Welcome everyone. The fourth quarter 2025 HII earnings call conference will begin shortly. In the meantime, if you would like to pre-register to ask a question, please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two. Once again, today's call is going to start shortly. Thank you for your patience. Ladies and gentlemen, thank you for standing by and welcome to the fourth quarter 2025 HII earnings conference call. At this time all participants are in a listen-only mode. After the speaker's presentation there will 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 please press star followed by two on your telephone keypad.

Please be advised that today's conference is being recorded if you need further assistance please star zero to reach an operator i would like now to handle the call over to christy thomas vice president of investor relations mrs thomas you may thank you operator and good morning everyone welcome to the hii fourth quarter 2025 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 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, and Tom Steele, Executive Vice President and Chief Financial Officer. Now I'll turn the call over to Chris.

Thanks, Christy. Good morning, everyone, and thank you for joining us on our fourth quarter 2025 earnings call. Before discussing the results, highlights, and guidance, I'd like to take a moment to reflect upon our progress over the past year. The solid results we posted this morning are the outcome of a measurable increase in shipbuilding throughput, a key indicator for scheduled performance. During 2025, in partnership with our government customers, we've taken steps to increase our hiring, improve our retention, and strengthen proficiency levels within our workforce. What these efforts represent are thousands of skilled shipbuilders, engineers, technologists, and professionals who are committed to HI's mission. Thank you to our 44,000 employees. Every improvement in our operations, every day we reduce from a schedule, translates directly into capability and can deploy to protect American interests. Now turning to our 2025 results, revenues of 12.5 billion grew 8.2% and EPS was $15.39. 2025 awards totaled 16.9 billion. All three of our divisions reached record revenue levels and hit key milestones. Now I'd like to share some of the 2025 division highlights starting with Mission Technologies. In 2025 Mission Technologies delivered another year of top-line growth with record revenues topping the $3 billion mark for the first time, we announced key milestones that highlight the breadth of our defense technology offerings. These included developing the U.S. Army's high-energy laser weapon system, debuting Grimm's Spectrum Dominance EW solution, delivering Lionfish small unmanned underwater vehicles to the U.S. Navy, expanding shipboard and shore-based training for U.S. and coalition forces, and delivering our 750th Remus autonomous underwater vehicle. We unveiled the Romulus family of unmanned surface vessels economy software suite is well underway on the gulf coast in summary the mission technologies team is executing well we are confident in continuing this success particularly given how close flight three destroyer ddg 128 ted stevens launched ddg 129 jeremiah denton and authenticated the keel ddg 135 thad cochran Also in January, we completed sea trials on DDG-1000 Zumwalt. On the amphibious ship programs, we christened LPD-30 Harrisburg and began fabrication of LPD-32 Philadelphia. And LHA Bougainville is active as the chief generator light-off. We signed a memorandum of agreement with HD Hyundai Heavy Industries, reinforcing our strategic collaboration to explore future partnership opportunities. Additionally, in December, the U.S. Navy announced a golden fleet, which includes the Trump Club Legend-class National Security Cutter. ...to execute this program, and in our ongoing efforts with our partners to successfully expand the U.S. shipbuilding industrial base to meet the Navy's needs. In 2025, at Newport News Shipbuilding, we delivered Virginia-class submarine SSN-798 Massachusetts, launched SSN 800 Arkansas, laid the keel of SSN 804 BARB, and undocked SSN 796 New Jersey in preparation for her re-delivery to the fleet. We also delivered the BOW, the first Columbia-class submarine SSBN 826 District of Columbia. In our aircraft carrier programs, last year we completed dock trials on CVN 79 Kennedy, and the team is now finishing up her first sea trial evolution moving another step closer to preliminary acceptance and delivery in addition having completed deck over of both engine rooms post CVN 80 has now reached 50% erected in the dry dock and CVN 81 keel units are in fabrication and we continue to receive major material components in two ships in 2025 DDG 128 and SSN 798 we We expect to deliver another two shifts in 2026, SSN 800 and LPD 30 of CVN 79. I'll note that we've accelerated our forecast of LPD 30 delivery into 2026 and adjusted LHA 8 Bougainville delivery to 2027. This ensures that we avoid any potential conflicts, people or equipment, Navy teams leading to Now, I'd like to update you on our operational initiative, 14% year-over-year increase. As we continue to invest with our customer technology and supply chain, we've established our 2026 target, another 15%. Supporting the throughput increase, we have in 2025 and expect to hire at least this many in 2026. Given recent investments in wages and workforce, we expect continued improvement in our retention rate, and we'll continue to develop our workforce. We plan to continue to ramp our distributed shipbuilding strategy. While we doubled outsourcing year-over-year in 2025, we are planning to increase outsourcing by another 30% in 2026. 2025 was a cost reduction target of $250 million, which we met by removing mostly overcastly. We expect several shipbuilding contract awards in 2026, including Virginia Class Block 6, Columbia Build 2, CVN 75 RCOH, and CVN 82 Longleaf Material. Allocation, we have historically seen firsthand the tremendous amount of investment we have made over the past decade at both Ingalls and Newport News. In 2026, we will again target hundreds of millions of dollars, finishing a multipurpose carrier refueling and making peer updates to support carrier inactivation. significant investments in manufacturing centers of excellence to know the new parking garage that began construction in 2025. Now I'd like to say a few words about guidance and Tom will provide more detail in his remarks. With our keen focus on execution, the progress made this past year, the large investments in shipbuilding and the unprecedented demand in our medium-term shipbuilding revenue growth guidance, we did have some sales driven by material timing move into 2025 that were expected in 2026 so our current year outlook for shippling revenues is between 9.7 and 9.9 billion and shippling margins in the range of five points in technologies we expect revenues between three and three point two billion and margins of approximately five percent with EBITDA margins between eight point four and eight point six percent free cash flow outlook for 2026 is between 500 and 600 million turning to activities in Washington for a moment, fiscal year 2026 in December. Six NDAA strong including incremental funding and block by for CVN's 82 and 83. Incremental funding and procurement Columbia class submarines to Virginia class components to optimize construction schedules and supply chain resilience. 2026 defense appropriations continue incremental funding for CVN's 80 and 81 along with advanced procurement for CVN 82, continued funding for CVN 74 or COA for the Virginia Classic for the DDG 51 program and funding for long lead materials for the new frigate program. Combined with the shipbuilding funding provided in the budget reconciliation bill that was enacted into law in July 2025, the FY26 defense appropriations bill continues the strong support for the ship. We've made meaningful progress over the past year and have increased throughput. We must build on this momentum and continue to increase our the U.S. Navy and all of our defense customers need our ships and technologies now more than ever. The global security environment demands that we operate with a sense of urgency and purpose that matches the seriousness of the threats our nation faces. Now I will turn the call over to Tom for some remarks on our financing.

Good morning. Issued this morning and posted to our website beginning with our consolidator revenues of 3.5 billion increased approximately 16% compared to the same period last year the higher revenues were driven by growth at all three segments Ingalls fourth quarter 2025 revenues of 889 million increased 153 million but of 2024 revenues of 1.19 percent of 2025 revenues thousand 24 and 24 and margin of 7.6 percent compares to 46 million and 6.3 percent respectively in the fourth quarter. The improvement was due to the higher adjustments for end of 2024. Newport News fourth quarter 2025 operating income of 84 million and margin of 4.4 percent compares to 38 million and 2.4 percent respectively in the fourth quarter of 2024. If you recall these results are lapping the fourth quarter of 2024. For Virginia class sub to the columbia class program on the virginia class program for the 2025 operating income security and earnings in the quarter were 159 million or four dollars and 49 million revenues of 3.1 billion in 2000 from 2024 security 2024 and in 2025 7.6 2025 operating income of 24 and incentives in 2024 these overhaul program nine percent within the guidance range we provided for the year. And concerning this call, Newport News net cumulative adjustments with negative 64.81 carry a 2025 operating income of $153 million and segment operating margin in 2024. Mission Technologies 2025 results included approximately $89 million of amortization of purchase intangible assets compared to approximately $99 million in 2024. Mission Technologies EBITDA margin for 2025.9% in 2024. Net earnings in 2025 were 624, diluted earnings per share in 2020. 39 cents. Turning to cash flow on slide 10, 2025 free cash flows as we finished the year very strong from a working capital position, slightly underran our plan and did not repurchase any shares during the year. We ended 2025 with $774 million in cash and liquidity of approximately cash contributions to our pen in 2025. The appendix of today's presentation on slide 14, improvements half of the year, targets we are building growth of approximately 6% and mission technologies growth. We believe that we will need to revisit these breaks. Each of these programs will proceed in 2026 expectations of between 500 and 600 million. At the midpoint, that puts combined 2025 and 2026 free cash flow at 1.35 billion, an increase from the $1.2 billion target we discussed. As I noted earlier, a full working capital manager from the one big, beautiful bell will continue to be a cash. As I mentioned, we continue to prioritize strategic capital investments into our shipyards. We expect 2026 capital expenditures to be approximately 4% to 5%. Includes an anticipated 2026 tax rate is primarily attributed to a provided look-ahead for the first $1.3 billion for shipbuilding revenues, a million of mission technologies revenues, 5.5% between 4% and 4.5%.

Consistent with normal cash flow cadence, we expect first quarter free cash flow to be negative, representing a use of approximately $600 million as some of the fourth quarter working capital benefit unwinds.

To close my remarks and echo Chris's customers' needs and our national security, while continuing to create value for the HI enterprise.

Thanks, Tom.

As a reminder to everyone on the call, please limit yourself to one initial question and one follow-up so we can get as many people through the queue as possible operator i will turn it over to you to manage the q a thank you christy to ask a question please press star followed by one on your telephone keypad now if you change your mind please press star followed by two when preparing to ask your questions please ensure your device is unmuted locally our first question is from robert stalin from Vertical Research. Your line is now open. Please go ahead.

Thanks so much. Chris, I'd like to follow up on those productivity numbers that you gave, the 14% progress in 2025. I was wondering if the performance there was the same across the various shipbuilding programs, and then how much more is needed, for example, on the Virginia class if you're going to get consistently to two a year?

Yeah, it was pretty broad-based. improvement across the programs. The Virginia class program actually did very well in 2025. Remember those schedules were reset post-COVID, so there's an incremental walk-up in throughput required to get to the two Virginia class per year, but they had a very good year last year, but it was really broad-based improvement across the portfolio both at Newport News and Ingalls. Okay, and then quickly as a follow-up, you mentioned that there's a step up in capex this year um how do you expect the long-term capex to progress from here do you expect it to remain around four percent of sales going forward well we don't have uh guidance beyond uh this year yet rob but i do expect it to continue to be elevated simply because there's such opportunity out there uh tom i don't know if you want to give any more additional details related to that but i i do expect it to continue to be elevated and uh but we're not going to right provide additional guidance at this point that's right chris i just comment on that and as he says this opportunity the awards are plenty for going forward and obviously that's going to

drive the top line but there's going to be a need for capital and investments both from our navy partner and ourselves in that so i haven't provided that yet but i would expect it to be higher than where we've been in the past and probably consistent with where we are right now going forward in 2026. okay that's great thanks so much thanks rob thank you robert Our next question is from Doug Hornd of Bernstein.

Your line is now open. Please go ahead.

Thank you. Good morning, Doug. Good morning. So you saw a really good revenue growth in 2004 at both yards. In Newport News, though, your margins are still pretty low. you know, Tom, you mentioned the two negative EACs on the CVN program. But when you look across the programs at Newport News, my assumption is you're working hard to get those margins higher. How do you see each of the programs in terms of their ability to improve and get to the goals that you're really looking for longer term?

I appreciate the question there. Yeah, Yeah, so when we look at Newport News and the EACs are stable, the booking rates, obviously we want to get those up right there. That's going to be a function, as we've described in the past, of working off the existing portfolio we have right now. We have these pre-COVID shifts that have been impacted by schedule and inefficiency, and as those continue to evolve out, we talk about the portfolio in 2027 becoming more post than pre-COVID, that's going to assist in that lift. I believe what we've done in wages and what we've done in contract adjustments, some change management REAs that we have in that. We'll assist in that too. A piece of what we're seeing at Newport News is fairly consistent across all four quarters there. It's just a mix of the portfolio itself, contract type, additional work scope that we have. The growth, which is good on the top line, is coming about both in labor and material. But on the material side, it's hitting contracts that need advanced procurement, which have restrictions on margins and fee right now. And then as we kind work ourselves forward and definitize either those contracts and new contract awards we'll see uh you know a moderate ramp and either fee on the existing contracts um or incentives that that can come in place on on the new awards there so that's the playbook going forward we're working hard to kind of stabilize performance we've seen uh you know improvement in uh hiring attrition uh moderately improvements in rework so it's the stabilization you see making our milestones working off the existing portfolio and getting into those new start contracts well um you know when you look at um when you look at you've got um a lot of money you know for the industrial base off those last

two block five boats and as you as you commented um the 26 budget has really in a big support for shipbuilding one of the things that you know we found challenging is money can be there but it's getting it through, the throughput that you're talking about. You know, right now, you've probably seen, you know, a lot of the commentary about a pretty significant addition to the 2027 budget potentially, which could include money for the industrial base.

When you look at it from a shipbuilding standpoint, do you need more or are you in already a good position given the large amount of funding that's come in is that enabling you to get where you need to be with respect to the to your industrial base yeah so doug let me take that and i can uh tom if he wants to add uh that's great uh but definitely the block five two boat contract uh assisted us from a capital standpoint a wages standpoint to increase throughput uh at at newport news uh there is more capital required if we're going to continue to ramp the throughput within Newport News on the submarine program and the aircraft carrier program. So there will be additional capital requirements. We hope to partner with our Navy customer to provide that capital, both our internal capital as well as incentives. But there's plenty of opportunity to increase throughput uh in in both internally uh within the shipyards and then through distributed shipbuilding as well as because it's not just labor it's not just additional labor and throughput within the shipyards we need to expand uh distributed shipbuilding as well we had a pretty good year last year we have another good year this year in expanding the industrial base and some of the investments could go there as well so um we welcome the opportunity to continue investment to increase throughput, and we're going to continue to do that.

I'd piggyback on the back side of that. I'm with you about the budgets and opportunities that's there, and we're seeing it flow into the company, so it's not just on the budget line. Both Q3 and Q4 saw HII have quarters of 16% growth. We finished out this year in 2025 at 8.2% growth from 25 over 24. We saw shipbuilding at 9.7% for the year for 25 over 24. And, you know, I'm inspired by, you know, several quarters now in a row of seeing double-digit growth in shipbuilding. Ingalls was at 11.2, and New Point News 9% for the year. So the dollars are there. There's a need for our products and services. The funding's in place, both with our backlog and anticipated awards that we have coming in 2026. And I'm happy to see an inflection of, you know, the labor material flowing into the yards, increased outsourcing. We've established over 23 vendors last year, and there's more to follow going forward. You can see from our earnings release, we've increased outsourcing by 100% last year. We have a 30% target this year. So the inflection that we've discussed is happening right now. The guide right now at 6% is probably a conservative guide, but it's the beginning of the year. Let's get into it.

We've beaten that the last two quarters, and we'll see that we can continue hiring, retention, and outsourcing. very good thank you thank you doug our next question is from scott micas from me liam research your line is now open please go ahead morning chris and tom uh quick question ingles and newport news both exited 25 with a lot of top line momentum you did note that the fourth quarter had some pull forward but the first quarter guide if my math is right calls for shipbuilding sales to be up 13 percent year-over-year but then that implies that shipbuilding sales are down one percent

for the remaining three quarters is that just a function of tougher comps because it seems like you have a healthy amount of opportunity based on the milestones laid out in the slides yeah i wouldn't get too tied up in how that plays out for the whole year um you know there's a lot of timing in that both we saw a little bit material you know unexpected even the guide we gave you going from 8.9 to 9.1 to 9.0 to 9.1, and then we came out at 9.5. So there's some material that got pulled to the left. I would tell you it's not a one-time trick there of getting revenue up in Q4, because as I just answered in the previous question, Q3 and Q4, so some good growth. The backlog and the new awards are going to facilitate that, and then the outsourcing and the hiring is all going to continue that. I think it's more just a conservative guide that we have right now at the beginning of the year. We want to make sure we continue with the momentum we're exiting last year on the top line. And I would anticipate, I expect that to continue going forward here. So there's always some choppiness from quarter to quarter on milestones and margin recognition on ship deliveries and major milestones. So there's nothing overly to highlight that's going to be problematic as the revenue I expect to continue to ramp into 2026.

Okay. And then on the new battleships, is there a possibility that a Japanese or Korean shipyard could fund some of the CapEx to fulfill their obligations under the recent trade deals? And then do you contribute the workforce and the design sort of in a joint venture type format? That way it would be an attractive investment for Huntington from a return on invested capital standpoint.

I'm really not sure. I think the aperture is open relative to the industrial base and how that battleship is going to get built. There's a need for additional capacity in the industrial base. And could a foreign investor bring more capacity into the industrial base? I don't know if it'd be necessarily for the battleship, but that's always an opportunity. So you need to keep the aperture open. And depending on how that acquisition profile or the acquisition strategy develops, then I think the investments will follow.

All right.

Sure.

Scott. our next question is from from golden sacks your license please go ahead hey good morning guys right now so i guess you know if i kind of zoom out and look at the shipbuilding margin um it's kind of flattish through 2025 i mean it's actually down sequentially a little bit through 25 26 guidance kind of flattish first 25. you know recognizing it's a long cycle business and manufacturing process and these things take time i guess just with the incremental funding the throughput achievements the labor achievements tommy just reiterated you know better mix of contract by 27. um how to help us better understand how the shipbuilding margins are flat for that full two-year window do they snap in 27 when when the mix flips to more post-COVID? And to what extent is the waiting on the next batch of nuclear subcontracts pretty binary in this discussion because you have to book so much long lead at a low margin before you get that?

Let me start on that note, and then Tom can chip in on the back end. But you know our process, I think, relative to how we evaluate risk and opportunities when we do our plan and we're very disciplined in how we evaluate them and how we develop uh our guidance for the subsequent year and that's what we've done i would say that we are uh there's that there's investment required uh that we're making uh in outsourcing and overtime uh to prioritize schedules on these ships which is impacting our profitability there's no doubt we think that makes sense we're going to continue to do it uh because the strategy to get out of these ships into the next uh into the next ships just makes great sense relative uh to the submarine program uh we think that needs to get done by the end of the end of the first half of the year we need to make sure that we don't incur risk related to a delayed start on that program the teams are meeting i have high hopes that after the 26 budget was done and then the 27 budget we get a little more clarity that everything will fall into place and we'll get started, but we really need to get that done in the first half of the year. Tom, I don't know if you have anything else.

I have some comments for you, Scott, in the street there. So, you know, to your point on the new contract starts that are coming with the awards and we book low, that's baked in already into the guidance that we provide, right? So nothing's changed just because those awards are coming and what we gave you in 2026. And then, you know, Chris and I have said that, hey, the 9% to 10% is not just aspiration we've been there before we want to get there we haven't given the street the timing of that we've said incrementally we would expect to improve annually um and we still feel that way right now going from 25 to 26 if you think about 24 was 5.2 25 was 5.9 that's up 13 and although we give you a range of five five to six five it's kind of in line you know chris said back in q3 and 24 in the next 18 to 24 months it's going to be choppy we're going to work off these little ships so you know a re-guide of what we gave you last year um is not inconsistent and even in q3 when i gave you the hey i said it's around the midpoint it could be a little bit higher with the awards it could be a little bit lower with afterwards we didn't get the awards in 25 they've fallen into this year and we finished at 5.9 ross so like we're not surprised or it's off what we've been been talking about that we're dealing with here i tell you that you the range is consistent in 26 as it is in 25. We finished 25 at 5.5 for the quarter. And when we look at Q1 right here, there's not a plethora of milestones or sell-offs that's going to change, you know, what the last 13 weeks did for the next 13 weeks. So again, if we think about it, we shouldn't be surprised that we got it fairly conservative at the beginning of the year and consistent with what the actuals were for Q4. As we look at, you know, Q4, this timing in there, there's a higher volume of the new starts that I've talked about, advanced procurement, that kind of either no fee or limits fee. So we'll work that off. And then the material, which is good for the top line, pulls a little less fee on a couple of our contracts as we work ourselves through that. You know, the 5.5 to 6.5, it still has a good range of outcomes. Last year, it was just about at the midpoint without at the award. So we're expecting those awards to happen this year. In my remarks, I said in the first half of the year. And then with the milestones that we've given you and this you know q2 q4 we provide the milestones we met most of them last year and we expect to go do that most all of them this year here so that's going to be a lift on where we go forward here the awards will have some incentives to them to do that we didn't have last year so that's going to be an assist as we go forward and then uh i i mentioned the increase from the 5-2 of 24 to 5-9 of 2025 and the midpoint at six percent although moderate is still kind of better than the actual of last year, and we have a whole year to go work the contracts here. And then kind of lastly, as Chris said, it was baked in already, but, you know, we have had a, you know, as we put focus on milestones and delivering the ships as fast as possible for our Navy customer, we have put a premium on additional overtime. We have both sites working higher overtime than usual, so there's a little bit of draw on cost efficiency on that. And then the first time, you know, outsourcing and first-time bills, just a little bit of extra cost in that.

Not unanticipated, again, it's all in our guide and our progression as we turn the portfolio heading towards 2027 i hope that was helpful that was very helpful it's a lot of detail and i appreciate it um when you provided the shipbuilding medium-term revenue growth target the six percent you have the sub bullet point there that says additional upside from recently announced programs can you can you talk a little bit more about that I mean, how much upside, and specifically on the SSC win, when does that start ramping up for you?

Yeah, so, yeah, thanks, Noah. The frigate win, that pretty confident, very confident we're going to build the first two boats or first two ships in that class. We're unsure what the acquisition strategy is beyond that. i think we'll learn more when the 27 budget comes out but we're fortunate on that program that we still have a lot of material from nfc 11 which is really a lot of the upfront cost on a ship so i don't expect material on impact of sales this year it should start to ramp uh in 27 battle the battleship is a little different uh we're still uh engaged with the navy on understanding how that design is going to unfold uh with us the navy and biw um so there will be modest uh revenue this year and then a little ramp from there we don't have specific numbers for you right now uh but as

we as we understand them we will we will provide them okay thank you thank you noah our next question is from from alambic global your line is now open please go ahead hey good morning guys um Hey, Chris, can you talk more about the supply chain at Newport News?

I think you touched on it in your remarks. I didn't quite hear all of it. Did you receive all the equipment from the supply chain that you expected in the fourth quarter on CBN 80? Or was it later than expected? Is that what drove the negative EACs and kind of where are you right now in that program?

And I just want to get a better sense of that. yeah so we have received all the engine room material done deck over as i said in my prepared remarks uh we're 50 erected and we'll we'll continue to to make progress uh this year have a little bit of momentum uh on that program throughput has actually accelerated uh and the key there is to getting back in sequence which they're working very hard to do so it did uh there was investment in uh in overtime uh on on 80 to to get back on schedule try to get back on schedule um and they're as i said they're working hard to do that okay sounds good and then just chris on you know between reconciliation and the 26 appropriations

bill that's that's law now did you get all of your priorities through in the budget this past year that you wanted you know just wonder if there's anything that didn't get into those bills that is going to be a priority for you in fiscal 27?

No, it's universal support for shipbuilding and reconciliation, the 26 budget, the potential 27 budget. It's all on us to execute now, but all of our programs are supported. Okay, great. Thank you. Sure.

Thank you, Pete. Our next question is from Seth Steithman from JPMorgan. Your line is now open. Please go ahead.

Hey, thanks very much and good morning. Wanted to follow quickly on the frigate. I think you talked about that being a driver potentially of growth in 2027. I mean, given the target of having a boat in the water in 2028, should we think about that ramping up rather quickly? And is there anything you could say about the magnitude of the lift there at Ingalls and what it will do to the mix as well, given that the, you know, I think the NSC was a very profitable ship for that yard.

I think it's a little bit too early for that. I think if you were to project the cost related to ship getting in the water in two years, less the longlead material, there's probably enough data out there for you to figure out what that could mean from a sales standpoint. So that is upside. But beyond that, I think it's a little bit too early to talk about potential top line upside related to that until we get a little bit further along.

Okay. Okay. And should we think about that being, you know, Mixwise being, you know, NSC-like?

I wouldn't necessarily think that, right? We're going to work with our customer to get a fair deal on that contract. So I wouldn't necessarily think about that. But I think on a blended rate, getting to 9% to 10% margin is still our objective, and I think we'll eventually get there.

Okay, thanks. And then just to follow up, given where you ended the year with the cash balance and what you're forecasting for 26, you have a decent amount of excess cash on the balance sheet, but by year end, I know there's understandably a certain amount of reticence about repurchases at this point but um you know with good performance does that become more of an option or are there other things you would think about doing with it or you know does uh do we just kind of um you know maybe sit with some excess cash for for a little while remember uh in the words of

one of my predecessors cash can be pretty lumpy so it will continue to be lumpy and in shipbuilding but we think the overwhelming uh opportunity from a value standpoint is to continue to invest in the shipyards uh so so we're going to do that it's going to improve both the top and bottom line so that that's our focus right now and it's been our focus for a while great thanks very much thank you sir our next question from john godin from city group your line is now open please go ahead hey guys um thanks for taking my question i wanted to just revisit shipbuilding margins

one more time. There's a lot of good detail. I think you made clear that there's some conservatism in the outlook. What I'm interested in is in the first quarter, you have shipbuilding margins kind of at the low end of the full year guidance. It suggests that the conservatism is more of a back half event as it plays out. Is that right or is that not?

Can you help us just think about the shape of margins throughout the year and and and and is that conservatism something in the back half or might we just see a stronger start um to the year than expected as you suggested yeah so you know obviously we gave you the annual guide at five five to six five we've been giving for the last a couple years the next quarter so it's five five that kind of leaves you guessing for q2 q3 q4 i'd say you stay consistent with just what you've seen from us over the years it's about the milestones it's about performance it's about the deliveries um there's nothing um uh that's going to alter it one way or the other other than timing how we perform over the next you know 11 months and then um the awards themselves will bring about you know a good good balance of uh affordability to profitability the contract terms and conditions there will be some incentives in there so we'll have to work ourselves through that not going to give any more comment on that is that you know we're in negotiations through negotiations as that effort's trying to get through uh approval cycle right now but um uh yeah i mean i think it's the beginning of the year we don't want to get ahead of ourselves and really it makes sense that we exit q4 you know a five five kind of run right over there so we're going to hold pat at this number we'll update you in in may and you'll get a look see you know both for uh uh what's going to happen as a forecast in q2 we have hinted that you know we'd like to see the awards expect the awards the first half of the year so it's going to facilitate a a good pace and a pro and a a trajectory of at least

midpoint nevada going forward here for the year i guess i guess my question is is it even possible that we start the year um you know at at the higher end at six and a half that we fast forward a quarter or two and we realize that we deliver numbers like that or in terms of the art of the possible. That's not even on the table.

The range is for the entire year. I'd stay focused on what we gave you for the quarter.

Okay, fair enough. And then if we just double click on the milestones and the timeline, as you guys know, you know, with deliveries, with the milestones, there's an intense focus on different milestones as we get closer to the dates. Are there any milestones or delivery dates that you would just flag for us right now to kind of bracket and sensitize a at all but one that might be pushed a little bit more than others just just so that we can have that conversation now um you know instead of on the eve of expecting some sort of delivery or a milestone event any any risk around anything that you would just kind of you know take the opportunity to uh um to bound for us sure uh delivery of of 30 and the delivery of of 800 towards the end of the year.

Very focused on getting both of those boats done. So that's how I would call it from a risk standpoint and an opportunity standpoint. Those two, that boat and that ship are very critical to us.

Got it. Thank you, guys.

Sure.

Thank you, John. Our next question is from Scott Duschl from Deutsche Bank. Your line is now open. Please go ahead.

Hey, good morning. Tom, do you expect the company to make money on CVN 80 and 81 given this trend of negative EACs?

Yes, we do. We think we're booked accordingly right now. We've described what transpired on those ships from. We've impacted by some material that goes deep into the ship. That risk is behind us. Obviously, that's caused an impact on the schedule. So the schedule is a little bit longer and it's created some cost efficiency. We're working 80 specifically out of sequence but with the deck over right now the team's feverishly working with the experience to have building carries getting that back on sequence getting it out of the dry dock and then doing the the ship show we're kind of going forward here but um we we have not forecasted we do not expect it it not to be profitable okay and then chris there are a lot of data centers under construction in the state of virginia it looks like within an hour or two's drive from Newport News.

Are you seeing that have any kind of impact on the labor situation at Newport News, particularly for trades like electricians or pipefitters?

That's interesting. We haven't seen the impact and the applicants and the hiring in Newport News was very, very strong over the back half of the year. So we haven't seen it yet. We'll watch out for it. We're fortunate in the regional workforce development centers have been coordinating with the federal government, government, state governments to produce good shipbuilders, and we're going to continue to work on that pipeline, but we have not seen that.

Thank you, Scott. Our next question is from Myles Walton from Wolf Research. Your line is now open. Please go ahead.

Tom, I was wondering if you can give us a little bit more color on the improvement in attrition? Because I'm trying to put the math together. You hired 6,600 shipbuilders. I think you got another 500 employees from W International's acquisition. But I also think that you finished headcount flat versus the start of the year. So walk me through what your definition of improvement of attrition is. Did you end with the headcount you expected? And then do you expect headcount to grow in 26?

So let me start. And if Tom has anything additional, he can add it. So attrition did improve year over year. It's about a 15 to 18 percent improvement across both shipyards. Both shipyards improved. In that data, the 44,000 employees, Miles, we have support labor in that as well, and obviously mission technologies labor in that as well. So we did increase staff in both shipyards. We ended pretty much where we wanted to be, and we're in a pretty good place from an applicant flow and a hiring standpoint for next year. So from a labor standpoint, we're in a pretty good place we do need to continue to improve attrition and efficiency of the workforce which we're working very hard at but with that we also need to continue to focus on distributed ship building because in order to get through all of these ships it's not just the shipyards that are that are going to be required to to be more efficient we need to work on distributed ship building continue to qualify suppliers and make sure they're efficient in producing what they they need to produce as well.

Okay. I can comment on that. And Chris, there's the next one. What's the direct... It's Tom here. I'll comment just on that. It's the mix of the labor, right? This direct labor, this support, this job shoppers that we have that's not in the number, and then this outsourced work that we have. So all that goes into our ability to kind of ramp and both get more earned progress and get more work accomplished towards the milestones going forward.

Okay. And then one quick one on mission technologies. I think you're benefiting by another $20 million runoff in amortization, which would imply an 80 base point step down in EBITDA margins, basically very little growth in EBIT despite the $20 million runoff. Is that right? And if so, what's driving the year-on-year profile for mission technologies profit?

Yeah, so you're talking about, I guess, the guide, or are you talking about how we performed the 25 to 24 or the guide to 26? 2026 guidance for five percent five percent EBIT yeah but it should be benefiting i believe about 80 basis points of amortization runoff yeah i think the administration runoff is about 10 million improvements so it's not as much as of that um i would tell you that uh so so that's a piece of it it's about half of it and then just the other half is what we're seeing in our contract performance the maturity of how we're executing had some fee write-ups in 2025 that we took, and there's a potential of opportunity sets in 2026. Our nuclear business with equity income always has an upside, and we'll have to see how the year plays out and how our scores are. We get evaluated by the customer set, so that's included in there. Although your question was specifically on the return on sales side, the EBIT side, I would tell you on the EBITDA side, you saw we raised the gains from 8 to 8.5 last year, an 8.6 finish. up almost 50 bps on that now to 84 to 86 again just the maturation of the portfolio i'm trying to although it's predominantly cost type contracts trying to see where we can get the additional value of bidding more products than services a little bit more how we get these jobs and at a focus on profitability so it's an incremental improvement i like how we finished out from 25 versus 24 and it's good to see an incremental improvement on on both metrics going forward in

26. good thank you thanks thanks for the question thank you miles our next question is from gautam canna from td cowen your line is now open please go ahead hey good morning guys wanted wanted to ask on ingles i know there was and maybe you addressed it and i missed it but But, you know, that union contract, did you guys push the wage increases through in Q4? And was that part of the revenue upside at shipbuilding broadly in the quarter? No, not at Ingalls, no. No. And what's sort of the timing on that?

We expect to get through that in the first quarter. I don't want to comment directly on a union negotiation, but we're engaged heavily with the union to get that done almost daily. So, but we expect that to get done in the first quarter.

Gotcha. And just on the DCS Block 6 and the Columbia Class contract, what is your best sense on timing of when that might get awarded formally?

Don, it's really hard to say. We need it before the end of the first half of the year in order to maintain our production schedules. But it's just hard to say. We're engaged heavily with electric boats and the Navy to get it behind us. And I think we will get it done. And as I said previously, the 26 budget getting done and then clarity around what's going to happen in 27 and the FIDIP I think really helps. And after that falls into place, we can get those contracts behind us. One thing I know for sure, the Navy's going to buy submarines. So we need to get it done before the first half of the year so we can maintain the production schedules and make sure that is not a risk that we have to deal with.

And I would just love to get your perspectives, if you're willing to share them, on how, like, you know, this thing was expected at one point to be done over a year ago. Then we were thinking year-end 2025. 25. Is there any long pulls in the 10, or is this just sort of P's and C's, you know, minor stuff that needs to get hashed out? Or is there a big... I'm just curious if you can give us any sort of update, just because we've been talking about it for north of a year.

Well, I just think it's a big, complicated contract. And you have three parties involved that need to all be comfortable with what the solution is.

Fortunately, those teams work very well together but it's just a big complicated contract and we need to get to the get to the finish line here okay thank you guys sure thank you galton our last question is from mariana peres mora from the bank of america your line is now open please go ahead thank you very much for taking my question good morning everyone so my question is going to be about mission technologies and how should we think about the share or the mix towards like and man solutions autonomy and those things in that in that portfolio because i could imagine those are growing double digits and i'm wondering when we we should start to see that reflected in the growth for that segment so interesting let me start here and thank you for bringing up that um that question We don't break out growth rates within mission technologies by market segment, but I will say that Unmanned is doing very well.

Unmanned undersea and Unmanned surface, as you can see by the launch of our new Romulus vehicles. I think it's interesting when you think about the new or the evolving Navy strategy around the hybrid fleet or the hedge fleet, that we're right in the middle of that with obviously a very keen understanding of large capital ships, but then also being the largest provider of unmanned undersea vehicles and then having unmanned surface vehicles, all predicated upon autonomy software that's really world class. So from an unmanned standpoint, I do believe there's potential tailwinds there, but I think there's also tailwinds with the intersection between man and unmanned. When you think about the Minotaur suite that we provide for the Navy, we're the chief developer of that. So I think it's going to continue to evolve. I think it's going to continue to play right into our sweet spot. And I thank you for the question because I think it's something that's going to be very positive going forward.

And then when you think about those opportunities, right, and an administration that is leaning into what we're going to call like commercial terms, how do you think about like investing your own dollars, owning that IP, and actually getting, I don't know, out of this like mid-single digit, like cost plus type of like margins for that segment, I don't know, five, 10 years from now? Is that a possibility? How do you think about like investments from that end?

I definitely think there's more profitability potential within that segment. I think the IP situation or that argument gets to be a little bit more complex because we actually design our autonomy software to Navy standards and it's open source, which allows you to plug and play and bring really good providers in into the space. So that is a different argument. That's a different discussion on profitability. I do think that there's upside related to the unmanned space i do think there's upside um uh related uh to integrating the software into the product sets um and so that's why we've invested against it we will continue to invest it against it and it's probably our highest source of irad uh internally within the organization thank you so much thank you thank you mariana i am not showing any further questions at this time I would now like to hand back the call over to Mr. Kasna for any closing remarks. Sure, thank you, and thanks for joining the call today. Hey, I want to give a shout-out to the CVN 79 team. Both the sailors and the shipbuilders had a really great trial this week. It was an excellent week to be a shipbuilder. I'm proud of the team, and I think the ship performed very, very well, and will keep that momentum towards delivery on CVN 79. So thanks everybody for joining and we'll see you out there.

That concludes today's conference call. You may now disconnect.