Huntington Ingalls Industries, Inc. Q4 FY2023 Earnings Call

Ladies and gentlemen, thank you for standing by and welcome to the Fourth Quarter 2023 HII Earnings Conference Call. Please be advised that today's conference call is being recorded. I would now like to turn the call over to Christie 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 fourth quarter 2023 earnings conference call. Joining me today on the call are our President and CEO, Chris Kastner; and Executive Vice President and CFO, Tom Stiehle. 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 and 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 reconciliation of these metrics to the comparable GAAP measures, please see the slides that accompany this webcast, which are available on the Investor Relations website at ir.hii.com. With that, I would like to turn the call over to President and CEO, Chris Kastner. Chris?

Thanks, Christie, good morning, everyone, and thank you for joining us on our fourth quarter 2023 earnings call. 2023 was a strong year for HII. We continue to invest both in our shipyards and in internal research and development to expand capacity and develop new products and solutions for our customers. Our growth rate for the year of more than 7% and our free cash flow generation of almost $700 million demonstrate that we're entering a period of accelerated growth and increased free cash flow generation. In addition to record sales growth with 2023 revenues of $11.5 billion, fourth quarter revenue was especially strong across all three divisions, with 13% year-over-year growth and a record $3.2 billion of revenue. In 2023, net earnings were $681 million, 18% higher than the prior year and strong free cash flow of $692 million was 40% higher than 2022. We also had $12.5 billion of contract awards in 2023, resulting in backlog of $48 billion at year-end. At Ingalls, we delivered DDG 125 Jack H. Lucas, the first Flight III ship and NSC 10 Calhoun. Our DDG 51 team was also awarded the contracts for seven destroyers in the FY '23 multiyear procurement competition. In our amphibious ship programs, we were awarded a $1.3 billion detailed design and construction contract for LPD 32 and launched LHA 8 Bougainville, the third big deck amphibious warship in the America class. Ingalls expects to complete sea trials and deliver LPD 29, Richard M. McCool, Jr. in the first half of 2024. At Newport News, we redelivered CVN 73 USS George Washington after completing her refueling and complex overhaul and continue to progress on the test program for CVN 79 John F. Kennedy. In the Virginia-class program last year, we were awarded the long lead time material for two additional Block V boats and the first two boats of Block VI. We completed work on SSN 796 New Jersey and expect to deliver in the first half of 2024. And SSN 798 Massachusetts is nearing float-off, which we anticipate in the first quarter of 2024. In addition to the 2024 milestones, we've included our 2025 milestone outlook, which reflects our continued focus on execution. Regarding our workforce, I'm pleased with the positive progress in hiring. We hired over 6,900 craft personnel in 2023 and continue to see progress early this year. For 2024, we have a hiring target of approximately 6,000 craft personnel. The competition for skilled labor in shipbuilding and the larger manufacturing sector continues to impact our shipyards and our supply base. With our Navy partner, we will continue to invest in our team to improve worker retention and proficiency, both within our shipyard and in the supply chain to ensure we fulfill our contractual commitments and meet our financial objectives. At Mission Technologies, we delivered another outstanding quarter, performing ahead of plan across all business units, leading to strong revenue growth in 2023. In addition to the record revenue growth, Mission Technologies booked new and recompete contract awards with nearly $6 billion in total contract value. Also, Mission Technologies ended the year with a robust business pipeline of $75 billion, which makes us optimistic about potential growth opportunities in 2024. Key growth drivers include support for mission readiness in artificial intelligence, cyber and electronic warfare, advanced modeling and simulation, LVC and C5 ISR. Turning to activities in Washington, D.C. for a moment. We are pleased with the passage and enactment of the defense authorization bill for fiscal year 2024. The FY '24 NDAA strongly supports our shipbuilding programs including multiyear procurement authority for Virginia Class Block 6 submarines and incremental funding authority for LPD 33. The Defense Authorization Act also includes necessary authorities to support the implementation of the AUKUS agreement. Looking ahead over the next five years, we expect revenue growth of more than 4% and cash generation of $3.6 billion. Our expectations are grounded on the assumption that we must deliver on our commitments to our customers. Also, while the trajectory may not be linear due to the timing of ship milestones and material timing, we expect that HII will be generating approximately $15 billion annually in revenue by the end of the decade. As always, fundamental to our expectations for the business is executing on our contracts and developing and providing solutions to all domain customers. We take this responsibility very seriously and remain focused on executing our program commitments. So with that, I will turn the call over to Tom for some remarks on our financial results and guidance. Tom?

Thanks, Chris, and good morning. Today, I'll review our fourth quarter and full year results and also provide our outlook for 2024. For more detail on the segment results, please refer to the earnings release issued this morning and posted to our website. Beginning with our consolidated fourth quarter results on Slide 4. Our Q4 revenues of $3.2 billion increased approximately 13% compared to the same period last year. This growth was driven primarily by higher year-over-year revenue at all three segments, leading to record quarterly revenue for HII. Operating income for the quarter of $312 million increased by $207 million or 197% from the fourth quarter of 2022, and operating margin of 9.8% compared to margin of 3.7% in the prior year period, up 609 basis points. The increase in operating margin was primarily due to higher segment operating income. Net earnings in the quarter were $274 million compared to $123 million in the fourth quarter of last year, up 123%. Diluted earnings per share in the quarter was $6.90 compared to $3.07 in the fourth quarter of the previous year. Moving to our consolidated results for the full year. Revenues were a record $11.5 billion for the year, a significant increase of 7.3% from 2022. The improvement was driven by strong year-over-year growth at all three segments. Operating income for the year was $781 million and operating margin was 6.8%. This compares to operating income of $565 million and operating margin of 5.3% in 2022. The operating income growth was primarily driven by year-over-year improvement in segment operating income at all three segments. Net earnings for the year were $681 million, compared to $579 million in 2022, up 17.6% and diluted earnings per share was $17.07 compared to $14.44 in 2022, up 18.2%. For segment results on Slide 5, Ingalls' revenues of $2.8 billion in 2023 increased $182 million or 7.1% from 2022, driven primarily by higher volumes in surface combatants and amphibious assault ships partially offset by lower NSE program revenues. Ingalls' operating income of $362 million and margin of 13.2% in 2023, both improved from 2022 results driven primarily by a $70.5 million sale of a court judgment to recover unpaid receivables for the prior repair, refurbishment and modernization of foreign-built frigates. The higher volumes that I just mentioned and the contract incentive on DDG 129 partially offset by lower risk retirement on LPD 28 and LPD 30 than the prior year. At Newport News, 2023 revenues of $6.1 billion increased by $281 million or 4.8% from 2022, primarily due to higher volumes in aircraft carrier construction and engineering and submarines and partially offset by lower revenues in the RCOH program and naval nuclear support services. Newport News 2023 operating income of $379 million increased $22 million from 2022 and margin of 6.2% was relatively consistent with 2022 performance. The increase was driven by higher volumes I just discussed, and a revenue adjustment on CVN 73, partially offset by contract incentives on the Columbia Class Submarine Program in 2022. Shipbuilding margin for 2023 was 8.3%. In Mission Technologies, 2023 revenues of $2.7 billion increased $312 million or 13.1% from 2022, primarily driven by higher volumes in C5 ISR and cyber, electronic warfare and space contracts. Mission Technologies 2023 operating income of $101 million and segment operating margin of 3.7%, both improved operating income of $63 million and segment operating margin of 2.6% in 2022, driven primarily by a $49.5 million settlement of representations and warranties insurance claim relating to the acquisition of hydroids. And the higher volumes I described, partially offset by a contract loss and lower equity income due to the sale of a joint venture. Mission Technologies 2023 results included approximately $109 million of amortization of purchased intangible assets compared to approximately $120 million in 2022. Mission Technologies EBITDA margin for 2023 was 8.6%. Turning to cash. 2023 free cash flow was $692 million, handily beating the guidance due to strong year-end collections as well as benefiting from the sale of the Frigate court judgment and settlement of the reps and warranty insurance claims I've highlighted. During the year, the company reduced debt by $480 million, invested $278 million in capital expenditures, paid $200 million in dividends and used $75 million to repurchase shares, while ending 2023 with $430 million in cash on hand and liquidity of approximately $1.9 billion. Net capital expenditures finished the year at 2.4% of revenues, just under 2022's value of 2.5%. Cash contributions to our pension and other post-retirement benefit plans totaled $44 million in 2023. Our pension outlook for 2024 has improved from the update we provided in November, given the better-than-expected returns to assets, partially offset by a decrease in discount rates since that time. Asset returns for 2023 were 12.3%. Pension expectations for 2025 through 2027 have been updated. And similar to the update we provided for 2024 last quarter, the fast benefit has increased from our last update, given the more immediate recognition of the positive asset returns experienced in 2023. This is partially offset by the impact of the lower discount rate. We've also provided an initial view of our 2028 expectations. Turning to Slide 7 of our financial outlook for 2024. Given backlog growth performance in 2023 and the strong demand for our products and services, we are now forecasting mid- to long-term HII revenue growth of over 4%. For shipbuilding, mid- to long-term forecast revenue growth has increased from 3% to approximately 4%, although growth in 2024 will be tempered due to the outperformance in 2023. Accordingly, we are forecasting 2024 shipbuilding revenue between $8.8 billion and $9.1 billion. For 2024, we expect shipbuilding operating margin to be between 7.6% and 7.8% as we continue to target incremental margin improvement. For Mission Technologies, we continue to expect approximately 5% mid- to long-term top line growth. And again, due to the 2023 outperformance driven by approximately $80 million of material timing, we expect tempered growth for FY '24, forecasting revenue between $2.7 billion and $2.75 billion. And we expect Mission Technologies operating margins to be between 3% and 3.5% and EBITDA margins to be between 8% and 8.5%. In 2024, amortization and purchased intangible assets is expected to total approximately $109 million, of which $99 million is attributable to Mission Technologies. We expect first quarter revenues of approximately $2.2 billion for shipbuilding and $650 million for Mission Technologies, with shipbuilding operating margin near 7% and Mission Technologies operating margin near 2.5%. Moving on to capital expenditures. As we've discussed in prior quarters, we continue to see the long-term capital expenditure rate of 1.5% to 2% of general sustainment. In the near term, given the significant demand in submarine construction, we are partnering with our Navy customer to invest in expanding our shipbuilding capacity and throughput. The investment is expected to drive CapEx to approximately 5% on average for the next three years, with 2024 targeted to be approximately 5.3% of sales. I will note that the sustainable free cash flow levels we've previously discussed are not expected to be impacted by this due to customer investment, evidenced by the projected free cash flow growth over the next five years I'll provide shortly. Additionally, on Slide 7, we have provided our updated outlook for a number of other discrete items to assist with your modeling. Moving on to Slide 8. We have provided an updated view of our free cash flow outlook for 2024 of $600 million to $700 million, ending our prior five-year free cash flow projection period with an estimate of $3 billion up from our prior estimate of $2.9 billion. I'm also pleased to provide a free cash flow outlook for the next five years or for FY '24 to '28 of approximately $3.6 billion. I would note that these forecasts do not include Section 174 deferral, which if it occurs, would be a tailwind to approximately $150 million to $200 million in 2024. On Slide 9, we provided our capital allocation prioritization model unchanged from previous discussions but updated for current events. We continue to remain committed to an investment-grade rating and have reduced our leverage ratio to under two turns at the end of 2023, a year earlier than planned. In addition, we finished paying off our $650 million term loan in January of 2024, which concludes our debt repayment prioritization while securing our investment-grade ratings and credit metrics. In 2024, we expect to return approximately $500 million of free cash flow to shareholders through dividends and share repurchases. Lastly, on this slide, the Board has approved a revision to our share repurchase program in both term and amount resulting in available share repurchase authorization of $1.5 billion through 2028. To close on my remarks, the company's mainstay programs are well supported in demand, and Mission Technologies' growth success continues to expand and diversify our portfolio. Our future is bright and within our control by executing on our current production contracts and capitalizing on the growth demand for HII products and services. We've exceeded our 2023 financial guidance metrics in terms of revenue, profitability, and free cash flow while investing in our programs to facilitate growth and throughput. Additionally, we've strengthened our balance sheet, paying down debt and lowering our leverage ratio. Lastly, fine-tuning the HII investment thesis on the last page of the earnings presentation, focusing on the portfolio strength and visibility execution and growth and free cash flow expansion driving our current and future capital allocation commitments. With that, I'll turn the call back over to Christie for Q&A.

Thanks Tom. Operator, I will turn it over to you to manage the Q&A.

Our first question today is from Myles Walton from Wolf Research. Myles, please go ahead. Your line is open.

Great. Thanks. Good morning. Maybe to start with the CapEx change, obviously, pretty material, $300 million annualized step up in run rate. A couple questions on it. One, why isn't it dropping through a higher revenue run rate in the near term, like '24? And second, why is it only a couple three-year investment? What specifically is it going towards? Thanks.

Hi, good morning, Miles. Tom here, I appreciate the question. Yes, so we mentioned here that traditionally we look at maintaining the yards to be about - 1% to 1.5% with about another point-to-point to have specific projects. As we've talked about in the recent past, we have a lot of activity that's going on in the yards, acquisitions specifically at Newport News, and driving down into the submarine program there. So, we're putting more boats on contract on VCS in the Columbia program. And as we're working ourselves through those negotiations and schedules, we see it necessitates additional capacity and throughput. So in conversations with our Navy partner, we've partnered on what that means. There'll be a couple more buildings, more capacity in the yard, and it's requiring investments. Just over three years, we have defined projects that we've worked through and we've gotten approved through the Board and with the Navy. And the investment there from the Navy will pay for the majority of that. So as much as it rolls through, I'm capitalizing the projects themselves. I'll get the investments on the contracts to help offset that. So it's a three-year run, it peaks out the first year at 5.3%. And as I said, we've kind of given you what the free cash flow projection is from '24 to '28 to kind of evidence that we're still good to our thesis of the cash flow inflection to $700 million plus as we go forward. There's a shake to it, obviously, of that $3.6 billion I gave you. And obviously, it grows over time as the revenue and the incremental margin expansion comes online. And then as the CapEx falls off in years four and five. But we think it's a good business arrangement. It facilitates the growth that we're talking about. You heard in the comments, both from Chris and myself, we're raising shipbuilding from 3% to 4%. And this capital investment by both the Navy and us facilitates that growth long-term.

Miles, I'd also add that I obviously want to factor '24. These projects take a while to get implemented. But it does support the mid to long-term growth.

Okay. And Chris, just to follow-up on the longer-term projection and the capital allocation prioritization. You'll probably get into this Investor Day. But the last several years have been a lot of cash going to pay down debt. It doesn't sound like we need to do that. So are we at a point where we can commit to a significant majority, or not all of the free cash flow to return to shareholders over the timeframe looking forward?

Yes. I'll start. So, we fundamentally believe the greatest source of value that we can achieve as a corporation is to focus on our operational priorities right now and delivering our ships. So, you see that in the capital investments. And then we're fairly clear on our capital allocation priorities relative to investing in our shipyards, being investment grade, progressively improving our dividends, and then providing any remainder back to shareholders. Now that being said, we're going to have optionality around M&A. We have the responsibility to evaluate M&A projects from time to time. I don't see any significant holes in the portfolio right now. And operationally, I think our greatest focus needs to be on delivering our ships to our customers because they need them. So while we're not going to commit to providing everything back to shareholders on this call, we need to, we're forced to have a strong balance sheet and we can do everything. So that's how we're thinking about capital allocation moving forward.

Yes, if I could piggyback on top of that. And Miles, I think you're looking at it the right way. If you look back on where we've been right in '22, we gave back to the shareholders $249 million in dividends and repos. This year, it's up to $275 million, which is 40% of free cash flow. We have to keep in mind for 2023, it was $480 million of debt paydown. So, we actually between the debt paydown and what we gave back to shareholders. It was better than 100% of the free cash flow of $692 million for 2023. And now for this year, as we're saying $500 million of dividends and repos is still another $229 million. I just paid $145 million in January. There's $84 million of on payment in May. So $229 million of debt and that concludes it, going forward plus the $500 million I'm committing to again is over 100% of free cash flow going back to the shareholders this year. If you take the midpoint of the guide of $650 million, right? So it's ramping. We're giving you the commitment through 2024. We haven't told you we're committing to pass that, but we would envision as we work off each year and the cash is there, that we'll update you accordingly.

Thank you. Our next question today is from Gautam Khanna from TD Cowen. Gautam, please go ahead. Your line is open.

Yes, hi, I joined a little late. So I apologize if you covered this, but could you update us on the timing of when the three milestones that looked at Q4 will get caught up? And if there's any downstream impacts from those delays, but maybe crowding out labor, or anything else? And then if you could just talk about the milestones in 2024, are there any that are kind of late in the year Q4 weighted that could pose a similar note? Thank you.

Sure. Thanks, Gautam. The two VCS milestones, we're essentially complete with both of the operational commitments for those milestones. There were some late-breaking changes on both of those boats that needed to be implemented before we could claim victory and finally achieve them, but we're essentially complete. The staffing has been significantly reduced on each of the boats and it's been reallocated to the other boats. And no material financial issue related to those at all. On LPD 29, we ran into an issue going through the test program that we need to stop and do a root cause corrective action on. We've done that. The ship went to sea this week, performed well, we think we'll deliver that here late Q1, early Q2. Now from '24 milestone impact, we're all aligned within the corporation relative to those milestones. It does put some pressure on the VCS milestones at the end of the year on 798 and 800, but we have detailed plans to achieve those and we're committed to getting those done.

Thank you. And if I could follow-up, I just wanted to make sure I understood the accounting on those three that moved out of Q4. Were there positive team catch-ups related to that in Q4 and if not, do you anticipate that in Q1 and Q2 as you recover?

No, there were no material financial issues related to those. Obviously on LPD 29, there is a bit of an opportunity lost there that will recover when it ultimately gets delivered, but it's all included in our guidance.

Thank you. Our next question is from Seth Seifman from JPMorgan. Seth, please go ahead. Your line is open.

Okay. Thanks very much. Good morning.

Good morning, Seth.

Good morning. I guess in other your earnings calls this quarter, we've heard about various supply chain challenges on Virginia. I guess, can you speak to kind of how you feel your estimates are looking on Virginia and the amount of risk in those estimates? And then to the extent that is there much in there that's contemplated for inflation reimbursement, because it seems that contractor expectations for inflation reimbursement have been coming down. Has that been the case for HII, or were they not there in the first place? Or is the sub-industrial base different because it's such a priority?

Yes, so we don't have inflation protection on the VCS program at this time. The supply chain is a challenge across all of our programs, actually. We do have EPA protection for the most part at Ingalls, and we're managing supply chain risk across the portfolio. The Navy is fully aware of this. We're very transparent about it. That's why the SIB funding is so important. That's why getting three-year AP is so important. So we could just eliminate that risk. But we evaluate our EACs every quarter and if there's risk we deal with it in that quarter. But it's not going away anytime soon. I think everyone understands that. That's why we have SIB funding being appropriated and authorized. And as soon as we can get that down into the supply chain, the better.

Okay. Okay. Thanks. And maybe just a quick follow-up on the capital deployment. If I look at the $3.6 billion over the period, think about the dividends and the 2024 debt paydown. That maybe leaves like $2.25 billion. I know the repo authorization, I think the slide says there's about $1.5 billion left. I mean, would you think that there's before that it's possible to exceed that $1.5 billion by 2028?

Yes. And what that means is regarding like - we extended the term and time, but we can always go back and change that again. So we wouldn't read too much into the math of it. But as we said, there's $1.5 billion available, $1.5 billion by 2028. And as we move forward, we'll adjust that accordingly. So that was just more of a housekeeping issue that we cleaned up.

Hi, good morning.

Hi.

Good morning.

Hi Chris, just to clarify, did the LPD 29 delivery delays have much extra cost associated with them? Or is it more just the function of some extra time and a deferral of the AC, rather than a diminishment of the AC opportunity?

Well, there's time and shipbuilding is cost, right? So, we've probably lost a little opportunity there. It's not material in nature. And we'll do that. We'll take a step up if appropriate when we make final delivery. But it obviously would have been worth more if we did it at the end of the year.

Okay. Got it. And then, Tom, just from a reporting perspective, why are Venezuela insurance recoveries included in operating loans rather than below the line? A lot of people are thinking you started reporting this quarter? Thanks.

Yes, the way that accounting works on that, it's got an angle, it's in the operating income and other income. Because we've had that contract. We incurred cost on it. So it's a recovery from cost that we've had both in the past and we had written off. So, it comes back still as an operating income. It doesn't go into the revenue. So, there's not a rev-rank to it. But we do account for the margin and income statement. And obviously, we picked up the cash on both of those, on both the frigate and the reps and warranty in Q4.

Yes. I wanted to ask why your actual ship revenues were nearly $300 million higher than the high end of the guidance provided during the November call. This business seems fairly predictable to me. I also have a different question.

Yes, sure, sure. So from the MT side, we saw a nice rush at the end of the year of some receivables. I mentioned in my notes, it's about $80 million. So that was a big pickup. On the shipbuilding side, just the timing of material on how that floating here, the majority of the overage and where we felt we would land was on the material side. We have some outsourcing going on as well. So those costs flow through opportunistically that they landed in 2023 here. But we guided $86 million to $88 million, we came about $100 million over that and you kind of normalize that. It was good growth there. You saw it in shipbuilding better than 5%, 5.5% in shipbuilding. Ingalls was up in the 7s and Newport News at 4.8%. But it was a sharing between all three divisions that just exceeded. It was a nice run at the end of the year on the revenue side.

George, you know that material timing can result in delays of one to two months occasionally. It ultimately affected our year-end performance. Unfortunately, this impacts our guidance for the upcoming year, and we had to take that into account. It was simply a matter of timing.

Okay. And then the other one probably for Tom, if you had a $49 million benefit in Mission Systems from Hydroid I mean, it implies the rest of the business made $2 million. Now you alluded to some charges at some of the other businesses there. But if you could just provide some more information on that?

Yes, that's right. A piece of that's timing on how the program is just playing out in the mix and execution on that. We did have one job over there that we just took a slight step back. It wasn't material. You won't find it in the K. I guess it's not at the threshold, there's a couple of million dollars on that. But not a lot of dollars when you break down that kind of business to begin with. And then when you take a small charge and then the timing of performance on how we book things, it came out to be a light quarter there. But overall, with the claim, 8.6% EBITDA, the RCOH 3.7%, you can normalize that out. It'll be a little bit on the bottom end of the guide that we gave you, 8 to 8.5 at the beginning of the year EBITDA. But as we had mentioned throughout the year, there was the joint venture that we sold off, we picked up cash, but we lost some equity. And we've been kind of mentioning about a charge on a manufacturing effort that we have over this I think that's behind us right now going forward. And I'm still very satisfied with the numbers that MC kind of put up across the board for revenue, margin, and cash. Sure. So for the quarter, that was $111 million of favorability, $43 million of unfavorability, a net of $68 million was made up of about 50% Ingalls. That net was 50% in Ingalls, about 35% of Newport News, about 15% in MT just for everyone on the call, you'll see in the K, which does the whole year, was $309 million growth, gross favorability for the whole year, $191 million gross unfavorable with a net of $118 million. And that breaks out to be about 75% Ingalls and 15% MT and 10% Newport News. I appreciate the question.

I wanted to ask, is any of the customer-funded investments over the next 3 years? Is any of that contingent on the supplemental package making its way through Congress?

That's a good question, and I don't have that information available right now. I can share part of it, but I can't provide a specific quantification at this moment. We'll make sure to get that information for you, Scott.

Okay. Got it. And then thinking about the shipbuilding revenue growth rate, you've for a long time, talked about labor being the governor on output there. So how much can these investments improve throughput in the shipyard if retention rates don't improve materially?

It has to be both, right? When we make our projections, we adjust for risk. We're not assuming that everything works out perfectly. So we need to improve our retention rates, enhance our supply chain, and increase capacity. If we achieve that, then throughput will significantly rise. You're absolutely correct; we need to succeed in both areas.

Scott, I'd supplement that, too, that as we're building that out, how we hire, how we train, how we've retained we're not standing flat for it, but I know that the yards themselves have active plans on either outsourcing or contract labor, using additional overtime crew that we do have, working the three full shifts where there's a critical path. But there's dials that we have to try and offset that in the near term. You can't run that five or 10 years if you see - we see the demand we're building out organically that we'll be able to do things in the yards. But right now, there are dials and opportunity sets for additional labor outside the yard that we're employing right now.

Thanks Ron.

Thank you. This is all the time we have for the Q&A session today. So I would now like to hand back over to Mr. Chris Kastner for any closing remarks.

Yes. Thank you, and thank you for joining the call today. I'm very proud of our team's strong performance last year, and I'm confident that we will continue to create value for our shareholders this year. I would also like to remind you that we are hosting an Investor Day on March 20 and look forward to seeing many of you then. Have a good afternoon.

Thank you, everyone, for joining today's call. You may now disconnect your lines and have a lovely day.