Kastner

everything to we perfectly. be right? do both, adjust when we we has out assuming risk And it works -- It's that them. our projections, not Well,

So be it has both. to

have We our to rates. improve retention

improve improve We and supply capacity. to And then that, increase. we of if throughput correct. chain, significantly do out have to we have But will absolutely the you're

in successful have both. to be We

Thomas Stiehle

overtime as we've it, yards plans Scott, we're how that know how too, retained either that we crew but not that shifts that where and or contract we standing a that the that full have I'd have, hire, building have But supplement on how that, we using I we dials additional offset out, outsourcing we're labor, to train, critical in flat term. active the the working there's path. try themselves near there's do X for

there can't that You the out able do But run right yards. we'll dials sets or yard years X see XX organically that we opportunity you to that and demand building for additional in employing things right the we're we're -- liver now, see if now. the are outside be

Operator

the This session for Q&A is the we time have all today.

back to remarks. Chris any like So Kastner for closing over I Mr. to now would hand

Christopher Kastner

this XX remind are create also joining year. Investor on to good I seeing will I'm value for to call performance many forward Yes. year, our Thank and of you you, our the for hosting of today. very that last thank Have confident continue then. a afternoon. shareholders and look we team's strong and like we March I'm proud would you an Day you to that

Operator

for everyone, you, Thank call. today's joining

now may disconnect and You a lines, lovely day. your have

Huntington Ingalls Industries (HII) 1 Feb 242023 Q4 Earnings call transcript