HII - Huntington Ingalls Industries, Inc.

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Third Quarter 2025 HII Earnings Conference Call. [Operator Instructions] After the speaker's presentation, there will be a question and answer session. [Operator Instructions] Please be advised that this -- 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. Mrs. Thomas, you may go ahead. Christie Thomas: Thank you, operator, and good morning, everyone. Welcome to the HII Third Quarter 2025 Conference Call. Matters discussed on today's call that constitute forward-looking statements, including our estimates regarding the company's outlook, involve risks and uncertainties that reflect the company's judgment based on information available at the time of this call. These risks and uncertainties may cause our actual results to differ materially. Additional information regarding these factors is contained in today's press release and the company's SEC filings. We will also refer to certain non-GAAP financial measures. For additional disclosures about these non-GAAP measures, including reconciliations to comparable GAAP measures, please see the slides that accompany this webcast, which are available on the Investor Relations page of our website at ir.hii.com. On the call today are Chris Kastner, President and Chief Executive Officer; and Tom Stiehle, Executive Vice President and Chief Financial Officer. Now I'll turn the call over to Chris. Christopher Kastner: Thanks, Christie. Good morning, everyone. The United States Navy recently celebrated its 250th birthday and the U.S. Marine Corps will do the same in the coming weeks. So I would like to start today by thanking both of them for their enduring service to our country and their commitment to our national defense. Thank you for all that you have done and all that you do to protect us and future generations. Moving on to the third quarter, I'll start by discussing our results and division highlights and provide an update on our operational initiatives, then Tom will provide some details on our financial performance and outlook. Before I begin, I'd like to reiterate our commitment to accelerate shipbuilding construction to meet our customers' requirements. We continue to support the identification of strategies to increase throughput across our shipbuilding programs and are working closely with our customer and partners to achieve this important mission. Now turning to our results. This morning, we reported record third quarter sales of $3.2 billion and diluted earnings per share of $3.68. Shipbuilding sales growth of 18% year-over-year was driven by our shipbuilding division's focus on increasing throughput in our shipyards and supported by broader efforts underway to rebuild the U.S. maritime industrial base. Likewise, 11% sales growth at Mission Technologies was driven by our team's continued focus on delivering innovative solutions, including growth in the critical areas of C5ISR; cyber; electronic warfare & space; and live, virtual, and constructive training as well as unmanned systems. Demand for our products and services remain strong. Third quarter contract awards were $2 billion, and our backlog is $56 billion, of which $33 billion is funded. At Newport News, we continue to make progress on submarines and aircraft carriers. The last 2 Virginia-Class Block IV submarines are in the water with SSN 798 Massachusetts having recently completed sea trials and preparing for delivery this year. As for our carrier program, CVN-79 Kennedy continues to make progress in its testing program, and we expect to conduct the ship's first sea trials around the end of the year. And shipbuilders are installing the large components that have now been received on CVN-80 Enterprise, which will allow erection progress to accelerate. Moving to Ingalls. In the third quarter, we successfully completed builders trials for DDG 128 Ted Stevens, bringing her a step closer to acceptance trials and delivery. Our amphibious warship construction continues to make progress with both LHA-8 Bougainville and LPD-30 Harrisburg through integration and testing in support of trials next year. At Mission Technologies, we had another strong quarter of sales at $787 million, along with a book-to-bill of 1.25x and announced key strategic partnerships around future opportunities. First, we joined forces with Babcock International to integrate HII's unmanned underwater vehicles with the Babcock submarine weapon handling and launch systems, while REMUS 620 was validated for torpedo tube deployment. This will position our torpedo tube launch and recovery solutions for international markets. We also announced a partnership with Shield AI to accelerate cross-domain and modular mission autonomy solutions and a partnership with Thales to develop advanced autonomous undersea mine countermeasure capabilities. Additionally, we unveiled the ROMULUS family of unmanned surface vessels powered by our Odyssey Autonomy software and have started building the flagship ROMULUS 190. ROMULUS is one example of numerous projects and contracts underway in Mission Technologies that combines internally developed technology with world-class partner technology to create best-of-breed technology solutions for the war fighter. Now shifting to an update on our operational initiatives. Both Ingalls and Newport News performance was stable to slightly improving in the quarter as we continue to work through ships that were contracted prior to COVID. As I previously indicated, during the contract mix transition from pre-COVID contracts to our newly awarded contracts, we continue to expect some choppiness in performance. The first operational initiative increasing throughput is showing improvement over 2024. Initial indications align with our expectation that the HII and Navy investments in workforce, infrastructure and supply chain will have a positive impact on throughput trajectory. Our updated expectation is to achieve approximately 15% throughput improvement for the full year 2025 as throughput improvements have accelerated throughout the year. From a labor perspective, we have hired over 4,600 shipbuilders year-to-date, and our retention rates have improved at both shipyards. At Newport News, we've seen an increase in experienced hires following the wage investment this summer and increased hiring from regional workforce development pipelines, which provides more proficient incoming shipbuilders. These are important steps to stabilize and level up the experience of our workforce. Also, we are seeing success and expansion of the industrial base with our distributed shipbuilding strategy resulting in significant outsourcing taking place at 23 partners and growing. With the Navy support, we are partnering with shipyards and fabricators in multiple states to grow throughput and improve schedule adherence for all of our shipbuilding programs. The second operational initiative is our $250 million annualized cost reduction effort, and we remain on track to achieve this target. And the final operational initiative is achieving our new contract awards. Having completed the negotiations for the significant award of 2 submarines earlier this year, our teams have pivoted to negotiations of Block VI and the next Columbia award and are working towards having agreements in place late this year. Shifting to activities in Washington. The new fiscal year began with a lapse in appropriations. And as a result, many activities of the federal government have halted. I will note, in the Department of Water shutdown guidance, shipbuilding is 1 of 6 departmental priorities that should be supported to the extent possible with available funds. To date, our programs in shipbuilding have been fully supported, and we've seen no impact to normal operations. We have had immaterial impact to Mission Technologies, but we are watching those programs closely as they are more likely to be impacted by budget timing. We continue to support completion of the FY '26 appropriations process as soon as possible to minimize the impact that a lapse in funding could have on our programs. Both House and Senate defense appropriations bills include critical funding to support the submarine and maritime industrial base. And both bills reflect continued investment in our shipbuilding programs with funding provided for the Columbia-Class and Virginia-Class Submarine programs for CVNs 80 and 81 construction and CVN 82 advanced procurement for the DDG-51 program and for the second of 3 years of funding for the refueling and overhaul of CVN 75. We also look forward to Congress completing work on the fiscal year 2026 National Defense Authorization Bill, qualifying the strong support for shipbuilding and other national security priorities reflected in the respective House and Senate bills. The 2 defense authorization committees continue to show strong support for our company's programs. In summary, we had a solid third quarter with record sales as we ramp production in support of delivering on our commitments. And now I'll turn the call over to Tom for some remarks on our financial performance. Tom? Thomas Stiehle: Thanks, Chris, and good morning. Let me start by briefly discussing our third quarter results, and then I'll address our outlook for the year. For more detail, please refer to the earnings release issued this morning and posted to our website. Beginning with our consolidated results on Slide 5 of the presentation, our third quarter revenues of approximately $3.2 billion were a record for HII and increased 16.1% compared to the same period last year. The higher revenue was attributable to strong year-over-year growth at all 3 divisions. Ingalls revenues were a record $828 million and increased by 24.7% compared to the third quarter of 2024, driven primarily by higher material volume in surface combatants. Newport News revenues of $1.6 billion increased by 14.5% compared to the third quarter of 2024, driven primarily by higher volumes across submarine and aircraft carrier programs. Together, shipbuilding revenue was $2.4 billion, well ahead of our guidance for the quarter as results benefited from higher-than-expected material receipt as well as the impacts of wage investments and our broader efforts to drive higher shipbuilding throughput, including increased outsourcing. Mission Technologies revenues of $787 million increased by 11% compared to the third quarter of 2024, driven by higher volume in C5ISR; cyber, electronic warfare & space; and live, virtual, and constructive training as well as our growth in unmanned systems. Moving on to Slide 6. Segment operating income of $179 million and segment operating margin of 5.6% in the third quarter of 2025 were both up from prior year results, primarily driven by the prior year period's negative adjustments as well as the positive impacts of the volume growth I discussed. At Ingalls, segment operating income was $65 million and operating margin of 7.9% compared to $49 million and 7.4% in the third quarter of last year. The increases were driven by the volume increases in surface combatants. The third quarter net cumulative adjustment at Ingalls was a positive $6 million and none of the adjustments were individually significant. At Newport News, segment operating income was $80 million and operating margin was 4.9% compared to $15 million and 1.1% in the third quarter of 2024. Prior year results were impacted by negative adjustments resulting from the performance challenges and the delay of new contract awards. For the third quarter of 2025, Newport News Shipbuilding net cumulative adjustment was negative $13 million. None of the adjustments in the quarter were individually significant. Mission Technologies operating income and margin were largely consistent year-over-year as changes in the contract mix offset the higher volumes I previously mentioned. Consolidated operating income for the quarter was $161 million, and operating margin was 5% compared to $82 million and 3% in the same period last year. The variance was primarily driven by the segment results I've just noted. Net earnings in the quarter were $145 million compared to $101 million in the third quarter of 2024. Diluted earnings per share in the quarter were $3.68 compared to $2.56 in the same period last year. The effective tax rate in the third quarter was 28.9%, higher than our initial expectations as results were impacted by a reduction in the estimated research and development tax credit for the prior year. Turning to Slide 7. Cash provided by operations was $118 million in the quarter. Net capital expenditures were $102 million or 3.2% of revenues. Free cash flow in the quarter was $16 million. Free cash flow results in the quarter were better than the guidance we had provided, largely due to stronger collections in the quarter as well as some disbursements moving out of the quarter. I'll discuss our updated 2025 free cash flow guidance in a moment. During the quarter, we did not repurchase any shares. We did pay a cash dividend of $1.35 per share or $53 million in the aggregate. Last week, we announced a modest increase in our quarterly dividend to $1.38 per share. Turning to liquidity and the balance sheet. We ended the quarter with a cash balance of $312 million and liquidity of approximately $2 billion. Our capital allocation priorities are unchanged. We value our investment-grade credit rating, and we will continue to prioritize prudent debt levels while strategically investing in our shipyards and thoughtfully growing our dividend while continuing to use excess free cash flow for share repurchases. Moving on to our outlook on Slide 8. We have narrowed the shipbuilding revenue range to be between $9 billion and $9.1 billion, which is an increase of $50 million at the midpoint from the prior guidance range. We are reiterating the shipbuilding margin range of between 5.5% and 6.5%. For Mission Technologies, we are now expecting revenue between $3 billion and $3.1 billion, an increase of $50 million from the prior guidance range at the midpoint. We expect Mission Technologies operating margins of approximately 4.5% and EBITDA margins between 8% and 8.5%. Our 2025 guidance is predicated on achieving the operational initiatives we have laid out. We are pleased with the throughput improvement we saw in the third quarter, though we have not been able to overcome the slower start to the year and therefore had to trim our throughput improvement expectation for the full year. As Chris noted, we are continuing to work towards the Virginia-Class Block VI and Columbia Build II submarine awards later this year. If the award were to push into 2026, it would be a headwind to our guidance that would likely have us end the year slightly below the midpoint of our shipbuilding margin guidance range. Conversely, an award this year would support us ending at or slightly above the midpoint of the range. For 2025 free cash flow, we are updating our guidance to be between $550 million and $650 million. At the midpoint, this is an increase of $50 million compared to our prior guidance range. We are establishing a cumulative free cash flow target for 2025 and 2026 of $1.2 billion. Using the 2025 free cash flow guidance midpoint, this does imply both years will generate about $600 million in free cash flow. As always, our cash flow in a particular quarter or year can be impacted by small changes in timing for large receipts and disbursements. We are also updating a number of discrete income statement guidance elements. We have made some minor revisions to our pension outlook, and you can find updated 2025 and 2026 expectations in the appendix of today's slide presentation. We are also updating the expected effective tax rate for the year to 22% given the elevated rate in the third quarter that I discussed previously. To close, it was a good quarter as we continue to make steady progress working our way through challenging shifts and executing our 2025 operational initiatives, securing new contracts aligned to the current environment, drive higher throughput and thoughtfully manage cost. With that, I'll turn the call back over to Christie to manage Q&A. Christie Thomas: Thanks, Tom. [Operator Instructions] Operator, I'll turn the call over to you to manage the Q&A. Operator: [Operator Instructions] Our first question comes from Scott Mikus with Melius Research. Scott Mikus: Chris and Tom, I wanted to ask on Virginia Block VI and Columbia Build II negotiations. So you kind of touched on the fact that shipbuilding is not really impacted by the shutdown. Is there anything that's potentially holding up that negotiation maybe due to government employees being furloughed? And then also from a high-level perspective, does it make sense for industry and the customer to commit to that many boats at once? Or should the negotiation maybe split up into 2 or more negotiations to just get a better understanding of the cost and schedule to build those? Christopher Kastner: Yes. Thanks, Scott. I think furlough is not impacting that negotiation. The team is working very hard to get that done. I won't comment directly on the negotiations because it's inappropriate. But the team is working very hard to get that done before the end of the year. I know -- I also know the Navy is working on how that works with the shutdown and potential CR to make sure that we can get the ships awarded. So more to come there, but I think we're making good progress. On the incremental award or potentially award less ships, really doesn't make sense and contrary to really what we think is the most important thing for the industrial base, which is a consistent demand signal. And as important as that is to us, the supply chain really needs it. So I think incrementally negotiating these, rewarding these does not make a lot of sense. We need to get all 10 of these awarded and be on our way. So thanks, Scott. Appreciate it. Scott Mikus: Okay. And then a quick one. It looks like you mentioned the retention rates have been improving. You had the wage increase go in at Newport News, I think, in June. When is the wage increase going in at Ingalls? Christopher Kastner: Yes. So we're in discussions with the union at Ingalls. That union agreement expires next year. So we're hoping to get that in place at the beginning of next year or maybe end of this year, but we're in discussions. It makes it a bit more complicated because we have to engage with the union to get that done. Operator: Our next question comes from Noah Poponak with Goldman Sachs. Noah Poponak: Tom, you highlighted the shipbuilding revenue in the quarter being almost $250 million ahead of your plan, but then only raising the full year by $50 million. And to be in the full year range, 4Q shipbuilding revenue would need to be flat, actually maybe even down a little. And I think the compare is pretty easy. Can you help me with that math? And I guess the bigger picture question is just seeing this very high growth rate in the quarter on shipbuilding revenue. The question is, have you achieved much better ability to get the throughput relative to demand? And can we extrapolate -- maybe it's not 16% every quarter for a while, but can we extrapolate much better growth in the medium term? Or was there something just with the outlay allocation or something kind of random to the quarter? Thomas Stiehle: I appreciate the question there, Noah. So a couple of things there. Newport News, they grew 15%. Ingalls grew 25%. From a Newport News perspective, what we saw there, increased throughput, wages and outsourcing. It was primarily driven by the material that we see on those contracts as well. And from an Ingalls perspective, it was the material volume that we saw on the surface commend, a mixture of FY '23, the destroyers, the DDG-1000 and some growth on some long lead contracts we have and some orders on that front. I do expect we held the guidance right now. We took the bottom range up. We held the top range still and what we gave you at the beginning of the year there. There is some tailwinds, I'll tell you. So we want to see how we continue to improve. As Chris mentioned in his remarks upfront, it was earned throughput. Charleston Operations is providing a lift in revenue. We've qualified over 23 new vendors on the outsourcing side. So all that's very favorable. We want to continue to see a positive trend as we go forward here. I would say a couple of the dollars are pull ahead from Q4 to Q3, but there's some foundation and some substance there of increased growth as we go forward here. Chris and I will evaluate how Q4 plays out, and then we'll provide some guidance of revenue projections for shipbuilding on the February call. Christopher Kastner: Yes. I think to add to that and Noah, obviously, I think 4% midterm growth is probably in the rearview mirror. But we want to make sure we roll up our plans and give you good guidance on the year-end call. Thomas Stiehle: Yes. I would comment too, if you pull back just -- even though Q3 was 18% growth that we had here, kind of year-over-year in shipbuilding. For the year itself, it's 6.1% between Q1, Q2 and Q3 here. So we do see some positive signs of the capacity and throughput. And I envision as we continue to execute on the backlog we have, we have the book of business, the investments mature, the wages take hold and the workforce becomes more senior, I would envision that that's going to ramp as we go forward here. Noah Poponak: Chris, 4% is in the rearview mirror. What do you mean by that? Christopher Kastner: Just long midterm guidance for shipbuilding. We have provided kind of midterm guidance for shipbuilding at 4%... Noah Poponak: What do you mean by it being in the rearview mirror? Christopher Kastner: That means it's not -- probably not valid anymore. It's probably in excess of that. We just need to roll up our plans. Noah Poponak: Okay. Understood. And then Tom or Chris, the $250 million cost initiative, it's a pretty big number just compared to your EBITDA base. Will that be a gross number? Do we need to net that number? And how much of that is already done and in your numbers versus is still ahead of you? Christopher Kastner: Yes, it's all in our guidance. We assume we're going to achieve that in our guidance. So it's all in. Noah Poponak: It's in your 2025 guidance? Christopher Kastner: Yes. Thomas Stiehle: Yes. Noah Poponak: And has that been benefiting the margin year-to-date? Christopher Kastner: Well, these are long-term contracts, and you make assumptions about what the cost profile is going to be. So it's all been -- it's all been in our guidance. Operator: Our next question comes from Ron Epstein with Bank of America. Ronald Epstein: Yes, just maybe a quick one here. Can you give us more color on your partnering strategy on unmanned vessels? You announced recently a partnership with Shield AI and the progress you're having on your own internal autonomy systems for these vehicles? Christopher Kastner: Sure. Thanks for that. As you know, it's an Odyssey software solution for autonomy. We've got -- the beauty of Odyssey, it's open source. So the implementation or incorporation of new software tools is pretty seamless. And so when we reviewed the space and opportunity we had to identify partners that could add capability into that software, Shield AI made a lot of sense. C3 AI makes a lot of sense. It just makes it more powerful for the mission. We've been working on that software for a long time. As you know, we have over 750 uncrewed vehicles that have been delivered both to international and domestic partners. So it's been very positive. And I don't know if you've seen the releases relative to our ROMULUS line of vehicles that we're building as well. So Odyssey is a critical part of that. It only makes sense. It's part of MT's strategy to use world-class commercial solutions to make sure that we provide the best solutions for our customer and the open architecture of that software makes that pretty seamless. So we're excited about it. We think it's going to be a great tool, and we tend to include it going forward in our unmanned products. Ronald Epstein: Got it. Got it. And I mean, ultimately, how big do you think the unmanned market can be for you? Christopher Kastner: Yes. So I don't want to give a specific size. It is ramping. It is becoming more material within Mission Technologies, and you see the budget environment, the allocation of additional unmanned opportunities in reconciliation is very positive. So it's ramping. I don't want to size it here, but it's definitely a place we're investing in. Ronald Epstein: Got it. Got it. And then maybe just one last one. You probably saw in the news yesterday. And if you can answer this, I mean it didn't happen that long ago. But the Trump administration suggested that Hanwha is going to be making nuclear submarines into the Philadelphia Navy Yard. How does that changed things or not? I mean, how do you think about that strategically? Christopher Kastner: Well, it's definitely been an exciting couple of days in shipbuilding. I don't want to comment specifically on that because that's pretty new information. But at the end of the day, we're going to build what the Navy wants us to build. We're going to partner with them. And if they need our help, we're going to help them. So we're not getting distracted by anything. We're keeping our heads down, and we're going to build what's in front of us. But that's pretty new information. I don't want to comment directly on it until we understand more details. Operator: Our next question comes from Seth Seifman with JPMorgan. Seth Seifman: So I wanted to ask, I think -- Tom, I think you mentioned with regard to the margin rate, if the contract didn't come in Q4, you'd be below the midpoint for the year, which I think would imply kind of a step down in the margin in Q4. And just kind of curious what drives that given where the underlying margins are in the -- in each shipyard after EACs, it would seem that the underlying margin here with kind of neutral EACs is something that is above 6% kind of in the maybe low towards mid-6 range. And so is that some conservatism that leads you to have that guidance? Or is there some kind of anticipation of potential further negative adjustments? Thomas Stiehle: Yes, I appreciate the question. Our shipbuilding margins for the first 3 quarters have been stable. We saw 6.4%, 5.8% and 5.9%. We're just tweaking the guidance on what will happen as we play out in Q4. The [indiscernible] award will have incentives in there, some performance incentives and some capital incentives. Just the math of that is the timing of when that happens and how we book that, has incremental changes as we adopt the capital projects, the CapEx incentives and how we book that. So we're probably being a little conservative on that front, and we're trying to guide the Street as where we could land depending on the timing of those awards. We don't see some stepbacks right now. Through Q3, we've booked our performance for cost and schedule. And we're just reiterating the guide that we gave you at the beginning of the year for [indiscernible]. But no issues or concerns, expect to kind of finish up around the midpoint as we go forward here. Operator: Our next question comes from Scott Deuschle with Deutsche Bank. Scott Deuschle: Chris, relative to that 15% throughput target, are you looking for a similar number from both Ingalls and Newport News? Or is that target materially different between the 2 yards? Christopher Kastner: No, they actually are ending up at about the same place. So that doesn't often happen. But yes, they're ending up in about the same place. And it's pretty equally distributed between increased outsourcing and performance of the labor force. So yes, it's been pretty equal. Scott Deuschle: Okay. And then relative to the reduction from the 20, was that also equal? Or did one of the yards see like slightly less improvement than was expected? It sounds like fairly equal as well, but just curious for that. Christopher Kastner: Yes. Yes, fairly equal. Scott Deuschle: Okay. And then, Chris, after you raised the wages for your workers in Newport News, did you see any other local area industries respond in kind by also raising wages? Just trying to get a sense as to whether you're maintaining a consistent spread above the market wage rate as a result of those increases or if the market is also already eating into that at all? Christopher Kastner: Yes. The market has not materially adjusted such that it's impacted our hiring in Newport News. It's been pretty positive at Newport News and the effect of those wages has been positive and reduced attrition. But we're probably most excited about repositioning the experience level of the workforce where we have more experience, but we're also hiring about 50% out of what we call the pipeline, which are the regional workforce development centers, the apprentice schools and the high school programs, which is very positive. So Newport News labor is doing well, kind of cautiously optimistic, and we hope to keep it going. Operator: Our next question comes from Myles Walton with Wolfe Research. Myles Walton: Tom, on cash flow -- on the cash flow flatness implied in 2026, maybe just give us a little bit of a color there. Obviously, an assumption that earnings will grow, CapEx, I would have thought maybe steps down a tad. Is there an offset to that to kind of keep in the flat range? And then a couple of years back, there was a bigger target for cash flow in the $700 million to $800 million range. Is that something that can only arrive with something like the [indiscernible]? Thomas Stiehle: I appreciate the question on that. Yes. So we brought back more than a guide, an annual guide here for 2-year guide. A piece of that is just with 5 quarters, this quarter this year. And next year, as the awards come through, we watch performance for Q4 and then we set the trajectory for next year, we wanted to kind of settle the Street on where we think we're going to be. We've talked about the book of business we have, the performance where we stand. I think it's consistent that we'll have a run rate here about $600 million between the 2 years. We'll just see what hits this year versus kind of next year between receipts and the awards. So I'm comfortable with that right now. Relative to your math, the revenue does grow here. There is a lot of moving parts in there between the working capital that I have, the CapEx -- and again, the timing of receipts and the performance for the next 5 quarters, that plays into all of that here. But generally speaking, there's -- I'm comfortable with where we're at. It's a conservative guide, I would tell you, for 2026 as we go forward here, I really want to close out the year, lock on our plan, get the awards from the customer, which has both opportunity R&Os around that. And then we'll give you more color on that in the February time frame. Relative to your comment on the $700 million to $800 million, as we get back, obviously, the top line is growing, that's good. We've kind of hinted here that the 4% has some good tailwinds. And you see for the first 3 quarters of this year, it's over 6%. So we'll give you increased kind of guidance on that in the February time frame. But the top line will grow kind of meaningfully. And the major piece that will change that cash flow inflection in the medium to long term will be the return of the profitability. We expect incremental profitability from year-to-year. And as we continue to retire the pre-COVID contract work, the new contracts are aligned with the efficiencies and the schedules and the materials that we see. And as we get into those contracts, we start kind of booking more conservatively. But as we get into those contracts 3 to 5 years out, we will see us getting back to more traditional expectations of profitability in shipbuilding. Obviously, higher top line, higher bottom line, and that's where we get back to the cash flows that you've kind of hinted here on the tail end of the decade here, so okay. Myles Walton: Okay. Got it. And then, Chris, maybe one for you, and I don't know if you can answer this one either, but the President has recently quoted saying he's going to have an executive order moving aircraft carrier designs back to steam from emails. I'm just curious, what carrier could that cut over into if that was actually a change that was going to take place? Christopher Kastner: Yes. So again, I probably don't need to comment on that directly. What I will say is, we're going to build whatever the Navy asks us to build. So if they ask us to code over e-malls or weapons elevators, we'll work with them to do it the most intelligent way and cut it over in the right way. But again, we're going to build what they ask us to build. Operator: Our next question comes from Gautam Khanna, TD Cowen. [Operator Instructions] Gautam Khanna: Guys, I was wondering if you could update us on a couple of things. One, did you receive the modules for CVN-80 that were delayed in the quarter? Christopher Kastner: We did. We did. We're -- we will install those in Q4 and to get back on the erection schedule for that both. So yes, we did receive the modules. Gautam Khanna: Terrific. And could you give us the net EACs by segment? Thomas Stiehle: Yes. So the net EACs that we had here were gross favorable was 37%, unfavorable was 40%, net of minus 3%. And that was made up Ingalls at positive 6%, as I said in my remarks, Newport News at minus 13%, those in the remarks as well as NTA at positive 4%. Gautam Khanna: Okay. Sorry, I missed that. And then I was just curious, Tom, on the Q4 implied shipbuilding EBIT, pretty wide range, but you did mention that it's going to be somewhere around the midpoint with or without the submarine contracts signed. Is there the high end, is that like what would get you to the high end of the implied range? And is there any reason to think that the extremes are actually in play? Thomas Stiehle: Yes. I appreciate the question. We gave you that guide at the beginning of the year in February. We have reiterated in May and July now here. We just have not changed that. I mean the math of the extremes would take a lot of things break in one way or another way. I would stick to the comments I had earlier here. We've been very consistent from quarter-to-quarter. I don't really expect this to inflect significantly up or down from here for the end of the year. As I said earlier, I do expect as we go from year-to-year an incremental improvement here. But we understand how we're operating. The performance has been really steady right now, and we're razor-focused on what we have to do for the end of the year to close out within our guidance ranges that we gave. Gautam Khanna: Perfect. And one last one, Tom, just I know you talked about the pre-COVID and post-COVID contract mix. Can you remind us what it is this year? And what do you expect it to be in 2026? Thomas Stiehle: Yes. We haven't given specific percentages on that, but we've said that when we get to 2027, there'll be more work post-COVID than pre-COVID, it will be over 50%. So you can do the math of that of where we stand. But we're ramping from being in the 80s and 70s down to that by 2027. And it's fairly significant to retire those boats and ships. Every time we sell one off, obviously, there's less pre-COVID work and then the opportunity set is in front of us there with the new contracts aligned to performance and schedule and cost that we see here. Operator: Our next question comes from Noah Poponak with Goldman Sachs. Noah Poponak: Just one follow-up on kind of everything happening here. Can you talk about why philosophically or mechanically and whether that's mechanically in the actual work or the nature of your contracting, why would throughput and top line growth improve before faster than the margins? Christopher Kastner: Yes. That's an interesting question. The throughput assumptions we have in our schedule support the EACs, and we have risk and opportunity around them. So if we can execute on those throughput targets, then it mitigates a significant amount of risk and there's potential upside, but you have to evaluate each every quarter. It's not a perfectly aligned metric tied to margin performance. Noah Poponak: Okay. Yes. Just sort of trying to better understand the much better top line and your confidence in that continuing with the shipbuilding margin being kind of just flat through the year. And I guess I would -- improve the labor, I guess, would maybe immediately drive higher throughput, but then you need the labor to refine and get better before it impacts the margin was maybe a thought or I didn't know if it's just the nature of percentage of completion accounting. It's just sort of an interesting dynamic in the financials. Christopher Kastner: Yes. So, I think it's an interesting question. Tom can chime in here as well. But 1 quarter doesn't win the day, right, in an EAC. And you're running risk and opportunity throughout the entire program. So while, yes, you're retiring risk. And if you're achieving your throughput targets and achieving your sales targets, you are retiring risk, but you aren't necessarily going to convert that into profitability in your EACs. Noah Poponak: So perhaps 1 quarter is evidence of a start of everything you're doing, but you need more than that to put it in the actual booking rates. Christopher Kastner: That's why I consider this a stable quarter. It's stable, but we need to continue to keep our head down and work. Thomas Stiehle: I'd comment on the back of that, too. I'm with Chris, Noah, it's 13 weeks. Some of these contracts have 2 to 6 years to go. It's good -- it's actuals plus estimate to complete and you put a quarter in the books that's a solid quarter, which is good. Expect that trend to continue if not improve, but that wouldn't necessarily mean that immediately we change the EACs. Incrementally, we'll continue with good performance to retire down the risk. And as the cost risk kind of goes away, that's the catalyst to really take the booking rates up. So I like the trends that I'm seeing right now. And quarter-over-quarter, as we continue to see that, that's what's going to drive the incremental improvement of the bottom line. Thanks for the follow-up. Noah Poponak: Yes, yes. It's interesting. The appreciate the detail. Operator: I'm not showing any further questions at this time. I would now like to hand the call back over to Mr. Kastner for any closing remarks. Christopher Kastner: Thank you for taking the time to join us today and for your interest in HII. At HII, we're committed to delivering on our strategic priorities and aim to drive growth, improve efficiency and create value for all our stakeholders. Please have a safe and happy Halloween weekend ahead. Operator: Thank you very much. That concludes today's call. You may now disconnect your lines.

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Second Quarter 2025 HII Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [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. Mrs. Thomas, you may begin. Christie Thomas: Thank you, operator, and good morning, everyone. Welcome to the HII Second Quarter 2025 Conference Call. Matters discussed on today's call that constitute forward-looking statements, including our estimates regarding the company's outlook involve risks and uncertainties and reflect the company's judgment based on information available at the time of this call. These risks and uncertainties may cause our actual results to differ materially. Additional information regarding these factors is contained in today's press release and the company's SEC filings. We will also refer to certain non-GAAP financial measures. For additional disclosures about these non-GAAP measures, including reconciliations to comparable GAAP measures, please see the slides that accompany this webcast, which are available on the Investor Relations page of our website at ir.hii.com. On the call today are Chris Kastner, President and Chief Executive Officer; and Tom Stiehle, Executive Vice President and Chief Financial Officer. I will now turn the call over to Chris. Christopher D. Kastner: Thanks, Christie. Good morning, everyone, and thank you for joining us on today's call. I'll start by providing a high-level summary of our financial performance, highlighting key achievements, and then I'll provide an update on our operational initiatives. Tom will discuss our quarterly results and full year 2025 outlook in more depth. This morning, we reported second quarter sales of $3.1 billion and earnings per share of $3.86, with backlog reaching $56.9 billion. Contract awards of $11.9 billion included DDG 145 and 146, LPD 33 and 2 Block V submarines with associated investments in shipbuilder wages, workforce development, infrastructure and technology insertion. Free cash flow was $730 million, and we invested $93 million in CapEx. At Newport News in the second quarter, we floated off SSN 800 Arkansas and are on track to deliver SSN 798 Massachusetts later this year. New carrier construction is also progressing. And on CVN 79 Kennedy, we are working with our customer to deliver the most complete and combat-ready ship to the Navy as early as possible and are scheduled to go to sea for our first trials toward the end of the year. CVN 80 Enterprise has received several of the late engine room components that I discussed previously, with the remaining equipment scheduled to come in over the next few months. Receipt of the remaining sequenced critical components enables progress acceleration as our shipbuilders integrate the equipment into the ship and unlock associated delayed progress. Moving to Ingalls. In the second quarter, we completed main engine light off on DDG 128 Ted Stevens, and christened DDG 129 Jeremiah Denton. And we continued to make progress on our amphib programs as we completed fuel load on LPD 30 Harrisburg and generator light off on LHA 8 Bougainville. At Mission Technologies, we had another quarter of strong sales of $791 million. Key wins included a contract to provide live training solutions to the U.S. Army's Program Executive Office for Simulation, Training and Instrumentation. And in our uncrewed business, we delivered the first 2 Lionfish small uncrewed undersea vehicles to the U.S. Navy under a program that could scale to 200 vehicles. We also announced a commercial sale of REMUS 300 UUVs to Hitachi. Notably, our recent announcement of a technology partnership with C3 AI is a key strategic highlight for the quarter. This partnership enables us to leverage digital technologies in AI to accelerate shipbuilding throughput with a primary focus on schedule optimization to drive faster delivery. Now on to the operational update. Both Ingalls and Newport News performance was relatively stable in the quarter as we continued to work through ships that were contracted for prior to COVID. As I have indicated previously, the next 1.5 years will be challenging as we transition out of ships contracted for pre-COVID to our new contracts. As for the first operational initiative, increasing throughput, Ingalls is on plan and Newport News continues to be behind plan, primarily due to CVN 80 supply chain issues I previously discussed. Both shipyards increased throughput in the second quarter, and I expect further acceleration on the back half of the year. It's important to note that progress is being made on improving performance due to the sustained and significant investment by the Navy and Congress along with our internal investments, leading indicators in the labor pipeline and retention are showing positive trends. And on the supply chain front, we expect continued stability but risk remains for some major equipment. While these early indicators are encouraging, there is still tremendous work to be done. We know that it will require sustained improvement to achieve our long-term targets. Also, the industrial base is expanding with significant outsourcing taking place, increasing the capacity of the shipbuilding industry as a whole; and our technology efforts to increase efficiency are off to a strong start. The second operational initiative is our $250 million annualized cost reduction effort, and we expect to achieve this by year's end. Finally, regarding the third operational initiative, contract awards, we announced the award for 2 Block V submarines and associated investments on April 30. This award reflects a significant step solidifying the investment our customer is making in the shipbuilding industrial base and highlighting the critical and urgent need for these submarines. The shipbuilding and Navy teams have now pivoted to negotiate agreements for Virginia-class Block VI and Columbia Build II, and I expect these agreements to be completed later this year. Turning to activities in Washington. The reconciliation bill in the FY '26 budget includes significant support for our shipbuilding programs. Specifically, the reconciliation bill includes a second FY '26 Virginia-class submarine, 2 DDG 51 Arleigh Burke destroyers, funding for the amphibious warship bundle, funding for expansion of USV, UUV production and $4.9 billion for the shipbuilding industrial base. Additionally, the President's budget for fiscal year 2026 is now under consideration by Congress and the proposed budget reflects continued investment in our shipbuilding programs with funding provided for the Columbia class and Virginia-class submarine programs for CVNs 80 and 81 construction and CVN 82 advanced procurement. And for the second of 3 years of funding for the refueling and overhaul of CVN 75. In summary, we had a solid Q2 that was largely consistent with our expectations as we remain focused on executing our operational initiatives, increasing throughput, achieving cost reductions and capturing new contract awards. And now I'll turn the call over to Tom for some remarks on our financial performance. Tom? Thomas E. Stiehle: Thanks, Chris, and good morning. Let me start by briefly discussing our second quarter results, and then I'll address our outlook for the year. For more detail, please refer to the earnings release issued this morning and posted to our website. Beginning with our consolidated results on Slide 6 of the presentation, our second quarter revenues are approximately $3.1 billion, increased 3.5% compared to the same period last year. The higher revenue was attributable to year-over-year growth at all 3 divisions. Ingalls revenues of $724 million increased by 1.7% compared to the second quarter of 2024, driven primarily by higher volume on the guided missile destroyer program, partially offset by lower volume on the LHA and LPD programs. Newport News revenues of $1.6 billion increased by 4.4% compared to the second quarter of 2024, driven primarily by higher volumes in both Columbia and Virginia-class submarine programs, partially offset by unfavorable cumulative adjustments on aircraft carriers. Mission Technologies revenues of $791 million increased by 3.4% compared to the second quarter of 2024, driven primarily by a nonrecurring favorable resolution related to a C5ISR contract as well as higher live, virtual and constructive training volume. Excluding the impact of the noted resolution, Mission Technologies results were generally in line with our prior expectations and the guidance we provided on the first quarter call. Moving on to Slide 7. Segment operating income of $172 million and segment operating margin of 5.6% in the second quarter of 2025 were both down from prior year results, but were consistent with our expectations for the quarter. At Newport News, segment operating income was $82 million, and operating margin was 5.1% compared to $111 million and 7.2% in the second quarter of 2024. The decreases were driven by performance of the Virginia-class submarine program and aircraft carrier construction, partially offset by favorable contract incentives of those programs as well as a higher risk retirement on the Columbia- class submarine program. Additionally, prior year results benefited from favorable contract adjustments and incentives on the Aircraft Carrier Refueling and Complex Overhaul program. For the second quarter of 2025, Newport News Shipbuilding's net cumulative adjustment was negative $17 million. This includes a negative adjustment on CVN 80 as well as other performance adjustments. At Ingalls, segment operating income was $54 million and operating margin was 7.5% compared to $56 million and 7.9% in the second quarter of last year. The decreases were driven by lower performance and lower contract incentives on the amphibious assault ship programs, which was largely offset by favorable contract adjustments related to the guided missile destroyer program. Prior year results included a favorable impact related to the delivery of LPD 29. The second quarter net cumulative adjustment at Ingalls was a positive $4 million and included positive adjustments related to the destroyer program that were largely offset by an unfavorable adjustment related to LHA 8. Mission Technologies operating income and margin were largely consistent year-over-year, with changes in contract mix offsetting the impacts of higher volume. Consolidated operating income for the quarter was $163 million, and operating margin was 5.3% compared to $189 million and 6.3% in the same period last year. The variance was driven by the segment's results I just noted, along with a more favorable operating FAS/ CAS adjustment compared to prior year period. Net earnings in the quarter were $152 million compared to $173 million in the second quarter of 2024. Diluted earnings per share in the quarter were $3.86 and compared to $4.38 in the same period last year. Turning to Slide 8. Cash provided by operations was $823 million in the quarter. Net capital expenditures were $93 million or 3% of revenues. Free cash flow in the quarter was $730 million. Free cash flow results in the quarter were $480 million better than the midpoint of the guidance we provided on the first quarter call. The overperformance is due to a number of factors, including the timing of incentives, some of which were received earlier than previously anticipated; normal quarterly timing of cash receipts and disbursements; and improvement in quarterly taxes and capital expenditure timing. I'll discuss our updated 2025 free cash flow guidance in a moment. During the quarter, we did not repurchase any shares. We did pay a cash dividend of $1.35 per share or $53 million in aggregate. Turning to liquidity and the balance sheet. We ended the quarter with a cash balance of $343 million and liquidity of approximately $2 billion. Our capital allocation priorities are unchanged. We value our investment-grade credit rating, and we'll continue to prioritize prudent debt levels, while strategically investing in our shipyards and thoughtfully growing our dividend while continuing to use excess free cash for share repurchases. Moving on to our outlook on Slide 9. We are reiterating our segment revenue and operating margin guidance for the year. We expect shipbuilding revenue between $8.9 million and $9.1 billion and margins between 5.5% and 6.5%. For Mission Technologies, we expect revenue between $2.9 billion and $3.1 billion. Operating margins between 4% and 4.5%. And EBITDA margins between 8% and 8.5%. Our 2025 guidance is predicated on achieving the operational initiatives we have laid out. As Chris noted, we are progressing on each of these items, and we expect to achieve a meaningful improvement in throughput over the course of the year. Regarding our assumption related to the award of Virginia-class Block VI and Columbia Build II submarines, we continue to expect that award to occur this year. If the award were to push into 2026, it would be a headwind. However, we believe we have accounted for a range of timing considerations within our guidance. For 2025 free cash flow, we are updating our guidance to between $500 million and $600 million. At the midpoint, this is an increase of $150 million compared to our prior guidance range. The majority of this growth is related to updated cash tax expectations given the recent change in tax law, including R&D expensing and bonus depreciation changes. We are also updating a number of discrete income statement guidance elements. We are revising our operating FAS/CAS adjustment from $43 million to $40 million. Our noncurrent state income tax expense for the year is now estimated to be approximately $15 million, with approximately $10 million of that expense falling in the third quarter. This update reflects the state impact, a recently enacted federal tax law changes that benefited our cash flow expectations and may be further impacted depending on how individual states conform to the recent federal tax law changes. Our interest expense guidance has declined by $20 million from our prior outlook, given the strong second quarter cash flow and resulting lower commercial paper usage. Moving on to a preview for the third quarter. For shipbuilding, we expect third quarter sales of approximately $2.2 billion and margins near the low end of our annual guidance range. This does imply a stronger fourth quarter, which is consistent with our expectations and timing of milestones. For Mission Technologies, we expect third quarter sales of approximately $730 million and operating margin of approximately 3.5%. This does imply a sequential decline in revenue However, second quarter results did include the nonrecurring favorable contract resolution I previously discussed. Finally, we expect third quarter free cash flow to be approximately negative $150 million as a result of normal business operations and the strong Q2 cash generation. To close, I will echo Chris' sentiment, it was a good quarter as we continue to make steady progress working our way through challenging ships and executing our 2025 operational initiatives, securing new contracts aligned to the current environment, driving higher throughput and thoughtfully managing costs. With that, I'll turn the call back over to Christie to manage Q&A. Christie Thomas: Thanks, Tom. [Operator Instructions] Operator, I will turn it over to you to manage the Q&A. Operator: [Operator Instructions] Our first question comes from Doug Harned with Bernstein. Douglas Stuart Harned: You had a big quarter for shipbuilding in Q2 revenues. And you're looking at 20% better throughput this year, you're getting -- should be getting some money from the Block V award. But your guide for shipbuilding revenue is only up 3%. I mean how should we reconcile those things? Christopher D. Kastner: Yes, it's a good question, Doug. Thank you. Our throughput increase and our revenue forecast all takes into consideration wages getting incorporated in both shipyards, that's already happened in Newport News. We expect that to happen over the back half of the year at Ingalls. Outsourcing, improving which -- actually outsourcing this year should get up to 2 million hours, which is over 1 million-hour increase from last year. And then our Charleston operations also comes online and provides additional throughput. If you take all that into consideration, most of that happens in the back half of the year. And if we're able to achieve that, we should achieve -- and I'm confident we'll achieve our 20% improvement on throughput, which should lead us to our guidance estimate. You always have to take into consideration material timing when you take -- when you're doing your sales forecast. But I'm pretty comfortable that our guidance is appropriate. There's potentially some upside there if we make all our throughput commitments. If we are able to continue to hire experienced people and our attrition trends continue. But all that works together and conspire together to project towards our sales guidance. Douglas Stuart Harned: I guess what I'm trying to understand is -- and we're looking at this situation where a lot of money is coming in to shipbuilding right now in proposed budgets, current budgets; and you're looking at the higher throughput. Just trying to figure out -- and I know that it's not easy to change shipbuilding revenues in a short period of time. But I'm just trying to understand how we get -- we kind of triangulate between the funding trajectories, the throughput and what this revenue outlook would likely be over, at least, the coming years? Christopher D. Kastner: Right. Well, so I'm still comfortable with the 4% growth revenue outlook, and I'm very comfortable that this shipbuilding industrial base is getting rebuilt. I think labor is being addressed through increase in salary and positioning towards more experienced people and attracting more people into the industry. I'm very confident the industrial base is expanding, led by the prime contractors that are doing that effort, including the acquisition of Charleston. So it's going to happen. The industrial base is growing. The supply chain is becoming more stable. I can't predict when that volume will show up, but it's occurring as we're moving through this year. I don't want to get ahead of ourselves from a guidance standpoint and a sales standpoint, but I'm still comfortable with the 4% growth rate and it's incumbent upon us to execute. Operator: Our next question comes from Scott Mikus with Melius Research. Scott Stephen Mikus: Chris and Tom, nice results. We have better clarity on the funding environment with the One Big Beautiful Bill signed, the 2026 budget also, it's very supportive. When we think about kind of the repeal of Section 174, is that 5-year cumulative free cash flow target of $3.6 billion now back on the table, but just from 2025 through 2029? Thomas E. Stiehle: Yes, we pulled our guidance last year, and I would not say it's back on the table right now. We're raised the focus and fixated on showing that we provide guidance going forward that we can hit. Right now, we have the annual guidance you saw from my remarks upfront in the released information that we provided, that we raised that from $300 million to $500 million to $500 million to $600 million in free cash flow. But we're going to stick to an annual guidance right now. And as we get consistent and we quarter-over- quarter meeting or exceeding the guides, we'll address that in future discussions. But we don't have a 5-year guide on the table right now. Scott Stephen Mikus: Okay. And then, Chris, the Secretary in Navy commented that it might be preferable to have Newport News and Electric Boat each build Virginias separately rather than teaming. So if the Navy were to pursue that route, just curious how much capital would you and the Navy need to invest to make that happen? And would you have enough skilled labor or optionality to outsource to support 1 Virginia by itself at Newport News? Christopher D. Kastner: I think it's always important to evaluate alternatives. Right now, we're happy with the teaming arrangement that we have with General Dynamics on the Virginia-class program. It would take additional capital. I don't -- and it would be a significant capital, and we've communicated that to the Navy. We would have enough skilled labor to execute on any job like that and we're talking about a time horizon that's pretty far out in front of us. So that's probably all I want to say on that. It's always good to look at options, look at alternatives, we would need additional significantly more capital to execute on that. But we'll support the Navy in these initiatives as they work through how they want to proceed. Operator: Our next question comes from Gautam Khanna with TD Cowen. Please go ahead. Gautam J. Khanna: Yes. And sorry if you've covered this, I was a little late. But on CVN 79 and the timing slip to 2027, could you characterize any economic impact from that? And was there a negative EAC or could there be because of that schedule change. Christopher D. Kastner: Yes. So we've already taken that schedule consideration into our guidance. And that was understood when we did the financials. There was no material impact related to that. It should be noted that CVN 79 is progressing very well. There's only 90 compartments left on that ship. We're going to go to sea this year. There's just a couple of systems that are taking a little bit longer and we need to add some capability as well. So 79 is progressing very well. There's no financial -- or no material financial impact, and we're going to deliver a great ship when it gets finally delivered. Operator: Our next question comes from David Strauss with Barclays. Joshua Tyler Korn: This is Josh Korn on for David. I wanted to follow up on the reconciliation funding for shipbuilding. I guess, both on the shipbuilding and unmanned side, exactly how you see that flowing through to you, time line and any kind of quantification. Christopher D. Kastner: Yes. So we tend to look at that together with the FY '26 budget. If you look at them together, all of our programs are supported and all of that is included in our in our 4% mid- to long-term guidance relative to shipbuilding sales. So we think it's all very positive. I think the unmanned stuff is very interesting. Obviously, we have the premier uncrewed underwater vehicle program up in our Boston organization within -- in Mission Technologies. And then some very interesting programs we're evaluating, participating in from a surface standpoint. So we think that's positive as well, and that could be some tailwinds if we're successful in that regard. So we look at them together. Significant tailwinds in shipbuilding, and we're going to take advantage of them. Joshua Tyler Korn: Okay. And then on Mission Technologies, have you had any impact or discussions around DOGE at this time? Christopher D. Kastner: So we're comfortable with our '25 guidance still. There has been some minor restructuring of contracts, which would potentially impact '26. We're looking for ways to offset that. As of this point, we're still comfortable with our revenue growth within Mission Technologies. But that there has been a slowing of awards and activity, although the pipeline still looks very strong at over $90 billion. So we're going to watch it. We're following it every day, and we're offsetting impacts where we can. But as of right now, we're comfortable with our guidance. Operator: [Operator Instructions] Our next question comes from Seth Seifman of JPMorgan. Seth Michael Seifman: I think you mentioned earlier, Chris, the timing of the contracts -- or maybe Tom, you mentioned the timing of the contracts for Block VI and Build II could affect this year's results. Maybe if you could tell us a little bit more about that based on the margin forecast for Q3, it seems like you're expecting those results in those contracts in Q4. Are they -- do you expect them to come together? Do you think they could come separately? If you could give us an update on sort of where things stand and kind of the magnitude of that within the outlook. Christopher D. Kastner: Sure. I'll start, and then I'll kick it over to Tom for the details on how he's thinking about it from an outlook standpoint. We quickly repositioned from the Block V contract into Block VI and the Columbia Build II contracts, and we're actively engaged with the Navy and our partners to get that done. The good news is that we had a construct that was put together under Block V that we can follow as we move into Block VI. Now it's going to take some time. We're working at a very detailed level with them to get these docs just because they're very important. But it could slip into Q4, and we'll do them incrementally. And as Tom indicated in his in his prepared remarks, while we do expect them to be done this year and -- but we also factored it when we think through the balance of the year. So it could potentially provide some upside if it gets done or potentially a minor downside if it doesn't, based on those factors. But I'll let Tom talk about details. Thomas E. Stiehle: Yes. In February, we had mentioned about the 3 awards we had in FY [ 2020 ] anomaly done in the springtime. Another 2 awards were planned for the back half of the year. As we mentioned, there is a factoring of opportunities and risks in how things play out, so that's why we give ranges on revenue and margin and cash. Those awards really -- we wouldn't have any cost to sales or they wouldn't overly impact the margin if they got awarded in the back half of the year. It really just is a function of incentives, any advancements on any infrastructure for capital investments. That could either provide tailwinds or headwinds. That's been factored into guidance right now. So it doesn't impact the current EACs and profitability that I have today. And the range of outcomes I see right now, we feel really comfortable with the $500 million to $600 million in free cash flow in the year. So we'll keep you informed. We do anticipate -- we're working actively with the Navy right now on those requirements and those offerings, and we'll see how the back half of the year plays out. Seth Michael Seifman: Okay. Okay, great. And then just a follow-up, just to understand kind of how some of the stuff works. The wage increases that you talked about for Newport News, did those go into productivity assumptions on existing contracts and thus led to some higher booking rates on contracts or at least in the mix upward pressure on booking rates for existing programs and when that comes to Ingalls, we'll see something similar? Or is that not the right way to think about it. Christopher D. Kastner: That's not necessarily the right way to think about it. We think there's going to be a direct correlation between higher wages and improved retention, which should lead to a more skilled employee and improved performance, but we don't necessarily bake those into the estimates to complete right away. We need to prove it. So we're just going to continue to execute. And if that performance does improve, then we could potentially book up there. But it's not necessarily a direct link as you indicated in your statement. Seth Michael Seifman: Okay. No, that's helpful to have that clarity. Operator: Our next question comes from Ron Epstein with Bank of America. Ronald Jay Epstein: What impact, if any, are you guys expecting on the business from the changes in R&D in the tax code? Is that pretty rough to do some stuff that you might not have done before? Thomas E. Stiehle: Well, I'll start with the changes of the tax law, right? So obviously, that got approved on July 5, and that kind of works itself through rather than amortizing the R&D expense, it gets period expense. So there's the tailwind for that. We see about $150 million of increase, and that's why we took the free cash flow from a midpoint of $450 million now to -- from $300 million to $500 million, which was $400 million of a midpoint up to now, $550 million midpoint between $500 million and $600 million. So we'll get some favoritism on that. It's now period expense, plus you can do that retroactively since the beginning of this year. And then there's a catch-up between '22 and '24 on the amortization. So a lot of moving parts just on the tax front alone, and that's on the federal side. On the state, on the noncurrent state taxes, it actually provides a slight kind of headwind, and that's why we adjusted that for the guidance to be $15 million expense this year as opposed to being neutral. And $10 million of that $15 million will show up in Q3 in the guide that I gave you. So realistically, it provides a couple of more dollars to kind of run the business and invest in the business here. And as you see, we finished out the quarter with positive cash flow of $343 million. So going forward, as we say, we don't think $147 million, $150 million of tax benefit here, we'll have a credit or will forgo paying taxes for the rest of the year. Ronald Jay Epstein: Got it. Got it. Got it. And then maybe just as a follow-up with -- on the unmanned undersea business that you guys have. I mean how large is that product line today? And if you could frame maybe the kind of growth you could see there? Christopher D. Kastner: So we haven't specifically identified how large they are externally. They're -- just not significantly material to the Mission Technologies portfolio, but we do expect outsized growth beyond the 5% growth rate. And when you look at the opportunities that are presenting themselves in the space, we have an opportunity, as I indicated in my remarks, for over 200 vehicles on that small uncrewed vehicle contracts with the Navy. And there are some upcoming competitions, both in undersea and surface that are very interesting to us that we're going to evaluate. So while it's small now, we do expect it to grow at an outsized rate within Mission Technologies. And there are some really good opportunities there that are absolutely funded within the reconciliation bill. Operator: Our next question comes from Myles Walton with Wolfe Research. Myles Alexander Walton: Chris, I was wondering if you could touch on your views of AUKUS and its trajectory. It seems like it may be getting a relook but it's never quite clear as to what is and what isn't actually occurring. And then as well, if you can just touch on where you think the role of partnerships with international shipbuilders would be most impactful in a positive way to the business and to getting the output of the overall industry up? Christopher D. Kastner: Sure. Great. Thank you, Myles. Yes, the AUKUS is still broadly supported simply because it makes great strategic and economic sense. So there's no backup that I see within Australia, the U.K. or the United States. There is a Pentagon review going on, and I think that's healthy. They need to look at it to make sure that we're proceeding down the right path. But I fully expect it to continue to be supported across all 3 countries. From our perspective, we do have a footprint down there now. We've got a great partner in Babcock. We've got some good wins under our belt, and we're competing for some also very interesting wins that should show up over the back half of the year. So it's positive for us. We're going to continue to grow. We're going to continue to have a presence down there with our partner, and I'm still very bullish on AUKUS. From other international shipbuilders, we have taken the steps, because we saw this coming, we have developed a strategic relationship with HHI out of Korea to evaluate both defense opportunities and commercial opportunities. Could they help with investments in our current shipyards or other shipyards to increase throughput for the industrial base? Absolutely. We're going to have to see how that develops over the next couple of quarters. But I think there's -- I'm pretty bullish on that as well. They're committing dollars to increase the industrial base, which will increase throughput. So I think that's only positive and just adds to the tailwinds that we see in shipbuilding. Myles Alexander Walton: Okay. That's great. And then just can you touch on how many employees were hired in the quarter? Christopher D. Kastner: About 2,400, more experienced. And I didn't specifically talk about retention, but we've seen month-over-month improvement in our retention and attrition metrics. And since we implemented the wage adjustment of Newport News, there's been a very good trend for the first few weeks from an attrition standpoint. Now we're not going to claim victory yet because it's just a few data points. But our initial assumptions seem to be proving out positively, and we think that's a really good sign for the future. Operator: Our next question comes from Noah Poponak with Goldman Sachs. Noah Poponak: I guess it feels like there's a little bit of a chasm between the very significant change in funding and treatment of your business and the Navy overall by the government in the budgets, and what you're doing here with guidance and sort of your tone on the pace of improvement. Recognizing it's a very long-cycle business and a lot of these things will take time, I'm trying to sort out how much of that is it just will take time and 2025 and 2026, still have the pre-COVID contracts, and it's not until beyond that, that we see significant improvement in revenue growth and margin versus I'm wondering if -- does the Block VI, Block II (sic) [ Build II ] waiting for that award this year, make this year just -- is that a very binary thing where you can't really call for much improvement this year until you know that's in this year and not sliding into early '26? Christopher D. Kastner: Yes. I think your first assumption is correct, Noah. I think you've got it. It does take time. We have pre-COVID contracts we're working through. We've assessed the Block VI and Build II contracts and factored them into the indicated final. So if it happens, things could potentially get a bit better. If it doesn't, it could be maybe slightly worse. But we're comfortable with how we factored that. So I think you've got it right, it just takes time. We need to get through these pre-COVID contracts. But the tailwinds are real. The demand is real. The actions we're taking to expand the industrial base are happening. The maritime industrial base funding that have been flowed to the supply chain have absolutely improved the supply chain. The technology investments that are taking place with AI with C3 AI and the Newport News shipyard is going to yield positive results. So it's going to happen. We just need to come through these pre-COVID ships to transition to the other side. Noah Poponak: Okay. Chris, can you give us a sense for the split -- on the labor front, the split between the need to improve new hiring versus the need to improve attrition? Because I would think the former would take a while and have a long learning curve or as I would think the latter would maybe flow to the business much more quickly? Christopher D. Kastner: It's interesting. They work together as you would expect. If we can hire more experienced people that are going to stay, then your efficiency is going to get better very quickly. And you can afford to not hire as many people because you're not losing as many. So it's directly related, and they move together. And if we're successful in hiring then our attrition should get better as well. Noah Poponak: Okay. And then just, Tom, in the cash flow buildup, the $150 million approximately of cash tax tailwind, does that recur for a while? Or does it get smaller beyond '25? And then on CapEx, how long are you in the 3.5% to 4% of sales range before that starts to come down and become a tailwind? Thomas E. Stiehle: Yes. So on the taxes right now, we gave the guide for this year. Still have some tailwinds out years, too, we're working ourselves through that. It's a bit complicated because, one, is the timing on the Fed side since it was enacted. We kind of understand that. The state, obviously, it's different states, how they enact it, when they enact it. We're working ourselves through the math of that. So we haven't guided anything for '26 and on. There are some dollar savings in those years as well. And we'll provide more guidance on the back half of this year on that front. All right. Your part 2 was? Noah Poponak: CapEx. Thomas E. Stiehle: CapEx. So the CapEx, we finished 2.5% in Q1, 3% in Q2. We're 2.8% through the first half of the year. We guided 4%. Haven't provided guidance after this year. I know last year, when we thought we were going to put all the subs on contract immediately, it was about 5% for 3 years. I do envision it to be elevated over the normal, what we term medium to long term of 2.5%. I do envision us being higher than that in the next couple of years, but we haven't provided a specific number. That will be a function as we come through the Columbia Build II in the VCS Block VI, timing and pace, the number of boats and the level of infrastructure and investment that goes into the Newport News yard, will dictate. But I'm comfortable like we have in the recent past, we'll continue to get participation -- meaningful participation from our Navy customer as we invest for more throughput and higher revenues in Newport News. Operator: Thank you. I am not showing any further questions at this time. I would now like to hand the call back over to Mr. Kastner for any closing remarks. Christopher D. Kastner: Sure. Thanks for joining the call today and your interest in HII. We are focused on building on these results and driving value for all of our stakeholders. We look forward to providing further updates as we progress throughout the year. Thank you. Operator: Thank you very much. That concludes today's conference call. You may now disconnect.

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the First Quarter 2025 HII Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the call over to Christie Thomas, Vice President of Investor Relations. Mrs. Thomas, you may begin. Christie Thomas: Thank you, operator, and good morning, everyone. Welcome to the HII first quarter 2025 conference call. Matters discussed on today's call that constitute forward-looking statements, including our estimates regarding the company's outlook, involve risks and uncertainties and reflect the company's judgment based on information available at the time of this call. These risks and uncertainties may cause our actual results to differ materially. Additional information regarding these factors is contained in today's press release and the company's SEC filings. We will also refer to certain non-GAAP financial measures. For additional disclosures about these non-GAAP measures, including reconciliations to comparable GAAP measures, please see the slides that accompany this webcast, which are available on the Investor Relations page of our website at ir.hii.com. On the call today are Chris Kastner, President and Chief Executive Officer; and Tom Stiehle, Executive Vice President and Chief Financial Officer. I will now turn the call over to Chris. Chris Kastner: Thanks, Christie. Good morning, everyone, and thank you for joining the call. I'll start by providing an update on our 2025 operational initiatives, which include enhancing shipbuilding throughput, reducing costs, and securing new contract awards. In the first quarter, we made progress against our goal of improving shipbuilding throughput by 20% year-over-year. Ingalls is largely on plan and their production milestones remain unchanged. Newport News is modestly behind plan. Half of this variance is driven by the atypical weather we experienced in January and February. The most significant variance in Newport News resides with CVN 80. This is directly related to the late major equipment that is to be installed in the whole of the ship. These delays directly impact the construction approach and have limited the progress we can make on the ship. Once this equipment is received from our suppliers, which is scheduled throughout the summer, we anticipate an acceleration of progress. Additionally, for both shipyards, our outsourcing efforts continue, and we expect this to ramp throughout the year to support our throughput goals. Our South Carolina production facility is online and has already completed the first carrier unit for Newport News. The team remains focused on meeting our delivery schedules and is working with the Navy to identify additional initiatives that will accelerate scheduled performance. Turning to our cost reduction efforts. Plans are in place, and we intend to reach our goal of $250 million in annualized cost reduction by year's end. We have an agreement on the Block V FY 2024 II Built contract, and we will now turn our focus to the Block VI and Columbia Build II contracts. Also, I want to highlight how our strategic focus in 2025 aligns nicely with the administration's defense priorities. On April 9th, the Trump administration released two executive orders, modernizing defense acquisitions and spurring innovation in the defense industrial base and restoring America's maritime dominance. We are working with our customers on strengthening the industrial base and accelerating the transition of new capabilities to the warfighter. We are leaning into the use of other transaction authorities and are working with the Rapid Capabilities Office as a means to leverage new technologies. For example, in April, we delivered the first two Lionfish small uncrewed undersea vehicles to the U.S. Navy under a program that could scale to 200 vehicles. The program was developed in partnership with the U.S. Navy and Defense Innovation Unit to accelerate adoption of dual-use commercial technologies into U.S. Department of Defense programs. This quarter, we also announced that our Mission Technologies division was selected to develop an open architecture high-energy laser counter-drone system for the U.S. Army's Rapid Capabilities and Critical Technologies office. HII will develop and test a high-energy laser prototype to acquire, track and destroy small-to-medium-sized unmanned aircraft systems. On the shipbuilding side of the business, we established an MOU with HD Hyundai Heavy Industries. The MOU provides a framework for us to jointly explore opportunities to collaborate, on accelerating ship production in support of defense and commercial shipbuilding projects. Like our existing strategic relationship with U.K.-based Babcock International, we believe international partnerships are crucial to strengthening the Allied industrial base. Given our core business, these strategic relationships position us to support initiatives that may result from the Maritime executive order. Turning to the results, first quarter revenue was $2.7 billion and earnings, per share was $3.79. We ended the first quarter with backlog of $48 billion, of which approximately $28 billion is currently funded. Now let me share a few first quarter highlights. During the quarter, at Ingalls Shipbuilding, we launched DDG 129, Jeremiah Denton, christened LPD 30, Harrisburg and started fabrication of LPD 32 Philadelphia. At Newport News, CVN 79, Kennedy continued catapult testing and achieved 95% of compartments turned over to the Navy. And on the Virginia-class program, we completed a major test event on the first boat of Block V, SSN 802 Oklahoma. Also at our recently acquired Newport News Charleston operations, we retained 99% of the transitioning workforce, and these new shipbuilding team members are working on submarine and carrier units, to help increase throughput at Newport News. We also celebrated the graduation of 115 apprentices during the Apprentice School graduations at both shipyards. These graduates started the apprentice program during COVID, and we look forward to higher numbers of graduates in upcoming years, following the expanded enrollment we've recently experienced. Turning to Mission Technologies, in addition to delivering the initial line five small UUVs I mentioned earlier, we surpassed 700 Remus Uncrewed underwater vehicles sold and delivered to 30 countries. Key wins at Mission Technologies in the quarter, in addition to the high-energy laser weapon system included a contract to expand shipboard and shore-based training support for the U.S. Navy and Coalition Forces, a pilot training contract to support the nation's combat-Ready force, an award from the U.S. Air Force to protect systems and software and a task order to support global air and space operations. Turning to activities in Washington for a moment, while a full year continuing resolution for defense is unprecedented, we are pleased with the support provided for our shipbuilding programs, which supports our target of achieving more than $50 billion in awards across 2025 and 2026. The Full-Year Continuing Appropriations and Extensions Act 2025 included funding for 3 Arleigh Burke-class surface combatants, one Virginia-class submarine, one San Antonio-class amphibious ship and the RCOH for CVN-75. I'll note that we do not expect a material impact related to tariffs. We purchased the vast majority of our material domestically. We have long-term purchase agreements in place for material that may be impacted by tariffs. In summary, I'm encouraged by the results to-date and the progress our team has made against the operational initiatives we've laid out. But I also know there is significant work to be done as we continue to execute for our customers and create value for our shareholders. Our outlook is unchanged. And over the next few years, as we execute on the pre-COVID contracts and transition into the post-COVID contracts, we will continue to reduce risk and align our portfolio baselines with the current environment. I fully expect top line growth with a forecast of $15 billion of revenue by 2030 as well as margin and free cash flow normalization in the years ahead. And now I'll turn the call over to Tom for some remarks on our financial performance. Tom? Tom Stiehle : Thanks, Chris, and good morning. Let me start by briefly discussing our first quarter results, and then I will address our reaffirmed outlook for the year. For more detail, please refer to the earnings release issued this morning and posted to our website. Beginning with our consolidated results on Slide 5 of the presentation. Our first quarter revenues of approximately $2.7 billion decreased 2.5% compared to the same period last year. This decreased revenue was attributable to declines at Newport News Shipbuilding, Ingalls Shipbuilding and Mission Technologies. Ingalls revenues of $637 million decreased by 2.7% compared to the first quarter of 2024, driven primarily by lower volume on amphibious assaults ships. Newport News revenues of $1.4 billion decreased by 2.6% compared to the first quarter of 2024, driven primarily by lower volumes in aircraft carriers and naval nuclear support services, partially offset by higher volumes in the Columbia-class submarine program. Mission Technology revenues of $735 million decreased by 2% compared to the first quarter of 2024 driven primarily by lower volume in C5ISR. Results for the quarter exceeded our guidance. The year-over-year decline was expected and related to nonrecurring sales in the first quarter of 2024. Moving on to Slide 6. Segment operating income of $171 million in the first quarter of 2025 increased less than 1% compared to the first quarter of 2024, driven by improved performance at Mission Technologies in cyber, electronic warfare and space and Uncrewed Systems, which was largely offset by lower amphibious assault ship risk retirements at Ingalls. At Newport News, segment operating income improved by $3 million, or 3.7% compared to the first quarter of 2024. Results in the quarter included unfavorable performance-related adjustments for CVN-80 Enterprise as well as Block IV and Block V of the Virginia-class program, which were offset by contract incentives. Consolidated operating income for the quarter of $161 million increased by $7 million, or 4.5% from the first quarter of 2024, and operating margin of 5.9% in the quarter compares to 5.5% in the same period last year. The improvement was driven by a more favorable operating FAS/CAS adjustment as well as the favorable segment results I've noted. Net earnings in the quarter were $149 million compared to $153 million in the first quarter of 2024. Diluted earnings per share in the quarter were $3.79 compared to $3.87 in the same period last year. Our contractual commitments increased by approximately $2.1 billion in the period, bringing backlog to $48 billion at the end of the quarter. Turning to slide 7. Cash used in operations was $395 million in the quarter. Net capital expenditures were $67 million or 2.5% of revenues. Free cash flow in the quarter was negative $462 million. This was within our free cash flow guidance range for the quarter, though at the low end of the range due to timing of incentives and normal fluctuations in program receipts and disbursements. During the quarter, we did not repurchase any shares. We did pay a cash dividend of $1.35 per share or $53 million in aggregate. Turning to liquidity and the balance sheet. We ended the quarter with a cash balance of $167 million and liquidity of approximately $1.5 billion. Today, we are repaying a $500 million note and plan to utilize our revolving credit facility and commercial paper program to support interim liquidity as free cash flow generation ramps through the year. This is in line with our prior expectations and was contemplated in the interest expense guidance that we had previously provided and are reiterating today. Our capital allocation priorities are unchanged. We value our investment-grade credit rating. We will continue to strategically invest in our shipyards, thoughtfully grow our dividend and return excess cash through share repurchases. Moving on to our outlook on slide 8. We are reiterating all elements of the 2025 guidance, and there's no change to our medium to long-term thinking in terms of growth and profitability expectations. Our guidance is predicated on achieving the operational initiatives we have laid out for 2025. As Chris noted, we are progressing on each of these items, and we expect to achieve a meaningful improvement in throughput over the course of the year. For Shipbuilding, we expect second quarter sales of approximately $2.2 billion and margins near the low end of our annual guidance range. For Mission Technologies, we expect second quarter sales that are relatively flat sequentially and margins of 3% to 3.5%. We expect second quarter free cash flow to be between $200 million and $300 million. To close, I will echo Chris' positive sentiment regarding the company's mid to long-term outlook. We see incredible demand for critical products and services that we provide and are heartened by the administration's clear focus on growing our domestic shipbuilding capability and supporting a strong maritime industrial base. With that, I'll turn the call back over to Christie to manage the Q&A. Christie Thomas: Thanks, Tom. As a reminder to everyone on the call, please limit yourself to one initial question and one follow-up, so we can get as many people through the queue as possible. Operator, I will turn it over to you to manage the Q&A. Operator: Thank you very much, Christie. [Operator Instructions] Our first question comes from Doug Harned with Bernstein. Doug, your line is now open. Please go ahead. Doug Harned: Good morning. Thank you. Chris Kastner: Good morning, Doug. Doug Harned: We've seen now with the CR with additional money for shipbuilding, infrastructure, and then this big authorization proposal that came up on the weekend. Now, when you look at all of this, there should be more money there. But the thing that I've sort of struggled with here is how to take that money and convert it into a plan that can address what you -- say, on the Virginia-class U, Electric Boat and the whole infrastructure needs to happen to really get throughput up. Can you comment on where the responsibilities lie, what the Navy is actually doing so that we can have confidence that not just the money is there, but the real actions are there to change the way things have been going over the last few years. Chris Kastner: Sure, Doug. Let me give that a shot. That's a big question. And it's not only the budget, the FY 2024 boat, the executive orders related to commercial shipbuilding and then reconciliation. There's just a lot of tailwinds right now related to shipbuilding that we need to participate in. Now the first step in seeing what the investments are in that regard is this FY 2024 tub-boat contract. That was a product of really a couple of years of effort by the Navy and the shipbuilders to evaluate the investments that were required to get at accelerating throughput. You see that in the award of that contract. It was very thoughtfully put together. It's a wage support and workforce development support. It's very targeted investments to increase the submarine build rate. So that's all very positive. And then when you look at the CIB and the MIB funding that have been applied to the supplier base, that's also very positive. And you see a buildup of the infrastructure in shipbuilding that will support the growth that we think is ahead of us. So it's really, I would think, an industry-wide, all hands-on deck effort to identify a build-out of that industrial base. Now it's not easy. It takes time. These are heavy manufacturing facilities and equipment. This is building a workforce in a challenging environment. But I think it's only positive for HII and positive for shipbuilding. Doug Harned: I guess the challenge here is that there's been a lot of discussion about this over the last few years. And just are there some specific things like if you start to look at what you need to get to that rate of 2 Virginia class per year, what's the trajectory for this? Are there specific things that will enable you and your partner to get there? Chris Kastner: Absolutely. And really the first step of that is this FY 2024 tub-boat contract, targeted investments in workforce equipment, facilities, training that will accelerate the throughput. We have a lot of confidence that when these investments take hold, it's going to start to ramp throughput for the submarine program. And this shouldn't end here. We're going to negotiate Block 6 of the Columbia build 2 contracts. We've identified additional investments that could potentially be applied to further accelerate. So it's going to -- as I said before, it's going to take a while. You just don't build a building overnight. You don't build a workforce overnight. But I absolutely think that these are the right investments to get at the build rate. Doug Harned: Okay. Very good. Thank you. Chris Kastner: Thank you Operator: Our next question comes from David Strauss with Barclays. David, your line is now open. Please go ahead. David Strauss: Hi, good morning. Chris Kastner: Good morning. Q – David Strauss: Chris, following up on the CR money, the 242 contract that was announced yesterday, it looks like it's a cost -- some form of cost contract. How is that -- I thought we were operating under fixed price on Virginia-class. So how is that potentially different? What does that contract contemplate differently, I guess, than prior contract? Chris Kastner: Yes. It's a bit of a hybrid, but I'll kick it over to Tom. He can answer that. Tom Stiehle: Yes. So it's a cost-type contract. It covers both parties, the Navy and ourselves concerns as far as what wants -- to be put on contract. It's a good mix and blend between affordability and profitability. It covers the business environment that we find ourselves operating in. So it's a CTIF and it has some constraints as far as some parameters around the outskirts of where costs can land. But we're happy that we were able to get that done. We've worked hard with the Navy, and it was approved through the government channels. And as you saw, it was awarded last night. So we're excited about that to get going on that contract. Q – David Strauss: Okay. And any more detail on -- obviously, the shipbuilding margins in total came through better than what you had guided to. Newport News got a fair amount better. Ingalls kind of continue to step back. Can you just a little bit more detail on exactly what's going on and why you're forecasting kind of a margin step down again in Q2? And if you also want to talk about what EACs were in the quarter? Thanks. Tom Stiehle: Yes, sure. So we guided 5.5 for the quarter. So we're happy with where we landed. We landed about 90 bps above that. Ingalls came in at 7.2 and it was a pacing quarter for them. I guess I can start with the EAC adjustments. We had 80 up and 80 down for a net of zero. So there's no break at that for you. So there was no cumulative adjustments across the company as a net. Ingalls pacing quarter, I would say, right now. We're watching how [indiscernible] are performing. We saw a little pressure on sales -- on the sales front, and it's kind of working ourselves through the heart of those programs down there. From a Newport News perspective, it was a good quarter as they came in at 6.1% on the margin side. It was a mix of some pressures that we've seen on CVN 80 that Chris talked about in his remarks as we're waiting for parts to pop in there. It's just having a little bit of a draw on the EAC schedule on that front. And then the VCS program as we're working people and parts to make sure we have enough people, talented people, the wage element of this recent award will help that. And on the parts side, just making sure we can feed that production line as that production line ramps up and wants to get to the one plus two that we talked about earlier here. So the new award assisted with that with some incentives that helped to offset that. But as I said, overall, it was a net neutral for EAC adjustments across the corporation. Chris Kastner: Yes, David, this is Chris. I think you're seeing a bit of frustration regarding the timing of incentives kind of across the portfolio. I've spoken previously that we just have more incentives on our contracts now and the timing is variable at some point. So we try to guide based on what we see in front of us. And if we -- if incentives fall before or after, then it adjusts that a bit, but we're comfortable with our guidance. Tom Stiehle: From SMT perspective, we saw that they had a very strong quarter. The CEW business unit performed well against the contracts they had and the uncrewed business unit that we have there is performing well right now. So it's a couple of dollars of margin accretive on that front. The guide for Q2 that you asked about, I think we're just being conservative right now. As Chris said, there's a lot of work to do, although we're on pace on where we want to be on cost reductions and throughput and the contract awards. We've got the first increment of this one here in the spring, and then we have VCS Block VI and Columbia Bill II at the back half of the year. But I think it's just conservatism and prudence on our side that we went back to the lower end of the range. David Strauss: All right. Thanks very much. Chris Kastner: Thanks. Operator: Our next question comes from Scott Mikus with Melius Research. Scott, your line is now open. Please go ahead. Scott Mikus: Morning, Chris and Tom. I wanted to follow-up on David's question about the two-boat Virginia contract. It was surprising to see that it was cost plus. But, obviously, there's funding in there for workforce development. Electric boat has an ongoing labor negotiation. I think Newport News is three collective bargaining agreements expiring in 2027. So until those negotiations are wrapped up, should we expect a greater share of shipbuilding orders over the remainder of this year and next year to be more cost-plus incentive fee type structures? Chris Kastner: Yeah, I wouldn't necessarily assume that. We need to really get the wage support that's provided in two-boat out to our workforce as quickly as we can. I'm not going to get into dates or commitments about when that happens, because we do have to discuss that with our labor unions. But we believe that when we get the workforce, the support, the wage support to our workforce that retention will improve and productivity will improve, and we'll be able to make our throughput and our schedule commitments. So I wouldn't necessarily think that, that would dictate the contract types. And we're going to evaluate the appropriate contract types based on the situation at hand when we negotiate the contracts. So we're just going to have to move ahead from here on Block VI and Columbia Build II. The hybrid approach that essentially was put in place with the two boat contract forms an interesting basis to roll into those discussions, but we're going to have to establish those contract types as we engage with the customer and our partner. Scott Mikus: Okay. And then the Golden Dome is also a big priority for the administration, and that's going to require a lot of equipment, especially radars and potentially the Aegis Ashore system. Lead times on radars are also very long. So has there been communication between shipbuilding and the administration about how to produce enough radars for both the Golden Dome and what the Navy needs for its shipbuilding priorities? Chris Kastner: Yeah. So we have not been involved in those discussions to date. I'm unaware of any discussions with the Navy and potential suppliers for that. So I will say our DDG 51 program is -- Aegis program is going well. We saw 129 go on the water, 128 will get to its first trials this year. So we're making progress on our milestones there. But relative to those ships with those new radars, but I'm unaware of any discussions relative to Golden Dome with our product. Scott Mikus: All right. Thanks for taking the question. Chris Kastner: Sure. Operator: Thank you very much. Our next question is from Pete Skibitski with Alembic Global. Pete, your line is now open. Please go ahead. Pete Skibitski: Hey, good morning guys. I guess, Chris or Tom, I'm not sure, but kind of a complicated situation, but you guys have nearly $50 billion in total backlog right now, and you're talking about an incremental $50 billion in new awards in the relative near-term. I probably not think that there's upward pressure on that 4% shipbuilding revenue growth guide in this type of backdrop? Is it still just early -- or is the labor situation that confounding? And I assume the 4% doesn't include the $150 billion in defense adds that's potentially coming down the pike as well. So, I just want to hear your thoughts on that. Tom Stiehle: Yes. So the $50 billion in new awards includes the FY '24 2-boat contract, Block VI and the Columbia second build. It also includes the ASI bundle down in Ingalls. So I wouldn't necessarily correlate it to a $50 billion add in backlog from our current backlog levels. Now, tailwinds related to the 4% absolutely could happen. I'm not going to go there from a guidance standpoint at all right now. But the tailwinds between reconciliation, the executive order, these contracts being put under contract, the investments that are being made in the industrial base and the shipyards, there's absolutely medium-term upside related to that top line growth number. So we just need to take advantage of it, and that's what we're going to work to do over the next couple of years. Pete Skibitski: Okay. I appreciate it. Just one last one for me on Ingalls margin. It used to be kind of reliably in the double digits, and it's kind of regressed over the past 5 quarters or so. What time frame is reasonable for us to think about the current environment changing to one where positive EAC adjustments are more -- maybe more likely than not? Tom Stiehle: Yes. I think you nailed it, Pete. Corporate is positive easy adjustments. It's not so much that we're realizing kind of negative adjustments, but we're staying on our run rate, and we're neutral there. All 3 of those programs are in the production environment, the engineering works, the facility is up and running. We've come through the shipyard of the future and we're facilitized. It's really just about people and parts, being able to hire enough and keep the retention. And as we go forward with that to make sure that we feed the factory to run its production environment there. So I'm comfortable with the leadership down there and that we understand those ships. I think it's just coming post COVID and getting the sand out of the gears there and having the production flow run as fast as possible. We are down probably a couple of years and hours of experience down there. That just works itself through maybe not as cost efficient to realize those upsides or maybe a little bit more rework from time to time, maybe a piece of late material, whether it's CFE or GFE just all conspires to maybe not have a month or 2 early in schedule or an EAC reduction that we just kind of finish on par. But I'm comfortable with where they are right now. I mean, I'd love to see upsides every quarter, but we have not seen like major step backs down there. So I think they understand what's in front of them. It's the throughput we've talked about, more cost efficiency, keep the factory fed with parts. And that shipyard with that portfolio has a legacy of performance. So I think that they'll turn the corner. We haven't given you the time frame yet, and we'll keep you informed quarterly as we watch that proceed forward. Pete Skibitski: Appreciate it guys. Operator: Our next question comes from Myles Walton with Wolfe Research. Myles, your line is now open. Please go ahead. Myles Walton: Thanks. Maybe, Chris, could you start by talking a little bit about the workforce and how it trended in the first quarter? I think you probably picked up about 500 employees with W International and the press release is still talking about 44,000 employees. So was there much of a movement in net hiring? And how is attrition doing? Chris Kastner: Yes. So, interesting. Good question, Myles. We hired 1,000 people in the first quarter, 1,000 craftsmen and women. That's directly related to the change in the strategy in both shipyards to hire more experienced personnel and improve the mix of experienced versus new hires. We think that strategy makes sense. We're going to continue to execute on that. The good news is attrition is down in both shipyards. Not materially down, not back to pre-COVID levels, but it is definitely moving in the right direction. So yes, hired 1,000, which is a bit south of where we wanted to be, but it's consistent with our strategy and attrition is a bit better in both shipyards, which is very positive. Myles Walton: Okay. And regarding the 35% increase in outsourcing, can you comment on where you are with respect to that and sort of how the performance quality is looking from what you're outsourcing? Chris Kastner: Actually, the way we've executed on our outsourcing program has been very positive. We had some tough lessons learned back at Ingalls and outsourcing in the early 2000s. And we've used those lessons learned and applied them at both shipyards. So, the quality is pretty good. We do pilots in these manufacturing yards before they actually execute work at scale, and we learned through that process, they've done that. We are on schedule in both yards in outsourcing for the year and the quality looks good. So, we're going to continue it. We need to. The industrial base is expanding. We need to take advantage of it, but we need to make sure that it's always high quality because if it's not, you have to redo it and that doesn't help us at all. So yes, it's very positive right now. Myles Walton: Okay. And last one on the SAS program, is there a direct benefit to the carrier programs? Or is it more of an indirect benefit with the submarines being the direct beneficiaries? Chris Kastner: Yes. It supports the entire nuclear industrial base, so -- and nuclear infrastructure. So, aircraft carriers get support in that as well. Myles Walton: All right. Thank you. Chris Kastner: Sure. Operator: Our next question comes from Seth Seifman with JPMorgan. Seth, your line is now open, please go ahead. Seth Seifman: Hi, thanks very much and good morning. Chris Kastner: Good morning. Seth Seifman: I wanted to when we think about kind of the direct impact of the contract that was announced last night, is there kind of a sizable cash advance associated with it? And is that part of the cash guidance for Q2? And does it enable signing the contract give you opportunity to change some of the assumptions across the different work at Newport News beyond just the two subs that were contracted? Chris Kastner: Let me start with that. So guidance assumes execution of the Block V Build II contract that it has all year. And we assume incentives and capital incentives in all of our guidance. So, there are some incentives in Q2 related to that contract as well as other contracts. So it's all in the mix when we come through our guidance for free cash flow for Q2 as well as the end of the year. I don't know, Tom, if you want to add anything in regard to that. Tom Stiehle: You really hit it. I mean it was incorporated into the guide that we gave you for Q2. We mentioned at the very beginning of the year expectation to have both that award and then in the back half of the year, VCS Block VI and Columbia Bill II. So we're really happy we got that done here. Cash comes from margin, margin can come from operational performance, capital incentives, performance incentives. And with the new contract add, it helps out incrementally, but it was in the mix, and it was in line with what we expected here. So I'm comfortable with both the guide that we've given you now for Q2 at $200 million to $300 million supports the $300 million to $500 million for the entire year with no change. We have pathways to get there. So I appreciate the question. Seth Seifman: And on the assumed -- on the booking rate part of that? Chris Kastner: Well, it's all included in our guide and in our accounting. So it's -- we had always assumed that this contract was going to get done this year in all of our -- in our accounting and in our guidance. Seth Seifman: Okay. And then just a little bit bigger picture. You had this announcement with -- I think, with Hyundai during the quarter. And one of the topics that some people in Washington are discussing in terms of ways to accelerate shipbuilding is through partnership with other countries. This seems like a pretty early effort based on what was in the press release. But how do you think about where that could go and where international partners might actually be able to fit in? Chris Kastner: Thank you for that question. Yes, it is early on in a strategic relationship that's very broad in nature, and it's going to apply to commercial shipbuilding and potentially taking advantage of the economic situation arising out of the executive order on commercial shipbuilding to see if there's an economic model that makes sense for expanding the commercial shipbuilding base in the United States. And then best practices in defense and military shipbuilding. We've been in their shipyard. They've been in our shipyard. They're a great shipbuilder. We're a great shipbuilder, and we can learn from each other. So it's very broad in its nature right now. I think it's -- when you think about having allies participate in shipbuilding, that only makes sense. an expansion of the capacity only makes sense and bringing the best people to the table to execute against this is only the right thing to do. So we don't know where it's exactly going to take us at this point. It's in the initial talks, but we need -- it's part of taking advantage of what we see as a pretty significant tailwind in shipbuilding. Seth Seifman: Very interesting. Thanks. Operator: Our next question comes from Jason Gursky with Citigroup. Jason, your line is now open. Please go ahead. Jason Gursky: Great. Thaks. Good morning, everybody. Chris Kastner: Hey, Jason. Jason Gursky: Chris, we've talked about this kind of in bits and pieces throughout the call today and I think in prior calls. But I'd like to just ask kind of a step back, bigger picture question about the timing of the transition from pre-COVID to post-COVID chips and maybe give you an opportunity to kind of update us on any changes to the timing and maybe the major risks and opportunities in that time line? I think you announced today some modest delays on the carrier side. So I just want to make sure we're kind of baseline -- rebaselined here on the expectations on timing of that transition. Chris Kastner: I think we said that 50% was going to -- we're going to hit the 50% mark or beyond 50% mark in 2027. That's correct. You're correct to pick up on the 80 -- the issues with CVN-80 related to the equipment that's late in the bottom of the ship. We expect to get that over the summer. And then when that gets in, we'll start to make more progress. But that's -- there's no change in the balance of our milestones. We're in a pretty good place there. So I still expect that transition to be on schedule. Jason Gursky: Okay. Great. And then Christie is restricting us to one follow-up question. So this might be like a couple of three parts here. I'm just kind of curious on all the reform and the executive orders that are -- have been coming our way to get your thoughts on a couple of different things. First, on shipbuilding assistance of investment that might go into the shipbuilding industrial base. Kind of what strings might be attached to it? And what the -- do you need to invest ahead of getting funds? And does that change the potential cash flow profile ahead for you? And then you mentioned OTAs in your prepared remarks and I think it's kind of tied up in the potential for acquisition reform of FAR and DFARS specifically. So I'm kind of curious, is that something that is going to impact -- those kinds of mechanisms will impact the Mission Systems business more than shipbuilding per se? And what do you think is the long-term impact on the Mission Systems business from a risk and opportunities and margins? Chris Kastner: Thanks, Jason. So first things first, the reform, executive orders and cash flow profile. Look, I think it's too early for that right now. There's a lot of work going into making recommendations on how those are rolled out. If you read the executive order, a significant amount of activity that we need to participate in quite actually because we think we can add a lot of provide a lot of input to them so we can kind of get to the right answer. But -- so yes, a lot of work by the team, the government team and the shipbuilding office over the next 30, 60, 90 days to further define what those mean, what the economics mean, what the investments mean. And we'll know more, but I don't see a -- definitely a cash flow drain by us related to that at this point, but more to come. On the OTAs, those are only positive. Things happen faster in an OTA environment. We're pretty good at them. We -- our uncrewed small uncrewed vehicle was an OTA that was converted to a program of record and very positively. So we only see upside related to that. We're comfortable with it. We're going to lean into it. So there is potential upside within Mission Technologies related to that activities. And the rapid capability office sort of activities with our high-energy laser that we're providing for the Army is also positive. So I think you have to lean into this stuff. Historically, our Mission Technologies division has been very good at applying commercial technologies to some of the biggest problems that the DoD has. We're going to continue to do that. We have a team that can do that within Mission Technologies. So as I said before, we're going to lean into it, and I see potential upside related to it. Jason Gursky: Awesome. Thank you. Chris Kastner: Thanks. Operator: Our next question comes from Noah Poponak with Goldman Sachs. Noah, your line is now open. Please go ahead. Noah Poponak: Hey, good morning, everyone. Chris Kastner: Good morning, Noah. Noah Poponak: Yes. Thanks. It was reported in the press, and I think you discussed that there was a draft of the Maritime executive order that included the SAS language. And then we now have the executive order, it doesn't include it. And we have kind of a -- I mean, I know it's a very long-cycle business, but a long planning process to sort out where to go from here. I was curious what your sense is for why that changed in the process? And how likely or unlikely it is that that you eventually see SAS? Chris Kastner: Yes. So that's probably not important to how it did not end up in the final executive order. I'm sure that those are -- that's why they're drafts. They go through review with the different elements of the government and ultimately, it wasn't included. Do I think SAS will happen in the future? Look, SAS did a lot of really interesting things. It was very innovative. It accelerated investment into the shipyards to get at the submarine production rate. But right now, our baseline is the Block V contract, the Block VI contract and Columbia Bill 2, and we're working with our customer to March 4 to get those under contract. Now the really good part about SAS is it identified in detail the investments we thought we needed to get this done. You see those investments show up in the Block V contract. And as we move through Block VI and Columbia Bill 2, they should show up there as well. So SAS called another name, but the investments are required. The team knows it. They put those investments together as a team. So we need to make sure that we continue to make those investments to get to the build rate. So it's -- SAS is something that is a name at this point that could or could not happen in the future, but the investments have to happen in order to get to the build rate. Noah Poponak: Okay. Chris, how much have you been able to raise wages in recent periods to get the attrition improvement that you referenced? And how much more do you have to raise wages to make much more significant strides on that front? Chris Kastner: So I think the attrition improvement has really been a result of the targeted hiring of more experienced labor. We have addressed wages very tactically, both at Ingalls and Newport News, but we do have labor arrangements, so we haven't been able to do broad labor adjustments. But I think the attrition improvement is more directly related to our hiring strategies to focus on more experienced people. Noah Poponak: Okay. And then lastly, Tom, can you just give us the very specifics on why both the Shipbuilding and the MT margin are down a decent amount sequentially in the second quarter? Tom Stiehle: Yes. So as we said earlier, just the guide that we're giving is on the conservative side. We saw from MT crew and uncrewed and CEW do well for the quarters as they booked up and they closed out some projects. We don't want to get ahead of ourselves. And then from a Shipbuilding side, I think we're just being conservative. We have some risk to burn down through the year and the initiatives that we've talked about more progress and the cost reductions, I want to see them kind of play out. We do have plans in place for that to occur. But with the risk and variability, we're just staying and guiding closer to the low end of the range there. I'm still comfortable with the guide that we have from 5.5% to 6.5%. It was a good first quarter out of the gate, and we'll adjust kind of going forward as we see successive quarters do well. Noah Poponak: Okay. Thank you. Operator: Our next question comes from Ron Epstein with Bank of America. Ron, your line is now open. Please go ahead. Ron Epstein: Hey. Good morning guys. Maybe going back to… Chris Kastner: Good morning. Ron Epstein: …a couple of questions we've heard before, maybe Doug's earlier. And what has to happen in the shipyards to really update the manufacturing process, right? I mean when you look at how the Koreans, do it and their commercial operations, it seems like there's more automation, they build ships differently. I mean realistically, how much of that can be deployed in our military shipyards to improve throughput in the whole nine yards? Chris Kastner: Yeah. I like the distinction you're making between the Commercial manufacturing process and the Defense process. They are different. When you're getting at a rate on fairly simple ships to build that aren't as dense, it's just a different process. So what's it going to take? Fortunately, we've been doing this work for a while now, identifying, what's it going to take to increase the submarine throughput, and it's going to show up on that FY 2024 two-boat contract. These are targeted investments to create capacity and increase the efficiency on how the ships and how the manufacturing works through the process. We've been working very hard at it. We know where the constraints are. And once they get implemented, I'm very confident that things are going to improve. Ron Epstein: I mean is it more automation? I mean are there things like that that you can do, to take out variability or... Chris Kastner: It's more about streamlining. There is some automation that can take place to begin at the front end of the process. We have AI pilots going on in both shipyards where we can be more efficient in analysis of scheduling per se or quality. But this is more about efficiency of the manufacturing process and eliminating roadblocks or ensuring that your critical path is squared away. It's not real automation when you get to the back half of the process. This is all about throughput and efficiency and throughput. Ron Epstein: Got it. Got it. And then maybe just one more, what are you seeing in terms of demand for your unmanned product for the autonomous stuff? Chris Kastner: Yeah. So really good in the uncrewed space, not only in our -- as I said in my remarks, we have really a couple of hundred in backlog. We could have significant ramp this year executing on that small uncrewed underwater vehicle space. So demand is only improving in the uncrewed space, underwater uncrewed space, not only for that product, but derivatives of that product, both domestically and internationally, so some very positive developments in the uncrewed space. Ron Epstein: Got it. All right. Thank you. Chris Kastner: Sure. Operator: Thank you very much. I'm not showing any further questions at this time. I would now like to hand the call back over to Mr. Kastner, for any closing remarks. Chris Kastner: Thanks again for your interest and participation today. I look forward to providing updates as we progress throughout the year. Operator: Thank you very much, everyone, for joining. That concludes today's call. You may now disconnect your lines.

Operator: Welcome to the Huntington Ingalls Industries, Inc. Fourth Quarter 2024 Conference Call. Matters discussed on today's call that constitute forward-looking statements, including our estimates regarding the company's outlook, involve risks and uncertainties and reflect the company's judgment based on information available at the time of this call. These risks and uncertainties may cause our actual results to differ materially. Additional information regarding these factors is contained in today's press release and the company's SEC filings. We will also refer to certain non-GAAP financial measures. For additional disclosures about these non-GAAP measures, including reconciliations to comparable GAAP measures, please see the slides that accompany this webcast, which are available on the Investor Relations page of our website at ir.hii.com. On the call today are Chris Kastner, President and Chief Executive Officer, and Tom Stiehle, Executive Vice President and Chief Financial Officer. I will now turn the call over to Chris. Thanks, Christie. Chris Kastner: Good morning, everyone, and thank you for joining us on our fourth quarter 2024 earnings call. Last year, Huntington Ingalls Industries, Inc. employees remained steadfast in our commitment to our mission of delivering the world's most powerful ships and all-domain solutions in service of the nation. I thank them for these efforts, which contributed to Huntington Ingalls Industries, Inc. reaching critical milestones last year. We remain focused on meeting our commitments to the Navy and all our customers. Before I discuss the 2024 results, operational initiatives, and guidance, I would like to put in context where we are and give you a perspective on the next 24 months, as well as the mid to long-term outlook. Over the next 24 months, we expect to secure over $50 billion of contract awards. These contracts are being and will be negotiated with current performance and economic conditions in our estimates. They are expected to have a more balanced risk equation, be predictable in cost and schedules for our customers, and provide an opportunity to achieve margins more consistent with historical norms. At the same time, we are achieving key milestones on ships contracted prior to COVID. And as our progress continues, these contracts are of our portfolio and less of a drag on our financial results. By 2027, the majority of pre-COVID contracts will be behind us. In addition, our focus on increasing throughput and cost reductions is expected to lead to improved operational execution across the business. With these operational initiatives and the significant demand for our products and services, we expect improved financial performance over the mid to long term. We anticipate growing to $15 billion of annual revenue by 2030, with associated margin expansion, opportunity, and free cash flow growth. Now turning to our 2024 results. We generated sales of $11.5 billion and earnings per share of $13.96. All three of our divisions hit key milestones and won significant new business the year. 2024 awards totaled $12 billion, and our year-end backlog was $49 billion, of which $27 billion is funded. Now I'll provide some highlights from each of our divisions. First, Mission Technologies had another strong year. It achieved awards of more than $12 billion in potential total contract value, a 2024 book-to-bill of 1.33, and 9% revenue growth year over year. This positive performance reflects Mission Technologies' continued alignment with our country's and our allies' national security strategies. For example, in 2024, Mission Technologies achieved its largest win ever, a $6.7 billion contract to provide electronic warfare engineering and technical services support for the US Air Force, as well as a $3 billion LOGIX task order to provide logistic services, ISR operations, and next-gen tech. And in Australia, Mission Technologies was awarded an initial five-year contract to the Australian government's Department of Defense. In summary, the Mission Technologies team is executing well, and we are confident in its ongoing success, particularly given how closely its portfolio maps to our defense customers' needs. In 2024, at Ingalls Shipbuilding, we were awarded a $9.6 billion multi-ship procurement contract for the construction of LPD 33, 34, and 35, and large deck amphibious ship LHA 10, which secures ANFIP production backlog well into the next decade. Also, we delivered OPD 29 USS Richard M. McCool Junior and launched LPD 30 Harrisburg, and we continue to make progress on the DDG program with six destroyers in production, authenticating the kill of DDG 133 Sam Nunn in the fourth quarter. Finally, we completed dry dock work and undocked USS Zumwalt DDG 1000 in December. In 2024 at Newport News Shipbuilding, in the Virginia class submarine program, we floated off SSN 798 Massachusetts, delivered SSN 796 USS New Jersey, shipped the final module of SSN 801 Utah, and in December, we christened SSN 800 Arkansas. As for aircraft carriers, we completed dry dock work for the RCOH of CVN 74, USS John C. Stennis, and were awarded the advanced planning contract for the RCOH of CVN 75 USS Harry S. Truman. Also, 94% of CVN 79 Kennedy compartments have been turned over to the Navy, and all combat systems have been turned over to the test team. And CVN 80 Enterprise was moved for the first time, enabling construction of two aircraft carriers at once in the same dry dock. Looking ahead to 2025, at Ingalls, we expect to launch DDG 129, Jeremiah Denton, and complete sea trials for DDG 1000. At Newport News, we plan to deliver SSN 798 and float off SSN 800. Also, the team is focused on completing CVN 79. CVN 79 is scheduled to deliver in 2025, and the program team is evaluating options for optimizing combat capability additions and readiness for Navy workups. In 2026, we expect to deliver DDG 128 Ted Stevens LHA 8 Bougainville at Ingalls. In Newport News, we expect to deliver SSN 800 and lay the keel for CVN 81 Dory Miller. In 2025, we are also doubling down on operation improvement actions to address the residual COVID-related labor, productivity, and supply chain challenges we've been facing. Starting with labor and enhancing throughput, in 2024, we exceeded our hiring goal of over 6,000 craft personnel, but attrition remains stubbornly high. Our data shows that additional investment in wages in coordination with our Navy partner will provide needed workforce stability. These increases also allow us to attract highly skilled first-class shipbuilders with the proficiency they bring. Additionally, we continue to deploy our enterprise operating system across all our Shipbuilding programs to ensure consistency. On labor and throughput, we have acquired the assets of an existing advanced metal fabricator, W International, in Charleston, South Carolina. This acquisition increased our workforce by approximately 500 highly trained personnel, and we plan by 2027 to increase employment significantly at this site, a 480,000 square foot facility. Huntington Ingalls Industries, Inc. Charleston operations is already working on aircraft carrier units for Newport News, and in the next few weeks, we expect to start submarine unit construction. Similarly, we plan to increase our outsourcing by 30% in 2025 and insource contract labor to address critical skill gaps within our shipyards. As a result of these workforce strategies, we expect to achieve a 20% year-over-year improvement. Our second operational initiative is an annualized enterprise-wide cost reduction target of approximately $250 million per year. Several actions have already been taken to achieve this target, including the realignment of the Mission Technologies segment from six business units to four and the implementation of a new payroll system at the beginning of 2025. Further cost efficiency plans around optimizing cost structures, decreasing overhead, and service and support costs, and reducing third-party services are under development and are expected to be executed throughout 2025. Our third operational initiative for 2025 is ensuring our new contract awards reflect the current economic and production environment. Regarding the FY24 Block 5 submarine contract agreement, negotiations are continuing. We continue to be confident that an agreement will be reached, although we do not have certainty today on the timing of that agreement. These three items—meeting our throughput improvement goals, executing our cost reductions, and achieving new contract awards that reflect the current economic and production environment—underpin our guidance and are expected to bring more predictability to our contract cost estimates, delivery schedules, financial performance, and guidance. In terms of our financial outlook, more specifically for 2025, we expect shipbuilding revenues between $8.9 and $9.1 billion, and shipbuilding margins in the range of 5.5% to 6.5%. For Mission Technologies, we expect revenues between $2.9 billion and $3.1 billion and margins between 4% and 4.5%, with EBITDA margins between 8% and 8.5%. Our free cash flow outlook for 2025 is between $300 million and $500 million. The 2025 shipbuilding margin and free cash flow outlook is predicated on meeting our throughput and cost reduction objectives. It also assumes appropriate resolution on the last two VCS Block 5 boats, the Block 6, and Columbia Bill 2 contracts, consistent with the continuing resolution anomaly language that was passed by Congress. Turning to activities in Washington for a moment, we are pleased with the passage and enactment of the Defense Authorization Act for fiscal year 2025. The FY25 NDAA strongly supports our shipbuilding programs. In addition to authorizing funding for three Arleigh Burke class surface combatants, one Virginia class submarine, and one San Antonio class amphibious warship, the NDAA authorizes the refueling and overhaul of CVN 75, additional incremental funding for the second Virginia class attack submarine in FY25, and continued support for Gerald R. Ford class aircraft carriers in the LHA and LPD amphibious warship bundle. The NDAA also recommends the Navy optimize aircraft carrier acquisition strategy and procure CVN 82 in FY28. We applaud Congress for including anomalies in the CR that provide additional support for nuclear-powered vessel programs, and we look forward to Congress finalizing FY25 appropriation bills. In summary, we continue to make progress on our programs with impactful operational initiatives that we believe will lead to meaningful improvements in productivity and throughput. Demand for our products and services is strong, and we continue our focus on executing for our key customer, the US Navy, with five deliveries over the next two years. We have a line of sight for generating approximately $15 billion in annual revenue by the decade's end, with incrementally improving operating margins over that period, which will facilitate improved results for all stakeholders. So with that, I will turn the call over to Tom for some remarks on our financial results and guidance. Tom? Tom Stiehle: Thanks, Chris, and good morning. Today, I'll review our fourth quarter and full-year results and also provide some additional color regarding our outlook for 2025. For more detail on the segment results, please refer to the earnings release issued this morning and posted to our website. Beginning with our consolidated fourth quarter results on Slide 6. Our fourth quarter revenues of $3 billion decreased approximately 5% compared to the same period last year. This decline was driven by lower year-over-year revenue at all three segments. Ingalls revenues of $736 million decreased $64 million, 8%, compared to the fourth quarter of 2023, driven primarily by lower volumes on amphibious assault ships, partially offset by higher surface combatant revenues. At Newport News, revenues of $1.6 billion declined $77 million or 4.6% from the fourth quarter of 2023, primarily due to lower RCOH volumes, unfavorable cumulative adjustments on the Virginia class and aircraft carrier construction program, partially offset by higher Columbia class volumes. Mission Technologies fourth quarter 2024 revenues of $713 million decreased $32 million or 4.3% from the fourth quarter of 2023, primarily driven by lower volumes in C5ISR due to nonrecurring product revenue in the fourth quarter of 2023. Moving to Slide 7, segment operating income for the quarter was $103 million, and segment operating margin was 3.4%. This compares to $330 million and 10.4%, respectively, in the fourth quarter of 2023. Fourth quarter 2023 results included two nonrecurring variable items that make for a difficult year-over-year comparison. The first item was a $70.5 million sale of a court judgment at Ingalls. The second was a $49.5 million insurance claim settlement at Mission Technology. Ingalls operating income of $46 million and margin of 6.3% compares to $169 million and 21.1%, respectively, in the fourth quarter of 2023. The prior year period included both the favorable sale of a court judgment that I noted as well as a surface combatant-related contract incentive. Newport News fourth quarter 2024 operating income of $38 million and margin of 2.4% compares to $110 million and 6.6%, respectively, in the fourth quarter of 2023. The declines were driven by lower performance on Virginia class submarine new carrier construction, partially offset by contract incentives on the Columbia class program. Shipbuilding margin for the fourth quarter of 2024 was 3.6%. Mission Technologies fourth quarter operating income of $19 million and segment operating margin of 2.7% compares to $51 million and 6.8% in the fourth quarter of 2023. The declines were primarily driven by a favorable insurance claim settlement that occurred in the fourth quarter of 2023. Net earnings in the quarter were $123 million compared to $274 million in the fourth quarter of last year. Diluted earnings per share in the quarter were $3.15 compared to $6.90 in the fourth quarter of the previous year. Moving on to consolidated results for 2024 on Slide 8. Revenues of $11.5 billion increased $81 million or approximately 1% compared to 2023. Growth was driven primarily by higher volumes at Mission Technologies, partially offset by lower volumes at Newport News Shipbuilding. Ingalls revenues of $2.8 billion in 2024 increased $15 million or half a percent from 2023, driven primarily by higher volumes in surface combatants, largely offset by lower amphibious assault ship and NSC program revenues. At Newport News, 2024 revenue of $6 billion decreased by $164 million or 2.7% from 2023, primarily due to unfavorable Virginia class cumulative adjustments as well as lower volumes in aircraft carriers and nuclear support services, partially offset by higher volume on the Columbia program. Mission Technologies 2024 revenues of $2.9 billion increased $138 million or 8.8% from 2023, primarily driven by higher volumes in cyber, electronic warfare, and space, as well as C5ISR contracts. Moving to Slide 9, segment operating income for the year was $573 million, and segment operating margin was 5%. This compares to $842 million and 7.4% in 2023. Ingalls operating income of $211 million and margin of 7.6% in 2024 compared to $362 million and 13.2%, respectively, in 2023. The declines were primarily driven by the sale of the court judgment in 2023, as well as lower performance on amphibious assault ships and surface combatants. Newport News 2024 operating income of $246 million and margin of 4.1% compared to $379 million and 6.2%, respectively, in 2023. Decreases were primarily driven by lower Virginia class and aircraft carrier performance, partially offset by Columbia class contract incentives. Shipbuilding margin for 2024 was 5.2%, within the revised guidance range we provided for the year. Net cumulative adjustments for the year were negative $120 million. Newport News's net cumulative adjustment was negative $154 million, partially offset by positive net cumulative adjustments at both Ingalls and Mission Technologies, approximately $14 million. Mission Technologies 2024 operating income of $116 million and segment operating margin of 3.9% both improved from $101 million and 3.7%, respectively, in 2023. The improvement was driven primarily by volume and performance in cyber, electronic warfare, and space contracts, stronger performance in fleet sustainment, as well as higher equity income. Again, the Mission Technologies 2023 results included a favorable $49.5 million insurance claim, so we are lapping that difficult comparison, and we believe our results still show strong absolute income growth and margin expansion for the year. Mission Technologies 2024 results included approximately $99 million of amortization to purchase intangible assets, compared to approximately $109 million in 2023. Mission Technologies EBITDA margin for 2024 was 7.9%. Company net earnings in 2024 were $550 million, compared to $681 million in 2023. Diluted earnings per share in 2024 was $13.96, compared to $17.07 in 2023. Turning to cash and capital deployment on Slide 10, 2024 free cash flow was $40 million, consistent with our most recent guidance reflecting factors previously discussed. During the year, the company invested $353 million in capital expenditures or 3.1% of sales, as we continue to prioritize higher throughput in our shipyard. We paid $206 million in dividends while ending 2024 with $831 million in cash and cash equivalents on hand and liquidity of approximately $2.5 billion. Cash contributions to our pension and other postretirement benefit plans totaled $47 million in 2024. Our pension outlook for 2025 has modestly improved from the update that we provided in November, given this increase in discount rates partially offset by 2024 asset returns that were slightly below our expectations. Actual asset returns for 2024 were 7.7%. Our five-year pension outlook has been updated and is available in the appendix of today's presentation on Slide 13. Turning to Slide 11 and our financial outlook. First, we are reaffirming our medium to long-term growth targets for both shipbuilding and mission technology. As Chris noted, we see a clear path to $15 billion in annual revenue by the end of the decade, given our robust backlog and very strong demand across the portfolio. Regarding 2025 expectations, Chris provided our operational guidance, but let me provide a bit more color on our cash flow outlook. We expect 2025 free cash flow of between $300 million and $500 million. Performance on contracts entered into prior to the commencement of the COVID pandemic has impacted our ability to achieve program milestones and corresponding cash receipts. We expect this headwind will continue in 2025, which, along with elevated capital expenditures and cash taxes, is impacting our overall cash generation. We expect 2025 capital expenditures to be approximately 4% of sales as we continue to invest in increasing our shipbuilding efficiency and throughput. Additionally, we expect our 2025 cash taxes will total approximately $220 million. Regarding our expectations for the first quarter in 2025, we expect approximately $2.1 billion for shipment revenues, $680 million of Mission Technologies revenues, the shipbuilding margin near 5.5%, and Mission Technologies operating margin of approximately 3%. Consistent with normal cash flow cadence, we expect first quarter free cash flow to be negative, representing a use of between $300 million and $500 million, as working capital continues to build through midyear before we are able to reach program milestones and contract awards. Turning for a moment to capital allocation, as we have highlighted today, we will continue to invest in our business to maintain and grow the capacity of our shipyards. Our approach to dividends and returning excess cash to shareholders remains unchanged. Our focus now, of course, is working through challenged contracts and returning free cash flow to more normalized levels. To close my remarks, achieving the throughput, cost reduction, and contract award initiatives that we have outlined are critical to stabilizing shipbuilding performance in 2025 and achieving the outlook we have provided. Similar to 2024, we expect that about 70% of the shipbuilding revenue generated in 2025 will be derived from pre-COVID contracts. We forecast approximately 60% of 2026 shipbuilding revenue will be derived from pre-COVID contracts. Finally, we expect that in 2027, the majority of the shipping revenue will be derived from contracts that reflect the current operating environment, and we will set the foundation for margin improvement and returns towards historical margin levels. With that, I'll turn the call back over to Christie for Q&A. Operator: As a reminder to everyone on the call, please limit yourself to one initial question and one follow-up so we can get as many people through the queue as possible. Operator, I will turn it over to you to manage the Q&A. Thank you very much. If you would like to ask a question, please or your question has already been answered, please press star followed by two. Our first question comes from Douglas Harned with Bernstein. Doug, your line is now open. Please go ahead. Douglas Harned: Very good. Good morning. Thank you. Chris Kastner: Morning, Doug. So sorry for the background noise. We're going through a thunderstorm outside right now, but just bear with us a little bit. Douglas Harned: Okay. I've got a snowstorm here too. So Operator: Okay. Douglas Harned: So if I go back a few years, there was a margin outlook that had always been talked about in the 9% to 10% level. And knowing that, I mean, the CPI is hardly a good indicator for inflation for you all. But can you give us a sense first when you look at the margin gap that you have now, how much of that would you attribute to inflation versus other operational challenges if you're, you know, looking back at that 9% to 10% projected level? Chris Kastner: Yeah. So that's a very interesting question, and I don't have a specific number for you, Doug. We do have some EPA protection on our inflation protection on our Ingalls contracts and limited EPA protection on material on our aircraft carrier contracts. But it's not just directly inflation that impacts you. It's a bit more nefarious than that because you have inflation that adjusts very quickly on some products and services that can be passed along very quickly to a customer where we have long-term contracts that we have to perform against the baseline that was negotiated. You really can't adjust as quickly, which leads to a less experienced workforce and performance challenges. So I hate to say that, you know, I hate to not give you a number related to that, but it's a broader question than just the calculation of the inflation impact on our ship programs. As related to that is in the supply chain, it's even if we have protection for it, the performance of the supply chain because of inflation is not as efficient. So it's a very broad answer. I apologize for not giving you a precise answer. But inflation kind of seeps into various elements of our cost structure, not just paying people more. Douglas Harned: Well, just to follow on that, if you look outside of shipbuilding, the Pentagon has frankly not been very helpful at all in providing equitable price adjustments, and that's across many types of programs. And even though you have some, you know, it appears you've been facing a lot of the same problem, and everyone, I think there's universal acceptance of the importance of the Virginia class, the Columbia class. But when you're negotiating new contracts now, and what has been a tough funding environment, do you still see it as possible to get back to those 9% to 10% type margin levels that have been more traditional, or are we living in a different world now where you may have to sort of give in, in a sense, to lower financial performance? Chris Kastner: Well, you know, yeah, interesting. I absolutely believe that 9% is possible moving forward. The $50 billion of contracts that, you know, we've negotiated some of those with the bundle, the amp ship bundle down in Mississippi, and we're negotiating the FY24 Block 5 two-boat contract now. The customer's been very receptive to understanding the current economic environment, and we will get inflation protection in those new contracts. I think you saw Congress put an additional $5.7 billion in the anomaly for those FY24 boats. There's a recognition that we need to rebuild this industrial base. There's also a recognition, I believe, that shipbuilders need to earn fair margins. And so we're taking that to the table, and we're going to make sure that that happens. But I absolutely believe that 9% is something that we can achieve. And the reason I believe it, Doug, is simply because I've done it before. Down at Ingalls, we're in the exact same position. We had to negotiate performance post-Katrina into the new dataset of ships. We got that done, and they had a very good run where there was predictable cost and schedule performance because, ultimately, it doesn't do anybody any favor to agree to cost estimates or schedules that are unrealistic. So we're going to make sure that that happens. I think the customer's on board with that. They want realistic, achievable schedules as well. And so I firmly believe that's going to happen. Douglas Harned: Okay. Very good. Thank you. Chris Kastner: Thanks, Doug. Operator: Our next question comes from Seth Seifman with JPMorgan. Seth, your line is now open. Please go ahead. Seth Seifman: Hey. Thanks very much. Good morning. Chris Kastner: Good morning. Seth Seifman: In the prepared remarks, I think you talked about the guidance. What underpins the guidance, I think, expects for more predictability. Are you basically, what contract awards are you assuming that the company will get this year in the guidance? Chris Kastner: Yeah. The summary and contracts, the seventeen boats contemplated by a bunch of support. If the phone, the four laws kind of plan that you've been advocating is assumed in this sense. No. Let me correct you there. It's not a full sol solace plan. We're negotiating FY24 two boats consistent with the acquisition approach that was set forth by Congress and supported by the anomaly. Block six and Columbia Bill two, we're going to have to see the acquisition approach for those boats as they develop. Saws or a derivative of saws, yes, is positive. Anything that brings additional investment into the industrial base that accelerates shipbuilding production is positive. But we're going to take this one step at a time. Seth Seifman: So the guidance doesn't assume the seventeen boats get under contract? Chris Kastner: It does. It assumes FY24 two boats and then assumes the negotiation of the Block three contracts and the Columbia Bill two contract, yes. Seth Seifman: Okay. And do you, I guess, what gives you, have you had communications with the new administrator, what kind of gives you confidence that that's going to happen during this year? Chris Kastner: Yeah. So interesting. I have high confidence in the FY24 two boats that'll happen first part of the year. I have had limited conversations with elements of the new administration, and they've assured me that shipbuilding is one of their top priorities. And that's welcome. That makes perfect sense based upon the threat environment. So I believe we'll step right into Block six after we negotiate the last two block five votes. Seth Seifman: Okay. Thanks. I'll leave it there for now. Chris Kastner: Sure. Operator: Thank you very much. Our next question comes from Scott Mikus with Melius Research. Scott, your line is now open. Please go ahead. Scott Mikus: Good morning, Chris. I kind of want to follow up on your answer to Doug's question. When I think about post-Katrina, Northrop had a lot of struggles with the shipbuilding business before spinning it off to form Huntington Ingalls Industries, Inc. Shipbuilding margins initially weren't that great post-spin, but come 2013, there was a meaningful pickup in favorable EAC adjustments, and your stock more than doubled that year. Just curious, what lessons did you learn from the late 2000s and early 2010s that are still relevant and can be applied today? And when do you think investors will see EACs flip from unfavorable to favorable? Chris Kastner: Thank you. I'll start this answer, then I'll kick it over to Tom for some timing-related issues. But I have confidence that we can get this done because I've done it before, as you said. And the key is making sure that you're very transparent and disclose current performance, and ensure that you're resolute at the negotiation table. And there's achievable and predictable cost of schedule estimates when you do those negotiations. As I said previously, it doesn't do anybody any favors to miss schedules or miss cost estimates. So we just need to make sure that we estimate them correctly and negotiate them correctly. And that can be done. And there's $50 billion of work that's going to be negotiated here. It's just getting through the pre-COVID contracts is what's important. So I'll let Tom talk about the timing a little bit. Tom Stiehle: Thanks, Chris. Yes. As Chris had mentioned, both him and myself were down there. I spent ten years from 2011 through 2021. So I saw that march up, and it's really about making sure, one, we get good contracts and have a good cost-equal agreement balance between us and our customer. We've been hit now with COVID and inflation and things of that nature. It's really causing a draw on our production lines. These long-term contracts are being impacted by inflation. The number of heads experienced in the yard and the supportability of the material right now. So one is any of the new awards we get, like the bundle down in Ingles that we have, the FY23 award for destroyers that we received, and now going forward, the plethora of seventeen boats between the VCS one five, six, and Columbia Bill two. You know, getting balanced contracts that we have appropriate, our performance appropriately aligned, our schedules that we see right now are rolling it. The investments both from ourselves and from our Navy partner will have a positive benefit. But ensuring we have a solid program plan and we're putting good commitments on contract. And then, obviously, we've got to execute on our commitments on that front. So it's maintaining our budgets, holding schedules, making progress weekly, monthly, quarterly, and we have a track record of doing that. I'm confident we have the processes and the facilities for the most part, we need more throughput, but the processes and the tools and the facilities are in place right now. It's about building out the workforce we have, strengthening, and more consistent supply chain that we have against our schedules, and then us kind of hitting the mark in cost and schedule on a regular rhythm. That's what we did down at Ingalls. I think we have the pieces in place and where we are short on people, the cost reduction initiatives that we have right now, and we've talked about the contracts. Contract equity going forward here. I think we understand what's causing us a delay in our production programs. Specifically on VCS and some headwinds they have down at Ingles on the destroy program. And I think we're working hard putting the dollars and the pressure in the right areas to find the rhythm that we saw on the Ingalls march up post-Katrina. So we don't have a specific date for you on when we get back to those sort of profitability estimates. But as Tom mentioned in his script, we are transitioning over the next couple of years out of these pre-COVID contracts into the new contracts. And as we transition, there should be an uplift in profitability. Scott Mikus: Okay. And then one quick follow-up. So the midpoint of the guidance implies about $540 million of shipbuilding operating income. I'm just curious, is there any assumption baked in there for what net EACs will be for this year? Tom Stiehle: Yeah. So obviously, we run our EAC process on a quarterly basis. We don't provide, you know, the profitability by ship or by class like that, even by division. So we always bake in EAC and the estimate to complete in the EAC is aligned with our performance that we have right now. With risks and opportunities kind of hedged against that. Right? We know we're throwing additional investment dollars in it. And efforts and improvements of our production lines. We balance that with the risks and opportunities we see in front of us, so that sets the trajectory and how we expect to perform kind of going forward. And, again, that ETC estimate to complete on these EACs gets reevaluated every ninety days when we get another set of actuals. I'm not going to get into the specific details that we have in there, but, you know, we do expect a stabilization and an improvement as we go forward. Scott Mikus: Okay. Got it. Thanks for taking the question. Chris Kastner: Sure. Operator: Thank you. Our next question is from Pete Skibitski with Alembic Global. Pete, your line is now open. Please go ahead. Pete Skibitski: I guess just sticking to the shipbuilding margin questions, it sounds like maybe you'd recommend we assume sort of gradual improvements on shipbuilding margin through kind of to the end of the decade, maybe hitting that 9% mark. And I don't know if we should think about a step change improvement in 2027 or just keeping it gradual. And then just wonder if you could talk about the, it sounds like you could potentially get a contract change on CVN 79. Wasn't sure if that, if you did get a contract change, if that would impact margin one way or another. Thanks. Chris Kastner: Yeah. So let me start, and I'll let Tom chip in. Let me answer the 79 question first. Then I'll kick the margin timing question over to Tom. 79, yes. We do some additional capabilities that may expect a contract change related to in the ship. Maybe put in the program team's working on that. And with the objective of getting the ship delivered with the most capability and deployed as soon as possible. The program teams are working on that, and there would be a change related to that. But I don't think it's positive or negative. It's just an equitable adjustment related to the capabilities that are added. So with that, I'll send it over to Tom on the margin timing. Tom Stiehle: Yeah. So specifically, obviously, we don't provide margin guidance for the following year or the out years. Obviously, there is a shape and an expectation we have right here. And, you know, as of Q3 last year, we missed the expectation of where we thought we were. You really got to get down to where we've been impacted. And, again, it's the less experienced labor we have, the throughput, and the support of supply chain. We see areas and we have initiatives to kind of improve all of that. So going forward, that's going to be a lift against all operations we have. Now for contracts that have run through COVID, you know, the older pre-COVID contracts, those contracts have seen increased costs. So there's limited ability to go and get additional profitability on those contracts. As we put the new work, the $50 billion on here, obviously, that didn't run through that. Gonna get the benefit of the current performance and where we stand right now. The opportunity is much greater to have the profitability bounce back. So I would say the way to model that is you follow the revenue in my remarks. I gave you the next and how it blends out. And by 2027, the majority of the work will be post-COVID work. And I do expect a ramp in profitability as we work ourselves through the decade. But always remember, we're pretty conservative when we start out ships. So I do agree it's going to increase. But I wouldn't anticipate a step change. Pete Skibitski: Okay. For the call, guys. Chris Kastner: Yeah. Operator: Our next question is from David Strauss with Barclays. David, your line is now open. Please go ahead. David Strauss: Thanks. Good morning. Chris Kastner: Morning. David Strauss: Hey, Chris. Could you maybe talk about the opportunity to buy additional shipyard capacity? I think you've made some comments recently in the press around that. Can you kind of size that opportunity? And if I missed that, I apologize on the call. Or in your prepared remarks. What are your hiring plans in 2025 relative to 2024? Chris Kastner: Yeah. So we'll hire about the same amount. We've repositioned our hiring a bit, as I said in a previous earnings call, from kind of broadly hiring including entry-level to hiring more experienced people. We've actually made some progress in that regard. And specifically in Newport News, we had been hiring out of the pipeline, which is really the regional development centers. These are people that had chosen shipbuilding as a career. They've been at the 5% to 10% rate. That's increased to 35% at the back half of the year, which is really positive. And we would like it to get to 60% this year, and that's really thanks to the state of Virginia and the federal government for increasing the funding for those regional development centers. We're also targeting additional experience down at Ingalls, where they like to hire 80% experienced people. So while the number's the same, we're repositioning it a bit. Now your question about buying another shipyard, I'm really not interested in that. W International was an opportunity that came along, and they're a quality builder or manufacturer that has been in the shipbuilding industry, and we were concerned they were going to move out of the shipbuilding industry, and that is a problem. So we have a lot of outsource partners, and I'd rather develop outsource partners and have an arms-length relationship. I really don't want to vertically integrate, but this opportunity showed up, and we got 500 world-class shipbuilders with Newport News management team managing them. So this really was a layup for us. It's going to increase our throughput immediately. But I have no plans to right now, unless something very interesting came along, to buy additional manufacturing facilities. David Strauss: Okay. Thanks. And Tom, a follow-up on free cash flow and capital deployment. In terms of your free cash flow progression beyond this year, I think about 2026, 2027 as the pre-COVID work runs off. Would you expect the free cash flow progression, given the CapEx and working capital investments you've had to make here, would you expect that free cash flow progression back to normal to maybe be faster relative to what we're going to see in terms of the runoff of the pre-COVID work? And then just how you're thinking about capital deployment, given the cash burn in Q1 and the debt maturity in, I think, the beginning of Q2? Thanks. Tom Stiehle: Yeah. So I would expect, you know, as you work through, as Chris said, the chop in the water for the next twelve to eighteen months, the cash flow would ramp up, you know, and we would get back to more normalized levels as we work ourselves through the pre-COVID contracts that we have here. And you can time that as well as with the margin. The cash flow will follow that in the out years. So that's how that works. From the capital deployment, there's no change. We're still using the same process and the model that we have here. We'll continue to have a, we'll invest in the yard. We'll have a capital, we'll have a dividend that we have annually here. And any excess free cash flow, which we've been doing since 2001, will go back to the shareholders as that materializes. So no change in that policy right now. We did not provide any guidance for share buybacks in 2025. And if something changes on that front, we'll update you on a quarterly earning. Chris Kastner: You know, I would add, it's an interesting question on projecting free cash flow right now. And I've spoken of this previously. I don't know if it's been picked up, but the incentive-laden nature of some of these contracts that are being led really lends itself to be difficult to project free cash flow timing. It's always been a challenge for us to project free cash flow timing because of the lumpy, you know, the limited amount of projects, large invoices can move across the period. But with these large incentives and the timing of these incentives and some of them not even being negotiated yet, it makes it a bit of a challenge. We're going to continue to be lumpy going forward, but I agree with Tom 100% it should incrementally improve over the long term. David Strauss: Thanks very much. Chris Kastner: Sure. Operator: Our next question comes from Scott Deuschle with Deutsche Bank. Scott, your line is now open. Please go ahead. Scott Deuschle: Thanks. Tom, were the Virginia class negative EACs on the block four boats, the block five boats, or both? Tom Stiehle: A mix of both. Scott Deuschle: Okay. And I think the block five boats are post-COVID boats. Why should we only be focused on the pre-COVID ship? They were negotiated in 2019. Chris Kastner: No. Those were negotiated in 2019. Tom Stiehle: Yeah. They went in 2019. Yeah. Scott Deuschle: Okay. And then, Chris, would the contract change on CVN 79 result in a change in delivery timeline for that ship? Chris Kastner: We're working through that with the customer right now. Potentially, we're working. Scott Deuschle: Okay. Can you remind me why the ship was originally delayed from 2024 to 2025? I thought it was something similar to what you're now saying may cause it to go into. Chris Kastner: Well, there's a couple of changes, large changes that took place on CVN 79. The first one was related to some significant combat system work that the Navy asked us to do into the baseline work. I think what you're referring to is moving PSC. That was the schedule change previously, where we were going to deliver it, do a significant amount of PSA work, and then get it deployed. They moved that into the baseline, which caused a schedule change. This is additional capability that they've developed based on CVN 78's performance in deployment. And so you always want to get that as you learn. This is the second ship of the class. As you learn, you want to make sure that all the capabilities are in that ship when it gets deployed. Scott Deuschle: Okay. And did you book a negative EAC on CVN 79 this quarter? Chris Kastner: It wasn't material. Yeah. I think there's a modest negative adjustment. Scott Deuschle: Okay. Thanks, guys. I'll leave it there. Chris Kastner: Sure. Operator: Our next question comes from Myles Walton with Wolfe Research. Myles, your line is now open. Please go ahead. Myles Walton: Thanks. Good morning. Chris Kastner: Morning, Myles. Myles Walton: I was curious on the shipbuilding margin guidance for 2025, five and a half to six and a half. In the first quarter, you're already at five and a half. I think the full year is predicated on material increases in throughputs and cost reduction as well as the contract word assumptions. So the question is, how much are you assuming is going to happen in the booking rate versus when those things happen, the margins will progress higher? Chris Kastner: Yeah. So all of that is included in the guide. Right? The new ships, meeting our throughput and our cost reduction initiatives, the timing of the new ships, an incentive assumption on those new ships. So it's kind of all in the mix. And then we do have a bit of a, it's a bit of a conservative guide related to, we've just had a couple of quarters of negative adjustments here, so we thought it was prudent to make it a bit conservative. So it's all in the mix. I'd like to say I could time it out for you. We'll give you the information every quarter on how we think the next quarter is going to be. But all of that factors into the guide. Myles Walton: I guess the way I was going on is first quarter, you obviously would have the contract. You wouldn't have a lot of these cost improvements. So that five and a half percent, is that low end pretty much reflective of your current situation, ignoring, you know, the improvements you're talking about in throughput and cost improvement? Chris Kastner: I think that's probably fair. But we're working hard to get that contract done. Tom Stiehle: Miles, it's Tom. You know, we give the quota guide, so we're really close to that. And that's how we see it's going to play out. I mean, obviously, there's a timing of, like, the new contract award. There's the list that we expect to get from the initiatives that we have on the objectives page, the operational objectives page. Then there's just the run rate opportunities and risk that we see. Most closest to the slide here. So, I mean, it's in the mix there. Obviously, it's on the bottom end of the range here. Beginning of the year, but they'll be bait hopefully, they'll be bait against the contract awards. The initiatives we have. And then as the programs mature, going forward, we could realize, you know, the medium or the top end of that range. Myles Walton: Okay. And then Chris, maybe a higher-level question. This move towards outsourcing, obviously, there's benefits to that. You could maybe control your cost or have a little bit more visibility on cost, but you're relinquishing some control and quality control in particular. How do you weigh that? And a move to increase it as much as you're talking about, 30%. I don't know what the base level is, so that could be a material number or could be an immaterial number. Chris Kastner: Yeah. It's a material number. And the good news is we're outsourcing with partners that we already do outsource work with. So we're very familiar with them. We don't do this lightly. We do pilot projects so that the partners can demonstrate their cost and schedule and quality capability before we do it. So it's a good question because, you know, we've been burned by outsourcing before. I think a lot of people in the industry have, and we just need to make sure we do it right. So it's a fair, it's a risk that we understand and we mitigate because we've done it before. Tom Stiehle: I would add on the back of that, like, an acquisition, like, W International are bringing it in-house with Newport News people, leadership processes. We put a proven workforce that's there that was up and running. You know, there's work going on down there right now and, you know, having 500 heads ready and moving forward, operationally is a big plus there. So we're doing it really smartly. We're ensuring who we insource to outsource. Putting the bumpers around to make sure we get the performance and expectations. And we anticipate that, you know, we'll be able to execute that work. And be a significant piece of the list that we talked about, about 20% more earn throughput. Myles Walton: Okay. Alright. Thank you. Chris Kastner: Thanks. Operator: Our next question is from Ron Epstein with Bank of America. Ron, your line is now open. Please go ahead. Jordan Lyonnais: Hey. Good morning. This is Jordan on for Ron. Chris Kastner: Hey. Good morning, Jordan. Jordan Lyonnais: Morning. On the initiatives that you guys are working on for hiring, what's changed versus what you guys have been doing for the past couple of years? And also, how do you think Huntington Ingalls Industries, Inc. and Mission Tech specifically too, is there any impact from George? Chris Kastner: Okay. Yeah. So first, what changes? I previously spoke about it's not only hiring. We've refocused that to target more experienced shipbuilders. Wages are going to help that. The anomaly has workforce development support, and so that will help that process to hire more experienced shipbuilders, and will assist in retention as well. Doge is, you know, it's the new administration. It's good that one of their top priorities is shipbuilding. We're all for reduced regulation. So we'll work with that team to ensure that we have the appropriate level of regulations, and trust me, no one wants less cost and better delivery schedules than I do. So we welcome the initiatives that could be put in place, and we would participate in that going forward. Jordan Lyonnais: Great. Thank you. Chris Kastner: Thank you. Operator: Our next question comes from Gautam Khanna with TD Cohen. Gautam, your line is now open. Please go ahead. Gautam Khanna: Hey. Good morning, guys. Chris Kastner: Morning, Gautam. Gautam Khanna: So I have two questions. One, previously, you guys had thought about a cash inflow associated with signing the seventeen submarine contracts. I think it was a release of contract assets to receivable. Is that still true? And if you could quantify how much would be, you know, to be invoiced upon signing that, and then I have a follow-up. Chris Kastner: Yeah. There is some cash upside to executing those contracts. We risk adjust all of that, and so we haven't broken that out, Gautam. But that's included in our guide, and there will be some cash receipts related to that. Gautam Khanna: I recall a quarter ago, a lot of the free cash reduction was in the guidance for 2024 was those contracts moving out to signing. So is it about $500 million, and can you ballpark it for us? Chris Kastner: I'd really rather not, Gautam, at this point. There's a lot of moving parts in the cash guide, as Tom mentioned previously. But, yeah, I'd really rather not ballpark that. But we're still in discussions with the government on that contract. We need to negotiate that really holistically. So I'd rather not give you specifics on the cash impact. Tom Stiehle: I'll probably just like a little color there because I think as you referenced back to the Q3 call, your question's kind of getting your head around. Hey. That was near back half of the year that the omnibus approach, seventeen subs being put on contract was a pathway for us to still make our guide last year. Right? And we had the early question on SARS right now. So although that's viable and that's still out there and the industry still believes that's a very efficient way to get the most ships on contract built fastest. Right now, as you know, the CR just has an anomaly in there for the first two of the seventeen boats, and we're working very closely with the Navy partner to get those on contract near term. So the difference between where we were, say, last quarter and this quarter is just the contracting approach, the mechanisms. Is it an omnibus at all seventeen, which it would impact additional contracts, or is it just two boats for FY24 and incremental approach? Maybe you saw still an opportunity set behind it. But it brings us a little bit of an uncertainty of what was the cash perspective and outlook back in Q3 versus how we're going forward here. All these boats will get on contract. Right? We'll find a good risky equilibrium between us and our Navy partner. Right? And a balance between affordability and profitability. And we'll ensure that the deal on our side obviously meets the requirements and the expectations of our customer, while being true to bringing home a contract that we can go execute the cost and the schedule. It's aligned with our profitability expectations. Gautam Khanna: Thanks, Tom. And just one last one. In private insurance, first time. We all remember the whole FSA discussion going to more unmanned, lighter ships. Is there any movement afoot? Have you heard anything from the new advanced station about their inclinations to revisit some of the recommendations back then? Chris Kastner: Not yet, but it's early. The leadership is still getting confirmed. And we support, obviously, with our unmanned business, we support both. There's a high-low argument and actually a fact that is going to have to be executed. But, no, we've not had those conversations with the new administration yet because they just aren't there yet. Gautam Khanna: Alright. Fair enough. Thank you, guys. Chris Kastner: Thanks. Operator: Thank you very much. I'm not showing any further questions at this time. I would now like to hand the call back over to Mr. Kastner for any closing remarks. Chris Kastner: Alright. Thank you for joining the call today. I appreciate everyone's patience. Thank you. Operator: That does conclude today's conference call. You may now disconnect.

Operator: Ladies and gentlemen, thank you for standing by and welcome to the Third Quarter 2024 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. Mrs. Thomas, you may begin. Christie Thomas: Thank you, operator, and good morning, everyone. Welcome to the HII third quarter 2024 conference call. Matters discussed on today's call that constitute forward-looking statements, including our estimates regarding the company's outlook, involve risks and uncertainties and reflect the company's judgment based on information available at the time of this call. These risks and uncertainties may cause our actual results to differ materially. Additional information regarding these factors is contained in today's press release and the company's SEC filings. We also will refer to certain non-GAAP financial measures. For additional disclosures about these non-GAAP measures, including reconciliations to comparable GAAP measures, please see the slides that accompany this webcast, which are available on the Investor Relations page of our website at ir.hii.com. On the call today are Chris Kastner, President and Chief Executive Officer; and Tom Stiehle, Executive Vice President and Chief Financial Officer. I will now turn the call over to Chris. Chris Kastner: Thanks, Christie, and thank you for joining the call, everyone. Earlier today, we released our third quarter results and announced updated guidance for the year. Before I get to the results, I want to thank the 44,000 HII employees who build ships in our shipyards and who solve some of the most pressing technical challenges related to our national security within our Mission Technologies division. At HII, our mission is clear. It is to deliver the most powerful ships and all domain solutions in service of our nation, creating advantage for our customers to protect peace and freedom around the world. Now for the results. Third quarter revenue was $2.7 billion and earnings per share was $2.56, down from $3.70 a year ago. We updated our shipbuilding revenue guidance for the full year to approximately $8.8 billion and our Mission Technologies revenue guidance to a range of $2.8 billion to $2.85 billion. We also updated our 2024 shipbuilding margin guidance to 5% to 6% and revised our 2024 free cash flow guidance to zero to $100 million. I'll provide some operational milestone updates and division highlights prior to providing a more detailed discussion surrounding the quarter's performance and guidance changes. During the quarter, Newport News shipped the final module of Virginia-class submarine Utah, SSN 801 and on CVN 79 Kennedy, the ship is progressing into the test and turnover phase. 92% of compartments have been turned over to the Navy and all 19 of the ship's combat systems are turned over to the government test team. Looking ahead, float off of SSN 800, Arkansas is moved to 2025 due to a customer-driven design change that requires incorporation prior to launch. At Ingalls Shipbuilding, we received the $9.6 billion award of the multi-ship procurement of amphibious warships, which provides strong revenue visibility for years to come. Combining this with a series of milestone achievements in the quarter and early October, including the launch of LPD 30 Harrisburg, the load-out of three or four hypersonic missile tubes into the DDG 1000 Zumwalt structure and Aegis Light Off on DDG 128 Ted Stevens, the second Ingalls Flight III destroyer, some solid progress is being made at Ingalls. Our results also reflect strong performance at Mission Technologies with 14% revenue growth year-to-date over 2023 and a third quarter funded book-to-bill of 2.2. Mission Technologies had several significant contract wins in the third quarter, totaling $11 billion of potential contract value, including a $6.7 billion contract to provide electronic warfare engineering and technical services support for the U.S. Air Force. The single award Indefinite Delivery and Indefinite Quantity contract is the largest-ever awarded HII's Mission Technologies division. We were also awarded a $3 billion federal government single award task order for National Security Services and new and emergent technology, a $458 million contract to modernize U.S. government comms and IT networks, and a $209 million contract to support U.S. Air Force Weapons Systems development and sustainment. We ended the third quarter with backlog of $49.4 billion, of which approximately $28 billion is currently funded. Further to results and guidance changes, two issues have impacted our expectations for the year. First, based on constructive discussions with our Navy partner, we expected to reach an agreement for Virginia-class Block V and Block VI and Columbia-class submarines in the second half of 2024. Starting this fall, some uncertainty emerged about the timing of that agreement, where we are confident an agreement will be reached and discussions continue, we have updated our profitability and cash flow assumptions based on the uncertain timing and structure of that award. We continue to pursue innovative contracting approaches that incentivize greater investments in our workforce, facilities, and technology. These investments are critical to the goal of yielding accelerated program schedules that meet their urgent needs of the Navy. Second, our assumptions of performance improvement and risk reduction have not been achieved. This is due to late critical material deliveries and reduced experience levels within our teams, both in production touch labor, and supervision. The combination of material delivery delays and inexperience leads to labor inefficiency and in some cases to rework, which affects program schedules. Late supply chain material has necessitated a renewed look at our labor plans and delivery schedules. This alignment of labor and material from the supply chain is critical to mitigating program cost. It bears repeating that nearly all the ships currently under construction were negotiated prior to COVID. These ship contracts, which provide long-term revenue visibility, did not anticipate in their cost targets and risk-limiting clauses, the significant disruption of our workforce and supply chain or the subsequent inflation experienced by us and the broader economy. They did not anticipate the significant loss of shipbuilding experience in our yards through early retirements and the training requirements of new shipbuilders. As I said, the terms of these contracts are still governing the majority of the work underway now at Newport News. Let me be clear, delays and cost increases on these ships are unacceptable to me, my team, and all of us at HII. Looking ahead, we continue to take decisive actions to focus on the fundamentals of shipbuilding to ensure that we finish these ships, get them delivered to the Navy, and transition to ships negotiated in the context of our current economic reality. Further, regarding actions to improve performance, I'll focus on three points, starting with workforce. I want to emphasize we have thousands of highly skilled and committed shipbuilders and their example and mentorship are invaluable as we develop a new generation of manufacturing talent to execute on our backlog and the demand ahead of us. We are making significant investments in craft proficiency training and in leadership development, so that our deck plate executes safely, efficiently, and with first-time quality. Our innovative craft learning centers, virtual and augmented reality training cells, and foreman support strategies are helping to accelerate learning within the teams. In partnership with the submarine industrial base, the Hampton Roads regional training pipeline has grown its capacity, allowing Newport News Shipbuilding to hire 30% of craft new hires from a pre-hire training pipeline, up from only 5% two years ago. Also at Newport News, we remain focused on deploying and maturing a common operating system across all programs to improve execution. In trades where we first piloted this, we have seen meaningful throughput improvement by enabling our frontline leaders to spend more time on the deck plate with their people and by standardizing and simplifying how they put their teams to work every day. We are also investing in data analytics and pilot projects utilizing AI to find faster solutions to material delivery delays and mitigate their impacts to ship assembly schedules. Scaling the operating system across all production areas is our best near-term opportunity to improve throughput while we pursue long-term structural improvements to our infrastructure, supply base, and workforce. Second, supply chain and supplier development, we are working with the Navy fueled by submarine industrial-based funding to improve supply-chain performance. With the goal of helping to accelerate throughput in the shipyards, we are also investing in new centralized manufacturing centers of excellence for high-risk items to improve cost and schedule predictability for these build sequence critical parts. Third, capacity, we are outsourcing additional work to new suppliers, which helps to rebuild the industrial base and takes the work to where there is additional workforce and investing in new industry 4.0 technologies, including additive manufacturing and digital engineering. As an example, we are outsourcing over 1 million hours in 2024 and plan to increase that by over 30% in 2025. We are committed to growing the manufacturing ecosystem necessary to build these ships. Additionally, we are reviewing costs across all three divisions to remain competitive and meet our cost objectives. This enterprise-wide review includes a thorough evaluation of our overhead costs and support costs to ensure that each element supports our customer requirements. We are evaluating capital in a similar fashion and ensuring we focus our capital on improving throughput. While our previous cash-flow forecast included a capital expenditure target at 5% of sales from 2024 through 2026, we have reduced our planned spend for 2024 and we are thoroughly evaluating our 2025 and 2026 capital plans to reflect the uncertainty of the timing and structure of the future contracting activity. Turning to Washington, while the government operates under a continuing resolution into December, we continue to engage with the Navy on the most appropriate path forward on the submarine contracts. As demonstrated with the recent multi-ship procurement award for amphibious ships, HII has a record of reaching equitable agreement on this type of contract that delivers sustainable returns for the company and savings to the customer. In closing, before I turn the call over to Tom, I want to emphasize these primary points. First, we are confident we are focused on the right things on the fundamentals to execute on our current backlog. And once we transition to these post-COVID contracts, cost and schedule performance and predictability will improve. Second, on the outstanding contract awards in shipbuilding, we expect agreement at a fair cost and schedule that reflects our current operating environment and we will continue to work with the Navy until we get this complete. Finally, the long-term value equation for HII has not changed. There is unprecedented demand for our products and services. We remain confident in our mid to long-term guidance of 9% to 10% shipbuilding margins and we firmly believe the actions we are taking will enable us to stabilize performance as we continue to work through these ships. And now, Tom? Tom Stiehle: Thanks, Chris, and good morning. Let me first start by briefly discussing our third-quarter results and then I'll address our updated outlook. For more details, please refer to the earnings release issued this morning and posted to our website. Beginning with our consolidated results on Slide 6 of the presentation, our third-quarter revenues of approximately $2.7 billion decreased 2.4% compared to the same period last year. This decreased revenue was attributable to declines at both Ingalls Shipbuilding and Newport News Shipbuilding, partially offset by growth at Mission Technologies. Operating income for the quarter of $82 million decreased by $90 million or 52.3% from the third quarter of 2023 and operating margin of 3% in the quarter compares to 6.1% in the same period last year. Decreased operating income was largely driven by declines at both Newport News and Ingalls, which I will discuss in more detail in a moment. Net earnings in the quarter were $101 million compared to $148 million in the third quarter of 2023. Diluted earnings per share in the quarter were $2.56 compared to $3.70 in the third quarter of the prior year. Our contractual commitments increased by approximately $900 million in the period, bringing backlog to $49.4 billion at the end of the quarter, while we did secure the $9.6 billion award in the court at Ingalls for four amphibious ships, including LHA 10, LPD 33, 34 and 35. We recorded just the authorized value to date, approximately $565 million in the quarter. We will see the awarded values of those ships grow over time as authorizations expand. Moving to Slide 7, Ingalls revenues of $664 million in the quarter decreased $47 million or 6.6% from the same period last year, driven primarily by lower volumes in the amphibious assault ships and the National Security Cutter Program, partially offset by higher surface combatant volume. Ingalls' operating income in the quarter was $49 million and operating margin was 7.4% compared to $73 million and 10.3%, respectively, from the same period last year. The decreases were primarily due to lower performance on amphibious assault ships and surface combatants. At Newport News, revenues of $1.4 billion in the quarter were down $41 million or 2.8% from the same period last year, driven primarily by lower volumes in naval nuclear support services as well as the cumulative adjustments on the Virginia class submarine program in aircraft carriers, partially offset by higher volumes in the Columbia class submarine program. Newport News' operating income in the quarter was $15 million and operating margin of 1.1% compared to $90 million and 6.2% respectively in the prior year period. Newport News results included net unfavorable cumulative adjustments totaling $78 million, including $34 million on Block IV of the Virginia class submarine program, $16 million on the Enterprise CVN 80 and Doris Miller CVN 81 two-carrier contract, and $14 million on the refueling and complex overhaul of the USS John C. Stennis CVN 74. As Chris described, these unfavorable adjustments were driven by both the change in our assumption around contract awards as well as program performance challenges as we have not achieved planned performance improvements. During the quarter, some welder issues were reported publicly that we had previously disclosed to our customer. An initial assessment at Newport News shipbuilding determined that fewer than two dozen welders did not consistently follow procedures in their weld process. We continue to work alongside with the Navy through a comprehensive investigation and analysis to determine the extent of any financial impact. At Mission Technologies, revenues of $709 million increased $24 million or 3.5% compared to the third quarter of 2023, primarily due to higher volumes in cyber electronic warfare and space. Mission Technologies' operating income for the quarter was $33 million and operating margin was 4.7% compared to $24 million and 3.5%, respectively, in the third quarter of last year. The increases were primarily driven by higher cyber electronic warfare and space volumes as well as equity income from nuclear and environmental joint ventures. Third-quarter results for Mission Technologies included approximately $25 million of amortization to purchased intangible assets. Mission Technologies' EBITDA margin in the third quarter was 8.9% compared to 8.2% in the third quarter of 2023 and 8.5% last quarter. As Chris noted, Mission Technologies' performance in 2024 has been very strong with year-to-date sales growth of 14%. This follows 2023 revenue growth of 13.1% over 2022. Mission Technologies' third-quarter contract awards, which entail new work and recompete wins across the service branches and multi-domain operations represent nearly $11 billion in total potential contract value, a record for Mission Technologies. Turning to Slide 8, cash generated by operations was $213 million in the quarter. Net capital expenditures were $77 million or 2.8% of revenues. Free cash flow in the quarter was $136 million. Cash contributions to our pension and other post-retirement benefit plans were $12 million in the quarter. We have provided an update to our 2024 and 2025 pension outlook in the appendix of today's slides. The cash-flow impacts related to the updated forecast are quite minimal. Pension-related numbers are subject to year-end performance and measurement criteria. As usual, we plan to provide a multiyear update of pension estimates on our fourth quarter call in January. During the quarter, we repurchased approximately 134,000 shares at a cost of approximately $35 million, bringing the year-to-date total to 608,000 shares at a cost of $162 million. With cash from operations now below our initial expectations, consistent with our capital allocation priorities, we have throttle repurchases for the remainder of the year. Also during the quarter, we paid cash dividends of $1.30 per share or $52 million in aggregate. Yesterday, we were pleased to announce an increase to our quarterly dividend to $1.35 per share, or an increase of approximately 3.8%. Moving on to our updated outlook, which we have summarized on Slide 9. We've increased Mission Technologies' revenue by $50 million for the year, now to $2.8 billion to $2.85 billion and increased their margin outlook to 3.75%. For Shipbuilding, we have centered on revenue guidance to the lower end of the range at $8.8 billion. Our prior shipbuilding revenue and margin guidance anticipated receiving an omnibus of submarine contract awards and contract modifications incorporating opportunities to address key shipbuilding structural challenges across the Newport News enterprise, focusing on investments in our workforce, aiding, attrition and training, and investments in our infrastructure, buildings, facilities, manufacturing, tooling, and aids for additional throughput and capacity across the Newport News portfolio. While we remain confident that we will ultimately receive the new contract awards, we are now uncertain of the timing and whether the overall contracting construct of those awards will enable full pursuit of near-term key investments needed to accelerate performance, rate, and volume of the Newport News portfolio of contracts. Our initial guidance for 2024 also assumed incremental program performance improvement consistent with normal expectations to capture learning curve improvements and production efficiencies over time. Performance has not improved at the forecasted rate due to workforce inexperience and delays with the supply chain, which along with our updated contracting expectation has a near-term impact on our ability to achieve progress milestones, burn down working capital, and collect associated cash. The results and updated outlook announced today reflect a reduced performance trajectory aligned to current conditions. Our updated shipbuilding operating margin expectation for the year is now 5% to 6%. Our updated free cash flow is between zero and $100 million and our capital expenditure outlay for the year has been reduced from 5.3% to 3.4% of sales. Prior guidance anticipated contract structures that would have allowed us to capture additional progress milestones as well as the inclusion of incentives related to the new contract awards. We expect to return to more normal free cash flow levels once we are able to work through the challenging portions of our current contracts and have a better understanding of the new submarine awards. In light of this dynamic, we are withdrawing our five-year free cash flow target. Beyond our operational guidance, we have also made modest updates to our outlook for pension-related items, interest expense, and our expected tax rate for the year, which has declined to 17%. The lower annual forecasted tax rate is driven by third quarter results that include an increase in the research and development tax credits for current and prior years, resulting in an effective tax rate of approximately 10% for Q3. Turning to the balance sheet, we ended the quarter with liquidity of approximately $1.3 billion and modest leverage of approximately 2.1 times net debt to trailing 12-month EBITDA. Our capital allocation priorities are unchanged, including our commitment to investment-grade credit rating, thoughtful investment in our shipyards, continued dividend growth, and the return of excess cash through share repurchases. Within the third quarter, we expanded our revolver from $1.5 billion to $1.7 billion and raised our commercial paper program from $1 billion to $1.7 billion, consistent with our normal cost of business and given the more favorable interest-rate environment, we are considering a new debt issuance in the coming months. Proceeds would be used in part to support the redemption of the $500 million senior notes due in May 2025 and for other general corporate purposes. This plan is still under evaluation. Further to Chris' comments on our focus on cost-efficiency ongoing across the corporation, we recently announced the consolidation of Mission Technologies into four groups, down from the previous six business units, simplifying the division's structure around key growth initiatives while enhancing competitiveness by reducing operational cost. This more efficient alignment of the portfolio, talent, and resources will support continued long-term business growth. To close, I will reiterate that while our updated guidance removes the assumption of a near-term Omnibus contract agreement for the next increment of VCS and Columbia submarines, we continue to advocate for innovative and sensible solutions to address the urgent shipbuilding industry challenges we have discussed. We are confident in our ability to work through the current challenges and we will continue to focus on aggressively driving performance improvement in our shipyards, expanding capacity and throughput, and securing equitable contract solutions that address the business realities of the current operating environment. With that, I'll turn the call back over to Christie to manage Q&A. Christie Thomas: Thanks, Tom. As a reminder to everyone on the call, please limit yourself to one initial question and one follow-up, so that we can get as many people through the queue as possible. Operator, I will turn it over to you to manage the Q&A. Operator: [Operator Instructions] The first question is from the line of Gautam Khanna with TD Cowen. Your line is now open. Please go ahead. Gautam Khanna: Yes. Hi guys. A couple of questions. Chris Kastner: Good morning, Khanna. Gautam Khanna: Good morning. Tom, you mentioned -- it sounded like contingent on signing these new submarine contracts was an implicit assumption that you would get a lease on existing contracts that are in the yard and so I'm curious how much of the negative cum catch-up at Newport News related to that? How that impacts the ongoing booking rate? So I mean, it sounds like you were booking with this assumption in mind already. So I'm curious like what's the incremental hit was? And what was already established, if you will? And then so I guess that's my first question. And then the second one is related to the Wells rework. Just how much of the keen catch-up relates to that? And then I'll leave it for someone else. Thanks. Chris Kastner: Okay, Gautam. Let me have -- this is Chris. I'll handle the first question and then I'll start in on the welds and Tom can answer it. But really in the quarter, we had two issues impacting us. We had performance and execution on the deck plate, really on these pre-COVID ships. And then we had the assumption really for the year the quarter and into the guidance actually relative to this 17 ship contract. I think it helps to get into detail a little bit on what happened in the quarter from a performance standpoint. And the largest impact was related to the Block IV submarines and you have 798 and 800 nearing some critical milestones where you're going through the test program and you're buttoning some systems up. And we just encountered rework on systems that we didn't expect and we have -- and that impacts schedule and we're having to roll through that. And that's really illustrative of what we're finding on these pre-COVID ships is there's unpredictability as you move into buttoning them up and entering into these major milestones, which creates this unpredictability going forward. On the 17-ship contract, we were making good progress, as I said in my script. And when you think about the 17 submarines, it's really a reset of the portfolio in Newport News. This is not business as usual. You can't simply just put that much work into a facility and expect it to be executed, especially in this environment that we're operating in relative to labor and the supply chain and the capacity in the industrial base. So we've been working very hard with the customer to try to get those 17 ships right. And it's a broad-based sort of a contract that we're working on that really unlocks investment in labor and infrastructure and technology across the portfolio. So we're going to keep working on it as it's -- we thought we were pretty close to getting it done. It's in review still and alternatives are being reviewed and we're supporting that conversation, but it's just created some unpredictability not only in the quarter and the year, but in our outlook and we're working through that. But ultimately, I can represent that when that when that contract is executed, it's going to be a fair and equitable contract. It's going to be broad-based and it's going to reflect the economic environment in which we're operating, it does none of us any good to agree to cost or schedules on these submarines that are so urgently needed that we can't achieve. So that's kind of what happened in the quarter, in the year, and in guidance. I don't think it's appropriate to parse it between our performance and what we thought was going to happen in the 17-ship contract. There was incentives in that contract that we thought we would realize that we just didn't. But I think it's tough to parse it between the two. On the welds, Tom started that conversation a bit and I'll let him talk about the financials. But really, this is a process issue. This is a small fraction of our -- of some welders in the yard and a small fraction of welds that were impacted. We're working very closely with the customer to bound the issue and come through the issue. And we think we'll march through that very smartly. So, Tom, do you want to comment on the financials related to that? Tom Stiehle: Yes. So as we proceed through the investigations and eventually close that out, we'll have a finality on the financial front. We have taken an initial booking. It's not material. It's not identified in the queue. It's just for the costs that we think that could be deemed unallowable on that. So we'll get you more information as we close that out and that's all I have to say about that. On that first part, I would just add, as Chris was commenting, trying -- the reason why we wouldn't parse out between performance and the -- and the new contract innovative approach, now that's still ongoing right now. It's in negotiations. There's optionality against that and we'll have to see how that plays out. So it's just -- it's not appropriate for us to comment at this time as we're trying to work and negotiate ourselves through that without any partner. Gautam Khanna: Okay. Thank you. Chris Kastner: Sure. Operator: Thank you. The next question is from the line of Robert Spingarn with Melius Research. Your line is now open. Please go ahead. Scott Mikus: Good morning. This is Scott Mikus on for Rob Spingarn. Chris Kastner: Good morning, Scott. Scott Mikus: Chris -- good morning. Chris, the press release and your opening remarks, you talked about innovative contracting approaches that incentivize greater investments in the workforce, facilities, and technology. Presumably, you're referring to the SAWS funding plan where the Navy wants to pull funding from boats that haven't started construction to support higher wages and infrastructure build right now. So just wondering if you could talk about your thoughts on the SAWS plan and then I have another follow-up on that as well. Chris Kastner: Well, if the SAWS plan has kind of broadly reported, I wouldn't get into too much detail. You kind of hit the basics there. We support it. It was an excellent idea. It was a Navy initiative that we supported. I still believe it's the smartest best way to get at this issue because it unlocks such investment in the workforce, the infrastructure, and technology. We're still in discussions on alternatives with the Navy and the Congress in supporting and asking questions on alternatives. But that SAWS plan is a -- it was a very good idea that we think is still under review and potentially could be put under contract, although we don't forecast that happening over the balance of this year. Scott Mikus: Okay. And then there was a letter from a bipartisan group of senators. It was regarding the SAWS plan, but it also mentioned that there could be a $17 billion shortfall in funding on the Virginia-class program over the next six years. I understand shipbuilding costs have increased significantly, but does a $17 billion shortfall sound remotely close to you? And do you think Congress will support plugging that shortfall? Chris Kastner: Yes. So I'm not going to comment on the ability of Congress to obtain additional funding. The beauty of SAWS was you didn't need any more funding. So -- and I really don't think it's appropriate for me to comment on the baseline that was used for that -- for that increase. But look, the teams are working very hard to come to a contract solution on these 17 ships. We need to make sure that, that solution is equitable and reflects our current macroeconomic environment, and also enables initial investment so that we can get these critical assets to the fleet as soon as possible. Scott Mikus: All right. Thanks for taking the question. Chris Kastner: Sure. Operator: Thank you. The next question is from the line of Myles Walton with Wolfe Research. Your line is now open. Please go ahead. Myles Walton: Yes, thanks. I was hoping you could talk and maybe give us a little bit of color on the $800 million cut to operating cash flow for the year. How much of that was specifically tied to the contract slipping out beyond this year? And how much was tied to performance? I know you didn't want to do that for the EAC, but given the size of the cash cut, I hope you can do it for this. Chris Kastner: Yes. So let me start and Tom can step in. As you know, we really -- when we think through guidance, we risk-adjust everything. So it's really a combination of both the new contract as well as progress within the yards. So Tom, I don't know if you want to comment further on that. Tom Stiehle: Yes. So we talked a little bit about this in Q1 and Q2 where we had a pathway to make the guide. And obviously, at that time, you could see on the balance sheet that the working capital was rising right there. We had talked about progress, progress, timing, making the major milestones up and out that we show you, the minor milestones and the incentives, both the capital and performance incentives behind the scenes. And then what we normally have, just the run-rate of unadjudicated change, change orders, REAs, and things of that nature and compositely between the recoveries, and the performance and the recoveries of those, I mean, that's how we pick up our margin and cash. So the pathway was clearly at the beginning of the year when we laid out the plan. And then in Q1 and Q2, we still had pathways from performance and from the investments that would come about with the 17 boats on that innovative contracting approach to be able to kind of hit our guide here. The backup that we've seen right now, obviously is twofold is the awards, certainly all 17 boats do not look imminent by the end of the year. I think we all know that. And then from a performance standpoint, we've been able to make progress, but not enough of the progress or the right progress and the progress timing is limiting us to be able to fill all the costs that are on the balance sheet right now. So we thought it was prudent to take the $600 million to $700 million guidance that we've had at the beginning of the year, bring that down to zero to $100 million. So again, it's a piece of the awards and that's a timing aspect. It's a piece on both the performance. Obviously, when we bring the 7.6% to 7.8% in margin for shipbuilding down to 5% to 6% this year, the less margin means less cash. There's a piece of so that's a piece of it -- there's a piece of timing where it moves from '24 to '25 and then there's just a piece of the operations here. So it's a mix of it, but we thought it was prudent after the Q2 call when we saw some headwinds on the innovative contracting approach being able to be pushed through and executed by the end of the year as well as the Q3's performance to bring down guidance on this call. Myles Walton: Yes. No, and I get the moving parts. I'm just hoping because obviously, the timing piece is an important question, if it's timing or if it's performance and the contract, I think we could perceive some of that is timing. And so I would just ask, is it three quarters related to the contracts? Is it that high or is it not that high? Chris Kastner: Yes. So, Myles, I understand the question. I understand it's the split that you're asking, but the interesting thing about that 17 ships is the construct of that contract right now, we just don't know. We've been in active discussions on what it's going to look like. I am very confident they're going to order those submarines. But we just -- we just don't know the ultimate construct of that. So it's just -- it's a challenge to break that out for you. Myles Walton: Okay. Maybe the following question, I'll leave it is, so going into next year in terms of normalcy of cash generation of this business, what would be the framework that you'd suggest for thinking about cash generation of the business? Chris Kastner: Well, I think it's going to be choppy for a couple of years, quite honestly, Myles. We're taking a hard look at all our expenses, our capital. We're relooking at that. But it's all going to be the indicators of cash, they are all going to be about performance and how that shifts, how that contract comes together, how we execute at the deck plate and proceed, and just how we transition into those new contracts. It's that's going to be the story from a cash flow standpoint for the next couple of years for us. Myles Walton: Okay. All right. Thank you. Chris Kastner: Yes. Operator: Thank you. The next question is from the line of Pete Skibitski with Alembic Global. Your line is now open. Please go ahead. Pete Skibitski: Yes, good morning, guys. I guess just on the Block -- and just on the Block IV charges, did the design change Did the Navy request it on the 800? Did they kind of -- did they pay you guys for that? Or did that for some of the negative EAC? Chris Kastner: Yes. So it's both backed-up in the quarter. A part of that is the design change related to 800, there's probably some upside on that when that gets negotiated potentially. It's clearly a Class 1 change for work that needed to get done before we floated off. But that was not the only issue in the quarter for 800 and there could potentially be some upside related to that. Pete Skibitski: Okay. And then just at Ingalls, it seemed like on the last call, you guys had a feel that things were going to improve imminently at Ingalls and it seems like they're largely in zero production down there. So I'm just wondering if you can categorize or characterize, is there pretty meaningful net attrition issues at Ingalls as well? Or why are things kind of going in the wrong direction there? Chris Kastner: Yes, I wouldn't necessarily say they're going in the wrong direction at Ingalls. They do have the same issues that everyone in manufacturing is facing relative to green labor and they're working very hard to address that. The issue with Ingalls right now is there's just less opportunity for positive adjustments. You don't see significant negative adjustments, but you don't see significant positive either. So they're fighting through the same issues as everyone in manufacturing in United States fighting through relative to green labor, fragile supply-chain, but I got a lot of confidence in Ingalls' team. They're making their milestones and they're proceeding on their programs. And that bundle contract was very positive. It's really representative of the type of contract we need going forward to reflect our current macroeconomic environment, ensuring we protect ourselves against the risk of inflation and a fragile supply chain. So yes, I got a lot of confidence in the Ingalls team. Pete Skibitski: Okay. Thank you. Chris Kastner: Sure. Operator: Thank you. The next question is from the line of David Strauss with Barclays. Your line is now open. Please go ahead. David Strauss: Good morning. Thank you. Chris Kastner: Good morning. David Strauss: Hi, Chris, in terms of -- good morning. In terms of the submarine industrial base money, all the money that's being thrown at this, where is it going? And are you seeing any evidence that it's actually helping at this point? Chris Kastner: Yes. So the industrial-based funding really positive developments there from Congress and the Navy to flow that money into the industrial base, it gets distributed primarily in the supply base, but we benefit from it as well. And there will be benefits related to it. The problem is it just doesn't happen very quickly. When you're talking about potentially new tooling, new buildings, it takes a while to get that stuff done and then to reap the benefits from it. So we're actually rebuilding the industrial base related to shipbuilding right now and expanding capacity both through Navy investments as well as our investments. So I think it's a very positive development. I think actually, I know there's going to be benefits that come from it. It's just we're going to have to be a bit patient. David Strauss: Okay. And as a follow-up, I think to Myles' question, Tom, maybe just going after with the working capital side of things, it -- I guess you're about 9% right now on working capital. I'm guessing your guide for the full year implies something like in Q4, we get down to around 6% to 7%. Is that right? And do you still view kind of a normal level of working capital around 5%? Tom Stiehle: Yes. So I think obviously you can calculate we are in the upper 8s right now and we are going to take a couple of 100 basis points to 200 basis points out of that by the end of the year. There's a range of variability between zero and 100. I do think once we get past these ships here, the pre-COVID ships, we'll get back to a normal range of cash flow. As Chris said, that could be 12 to 18 months by the end of '24 into '25. So we’re just going to have to work ourselves through that. We're making progress. The cost is there on the balance sheet. We just have to finish these ships up and get paid. The cash will come as we make our deliveries. So it's just a function of us grinding through the current portfolio of ships. David Strauss: All right. Thank you. Operator: Thank you. The next question is from the line of Scott Deuschle with Deutsche Bank. Your line is now open. Scott Deuschle: Hi, good morning. Chris Kastner: Good morning, Scott. Scott Deuschle: Tom, the low end of the shipbuilding margin guide seems to imply significantly more negative EACs in the fourth quarter. So I guess you see risk there. So my question is what prevents that risk from crystallizing other than getting the submarine contract? And then why not just book those negative EACs now if we're going to guide to them? Thanks. Tom Stiehle: So we gave you a range for 5% to 6% for the end-of-the year. Obviously with the actions that you have for Q1, Q2, Q3, you can kind of calculate where that lands. There's a little volume against that, but generally speaking, there's still a spread there about 300 basis-points between the low-end and the high-end, 400 basis-points between the low-end at the high-end. And it just depends on how we proceed. We have Q4 performance, right? We have making progress and milestones, making those incentives I talked about the CapEx incentives and performance incentives on that and then kind of getting paid by the end of the year. On the cash side and the margin side, we're watching the EACs and finding a footing against the ships that we have here right now. So we wanted to make sure we had an appropriate range that had all outcomes. There's upside to it too as you see, between 5% and 6%, and we'll just -- we'll see how the year proceeds as we close out. We did wash out, as we mentioned in the scripts, the investment upside that you'd get as the investment dollars flow through here for the VCS and Columbia bill too. So that's not a factor as far as the year-end close-out. Scott Deuschle: Okay. Thank you. And then, Chris, sorry if I missed it, but do you still expect to deliver CVN 79 in 2025? And is that pre-COVID ship seeing any issues or rework requirements in the testing phase like those you referenced on Block IV Virginia-class? Chris Kastner: Yes. So no change in the milestones other than what I referenced on my script. We're absolutely impacted on all those pre-COVID shifts by additional rework and really the fragility of the supply-chain. We've talked previously about it at the kind of the variability in the supply-chain going down from an inflation and predictability standpoint. But when something breaks, when you're going through the test program, something breaks and you have to go reorder or you have to rebuild it, there's just arthritis in the system-related to getting that back, which causes schedule risk. So, yes, no change to 79 right now, but it's just going to be a challenge completing any ship that was done negotiated pre-COVID. Scott Deuschle: Thank you. Operator: Thank you. The next question is from the line of Jason Gursky with Citi. Your line is now open. Please go ahead. Jason Gursky: Yes. Thanks and good morning, everybody. Chris Kastner: Good morning, Jason. Jason Gursky: Hi, Chris. Hi, I'm just kind of curious how you go about managing the business with this much uncertainty going on the start new contracts and just kind of how you're going to go about go about managing through this? And then I can't help but wonder if slowing down here for some period of time might be helpful as you try to convert some of your green labor into more experienced labor. So I'm just kind of curious, could we wake up someday and see that we just hit the pause button, let you guys figure out how to get this work done more methodically and we kind of restart it. Is that a bad idea? I'm just trying to understand how this gets fixed. Chris Kastner: Well, so that's it, Jason, thank you for that question. And first, first of all, I don't think there's any backup related to the urgency that's required to get these ships delivered and we're doing all we can to get these ships delivered to the Navy. But you bring up a very good point related to green labor. And while we're on our hiring plan for the year, we're actually repositioning our strategy relative to hiring where we're reducing our reliance on green labor, we're just going to hire less. And we're going to focus on more experienced labor because we're just out of alignment or out of balance from an experience level right now, which leads to rework, which leads to inefficiency. And it's not good for anyone. So we're repositioning that a bit, which I don't consider that is slowing down. I consider that investing in the workforce so that you're more efficient and really aligning and that's what we're doing with our capital plans and our cost structure as well, Jason, is we're aligning those investments and that cost structure with what we think the pace of activity will be going forward. As I said previously, and it doesn't do anyone any good to have to meet your hiring plan and then not have supply-chain material there, right? So I think you bring up a good point. I think we have to be very disciplined in how we do that. I think we have to be really disciplined in how we put these ships under contract as well. We can't sign a contract and hope. We have to do that. We have to do it understanding the current macroeconomic environment, understanding of proficiency of our labor force, the fragility of the supply chain, potential for increased inflation, and all of the work that's happening within the shipyard. So you bring up a good point, we're thoughtful about it. We're thinking about it and we're making sure that we do it responsibly. Jason Gursky: Right. Okay. I appreciate that. And then somebody has got to ask a question about Mission Technologies, right? I mean, that business continues performed well, nice growth, margin -- margins are doing well there. So maybe just talk a little bit about the next few years at Mission Tech, the pipeline that you have there, the outlook for book-to-bill, the mix that you have in the current backlog and kind of what you're chasing? And just the potential for book-to-bills, growth rates, margins, kind of just give us a share of mosaic for the next few years to think about that business. Thanks. Chris Kastner: Sure, sure. Mission Technology is doing very well. I know they've grown at 14% year-to-date over last year, some really big wins, $11 billion of wins. The outlook for that business couldn't be better and it's broadly across their portfolio. The team just restructured their business to focus on where they think the higher-growth areas are you think about C5ISR electronic warfare unmanned or uncrewed vehicles. So they're doing very well. The pipeline is strong. The team seems to be very focused and I look forward to them performing over the next few years, consistent with the growth rates or even beyond the growth rates that we communicated at our Investor Day. So yes, very pleased with Mission Technologies. The team is executing very well. Tom, do you have anything to add on Mission Technologies? Tom Stiehle: No, I mean, just to hop on the back-end on-top of the growth rate that we've seen this year at 14% year-to-date has been 13% from '22 to '23. So I'm excited by that. The efficiency that Chris talked about from six business units to four, we're leveraging the strongest leaders here of the portfolio, the talent, we're aligning to be even more efficient on new bids there from a rate structure. So I'm excited with what they're doing there as they're honing the business. And the align acquisition was in 2021 and each year we're finding opportunity sense to either take more cost out or get some additional synergies within the division and the interfacing within shipbuilding and the opportunity set there continue to grow and how we can leverage Mission Technologies' applications and tech into how we construct and support our shipbuilding. So I'm excited about the future. We kind of set that up with a thesis of 7% to 9% growth, 8% to 10% EBITDA. I know that first year was up 4% from 2021 to 2022, but as I said, the last two years have been 13% and 14% higher than the initial hope and the projection that we gave for a 7% to 9% growth. And it's nice to see a couple of quarters here where the EBITDA margins have themselves up. A lot of cost-type contracts over that. But as we continue to mature the portfolio and the relationships with the customers and additional contracts, there'll be opportunity sets to kind of build out from just 80% to 85% cost-type into other type of contracts and delivery orders against those bottle contracts that will offer opportunity sets for higher returns as well, more products and services than just engineering solutions and studies. So I think it's going well right now and I'm excited that it brings about a new line of customer sets, different avenues of funding. We talked at Investor Day, the opportunity sets we have there to go international, commercial contracting, Australia over to England, and with the office opportunity sets in front of us too that's hitting on all cylinders for us. Jason Gursky: Right. Okay. I appreciate that color and best of luck to the rest of the questions here. Tom Stiehle: Thanks, Jason. Operator: Thank you. The next question is from the line of Seth Seifman with JPMorgan. Your line is now open. Please go ahead. Seth Seifman: Hi, thanks very much, and good morning. Chris Kastner: Good morning. Tom Stiehle: Good morning. Seth Seifman: So I wanted to ask --good morning. You mentioned doing more outsourcing and kind of hiring less. How do we think about how that affects your returns and cost estimates when more of the work is done with outsourcing? And when we see all this money going into the submarine industrial base and some of it going into kind of our restarting small and medium-sized shipyards elsewhere, should we think about a greater percentage of the work being outsourced going forward and kind of what does that mean for margins? Chris Kastner: Yes, I think there's going to be a greater percentage of our work outsourced going forward. There is a premium related to that. And you're seeing that, that impact in the profitability of our current portfolio. Now, I don't think it's going to be a significant impact going forward on these ships because we pretty much made most of those decisions. But we will increase the industrial base and increase outsourced partners on our future contracting activity and we make sure we protect those potential increases in those targets. That's what I mean about when I talk about ensuring that our new ships reflect the current macroeconomic environment, which means you're going to outsource more, which means it costs more. So we will outsource more. We need to expand the capacity in shipbuilding. We'll do that, but we need on these new contracts to ensure we protect ourselves. Tom Stiehle: I hop on the back end of that to you a bit. I wouldn't want you to like take away that we're going to significantly reduce hiring. The hiring, the training, working on retention. The backdrop that we've given you is that there's going to be additional growth in shipbuilding, right, from 3% to 4%. So there needs to be more volume and capacity, right? It's not out-of-the inability just for us to hire enough, but because of the top-line growing. So we'll be outsourcing what makes sense. And compared to maybe the inefficiency of some things we do inside we don't have the capacity to do it, all that goes into the business construct as we outsource. We'll in-source. There's teams that we can have pop into the yard, painters and welders at times on ships that they can pop in here for a month or a couple of quarters and help out as well. And again, if there's maybe a slight premium, a lot of times you don't pay like the benefit end of that. And then coming in here to offset the inefficiency we have of maybe schedule growth of the inefficiencies of the inexperience, some of the inexperience that we have in here. And all that's rolled into the EAC right here. So I see that as nothing but positive. Also, there's opportunity sets for us to do other things like operating centers, manufacturing operating centers. And that's in the mix. We're always kind of studying that. So we're not flat-footed here. We've kind of talked over the last two or three years since COVID about hiring and we were successful at that. We see the attrition is a draw here and now we're kind of pivoting to like, hey, the answer to that is more training, more relationships, and engagement with our new hires. And then where we need to supplement that, that's where we either outsource, insource, or look at other operating centers that we can team with, team acquire, things of that nature. So I mean, all that's in play on how we're trying to manage the business as we see going forward. Seth Seifman: All right. Okay. And then maybe then to follow-up, you mentioned kind of that 3% to 4% annual shipbuilding growth. That target, I think was also based on the investments that you guys thought you were making with the elevated CapEx over three years. Now this year for sure, and it seems like maybe going forward, the capital plan is much lighter without the kind of capacity and productivity that would come from that capital spending. Is it still appropriate to be thinking about that sort of 3% to 4% top-line over the next few years? Chris Kastner: Yes. Sure, absolutely, right? I wouldn't want anyone to see the signal of the CapEx has reduced for this year. We had guided 5% for the next three years from '24, '25, and '26 with '24 being 5.3%. So we prudently kind of hedged that back and we're managing accordingly because we want to see is it going to be an incremental approach or are we still going to do something more globally like an omnibus approach for the 17 boats that we have. But none of that work has moved out. Every year we replan our 10-year annual operating plan and none of that work has moved out of the plant. So the business, the value equation that we have, the specific skills and the opportunity sets we have with the growing Navy requirement, one of the 30-year shipbuilding plan, the five-year flight up, all that's in place here. As Chris said, we're trying to make sure that we marry the business environment and the headwinds that we see with both the labor needs and the supply-chain availability. We're trying to fairy home to fair and equitable contracts going forward that protects -- finds the right balance between affordability and profitability. So that has not changed the value equation of HII. It does mean that for the remaining part of this year, as we're trying to get rid of a little bit of the cloudiness and how that's going to play out and see the footing on performance take hold in Q4 and going forward. We throttled back just from a CapEx and cash position to be prudent in the short term. But medium to long-term, really nothing changes from what we envisioned and what we walked the industry and street through at Investor Day, right. That was a medium to long-term. We talked about three to five for medium and five to 10 years, the thesis of HII investment, and what -- how we see the business playing out has not changed at all. Seth Seifman: Great. Thanks very much. Chris Kastner: Thanks. Tom Stiehle: Thank you. Operator: Thank you. The next question is from the line of Ron Epstein with Bank of America. Your line is now open. Please go ahead Ronald Epstein: Hi, good morning, guys. Chris Kastner: Good morning. Ronald Epstein: I think we've been kind of through this, but I'm still trying to get my head around back at the Investor Day when you guys gave your outlook, how could you not see this coming? Chris Kastner: Yes. So it's a good question, Ron. You talked about Investor Day, it was kind of a broad look at the -- at the business and a medium to long-term take on growth rates and where we saw performance was going, and consistent with Investor Day, we said we had to get through these pre-COVID contracts. And our assumptions of how we were going to get through them were just a little bit too optimistic. So we're having to deal with it. We have a very good accounting process where we roll through our EACs every quarter and we have to -- we have to take an issue if it shows up. So it's not grossly inconsistent with the challenges we knew we had on these -- on these contracts that were negotiated pre-COVID. We're just going to have to get through them and transition to these new contracts that reflect our current environment. Ronald Epstein: Got it. Got it. And then how should we think about margins into next year? I mean, can you talk about that? Chris Kastner: Yes. So they're going to be -- we're not going to provide guidance until the end of January on that. And it's going to be a reflection of how we execute over the next couple of months, our expectations of execution for the balance of the year, those risk and opportunities. And then what we think that 17-ship submarine contract looks like, whether it gets awarded together, whether it gets awarded separately in the FY '24 votes, what that construct looks like and what the incentives are, look like on that. So we'll give -- we'll give that -- that information out in -- for guidance in 2025 in January. And those are the factors that will influence it. Tom, I don't know if you have anything you want to add to that. Tom Stiehle: You kind of hit it. It's just going to be a function of the performance and then these new contract awards that we have going forward. So I think it's premature right now for us to kind of guide that. I mean, we give you a range to get out of this year and then we'll give you a perspective kind of going forward. We understand what's impacting us. We're throwing a lot of horsepower, internal investment on labor front and on the supply chain. I mentioned to your question on the Investor Day, I mentioned about you had to work off the existing ships, the ships that have been during COVID and post-COVID the last three, four years now. I know a lot of people say, hey, COVID is behind us, but the contract value that we brought in here was pre-COVID, and then with the loss of hedge and the experience and the fragility of the supply chain, I mean, the impacts are still real today, whether it's impacting the ship at the deck plate parts and labor, or it's just a cumulative effect of higher costs over the performance of the ships and boats as they ran through the three or four years of three years of COVID 9% plus inflation for a couple of years and now tightening of the labor market. Those are real impacts that we're kind of living each day. So if you recall, I broke that down. Hey, we got every year, we get rid of a couple of boats and ships that went through that. We start some new boats and ships and then it's about the equity of the new contracts that we bring home with additional backstops on clauses, more alignment on program schedules, and then the cost returns that we see would get cranked into the new bids and we'd find that overlap between affordability and profitability on the new awards. And there's a transition period of that -- the new portfolio replacing the existing portfolio we have here, but I think that's the color we have. Ronald Epstein: Yes. And then maybe just one more question. I mean, and tell me if I'm just oversimplifying this, but it -- when you look at the commercial airlines as an example, they had a pilot shortage until they paid the pilots a lot more, and then the shortage went away. I mean, is it as simple in the yard just paying the shipbuilders more, and you'll get more talented people with more experience? And is there a way to work with the Navy to do that? Chris Kastner: Yes. That's what we're -- we are working with the Navy to do that now. We've worked with them on some interesting projects relative to increasing the labor and we're seeing some promising results for that. So Ron, you're bringing up a good point. It's something we're working very closely with the Navy to address on a 17-ship submarine contract. We've done it at Ingalls already in some areas and we're seeing some positive results. So it is an oversimplification, but we think that is one lever you can pull to improve retention, improve performance, and improve predictability. Ronald Epstein: Yes, it makes sense. All right. Thank you. Chris Kastner: Sure. Operator: Thank you. The next question is from the line of Robert Stallard with Vertical Research. Your line is now open. Please go ahead. Robert Stallard: Thanks so much. Good morning. Chris Kastner: Good morning. Robert Stallard: Chris, I don't want to belabor this 17-ship issue, but I was wondering if you could elaborate on what the potential sticking points are here. Is it very basically that the cost per unit has gone up significantly versus what the Navy is prepared to pay, or had budgeted, or that you were trying to get sort of recompense on the older pre-COVID contracts? And what exactly is the issue here? Chris Kastner: Yes. So fundamentally, the budgets that were established for those boats was a few years ago and it didn't really have the -- our current environment baked into the budget scenario. So that creates a risk, just that creates a risk in getting those under contract. But it also doesn't -- if we were to just kind of go business-as-usual to put those under contract, it doesn't address the significant investment that's required to meet the critical need for these submarine schedules. And so whenever you do something that's somewhat innovative and create an asset that can be used for investment, it just takes longer to get that approved. We still think it's the right approach. So it's a combination of both of the things you mentioned, which the budget was not enough, but it also doesn't unlock all the investment that we need to make in the industrial base to meet our contract schedules. So it's a little bit of a budgeting challenge, but also how do we attack this issue kind of holistically so we can accelerate submarine production. Robert Stallard: Right. And then just a quick one for Tom. Mission Technologies in Q4, it looks like things stepped down. Is there a reason for that? Tom Stiehle: Yes. We're being conservative right now on the way that plays out. A piece of the performance that we see here is timing. So -- and but we're still -- if you notice, we're raising the guide both on the top line and the bottom line at Mission Technologies. So there's no issue or problem there. We just let it play out. They've met or exceeded where we thought they landed each quarter and I'm feeling positive about that. But there's still another two-plus months to kind of play out here and I'm looking forward to providing some good news in February. Robert Stallard: Okay. Thanks, Tom. Operator: Thank you. The next question is from the line of Doug Harned with Bernstein. Your line is now open. Please go ahead. Mike McCormick: Hi guys, this is Mike McCormick on for Doug. Chris Kastner: Hi, Mike. Mike McCormick: Just a quick question on labor. I know that you talked about sort of the outsourcing and hiring goals, but can you just touch on attrition in the quarter? I know last quarter kind of said not really improving, but an update there would be helpful. And then I have a quick follow-up. Chris Kastner: Yes, we haven't seen market improvement in attrition. That's why we're kind of repositioning the way we're hiring and focusing on less entry-level and more experienced labor because they tend to -- they tend to stay. So, yes, no meaningful change in attrition. Mike McCormick: Okay. Thank you. And then just on CVN 79, I guess as we get through to 80 and 81, any comments on how we should think about sort of the margin profile, should we expect margin expansion on these ships there too? Just any color on that would be helpful too. Chris Kastner: Yes, I'm sorry, Mike, I have a bit of a trouble understanding what your question is, but I think it was margin profile on aircraft carriers. And we don't give margin by program. So it's just not something we do, but I do -- I'm still very confident as a 9% to 10% business, we just need to transition out of these pre-COVID contracts. Mike McCormick: Okay. Thank you. Chris Kastner: Thanks Operator: Thank you. The next question is from the line of Noah Poponak with Goldman Sachs. Your line is now open. Please go ahead. Noah Poponak: Hi, good morning. Chris Kastner: Good morning, Noah. Noah Poponak: Hi, thanks. Can you frame the timing at which you will no longer have pre-pandemic contracts flowing through your financials? Tom Stiehle: And so it transitions out. I think between 24% and 28%, about 50% to 60% of the work is pre-COVID. And just depending on the pace and tempo of the new awards, you saw we got the -- we got -- if I break down the new awards post-COVID FY '23 on the destroyers, you saw Ingalls just picked up the bundle in Q3. We're talking about the 17 boats here for the last two on FY '24 Block V on VCS, the next 10 boats for Block VI and then the Columbia Bill II, and then CVN 75 RCOH, we're already on contract for a long lead on that and that comes in here from a construction standpoint, I believe at the end of '25-26. So it's two, three, four years out as it starts to meaningfully ramp and we switch over in a couple of years that there'll be more of post-COVID awarded jobs than there are pre-COVID here. So that's in the '27-28 time-frame where we swing over. Noah Poponak: Okay. Tom Stiehle: With more post than pre. Noah Poponak: Yes, okay. Okay. And Tom, I guess just on the on -- you had a multi-year free cash flow framework for a while and talked about kind of normalized recurring annual levels. Is there any new way you're framing the recurring annualized number? I guess it's a little surprising you pulled that because you're showing you can toggle the CapEx by a not insignificant amount and you've referenced timing, although I guess if it's a multi-year window where the margins are just structurally lower from pre-pandemic contracts, then maybe not. So I don't know if there's any additional color you can provide on how you're thinking about the beyond '24 free cash? Tom Stiehle: Yes, I can. I can. We did think about that, but if you think about the five-year guide and here we are at the first of the five years and we've got the $600 million to $700 million to zero to $100 million. So you can easily do the quick math and just say, hey, the all 36 is now like a $3 billion area. But it's so close-up front of the five-year run here. We really want to kind of get out of this year with actuals, see what's happening on the new omnibus incremental innovative contracting approach, see how that takes hold, the timing and the pace, and the investments on that. And we just thought it was better to take it off the table right now and we'll evaluate when we feel good enough that we give you a number that we can hang on right now. So we could have adjusted it and then it could either be higher than that or less than that depending on the pace and tempo of the awards and performance. So we're going to hold that back. I mean, we hold our guide knee, and dear, at times, you've been on the call with us for many years. We talk about our ability to meet or exceed our guide. We were on a good run there from a cash -- since we started this cash-flow perspective back at end of 2019 from '20 to '24, each guide we met or exceeded. And of course, we're missing it kind of big-time here this year. And we thought it was just more prudent for us to take a break, understand what we have here, see how the contracting landscape plays out over the next six to 12 months, and then we can revisit that in the future. Noah Poponak: Okay. Tom Stiehle: I would say to my early comments that I still think -- yes, I would say to my earlier comments that still the HII value -- investment value has not changed, right, the 30-year shipbuilding plan, the five-year 5F, our backlog, it's a pace and tempo piece on performance and throughput on the existing work and then it's the modification -- the new awards, as Chris said, is it business-as-usual or as we kind of look for additional investments in labor and capacity and throughput and our supply chain, which needs dollars, which will assist us as far as I mentioned in Q1 and Q2 calls, those new contract awards bring equity in terms of margin and cash for investments and they facilitate unlocking the value of the existing contracts that we have the funds that are on there. So it's a fairly decent swinger on changing the trajectory of performance, capacity, and throughput and the recovery and the improvement going forward and we just have to see how that plays out over the next couple of quarters. Noah Poponak: Okay. I appreciate it. Thank you. Tom Stiehle: Thanks, Noah. Operator: Thank you. I am not showing any further questions at this time. I would now like to hand the call back over to Mr. Kastner for any closing remarks. Chris Kastner: Sure, thank you. To wrap it up today, I'd like to summarize that we remain focused on optimizing our operations, improving our cost structure in shipbuilding performance, and driving higher throughput. We believe the actions we're taking will enable us to stabilize performance as we continue to work through these ships. Thanks again for your interest and participation today. Operator: That does conclude today's conference call. You may now disconnect.

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Second Quarter 2024 HII Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the call over to the Vice President of Investor Relations, Christie Thomas. Ms. Thomas, you may begin. Christie Thomas: Thank you, operator and good morning. I’d like to welcome everyone to the HII second quarter 2024 earnings conference call. Joining me today on the call are Chris Kastner, our President and CEO; and Tom Stiehle, Executive Vice President and CFO. As a reminder, statements made today that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results to be materially different from future results expressed or implied by these forward-looking statements. Please see our SEC filings for important factors that could cause our actual results to differ materially from expected results. Also, in their remarks today, Chris and Tom will refer to certain non-GAAP measures. For reconciliations of these metrics to the comparable GAAP measures, please see the slides that accompany this webcast, which are available on our website’s Investor Relations page at ir.hii.com. With that, I would like to turn the call over to our President and CEO, Chris Kastner. Chris? Chris Kastner: Thanks, Christie and good morning everyone. The HII team remains focused on executing on our programs and meeting our commitments to our customers. In the second quarter, our shipbuilding division delivered two ships, and our Mission Technologies business achieved another quarter of strong performance. The alignment of our products and services to the United States national security strategy continues to provide strong visibility to our long-term revenue forecast. To start, I'd like to discuss our results. Record second quarter revenue was $3 billion, up 6.8% from a year ago and diluted earnings per share was $4.38 for the quarter, up from $3.27 in the second quarter of 2023. New contract awards during the quarter were $3.1 billion, which resulted in backlog of $48.5 billion at the end of the quarter, of which $27 billion is currently funded. At Mission Technologies, we had the seventh consecutive quarter of record revenue with sales of $765 million, 19% over the second quarter of 2023. In addition to very strong revenue, Mission Technologies trailing 12-month book-to-bill is 1.15 and its new business opportunity pipeline is over $83 billion. Mission Technologies continues to offer leading-edge technologies aligned with the capabilities our customers need -- and this growth in a competitive sector confirms for us that our technology portfolio is ideal for today's market requirements. In shipbuilding, we remain focused on directing our resources toward meeting our delivery commitments to the Navy. Significant efforts continue in each of our shipyards to create labor stability, improve proficiency and increase capacity, all aimed at meeting our throughput goals. The long-term investments we are making in capital and employee development, coupled with Navy industrial-based investments will stabilize and improve performance as our portfolio shifts towards new contracts and our ability to meet scheduled projections and performance goals will support achievement of our financial commitments to our shareholders. In the second quarter at Ingalls, we delivered LPD 29, Richard M. McCool Jr. and are looking forward to launching LPD 30 Harrisburg later this year. Other milestones including the launch of DDG 129, Jeremiah Denton and the delivery of LHA 8 Bougainville have been adjusted based on workforce availability, the most efficient utilization of shipyard facilities and levels of system completion to support predictable downstream execution of future milestones. At Newport News, in the second quarter, we delivered SSN 796 New Jersey and continue to make progress toward our remaining milestones that are planned for later this year. During the quarter, SSN 798 construction team experienced a minor disruption to Massachusetts test program due to some equipment replacement identified during testing. The disruption has been resolved, and the team is back into the test program making steady progress. It does, however, shift delivery from late 2024 to early 2025. We are reaffirming our shipbuilding margin outlook for the year. And as we've discussed, we are already in negotiations and expect several significant contract awards by the end of this year, including Block V Virginia class submarines, Build II Columbia class submarines and additional amphibious ships. Turning to activities in Washington. We continue to see bipartisan support for our programs reflected in the fiscal year 2025 defense appropriations and authorization bills as they progress through both chambers of Congress. We are pleased that the 2 authorization committees have shown strong support for shipbuilding including support for additional advanced procurement funding authority for CVN 82, additional funding authority to support for Virginia class construction and a multi-ship procurement of Amphibious shifts. The Senate authorizers also included additional funding authority for LPD Flight II and DDG-51 Flight III ships. The House appropriations bill continues to support our major shipbuilding programs and notably includes investment of $4 billion into the submarine industrial base. We await Senate appropriations positions and the final outcomes will depend on eventual respective conference negotiations by the appropriations and authorization committees. Now turning to labor. Positive trends continue in talent acquisition as we have hired over 3,800 craft personnel year-to-date, which keeps us on track to achieve our full year plan of approximately 6,000. In summary, I'm confident that the teams' focus on the execution of the fundamentals in our programs positions us positively for the future and look forward to the second half of the year as we meet more milestones and deliver on our commitments to our customers and shareholders. And now, I will turn the call over to Tom for some remarks on our financial results. Tom? Tom Stiehle: Thanks, Chris, and good morning. Today, I'll briefly review our second quarter results. For more detail on the segment results, please refer to the earnings release issued this morning and posted to our website. Beginning with our consolidated results on Slide 6 of the presentation, our second quarter revenues of approximately $3 billion increased 6.8% compared to the same period last year and represent a record second quarter result for HII. This increased revenue was attributable to very strong year-over-year revenue growth of nearly 19% at Mission Technologies as well as growth at Ingalls and Newport News shipbuilding. Operating income for the quarter of $189 million increased by $33 million or 21.2% from the second quarter of 2023 and operating margin of 6.3% compares to operating margin of 5.6% in the same period last year. Net earnings in the quarter were $173 million compared to $130 million in the second quarter of 2023. Diluted earnings per share in the quarter were $4.38 compared to $3.27 in the second quarter of the prior year, representing a year-over-year growth of approximately 34%. Backlog increased slightly to end the quarter at $48.5 billion, up approximately $100 million from Q1's close. Moving to Slide 7. Ingalls revenues of $712 million in the quarter increased $48 million or 7.2% from the same period last year, driven primarily by higher volumes in amphibious assault ships and surface combatants, partially offset by lower volumes in the national security cutter program. Ingalls operating income for the quarter was $56 million and operating margin of 7.9% compared to $65 million and 9.8%, respectively, from the same period last year. The decreases were primarily due to lower risk retirement on surface combatants, partially offset by a delivery contract incentive on LPD 29 Richard M. McCool, Jr. At Newport News, revenues of $1.5 billion were up $26 million or 1.7% from the same period last year. Newport News operating income for the quarter was $111 million, and operating margin was 7.2% compared to $95 million and 6.3%, respectively, in the prior year period. The increases were primarily driven by a favorable contract adjustments, incentives and volume on the RCOH program, partially offset by lower performance on aircraft carrier construction and the VCS program. Shipbuilding operating margin in the second quarter was 7.4%, up from 6.8% in Q1 of this year. We are pleased to exceed the shipbuilding margin guidance we previously provided for the quarter, and we continue to see significant opportunity in the second half of the year for margin enhancement. At Mission Technologies, revenues of $765 million increased $129 million or 18.6% compared to the second quarter of 2023, primarily due to higher volumes in C5ISR and cyber electronic warfare and space. A portion of Mission Technologies overperformance in the quarter was driven by material and work that may not reoccur on a consistent basis, and we have factored that into our guide going forward. We are obviously very pleased with the growth in the quarter, and we are raising the Mission Technologies revenue guidance range for the year by $50 million. Mission Technologies operating income for the quarter was $36 million, and operating margin was 4.7% compared to $9 million and 1.4%, respectively, in the second quarter of last year. The increases were driven primarily by higher volumes I just mentioned, as well as stronger performance in fleet sustainment. In addition, in the second quarter of 2023, we recorded a $6 million loss related to the sale of a joint venture interest, which also helps the year-over-year comparison. Second quarter results for Mission Technologies included approximately $25 million of amortization of purchased intangible assets. Mission Technologies EBITDA margin in the second quarter was 8.5% compared to 6.7% in the second quarter of 2023 and 7.7% last quarter. Turning to Slide 8. Cash used in operations was $9 million in the quarter. Net capital expenditures were $90 million or 3% of revenues. Free cash flow in the quarter was negative $99 million, consistent with the guidance we provided on the first quarter call. Cash contributions to our pension and other postretirement benefit plans were $14 million in the quarter. Also during the quarter, we paid dividends of $1.30 per share or $51 million in aggregate. We also repurchased approximately 250,000 shares during the quarter at a cost of approximately $65 million. Moving to Slide 9. We have summarized our expectations for the third quarter and the year. For the third quarter, we expect shipbuilding revenue of approximately $2.2 billion and shipbuilding margin of approximately 7.8%, with margin continuing to ramp in the fourth quarter. For Mission Technologies, we expect revenues of approximately $650 million and operating margin of approximately 2.5%. For the year, we are reaffirming our share building revenue and margin expectations. And as I previously noted, we are raising Mission Technologies revenue guidance range. We are also updating our interest expense expectation to $95 million based on the phasing of our latest cash flow forecast. We are reiterating our free cash flow outlook for 2024 of $600 million to $700 million as well as our five-year free cash flow outlook of $3.6 billion. As we have noted, we expect free cash flow to be weighted towards the latter part of the year, which is not unusual. We currently expect third quarter free cash flow to be near zero, preceding expected strong cash collections in the fourth quarter. To summarize, we delivered another quarter of strong year-over-year revenue growth and met our shipbuilding expectations, while Mission Technologies portfolio continues to perform very well. Additionally, we are pleased to raise our Mission Technologies revenue guidance and reaffirm our shipbuilding financial outlook for the year. With that, I'll turn the call back over to Christie to manage Q&A. Christie Thomas : Thanks, Tom. As a reminder to everyone on the call, please limit yourself to one initial question and one follow-up so that we can get as many people through the queue as possible. Operator, I will turn it over to you to manage the Q&A. Operator: Thank you, Christie. We will now begin the Q&A session. [Operator Instructions] The first question is from the line of Myles Walton with Wolfe Research. Please go ahead. Myles Walton: Thanks. Good morning. Chris, could we start with labor. It sounds like you continue to have good traction on the hiring front, but it's not clear to me if you're net-net increase in your headcount to where you want. So maybe just touch on attrition, hiring goals, I guess, are good, but attrition goals for the year at both shipyards and if that's a meaningful driver to some of the milestone slip-outs? Chris Kastner : Yes, sure. Thanks, Myles. Thanks for your question. Yes, we are achieving our hiring goals in both shipyards. So we think we've made significant progress on ensuring that we can get the people to execute the work. Attrition is not materially improving, but we're thinking about it more broadly from a labor standpoint, an execution standpoint, attrition -- excuse me, attendance and over time, both have recovered. We're performing well there. Our outsourcing programs are executing well and industrial-based funding is being applied where it's necessary to increase the industrial base. So it's not just labor. We need to execute on our programs independent of how attrition is working. We'll continue to work on our attrition issues. We'll work on salary, flexibility, recruiting in the right places. But we're having to go where labor is. We've got some interesting stuff going on in Hampton Roads, where we're actually creating manufacturing footprint in areas we hadn't before to attract labor. So we're thinking about it more holistically now. It's not just simply labor and attrition in order to meet our throughput goals. Myles Walton: And in terms of this effect on the milestones, I understand the Massachusetts sounds more like a technical discovery are the Ingalls milestone slippages more workforce limitations driven? Chris Kastner : Well, it's both actually. It's -- on LHA, it's just a significant amount of volume and labor and application of the labor to achieve those milestones. So we move that. DDG 129 is a little different. There's sequencing involved in getting to that launch, but also some impact related to labor. Now all of that is included in our financials and in our guidance, and we're comfortable with where we are. Myles Walton: Okay, Thank you. Chris Kastner: Sure. Operator: Thank you. The next question is from the line of Robert Spingarn with Melius Research. Please go ahead. Scott Mikus: Good morning. This Scott Mikus on for Rob Spingarn. Chris Kastner: Good morning. Tom Stiehle: Good morning, Scott. Scott Mikus: Tom or Chris, I wanted to ask, based on the guidance, you need to generate about $1 billion of free cash flow in the fourth quarter. So I'm just wondering if you could talk about your level of visibility into that cash generation? And then if possible, can you quantify how much of the fourth quarter free cash is tied to working capital that could move into early 2025? Chris Kastner: Yes. Thank you for the question. I'll start and then Tom can finish it off with some details here, but I hate to give the answer of timing because it's just not specific enough for you all. But there is a lot of timing in the back half of the year for margin and cash. In order to achieve that progress over the back half of the year, we need to make our milestones and our ships, we need to achieve contract incentives, and it's not just one. It's -- we risk adjust all of our programs over the back half of the year to ensure that we can make guidance, and we have a line of sight to it. So yes, it is over the back half of the year. There is some timing. There's some unwind in working capital, but we do have line of sight to it. Tom? Tom Stiehle: Yes. I'll provide some more color on that, too. Hey, Scott efficient question. It's not a comment from where we are right now. I mean we usually use cash at the beginning of the year. And we have guided both minus 200 and minus 100 for Q1 and Q2, respectively we find ourselves right now through the quarter -- through the first half of the year at minus $274 million. And this is broken, there was about $100 million that moved from Q1 to Q2 in a payment, and then we closed Q2 kind of missing a $75 million thing. So I mean, from performance and where we thought we'd be, we're kind of right where we guided. From a perspective, the year had to shape to it. It was back end loaded anyway. It was more back end loaded in 2024 than it was in 2023. When you get the Q and you can take a look at this comparison in there from 2023 over to 2024. And we're down operationally in cash about $28.4 million, and then we have another $54 million of CapEx that we're spending in 2024 over 2023. So that constitutes about $330 million down in 2024 over 2023. But again, in line with where we thought we'd be in the plan, the portfolio. I would tell you a couple of the milestones that you had at the end of 2023 that dragged into 2024, although it's only a couple of ships up to 2029, the excess -- 786 and then the launch of 788 all just brought that work into 2024 and created just a little bit of a draw on making kind of cost and progress and headway on the existing portfolio we have here. But the guides that have we provided zero on free cash flow for Q3, which has some variability to it. There's a lot of activity that milestones that you have on major milestones, smaller milestones underneath, capital incentives, the capital is a little bit slower than we guided. You guided 5.3% for the year. It was 2.6% in Q1 and 3% for Q2. But as that comes online in the back half of the year, the progress that we want to make to close out the work packages that are in play right now will allow us to fully fulfill all the costs that you see on the balance sheet. You can see the contract liabilities and ARP in there. So there's some net working capital that's going to burn it off sat down. We finished last year at 5% of working capital at the end of 2023. We sit just under 9% right now. And I kind of foreshowed at the beginning of the year that we were going to have this shape. And by the end of the year because of the capital incentives we've had, we'd actually have a little bit of an advancement. We'll work ourselves down to the 2% to 3% range in working capital. And that's aligned with our plan. It's aligned not only with the free cash flow perspective we gave you to $600 million to $700 million this year. But in the five-year goal, I told you that had some shape in two. And net working capital level exiting 2020 into 2025 is planned in the guidance that I gave you for $3.6 billion kind of going forward. So I think we have -- we understand where we are. We aligned with the plan that we had this year. The increases on the back half of the year between the progressing, milestones, incentives, capital incentives and then we have some new contract awards that introduced some alignment with the business environments that we have here that, that itself, it just at the beginning of those contracts, we anticipate them to be awarded if not at the end of Q3 and Q4, a little variability of the effect. Is that going to be lifespan Q3 or Q4. But it will -- by the end of the year, we'll have new awards that will assist both in margin and cash as well. Scott Mikus: Okay. That gets into my next question. So I wanted to ask, just high level, a big part of the margin story, at least for shipbuilding is putting new ships and boats on contracts that have better pricing compared to some of your older contracts. So can you give us an update on how many ships and boats you put on contract so far this year? And how many you expect to put on contract in the next 12 to 18 months? Chris Kastner: Yeah. So we expect to put under contract over the next 6 months to 12 months and probably before the year expires actually another 21 boats with pricing that reflects the current macroeconomic environment. So it's a significant amount of work that we intend to put under contract over the back half of the year. Scott Mikus: All right. I'll stop there. Chris Kastner: Sure. Operator: The next question is from the line of Pete Skibitski with Alembic Global. Please go ahead, Pete. Pete Skibitski: Hey, good morning. Nice quarter. Chris Kastner: Good morning, Pete. Pete Skibitski: I did have a question on Ingalls margin. I know you've touched on it a little bit just because it's dipped here for the first time in almost a couple of years. The release talked about lower risk retirement on service companies. And I wasn't sure if that's kind of -- you've got some early DDG-51s in the yard and you're booking conservatively or I wasn't sure if that was -- if the DG-129 push out next year impacted this quarter. Can you maybe talk through that a little bit with us a little more deeply? Chris Kastner: Yeah. Sure, I can start. I think you probably have a little bit of a compare issue from last year in that language. But obviously, you moved to two milestones, cost goes with schedule. So that impacted the quarter. And then 129 had a bit -- or excuse me, LPD 29 delivery had a little bit less risk retirement than we usually have. So Ingalls is going to continue to execute. This is just a bit of a quiet quarter for them, and I expect them to recover very quickly here. Pete Skibitski: Okay. I appreciate it. And just one follow-up. I know some of the -- there's been some supply chain issues on the Virginia, I think -- and the carriers I think one of the issues has been development of the new electric generators. Do you guys have a time line of when that new system is expected to arrive in the yard? Chris Kastner: Yeah. So I'm probably not the right person to talk about that depending on what program you're referencing. We have -- our estimates have not changed for 80%, if that's what you're referencing. And our schedules have not changed materially either. They're making good progress on 80. They're doing some very interesting things relative to ensuring that we hold on to the schedule for 81 and how we're going to build those. But I'm not really comfortable because there's been no material change between Q1 and Q2 relative to those delivery requirements or expectations. Pete Skibitski: Okay. Got it. Thank you. Chris Kastner: Sure. Operator: Thank you. The next question is from the line of David Strauss with Barclays. Please go ahead. David Strauss: Thanks. Good morning. Chris Kastner: Good morning. Tom Stiehle: Good morning, David. David Strauss: Chris, can you talk about where you are in terms of Block IV, Block V work and then negotiating Block VI on ECS? Chris Kastner: Sure. Sure. Block IV, we're marching towards delivery on 798. We did have that minor move on the milestone, but they're making progress on the test program now. And it's a good team on it. It's a good crew. It's a good leadership. So I fully expect 798 will resolve at the beginning of next year. 800s making progress. That milestone is holding the float off the back half of this year, and then we have one more module that we have to deliver to general dynamics. And then we're making progress on Block V and they'll start to fill in behind Block IV in those -- getting into the integrated delivery and test of the Block V Virginia class boats. Block VI, we're in discussions with the government relative to negotiation of that block. I expect that to resolve this year, working closely, I think it will be a fair deal dealing with this macroeconomic environment we talk about with inflation and supply chain insurance. We have all that risk protected. The good news is we're making investments, the Navy's making investments in the industrial base in order to get at this throughput issue and we fully expect it and when we do Block VI, all of that will be wrapped into that deal, and it will be a fair deal. So that's where we stand on Virginia class. David Strauss: Thanks. What is your revenue mix right now between Block IV and Block V? Chris Kastner: Yes, the vast majority of it tell if you have the details, but the vast majority of it is headed in the Block 5 now. Tom Stiehle: Yeah. So we're at 95% complete on Block IV. And then of, I know it's not the exact answer to your question, but we're a 95-plus percent of the contract completed on Block IV and Black V in the mid-20% range. So -- and we're spending -- we crossed over about six quarters ago, that Block V has high revenue on Block IV. David Strauss: Okay. Thank you. And then if you come a follow-up on working capital. Did I hear correctly? Now it's going to drop to -- you're saying 2% by the end of this year? Where does that go in 2025? Tom Stiehle: So a couple of things, yes. We got -- I think the last couple of calls, we've been talking about that, right? And the -- for the 600 to 700 guys and we have the working capital is right now, the capital incentives pop in here, we will burn down the 9% that we see through Q2 to that level going forward, right, lower than what we traditionally guided to between 4% and 5% because of what's going on, on the capital front. We haven't guided both for free cash flow specifically for 2025. And I would be -- I don't want to get into specific targets going forward. But I will tell you that we're kind of on plan on that front relative to its implications to the five-year free cash flow guidance. And as we close out the year for Q3, Q4, a lot of activity has to happen and how that's going to fall with everything I rattle on how we're going to make the 600 to 700. I prefer to hang on to the exact working capital guidance at the back half of the year as we set the trajectory and the targets for next year on the February's call. David Strauss: All right. Understood. Thank you. Operator: Thank you. The next question is from the line of Gautam Khanna with TD Cowen. Please go ahead. Gautam Khanna: Yeah. Thanks. I have two questions. First, just on the Q4 cash flow, was there -- are there any major like lumpy events that you could -- that might actually move that number materially if they were to slip out. And relatedly, do the delivery milestone slips have any impact on that whatsoever? And then I have a follow-up. Chris Kastner: Yes. So I would tell you the ramp that we're going to see here between Q3, Q4, again, we can certainly guided to zero for Q3, but that could be 100 to 200 higher. It could be 50 to 100 less there, just depending on how everything that I said earlier kind of falls out. But the ramp from now where we are to Q3 and Q4, it's a composite there of improved trade working capital between AP and AR, the progressing and closing our sales, you can see how the cost in the balance sheet, so just getting the right progressing as we make headway on schedule to be able to build all the costs. The major milestones add into that. We've talked a bit that, I think, we have a slide on the PowerPoint briefing that you can see the ones that we have to hit there on the deliveries. And then we work ourselves through both incentives and program contract incentives and then capital incentives. And then the new awards contribute that rise and lift on the back half of the year, too. So it's all of it. I don't think -- missing one milestone here or there is not going to drive the preponderance of the lift that we see kind of going forward. But we'll keep you informed, and we'll give you an update on the November call. And parts of your other question? Gautam Khanna: Great. Thank you. And Chris, I was just wondering what's your appetite for acquisitions at this point, if you could just talk about that? Chris Kastner: Yeah. So capital allocation has been fairly consistent here for the last year after we started to pay down the debt. We like to be investment grade. We think that's where we need to be and where we want to be. We're going to continue to invest in our shipyards. We're going to pay a dividend. And then with excess cash, we're going to provide it back to shareholders, but we'll continue to evaluate M&A opportunities as they present themselves. And if it makes strategic and financial sense, we'll evaluate it and entertain it. So there's not really a change in our capital allocation philosophy. Gautam Khanna: Thank you. Chris Kastner: Thank you. Operator: Thank you. The next question is from the line of Jason Gursky with Citi. Please go ahead, Jason. Jason Gursky: Okay. Good morning, everybody. Can you hear me? Chris Kastner: Good morning, Jason. Yes. Jason Gursky: Okay, great. I think the operator’s struggling there a bit. And Chris, just a quick question first on Mission Technologies. You mentioned the trailing 12 month book-to-bill of 1.15 and the quantum of the pipeline that you have there in that business. I'm wondering if you can step back for a minute and just talk a little bit about the 1.15, when you can execute on that backlog and the pipeline that you have available to you? And what that means for growth rates beyond 2024. We are obviously off to a really solid start here in the first half of this year. I'm just kind of curious how this growth rate settles out over the next couple of years? Chris Kastner: Yes. So thanks, Jason. We're still comfortable with our 5% growth rate in Mission Technologies. It was a bit of a conservative guide. We've increased it for the year. And beyond that, if we can execute on the $83 billion pipeline and the book-to-bill continues to be very good, it could be north of that. And it's really broad-based across the business that each one of those business areas is executing very well. I would like to point out that there's a lot of interesting things going on in Mission Technologies. This is the first time that the Navy is going to deploy Virginia-class submarine with launch and recovery all autonomously of REMUS vehicle. And it's not just an exercise, that's full deployment to see Elmore [ph]. It's a great product, and it demonstrates the kind of the man and autonomous and man teaming that we really think about provides a lot of value for our customer. So if they continue to execute like this, they continue to execute on that backlog, and they take advantage of that pipeline, it could be north of that. But we don't want to get too far over our skis. We're going to be relatively conservative, as you would expect for us to be, but I'm very encouraged by how Mission Technologies is developing. Jason Gursky: Okay. Great. That's helpful. Appreciate that. And then secondarily, just on labor productivity in the shipyards. I know you talked a little bit earlier during the Q&A session about attrition rates and hiring and all that kind of stuff, good stuff, which is great. But I think probably just as important, hate to those numbers is kind of the learning curve of the employees -- and I'm wondering if you have the ability, maybe just from a big picture perspective to talk about labor productivity, where you are today relative to maybe where you were pre-pandemic? Just wondering if we're still down relative to pre-pandemic levels from a labor productivity perspective? And kind of what analytics back over the next couple of years and maybe when we can return back to kind of pre-pandemic productivity. Thanks. Chris Kastner: Great. So it's a great question, Jason. So productivity is not as it was before the pandemic. There's no getting around that. And it's related to the experience level of the team. Now do I expect it -- do I expect it to improve? Absolutely. And both teams in Ingalls and Newport News are making investments to ensure it does. And the SIB investments that you see coming out of the Navy are focused on that as well. It's not just infrastructure. It's targeted at the proficiency of the workforce as well. So I do expect it to improve. We're investing against it. We've done it before. We've seen it before, and I expect it to continue to improve as we stabilize moving forward. Jason Gursky: Great. Thanks. Chris Kastner: Sure. Operator: The next question is from the line of Seth Seifman with JPMorgan. Pleas go ahead, sir. Seth Seifman: Hey, thanks very much and good morning. Chris Kastner: Good morning. Seth Seifman: I wonder – good morning. In the slides, I think you talked about a reduction year-on-year in Virginia sub profitability. Should we attribute that to what's happening on Massachusetts? Or was the reduction in expected profitability on Block V? Chris Kastner: Yes. So, I think that's probably a compare issue related to last year. There's no material issue that we can note related to that. It's kind of broadly across the blocks. We assess our ACs every quarter. We have to make an adjustment, we do that, plus or minus. So this is not anything individually material there. Seth Seifman: Okay. So -- and I think you mentioned earlier about the carrier. So, with both the carrier and Virginia Block 5, there weren't meaningful changes to the estimated profitability? Chris Kastner: No, not material enough to note. No. But we -- as I said, we assess our issues every quarter when we make those adjustments dictated by our evaluation in that quarter. Seth Seifman: Right. Okay. Okay, great. And then just for Ingalls, I guess, should we expect profitability there to -- we've seen typically kind of solidly double-digit margin for angles. Is that something kind of going forward that Ingalls can still be kind of at the high end of kind of good shipyard margins? Chris Kastner: Yes. So, we don't guide by shipyard, but I fully expect Ingalls to continue to execute on their programs very well. But yes, we don't provide guidance by our shipyards. Seth Seifman: Okay, great. Thanks very much. Chris Kastner: Sure. Operator: Thank you. The next question is from the line of George Shapiro with Shapiro Research. Please go ahead. George Shapiro: Yes, good morning. Chris Kastner: Good morning. George Shapiro: Tom, I wanted to pursue a little bit the free cash flow needs for the fourth quarter. I mean, obviously, we can all do the arithmetic $973 billion to $1.73 billion. Now, if I look back, that's nearly twice what you've ever done before, the last highest year in the last five with $539 million in the fourth quarter of 2018. In addition, you've never had three quarters in a row where no quarter generated positive cash flow. So, my question is what has changed in the last five years in terms of contracts that you have or what to suggest such a dramatic swing this year from what we've seen before? Tom Stiehle: Yes. So, I think we have a couple of quarters that were negative. So we can catch up offline on that, George. But this isn't an odd year, I would tell you, it's backloaded, one. Two, I would tell you that pre-COVID, as we're executing these contracts right now, we have seen a draw in the schedules over the last three or four years. And that just changes the construct of as we get progress and collect costs and what we're allowed to bill and creates a little bit of a draw on that. We still manage it annually. And as you know, we've been pretty good at providing a five-year target back in 2019, providing a guidance annually for each of the years and we've met or exceeded that. So, I mean we're in the lane right now. We've actually increased that $2.9 billion to $3 billion, so we another $10 million at it. We've given the next five years at 20% more. So, we have pretty good visibility into the portfolio. It's a relatively -- I'm sorry? There's some feedback here. It's a relatively mature portfolio that's going on that we have here. So, we have line of sight as far as what we have to build, program plans, the expected costs and then all that rolls in once we come through our quarterly ACs into the guidance of free cash flow going forward here. It is backloaded. And as I commented earlier, I did a comparison, you could take a peek at Q there on what's driving that. A little bit more CapEx that we've seen. The last two years has been 26% and 24% of sales, respectively, and already where we saw the previous headquarter of last year, and that's going to ramp in the back half of the year. Last years capital incentives that come along with that. As we continue to make progress, the cost that you can see that's on the books and the balance sheet there, we plan to liquidate that and really drive that working capital, that's going to be the catalyst, the working capital coming down, milestones and deliveries and additional awards as well as on contract performance and capital incentives are going to drive the back half of the year. The guide of 3% was probably on the conservative side. We didn't want to say it could be $100 million to $200 million higher or $50 million to $100 million less. And we didn't want to provide a number that we leaned into for Q3. The events and criteria and milestones that we see have to happen are right in that end of September, October and November time frame. So we guided conservatively, which does make the Q4 look like it's a larger lift than it may be as it plays out. George Shapiro: Okay. Just one comment. What I said -- what I meant to say, if I didn't say it properly on the cash flow is, there hasn't been -- if you look at quarter-by-quarter, there's been no time in the last 5 years where one quarter hasn't had at least positive cash flow of the 3. There's been several quarters with two, 2 have been negative, but not 0 in the third. A follow-up I had was, in Mission Technologies, the guide for the second quarter was like $650 million, you did $750 million, which is a $765 million, which was similar to the first quarter. And you had mentioned the material and that may drop down in the third quarter. Can you just be a little clear as kind of what actually drove in the materials comment that you made. Tom Stiehle: Yes. So, on the material comment that I said in my opening statements, that was more applicable to Q1. So there was some sales that we had, which are not in -- we don't envision to be on a recurring basis. We're not included in the Q2 or the guide kind of going forward. The Q2 revenue that we had at Mission Technologies was driven by strong performance in C5ISR and CEWS. And we believe that will continue going forward. We have normalized out for the book of business on contract right now. So we know what contracts we have and we're executing, and we see the -- how we load that out, and we have a clear sight on expectations of the revenues for the last 2 quarters, as well as there is some -- there's still awards happen every month. And the -- even though we're in the back half of the year, there's several tens of millions of dollars of potential sales that happen on awards. So, we have to execute our plan that we have in existing contracts. Those awards have to play out. And we've guided pricely probably on the conservative side of where we stand. The run rate at Mission Technologies between the first 2 quarters at 750 and 765 is 15.15 on an annual basis, over $3 billion. We've conservatively taken the beginning of the year guide to 2750 up to 2750 to 2280. So let's see how it plays out. We don't want to get ahead of ourselves. Chris made a comment earlier about the growth. We saw some good growth in '21 to '22 at 4% from '22 to '23 at 12.7%. And then both Q1 and Q2, respectively has seen 20% and 18% growth. But we don't want to only guide here. Obviously, we've got to get the people in, win those contracts and continue some good performance. But I'm feeling really strong about the Alion acquisition, the business proposition that we set that MT would be a $200 million cash generated, which it is. And I feel really good about the portfolio of contracts we have and that pipeline growing. George Shapiro: So just one last one. So why guide only $650 million in the third quarter? Tom Stiehle: Well, I would say we have a lot of work to do going forward here. We don't want to over guide in this, and it's still a function of a couple of awards that will have a minor impact on the revenue for the rest of the year here. George Shapiro: Okay. Thanks very much for all the color. Operator: Thank you. The next question is from the line of Jordan Lyonnais with Bank of America. Your line is now open. Please go ahead. Jordan Lyonnais: Hi. Good morning. Chris Kastner : Good morning, Jordan. Jordan Lyonnais: Thanks. On CapEx, the sequential uptick that you guys had, is there a percentage or a portion of that, that you could give color on that you'd expect to get back from the Navy CapEx incentives? Tom Stiehle : Yes. We always invest with our partner with the Navy on this. And depending on what the CapEx is and the timing and the value equation, what that adds and the design of getting in the yard, whether it's for operational here or maybe sales and things like a there's a mix there of investment. We don't get into that. I mean, that's just part of the business case. And I will tell you that any capital projects that we do add value, we get a return on our capital, and it goes into the business construct and how we choose which projects we bid, we approved and we execute, so I'd leave it at that. It was 2.6% in Q1, 3% in Q2. The guide is still 53% [ph] for this year with a 5% CapEx over the next three years. Jordan Lyonnais: Got it. Okay. And then also to the contract at Deloitte one that's for Navy shipbuilding, do you have any sense of the scope for it? Or why like mission tax wasn't picked or you guys in general? Chris Kastner : I can't necessarily hear the question. There's some feedback. Can you repeat that? Jordan Lyonnais: Yes. So Deloitte, the one that was a $2.4 billion Navy contract for -- it seems like an HR contract on the Navy shipbuilding data? Chris Kastner : Yes, I think they're supporting their identification allocation of investments to support where they should make investments. So yes -- we were not involved in that contracting process. Jordan Lyonnais: Okay. Got it. Thank you so much. Chris Kastner : Sure. Operator: Thank you. I am not showing any further questions at this time. I would now like to hand the call back over to Mr. Kastner for any closing remarks. Chris Kastner : Thanks, everybody, for joining today. Before we go, I'd like to extend my thanks to the entire HII team for their continued focus, and we look forward to speaking with you on our next earnings call. Thank you. Operator: That does conclude today's conference call. You may now disconnect.

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the First Quarter 2024 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 the Vice President of Investor Relations, Christie Thomas, Mrs. Thomas, please go ahead. Christie Thomas: Thank you, operator, and good morning. I'd like to welcome everyone to the HII First Quarter 2024 Earnings Conference Call. Joining me today on the call are Chris Kastner, our President and CEO; and Tom Stiehle, Executive Vice President and CFO. As a reminder, statements made today that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results to be materially different from future results expressed or implied by these forward-looking statements. Please see our SEC filings for important factors that could cause our actual results to differ materially from expected results. Also, in their remarks today, Chris and Tom will refer to certain non-GAAP measures. For reconciliations of these metrics to the comparable GAAP measures, please see the slides that accompany this webcast, which are available on our website's Investor Relations page at ir.hii.com. With that, I would like to turn the call over to our President and CEO, Chris Kastner. Chris? Christopher Kastner: Thanks, Christie, and good morning, everyone. Today, we released quarterly results that were characterized by steady performance in shipbuilding and strong growth of Mission Technologies. We saw record first quarter revenues, reflecting the continued strong demand from our customers for our products. As we discussed at our Investor Day in March, we remain focused on delivering the advantage to all our stakeholders: Our customers, employees, shareholders, suppliers and communities. Now let's turn to our results. Record first quarter revenue was $2.8 billion and diluted earnings per share was $3.87 for the quarter, up from $3.23 in the first quarter of 2023. New contract awards during the quarter were $3.1 billion, which resulted in backlog of $48.4 billion at the end of the quarter, of which $27 billion is currently funded. Turning to an update on our shipbuilding milestones. In the first quarter, at Ingalls, we completed builders and acceptance trials on LPD 29, Richard M. McCool Jr., which led to delivery of the ship last month. At Newport News, we delivered the first Columbia-class stern, floated off SSN 798 Massachusetts; and completed acceptance trials for SSN 796 New Jersey, which also delivered in April. We were also awarded the advanced planning contract for CVN 75 USS Harry S. Truman's RCOH, and undocked CVN 74 USS John C. Stennis as part of its RCOH in April. In addition, last month, we announced the first integration of an Australian company into the Newport News shipbuilding supply chain with the purchase of steel from Australian manufacturer, BISALLOY Steel. The steel will be used for training and testing to enable us to begin the qualification process for the incremental steel volume required for AUKUS. This is a critical first step toward an integrated U.S., U.K., Australian supply chain under AUKUS. At Mission Technologies, we saw record first quarter revenue with sales of $750 million, 20% over the first quarter of 2023. In addition to very strong sales growth, Mission Technologies won strategic competitions in the quarter, including a $305 million contract to protect U.S. regional interest in the Republic of Korea; a $74 million contract to research, analyze and develop enhanced capabilities for vertical launching systems onboard U.S. Navy surface ships; and an order to build a REMUS 620 unmanned underwater vehicle for an international customer. Now shifting to activities in Washington for a moment. We were pleased that the fiscal year 2024 budget cycle ultimately concluded in March. We saw continued bipartisan support for our programs reflected in the final Defense Appropriations Act, including funding for 2 Arleigh Burke-class destroyers, 2 Virginia-class attack submarines and 1 Columbia-class ballistic submarine. Additionally, the appropriations measure provided $500 million for advanced procurement funding for LPD 33. The final appropriations bill also provided funding for the submarine industrial base and large surface combatant shipyard infrastructure and authorized the Navy to enter into a multiyear procurement contract for Virginia-class submarines. Also in March, the President submitted the fiscal year 2025 budget request now under consideration by Congress. The proposed budget reflects continued investment in our shipbuilding programs, requesting funding for 2 Arleigh Burke-class surface combatants, 1 San Antonio-class amphibious warship and the lead Block VI Virginia-class submarine. Additionally, the budget request funds the first year of the 3-year refueling and complex overhaul of CVN 75 USS Harry S. Truman. The budget request also continues funding for investment in the submarine industrial base and research and development efforts for the next-generation large surface combatants, DDG(X); and nuclear submarines, SSN[X]. From an operational standpoint, to access the skilled manufacturing labor, coupled with our supply chain experiencing the same labor challenges continue to impact our programs. In that regard, we hired over 1,700 craft personnel in the first quarter which puts us on track to achieve our full year plan of approximately 6,000. Also in the first quarter, both of our shipyards held apprentice graduations celebrating over 230 graduates across HII who are and will become the leaders in their crafts. We continue to maintain our focus on workforce retention and development and are working closely with our customers and state and local governments to solve this challenging issue. We continue to use overtime, contract labor and outsourcing to mitigate risk and strengthen the opportunity for progress and schedule stabilization. In summary, we remain focused on meeting our commitments to our customers, and we'll continue to invest in our people and our facilities to ensure we meet the demand we forecast for our products and services. And now I will turn the call over to Tom for some remarks on our financial results. Tom? Thomas Stiehle: Thanks, Chris, and good morning. Today, I'll briefly review our first quarter results. For more detail on the segment results, please refer to the earnings release issued this morning and posted to our website. Beginning with our consolidated results on Slide 3 of the presentation. Our first quarter revenues of $2.8 billion increased 4.9% compared to the same period last year and represent a record first quarter result for HII. This increased revenue was attributable to growth at Mission Technologies and Ingalls. Operating income for the quarter of $154 million increased by $13 million or 9.2% from the first quarter of 2023, and operating margin of 5.5% compares to operating margin of 5.3% in the same period last year. Net earnings in the quarter were $153 million compared to $129 million in the first quarter of 2023. Diluted earnings per share in the quarter was $3.87 compared to $3.23 in the first quarter of the previous year. And backlog increased to end the quarter at $48.4 billion. Moving to Slide 5. Ingalls revenues of $655 million in the quarter increased $78 million or 14% from the same period last year, driven primarily by higher volumes in surface combatants and amphibious assault ships. Ingalls operating income of $60 million increased 9% from last year, and operating margin was 9.2% in the quarter, primarily due to the higher volumes I just mentioned. At Newport News, revenues of $1.4 billion decreased $72 million or 5% from the same period last year, primarily driven by lower volumes in aircraft carriers and the Virginia-class submarine program. Newport News operating income for Q1 was $82 million and operating margin of 5.7% were relatively flat with the prior year. Shipbuilding operating margin in the first quarter was 6.8%, slightly behind the outlook we provided for the quarter. Our shipbuilding revenue and operating margin outlook for the full year remains unchanged. And as we previously noted, our expected shipbuilding milestones for 2024 are concentrated largely in the second half of the year. At Mission Technologies, revenues of $750 million increased $126 million or 20% compared to the first quarter of 2023, primarily due to higher volumes in C5ISR in cyber electronic warfare and space. Mission Technologies operating income of $28 million compares to operating income of $17 million in the first quarter of last year. The increase in operating income was driven primarily by higher volumes I just mentioned. First quarter results for Mission Technologies included approximately $25 million of amortization of purchased intangible assets. Mission Technologies EBITDA margin in the first quarter was 7.7%. Turning to Slide 6. Cash used in operations was $202 million in the quarter. Net capital expenditures were $72 million or 2.6% of revenues. Free cash flow in the quarter was negative $274 million. This compares to cash used in operations of $9 million, net capital expenditures of $40 million or 1.5% of revenues and free cash flow of negative $49 million in the first quarter of 2023. The use of cash in the first quarter was expected and was due to timing of collections. We reaffirm our free cash flow outlook for 2024 of $600 million to $700 million and our 5-year free cash flow outlook of $3.6 billion. Cash contributions to our pension and other post-retirement benefit plans were $10 million in the quarter. I would also like to note that we made the remaining $145 million debt payment on our term loan associated with the Alion acquisition in Q1. Also during the quarter, we paid dividends of $1.30 per share or $51 million in aggregate. We also repurchased approximately 223,000 shares during the quarter at a cost of approximately $62 million. To summarize, we delivered strong year-over-year revenue growth in the first quarter, driven by Mission Technologies and Ingalls, and expect Newport News volumes to ramp up throughout the remainder of the year. In addition to its very strong sales, Mission Technologies continued to win new contracts and has a robust opportunity pipeline that has grown now to $80 billion. We're off to a solid start for the year in revenues and operating income. And as typical, we expect free cash flow to ramp up throughout the year. Looking forward, we are confident in reaffirming our 2024 outlook and our 5-year free cash flow outlook of $3.6 billion. Before I end my remarks, I'd like to thank you again for attending and for watching the webcast of our Investor Day on March 20. Chris and I and the HII leadership team appreciated the opportunity to showcase the details of our strategy, investment thesis and financial plans. With that, I'll turn the call back over to Christie to manage Q&A. Christie Thomas: [Operator Instructions] Operator, I will turn it over to you to manage the Q&A. Operator: [Operator Instructions] Our first question comes from Scott Deuschle from Deutsche Bank. Scott Deuschle: Chris, sorry if I missed one. Where is CVN 79? Yes, where is CVN 79 at in terms of percent complete? Christopher Kastner: It's right around 90%. It's progressing well. They're into the test program. We're actually seeing dead loads fired off [ malls ] off the ship. So that's a positive sign. So yes, they're progressing very well. Scott Deuschle: Okay. And then, Tom, to hit the midpoint of the shipbuilding margin guide, it looks like you'll need to do second half margins about, I guess, 150 basis points above the first half. It sounds like it's driven by better milestones. Maybe you can just walk through in a bit more detail as to where that uplift comes from. Thomas Stiehle: Yes. So we do have -- thanks Scott, appreciate the question. And we do have a shape of our margin, and it's backloaded in the year because of the milestones. And we guided to 7%. We came in at 6.88%, just a little light on the margin there. And then on the operating income, the sales being under Q2. But timing on that cost and labor is here, working ourselves to progressing on that front. But on the back half of the year, as we make our milestones, I do anticipate a ramp. We're guiding for Q2 to be a 7% quarter as well in shipbuilding. And then obviously the back half of the year, we'll kind of lift that up. Operator: Our next question comes from Robert Spingarn from Melius Research. Robert Spingarn: Chris, just going to touch on the labor situation, but the Navy controller was saying recently that the Navy just can't simply buy its way out of programmatic challenges and delays. And I assume that has to do the delays, of course, we've talked about this a lot, are just driven by labor constraints. I was wondering if you could expand a little bit on that. And is there any possibility that maybe some subsidies to shipbuilders might relieve the situation? Christopher Kastner: Yes. That's interesting. Obviously, subsidies would help. More important than that is that some of the industrial-based funding that's been appropriated in '24, where there's real line of sight on projects that are going to improve performance within the industrial base, in the supply chain, in the labor force and in capacity. So I think that, that targeted effort by the Navy and the shipbuilders to identify spaces where we can make investments and get improvements is appropriate, and the teams are working very hard to do that. Robert Spingarn: So it sounds like it's really then not just labor. There are these other things you can do. Christopher Kastner: Well, there are other things you can do. But labor is the primary issue, is manufacturing labor in the United States and then shipbuilding labor in the United States. Simply the amount of labor that's necessary to build the ships, the access to labor and then the labor rates that we need to develop to be able to access more labor. We're working very hard on the apprentice schools, in workforce development with the State of Virginia and Mississippi and the community colleges. And it's really kind of a change in approach relative to ensuring that manufacturing labor is a good job and a good-paying job that people want to do coming out of high school. So I don't think it's a one size fits all sort of solution to this. But labor is, I believe, the most contributing factor. And when you think about the supply chain, it's labor in the supply chain as well. So manufacturing labor is definitely a priority that needs to be fixed for the nation, I believe. Robert Spingarn: Okay. And then just quickly on Mission Technologies. Andy had real good sales in the first quarter here ahead of the guidance run rate. So I was just wondering if we could talk about what's expected for the rest of the year there. What drove the quarter? And then do we fade a little bit in the rest of the year? Or is that just being conservative? Thomas Stiehle: So Rob, I'll give you some color on that. Yes, it was a strong quarter. Again, it came in at $750 million, following Q4 last year at $745 million. That we are being conservative in the guide, it's still holding it at $2.7 billion to $2.75 billion. I mean, if you do the quick math, the run rate for the remaining of the year is $650 million and holding to the guide there at the midpoint. There is opportunity, I think, for him to do better than that, but we don't want to get ahead of ourselves. It's about awards that he has in the plan this year, changing contracts that we have that we have backlog on those contracts into sales, and then him continuing his team to continue to stay on his labor plan and his hiring in that. So I do think there's some potential tailwinds on that front, but we'll just have to let the year play out. Right now, I'm really comfortable. We saw -- we finished last year at 13% growth from '23 over '22. And then the you see a quarter here where it's over 20% quarter-over-quarter. So a fantastic start to the year. And he's got -- his pipeline has grown from $60 billion to $80 billion. So the opportunity set and scope of what's in play there has grown as well. So I'm looking for a strong back half of the year here from MT, but we'll have to see how it plays out. Operator: Our next question comes from David Strauss from Barclays. David Strauss: Chris, I wanted to ask you, you've now in Q1 and Q2, you're going to knock off a lot of these milestones that were supposed to happen late last year. But at the same time, we really haven't seen any of that perceived upside come through in terms of the margins based off of what you did in ship -- for shipbuilding in Q1 and what you're forecasting for Q2. So if you could just square that, why we're not seeing some of that upside that we would think would be there would come -- that is not coming through with these milestones being completed. Christopher Kastner: Yes. Well, no doubt that when you miss milestones and you extend schedules, there's going to be additional cost. So unfortunately, as we came through those amidst the end of the year and then got them done, 798, we floated off in the first quarter, we got the 2 deliveries in the second quarter, and there's just less opportunity. So yes, unfortunately, schedule equals cost, we've got to make our milestones. You think of the balance of the milestones in the year, they're all holding. I would say the VCS milestones for the back half of the year are going to be a challenge, but the team is committed to getting those done, and they're holding now. But that's why we give you the milestones, you can get a barometer of how we're executing. David Strauss: Okay. That's helpful. And then, Tom, could you maybe -- I mean, you guided for free cash flow burn in Q2. Is it -- I mean, it seems like obviously going to be a very back-end loaded year. How should we think about the pacing of the CapEx step-up? We didn't really see it in Q1. So when do we really start to see a pickup in CapEx, and then what I would assume would be a big working capital recovery on the other side? Thomas Stiehle: Yes. So from a cash perspective, we came in at $274 million here. We're guiding another minus $100 million. So we'll work ourselves through that. Not uncommon, we burn cash at the beginning of the year, and not unanticipated here. Yes. So we wanted to make sure everyone's aligned with us on that front. From a CapEx perspective, we spent 2.6% of sales in the first quarter here. And as we get into those projects this year, we'll ramp on the back half of the year. So we held the guidance at 5.3% of CapEx of sales for the entire year, and you'll see that ramp as we get into the back half of the year here. Operator: Our next question comes from Doug Harned from Bernstein. Douglas Harned: There has been -- and the Navy has commented on the Columbia-class issues with the work on the bow at Newport News. Can you comment on that in terms of what the status is and how that can affect your work flow on Columbia-class? Christopher Kastner: Sure. So yes, widely reported on that issue. The team has come through the first-of-class issues on the bow that impacted the schedule. Those are essentially behind us now. And then there's just -- now there's volume work to get the bow complete. We're actually a bit ahead of schedule to the recovery plan. The team is very focused on it. It's really our top priority, it's the top priority of the Navy. So unfortunate that we encountered those first-of-class issues, but we think the specific issue that drove the schedule delay is behind us at this point. Douglas Harned: Okay. Good. And then on Virginia-class, the -- you talked about the milestones this year. What I'm trying to understand is kind of where everything is in the flow in terms of eventually getting to that 2 deliveries per year level. And you had this letter come out of the House with a lot of members of Congress arguing that there should be 2 Virginia-class in the 2025 budget, the President's budget. But does that matter? In other words, what I'm trying to understand is getting to 2 looks difficult right now. Does it matter to have the second one in the 2025 budget? And where do you stand on that pathway to get to 2 when you look at the milestones ahead here? Christopher Kastner: Yes. So I'll tell you, there has been incremental improvement as we move through the first part of the year on improving the rate on the VCS program. It's not good enough. There needs to be additional improvement. In regard to the budget, I think the most important thing relative to the discussion on 1 or 2 boats procured in '25 is the signal it sends to the supply chain, is we need to make sure that we buy a full boat of materials, we keep the supply chain healthy so that we eliminate that risk for them. The last thing we want to do is create risk on the -- within the program. So I think we've communicated that with the customer, and the Congress, they understand it. And as you know, we're just at the beginning of the budget discussions. So ultimately, we expect it to get resolved. But it's very important that we get the supply chain under order for both of the boats. Operator: Our next question comes from Ronald Epstein from Bank of America. Mariana Perez Mora: This is Mariana Perez Mora on for Ron today. So the first question is going to be related to Australia. As you see this first order for steel delivery from an Australian company, how should we think about, like in the near term, you benefiting from like this early investment to actually make the Australian submarine supply chain stronger? Christopher Kastner: Yes. So that's an excellent question. This is, from an AUKUS standpoint, as I previously indicated, we view this as an opening of two markets for us. So it's a really good opportunity for us. And we think we're taking all the right steps to prepare for ultimately a pretty material impact to the corporation. This is a really critical first step because we're flexing muscles in our supply chain to qualify a vendor in Australia that will ultimately potentially be part of the supply chain. We could start -- we're starting small, but it will ultimately grow from here to make them a sovereign-ready submarine provider. So this is just the first step. I don't believe material revenue will flow from this immediately, but it's an important step to be prepared for us to support Australia. Mariana Perez Mora: Perfect. And also in the line of AUKUS, there has been talks that South Korea would like to join this trilateral agreement. If that goes through, how do you see this impacting the potential of the program demand and even supply chain environment? Christopher Kastner: Well obviously there would be further upside related to that. I think there are discussions about that, but I don't want to get ahead of ourselves. Let's focus on AUKUS at this point, and I'll leave those sort of discussions to the Pentagon and the Navy. Operator: Our next question comes from Gautam Khanna from TD Cowen. Gautam Khanna: I was wondering if you could give us the EACs by segment in the quarter? Then I have a follow-up. Thomas Stiehle: Okay. Yes. So it was $53 million up, $51 million down for net $2 million. And the makeup of that was Ingalls was positive $13 million, Newport News was the negative $12 million, and MT was $1 million. Gautam Khanna: Okay. At NNS, the margins were a little light of our expectation. I'm just curious, any stepbacks in productivity or labor to speak of broadly at NNS or elsewhere? Christopher Kastner: Yes. So I'll start and then Tom can jump in. Yes, as you know, Gautam, we evaluate our EACs every quarter, and we have to take step-ups or step-backs. We do that, none more material in nature. But you saw the slip of the milestones which impacted some programs. So there were minor step-ups and step-backs throughout. Thomas Stiehle: But nothing material on that... Christopher Kastner: Yes, nothing material. Thomas Stiehle: I'll comment, too, here. So yes, 6.8% versus guidance of 7.0%. A year ago this quarter, it was 6.7% push [indiscernible], so not that far off. From a Newport News perspective, again at 5.7% for the quarter. A year ago, there were 5.6%. We finished off last year at 6.2%. So slightly off of that, just working through getting that production line working, material and labor on deck plate at the same time, trying to get that rework down and keeping the production line going here. So we're fighting through it. And really not that far off the guide, so -- okay. Gautam Khanna: Yes. And then just lastly, on LPD 29, was that EAC taken in the first quarter? Or was the delivery actually in the second quarter, and therefore it's more of a second quarter event? Christopher Kastner: Yes. So we obviously assess the EACs in the first quarter, but it's a second quarter event. And it's included in our guide for the second quarter and our expectations for the second quarter. Operator: Our next question comes from Seth Seifman from JPMorgan. Seth Seifman: Tom, just first a quick clarification. I know you mentioned the CapEx really stepping up in the second half along with the cash generation. So I assume you're also expecting a step-up in the Navy support for that CapEx in the second half-plus. Thomas Stiehle: It's aligned. It's all baked into the plan we have and the guidance that we give, yes. Seth Seifman: Right. Okay. Okay. And then just on the margin rates in the shipyards, Q1, similar to last year, slightly higher. Q2 though, around 7%. Like if we look at the Q1 margin rates, kind of seems probably at the lower end of what you might expect for each of the yards. And so would normally expect some sequential improvement in each of the yards, maybe to something like above 6% at Newport, and I mean, Ingalls is often in the double digits. Is there something to be aware of that weighing on margins in the second quarter? Or is it -- I know you mentioned one milestone, but maybe a lack of overall milestones that's driving the 7% for the second quarter? Thomas Stiehle: So it's tough to look at the margin rates from quarter-to-quarter, and we do try and forecast so that you can land about where we think that we will be. Behind the scenes is the maturation of where we are on EACs, where the milestones are going to fall, where we see the potential risk burned out, so we've been taking the step-ups in the booking rates. And it's just the first half of the year. We've had this for a couple of years now, that the first half of the year is lighter than the back half. Obviously, the major milestones, the deliveries and the launches are back half-loaded, so we expect to see that there. I'm not surprised on where we are. A couple of tenths here or there is not a huge deal overall. And we're working through our risks and opportunities going forward here. Operator: Our next question comes from George Shapiro from Shapiro Research. George Shapiro: Yes. Just following up a little bit on Seth's comment, but trying to get into some more detail. To get to the low end of your 7.6% margin guide for shipbuilding for the year would imply something like 8.3% or 8.4% in second half margins, which would imply an incremental $70 million to $75 million in profit. Are the milestones that you're projecting for the second half going to give us all that $70 million to $75 million? Or is there something else? Thomas Stiehle: It's a mix of the milestones that we have, incentives, all the aspects that we have and burning down risk. So all that plays out. I will tell you from a margin perspective, if you look over the last 3 years, right, whether it's shipbuilding at 7.7%, 7.7%, last year it was 8.3%. Even when you take the claim out, that we had that recovery, it was 7.5%. From a Newport News perspective, which is the preponderance of where the risk is right now, we were 6.2%, 6.1%, 6.2%. So that margin rate has been stable. What we're talking about is a lift here kind of going forward. And as long as we stay on pace, the tempo of hiring, material and the cost efficiency, as we've said in the past, we expect that incrementally to improve annually here. So we'll keep you informed. Right now, 6.8% versus 7.0% is pretty much on top of what we thought we'd expect, and we're guiding to 7% right now, yes. So the back half of the year, George, will be a lift. George Shapiro: Okay. And a follow-up, a different question on the working capital. I mean, receivables were up like $253 million, contracts assets up $124 million in the quarter. That was well above last year's first quarter. So can you just kind of talk as to what caused it? Thomas Stiehle: Yes. So it's the working capital, it's timing, it's trade working capital between the billings and the receipts, the AR and the AP that we have right now. We have the cost in hand. At times, it's either making the progress or being able to bill, working ourselves through incentives for collections as well as progress restrictions that we have. So a little bit higher than we guided to at minus $200 million here and minus $400 million for Q2. Not uncommon, like in 2022, where we ran the first 3 quarters in a deficit in cash, and then we came back strong in Q4. So we're watching that closely, and I think we're on plan right now going forward. Operator: Our next question comes from Myles Walton from Wolfe Research. Myles Walton: I was wondering if I could ask a question first on the milestones as it relates to -- I know you don't size them individually, but there's not a milestone chart in the slide deck, so I just was looking to refresh. The Massachusetts, is that the most important milestone for this year for Newport News? And also any of the '25 milestones you had in the deck last time, have those shifted at all? Christopher Kastner: No, '25 has not shifted, and all the milestones are important. It is critical on the VCS program, that they meet their commitments because it is an assembly line and you need to roll crews to the next boat. So yes, those VCS milestones are important. Myles Walton: Okay. And then on the supply chain, I guess, some of the testimony emerging, I was talking about merchant suppliers of propulsion systems for ships. And I'm curious, Chris, if you just give us a little baseline of where you are in terms of the whack-a-mole game here of containing issues? And is it supplier component? Is it workforce? And I know you're going to say all of them. But maybe you can just give a little bit more color as the Navy Secretary was willing to offer up Northrop as a source of issues is a little bit of an incremental step in the direction of emerging of where the supply chain constraints might be. Christopher Kastner: Yes. So thanks, Myles. Workforce is a significant issue. We think we've solved the hiring part of that issue. We've hired over 1,700 in the quarter to our commitment of -- or to our goal of 6,000, and we're working very hard on attrition. There are some pilot projects that we have within each of the organizations, each of the shipyards, relative to attrition surrounding pay, where you recruit from and flexibility. Those are starting to yield some fruit, but not enough where I can really take it to the bank. So some positive indicators, but not good enough yet and we're going to continue to work on it. From a supply chain standpoint, we are being impacted by some major equipment within a number of our programs. The overall supply chain is definitely more stable than it was a couple of years ago and even 12 months ago, but some of our major suppliers are impacting the erection of our ships, and we're working hard to resolve that with those subcontractors. Myles Walton: Okay. Is it concentrated to just a couple? Or is this really widespread? Christopher Kastner: No. Let's say 2 to 5. Operator: Our last question comes from Noah Poponak from Goldman Sachs. Noah Poponak: Tom, you've referenced with the shipbuilding margin kind of being essentially flat year-over-year and have close to the guide in the quarter. But -- and I understand and appreciate all that and how it can move around quarter-to-quarter. But I guess, last year, the full year did come in below the original full year outlook, and you've cited the movement of milestones out of the end of the year into the beginning of this year. I guess, maybe could you frame it as your level of visibility into the back half milestones this year compared to what you saw when you sat there at this time last year? Thomas Stiehle: I think both years kind of near or pretty closely expectations, both from where we were on the margin side and the cash that's going to follow that. So it is a year where there's more milestones in the back half. It will be highly dependent that we get those done. Last year, the 3 events kind of slipped right from Q4 into Q1 and essentially at the very beginning of Q2. So we had talked about staying attentive to us making our schedules. 2, 3, 4 months slip, although we don't like that, it's not huge. And I think the milestones we have right now, we have plans in place to make it by the end of the year, but there's risk on a couple of them. So we'll just have to see how that plays out here. I think it's going to -- near is a very similar profile year as 2023. As far as your comments about kind of missing, last year, we guided in the upper 7s. We finished 8.375%. I tell you, the year before that, it was a couple of ticks off, too, a couple of tenths. So I think the guide is realistic, we have a plan in place to hit it, and it's just about execution here now with 8 months to go in this year. Noah Poponak: Okay. Makes sense. And how should we think about the pacing of the buyback through the year? And I guess also, what's the minimum cash balance, just given the shape of the free cash flow through the year? Thomas Stiehle: Yes. So we did buy back $62 million in the first quarter. We talked about a target of $300 million by the end of the year. So you can do the math on that. That will -- that should ramp up as we go through the back half of the year. We follow a very disciplined buying grid. We have algorithms against that where we see value. So we'll continue to employ that process. It has served us well. We reiterated our targets, so I don't see a change in that going forward right now. And then from a minimum on the cash balance, it's not per se a minimum. From time to time, we will dig into our revolver or our commercial paper. So that's not uncommon, we've seen that in the past here. And as we're into the seasonality of Q1 in the first half of the year, being cash users, that's not a concern or a problem right now. So there isn't like a threshold or a minimum balance of cash that we have that would tie to being opportunistic and seeing value in the repo. So they're kind of independent. Noah Poponak: Got it. And Chris, you've touched on labor and attrition here. I think at the Investor Day, you quantified that attrition improved around 20% last year. It sounds like that continues to get better. I don't know if there are any numbers you can put around how much better that needs to get to be kind of fully normal or stable, or what you've seen year-to-date? Christopher Kastner: Yes. We don't publish our target there. It's definitely not back at pre-COVID levels, so we still need to improve our performance from a retention standpoint. Operator: I am not showing any further questions. At this time, I would now like to hand over to Mr. Kastner for any closing remarks. Christopher Kastner: Okay. Thank you, everyone, for your interest in HII, and we will continue to focus on the fundamentals of our business in support of our customers. Have a good afternoon. Operator: And this concludes today's conference call. You may now disconnect your lines.

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 call is being recorded. [Operator Instructions] I would now like to turn the call over to Christie Thomas, Vice President of Investor Relations. Ms. Thomas, you may begin. Christie Thomas: Thank you, operator, and good morning. I'd like to welcome everyone to the HII fourth quarter 2023 earnings conference call. Joining me today on the call are our President and CEO, Chris Kastner; and Executive Vice President and CFO, Tom Stiehle. As a reminder, statements made today that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance and involve known and unknown risks uncertainties, and other factors that may cause our actual results to be materially different from future results expressed or implied by these forward-looking statements. Please see our SEC filings for important factors that could cause our actual results to differ materially from expected results. Also in their remarks today, Chris and Tom will refer to certain non-GAAP measures. For reconciliation of these metrics to the comparable GAAP measures, please see the slides that accompany this webcast, which are available on the Investor Relations website at ir.hii.com. With that, I would like to turn the call over to President and CEO, Chris Kastner. Chris? Christopher Kastner: Thanks, Christie, good morning, everyone, and thank you for joining us on our fourth quarter 2023 earnings call. 2023 was a strong year for HII. We continue to invest both in our shipyards and in [IRAD] to both expand capacity and develop new products and solutions for our customers. Our growth rate for the year of more than 7% and our free cash flow generation of almost $700 million demonstrate that we're entering a period of accelerated growth and increased free cash flow generation. In addition to record sales growth with 2023 revenues of $11.5 billion, fourth quarter revenue was especially strong across all three divisions, with 13% year-over-year growth and a record $3.2 billion of revenue. In 2023, net earnings were $681 million, 18% higher than the prior year and strong free cash flow of $692 million was 40% higher than 2022. We also had $12.5 billion of contract awards in 2023, resulting in backlog of $48 billion at year-end. At Ingalls, we delivered DDG 125 Jack H. Lucas, the first Flight III ship and NSC 10 Calhoun. Our DDG 51 team was also awarded the contracts for seven destroyers in the FY '23 multiyear procurement competition. In our amphibious ship programs, we were awarded a $1.3 billion detailed design and construction contract for LPD 32 and launched LHA 8 Bougainville, the third big deck amphibious warship in the America class. Ingalls expects to complete sea trials and deliver LPD 29, Richard M. McCool, Jr. in the first half of 2024. At Newport News, we redelivered CVN 73 USS George Washington after completing her refueling and complex overhaul and continue to progress on the test program for CVN 79 John F. Kennedy. In the Virginia-class program last year, we were awarded the long lead time material for two additional Block V boats and the first two boats of Block VI. We completed work on SSN 796 New Jersey and expect to deliver in the first half of 2024. And SSN 798 Massachusetts is nearing float-off which we anticipate in the first quarter of 2024. In addition to the 2024 milestones, we've included our 2025 milestone outlook, which reflects our continued focus on execution. Regarding our workforce, I'm pleased with the positive progress in hiring. We hired over 6,900 craft personnel in 2023 and continue to see progress early this year. For 2024, we have a hiring target of approximately 6,000 craft personnel. The competition for skilled labor and shipbuilding and the larger manufacturing sector continues to impact our shipyards and our supply base. With our Navy partner, we will continue to invest in our team to improve worker retention and proficiency, both within our shipyard and in the supply chain to ensure we fulfill our contractual commitments and meet our financial objectives. At Mission Technologies, we delivered another outstanding quarter, performing ahead of plan across all business units, leading to strong revenue growth in 2023. In addition to the record revenue growth, Mission Technologies booked new and recompete contract awards with nearly $6 billion in total contract value. Also, Mission Technologies ended the year with a robust business pipeline of $75 billion, which makes us optimistic about potential growth opportunities in 2024. Key growth drivers include support for mission readiness in artificial intelligence, cyber and electronic warfare, advanced modeling and simulation, LVC and C5 ISR. Turning to activities in Washington, D.C. for a moment. We are pleased with the passage and enactment of the defense authorization bill for fiscal year 2024. The FY '24 NDAA strongly supports our shipbuilding programs including multiyear procurement authority for Virginia Class Block 6 submarines and incremental funding authority for LPD 33. The Defense Authorization Act also includes necessary authorities to support the implementation of the AUKUS agreement. Looking ahead over the next five years, we expect revenue growth of more than 4% and cash generation of $3.6 billion. Our expectations are grounded on the assumption that we must deliver on our commitments to our customers. Also, while the trajectory may not be linear due to the timing of ship milestones and material timing, we expect that HII will be generating approximately $15 billion annually in revenue by the end of the decade. As always, fundamental to our expectations for the business is executing on our contracts and developing and providing solutions to our all domain customers. We take this responsibility very seriously and remain focused on executing our program commitments. So with that, I will turn the call over to Tom for some remarks on our financial results and guidance. Tom? Thomas Stiehle: Thanks, Chris, and good morning. Today, I'll review our fourth quarter and full year results and also provide our outlook for 2024. For more detail on the segment results, please refer to the earnings release issued this morning and posted to our website. Beginning with our consolidated fourth quarter results on Slide 4. Our Q4 revenues of $3.2 billion increased approximately 13% compared to the same period last year. This growth was driven primarily by higher year-over-year revenue at all three segments, leading to record quarterly revenue for HII. Operating income for the quarter of $312 million increased by $207 million or 197% from the fourth quarter of 2022, and operating margin of 9.8% compared to margin of 3.7% in the prior year period, up 609 basis points. The increase in operating margin was primarily due to higher segment operating income. Net earnings in the quarter were $274 million compared to $123 million in the fourth quarter of last year, up 123%. Diluted earnings per share in the quarter was $6.90 compared to $3.07 in the fourth quarter of the previous year. Moving to our consolidated results for the full year. Revenues were a record $11.5 billion for the year, a significant increase of 7.3% from 2022. The improvement was driven by strong year-over-year growth at all three segments. Operating income for the year was $781 million and operating margin was 6.8%. This compares to operating income of $565 million and operating margin of 5.3% in 2022. The operating income growth was primarily driven by year-over-year improvement in segment operating income at all three segments. Net earnings for the year were $681 million, compared to $579 million in 2022, up 17.6% and diluted earnings per share was $17.07 compared to $14.44 in 2022, up 18.2%. For segment results on Slide 5, Ingall's revenues of $2.8 billion in 2023 increased $182 million or 7.1% from 2022, driven primarily by higher volumes in surface combatants and amphibious assault ships partially offset by lower NSE program revenues. Ingalls' operating income of $362 million and margin of 13.2% in 2023, both improved from 2022 results driven primarily by a $70.5 million sale of a court judgment to recover unpaid receivables for the prior repair, refurbishment and modernization of foreign built frigates. The higher volumes that I just mentioned and the contract incentive on DDG 129, partially offset by lower risk retirement on LPD 28 and LPD 30 than the prior year. At Newport News, 2023 revenues of $6.1 billion increased by $281 million or 4.8% from 2022, primarily due to higher volumes in aircraft carrier construction and engineering and submarines and partially offset by lower revenues in the RCOH program and naval nuclear support services. Newport News 2023 operating income of $379 million increased $22 million from 2022 and margin of 6.2% was relatively consistent with 2022 performance. The increase was driven by higher volumes I just discussed, and a revenue adjustment on CVN 73, partially offset by contract incentives on the Columbia Class Submarine Program in 2022. Shipbuilding margin for 2023 was 8.3%. Admission technology, 2023 revenues of $2.7 billion increased $312 million or 13.1% from 2022, primarily driven by higher volumes in C5 ISR and cyber, electronic, warfare and space contracts. Mission Technologies 2023 operating income of $101 million and segment operating margin of 3.7%, both improved operating income of $63 million and segment operating margin of 2.6% in 2022, driven primarily by a $49.5 million settlement of representations and warranties insurance claim relating to the acquisition of hydroids. And the higher volumes I described, partially offset by a contract loss and lower equity income due to the sale of a joint venture. Mission Technologies 2023 results included approximately $109 million of amortization of purchased intangible assets compared to approximately $120 million in 2022. Mission Technologies EBITDA margin for 2023 was 8.6%. Turning to cash. 2023 free cash flow was $692 million, handily beating the guidance due to strong year-end collections as well as benefiting from the sale of the Frigate court judgment and settlement of the reps and warranty insurance claims I've highlighted. During the year, the company reduced debt by $480 million, invested $278 million in capital expenditures, paid $200 million in dividends and used $75 million to repurchase shares, while ending 2023 with $430 million in cash on hand and the liquidity of approximately $1.9 billion. Net capital expenditures finished the year at 2.4% of revenues, just under 2022's value of 2.5%. Cash contributions to our pension and other postretirement benefit plans totaled $44 million in 2023. Our pension outlook for 2024 has improved from the update we provided in November, given the better-than-expected returns to assets, partially offset by a decrease in discount rates since that time. Asset returns for 2023 were 12.3%. Pension expectations for 2025 through 2027 have been updated. And similar to the update we provided for 2024 last quarter, the fast benefit has increased from our last update, given the more immediate recognition of the positive asset returns experienced in 2023. This is partially offset by the impact of the lower discount rate. We've also provided an initial view of our 2028 expectations. Turning to Slide 7 of our financial outlook for 2024. Given backlog growth performance in 2023 and the strong demand for our products and services, we are now forecasting mid- to long-term HII revenue growth of 4-plus percent. For shipbuilding mid- to long-term forecast revenue growth has increased from 3% to approximately 4%, although growth in 2024 will be tempered due to the outperformance in 2023. Accordingly, we are forecasting 2024 shipbuilding revenue between $8.8 billion and $9.1 billion. For 2024, we expect shipbuilding operating margin to be between 7.6% and 7.8% as we continue to target incremental margin improvement. For Mission Technologies, we continue to expect approximately 5% mid- to long-term top line growth. And again, due to the 2023 outperformance driven by approximately $80 million of material timing. We expect tempered growth for FY '24, forecasting revenue between $2.7 billion and $2.75 billion. And we expect Mission Technologies operating margins to be between 3% and 3.5% and EBITDA margins to be between 8% and 8.5%. In 2024, amortization and purchased intangible assets is expected to total approximately $109 million, of which $99 million is attributable to Mission Technologies. We expect first quarter revenues of approximately $2.2 billion for shipbuilding and $650 million for Mission Technologies, with shipbuilding operating margin near 7% and Mission Technologies operating margin near 2.5%. Moving on to capital expenditures. As we've discussed in prior quarters, we continue to see the long-term capital expenditure rate of 1.5% to 2% of general sustainment. In the near term, given the significant demand in submarine construction, we are partnering with our Navy customer to invest in expanding our shipbuilding capacity and throughput. The investment is expected to drive CapEx to approximately 5% on average for the next three years, with 2024 targeted to be approximately 5.3% of sales. I will note that the sustainable free cash flow levels we've previously discussed are not expected to be impacted by this due to customer investment, evidenced by the projected free cash flow growth over the next five years, I'll provide shortly. Additionally, on Slide 7, we have provided our updated outlook for a number of other discrete items to assist with your modeling. Moving on to Slide 8. We have provided an updated view of our free cash flow outlook for 2024 of $600 million to $700 million, ending our prior five year free cash flow projection period with an estimate of $3 billion up from our prior estimate of $2.9 billion. I'm also pleased to provide a free cash flow outlook for the next five years or for FY '24 to '28 of approximately $3.6 billion. I would note that these forecasts do not include Section 174 deferral, which if it occurs, would beat a tailwind to approximately $150 million to $200 million in 2024. On Slide 9, we provided our capital allocation prioritization model unchanged from previous discussions, but updated for current events. We continue to remain committed to an investment-grade rating and have reduced our leverage ratio to under two turns at the end of 2023, a year earlier than planned. In addition, we finished paying off our $650 million term loan in January of 2024, which concludes our debt repayment prioritization while securing our investment-grade ratings and credit metrics. In 2024, we expect to return approximately $500 million of free cash flow to shareholders through dividends and share repurchases. Lastly, on this slide, the Board has approved a revision to our share repurchase program in both term and amount resulting in available share repurchase authorization of $1.5 billion through 2028. To close on my remarks, company's mainstay programs are well supported in demand, and MT's growth success continues to expand and diversify our portfolio. Our future is bright and within our control by executing on our current production contracts and capitalizing on the growth demand for HII products and services. We've exceeded our 2023 financial guidance metrics in terms of revenue, profitability and free cash flow while investing in our programs to facilitate growth and throughput. Additionally, we've strengthened our balance sheet, paying down debt and lowering our leverage ratio. Lastly, fine-tuned the HII investment thesis on the last page of the earnings presentation, focusing on the portfolio strength and visibility execution and growth and free cash flow expansion driving our current and future capital allocation commitments. With that, I'll turn the call back over to Christie for Q&A. Christie Thomas: Thanks Tom. [Operator Instructions] Operator, I will turn it over to you to manage the Q&A. Operator: [Operator Instructions] Our first question today is from Myles Walton from Wolf Research. Myles, please go ahead. Your line is open. Myles Walton: Great. Thanks. Good morning. Maybe to start with the CapEx change, obviously, pretty material, $300 million annualized step up in run rate. A couple questions on it. One, why isn't it dropping through a higher revenue run rate in the near term, like '24? And second, why is it only a couple three-year investment? What specifically is it going towards? Thanks. Thomas Stiehle: Hi, good morning, Miles. Tom here, I appreciate the question. Yes, so we mentioned here that traditionally we look at maintaining the yards to be about - 1% to 1.5% with about another point-to-point to have specific projects. As we've talked about in the recent past, we have a lot of activity that's going on in the yards, acquisitions specifically at Newport News, and driving down into the submarine program there. So, we're putting more boats on contract in on VCS in the Columbia program. And as we're working ourselves through those negotiations and schedules, we see - it necessitates additional capacity and throughput. So in conversations with our Navy partner, we've partnered on what that means. There'll be - a couple more buildings, more capacity in the yard, and its requiring investments. Just over three years, we have defined projects that, we've worked through and we've gotten approved through the Board and with the Navy. And the investment there from the Navy will pay for the majority of that. So as much as it rolls through, I'm capitalizing the projects themselves. I'll get the investments on the contracts, to help offset that. So it's a three-year run, it peaks out. The first year at 5.3%. And as I said, we've kind of given you, what the free cash flow projection is from '24 to '28 to kind of evidence that, we're still good to our thesis of the cash flow inflection to $700 million plus as we go forward. There's a shake to it, obviously, of that $3.6 billion I gave you. And obviously, it grows over time as the revenue and the incremental margin expansion comes online. And then as the CapEx falls off on years four and five. But we think it's a good business arrangement. It facilitates the growth that we're talking about. You heard in the comments, both from Chris and myself, we're raising shipbuilding from 3% to 4%. And this capital investment by both the Navy and us facilitates that growth long-term. Christopher Kastner: Miles, I'd also add that I obviously want to fact '24. These projects take a while to get implemented. But it does support the mid to long-term growth. Miles Walton: Okay. And Chris, just to follow-up on the longer-term projection and the capital allocation prioritization. You'll probably get into this Investor Day. But the last several years have been a lot of cash going to paydown debt. It doesn't sound like we need to do that. So are we at a point, where we can more commit to a significant majority, or not all of the free cash flow to return to shareholders over the timeframe looking forward? Christopher Kastner: Yes. I'll start. So, we fundamentally believe the greatest source of value that we can achieve as a corporation, is to focus on our operational priorities right now and delivering our ships. So, you see that in the capital investments. And then we're fairly clear on our capital allocation priorities relative to investing in our investing in our shipyards, being investment grade, progressively improving our dividends, and then providing any remainder back to shareholders. Now that being said, we're going to have optionality around M&A. We have the responsibility, to evaluate M&A projects from time-to-time. I don't see any significant holes in the portfolio right now. And operationally, I think our greatest focus needs to be on delivering our ships to our customer, because they need them. So while we're not going to commit, to providing everything, back to shareholders on this call. We need to, we're forced to have a strong balance sheet and we can do everything. So that's how we're thinking about capital allocation moving forward. Thomas Stiehle: Yes, if I could piggyback on top of that. And Miles, I think you're looking at it the right way. If you look back on where we've been right in '22, we gave back to the shareholders $249 million in dividends and repos. This year, it's up to $275 million, which is 40% of free cash flow. We have to keep in mind for 2023, it was $480 million of debt paydown. So, we actually between the debt paydown and what we gave back to shareholders. It was better than 100% of the free cash flow of $692 million for 2023. And now for this year, as we're saying $500 million of dividends and repos is still another $229 million. I just paid $145 million in January. There's $84 million of on payment in May. So $229 million of debt and that concludes it, kind of going forward plus the $500 million I'm committing to again is over 100% of free cash flow going back to the shareholders this year. If you take the midpoint of the guide of $650 million, right? So it's ramping. We're giving you the commitment through 2024. We haven't told you, we're committing to pass that, but we would envision as we work off each year and the cash is there, that we'll update you accordingly. Miles Walton: All right, thank you. Operator: Thank you. Our next question today is from Gautam Khanna from TD Cowen. Gautam, please go ahead. Your line is open. Gautam Khanna: Yes, hi, I joined a little late. So I apologize if you covered this, but could you update us on the timing of when the three milestones that's looked at Q4, will get caught up? And if there's any downstream impacts from those delays, but maybe crowding out labor, or anything else? And then if you could just talk about the milestones in 2024, are there any that are kind of late in the year Q4, weighted that could pose a similar note? Thank you. Christopher Kastner: Sure. Thanks, Gautam. The two VCS milestones, we're essentially complete with both of the operational commitments for those milestones. There were some late breaking changes on both of those boats that, needed to be implemented before we could claim victory, and finally achieve them, but we're essentially complete. The staffing has been significantly reduced, on each of the boats and it's been reallocated, to the other boats. And no material financial issue related to those at all. On LPD 29, we ran into an issue going through the test program that we need to stop and do a root cause corrective action on. We've done that. The ship went to sea this week, performed well, we think we'll deliver that here late Q1, early Q2. Now from '24 milestone impact, we're all aligned within the corporation relative to those milestones. It does put some pressure on the VCS milestones at the end of the year on 798 and 800, but we have detailed plans to achieve those and we're committed to getting those done. Gautam Khanna: Thank you. And if I could follow-up, I just wanted to make sure I understood the accounting on those three that moved out of Q4. Were there positive team catch-ups related to that in Q4 and if not, do you anticipate that in Q1 and Q2 as you recover? Christopher Kastner: No, there were no material financial issues related to those. Obviously on LPD 29, there is a bit of an opportunity lost there that, will recover when it ultimately gets delivered, but it's all included in our guidance. Gautam Khanna: Got you. Thank you so much. Appreciate it. Christopher Kastner: Sure. Operator: Thank you. Our next question is from Seth Seifman from JPMorgan. Seth, please go ahead. Your line is open. Seth Seifman: Okay. Thanks very much. Good morning. Christopher Kastner: Good morning, Seth. Seth Seifman: Good morning. I guess in other your earnings calls this quarter, we've heard about various supply chain challenges on Virginia. I guess, can you speak to kind of how you feel your estimates are looking on Virginia and the amount of risk in those estimates? And then to the extent that, is there much in there that's contemplated for inflation reimbursement, because it seems that contractor expectations for inflation reimbursement have been coming down. Has that been the case for HII, or were they not there in the first place? Or is the sub-industrial base different, because it's such a priority? Christopher Kastner: Yes, so we don't have inflation protection on the VCS program at this time. The supply chain is a challenge across all of our programs, actually. We do have EPA protection of the most part at Ingalls, and we're managing supply chain risk across the portfolio. The Navy is fully aware of this. We're very transparent about it. That's why the SIB funding is so important. That's why getting three-year AP is so important. So, we could just eliminate that risk. But we evaluate our EACs every quarter and if there's risk we deal with it in that quarter. But it's not going away anytime soon. I think everyone understands that. That's why we have SIB funding being appropriated and authorized. And as soon as we can get that down into the supply chain, the better. Seth Seifman: Okay. Okay. Thanks. And maybe just a quick follow-up on the capital deployment. If I look at the $3.6 billion over the period, think about the dividends and the 2024 debt paydown. That maybe leaves like $2.25 billion. I know the repo authorization, I think the slide says there's about $1.5 billion left. I mean, would you think that there's before, that it's possible to exceed that $1.5 billion by 2028? Thomas Stiehle: Yes. And what that means is regarding like - we extended to term and time, but we can always go back and change that again. So we wouldn't read too much into the math of it. But as we said, there's $1.5 billion available, $1.5 billion by 2028. And as we move forward, we'll adjust that accordingly. So that was just more of a housekeeping issue that we cleaned up. Seth Seifman: Okay. Thank you very much. Thomas Stiehle: Sure. Operator: Thank you. Our next question is from Scott Deuschle from Deutsche Bank. Scott, please go ahead. Your line is open. Scott Deuschle: Hi, good morning. Thomas Stiehle: Hi. Christopher Kastner: Good morning. Scott Deuschle: Hi Chris, just to clarify, did the LPD 29 delivery delays have much extra cost associated with them? Or is it more just the function of some extra time and a deferral of the AC, rather than a diminishment of the AC opportunity? Christopher Kastner: Well, there's time and shipbuilding is cost, right? So, we've probably lost a little opportunity there. It's not material in nature. And we'll do that. We'll take a step up if appropriate when we make final delivery. But it obviously would have been worth more if we did it at the end of the year. Scott Deuschle: Okay. Got it. And then, Tom, just from a reporting perspective, why are Venezuela insurance recoveries included in operating loans rather than below the line? A lot of people are thinking you started reporting this quarter? Thanks. Thomas Stiehle: Yes, the way that accounting works on that, it's got an angle, it's in the operating income and other income. Because we've had that contract. We incurred cost on it. So it's a recovery from cost that, we've had both in the past and we had written off. So, it comes back still as an operating income. It doesn't go into the revenue. So, there's not a rev-rank to it. But we do account for the margin and income statement. And obviously, we picked up the cash on both of those, on both the frigate and the reps and warranty in Q4 Scott Deuschle: Okay. And then, Tom, last question. Is there any kind of ramp to the - or slope to the free cash flow target, the cumulative target over the next five years? Or is it fairly leveled at '24? Thank you. Thomas Stiehle: No, there is a ramp to it and the shape to it. I knew when we gave that that people would want to see that, because we've been giving you the shape of the current one from 2020 to '24. But really only the back end of it. When we first announced that, we didn't provide it either. And the only reason why we're not trying to be kind of too nebulous - five years, a lot of moving parts, how it can move around. I can tell you it's not a reach number. We wouldn't put it out there. We don't feel that we can hit it. But I'm most comfortable right now. I try and manage by year. And we gave that number to show with the evidence ramp and the revenue that we talked about for 4% plus to HII across the enterprise, we see that mission technology is definitely accretive and pulling cash for us right now. Your modeling should easily be able to get to that number. But I really want to get through 2024 and then we can give you a guide on what like 2025 kind of, looks like in each year thereafter. Okay. Scott Deuschle: Thank you. That's resolved. Thomas Stiehle: Thank you. Operator: Thank you. Our next question is from David Strauss from Barclays. David, please go ahead. Your line is open. David Strauss: Great. Thanks. Good morning. Christopher Kastner: Good morning, David. David Strauss: Chris or Tom, I wanted to ask about the shipbuilding margin target. So, I think, you have been targeting 7% to 8% for '23 and you talked about '24 being above that. And then you had milestones slip out that, I would assume with those potential EAC adjustments that would help. So, I guess what changed in terms of the progression on the shipbuilding margin side as it relates to '24, versus what you talked about, or were thinking about before? Thomas Stiehle: Yes. So, we don't want to get ahead of ourselves, right? Yes. We did talk about 7.7% to 8.0%. There's a couple of milestones that we missed at the end of the year, which causes a little bit of a drag, as you saw how we finished off. Still shipbuilding healthy with the recovery of the sale of the claim, 8.3% still kind of beat the guidance with the claim on a recurring run rate. I'm with you that it's a little bit short on that right now. And we'll pick it up kind of going forward, right? So, I'm not just going to have function up, but we'll pick up where we have on our run rate as we finish our milestones as we get credit for that. There'll be some stuff up so long the way. I think 7.6% to 7.8% is appropriate. I'm a comfortable and conservative on that right now. And I've gotten to the last couple of years and we've missed a couple of attempts right at the end of the quarter. So, I don't want us to get ahead of ourselves a little bit. Let's kind of earn each of these quarters. I think 7.6% to 7.8% is the appropriate way to kind of look at it. If we - that get the hiring and the retention and we have clean shifts through the whole year, and we make up our milestones, we could be on the upper end of that range. It's not higher, but I think for now finishing the year off at 8.3% with the claim, the bottom end of the guide right now without the claim. I think that's the right starting point with a year's worth of shipbuilding to go through 2024. David Strauss: Okay. And then one last about working capital. I think for the year, at the end of the year, you came in kind of below your target. It looks like you're around 5% of sales. So how does working capital look going forward? I see some of the CapEx recovery will flow through working capital at least over the near term? Thanks. Thomas Stiehle: Sure. Yes. Yes, we've had a lot of conversation on that working capital. And I know when we were much higher in that at 10% and 8% range that was concerned, like how could we get that down? And we were projecting that that would happen. I'm happy to report that it's kind of landed right where we thought it would be, right? So, I think we started the year off in around 6% to 6.5%. We finished the year off at 5%. The conversations we've had in the recent past, we've talked about it used to be 6% to 8% without Mission Technologies with the additional sales for Mission Technologies. It's more like 4% to 6%. And that's I had highlighted that we were coming down, you know, with COVID in the rearview mirror, production programs that we have, trying to maintain the schedules with the same type work. We would see a normalization of the working capital. And that's exactly what's played out. We've lost about a point of working capital throughout this year. And I still anticipate kind of going forward a little bit improvement in that as we go forward. So 4% to 6% is the right way to kind of look at it. We exit '23 at 5%. And I would expect in 2024 to be on about you know, a little bit lower than that between 4% to 5%. The capital incentives will help as we get the cash up front, before the cost is completely incurred. And I think that's the appropriate way to kind of model it, going forward in the 4% to 5% range in the next couple of years. David Strauss: Thank you. Operator: Thank you. Our next question today is from Pete Skibitski from Alembic Global. Pete, please go ahead. Your line is open. Pete Skibitski: Good morning, guys. Nice quarter. Christopher Kastner: Good morning. Pete Skibitski: Thank you. Tom, I think you just helped us out a little bit. But can you quantify, and sorry if I missed it, can you quantify the two one-off gains in the fourth quarter at Ingalls and Mission Technologies? Thomas Stiehle: Yes, our Mission Technologies it was - the warranties and representations for the purchase of Hydroid was a settlement cash $49.5 million. And then Ingalls, we picked up from a frigate repair effort that we had in the late 90s and had cost against that. And we've been working to see how we could get a recovery on that. And we did get a settlement judgment in 2018, and then we were able to broker and sell that entity for $70.5 million. And you'll see in the K2, there's a little bit of a back end on that, too. We'll see how that plays out. But that's about all I want to say about this. It net's about $120 million gross, but obviously I pay tax on that. So net tax is the impact to the profitability and cash was $95 million. Pete Skibitski: Yes. I appreciate it. And then maybe a more top-level question, what gave you guys the confidence to raise kind of the midterm outlook despite the fact that we don't have a '24 budget appropriated yet. And then on the '24 supplemental that's out there, I think there's a lot of shipbuilding industrial base money in there. Maybe you could talk about that. And is there anything else in the supplemental that could benefit you guys? Christopher Kastner: Yes. So I'll start with that. The '24 budget is very positive for us. All our major programs are supported. LPD 33 is supported, which is really important to Ingalls. The submarine industrial base funding in the baseline budget is important. I think that's around $400 million, but the additional $3 billion in the supplemental, just further effort to improve the supply base. And there's also funds within that to improve the labor force. So getting both of those approved is really important. Now our confidence relative to the guide is just on the demand for our products. We see the demand for nominated products in shipbuilding, both in Newport News and Ingalls, but also Mission Technologies. And when we laid it out, we looked at the investments we're making and the opportunity it just makes sense. We're in a bit of an inflection point from a sales standpoint. And I actually think there's probably some tailwinds if we can get that summary industrial-based funding approved, executed and start improving throughput. Tom, do you have anything to add? Thomas Stiehle: Sure. Yes. We've talked about the demand for the products and services we have. When you go around the horn down there, Ingalls just won seven destroyers with a pretty good clip on the schedule side of that with options in the future for that. We see the 30-ish ship building plan, the five-year side app. We've talked about the 17 boats that are going to happen, already to long lead for the last two on Block V and then VCS Block VI. Those advanced procurements happen. They have to get definitized. We're talking about Columbia Build II, the RCOH for 75 and then just the preponderance of work that we have, change work and then the growth at Mission Technologies. We updated our annual plan every year, obviously, it's a 10-year look. And when we really kind of look, we say mid to long that's like 5% and five to 10 years. I know the street that's too far, but at least five years, we see growth rates at least that, if not higher. And things have to break our way with timely awards. We have to get labor any of the materials have to hit. But we can just see how the programs are playing out cost, inflation, orders, backlog and things of that nature. And we think it's appropriate to raise to these levels, and there's still opportunities above and below this for additional growth. Pete Skibitski: Great. Thanks guys. Thomas Stiehle: Sure. Operator: Thank you. Our next question is from Ron Epstein from Bank of America. Ron, please go ahead. Ronald Epstein: Hi, good morning. Christopher Kastner: Good morning, Ron. Ronald Epstein: Maybe just a follow-on - two questions, one on the supply chain and one on labor. On the labor front, how is retaining labor been? Because something we've heard across the industry, not specific to you guys, but generally across the industry, it's been tough to retain labor that companies are bringing in young mechanics, or whatever, they stick around for a year or two and then they take off. I mean how are you guys fairing on that front? And what are you doing to keep them? Christopher Kastner: Yes. Ron, thanks for that question. It's definitely been a challenge over the last couple of years citing the exact example that you brought up. And the team has a number of initiatives they've implemented over the last year to address the situation, and they center around 3 fundamental issues, really, which is flexibility for the team that we're hiring in work schedules potential time off. The craft person, man and women that we are now hiring is not fully prepared to come right into the workforce and start that kind of daily grind without having some flexibility in the work schedules. So, we have a number of pilots that we're working in that regard. We have some really interesting analytics around targeting geographies that we have better success in hiring and retaining. So, we have initiatives there. And then we have very focused incentives on critical skills. An example is machinists where you have to just pay them more to get them and keep them. So a number of initiatives, we pivot very quickly because we have such good data on what works, or what is going to work and what does work. So, we can expand upon it. But you're hitting on a fundamental issue in the industry right now in the manufacturing industry as a whole. And within defense and in shipbuilding is that the labor issue is obviously one of our major risk issues and one we're working very hard to resolve. I would also say the Navy understands it. And in the SIB funding, as I previously mentioned, there are workforce development issues as well. Getting people into the apprentice schools, because our retention rates in the apprentice schools. And established programs are significantly higher because the people that go in there are choosing that as a profession. So it's something we're well aware of. Our partners are well aware of it and the Navy is well aware of it, and we're addressing it. We've seen some rays of light as we ended the year, but you can't really trust a couple of data points. So we're going to keep working on it this year. Ronald Epstein: Got it. Got it. And then on the supply chain with the investment that the Navy is making, where does that have to be made? And where are the weaknesses in the supply chain today as you see it? Christopher Kastner: Yes. So they've done a really good job, both on the VCS program and on the DDG program, it doesn't get enough as much press, but on the DDG program as well as identifying single source or sole source vendors, in the supply chain that need investment to increase capacity because as you know, capacity had dwindled a bit in the previous 10 to 15 years. So they've done a very good job targeting those suppliers and making investments. And then there's some large critical material where there's a single source suppliers that are dealing with the same sort of labor and supply chain issues that we are. So to identify those potentially dual source them, or qualify an additional source is something that the Navy and we are looking at as well. So it's a very comprehensive review. I think it's managed very well by us and our partners. And I think it's going to get it the issue, but it doesn't turn overnight. Ronald Epstein: Got it. Got it. Thank you very much. Christopher Kastner: Thanks Ron. Operator: Thank you. Our next question is from Noah Poponak from Goldman Sachs. Noah, please go ahead. Your line is open. Noah Poponak: Good morning, everyone. Christopher Kastner: Good morning, Noah. Noah Poponak: Tom, can you give us the pieces that bridge your actual full year '23 free cash versus what you had last guided it to? Thomas Stiehle: So, we started the year with $450 million. We guided up to $500 million. You can - at $692 million, at completion, if you take out the two claims net tax, obviously, that's $95 million comes off the $692 million gets you to $597 million. And then the difference between the increased guide in Q3 of $500 million to $597 million, with strong collections in Q4. The team really stayed on it. We make sure that we've got a building on time and we had a clean Q4 receivables. So, it's just across the enterprise. There wasn't anything of significance to really note in that. Noah Poponak: Okay. So if I take that final and take out the claims, I guess, call that closer to $600 million. Can you bridge me from that to staying there in '24 while CapEx is going up as much as it is? If you're - because you got revenue guidance that's up kind of 2% or 3% in a flat segment operating margin? Thomas Stiehle: Yes. So I had mentioned in my comments upfront that this active and significant Navy participation in that. So I don't want to get too much into the details, but we're both contributing to it. But that's helping offset that increase there. So the guide of $600 million to $700 million, we took that down a little bit from where I left you last quarter as we exceeded this year, a little bit of timing, too, was in there on the collections. So a little overachievement in 2023, a little back off from where I left you last time at $700 million, now it's $600 million but I would not be alarmed, because of the higher CapEx in '24, '25 over '26. That it's going to be a major draw on the free cash flow from the discussions we've had in the past. That's been a little bit of guiding light. We definitely want to support our customer perform in existing contracts. Much of the work we're talking about for the new CapEx is on the new requirements that are coming. And as we broke with that relationship and how we make that happen, we're going to ensure that we kind of keep everything in lockstep. We got to be ships out to get cleaner and sooner, high-quality value. And on our side, we still have to be able to kind of run the business here and have good working capital. So all that's in the mix. And I would not be concerned on the 5.3% against the cash flow projections that we've given you. Again, that's why we gave you - again you probably won't see that too often a five-year projection going forward. But we wanted to settle everyone out there that, all that's been factored in, as we run the business and we manage our cash. Noah Poponak: So how will we actually... Thomas Stiehle: I'm sorry, go ahead. Go ahead. Noah Poponak: Well, I'm just wondering like if there's a Navy participation will we see - will not all of that actually be recorded in CapEx? Or will it flow to your CapEx and come back in your rates in your operating margin? Or how will we actually see that in your financials? Thomas Stiehle: So when we do our CapEx, obviously, our costs, we get incentivized to go do that. So it comes on the contract in the form of capital incentives, additional margin and cash that flows through there. That helps offset by additional cost of okay. I would comment just earlier to your question, as you try to kind of normalize the $692 million out to like $597 million as I said, when you pull up the two claims. It's the ramp that we've been talking about. If you go back to '21 it's $449 million and '22 at $494 million And now we've got the claims. Now it's ramped to $597 million and then we're at $600 million to $700 million. We've talked about a $700 million number in 2024 and just a little bit, its range bound now, because we exceeded in 2023. And now the $3.6 billion, the average of that is $720 million, and that's got to shape to it, obviously. It's going to be smaller upfront as the revenue incremental margin grows in the out uses going to be large in the back. I think that's appropriate right now. It's not a stretch number. It's a - it's conservative. It's a reasonable number. We have risk to kind of go work off. And I think that has both risks and opportunities associated with them. So I'd leave you with that. Noah Poponak: So the piece that goes through CapEx that's supported by the Navy that we'll just see that in future margins as it flows through your rates? Is that right? Thomas Stiehle: Yes. Margins and cash, yes. Noah Poponak: Okay. And then I guess, I just -- so for '24, with the margin guidance flattish year-over-year, I still struggle to see where that $300 million is coming from? Thomas Stiehle: So on the margin side, first, is the timing of when that happens, right? So you get that on contract and you've got to do the work, and there's a percentage of completion you take. So there's a lag on the margin side. And on the cash side, we try to make sure that we try and stay neutral so that we're not impacted as an incurring costs that high of 5.3% of CapEx, but that gets offset on the payment schedule of the CapEx, right? So the margin is not running exactly with the cash. But on our side, we're trying to keep it neutral here. So it's not going to impact our projections that we've given. Christopher Kastner: Yes. It's part of the total ship P&L, Noah. Noah Poponak: Okay. Okay. All right. I appreciate that. Thanks so much. Thomas Stiehle: Sure Noah Christopher Kastner: Thanks for the question. Operator: Thank you. Our next question is from George Shapiro from Shapiro Research. George, please go ahead. Your line is open. George Shapiro: Yes. I wanted to ask your actual ship revenues were like almost $300 million higher than what you -- the high end of the guide that you provided on the November call. So just wondering why, given that, to me, this is a fairly predictable business? And I have a different question, too. Thomas Stiehle: Yes, sure, sure. So from the MT side, we saw a nice rush at the end of the year of some receivables. I mentioned in my notes, it's about $80 million. So that was a big pickup. On the shipbuilding side, just the timing of material on how that floating here, the majority of the overage and where we felt we would land was on the material side. We have some outsourcing going on as well. So those costs flow through opportunistic that they landed in 2023 here. But we guided $86 million to $88 million, we came about $100 million over that and you kind of normalize that. It was good growth there. You saw it in shipbuilding better than 5%, 5.5% in shipbuilding. Ingall's up in the 7s and Newport News at 4.8%. But it was a sharing between all three divisions that just exceeded. It was a nice run at the end of the year on the revenue side. Christopher Kastner: George, you're familiar with material timing, you can miss by a month to 2 months from time to time. It just came in at the end of the year. Now unfortunately, it impacts the guide for the next year, right? So you had to -- we had to include that. But it was just timing. George Shapiro: Okay. And then the other one probably for Tom, if you had a $49 million benefit in Mission Systems from Hydroid I mean, it implies the rest of the business made $2 million. Now you alluded to some charges at some of the other businesses there. But if you could just provide some more information on that? Thomas Stiehle: Yes, that's right. A piece of that's timing on how the program is just playing out in the mix and execution on that. We did have one job over there that we just took a slight step back. It wasn't material. You won't find it in the K. I guess it's not at the threshold, there's a couple of million dollars on that. But not a lot of dollars when you break down that kind of business to begin with. And then when you take a small charge and then the timing of performance on how we book things, it came out to be a light quarter there. But overall, with the claim, 8.6% EBITDA, the RCOH 3.7%, you can normalize that out. It'll be a little bit on the bottom end of the guide that we gave you, 8 to 8.5 at the beginning of the year the EBITDA. But as we had mentioned throughout the year, there was the joint venture that we sold off, we picked up cash, but we lost some equity. And we've been kind of mentioning about a charge on a manufacturing effort that we have over this I think that's behind us right now kind of going forward. And I'm still very satisfied with the numbers that MC kind of put up across the board for revenue, margin and cash. George Shapiro: And Tom, if you could just provide the EAC for each of the sectors in the quarter? Thomas Stiehle: Sure. So for the quarter, that was $111 million of favorability, $43 million of unfavourability, a net of $68 million was made up of about 50% Ingall's. That net was 50% in Ingalls, about 35% of Newport News, about 15% in MT just for everyone on the call, you'll see in the K, which does the whole year, was $309 million growth, gross favorability for the whole year, $191 million gross unfavorable with a net of $118 million. And that breaks out to be about 75% Ingall's and 15% MT and 10% Newport News. I appreciate the question. George Shapiro: Okay. Thanks very much. Thomas Stiehle: Sure, George. Operator: We will now be taking our last question from Scott Mikus from Melius Research. Scott, please go ahead. Your line is open. Scott Mikus: I wanted to ask, is any of the customer-funded investments over the next 3 years? Is any of that contingent on the supplemental package making its way through Congress? Christopher Kastner: That's a good question, and I don't have that in front of me. That's a really good question. I don't have that in front of me. I know part of it -- I think a part of it is, but I couldn't quantify it for you. So we'll get that information for you, Scott. Scott Mikus: Okay. Got it. And then thinking about the shipbuilding revenue growth rate, you've for a long time, talked about labor being the governor on output there. So how much can these investments improve throughput in the shipyard if retention rates don't improve materially? Christopher Kastner: Well, it has to be both, right? And we -- when we do our projections, we risk adjust them. It's not assuming that everything works out perfectly. So it has to be both. We have to improve our retention rates. We have to improve out of the supply chain, and we have to improve capacity. And if we do that, then throughput will significantly increase. But you're absolutely correct. We have to be successful in both. Thomas Stiehle: Scott, I'd supplement that, too, that as we're building that out, how we hire, how we train, how we've retained we're not standing flat for it, but I know that the yards themselves have active plans on either outsourcing or contract labor, using additional overtime crew that we do have, working the three full shifts where there's a critical path. But there's dials that we have to try and offset that in the near term. You can't run that five or 10 years if you see - we see the demand we're building out organically that we'll be able to do things in the yards. But right now, there are dials and opportunity sets for additional labor outside the yard that we're employing right now. Scott Mikus: Okay. Got it. Thank you. Thomas Stiehle: Thanks. Operator: Thank you. This is all the time we have for the Q&A session today. So I would now like to hand back over to Mr. Chris Kastner for any closing remarks. Christopher Kastner: Yes. Thank you, and thank you for joining the call today. I'm very proud of our team's strong performance last year, and I'm confident that we will continue to create value for our shareholders this year. I would also like to remind you that we are hosting an Investor Day on March 20 and look forward to seeing many of you then. Have a good afternoon. Operator: Thank you, everyone, for joining today's call. You may now disconnect your lines, and have a lovely day.

Operator: Ladies and gentlemen, thank you for standing by and welcome to the Third Quarter 2023 HII Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference call is being recorded. [Operator Instructions]. I would now like to turn the call over to Christie Thomas, Vice President of Investor Relations. Ms. Thomas, you may begin. Christie Thomas: Thank you, operator, and good morning. I’d like to welcome everyone to the HII third quarter 2023 earnings conference call. Joining me today on the call are Chris Kastner, our President and CEO; and Tom Stiehle, Executive Vice President and CFO. As a reminder, statements made today that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or our future financial performance and involve known and unknown risks uncertainties, and other factors that may cause our actual results to be materially different from future results expressed or implied by these forward-looking statements. Please see our SEC filings for important factors that could cause our actual results to differ materially from expected results. Also in their remarks today, Chris and Tom will refer to certain non-GAAP measures. For reconciliation of these metrics to the comparable GAAP measures, please see the slides that accompany this webcast, which are available on the Investor Relations website at ir.hii.com. With that, I would like to turn the call over to President and CEO, Chris Kastner. Chris? Christopher D. Kastner: Thanks, Christie, and good morning, everyone. Today, we released quarterly results that demonstrate continued topline growth across all three of our divisions, steady operational performance and strong free cash flow generation. Our focus on the fundamentals of the business is evidenced through our strong 5.3% year-to-date revenue growth or outstanding 2.4 book-to-bill in the quarter at Mission Technologies and continued shipbuilding milestone achievements. Given our year-to-date results, we are pleased to increase our 2023 revenue and free cash flow guidance, and Tom will provide more information on these increases during his remarks. Our talented workforce remains focused on executing our strategy, supporting our customer's top national defense priorities by delivering quality platforms, technologies, and solutions, and in parallel, winning new business leading to growth opportunities. Before I get into the results, I would like to thank our HII employees’ at all three divisions for their dedication, innovation and customer focus. Let's turn to our results on page three of the presentation. Topline growth increased 7.2% from the third quarter of 2022, resulting in a record third quarter revenue of $2.8 billion. Diluted earnings per share was $3.70 for the quarter, up from $3.44 in the third quarter of 2022. New contract awards during the quarter were $5.4 billion, which resulted in backlog of approximately $49 billion at the end of the quarter, of which $27 billion is currently funded. Shifting to an update on our shipbuilding milestones. In the third quarter at Ingalls, we launched amphibious assault ship LHA 8 Bougainville, and lay the keel for LHA 9 Fallujah. Also, we successfully completed acceptance trials for NSC 10 Calhoun, and delivered her last month. In addition we successfully launched and christened the Flight III Arleigh Burke-class destroyer, DDG 128 Ted Stevens. Finally, LPD 29 Richard M. McCool Jr. is expected to complete acceptance trials and deliver in the fourth quarter of this year. Ingalls contract awards this quarter included a $155 million contract for the modernization of USS Zumwalt DDG 1000, and the significant award of seven of ten Flight III Arleigh Burke-class destroyer in the FY23 DDG multi-year procurement competition. At Newport News, we continue to make progress on the Virginia-class attack submarines as we laid the keel of Oklahoma, SSN 802, and we reached pressure hull complete on Arkansas SSN 800. We expect to Float off SSN 798 Massachusetts and deliver SSN 796 New Jersey before the end of the year. We also continue to make progress on nuclear-powered aircraft carrier construction CVN 79 Kennedy is focused on compartment completion and the test program having turned over more than 70% of the ship compartments to the navy and lighting off combat systems for integrated testing. CVN 80 enterprise is progressing well and is approximately 25% complete. The cost for the combined buy of CVN 80 and 81 has benefited from the bundling and early procurement of the majority of the material. So much so, that over 70% of the material for CVN 81 has already been placed on order generating significant savings over the traditional approach to ordering. However, due to major component delays from the supply chain driven primarily from COVID, and the labor and supply chain effects subsequent to COVID delivery of CVN 80 is forecasted to be approximately 12 months late. To mitigate the delay, HII has worked with the Navy to employ innovative build techniques, which minimize the impact of CVN 81. At Mission Technologies, we saw the third straight quarter of record revenue with sales of $685 million, 15% over the third quarter of 2022. In addition to strong sales growth, Mission Technologies also won several majors strategic competitions in the quarter, and now has posted over $5 billion in potential total contract value bookings year-to-date. These awards resulted in a third quarter backlog book-to-bill of 2.4 and a year-to-date backlog book-to-bill of 1.2. Significant wins in the quarter included the $1.4 billion joint network engineering and emerging operations task order, the $347 million contract for the Navy's Lionfish SUUV program and $244 million task order to integrate Minotaur software products into maritime platform for the Navy, Marine Corps and Coast Guard. Shifting to activities in Washington, the federal government began the new fiscal year under a continuing resolution, which funds government operations through November 17. Well, we applaud the Congress for including an anomaly in the CR that will allow DoD to deviate from typical restrictions and obligate funding to begin construction to begin construction of the second Columbia-class nuclear submarine, we look forward to Congress proceeding as expeditiously as possible on appropriations bills. We also look forward to Congress completing their work on the fiscal year 2024 National Defense Authorization Act with the respected bills of the house and the senate, reflecting strong support for shipbuilding and other national security priorities. Final outcomes will depend on eventual respective conference negotiations between the appropriations and authorization committees. We are encouraged by the support of our programs thus far in the four committees of jurisdiction during the fiscal year 2024 budget cycle. Now turning to labor, we have hired nearly 5,400 craft personnel year-to-date through the third quarter, which puts us 8% ahead of our full-year plan of approximately 5,000. We have work to do to improve our retention rate and the shipbuilding teams are laser focused on addressing this challenge. Retention and attendance and the acceleration of workforce development will remain consistent focus areas for us going forward. In summary, this was a very strong quarter, demonstrating continued focus and progress on our strategy of executing against our backlog and driving growth in Mission Technologies. We remain committed to continuing to create value for all of our stakeholders, our employees, customers, shareholders, suppliers, and communities. And now, I will turn the call over to Tom, for some remarks on our financial results. Tom? Thomas E. Stiehle: Thanks, Chris, and good morning. Today, I'll briefly review our third quarter results. For more detail on the segment results, please be refer to the earnings release issued this morning and posted to our website. Beginning with our consolidated results on slide six of the presentation, our third quarter revenues of $2.8 billion increased approximately 7.2% compared to the same period last year, and represents a record third quarter result for HII. This increased revenue was largely attributable to growth at Mission Technologies and Ingalls shipbuilding. Operating income for the quarter of a $172 million increased by $41 million or 31% from the third quarter of 2022, and operating margin of 6.1% compares to operating margin of 5% in the same period last year. The increase in operating income was primarily due to higher segment operating income, a more favorable operating FAS/CAS adjustment and more favorable non-current state income taxes compared to the prior year period. Net earnings in the quarter were a $148 million compared to a $138 million in the third quarter of 2022. Diluted earnings per share in the quarter was $3.70 compared to $3.44 in the third quarter of the previous year. Moving on to slide seven, Ingalls revenues of $711 million in the quarter increased to $88 million or about 14% from the same period last year, driven primarily by higher volumes on amphibious assault ships and surface combatants. Ingalls operating income of $73 million and operating margin of 10.3% in the quarter increased from last year, primarily due to higher volumes I mentioned earlier, and favorable changes in contract estimates compared to the prior year. At Newport News, revenues of $1.45 billion increased $8 million or 1% from the same period last year. Newport News operating income for Q3 was $90 million, a decrease of $12 million compared to the third quarter of last year. Operating income was lower due to contract incentives earned in the Columbia-class program in the third quarter of 2022, partially offset by improved performance on the Virginia-class submarine program. Shipbuilding operating margin in the third quarter was 7.5%, slightly ahead of the outlook we had provided for the quarter. Our shipbuilding operating margin outlook for the full year remains unchanged. And as we have previously noted, our expected shipbuilding milestones for 2023 are concentrated largely in the fourth quarter. At Mission Technologies, revenues of $685 million increased $90 million or about 15% compared to the third quarter of 2022, primarily due to higher volumes in mission based solutions, driven by our C5ISR and cyber, electronic warfare, and space programs. Mission Technologies operating income of $24 million compares to operating income $14 million in third quarter of last year. The increase in operating income was driven primarily by the higher volumes I just mentioned, as well as improved performance in unmanned systems. Current results for Mission Technologies included approximately $27 million of amortization of purchased intangible assets. Mission Technologies EBITDA margin in the third quarter was 8.2%. Turning to slide eight, Cash from operations was $335 million in the quarter. Net capital expenditures were $42 million or 1.5% of revenues. Free cash flow in the quarter was $293 million. This compares to cash used in operations of $19 million. Net capital expenditures of $77 million or 2.9% of revenues and free cash flow of negative $96 million in the third quarter of 2022. Cash contributions to our pension and other postretirement benefit plans were $11 million in the quarter. During the third quarter, we paid dividends of $1.24 per share or $50 million in aggregate. We also repurchased approximately 100,000 shares during the quarter at an aggregate cost of approximately $21 million. Year-to-date through the third quarter, we have repurchased approximately a 176,000 shares as an aggregate cost of approximately $37 million. Moving on to slide nine, I'd like to provide an update on our pension sensitivities for 2024. Our forecast in early 2023 assumed asset returns of 8% and a discount rate of approximately 5.5%. Through the end of the third quarter, discount rates have increased approximately 60 basis points and our year-to-date asset return is roughly 4.6%. Pension related numbers are subject to year-end performance and measurement criteria. We will provide a multiyear update of pension estimates on our fourth quarter earnings call in February. Also I would like to highlight that our pension funded status remains strong and has improved year-to-date. Additionally, I will note that the cash flow impacts related to pension changes remain minimal. Moving on to slide 10. Given the strong third quarter free cash flow, we are increasing our 2023 free cash flow guidance to approximately $500 million, an increase of $75 million from the prior midpoint guidance. This increase is primarily driven by the conclusion of the negotiations regarding the payment of COVID advances as well as positive cash flow contributions for Mission Technologies. We continue to expect approximately $1.2 billion of free cash flow over the two-year period of 2023 and 2024. I'll highlight that we continue to expect to distribute substantially all free cash flow shareholders through 2024 after planned debt repayment, which is currently on track. Turning to slide 11, in addition to increasing our fiscal year ’23 free cash flow guidance we’re increasing our revenue guidance of both shipbuilding and Mission Technologies. Given the strong third quarter revenues across all three divisions, we are increasing the midpoint of shipbuilding revenue guidance by revising a range from $8.4 billion to $8.6 billion to a range of $8.5 billion to $8.6 billion, and increasing our Mission Technologies revenue guidance from approximately $2.5 billion to approximately $2.55 billion. This is an increase to the midpoint of shipbuilding revenue guidance of $50 million an increased to Mission Technologies revenue guidance of $50 million. Additionally, we are reaffirming our shipbuilding Mission Technologies margin guidance. To summarize, we delivered strong revenue growth in the third quarter and finished slightly ahead of our margin expectations for the quarter. We also delivered strong free cash flow. Mission Technologies had an impressive third quarter backlog book-to-bill of 2.4, and year-to-date has the potential total contract value awards of over $5 billion, in addition to a robust opportunity pipeline of $70 billion. Looking to the end of the year, we are pleased to raise 2023 revenue and free cash flow guidance and reaffirm margin guidance as we continue to execute the milestones and commitments that we've laid out. With that, I'll turn the call back over to Christie to manage Q&A. Christie Thomas: Thanks, Tom. As a reminder to everyone on the call, please limit yourself to one initial question and one follow-up so we can get as many people through the queue as possible. Operator, I will turn it over to you to manage the Q&A. Operator: Thank you, Christie. [Operator Instructions]. Our first question today comes from Scott Deuschle from Deutsche Bank. Scott, your line is now open. Please go ahead. Scott Deuschle: Hey, good morning. Christopher D. Kastner: Good morning, Scott. Scott Deuschle: Chris, what's the financial impacts from the delay on CVN 80? I think you said it was 12 months. And then was that delay known when you closed the books and accrued the EACs for the quarter? Christopher D. Kastner: Yes, approximately 12 months. And we've been holding that risk for a while on our financials. So there's no financial impact related to it. That impact is driven by some issues in the supply chain and some major equipment in the bottom of the ship, but no financial impact related to it. And the team's doing their best to mitigate the impact. The good news on that is we do have some EPA protection, which mitigates it a bit. But the team's focused on it and they're going to do their best to mitigate the impact going forward. Scott Deuschle: Okay. That's great. And then I think one thing that's been maybe a bit confusing to investors is trying to understand the impacts to Huntington or the read through when your partner books negative EACs on Block V Virginia-class boats due to supplier costs. Can you just maybe, like, level set us on how we should interpret that? And I realize your booking rates are probably lower in there. So it doesn't necessarily mean you book, need to book negative EACs, but does it have any impact to your longer term margin trajectory on Block V? Thanks. Christopher D. Kastner: Yes. So, we evaluate our EACs on all our programs on a quarterly basis and take appropriate adjustments up or down as we see fit. I continue to believe that there's opportunity in Block V. As we transition out of the Block IV boats and get into Block V, we should have some upside. But I wouldn't comment on our partner's accounting, but I'm very comfortable with where we're at. Scott Deuschle: Okay. Great. Thank you so much. Christopher D. Kastner: Sure. Operator: Thank you. Scott. Our next question today comes from David Strauss from Barclays. David, your line is open. Please proceed with your question. Josh Corn: Hi. Good morning. This is actually Josh Corn, on for David. Christopher D. Kastner: Hi. Josh Corn: I wanted to ask about the outlook for shipbuilding margins in 2024 if you see any improvement and what some of the drivers might be. Thanks. Christopher D. Kastner: Yes. So I fully expect incremental improvement in shipbuilding margins as we move forward. It's all about transitioning out of the Block IV boats in Newport News and the Block V and continuing to improve in Newport News. So the story hasn't really changed quarter-to-quarter. Newport News continues to stabilize. Labor is good. Hiring is good. We still need to work on retention. But I'm comfortable with where we're at. Josh Corn: Okay. Thank you. Christopher D. Kastner: Sure. Operator: Thanks very much. Our next question comes from Doug Harned from Bernstein. Doug, your line is now open. Please go ahead. Doug Harned: Good morning. Thank you. Christopher D. Kastner: Good morning, Doug. Doug Harned: On your margins, at Newport News, you talked about you met your goal of 7.4% for the quarter. But when you look at the margin improvement you're going to have to have in Q4, can you walk through what has to happen there because there you're going to have to get a lot of upside in margins in Q4 to meet your guidance, it looks like. Thomas E. Stiehle: Hey, Doug. Yes, it's Tom here. So, yes, we have been consistent throughout the year here saying that the shipbuilding milestones were in the back half of the year, specifically for Newport News. We have two large milestones here in the 796, delivery and then the 798 float off. So, that's going to be a driver on the back half of the program. And there's a lot of focus down there. Chris, has talked about the hiring and the attrition that we're doing, the extra training, the operating system that we've added down there. Think as COVID becomes further in the rearview mirror against the portfolio of contracts that we have right there. And opportunity sets are bound as we finish off the ships that were impacted to start new ships. Although we saw them up at a lower level, that incremental margin improvement story exists especially at Newport News. But specifically, just on Q4, I think for the last 13 weeks of the year, it's continued performance on the ships that we have here. And kind of hitting the milestones I just described, ensuring that we're getting progress and watching, the heads we have on the programs, and keeping the rework in check. Christopher D. Kastner: Yes. To support that, Doug, it's absolutely 796 needs to get delivered, that boat is essentially complete, which need to get to trials, 798 needs to float off and then 29 needs to continue to complete their test program and get through their trial efforts. So, it's going to be a race to completion on 29, but we're fine with where we are now. Doug Harned: And then when you look at the submarines, in Columbia-class, becoming more and more important. I mean, how what is the, can you describe what the mix is right now in your work between Columbia-class versus Virginia-class and how you think of Columbia-class as it grows, affecting margins over time. Christopher D. Kastner: Well, Columbia-class, as you know, we only build 22% to 23% of that, both the [bells] (ph) and the sterns. It'll grow at an importance at Newport News and provide a good source of growth, but how we perform on the VCS program is going to really dictate how Newport News does in the long run. The Columbia-class is important work. It's high priority work, but it really won't dictate a margin performance going forward in Newport News. Doug Harned: Okay. Very good. Thank you. Christopher D. Kastner: Thank you, Doug. Operator: Thank you, Doug. Our next question comes from Ron Epstein from Bank of America. Ron, your line is open. Please go ahead. Jordan Lyonnais: Hey. Good morning. This is Jordan Lyonnais on for Ron. Christopher D. Kastner: Good morning. Jordan Lyonnais: Would you guys be able to give more color. Good morning. Would you guys give more color on the retention rates of where they are now and also to for all the new hires that you have when you expect them to reach optimal efficiency? Christopher D. Kastner: Yes. So, we don't provide our retention rates. We're meeting or actually beating our hiring forecast for the year. So, feel good with, where we are there. The second -- what was your second question again? I'm sorry. Jordan Lyonnais: How long for the new hires, for the fully working? Christopher D. Kastner: Yes. So, we talk about three to five years, the interesting stuff. Some of the interesting things we have going on in Newport News is digital shipbuilding, which we think will increase the time to talent. But we generally think three to five years and we can accelerate that with some of our digital tools. Jordan Lyonnais: Got it. Okay. And then one other question too. For the office funding, the $3 billion and then also the, other supplemental from the White House was $3 billion. Are you guys seeing that flow through, or do you expect it? Can you size it? Christopher D. Kastner: Yes, we absolutely expect it eventually to flow through. We – office is very important to us. We actually see that as an opening of markets, right? It's an opening of markets in the U.K. and Australia. We think in the short term here, it's really not material financially, but funds could flow next year in important areas like workforce development, supply chain assessment, infrastructure support. We're following the Navy's lead on this. They absolutely are being very methodical, in how they think through this, but we're, we're standing ready to support them and look forward to. But it's really from top line standpoint, it's more of a medium to long-term opportunity, but we need to make sure that we're taking the steps now to ensure that we're prepared for. Jordan Lyonnais: Great. Thank you guys so much. Christopher D. Kastner: Sure. Operator: Thank you. Our next question comes from George Shapiro from Shapiro Research. George, your line is open. Please go ahead. George Shapiro: Hi. Yes. Good morning. Christopher D. Kastner: Morning. George Shapiro: Chris, I guess you increased your free cash flow for this year, but reduced it for next year. So, what was the timing that really caused that to occur? Because, obviously, you left a two year number the same. Christopher D. Kastner: Yes. It's just timing, George. As you know, from time-to-time, we're you get receipts flowing sooner than you expect. The team's working very hard on working capital. It's a focus for us. I'll let, Tom go into specifics. Thomas E. Stiehle: Yes. So specifically here on 2023, what we've seen is some good performance on Mission Technologies, both topline and the cash collections. And how they're performing in the MBSS. So, that is positive. Also, just kind of hitting on milestones right now, is adds, to the free cash flow at the end of the year, as well as we've come through the COVID repay with our customer set. We've worked ourselves through strategy and algorithm, how that applies to the contract. And that was a couple of dollars there too. So, that's the confidence in the lift that we went from the midpoint of 425 to 500 for this year. As I've been pretty consistent on our five year target, the guiding light from mid-year this year through the end of next year is $1.2 billion. So, we brought this year up to 75. A piece of that, as I said, is the retentions with the COVID. So, that was just timing anyway between ’23 and ‘24. If you notice between $5 and now $700 next year now from $780, it's still the $1.2 billion. I think there's tailwinds against that as we finish out this year. And opportunity sets kind of going forward, but we didn't want to get ahead of ourselves. So we maintained a $1.2 billion target here. Okay. George Shapiro: Okay. And just to follow-up, on the margins in the fourth quarter that, Doug, had asked about I mean, specifically, it looks like the fourth quarter's got to be about 9.2% just to get to the low-end of your guide. Now, given the milestones in the fourth quarter, I would assume the biggest jump in the fourth quarter from normal is going to be at Newport News. Thomas E. Stiehle: I think, the three remaining milestones are all important for us to kind of get into the range. And, we're watching them as Chris, has a pathway on each of the three here. 796 is ready to go. I think we're just waiting for transfer that ship. 798 should float off before the end of the year. And LPD 29, we've been saying since the beginning of the year that it's just a race to, align up the final tasks, the ship to see in serve approving the ship, and then we see that whether that happens in December, the end of December or at the beginning of next year, those three are pretty significant milestones as they play out as we go forward here. I think opportunity sets on there may be a little EPA adjustment as we've seen rates high, and then just the consistent performance seen, we've seen some settling of performance over the last couple of quarters. So, I think that will play out. ‘23 is opposite on ‘22 where we started off really hot and heavy in the first couple of quarters. But, this isn't a surprise for us that Q4 was going to be a big quarter for us. And, I think we're in the lane right now to kind of we're reaffirming our guidance there on profitability for shipbuilding between [indiscernible]. George Shapiro: Okay. Thank you very much. Christopher D. Kastner: Thanks, George. Operator: Thank you, George. Our next question today comes from Seth Seifman from JP Morgan. Seth, your line is open. Please go ahead. Seth Seifman: Thanks very much. Good morning. So, I saw that, you guys -- Christopher D. Kastner: Morning. Seth Seifman: Morning. So, you guys increased the revenue guide for shipbuilding. And I wonder if you could talk maybe a little bit more over time about the opportunity for growth at Ingalls, with the, especially with the latest multi-years on the DDG, how that growth profile kind of looks now maybe versus, several months ago and, to the extent to which that can maybe be helpful for the margin mix. Christopher D. Kastner: Yes, this is Chris. I'll start and then Tom can complete, if we need to here, but they were the DDG 51 really solidifies Ingalls based for the next few years and creates a very stable business down at Ingalls. And we don't give growth rates by division. But what we're seeing is a bit of an inflection point from a topline standpoint, both in shipbuilding and Mission Technologies, I don't want to get in front of it, we'll wait till the end of the year before we can communicate that. But, well, I think we're in a pretty good place. Growth has shown up in shipbuilding. It's driven by the supply chain and stabilization of labor. And then Mission Technologies is just winning stuff. They're converting their re-competes, they're converting new business, all end markets that we think are very strong. So yes, it's a bit of an inflection point. We're going to talk a lot more about that after we get to the end of the year because we want to close the year strong. But we feel pretty positive about growth going forward. Thomas E. Stiehle: Yes. I'll hop on the back of that too. Seth Seifman: Perfect. Thomas E. Stiehle: Yes, Seth, I’ll hop on the back of that too. I'm pretty happy with what I'm seeing down at Ingalls there. You know, NSC, we delivered NSC 10, so there's one more ship set there. We've talked about how that portfolio can sustain itself and still get 3%, 3% plus potentially if things break their way on just the three major programs down there. We've seen that with the DDGs, the seven DDGs on contract, and now more most recently in August timeframe, they received the seven more there. So, they know what they're building over the next decade. They can line that up from a planning, a labor resource and material perspective, and that's going to kind of really help them drive consistent performance in production down there. Also on top of that, we've seen a maturation of the 1000 program, the DDG 1000 program. So we put, the, first of, there's two on contract, we put the first monetization on contract earlier this year. All three of those ships will be down there over the next two to three years going through an 11 to 12 month modernization process. And that's a good base for them to employ the workforce there too. So I see, good healthiness even with the NSC program sun setting for Ingalls, to hit the 3% guided that we've had through 2023 and going forward. Yes. Seth Seifman: Excellent. Okay. Thanks very much. I'll stick to one this morning. Operator: Thank you. [Operator Instructions] Our next question today comes from Myles Walton from Wolfe Research. Myles, your line is open. Please go ahead. Unidentified Participant : Good morning. This is actually Emily on for Myles. Hi, everyone. Christopher D. Kastner: Hi, Emily. Unidentified Participant : So on a ship -- Hi there. Another shipbuilding margin question. So, thanks for some additional color on 2024, but I was wondering, are you all able to do any leveling of quarterly cadence for ‘24 at this point? Is there a skew towards either half of the year or quarter-to-quarter? Any color on that would be great. Thomas E. Stiehle: Yes. So I think it's just a little premature. Obviously, we have some tentative plans right now. We work ourselves through the final planning process for ‘24 and on at the end of this year. We bring that to our internal management and Board here. Once we get that kind of solidified, I'd really like to take a look to see at the actuals at the end of the year, we've talked about those milestones, which we anticipate to hit in Q4, but they just get trickle into Q1. If that does, it would change the shape. So I wouldn't want to get ahead of myself. But, we still maintain the same thesis here of expectation of incremental margin improvement. We think, I mentioned earlier with COVID getting further behind us, us putting the energy into hiring, extra training, retention. The material seems like it's stabilized. It's not where we want it to be, but we have to get that improve, with the maturation of the workforce, anticipation of less rework, the roll over or the portfolio of the existing ships that have increased EACs and scheduled extensions. There's a lot of positiveness kind of going into the follow on years here. And I would anticipate that to grow for shipbuilding. On the Mission Technology side, we've talked about still scaling that business. We've seen some fantastic growth going on the topline. And we have some work to go do and how we get our margins higher there, a little bit more on the fixed price instead of just, at 85% in cost type, additional technology, which should be able to have us deploy IP technology, more products, a little bit more products and services. That should be able to put a premium on what we bid and what we achieve there. So, I would expect, improvement in the margin and at the Q4 call in February we'll give you the shape of next year. Unidentified Participant : Sounds good, Tom. And then, one quick follow-up. So on the maintenance side, that's something that the Navy been pounding the drums about for a long time. Have you all been getting any more visibility from the Navy customer about timeline for maintenance, we know pretty well about the carrier cycle, but anything on the submarine side, I know those sometimes pop up, and it's a good surprise, but it's hard to plan specifically and then also on the surface side. Christopher D. Kastner: Yeah. So, Emily, this is Chris. We don't expect real surprise pop ups from a maintenance standpoint. We expect fairly consistent revenue for maintenance at Newport News. At Ingalls, we'll be opportunistic if we see stuff that we could potentially participate in. But right now, it's not in their forecast other than the work we're doing on DDG 1000, which is really not maintenance. It's upgrades. Unidentified Participant : Great. Thanks, Chris. Christopher D. Kastner: Sure. Operator: Thank you. Our last question today comes from Gautam Khanna from TD Cowen. Gautam, your line is now open. Please go ahead. Gautam Khanna: Hey. Good morning, guys. Christopher D. Kastner: Good morning, Gautam. Gautam Khanna: Hey. Quick question. On LPD 29, I just curious your confidence level on that getting, delivered this quarter. Is it a very late in the quarter kind of skew? And just how, if you could give us some framework on what the EAC sensitivity is to that in the fourth quarter? Christopher D. Kastner: Yes. So Gautam, it'll be a race to the finish on 29. We need to get through the final trials, get in serve in, get it approved and delivered. There's some sensitivity, obviously, as we come through the final, throws on that ship from an EAC standpoint. And then a lot will depend on how much work remains subsequent to delivery. I don't have a specific range for you, but we tend to, as you know, we tend to risk adjust our opportunities as we flow towards the end of the year and LPD 29 is right in the middle of that risk profile. Gautam Khanna: Gotcha. Okay. So would you argue that the implied shipbuilding range for Q4 bounds that risk? Because it is a pretty wide margin range, obviously, that’s implied shipbuilding. Christopher D. Kastner: Yes. I don't want to comment on that. There's a lot of variables go into that that range, Gautam. LPD 29 is one of those variables. Gautam Khanna: Okay. And just, wanted to get your sense on given all the labor challenges that you guys have faced on over the last couple of years, what is kind of an appropriate margin increase rate shipbuilding next year. Like, what would be a good scenario or a realistic scenario? I mean, are we talking, like, 10, 20 basis points? Are we talking, a more significant step up, next year in shipbuilding? Christopher D. Kastner: Yes. So we're not going to give specifics on improvement in 2024. We'll give that on our year-end call. But I do continue to expect improvement. I just think it's a bit premature. Let's get through the end of the year, see how we close-up, close strong, and then we'll give you information on the year-end call. Gautam Khanna: All right. Thank you very much guys. Appreciate it. Christopher D. Kastner: Sure. Thanks, Gautam. Operator: Thank you. There are no further questions at this time. So, I'd now hand the call back to Mr. Kastner for any closing remarks. Christopher D. Kastner: Sure. Thanks for joining us on the call. Before we wrap up, I'd like to note that we'll be hosting Investor Day on March 20th in New York. So, be on the lookout for more information. Thanks again for your interest in HII and joining us on today's call. Operator: That concludes today's conference for everybody. Thanks very much for joining. You may now disconnect your lines. Have a great rest of your day.

Operator: Ladies and gentlemen, thank you for standing by and welcome to the Second 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 turn the call over to Christie Thomas, Vice President of Investor Relations. Ms. Thomas, you may begin. Christie Thomas: Thank you, operator, and good morning, everyone. Welcome to the HII second quarter 2023 earnings conference call. Joining me today on the call are Chris Kastner, our President and CEO; and Tom Stiehle, Executive Vice President and CFO. As a reminder, any forward-looking statements made today that are not historical facts are considered our company's estimates or expectations and are forward-looking statements made pursuant to the Safe Harbor provisions of Federal Securities Laws. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. For additional information regarding factors that could cause actual results to differ materially from expected results, refer to our SEC filings. Also, in their remarks today, Chris and Tom will refer to certain non-GAAP measures. For reconciliations of these metrics to the comparable GAAP measures, please see the slides that accompany this webcast, which are available on the Investor Relations website at ir.hii.com. With that, I would like to turn the call over to our President and CEO, Chris Kastner. Chris? Chris Kastner: Thanks, Christie. Good morning, everyone. Thank you for joining us. The HII team delivered another solid quarter. Our results demonstrate continued top line growth and steady operational performance. We continue to make progress on our strategy, executing on our significant shipbuilding backlog and growing mission technologies. Not only are we executing on our shipbuilding backlog, we are also delivering all domain solutions to our unique capabilities to connect the different platforms that our customers use to perform their missions. Now let's turn to our results on Page 3 of the presentation. Top line growth was 4.7% from the second quarter of 2022, resulting in second quarter revenue of $2.8 billion. Diluted earnings per share was $3.27 for the quarter, down from $4.44 in the second quarter of 2022. New contract awards during the quarter were approximately $2.6 billion, which resulted in backlog of approximately $47 billion at the end of the quarter, of which $24 billion is currently funded. In the second quarter Ingalls, we laid the keel for LPD 31, Pittsburgh, and successfully completed builder's trials for NSC 10 Calhoun. We also successfully completed acceptance trials and delivered the first Flight III Arleigh Burke destroyer DDG 125, Jack H. Lucas. We expect to launch DDG 128 Ted Stevens, and LHA 8 Bougainville and deliver NSC 10 and LPD 29. Richard M. McCool, Jr., later this year. At Newport News, we christened Virginia class attack submarine SSN 798 Massachusetts, and redelivered the Nimitz class aircraft carrier CVN 73 USS George Washington. Later this year, Newport News expects to float off SSN 798 and deliver SSN 796 New Jersey. As I previewed last quarter CVN 79 Kennedy received the contract modification intended to optimize its construction schedule and deliver a more capable ship to the fleet earlier, which update the expected ship delivery to 2025. Slide 4 summarizes the projected shipbuilding milestones for 2023 and 2024, reflecting the updates for the CVN 79 contract modification and an update for the expected shipment of the final module of Virginia class submarine Block IV SSN 801, Utah, which is moved to 2024. At Mission Technologies, we saw the second straight quarter of record high revenue of $645 million, with sales growing 7.5% over the second quarter of 2022. Mission Technologies had multiple wins in the quarter across its business unit, capped off with the early third quarter win at J-NEEO, a $1.4 billion contract vehicle that serves the national security innovation network, and its mission partners by enabling the transition of innovation in both speed and scale from the lab to the battlespace. In addition to these accomplishments, we recognized and are committed to the broader international opportunities represented by the OCAS [ph] agreement, which directly align with our capabilities in nuclear submarines, as well as other emerging technologies as set forth in Pillar 2 of the OCAS agreement. Turning to activities in Washington, the President's budget request for fiscal year 2024 is under consideration by Congress. And as Bill's progresses through both chambers, we continue to see bipartisan support for our programs. We are pleased that the Armed Services Committees have shown strong support for shipbuilding to include authorizing funding for LPD 33 and multi-year procurement authorization for the next block of Virginia class submarines. Both authorization bills which had been passed by the respective chambers, authorized funding for the requested procurement of two Virginia class submarines, one Columbia class ballistic missile submarine and two DDG 51 Early Bird destroyers. Both House and Senate Appropriations Committees include multi-year procurement authority for Block VI Virginia class submarines, and fund the procurement of two Virginia class submarines, one Columbia class ballistic missile submarine and two DDG 51 Early Bird destroyers. The Senate Appropriations Bill provides advanced procurements funding for LPD 33 in FY24, and a third DDG 51 in FY25. And the House Appropriations Bill includes language supporting a stable rate of procurement of amphibious warfare ships. Final outcomes will depend on respected conference negotiations between the Appropriations and the Authorization Committees. Now, moving to labor, through the second quarter, we hired over 3,200 craftsmen and women on a solid pace to meet our full year plan of approximately 5,000. Although we're meeting our hiring targets, attrition remains high and labor is still the greatest risk to meeting our plan. We are continuing to devote substantial effort at both shipyards in the areas of recruiting, robust training and retention of our workforce in this very challenging labor environment. In summary, the strong demand for our products and services coupled with continued progress on our strategy of executing against our backlog and growing Mission Technologies sets the foundation for HII to continue to fulfil our mission to deliver the world's most powerful ships, and all the main solutions and service of the nation. And now I'll turn the call over to Tom for some remarks on our financial results. Tom? Tom Stiehle: Thanks, Chris, and good morning. Today I'll briefly review our second quarter results. For more detail on the segment results, please refer to the earnings release issued this morning and posted to our website. Beginning with our consolidated results on Slide 5 of the presentation, our second quarter revenues of $2.8 billion increased approximately 4.7% compared to the same period last year and represents a record second quarter results for HII. This increased revenue was largely attributable to growth at Newport News Shipbuilding and Mission Technologies. Operating income for the quarter of $156 million decreased by $35 million or 18% from the second quarter of 2020 and operating margin of 5.6% compared to operating margin of 7.2i in the same period last year. The decrease in operating income was primarily due to lower segment operating income, partially offset by more favorable operating FAS/CAS adjustments and more favorable non-current state income taxes compared to the prior year period. Net earnings in the quarter were $130 million compared to $178 million in the second quarter of 2022. Diluted earnings per share in the quarter was $3.27 compared to $4.44 in the second quarter of the previous year. Shipbuilding results in the quarter were in line with our expectations and slightly stronger than the outlook we provided on a first quarter call. Segment operating income in the second quarter of 2022 benefited significantly from favorable adjustments from facilities, capital and economic price adjustment clauses at both Ingalls and Newport News, making for difficult comparison year-over-year as expected. Moving on to Slide 6 Ingalls revenues of $664 million in the quarter increased $6 million or about 1% from the same period last year, driven primarily by higher revenues on the DTG program partially offset by lower NSC program revenues. Ingalls operating income of $65 million and operating margin of 9.8% in the quarter declined from last year, as expected primarily due to lower favorable changes in contract estimates from facilities capital economic price adjustment clauses, as well as lower risk retirement on LPD 30 Harrisburg. At Newport News revenues of $1.5 billion increased by $76 million or 5.3% from the same period last year, due to growth in both aircraft carrier and submarine construction revenues. Newport News operating income in the second quarter of 2023 was $95 million, an increase of $1 million or 1.1% compared to the second quarter of last year. Operating income was largely consistent year-over-year, as favorable VCS program adjustments were offset by lower favorable changes in contract estimates from facilities capital and economic price adjustment clauses. Shipbuilding operating margin in the second quarter was 7.4%, above the 7% outlook we had previously provided for the quarter. Our shipbuilding operating margin outlook for the full year is unchanged. We have noted previously that our expected milestones for 2023 are concentrated in the second half of the year, and largely in the fourth quarter. At Mission Technologies revenues of $645 million increased $45 million or 7.5% compared to the second quarter of 2022, primarily driven by higher volumes and mission-based solutions, which includes our C5ISR, cyber/electronic warfare and live virtual and constructive training capabilities. Mission Technologies operating income of $9 million compared to operating income of $25 million in the second quarter of last year. The second quarter of 2022 included additional non-recurring equity income of approximately $15 million for an equity method investment in a ship repair joint venture, which was sold in the second quarter of 2023. Cash proceeds of $61 million from the sale are included in investing cash flows. Additionally, negative equity method adjustment of $6 million was recorded from the sale of the ship repair joint venture. Current results for Mission Technologies included approximately $28 million of amortization of purchased tangible assets. Mission Technologies EBITDA margin in the second quarter was 6.7%. Turning to Slide 7, cash from operations was $82 million in the quarter. Net capital expenditures was $68 million or 2.4% of revenues. Free cash flow in the quarter was $14 million. This compares to cash from operations of $267 million, net capital expenditures of $59 million or 2.2% of revenues and free cash flow of $208 million in the second quarter of 2022. Cash contributions to our pension and other post retirement benefit plans were $11 million in the quarter. During the second quarter we paid dividends of $1.24 per share or $50 million in aggregate. We also repurchase approximately 37,000 shares during the quarter at an aggregate cost of approximately $7 million. Year-to-date through the second quarter, we repurchased approximately 76,000 shares at an aggregate cost of approximately $16 million. Moving on to Slide 8, our free cash flow outlook through 2024 remains unchanged, as do our capital allocation priorities. Regarding 2023 free cash flow guidance, we continue to see $400 million to $450 million as the most likely range. We continue to work with our customer on the timing and mechanics regarding the repayment of COVID-related advances, which is currently forecasted to occur in 2023. At this time, we do not have an agreement in place that will increase our free cash flow above the guidance range we have provided. I'll highlight that we continue to expect to distribute substantially all free cash flow to our shareholders through 2024, after planned debt repayment, which is on track. Turning to Slide 9, we are reaffirming our 2023 segment guidance. I will also provide some color on how we see the third quarter and the remainder of the year. Regarding the third quarter, we expect shipbuilding revenue to be approximately $2.1 billion and shipbuilding operating margin to be consistent with the second quarters result of 7.4%. This expectation does imply meaningful improvement in the fourth quarter results, which is consistent with when we expect our most impactful shipbuilding milestones to occur. For Mission Technologies we expect third quarter revenue to be similar to the second quarter results and expect third quarter operating margin of approximately 2.5%. Given second quarter results and the impact of the equity method accounting adjustment I referenced earlier we currently believe that Mission Technologies' 2023 operating and EBITDA margins are likely to be closer to the low end of the guidance ranges we have provided. We expect third quarter free cash flow to be approximately $100 million. Again, there is no change to our guidance for the year. We expect our cash flow generation will fall predominantly in the fourth quarter. Our cash expectation is consistent with both our expected timing for milestones and our normal cash cadence of the calendar year. To summarize, the second quarter shipbuilding results were largely in line with the expectations we provided on our first quarter call. Newport News and Ingalls continued to hit critical shipbuilding milestones. Mission Technologies delivered impressive year-over-year revenue growth. The Mission Technologies team continues to capture meaningful contract wins and maintains a very robust pipeline. We have great confidence in their future and the long term value creation opportunity. Finally, we are pleased to reaffirm our full year segment guidance as we remain focused on executing the milestones and commitments that we've laid out. With that I'll turn the call back over to Christie to manage the Q&A. Christie Thomas : Thanks, Tom. As a reminder to everyone on the call, please limit yourself to one initial question and one follow-up so we can get as many people through the queue as possible. Operator, I will turn it over to you to manage the Q&A. Operator: Thank you. [Operator Instructions]. And our first question today is from the line of Doug Harned from Bernstein. Doug, your line is live. Doug Harned : Thank you. Good morning. Chris Kastner: Good morning, Doug. Doug Harned : Thanks. On Virginia class, it looks the program right now is it's well behind the two per year delivery objective in Block V. I mean, do you see a path to get there? What are the obstacles here that need to be overcome to get to that rate? Chris Kastner: Yeah, the largest obstacle, the largest risk on the VCS program right now is labor and meeting our labor targets. We've worked hard here in Newport News to hire. You saw in my prepared remarks we're ahead plan of over 3,200 heads for the year. So that's some positive indicators. But it's -- this is a labor driven issue. And as I said, we've made good progress. We just need to continue to do that over the next couple of years. Doug Harned : And when you look at Newport News, you're a partner with Electric Boat on Virginia class, but you're a subcontractor on Columbia class. I mean, how do those different relationships affect the way in which you work with Electric Boat on the programs? Chris Kastner: Yeah, so it's not a material difference. Obviously, you have contractual differences. But when you get down to the deck plate, those teams work very closely together. There's a relationship that's been developed over a number of years between the two teams. And when you think about the efficiency of getting the work done and potentially transferring some work back and forth, there's obviously contractual mechanisms that need to be put in place under Columbia that you don't need under the Virginia class, but they work very closely together. Doug Harned : So there's no, in your mind there's no real effective difference in the way -- there's no sort of preferred relationship here that one works better than the other? Chris Kastner: Not really, the objective there is to get these critical assets to the fleet as soon as we can. So the team works very closely to ensure we're working on that. Doug Harned : Okay, great, thank you. Chris Kastner: Sure. Operator: Our next question is from the line of Robert Spingarn of Melius Research. Robert, your line is now open. Please go ahead. Rob Spingarn : Hey, good morning, Tom. Just a clarification on… Tom Stiehle : Good morning. Rob Spingarn : Thank you. And Chris then a high level one for you. But Tom, on the margins, at Mission Technologies, you talked about the 1.4%, but a $6 million impact from the sale of the JV. So was that impact built into the guidance? Tom Stiehle : No, it wasn't built into it. It wasn't until right now. So… Rob Spingarn : All right, so this is why you're tracking to the low end. Is that how I should interpret that? Tom Stiehle : Right, yeah. Rob Spingarn : Okay, then Chris, a high level question, but between shipbuilding and MT, I thought it might be interesting to hear you talk about how these two businesses can contribute to two priority areas for DoD, and that's CAC C2 and Contested Logistics? Chris Kastner: That's a really good question. You kind of teed me up there, interesting, the line acquisition, they have really great AI/ML products and big data products that fit right into CAC C2 and potential CAC C2 missions. And when you think about data and big data and the speed in which data can be understood, it fits right into the contested logistics model as well. We're a LVC enterprise that is not just training. It can fit right into a war gaming concept. Think about war gaming, you think about Op plans. You think about op plans, you have to think about contested logistics. So we have products that that can quickly be adapted to deal with those two issues. We've had high level conversations with the Navy, and other customers about potential applications there. So we think we can add to those products set. We think they're important product sets. And we'll continue to talk to the customer about it. Rob Spingarn : Thanks so much. Chris Kastner: Sure. Operator: Our next question today is from the line of Pete Skibitski of Alembic Global. Pete, your line is now open. Pete Skibitski : Hey, good morning, guys. Chris Kastner: Good morning. Pete Skibitski : Chris, on the hiring, can you give us the actual net hiring, your net retention numbers kind of after attrition? And maybe can you gauge a level of revenue that could be at risk if you don't meet your net goals for the balance of the year? Chris Kastner: Yeah, so we don't provide the right net. There's a lot of things going into that equation. We have over time, we have attendance, we have attrition, we have Job Shop labor that can contribute to that. I will say there's potentially some upside if we're able to continue to meet our hiring growth goals and deal with attrition over the balance of the year. But we just need to see how the year develops. Pete Skibitski : Got it, okay. And then I want to ask about the Kennedy contract mod, it was a little under $4 million on the mod. Does it raise your -- now that that's in place, does it raise your confidence level in terms of how your performance on that project could trend through next year and, and the potential milestone opportunities for you on the project? Chris Kastner: Yeah, I know the team did a really good job incorporating the PSA work into the baseline contract and assessing the schedule and. And we're putting the work or integrating that work into the baseline schedule. We're confident the way that Kennedy is developing, they're meeting their compartment completion goals. They're -- their test rates proceeding and the plants proceeding. So we got a lot of confidence in where the Kennedy is at right now. Pete Skibitski : Okay, maybe another way of saying it, are the milestone opportunities on the Kennedy meaningful relative to other programs, or should we not, focus so much on the Kennedy? Chris Kastner: We're just going to have to see. We're going to have to let things play out over the next 18 months, 18 to 24 months. It's a lot of critical work in front of us. But potentially, if we continue to perform well, there'll be milestone opportunities for sure. Pete Skibitski : Okay, okay. Thank you. Chris Kastner: Sure. Operator: The next question today is from the line of Seth Seifman of JP Morgan. Seth, please go ahead. Your line is open. Seth Seifman : Hey, thanks very much. Good morning. Chris Kastner: Good morning. Pete Skibitski : I wanted to ask in Mission Tech, looking at the margin there, and then looking at the contract mix is -- fixed price is a relatively small portion of the mix. I think it's like 12%. And so when you think over time about the profitability that you want to see in that business, and it seems to be an environment where there are more opportunities in the Fed IT services market right now. Is that something that the business is going to try to move higher? Or is that not really consistent with the risk profile that you want to take on? Chris Kastner: Yeah, so we believe it will move higher. We're going to -- you indicated that the majority of those contracts are cost plus. That's true, I think over 80%, which drives the margin rate a bit lower. The team at our Mission Technologies is -- we're focused on technology there. So there's going to be a lot of cost plus work, but they're competing very well also and in their pipeline, there is fixed price opportunities, and we're going to pursue those where those make sense. And if we're successful, the mix should improve a bit and margin will improve. Tom, do you have anything on that? Tom Stiehle : Yeah. So you are right, Seth, CD 7% is cost of [ph] contracts. I would say that there is a move afoot. I mean, we kind of realized the customer sets that we have in the portfolio, there is a move to try it. And as we introduce more technology, that will bring about potential premium on pricing on that front. And then as we get away from services and more into products, that's not an area too where we could see an expansion of the margin on those jobs. Pete Skibitski : Great, thanks. And then just a real quick follow up, Tom, the Q3 cash flow target that you gave, what does that contemplate with regard to the advance repayment. Tom Stiehle : So right now, a little color on that right. So we got an extension on that. It was supposed to be repaid by the end of June. It was a two month extension. So in negotiations, the Navy's now going out and understanding how we'll transition the contract back from the advanced prog pay that was in place since 2020. I don't have a negotiated settlement on that yet. So I don't know what that's going to entail. The guide assumes that there's not a payback right now on that. And we'll have to work ourselves through that as we go through here. So that's a normal run rate that we expect for the quarter. It doesn't impact the guide of 400 to 450 that I've said for the entire year. And I would tell you that the best way to model it and take a look at it is stick to that guidance right now. I think another 60 days, we're going to look see and what that negotiations entails, the timing of it, and the impact, although then we have some significant milestones in the back half of the year. So I have three deliveries, two launches, and one float off. Every time I have a delivery, we liquidate the contract. I get the contract price, the Navy gets the ship. There's some retentions for work that was incomplete there. So there's opportunities that's there to work those retentions off. And that's an opportunity for both margin and cash. And then as I work myself to the back half of the year with LTE 29 is not going to hit this year or next year. We're still holding that milestone as a 2023 event. But I would take a look at cash just from now through 2024, the milestone chart that we gave you, the five year look. It's 1.2 billion over the next 17 months. And I'm still comfortable that we're on target to kind of make to make those goals. Pete Skibitski : Great. Cool, thank you very much. Operator: The next question today is from the line of Myles Walton of Wolfe Research. Please go ahead. Your line is now open Myles Walton : Thanks. Was hoping you could comment on two items. One, the 801 module move. And I guess does that put any pressure on the margin guidance range for this year? And then also on LHA-8, were there any costs that you had to absorb in the quarter or was it minor and sort of non material? Chris Kastner: Yes, I'll handle that and Tom can chip in if he needs to. So 801 had some late breaking rework that pushed up module to the beginning next year. It was late in the year delivery. So just modest, really not a material impact that, as I said to Doug previously, teams pretty good at moving work back and forth to ensure they do that as efficiently as possible. So not a material impact on 801. On LHA-8 I think, first things first, I don't want to just kind of gloss over a pretty significant thing that we like. We really pay attention to in the shipyards is the fire on LHA-8, first thing you have to do is make sure everybody's safe. The team did a really good job. The first responders made sure no one was hurt. Just minor smoke inhalation. But the shipbuilders, and the Navy personnel were safe. Second thing is to limit the damage. They did that, really minor damage to one compartment, some waterways [ph]. We put a corrective action plan, did a root cause analysis. We're working through that corrective action plan now. So the important thing is that we learned from this issue. So no real cost, or cost to schedule impact that's material on LHA-8, and the milestones for that that ship remain intact. Myles Walton : Okay, thanks for that. And then just on the buying out of Honeywell's portion of the Savannah River JV, what's the expected outflow for your incremental portion being acquired? Chris Kastner: Yes, so it's already in, right. Tom Stiehle : So we paid that. Right now it's in the -- you can see that in the cash flow investing is $24 million on the out and we expect to get additional margin and cash in the out years. We haven't defined that. Myles Walton : Thank you. Chris Kastner: Thanks Myles. Operator: Our next question is from the line of David Strauss of Barclays. Please go ahead. Your line is open. David Strauss : Great, thank you. Good morning. Chris Kastner: Good morning. David Strauss : Tom, can you just give us an update kind of working capital progress year-to-date, it's tracking? I think you're about 8% of revenues now net working capital if you're tracking where you would expect it year-to-date, remind us again of what you're expecting at the end of the year. And what you're baking into the '24 free cash flow forecast. Tom Stiehle : Yeah, so I am on plan. And consistent with the forecast and discussions we've had past earnings releases 8% about right of where I find myself right now, popping out of this quarter. I work myself through the back half of the year with the shipyards to get around the 6% target that we've talked about. And then there is some tailwinds as we go from '23 to '24, consistent with what we've had, in past discussions. We used to think of for Mission Technologies the 6% to 8%, was the norm of where we think working capital would be in the yard as Mission Technologies has grown. And we've gotten to more of a cadence between the two yards and our shipyard production programs. I look at it more as 4% to 6%. And we'll finish this year out on the higher end of that range. And then as we work ourselves into 2024, we'll be on the low end of that range here. Just the cadence making milestones or schedule deliveries, we settled down both in material and the labor that we give me some status about. And that's going to bring about some consistency and keep us in the norm range, as I see in the coming years going forward. David Strauss : Okay, great. And then follow-up in terms of the shipbuilding margin, that's implied for Q4, are you or are we potentially looking at a margin at Ingalls in a similar range to kind of what we saw in the first half of 2022, when it was strongly in the double digit range? And if LPD-29, that delivery does slip, how much risk is there to the Q4 margin guide? Thanks. Tom Stiehle : Sure. So we don't give specific forecasts by each yard. But obviously, we can do the math here. It's 6%, 7%, [ph] at the first quarter and 7% for this quarter for Q2 for shipbuilding. And we're guiding 7% for Q3. It's in the low to upper ranges for Q4 and the 9% for shipbuilding across both yards. I'm very comfortable with that. I think I gave an answer earlier, but I'll hit it again. Yeah, we still have three deliveries, two launches, one float off all in Q3 and Q4, heavily loaded in Q4 timeframe. Both of the deliveries themselves that are upcoming, and the two that we've had this year, have retentions and releases associated with that, that bring both margin and cash. And then on the back half we have some smaller incentives and some change adjudication to that will play out. So I think '23 is opposite of '22. We saw a very strong first half, specifically, as you mentioned Ingalls is in the 13% to 16%, Q1 and Q2. I won't get into the breakdown in the yards as a forecast for the back half of 2023. But I'm comfortable that back half is going to be meaningfully higher than the front half, with the pacing here for the first half of this year. David Strauss : And the risk around if LPD 29 slips, the delivery. Tom Stiehle : So it's at the very back half of the year here. As we come through we've talked in the past, whether the deliveries are clean, or the timely or do they go around what we want with a lot of retentions or not. Right now LP 29 is progressing well. We don't see any avenue that is our way right now. We'll have five months of things to do, taking the ship to see and burning down risk there. But we'll have to see how that plays out. I don't want to overly play my hand on that. It's one ship and one milestone in the context of the shipbuilding here. So I don't think it will either overly hurt or overly help us. And I think I think the guide's appropriate right now. We still maintain the 7% to 8% shipbuilding margin by yearend. David Strauss : Thank you. Tom Stiehle : Thanks. Operator: Our next question is from the line of Gautam Khanna of TD Cowen. Gautam, please go ahead. Your line is open. Gautam Khanna : Hey, good morning, guys. Chris Kastner: Good morning, Gautam. Gautam Khanna : Hey, I was wondering, remember when the fit up came out, and there were different schedules for various ships, in terms of delivery dates and the like. And I'm just curious, relative to the prior update, I was curious if you had any better color on how to reconcile that with your own expectations for delivery dates over the next couple of years. Chris Kastner: Yeah, I can start then then then Tom can chime in. I think it's context and timing on those delivery dates, and really assessment of risk. They might move a couple of months or have a different representation of deliveries a couple months, one way or the other. But we assess our, our EACs and our schedules on a very consistent basis. You're looking at a one time adjustment potentially or notification to Congress. So I really think it's a context issue more than a more than a disconnect. Because we work very closely with our customers so that they understand where we are from a schedule standpoint, how we're assessing the schedule. They have their own point of view on the schedules, and it's very reconcilable. Tom Stiehle : I don't really have much more to add on that. On an annual basis as the NDAA and the budgets pop out, and then obviously we take a -- look at the [indiscernible], which gives you a five year look at the forecast on funding perspective, we reconcile where we stand. It's a cross reference of what we do anyway, every 13 weeks doing EACs and we make sure that we align actuals to date and estimates to complete where we are with our labor and material performance and burn and expectations of future performance. And all that gets baked into revised EAC that marries home, to an updated long range strategic plan that we have, a labor resource plan and then the master construction schedules that we have at each site. So we're locked tight with ourselves. And then we have monthly reviews with our program offices into our customer. So I don't think there was any disconnect there. Gautam Khanna : Okay, and just if you wouldn't mind providing the EACs the net EACs by segment and also there was some language in the release about VCS favorable variance. Could you just give us a quick update on how that that program is performing? And if there was a favorable EAC on that program in particular? Thanks. Chris Kastner: So the net -- I'll start with the VCS performance then Tom will talk about the net EACs in the quarter. So yeah, VCS is definitely showing some stability and some positive momentum. So as Tom said, we assess our EACs every quarter and there's nothing material to note, but there is some -- the team's working very hard, the program team, on VCS, to meet their milestones and meet their cost targets, in really kind of a difficult macroeconomic environment. So there is some progress there. There's definitely some progress on stability on VCS. I continue to think the best thing we can do on the VCs program is meet our commitments on the block for contract, get those ships and modules out and then transition into Block V where we have more where we have more opportunity. So with that Tom the EACs. Tom Stiehle : Yeah, and the favorable, the gross favourable was $72 million, unfavorable was $52 million. That net was $20 million. And that was that was made up of $17 million Ingalls or 85% and $3.9 million or 15% in NMT. There was no specific favorable or unfavorable. That was material. Thanks. Gautam Khanna : Great. Operator: Our next question today is from the line of George Shapiro from Shapiro Research. George, please go ahead. Your line is open. George Shapiro : Yes, Tom. If you just look at the free cash flow implied in the fourth quarter, the midpoint's around $360 million. Of the milestones that you have listed for Ingalls in Newport for the fourth quarter, what are the key ones that would contribute to that? Tom Stiehle : So I think it's a host of it. You can run down if you go to the slide on the milestones, the launches and the deliveries that we've talked about, the retention releases on delivered ships. We've talked about adjudication to change. There's some minor incentives that we pick up too. So usually because of the seasonality, you do see Q4 to be very strong for us. We saw that last year with over $0.5 billion in Q4. So I think the plan and the milestones are situated for us to generate that same type of result this year. I would want to clarify, it's early. I think I want to make sure everyone understands what I said the guide specific -- the guide specific for Q3 assumes that there is a repayment for COVID right now. My comment was since I don't know of any change with the Navy, and what that could do, we are sticking to how we guided at the beginning of the year 4 to 450 with the COVID repay is going to occur this year. If and when that changes and we know how much we will give you some more color. I would expect that come the November call for Q3 we'll have a real good look at the milestone performance, how the rest of the year is wrapping up and we anticipate when the negotiations with the Navy is behind us, and give you more color on that. George Shapiro : Okay, thanks very much. Chris Kastner: Thanks, George. Operator: Our next question is from the line of Ron Epstein from Bank of America. Ron, your line is now open. Please go ahead. Ronald Epstein: Hey, good morning, guys. Just a couple of quick ones. Chris Kastner: Good morning. Ronald Epstein: Could you speak a little bit about the DDG-51 award that was pretty gigantic? How that's going to play out? Was it a competitive bid? I'm guessing it was right? And now you're thinking about that? But let's start with that. Chris Kastner: Yeah, so DDG-51, excellent job by the Ingalls team competing for that. It was competitive. There's a standard competitive environment between the two shipyards, both of which are very, very capable shipyards. Getting awarded six is very positive, just shows the demonstrated proficiency of that Ingalls team on executing. Obvious we've delivered DDG-125 already. And we're proceeding on the next three destroyers. So really, really a positive indicator. What it does is provide a lot of stability for Ingalls moving forward. That should fix ship by combined with LPDs and support for LPD 33 and potential bundle arrangements for LPDs and LHA moving forward provides a lot of stability for Ingalls. And it's very positive. Ronald Epstein: Got it? Got it. And then on the Savannah River stuff, my understanding of how the accounting would work, that you guys would potentially take a gain, right. I think that's how it works. Are you deferring it? Or did you take a gain in the quarter? Tom Stiehle : No, we didn't take a gain in the quarter right now. So we become a higher owner of the joint venture, still a minority owner, but a higher owner of it. So as proceeds are released, it's consolidated. How that's recorded as gains happen in the future, they'll be higher than what we've had in the past. So I expect that to play out over the next couple of years. Ronald Epstein: Got it. So it wasn't like an event where you could mark to market and your carrying value would be greater or whatever. Tom Stiehle : No. Ronald Epstein: Got it. Got it. And then can you just speak a little bit to how it's going in terms of retention of employees and how the workforce has evolved here as we recover from kind of all the COVID disruptions? Chris Kastner: Yeah, workforce is definitely evolving. Ron, thanks for that question. As I said previously, hiring is better, right. The applicant rate is better, but retention is still a challenge. And what we're finding is the days of hiring someone, training them and sending them down to the deck plate are really over. We need to ensure that the new hires that don't come through our established programs, because the apprentice school, community colleges, the high school programs are still very successful, when it comes to retention. But the walk-ins, we need to make sure that we shepherd them through the process of the next, 12 to 18 months of their employment, to make them understand that this is a good career, and there's opportunity for growth and stability. So that's really the fundamental change is the walk in applicants are just not the same as they used to be. So that's what both Ingalls and Newport, Newport News are working on. Ronald Epstein: Got it? All right. Thank you very much. Chris Kastner: Sure. Operator: And the next question is from the line of Noah Poponak of Goldman Sachs. Noah, your line is open. Noah Poponak: Hey, good morning, everyone. Chris Kastner: Good morning, Noah. If I take the MT revenue guide to be flat sequentially in the third quarter, I think we'd have to be, maybe down a little or flat year-over-year in the fourth quarter to be at the 5% for the year, after being kind of six to eight through the first nine months of the year. So how much of that is just kind of leaving some conservatism there? How do you see the MT organic revenue growth profile from here? Tom Stiehle : So, at 645, that's a record quarter that they've had followed, 624, which was the previous record quarter. Feel comfortable with right now. I think 645 is a balance between -- there's new awards that happened -- occur and then get delivery orders funded and awarded for that, get heads in here. I do think there could be some upside here. So we'll see how that plays out. We look at a Mission Technologies, they grew 4%. Last year each of the six business units grew. We see quarter-over-quarter, it's 7.5% sequentially, grew over 5% right now. So I think north of 5% is the right way to kind of take a look at that. We'll see how that plays out. They on a good string right now of awards. And they're working hard to kind of fill the seats, funded seats that they have. So it's going to be a function of awards and labor as we go forward. But I'm feeling good about the pipeline I have there. Although the book to bill is low right now. I think that's going to come on in the back half of the year. We'll see that pop up on. There's still a plethora of awards for Q3 and Q4 that we're keeping a close eye on here right now. I think that business is starting to really play out and justify the acquisition of alliances, as we see a sales ramp that's happening. Chris Kastner: Yeah, so Noah, I could I could add that, not to jump into the early wins in Q3, but on a total contract value, not just awarded, we're almost $4 billion of awards for this year, which is really a record for [indiscernible] and Mission Technologies together. It's kind of unprecedented. That team is really doing very well and will create a lot of stability into the future and potential growth, for Mission Technologies. Noah Poponak: Okay, appreciate that. And Tom, the 7.7% to 8% for the full year shipbuilding margin, it's a relatively tight range. But if I keep it flat sequentially in the third quarter, to get to the low end of the full year, the fourth quarter would need to be close to 9% and to get to the high end, it would need to be close to 10.5%. Can you speak to where in that range, do you see I know the milestones need to occur and every milestone is different. But where in that range, do you more likely see the 4Q shipbuilding margin falling? Tom Stiehle : Yeah, I think we're splitting hairs right now. I mean, you can see that there are a lot of milestones out there. Things and then there's incentives and adjudication to change to that occur, LPD 29 a piece of it, although we said early it's not a big swinger, but it does contribute to the margin and the end results. I wouldn't want to get too precise. I mean, 7.7% 8.0% is pretty precise right there. But I do expect it when you run the math we said 6.7% 7.4% through Q2, another 7.4% about for Q3. We will be in the 9%s for Q4 is the math of it. And I feel comfortable with what's on our plate, the performance I see today. The avenue, I speak daily and weekly with the CFOs out in the yard. So I know what's in front of them and what has to get done both from a performance end of it and then what has to get done on the contract side. And we're very much in place to finish up in that range. Noah Poponak: Got it? And then just one other item, back to that attrition question, Chris, has the rate of attrition slowed through the year? I know that's another kind of specific question, but it seems like a pretty important element into your total labor equation. Chris Kastner: So it's definitely lower than it was coming up COVID. It's been pretty consistent this year. I don't I haven't seen a lot of slowing in attrition this year. It's still the walk in early career people that really aren't prepared for the rigors of shipbuilding. It's a challenging job. And we're just working very hard to get them prepared to understand the real benefits of being a ship builder. Noah Poponak: Okay, thanks, guys. Appreciate it. Chris Kastner: Sure. See you Noah. Operator: Our next question is from the line of Pete Skibitski of Alembic Global. Pete, your line is now open. Pete Skibitski : Yeah, Chris, although we've talked about this, but the Navy, I think is working up the strategy for the Nimitz retirement. Then there's an RFI out there. Can you talk about -- if you think HII will have a roll on that? Maybe the timing and sizing of that. Just your thoughts on that overall? Chris Kastner: Yeah, so we will absolutely have a role in it. There's a lot of planning going on within the Navy and Newport News on integration of RCA, OHS, and retirements. We obviously did the enterprise, uniquely qualified to do it. And so it's really kind of an advance planning, actually, because it's kind of a dance between the RCA OHS and then finishing the ships and doing the DND. So absolutely. It doesn't change my perspective about the long term growth rate of the business. It's integrated into the forecasting. And Newport News will probably do that work. Pete Skibitski : Okay, but maybe it's like a mid decade to slightly after mid-decade before it starts? Chris Kastner: I hate to give you a specific time, but it's integrated over the next, 10 to 15 years, to 20 years, actually. Pete Skibitski : I see. Okay, thank you. Chris Kastner: It's all in the mix. It's all in the mix, Pete, when you think about their plan, and how we forecast the long term growth rate of the business. Pete Skibitski : Got it. Operator: Thank you. I'm not showing any further questions at this time. So I'd now like to hand the call back over to Mr. Kastner for any closing remarks. Chris Kastner: Yeah. Thank you for joining us today. We appreciate your interest in HII and look forward to continuing to engage with you all going forward. Operator: That concludes today's conference call. You may now disconnect your line.

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. Thomas, you may begin. Christie Thomas : Thank you, operator, and good morning, everyone. Welcome to the HII First Quarter 2023 Earnings Conference Call. Joining me today on the call are Chris Kastner, our President and CEO; and Tom Stiehle, Executive Vice President and CFO. As a reminder, any forward-looking statements made today that are not historical facts are considered our company's estimates or expectations and are forward-looking statements made pursuant to the safe harbor provisions of federal securities laws. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. For additional information regarding factors that could cause actual results to differ materially from expected results, refer to our SEC filings. Also, in their remarks today, Chris and Tom will refer to certain non-GAAP measures. For reconciliations of these metrics to the comparable GAAP measures, please see the slides that accompany this webcast, which are available on the Investor Relations website at ir.hii.com. With that, I would like to turn the call over to our President and CEO, Chris Kastner. Chris? Chris Kastner : Thanks, Christie. Good morning, everyone, and thank you for joining us on today's call. First quarter results reflect a good start to the year as we stay on course executing our nearly $50 billion of backlog and growing our Mission Technologies business in markets that support our customers. And I want to thank our 43,000 employees for continuing to deliver excellent products and services in support of national security. Our priority continues to be a focus on the fundamentals in shipbuilding, driving our shipbuilding schedules and delivering critically needed assets to the fleet. With that, we believe our milestones for 2023 and 2024 remain on track and consistent with our prior expectations. As we discussed last quarter, 2023 milestones include 3 ship launches and 5 ship deliveries, and the cadence of these is expected to pick up through the year, specifically in the third and fourth quarters. I will note that we are working closely with the Navy on a change to optimize the CVN 79 schedule, which pulls baseline work from the post-shakedown availability into the construction period in order to provide more capability at ship delivery. Ultimately, this change would allow for a more capable Kennedy to join the Navy's operational fleet. And once this contract change is finalized, we will adjust the crew move aboard and ship delivery dates accordingly. Now let's turn to our results on Page 3 of the presentation. Top line growth was 3.8% from the first quarter of 2022, resulting in record first quarter revenue of $2.7 billion. Diluted earnings per share was $3.23 for the quarter, down from $3.50 in the first quarter of 2022. New contract awards during the quarter were approximately $2.6 billion, which results in backlog of approximately $47 billion at the end of the quarter, of which $26 billion is currently funded. In the first quarter at Ingalls, we were awarded a $1.3 billion detail, design and construction contract for amphibious transport dock LPD 32, continuing the serial production of this critical product line for the U.S. Navy and Marines. At Newport News, we were recently awarded the Columbia bill 2 advanced procurement contract for $567 million, allowing Newport News to purchase major components and commodity material and to begin advanced construction on the next 5 submarines in the Columbia-class. Finally, at Mission Technologies, we saw strong revenue and margin this quarter with revenue growing 5.8% over the first quarter of 2022. Notably, this quarter, we were awarded the press program, a base plus 6 1-year options, $1.3 billion task order to provide personnel recovery, enterprise services and solutions for the U.S.-Africa Command. Shifting to activities in Washington. The President submitted his fiscal year 2024 budget request in March, which is now under consideration by Congress. The proposed budget reflects continued investment in our shipbuilding programs, funding the second Columbia-class submarine, 2 Virginia-class attack submarines and 2 Flight III Arlebird-class destroyers. The budget request continues funding [forward-class] nuclear aircraft carriers, an aircraft carrier refueling and overhaul programs as well as investment in the submarine industrial base. On the ship maintenance side, the budget request includes $600 million for the engineering overhaul of USS Boise. Funding is included for the final increment of LHA 9, but funding was not included for the LPD program or a third DDG 51 destroyer, although Congress provided advanced procurement for these programs last fiscal year. We will continue to work with Congress and our customers to support their requirements as we move through the budget process. Beyond shipbuilding, the fiscal year 2024 request reflects continued investments in capability enablers, such as AI, cyber and electronic warfare, C5ISR and autonomous systems, which align well with the advanced technology capabilities of our Mission Technologies division. Turning to labor. We successfully hired over 1,500 craftsmen and women in the first quarter, which is at 30% of our full year plan of approximately 5,000. This solid pace for hiring reflects continued recovery and stability in rebuilding our labor workforce post COVID. While hiring is on a positive trajectory, we continue to remain focused on hiring, the training of our workforce and our workforce development and retention programs. For example, in March, we celebrated the graduation of 200 apprentices from our Newport News shipbuilding apprentice school, strengthening our skilled workforce and leadership pipeline. Moving to an update on the health of our supply chain, where we are seeing stabilized lead times. We have not seen a return to pre-COVID levels. It is important that we not only manage the risk this creates for our current programs but also reflect these increased lead times in our future contracting activity. In summary, we've had a solid start to 2023 with record first quarter sales and continued long-term visibility given our significant backlog as well as future award opportunities based on the strong defense budget. Seeing progress in labor and supply chain lead time stabilization is certainly positive, but we need to continue to manage these risks moving forward. We are maintaining our emphasis on fundamentals, driving productivity to ensure we meet our customer commitments. And now I will turn the call over to Tom for some remarks on our financial results. Tom? Tom Stiehle: Thanks, Chris, and good morning. Today, I'll briefly review our first quarter results. For more detail on the segment results, please refer to the earnings release issued this morning and posted to our website. Beginning with our consolidated results on Slide 5 of the presentation. Our first quarter revenues of $2.7 billion increased approximately 4% compared to the same period last year and represents a record first quarter result for HII. This increased revenue was attributable to growth at Newport News Shipbuilding and Mission Technologies. Operating income for the quarter of $141 million increased by $3 million or 2% from the first quarter of 2022, and operating margin of 5.3% was essentially flat from the prior year period. The increase in operating income was primarily due to a more favorable operating FAS/CAS adjustment and more favorable noncurrent state income taxes compared to the prior year period, largely offset by lower segment operating income. Net earnings in the quarter were $129 million compared to $140 million in the first quarter of 2022. Diluted earnings per share in the quarter was $3.23 compared to $3.50 in the first quarter of the previous year. Moving on to Slide 6. Ingalls revenues of $577 million in the quarter decreased $54 million or 8.6% from the same period last year driven primarily by lower revenues on the LPD, LHA and NSC programs, partially offset by higher DDG program revenues. Ingalls operating income of $55 million and operating margin of 9.5% in the quarter declined from last year primarily due to lower-risk retirement on the LPD and LHA programs. It is important to remember that the first quarter of 2022 included a very clean delivery of Fort Lauderdale, LPD 28, which provided significant risk retirement at that time. At Newport News, revenues of $1.5 billion increased by $116 million or 8.3% from the same period last year due to growth in both aircraft carrier and submarine revenues, partially offset by lower support services revenues. Newport News operating income in the first quarter of 2023 was $84 million, an increase of $3 million or 3.7% compared to the first quarter of 2022. Segment operating margin of 5.6% was down slightly from last year primarily due to unfavorable risk retirement on enterprise CVN 80. Shipbuilding operating margin in the first quarter was 6.7%, slightly below the 7% outlook we previously provided for the quarter. Our outlook for the full year is unchanged. As we have noted previously, our expected milestones for 2023 are concentrated in the second half of the year, which will drive our performance for 2023. At Mission Technologies, revenues of $624 million increased $34 million or 5.8% compared to the first quarter of 2022 primarily driven by higher volumes in mission-based solutions, which includes our C5ISR, cyber and electronic warfare and live, virtual and constructive training businesses as well as growth in fleet sustainment. Mission Technologies operating income of $17 million compares to an operating income of $9 million in the first quarter of last year. Current results include approximately $27 million of amortization of purchased intangibles compared to $30 million in the first quarter of last year. Mission Technologies EBITDA margin in the first quarter was 8% compared to 7.3% for the same period last year. During the first quarter, Mission Technologies did record a provision for a contract loss relating to a manufacturing issue that was not material to our financial results as a whole. Turning to Slide 7. Cash used by operations was $9 million in the quarter, and net expenditures were $40 million or 1.5% of revenues, resulting in free cash flow of negative $49 million. This compares positively to cash used by operations of $83 million, net capital expenditures of $43 million or 1.7% of revenues and free cash flow of negative $126 million in the first quarter of 2022. Cash contributions to our pension and other postretirement benefit plans were $10 million in the quarter. During the first quarter, we paid dividends of $1.24 per share or $49 million. We also repurchased approximately 39,000 shares during the quarter at an aggregate cost of approximately $9 million. Moving on to Slide 8. Our free cash flow outlook through 2024 remains unchanged as do our capital allocation priorities. I'll highlight that we will continue to expect to distribute substantially all free cash flow to shareholders through 2024 after planned debt repayment, which is on track. Turning to Slide 9. We are reaffirming our 2023 guidance and providing some color on how we see the second quarter shaping up. Before discussing our second quarter outlook, I want to make clear that we are reaffirming our guidance for the full year with the knowledge that once the PSA modification is completed, the remaining CVN 79 milestones will be updated, including moving the delivery to 2025. We believe we'll be able to reach an agreement that is neutral from a margin and cash perspective to both 2023 and 2024, and our outlook reflects this. Regarding the second quarter, we expect shipbuilding revenue to be largely consistent with first quarter results and shipbuilding operating margin to be approximately 7%. That does imply meaningful improvement in the second half of the year, which is consistent with when we expect our shipbuilding milestones to occur. For Mission Technologies, we expect second quarter revenue of approximately $600 million and operating margin of 2.5%. We expect the second quarter free cash flow to be approximately negative $150 million. Again, there is no change to our expectation for the year. Our cash generation will fall predominantly in the third and fourth quarters, consistent with both our forecasted milestones and our normal cash cadence over the calendar year. To summarize, the first quarter results were largely in line with the expectations we provided on our fourth quarter call. We are pleased to reaffirm our full year guidance, and we remain focused on execution and hitting the milestones and commitments that we've laid out. With that, I will turn the call back over to Chris for some final remarks before we take your questions. Chris Kastner : Thanks, Tom. Before wrapping up, I would like to point out that we have recently published our 2023 sustainability update report, which among other things describes the governance and management framework that we have established around sustainability. And finally, I would like to emphasize that we remain focused on successfully executing on our strong backlog and positioning for long-term growth, which will generate value for our employees, customers and shareholders. Now I'll turn the call over to Christie for Q&A. Christie Thomas : Thanks, Chris. [Operator Instructions] Operator, I will turn it over to you to manage the Q&A. Operator: [Operator Instructions] The first question comes from the line of Doug Harned with Bernstein. Doug Harned : I'm interested, when you look at Newport News right now, and you appear to be getting some good growth there. Can you give us a sense of the breakdown of where growth is coming from? And I would say across Columbia-class, Virginia-class, the CVN programs. What really getting at here is, as Columbia-class starts to ramp, can we expect growth there to move above that kind of 3% to 3.5% trajectory that you've been on? Chris Kastner: Well, let me start and then -- Doug, and then Tom can step in here. I continue to think, and I've said previously, that Newport News will provide the majority of the growth in shipbuilding. So is there potential as Columbia comes online and the aircraft carriers become a more significant part of our revenue mix and then we get Block V in full rate and then into Block VI, that growth could be greater than 3%? Sure. But on a long-term basis, we think the right way to think about shipbuilding is 3%. Tom Stiehle: Sure, Doug. And I'll hop in. It's Tom here. So yes, we did have some good growth in Q1 there. It was up [$160] million. It was driven by carrier construction, [80 79 81], Columbia-class and the VCS program, partially offset by some fleet support that is just slightly underneath. But as Chris says, I think we feel comfortable about that. We have the capacity and the capability to kind of run that. I think long term, though, it's still kind of governed by labor and program plans that we have in the yard here. So I think 3% is the right way to take a look at it on a long-term basis. Doug Harned : And then you did the unfavorable -- there was an unfavorable adjustment in CVN 80. Can you -- that sort of surprised me because I would think of less risk on CVN 80 than it was on 79. Can you talk about where you -- what happened there and then also how Virginia-class is still proceeding right now? Tom Stiehle: Yes. So I'll take the CVN 80 first. Just backing up a little bit on color on margin and profitability that we thought we'd be at 7% for the quarter on shipbuilding. We came at 6.7%, and the majority of just that truck full there was about the enterprise step-back that we took. Now we find ourselves, as I noted in my remarks, the front on CVN 80 that we find ourselves from a time capacity and throughput needing to offload and/or outsource unit work and panel work right now. So as we're working ourselves to that, it's early in that project as we ramp that up. And we wanted to make sure that we increase the outsourcing risk protection, and we booked that conservatively. There's still many years to go on that ship, and it's just embarking on some additional out work on that. I would tell you that since the keeling last summer, that ship is coming tremendously along. It's in the dry dock right now. It's growing a lot of steel at it. The shape of the ship is directing, and I'm really proud of what the team is doing with that. But again, we just thought it would be prudent to take a balanced approach as we embark on getting some additional workout cost. Chris Kastner: Yes. Doug, I'll comment on VCS. Yes, the VCS program, the program schedules for VCS are pretty stable and have been stable for the last couple of quarters. We'll deliver 796 this year. 798 will be delivered the year after that. And actually, we have a christening with Sheryl Sandberg being the sponsor on Saturday for Massachusetts. So you're all invited. It will be streamed live. And Massachusetts is performing well. And then 800 will deliver the year out of that -- after that, excuse me. And then Block V will follow. So I think … [Technical Difficulty] Operator: Excuse me, ladies and gentlemen. We have lost connection with the speaker line. Please remain on hold as we reconnect them. Excuse me, ladies and gentlemen, thank you for your patience. We have the speakers back on the line. Please proceed. Chris Kastner: Hello, Doug, were you still on? Doug Harned : Yes, I’m still on. Yes. Chris Kastner: I don’t know when we fell off. I don’t know if you were at the absolute relative to VCS Program. Doug Harned : You were walking through transitions who full unblocked by in milestones schedule. So that’s where you were at that. I think you broke off in the middle of that. Chris Kastner: Yes. I apologies again. On Block V I do think there is opportunity on Block V, the [indiscernible] order to achieve that, and we're just not at the phase of the program where you'd be retiring that risk. So I still think there's opportunity in Block V. And I apologize for the line cutting out. Doug Harned : No. No problem. Operator: The next question comes from the line of Rob Spingarn with Melius Research. Rob Spingarn : Sticking with Newport News, if resources need to be diverted from Virginia to Columbia to keep that on track and given the priority there, are there any conversations with the customer to mitigate any potential economic losses to you or the industrial base -- the submarine industrial base given that Virginia is fixed cost? Chris Kastner: Yes. So there could potentially be discussions in that regard. I would say, from our point of view, our staffing is pretty solid on the Columbia-class and the Virginia-class right now. So I don't anticipate that. I think you saw that we had a good start to the year from a labor standpoint. Attrition is trending well. attendance is trending well, a lot of training expense as well. But we don't anticipate that right now. We're pretty comfortable from a staffing point of view. Operator: The next question comes from the line of Seth Seifman with JP Morgan. Seth Seifman : Wanted to ask a little bit about the -- so I guess we can look on the milestone side and see that there's a lot of -- a lot to come here in 2023 and that, that kind of underwrites, I guess, the margin expansion that you're looking for in the second half. And then, I guess, with the margins coming in, I think, a little bit lower than people expected in the first half, higher than expected in the second half, and it seems fairly variable based on milestones. And then we look at 2024, and we see that each one of the yards has fewer milestones in '24 than '23, although we don't know the value of those milestones could be different. I guess, how do we think about a margin trajectory given how the first half of this year, the second half of this year is so different? How do we think about where that takes us going into '24? Tom Stiehle: Sure. I appreciate the question there. Yes. So we did say in Q4 that the milestones were on the back half of the year, which we foreshadowed 7% for Q1. And now you can see the outlook for Q2 is going to be that way, too. So it does -- you do the math against the 7%, 7% to 8% and the back half of the year is going to be in the upper 8s on that, and we feel comfortable with that. You are right that the milestones are on the back half of the year there. I would tell you also that what's in the mix there, there's other things on top of the milestones, although they are the major reason that we have the changes in EACs and affect profitability. There's other areas, too, in there, whether it's our performance or capital incentives, either on contract or that we anticipate. We either have those factors or they're in potential. There's risks and opportunities, so we can materialize more opportunities and risk that we realize. So that plays out every quarter that we do at EACs. We also do -- we have our contracts, especially RCOHs, that pop in here and both for the condition and the statement of work that could be fluid over the 2.5 to 3 years that those ships are here. This change, there's condition, it's cost to contracts. So there's change proposals that are in flux right there. We've talked a little bit about on several calls of unadjudicated change. And what you'll see -- what we see here is that the cost is already into the EACs. We conservatively book the recovery on those things. And as that plays out, there's a natural recovery of those true-ups to the contract performance. So there's elements of that that's happening behind the scenes as well as just the milestones. So that gives you some context for 2023. For 2024, there are still more milestones than usual. We have 3 deliveries and 3 launches. We're holding everything on the page that we gave you a quarter ago with the caveat on CVN 79. But there'll be a natural lift as we work ourselves through. We've talked about in the past Block IV and Block V volumes. So that will sit closer to the deliveries of the large ships that we have here. And then as we proceed forward with new contracts that will roll in both the performance and inflationary impacts that we've seen, and that will give us new targets. And then lastly, I'd add that as quarters and years go by here, obviously, the inflection point will hit from the production and learning. As we get this workforce up to speed, the more experienced, successive bills on follow-on shifts, there's a natural lift in profitability on that front as well. Seth Seifman : Great. That's really helpful. And maybe as a follow-up, just a quick confirmation. I want to make sure I understand. The optimization you're talking about on CVN 79, when reaching an agreement there with Navy and that's finalized, that is a neutral event as far as margin and estimates for the program and cash is concerned for you guys? Tom Stiehle: I just want to caveat that a little bit. We anticipated to be neutral. It's a benefit both of us and the customer to have that ship be more capable, have more functionality in it, and it will be to the latest configuration. And as we work ourselves through the negotiations on that contract, takes one more statement to work. We'll get scheduled, we'll adjust the targets, we'll situate that. Although we won't get the liquidation and the retention release next year, we'll have more statement of work and cost and cash that's running through the books. And it's our -- we anticipate that, that will be margin- and cash-neutral for the next few years through the delivery of that ship. Chris Kastner: I could also add, I think it's a really smart thing being done by the Navy here relative to integrating the PSA into the base contract because it reduces deployment risk for the shift. So we're participating in that. We'll get it definitized over the summer. We think it's real -- a very positive development. Operator: The next question comes from the line of Myles Walton with Wolfe Research. Myles Walton : Chris, could you comment on LPD 29? I think there's both the sea trials and the delivery aspect that you're thinking about for '23. And obviously, you have trials where you have delivery. And I'm curious, what's the hold time on the trials that you would need to see to actually be able to accomplish the delivery for this year? And how material is that to this back-end-loaded margin for the year? Chris Kastner: It's definitely in the mix. It's a Q4 trials and delivery. A lot of volume work to go on that ship. They're making really good progress, let off the engines really last week when we were down there. So I'm optimistic that team will start to continue to hit cadence the LPD program that we're very proud of and confident that LPD 29 will get done this year, contingent upon, of course, that labor stays stable and we continue to make progress. But a lot of confidence in that Ingalls team. Myles Walton : Okay. And just one on labor. Chris, you sound actually really good on labor from a hiring perspective. Could you comment on attrition as well? And is it showing up in the right disciplines and where the pinch... Chris Kastner: It is. Yes, Myles, it is. So attrition has been positive as well. And it is showing up in the right disciplines. You always having shipbuilding moments in time where you may need welders or rigors or electricians. You might be out of balance a bit. But that's kind of the art of managing labor and shipbuilding. So it's a positive start to the year. It's taken a lot of effort, a lot of effort, and we need to stay on it. Team is very focused on it, but it is positive thus far. Myles Walton : Great. And sorry, one last one, I can squeeze in. Tom, you mentioned that Mission Technology has absorbed a customer charge, I think. Can you size that? And is that the same that was disclosed in the Q last quarter for the K? Tom Stiehle: Yes. Appreciate the question there, Myles. Yes, it is the same issue that we had last time. You'll note when you get the Q that the disclosure has improved from a top range to now we've taken a charge. And no, I wouldn't disclose the customer or the charge itself. It's not material to our financials. So you won't see them in the come correct, all right? So yes. Operator: The next question comes from the line of David Strauss with Barclays. David Strauss : Chris, you mentioned in your prepared remarks that there was no amphib funding in fiscal '24. If you could just kind of update us on the status there. I mean we seem like there are always these ongoing reviews, and then Congress adds money back. Just kind of where things stand there? Chris Kastner: Yes. '24 is pretty positive from a budgetary standpoint for us. The one issue, as you mentioned, is LPD 33. We'll work with the customer and the Congress to ensure that they understand the importance of that ship to Ingalls, and we'll just follow it through the process. Got high confidence based on the law of 31 amphibs that we have a chance to get that back in the budget, but we'll just have to follow it through the process. David Strauss : Okay. And Block IV versus Block V, can you give us an idea of how much of Virginia-class revenue at this point is Block fo versus Block V and how that transitions over the next year in terms of -- I mean, Tom, your point is some potential margin lift as we progress there, Some sort of baseline where we are today and what that looks like? Tom Stiehle: Yes. So as we crossed over at the end of last year, Block V actually has more revenue than Block IV in it, although you find the programs for one better than 80% accomplished with 794 delivered, 796 to go, 798 floating off and then the successive years of the sell-off of 798, 800. So Block IV is significantly more complete with cost in the books here. Block V is still less than 30% complete right now. So there's a mix there. I have more volume on V and I still have a large amount of that program in front of me. As we talked about, I think, keeping the pedal to the metal on the labor, training that workforce, getting serial production cadence happening, which we see that with the operating system at the -- incorporated down there. I think all that's going to add to a real potential of additional profitability in Block V or IV. You don't see it yet, obviously, because it's early in the program. So good that we're getting the sales volume from the VCS program, a lot of interest in that. And we'll just keep working to get the production efficiency going on the VCS program. Operator: The next question comes from the line of Gautam Khanna with Cowen. Chris Kastner: Gautam, are you out there? We may have lost Gautam. Operator, do you still hear us? Operator: Yes, I still hear you. I don't have Gautam. Chris Kastner: Maybe he'll come back in. If you could maybe just go to Pete. Operator: The next question comes from the line of Pete Skibitski with Alembic Global. Pete Skibitski : Chris, I think a lot of us were targeting the return of shipbuilding margins to that 9% range by 2025 or so. Is that going to be still reasonable for that target after this -- the Kennedy contract changes and where you see labor going right now? Or is that a stretch at this point? What are you thinking there? Chris Kastner: Yes. I don't want to give commentary on '25 margins at this point. We're comfortable with our guidance for this year. I'm comfortable that the way we have the ships delivering and the stability of the milestones that we look for improvement next year. The teams are working on the fundamentals every day within both shipbuilding organizations coming through COVID and the labor challenges, but there are still significant labor challenges we're working through. So I don't want to predict when we'll recover to 9%. I still believe it is a 9%, 9%-plus business. We just need to continue to focus on the fundamentals and execute. Tom Stiehle: And if I could comment there too, Chris. We're obviously not happy with where we are right now. We're driving hard. We're being realistic with it. The strategy that we have that we've shared with The Street and shareholders is we anticipate and expect expansion of margin. We'll continue to fight through that, and we do that every day and every week here. We get realistic with the ranges that we give that definitely is attainable. We have strategies and plans, and the profiles and the forecast show that we can meet our forecast that we tell The Street. So we'll just keep you updated like we have every quarter, but the trajectory needs to go up, and we're working really hard every day to make that happen. Pete Skibitski : Okay. Appreciate it. And last one for me, guys, I remember a while back, one of the next big contractual things you were looking to accomplish was getting the fifth [4-class] carrier under contract. And I think you wanted to do that in the midterm, nothing near term. But is that now in the budget? And there was talk maybe even doing another 2-carrier bundle. Are those things still in play in terms of where the budget shook out? Chris Kastner: Well, it is in the budget. And we do still think and we know that buying them together absolutely saves the Navy money and the right way to buy it. We have -- that hasn't been -- hasn't shown up in the budget as of yet, but we believe that, that is the right way to acquire aircraft carriers. So positive in the budget, and then we'll continue to work with the Navy on potentially working on a 2-ship buy, but that hasn't manifested as of yet. Tom Stiehle: A comment on the strategy front there, we're looking -- we think it's mix financial and program sense to buy 2 carriers at a time with 3 years of AP on 4-year centers, right? And that's what we're focused on. From a time frame, that would be -- we would be looking for a construction turn on in 2028 and then optimistically, AP in 2025, if not 2026. But that's the playbook we used last time. It's buying power for our customer, it's efficiency for the yard here. We get to buy 2 sets of -- when we materially in the buying efficiency from that. So that's what we're working closely with our customer on. Operator: The next question comes from the line of George Shapiro with Shapiro Research. George Shapiro : I wanted to ask, General Dynamics on their call commented that they were having supply chain issues in Virginia. I think it was more Block V than IV, and they took a charge for that. And I guess you're not experiencing that. There's different suppliers. Or if you could just explain maybe. Chris Kastner: Yes. Well, I can't comment on GD's phone call. That would not be appropriate. I'm comfortable with where we are in the VCS program this quarter, both Block IV and Block V. As I've said, we're progressing down the delivery path on our Block IV boats. And then we need to transition to the Block V. But it would just be inappropriate for me to comment on GD's call, but we're comfortable with where we're at. George Shapiro : So you're not seeing the same supply -- you're not seeing supply chain issues? Is that it? Chris Kastner: Well, I think we're seeing supply chain issues across the board really. It has definitely stabilized from a lead time standpoint, but it's stabilized at a higher level than pre-COVID. And we need to make sure we take that into consideration not only on our current EACs but on our future bids. So yes, there are supply chain issues, but they they've stabilized a bit over the last couple of quarters from a lead time standpoint. Tom Stiehle: Right. And I'd add the cost and projected future costs have been incorporated into our EACs. We've updated the milestone schedule here, George. You've seen that we have walked those over the last couple of years when COVID started, and there has been some charges at Newport News that you know about. So as Chris said, I'll reiterate that every 13 weeks, we take a look at the axles today. The ETC expected the forecasts, the material indices, how costs going to come in. And we are comfortable with how we're booked and -- both in the milestone chart that we give you from a scheduling perspective and obviously, what's put into the financial reports or from an EAC perspective. George Shapiro : Okay. And then, Tom, the net EACs can get for the quarter and the break between the sectors? Tom Stiehle: Yes, sir. So the gross favorable was 64 up. The gross unfavorable was 55 down. The net favorable obviously, was $9 million, you know what the math of that is. And that's made up of actually -- you'll see now in the Q, there's a revised disclosure that has that information. Ingalls is 14 up of the 9. MT is 4 up that now it's 18 up, and then the Newport News is cumulatively down $9 million. And really, that $9 million is the preponderance of a 7% shipbuilding versus 6, 7, and we had that discussion early on the outsourcing of CVN 80. George Shapiro : Okay. And then one last one if I can get in here. Can you mention what drives the more negative free cash flow in the second quarter? And then what drives the almost doubling of your free cash flow in '24 after 3 years of relatively similar numbers? Tom Stiehle: Yes. So for the free cash flow, there's a rhythm in a cycle that we have. We usually cash users at the beginning of the year. We saw that in Q1. We had guided a minus $200 million to $300 million. We actually came in at minus 49. So we just had some better timing and collections in Q1. That's just probably pull ahead from Q1 to Q2. We're guiding a minus 150 for the back for Q2 now, the combined Q1 actual and the Q2 forecast. So we're still right on plan on where we thought we would be. And I think when I look where The Street perspective, if we add up both in the Q1 and Q2 expectation, we're slightly ahead of that, which is good. For the free cash flow kind of going forward here, you can look at it like 1 of 2 ways. We've talked about the top line revenue expansion. We haven't had a question on it here, but you heard in the remarks, almost 4%, 3.8% growth. Mission Technologies grew 5.8% this quarter and 3 -- in Q1. Year-over-year, it grew 3.5% from last quarter. And like Q4, every one of anti-Green Mission Technologies business unit expanded their top line. So that's a good sign right there. I really like what we're seeing. But I think that bolsters well. We had talked about long-term shipbuilding growth at 3%. It was 3.1% this quarter. We talked about long-term growth in Mission Technologies to be 5%, and it was 5.8%. The weighted mix should be 3.5%. But as we said, we came in at 3.8% this quarter. So the cases there and the numbers are playing out. From a Mission Technologies perspective, I would just leave you with they're in the year, they finished -- they're coming up on year 2 now this August. The restructures behind them, the leadership's chosen, the business units understanding. They've integrated operations, systems, processes. And I really think the team now has full-time focus and support on their objective of go win a lot of work and execute the contract. So I feel really good about that top line growth. Margin expansion, I know we've talked about it. There's an expectation that 8% to 10% that Mission Technologies would move that up. We had guided that, and that thesis is still in place to get from the low 8s to the higher end of the range of 8% to 10%. And we saw the EBITDA margins in pretty good shape, 8.2% last year. When we normalize out the booking for a joint venture sale that we have there, it was 8.6%. And this quarter, it's 8%. It's early in the year. So I think both the expansion of the top line and the bottom line is real, is in front of us. Managing our CapEx, we've guided to 3% here. So we've come off a high of almost 5% and upper 4s over the last 4 or 5 years, and that adds to the bottom line. We get through the adjustments for COVID, both the FICA and the COVID payments back. I think there's a natural lift that you'll see. Macro perspective, you can just take a look at that from a shipyard perspective, we were generating in the 4.75 to 5.50 just between the 2 yards. And then when you throw another $2.5 billion business with Mission Technologies that's growing annually, 8% to 9% EBITDA to take the midpoint at 9%, the math easily generates through taxes in the vicinity of about $200 million for Mission Technologies. So 500 to 700. So I'm comfortable that we'll get there. We've talked about the step up from '23 to '24 specifically will happen as we get into the cadence of production across both yards. And what we'll find is that working capital will come down a little bit. That will be the initial lift to get '23 up to '24. But then with the growth and the expansion of margin, we see us being $700 million plus -- $700 million to $700 million plus going forward in the out-years. Operator: The next question comes from the line of Gautam Khanna with Cowen. Gautam Khanna : Can you hear me guys? Chris Kastner: We can. Thanks, Gautam. Gautam Khanna : Terrific. I wanted to ask what your best guess as to why in the fit-up. A number of the delivery dates on Ingalls ships have moved to the right. And just relative to the last time they published those delivery dates, and they gave reasons for it. But do you broadly agree with those revised delivery dates expressed in the fit-up? Chris Kastner: Yes. I think what you're seeing there, Gautam, is kind of 2 different processes with potentially different risk expressions. And obviously, we look at our delivery dates and our -- so they don't specifically align, right? We can project better deliveries based on what we're seeing in the quarter of the year, the -- or some of the indicators that could impact delivery. So I just think there are different processes with different objectives. So you're going to have differences from time to time, but we're comfortable with where we're at. Tom Stiehle: Yes. I'll just -- I'll come behind that, too. That comes out every year, and we take a look at it and we might analyze it. I will tell you at times, you'll see ships and boats move. And at other times, they don't move. And sometimes they stick on a contract date for years, and then they move aggressively. I can tell you, from our perspective, we have -- we're aligned programmatically and -- with our customers on the status of the programs. We're aligned from both the milestones and schedules that we run our yards to, our master construction schedules that go into the milestones that we see to The Street. And then from an EAC perspective, to make sure we have the duration of the programs understood and priced in EACs. So I would not be overly concerned. At times, it's just risks and opportunities, when is the ship available, when is the crew available, when is the test sequencing to get the ships and boats out of here. So a lot goes into that. I wouldn't dismiss them. They're important, but our information is updated and evaluated every 13 weeks here. And I can tell you that the schedules and EACs are aligned to the current performance of both yards. Gautam Khanna : That's a great answer. And just to follow up on an earlier question about the differences on the Virginia class at GD relative to HII. And I know you're not going to opine on GD. But I was just curious if you could talk about -- since Q2 of '20, when you guys announced the large charge related to COVID and the schedule impacts on Virginia-class, have you had much in the way of negative come catch-ups on that program? Or was that kind of a big -- the big reset, if you will, on the program accounting? I'm just curious, like it doesn't seem called out quarter after quarter. Chris Kastner: Yes. So obviously, that was a significant adjustment we made with Block IV. But we, from time to time, have adjustments and we've had adjustments on the Block IV program between then and now. They just haven't been material enough to mention. We're very -- as you know, we have a disciplined process around our EACs. And if we have to make adjustments, we do. So you've kind of got it right on there. We had a significant adjustment. We've made smaller, less material adjustments between now and then, and we're very comfortable with where we are right now. Operator: The next question comes from the line of Noah Poponak with Goldman Sachs. Noah Poponak : I guess, at this point, should we expect the shipbuilding margin to be up or down in 2024? Chris Kastner: Well, I absolutely think not giving guidance for '24 yet, but I expect it to improve. I expect both shipyards to execute, barring any unforeseen labor issues or supply chain issues or macroeconomic issues, all things being equal, I expect it to be up. But we're not giving formal guidance on 2024 yet. Tom Stiehle: I'll reiterate that, too. We've told you where we want to take it to. We haven't told you when because of the environment that we operate under 3 variants of the COVID virus, inflation, unforeseen inflation from a couple of years ago and then the tightness of the labor market going back 2 years and as we work ourselves through the back end of that right now. It just creates headwinds into the market. We tried to be as transparent with you as possible. We set our objectives and share our forecasts, and we have plans behind them to kind of make them, and then we got to fight through. And if new risks pop up, we got to find other opportunities. But clearly, we anticipate to incrementally expand our margin performance kind of going forward. Noah Poponak : Appreciate that. Is it possible to give more specifics on maintaining margin and cash flow on CVN 79 while moving the schedule? Just if you could give us some more detail beyond how that happens. And is that true year-by-year in the remainder or just in the full aggregate of the remainder? Chris Kastner: Yes. So -- as Tom mentioned in his remarks, we need to keep that financially neutral. And so as we come through that Class 1 change, that's the objective. So the team is working on ensuring that on an annual basis or an annualized basis, we keep cash and margin kind of in a neutral place and risk in a neutral place from where we were today. Noah Poponak : Okay. And Tom, you walked through the good quarter at MT. But in your 2Q guide, you've got it back to flat year-over-year and the margin a little lower sequentially. Just what's behind that? And then I guess, maybe just what's your latest thinking on the longer-term margin potential of the segment? Tom Stiehle: Yes. I think that's just being conservative on where we are in timing. We'll see how that plays out. The quick turn quarters, especially in that business where the contract duration is shorter, a potential for recompetes and wins and when programs top online and things of that nature. So I think it's just us being more conservative. At our position for Q1, the run rate that's 24.96, we guided 2.5 for the year. So I'm feeling good about that. It's the largest quarter by far that MT has had with a line on it, and the 5.8% growth is fantastic. And then each of the business units growing is a great sign, too. And that's 2 quarters in a row of that happening. So I think there's some really good positive signs there. We don't want to overcommit, and that business is highly competitive. There's a lot of proposal working there, plus $60 billion of proposals. So half of that's qualified, a lot of moving pieces on when things either get awarded or delayed or extended or option year exercised. So we're just being conservative on how that plays out. I do think as we -- as I mentioned about restructuring in the rear-view mirror and the team even more focused and experience working together over there, the additions of the Chief Technology Officer that we have here, Eric Tuning, has been from executive S&D, all those will help mature that portfolio over there. So I do anticipate that although it's highly -- the portfolio has a lot of cost-type contracts in it, I think we'll see as we move push for more products and services, more technology than just the service side, and that will have a natural lift to and the profitability in there. So the guide we gave you was 8% to 10% EBITDA when we purchased the line, and that construct still holds here and expectation that we'll grow that up over the next couple of years. Chris Kastner: No. I would mention between Q1 and Q2, there are some contracts within Mission Technologies that are relatively lumpy in nature when you get -- when you book the margin. So that's why the lower guide in Q2 from a margin standpoint. Operator: The next question comes from the line of Scott Deuschle with Credit Suisse. Scott Deuschle : Tom, does the back half margin guide accommodate for the risk of additional negative EACs like we saw this quarter on CVN 80? Tom Stiehle: So that's a very specific question. I would tell you that each quarter, once we come through our DAC analysis, we evaluate performance, existing costs, we update our projections going forward, value material labor cost, schedule and overheads, all that goes into the construct of coming up with the booking rate. And then from there, we update our sets of opportunities and risks against that forecast. And from there, we'll make a determination of what the forecast is for ourselves and out to The Street here. So I would tell you that there's always the potential to either exceed the forecast or underrun it. Specifically, we think we book the risk on the CVN 80 outsourcing project accordingly. So I would not anticipate that to to continue to bleed. If anything, I'd like to see us do better than what we have in the plan right now from a risk mitigation standpoint. But I think the guidance still holds that I gave you between 7%, 7% and 8%. The back half will be better, and we'll just watch that play out. Scott Deuschle: Okay. And then, Chris, can you help reconcile the improved hiring and attrition trends you've noted with the increased outsourcing on CVN 80 that drove the negative EAC? I'm just trying to understand why you needed to do the unplanned outsourcing if hiring and attrition did track better. Chris Kastner: Yes. That's a really good question. And -- so when you're putting in your plan, you're projecting what your workload is going to be and what your labor is going to be. And it just made good sense to, over the last year or so, put together outsourcing plans. And the risk showed up when we finally rationalized and realized the cost estimate for that outsourcing. We needed to incorporate it into our EACs. So it's all in the mix together, and it's all related. Still positive on the labor front, but we still needed to do that outsourcing on 80. Scott Deuschle : Okay. And then last question, kind of bigger picture. But if you priced your fixed price contracts, assuming wage inflation would be at a low single-digit rate and it’s the mid- to high single-digit rate instead, I just – I’m trying to understand mechanically how this can still be a 9% margin business until you burn through a lot of the $47 billion backlog, which I assume would take another 4 to 5 years. Just trying to understand the mechanics of how that works in a chunk cost... Chris Kastner: Sure. I can start and then potentially, Tom here. But remember, we do have EPA protection pretty at Ingalls and some EPA protection at Newport News. And we do have long-term labor agreements in place both at Newport News and Ingalls. So that mitigates it to some extent. A –Tom Stiehle: Yes. I’d comment on that front, too. So yes, we do have the $47 billion of backlog. Only 55% of it’s funded, that’s one, right? So there’s other areas there, whether they’re going to get finalized, negotiated or exercised. Two is, as Chris said, about 45% of our workforce, we do have union agreements, so I know what I’m paying on that front. Much of the work we do, we’ve talked in the past about long lead contracts, advanced procurement contracts. So we really make sure we get current bids that we can both use in the proposal, get the advanced procurement turned on and then immediately exercise those bids and get the contractors locked into fixed price on the large material components. Most of Ingalls contracts have EPS provisions, which is 90-10 fixed price and then the Newport News where it’s more 50-50 cost type. The cost will be recognized on, I guess, those cost contracts. So a lot of things are in play. I’m with you that there was an expectation on inflation and for any long long-term contract that was put on before. Without EPA, the material could have some exposure. These are the headwinds that we talk about that we try and fight through. But then there’s other avenues and ways to get the contract adjustments, incentives, work-through, workaround or realize more opportunity than risk to still maintain and improve our profitability. Operator: I am not showing any further questions at this time. I would now like to hand the call back over to Mr. Kastner for any closing remarks. Chris Kastner : All right. Thank you for your interest in HII today. We look forward to continuing to engage with all of you. Thank you. Tom Stiehle: Thank you. Operator: That does conclude today's conference call. You may now disconnect your lines.

Operator: Ladies and gentlemen, thank you for standing by. And welcome to the Fourth Quarter 2022 HII Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference call is being recorded. [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: Thank you, Operator, and good morning, everyone. Welcome to the HII fourth quarter 2022 earnings conference call. Joining me today on the call are Chris Kastner, our President and CEO; and Tom Stiehle, Executive Vice President and CFO. As a reminder, any forward-looking statements made today that are not historical facts are considered our company’s estimates or expectations and are forward-looking statements made pursuant to the Safe Harbor provision of federal securities law. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. For additional information regarding factors that could cause actual results to differ materially from expected results, refer to our SEC filings. Also in their remarks today, Chris and Tom will refer to certain non-GAAP measures. For reconciliations of these metrics to the comparable GAAP measures, please see the slides that accompany this webcast, which are available on the Investor Relations website at ir.hii.com. With that, I would like to turn the call over to our President and CEO, Chris Kastner. Chris? Chris Kastner: Thanks, Christie. Good morning, everyone. And thank you for joining us on our fourth quarter 2022 earnings call. First, I would like to thank the entire HII team for a solid year and express my gratitude for their outstanding contributions throughout 2022. It was through their dedication and commitment that we were able to deliver results that demonstrated consistent performance in a pretty tough economic environment. Now let’s turn to the highlights for the quarter and the year on page three of the presentation. In 2022, we reported record sales of $10.7 billion, net earnings of $579 million and free cash flow of $494 million. The demand for our products continues to drive a tremendous backlog of $47 billion and we grew sales and earnings across all three of our segments in 2022, setting the foundation for continued growth in 2023 and beyond. At Ingalls, in the fourth quarter, we delivered DDG 123 Lenah Sutcliffe Higbee and completed builder’s trials on DDG 125 Jack H. Lucas, the first Flight III ship just one quarter after DDG 123 completed her trials. Our DDG 51 team also started fabrication on DDG 133 Sam Nunn. In our amphibious ship product line, we were awarded a $2.4 billion detailed design and construction contract and started fabrication for LHA 9 Fallujah, the fourth big deck amphibious warship in the America class. Also at Ingalls, in January, we were awarded the advanced planning contract for the modernization period for Zumwalt-class guided missile destroyers. At Newport News in the fourth quarter, we authenticated a keel for SSN 800 Arkansas, honoring the ship sponsors to Little Rock 9. We continue to remain focused on reducing risk and meeting cost and schedule objectives on the Virginia-class boats. As for nuclear aircraft carrier, CVN 79 Kennedy is well into the test program. Distributed systems such as fire main, potable water, air conditioning and ventilation are coming to life. The EMALS Catapult system, which we began testing in 2022 remains on track and is progressing as planned through her test program and we expect to enter into the Combat Systems Test program later this quarter. And finally, for the refueling and complex overhaul of CVN 73 USS George Washington, we are 98% complete as we near planned re-delivery later this year. At Mission Technologies, we achieved solid revenue growth for 2022, with all of the business groups growing year-over-year and we ended the year with a robust potential business pipeline of $66 billion, of which over one-third is qualified. Significant wins in 2022 included, the Decisive Mission Actions and Technology Services contract, Mobility Air Forces Distributed Mission Operations contract and the Remus 300 selection as the U.S. Navy as small UUV program of record. From an operational perspective, we have integrated Alion into our Mission Technologies and HII team and with the integration complete, we can turn our full attention towards executing our growth strategy. Moving on to slide four. We are providing the major milestones for 2023 and 2024. I am proud to say that we met all of the Shipbuilding milestones that we highlighted back in the second quarter of last year for 2022 and we are maintaining all of the 2023 milestones. This demonstrates growing confidence in our ship schedules and provides a solid platform to continue to improve our cost performance. Notable anticipated 2023 milestones at Newport News include the planned delivery of SSN 796 New Jersey and planned float off of SSN 798 Massachusetts, as well as the planned re-delivery of CVN 73 and planned crew move aboard on CVN 79. At Ingalls, DDG 125, NSC 10 Calhoun and LPD 29 Richard M. McCool Jr. are all forecast to deliver this year, while LHA 8 Bougainville is expected to launch. In addition to these Shipbuilding milestones, Mission Technologies expects to see continued growth resulting from our large opportunity pipeline, including the several award decisions that we expect to be made in the first half of the year. Now I would like to discuss our operational focus areas. Our top operational priority remains hiring and workforce development. I am confident in our plans for hiring, and as importantly, our retention and training strategies. These strategies that center around employee skills and leadership development are gaining traction and we have had a good start to the year. After hiring over 4,900 craft personnel in 2022, we expect a similar hiring rate in 2023, while at the same time, improving our productivity, attendance and over time together to drive performance. Regarding inflation, we have some installation through our contracting terms and conditions. However, non-programmatic elements of inflation have impacted us across all of our programs. And finally, the supply chain is stabilizing and we have worked closely with our customers and suppliers to achieve the best possible schedules. To summarize and notwithstanding being our most significant risk, as labor and supply chain impacts continue to stabilize and inflation abate, we believe we have the opportunity for improved performance over the next few years. Turning to the budget environment, we are pleased with the passage and enactment of the fiscal year 2023 Defense Appropriations and Defense Authorization Bills. Both pieces of legislation strongly support Shipbuilding, including funding and authority for an additional DDG 51 Flight III ship for a total of three DDGs, 2 Virginia-class attack submarines, the Columbia-class ballistic missile submarine program, Ford-class nuclear aircraft carrier programs and the refueling and complex overhaul of CVN 74 John C. Stennis. Both Appropriations and Authorization Bills continue funding for LPD 32 and LHA 9 and provide new advanced procurement funding for LPD 33, LHA 10 and a third DDG 51 in FY 2024. The Defense Authorization Act also includes language requiring a naval fleet of no less than 31 operational amphibious warships, including a minimum of 10 amphibious assault ships. We continue to see bipartisan congressional support for our programs. We look forward to working with the administration and Congress on the President’s fiscal year 2024 budget request. So, with that, I will turn the call over to Tom for some remarks on our financial results and guidance, and then I have a few additional comments before we move on to Q&A. Tom Stiehle: Thanks, Chris, and good morning. Today, I will briefly review our fourth quarter and full year results and also provide an outlook for 2023. For more detail on the segment results, please refer to the earnings release issued this morning and posted to our website. Beginning with our consolidated fourth quarter results on slide five of the presentation. Our fourth quarter revenues of $2.8 billion increased approximately 5% compared to the same period last year. This growth was driven by higher year-over-year revenue at all three segments, leading to record quarterly revenue for HII. Operating income for the quarter of $105 million decreased by $15 million or 12.5% from the fourth quarter of 2021 and operating margin of 3.7%, compared to margin of 4.5% in the prior year period. The decrease in operating income was primarily due to lower segment operating income. Net earnings in the quarter were $123 million, compared to $120 million in the fourth quarter of 2021. Diluted earnings per share in the quarter were $3.07, compared to $2.99 in the fourth quarter of the previous year. Moving to our consolidated results for the full year on slide six, revenues were $10.7 billion for the year, an increase of 12.1% from 2021. The increase was driven by year-over-year growth at all three segments, along with a full year of Alion revenue. Operating income for the year was $565 million and operating margin was 5.3%. This compares to operating income of $513 million and operating margin of 5.4% in 2021. The operating income growth was driven by year-over-year improvement at all three segments, as well as a more favorable non-current state income taxes and operating FAS/CAS adjustment. Net earnings for the year were $579 million, compared to $544 million in 2021 and diluted earnings per share were $14.44, compared to $13.50 in the previous year. Moving on to slide seven. Ingalls’ 2022 revenues of $2.6 billion increased $42 million or 1.7% from 2021, driven primarily by higher revenues in the LHA and DDG programs, partially offset by lower NSC program revenues. Ingalls’ 2022 operating income of $292 million and margin of 11.4%, both improved from $281 million and 11.1% last year. These results were driven primarily by favorable changes in contract estimates and price adjustment clauses, as well as higher risk retirement on the LPD program, partially offset by lower risk retirement on the DDG program compared to 2021. At Newport News, 2022 revenues of $5.9 billion increased by $189 million or 3.3% from 2021, primarily due to higher revenues in both aircraft carriers and submarines, partially offset by a lower revenue in naval nuclear support services. Increased aircraft carrier revenues were driven by higher volumes on the refueling and complex overhaul of the USS John C. Stennis CVN 74 and the construction of Doris Miller CVN 81 and Enterprise CVN 80, partially offset by lower volumes on the refueling and overhaul of the USS George Washington CVN 73 and USS Gerald R. Ford CVN 78. Submarine revenue growth was due to higher volumes on the Columbia-class and Block V boats on the Virginia-class, partially offset by lower volumes on the Virginia-class Block IV boats. Newport News 2022 operating income of $357 million and margin of 6.1% were relatively consistent with the performance in 2021 of $352 million and margin of 6.2%. 2022 results included favorable changes in contract estimates from facilities, capital and price adjustment clauses, as well as contract incentives on the Columbia-class submarine program, partially offset by lower risk retirement on the VCS program and the refueling overhaul of the USS George Washington CVN 73 compared to 2021. 2022 Shipbuilding margin of 7.7% was consistent with the performance of 2021, but below our expectations for year-over-year improvement, as the back half of the year provided limited risk retirement opportunities. Continued labor challenges, including high attrition rates, the impact of non-programmatic inflation and supply chain disruption all contributed to slower margin progress. At Mission Technologies, revenues of $2.4 billion increased $911 million or 61.7% from 2021, primarily driven by the acquisition of Alion in the third quarter of 2021. Mission Technologies’ operating income of $63 million compares to operating income of $50 million in 2021. Primary drivers of growth are the acquisition of Alion in 2021, as well as higher equity income from a joint venture, partially offset by higher amortization of purchased intangible assets in 2022 due to the Alion acquisition. 2022 results included approximately $96 million of amortization of Alion-related purchased intangibles compared to approximately $33 million in 2021. I will also note that the fourth quarter and 2022 results included a non-cash downward valuation adjustment of approximately $10 million or approximately $0.20 per share related to an equity method investment. Mission Technologies’ EBITDA margin in 2022 was 8.2% and adjusting out the onetime downward valuation adjustment, EBITDA margin was 8.6%, consistent with 2021 performance. Turning to capital deployment on slide eight. We ended 2022 with a cash balance of $467 million and liquidity of approximately $2 billion. 2022 cash from operations was $766 million and free cash flow was $494 million. Free cash flow generated in the fourth quarter of 2022 was significantly above our prior expectations, as we were able to accelerate several large cash collection events. This has a direct impact on our expectation for 2023 free cash flow, which I will discuss in more detail in a moment. I am pleased to report that the net capital expenditures were $272 million or 2.5% of revenues in 2022 at the very bottom end of the guidance range. Cash contributions to our pension and other postretirement benefit plans totaled $41 million in 2022. During the fourth quarter, we paid dividends of $1.24 per share or $50 million bringing total dividends paid for the year to $192 million. Over the course of 2022, we repurchased approximately 245,000 shares at an aggregate cost of approximately $52 million. Moving on to slide nine and our updated outlook for pension and post-retirement benefits. Our outlook for 2023 has improved modestly from the update we provided in November, given the increase in discount rates since that time. Asset returns for 2022 of negative 16.1% or about as expected compared to our update in the third quarter. Expectations for 2024 through 2026 have been updated and consistent with the Q3 update, the FAS benefit has come down considerably from our last update given the more immediate recognition of the negative asset returns experienced in 2022. This is partially offset by the impact of higher discount rate. We also have provided an initial review of our 2027 expectations. Turning to slide 10 and our outlook for 2023, while we continue to expect Shipbuilding growth of approximately 3% over time, our 2023 outlook range of $8.4 billion to $8.6 billion acknowledges uncertainties around the current environment, particularly the labor challenges we have discussed. For 2023, we expect Shipbuilding operating margin between 7.7% and 8%, as we continue to target incremental margin improvement, but acknowledge the current challenges have tempered the pace of that progress. For Mission Technologies, we expect 2023 revenue of approximately $2.5 billion, organic growth of approximately 5% year-over-year. We expect operating margins of between 2.5% and 3% and EBITDA margins of between 8% and 8.5%. In 2023, amortization of purchased intangible assets is expected to total approximately $128 million, of which $109 million is attributable to Mission Technologies. We expect 2023 capital expenditures to be approximately 3% of sales. Moving on to expectations for the first quarter of 2023, we expect overall revenue growth for the first quarter to be quite modest given normal seasonality in Mission Technologies and the strong fourth quarter performance for Shipbuilding, which benefited from favorable material timing. Additionally, given the timing of the Shipbuilding program milestones and the mentioned Mission Technology seasonality, we expect first quarter segment operating results to be the weakest of the year, with the Shipbuilding operating margin near 7% and Mission Technologies operating margin near 1%. The outlook we are providing today is based on the best information we currently have and assumes no further degradation in our supply chain, that non-programmatic impact from inflation continue to abate, and most importantly, that we are able to continue to hire and retain employees at a pace that supports our staffing plan. Additionally, on slide 10, we have provided our updated outlook for a number of other discrete items to assist with your modeling. On slide 11, we have provided an update -- updated view on our free cash flow expectations through 2024, consistent with how we presented this data in the third quarter, this outlook assumes the current R&D amortization treatment for tax purposes remains in place and we are reaffirming the $2.9 billion target. If Section 174 is deferred or repealed, all else equal, there would be an opportunity of approximately $215 million in total over the cost of 2023 and 2024. As I noted earlier, we significantly outperformed our 2022 free cash flow expectation of approximately $350 million by accelerating collections. This timing difference, along with the delay of the planned COVID-19 repayment now into this year have impacted 2023 free cash flow expectations. Consistent with our normal seasonality, we expect the first quarter of 2023 free cash flow will be the weakest of the year and given the pull-forward of collections into the fourth quarter of 2022 is likely to be an outflow of $200 million to $300 million. Our free cash flow expectation for 2024 remains unchanged, as it will not be burdened by COVID-19 repayment, will benefit from continued topline growth, and margin expansion potential as compared to 2022. Additionally, we expect to see sub-6% working capital levels as a percentage of sales in 2024. We are reaffirming our capital allocation priorities focused on debt paydown, which is on pace to retire about the $400 million bond this year and the remainder of our Alion acquisition term loan in 2024, and our commitment to return substantially all free cash flow after planned debt repayment to shareholders through 2024. To close my remarks, it was no doubt a challenging year, but I am proud of the entire HII team and the important work we accomplished across the business, from successfully meeting all of our planned Shipbuilding milestones to the critical integration work that was completed timely and under budget at Mission Technologies. Across the enterprise, we made meaningful progress in 2022, which resulted in growth across all segments and free cash flow results that were well ahead of our projections. We entered 2023 intent on driving execution and are well positioned to deliver profitable growth. With that, I will turn the call back over to Chris for some final remarks before we take your questions. Chris Kastner: Thanks, Tom. In summary, we delivered consistent results in 2022 and we believe we are well positioned to grow in markets of critical importance to our customers, while executing on almost $50 billion of backlog in 2023 and beyond. We will continue to make long-term strategic decisions that benefit our employees, customers and shareholders, creating long-term value for all of our stakeholders. Now I will turn the call over to Christie for Q&A. Christie Thomas: Thanks, Chris. As a reminder to everyone on the call, please limit yourself to one initial question and one follow-up so we can get as many people through the queue as possible. Operator, I will turn it over to you to manage the Q&A. Operator: Thank you. [Operator Instructions] Our first question today comes from Myles Walton from Wolfe Research. Please go ahead, Myles. Your line is now open. Myles Walton: Thanks. Good morning. Chris Kastner: Hi, Myles. Myles Walton: The first one, maybe at a high level, is this still a 9% plus Shipbuilding margin business? Chris Kastner: Yeah. Definitely. I believe that we have come through some challenging times with COVID and we have got some ships that are still working through that. Ingalls is obviously north of that and Newport News is making great strides. And I think the biggest issue we can work on a Newport News is simply work in the operating system, getting the Block IV boats delivered over the next two years and three years and transitioning to Block V. So, yeah, absolutely, it’s a 9% business. I am not going to give a forecast for when that’s going to happen, but I do expect performance to continue to improve from here. Myles Walton: Okay. And then, Chris or Tom, I don’t know, in terms of the plug for capital deployment for share repurchase, I guess, it’s $250 million to $300 million in 2023, 2024 is what you plan to do. Do you have any sights on doing that a little bit earlier or do you have to wait until 2024 as big cash flow come through to have confidence to execute against it? Tom Stiehle: Yeah. Myles, this is Tom. We haven’t given an exact number, obviously, if you work yourself through the math of where we are, expectations on the revenue and the margin expansion, the free cash flow bridges that we have given you and then the capital expense as long -- as well as with the working capital, the numbers fall that way. So as we work ourselves through the year, we -- the cash is generated. We anticipate to continue to buy back shares as we see value in the share price. But we haven’t really guided on how that is going to be portioned over 2023, 2024. We stand behind our commitment to that all excess free cash flow will be given back to the shareholders after debt repayment schedule. Myles Walton: And then just one clarification, what is non-programmatic inflation? Chris Kastner: Yeah. So I will give you an example of that, Myles. It’s related to expenses towards the end of the year that we didn’t -- that the actuals were higher than what we forecast, stuff like medical benefits, the insurance premiums, we just didn’t get that right. Tom Stiehle: And we have seen tight marketing expense [ph]. Myles Walton: All right. Thank you. Tom Stiehle: Yeah. Sure. So it’s overhead tight expenses for us. Myles Walton: Thank you. Operator: Thank you. Our next question comes from Robert Spingarn from Melius Research. Please go ahead, Robert. Your line is now open. Robert Spingarn: Hi. Good morning. Chris Kastner: Good morning, Rob. Tom Stiehle: Good morning. Robert Spingarn: Chris, you talked a lot about the labor constraint and I wanted to see if you could give us some granularity as to how that number splits between the two shipyards and Mission Technologies. One thing I have noted is if we look at your job postings, it seems like Newport News has 10x the openings of Ingalls and does that factor into the margins there? Chris Kastner: Not really. I will -- Mission Technologies is pretty stable, adding throughout the year with really industry standard attrition rates in a very competitive market. We plan to add about 5,000 shipbuilders throughout the year and then there are some positive indications in not only hiring, but also over time, attendance and attrition. So there are some positive indicators. I wouldn’t necessarily relate it back to margin. Newport News will hire more this year than Ingalls. We don’t break that out separately. But I wouldn’t necessarily relate that back to margin, no. Robert Spingarn: Okay. And then just as a follow-up to that, could there be upside to the 3% topline growth if Congress appropriated more funds to expand shipyard capacity and the fund training and apprenticeship programs? Chris Kastner: Yeah. But the constraint is labor. Our shipyards are facilitized to grow in excess really of that 3% and -- but we need to be conservative and how we project -- how we are going to add labor over the next few years. But is there upside? Yes, of course. Robert Spingarn: Yeah. I guess I am asking you is can they help you attract labor faster and train labor faster. The benefit to get the ship... Chris Kastner: Yeah. Interesting enough, there’s a lot of initiatives both at the state and federal level to help in workforce development. And we are actively communicating with both states that are involved in that and the federal government for infrastructure and workforce development support. Robert Spingarn: Okay. Thanks, Chris. Chris Kastner: Sure. Operator: Thank you. Our next question comes from Scott Deuschle from Credit Suisse. Please go ahead. Your line is now open. Scott Deuschle: Hey. Good morning. Chris Kastner: Good morning, Scott. Scott Deuschle: Tom, did CVN 79 book a net-net negative EAC in Q4? Just trying to interpret what’s in the press release on the year-over-year comparison there? Thanks. Tom Stiehle: Yeah. So we don’t provide the actual margin booking rates to step up, so step backs on any individual program. I would tell you -- to give you some color on that, on the adjustments, there was nothing significant either are up or down on any individual program. So the answer to your question is no on that. I would tell you that the effect that you are seeing at Newport News there is, although it’s net down as far as the adjustments it has, it was really a function of not having the upside that we would normally see. So if you kind of range bound to what we saw on the downside of EAC adjustments, because the timing on the milestones and just where they saw a little bit of a draw short on labor, a little bit of pressure on overhead costs, overhead absorption is a little bit higher on all the programs there and CVN 79 is not immune to that effect as well. But it was not significant enough as you see it’s not called out in the K. Chris Kastner: Scott, I’d also add that… Scott Deuschle: Okay. Chris Kastner: … CVN 79 had a pretty solid year. They met their compartment commitments for the year, EMALS is essentially built out. It’s pretty amazing. I was up there last week and the equipment is in and they started that test program. The topside test program has begun. So they have got a bit of momentum. I hate to use football reference, but the big game is this weekend, but 79 is what I call four yards in a cloud of dust, right? They are -- every week they are executing on a lot of volume work. They met their commitments for last year. They have got a lot of work in front of them, but I have high hopes for success on that program. Scott Deuschle: Great. And then, Chris, what were the, sorry, if I missed this, but what were the gross and net headcount additions in the Shipbuilding business in 2022 and then just curious on how attrition trended in Q4 sequentially relative to Q3? Thank you. Chris Kastner: Yeah. So attrition got better throughout the year. I don’t have the specific number here. We added about 5,000 heads, but it did trend better as we move through the year and it’s gotten better in January as well. It’s pretty -- it’s what I call this a bit of stability showing up in the Shipbuilding organizations from not only a labor standpoint, but also supply chain and inflation. It’s not back to pre-pandemic levels, but it’s definitely stabilized and that’s what we need to execute. Scott Deuschle: Thanks, guys. Appreciate it. Chris Kastner: Sure. Tom Stiehle: Thanks, Scott. Operator: Thank you. Our next question comes from Pete Skibitski from Alembic Global. Please go ahead. Your line is now open. Pete Skibitski: Hey. Good morning, guys. Chris Kastner: Hi. Pete Skibitski: Just going back to Kennedy, it’s a big contract for you guys at fixed price, and I was just wondering, my recollection was 2023, 2024, you guys are going to have some big risk milestones on that project. It sounds like that’s still going to happen. But is just the labor situation has kind of eaten up the upside on that potential risk retirement, is that the right way to think about it? Chris Kastner: I wouldn’t necessarily say it’s eating up all the upside. I would say that we are very conservative in how we deal with the EAC and there’s a lot of really complex work in front of us. So I would not necessarily say it’s eating up all the upside. Pete Skibitski: Okay. Okay. Just a follow-up to that, in Newport News, is VCS Block IV the bigger muscle mover margin wise? Is that kind of -- is the Block IV kind of roll-off over the next two years? Does that just give you a lot more relief than anything else? Chris Kastner: It will definitely give us a lot more confidence moving forward after we get those Block IV boats delivered and transition into Block V. Pete Skibitski: Okay. And Chris, just on that, it’s -- obviously, labor impacts all your programs, but Block IV had kind of the unusually aggressive schedule. Is that a combination why that’s been such kind of a door on your side, is that fair? Chris Kastner: Well, remember, Block IV was impacted the most by COVID, right? We had a pretty material impact back in 2020, which really reduced our profit expectations on those boats. So we just need to get through them. We need to get them delivered. The program schedules are pretty stable right now and a lot of cooperation between electric boat Newport News and really senior Navy to get through those program schedules. So we just need to get through them and then we will transition into Block V. Tom Stiehle: Chris, if I could hop on that too. Pete, so on that, to your question of IV or V, yeah, Block IV has been with COVID in 2021, 2022. So it’s long run rate, those contracts have had in the EACs with some additional costs. I think it’s two-fold. One, getting those Block IV boats done alleviates the mix in the portfolio at Newport News, so there’s a list that you talked about there. But then also it’s just -- those boats give us time to come down the learning curve, the lessons learned, the metrics and the operating system and the pressure on that we have on boat there. It truly is a production line of all programs you have, it’s the most serial production line with the modules go and then the boats are there, some will go from unit-to-unit with the same personnel. So getting through IV and then that kind of benefit lifts the Block V, which has higher profit potential. And then it will take the preponderance of the portfolio mix at Newport News. We crossed over the end of last year. So already now the sales proportion between Block IV and V is now more in V and IV. So there’s going to be a natural progression of improvement with learning for boats being accomplished and then that learning and higher profit potential on Block V is going to be affecting the New Port’s portfolio. Pete Skibitski: Got it. Thanks, guys. Tom Stiehle: Thanks. Operator: Thank you. And our next question comes from David Strauss from Barclays. Please go ahead, David. Your line is now open. David Strauss: Thanks. Good morning. Chris Kastner: Good morning. David Strauss: Tom, I have similar question that I have asked in the past around working capital. I mean you obviously had a big improvement in working capital in the fourth quarter. Looks like in your guide for cash, I guess, back into that, it looks like you are assuming relatively neutral working capital for 2024, is that correct or sorry, for 2023. And then could you help bridge us how you go from $400 million and $400 million, $450 million in cash to -- in 2023 to the number you are looking at in 2024, I guess, maybe a little bit of CapEx help, but what else gets us there? Tom Stiehle: Sure. Yes. I will break that down. I have several points I want to hit. I will hit the percentage on working capital last as I walk you through that. So we have updated on slide 11 of the PowerPoint presentation there. So we finished at $494 million, pretty healthy against an expectation of start the year at $300 million to $350 million, we pulled that down to $200 million to $250 million kind of midyear with the re-guide and then Q3 we told you $350 million, we finished $494 million with healthy free cash flow in 2022. Obviously, that pulls ahead a little bit and so we have taken down the 2023 expectation. We hedge our $545 million to $595 million or midpoint of $570 million last time we discussed and because of the pull ahead that we have here right now, we reset expectations of $400 million to $450 million. You -- to your point of working capital, you are right, just a couple of quarters ago, we were at 11.1%, last quarter we were in the 10% range and we finished 2022 up at 6.1% of working capital. As we have been guiding over the last three years or four years, we saw that the workload and just the cadence of the ships, we are going to have more deliveries and launches on the back half of the five-year free cash flow commitment in the front half and that’s exactly what we see here. If you look at the milestone chart, you will see that we are going from three deliveries in 2022 to five deliveries in 2023. We also have three launches in 2023. So that’s a pretty big year. And then kind of it going forward to the following year on that, we take that perspective up and we have two deliveries and three launches in 2024. So a lot of activity there, which will continue us leading the working capital, getting rid of the retention that we have and helping in the free cash flow lift as we go forward. Also, I would tell you that, as much as we finished up at 6.1% on working capital, it will just grow a little bit. We have got a couple of advancements on incentives that we have had. So we will go from 6.1% to about 6.5-ish working capital in 2023. So more deliveries helped slight rise in working capital in 2023 slightly hurts. We re-guided on CapEx from 2.5% to 3%, so a couple of dollars of headwinds there. So two things against us, but with all those deliveries and launches, we will see working capital finish up around $425 million. And mind you, 2023 has to repay COVID, which right now is about $125 million, right? The way I look at it and give you confidence on where we are going with that. We have three years in the whole now against the five-year commitment, $757 million, $449 million and $494 million, that averages out to $567 million straight stick at BSC about $600 million a year that you need. So we are running behind for the first three years, but we knew there was a natural grant with retention with revenue and margin expansion. And also we have Alion on board now. 2022 we had them onboard for the first year. I was happy with the contribution they made. If you recall, we took the $3 billion to $3.2 billion with Alion and I am happy with the contribution they made in 2022 and Alion will be on board for 2023, 2024. As we look -- going forward, right, EBITDA margin stay flat from 2021 to 2022. We are foreshadowing some margin expansion into 2023. We have the topline growing in Shipbuilding right now that we gave you in the guidance $486 million and we expect we will continue incrementally guiding higher revenue and margin into 2024. And also I’d ask you to take a look at the three years that we have had, the $757 million, $449 million and $494 million free cash flow. That $757 million really had two things that actually helped it, and if you normalize it out, how to make sense of how we are marching to be north of $700 million in free cash flow as we get out to the 2024 timeframe, but the $757 million had the FICA release, which was $130 million and it also has the COVID repayment benefit for $160 million. So $160 million and $130 million is $290 million. $290 million of the $757 million is about $467 million is really how I look at the first of the three years, $467 million. The $449 million to 2021 has the FICA repay in it. So you throw another $65 million in that, that’s about $510 million for a normalized 2021 and now for 2022, $494 million, there’s $65 million of FICA in that too, that’s $550 million. So I really look at it, we have normalize for what we have seen because of COVID with FICA and repay, it’s more like a match of $460-ish million to $510 million last year to $555 million, $550 million this year. The guide we gave you is $450 million for 2023 only because I have the COVID repay. So it’s another with $125 million on top of the midpoint, that’s a $550 million year and I have the year in front of me to burn down risk and pulling cash. So I am comfortable with how margin passed by average of $567 million in the first three years. And then the last piece on how we get that up to, how do you get to $780 million is the working capital we see is going to swing about 2 points down. As I mentioned earlier, we finished 6.1% 2022, we will be in the mid-6s for 2023 and then it’s going to swing down below 5% for 2024 and 2 points of margin against the topline of $10.8 million, is about $200 million. So $550 million plus $200 million is $750 million. I got you at the midpoint of $780 million, because we still have revenue growth and margin expansion. So I am quite comfortable with where we are right now. The numbers play out. If you have any questions, you can -- as we have our calls afterwards, we can break that down for you further. David Strauss: Okay. That’s a lot of detail. Thank you for that. And Chris, as a follow-up on Mission Technologies, the EBITDA margin there, which I guess is the right way to look at 18.5%. How do we think about those as longer term? I mean those are well below kind of what we see out of typical kind of services companies and you pitch this is not just your typical kind of services business. So how do we think about those EBITDA margin, I guess, the potential there? Thanks. Chris Kastner: Yeah. Thanks, David. You have to remember that the vast majority of that work is cost plus. So that would indicate that you would have a lower EBITDA percentage. I do think there’s opportunity for upside as we present more solutions and move into a fixed price sort of arrangement. We are not prepared to say that it’s going to get better than that right now, but there is opportunity for improvement and that’s something we are evaluating. David Strauss: Thank you. Tom Stiehle: Thanks. Operator: Thank you. Our next question comes from Doug Harned from AllianceBernstein. Please go ahead. Your line is now open. Doug Harned: Great. Thank you. Good morning. Chris Kastner: Good morning. Tom Stiehle: Good morning. Doug Harned: So I want to go back to Newport News and you had a 5.1% margin this quarter. That follows Q3 that if I take out the Columbia-class benefit, that was 4.1%. And what I want to understand is you have still got certainly the Massachusetts and the New Jersey flowing through there. And so the work that you have done on Block IV where you have taken charges in the past, I mean, how much of this, what I would call, kind of a low margin in Newport News is due to the overhang of those past charges. So then when you get out from under those, should we expect a step up? Chris Kastner: Well, yeah, Doug, this is Chris. I will start and then Tom can jump in there. There’s absolutely an overhang related to Block IV boats that we are dealing with and so we should expect a margin step up. Now we haven’t guided beyond 2023 and we need to be conservative, because we need to make sure the labor shows up and we get them trained up and they go execute. But I think you are right, relative to that overhang on Block IV, so we need to get those delivered. And as I said previously, those schedules are being very consistent right now. Cost performance, we are working on every day. Go ahead, Tom. Tom Stiehle: Sure. If I can hop on the back of that, right? So we talked about Block IV here and what we took back in Q2 of 2020, I would tell you the portfolio with Colombia that’s coming on board and sales. So that’s a new stock program that’s booking along right now across that contract. I have some change, change in unadjudicated change that still has to get proposed and pushed through the system. So that’s going to increase, we are very conservative on that until those unadjudicated changes are definitized. That’s boat RC 73 and 74 as is in infancy too both cost type contracts. So the portfolio just has a little bit higher level of that as we see it. And then, lastly, I think, as we go forward, burn down risk as 79 marches to its completion, as Chris said earlier, there’s a potential with good performance there for additional upside here. So I think we just find ourselves in a situation where the ships are right now, not too many milestones, a little bit of drag on overhead, down on labor. And I think we are booking prudently to conservatively right now as we want to see us pushing ships over the goal line. Those deliveries I mentioned is two each for 2023 and 2024, and I think, that will assist in the margin list, as well as Block IV gets small in the portfolio mix with the potential of Block V as we move forward. I think the Columbia program will mature and with 73 out of here at this year, a 74 focus and maturity will assist the portfolio of profitability as well. Doug Harned: So if I have it right, then Block IV, the overhang of these past charges is a contributor, but there’s still other -- there are a number of other things you just raised. So it’s sort of a blend of things that you are working through. I just wondered General Dynamics when they did their Q4 call and highlighted the number of issues that somewhat similar related to labor across shipyards and they did mention Virginia-class. Can you talk about how you are working with electric boat sort of together to deal with these problems and if they have been changed over time and how the -- how you work together and work through attrition issues… Chris Kastner: Yeah. Doug Harned: … inflation, all these sorts of things. Chris Kastner: Thank you for that question, Doug. It’s an important one. The Newport News and EV team, they work very closely together in understanding when the work, what work and how that work gets executed. So there could be movement of work between the yards where it’s most efficiently done if there’s labor issues and they are working very closely together. Their objectives are completely aligned to deliver all the Block IV boats. And I would add also the Navy is engaged as well. It’s all from the deck plate to the senior executive force. Everybody is all in and all of our objectives are aligned to get those Block IV boats delivered. And I will say that we are fully staffed on Block IV and Colombia, and we are working very hard on execution there. And not only is a Newport News working between each other, but working to ensure that any sort of outsourcing is effectively managed to ensure that we get -- that we meet our production schedules. Doug Harned: Okay. Very good. Thank you. Chris Kastner: Sure. Operator: Thank you. Our next question comes from Gautam Khanna from Cowen. Please go ahead. Your line is now open. Chris Kastner: Gautam, are you out there. Are you on mute, Gautam? Operator: Unfortunately, we are not getting any audio from the line. So we will move on to the next question. And our next question comes from George Shapiro from Shapiro Research. Please go ahead. Your line is now open. George Shapiro: Yes. Good morning. Tom Stiehle: Good morning, George. George Shapiro: I was curious that you wound up with 7.7% Shipbuilding margins and when you did the third quarter call in early November, you were looking for 8% to 8.1%. So just wondering what you missed here in two months, because I thought that Shipbuilding would be somewhat predictable sort of business? Tom Stiehle: Yeah. It was just the drag that we talked about at the end of the year. We had a strong first half of the year over 9% and we guided to 7% for the back half of the year and even Q3 was in that lane and we thought that the remaining 13 weeks of the year, we had that. But the shortfall of labor that we saw, a couple of the overhead or the non-programmatic issues drove hit boat yards actually on the cost that we talked about, on medical and just that shortfall as we go through and take a look at EAC performance and then the cost and how overheads flow through there, there’s a little bit of a drag on where we thought we would land. So if you call it on the call, I was focused on saying I want to see how the year plays out. We did stay on the guide at 8% to 8.1% and we thought we could get that home. But as the EACs kind of rolled up, there was just a little bit of a drag. I would say both to this question, George, and the previous one. From a Newport News perspective, 6.2% last year, 6.1% this year, about the same type of performance overall, if you think about it, another year with some drag upfront, with the effects of COVID and then supply chain, inflation, big year on inflation and then the hiring demands that we had here. So I am quite comfortable with promise as far as what the Newport News team accomplished it. But to your point, we thought we would get that home and Q4 came in a little flattish on Newport News than we expected. George Shapiro: And Tom, did you give the EACs for the quarter? Tom Stiehle: Not yet, but I can. No. I did, yeah. I referenced them, just that we didn’t have a tremendous downside. We just didn’t have upsides at Newport News. But from a -- for the quarter perspective, what we saw was the gross favorable were $29 million, the gross unfavorable were $56 million. That was a net of $27 million. And effectively, about 100% of that was at Newport News, basically Neutral Ingalls and Mission Technologies. So it was quiet at the other two divisions and Newport News saw a net down of that unfavorable for the corporation of 27 now. George Shapiro: Okay. Thanks very much. Tom Stiehle: Thanks, George. Operator: Thank you. Our next question comes from Seth Seifman from JPMorgan. Please go ahead, Seth. Your line is now open. Seth Seifman: Hey. Thanks very much and good morning. Chris Kastner: Good morning, Seth. Seth Seifman: Just maybe to follow up on that -- good morning. Maybe to follow up on that question, Tom, you talked about Newport News being in the low 6s for 2022 and 2021. I know you guys don’t typically guide segment margins. But if we are just to think kind of maybe qualitatively, overall Shipbuilding margins should be up 10 basis points to 20 basis points at the midpoint of the guidance. Does that mean there’s a little bit of improvement in each yard or given the way that some of the one-timers or some of the potential upside associated with the milestones that you are expecting at the shipyards. Is there opportunity for more expansion import news and maybe some headwinds in Ingalls? How do we think about that for this year? Chris Kastner: So I will start and then Tom can get into the details and thank you for saying we don’t guide by shipyards. We don’t do that. But I firmly expect Newport News will be better this year. I think they are executing their operating system very well. I think labor is more stable. I think the supply chain is more stable. I think the team has some momentum and I think Newport News is going to do better this year. So, with that, Thomas, you want to add anything about Ingalls, I think, they are pretty stable as well. Tom Stiehle: I am with you that we don’t guide by division, but from a historical perspective, things 10.5, 11, 11.1 for the last three years, they have the same portfolio basically done there finding labor overheads, the pressures that we talked about, but very strong operating team, a leadership. They know what they are building, those ships are under production. So I would think historically, they are going to continue perform well. And I think from a Newport News perspective, as they just fight it way through here, new technology started with Ford and now Colombia. We had that booking we talked about back in 2020, a little bit of COVID pressure, inflation, supply chain and hiring. But you can see some stabilization both in the performance over the last two years. We see stabilization and some stability in hiring and the schedule here and our expectation is that that yard can perform better. So I would expect that to increase as we go forward in the year here too. Seth Seifman: Okay. Great. Great. And then maybe to follow up real quick on a similar type of question on Mission Technology, I think you said, the EBITDA margin there ex the valuation allowance was like 8.6% in 2022 and so what’s driving it down in 2023? Tom Stiehle: We are probably just being conservative on the guide. So we had a 6.6% quarter with the impairment out of it, it was 8.3%. We have had quarters at Mission Technology anywhere from the low 8s to the low 9s. Last year was 8.6%. And as I said, adjusted it -- was unadjusted was 8% to 8.6% right now. So I think it’s just a function of net sales base. We have fixed and semi-variable costs there. It’s a good sized operation. We think we have the right people on board with the right strategy. The pipeline has grown year-over-year and the pipeline is more mature. And I think with the Mission Technologies integration into the HII family, with that behind us, as I mentioned in my notes, it was done under budget and is on time. That the team can completely focus on that pipeline, bids, execution and performance. So I think the 8% to 8.5% is just being conservative. Obviously, we want to see a couple of more dollars out of that division last year. We are guiding growth year-over-year right now. We did see Mission Technologies to grow 4% from 2021 to 2022 and each of the business units had growth in them. So those are all positive signs. I think the 8% to 8.5% is just waiting and seeing the awards happen. When the sales hit, I would expect we are going to be on the upper end of that range, if not over it. Seth Seifman: Great. Thank you very much. Chris Kastner: Thanks, Seth. Operator: Thank you. The next question is from Gautam Khanna from Cowen. Please go ahead. Your line is now open. Gautam Khanna: Hey. Sorry about that. I hope you can hear me. Chris Kastner: No. Yeah. Thanks. Now we had you, Gautam. Gautam Khanna: Great. Great. Hey. Thanks. I was curious if you could just give us some color on the timing of the milestones through the year. If you can tell us like, if there’s anything that’s in the month of December that has the potential to move out or things we should be watching… Chris Kastner: Yeah. Just… Gautam Khanna: … in terms of Q4 the way things happened [ph] Chris Kastner: Sure. Sure, Gautam. When you look at the 2023 milestones, I think, Tom already mentioned that Q1 was pretty light. The pretty evenly distributed across Q2 and Q3, but then CVN 79, excuse me, LPD 29, yeah, is in Q4. So that’s at the end of the year. So that’s the one we will have to watch. We got a lot of confidence in and the team down in Mississippi, but that’s the one towards the end of the year. Gautam Khanna: Okay. Thank you. And then just curious on VCS, anything incremental from last quarter on schedule with respect to... Chris Kastner: Not really. Pretty stable from a schedule standpoint on the VCS program. We have movement here and there, but it’s pretty stable. I got to hand it to that team, the program team and the construction team. They are getting after it and they are learning every day. So it’s been pretty stable. We need to stay on. Tom Stiehle: Chris has talked about that rhythm of the program, launch one and sell one-off when we saw that in 2022 and in the milestones, you will see that in 2023 and 2024. So we are working it. Gautam Khanna: Okay. And just on that last point, anything with respect to negative catch-ups or you can talk about 422 on VCS in aggregate anything, yeah, you can never call it out as material, but can we assume that there were kind of consistent negative marks in the program or anything you can tell us about that? Tom Stiehle: Nothing really significant to highlight here. I mean I mentioned in the keel the -- the keel net was at Newport News on that, which was down and they just kind of sprinkled over the programs, but there was nothing really to highlight here. Gautam Khanna: Okay. Thank you, guys. Chris Kastner: All right, Gautam. Operator: Thank you. Our final question today comes from Noah Poponak from Goldman Sachs. Please go ahead, Noah. Your line is now open. Noah Poponak: Hi. Good morning, everyone. Chris Kastner: Hi, Noah. Thanks for joining. Noah Poponak: Yeah. Sure. Tom, so just back to the cash flow breakdown and appreciate all the detail you gave there and I appreciate that there are a lot of moving pieces. But if I just kind of zoom out on the cash flow statement and look at a long history, it sort of ranged $400 million to $600 million for a while and the business is pretty stable topline and margin. I recognize you have some opportunity to grow the business and expand margins going forward. I think the pension looks pretty net neutral. The CapEx looks pretty stable. It sounded like you said earlier that you expect in that 2024 $780 million midpoint about $200 million of working capital. And I guess, should I think of working -- change in working capital is not a sustainable recurring part of the free cash flow, and therefore, that kind of $580 million, $600 million as sort of a predictable, sustainable engine of the cash flow statement going forward or is there some other reason to think of the base business is eventually making up that $200 million? Tom Stiehle: Yeah. So that’s a great question and we study that all the time and it’s the former -- it’s former with a caveat, right? So we are hitting the point right now. We have been impacted. If you look at the cash flow statement, we were in the $400 million to $600 million. I’d tell you from 2020, 2021 and 2022, those COVID, FICA repays and the COVID payments have tripped up and you have to normalize after that. A couple of things are happening. Obviously… Noah Poponak: Okay. Tom Stiehle: … prior to this window, the margin has dropped in Shipbuilding as we have kind of run through COVID. So we are fighting and working ourselves back with incremental improvement. The revenue growth with the backlog that we have shown you there and we expect at least have 3% here kind of going forward when we get through this labor crunch, that’s in place. So I think you can model that out. The -- as we go forward, the working capital I believe we will be in that 5% to 6% range and both yards are in a good rhythm right now, the DDG program annually, what we are doing with launch and sell off boat on VCS, the rhythm of Block V is behind that, the two carry by following 79, the Columbia Build 1, Build 2. So I think we are settling down on the mix of the portfolios in each yard and the timing on when they are going to pop out so. We have told you in the past, traditionally a Shipbuilding is like 6% to 8% of what we would expect. That gets water down a little bit, because now with Mission Technology and Alion with more sales in the base the numbers kind of pop down. If you normalize in just to the traditional Shipbuilding what we have talked about, right, we were at 12%, I think, in Q1 of 2022, Q3 of 2023, we are at 14%. We finished the year at 7.8% just for Shipbuilding and now as we go from 7.8% to 8.3% for Shipbuilding sales, we will see ourselves go down to 6% in 2024. That’s in the range that we were highlighting, say, for the first 10 years of the corporation of 6% to 8% in working capital. We were at that range in 2018. We were in the 6% or so. I think that’s sustainable as long as we are in a normal rhythm of adding work, which we have the backlog, we are performing to schedule, so we are selling ships off timely. And although being either at 6% our Shipbuilding sales or is subside, including all my sales with Mission Technology is on the low end of the range. I think what offsets that is the revenue -- an incremental revenue and margin that we think we are going to have in the coming years. So I am still bullish on the north of $700 million is going to be a run rate in a couple of years from now and I think 2024 is that inflection point to kind of start that run. Noah Poponak: Okay. The north of $700 million in a few years, I guess, if 2024 is $780 million midpoint about $200 million of working capital, once you get to the working capital goal, you then cease to have positive change in working capital flow to the cash flow. So 2025 million, I mean, who knows exactly what it’s going to be, but sort of directionally would not have that. So is there a step down from 2024 as -- and then as the business grows, you over time get back to that $700 million? Chris Kastner: Yeah. Noah, we are not going to discuss. Noah Poponak: You are not. Chris Kastner: We are not going to forecast 2025 free cash right now. But I think your logic is okay. The business is going to grow. And if we stay down with those working capital numbers, you are not going to get a benefit from it. You are going to have to get it from growth and margin improvement. So I think your logic is sound. But we do definitely believe that free cash is going to get north of $700 million in 2024 and then continue to grow from there. Tom Stiehle: I will tell you stick with a lot of the numbers, right? So I walk through how we normalize out the 2021 and 2022 because of COVID that you can see we are incrementally going from that $460-ish million to $510 million to $550 million with the guide of $425 million this year, COVID-adjusted, that’s another $550 million. And then I am telling you the working capital is going to get us there in 2024. So that is just say what’s the run rate. I think you are looking at… Noah Poponak: Okay. Tom Stiehle: … the right way on how you model it and we will provide guidance… Noah Poponak: Okay. Tom Stiehle: … for 2025 a year from that. Chris Kastner: Yeah. Noah Poponak: Great. And then, Chris, just on labor, you spent some time on it, but -- and it’s unpredictable, but I guess maybe just how -- when do you think you could get to something close to normal on your labor churn and development of the people you are hiring in. I guess with the amount of time you spent on it, the amount of time you have been in the business, obviously, it’s an unprecedented situation, but how much more time do you need to get to something that’s pretty stable? Chris Kastner: Yeah. Well, it’s absolutely more stable now than it was a year ago, okay? And that’s a testament to the hard work, the shipyards have put in to really kind of pivot who they were hiring, increase the training, increase the leadership training. So it’s absolutely better. I don’t know if you have ever done, right? There was a pretty generational change in our workforce where we lost a large swath of people through COVID. So we are retraining a workforce and retraining foreman and general foreman and construction superintendence and that’s happening. And the best thing we can do and the greatest learning potential is delivering ships. We are going to deliver five this year. Once you have been through that, you have learned a lot and they are going to continue to learn a lot. So I think it’s only improvement from here. I don’t think you have ever done, but I think we have made great progress. Noah Poponak: Okay. Thanks for the time. Chris Kastner: Yeah. Thanks, Noah. Tom Stiehle: Okay. Operator: Thank you. This concludes our Q&A session for today. I would now like to hand the call back over to Mr. Kastner for any closing remarks. Chris Kastner: Thank you for joining today. I am proud of all the hard work put in by the team and I am confident the hard work we are doing will pay off and value creation for all our stakeholders moving forward. Thanks again for joining the call. Operator: Thank you. That does conclude today’s conference call. You may now disconnect.

Operator: Ladies and gentlemen, thank you for standing by. And welcome to the Third Quarter 2022 HII Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference call is being recorded. [Operator Instructions] I would now like to hand the call over to Christie Thomas, Vice President of Investor Relations. Mrs. Thomas, you may begin. Christie Thomas: Thank you, operator and good morning, everyone. Welcome to the HII third quarter 2022 earnings conference call. Joining me today on the call are Chris Kastner, our President and CEO; and Tom Stiehle, Executive Vice President and CFO. As a reminder, any forward-looking statements made today that are not historical facts are considered our company's estimates or expectations and are forward-looking statements made pursuant to the safe harbor provisions of Federal Securities Law. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. For additional information regarding factors that could cause actual results to differ materially from expected results refer to our SEC filings. Also, in their remarks today, Chris and Tom will refer to certain non-GAAP measures. For reconciliations of these metrics to the comparable GAAP measures, please see the slides that accompany this webcast which are available on the Investor Relations website at ir.hii.com. With that, I would like to turn the call over to our President and CEO, Chris Kastner. Chris? Chris Kastner: Thanks, Christy. Good morning, everyone and thank you for joining us on today's call. I would like to begin today by highlighting the HII teams that work hard day in and day out to support our national defense customers, craftsmen and women constructing and overhauling the most powerful and survivable naval ships ever built, engineers and technology specialists developing critical capabilities and mission-driven solutions, all aligned with supporting our customers' priorities and pressing national defense needs. Thank you to the entire HII team. Now, let's turn to our results on Page 3 of the presentation. In the third quarter, we had sales of $2.6 billion which were 12% higher than 2021 and diluted EPS was $3.44 for the quarter, down from $3.65 in 2021. New contract awards during the quarter were approximately $2.1 billion which results in backlog of approximately $46.7 billion at the end of the quarter, of which $23.2 billion is currently funded. We continue to make progress across all of our shipbuilding programs. At Ingalls, we recently completed acceptance trials on DDG 123 Lenah Sutcliffe Higbee. And during the third quarter, the keel was authenticated for DDG 129 Jeremiah Denton. In our amphibious ship product lines, fabrication began on LPD 31 Pittsburgh. And last week, we were awarded a $2.4 billion detail design and construction contract for LHA 9. Also, we have commenced the work to complete the combat system, installation and activation on the Zumwalt-class destroyer, Lyndon B. Johnson, DDG 1002. At Newport News, CVN 79 Kennedy is moving further into the test program and began testing of the electromagnetic launch system. And on the other side of the shipyard, the keel was laid in the drydock for CVN 80 enterprise. The RCOH program continues to make progress with CVN 73 USS George Washington, on track to redeliver next year. Also, we continue to see progress on the Virginia-class submarine program and expect to deliver SSN 796 New Jersey -- SSN 798 Massachusetts next year. In the quarter, we experienced continued challenges from the broader macroeconomic environment, most notably a persistent tight labor market with really no material improvement in general economic conditions. Through the third quarter, we have hired over 3,600 craftsmen and women against our full year plan of approximately 5,000. And we continue to utilize the levers of outside leased labor and over time to offset the short-term deficit of employees. In addition, supply chain challenges continue across our supplier ecosystem, resulting in longer material lead times and inflation pressure. As we've discussed previously on inflation, we do have some contractual mitigation and we continue to actively manage the supply chain and our production schedules to minimize impacts. To address our shipbuilding labor challenges, we have aggressively enhanced our skilled workforce development pipeline. To this end, while we broadened our recruiting efforts to bring in more shipbuilders, we are also expanding our very successful apprenticeship programs, including revised curricula, reduction in completion time lines, a focus on pre-apprenticeships and use apprenticeships and expansion to underserved populations and women in the industry. Moving to our Mission Technologies business. Our pipeline remains very strong with $4 billion in proposal or evaluation and $17 billion in capture. Our third quarter book-to-bill was 2.2 and was a healthy 1.1 year-to-date. Integration of operations and business systems following the Alion acquisition is largely complete. And we are already seeing strong synergies such as the recently announced DMATs and awards totaling over $900 million in total contract value. We also received a couple of major contract actions in our Nuclear and Environmental business that were driven by sustained strong performance. At Savannah River, our joint venture received an extension for 4 years, plus an additional option year and at the Nevada National Security site, our joint venture received a simultaneous early exercise of all 5 of its option years. These are significant wins and we are very proud to support DOE across the complex. Despite headwinds earlier in the year due to the delayed omnibus spending bill and the ongoing intense competition for talent, we continue to gain momentum and see strong growth potential going forward. This includes both domestic and international markets, where we are expanding our presence in regions consistent with the national security strategy. In summary, I am confident that our presence across all the combatant commands coupled with an increasing demand signal for advanced technology solutions from our DoD customers positions mission technology as well going into FY '23. Shifting to activities in Washington; the federal government began the new fiscal year under a continuing resolution which funds government operations through December. We continue to urge to proceed expeditiously and remain optimistic that the annual defense appropriations and authorization processes will be completed in the months ahead. While final outcomes will depend on eventual respective appropriations and authorization conference committee negotiations, we are pleased to see defense oversight committees provide strong support to shipbuilding to include recommendations for new DDG 51 multiyear procurement authority, additional funding for amphibious ships and requirements for not less than 31 amphibious warfare ships. The strong shipbuilding demand driven by our national defense requirements as shown on Slide 5. These critical customer needs spanning destroyers, amphibs [ph], submarines and aircraft carriers and including new construction, overhaul and maintenance and modernization will result in significant contract award opportunities driving continued backlog stability. And now, I will turn the call over to Tom for some remarks on our financials. Tom? Tom Stiehle: Thanks, Chris and good morning. Today, I'll briefly review our third quarter results. For more detail on the segment results, please refer to the earnings release issued this morning and posted to our website. Beginning with our consolidated results on Slide 6. Our third quarter revenues of $2.6 billion increased approximately 12% compared to the same period last year. This increased revenue was attributable to the acquisition of Alion in the third quarter of 2021 as well as growth at Newport News Shipbuilding. Operating income for the quarter of $131 million increased by $13 million or 11% from the third quarter of 2021 and operating margin of 5% was essentially flat from the prior year period. The increase in operating income was primarily due to more favorable noncurrent state income taxes and operating fast cash adjustment compared to the prior year period as well as improved results at Newport News Shipbuilding. Other net expense was $13 million in the quarter which was primarily driven by losses on equity investments given market volatility in the quarter. Our effective tax rate in the quarter was approximately 14.8% compared to negative 4.3% in the third quarter of last year which included research and development tax credits for tax years 2016 through 2020. Net earnings in the quarter were $138 million compared to $147 million in the third quarter of 2021. Diluted earnings per share in the quarter was $3.44 compared to $3.65 in the third quarter of the previous year. Moving on to Slide 7. Ingall's revenues of $623 million in the quarter decreased to $5 million or less than 1% from the same period last year. driven primarily by lower revenues on the NSE and LPD programs and partially offset by higher DDG program revenues. Ingall's operating income of $50 million and margin at 8% in the quarter declined from last year, primarily due to lower risk retirement on the DDG program, partially offset by higher LPD risk retirement. At Newport News, revenues of $1.4 billion increased by $91 million or a robust 6.7% on from the same period last year due to higher naval nuclear support services as well as submarine and aircraft carrier revenues compared to the previous year. Newport News operating income of $102 million and margin of 7.1% were up from the last year due to contract incentives on the Columbia class submarine program, partially offset by lower risk retirement on the VCS program. The Columbia class contract incentives are related to Newport News support of continued growth in the submarine construction enterprise. At Mission Technologies, revenues of $595 million, increased $201 million compared to the third quarter of 2021, primarily driven by the acquisition of Alion in the third quarter of last year. Mission Technologies' operating income of $14 million compared to operating income of $13 million in the third quarter of last year. Current results included approximately $24 million of amortization of Alion-related purchase intangible assets compared to $8 million in the third quarter of last year. Mission Technologies' EBITDA margin in the third quarter was 8.4% and 8.7% year-to-date. Turning to Slide 8. Cash used by operations was $19 million in the quarter and net capital expenditures were $77 million or 2.9% of revenues, resulting in free cash flow of negative $96 million. This compares to cash from operations of $350 million, net capital expenditures of $73 million or 3.1% of revenues and free cash flow of $277 million in the third quarter of 2021. While third quarter free cash flow was below the projection we provided on our last earnings call, this is simply a function of timing as well as a tax payment of approximately $80 million that we elected to make in the third quarter given the lower probability of delayed deferral of changes to the R&D tax treatment. In fact, we are increasing our overall free cash flow outlook for fiscal year 2022 which I'll discuss in more detail in a moment. Cash contributions to our pension and other postretirement benefit plans were $11 million in the quarter, of which less than $1 million were discretionary contributions to our qualified pension plan. During the third quarter, we paid dividends of $1.18 per share or $48 million. We also repurchased approximately 66,000 shares during the quarter at an aggregate cost of approximately $14 million. Moving on to Slide 9 and our updated outlook for the 2022 and 2023 pension and postretirement benefits. First, I would like to highlight that our funded status remains strong and has improved year-to-date. Additionally, I will note that the cash flow impacts related to the pension changes remain muted. For 2023, the FAS benefit has come down considerably from our last update, given the more immediate recognition of the negative asset returns experienced thus far in 2022. While the increase in the discount rate does partially offset the impact of asset returns, the magnitude of the impact related to lower asset returns is clearly more significant. Please remember that pension-related numbers are subject to year-end performance and measurement criteria. We will provide a multiyear update of pension estimates on our fourth quarter earnings call in February. Turning to Slide 10. We are narrowing our 2022 Shipbuilding and Mission Technologies revenue guidance to the lower end of our prior guidance ranges, given results through the third quarter and the current operating environment. We are now expecting shipbuilding revenue to be between $8.2 billion and $8.3 billion and expect Mission Technologies revenues to be approximately $2.4 billion. The narrowing of the shipbuilding revenue guidance is a function of the challenging labor environment that we have frequently discussed as well as our expectations for the timing of the material as we near year-end. The Mission Technologies revenue is a reflection of the slower start of the year as well as the current hiring environment. As Chris noted, third quarter book-to-bill ratio exceeded 2.0, a very positive indicator as we move forward and we remain very enthusiastic about the growth opportunities at Mission Technologies. We are reaffirming our shipbuilding operating margin guidance range of 8% to 8.1%. For Mission Technologies, we are slightly revising our margin guidance to approximately 2.3% which is largely a function of the lower volume of work in the year. Moving to free cash flow. We are increasing our guidance for 2022 [ph]. Under current Section 174 R&D tax law, the midpoint of our prior guidance was $225 million which has now been raised to approximately $350 million. The most significant driver of that increase is the COVID progress repayment which we initially expected in 2022, moving to 2023. Given our free cash flow through the third quarter, we are expecting very strong free cash flow generation in the fourth quarter. On Slide 11, we have provided an updated in view of our free cash flow expectations. This outlook assumes the current R&D amortization treatment for tax purposes remain in place. And given that adjustment, our 2020 through 2024 free cash flow expectation is now approximately $2.9 billion. As we have noted before, the impact of the R&D treatment is approximately $250 million over the 2022 through 2024 time frame. We are reaffirming our capital allocation priorities, including our commitment to return substantially all free cash flow after planned debt repayment to shareholders through 2024. As we have noted, this is a significant commitment which should result in increased share repurchases, particularly in 2024 after we have reached a designed debt level. I will also note that we have recently announced and increased our quarterly cash dividend to $1.24, a 5% increase over the prior amount. To summarize, the operating environment remains challenging and we were not able to overcome the slow start to the services contracting pace which has resulted in revenue guidance moving to the low end of our prior ranges. We are pleased to reaffirm our shipbuilding margin guidance and increase our free cash flow expectations as we aggressively manage through current business conditions. Regarding fiscal year 2023, we plan to provide detailed guidance on our fourth quarter call, consistent with our normal guidance. With that said, we continue to view a long-term shipbuilding revenue CAGR of 3% as appropriate and we are pleased to reaffirm our long-term free cash flow target through 2024, as I have discussed. We would normally expect incremental shipbuilding operating margin improvement in 2023. However, given the current economic environment, we will need to close out the year to assess risk retirement and operational efficiencies before we can provide more insight. We will finish the year just as we've started focused on execution and we'll provide a more comprehensive update on our view for 2023 in February. With that, I'll turn the call back over to Chris for some final remarks before we take your questions. Chris Kastner: Thanks, Tom. Before wrapping up, I would like to highlight on Slide 12 that we will release an updated HII's sustainability report in the coming days which will be available on our website. We are focused on the alignment of the program with our mission, values and purpose and structuring our strategy around securing our business, building our community and protecting our resources. We have enhancements in process for future sustainability reporting and expect another update to be released in the spring of 2023. Finally, turning to Slide 13. We remain focused on successfully executing on our strong backlog and positioning for long-term growth which will generate value for our employees, customers and shareholders. Now, I will turn the call over to Christie for Q&A. Christie Thomas: [Operator Instructions] Operator, I will turn it over to you to manage the Q&A. Operator: [Operator Instructions] Your first question comes from the line of Doug Harned with Bernstein. Doug Harned: On Newport News, can you give us a sense of how things are progressing on Virginia class? I mean that's been -- I know you had less risk retirement this time around but we've talked a lot about this and the importance of getting labor back and trained. Where does that stand now in terms of your outlook? Chris Kastner: Yes. Thanks for that, Doug. Some -- definitely some stability in the Virginia class program right now, the Block 14 and 796 which is the [indiscernible] to be delivered, some positive developments from a schedule standpoint. They are very, very stable and looking towards the beginning of next year to get that [indiscernible] delivered. So I'd say stability in the schedule. Still working very hard on the fundamentals of cost and efficiency. But I think we're in a pretty good place from a schedule standpoint there. Doug Harned: Well, yes, so in terms of cost and efficiency, I guess what I'm trying to get at is -- is this there is a -- if you're seeing kind of a clear path to a point where you're really happy that you've got everything under control in terms of costs and so forth? I mean I'm just trying to get a picture for what that trajectory looks like to you now over the next few quarters, say? Chris Kastner: Yes. Sure. So fundamentally, when you have stability in your schedules and stability in your planning documentation and you know what work is in front of you, then you're going to have a better chance to have an efficient performance from a cost standpoint. So first things first, let's get the schedule right. We've got the labor. They are fully staffed on Block IV and Block 5 and they're making progress on their milestones. And now it's just knocking down that work, getting to the test program on 796 and progressing on 798. So I'm not going to give you a trajectory on margins on the VCS program. I will say, the best indicator within the submarine program is, are you making your milestones? Are your schedule stable? And if they are, you're going to meet your cost you're going to meet your cost objectives. But there's a lot of fight in that team, they're working very hard to get that done. I know the team is working very hard on the fundamentals of the operating system. If they get that right, they work on that every single week which they are, they're going to be successful. Doug Harned: If I can squeeze just one more in here. related to cost. You mentioned inflation in the last quarter. Historically, I felt your view has been that you can handle inflation. You've got enough opportunities in terms of escalators and so forth to deal with that. But when you talk about what may be different this time because we're seeing in a lot of defense companies now that inflation in the short term is more difficult than we've seen in prior periods. Chris Kastner: Yes. Well, so as I said previously, we do have some protection. The biggest issue for inflation for us is going to be in our -- really on our new contracts and ensuring that we get the bids right from the supply chain and ensure that the cost and schedule is correct when we bid those new contracts. So that's probably the greatest risk for us. We do have some inflation issues within some of our piece parts in the supply chain where we didn't have those under contract. But as I said previously, we have some protection for that, although not fully protected. So the real issue for us related to inflation is getting the bids right on our new contracts and we're working very hard to ensure we do that. Operator: The next question comes from the line of Robert Spingarn with Melius Research. Robert Spingarn: Tom, what was the organic growth for Mission Technologies in the third quarter since you have a partial inclusion last year in the third quarter? And then I know Alion has a lot of cost-plus work but how much might wage inflation have contributed to the top line growth there? Tom Stiehle: Yes. So when I look at that, you are right. We closed August 19 of last year. So the third quarter last year was incomplete. So the organic growth for the quarter specifically was about 1.5%. But I look at it for the year, it could be choppy because of the [indiscernible] at the beginning of the year. We've talked about the slow contracting environment, the wins and then the supply chain issue a little bit on the operational side of that. The overall emission technologies growth for the year is 4.3%. Alion stuff grew 8%. Q2, we told you about 6% Mission Technologies as a whole. Mission Technologies, revenue top line is a little light. Usually that third quarter for us or the fourth fiscal quarter is a sweep up quarter for both line and legacy MDIS we had anticipated when we told you about an 8% growth against the Q2 top line, we would see about that didn't materialize there. As I said, factors were that we didn't sweep up as much as we thought were in funds and have open seats we've talked about and hiring professionals there and then just some material -- some material didn't hit in the quarter. So that's where we stand with growth. Chris Kastner: Sorry, Rob, I don't recall if you just said that, Tom but I think that we had pro forma growth of 8% year-to-date within Mission Technologies. So I'm feeling very positive about the business. We had 2 real good wins in DMATs and Air Force training contract which is very positive. The book-to-bill is positive. So I think that team has a lot of opportunity moving into '23. Robert Spingarn: Okay. And then just a high level one, Chris. But on this potential 5-unit block buy for the Columbia class, could you talk about what that might mean for Huntington Ingalls as a cost savings and labor continuity opportunity? Chris Kastner: Well, we assume that the Columbia class will kind of orderly based on the planning documentations we've received from the Navy and Electric Boat, that that's been included in all our capacity planning and how we think about the business going forward [indiscernible] growth rate. Now I think the Navy has been very thoughtful in how they order material and how they're thinking about bundling procurement to ensure they get the best economics relative to ordering material from the supply chain. So I think it's a smart way to do it. We're just in the initial stages of kind of talking about it. But it will definitely be involved a part of our growth rate going forward. It's -- it will be a source of growth in Newport News and I think the team is smartly working on it. Robert Spingarn: Is it fair to think that's better visibility than normal, 5 boats? Chris Kastner: Absolutely. But you think -- jeez, as think about defense strategy and you think about the CNO NAV plan and the amount of visibility we have right now into what our backlog will be and the demand signal we're going to get in shipbuilding, we have very good visibility and high confidence that we're going to be in a pretty good place over the next 10 to 15 years from a visibility standpoint. The important thing we need to do is focus on execution, make sure we get these bids correct and then get the ships delivered because the Navy needs them. Tom Stiehle: I'd comment, too, on the back end of that. We added a new slide to kind of hit the strong demand for shipbuilding. You can see a backlog chart on Slide 5 there which shows that backlog at the $46 billion range that sustained itself through at least 2026. We have excellent visibility from both the shipbuilding [ph] plan, the 5-year side plan and then the more immediate FY '23 budget of expectations what we see in the near term and we have tremendous visibility of the awards we expect to come in the next 3 to 5 years. Operator: The next question comes from the line of [indiscernible] with Credit Suisse. Unidentified Analyst: Tom, can you quantify the benefit of the Columbia class incentives? And just wondering if that's something that could help also help the business in the coming quarters or maybe that's a one-off? Tom Stiehle: Yes, sure. So you'll see that in the Q later this morning when it comes out. The quantification is $41 million of Columbia incentives. And over the last 2 or 3 calls, we've highlighted that as we're working closely with our customer or customer and how the Virginia class and the Columbia class play out, both the additional boats to Block V, the Block VI boats and then we're working closely to program offices as far as what those requirements look like, what are the schedule requirements the both have to fly out here and that drives capacity and capability requirements within Newport News. So we've worked closely with the program office there and we see a need for additional capacity that we have in the yard. We've negotiated a position right now and we've achieved those incentives in the quarter. So it's $41 million. Unidentified Analyst: Got it. And then Chris, apparently, the Ukrainians recently used unmanned service vessels and combat, I think last Saturday. I think there were these USVs [ph]. If I recall correctly, you've said in the past that the -- it was something that still needed some work on the unmanned service vessels. So I guess now that you've actually -- we've actually seen these in combat, do you think that's a big moment for a class of weapon systems broadly? And what does that mean for Huntington? Chris Kastner: Yes, Scott. I don't want to comment on the specific mission. But I think getting these assets in the water executing missions for the customer is very important because it's going to demonstrate how positive and productive these can be as a force multiplier. And we think it's the most positive thing we can do is get these in service so they can demonstrate their pretty impressive capability. Now I don't know if we've hit an inflection point from a revenue standpoint as of yet but there's definitely momentum that's being gained both Subsea and on the surface and a number of different con ops and missions that are being contemplated for these type of vessels. So we only think it's a positive development and we think it will continue to gain momentum and we really like where we're positioned. Operator: The next question comes from the line of David Strauss with Barclays. David Strauss: Tom, could you just go through the rundown in the quarter? Tom Stiehle: Cumulative adjustments that we had then. So it was $84 million [ph] favorable, $57 million [ph] unfavorable, a net of $27 million and a proportionate of that was about half of that was on Newport News and then 25% each for Ingalls [ph]. David Strauss: Great. And then as we think about the opportunity for improved shipbuilding margins next year, I mean, you obviously talked about that there potentially could be some leverage on the volume side. But -- what about, Chris, I guess, from a milestone perspective, how do you see the milestones in '23 relative to '22 giving you an opportunity for -- to enhance margins? Chris Kastner: Yes. So we'll give you a comprehensive update on the milestones on the next call. But the 5 deliveries in '23, we're still very positive on those schedules are holding and we're pacing towards delivery on those ships. And the balance of those milestones are in process and on schedule as well as that we previously indicated to you. So yes, there's some opportunity but we're going to assess the risk and opportunity every quarter. It's definitely still a tight labor market. There's been some positive indicators here as of late but I don't think 2 data points is necessarily a trend. So we're going to be measured in how we deal with that, assess our risks and opportunities and then provide you a comprehensive update at the end of the year. But the milestones in '23 are holding. We're very comfortable with that we need to get these assets delivered and the team is working very hard to do that. Operator: The next question comes from the line of George Shapiro with Shapiro Research. George Shapiro: Yes, I just wanted to pursue, you raised the long-term assets for the pension to 8%. I guess that's maybe just based on how bad it is this year but if you give some color on it? And then also, what -- how that effect is your -- not the contribution, how it affected your adjustments for next year? Tom Stiehle: Yes, sure, George. I appreciate the question. Yes. So we did raise that. When we look at the company as a whole in business now 11 full years, this 12th. 9 of the 11 we exceeded the target of 7.5% that we've had. Obviously, this is a down year 2 years we were less than in the quarter. And as we've highlighted to the Street where as our peers are too, we're in the double-digit negative returns against the pension plan that we have here. So we do think it's prudent when we looked at it going forward, that at least for next year, we have an expectation that the return on assets could be 8%. So we raised that [ph]. Relative to the pension, you can see from our table that we gave you that updated the parameters 2023 is that rate has changed, it's gone from 3% to 4.90% [ph]. So that's up 190 bps. We gave you the returns on what we saw through the year-to-date at minus 15%. And you can see that flows through the fast cash adjustment was down about $102 million. So that's some headwinds on EPS next year. But we'll keep you updated and at the next call, we give you the entire [indiscernible] a 5-year projection going forward. Operator: The next question comes from the line of Seth Seifman with JPMorgan. Seth Seifman: I'd actually just say that -- I was going to ask a question about the asset returns and I figured no one else would ask that question but if someone did, I knew it would be, George. Maybe thinking about a different kind of bigger picture question and I apologize if this is a little bit squishy. But I was looking for something on your website recently and you go on the site and I think initially, there's a picture of like a solider, like an Army soldier holding gun and you've got kind of see cyber, land air, join all domain. When you think long term, Chris, about how you want to position the company during your tenure? Is there a point -- I know it's far out there by 2030 or whatever, where you want to see shipbuilding be a certain percentage of sales and much lower than it is right now? Chris Kastner: Well, it's going to be [indiscernible] percentage simply because we think we've made really good investments in growth markets when you think about the technology markets that we're in Mission Technologies. They really directly relate to the national priorities when you think about AI, ML, cyber, unmanned, ISR, live virtual constructive training and advanced synthetic training. Those directly relate and apply to the defense priorities moving forward. So they will naturally grow. And so shipbuilding will be less of a percentage of the portfolio. But make no mistake, shipbuilding will always kind of be at the heart of this company and we're focused on it. But I think they'll naturally reposition a little bit based on the technology. And it's interesting the Navy is asking for this, right? These are the Navy priorities. And I can think of no better way to serve your customers than to answer their call relative to additional more complicated missions that they need to execute. So -- it's a good question. It's one we think about a lot. And we think we're making the appropriate investments in these technology areas. Operator: The next question comes from the line of Gautam Khanna with Cowen. Gautam Khanna: Wanted to ask, just to be clear, the labor shortfall this year, how does that impact the timing of any milestones in the next couple of years? Is everything -- or the 8 milestones you cited last quarter for '23 still on for '23. Is there any Q4 weight to those, etcetera? Chris Kastner: They're still on for '23. And we assess the labor situation and Gautam, thanks for the question, this is Chris. And we assess our labor plans and our program schedules on a quarterly basis. So all of the labor situation that we've seen this year, what we expect for next year is always included in those program schedules and we're still comfortable with those milestones. Gautam Khanna: Okay. Could you -- so what do you anticipate your labor hires to be this year relative to the 5,000? And then what is the impact on an annual basis from the delta between 5,000 and whatever it's likely to be? Chris Kastner: Well, we're on pace to get to 5,000. I'm still comfortable with that number. We're going to have to see how it goes. We've had a couple of good indicators here. So we're still comfortable with that. As we said previously on this call, we'll give you a better highlight on what we think about '23 in February. Gautam Khanna: Okay. And do you have a preliminary view on what you need to add next year in terms of... Chris Kastner: Not at this time. We're working on that now. We're coming through our plans. -- and we'll provide you that information in February, Gautam. Operator: The next question comes from the line of Myles [ph] with Wolfe Research. Unidentified Analyst: On the topic of milestones, I was hoping you could touch on the 2 that were still on the slate for '22, DDG-123 and then [indiscernible]. Chris Kastner: Sure. So 123 is on schedule has some really good trials. They're on pace to get delivered before the end of the year. And then -- it [ph] has been initiated. I was actually down in the spaces last month, maybe 2 months ago. All the equipment is installed, doing localized testing, starting that test program. So some positive developments there. So yes, each of those are on schedule. Unidentified Analyst: Okay, got it. I was just going off the -- I think the release talked about a few, if any, milestones in the fourth quarter. So those must be minor milestone releases or reserve releases? Chris Kastner: Well, we'll assess them when they're complete and review the entire risk and opportunities and then deal with the outcomes at each. Unidentified Analyst: Okay, all right. And then maybe, Tom, on the progress payment rule or Chris, is there any legislative indication that, that rule is going to be reversed at some point? Because I mean, I know it's favorable but I'm imagining you're flowing it to your suppliers as well. I'm just curious, are you anticipating a rule change? Or are you actually seeing legislative action or policy action that would suggest it's going to change next year? Tom Stiehle: We think there's interest -- it's Tom. Yes, thanks for the question. We think there's interest there up on the hill. I don't think it's a top priority right now. We'll have to see how it plays out. We get through the elections. Does it get inserted into a bill by year-end or not? As the year progresses and there's just one last -- may kind of mid-December time frame, the benefit this year doesn't play out. But obviously, as soon as that loss swings over, as we've been highlighting, it's a $250 million impact, a positive impact to the free cash flow. So we're eagerly awaiting that. I'm hopeful that it does could change but we'll just have to see how that plays out. Unidentified Analyst: Sorry, Tom, I was referring to the progress payment rule shifts that you thought it would be reversed in '22. Now it's going to be reversed in '23. Just the timing of progress statements. I'm asking, do you actually see legislative inertia there. Tom Stiehle: So I would tell you that, as I told you at the Q3 call that believe it was going to be pushed to the end of the year right now and that's a piece of the uptick that we have in our free cash flow guidance that we gave you. So we told you it was 2.25 [ph] was the midpoint. We now project to have to pay those payments back in 2023 time frame. So it's an uptick in -- for this year, it's an adjustment in the free cash flow bridge that we gave you in the briefing and we anticipate paying those back in the first quarter of '23. Operator: The next question comes from the line of Ron Epstein with Bank of America. Ron Epstein: Yes, looking at Mission Tech, do you still feel confident on that 6% to 8% margin target by '24? Tom Stiehle: Yes. So we're on cost right now. When we look at the EBITDA right now, we've given you the numbers on where we finished the previous year and 8% range. If you noticed, we just adjusted the EBITDA NDA target down from 8.5% to 8.3% because of the volume pressures that we have but we feel comfortable with that right now. As the -- in the rising we have, we still have a robust pipeline. We feel comfortable that we're getting our momentum. The portfolio itself and the technology that we're going after many opportunities at this. So I do. I think there's a little stress on it right now for 2022 just for the volume of sales as we adjust around that. But that's still a target that we've been highlighting and it's good for modeling going forward. Chris Kastner: Yes. Ron, remember, a lot of that work is cost-plus. There's a lot of we think there'll be a lot of stability in the margin rate moving forward. So we're still comfortable with that. Ron Epstein: Got it. And then, if you look at Newport News and you back out the Columbia, right, the $41 million, that suggests the balance of the business was at maybe 4% margin in the quarter. Can you kind of walk through what was going on there? Chris Kastner: Yes. So we had minor adjustments or what I'll call tweaks in -- within the quarter on a few programs at Newport News, not material enough to be mentioned here and that it was offset by the Columbia class incentives. Now incentives and schedule incentives, performance incentives are normal in our contracts, it's a normal way to incentivize performance. We think it's a good method to incentivize performance. So it's not out of the ordinary. But we have to assess our EACs every quarter, we make minor adjustments where we see fit to the risk and opportunities and there was just some minor adjustments on a few of the programs there. Ron Epstein: Can you give any more color on like what programs? Chris Kastner: Yes, not material enough to mention, it was across a number of them. Operator: The next question comes from the line of Noah Poponak with Goldman Sachs. Noah Poponak: Why did you choose to exclude the milestone slide from the deck this quarter? Chris Kastner: Yes. So we only do that twice a year. We kind of inserted that as a convention. So we've done it twice a year. I can comment on any one of them that you'd like. As I said previously to some of the questions, the last 2 for this year are on schedule, deliveries for next year are on schedule. So it's just been our convention twice a year if you go back in time. Noah Poponak: Okay. I had forgotten that. So yes, I wasn't sure if it was, hey, something's happening with the milestones or it's -- nothing's changed, so it doesn't need to be there. And I just had forgotten that it was choice here. So... Chris Kastner: It's something that's happening with the milestones, I'd tell you. So -- but they're on schedule. So thanks for that. It's just -- that's our convention. Noah Poponak: Got it. Okay, perfect. With your discussion of inflation, I mean, I guess at the highest level of addressing it, do you expect inflation to actually negatively impact the margin in any noticeable way in the medium term? Or do you feel you have the contracting conventions to offset it? Chris Kastner: Yes, it could. I'll start and then Tom can chip in here. So we do have some protections, right, from an inflation standpoint. We were very fortunate that with our relationship with the labor unions, we're able to get long-term arrangements there which helps us mitigate it to some extent. Having suppliers under contract before we entered into this mitigates it to some extent. And then our EPA clauses mitigates it some. But absolutely, when you think about our workforce and some of the increases that we've had to provide from a salary standpoint for new hires, that impacts our labor rates a bit. And then some of the general inventory that you can't put under contract could impact it a bit as well. So I would say it modestly impacts it. We've assessed all of it in our EAC process and we think we have it but we're going to have to be mindful of it moving forward. Noah Poponak: Okay. And then, I guess your commentary about next year's shipbuilding margin, do we need to consider the potential that it is down year-over-year? Or were you more just saying the plan was some expansion that's still possible but flattish is also possible. Tom Stiehle: I think it's more of the latter there. Obviously, we want to come through. We're watching a risk profile, the risk registers what gets burned down this quarter, the performance and the cadence. We're maintaining schedule, the hiring and the experience in the yard, progress that we make with the experience and the material [indiscernible]. A piece of that process is the contract adjustments we get, the EPA and other type of provisions that will handle for inflation. To piggyback on what Chris said earlier, depending on the portfolio and the mix, Ingalls is more 90-10 fixed price, Newport News is 50-50 cost type and fixed which contracts have EPA clauses which contracts are being impacted. So a lot of things are moving around there between inflation, supply chain, interest rates, performance, material receipt and progressing. So, we really want to get a look see on where we stand right now. We told you 8% to 8.1% and we still feel comfortable with that right now. We had a strong first half which we kind of foreshadowed -- we told you the back half would be about 7% for shipbuilding. We came in at 7.4% with those incentives. So you can do the math. We're still holding at 7% for the back half of the year. So you can do the math on that, what Q4 looks like. But I think 8% to 8.1% is still a valid endpoint for us. I'd like to see where we land on that, see our run rate and then we'll factor that into the baseline going forward on the February call. Operator: We now have a follow-up question from the line of David Strauss with Barclays. David Strauss: Just want to -- Tom, maybe if you could run through the expectations on net working capital now. I think you had said -- I think right now, we're at about 11%. I think you would say getting down to 8% at the end of this year and then relatively flat on a percentage of sales basis from there but coming down in absolute terms, if you could just give an update. Tom Stiehle: Sure. Yes. So for -- yes, that's exactly right. I left her at 9.3% -- about 9.3% was the working capital sales in Q2. We are just about 11%, 11.1% for Q3. I anticipated that. We'll turn the corner a little bit as we exit the year here as we kind of work ourselves through the trades, the invoicing, payments and progressing. That will come down. And then we've talked about the milestones with the 5 deliveries of next year which are still in play here. So I see '23 dropping back to more traditional 6% to 8% range. And I would expect that we would run in that rate over the next couple of years. And that's the plan and we're on that trajectory. Operator: That concludes the question-and-answer session. I will now pass the line back to the management team, Chris Kastner, for final remarks. Chris Kastner: Thanks a lot. Thanks very much for your interest in -- continued interest in HII. We welcome your continued engagement and feedback. Thank you. Operator: That concludes the conference call. Thank you for your participation. You may now disconnect your lines.

Operator: Ladies and gentlemen, thank you for standing by. And welcome to the Second Quarter 2022 HII Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. Please be advised that today's conference call is being recorded. I would now like to hand the call over to Christie Thomas, Vice President of Investor Relations. Mrs. Thomas, you may begin. Christie Thomas: Thank you. Good morning, and welcome to the Huntington Ingalls Industries’ second quarter 2022 earnings conference call. With us today are Chris Kastner, President and Chief Executive Officer; and Tom Stiehle, Executive Vice President and Chief Financial Officer. As a reminder, statements made in today's call that are not historical fact are considered forward-looking statements and are made pursuant to the Safe Harbor provisions of federal securities law. Actual results may differ. Please refer to our SEC filings for a description of some of the factors that may cause actual results to vary materially from anticipated results. Also in their remarks today, Chris and Tom will refer to certain non-GAAP measures. Reconciliations of these metrics to the comparable GAAP measures are included in the appendix of our earnings presentation that is posted on our website. We plan to address the posted presentation slides during the call to supplement our comments. Please access our website at hii.com and click on the Investors link to view the presentation as well as our earnings release. With that, I will turn the call over to our President and CEO, Chris Kastner. Chris? Chris Kastner: Thanks Christie. Good morning, everyone. And thank you for joining us on today's call. Before discussing the results, I would like to thank each of our 44,000 employees for the work they do every day as they remain focused on our operational pillars of safety, quality, cost, and schedule and driving the delivery of our customer commitments. Today, we reported another quarter of solid performance across each of our operating segments. These results reflect our continued focus on operational execution. Starting with our results on Page 3 of the presentation, sales of $2.7 billion for the quarter or 19.3% higher than 2021. And diluted EPS was $4.44 for the quarter, up from $3.20 in 2021. New contract awards during the quarter were approximately $2 billion, which results in backlog of approximately $47 billion at the end of the quarter, of which $24.6 billion is currently funded. At Ingalls this quarter, LPD 29, Richard M. McCool Jr. was christened and serial production continued on LPD 30 Harrisburg and LPD 31 Pittsburgh. We were also awarded the advanced procurement contract for LPD 32. Additionally, progress continues on LHA 8 Bougainville and long-lead material procurement continues for LHA 9, with the detailed design and construction contract award expected later this year. On the DDG program, DDG 121 Frank E. Petersen Jr. sail away this quarter and serial production continues on DDG 123 and subsequent DDGs. On the NSC program we launched and christened NSC 10 Calhoun this quarter. At Newport News, submarine care and carrier construction and maintenance programs continued to progress. On the VCS program as discussed in the first quarter call, SSN 796, New Jersey floated off in April. In addition, SSN 798, Massachusetts achieved pressure hole complete in the quarter and the remaining Block 4 and Block 5 boats continue to make progress. On CVN 79 Kennedy, we turned over the 1000th compartment to the Navy last month and we will ramp the testing program later this year. CVN 80 Enterprise is beginning to take shape in the drydock and early unit construction has begun on CVN 81 Doris Miller. On the RCOH program CVN 73, USS George Washington continues to make progress on the testing phase and redelivery is now expected in the first quarter of 2023. CVN 74, USS John C. Stennis continues to make progress and pre-advanced planning is underway on CVN 75, USS Harry S. Truman. Regarding our shipbuilding labor, ensuring our shipyards have the necessary workforce to execute our backlog remains a key risk and focus area. We have hired over 2,000 craftsmen and women through the first half of the year against our full year plan of 5,000. While hiring is behind plan, we are making up this deficit using outside lease labor and overtime. Even in this current tight labor environment, we have continued to successfully bring shipbuilders on board and utilize our training programs and apprentice schools, which has positioned us to execute on our commitments. Now I want to take a moment to discuss the improvements to our execution operating system in the shipyards, our operating systems utilizes the best practice at each shipyard and allows our leaders and craftsmen across all programs to speak the same language, be predictable and relentlessly focused on execution. For example, the operating system breaks a long shipbuilding construction schedule into phases, the varying duration, but are generally 10 to 12 weeks and allows focus on the commitments and the critical path items to be accomplished in that phase. It also includes a common set of metrics and processes that provide feedback on progress and performance. I expect continued improvement of our operating system to drive our shipbuilding margin expansion opportunities and to take advantage of our significant backlog. The operating system also provides transparency to our customer, a progress towards delivery of these important assets. Moving to our mission technologies segment, we successfully demonstrated the prototype platform, the Pharos system, which has capabilities for launching, operating with and retrieving unmanned underwater vehicles from an amphibious ship. This achievement, which leveraged expertise across HII segments, reflects our commitment to delivering advanced technologies and multi-domain capability to support our national security customers. We also were awarded the Mobility Air Forces Distributed Mission Operations prime contract. This award is a key win in our strategy to expand our live virtual constructive customer base beyond the Navy to the air force and other services. Turning to Slide 5, we have provided a snapshot of the mission technologies pipeline. Among recent contract awards, we were just awarded a task order, decisive mission actions and technology services or DMATS to integrate new technology and capabilities and identify and characterize threats in support of the Department of Defense for the purpose of countering and deterring current and emerging global threats. This contract has a total ceiling value of over $800 million. And this win is particularly important for further validating our investment thesis, which is bringing together the innovation and technical expertise of legacy alliance with the depth and infrastructure breadth of HII. This will create opportunity and value for our customers, shareholders and employees, more than either company could have achieved on its own. While these strategic synergy wins are very positive. We continue to see contract award delays, pressuring timing of current year revenues. However, we continue to have a very large pipeline that creates significant opportunity for bookings and sales growth. In that regard, heading into the third quarter, our mission technologies pipeline stands at $61 billion with $26 billion of qualified pipeline. The DMATS award another expected award will drive up our book-to-bill ratio, which was 0.8 for the second quarter. All-in-all, I'm very pleased with the direction of mission technologies segment. And I'm excited about the growth opportunities in areas that support our customers’ critical needs. Turning to activities in Washington. The President submitted his fiscal year 2023 budget request in March, which is now under consideration by Congress. As bill progressed through both chambers, we continue to see bipartisan support for our programs reflected into defense appropriations and authorization bills in the House and the Senate. We are very pleased to see the strong support of our ship building programs in the draft Senate appropriations bill released last week. This bill includes an additional Arleigh Burke-class destroyer, $250 million for LPD 33 advanced procurement and $289 million for LHA-10. And continues the serial production of submarines, destroyers and amphibious warships that leverages production lines and supply chains to efficiently produce the ships our nation requires. The two authorization committees have also shown strong support for ship building to include adding LPD 33 advanced procurement funding authority and requiring 31 amphibious warfare ships in the Naval combat force. Both appropriations bills and both authorization bills include language in support of a DDG-51 multi-year procurement contract in FY 2023 and provide additional support and funding for the submarine industrial base. We are pleased with the legislative support our programs have received thus far and final outcomes will depend on eventual respective conference negotiations between the appropriations and authorization committees. And now I will turn the call over to Tom for some remarks on our financial results. Tom? Tom Stiehle: Thanks, Chris and good morning. Today, I will briefly review our second quarter results. For more detail on the segment results please refer to the earnings release issued this morning and posted to our website. Beginning with our consolidated results on Slide 6 of the presentation, our second quarter revenues of $2.7 billion increased approximately 19% compared to the same period last year. This increased revenue was attributable to the acquisition of Alion in the third quarter of 2021, as well as the growth in aircraft carrier revenue in Newport News Shipbuilding. Operating income for the quarter of $191 million increased by $63 million or 49% from the second quarter of 2021. And operating margin of 7.2% increased 144 basis points. These increases were largely due to a higher segment operating income driven by higher risk retirement and favorable changes in contract estimates, both at Ingalls and Newport News Shipbuilding. As well as a higher non-recurring equity income at Mission Technologies related to our investment in a ship repair and specialty fabrication joint venture. Results were additionally supported by more favorable non-current state income taxes and operating FAS/CAS adjustment compared to the prior period. Other net expense was $10 million in the quarter, which was primarily driven by losses on investments in marketable securities, given negative asset returns in the quarter. Our effective tax rate in the quarter was approximately 19.8% compared to 19.9% in the second quarter of last year. Net earnings in the quarter were $178 million compared to $129 million in the second quarter of 2021, diluted earnings per share in the quarter was $4.44 compared to $3.20 in the second quarter of the previous year. Moving onto Slide 7, Ingalls revenues of $658 million in the quarter decreased $12 million or 1.8% from the same period last year, driven primarily by lower revenues on the DDG program, partially offset by high amphibious ship revenues. Ingalls operating income of $106 million and margin of 16.1% in the quarter were up significantly from last year due to favorable changes in contract estimates as well as higher risk retirement on the LPD program, partially offset by lower DDG risk retirement. At Newport News revenues of $1.4 billion increased by $70 million or 5.1% from the same period last year due to higher aircraft carrier revenues, partially offset by lower naval nuclear support services. Newport News operating income of $94 million and margin of 6.6% were up from last year, primarily due to favorable changes in contract estimates, partially offset by lower risk retirement on VCS program. At Mission Technologies revenues of $600 million increased $363 million compared to the second quarter of 2021, primarily driven by the acquisition of Alion in the third quarter of last year. Mission Technologies operating income up $25 million compared to operating income of $13 million in the second quarter of last year. Second quarter 2022 results included a non-recurring gain of approximately $15 million related to higher equity income from our ship repair and specialty fabrication joint venture of which we are a minority owner. Additionally results included approximately $24 million of amortization of Alion-related purchase of intangible assets. Mission Technologies, EBITDA margin in the second quarter was a robust 10.7%. Turning to Slide 8, cash provided by operations was $267 million in the quarter and net capital expenditures were $59 million or 2.2% of revenues, resulting in free cash flow of $208 million. This compares to cash from operations of $96 million, net capital expenditures of $73 million or 3.3% of revenues and free cash flow of $23 million in the second quarter of 2021. Cash contributions to our pension and other post-retirement benefit plans were $11 million in the quarter of which less than $1 million were discretionary contributions to our qualified pension plans. During the second quarter, we paid dividends of $1.18 per share of $47 million. We also repurchased approximately 80,000 shares during the quarter at an aggregate cost of approximately $17 million. Turning to Slide 9, we are reaffirming our 2022 ship building sales and margin guidance, as well as our Mission Technologies, margin guidance and overall free cash flow expectations, while modestly revising our Mission Technologies revenue outlook, given a slower start to the year. For Mission Technologies, we are revising our revenue expectation to a range of between $2.4 billion and $2.6 billion. This revision is a function of a slower award in contracting environment than we had initially expected and precipitated by the continuing resolution to start the year. That said we remain very confident and excited by the growth opportunity we see ahead for Mission Technologies. Regarding our near-term outlook, our second quarter results were positively impacted by higher risk retirement and favorable changes in contract estimates, particularly for LPD-30, as reflected in the Ingalls operating margin. The remaining ship building milestones we expect to achieve in 2022 are waited towards the fourth quarter. Given that backdrop, we expect the third quarter ship building revenue to be relatively flat sequentially and ship building operating margin to be approximately 7%. Regarding Mission Technologies, we expect results will begin to ramp more meaningfully as the pace of awards increases and expect third quarter sequential sales growth in the 7% to 9% range and operating margin in-line with our full-year guidance of approximately 2.5%. Regarding our longer-term targets, we remain confident in our free cash flow target of $3.2 billion from 2020 through 2024. This outlook does assume the continued expensing of research and development costs for tax purposes. As a reminder, we believe the impact to 2022 free cash flow would be approximately $100 million if the current R&D amortization treatment remains in place. On Slide 10, we have provided a walk from our 2022 to 2024 free cash flow outlook, which is consistent with the chart we began providing earlier this year. Our strong free cash flow performance in the quarter was partially due to the pull forward from the third quarter, given this dynamic and the lack of milestones in the third quarter, we expect free cash flow to be minimal. As a result, we do expect robust free cash flow generation in the fourth quarter and do see positive tailwinds on our overall 2022 free cash flow guidance. As we are in the midst of our annual long-term plan update, our reserve and update to our free cash flow guidance until that is completed and we'll have more details on our third quarter call. Lastly, we are reaffirming our capital allocation priorities and we are committing today to return substantially all free cash flow after planned debt repayment to shareholders through 2024. This is a significant commitment, which should result in increased share repurchases, particularly in 2024, after we reached our desired debt level. To summarize, this was a strong quarter and we are pleased with our progress as we continue to navigate a challenging operating environment. With that, I'll turn the call back to Chris for some final remarks before we take your questions. Chris Kastner: Thanks Tom. In conclusion, I will wrap up on Slide 11 with the key tenants of our investment thesis. First we're focused on execution of our significant backlog, which provides meaningful earnings and cash flow. This coupled with our consistent long-term ship building growth profile and high growth opportunities in Mission Technologies positions us to deliver significant free cash flow and generate value for our employees, customers, and shareholders. Now I'll turn the call over to Christie for Q&A. Christie Thomas: Thanks, Chris. Operator, I will turn it over to you to manage the Q&A. Operator: Thank you. Our first question comes from Robert Springer from Melius Research. Robert, please go ahead. Robert Springer: Good morning. Chris Kastner: Good morning, Rob. Robert Springer: Chris or Tom, because you both talked about it, the strong Ingalls margin sounds like that was LPD-30 primarily, but you didn't change the ship building margin guide. So I assume that was expected from the outset or does this reflect maybe some increased costs from labor and such in the back half of the year? Chris Kastner: Yeah, that's a good question. This is Chris I'll start and then Tom can finish here. That was a bit of an acceleration in that milestone so we got some benefit in Q2, but labor, as I indicated previously is our greatest risk, what we're watching across the portfolio, in ship building, we've hired 2,000 to over to 5,000 commitment. Now, luckily we have leased labor and we have overtime and the good news there is people are actually working overtime now. Back in 2021 and after the pandemic started, it was really hard to get people to work overtime. So they started to come back and work overtime, which helps to offset it, but labor remains our large risk. So I'll kick it over to Tom. Tom Stiehle: Sure. Just additional comment on that front is we had a milestone that LPD-30 milestone that we referenced that was planned for Q3 that accelerated to Q2. So that's the timing event, Q2 was a good quarter for Ingalls overall. They had some DDG 121 post-delivery, clean up LPD-28 and LPD-29s, some additional risk retirements. And then on the large deck, we saw like a couple of dollars that popped into Q2 there. I still think on the back end, the reason why we haven't raised guidance is we don't have as many milestones. We do have DDG 123 in Q4 and there is the back half of the year to play out as Chris has, we're watching higher and how that impacts the portfolio here right now. And as the year unfolds and we continue to retire risk we'll provide additional guidance in that front. Robert Springer: So just on the back of that, I mean, it sounds like you'd have upside otherwise, but how do we quantify what this leased labor and just labor inflation in general over time you talked about how does that structurally change the cost of labor in the business, if it lingers for a while? Chris Kastner: Yeah, that's a great question. Obvious we're fortunate in that we have labor agreements for our own employees, but leased labor can be bit more expensive now they don't have the benefits. So you have to trade that off a bit. So what you do is you put estimates for what you think you're going to do in leased labor overtime in your EACs and that's been reflected in our margin profile. So I think it's a great question. You have to be mindful of that. Robert Springer: Okay. Thanks very much. Operator: Thank you. Our next question comes from Pete Skibiski from Alembic Global. Pete, please go ahead. Pete Skibiski: Hey, good morning guys. Tom, I guess on, on the expectation that share repurchase will ramp in 2024, I think you mentioned we should – when we're trying to figure that out the level of that, we should assume that you're going to pay off all the debt that's maturing essentially, you're not going to refinance? Tom Stiehle: That's correct. You can see we're on a cadence here about $100 million, a quarter for 100 year. We'll continue to go do that in 2022, 2023 we pay down the two-year bond, 2023, the term loan gets paid off in completion in Q3 and you can see that. So we'll follow our capital allocation policy that we have. We'll continue to keep the yard up and running. We don't see any holes in the portfolio from an M&A perspective and barring that there's nothing ultra attractive in that timeframe. We'll continue to provide all excess free cash flow back to the shareholders. And basically that desk slug that I've talked about will just kind of transition into repos if we don't have anything better to do with cash. Pete Skibiski: Okay. Thank you for that. And last one for me. Chris, are we – how are you feeling in terms of extending the amphibious kind of life cycle at Ingalls? I know there were some, some concerns there on the LPD line, on the LHA line and it seems like you're making some progress. Do you feel like you're kind of out of the woods there as long as the kind of momentum you're seeing in Congress continues? Chris Kastner: Yeah. So definitely some positive momentum, we're about halfway through. We like to say that it's a long process, positive momentum on LHA-10, acceleration LPD-33 and some really positive developments by the navy and the Marine Corps on establishing 31 amphibious, which provides some clarity from a planning standpoint. So yeah, positive momentum but we need to get through the process to completion. It solidifies the revenue profile that’s coupled with DDG 51, the 2023 multi-year that we're working on. All of that, all that activity within the 2023 budget really solidifies the Ingalls revenue profile moving forward. Pete Skibiski: Great, thanks guys. Chris Kastner: Thanks. Operator: Thank you. Our next question comes from Robert Stallard from Vertical Research Partners. Robert, please go ahead. Robert Stallard: Thanks so much. Good morning/ Chris Kastner: Good morning. Robert Stallard: Chris, I'll start with you following up on the labor issue. I wonder if you could also comment, not just on the numbers but the experience and skillset of the folks you've been able to get through the door how that compares to your target? Chris Kastner: Yeah. So it's over the last couple years, we do have a newer and greener workforce and we work very hard to train and get that workforce ready to be productive. So it's not new or unexpected for us. We've done it before. But it definitely is a greener workforce. That's why I mentioned the operating system in my script. It's very important that you kind of get into the fundamentals and make sure that all our ship builders are very productive. So, but you are correct. We do have a greener workforce today, but it's not unexpected. We've seen that for the last couple of years. Robert Stallard: Okay. And then quick follow-up for Tom, I was wondering if you could give us the latest prognosis on the pension, given that all the markets moves we see and also because base rates going higher? Tom Stiehle: Yeah. Sure. So appreciate the question. It is volatile out there, both on the capital front, interest rates on the market front. Right now, there's a favorability for the higher discount rates, which is partially offset by the unfavorable returns on the assets. And it's hard to predict right now how that play-out by year end, but we do the re-measurement at the end of the year. But consistent with the prior years, we still will provide an update on our Q3 call for 2022 and then the outlook for 2023. Robert Stallard: Okay. That's great. Thank you. Operator: Thank you. Our next question comes from Seth Seifman from JPMorgan, Seth, please go ahead. Seth Seifman: Hey thanks very much. Good morning. Just real quick, apologize if I missed it, but if you could quantify the EACs and roughly how they were allocated between the yards? Tom Stiehle: Sure. Great, Seth. Yeah it's net of $68 million, it was 106 favorable, 38 unfavorable and on the net for $68 million, it was split between Ingalls, Newport News and Mission Technologies a ratio of 80:15:5, so 68 net 80:15:5. Seth Seifman: Cool, very good and just as a quick follow-up appreciate the some of the pace of contracting activity in Mission Technologies and we've seen it in other companies in IT Services space. But I guess, if you could speak to the level of quarterly visibility that you have in that business, just given that the – not only did the guidance come down a little bit for the year, but the quarter itself fell a little bit short and so how you – what gives you confidence in sort of the remainder of the year there? Chris Kastner: Yeah, So I'll start and I'll let Tom. In the pipeline within our presentation because we wanted to make sure everybody understood that there was a lot of opportunity in this space. It has started slow for the beginning of the year, but the wind of DMATS which will help backlog and then book-to-bill in Q3 and the win of the LVC contract with the air force, which really transition to legacy established program from the Navy established that over that end of the air force, which will allow us to sell to other services as well. It is a really good indicator that things are hopefully starting to break loose and really validates our strategy for the Alion acquisition. So we are seeing some things break loose. We're going to have to see how that translates into revenue. But I'll let Tom talk about how it's distributed by quarter. Tom Stiehle: Yeah, sure. So just from a baseline perspective on this question, it was $590 million in the first quarter we had gotten about 5% on $620 million, we did stop in light here at $600 million, so we finished the year off just at under $1.2 million with a run rate at like $23.80 million against initial guidance of $2.6 billion, so that's background. Going forward we do think that we'll see for Q3 a run rate here of what we said the growth would be, which would be 7% to 9%. I don't know if you noticed enough, but in the PowerPoint briefing up front, we added Mission Technology slide and how we look at that business. Alion has a legacy process there, very robust on their pipeline and how they handle their work. Exploratory, $61 billion down to $27 billion on the Exploratory side, they break that down to which opportunities that they can qualify and capture. And then that goes into the evaluations it did. So we see that pipeline actually growing from the time that we picked them up last year. So that's a positive sign right now. As Chris said, we were impacted at the beginning of the year with the CRA and then just the general outflow of contracting and acquisitions have been a little bit slower than we thought. We have seen some awards that popped on here in the end of Q2 timeframe. And there's still additional opportunity that will happen on the back half of the year. So I'm still optimistic on the awards front. The other piece that holds us up there is, we do have more seats than we have heads right now. So like the shipyard, there's a hiring crunch there. The job market is tight, finding people with that type of background and tickets, so there's seats there we have unfilled and that brings in some variability on the sales outcome of the year. But we still have the $2.4 billion to $2.6 billion. We haven't let go of the top end, depending on a couple of awards, which the awards will really affect next year sales and this, and filling the seats that are unoccupied. We believe that we're still in the range there between $2.4 billion and $2.6 billion. Seth Seifman: Great. Thanks for the detailed responses. Thank you. Operator: Thank you. Our next question comes from Gautam Khanna from Cowen. Gautam, please go ahead. Gautam Khanna: Hey, good morning guys. Chris Kastner: Good morning Gautam. Gautam Khanna: I was wondering if you could talk a little bit about the VCS program. There's been a lot of press and GAO, and industry scuttle about the program being well behind schedule. And obviously you guys took a big charge in Q2 of 2020. It looks like there was another negative EAC in this quarter. Just where are we on the program relative to your expectations? And if you could just maybe give us some color on what your accrual rate might be so that we should either be… Chris Kastner: Yes. So thanks. It’s – I'm sorry. I'll let you finish. Did you have anything else? Gautam Khanna: No, please. No, that's great. Thank you. Chris Kastner: Okay, great. Yes, so the VCS program, I would characterize that as stable from a scheduling standpoint and over the last few quarters, pretty stable from a EAC standpoint actually. There's always minor adjustments from quarter-to-quarter but I think some of the data you may be referencing is a bit dated as you know, we do quarterly EACs. We incorporate the risk in all of the ships and boats on a quarterly basis. So I'm pretty comfortable with where we are from an EAC standpoint on the VCS. I don't think anything is – any of us are comfortable relative to the how we performed historically on the program, we need to improve, right. I think the Newport News team is very motivated and dedicated to getting it right. They're making progress. There's some potential momentum within Block 4 which we ought to translate into Block 5. I think there's some upside in Block 5. So I think the team is very focused. I think they're working the operating system very well. We need to get back to two per year. We need to get these assets back to our customer because they need them. So I would consider it stable from a schedule standpoint and we need to continue to improve from a cost standpoint. And any details I'll send over to Tom here. Tom Stiehle: Sure. Yes. I think when we took that charge back in Q2 of 2020, the preface of that was we had a list already with Columbia coming online, we saw that ramping up. And then getting to full two cadences launch and sell off a ship a year. There was already a list and a risk and a hiring ramp right there, obviously in 2020 after two quarters of that, it kind of midyear we saw with COVID impacting us. And then obviously, that continued without a prime into 2021. So there's been pressure on the program from what was the baseline of already being able to do two plus one between those two programs, hiring ramp with more junior people on board. And then that line that we've talked about in the past calls is very serial in nature, more than any of our other lines, each boat goes exactly through crew to crew. So if one boat in front of us gets impacted, it affects the line behind it, both the crews being able to cycle and then the schedule aspect of each boat. So I think when we took that look, see where we were in Q2 of 2020. We had a perspective of what was in the order was possible and how we could recover or we'll finish off the back end of Block 4 as that translates into Block 5. So I think as Chris says, we're relying on operating system, we're trying to stay to our manning plan that we have. We're doing lessons learned from boat to boat. We are seeing incremental improvement from operational where we were a quarter ago to now. So that's a positive sign right now. And as Chris says, we run a very rigorous EAC process and we look at our labor and material and overhead, a run-out, reevaluating our booking rates, the changes on that large. So you don't see them on the downside there, but we do have incremental changes from quarter-to-quarter here. So possible with where we're booking these ships right now. Gautam Khanna: Thank you very much, guys. Operator: Thank you. Our next question comes from George Shapiro from Shapiro Research. George, please go ahead. George Shapiro: Yes. Good morning, Chris Kastner: Good morning. Tom Stiehle: Good morning. George Shapiro: My question is if you take your EACs, it would imply the underlying margin that Ingalls is like 7.9%, which is generally higher than what you've seen in the past around 7%. So I was just wondering, is that just unique to this quarter? Or is this more of an ongoing underlying margin rate? Chris Kastner: Yes, it is a little bit of unique for this quarter. That's a high number. The run range from Ingalls is usually lower than upper 6s and low 7s. I think just how all the map kind of like played out with the performance list. We talked about the economic adjustments that were allowed because of the clauses that we have in the contract. So you may just be a little high there, but generally speaking, we've talked about the maturity, the portfolio data at Ingalls, more our serial production and follow on ships down there. So their run rate is out in front of Newport News. And we generally say it's between 6% and 7%. So I'd leave you with that, George. George Shapiro: Yes, no, that's really the question. If I did the numbers this quarter, it looks like it would come out to seven, nine. And like you suggest it's normally like closer to seven. So I'm just wondering if there's something unique that made this quarter out of line or is it at new run rate? Chris Kastner: It's not a new run rate. It's just how the match plays out to the quarter. George Shapiro: Okay. Thanks very much. Chris Kastner: Thanks, George. Operator: Thank you. Our next question comes from David Strauss with Barclays. David, please go ahead. David Strauss: Thanks. Good morning. Chris Kastner: Good morning. David Strauss: Tom, wanted to ask about the free cash flow of cadence. I know you mentioned Q3 close to, I guess zero break-even but I think you're still calling for a pretty meaningful working capital tailwind in the second half of the year, it looks like CapEx might be trending towards the lower end of your range. What keeps you from coming in a decent amount above kind of the 300 to 350, assuming R&D, it doesn't happen? Tom Stiehle: Yes. So astute question and you're putting pieces together out there, as we highlighted in the opening comments, we did say 300 to 350, we're holding that, that right now. I do feel comfortable that with the risk we've seen behind us and in front of us, we still have like five months of the year to play out. But right now, we do see although Q3 will be light just the way that year is playing out, Q2 and Q4 are going to be the cash flow quarters. But I do see we've been – the COVID repay is pushed to the back half of the year. And as I come through our planning process and I have the complete visibility in how the year is going to play out is the COVID repay either happening this year or next year, that's more of a timing play, the R&D amortization. You reference we'll see how that plays, but that could be the $100 million that we talk about as a down take this year could go away. And if the law changes, this seems like there's some traction and momentum to get attached to a bill at the back half of the year. That changes over. We could see the 100 million go away as we force out on a downside, and then it would validate the 3.2 billion over the five years. Cash from operations was very strong in Q2. We saw some nice pickups as far as older contracts, some service contracts we're able to get COVID costs that we had on our books included in our billing rates. So that was a pickup. And that's how Q2 kind of played out. When you think about Q4 on the back half of the year, I have 123 delivery. On the DDG side, I have a couple of supply capital incentives that play out LHA 8 billings, LHA 9 with the construction award helped clean up the long-lead contract that I have on there for cash. And then CVN 81 is going to be able to have progress payment billings as they work through kind of getting into Q4. We have some incentives on BCF and then Laurie Knowles kind of kick in that I'll use at the end of the year, too. So a good upside potential there, but I'm not ready to call that ball until I can get through our planning process. David Strauss: Okay. Thanks. And I mean, is any of this borrowing from kind of the upside, you've talked about for 2023 going up to 750 to 800, or you think maybe there's a little bit upside, but the plans full unpack to get to those kind of numbers in 2023? Chris Kastner: So just to be clear, the majority of what I talked about is in the plan and the forecast right now, those things could kick out, $25 million, $50 million, $75 million upside, the tiny aspect would be the COVID repay. So if I do not have to pay it at the end of this year that would be a pull forward from 2023 to now. But I believe by the time we have our Q3 call in November, I have complete clarity into that and I give you more visibility to that. David Strauss: Okay. Thanks very much. Operator: Thank you. Our next question comes from Ron Epstein from Bank of America. Ron, please go ahead. Ron Epstein: Hey, good morning guys. Maybe why don’t you just walk through a couple different programs and how things are going? In the unmanned underwater vehicle business, I mean, how's Excel UUV coming for you guys with Boeing? Chris Kastner: Yes. So Excel is progressing, right. We've delivered our first unit to Boeing really kind of a test unit. We're progressing through the other units, so it's going okay. I think normal, first of class issues that you have on a new program, on a development sort of program. So it's going okay. Ron Epstein: Okay, great. And then maybe just another program, if we can, on the next-generation destroyer, where does that stand and when do you think, there'd be competition for that and what's going on there, if you could give us an update on the DDG(X)? Chris Kastner: Yes. So I think you may have seen in the press, we got the next contract for development there, kind of concept development working. I think the Navy's done some really smart things in this regard and with Bath and Ingalls working on the development of that program. I think the important thing on the DDG programs is to ensure we don't stop building DDG 51s prior to transitioning, getting the design correct on the next-generation destroyer. And I think that's a smart move. I think they're continuing with the design effort in both shipyards and we're continuing to build DDG 51. So I think it makes great sense right now. Ron Epstein: Okay. Okay. Okay. And then I might have missed this, but maybe not. Where did we stand on the Coast Guard offshore patrol cutter? Was that formally awarded yet or where did we stay on that program? Chris Kastner: Yes, it was awarded, it was not awarded to us. It was disappointing. We know how to build those ships. Coast Guard is a great customer. But we were not awarded that. Ron Epstein: Is there another opportunity for that poll in another competition? Chris Kastner: Not sure. I mean, they're just coming through this competition for the next block of those boats. So not sure at this point. Ron Epstein: Got it. Got it. And maybe just one last one, what – when we look down the road at maybe in future things you potentially could be bidding for, what can we be looking out for? Chris Kastner: Yes. So interesting. Newport News is full, right. They've got a lot of the work to do. They're executing on it. And their legacy programs will continue over the medium to long-term actually, Ingalls is based on the pace of LHAs and LPDs, they're going to be in a very good place, but they have other opportunities. They have a DDG 1000 is down there now, and they're doing some combat system upgrades for that. And there's potential other DDG 1000 work that might be available. And then other repair sort of activity, but Ingalls is a pretty scrappy group. I wouldn't count them out and with the pace of LHAs and LPDs we've got a lot of time to figure that out. Ron Epstein: Okay, great. Thank you. Chris Kastner: Sure. Operator: Thank you. I'm not showing any further questions at this time. So I’d now like to hand the call back over to Mr. Kastner for any closing remarks. Chris Kastner: Okay. Thank you for your interest in HII. We welcome your continued engagement and feedback. Please have a safe and great rest of summer. Thank you. Operator: This concludes today's call. Thank you for joining. You may now disconnect your lines.

Operator: Ladies and gentlemen, thank you for standing by and welcome to the First Quarter 2022 HII Earnings Conference Call. I'd now like to hand over the call to Christie Thomas, Vice President of Investor Relations, Mr. Thomas, you may begin. Christie Thomas: First quarter 2022 earnings conference call. With us today are Chris Kastner, President and Chief Executive Officer; and Tom Stiehle, Executive Vice President and Chief Financial Officer. As a reminder, statements made in today's call that are not historical facts are considered forward-looking statements and are made pursuant to the safe harbor provisions of federal securities law. Actual results may differ. Please refer to our SEC filings for a description of some of the factors that may cause actual results to vary materially from anticipated results. Also in their remarks today, Chris and Tom will refer to certain non-GAAP measures. Reconciliations of these metrics to the comparable GAAP measures are included in the appendix of our earnings presentation that is posted on our website. We plan to address the posted presentation slides during the call to supplement our comments. Please access our website at hii.com and click on the Investor Relations link to view the presentation as well as our earnings release. With that, I will turn the call over to our President and CEO, Chris Kastner. Chris? Chris Kastner: Thanks, Christy. Good morning everyone and thank you for joining us on today's call. Earlier this morning we reported solid performance across each of our operating divisions. With our focus on execution and growth positioning us to reaffirm our previous revenue, margin, and free cash flow guidance. Our Shipbuilding emission technologies teams continue to execute well despite basically some headwinds in the areas of human capital and supply chain disruption. Like the economy broadly we are facing challenges created by the lingering effects of COVID and its impact on the labor market, making it challenging to hire and retain employees. Moreover, our suppliers are being impacted by the same shortage of labor as well as inflation issues, which creates risk of delays in delivery of key materials for our shipbuilding programs. We are aggressively working these challenges with our suppliers and our customers. In light of both of these challenges, I'm extremely proud of the resilience and the dedication of each of our 44,000 employees to continue to focus on our mission of delivering on their customer commitments. Now, shifting to our results. Sales of $2.6 billion for the quarter were 30% higher than 2021and diluted EPS of 350 for the quarter was down from 368 in 2021. New contract awards during the quarter were approximately $2 billion, driven by the award for DDG 139. This results in backlog of $47.9 billion at the end of the quarter, of which $24.8 billion is currently funded. At Ingalls LPD 28 Fort Lauderdale completed sea trials and was delivered to the Navy. LPD 29 Richard M McCool Jr was launched and we laid keel for LPD 30 Harrisburg. On LHA program, LHA 8 Bougainville is progressing well and long-lead material procurement has begun for LHA 9. On the DDG program, DDG 123 Lenah Sutcliffe Higbee achieved main engine light off and DDG 125 Jack H Lucas was christened this quarter. And finally on the NSC program serial production continues on NSC 10 Calhoun launched in April. At Newport News, SSN 794 Montana completed sea trials and was delivered to the Navy and SSN 796 New Jersey floated off in April. Also, as discussed in our fourth quarter call SSN 725 USS Helena was redelivered in January, which demonstrated the successful reconstitution of our submarine maintenance capability in support of the Navy. On the carrier front, Newport News in the Navy celebrated a centennial of US Navy aircraft carriers and CVN 78 USS Gerald R Ford was redelivered to the Navy in the first quarter, after completion of its inaugural maintenance and modernization period. Progress continued on CVN 79 Kennedy, which is 83% complete and CVN 80 enterprise has begun erecting steel on the dry-dock. On the RCOH program CVN 73 USS George Washington is progressing in the testing phase and is 95% complete and CVN 74 USS John T Stennis is approximately 25% complete. A few weeks ago we renamed our Technical Solutions division mission technologies to better reflect our portfolio of capabilities and our commitment to delivering advanced technologies in multi-domain expertise to our support of our national security customers. Contract towards emission technologies have had a slow start to the year, but this was largely due to the continuing resolution and the resulting lack of adjudication of awards. Looking ahead, we are very excited about our pipeline of new business Mission technologies and are confident it will support our growth objectives. We currently have almost $6 billion of proposals in evaluation with $3 billion in proposal development and a total qualified pipeline of more than $25 billion. We had a significant win in unmanned with the selection of our REMUS 300 vehicle as the US Navy's next generation small UUV program of record. We also recently released Odyssey a suite of advanced autonomy solutions that offer salable autonomy, across the variety of platforms and is aligned with the industry open architecture standards. Regarding our Shipbuilding workforce, I'm glad to report that we finalized the collective bargaining agreements at both shipyards. Our annual apprentice school graduation at Newport News Shipbuilding saw 170 graduates and over 200 individuals will complete their apprenticeship program in May at Ingalls Shipbuilding and we continue to work with local high schools and community colleges on our core hiring and development needs. Through the end of the quarter we had hired over 1,000 craft personnel, towards our plan of over 5,000 for the year, we remain focused on hiring and retaining a strong workforce, as we continue to face the headwinds of a tight labor market. Turning to activities in Washington, Congress finalized appropriations for fiscal year 2022 in March. We saw continued bipartisan support for our programs reflected in the Final Defense Appropriations Act including funding for two Arleigh Burke Class Destroyers and two Virginia-class attack submarines. Additionally, the appropriations measures provided $250 million for advance procurement funding for LPD 32, advance procurement for DDGs as well as funding for our other programs. Also in March, the President submitted his fiscal year 2023 budget request, now under consideration by Congress. The proposed budget reflects continued investment in our shipbuilding programs funding two amphibious ships LPD 32 and LHA 9, two DDG-51 surface combatants and two Block 5 Virginia-class submarines. The budget request continues funding for class nuclear aircraft carriers and aircraft carrier refueling programs and construction of Columbia class submarines, as well as investment in the submarine industrial base. Beyond Shipbuilding the fiscal year 2023 request reflects an emphasis on research and development with the increased investments in capability enablers such as AI, Cyber, Electronic Warfare, C5, ISR and autonomous systems. The line well with our advanced technology capabilities of our mission technologies division. In conclusion, we remain well positioned to execute on our shipbuilding backlog and leverage it to generate significant free cash flow while continuing to capture anticipated work and growth within our mission technologies division. So with that, I'll turn the call over to Tom for some remarks on our financial results. Tom. Tom Stiehle: Thanks, Chris, and good morning. Today, I'll briefly review our first quarter results. For more detail on the segment results, please refer to the earnings release issued this morning and posted to our website. Beginning with our consolidated results on Slide 4 of the presentation our first quarter revenues of $2.6 billion increased approximately 13% compared to the same period last year. This was largely due to revenue attributable to the acquisition of a line in the third quarter of 2021. Operating income for the quarter of $130 million decreased by $9 million from the first quarter of 2021 and operating margin of 5.4% decreased 110 basis points. These decreases were largely due to lower segment operating income driven by lower risk retirement at Newport News Shipbuilding, partially offset by more favorable non-current state income taxes and operating fast cash adjustment compared to the prior year. Our effective tax rate in the quarter was approximately 20.5% compared to approximately 40.5% in the first quarter of 2021. The lower rate in the first quarter of 2021 was primarily due to divestitures during that quarter. Net earnings in the quarter were $140 million compared to $148 million in the first quarter of 2021. Diluted earnings per share in the quarter were $3.50 compared to $3.68 in the first quarter of 2021. Turning to Slide 5. Cash used by operations was $83 million in the quarter and net capital expenditures were $43 million or 1.7% of revenues, resulting in free cash flow of negative $126 million. This compares to cash from operations of $43 million and net capital expenditures of $59 million and free cash flow of negative $16 million in the first quarter of 2021. Cash contributions to our pension and other post-retirement benefit plans were $10 million in the quarter, of which, less than $1 million were discretionary contributions to our qualified pension plans. During the first quarter, we paid dividend of $1.18 per share of $47 million. We also repurchased 51,000 shares during the quarter, an aggregate cost of $10 million. Moving on to Slide 6, Ingalls revenues of $631 million in the quarter decreased $18 million or 2.8% from the same period last year, driven primarily by lower on the DDG program, partially offset by high amphibious assault ship revenues. Ingalls operating income of $86 million and margin of 13.6% in the quarter were down slightly from last year due to lower risk retirement on the LHA and DDG programs, which was largely offset by increased risk retirement on the LPD program, following the delivery of LPD28. At Newport News, revenues of $1.4 billion, decreased by $17 million or 1.2% from the same period last year due to lower aircraft carrier and naval nuclear support service revenues largely offset by higher submarine revenue. Newport News operating income of $81 million and margin of 5.8%, we're down from last year, primarily due to lower risk retirement on the VCS program partially offset by higher risk retirement on CVN 78. At Mission technologies revenues of $590 million increased $331 million compared to the first quarter of 2021, primarily driven by the acquisition of Alion in the third quarter of 2021, partially offset by the divestiture of our oil and gas business and the contribution of the San Diego Shipyard to a joint venture in the first quarter of 2021. Mission technologies operating income of $9 million compared to an operating income of $7 million in the first quarter of 2021 first quarter 2022 results included approximately $24 million of amortization of Alion-related purchase intangible assets. Mission Technologies' EBITDA margin in the first quarter was 7.3%. Turning to Slide 7, we are reaffirming our 2022 sales margin and free cash flow expectations and have slightly revise our pension expectations. During the quarter, we reached a labor agreement with the United Steel workers at Newport News Shipbuilding. The contract includes increases in pension benefits triggering a pension remeasurement which also takes into account discount rate changes and asset returns through late February. Regarding our near-term outlook, our first quarter results were positively impacted by a very high quality, delivery for LPD 28, which allowed us to retire a significant amount of risk for that ship in the first quarter as reflected in the Ingalls operating margin. The remaining Shipbuilding milestones, we expect to achieve in 2022 our back-end weighted. Given that backdrop we expect the second quarter shipbuilding revenue to be relatively flat sequentially and shipbuilding operating margin to be approximately 7%. Regarding mission technologies, we expect results will ramp through the year with second quarter sales, up approximately 5% sequentially, and operating margin in line with our full year guidance of approximately 2.5%. Regarding our longer-term targets, we remain confident in our free cash flow of $3.2 billion from 2020 through 2024. This outlook does assume that continue to expensing of research and development costs for tax purposes. As a reminder, we believe the impact to 2022 free cash flow would be approximately $100 million if the current R&D amortization treatment remains in place. On Slide 8, we provided a walk from our 2022 to 2024 free cash flow outlook. This is consistent with the chart we began providing last quarter. Additionally, we are reaffirming our capital allocation priorities, which include significant deleveraging in the near term, along with continued modest dividend growth and balance share repurchases. We will continue to evaluate M&A, but we know significant capability gaps today. In closing, we are pleased with the operational milestones achieved in the first quarter along with the financial results. Notwithstanding the challenges of the current environment, we remain enthusiastic regarding our long-term outlook, with nearly $50 billion in backlog, strong budgetary and customer support for our shipbuilding programs and emission technology business that we believe is poised for very strong growth. We are laser focused on consistent execution and generating sustainable long-term value. Now I'll turn the call back over to Kristie for Q&A. Christie Thomas: Thanks, Tom. As a reminder to everyone on the call, please limit yourself to one initial question and one follow-up, so we can get as many people through the queue as possible. Operator, I will turn it over to you to manage the Q&A. Operator: Our first question goes from Robert Stallard from Vertical Research. Your line is now open. Robert. Please go ahead with your question. Robert Stallard: Chris. I'll start off with you a bigger picture question on the FY22 request. It looks like the year maybe is changing as planned for amphibious vessels proposed into this, how do you think this could play out and what's potentially the risk to HIIs. And then secondly, numbers question perhaps for Tom you mentioned on Slide 8, the potential for margin growth in mission. I was wondering what the sort of better long-term margin could be for this division because 0.25 pretty low compared to other companies in the industry. Thank you. Chris Kastner: Yes, okay. Robert, I'll start with the budget, the '23 budget request and then Tom can talk about Mission Technologies margins. One thing we should always remember with the budgetary process, this is the first step of the process. So we all work through that throughout the year, all our major ship building programs were supported the one line we do have to work on is the NCIB line as you identified. We need to get LPD 32 under contracts. We need to get LHA 9 under contract. We need to work on LPD 33 and ensure that we support the Marines and the Navy and the Congress really in analyzing that program going forward. So you're right, we do need to work on the NCIB line but I'm positive as we work through this process that will get to a solution that that makes a lot of sense. From a long-term big picture perspective, I think that the budget really does support our long-term growth rate, and I'm comfortable with the 3%. Tom Stiehle: Sure, Rob, and I'll pick up the question on MT from a margin perspective, 1.5%. So we got guided 1%. So it's higher than the guidance that's coming up 2.7% last year, 2.7% last year for Q1 and 2.9% for a quarter ago in Q4. I would tell you that because of the purchase intangibles both with empty about $30 million in line specifically for 24 net return on sales metric is not, probably a good lead indicator as far as where we want to land that's why we kind of give you the EBITDA perspective from 8% to 8.5%. The quarter herewith was 7.3%, not unexpected, because we guided you from a gross perspective only at 1%. We take with the CRM or sales light and obviously the margin will follow the sales, so we're comfortable with where we stand and from a perspective of where we could go, we've told you for the year is 8% to 8.5% from an EBITDA perspective as a percent of revenue and from now going through 2024 we've highlighted that it's more appropriate to think about 8% to 10%is is a range at where MT can land. All right. Operator: Our next question comes from Pete Skibitski from Alembic Global Advisors. Pete, your line is now open. Please go ahead with your question. Pete Skibitski: Chris also a question on the fit-up, one thing that's always a little bit hard to tell, timing-wise is just maintenance trend, ship building maintenance trend. Can you give us a sense of if you see, if you look at the fit-up, you know, should mean is be a tailwind for you guys are starting to flatten out. I just wonder what your thoughts were. Chris Kastner: Yes, I think it's pretty flat. They're coming through the submarine kind of maintenance schedule and how they're going to proceed with LA class and Virginia-class submarines from maintenance standpoint, but we think it's pretty, pretty flat from our perspective. Lots going to go into how they execute the sign up, but we think it's pretty flat. Pete Skibitski: Okay. And then one last question kind of off-the-beaten-path, there was an export notification back in December forum for emails and Advanced Arresting Gear to France in both you guys and General Atomics were excited. Is that any kind of a meaningful or a real revenue opportunity for you guys. And I'm just curious about the timing as well on that. Chris Kastner: Yes, not for us now, remember we don't, GA provides those system, so not for us now. Operator: Our next question comes from Seth Seifman from JPMorgan. Seth, your line is now open. Please go ahead with your question. Seth Seifman: I think you mentioned on the last call you mentioned Chris that you guys had a lot of confidence in the hiring your ability to hire this year and you started off this call focusing especially on the tight labor market. So maybe if you could just give a little bit of color on how things are tracking there any metrics we can think about kind of, what you need to do and then kind of where the risk would be in the financial plan if to the extent that that the hiring situation gets tougher. Chris Kastner: Sure Seth. Thanks. January and February were tough on really impacted our attendance. But in March attendance recovered and we're back to tenants levels that we're used to seeing within both of our shipyards. We've hired over 1,000 people through the end of March. We need to hire over 5,000, so a bit behind, but we're really focused on our relationships with our apprentice schools and high schools, community colleges and we expect that to ramp over the summer months graduations happened. So it's definitely a watch item. We need to, we need to hire, we need to train and we need to be productive. So still comfortable with our guidance but labor is a watch item for us as we move through the year. Seth Seifman: All right. And just a follow-up, is it more about, I mean I would think people come in in the summer there. There's probably only so much contribution they can make in a couple of months. And so, is this, is this really more about of setting up for 2023 and then to the extent you have an idea of how you are set up for 2023 that would affect you're the risk tolerance that you have in your, in your estimates completion. Chris Kastner: Yes, when they come out of the apprentice schools they're ready to go and if they can come out of the community colleges and the high schools where we have programs in place where there, they're learning. They're going to fill a critical role within the shipyard. Now they're not going to be first-class shipbuilders right away, but they're going to be learning, they're going to be making progress on executing, its all incumbent on our shipbuilding teams to make sure they're trained up and they've got the right mentorship and we did have very well. So yes, they're not going to be first class the shipbuilders coming out of the out of the gate, but we expect them to contribute. Operator: Thank you. Our next question comes from Doug Harned from Bernstein. Doug, your line is now open. Please go ahead with your question. Doug Harned: I'd like to just spend a little bit of time on Virginia class. I mean it was identified as a margin headwind in this quarter and the Newport News. If I go back to when you had the issues back in 2020, it was the Montana, the New Jersey, the Massachusetts those I mean the Montana is deliver in New Jersey float off. Then one of the big issues then was this question of lots of new people in a complex environment needing to train them and so some of the issues you had then were attributed to that. If you look at the situation on Virginia class today where does it stand because it seems that you might run into some of these similar issues as you try and bring a lot of new people in it. So how are you looking at the Virginia class performance right now. Chris Kastner: Yes, Doug. It's a good question and I appreciate it. Remember the issues we had previously we were in the heart of COVID right and we had a significant outs and significant labor issues with the Newport News, which drove, which drove a lot of that but what we're seeing now is it's interesting we talk about serial production line, but the VCS program is really a production line. And when you miss you miss schedule, there's a knock-on effect. So, as you know, we missed a couple of schedules at the end of the year that drifted into Q1. We've accomplished those and it's really had an impact on the future shifts and so we had to deal with that in the quarter, we reassessed our risk and you see the results in Q1. That being said, there is some stability in that workforce. Now the tendency has recovered. We're a bit short of our hiring plans, but it's not like what happened during COVID. The team is very focused on meeting their interim milestones working that offers operating system very diligently. I got a lot of confidence that there is actually some upside as we move through the next couple of years on the VCS program. Doug Harned: So if you look at and if going forward you're finishing the Massachusetts your own, your own boats in the Arkansas. And then you will go into block five. How do you, how do you, how should we think about kind of performance and margin trajectory as you move through those as well as the work that you're doing for the electric boat the modules for electric boat but I mean how has this risk retirement likely to move in in your thinking. Chris Kastner: Yes. So we've, we've assessed RACs in the risk on not only block four but block five boats and reset the GACS based upon how we, how we project them to perform over the life of both of those block. So we don't necessarily give margin guidance at a program level, but I do see after resetting that risk on block five going forward there is potential for upside if we're able to meet our milestones. Operator: Thank you very much. Our next question comes from Myles Walton from UBS. Myles, your line is now open. Please go ahead with your question. Myles Walton: Thanks, good morning. I wanted to ask about carriers for a second and in particular the 79 and the 73. So on the 79, I think the progress the completion metric you guys provide in the press release every quarter, it really hasn't moved in the last several quarters. And I know one of the adjustments, which were the single phase delivery but I don't think that would have played out here in the first quarter. So any reason why there wasn't progress there. And then just a comment on the 73 and if the slip to 2023 made any difference for your financials. Thanks. Tom Stiehle: So I'll take the 73one on the back of that. So right now we're still bringing that ship and trying to target for yearend completion through the EAC process. We are evaluating some risks to the schedule on that, that wasn't incorporate into the Q1 EAC share. Chris Kastner: Yes, 79 were absolutely making progress on that ship from we're heavily into the volume part of that ship, completing compartments. If you walk through the, you walk through the base and that ship right now, you see a lot of installation of paint, which is a good place to be. When you think about an aircraft carrier attacking that volume and then starting to test program. I don't know specifically about the math around the, around the progress Christy yield fill you in, in that after the call. But they're very dedicated and making progress, really on a weekly basis on the aircraft carrier. Myles Walton: So no movement to the expected delivery on that vessel. Chris Kastner: No, absolutely not. Myles Walton: Okay, thanks. Operator: Thank you very much. Our next question comes from Gotham Khanna from Cowen. Gautam your line is now open. Please ask your question. Gautam Khanna: I was wondering if you could refresh us on how your contracts adjust for higher input costs. So whether it be steel, whether it what have you everything like you mentioned at the outset, is moving up in price. How do you recover those, what does that do to margins, is just a pass-through where it actually dampens margins, just if you could walk through the mechanics there. Thanks. Tom Stiehle: Sure. It's Tom here. Good morning. Yes. So from an inflation perspective break, I know your question is focused on the existing contracts and how that it, I'll hit that but also now we're watching inflation as it applies to our new bids so it's like a two-part answer here but, from the mechanics that we have on how that fits as we spoke about this other earnings calls. And it really starts with our understanding of what we're buying, and how we contract for with these contracts being anywhere from 48 years long. Long-lead contracts upfront with an understanding of the material and the bill of materials. We have a very disciplined and dedicated process to make sure that we have live quotes and bids. And we go hand in glove making sure the quotes have the procurement side and ourselves locked into the contract value from a starting standpoint. So while we have a clear understanding of what we buy and at the onset of these contracts. We have a good bid from our suppliers. We do run into, from time to time as we move forward, we have the contracts awarded things purchased after that and on up commodity buys and we did see increases from time to time on raw materials and commodities. I will tell you that when we have a long lead phase of the contract, it operates almost like a cost-type contract and rolling those actions into the construction. The eventuality of the construction awarded that bit, so that's helpful. Another piece of that is when you look at, you'll see in queue, we have braked out across the three divisions. The percentage of cost type versus fixed-price contracts but from an high from entirely perspective, it's about 50-48 fixed price and cost. So this recruitment there are in the contract type. Mission Technologies has got the 90% cost price and Newport needed 50, 50. So that helps that. Several of our contracts do have EPA policies, which had a, recognizes things that we don't put on contract immediately. We have that risk covered with our bids within the estimated cost from bids that we see at the time of award. And the actual cost that we pay it can get adjusted depending on a inflationary industry. So that helps us on that side as well. Even our flexibly FX, flexibly price contracts there is a share on that. So we work ourselves through that as well. So I think the toolset that we have on how we manage our existing contracts as well as the change management process when we take on new orders to make sure that we maintain the equity of those contracts, keeps us in a relatively safe space. The last one I'd add to you too is a large majority of the cost of our existing contracts is on the labor side and we come through our union agreements, a four year down at Ingalls and a five year here at Newport News. So we understand those costs and there is a schedule of increases and we use that when we put things on contract. So I think overall it's a well-founded process and how we handle it and plays well against these inflationary times. On the new bids, I'll tell you that we're very, we are seeing on new bids price increases along the lead times and we're seeing higher costs kind of year-over-year but we ensure that we follow that same dedicated process of getting live quotes. Our customer sets are understanding of that, I mean, there may they're saying inflationary pressures across the industry and we bring that cost and pricing data for evaluation and make sure that we strike a reasonable risk balance here for inflation against the new awards. Gautam Khanna: And just the mechanics if you would mind on if the fact you have an EPA and together, is that just an increased revenue and cost and therefore, a document to profit margin. Tom Stiehle: The back-end of your question. So with all that as the backdrop the mechanics of that obviously we go through our disciplined quarterly EAC process, I mean, we're getting a cost weekly a multi-program to do and then obviously our quarterly EAC process, so we can see how the material is trending both against the existing orders that we have and material requirements in any proper requirements. We'll evaluate that whether the EAC is improving or were degrading and-or the associated risks that we thought were going to be retired for the quarter and the rest of the remaining scope on those contracts that will get incorporated into EAC, if there is an increase obviously there'll be an increase in costs will run that for our, profit tables and it all revise the booking rate accordingly. So all that gets factored in by ship by ship across the program and then it kind of rolls up into our adjustments that you see here. I guess the portfolio. Chris Kastner: I'd also add that if there is EPA protection, it's an increase in sales without the resultant impact on margin. So that does provide us additional protection and that's in our EAC process as well every quarter. Operator: Our next question comes from Robert Springer from Melius Research. Robert your line is now open. Please go ahead with your question. Robert Springer: Thank you, Good morning. Chris covering questions sort of higher level. A lot of talk about upside to defense spending from Europe. And while the export opportunity probably great for the shipbuilding side, what kinds of products and services from MT do you think will interest European countries. Chris Kastner: Yes, that's a really good question, we think about it a lot. Unmanned we've sold internationally, about 30% of our unmanned sales have historically been international to NATO countries in nature. And then you think about ISR surveillance, big data platforms, cyber, Intel, all of that as part of mission technologies get some traction internationally. So we work on that, we're very tactical in how we do that we make sure of the opportunity is valid but all those are opportunities in Europe and actually any NATO country actually. Robert Springer: Okay. And then on the domestic side, the Navy leadership has been talking about priorities as follows top priorities Columbia class then readiness modernization and lethality improvements and then third capacity. So knowing that the commitment to Colombia is rock solid and capacity is really a function of the budget's, future budgets. How do we think about HII's access to the middle part, the readiness in the modernization part and then again, how does that tie with MT. Chris Kastner: Yes. So interesting readiness and modernization in MT is very interesting tools related to big data and data analytics that absolutely support that. So it definitely helps provide tools and access for our customer to improve their readiness. So I actually, thank you for that question. It's very interesting thing we're working on with our customer. It's all upside. Right, but it will just give our customer additional capabilities. So, thanks for that. Robert Springer: Chris, do you see any timing or any visibility on when these things start to come through. Chris Kastner: No, I think unmanned can happen very quickly, the award of small is very important provides us additional opportunity to sell that internationally. The other stuff, we'll just have to see, but I don't see a short-term sort of upside related to it. Operator: Our next question comes from David Strauss from Barclays. David, your line is now open. Please go ahead with your question. David Strauss: Good morning. Hey Chris. So I think it was on the last call you talked about the discussions with the Navy in terms of additional investment in the shipyards, and how that was potentially going to be split and what it meant potentially for the expected CapEx drawdown. Can you just update us on where things stand there. Chris Kastner: Yes, we're still working on it. I think you saw in the three budget additional funding allocated to capital and support of infrastructure in the supply base, we're in discussions with the Navy on that now. And we'll just, we'll just continue to discuss that with them in order to make the investments to support their critical the critical program. David Strauss: Okay. And Tom, on the, on the working capital side, I think networking capital represents sales that you guys calculate was around 10% this quarter. I think that's the highest we've seen in a while even kind of adjusting for typical seasonality. Can you just talk about the working capital trend through the course of this year and again kind of what you're baking into that free cash flow forecast for '23 and '24 from a working capital perspective. Thanks. Tom Stiehle: Sure, David. Yes. So it was 10%. So, and that's just upfront is just the timing on the, on the working capital that we have. It's both the timing on the receipts for the accounts receivable and the collections, the payments for the accounts payable. We anticipated it would be high on the front end here right now, a little bit of a draw, as we talked about these milestones of kind of just stretch a little bit on the VCS program. And as we work through the back half of the year, I see that that coming down. We will finish the 2020 year at higher than we were in 2021, but then it's to come back and break our way into 2023. David Strauss: Okay. What are you targeting from a net working capital as a percent of sales in '23 and '24 specifically. Tom Stiehle: So we don't give guidance specifically on that, but we are talking about a normal range, our expectations is that 6% to 8%. This 10% is heart of deliberate higher on that range, but not unexpected. We saw in the quarter playing out and then the impact that that we've discussed here. I would tell you that would get back more into that range and into '23. 2023 is a help on cash. And then for '24 about neutral. 2023 and 2024, we've talked about more ship milestones and deliveries in the out years and that's helps to facilitate that working capital coming down from 10% and be more to that 6% to 8% range. Operator: Thank you very much. And our next question comes from George Shapiro from Shapiro Research. George, your line is now open. Please go ahead with your question. George Shapiro: Yes, Tom I was wondering if you could just provide what the EA's net EACs were in the quarter by division. Tom Stiehle: Sure. Yes, on the net EAC George was were $45 million and the split of that was 90% Ingalls and 10% Mission Technologies. George Shapiro: Say that again. I missed the last sentence. Tom Stiehle: Yes, it was 107 favorable, 62 unfavorable for net of 45. George Shapiro: Okay. And then, you had said that the LPD 28 was a major help in the quarter. Is that a singled out number in the queue or no. Tom Stiehle: You will see that for a $17 million adjustment. Yes. And also, it was a clean DDG-50 or delivery that we had in Q1 we usually get after both deliveries in the following quarter. We'll do a hot wash. The remaining work and this sometimes some profitability. It will happen in the next quarter. So that's been pulled into this quarter too, that kind of factored in in somewhat opening remarks of the 7% shipbuilding expectation in Q2 as we pull that margin into the Q1 time frame. George Shapiro: Yes. And then if the second quarter is 7%, it would imply that the third and the fourth quarter has got to average at least as good as the first quarter, if not a little better. So if you had this one-time major benefit in the first quarter, what is the benefits you get in the Q3 or Q4 to get that margin better than 8.3% to have the year at 8% to 8.1%. Tom Stiehle: All right. So we have several milestones on the back half of the year as we continue through the construction process on the LPD program. Milestones that we have know shifts and as we bring people back on board sales will rise with a margin perspective in this some efficiency gains on that. So we still feel comfortable with the 8.1%. We kind of highlighted at the beginning on the February call that it would be right upfront and both the sales and the margin will come in on the back half of the year. George Shapiro: Okay, thanks very much. Operator: Thank you very much. I'm not showing any further questions at this time, I'd now like to hand the call back over to Mr. Kastner for any closing remarks. Chris Kastner: Thank you again for joining us on today's call and your interest in HII is appreciated. We welcome your continued engagement and feedback. We'll see you out there.

Operator: Ladies and gentlemen, thank you for standing by and welcome to the Fourth Quarter 2021 Huntington Ingalls Industries Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the call over to Christie Thomas, Vice President of Investor Relations. Ms. Thomas, you may begin. Christie Thomas: Thanks. Good morning and welcome to the Huntington Ingalls Industries fourth quarter 2021 earnings conference call. With us today are Mike Petters, President and Chief Executive Officer; Chris Kastner, Executive Vice President and Chief Operating Officer; and Tom Steely, Executive Vice President and Chief Financial Officer. As a reminder, statements made in today's call that are not historical facts are considered forward-looking statements and are made pursuant to the safe harbor provisions of federal securities law. Actual results may differ. Please refer to our SEC filings for a description of some of the factors that may cause actual results to vary materially from anticipated results. Also in their remarks today, Mike, Chris and Tom will refer to certain non-GAAP measures. Reconciliations of these metrics to the comparable GAAP measures are included in the appendix of our earnings presentation that is posted on our website. We plan to address the posted presentation slides during the call to supplement our comments. Please access our website at huntingtoningalls.com and click on the Investor Relations link to view the presentation as well as our earnings release. With that, I will turn the call over to our President and CEO, Mike Petters. Mike? Mike Petters: Thanks, Christie. Good morning, everyone and thanks for joining us on today's call. Before getting into the results for the quarter and the full year, I want to personally thank each of our 44,000 employees for continuing to execute their daily activities with an unwavering commitment to our operational pillars of safety, quality, cost of schedule. 2021 was a year of solid performance and resiliency during the COVID pandemic. At HII, we are committed to promoting and protecting the health and safety of our employees, their families and their communities and continuing to serve our customers in a vital national security interest of our country without disruption as an essential contributor to the nation's critical infrastructure. Most recently faced with uncertainty around the Omicron variant, our employees remain focused on execution, while driving continuous improvement, innovation and creativity. While HII has not become subject to a vaccine mandate through any of our shipbuilding contracts at this time, we continue to be committed to promoting the benefits of a vaccinated workforce. Our Technical Solutions division does have the vaccine requirement in a number of contracts. And currently, we estimate that approximately 81% of our HII full-time employees are fully vaccinated. Earlier this morning, we released our 2021 results which we believe reflect consistent shipbuilding program execution, with year-over-year margin expansion and a transformational year for our Technical Solutions division. During the year, we captured major contract awards resulting in maintaining record backlog levels and we expanded our portfolio by acquiring Alion in our Technical Solutions division. With these actions, HII persevered to diligently pursue the business outcomes of driving growth, managing risk and generating strong returns. Some highlights from the quarter start on Slide 3 of the presentation. Sales of $2.7 billion for the fourth quarter are down 3% from the fourth quarter of 2020 and sales of $9.5 billion for the full year are up 2% from the full year of 2020. Given the numerous challenges in 2021, we were pleased to finish the year with shipbuilding revenues at the low end of our guidance and we remain confident in the 3% shipbuilding average growth rate over time. We also saw strong growth as anticipated in our Technical Solutions division. Diluted EPS was $2.99 for the quarter and $13.50 for the full year, down from $6.15 in the fourth quarter of 2020 and $17.14 for the full year in 2020. Full year segment operating income of $683 million is an increase of $128 million or 23% over 2020. These returns in line with our expectations as a result of continued performance improvement in shipbuilding margins and strong performance in our Technical Solutions division. New contract awards during the quarter were approximately $1 billion, resulting in our backlog of approximately $48 billion at the end of the quarter, of which approximately $23 billion is currently funded. Now entering 2022, our shipbuilding programs backlog provides, we believe, unmatched stability and visibility and we are laser focused on methodically executing our contracts, while the Technical Solutions business is positioned to capture growth opportunities. We remain extremely pleased with the technology, capability, talent and solutions that Alion has brought to the HII family. Now shifting the activities in Washington for a moment. We are pleased with the passage and enactment of the fiscal year 2022 Defense Authorization Bill and its strong support for shipbuilding. However, more than one quarter into the fiscal year, congressional appropriations have yet to be finalized and the federal government continues to operate under a continuing resolution through February 18. It remains uncertain at this point when annual funding measures will be finalized and we continue to urge Congress to proceed expeditiously. We do remain optimistic that the appropriations process will be completed in the weeks ahead. Now before I close, let me take a moment to address the recent announcement that, at my recommendation, our Board of Directors elected Chris Kastner to the role of President and CEO effective March 1. This is consistent with the company's succession plan and I fully endorse this transition. I truly believe this is a fantastic development for HII. As the Executive Vice Chairman of the Board, I will remain an HII employee through the rest of the year and will be able to support Chris and the Board. As the first CEO of this great company, I can tell you confidently that there is no better choice than Chris to lead HII into this bright new chapter, where I believe we are positioned better than ever before to successfully leverage our substantial backlog to generate strong free cash flow, demonstrate growth in our Technical Solutions division and create long-term sustainable value for our shareholders, our customers and our employees. And now, I will turn the call over to Chris for his remarks on the operations. Chris? Chris Kastner: Thanks, Mike and good morning, everyone. Let me first congratulate Mike on his transition to Executive Vice Chairman of the Board and thank him on behalf of myself and our 44,000 employees for his extraordinary leadership. I also want to thank the Board of Directors for electing me to succeed Mike as HII's next CEO. Thanks to Mike's vision, HII is positioned well today and the value creation opportunity in front of us is as strong as ever. I'm honored to lead HII in its next chapter. Now shifting to our results. I'm very pleased to report another solid operational quarter. Let me share a few highlights. At Ingalls, the Navy continues to fund advanced procurement for amphibious patrol ship. LHA 9 and LHA 8 Bougainville is achieving cost and schedule performance in line with our expectations. On the DDG program, the team delivered guided missile destroyer DDG 121, Frank E. Petersen Jr. to the Navy and began fabrication of DDG 131, George M. Neil. This seal production line continues to positive momentum in 2022, with planned delivery of DDG 123 Lenah Sutcliffe Higbee. On the LPD program, LPD 28 Fort Lauderdale, has completed sea trials and is on track for delivery to the Navy in the first quarter of this year. In addition, LPD 29, Richard M. McCool, Jr, was launched in early January. We continue to watch the upcoming budget release for advanced procurement funding for LTD 32 to maintain the benefits of the serial production on LPDs. At Newport News, the Ford-class aircraft carriers are progressing well. CVN 79 Kennedy is approximately 83% complete and the team is focused on compartment completion and key propulsion plant milestones. Later this year, Kennedy will begin testing of EMOLS, the electromagnetic launch system. CVN 80 Enterprise and CVN 81 Doris Miller continue material procurement and early unit construction and TVN 80 plans to lay Teal this year. On the RCOH program, CVN 73 USS George Washington reached 94% complete and is focused on propulsion plant testing and is planned for redelivery later this year. Regarding CVN 78 USS Gerald R. Ford, the planned incremental availability is on track to complete this year to support the Navy's first deployment of this critical asset. On the VCS program, SSN 794 Montana completed work as planned in Q4 2021 and will complete sea trials and delivery in Q1 2022. SSN 796 New Jersey was christened last year and is expected to achieve its float-off milestone early this year. While we did not achieve our projected end-of-year milestones, the VCS program continues to improve its progress towards a consistent 2 per year cadence. And finally, on a submarine fleet support program, SSN 725 Helena recently completed sea trials and was redelivered to the Navy last month. This Los Angeles class submarine maintenance completion marks the first redelivery from Newport News of a submarine following a major availability since 2009 and demonstrates the successful reconstitution of our submarine maintenance capability in support of the Navy. At Technical Solutions, the Alion integration is progressing on plan. Our organizations are already operating as a consolidated business. Back-office systems integration is in full swing and should be largely complete by the end of the year. Book-to-bill for 2021 was healthy at $1.1 million and the new business qualified pipeline is very robust at over $20 billion, a level strong enough to support our growth expectations for this business. Moreover, the velocity of the pipeline has already increased significantly entering 2022, with nearly $5 billion currently in evaluation or in proposal development. This includes multiple opportunities over $1 billion in total contract value that are expected to move to award this year. Before I close, I want to provide some remarks regarding our labor and material availability. We continue to keep COVID-19 impacts as watch items and are focused on ensuring our supply chain and labor supply will be able to continue to support our performance. Given the nation's overall labor pressures, we have increased attention with regard to hiring and attrition rates and we have detailed plans in place to accelerate hiring for 2022. We are leveraging targeted hiring events and actively utilizing our world-class apprentice schools as well as relationships with community colleges and high schools to increase the pace of talent acquisition and development. Now, I'll turn the call over to Tom for some remarks on the financials. Tom? Tom Steely: Thanks, Chris and good morning. Today, I'll briefly review our fourth quarter and full year results and also provide our outlook for 2022. For more detail on the segment results, please refer to the earnings release issued this morning and posted to our website. Beginning with our consolidated fourth quarter results on Slide 5 of the presentation. Our fourth quarter revenues of $2.7 billion decreased approximately 3% compared to the same period last year. This was due to a decline at Newport News and Ingalls shipbuilding which was largely driven by very high level of material volume in the fourth quarter of 2020, partially offset by the growth at Technical Solutions from the acquisition of Alion in the third quarter of this year. Operating income for the quarter of $120 million decreased by $185 million from the fourth quarter of 2020 and operating margin of 4.5% decreased 658 basis points. These decreases were largely due to a less favorable operating FAS/CAS adjustment compared to the prior year as well as lower segment operating income driven by lower risk retirement on the DDG and NSC programs at Ingalls as well as lower risk retirement on submarine fleet support at Newport News. Moving to our consolidated results for the full year on Slide 6. Revenues were $9.5 billion for the year, an increase of 1.7% from 2020. The increase was primarily driven by the acquisition of Alion in the third quarter as well as growth at Newport News shipbuilding in the Virginia class and Columbia class submarine programs and carrier construction and overhaul. This was partially offset by a decline in revenue at Ingalls due to lower volumes on NSE and amphibious assault ships programs as well as the divestiture of our oil and gas business and the contribution of the San Diego shipyard to a joint venture early in 2021. On an organic basis, revenue for Technical Solutions was essentially flat year-over-year. Operating income for the year was $513 million and operating margin was 5.4%. This compares to operating income of $799 million and operating margin of 8.5% in 2020. The decreases were due to a less sale operating FAS/CAS adjustment compared to 2020, partially offset by stronger segment operating results. Segment operating income for the year was $683 million and segment operating margin was 7.2%. This compares to segment operating income of $555 million and segment operating margin of 5.9% in 2020. Our effective income tax rate was 18.4% for the quarter and 12.5% for the full year. This compares to 17.8% and 14.1% for the fourth quarter and full year 2020, respectively. The decrease in the annual tax rate was primarily due to additional research and development tax credit for tax years 2016 through 2020 recorded in the third quarter of 2021. Net earnings in 2021 were $544 million compared to $696 million in 2020. Diluted earnings per share in 2021 was $13.50 compared to $17.14 in the prior year. Pension adjusted diluted earnings per share in 2021 were $13.03, an increase of 30% from 2020 results due to stronger segment operating performance. 2021 results included approximately $20 million of pretax transaction and financing expenses related to the acquisition of Alion. Additionally, 2021 results include amortization of purchased intangible assets totaling approximately $86 million, of which approximately $33 million was related to Alion. Turning to cash flow on Slide 7 of the presentation. We ended 2021 with a cash balance of $627 million, up from $512 million at the end of 2020. Cash from operations was $271 million in the fourth quarter and free cash flow was $165 million. For the full year, cash from operations was $760 million and free cash flow was $449 million. Net capital expenditures in 2021 were $311 million or 3.3% of revenues. Cash contributions to our pension and other postretirement benefit plans totaled $106 million in 2021. During the fourth quarter, we paid dividends of $1.18 per share or $48 million, bringing total dividends paid for the year to $186 million. We also repurchased approximately 75,000 shares during the quarter at an aggregate cost of approximately $14 million. In 2021, we repurchased approximately 544,000 shares at an aggregate cost of approximately $101 million. On Slide 8, we have provided our updated 5-year pension outlook. The notable change from our prior outlook is the increase in the FAS benefit. This was largely driven by asset returns in 2021 of 12.7% and, to a lesser extent, the modest change in the discount rate. Moving on to Slide 9. We have provided details on our outlook for 2022. While we continue to expect shipbuilding growth of approximately 3% over time, our 2022 outlook range of $8.2 billion to $8.5 billion acknowledges uncertainties around the current environment. We finished 2021 with shipbuilding operating margins at 7.7%, the high end of our initial guidance range and at the midpoint of our revised guidance range. This was a marked improvement from the shipbuilding margin of 6.2% in 2020. We expect shipbuilding operating margin to be between 8% and 8.1% for 2022 and we expect 2023 shipbuilding operating margin will continue to improve beyond 2022 results. For Technical Solutions, we expect revenue of approximately $2.6 billion in 2022, operating margins of approximately 2.5% and EBITDA margin between 8% and 8.5%. These are all consistent with our guidance and messaging at the time of the Alion announcement and current run rate in 2021 results firmly support our expectations. In 2022, amortization of purchased intangible assets is expected to total approximately $142 million, of which $121 million is attributable to Technical Solutions. Given the timing of the shipbuilding program milestones and the normal seasonality for Technical Solutions, we expect the first quarter segment operating results to be the weakest of the year, with shipbuilding operating margin near 7% and Technical Solutions operating margin near 1%. Additionally, we expect that the first quarter 2022 shipbuilding revenue will be the lightest of the year given Omicron and the challenging labor market driving to a slow start of the year. Our expectation is for shipbuilding revenue to be approximately $100 million lower than results in the first quarter of 2021, with that equally split between the shipyards. Moving on, we expect 2022 capital expenditures to be between 2.5% and 3% of sales. This guidance does include modest incremental capital expenditures above our prior guidance related to investments in infrastructure and tooling to support the submarine industrial base. We are working with our Navy partner regarding the shared investment and capital incentive structure and believe these critical investments will have minimal impact on our overall free cash flow generation. We expect 2022 free cash flow to be between $300 million and $350 million which includes a number of nonrecurring items. First, as we noted on the third quarter call, we now expect the repayment of the advanced progress payments we received in 2020 to occur in 2022 which totals approximately $160 million. Additionally, we have a repayment of approximately $70 million in 2022 due to the 2020 payroll tax holiday. Our 2021 free cash flow results were also about $125 million better than the midpoint of our latest guidance, simply due to timing of collections and distributions. The outlook we are providing today is based on the best information we have now and assumes no further degradation in our supply chain. It also assumes that we're able to continue to hire employees at a pace that supports our staffing and that we continue to see limited impacts from inflation given the nature of our contracts and the long-term arrangements that we have in place with our labor unions and suppliers. Additionally, on Slide 9, we've provided our updated outlook for a number of other discrete items to assist you with your modeling. Regarding our longer-term targets, we remain confident in our free cash flow target of $3.2 billion from 2020 through 2024. This outlook does assume the continued expensing of research and development costs for tax purposes. For context, we now believe the impact to 2022 free cash flow would be approximately $100 million if the current R&D amortization treatment remains in place. On Slide 10, we have provided a walk up from our 2022 to 2024 free cash flow outlook. First, 2023 free cash flow is enhanced by the lack of discrete headwinds I just mentioned for 2022, the advance to progress and payroll tax holiday repayments. Secondly, we do expect a working capital tailwind in 2023 that, along with continued top line growth in shipbuilding, is expected to drive approximately $200 million of incremental cash flow. Finally, the growth in margin expansion of Technical Solutions is expected to contribute meaningful incremental free cash flow in 2023 and beyond. As a reminder, working capital can be quite lumpy as we saw at the end of 2021 and we have provided ranges to help account for that variability. For 2023, we are expecting free cash flow to be between $750 million and $800 million and between $800 million and $900 million for 2024 which is all consistent with the target of $3.2 billion between 2020 and 2024. In closing, given the persistent challenges presented in 2021, we are pleased that we were able to complete the year with the results generally consistent with our guidance, including shipbuilding margin at the high end of our initial range and free cash flow well above our guidance. Notwithstanding the current environment, we remain enthusiastic regarding our long-term outlook as we begin 2022, with nearly $50 billion in backlog and Technical Solutions business that we believe is poised with very strong growth. We are laser-focused on consistent execution and generating sustainable long-term value. Now, I'll turn the call back over to Christie for Q&A. Christie Thomas: Thanks, Tom. As a reminder to everyone on the call, please limit yourself to one initial question and one follow-up so we can get as many people through the queue as possible. Operator, I will turn it over to you to manage the Q&A. Operator: And the first question will be from Myles Walton with UBS. Please go ahead. Myles Walton: Hi, good morning. So I was wondering if we can focus on cash flow for just a second and beyond '23, '24, just the algorithm and the conversion ratios that you think about as being sustainable. Obviously, in '23, '24, you're converting well above, I think, what's implied non -- after you adjust for pension, noncash pension income, you're converting well above 100%. So maybe just tell us about what the conversion structure or equation should be after '24. Tom Steely: Sure. Thanks, Myles. I'll take that. Tom here. Sure. So as we've been kind of guiding and as we get into the out year this year, the portfolio is maturing. The ships are getting deeper into their build cycles. We're getting deeper into prime. We're seeing -- and we're getting more ships as we've highlighted in the past in deliveries into '22, '23, '24 time frame from where we've come from. So we're seeing additional progressing and improvement in working capital in the out years and then a higher conversion rate as we released retentions and run through the deliveries of those ships. So, I'm with you that there's a couple of years that we're playing catch-up actually and the bridge I've given here in half of Page 10 actually kind of shows that there's some headwinds that we have in working capital exiting '21 going into '22. The working capital actually gets a little bit worse. And on the top end of our range, almost 8% in the high 7s. But then as we get into '23 and out, we actually see that turn back and become favorable for cash and cash contribution as we work off the progress of the ships and we deliver the ships there. Myles Walton: But we shouldn't assume any substantive drop off post '24 from working capital materials on the opposite direction. Tom Steely: No. No, I think what we've highlighted, long term, I mean, as we work the ships off, have the collections and then deliver, the margin and free cash flow will gravitate into a one-off. You'll see years where there's some pressure on that as the maturity of the enterprise as a whole is on the front end of the cycle. And then as we kind of move a little bit more on the back end of the cycle, we've accumulated this backlog of $48 billion. And now that we're kind of heavy in the ramp-up of pushing that work through the state here, hiring up and then achieving the progress, you'll see that swing backwards to favorability both in 2023 and 2024. Chris Kastner: Myles, it's Chris. I think you're getting into a new normal from a free cash flow generation standpoint up at those elevated levels. So it just naturally gets there. Myles Walton: Okay. And congratulations, Chris and Mike. Thanks, again. Chris Kastner: Thanks, Myles. Operator: And the next question will be from Doug Harned with Bernstein. Please go ahead. Doug Harned: Good morning, thank you. First, Mike, I just want to wish you all the best in this transition. It's been great working with you even from before there was an HII, so it's been a pretty exciting road, I think. Mike Petters: Thanks, Doug. Doug Harned: The question I've got is, you all talked a lot about a 3% top line growth rate which is pretty consistent when we model out where the ship by ship things should go. But if I look at the 2022 guidance, there's really negligible growth versus your shipbuilding revenues in 2020. And so is this consistent with your expectations? And can you break it down between Ingalls, Newport News and also the impact of services? Mike Petters: Sure. I'll take that. I appreciate that. Thanks, Doug. So yes, we gave some color on how 2020 finished out against 2019. And when you look at each year, specifically depending on how that material and labor hits at the quarter close of each year, it can sway how the trend line looks. If you think about the shipbuilding we finished off 2019, just on the $7.8 billion, we had thought 2020 would be about $8 billion but we had a strong, strong fourth quarter in 2020. We actually closed out in shipbuilding at $8.250 billion, $8.25 billion in that. So that was almost a 6% year increase on that. So that material kind of slid in a little bit earlier than we thought it was going to be in '21 to '20. So the trend line that we have here is at $7.8 billion and $8.2 billion. And then last year, although we highlight a 3% medium to long term, with the movement just kind of accelerating into the 2020 time frame that have shrunk a couple of hundred million dollars out of 2021. We did see pressures because of both Delta and Omicron at the end of 2021 which kind of pushed down. We saw -- although Newport News was a slight growth outlook, about $50 million in air sales. Ingalls was up about $150 million under and that was primarily driven either from a planning perspective, things were accelerated on the material side and some pressures on the labor on the back end. So it is true that if you look at 2020 and 2021, you're looking at $8.250 billion and then at $8.191 billion. We actually backed up $50 million in shipbuilding itself for 2021. Now relative to the range and your question of $8.2 billion to $8.5 billion, we're seeing right now problems with the virus and Omicron lightening right now. The case rates are going down at a quick pace at the beginning of this year. And if that sustains itself and we have a normal run rate year in 2020 and then '21 were both impacted with the virus in case rates. But if we see a normal year right here, we still think that $8.5 billion for shipbuilding which is a clean over 3.5%. -- clean 3% on the actual would be about at $8.436 billion. So that's why we've given you a range of $8.2 billion to $8.5 billion. I think $8.5 billion is a clean year. And for some reason COVID runs through the entire year or there's another variant, we could still see another flat year. The pressure would manifest itself on the labor side, right? So we do see some disruption at the end of 2021 and the beginning of 2022. On the labor side, we have hiring plans. We know how to go do that. Our human capital is the most important resource that we have. So we've been successful over the years in being able to establish our labor plan, hire, train, retain. And we just got to put our head down and that could happen this year. I do believe that the pressures that we see in my opening notes in Q1 that we see at the beginning of the first quarter, Q1 was going to be a low quarter anyway and then a little bit light because of the labor are recoverable this year as well in both perspective. If you're concerned about that, if you strike the line and we always say, it's lumpy, whether it's cash or even on the revenue side. So you can kind of look at it from quarter-to-quarter EBIT from 1 year to another year stuff. But if you look at from 2017 using that as the base of shipbuilding at $6.6 billion, the CAGR on that over 4 years is 5.5%. If you use 2018 as the base, the CAGR on that is 3.7%. And even using these 2 years where we had an acceleration in 2020 and then a little flatness in 2021 because of COVID is a 2.4% CAGR. So I mean, we're being transparent in the notes that although we believe that shipbuilding is still 3%. And as I said, over the last 4 years, it's 5.5%, the last 3 years, it's 3.7%. But we believe it's sustainable that we can get 3% long term. We moderated just slightly and did guide to a range of $8.2 billion to $8.5 billion. Doug Harned: And just related to this on timing. So you talked about 2021 and one of the things that helped you -- that you reported helping you in margins in Newport News was performance on Virginia class. Now you're going through this Block 4 to Block 5 transition. General Dynamics reported that they were seeing delays in modules and some supply chain issues right now. I mean when you're looking at 2022, are you seeing any issues there in terms of this overall program and how you do the transition from Block 4 to Block 5? Chris Kastner: Yes. No. Doug, this is Chris. Actually, it's pretty encouraging from a module standpoint in Newport News last year. They met their commitment on module, so they're getting some stability in the manufacturing organization in Newport News. So it's pretty stable. Missed the milestones at the end of the year related to Montana and New Jersey but those will happen here momentarily. But they're pressing towards getting back to a 2-tier cadence; the team is very focused on it. Doug Harned: Okay. Okay, great. Thank you. Operator: And the next question will be from Ron Epstein with Bank of America. Please go ahead. Ron Epstein: Yes. Good morning, guys. Thanks for the time. Could you walk through the growth in Technical Services? Because it looks like if you look at the guide that you guys are implying, it implies organic growth in the core. If you pick out a line, it was actually pretty darn good. I mean it seems like we had organic growth that might have been mid-teens or higher in the business without Alion. And how do we think about that? And what are the growth drivers for that business as we go into '22? Tom Steely: So Ron, it's Tom here. And consistent with the notes I gave you, actually, if you pull a line out, the organic growth year-over-year was flat. So we can walk you through that on the side if, for some reason, you see something that's driving a different way on that. We did have some pressures unmanned, although we feel positive about that business and we've highlighted that we think that's going help. Although the budget is smaller right now. We think that's going to be a high-growth area on the Navy side of the budget, probably fast-growing if there's any account that they have there. We did see that the appropriations and the awards were delayed and we've been foreshadowing that, that's going to be pushed out to the summer into the full time frame in 2022. So that actually stymied the organic side of TSD. From Alion perspective, though and you can work yourself through the -- in the K through the pro forma information that we gave, they actually had a stellar year last year from a growth perspective. They were up 23% from 2020 to 2021. And consistent with what we've highlighted at '18, '19, '20, they were in the teens from a growth perspective. We've incorporated that into our TSD $1 billion business. And within the $2.6 billion, we feel comfortable about the growth rates that we've been highlighting there from 7% to 9% for at least 2024. So also, as I noted in my opening comments, whether it was in Q3 for the first 9 weeks or through Q4 and Q3, Q4, the run rates have been consistent. They've been slightly kind of moving out there where we thought they would be to date. And as I've highlighted with the actuals at $507 million, with that run rate itself, it needs about 11% growth to kind of make the $1.6 billion of the $2.6 billion that we're highlighting for TSD division for 2022. So very comfortable with Alion to date, although you're always good at your next bid and win, so they have to go do that. And then from the other side, Andy Green has restructured his business over there. He's got his leaders aligned. He's getting some synergy of combining the leadership and resources with the organic TSD. And we're watching closely how unmanned unfolds to see the growth in that area. Chris Kastner: Ron, from a market standpoint, I mentioned some significant opportunities that we have bid on and will bid on in the first part of the year. I don't want to comment on the specific items because they're competitive but there -- it's broadly across ISR, advanced training, cyber-intel. And then we have unmanned opportunities that were delayed from last year that will come out this year. So it's pretty broad within growth markets that Alion and the legacy TSD are engaged in. Ron Epstein: Got it. Got it. And then maybe just as a follow-on. Can you speak a little bit to the CapEx investment you're making? Is that prepped for maybe more Virginia class? Or I mean, how do we think about that? Tom Steely: Yes. So from the previous quarters, we were kind of highlighting that, that was a possibility there, much as we've seen the CapEx come down from 3.6% in 2020. And last year, it finished up at 3.3%. We're guiding to about 2.5%. More recently, because of our taking a look at -- we're evaluating both the current submarine requirements as well as future anticipated awards that are coming down on Block VI -- Block V, Block VI, the Columbia class follow-on, we're in discussions with our Navy customer on these requirements. And there is a need for additional investments for the submarine industrial rates, specifically infrastructure and some tooling. We would partner with the Navy on that investment. And with capital incentives, we would be moderately increasing our CapEx to now the forecasted range of 2.5% to 3% and that would run out over the next several years. Again, we would only go forward with the customer assistance. And to be clear, we'd only move forward if the investment made sense and we just had an appropriate return against it. This is a minor change that we've incorporated into the business plan but it is considered in the forecast of the $3.2 billion free cash flow, the generation through 2024 that we've reconfirmed. Mike Petters: Yes. Ron, it's also consistent with the 2 per year, plus the next phase of the Columbia class. If they were to accelerate to 3, then there'd be initial investment that would be required. Ron Epstein: And my congratulations on the transition. For Doug's remark, it's been nice working with you over the years. Operator: Thank you. And the next question will come from Robert Spingarn with Melius Research. Please go ahead. Robert Spingarn: Hi, good morning. Mike and Chris, congrats. It has been an excellent run working with you, Mike. I'd Like to ask Chris if you could talk a little bit about labor. What do you expect net headcount to be or growth to be in '22, the pieces of that, so departures, additions and how we think about cost within that and how the new collective bargaining agreement with might affect that. Chris Kastner: Yes, that's a good question. There's some -- some really -- some positive indicators related to Omicron where we're cautiously optimistic. We only had 20 outs in Newport News or 20 folks that had the virus earlier this week and attendance is improving and that's half the battle. So getting the attendance back to stability, we have a predictable labor force to execute on the program. So it was really nirvana for a shipbuilder. So that's half the battle. The other half is we need to hire north of 5,000 people. So I don't want to get into attrition and splitting it by the shipyards. But we're pretty good at building a workforce relationships with our apprentice schools, community college, high schools. We think we can meet that commitment. It's going to be a challenge but we think we can build that workforce in order to achieve our sales guidance. Robert Spingarn: Okay. And then just a quick one for Tom. If you could run through the details on EACs in the quarter. Tom Steely: Sure. So for Q4, we saw a net of $10 million favorability, $45 million favorable and $35 million unfavorable. And the net debt of the $10 million was basically attributable to a split between Ingalls and TSD. Robert Spingarn: Okay. Thank you. Operator: And the next question will come from Mike Maugeri with Wolfe Research. Please go ahead. Mike Maugeri: Hey, good morning. Thank you, guys. And Mike and Chris, congratulations to both of you. Chris, following on Doug's question, can you add a little bit more color around the transition between Virginia Class Block IV and Block V as you close out the year, risk items you're keeping an eye on that happened to Block IV, where you're sort of expecting for Block V and whether there could be upside there? Chris Kastner: Yes. So remember, we did take a charge on Block IV. So there could potentially be some upside in Block V. The team is very focused on early module fabrication. We met our commitments this year in that regard. And the best thing about kind of the rhythm we're getting there on the VCS program is you're training a team, right? And you're training a team to deliver one afloat off one every year. That team is going to roll right on to Block V. So if we can get predictable performance, that's really the place you want to be in shipbuilding with -- in serial production. So we just need to keep the positive momentum going. Mike Maugeri: Got it. And then a related follow-up. How does the mix between Block IV and Block V trend over the next 3, 4 years, 3 years, probably? Chris Kastner: We don't have that specific information for you. We don't really provide guidance at that level. But deliveries on Block IV happen 1 a year for the next 3 years after we get through Montana and then we'll transition. So it will slowly evolve into more Block V revenue. Mike Maugeri: Got it. Thank you. Operator: The next question will come from Seth Seifman with JPMorgan. Please go ahead. Seth Seifman: Thanks very much and good morning, and congratulations to Mike and Chris. Just wanted to start off asking a little bit about the cash flow bridge and just kind of understanding the piece that's in '23, I think, the $200 million of shipbuilding growth at working capital. Just when we think about shipbuilding growth and we think about a 3% top line with a shipbuilding margin type drop-through after tax, that would imply that the vast, vast majority of that $200 million is working capital. So, I just want to confirm that that's kind of the right thing about it. And then when we think about what drives the growth from '23 to '24, is it a similar dynamic where there's that level of underlying EBITDA growth from the shipyards on that kind of 3% and then anything else is kind of working capital as you go to '24? Tom Steely: So yes, thanks. I appreciate the question. It's Tom here. So yes, from the working capital perspective, you are right. The bar there shows $200 million, so there is a lift there both in the volume and then the expected returns from the $7.7 billion drop that we gave you for shipbuilding. It's now the range that we have here. So you can do the quick math of that and it's about 1/4 of that, although -- for that. The rest is either in working capital which is the preponderance of it. And there is a piece, even though the CapEx is not at the 2.5% but 2.5% to 3% on the low end of the range, there is a little bit of a push there. We did put it on the chart kind of going forward. The CapEx could be $10 million to $20 million on a run rate cheaper going forward on that. The working capital itself, the way I kind of look at that, as I mentioned, is we see a drag from the working capital leaving '21 going into '22 by about $100 million in additional working capital. And then that reverses itself to over $300 million. I mean it's both the bar there as well as what's kind of sitting in the advanced progress and the FICA repayments, that's a give back there, too. And that comes about through both contracts -- working capital that we have as well as the trade working capital. So, you can work yourself through that. It does improve, as I said, significantly from '22 to '23 and we find the sums going from the top end of the range in '22 of the 6% to 8%. So actually, with cap incentives, it actually kind of gets us even below the bottom end of that 6% range in '23 with a slight improvement going forward in '24. Seth Seifman: Okay. And then just wanted to follow up quickly on the hiring. The 5,000 people, how does that compare to other years recently in terms of -- I guess that's the number of gross adds. Because just looking at it as a percentage of the shipbuilding workforce, it seems like it's pretty high. It's probably about 14% of the shipbuilding workforce. Mike Petters: Seth, we're pretty good at hiring people. We hired that -- almost that much last year; we'll actually hire north of that this year. So yes, we're pretty good at this; it's -- we -- my boss considers it a core competency and so do I. Seth Seifman: Great. Okay. Thanks very much, guys. Operator: The next question will come from David Strauss with Barclays. Please go ahead. David Strauss: Great, thanks. And let me echo my congratulations to you both as well. Mike Petters: Thanks, David. David Strauss: Just want to ask about the shipbuilding margin profile. So you're calling for a couple, I guess, 40 bps -- 40, 50 bps of improvement. Can you talk or give some color how that might break out amongst the shipyards? I mean we've been on a trend here where Newport News has been coming up. Ingalls has been trending down. So how does that look, I guess, in '22 and then for the additional progress you're expecting beyond '22? Tom Steely: Yes. So to date, we give our outlook against the enterprises, so we don't kind of break that up between both Ingalls or Newport News. As I kind of mentioned earlier a little bit, it is the ships that we have in the contract, working them through the EAP processes, the registers burning down risk. As we get deeper into the build cycle, the additional progress, payments clause allows us to have more collections. And with the bringing down on risk, we'll have high booking rates as we get into more deliveries in the out years. So I mean, that's the essence of it. Mike Petters: Yes. I will say, David, just I agree with Tom that it's really the maturity of the ships that Newport news are going to drive a lot of that earnings growth. David Strauss: Okay, got it. And Chris, maybe if you could touch on the unmanned portfolio. I think you highlighted it as a bit of a risk item last quarter. And I guess, you also highlighted in the release today, the dragged on TS margin, just an update on what you're seeing there. Chris Kastner: Yes. Yes. Some progress there, small and medium, we think will both be awarded late Q1, early Q2, really after the budget is agreed upon. So we'll know a lot more after small and medium size are awarded. We're making good progress on XL. We shipped our first modules to Boeing, so it's critically important we get that ship -- or that boat -- or Boeing gets that boat in the water to start demonstrating its capability. So, reasonable progress in unmanned and we'll know a lot more this year. David Strauss: All right. Thanks very much. Operator: And the next question is from Pete Skibitski with Alembic Global. Please go ahead. Pete Skibitski: Yes, good morning, guys. And I'll reiterate, Mike, best of luck, and Chris, congrats. I want to talk about aircraft carriers. It looks like work on the Ford elevators is finally finished up and ships getting closer to deployment. And I just saw on your slides the statement of work, I think, on the Kennedy is now done. Can you talk about maybe what you've learned about the technical risk on the Ford class and how that's going to apply to the Kennedy? And do you have that contract mod yet on the Kennedy? That's it. Mike Petters: Yes. We do have the mod on the Kennedy. I got an old aircraft carrier program manager here that hasn't answered a question, so I'm curious if he wants to jump in here on the aircraft carriers, then I'll jump in after. Unidentified Company Representative: Thanks. It's Chris . So I think the first part of your question is what do we learn from Ford that's going to go through the rest of the class. And I think, over the time we've talked about it, we've pointed out that the first ship in our production run is also a prototype where we have to test out the manning plans, the design, the supply chains, the construction plans, all those things get tested. We then came off of that, just to kind of set you, on how we did this. We came off of that with a plan to invest capital. We invested about $250 million in capital. We reduced the price of the Kennedy by about $1 billion based on that and that was really driven by learning curves. We went to the government and said, okay. We have now figured out how to efficiently build this ship, understanding the supply chains and understanding the manning and the technology and all that sort of stuff and the learning curves. The next thing we need to do is we need to buy these things smarter. And so the government worked with us and we came up with a 2-ship buy for 80 and 81. I think that where we are right now is the weapons elevators on Ford are behind us. The ship is accelerating towards delivery from its last availability with us post-shock trials and it's accelerating towards its first deployment. I think you're going to see the ship out there carrying the flag and doing great things. In the meantime, we've got the modification for Kennedy to go forward. We've taken all of the lessons that we've learned from Ford. We've invested against those lessons to drive success on Kennedy. And as I think Chris pointed out, the fabrication and work that we're already doing on the Enterprise after that and then Dory Miller after that, I mean, you're talking about a 4-ship program here that's going to be very mature and hot and running really well. And I think it's going to put the -- put our customer in a place where they can think seriously about how do we extend this program and move forward. And my focus would be at this point is how do we take all of this in a package and start talking about 82 and 83. I think that's where we need to be going with the program. I think it's positioned very well to do that. We're through the growing pains now and we're ready to accelerate into efficient production. I'm excited about the future of the program and it is a tremendous ship. Pete Skibitski: That's great. Thanks very much. Operator: The next question will be from Gautam Khanna with Cowen. Please go ahead. Gautam Khanna: Hey, good morning, guys. And congratulations, Mike and Chris. Mike Petters: Thanks, Gautam. Gautam Khanna: By the way it's sad now we are . Anyways, I just wanted to… Mike Petters: You'll be okay. I'm sure. . Gautam Khanna: No, no insult meant there. I just -- it's been a long time. I was going to ask about the guidance on shipbuilding margin, first of all, I mean, it seems extraordinarily precise, 8% to 8.1%. It's a tighter range than you've given in the past. And I was curious what informs that conviction around a 10 basis point swing? And given the soft Q1 start, I mean, is there any waiting you could tell us? Like Q4 has got a ton of human catch-ups or risk retirement opportunities or what have you. Like just if you could kind of give us a sense for why the precision. And when do we get those lumpy human catch-up opportunities later in the year? Tom Steely: Sure. Yes, it is a more precise range than we gave last year. Last year, we started out at 7% to 8% and then we narrowed that in Q3 to 7.5% to 8% and it came in at 7.7%. And although that range was probably a safe -- a conservative range, we went up on the top end of that range. We did see -- foresee that, that could happen but we wanted to see that the play out with COVID. So that was why we did that. I think going into 2022, we didn't want to give a really wide range. We felt we'd be a little bit more transparent where we think the year is going to land. We feel comfortable that from where we exited at 7.7% for shipbuilding, we know the work we're doing, the backlog that's coming on board which isn't really going to influence 2022 that much. But the work we're doing, the serial production, the lessons learned that Mike and Chris have talked about, we feel strong about that kind of going forward. The -- COVID could have an impact on the revenue but the cost efficiency and how we're operating right now, we feel good about and we think that this is going to be a lift. We've been guiding that we're going to march our way back up and we think that's still in sight here right now. The portfolio mix, as we've said on, what we take it behind us on DCS in the mix, so that's going to slow the march back but it's still the march back up for high of -- from where we thought we'd be. So we feel good about it right now. As we work -- as we get into the year and work down the risk, we'll see that we'll realize that, right? Now specifically, what we see happening here is with more deliveries in '22, '23 and '24 than where we came from in '18, '19, '20, with the ships as we're building them with the lessons learned in serial production and there are a couple of ships in the next year or so uniquely contracted and higher incentives, I think of like DDG-125, for example, that was a modified plateau. We incorporated in ECP a unique -- uniquely how we contracted that with incentives on the schedule side of it. So there's a couple of nuances in the ships that we believe are going to be -- provide additional margin, say, than a normal ship. But we have line of sight of that right now and we feel comfortable on that outlook of 8% to 8.1%. Gautam Khanna: And your point is it sequentially builds through the year. So Q4 is greater than Q3, greater than Q2, etcetera, in terms of margin. Tom Steely: We didn't provide that guidance. I would tell you, it's pretty flat. I mean, I think, obviously, Q1 is going to be light. And then from there, we'll see how it plays out. But after we get out of Q1, it's not a significant driver from quarter-to-quarter there. Gautam Khanna: Okay. And then just a follow up on... Tom Steely: Margins is like -- it's not a quarter-to-quarter gain, right? Gautam Khanna: Got it. Okay. No, that's helpful. And then with Alion, I'm just curious. We've seen a lot of the government services contractors not have great results of late for whatever reason, whether it be COVID, whether it be bookings are soft because the government's not getting stuff awarded on time due to COVID or continuing resolution and the like. I'm just curious, like, what can you say about sort of the Alion book-to-bill in Q4? And you mentioned there were some contracts you're bidding on in the first half. How do you -- what do you expect for book-to-bill in Alion in '22? Chris Kastner: So, we think -- this is Chris, Gautam. I think the book-to-bill will be north of 1 based on the significant opportunities we have there. If the CR extends too far into the year, there could be some pressure on the top line. But we're pretty comfortable. With our pipeline and the significant opportunities we're bidding on and the markets that we're in, we're pretty comfortable with Alion in Technical Solutions. Gautam Khanna: And Q4 book-to-bill? Chris Kastner: Yes. With south of that, I don't have that specific information in front of me. So Tom, if you have it, go ahead. Tom Steely: So I know for the year, it's 1, 1. Chris Kastner: 1, 1. Right. Gautam Khanna: Thank you, guys. Operator: The next question will be from George Shapiro with Shapiro Research. Please go ahead. George Shapiro: Yes. Could you comment on where the learning curve has been on the Kennedy that you're 89% done? I remember in the beginning, there was this big issue that you were going to have twice the learning curve that they may be is suggesting. Mike Petters: Yes. So we don't have a specific learning curve on Kennedy at this point. We just figured -- extended the schedule for the single-phase delivery. They're heavily into the volume work on the ship. They're miles ahead in some systems and making really good progress. So I'm comfortable with where they're at financially but I don't have a specific learning curve for you right now, George. George Shapiro: Okay. And then maybe one quick one for Tom. Given that New Jersey and Montana didn't meet the milestones in Q4, are they expected to meet them in Q1? And if so, why wouldn't the margin be a little better than the 7%? Tom Steely: So they were planned happening last year. I will tell you, though, that just as we go over the goal line, some of the milestones don't specifically bring margin immediately. Depending on where we finished in the quarter, there's an EAC and hot wash that we do and it could be both a subsequent fourth quarter. Even though they will bring a couple of dollars that goes into the mix against the portfolio. So when you really -- out of all the math, you're not going to see a big drive in one specific quarter like that. But it is a slight lift and that's probably at more accretive. So the 7.7% last year without them coming into this year bolsters our outlook and our perspective on what 8% to 8.1% looks good. Chris Kastner: Remember, George, those are Block IV boats and we did take a charge on those. So the opportunity for risk retirement is reduced. George Shapiro: Okay, thanks. And congratulations, Chris. And lots of luck to you, Mike. Mike Petters: Thanks, George. Chris Kastner: Thanks, George. Operator: Thank you. I am not showing any further questions at this time. I would like to hand the conference back over to Mr. Petters for any closing remarks. Mike Petters: This is my last earning call. I just want to take the opportunity to say thank you, again, to all of the folks that I've had the opportunity to work alongside with the last 35 years. It's been a privilege for me to serve as CEO of this company for so many years and I frankly have enjoyed working with each and every one of you in the financial community, in the business, in our customer set. And I do appreciate your research and thoughtful questions, even if I didn't say so at the time. I've learned a lot. I would hope that maybe you've learned a little along the way. But as we look forward and as you can tell by today's call, our company is in very good hands with Chris and the senior leadership team. And I am confident that HII has a very bright, bright future. Thanks for joining us on today's call. I hope that you and your families continue to stay safe and healthy. We appreciate your time and your continuing interest in our company. Thank you very much. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: Ladies and gentlemen, thank you for standing by and welcome to the Third Quarter 2021, Huntington Ingalls Industries Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker’s presentation, there will be Q&A session to ask a question. Please be advised that -- please be advised that today's conference is being recorded. If you need further assistance, please signal a conference specialist I will now like to hand the call over to Dwayne Blake, Vice President of Investor Relations. Mr. Blake, you may begin. Dwayne Blake: Thanks. Good morning. And welcome to the Huntington Ingalls Industries, Third Quarter 2021, earnings conference call. With us today are Mike Petters, President and Chief Executive Officer, Chris Kastner, Executive Vice President and Chief Operating Officer, and Tom Steely, Executive Vice President and Chief Financial Officer. As a reminder, statements made in today's call that are not historical fact are considered forward-looking statements and are made pursuant to the safe harbor provisions of federal securities law, actual results may differ. Please refer to our SEC filings for a description of some of the factors that may cause actual results to vary materially from anticipated results. Also, in their remarks today, Mike, Chris, and Tom will refer to certain non-GAAP measures. Reconciliations of these metrics to the comparable GAAP measures are included in the appendix of our earnings presentation that is posted on our website. We plan to address the posted presentation slides during the call to supplement our comments, please access our website at huntingtoningalls.com and click on the Investor Relations link to view the presentation, as well as our earnings release. With that, I'll turn the call over to our President and CEO, Mike Petters. Mike. Mike Petters: Thanks Dwayne. Good morning, everyone and thanks for joining us on today's call. This morning, we released third quarter 2021 financial results that included another quarter of consistent shipbuilding program execution. Let me share some highlights from the quarter starting on Slide 3 of the presentation. Sales of $2.3 billion were up 1% from the third quarter of 2020 and diluted EPS was $3.65 down from $5.45 in the third quarter of 2020. New contract awards during the quarter were approximately $600 million, resulting in backlog of approximately $50 billion at the end of the quarter, of which approximately $24 billion is funded. Shipping to activities in Washington, the federal government began the new fiscal year under a continuing resolution, which funds government operations through December 3. And we continue to urge Congress to proceed expeditiously and remain optimistic that the defense appropriations and authorization processes will be completed in the months ahead. As bill's progress through both chambers of Congress, we continue to see bipartisan support for our programs reflected in the defense appropriations and authorization bills in the House and the Senate. We're pleased that the 4 defense oversight committees have shown strong support for shipbuilding to include adding a second, Arleigh Burke-class destroyer, which is a navy -- a top navy priority for fiscal year 2022. The appropriations bill also include language in support of a DDG 51 follow-on multi-year procurement contract in FY23. So, as I prepare to close, let me give a quick update on COVID-19. We continue to work with our customers to satisfy the requirement for federal contractors to have their workforce vaccinated against COVID-19 by December the 8 2021. At HII we remain committed to promoting and protecting the health and safety of our employees, their families, and their communities, and continuing to serve our customers and the vital national security interest of our country without disruption as an essential contributor to the nation's critical infrastructure. We view our workforce of approximately 44,000 employees as critical partners in this effort and continue to help our unvaccinated employees meet this requirement as safely and efficiently as possible. We will continue to evaluate how the vaccine mandate and Delta variant impact our workforce as well as material availability from our supply chain and we expect to have more to share during the fourth quarter earnings call in February. And finally, let me recap what HII has done from a portfolio shaping perspective over the past 20 months. In short, we have done exactly what we said we would do during our February 2020 Investor Day. First, we have positioned the Technical Solutions business in growth markets that support the constantly evolving requirements of our customers. And second, we have demonstrated the financial flexibility to pursue these critical growth opportunities while maintaining our investment-grade credit ratings and continuing to return capital to shareholders. And following the closing of the aligned transaction during the quarter, our team is laser-focused on a successfully integration in order to produce the financial returns we expect, we're also ensuring that our core ship building programs are achieving key production milestones in order to generate strong free cash flow, which will enable deleveraging of the balance sheet while continuing to return capital to shareholders via dividends and share repurchases. We firmly believe that these are the appropriate steps to generate significant long-term sustainable value for our shareholders, our customers and our employees. And now I will turn the call over to Chris for some remarks on the operations. Chris. Chris Kastner: Thanks, Mike. Good morning, everyone. I'm very pleased to report another solid operational quarter. With that, let me share a few highlights. At Ingalls, let me first provide a brief update on the pending contract awards LHA 9, LPD 32, and 33. We still believe that a bundled acquisition of these critically important shifts is the most cost-effective method of procurement and are pleased that the Navy and Congress have protected the shift schedules with a contract for long lead material on LHA 9 coupled with continued support for LPD 32 and 33, Shifting the program status, LHA 8 Bonneville (ph) continues to achieve cost and schedule performance in line with our expectations. We're making steady progress through the structural erection and initial outfitting phases of construction. On the DDG program, the team successfully completed acceptance trials for guided missile destroyer DDG 121, Frank E Peterson Junior, and expects to deliver the shift to the Navy by the end of this year. In addition, DDGs 123 and 125 remain on track to complete sea trials next year as planned. On the LPD program, LPD 28, Fort Lauderdale was christened in August. This ship remains on track to complete sea trials during the fourth quarter with delivery to the Navy planned in the first quarter of next year. Our Newport News CVN-79, Kennedy is approximately 84% complete. And the focus remains on compartment completion and key initial propulsion plant milestones. Regarding the sensitization of a single-phase delivery contract modification, we have reached agreement on a cost and schedule impacts with the Navy and expect to execute the contract modification late this year, or early next year. On the RCOH programs, CVN-73, USS George Washington continues to achieve key propulsion plant milestones and is approximately 92% complete. And CVN 78, USS Gerald Ford, returned to Newport News in August to begin a planned incremental availability. On the VCS program SSN 794, Montana remains on track for delivery to the Navy later this year. And the SSN 796 New Jersey float up milestone has moved to early next year to ensure that we achieve the optimum build sequence from float off to delivery plan in 2022. And finally, on the submarine fleet support program, SSN 725, Helena remains on track for redelivery to the Navy later this year. At technical solutions to the Alion transaction closed in that August and the team announced new business groups and executive appointments that directly aligned with our strategic focus that we have previously articulated. We expect this very talented team to execute a successful integration of Alion and deliver unparalleled national security solutions to our customers while growing the business and producing returns in line with our expectations. Delays in contract awards in our unmanned business for critical new programs remains a watch item. We're expecting this to be resolved by the end of the year but as a tier that these awards are not likely until early to mid-2022. Now, I will turn the call over to Tom for some remarks on the financials. Tom? Tom Steely: Thanks, Chris and good morning. Today, I will briefly review our third quarter results and provide an update on our outlook for 2021. For more detail on the segment results, please refer to the earnings release issued this morning and posted to our website beginning with our consolidated results on Slide four of the presentation. Our third quarter revenues of 2.3 billion increased approximately 1% compared to the same period last year. This is due to growth at Technical Solutions driven by the Allied acquisition, which was largely offset by a decline in revenue at Ingalls primarily due to lower volumes on the NSC, DDG and HLA programs. Segment operating income for the quarter of a $163 million increased $1 million comparison the third quarter of 2020 and segment operating margin of 7% was in line with the results from the prior-year period. Operating income for the quarter of a $118 million decreased by a $104 million from the third quarter of 2020 and operating margin of 5% decreased 455 basis points. These decreases were almost entirely due to a less favorable operating FAS CAS adjustment compared to the prior year period. The tax rate in the quarter was a negative 4.3% compared to 1.8% in the third quarter of 2020 to decrease in the tax rate was primarily due to additional research and development tax credits for tax years 2016 through 2020 recorded in the third quarter of 2021. Net earnings in the quarter were 147 million compared to 222 million in the third quarter of 2020, diluted earnings per share in the quarter were $3.65 compared to $5.45 in the prior-year period. Third quarter 2021 results include approximately $15 million of non-recurring pre -tax transaction expenses related to the acquisition of Alion. Excluding the impact of pension diluted earnings per share in the quarter were $3.50. compared to $3.73 per share in the third quarter of 2020. Turning to slide 5, cash from operations was 350 million in the quarter, and net capital expenditures were 73 million or 3.1% of revenues, resulting in free cash flow of 277 million. This can pass to cash from operations of 222 million and 62 million of net capital expenditures or free cash flow of a 160 million in the prior-year period. Cash contributions to our pension and other post-retirement benefit plans were 10 million in the quarter principally related to post-retirement benefits. During the third quarter, we paid dividends of $1.14 per share or 46 million. Our Board of Directors recently approved a 3.5% increase in our quarterly dividend to $1.18 per share. And this will take effect in the fourth quarter of this year. We also repurchased approximately 83,000 shares during the quarter at an aggregate cost of approximately $17 million. Moving onto Slide 6, Ingalls revenues in the quarter of $628 million decreased $47 million or 7% from the same period last year, driven primarily by lower revenues on the NSC, DDG, and LHA programs. Ingalls operating income of $62 million and margin of 9.9% in the quarter, compared to operating income of $62 million and margin of 9.2% in the third quarter of 2020. The operating margin improvement was driven by an incentive on the DDG program and higher risk retirement for the LPD program, partially offset by lower risk retirement on the NSC program. Turning to Slide 7, Newport News revenues of approximately $1.4 billion in the quarter decreased $4 million or less than 1% from the same period last year, driven by lower revenues enabled Nucleus support services partially offset by higher revenues in submarines and aircraft carriers. Naval Nucleus support services revenues decreased primarily as a result of lower volumes in submarine fleet support services and facility maintenance services, partially offset by higher volumes in carrier fleet support services. Summering revenues increased due to higher volumes in block 5 boats of the Virginia class submarine program and submarine support services and Columbia class submarine program, partially offset by lower volumes on block 4 boats of the Virginia class submarine program. Aircraft carrier revenues increased primarily as a result of higher volumes on the RCOH of USS , CVN 74 and the construction of Doris Mellow CVN 81 and enterprise CVN 80, partially offset by lower volumes on RCOH of USS George Washington, CVN-73 and the construction of John F. Kennedy, CVN-79, Newport News operating income of $88 million and margin of 6.5% in the quarter compares to operating income of $79 million and margin of 5.8% in the third quarter of 2020. The improvement was primarily due to higher risk retirement on the RCOH of the USS George Washington, CVN-73 and block 4 boats of the VCS program. Partially offset by lower risk retirement on the Naval Nuclear support services. Now the Technical Solutions on slide 8 of the presentation, Technical Solutions, revenues of $394 million in the quarter increased 23% from the same period last year, mainly due to revenue attributable to the acquisition of Alion in mid-August partially offset by the divestiture of our oil and gas business and contribution of the San Diego shipyard to a joint venture in the first quarter of this year. The acquisition of Alion closed on August 19, and third-quarter results included approximately a $163 million of revenue attributable to align. Technical Solution's operating income of $13 million and operating margin of 3.3% in the quarter compares to an operating income of $21 million and operating margin of 6.6% in the third quarter of 2020 decreases were primarily driven by the inclusion of approximately $8 million of Alion related purchase in tangible amortization, as well as lower performance in Defense and federal solutions to divestiture of our oil and gas business. And the contribution in the San Diego shipyards to a joint venture I previously mentioned. Third quarter of 2021 results included approximately $4 million of operating income attributable to Alion. Third quarter Technical Solution's EBITDA was approximate $30.3 million or an EBITDA margin of 7.7%. Moving onto slide 9 of the presentation, was updated our outlook for 2021 and 2022, pension and post-retirement benefits. For 2022, FAS is now projected to be a benefit rather than expense, primarily due to higher asset returns. Consequently, the FAS CAS adjustment has increased from the prior outlook and is now projected to total 52 million in 2022. Please remember that pension-related numbers are subject to year-end performance and measurement criteria. We will provide a multiyear update of pension estimates on our fourth quarter earnings call in February. Finally, on Slide 10, a perspective on the outlook for the remainder of the year for both shipbuilding and technical solutions, inclusive of Alion. Regarding shipbuilding, we now expect 2021 revenue to be approximately $8.2 billion, at the low end but within our initial guidance range. Third quarter shipbuilding's revenue was modestly impacted by material timing, which may persist in the near-term. Additionally, we continue to navigate through a challenging labor market, as well as the potential impacts of COVID-19 vaccine mandate. Given all of that, we think it's best to be prudent and near-term expectations. We continue to expect that ship building operating margin will finish the year in the 7.5 to 8% range. We expect that the fourth quarter shipbuilding operating margin will be roughly consistent with the third quarter results as we were able to recognize some key retirement events in the third quarter, including the completion of sea trials for DDG 121. Regarding Technical Solutions, I've noted that Alion acquisition closed in mid-August and our updated expectations for 2021 now include Alion from the date of acquisition, inclusive of incremental purchase intangible amortization that impacts our segment operating margin expectation. Turning to free cash flow, we now expect. 2021 free cash flow to be between three $300 million and $350 million as the repayment of the accelerated progress payments, which was initially expected in 2021, has now moved out to 2022. Additionally, on Slide 10, we have provided an updated outlook for a number of other discrete items to assist with your modeling. Regarding our longer-term targets, we continue to believe that the 3% CAGR for shipbuilding revenue is appropriate. Additionally, we remain comfortable with our free cash flow target of $3.2 billion from 2020 through 2024. We plan to provide a more detailed view of 2022 on our fourth quarter call in February. Now I will turn the call back over to Dwayne for Q&A. Dwayne Blake: Thanks, Tom. As a reminder to everyone on the call, please limit yourself to 1 initial question and one follow-up so we can get as many people through the queue as possible. Operator, I will turn it over to you to manage the Q&A. Operator: We will now begin the question-and-answer session. If you're using a speakerphone, please pick up your handset before pressing the keys. At this time, we will pause momentarily to assemble our roster. Our first question comes from Myles Walton with UBS. You may go ahead. Myles Walton : Thanks. Good morning. Mike Petters: Good morning, Myles. Myles Walton : Was hoping I could just start with the shipbuilding revenue outlook and maybe less specific to the revenue outlook, more specific to what you're seeing in the labor workforce and moving to the low-end of this range. Is that anticipating things that you haven't seen yet as it relates to the covered mandate and what it could do to attendance, and workforce, or is it more of what you saw in the third quarter? If you get where I'm going. Tom Steely: Hey, good morning, Myles, it's Tom. I'll start with that one. So, from an outlook perspective, we did go to the bottom end of the range. As you recall, we gave you 2 to 8 for the beginning of the year. As we see how the quarter played out right now, what's left in front of us right now. We -- when I move to shipbuilding revenue expectation that $8.2 billion. A couple of points on that right now, we're a little light on material specifically at Ingalls. If you look from a Newport News perspective, net revenues were flat. Obviously, a little look back from a PTC perspective, but when we're talking about shipbuilding, the material lag behind roughly about $40 million in the quarter. And as we look forward into Q4. All right. That could persist. You don't see significant labor oppression at this time that's going to impact our revenue. We have a keen on right now with the EO and the mandate and how that's changing very dynamic situation there, as well as keeping an eye on our supply chain to see how the material flows here. But it's just timing right now as we see the outlook. And as I say, it's still in the range that we gave you at the beginning of the year. Myles Walton : Okay. And what is the percent of the workforce that's currently vaccinated and if there were perturbations, is it covered in your contracts because it's a new requirement being placed upon you. Mike Petters: Right. Miles, this is Mike. Right now, we're, I'd say, roughly around 75%. We've seen a tremendous uptick in the last 30 days and folks getting the vaccine. I think the breaking news right now, it looks like the executive orders being moved out into January and the -- and they're talking about having your shot by January, not completely through the quarantine. So, we're going to have to interpret it how all that plays out. We're working very closely with our customers on how do you implement the executive order. I mean, the executive order is -- we've been -- we have been, from a policy standpoint, we have been directly aligned with what the white house put out. But as you hinted at there, the executive order is not contractual. And so, working with our customers on all of our contracts to figure out how best to implement that executive order is what we're doing, and we're doing that across the board. So, we're continuing to move ahead. Our ambition is to get as many of our employees vaccinated as we possibly can because we are committed to a safe workplace and we think that's the best way to do it. Myles Walton : Alright. Thank you. Operator: Our next question comes from Doug Harned with Bernstein. You may go ahead. Doug Harned : Good morning. Thank you. Mike Petters: Morning, Tom Steely: . Doug Harned : Right now, you are in the transition on Virginia-class for Block-4 to Block-5, could you comment on how block 5 looks in terms of the amount of content you have on that, and how would you describe any risks in the transition relative to the one you did when you move to block 4. Mike Petters: Well, I'll start and then let Chris pick it up. When we kicked off block 4 the contract took quite a while to negotiate that contract and as a result, there was some late material procurement, material that kind of helped, helped us get off to a rocky start relative to that program as well as the ramp up in production. So, we had a lot of things moving, a lot of parts moving on the beginning of block 4. But we don't have any of those partners moving at the building of block 5. And so, we're -- the transition for us is moving basically, seamlessly from block 4 into block 5, pretty excited about that and pretty optimistic about where that's going to go. Chris Kastner: No, I think that's right. And when you think through VCS and block 4 getting back to a cadence where we're floating off 1 vote a year and delivering 1 vote a year and then transitioning that workforce right into block 5 makes great sense. So, we have high hopes for performance on block 5 because of the lessons we're learning through block 4 when you get to a 2 per year cadence. Doug Harned : And then, also in submarines, you commented this time that your services revenues were down a little bit. Can you comment on where the 3 Los Angeles class ships stand in their process and how you see services, revenues at Newport News trending over the next couple of years here? Chris Kastner: Sure. Helena will -- this is Chris, Doug. Helena will deliver this year. Columbus is in process and moving through the cycle in their contract and Boise is really in their prompts start period. We're going to get into a place here. And I think in communication with our customer where it makes great sense to have sort of a consistent stream of work and revenue. It probably will not be as high as it's been going forward and we need to create that plan with our customer. That's the status of the three that are in Newport News now. And as I said, we're working with a customer to ensure we had a steady cadence of repair activity going forward. Doug Harned : Okay. Very good. Thank you. Chris Kastner: Sure. Operator: Our next question comes from Seth Seifman with JP Morgan. You may go ahead. Seth Seifman : Thanks very much. And good morning, everyone. Mike Petters: Good morning. Seth Seifman : I wanted to start off. I think you mentioned a bit earlier that you were looking to finalize the single pay delivery agreement for the carrier with the Navy either late this year or early in 1Q. Again, can you tell us is there any margin or cash impact we should think about once that is finalized? Chris Kastner: Yes. This is Chris. We will definitize that, if not this year, it would be beginning of next. Don't anticipate significant or margin cash impact. It's obviously an increase in the top-line for that shift, but it also extends the risk retirement events out a couple of years because it extends the test program. So, nothing significant from a material from a sales margin or cash impact at this point. Seth Seifman : Okay. And then it seems like it's mostly a timing issue, but just wanted to ask about the cash flow guidance increase this year. Should we think about that increasing your kind of 5-year expectation or is it mainly having to do with the timing of when those progress payments go back to the government? Tom Steely: Good morning. It's Tom. Yes, it is. The progress payments are the predominance of the change that we have right now. Obviously, another quarter with rich retirement, and we have actual -- through Q3 and we have a line of sight for the end of the year, but predominantly the change there was because of the progress payments not getting kicked into the 2022-time frame. Keep in mind to that year-end, we have to get back half of the payroll bike attacks that we did not pay in 2020. So that's baked into the numbers. So, it's timing and within the 32, it still holds. Seth Seifman : Okay. Thanks very much. Operator: The next question comes from Ron Epstein with Bank of America. You may go ahead. Ron Epstein : Yeah. Good morning, guy. Tom Steely: Good morning. Ron Epstein : I was wondering if you could give us just some more color and maybe just following up on Miles’s question about what's going on in your supply chain, where you're seeing some material shortages and is it just being driven by delays in transportation or what are good. Tom Steely: Sure. Yeah, it's Tom here. I will take that one. So, we've had this conversation on the last couple of calls and we're watching that and intently, regularly to touch base with the supply chain offices out Cabot, each of the yard, some of speed exactly on where the stand right now, as we've given in the past, because of the nature of our long-term contracts, long-term material orders that start ahead of the construction of these contracts. And then obviously with the backlog that we have this spin-off contracting, you have line of sight of the work that's going to be performed in the yards. A significant amount of those requirements has already been put on order and we're managing them aggressively over the next material flows in hits the end-year need dates. Preponderance of the material is coming in on time and meeting the contractual needs that we have within the art. I would tell you that recently, less 3 to 6 months that as we have spot orders, what we're seeing is a little bit of volatility in pricing and the validity days of shrinking a little bit on things that we have spots high. But from a perspective of Execution of the existing contracts we have we don't see a significant impact at this time. Obviously, we're watching how the EO mandate impacts a supply chain. And the precious that we do, we do here are our second and fifth third tier were dependent on the raw materials. So copper cabling, things of that nature. But again, as we stand here today, the supply chain that we need because of how we've contracted at work in advance, has us maintaining schedule at this time. Ron Epstein : Okay. Got it. All right. Thanks for that. And then on the Technical Services business, if we just open up the aperture a little bit and think about when we walk out 2, 3, 4 years from now, where do you see the margin in that business? I mean, presumably it's going to be much better than where it is today. And I'm just curious, I mean, if you can just give us -- I know you're not giving forward guidance, most companies don't do it. So, I'm not asking for that but just -- if you can put a little framework around how we should think about the margin in that business as we think longer term. Tom Steely: Yes. So, because of how we put that division together with the acquisitions, purchase, intangibles, and things of that nature. If you noticed, we've been guiding and driving towards an EBITDA relationship against the performance and where we see. You've noticed from the announcement we had on the July time frame and then with July, close in August, we've got on how that was going to cause a lift there. From a rough perspective, we were at 45%. We dialed in from an EBITDA perspective to be in the 8% to 10% range by 2024. Both the initial guidance we gave you in the July time frame of Alion supported that. As we sit today after the close in August and that close to the quarter with Alion cranked into our financials. They're hovering on the low end of the range right now so that's good news because that's more than 50% of that portfolio. I think going forward as we see those purchase intangibles get burnt off for the next 3, 4, 5 years going forward, obviously that's going to be an improvement. I would tell you that PI is baked into the rocks, although the rocks, even for this quarter TSD is 2.6% with $8 million of purchase intangibles when you roll that out at the 5.3% last quarter and the EBITDA is at 7% right now. So that's a near-term perspective and how I see it evolving in the out years. Ron Epstein : Okay, great. Thank you. Operator: Our next question comes from George Shapiro with Shapiro Research. You may go ahead. George Shapiro: Yes, you had mentioned that the margin and Shipbuilding in Q4 of the similar to Q3 because some. Items moved to Q3. Can you just list what moved to Q3? And I thought you'd mentioned some might have moved to Q1 were so Next year. What do we expect in Q2 -- in Q4 for incentives versus what we had thought before? Tom Steely: Hey, George. It's Tom here. Good morning. Yes. I'll take that. Just a couple of moving parts there. We guided Q2 going into Q3 would be licensed for it would be a little bit heavier than that. We have pulled a couple of incentives at Newport News on the RCOH fund from 73 to the left, as well as before? Ingalls taken DDG 121 to trials was a risk retirement evaluation on a bad so just a couple of moving parts there from Q3 to Q4. But we're still in the lane there of the 7.5% to 8% that we gave you for shipbuilding, for year-end. I didn't mention anything moving into next year. In my remarks, we do have LPD 28 moving or staying on contracting in the beginning of 2022. George Shapiro: Okay. And then just a separate one, probably more for Mike. I noticed that Newport News you got like -- they're a union contract with perfecting 50% of the workers up to November here now, so if you could give us what you think about the status here. I mean, I guess it's more in the news given the contract results at the end of the year. Chris Kastner: Yes. George Oliver. George, I'll start. This is Chris. We're in process with the Newport News union working through that contract with a very good relationship with them and I fully expect we can come to a reasonable agreement on a contract. I know Mike ran Newport News for a while, so he probably has for a long time actually, probably has better comments on that, but we're working with them every day to try to get to a resolution. George Shapiro: Okay, thanks. Mike Petters: We pride ourselves on having very constructive relationships with our labor partners and I don't think this will be any different than that. George Shapiro: Okay. Thanks very much. Mike Petters: George. Operator: Our next question comes from Richard Safran with Shapiro Research. You may go ahead. Richard Safran: Thanks. Good morning, everybody. Mike Petters: Good morning. Richard Safran: So, it's -- on the Navy's new destroyer crews or class, the ship doesn't appear to be slated to arrive until very late in the decade. Correct me if I'm wrong, but I think that represents a bit of a slide to the right in terms of schedule. Could you discuss a timeline for a competition and following up on your opening remarks, I'm wondering how you think that the Navy strategy with the new ship now impacts to buy the new flight of DDG 51 since the new ship isn't arriving. Now for close to ten years down the line. I'm thinking that really reinforces the idea of a new flight of DDG, but that's my view is I was wondering what you think of that. Mike Petters: This is Mike. I don't think you're too far off there, just in general. I think general principles are -- it's really hard to pin down the development, path, and timeline for a new program like this, this early in the process. They are trying to work through -- how do they fund the design, how they fund the project? When are they going to have it, where the requirement is going to be? That's a pretty dynamic thing and so trying to pin that down precisely. It is a bit of a challenge. And our general view is that you don't really want to stop production of a line until you're ready to move to a mature design product going forward. So as that product matures, it will interact. The construction work that's going on So, DDGs today, the flight 3 ships will -- my -- we certainly will advocate and believe that the best prudent course ahead will be to continue to build flight threes until that designer is maturing. We're ready to go into production on that. And if that happens to be 20 something else, then it's 20 something else, and then we will be ready. As far as the competition for that goes, it'll -- that will just lay in as that program matures, we'll get more visibility into what the competition -- when it might be, what it would look like, and that sort of thing. I think it would be a mistake though for there to be any sort of curtailment in the destroyer program. Anticipating some kind of maturation path. We kind of went down that path in a couple of programs during my career, we've done that with submarines. We did that, actually, with DDGs and we tried to transition over to the 1,000s and then transitioned back. So, we had a gap and then short program. Our industry is full of people who have seen gaps in production become tremendous problems for restarts of production. So, let's keep the production line moving. And when the production line, when the design to churn off to transition, we will transition it. Richard Safran: Okay. Thanks for that. And, you know, more general, I thought you could talk a little bit about efficiency initiatives while back we had things like digital transformation, but I thought you might discuss efforts to reduce costs and then in your answer, maybe you could talk about how much that might contribute to margin improvement. Any objective eventually, getting to 9% margins. Chris Kastner: This is Chris, I won't discuss the contribution to the margin rate. And when we expect to get to 9%, we'll talk a lot more about that on the year-end call. But the capital investments we've made in technology investments we've made both Ingalls and Newport News are going very well. And the simplest form at Ingalls getting all the work on undercover really drives efficiency if you've ever been in Mississippi in August and then the digital shipbuilding products are becoming more mature and help on the manufacturing and CVN 80 and the Columbia class. so, we're very encouraged by the technology investments in the capital investments we've made and we hope to continue to drive costs out of our products. Richard Safran: Okay. Thank you. Operator: Our next question comes from Pete Skibitski with Alembic Global. You may go ahead. Pete Skibitski: Good morning, guys. Dwayne Blake: Go ahead. Pete Skibitski: Just a follow-on to Seth's question on the Kennedy. Chris, I think you say you're going to get the contract defeminization that's going to maybe move the risk registers to the right a little bit. I just want to make sure I'm in line with. I think I've been assuming that the Kennedy retirement opportunities, those retirement opportunities who will be 2022 2023. Is that still the case or are they shifted to the right at 24 or 25. I just want to level set that. Chris Kastner: No, no. 23 and 24 make a lot of sense. We're really in volume when it comes to 79 right now getting through compartments and work packages, starting localized testing. But it's 23, 24-time frame. Pete Skibitski: I appreciate that and maybe one for you, Mike. I always like to ask any hope left on with NFC 12, it seems like all the committees have reported I wasn't sure if anyone stuck in any language or funding at all with regard to that? Mike Petters: Well, I think, you're reading that right. We are -- we have a great product line there and we're very excited about what we've done. But right now, there's just this -- in the contest for resources it's not fairing very well. So, we'll probably just leave it at that. Pete Skibitski: Yeah. Those always seems to come up short and I know, too bad. All right, thanks, guys. Operator: Next question comes from David Strauss with Barclays. You may now go ahead. David Strauss : Thanks. Good morning. I wanted to ask about Alion. I think when you announced the deal, you talked about $1.6 billion in annualized revenue. Based when you do in the quarter and when you're applying for the year and it would seem like either it's running well below that or you're expecting big growth in ' 22. Can you just comment on that? Tom Steely: Sure. Yeah. Good morning. So, for the court, I think in my remarks, you'll see a $163 million Q3 from the line perspective. You kind of run that out for another quarter as Q4, that's the run rate. A little over $300 million there. so collectively it's about $450 million. On an annualized basis, that's like $1.4 and change. And then you get to the 1/6 growth rate of a little bit higher than 11.5%, 12%, so that's the math of it right now. We still stand by the guidance that we. And revenue and the 135 adjusted EBITDA. Chris Kastner: David, this is Chris. I'd also add that the integration of the front end of that business has gone very well in business development and capture. We have a $60 billion total pipeline that we're working through and prioritizing a number of significant competitions over the next . and a book-to-bill at 1.8 in the quarter. So, all indications are positive for that business. David Strauss : Okay. Thanks for that. As a follow-up, I want to ask about the, Tom, the long-term free cash flow profile. Obviously, you're sticking with the 3.2. I think previously you had said that '22, '23, '24, that time frame would be fairly -- free cash flow over that period will be fairly ratable across those years. Is that still the view or is there -- is it going to ramp during that period? Thanks. Tom Steely: Yeah. So, as you said, the Q2 is still good. We have 757 behind us. I've given you the outlook for this year, so it's about 1-1 and that leads to what last over the last three years. So strict to pick map would be about $700 million. We do have a next year, as I mentioned, we have to pay back the fica payments, so that's $66 million. We have progress payments that have to be paid back, that's $100 -- around $160, so you can do some math on that, but there is a ramp to it. So, between those 2 payments and just a slight ramp, I mean, you can just model those 3 years out, but we still feel comfortable and it's appropriate to guide to $3.2 billion over these 5 years. David Strauss : All right, perfect. Thank you. Operator: Again, Our next question comes from Noah Poponak with Goldman Sachs. You may go ahead. Noah Poponak : Good morning, everyone. Mike Petters: Good morning. Noah Poponak : Tom. With these outsides of the normal course of business items, supply-chain, with just their material labor. And then also combining that with the, with how the growth compares shakeout. Should we be seeing thinking of next year? the shipbuilding growth rate being fairly back-end loaded versus the first-half? And then just following up on that Alion discussion there, are you seeing -- we've seen those headwinds across hardware and outside of hardware. Are you seeing some of those same challenges outside of the business in Alion or not as much? Tom Steely: Sure. For the first part, from a shipbuilding perspective, I highlighted a little bit earlier, I didn't hit the backlog piece of the outlook, right? So, unlike say, requiring needed new awards or funding, we have a line of sight of the work that we have in-house. So, I look at, from an outlook perspective, from shipbuilding. Still the 3% CAGR is good. I would tell you that although it looks like we're at the same point we were through the first 3 quarters of this year compared to last year, last year was an exceptional year, '18 to '19 with the 6% growth and then '19 to '20 with another 6% growth. And even specifically Q4 last year was a 19% growth over the quarter previously there. So, some material as I highlighted -- as actually Chris has moved into the end of Q4 of 2020, it made that year look big, which now makes 2021 look flat. So, I'm not concerned right now because we have the backlog, we have the work, we have the labor force right now. We are watching materials as I said and we're watching if the EO mandate impacts our workforce, but I don't -- I'm not concerned with how 2021 was shaking out from a revenue perspective. And I would think going forward that it's pretty linearly in 2022 for ship building. Relative to your lying question, I don't see obviously, their contracts are different, more service oriented. We're excited with them on board. Andy has put his leadership team in play, as Chris had mentioned earlier, the initial assessments that we had going into the purchase and now the close we've had a good 6 weeks run rate in the financials and look under the hood there. We're comfortable with what's in front of them. The items that they're bidding, and how they're executing on the existing contracts for evaluating the revenue synergies between Alion making us better, the DFS and MDIF and vice versa. So, I feel comfortable with that going forward there. I don't see today, again, the EL mandate significantly impacting our revenue expectations from an Alion perspective. We have highlighted from a perspective. When you get to watch the funding come about and the unmanned portfolio evolve and grow going forward. Special watch on for us. Noah Poponak : Okay. Thank you. Operator: I'm not showing any further questions at this time. I would now like to hand the call back over to Mr. Petters with any closing remarks? Mike Petters: Well, thank you. And I want to thank everyone for joining us on today's call. Before I close, I wanted to pass on to you that Dwayne Blake has informed me that he wishes to retire. Dwayne Blake: Deny that request, Mike. Mike Petters: Yeah. I've already turn it down a couple of times. But Dwayne and his family, they've been parts of our family here for 37 years. His personal support for all of us here at Huntington, it -- throughout his career, but especially in his last position here had just been extraordinary. So, when you call today to harass Dwayne about the filing or the call, just remember, he's a short timer now and so he might have some leverage in that call. With that, we wish Dwayne and his family well, and we wish them all the best as they move forward with the next chapter of their lives. And with that, we appreciate your interest in HII and we welcome your continued engagement and your feedback. Thank you very much. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Second Quarter 2021 Huntington Ingalls Industries Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the call over to Dwayne Blake, Vice President of Investor Relations. Mr. Blake, you may now begin. Dwayne Blake: Thanks. Good morning and welcome to the Huntington Ingalls Industries second quarter 2021 earnings conference call. With us today are Mike Petters, President and Chief Executive Officer; Chris Kastner, Executive Vice President and Chief Operating Officer; and Tom Stiehle, Executive Vice President and Chief Financial Officer. As a reminder, statements made in today's call that are not historical facts are considered forward-looking statements and are made pursuant to the safe harbor provisions of federal Securities law. Actual results may differ. Please refer to our SEC filings for a description of some of the factors that may cause actual results to vary materially from anticipated results. Also in the remarks today, Mike, Chris and Tom will refer to certain non-GAAP measures. Reconciliations of these metrics to the comparable GAAP measures are included in the appendix of our earnings presentation that is posted on our website. We plan to address the posted presentation slides during the call to supplement our comments. Please access our website at huntingtoningalls.com and click on the Investor Relations link to view the presentation as well as our earnings release. With that, I'll turn the call over to our President and CEO, Mike Petters. Mike? Mike Petters: Thanks, Dwayne. Good morning, everyone, and thanks for joining us on today's call. This morning we released strong second quarter 2021 financial results driven by another quarter of solid operational performance. So let me share some highlights from the quarter, starting on Slide 3 of the presentation. Sales of $2.2 billion were up from $2.0 billion in the second quarter of 2020. Diluted EPS of $3.20 was up significantly from a $1.30 in the second quarter of last year and pension adjusted EPS for the quarter was $3.05. New contract awards during the quarter were approximately $1.2 billion, resulting in a backlog of approximately $48 billion, of which approximately $24 billion is funded. And Chris will provide some color on a few of the key awards for the quarter during his remarks. Shifting to activities in Washington, we're pleased with a congressional markup process for fiscal year 2022 has begun an earnest following release of the president's budget request in May. Of note, the budget request continued recapitalization of the nation's strategic ballistic missile submarine fleet, and supported funding for CVN 80 and CVN 81 Ford-class aircraft carriers, two Virginia-Class submarines, one DDG 51 Arleigh Burke-class destroyer and LHA 9. We were also pleased that a second DDG 51 class destroyer was included as the number one priority on the Navy's unfunded requirements list for fiscal year 2022. And we look forward to working closely with the Congress during the FY 2022 markup process to urge support for the second DDG and other critical priorities, including the efficient production of amphibious warships. In closing Slide 4 provides some key takeaways from the recently announced agreement to acquire Alion Science and Technology. The team is preparing for closing of the transaction, and we are very excited about the addition of Alion to the HII family. Alion is a perfect complement to our existing capabilities in the technology driven defense and federal solution space. The solutions and products they provide are directly in line with the strategic focus that we have articulated for our technical solutions business and it enhances our technical capabilities and customer access in high growth national security markets, including C5ISR, Military Training & Simulation, and Next Generation Technologies & Solutions. We firmly believe that Alion offers significant growth potential and represents an investment in capabilities that support the evolving DoD national security requirements, which in turn are expected to generate significant long-term sustainable value for our shareholders, our customers, and our employees. Now, I will turn the call over to Chris for some remarks on the operations. Chris? Chris Kastner: Thanks, Mike, and good morning, everyone. This was another solid operational quarter and I'm very pleased with the consistent progress being achieved across our shipbuilding and technical solutions programs. With that, let me share a few key contract awards and programmatic highlights from the business segments for the quarter. At Ingalls, the team received a contract modification from the U.S. Navy for $107 million to provide additional long lead time material and advanced procurement activities for amphibious assault ship LHA 9, which increases current funding on this ship to approximately $490 million. Regarding the potential bundled acquisition of LHA 9 with LPD 32 and LPD 33, discussions are ongoing with the customer. We believe that a bundled acquisition continues to be the most cost effective method of procurement of these critically important ships. In addition, Ingalls was awarded a contract with a potential total value of $724 million over seven years for planning yard services and supportive of a variety of in-service amphibious class ships, including the LPD 17 San Antonio class and LHA 6 America class. Shifting to program status, LHA 8 Bougainville is making steady progress through the structural erection and initial outfitting phases of construction with costs and schedule performance in line with our expectations. On the DDG program, the team successfully launched the first Flight III Arleigh Burke-class guided missile destroyer DDG 125 Jack H. Lucas in June and DDG 121 Frank E. Peterson, Jr. is expected to conduct sea trials later this year. On the LPD program, LPD 28 Fort Lauderdale is on track to conduct sea trials during the fourth quarter and LPD 29 Richard M. McCool Jr. continues to achieve production milestones in supportive launch early next year. A Newport News there were no significant contract awards to highlight for the quarter. So I will go right onto program status CVN 79, Kennedy is approximately 83% complete, and the team remains focused on compartment completion and key propulsion plant milestones. CVN 73, USS George Washington is approximately 90% complete and the team remains focused on achieving key test program milestones to support redelivery to the Navy, which is planned for next year. On the VCS program, the team completed shipment of the final module of SSN 797 Iowa during the quarter. In addition, SSN 794 Montana remains on track for delivery to the Navy later this year and SSN 796 New Jersey remains on track to achieve the float off milestone as planned in the second half of this year. And finally on the submarine fleet support program, SSN 725, Helena is on track for redelivery to the Navy later this year. At technical solutions, contract awards are bringing this 300 unmanned underwater vehicles during the quarter to the U.S. Navy and Royal New Zealand Navy affirm the flexibility and modularity of these units. TS was also recently awarded a 273 million cost plus fixed fee indefinite delivery, indefinite quantity contract to support maintenance and planning for the overhaul and repair of equipment and systems associated with the Navy aircraft carriers and West Coast Navy surfer ships. In addition, TS was awarded a contract with a one-year base period in four one-year options with a total potential value of $346 million to provide a variety of aircraft and operational support services for U.S., Afrikaan included planning, management, maintenance, logistics, and airlift, airdrop services and emergency medical care. Execution within technical solutions remains consistent with expectations except for delays in awards and our unmanned business for critical new programs, which we expect to be resolved by the end of the year. As I close, note that we have included upcoming key program milestones on Slide 5. There are no changes from what we have previously provided other than designated those milestones that have been completed with the check mark. Now, I'll turn the call back over to Tom for his remarks on the financials. Tom? Tom Stiehle: Thanks, Chris, and good morning. Today, I'll briefly review our second quarter results. For more detail on the segment results, please refer to the earnings release issued this morning and posted to our website. Beginning with our consolidated results on Slide 6 of the presentation, our second quarter revenues of $2.2 billion increased approximately 10% capacity at the same period last year. This was primarily due to the growth of Newport News and Ingalls and was partially offset by decline at technical solutions due to the portfolio of shaping actions we have taken. Segment operating income for the quarter of $169 million increased $174 million compared to the second quarter of 2020, and segment operating margin of 7.6% compares to a segment operating margin of negative 0.2% of the second quarter of 2020. The prior year results were negatively impacted by the Virginia-Class submarine program performance as well as impacts related to COVID-19. Operating income for the quarter of $128 million increased by $71 million from the second quarter of 2020 and operating margin of 5.7% increased 293 basis points. These increases were primarily driven by the segments, I just mentioned partially offset by a less favorable operating FAS/CAS adjustment. The tax rate in the quarter was approximately 19.9% compared to 18.5% in the second quarter of 2020. The increase in the tax rate was primarily due to adjustments related to research and development tax credits recorded in the second quarter of 2020. Net earnings in the quarter were $129 million compared to $53 million in the second quarter of 2020. Diluted earnings per share in the quarter were $3.20 compared to $1.30 in the second quarter of 2020. Excluding the impacts of pension, diluted earnings per share in the quarter were $3.05 compared to a loss of $0.49 per share in the second quarter of 2020. Turning to Slide 7 of the presentation; cash from operations was $96 million in the quarter and net capital expenditures were $73 million or 3.3% of revenues resulting in free cash flow of $23 million. This compassed to cash from operations of $201 million and $75 million of net capital expenditures or free cash flow of $126 million in the second quarter of 2020. Cash contribution to our pension and other postretirement benefit plan were $12 million in the quarter, principally related to postretirement benefits. During the second quarter, we paid dividends of $1.14 per share or $46 million. And we purchased approximately 95,000 shares at a cost of $20 million. Moving on to Slide 8 of the presentation, Ingalls revenues in the quarter of $670 million increased $48 million or 7.7% from the same period last year. Driven primarily by higher revenues on the DDG program and amphibious assault ships partially offset by low revenues on the NSC program. Ingalls operating income of $80 million and margin of 11.9% in the quarter were up from the second quarter of 2020, driven by the recognition of a capital investment related incentive for the DDG program that was recognized in DDG 125, as well as higher risk retirement on LHA 8, LP 28 and LP 29 ships. Turning to Slide 9 of the presentation, Newport News revenues of $1.4 billion in the quarter increased $241 million or 21.5% from the same period last year due to high revenues in both the submarine and aircraft carrier construction. Newport News operating income of $76 million and margin of 5.6% in the quarter were up year-over-year primarily due to the impacts related to the Virginia-Class performance and COVID in the prior year period. Now at the Technical Solutions on Slide 10. Technical solutions, revenues of $237 million in the quarter decreased 25.9% from the same period last year, mainly due to the divestiture of the oil and gas business and the contribution of the San Diego shipyard to a joint venture in the first quarter of this year, as well as low volumes and unmanned systems partially offset by increases in volumes and the defense in frontal solutions. Technical solutions operating income of $13 million in the quarter compassed to the income of $9 million in the second quarter of 2020. This increase was primarily driven by high equity income related to our ship repair partnership with Titan as well as improved performance at defense and federal solutions and nuclear environmental services, partially offset by lower volumes in the unmanned system. Finally, a perspective on the outlook of the shipbuilding for the remaining part of the year. We continue to see limited opportunities for risk-free tightness in the third quarter, with the remainder of the milestones weighted towards the end of the year. Given the strong performance of the first half of the year, we now expect that the shipbuilding margins for the full year will be in the 7.5% to 8% range. We continue to expect the align acquisition will close in the coming weeks and that we will incur approximately $25 million of one-time pre-tax transaction and financing related expenses in 2021. We completed the syndication of the term-loan component of the acquisition funding earlier this week and more details of the specifics are available in the 10-Q. We will provide a more comprehensive update on our 2021 outlook for technical solutions on our third quarter call following the closing of the acquisition. Now, turn the call back over to Dwayne for Q&A. Dwayne Blake: Thanks, Tom. As a reminder to everyone on the call, please limit yourself to one initial question and one follow-up so we can get as many people through the queue as possible. Operator, I'll turn it over to you to manage the Q&A. Operator: We will now begin the question-and-answer session. Our first question comes from Doug Harned with Bernstein. Please go ahead. Doug Harned: Good morning, thank you. Mike Petters: Good morning, Doug. Doug Harned: In Q2, you had a big increase in Newport News revenues. And when you look at the back half of the year, you've got several pretty important milestones. So you've got a lot going on there. Can you give us a sense of sort of what took the revenues up so much in Q2? And how we should expect the workflow in revenues to kind of play out over these next few quarters? Tom Stiehle: Sure. It’s Tom here. Good morning, Doug. I appreciate the question here. Although the growth year-over-year for Q2 was large, capital result took a charge in Q2 last year for the Virginia-Class programs, so that comes on the margin side and the revenue side. So, it has a 21% increase, looking larger than it is. I'll tell you on the back half of the year with COVID understood right now the labor force stable, the contracts that we have no place right now. The run rate that we see is going to play out pretty consistent to the back half of the year. I’d say it's probably a flat to consistent back half of the year. I wouldn't let it run away from you as you try and see the growth from a year-over-year perspective and stick with the guidance that we gave you back at the beginning of the year, I still think that we're running on top of that. Doug Harned: Okay. And then you got this $926 million service award at Ingalls, you're in the process of working through the Los Angeles classwork as well in services. Can you give us a sense of how you expect services revenues to flow? Because I always think of this as something that we kind of know that trajectory for shipbuilding, but services is less certain. So how do you see that flowing? And do you get a sense on your Navy and budget discussions that – that there is going to be a pretty consistent driver of revenue coming from the services side? Tom Stiehle: Yes. So, a couple of parts on that answer there. On the Ingalls award down there, it's a long-term services type contract, obviously as the claims in the years get funded in the out years, we'll see that revenue mature down there. The services contract they have is the oversight and then the services aspect for the LPD and LHA program. So that was anticipated as far as our revenue projections that we had for you there. It's not a large portion of the Ingalls portfolio as you see it today. There are potentials going forward depending on how the landscape plays out both from a construction and feature services and our own type work to play out. We'll have to see how that goes forward. From a Newport News perspective, as you mentioned, we took on the LA's overhaul right now. So those were anticipated in our plans also, that was an overflow, right, from where the Navy was. I think medium to long-term we'd like to see ourselves get into a cadence of getting an overhaul on the subside going forward. And as we work with our Navy partner and what that kind of looks like, we'll provide additional guidance on that front. Doug Harned: Okay, thank you. Operator: Our next question comes from Myles Walton with UBS. Please go ahead. Myles Walton: Thanks. Hi, Mike, I think in your remarks, you talked about stability or more predictability in the emptive purchasing power or purchasing strategy. And I guess you've got to a "handshake agreement" with the Navy. The congressional committees are pushing that to be more formalized into a contract. Can you just give some color aside from the greater visibility of having the ships under contract? What are the financial implications to Huntington Ingalls? I know there is savings for the customer. I'm just curious from a financial perspective to the company, how would it change if they bought it individually or they bought by agreement? Mike Petters: Yes, so I'll just kind of talk in general, anytime you're in a multi-year program, you're able to sequence the schedule of the platforms super informed to the way you've got your capital and your people and your material lined up. And you get into, as Tom used the work cadence, where cadence matters a lot – yet in this case, getting the LPDs and the LHA on in a cadence that's predictable over the next several years creates a foundation for all the other programs that Ingalls is going to be working, we're chasing, we're trying to capture. So it's a foundational piece of predictability from a cost structure, rate structure perspective. And I guess our view of that is that if you can get that locked in and create that kind of stability it's worth the savings to our customer, customer gets a good price for it, but it's also worth that to us from the standpoint of predictability. So that's kind of the way we think about it. I don't know Thomas do you want to add any more to that or Chris? Myles Walton: Okay. Chris Kastner: Yes. So, Myles, its Chris. It really solidifies the next three to four years at Ingalls moving forward and maybe even more important than that, it solidifies the supply base that we keep that that ship class moving on a normal cadence to support Ingalls' readily over the next three to five years. Mike Petters: Sure. And I would probably just follow-up on the back of that too. As you know these bundles whether it's a bundle like we're doing here or a multi-year that provide flexibility to our customers and our parties down there, so whether they decide to take the bundle that's on the table now, or buy them kind of separately, the financial impact – so that obviously, as Mike said, this rates – this rates that come into play, the schedule of the ships, how we buy the material in a lot quantity or do we buy them individually. So all that factors into an affordability profitability piece of the equation now, but we put that forth to be as flexible to our Navy customer as possible and we'll see how they move forward with appropriate funds and award accordingly. Myles Walton: Okay. And I think you increased the five-year cash flow to $3.2 billion after Alion acquisition from 2020 to 2024. As we look to 2022 to 2024, I guess it implies the $740 million or so is that – Mike, is that a linear profile? Is it a big step up with a significantly higher backends? Can you just give any color to that as you see it today? Mike Petters: Yes. So they come online, as you know, we closed on the deal in August. In Q3, you'll get a look – see of the financials when the line rolled in there. We'll give you a little bit more color during the Q3 call for the specifics on how we do see 2021 falling out and then give additional color, as I hold until Q4 in the February timeframe of next year when we give that guidance going forward. I mean there's only so many ways you can spread the $200 million, but I just hold the thought there until we come through the integration and we finish out this year. Myles Walton: Okay. All right, thank you. Operator: Our next question comes from Robert Spingarn with Credit Suisse. Please go ahead. Robert Spingarn: Hi, good morning. Mike Petters: Hi. Robert Spingarn: Tom, the margins at Newport News were a bit below where we were thinking and also below the underlying margins we've seen over the past couple of quarters. So I wanted to just ask what's going on there, driving the fluctuations in the underlying margins XEACs or was this net – negative EACs at work, and while we're at it, maybe you can just give us the EAC splits between the segments. Thank you. Mike Petters: That's great. I appreciate the questions. Sure. So now from a Newport News perspective, we kind of guided in Q1 if there was not going to be many opportunities for risk retirement and milestone from Q2 and Q3 that was exasperated at Newport News. I'd tell you although 5,000, 6,000 a bit low when you combine it with the first quarter, it's 6.1 for the first half year. So it's right in the runway of 6, 7 even if it's on the long side. It was not impacted by any major setbacks. The – favorably EAC increases was $62 million, the unfavorable was $27 million down for a net $35 million. And the upside is a little bit slated towards the Ingalls and then on the unfavorable assistance, slightly slopped from 50:50 towards Newport News, but there wasn't anything specific to call out there. On the favorable side, you will find in the Q there was – and in my comments upfront that the DDG 125 took an incentive for the CapEx and there was some solid performance and risk reduction at LHA, LPD 28 and LPD 29. But on the downside, there is nothing notable to kind of highlight here. Okay. Robert Spingarn: Can you quantify the benefit of the capital investment incentive recognized on Jack Lucas? Mike Petters: Yeah. It's up $14 million, and you will find that in the Q, it's upfront. Robert Spingarn: All right. Thank you very much. Operator: Our next question comes from George Shapiro with Shapiro Research. Please go ahead. George Shapiro: Yes, good morning. It seems like you've raised the shipbuilding margin for the year that this benefit from – this capital investment benefit was something that you weren't anticipating? Or is it raised because you're expecting higher EACs in the second half of the year? Or it's just continued performance versus the first half? Tom Stiehle: Good morning, George. It’s Tom here. I'll tell you that we're happy in the books. We kind of have a line of sight the year is going to play out. So factoring in actually the two quarters than what we see here. We're still foreshadowing that Q3 is going to be in light in terms of milestones and risk retirements in the backend of the year for traditional opportunities another six months of a run rate to burn down risk. So, I think, we just felt comfortable and we wanted to help The Street understand where we think we're going to land by year's end. George Shapiro: Okay. But specifically was that capital investment benefit not an expected thing for the year? Tom Stiehle: So, George, it's a one-time event and it was expected, but it doesn't play out in the run rate for the range that we're giving you at 7.5% to 8%. George Shapiro: Okay. And then one, the free cash flow is pretty weak in the first half and it looks like working capital was up north of $200 million. The guide of $150 million to $250 million for the year still holds and what would it cause the second quarter to be as weak as it was. Thanks. Mike Petters: Sure. So, I'll tell you traditionally we use cash up front, so we punched out a minus 16 in the first quarter 2023 up here for net of plus seven through the first half of the year, not unexpected. And then Q2 was – the working capital was 7.9%. So, again, in the range of 6 to 8 what we expect. The back half of the year usually does see some favorability to the working capital, and that will come a little bit that we have to keep our eye on as we have to pay back the couple of progress payments at the end of 2021 and that may gates some of the positives – positiveness that you'd see in the working capital traditionally in the back half of HII. So from where we stand here to get to the $150 million to $250 million, it's just the number of operational run on the revenues and the payments flow to the book. George Shapiro: Okay. Thanks. Operator: Our next question comes from Seth Seifman with J.P. Morgan. Please go ahead. Seth Seifman: Hi, thanks. Thanks very much and good morning. A question, I guess, about profitability and whether I guess – if you look at the margin side and you talk about the opportunities for risk retirement later in the year and sort of the correlation between those two things, I guess, the new margin guide implies a down margin in the second half versus the first half, but you look at all the opportunities to check off at Newport News and even at Ingalls where margins have been very strong still more risk retirements ahead than have been checked off. So, I guess, the first part is kind of given this list for the second half, but why wouldn't we expect a stronger shipbuilding margin than we saw in first half. And then second, I guess, when we look at 2022 and we see sort of fewer milestones for Newport News, how do we think about – what that means for profitability there, and then Ingalls kind of coming off a high base, but obviously it looks like there's a lot to do there. So, I guess, looking at the correlation between these upcoming milestones and the ship building margins? Mike Petters: Sure. Yes, I can give you some color on both of those questions. So when you look at Q1, Q2, this was quite a few one-time events. Other than that, the incentives we're talking about here, on DDG 125 in Q2, Q1 there was a couple of incentives in there too, that we've highlighted. But I've been asked, can Ingalls keep this up at 14% and now 11.9%. And I keep providing the guidance down that that's not a run rate that's sustainable, I think between the one-time events and the incentives that we talked that – we'll see that come down. So I wouldn't really read that because we're giving you the 7.5% to 8% that somehow the margins are dropping off from a performance or operational standpoint at Ingalls. It's just that we won't see those one-time events in Q3 and Q4. From the question on the Newport News perspective, right now, if you look at it, they have a lot of new ships in their portfolio, right. So CVN 80, CVN 81 is coming online. There is a CVN 74 that just popped in here. And CVN 73 is nearing the end from a revenue perspective, and they have less weight on the portfolio there. So it's the mix of the ships that are in at Newport News. So when you talk about 2022 timeframe, those ships as they run through another three, four, five quarters, that'd be burning down risk, and there'll be a potential to increase booking rates. Seth Seifman: Okay, great. I will take the one . Thanks very much. Operator: The next question comes from Ron Epstein with Bank of America. Please go ahead. Ron Epstein: Good morning guys. Mike Petters: Good morning, Ron. Ron Epstein: Just quickly, could you give us an update on how things are proceeding with the Virginia-Class? Because that's a program that you ran into some challenges in the last 18 months, and how is it tracking now? Chris Kastner: Yes, Ron, this is Chris. I'll start, if Mike wants to add on here. We'll do that, but really team performing well and the partnership performing well. Montana is proceeding to delivery this year, and New Jersey is proceeding to launch and then delivering next year, and then the shops are executing on the modules to support assembly for the subsequent votes. So confident and comfortable with how the Block IV and Block V programs are executing right now. Mike you want to... Mike Petters: Yes. Having to say that, moving the two per year in Block IV, and then we’ve been adding in the Virginia payload module in Block V. Success is going if it depend on rhythm and what we have established here; Chris's team and Jennifer, as the shipyard is establishing right now is they're establishing a rhythm and a program that's going to make them comfortable. We were working that when COVID hit us last year. And so we kind of hasn't stepped back a little bit and reset, but we're pretty excited right now about what's happening today, but also the rhythm that we're setting up for the rest of this program and the rest of the next programs; so pretty excited about that. Ron Epstein: Got it. Got it. And then maybe just another with summary and question; this, do you guys, does the industrial have enough manpower labor right now to do the Virginia and the Columbia at the projected rates, where in a given year, if there's two Virginia’s delivered and Columbia, so you get three-subs. Is there enough capacity in terms of a qualified on a pipe fitters to do that? Mike Petters: Well, Ron, I guess if you took a – if you decided that everything was static and then you had to do all of that with the people that you have in the plant today, the answer is no, we don't have enough people in the plant today to do that. The fact is that we've been, since COVID began last March, we hired 6,000 people and train them and I will be forever remembered for saying that we can build capacity in the industry faster than the government can appropriate funding for it. So if the government wants to move ahead with a higher rate of so many production in a sustained way, not just doing it once in a while, but in a some sort of sustained way they want to go to three submarines a year or three Virginia-Class a year or two Virginia-Class and a Columbia a year, and they're going to sustain that for a period of time. We can absolutely have the workforce and the physical plant and the supply chain set up to go execute that. You set that it's a light switch and starting in the FY 2022 budget we're going to expand the buy from two to four. Well, we probably have some startup paints there, but we don't believe that's the way that's going to go. We believe that this has going to be done in concert, that's the history of it. And so I think I guess my own experience is that when you hear budget, people talking about lack of capacity, what they really mean is if they don't have fund, and that's, that's kind of the way the industry looks at it. So I think we can – we can expand, we can expand capacity if that's the plan, if it's the sustained. Ron Epstein: Got it. Thank you. Operator: The next question comes from Gautam Khanna with Cowen. Please go ahead. Gautam Khanna: Hey guys, I was wondering if you could talk a little bit about integration planning and sort of what early milestones we should be thinking about on the Alion deal to make sure that it's tracking the plan. So could you little – could you outline what you're doing, I know you're planning in terms of integration, sort of what the, what you hope to have accomplished by the end of the year with that deal? Chris Kastner: Gautam, you've got to be careful here because this is Chris, we're not closed yet, obviously. She doesn’t want to get ahead of that. I will say that we had a very detailed immigration plan in place and then working very well with the Alion and in putting that plan in place. And I'd also I could say that Alion leadership team is going to play a very prominent role in the leadership team, king of the combined company when we do get closed. And we'll be able to report that the status of the integration on the Q3 call, but I don’t want to get in front of closing on that. And Mike, I won't hold up if you want to add anything. Mike Petters: I mean, I think we – I'll always say that we integrated high board last year. We have a blueprint for how to get into that effective and efficient way. Obviously this is a but muscles are to same. I'm pretty excited about; I'm excited about the opportunity to do this. There will be a lot of hard work by a lot of folks, but it will be the right time stuff to do. So, and we're certainly going to keep you posted on that. Gautam Khanna: Okay. And just as a follow-up, you talked about the $14 million benefit from the capital incentive this quarter. If I recall last quarter, you guys talked about Q2 and Q3 having fewer shipbuilding milestones. And I know this has been asked on the call, but I just trying to get a sense for; should we have thought about the potential for team catch-ups, maybe last quarter as $35 million minus the $14 million, like when we say not a lot of team catch up are opportunities, is $20 million sort of the not a lot opportunity, or should we think of it as like zero. There isn't a lot of, risk retirement opportunities. Because I guess, that was sort of the upside that certainly relative to my expectations walking in today, but there was an opportunity for a lot of favorable net adjustments. Mike Petters: Yes, I'll hop in there, we give that guidance. You talk about, hey milestones, hard milestones, so either milestones that if the, if we hit the milestone, we take a step up, as we check the EAC, we sell ship-off, really defined milestones that will bring in additional margin. So, I mean, that's true when we got it in Q1 and it's true right now when I look at punch through via Q2 into Q3. As I mentioned there was $62 million of $27 million out for net $35 million in the $62 million is $14 million of it, right? So as you're doing the math of that, I guess we're asking, hey zero to $20 million and $40 million is a of catch-up, as I mentioned to you 60-40 Ingles versus a Newport News there, but hey, just steady performance down at Ingles LHA, LPD programs. And there wasn't a specific hard milestone, but as we come through our quarterly EAC processes. We check the burn rate and the risk registers and where we stand. And the programs are running smoothly right now. So I don't think out of ordinary performance there and I think our guidance still holds true about Q3 is going to be light on milestones and there's opportunities over the next six months to retire additional risk. Gautam Khanna: Thanks a lot. Operator: The next question is from Noah Poponak with Goldman Sachs. Please go ahead. Noah Poponak: Hi, good morning, everyone. Mike Petters: Good morning. Noah Poponak: Tom, did you say you also had capital investment related incentive in the first quarter? Tom Stiehle: I may have said that, but now that you bring it up again, we had an ECP that we closed out and I mistakenly put capital incentive. So we had an ECP on a DDG program that cleaned up for us. Noah Poponak: Okay. Yes, I was going to say I was looking for that and I couldn't find it. Is that, something that has the potential to occur often and it's usually small enough to not call out or is it, or is that pretty unusual? Mike Petters: We do have ECPs that closed that from time-to-time, they not big adjustments that happened to be a rather larger adjustment that we had; and so that – that kind of weighed into the Q1 timeframe. Noah Poponak: And the same question on capital incentive? Mike Petters: Fairly unusual to have a capital incentive that large. Noah Poponak: Okay. Mike Petters: So we work, we work ourselves through, as we come through on these ECP that we provide for book proposals. We go to the table and negotiate. There's a balance of affordability and equity on these deals. And as we work ourselves through, sometimes they take time and then as we settled the deal whether it's additional large capital incentive. We'll let the street know when we close the booking. Noah Poponak: Got it. Is there any other change to the previously provided 2021 guidance items outside of what you've mentioned on the shipbuilding margin? Mike Petters: No. We're going to give additional guidance that said in Q3 as we close out. Noah Poponak: So that, that not being in the release or the deck is mainly just a reiteration as opposed to something else. Mike Petters: That's correct. Noah Poponak: Okay. Thanks very much. Operator: The next question comes from David Strauss with Barclays. Please go ahead. David Strauss: Thanks. Thanks for taking the question. Good morning. Mike Petters: Good morning. David Strauss: So in terms of performance year-to-date, does it change anything about how you're thinking about the shipbuilding margin progression beyond 2021? I think you've talked about low-80% in 2022 and then going up from there. So anything about the performance year-to-date give you more confidence. Maybe that could be a little bit better than that? Mike Petters: No. I would say where we got guided and where we expected today, and our outlook right now and next year is still whole. David Strauss: Okay. And Tom, what has to happen from a working capital perspective over the next couple of years to be able to hit this $3 billion or $3.2 billion, I guess, with Alion included in it that, that free cash flow target. What's that embed for working capital and where specifically could the working capital upside come from? Tom Stiehle: Well, I think what we've always talked about is the working capital will be between 6% and 8%. So I think we'll continue to run operations accordingly. The Alion portfolio 85% costs that contract. So we don't see that as a claim from a working capital perspective as that gets integrated into the HI portfolio. But the big drivers that we kind of had highlighted how that $3 billion and now $3.2 billion come about, well more from a function of the 3% CAGR from the revenue, the margin rates popping up from shipbuilding, the capital getting back to 2.5%. And then we run through the math of that. The pension we've kind of cleaned up with Safe Harbor, so there's not going to be fluctuations on that front. I think on a couple of calls we've worked that through for $700 million on a run rate was attainable price of Alion purchase. David Strauss: Okay. And thinking on pension is still, it's kind of a net neutral cash versus your contribution? Mike Petters: Yes. David Strauss: All right. Thanks, very much. Operator: Our next question comes from Burkett Huey with Morningstar. Please go ahead. Burkett Huey: Hey, thank you so much for taking the question. So I was taking a look at the awards of $1.2 billion, and if you take out the shipbuilding – I'm sorry, the servicing contracts, and I think another $100 million contract to get to about $360 million and six unmanned awards. I'm wondering, is that a good way to think about the pricing point for you've used or may not thinking about that, right? Mike Petters: Yes. So there's a number of awards across the corporation in that value for awards. We don't get specific values to the price points of our UUVs? So yes, I wouldn't necessarily think about it that way. Burkett Huey: Okay. Thanks. Operator: Thank you. I'm not showing any further questions at this time. I would now like to hand the call back over to Mr. Petters for any closing remarks. Mike Petters: Well, I just want to thank everybody for joining us this morning. We had a good strong quarter. I'm pleased with where the leadership team is and where we're going. I hope that you and your families are able to stay safe and that you're able to encourage everyone out there to go get your shot. That's what we need right now. They are ready to get shots. So thank you all very much. We look forward to seeing you. Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Operator: Ladies and gentlemen, thank you for standing by and welcome to the First Quarter 2021 Huntington Ingalls Industries Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to turn the call over to Dwayne Blake, Vice President of Investor Relations. Mr. Blake, you may now begin. Dwayne Blake: Thanks. Good morning, and welcome to the Huntington Ingalls Industries first quarter 2021 earnings conference call. With us today are Mike Petters, President and Chief Executive Officer; Chris Kastner, Executive Vice President and Chief Operating Officer; and Tom Stiehle, Executive Vice President and Chief Financial Officer. As a reminder, statements made in today's call that are not historical fact are considered forward-looking statements and are made pursuant to the safe harbor provisions of federal securities law. Actual results may differ. Please refer to our SEC filings for a description of some of the factors that may cause actual results to vary materially from anticipated results. Also in the remarks today, Mike, Chris and Tom will refer to certain non-GAAP measures. Reconciliations of these metrics to the comparable GAAP measures are included in the appendix of our earnings presentation that is posted on our website. We plan to address the posted presentation slides during the call to supplement our comments. Please access our website at huntingtoningalls.com and click on the Investor Relations link to view the presentation, as well as our earnings release. With that, I'll turn the call over to our President and CEO, Mike Petters. Mike? Michael Petters: Thanks, Dwayne. Good morning, everyone, and thanks for joining us on today's call. I trust that everyone is staying healthy and safe. Now, let me share some highlights from the quarter starting on Slide 3 of the presentation. Sales of $2.3 billion for the quarter were slightly higher than 2020. Diluted EPS was $3.68 for the quarter and pension adjusted EPS was $3.56, up from $2.43 in 2020. New contract awards during the quarter were approximately $5.3 billion resulting in a record backlog of approximately $49 billion of which approximately $25 billion is funded. Chris will provide some color on a few of the key awards for the quarter during his remarks. Shifting to activities in Washington, we were pleased that the recently released summary of the fiscal year 2022 President's budget request affirm that maintaining U.S. Naval Power is critical to reassuring allies and signaling U.S. resolved to potential adversaries. Of note, the budget summary cited continued recapitalization of the nation's strategic ballistic-missile submarine fleet, investment in remotely operated in autonomous systems, and funding for the next generation of tax submarine program, and we look forward to understanding budget details for these and other national security priorities when that information becomes available, as well as funding levels requested for the Department of Energy and the Department of Homeland Security. We also look forward to working closely with the Congress as the FY '22 President's budget request is considered during the current legislative cycle. Regarding portfolio shaping actions during the quarter, we completed the previously announced sale of our oil and gas business and also completed the contribution of the San Diego shipyard to tighten acquisition Holdings in exchange for a non-controlling interest in this leading provider of ship repair and fleet sustainment services. Completion of these transactions sharpens the focus of our Technical Solutions business into areas where we believe are unique capabilities and close customer relationships will drive strong organic revenue growth and margin expansion. And as I prepare to close, I'm very pleased with the operating rhythm the team is achieving, which led to the third consecutive quarter of solid program execution and financial results. And I'm very confident that our strength, agility and positive momentum resulting from enduring the impacts of COVID-19 will serve as a key catalyst to help us leverage our historic backlog to generate strong free cash flow, and create long-term sustainable value for our shareholders, customers and employees. Now before I turn the call over to Chris, let me make a few comments about our recent leadership change. After serving as President of Ingalls since 2014 and with more than 40 years of service, Brian Cuccias retired on April 1. Brian's career at Ingalls has been remarkable, and HII has truly benefited from his leadership. Effective April 1, Kari Wilkinson succeeded Brian as the new President of Ingalls and will report to Chris. Kari has proven ourselves to be a strategic and visionary leader that is focused on operational excellence and I am extremely confident that Ingalls is in very capable hands. And now I will turn the call over to Chris for some remarks on the operations. Chris? Chris Kastner: Thanks, Mike, and good morning everyone. Operationally we had a solid quarter making consistent progress across our shipbuilding and Technical Solutions programs. With that, let me share a few key contract awards and programmatic highlights from the business segments for the quarter. At Ingalls, the team was awarded a lifecycle engineering and support services contract for the LPD program with a cumulative value of approximately $214 million. The scope of work includes engineering change management, supply chain management, training for new shipboard systems, and the execution of post-delivery availabilities. Regarding program status, LHA 8 Bougainville achieved the 25% complete milestone during the quarter. And the team remains focused on maintaining strong cost and schedule performance in support of their planned production milestones. On the DDG program, the team remains focused on preparations for launch of DDG 125 Jack H. Lucas, and sea trials for DDG-121 Frank E. Petersen Junior both planned for the second half of this year. And on the LPD program, LPD 28 Fort Lauderdale remains on track to complete sea trials later this year, and LPD 29, Richard M. McCool Junior remains on schedule for launch early next year. The Ingalls is also working closely with the Navy to put LPD 32 and 33 along with LHA 9 under contract. This bundled acquisition approach is the most affordable method by the ship and when complete affords predictable savings for the Navy. At Newport News, the team was awarded a $3 billion contract for the refueling and complex overhaul of CVN 74 USS John C. Stennis, and also received a contract modification for construction of the 10th Virginia-class Block 5 submarine. These key awards are additional building blocks for our record backlog, which now stands at nearly $49 billion. Shifting the program's data, CVN 79 Kennedy is approximately 81% complete. The team is finalizing plans to support the single phase delivery requirements, while continuing to focus on compartment completion and key initial test milestones. CVN 73 USS George Washington is approximately 87% complete and continues to make progress with the crew recently beginning to move back board the ship. This is another key milestone in support of re-delivery to the Navy plan for next year. On the VCS program, SSN 794 Montana continues to test program activities in preparation for delivery to the Navy planned for later this year. In addition, SSN 796 New Jersey remains on track to achieve the float off milestone as planned in the second half of this year. Our Technical Solutions that we booked several key awards during the quarter this included a $175 million fleet sustainment recompete and its position on a Naval Information Warfare Center Pacific ISR and cyber security IDIQ contract. Additionally, production of the first Orca XLUUV modules is now underway at our Unmanned Systems Center of Excellence. Approximately 75% of our structural components have been fabricated and assembly has commenced with final unit delivery to Boeing plan later this year. And finally our nuclear and environmental services business continues to perform very well with strong performance across our Department of Energy contracts on Los Alamos, Nevada and Savannah River. Now I will turn the call over to Tom for some remarks on our financials. Tom? Tom Stiehle: Thanks, Chris and good morning. Today, I will briefly review our first quarter results. For more detail on the segment results, please refer to the earnings release issued this morning and posted to our website. Beginning with our consolidated results on Slide 4 of the presentation, our first quarter revenues of $2.3 billion increase of less than 1% compared to the same period last year. This was primarily due to growth in Newport News and Ingalls that was largely offset by a decline in Technical Solutions due to divestitures associated with our portfolio shaping actions we have taken. Segment operating income for the quarter of $191 million increased $35 million from the first quarter of 2020 and segment operating margin .8.4% increased to 149 basis points. The improvement was driven by higher risk retirement at Ingalls and improved performance at Technical Solutions. Operating income for the quarter of $147 million decreased by $68 million from the first quarter of 2020 and operating margin of 6.5% percent decreased 305 basis points. These decreases were primarily driven by less favorable operating FAS/CAS adjustment, partially offset by the strongest segment operating results compared to the prior year. The tax rate in the quarter was approximately 15% compared to approximately 20% in the first quarter of 2020. The decline in tax rate was primarily due to the divestiture of our oil and gas business, as well as the recognition of R&D tax credit for the current year and prior periods. Net earnings in the quarter were $148 million compared to $172 million in the first quarter of 2020. Diluted earnings per share in the quarter were $3.68 compared to $4.23 in the first quarter of 2020. Excluding the impacts of pension, diluted earnings per share in the quarter were $3.56 compared to $2.43 in the first quarter of 2020. Turning to Slide 5 of the presentation, cash from operations was $43 million in the quarter and net capital expenditures were $59 million or 2.6% of revenues, resulting in free cash flow of negative $16 million. This compares to cash from operations of $68 million and net capital expenditures of $66 million and free cash flow of $2 million in the first quarter of 2020. Cash contributions to our pension and other post retirement benefit plans were $72 million in the quarter, of which $60 million were discretionary contributions to our qualified pension plans. During the first quarter, we paid dividends of $1.14 per share or $46 million. As noted on our fourth quarter earnings call, we did reinitiate share repurchases earlier this year and continue to view the return of excess free cash flow via share repurchases as a integral part of our capital allocation strategy over the long-term. During the quarter, we repurchased approximately 292,000 shares at a cost of approximately $50 million. Moving on to pension with the passage of the American Rescue Plan Act, we have reviewed the 5-year pension outlook that we provided on our last earnings call and continue to believe that remains the most appropriate deal. Due to the limited nature of our projected contribution and the impact of lower cash activity with Safe Harbor implementation the passage of the legislation does not have any meaningful impact on our outlook. We plan to provide an update to near-term pension expectations on our Q3 call, consistent with our product cadence. Moving on to Slide 6 of the presentation, Ingalls revenues of $649 million in the quarter increased $20 million or 3.2% from the same period last year, driven primarily by higher revenues on the DDG program. Ingalls’ operating income of $91 million and margin of 14% in the quarter were up from the first quarter of 2020 mainly due to higher risk retirement on LHA 8, which was related to the 25% completion milestone that Chris mentioned earlier. Turning to Slide 7 of the presentation, Newport News revenues of $1.4 billion in the quarter increased to $66 million or 4.9% from the same period last year due to higher revenue in both aircraft carrier and submarine construction as well as fleet support services. Newport News operating income of $93 million and margin of 6.6% in the quarter were down slightly year-over-year primarily due to lower risk retirement on CVN 73 RCOH partially offset by higher risk retirement and VCS Block IV boats. Now to Technical Solutions on Slide 8 of the presentation, Technical Solutions revenues of $259 million in the quarter decreased 18.3% from the same period last year, mainly due to the divestitures of both our oil and gas business and the San Diego shipyard on February 1 of this year, partially offset by a full quarter of results from Hydroid which was acquired at the end of the first quarter of 2020. Technical Solutions operating income of $7 million in the quarter compared to a loss of $7 million in the first quarter of 2020. This was driven primarily by improved performance in defense and federal solutions and nuclear environmental services as well as a gain related to the sale of our oil and gas business. Turning to Slide 9, we continue to expect we will finish the year with shipbuilding operating margin in the 7% to 8% range with the significant remaining risk retirement events weighted towards the end of the year. In addition, we expect shipbuilding margin for the first half of 2021 to be around the midpoint of our annual guidance range. We continue to view the remainder of our 2021 guidance as appropriate with the exception of the effective tax rate which we now expect to be approximately 18%. Now I'll turn the call back over to Dwayne for Q&A. Dwayne Blake: Thanks, Tom. As a reminder to everyone on the call, please limit yourself to one initial question and one follow-up, so we can get as many people through the queue as possible. Operator, I'll turn it over to you to manage the Q&A. Operator: The first question comes from Carter Copeland from Melius Research. Please go ahead. Carter Copeland: Mike, I wondered if you could expand. I mean it's been quite a string of challenges thrown out over the last several quarters. But the comment you made around the operating rhythm and finding I guess more of a better cadence there. I wondered if you could expand on that, and specifically what sort of operating metrics you're looking at that give you conviction that that's a trend you're going to stay on. Michael Petters: Okay, I think first of all, Carter you're right. We've had a lot of we got a lot of stuff thrown at us in the last 12 months. And we took a pretty good body blow back a year ago with attendance and relative to the pandemic and the impact that had on our ability to retire risk. We recognized that in Q2, but what came out of that was. We've stabilized our employment levels. We've stabilized our scheduling. We've actually created the mechanisms in our risk register so that we know where we are and where we're going and where we need to get. It helps a lot that we have this backlog that we're working off of and where we are now is that - when you come through a crisis like this as a leadership team the connectivity, the tools that you've put in place, the innovation that has happened. You're taking advantage of all of that and as you move forward you start to look at what we actually accomplished. While we started at the beginning of the pandemic thinking that we needed to preserve 25,000 people. We have just hired over the last five years in our workforce. We've done that. We actually have hired between 5,000 and 6,000 people since the pandemic started that's pretty creative and innovative, if you will. And that's, and we still have pretty robust hiring plans going forward. Our case rates today are lower than they have been since last summer that's inside of our yard and the quarantine volume today is lower than it's been, really since this began. We have actually administered vaccines to we've administered vaccines to about a third of our workforce on top of where - they're widely available to the rest of the employees who are getting them not to us. And so, we're seeing a pretty steady rhythm now our folks are at work there engaged. We understand what needs to be done and we're actually getting stuff done. I think the change, where we moved Chris over to be the Chief Operating Officer and really create more management bandwidth on how do we manage that risk going forward and how do we make sure that we're doing what we said we were going to do has really helped. And so I don't know, I guess I've been around for a long time, but I feel really good about where we are right now in terms of doing what we said we're going to do. Carter Copeland: Okay. And then just as a quick follow-up is - obviously a lot of talk macro wise about inflation and inflationary impacts, when you look at, at least in terms of your fixed-price work. Is there any cost exposure that you watch there to be aware of or is it not significant at this point? How should we think about that? Michael Petters: Yes, I may let Tom take that one. And let him talk to you about what we're seeing there. Tom Stiehle: Good morning, Carter. Yes, so relative to inflation, our contracts they are much longer term. We have the benefit here with long lead contracts and from a planning horizon and the backlog that we have to plan our work out. So, we have a site as far as the materials that we need additionally, where we put together our proposals and the contracts that we bring home. We generally want to see those POs in place. They’re backstopped by proposals and commitments shortly - they are after the award. So what we're seeing, I've talked about yards just this week as matter fact at that point. We're not seeing tremendous amount of inflation across the purchases that we have. And we’re not having a problem feeding yards from a material perspective. We do see going forward as we're getting new quotes that the span of the validity of the quote is short. I think the contractors are staying light on their feet as far as what they are committing to, but relative to our contracts and our performance, we don't see an impact right now. Operator: We take the next question from the line of Myles Walton from UBS. Please go ahead. Myles Walton: I was hoping, Chris you could clarify that LPD bundled contracts you mentioned the size, timing and if that is more to just generate efficiencies or could there actually be increased levels of work versus your medium-term plan as well? Chris Kastner: Yes, so that's all kind of contained in the 3% guidance that we talked about from a growth standpoint. The benefits of the bundle are pretty clear, when you can order those three ships together and sequence the work in an efficient manner. You're going to absolutely get savings. So it's something we support, it's something we're working very closely with the Navy. If we are not able to get that, we'll get those ships under contract incrementally it just will not be as efficient. Myles Walton: What would be the size - of a bundle of those three? Chris Kastner: 5.5 billion potentially. Myles Walton: Okay. And there is a clarification for Tom. The sequential margin in 2Q given the 1H is expected to be at the midpoint of the range. Can you point to maybe why the step down is so significant to six mid-sixes or so? Tom Stiehle: Sure, as I related in my comments, opening comments there, there's not a tremendous amount of milestones that we have in Q2, Q3, it's just a pacing year right now. So we're watching the volume come through at the present booking rates that we have right now. We think the first half of the year will come in around the midpoint of the guidance. And then we have milestones in the back half of the year, that - if retired have some potential there, but obviously we have to burn that off as the year kick by. Operator: The next question is from the line of Doug Harned from Bernstein. Douglas Harned: We've seen a whole lot of Navy shipbuilding plans at the 500 plus versions and the C&L appears to have gone back to kind of 355 ship goal, but even that goal has been not easy to get to and the mix appears very uncertain. So Mike when you think about planning in this environment. How do you think about long-term investments and where you want to sit given all of the flux around these shipbuilding plans? Michael Petters: Thanks, Doug. That's a great question when we actually kind of kick around a lot is, are we thinking about this the right way. I think at a macro kind of at the higher level what we see is that the shipbuilding execution plan is on a much longer rhythm then the shipbuilding theoretical plans like a 30-year plan comes out, I don't know every couple of years. But the contracts we have ships right now that are under contract to deliver. I mean Doris Miller deliveries in 2032. So what is that like four 30-year plans between now and then. So we look at those plans, not so much as the precision of the plan, but more about what's the intent of the plan. And what we're seeing in the intent of the plan you've acknowledged that they move around a little bit, but what we see in those movements is maybe wants to move to a Navy that has many ships, faster ships, maybe smaller ships, cheaper ships. So our investments are aimed in that direction. Now that doesn't mean they are not going to build aircraft carriers or submarines, because I think they are, but they're going to want to build aircraft carriers more efficiently. They're going to want to build submarines more efficiently. They want to build more submarines more efficiently. When it comes to the non-nuclear ships amphibs, destroyers, frigates those kinds of platforms go. They either go through class change or block changes and our challenge is to be agile enough to respond to the customers' requirements, and do that as effectively and efficiently as we can. So the investments we make in our facilities are designed to be able to do that. There are multipurpose, multi-product kinds of investments. We'll do a capital investment at Ingalls that will apply to four classes of ships. We’ll do capital investments at Newport News that you can use for carriers or submarines, and so that's kind of the way we think about that as opposed to, we need to go make a big investment for pick your program that three years from now may evaporate. We don't do that. So that's kind of the way we sized and thought about this generational investment we made over the past five years or so, a couple of billion dollars in our shipyards. We think that positions us very, very well for the direction that we think the Navy is going to end up going. And we'll probably have lots of discussion about whether it's one more submarine or one less destroyer all that sort of thing, but it means our investments were still the right thing to do. Douglas Harned: And do you think, when you look forward as you're saying more you know faster ships, slower ships, in a sense, it can open it up to other competitors rather first you and general dynamics and we saw this with the frigate LCS. I mean, do you foresee a time obviously it's a ways away when the - competitive structure of this industry could change because of the smaller faster different ships? Michael Petters: I don't know, Doug, I guess maybe, but I would say that I would caution anybody from thinking about that question is a binary question that it's either one or the other. It's going to be - kind of a transformation, that's going to be product line specific. Most of the shipyards in this country build a product. Our shipyards build - several classes. We build four classes of ships at Ingalls. We build carriers and submarines at Newport News and refueling and all that sort of thing. So we do multiple classes of ships in our shipyards. We think that serves us pretty well for whatever direction the future is going to be, and if the environment is going to be more competitive. So be it. We're happy to compete. Operator: The next question comes from Ron Epstein from Bank of America. Please go ahead. Ron Epstein: Can we talk a little bit or maybe about the services business, the margins in the quarter were maybe about 2.7% and the target margins were 3% to 5%. What drives the upside there? How are you thinking about that? Tom Stiehle: Yes, I'll take that hey Ron. It's Tom here. So a couple of things, we have got it from 3%, 5%. You're right, it is 2.7% quarter. Right now, we saw a little bit of volume shortfall there as we're waiting for awards and the sales to come along with those awards for the year. Just with COVID and the announcements of where we are and some recompetes, it’s just a little bit - behind relative to guidance of 3% to 5%, but the year still in front of us, we haven't changed our guidance, we think TS will be at year's end. Chris Kastner: Ron, I can add to that. There is - in our equity accounting relative to the nuclear space, the timing of some of those are slated towards second and fourth quarter. So you see - you don’t generally see that happening in the first quarter. So it's a bit lumpy, and we usually start light. Ron Epstein: And then a question for Mike. When you're looking out medium term, let's call it, what are the biggest opportunities that you're trying to plan for now. I mean this is a follow-on to Doug's question as you're positioning the business, what's the big fish out there that you want to catch say call it three, four or five years out? Michael Petters: So in shipbuilding, I think that we'll start with that. I think that if there is an expansion of a product line say and there has been some discussion about what's the industry's ability to support expansion of say, the submarine product line. We certainly want to be able to take full advantage of that. In the same way, if the Navy wants to expand in the frigate space we want to be able to assist that if we need to be able to go and do that. And then I think it's - engagement on the planning and design piece for. So what happens to the future of amphibs probably that's mid to long-term, probably not near to mid-term. And what happens with the carrier is, are there going to be CVN 82 going to have some design for affordability put to it and are we going to engage in that. I mean frankly CVN 82 is a ship that starts to show up here, I mean it's - you got a contract in 27 or 28. So making sure that that stays on track that's come of the way we think about it in shipbuilding. In the Technical Solutions space, we've made a big investment in unmanned and expansion of the unmanned business I think is something that. Now that we made that investment and we have a portfolio, it's up to us to make sure that we capture that expansion. Of all the budget items that I see out there, the unmanned budget item is probably going to have the largest percentage growth over the next five in my view. We've established - as Chris kind of alluded to a minute ago, we've established our position as a department of energy prime and there is a lot of work over there that needs to be done and we are pursuing all of that very aggressively. We think that's a really great spot for us to be in takes advantage of capability that we have in our shipbuilding business, but it gives access to another customer, and we've done very well with that and we look to continue to expand that. And then ISR space, where we've really actually done well and we expect to do well going forward. So we kind of look at that it's kind of capability dependent based on what our customers’ needs for capability are, but that's kind of how we think about it. Where do we think our customers are going to want to be in three to five years and how do we make sure we get there and help them get there. Operator: Thank you. The next question comes from George Shapiro from Shapiro Research. Please go ahead. George Shapiro: Yes - Tom if you could provide the EAC’s and is it fair that the pickup on the LHA 8 was probably $35 million or so? Tom Stiehle: So a little bit, good morning, George a little bit color on that is, 86 was the up - was the favorable 36 is down net 50 across the yards about 9010 at Ingalls. Only significant drivers on the upside there were the LHA 8, we usually don't give guidance or information on the specific ship so 35 kind of heavy there. Ingalls’ had a good quarter on top of the LHA 8 hitting the 25% vessel complete milestone where they reevaluate the risk and they re-strike the EAC. We did have a change proposal that definitize they have been focused our cost management there so overall it was a good quarter for Ingalls. There was no - the significant upsides or downsides that I probably highlight here. George Shapiro: Tom if 35 is a little bit heavy I mean just on the rough numbers you gave it would imply about $45 million of favorable at Ingalls. So was there anything else you can specify or its all spread across the board for say another $20 million if 30 was the LHA 8? Tom Stiehle: Yes, the Q has the information on LHA 8. So we're not you'll see that you're about $10 million heavy. But as I say, the other aspects of it change management. We've definitize the change down there not only significant. And then just a good performance in LPD 28 is coming along and paying attention on cost. 14% high so I wouldn't expect that going forward, but they cleaned up well, and they didn’t get bit for the quarter so that's where he landed. George Shapiro: And one quick one for Mike, can you update us on the Block V submarines I mean that was the one that you've had some problems with this to where we stand right now? Michael Petters: Actually, the challenge we had in Q2 was on Block IV, George. And we've got a rhythm in Block we're establishing a rhythm in Block IV, that's going to carry through and help us do really well on Block V. So I don't know Chris if you want to add to that. Chris Kastner: I can add on Block IV we hit some important milestones in the first quarter with Montana floating off and New Jersey getting pressure hull complete through important milestones on the balance of the year there for VCS Block IV getting Montana deliver and getting New Jersey floated off. So we're watching those milestones very closely. Good progress online channel I am getting ready for delivery. So we're optimistic on kind of the rhythm and the momentum on the Block IV contract right now. Operator: The next question comes from Richard Safran from Seaport Global. Please go ahead. Richard Safran: So I’ve just been doing reading about the work. I wanted to ask you about the forward. I've been reading about the work being done there based on that. Newport still doing work on things like the weapons elevators and there are other maintenance items, et cetera? I just want to know if you could discuss how the work on the Ford is progressing relative to your expectations, when you expect completion and if there's been any commentary from the Navy about the level of satisfaction with you efforts so far? Chris Kastner: Yes, this is Chris. And I'll let our ex-aircraft carrier program manager Mike talked about it after me. But yes, really positive interaction with the Navy on the Ford weekly interaction on the Ford, especially on the weapons elevators got seven of those turned over Ford will be done this summer so really positive interaction that work will go on for a while, but nothing not really material going forward, but yes it's been positive. The Newport News team is performing very well and I think the Navy is very pleased with the performance of that ship right now. Michael Petters: And I'll just add the Ford at sea as much as probably more than any other ship in the fleet last year. It's the training carrier for the East Coast and the Navy would will say and they have said they can quote you the number of Traps the number of launches. The number - the tons of ordnance that they've moved on the weapons elevators how easy it is to operate, how much power density changes from the Nimitz’s class. I mean it is a centerpiece of the design is a centerpiece of the Navy strategy going forward and the ship is coming together really well. I mean getting ready to go towards their shock trial so all systems at our green and full speed ahead. Richard Safran: Okay, and now I'd like to go - revisit this comment you talked about your comments you were making about the future, the Navy fleet. It was one program I think that was omitted and maybe it was deliberate and there was talk of a replacement for the Ticonderoga was kind of wondering if you could just comment on the status of that program? I mean if you think that will ever materialize to a real opportunity. Or for example do you think that Flight III was is what you think is going to replace the Tyco's? Michael Petters: I'm not sure I know how to handicap that one of the first things I learned at the Academy 40 years ago was that there is countermeasures and then there's counter, countermeasures and there's counter, counter, countermeasures. And what happens is the technology races ahead at a speed that's lot different than the build cycle of a ship. And so the question is what kind of platform. You're going to need to work technology. If you look at the Flight III destroyer and you look at what they're trying to do with it that ship is pretty full. And so is there a - if the technology is going to require that kind of space and weight than it probably need something different to carry it forward. How we get there as an industry to design that and create a platform that has the margin, if you will for future technological upgrades. I think the Navy is - and the industry are having a pretty robust discussion about that right now. And I'm not sure I'm ready to handicap how it's going to turn out. Operator: The next question comes from Noah Poponak from Goldman Sachs. Please go ahead. Noah Poponak: Just going back to the pace of margin through the year topic and the risk retirement and how they flow through. The shipbuilding margin if I take out the net positive EAC in a lot of your history is in the zone of 6.5% and the different guidance comments you've provided for first half and full-year sort of implies second half 2Q, 3Q and then stepping up in 4Q? So I guess, it implies essentially no risk retirement events 2Q, 3Q actually maybe even embedding something slightly negative. Just want to make sure that's what you're looking for. And I have that correct? Michael Petters: Yes, I'd tell you, we are in the zone Noah so between 6% and 7% will be the norm, a 6.5% is a good estimate on your part. I tell you that the mix moves around at both yards as far as where the ships are so as ships get either sold off or mature when they take a step up and/or you have new ships that's spotted lower booking rate that mix changes. I wouldn't read too much into that where we need to be from a plan perspective and against our guidance that we gave you there. So yes, I think you got that right. Noah Poponak: Makes sense, and Tom when you look to next year in 2022, do you have more risk retirement events or less or a similar amount? Tom Stiehle: So we told you 7%, 8% this year low 8% next year. We had mentioned that I can go forward and then Chris gave the guidance for Q4 in February, had mentioned that hey this is a pacing year and then as we get into 2022 and 2023 we'll see more ship deliveries. So there is the potential there and the plan has this moving upward. And obviously, as the quarters kind of click off or burn down that risk and we'll realize those margin expansion that we discussed. Noah Poponak: And then just a clarification on the ARPA into pension, cash flow inputs do the contribution and CAS recovery numbers you provided previously literally not change at all or it's just that those had come down enough that the change is going to be small relative to your total cash flows? Tom Stiehle: Yes, it seems significant as far the change if you do the math - there is something there, but - we really don't want to chase it on a quarter-by-quarter basis. Since we strong over to Safe Harbor we really kind of mitigated the CAS variability and already we're at a limited contributions over the projection that Chris gave in February again. The mac contribution was $80 million half of that post retirement benefits. So and then also obviously the projections on pension it's going to be equally a function the discount rate is that changes and the plant performance, between those three variables. We're not going to update as recorded here. We'll give you a look see at Q3, that's the normal cadence for the remainder of the year in 2022. And then as 2021 closes out we will give you a fresh look at a 5-year projection next February. Operator: The next question comes from David Strauss from Barclays. Please go ahead. David Strauss: Mike, you touched on the unmanned portfolio and the potential growth there and a couple of your comments. Could you size the revenue in revenue now that sits within TS what a reasonable kind of target for that business could be over the next couple of years. And when you would think about actually breaking it out, so we can see what's going on there? Michael Petters: Yes, we have a broken that out yet. And so we'll just, we'll let you know when we're ready to break it out. David Strauss: Okay. I guess in the first quarter. You did, you had 5% growth at Newport, 3% at Ingalls you're forecasting shipbuilding relatively flat top a little bit this year and 3% from here. How should we think about the relative growth rate of new perb versus Ingalls both this year and into the future? Chris Kastner: Yes, this is Chris. We don't break out the growth rate by the two shipyards. We have historically said that Ingalls is more flattish moving forward and a lot of the growth is coming from Newport News, but we don't give specific growth rates. David Strauss: Okay, see if I can hit on one here the R&D amortization Tom what potential impact. Could you guys be looking at there, if that holds? Tom Stiehle: Yes, so the opinion that we have on that is not constructive to - from an investment standpoint and R&D if I have to amortize over five years. So we'll have to see how that legislation flows out. We have run some models on that. It's not a tremendous impact it does obviously affect the cash on it. I mean our model say, it could be in the 50-ish range $50 million to $100 million range, and we'll have to see how that legislation unfolds. David Strauss: Okay $50 million to $100 million on annualized cash flow in 2020? Tom Stiehle: Right, you got to amortize it over five years. Those credits and that's an evaluation we do annually against the portfolio that we have so. Operator: Our next question comes from Gautam Khanna from Cowen. Please go ahead. Gautam Khanna: I have a question on, good morning, guys. Question on the National Security Cutter program any change in the Biden administration the desire to keep bind these, what should we be looking for 2022 request what's on your contract if you could just refresh us on that? Michael Petters: Yes, we're pushing hard to get NSC 12 appropriated. I think it's kind of like the Navy side where we're kind of living off of the works done on the FY 2022 budget, before this administration got here. And I think the administration now is doing a kind of a top to bottom review of all of that stuff. That's why frankly for DoD you've just seen the top line number come out with not any details behind it. Our view is there is a lot of strong support for the National Security Cutter. The Coast Guard - is gainfully using that platform around the world and we're proud to be able to partner with them to get it done and we're going to continue to pursue it. Chris Kastner: Yes, Gautam I could add we've delivered through nine, as you're probably aware 11 kind of 11 on the production there at Ingalls 11 delivers on the 2024 timeframe. As Mike indicated very capable ship and we're working with the Coast Guard for potentially and the Congress to get 12 on the contract. Gautam Khanna: Okay, understood any discussion of additional Block V resource, this 12 sort of the end of the line on that program? Michael Petters: I think we'll see. I think we're just a lot of new players are coming to the table to have a discussion around it. We're happy to provide whatever requirement the nation needs in that platform. Gautam Khanna: Okay. And I may have missed it in your opening remarks, but where are we in terms of staffing at the shipyards people showing up like level of absenteeism and/or from COVID where is that? Michael Petters: Yes, we're at normal levels. Yes, we are at normal levels now. I mean, we have our lowest case rates since last summer. We have the fewest number of people in quarantine since last summer. Our third of our workforce, we've actually vaccinated one-third of the workforce. And the workforce is getting vaccinations in other places as well. And so what that's doing is that's just driving our case rates down pretty dramatically. We hired 6,000 people during the pandemic, our hiring plans continue and. And so, we're moving ahead, we expect that by 1st of June, the people in our shipyards that have - that want to get the vaccine will have had access to get it. And so, we're moving ahead. Gautam Khanna: And last one from me, just curious, is there any precedent for the bundled purchase that you were talking about which maybe LHA and LPD been put together was a bundle across different ship classes, contracting? Chris Kastner: We had a competition a few years ago where the competition was around and LHA and a TAO. And we won the LHA, and our friends at NASCO won the TAOs. So we've been building ships in this country for over 200 years. I would say that there is probably precedent for just about everything that's out there. Operator: The next question comes from Robert Spingarn from Credit Suisse. Please go ahead. Robert Spingarn: Chris, this one's for you. I wanted to ask in your new role. I think one of the things that you're tackling is just moving up the best practices from one yard to the other, maybe across all three businesses. And I was hoping you could expand on that a little bit talk about where the opportunities are within that? Chris Kastner: Yes, no that's a really good question. I do, I have had the opportunity to work at Ingalls as a CFO there. And then my corporate CFO job reviewing all the processes at Newport News. And there are significant things that happen within each of the yards and even internal solutions that can be shared. One example I can give is supply chain, the supply chain teams work very closely with each other. They bundle procurements, they look at capacity across the spectrum and they do a very good job at that, their operating systems are a bit different, but they learn from each other, and we bring best practices in the operating systems as well. So I can talk for days on the things we're working on across shipbuilding and within Technical Solutions to learn from each other. But those are just a few of them. Robert Spingarn: I think on one of our visits, one of the things we saw at Newport News was the implementation of VR - sort of to replace physical blueprints as an example of where technology can come in. Is there an update on how well that's implemented and if you're actually using that yet or if there are other technologies we're talking about? Chris Kastner: Yes, so another good question. Digital is absolutely being utilized within Newport News and building a CVN 80 - it's preparing for utilization on the Columbia class. So it's absolutely an investment we're making. It's paying off the craft and the traits like the new product and we're hoping for really great things to come from that. Robert Spingarn: As anyone quantified the benefit, have you seen at least in testing percentage of man-hours reduced or anything like that? Chris Kastner: We have definitely seen a percent increase in savings. We haven't published anything to that regard. It's just at the beginning stages on 80. So we don't want to get ahead of ourselves, but we are achieving savings yes. Operator: The next question comes from Joseph DeNardi from Stifel. Please go ahead. Joseph DeNardi: Just to clarify Carter's question maybe more specifically when you think about an inflationary environment what protections do you have and then where are the risk - and understand you're not seeing anything right now. But to the extent, we do see that where are you protected and where the risks? Tom Stiehle: Thanks, Joseph. So I just said early on that. Our contracts are a little bit more long-term and say across other industries. We do have the planning cycle long lead on our contracts. We usually our process here as we want to make sure that we have as much material understood on the quote. So when we go on award, the risk of inflation hitting, our handshake values is low on that. Additionally as contracts run out, there are some contracts here with the carriers’ six to seven or eight years, and we bought the material much further where it's tough to get that quote. We still have EPA, indices and pricing bands with the customer that we share in both the potential on the run or the overrun in that. And then obviously these contracts FBI’s so there is some sharing there. But like more immediate as we post right now for the execution of the contracts that we're working today. We don't see that right. I mean there is pockets here and there a piece of material that may be late. But on the whole material is being flown into the yard at the expected times and expectation of costs that the contracts that send it around. So hope that hit the answer to your question. Joseph DeNardi: Okay yes, that's helpful. And then Mike, when you look at 80, 81 and 82, can you talk about the degree of commonality you're expecting from those ships, does the Block Buy ensure greater commonality, so that maybe you can benefit more from serial production. When you think about the opportunity to improve margins on carrier construction, how important is maybe more commonality or - is it something very different than that? Thank you. Michael Petters: Yes, so 80 and 81 are the two ships under contract. 82 is the ship that's out there, Chris alluded to my ancient history as being a program manager. I was actually a program manager for the Stennis and Truman, which was the last time we've built two ships at the same time. I can tell you that the second ship absolutely benefits from the first ship in the way that the teams move from one platform to the next. The learning curves are there. It's kind of hard to think about learning curves on ships that deliver four or five years apart, but they actually it's real. And as you get to the second ship you have well trained crews, who have been through this who are working through it, who are capturing lessons and they are carrying lessons learned with them into that platform. Then the trick will be how do you take what we've learned at 81 and make sure that you do that with 82 and what that means is 82 is got to be on time. If you delay 82, and I've seen this over my whole career, you start spreading these things back out, you start breaking those learning curves. So what 80, 81 means is that you're going to get great efficiency there. I think the Navy advertised $4 billion of efficiency across the enterprise, which that's pretty significant. If you spread that out and you delay 82 and you push it out, you're going to start to cut into that efficiency pretty dramatically. That's what happened after Stennis and Truman of 74 and 75, really came together very nicely. Then we kind of push 76 out to the right a little bit. And then we push 77 out to the right a little bit. And then we push 78 out to the right a little bit. And so all of that we're trying to capture that back. And I would, no surprise, I would argue that the next carrier contract should also be a two-ship by 82 and 83. So but that's just me. Operator: Thank you. I'm not showing any further questions at this time, I would now like to hand the call back over to Petters for any closing remarks. Michael Petters: Well, thanks for that and thanks for joining us today, and we certainly hope that you and your families are all staying safe and our healthy in this environment as we kind of come through the pandemic. But one final thought for you all, as I'd like to direct your attention to our Investor Relations page on our website, and take a look at our corporate sustainability report. We've been doing a lot of work over many years around these kinds of issues related to sustainability. But we've collected all of that and created a virtual report for you to take a look at, and it's only been up there. I don't know over couple of months, and it's a pretty dynamic presentation, but I'm very proud of what this company does relative to our communities, relative for our employees, for their families, for our customers. I'm very proud of what we do and how we do it, and this is a chance for us to kind of brag about a little bit. So if you get a chance take a look at that. And as always, I appreciate your and we appreciate your interest in our company. Your engagement with us and any feedback that you have, and we look forward to seeing you again soon. Thanks. Operator: Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.