Huntington Ingalls Industries, Inc. · NYSE:HII
Huntington Ingalls Industries — Q3 2023 Earnings Presentation
21 slides from Huntington Ingalls Industries's earnings presentation, Nov 2, 2023
Slide 1: HII Q3 2023 Earnings
HII Q3 2023 Earnings November 2, 2023 Chris Kastner President and Chief Executive Officer Tom Stiehle Executive Vice President and Chief Financial Officer
Slide 2: Cautionary Statement Regarding Forward-looking Statements
Cautionary Statement Regarding 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. You can generally identify forward-looking statemen
Slide 3: HII Q3 2023 Highlights
HII Q3 2023 Highlights • Record third quarter revenues of $2.8 billion, up 7.2% YoY Change • Contract awards of $5.4 billion, resulting in backlog of approximately $49 billion Q3 from • Diluted EPS of $3.70 for the quarter 2023 Q3 2022 Ingalls Shipbuilding Highlights • Launched amphibious assault sh
Slide 4: Mission Technologies Q3 Wins
Mission Technologies Q3 Wins • $1.4 billion Joint Network Engineering and Emerging Operations (J-NEEO) task order under the General Services Administration’s ASTRO contract • $347 million Lionfish Small Unmanned Undersea Vehicle production, training, and engineering • $244 million U.S. Navy, U.S. Ma
Slide 5: Upcoming Shipbuilding Milestones
Upcoming Shipbuilding Milestones1 2023 2024 o Ingalls o Ingalls Complete sea trials and deliver DDG 125 Complete sea trials and deliver DDG 128 (Jack H. Lucas) (Ted Stevens)- moving to early 2025 Launch DDG 128 (Ted Stevens) Launch DDG 129 (Jeremiah Denton) Launch LHA 8 (Bougainville) La
Slide 6: HII Q3 2023 Consolidated Results
HII Q3 2023 Consolidated Results CONSOLIDATED REVENUE ($M) OPERATING INCOME ($M) & MARGIN $3,000 $2,816 $200 $2,626 $180 $172 $2,500 $160 $2,000 $140 $131 $120 $1,500 $100 6.1% $80 $1,000 $60 5.0% $500 $40 $20 $0 Q3 22 Q3 23 $0 Q3 22 5.6% Q3 23 • Revenue grew $190M or 7.2% • Operating income increas
Slide 7: HII Q3 2023 Segment Results
HII Q3 2023 Segment Results SEGMENT OPERATING INCOME ($M) Ingalls Shipbuilding REVENUE ($M) & MARGIN1 $800 $711 Revenue $623 $80 $73 + Amphibious assault ships $600 $60 $50 + Surface combatants $400 16.1% 10.3% $40 Operating Income 9.8% 8.0% + Higher volumes $200 $20 + Favorable contract adjustments
Slide 8: HII Q3 2023 Capital Deployment
HII Q3 2023 Capital Deployment CASH FLOW GENERATION ($M) SHAREHOLDER DISTRIBUTIONS ($M) $400 $80 TOTAL $335 $71 $350 TOTAL $293 $70 $300 $62 $250 $60 $200 $50 $150 $40 $100 $50 $30 $0 $20 ($50) ($19) ($42) $10 ($100) ($77) ($96) ($150) $0 Q3 22 Q3 23 Q3 22 Q3 23 Cash from Ops. CAPEX Free Cash Flow 1
Slide 9: 2024 Net Pension & PRB Income Sensitivities
2024 Net Pension & PRB Income Sensitivities ($M) 2023 Actual Asset Return FAS 0% 2.5% 4.6%(1) 6.0% 7.5% Discount Rate Change(2) -25 bps (48) (17) 8 24 41 0 bps (29) 0 24 40 53 +25 bps (13) 15 37 48 60 +50 bps 2 27 44 55 66 +62 bps 8 31 47(1) 57 66 +75 bps 14 34 50 59 67 +100 bps 20 38 52 59 67 CAS(3
Slide 10: HII Free Cash Flow & Capital Allocation
HII Free Cash Flow1,2 & Capital Allocation3 • Committed to investment grade rating; FREE CASH FLOW1 FY20-24 Targeting ≤2x Debt/EBITDA1 by year-end 2024 (assumes Sec. 174 is not deferred or repealed) • Continued dividend growth at a low to mid-single ~$1.2B over FY23 & FY24 digit growth rate • Balanc
Slide 11: HII 2023 Outlook
HII 2023 Outlook1 FY23 OUTLOOK1 FY23 • Increasing midpoint of shipbuilding revenue2 guidance by $50 Outlook million, to $8.5 - $8.6B Shipbuilding Revenue2 $8.5B - $8.6B • Increasing Mission Technologies revenue guidance by $50 million, Shipbuilding Operating Margin2 7.7% - 8.0% to ~$2.55B Mission Te
Slide 12: Investment Thesis
Historic backlog and positioning provide strong visibility INVESTMENT Consistent long-term shipbuilding growth profile THESIS Reshaped Mission Technologies portfolio to address evolving customer needs in high growth markets POSITIONED FOR SUCCESS Nearing sustainable free cash flow inflection point F
Slide 13: Appendix
Appendix
Slide 14: Non-GAAP Information
Non-GAAP Information We make reference to “segment operating income,” “segment operating margin,” “shipbuilding revenue,” “shipbuilding operating margin,” “Mission Technologies EBITDA,” “Mission Technologies EBITDA margin,” “Debt/EBITDA” and “free cash flow.” We internally manage our operations by r
Slide 15: Non-GAAP Measures Definitions
Non-GAAP Measures Definitions Debt/EBITDA is defined as gross debt divided by net earnings before interest expense, income taxes, depreciation and amortization. Segment operating income is defined as operating income for the relevant segment(s) before the Operating FAS/CAS Adjustment and non-current
Slide 16: Non-GAAP Reconciliations: Segment Operating Income & Margin
Non-GAAP Reconciliations Segment Operating Income & Segment Operating Margin Three Months Ended Nine Months Ended September 30 September 30 ($ in millions) 2023 2022 2023 2022 Ingalls revenues 711 623 1,952 1,912 Newport News revenues 1,453 1,445 4,468 4,268 Mission Technologies revenues 685 595 1,9
Slide 17: Non-GAAP Reconciliations: Shipbuilding Revenues & Operating Margin
Non-GAAP Reconciliations Shipbuilding Revenues & Operating Margin Three Months Ended Nine Months Ended September 30 September 30 ($ in millions) 2023 2022 2023 2022 Sales and service revenues 2,816 2,626 8,277 7,864 Mission Technologies (685) (595) (1,954) (1,785) Intersegment eliminations 33 37 97
Slide 18: Non-GAAP Reconciliations: Free Cash Flow
Non-GAAP Reconciliations Free Cash Flow Three Months Ended Nine Months Ended Year Ended September 30 September 30 December 31 ($ in millions) 2023 2022 2023 2022 2022 2021 2020 Net cash provided by operating activities 335 (19) 408 165 766 760 1,093 Less capital expenditures: Capital expenditure add
Slide 19: Non-GAAP Reconciliations: Mission Technologies EBITDA & Margin
Non-GAAP Reconciliations Mission Technologies EBITDA & EBITDA Margin Three Months Ended Nine Months Ended September 30 September 30 (in millions, except per share amounts) 2023 2022 2023 2022 Mission Technologies sales and service revenues 685 595 1,954 1,785 Mission Technologies segment operating i
Slide 20: Pension Outlook
Pension Outlook ($ in millions) 2022 (Actual) 20233 20243 Pension Discount Rate 3.00% 5.47% 6.09%4 Change from prior est. N/A Change from prior est. 62 bps Expected Long-Term Return on Assets 7.25% 8.00% 8.00% N/A N/A Actual return on Assets (16.1%) 4.6%4 4.6%4 CAS Recoveries Over Cash Contributions
Slide 21: Slide 21
Huntington Ingalls Industries — Q3 2023 Earnings Presentation on 6ix