Huntington Ingalls Industries, Inc.

HII earnings conference call. At this time all participants are in the listen only mode. After the speaker's presentation there'll be a question and answer session. To ask a question during the session please press star followed by one on your telephone keypad. If you change your mind and would like to revoke your question please press star followed by two. Please be advised that today's conference is being recorded. If you need further assistance at any time please press star followed by zero to reach an operator. I'd now like to hand the call over to Christy Thomas, Vice President of Investor Relations. Ms. Thomas, you may begin.

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 Steele, 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? Thanks, Christy, and good morning, everyone. Today, we released quarterly results that demonstrate continued top-line 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, our outstanding 2.4 book-to-bill in the quarter admission 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 customers' 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 HIA employees at all three divisions for their dedication, innovation, and customer focus. Let's turn to our results on page three of the presentation. Top line 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 laid 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 3 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 10 Flight 3 Arleigh Burke-class destroyers in the FY23 DDG multi-year procurement competition. At Newport News, we continued to make progress on the Virginia-class attack submarines as we laid the keel of Oklahoma SSN-802 and we reached pressure hole 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. CDN 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. CDN 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, HAI 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 major 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 platforms 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. While 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 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 respective 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?