Huntington Ingalls Industries, Inc. (NYSE:HII) Q4 2022 Earnings Call Transcript

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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.

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