Huntington Ingalls Industries, Inc. · NYSE:HII
Huntington Ingalls Industries — Q3 2022 Earnings Presentation
21 slides from Huntington Ingalls Industries's earnings presentation, Nov 3, 2022
Slide 1: HII Q3 2022 Earnings
HII Q3 2022 Earnings November 3, 2022 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 2022 Highlights
HII Q3 2022 Highlights • Revenues were ~$2.6 billion in the quarter • Diluted EPS was $3.44 in the quarter • Total backlog of ~$47 billion Ingalls Shipbuilding • Awarded a design engineering contract for the next-generation guided-missile destroyer • Authenticated the keel of guided-missile destroye
Slide 4: Mission Technologies
Mission Technologies Recent Mission Technologies Highlights • Secured $1.3B in contract awards in Q3 Q3 22 Book to Bill: 2.2x • Significant DoE wins for Savannah River and Nevada National Security Site teams • Expanding presence with key customers: • Awarded Decisive Mission Actions and Technology S
Slide 5: Strong Shipbuilding Demand
Strong Shipbuilding Demand • Expect current backlog of ~$47B to be replenished by anticipated future awards Ingalls Shipbuilding BACKLOG ($B) • DDG multi-year procurement $60 • 10 -15 ships total / 5-8 ships for Ingalls • LPD 32 Detail Design & Construction (DD&C) $49 Expect • LPD 33 Long Lead Time
Slide 6: HII Q3 2022 Consolidated Results
HII Q3 2022 Consolidated Results CONSOLIDATED REVENUE ($M) OPERATING INCOME ($M) & MARGIN $3,000 $140 $131 $2,626 $118 $2,500 $2,338 $120 $100 $2,000 $80 5.0% 5.0% $1,500 $60 $1,000 $40 $500 $20 $0 $0 Q3 21 Q3 22 Q3 21 Q3 22 • Revenue grew 12% YoY due • Operating income grew 11% YoY primarily to gro
Slide 7: HII Q3 2022 Segment Results YoY
HII Q3 2022 Segment Results YoY Ingalls Shipbuilding SEGMENT OPERATING INCOME ($M) REVENUE ($M) & MARGIN1 Revenue - NSC & LPD $800 $628 $623 $80 $62 + DDG $600 $60 $50 $400 $40 9.9% Operating Income 8.0% $200 $20 - DDG risk retirement (prior year incentive) $0 $0 + LPD risk retirement Q3 21 Q3 22 Q3
Slide 8: HII Q3 2022 Capital Deployment
HII Q3 2022 Capital Deployment CASH FLOW GENERATION ($M) SHAREHOLDER DISTRIBUTIONS ($M) $400 $350 $80 TOTAL TOTAL $350 $63 $62 $70 $300 $277 $250 $60 $17 $14 $200 $50 $150 $40 $100 $50 $30 $46 $48 $0 $20 ($50) ($19) $10 ($100) ($73) ($77) ($96) $0 ($150) Q3 21 Q3 22 Q3 21 Q3 22 Cash from Ops. CAPEX
Slide 9: Pension Outlook
Pension Outlook ($ in millions) 2021 (Actual) 20221 20231 Pension Discount Rate 2.80% 3.00% 4.90% N Change from prior est. N/A Change from prior est. +190bps Expected Long-Term Return on Assets 7.25% 7.25% 8.00% N N/A +75bps Actual Return on Assets 12.7% (15.0%) N/A CAS Recoveries Over/(Under) Cash
Slide 10: Outlook
FY22 OUTLOOK1 Outlook Prior Outlook Current Outlook Shipbuilding Revenue2 $8.2B - $8.5B $8.2B - $8.3B • Narrowing revenue expectations to lower end of previous Shipbuilding Operating Margin2 8.0% - 8.1% 8.0% - 8.1% guidance ranges given challenging labor environment Mission Technologies Revenue $2.4
Slide 11: Free Cash Flow & Capital Allocation
Free Cash Flow1,2 & Capital Allocation3 FREE CASH FLOW1 WALK FY22-24 (assumes Sec. 174 is not deferred or repealed, • Committed to investment grade rating; ~$250M impact FY22-24) Targeting ≤2x Debt/EBITDA1 by year-end 2024 ~$250M opportunity over FY23-24 if • Continued dividend growth at Sec. 174 is
Slide 12: Sustainability at HII
Sustainability at HII • Appointed HII’s first Chief Sustainability Officer • Ongoing work to develop program and future reporting • Recognized as one of America’s best large employers • Sustainability program aligned with our core values and our commitment to the communities in which we work Our fir
Slide 13: Investment Thesis
Historic backlog and positioning provide strong visibility INVESTMENT Consistent long-term shipbuilding growth profile THESIS Reshaped Mission Technologies portfolio to address evolving customer needs in high growth markets POSITIONED FOR SUCCESS; Nearing sustainable free cash flow inflection point
Slide 14: Appendix
Appendix 14
Slide 15: Non-GAAP Information
Non-GAAP Information We make reference to “segment operating income,” “segment operating margin,” “shipbuilding revenue,” “shipbuilding operating margin,” “Mission Technologies EBITDA margin,” “Debt/EBITDA” and “free cash flow.” We internally manage our operations by reference to segment operating i
Slide 16: Non-GAAP Measures Definitions
Non-GAAP Measures Definitions Debt/EBITDA is defined as gross debt divided by net earnings before interest expense, income taxes, depreciation and amortization. Segment operating income is defined as operating income for the relevant segment(s) before the Operating FAS/CAS Adjustment and non-current
Slide 17: Non-GAAP Reconciliations Segment Operating Income & Segment Operating Margin
Non-GAAP Reconciliations Segment Operating Income & Segment Operating Margin Three Months Ended Nine Months Ended September 30 September 30 ($ in millions) 2022 2021 2022 2021 Ingalls revenues 623 628 1,912 1,947 Newport News revenues 1,445 1,354 4,268 4,124 Mission Technologies revenues 595 394 1,7
Slide 18: 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) 2022 2021 2022 2021 Sales and service revenues 2,626 2,338 7,864 6,847 Mission Technologies (595) (394) (1,785) (890) Intersegment eliminations 37 38 101 1
Slide 19: Non-GAAP Reconciliations Free Cash Flow
NON-GAAP Reconciliations Free Cash Flow Three Months Ended Nine Months Ended September 30 September 30 ($ in millions) 2022 2021 2022 2021 Net cash provided by (used in) operating activities (19) 350 165 489 Less capital expenditures: Capital expenditure additions (77) (82) (179) (216) Grant proceed
Slide 20: Non-GAAP Reconciliations Mission Technologies EBITDA Margin
Non-GAAP Reconciliations Mission Technologies EBITDA Margin Three Months Ended Nine Months Ended September 30 September 30 (in millions) 2022 2021 2022 2021 Mission Technologies sales and service revenues 595 394 1,785 890 Mission Technologies segment operating income 14 13 48 33 Mission Technologie
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