HII REPORTS FIRST QUARTER 2022 RESULTS

• Revenues were $2.6 billion in the quarter


• Net earnings of $140 million, $3.50 diluted earnings per share


• Delivered Virginia-class submarine Montana (SSN 794)


• Delivered amphibious transport dock Fort Lauderdale (LPD 28)


• Company reaffirms FY22 revenue, margin and free cash flow1 guidance

NEWPORT NEWS, Va., May 05, 2022 -- HII (NYSE:HII) reported first quarter 2022 revenues of $2.6 billion, up 13.1% from the first quarter of 2021, primarily driven by revenue attributable to the acquisition of Alion Science and Technology (Alion) in the third quarter of 2021.

Operating income in the first quarter of 2022 was $138 million and operating margin was 5.4%, compared to $147 million and 6.5%, respectively, in the first quarter of 2021. The decreases in operating income and operating margin were primarily driven by lower segment operating income1, partially offset by more favorable non-current state income taxes and operating FAS/CAS adjustment compared to the prior year.

Segment operating income1 in the first quarter of 2022 was $176 million and segment operating margin1 was 6.8%, compared to $191 million and 8.4%, respectively, in the first quarter of 2021. The decreases in segment operating income1 and segment operating margin1 were primarily driven by lower risk retirement at Newport News Shipbuilding compared to the prior year.

Net earnings in the quarter were $140 million, compared to $148 million in the first quarter of 2021. Diluted earnings per share in the quarter was $3.50, compared to $3.68 in the first quarter of 2021.

Net cash used in operating activities in the quarter was $83 million and free cash flow1 was negative $126 million, compared to cash provided by operating activities of $43 million and free cash flow1 of negative $16 million in the first quarter of 2021.

New contract awards in the first quarter of 2022 were approximately $2.0 billion, bringing total backlog to approximately $47.9 billion as of March 31, 2022.

“We are pleased with another quarter of consistent program execution and results that were
slightly ahead of our initial expectations as we continue to navigate through a challenging operational environment,” said Chris Kastner, HII’s president and CEO. "We believe HII is well positioned for long-term value creation with very strong shipbuilding backlog and demand signals, as well as a highly capable Mission Technologies division that has been strategically shaped to address our customers most pressing needs."

1Non-GAAP measures. See Exhibit B for definitions and reconciliations. Reconciliations of forward-looking GAAP and non-GAAP measures are not provided because we are unable to provide such reconciliations without unreasonable effort due to the uncertainty and inherent difficulty of predicting the future occurrence and financial impact of certain elements of GAAP and non-GAAP measures.

Results of Operations





Three Months Ended






March 31




($ in millions, except per share amounts)


2022


2021

$ Change
% Change


Sales and service revenues

$
2,576

$
2,278

$
298

13.1%



Operating income


138


147


(9)

(6.1)%



Operating margin %


5.4%


6.5%


(110) bps


Segment operating income1


176


191


(15)

(7.9)%



Segment operating margin %1


6.8%


8.4%


(155) bps


Net earnings


140


148


(8)

(5.4)%



Diluted earnings per share

$
3.50

$
3.68

$
(0.18)

(4.9)%



1 Non-GAAP measures that exclude non-segment factors affecting operating income. See Exhibit B for definitions and reconciliations.



Segment Operating Results

Ingalls Shipbuilding





Three Months Ended







March 31





($ in millions)


2022


2021

$ Change
% Change



Revenues

$
631

$
649

$
(18)

(2.8)%



Segment operating income1


86


91


(5)

(5.5)%



Segment operating margin %1


13.6%


14.0%


(39) bps


1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.




Ingalls Shipbuilding revenues for the first quarter of 2022 were $631 million, a decrease of $18 million, or 2.8%, from the same period in 2021, primarily driven by lower revenues in the Arleigh Burke-class guided missile destroyer (DDG) program, partially offset by higher revenues in amphibious assault ships. DDG program revenues decreased due to lower volumes on Jeremiah Denton (DDG 129), George M. Neal (DDG 131) and Frank E. Petersen Jr. (DDG 121), partially offset by higher volume on Sam Nunn (DDG 133). Revenues on amphibious assault ships increased due to higher volumes on LHA 9 (unnamed) and amphibious assault ship planning yard services, partially offset by lower volumes on Bougainville (LHA 8).

Ingalls Shipbuilding segment operating income1 for the first quarter of 2022 was $86 million, a decrease of $5 million from the same period in 2021. Segment operating margin1 in the first quarter of 2022 was 13.6%, compared to 14.0% in the same period last year. The decrease in segment operating margin1 was primarily driven by lower risk retirement on amphibious assault ship Bougainville (LHA 8) and guided missile destroyer Jack H. Lucas (DDG 125), partially offset by higher risk retirement on amphibious transport dock Fort Lauderdale (LPD 28) following its delivery.

Key Ingalls Shipbuilding milestones for the quarter:

• Delivered amphibious transport dock Fort Lauderdale (LPD 28)


• Launched amphibious transport dock Richard M. McCool Jr. (LPD 29)


• Authenticated keel of amphibious transport dock Harrisburg (LPD 30)


• Christened guided missile destroyer Jack H. Lucas (DDG 125)


• Authenticated keel of guided missile destroyer Ted Stevens (DDG 128)

1Non-GAAP measures. See Exhibit B for definitions and reconciliations.

Newport News Shipbuilding





Three Months Ended







March 31





($ in millions)


2022


2021

$ Change
% Change



Revenues

$
1,390

$
1,407

$
(17)

(1.2)%



Segment operating income1


81


93


(12)

(12.9)%



Segment operating margin %1


5.8%


6.6%


(78) bps


1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.




Newport News Shipbuilding revenues for the first quarter of 2022 were $1.4 billion, a decrease of $17 million, or 1.2%, from the same period in 2021, primarily driven by lower revenues in aircraft carriers and naval nuclear support services, partially offset by higher revenues in submarines. Aircraft carrier revenues decreased primarily as a result of lower volumes on the refueling and complex overhaul (RCOH) of USS George Washington (CVN 73), the construction of John F. Kennedy (CVN 79) and USS Gerald R. Ford (CVN 78), partially offset by higher volume on the RCOH of USS John C. Stennis (CVN 74). Naval nuclear support service revenues decreased primarily as a result of lower volumes in submarine fleet support services and facility maintenance services, partially offset by higher volumes in carrier fleet support services. Submarine revenues increased due to higher volumes on the Columbia-class submarine program and Block V boats of the Virginia-class submarine (VCS) program, partially offset by lower volumes on Block IV boats of the VCS program.

Newport News Shipbuilding segment operating income1 for the first quarter of 2022 was $81 million, a decrease of $12 million from the same period in 2021. Segment operating margin1 in the first quarter of 2022 was 5.8%, compared to 6.6% in the same period last year. The decreases were primarily due to lower risk retirement on the VCS program, partially offset by higher risk retirement on USS Gerald R. Ford (CVN 78).

Key Newport News Shipbuilding milestones for the quarter:

• Delivered Virginia-class submarine Montana (SSN 794)


• Re-delivered USS Helena (SSN 725)


• Completed inaugural maintenance and modernization period of USS Gerald R. Ford (CVN 78)


• Reached approximate 95% completion of the RCOH of USS George Washington (CVN 73)


• Reached approximate 25% completion of the RCOH of USS John C. Stennis (CVN 74)


• Reached approximate 83% completion of John F. Kennedy (CVN 79)


• Reached 5-year labor agreement with United Steelworkers

Mission Technologies





Three Months Ended







March 31





($ in millions)


2022


2021

$ Change
% Change


Revenues

$
590

$
259

$
331

127.8%



Segment operating income1


9


7

2

28.6%



Segment operating margin %1


1.5%


2.7%



(118) bps


1 Non-GAAP measures. See Exhibit B for definitions and reconciliations.









Mission Technologies (formerly "Technical Solutions") revenues for the first quarter of 2022 were $590 million, an increase of $331 million from the same period in 2021. The increase was primarily due to higher volumes in DFS attributable to the acquisition of Alion in the third quarter of 2021, partially offset by the divestiture of our oil and gas business and contribution of our San Diego Shipyard to a joint venture in the first quarter of 2021, as well as lower volumes in Fleet Sustainment.

1Non-GAAP measures. See Exhibit B for definitions and reconciliations.

Mission Technologies segment operating income1 for the first quarter of 2022 was $9 million, compared to $7 million in the first quarter of 2021. Segment operating margin1 in the first quarter of 2022 was 1.5%, compared to 2.7% in the same period last year. The decrease in segment operating margin1 was primarily driven by approximately $24 million of amortization of Alion related purchased intangible assets. Mission Technologies EBITDA margin1 in the first quarter of 2022 was 7.3%.

Key Mission Technologies milestones for the quarter:

• REMUS 300 was selected as U.S. Navy’s next generation small UUV (SUUV) program of record


• Completed the first contractor-owned, contractor-operated air combat training mission with the U.S. Air Force in Europe


• Launched Odyssey, a suite of advanced autonomy solutions, and demonstrated successful integration with third party autonomy products

1Non-GAAP measures. See Exhibit B for definitions and reconciliations.

2022 Financial Outlook1

• Reaffirming revenue, margin and free cash flow2 guidance, updating FY22 pension expectations


• Expect FY22 shipbuilding revenue2 between $8.2 and $8.5 billion; expect shipbuilding operating margin2 between 8.0% and 8.1%


• Expect FY22 Mission Technologies revenue of approximately $2.6 billion, segment operating margin2 of approximately 2.5%; and expect Mission Technologies EBITDA margin2 of between 8.0% and 8.5%


• Expect FY22 free cash flow2 of between $300 and $350 million3


• Expect cumulative FY20-FY24 free cash flow2 of approximately $3.2 billion3


• Updated FY22 pension expectations following ratification of labor agreement

Prior
Outlook

Current
Outlook


Shipbuilding Revenue2

$8.2B - $8.5B

$8.2B - $8.5B


Shipbuilding Operating Margin2

8.0% - 8.1%

8.0% - 8.1%



~$2.6B

~$2.6B


Mission Technologies Segment Operating Margin2

~2.5%

~2.5%


Mission Technologies EBITDA Margin2

8.0% - 8.5%

8.0% - 8.5%









Operating FAS/CAS Adjustment

($142M)

($143M)


Non-current State Income Tax Expense

($5M)

($5M)



($102M)

($102M)


Non-operating Retirement Benefit

$294M

$273M



~21%

~21%









Depreciation & Amortization

$365M

$365M



2.5% - 3.0%
of Sales

2.5% - 3.0%
of Sales


Free Cash Flow2,3

$300M - $350M

$300M - $350M