Huntington Ingalls Industries, Inc. · NYSE:HII
Huntington Ingalls Industries — Investor Day (February 2020)
86 slides from Huntington Ingalls Industries's investor day presentation, Feb 18, 2020
Slide 1: Huntington Ingalls Industries Investor Day
Huntington Ingalls Industries Investor Day February 18, 2020 HARD STUFF DONE RIGHT
Slide 2: Safe Harbor / Forward-looking Statements
Safe Harbor / Forward-looking Statements Statements in this presentation, other than statements of historical fact, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties that coul
Slide 3: Speakers and Agenda
Speakers and Agenda Mike Petters Mitch Waldman Jennifer Boykin Brian Cuccias Andy Green Chris Kastner President & EVP Govt. & EVP & President EVP & President EVP & President EVP & Chief Executive Officer Customer Relations Newport News Ingalls Shipbuilding Technical Solutions Chief Financial Officer
Slide 4: Opening Remarks and Operational Review
Opening Remarks and Operational Review Huntington Ingalls Industries Investor Day February 18, 2020 Mike Petters President and Chief Executive Officer
Slide 5: Key Messages for Today
Key Messages for Today We have established the foundation for shipbuilding success over the next decade We are aligning our portfolio with customer requirements that will drive higher revenue and earnings growth We have the financial flexibility to pursue critical growth opportunities and return cas
Slide 6: HII at a Glance
HII at a Glance America’s premier military shipbuilder and U.S. Navy’s mission critical partner Sole source for nuclear-powered aircraft carrier construction, refueling and inactivation Technical Solutions One of two builders of Virginia class (VCS) nuclear-powered submarines 13% Subcontractor
Slide 7: Markets, Products & Customers
Markets, Products & Customers Markets Products Primary Customers Construction Shipbuilding RCOH Maintenance Fleet Sustainment Modernization Platforms Unmanned Maritime Systems Systems Services Defense & Federal Training & Simulation Solutions Advanced Cyber & Engineering Next-Gen
Slide 8: Commitments Made, Commitments Kept
Commitments Made, Commitments Kept 2011 – 2015 Commitments & Results Path to 2020 Commitments & Results Improved operations and achieved Generational investment in shipyards benefits of serial production at Ingalls and captured new business Optimize and expand portfolio with disciplined M&A fr
Slide 9: Backlog Provides Unmatched Stability and Visibility
Backlog Provides Unmatched Stability and Visibility Backlog ($B) Focused effort led to capture of key contract Significant Backlog Growth in FY19 $50 2 aircraft carrier buy $46 awards in a challenging budget environment VCS Block V $40 LPD 30 $30 $23 $21 $21 Long-term visibility allows for
Slide 10: Success Enablers
HII Operating System Tenets…the Key to Execution Organization / People Ensuring right people in right place at right time Utilizing capital investments to improve People efficiency and affordability Success Enablers Business Processes Capturing and leveraging lessons learned Proposal Developme
Slide 11: Investing Strategically to Meet Customer Needs
Investing Strategically to Meet Customer Needs Evolving Customer Requirements Recent HII Investments National National Defense Intelligence Shipbuilding Strategy Strategy SECNAV Vectors o ~$1.9B CAPEX Program Fleet Expansion / Undersea Coast Guard Modernization Dominance Capital Investment Plan
Slide 12: Potential M&A Focus Areas
Potential M&A Focus Areas Unmanned Systems o Growing and evolving market Required Characteristics o Hydroid acquisition closes gaps Customer Capabilities Access Next-Gen IT, C5ISR, Training & Simulation Shipbuilding o Growing market where critical mass adds to Fleet Sustainment success o Custome
Slide 13: Market Leadership in Unmanned is Critical
Market Leadership in Unmanned is Critical Capability Hydroid HII Combined HII and Hydroid to provide leading end- Small UUV to-end unmanned system solutions Medium UUV across the market spectrum Large UUV XLUUV Hydroid expands HII’s capabilities, Small USV technologies acro
Slide 14: 2020-2024 Strategic Focus
2020-2024 Strategic Focus Driving Growth Consistent, predictable long-term shipbuilding growth with repair/maintenance upside opportunities Disciplined pursuit of opportunities in high-growth end markets Managing Risk Experienced management team laser-focused on efficient execution of backlog
Slide 15: HII Investment Thesis
HII Investment Thesis 1. Unparalleled visibility created by historic backlog and strong competitive posture 2. Consistent and predictable shipbuilding revenue growth profile 3. Portfolio shaping aligned with growing and evolving customer requirements 4. Improving operational performance that support
Slide 16: Government & Customer Relations
Government & Customer Relations Huntington Ingalls Industries Investor Day February 18, 2020 Mitch Waldman Executive Vice President Government and Customer Relations HARD STUFF DONE RIGHT
Slide 17: Customer Strategy & Investment
Customer Strategy & Investment National Security Strategy (Pillar 3: Preserve Peace Through Strength) SECNAV Vectors NATIONAL NATIONAL INTELLIGENCE Modernize and grow a resilient DEFENSE STRATEGY STRATEGY Coast Guard global force Capital Investment Plan Field a ready and trained force CNO Fragme
Slide 18: Modernize and Grow a Resilient Global Force
Modernize and grow a resilient global force Modernize and Grow a Resilient Global Force Navy/Marine Corps At least 355 ships by 2030 – an evolving mix o Undersea dominance o Unmanned, “minimally” manned, autonomous o Enhanced lethality Resilient networks & sensors Air Force/Army/Intelligence Com
Slide 19: Field a Ready and Trained Force
Field a Ready and Trained Force Navy/Marine Corps Air Force Ship & depot maintenance Synthetic Training Experimentation Force exercises & wargames Fleet exercises & wargames Overmatch the Threat – Deliver Decisive Force 19 HUNTINGTON INGALLS INDUSTRIES HARD STUFF DONE RIGHT
Slide 20: Modernize a Safe and Effective Strategic Nuclear Triad
Modernize a Safe and Effective Strategic Nuclear Triad Navy Columbia (SSBN-826) Class Ballistic Missile Submarine DoE Modernization & recapitalization of the nuclear security enterprise Acceleration of environmental management High Complexity – Strategic Importance 20 HUNTINGTON INGALLS INDUST
Slide 21: Sustain a Healthy Defense Industrial Base
Sustain a Healthy Defense Industrial Base Executive Order 13806 – Strengthening the Manufacturing and Defense Industrial Base DoD comprehensive study on defense industrial base o Sequestration impact o Significant decline in manufacturing capacity o Complexity of government procurement practices
Slide 22: Budget Summary
Budget Summary Funding FY2015 FY2020 FY2021 ($ millions) Enacted Enacted Requested Department of Defense Shipbuilding 15,995 23,975 19,900 Ship Depot Maintenance 8,544 10,052 11,200 Unmanned (UUV/USV) 41 645 698 C4I 6,600 10,200 11,900 Department of Homeland Security USCG Ships 824 994 1,280 Departm
Slide 23: Legislative Posture - Observations
Legislative Posture - Observations HOUSE SENATE Bi-partisan Budget Act provides defense and non-defense discretionary topline for FY2021 o Budget sequestration ends in FY2021 National Defense Authorization Strong support of fleet capability & capacity Act Coast Guard o 10 USC 5062 Authorization
Slide 24: Newport News Shipbuilding
Newport News Shipbuilding Huntington Ingalls Industries Investor Day February 18, 2020 Jennifer Boykin Executive Vice President and President, Newport News Shipbuilding HUNTINGTON INGALLS INDUSTRIES HARD STUFF DONE RIGHT
Slide 25: Newport News Shipbuilding at a Glance
Newport News Shipbuilding at a Glance ~25% ~29% Newport News Shipbuilding is the sole designer, builder and refueler of U.S. Navy Aircraft Services aircraft carriers and one of two providers of U.S. Navy submarines. We design, build, Carriers maintain and inactivate the most advanced ships in the
Slide 26: NNS – Financial Update
NNS – Financial Update Backlog Revenue Segment Operating Income & Margin1 ($B) ($M) ($M) $40 $6,000 600 9.4% 10.0% $35 $35 8.2% CAGR 8.5% $5,000 500 $5,186 7.5% 8.0% $30 $4,722 6.7% $4,000 400 $25 $4,089 $4,164 $390 6.0% $386 $354 $20 $3,000 300 $318 $15 $13 $13 4.0% $11 $2,000 200 $10 $1,000 100 2.
Slide 27: Our Execution Focus
Our Execution Focus: Expertise Aligns with Navy’s Requirements and the National Defense Strategy Investing in our Future Aircraft Carriers Refuelings & Inactivations Submarines Facilities, Technology, People Defined Standards Enabling Execution with Governance to Check, Verify and Improve 27 HUNTING
Slide 28: Aircraft Carriers: Ford Class
CVN 78 CVN 79 CVN 80 & 81 Facility Investments Aircraft Carriers: Ford Class USS Gerald R. Ford John F. Kennedy Enterprise & Doris Miller New Facilities for Complex Designed in a 3-D Leverage 3-D for Two-Ship Contract Manufacturing Product Model Greater Build Efficiency Reduces Cost
Slide 29: Aircraft Carriers: RCOH and Inactivations
RCOH Inactivations Facility Investments Aircraft Carriers: Refueling & Complex Overhauls (RCOH) and Carrier Inactivations “The Refueling and Complex Overhaul of a nuclear-powered Recapitalizes Centerpiece of Finished First Nuclear Aircraft New 315-Metric-Ton Gantry aircraft carrier is one of t
Slide 30: Aircraft Carrier Life Cycle
Aircraft Carrier Life Cycle 2018 2087 USS Doris Miller (CVN 81) Fleet Operations Fleet Operations ~ $8 Billion Value ~ $3.5 Billion Value ~ $1 Billion Value (2020 dollars) (2020 dollars) (2020 dollars) 30 HUNTINGTON INGALLS INDUSTRIES HARD STUFF DONE RIGHT
Slide 31: Aircraft Carrier Life Cycle
Aircraft Carrier Life Cycle 2015 2015 2018 2021 2024 2027 2030 2033 2036 2039 2042 2045 2048 2051 2054 2057 2060 2063 2066 2069 2072 2075 2078 2081 2084 2087 2087 New New Aircraft Construction Construction CVN 79 - JOHN F. KENNEDY CVN 80 - ENTERPRISE CVN 81 - DORIS MILLER Refueling & Complex Overhau
Slide 32: Submarines: New Construction and Design
Virginia Columbia SSN(X) Facility Investments Submarines: New Construction and Design 18 Boats Delivered 12 Boats Planned – Design Studies in New State-of-the-Art 19 Boats Under 70% of U.S. Nuclear Support of Navy’s Facilities to Increase Triad Next Generation Capacity Contract Through 202
Slide 33: Investing in our Future Through Our Facility
Investing in our Future Through Our Facility Significant Investments in Physical Plant Infrastructure Since 2016 Joint Manufacturing & Assembly Facility (VCS/Columbia/CVN) Submarine Facility Extension Machine Shop, Foundry & Steel Fabrication Improvements New Automation to 310-Ton Crane Increase Eff
Slide 34: Investing in our Future Through Technology
Investing in our Future Through Technology Current Integrated Digital Shipbuilding (iDS) Efforts Design and Planning Build Management Work Execution Technology Enablers Additive Laser Scanning/ Augmented 5G Shipyard Data Analytics Manufacturing Reality Capture Reality Enables Efficiency, Mobility, A
Slide 35: Investing in our Future Through People
Investing in our Future Pre-K, Elementary Programs: Through People Future CVN 81 and Columbia-Class Shipbuilders Employee Volunteer Programs Ongoing Training for Current Workforce: Modern Training Tools, Methods and Curriculum for Current Employees Middle School Programs: Future CVN 80 and Columbia
Slide 36: Summary
Summary Summary Historic $34.8 billion backlog Intensely Focused on the Safety and Well-being of our Workforce Growing the Talent of our Skilled and Proud Workforce Aggressively Driving Cost Reduction and Continuous Improvement Opportunities Investing in our People, Facilities, Technologie
Slide 37: Ingalls Shipbuilding
Ingalls Shipbuilding Huntington Ingalls Industries Investor Day February 18, 2020 Brian Cuccias Executive Vice President and President, Ingalls Shipbuilding
Slide 38: Ingalls Shipbuilding at a Glance
Ingalls Shipbuilding at a Glance Currently building four classes…13 hulls under construction USCG 14% Sole builder of LHA 6 America class large deck amphibious Services assault ships, LPD 17 San Antonio class amphibious 9% transport dock ships and Legend class National Security 2019 Cutters (NSC
Slide 39: Ingalls – Financial Update
Ingalls – Financial Update Backlog Revenue Segment Operating Income & Margin1 ($B) ($M) ($M) $12 $11.4 $3,500 $10.8 $500 16% $10 $3,000 2.3% CAGR 13.4% 12.9% 14% $400 12.0% $8.0 $2,500 12% $8 $2,607 $2,555 $6.7 $2,420 9.2% 10% $2,000 $2,389 $300 $321 $313 $313 $6 8% $1,500 $235 $200 6% $4 $1,000 4%
Slide 40: Amphibious Assault Ships – LHA Program
Amphibious Assault Ships – LHA Program LHA 6 America Class Cornerstone of amphibious ready groups Transports and lands marine expeditionary units Built for the Joint Strike Fighter F35B Length 844 feet Displacement 44,850 tons 14 large deck amphibious Two ship backlog assault ships delivered
Slide 41: Amphibious Landing Platform/Dock Ships – LPD Program
Amphibious Landing Platform/Dock Ships – LPD Program LPD 17 San Antonio Class Transports marines, equipment and supplies Expeditionary warfare missions Humanitarian assistance and disaster relief missions Length 684 feet Displacement 24,900 tons 11 amphibious Three ship backlog landing platfor
Slide 42: Surface Combatants – DDG Program
Surface Combatants – DDG Program DDG 51 Arleigh Burke Class Multi-mission, guided missile destroyers Anti-air, anti-submarine, and anti-surface warfare 100,000 total shaft horsepower Length 509.5 feet Displacement 9,300 tons DDG 119 Ten ship backlog 31 guided missile DDG 121 DDG 123 destroyers
Slide 43: National Security Cutters – NSC Program
National Security Cutters – NSC Program Legend Class National Security Cutter (NSC) Centerpiece of the U. S. Coast Guard’s fleet Largest, most technologically advanced cutters Length 418 feet Displacement 4,600 tons Eight national security Three ship backlog cutters delivered NSC 9 NSC 1 – 8 N
Slide 44: Planning Yard and Fleet Services
Planning Yard and Fleet Services CG 47 Class LPD 17 Class LCS Class Fleet Services Planning Yard Planning Yard Planning Yard Washington, DC Japan Yokosuka Sasebo Norfolk, VA Norfolk, VA San Diego, CA Mayport, FL Mayport, FL Pearl Harbor, HI Pascagoula, MS Hawaii Base Operations Comprehensive life-
Slide 45: Investing for the Future (Shipyard of the Future)
Investing for the Future (Shipyard of the Future) Increased Capacity Improved Product Flow Manufacturing Optimization Increased Utilization Investment in People, Processes and Facilities 45 HUNTINGTON INGALLS INDUSTRIES HARD STUFF DONE RIGHT
Slide 46: Ingalls’ New Ship Construction Competitive Wins
Ingalls’ New Ship Construction Competitive Wins 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 7 Ships LHA 8-14 LHA 8-14 7 Ships 10 - 13 Ships DDG Program of Record DDG 125-145+ 10-13 Ships DDG Continuation LPD 28-29 LPD 28-29 2 Sh
Slide 47: Shipyard of the Future Facility (2015)
Shipyard of the Future Facility (2015) West Bank East Bank Flow was not optimized Significant work outside 2019 summer months averaged over 95⁰ heat index (128⁰ peak) Last three years averaged over 80 rain days 47 HUNTINGTON INGALLS INDUSTRIES HARD STUFF DONE RIGHT
Slide 48: Shipyard of the Future Facility (2020)
Shipyard of the Future Facility (2020) West Bank East Bank Final stages of completion Improved product flow Increased utilization Added 1,000,000 sq. ft. of cover 48 HUNTINGTON INGALLS INDUSTRIES HARD STUFF DONE RIGHT
Slide 49: Shipyard of the Future Projects
Shipyard of the Future Projects Rolling Covers – Bay 1 CSA III Thin Panel Line Rolling Covers – Track 6 East Bank Revitalization Dry Dock Increased Increased Improved Cover Capacity & Cover Flow & Utilization 49 HUNTINGTON INGALLS INDUSTRIES HARD STUFF DONE RIGHT
Slide 50: Shipbuilder of the Future – Innovating Workforce Development
Shipbuilder of the Future – Innovating Workforce Development Shipbuilder Academy Program for high school seniors to develop Partnering with a career pathway in the maritime industry Local High Schools Talent Development Labs Maritime Training Academy State of the art apprentice school Early Educatio
Slide 51: Shipbuilder of the Future – High School Partnerships
Shipbuilder of the Future – High School Partnerships • State of the art facilities and equipment to meet industry standards • Superior technical training • Trade leadership mentoring students Soft Skills Curriculum Decision Making Perseverance Grit Employability Determination Financial Responsibilit
Slide 52: Summary
Summary Ingalls has the talent, experience and capacity to meet the nation’s needs today and in the future Shipyard of the Future investments are essentially complete and in operation today Workforce development initiatives are revolutionizing the pipeline for future shipbuilders Recent comp
Slide 53: Technical Solutions
Technical Solutions Huntington Ingalls Industries Investor Day February 18, 2020 Andy Green Executive Vice President and President, Technical Solutions Division
Slide 54: Technical Solutions at a Glance
Technical Solutions at a Glance Professional services provider for government and commercial partners, supporting national security missions around the globe. ~ 6,000 employees located in 45 states and 16 countries Nuclear & Unmanned Environmental Systems 20% with 10+ 53% with security ~ 1,000 engin
Slide 55: Financial Update
Financial Update Backlog Revenue Segment Operating Income & Margin1 ($M) ($M) ($M) $1,200 $1,400 $35 4% $1,200 17% CAGR $1,309 $30 $1,000 11% CAGR 3.2% $973 $1,000 3% $25 $800 $988 $792 $952 $800 $20 2.2% $600 $719 2% $600 $15 $32 $400 $400 $10 $21 1% $200 $200 $5 0.5% $6 $0 $0 $0 0% 2017 2018 2019
Slide 56: History of Technical Solutions
History of Technical Solutions Huntington Ingalls Industries formed Pending ship repair partnership with Titan Pending Hydroid acquisition S.M. Stoller acquired, strengthens HII’s position as a providing nuclear and leader in unmanned maritime systems environmental services Fulcrum acquired, providi
Slide 57: Technical Solutions Overview
Technical Solutions Overview Market Expertise Differentiator Design, engineering, fabrication and Long history of undersea system Unmanned operation of UUVs and platform development for USN UUV platform sustainment and maintenance Strong positions on key unmanned Systems Autonomy software
Slide 58: Strategic Growth and Sustainment
Strategic Growth and Sustainment Unmanned Defense & Intelligence Nuclear & Environmental Unmanned Maritime Systems: C5ISR Services: Department of Energy: Essential to Navy’s distributed maritime Multi-domain ISR (including ISR as-a-Service); Nuclear lab operations, site management, operations
Slide 59: HII Capabilities: Intelligence Lifecycle Support
HII Capabilities: Intelligence Lifecycle Support Intelligence Analysis IT & Cyber Real-time data analytics, Satellite operations, reporting, training support systems infrastructure, integration, security Integrated DoD ISR Support Intelligence Unmanned Systems Mission planning, platform Operations D
Slide 60: HII Capabilities: Leveraging NNS and Stoller Across DOE
60 HII Capabilities: Leveraging NNS and Stoller Across DOE Hanford Site Dept. of Energy Sites Pacific N.W. NL National Nuclear Security Agency Site Kesselring (NL=National Lab) Idaho NL (DOD Site) Office of Science Naval Reactors Facility Bettis Atomic Environmental Nat. Renewable Power Lab. Managem
Slide 61: Pipeline for Sustainment and Growth
61 Pipeline for Sustainment and Growth Qualified YoY revenue organic 12.4% Opportunities $10.7B growth rate1: New work 46% Submissions win rate: $1.6B Re-compete Awards win rate: 78% $1.4B Book to Total Backlog 1.1x $973M Bill Ratio: 1 2019 YoY revenue growth rate excluding acquisitions of G2 and Fu
Slide 62: Summary
Summary Well-positioned to capitalize on strong growth opportunities in unmanned systems, C5ISR, training and simulation, and nuclear services. Unique blend of technical capabilities, customer relationships, and program execution expertise. Organic growth will be augmented by disciplined acqui
Slide 63: Financial Review
Financial Review Huntington Ingalls Industries Investor Day February 18, 2020 Chris Kastner Executive Vice President and Chief Financial Officer
Slide 64: Fiscal 2019 Results
Fiscal 2019 Results Consolidated Revenues ($M) Revenue growth of 8.8% $9,000 +8.8% $8,500 o Shipbuilding grew 5.6% YoY $8,000 $8,899 o Technical Solutions grew 32.5% YoY; 12.4% organically $7,500 $8,176 $7,000 8.1% shipbuilding operating margin2 exceeded FY18 FY19 mid-point of target 2019 Shipbu
Slide 65: Successfully Executing the Path to 2020 Strategy
Successfully Executing Cash Generation the Path to 2020 Strategy and Deployment FY16-19 Free Cash Flow1 Generation & Deployment Commitments Made Results to Date (FY16-19) ($M) Invest ~$1.9B in ~$1.5B invested to date; $2,500 shipyards 2016-20 complete investment in FY20 $2,000 $1,962 $1,978 Re
Slide 66: Generational Capital Investment Cycle Concludes in FY20
Generational Capital Investment Cycle Concludes in FY20 Capital Expenditures ($M) $500 10.0% $436 9.0% $402 $400 8.0% $361 7.0% $300 $287 $285 6.0% $266 $246 $220 5.4% $218 5.0% $191 $197 $188 4.9% 4.9% 4.9% $200 4.6% $181 4.0% 4.3% $162 $165 4-5% $136 $139 4.0% 3.5% 3.5% 3.0% 2.9% 2.8% 3.0% $100 2.
Slide 67: Sharpening our Strategic Focus
Sharpening our Strategic Focus Capabilities Added Resulting Strategic Benefits Nuclear & Environmental Services Enabled key DoE wins Unmanned Maritime Systems Established HII in critical emerging naval market Defense & Federal Solutions ·Training & Simulation Enhanced HII position in multiple
Slide 68: The Future: Key Financial Considerations
The Future: Key Financial Considerations Unprecedented visibility in revenue and growth profile Improving segment operating margins Expanding free cash flow driven by growth, improving margins and lower capital expenditures Strong balance sheet supports: o Customer requirements o Shareholder
Slide 69: Record Backlog Provides Significant Visibility and Stability
Record Backlog Provides Significant Visibility and Stability Over 85% of expected FY20 to FY24 shipbuilding revenue already under contract1 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2020 2021 2022 2023 2024 Aircraft Carriers Submarines LHA & LPD DDG & NSC Other Not Under Contract Under Contract 1
Slide 70: Technical Solutions: Focused on higher growth and higher margin markets
Technical Solutions Focused on higher growth and higher margin markets FY201-FY24 Revenue CAGR Post strategic actions Unmanned Systems 7-8% Technical Solutions generates revenues of ~$1B in FY20 Defense & Federal 5-6% Solutions 7-9% EBITDA margin expands Fleet Sustainment ~2% to 8-10% by FY24 Nuclea
Slide 71: Segment Operating Income Poised to Grow
Segment Operating Income Poised to Grow Shipbuilding Revenue Growth Shipbuilding Portfolio Maturity TS Growth and Focus FY192 FY24 1 Non-GAAP financial measure. See appendix for definition and reconciliation to GAAP. 2 Adjusted Segment Operating Income, which excludes the impact of 2019 goodwi
Slide 72: Free Cash Flow Ramps
Free Cash Flow Ramps Notional Annual Free Cash Flow 1 Generation ($M) Revenue growth, operating margin improvement and lower CAPEX drive Net pension FCF improvement ~$3B Cumulative FCF Last year of cash begins FY20-FY24 elevated to moderate CAPEX $500 FY20 FY21 FY22 FY23 FY24 Robust free cash flow g
Slide 73: Capital Allocation Supports Value Creation
Capital Allocation Supports Value Creation Maintain Our Shipyards Continue Dividend Growth - Target ~30% pension adj. payout ratio by end of 2024 Strategically Shape Portfolio Excess Cash to Share Repurchases - Returns exceed cost of capital - $1.2B remains on repurchase authorization through FY24 -
Slide 74: FY20-24 Outlook
FY20-24 Outlook Significant revenue stability and visibility o Over 85% of expected shipbuilding revenue is under contract o Long-term shipbuilding revenue CAGR of 3% with opportunity for near-term upside (3-5% YoY growth in 2020) o Technical Solutions revenue CAGR of 4-5% Margin stability o Seg
Slide 75: Closing Remarks
Closing Remarks Huntington Ingalls Industries Investor Day February 18, 2020 Mike Petters President and Chief Executive Officer
Slide 76: Closing Thoughts – We are Focused on Value Creation
Closing Thoughts – We are Focused on Value Creation We have established the foundation for $46B Backlog shipbuilding success over the next decade 3% Revenue growth w/near-term upside Improving operational performance We are aligning our portfolio with customer Acquisition of Hydroid requirem
Slide 77: Q&A
Q&A Mike Petters Chris Kastner President & CEO EVP & CFO
Slide 78: Appendix
Appendix HUNTINGTON INGALLS INDUSTRIES PROPRIETARY
Slide 79: Acronyms
Acronyms C5ISR - Command, Control, Communications, Computers, Combat systems, Intelligence, Surveillance and Reconnaissance CNO - Chief of Naval Operations CSAF - Chief of Staff of the Air Force CG - Hull classification symbol for guided missile cruiser CVN - Hull classification symbol for
Slide 80: Non-GAAP Measures Definitions
Non-GAAP Measures Definitions We make reference to “segment operating income,” “segment operating margin,” “adjusted segment operating income,” “shipbuilding operating margin,” and “free cash flow.” We internally manage our operations by reference to segment operating income and segment operating ma
Slide 81: Non-GAAP Measures Definitions Cont’d
Non-GAAP Measures Definitions Cont’d Segment operating income is defined as operating income for the relevant segment(s) before the Operating FAS/CAS Adjustment and non-current state income taxes. Segment operating margin is defined as segment operating income as a percentage of sales and service re
Slide 82: Non-GAAP Reconciliations – Segment Operating Income & Segment Operating Margin
Non-GAAP Reconciliations – Segment Operating Income & Segment Operating Margin Year Ended December 31 ($ in millions) 2019 2018 2017 2016 Ingalls revenues $ 2,555 $ 2,607 $ 2,420 $ 2,389 Newport News revenues 5,186 4,722 4,164 4,089 Technical Solutions revenues 1,309 988 952 691 Intersegment elimina
Slide 83: Non-GAAP Reconciliations – Adjusted Segment Operating Income
Non-GAAP Reconciliations – Adjusted Segment Operating Income Three Three Months Months Ended Ended YearYear Ended Ended December December 31 31 December December 31 31 ($ in ($ in millions) millions) 20192019 20182018 20192019 20182018 Operating Operating income income 186 186 213 213 736 736 951 95
Slide 84: Non-GAAP Reconciliations – Shipbuilding Operating Margin
Non-GAAP Reconciliations – Shipbuilding Operating Margin Three Months Ended March 31 June 30 September 30 December 31 ($ in millions) 2019 2019 2019 2019 Sales and service revenues 2,080 2,188 2,219 2,412 Less Technical Solutions revenues 257 336 347 369 Intersegment eliminations 26 37 39 49 Shipbui
Slide 85: Non-GAAP Reconciliations – Free Cash Flow
Non-GAAP Reconciliations – Free Cash Flow Year Ended December 31 ($ in millions) 2019 2018 2017 2016 Net cash provided by (used in) operating activities 896 914 814 822 Less capital expenditures: Capital expenditure additions (530) (463) (382) (285) Grant proceeds for capital expenditures 94 61 21 -
Slide 86: HUNTINGTON INGALLS INDUSTRIES HARD STUFF DONE RIGHT
HUNTINGTON INGALLS INDUSTRIES HARD STUFF DONE RIGHT
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