Huntington Ingalls Industries, Inc. 2026 Q3 Earnings Call

Thank you, operator, and good morning, everyone. Welcome to the HII third quarter 2026 conference call. Matters discussed on today's call that constitute forward-looking statements, including our estimates regarding the company's outlook, involve risks and uncertainties and reflect the company's judgment based on information available at the time of this call. These risks and uncertainties may cause our actual results to differ materially. Additional information regarding these factors is contained in today's press release and the company's SEC filings. We will also refer to certain non-GAAP financial measures. For additional disclosures about these non-GAAP measures, including reconciliations to comparable GAAP measures, please see the slides that accompany this webcast, which are available on the investor relations page of our website at ir.hii.com.

On the call today are Chris Kastner, President and Chief Executive Officer, Andy Green, Executive Vice President and President of Mission Technologies, and Tom Stiehle, Executive Vice President and Chief Financial Officer. Now I'll turn the call over to Chris.

Thanks, Christy. Good morning, everyone, and thanks for joining us on today's call. This morning, we reported strong third quarter results underscoring our focus on providing ships and mission technology solutions to our war fighters. Today, I'll begin by providing the Q3 results and highlights from Newport News and Ingalls Shipbuilding. Andy Green, President of Mission Technologies, has joined us to provide an update on recent key wins and accomplishments, and then Tom will give the financial details and outlook. Starting with our results, we reported record third quarter sales of $3.5 billion and diluted earnings per share of $5.48. At approximately $2.8 billion, third quarter shipbuilding sales were 14% ahead year over year. This continued outperformance supports raising our 2026 shipbuilding revenue guidance to between $10.5 billion and $10.7 billion. Our portfolio turnover and throughput increases continue to drive incremental margin expansion.

We are reiterating our 2026 shipbuilding margin outlook of 6% to 6.5%, and the midpoint represents a 35 basis point improvement over 2025. Turning to awards, we had an unprecedented quarter, securing over $32 billion in new contract awards driven by Block VI Virginia class and build two Columbia-class submarine contract awards, as well as a CVN-82 long lead time materials contract. We also finalized the contract for the refueling and complex overhaul of CVN-75 USS Harry S. Truman at the end of September, which will be recognized in our fourth quarter results. Mission Technologies had strong performance this quarter, with revenues over $790 million, EBITDA margins of 12%, and book to bill of 2.4 times. The team is making strides across all business units, and we are raising our full year margins guidance for Mission Technologies.

Andy will provide more details on the significant competitions we've recently won and accomplishments we've achieved in the third quarter. Now, I'll provide highlights from the shipyards. At Newport News, CVN-79 Kennedy successfully completed preliminary acceptance trials and is on track for final ship delivery in 2027, consistent with the milestones we provided earlier this year. CVN-80 and CVN-81 continue to make progress, and as I mentioned, we received the long lead time materials contract for CVN-82. One day after the award of the CVN-75 RCOH contract, the ship arrived at Newport News to officially begin the availability. On submarines, SSN-800 Arkansas, which is our last Block IV boat, is progressing towards delivery later this year. At Ingalls, our team is focused on preparing three ships for delivery. LPD 30 Harrisburg will deliver this year, and LHA-8 Bougainville and DDG 129 Jeremiah Denton prepare for deliveries in 2027.

Overall, as we head into year-end, all of our shipbuilding milestones remain on track for 2026 and 2027. Shipbuilding throughput has increased approximately 9% year to date over 2025. While Newport News is executing consistent with expectations, Ingalls has been impacted by a slower labor recovery given their wage increases were put in place near the end of the first quarter. However, we continue to see positive momentum. Year to date, we've hired over 6,000 shipbuilders across both yards, and in the third quarter, Ingalls has gained a net of 576 shipbuilders, which is their highest net increase over the past 10 quarters. Also, we have achieved enrollment of over 800 at both our apprentice schools, which is a 14% increase over last year. We expect this continued labor ramp to positively impact throughput as we look ahead.

Finally, distributed shipbuilding is meeting targeted levels, and we expect to exceed 30% growth year-over-year. Turning to activities in Washington, the President submitted his fiscal year 2027 budget request in April, which remains under consideration by Congress. As bills progress through both chambers, we continue to see bipartisan support for our programs reflected in the defense bills in the House and the Senate. In closing, overall, the quarter reflects strong operational execution.

Our priority is a disciplined finish to the year and sustained momentum into 2027. Now I will turn the call over to Andy for his remarks on Mission Technologies.

Andy? Thank you, Chris, and good morning, everyone.

It is great to join you on today's call. At Mission Technologies, we are proud to be part of shaping the future of America's seapower by supporting and advancing the future fleet, a new paradigm for robotic and autonomous systems and integrated combat power that delivers speed, scale, and resilience. Almost half of our 7,000 employees are veterans, and they know what it takes to win and how to be a partner with our Department of War customers. This quarter, we delivered strong performance with several major strategic contract wins. We continued to grow the top line in the quarter while also expanding operating and EBITDA margins. Year to date, operating margin was 7% and EBITDA margin was 10%, with total contract awards of almost $5 billion. These results reflect a better revenue mix and continued focus on execution by the entire Mission Technologies team.

Notably, we secured several strategically significant contract awards in the third quarter. In late July, we were awarded the $2.2 billion STINGRAI program to advance our nation's ISR capabilities across the Western Hemisphere in support of SOUTHCOM. Under this program, HII will deliver advanced tracking, intelligence, network services, reconnaissance, and analysis. The program leverages the division's broad portfolio to strengthen operational awareness against evolving threats in the region. Also during the quarter, we were awarded a large follow-on production order for the Navy's Lionfish UUVs, vehicles deployed for critical missions in hotspots around the world. We supplied more than 750 REMUS UUVs to the Navy and our allies for almost two decades, and more than 90% of these vehicles remain in service today.

This is a testament to the effectiveness and utility of these highly advanced platforms and is why they continue to be central to the Navy's robotics and autonomous systems strategy. Building on our advanced maritime autonomy, we also received an award for 10 ROMULUS 150-foot USVs under the Navy's MUSV program with multiple hulls already in production at our partner shipyards, Breaux Brothers and Halimar. This award followed a successful two-week intensive evaluation of our robust Odyssey autonomy suite. To meet the accelerating demand from the Navy and allied partners, Mission Technologies recently expanded our autonomous systems production facility in Massachusetts by 25%, increasing capacity for manufacturing, testing, and integration. This investment enhances our ability to deliver next generation unmanned systems to U.S. and international customers. It strengthens the defense industrial base, and it accelerates throughput of several high-priority vehicles.

Additionally, during the quarter, the Air Force awarded HII a new $332 million five-year contract to provide enterprise AI capabilities, including analytics and data engineering. This was a follow-on award reflecting the strong partnership we've developed with our Air Force customer. As we expand support across the joint force, we also continue to invest in the development of containerized and palletized solutions that can be fielded on ground and sea platforms. These flexible modular systems will be able to rapidly field a wide variety of weapons and sensors, including systems such as advanced EW capabilities, directed energy, kinetic launch systems, and counter-UAS systems. Another powerful example of how HII is committed to delivering adaptable, integrated, and combat-ready capabilities essential to the nation's defense. Looking ahead toward year-end, our team remains focused on operational excellence, disciplined execution, and delivering the most advanced capabilities to our war fighters.