Welcome to the Huntington Ingalls Industries, Inc. Fourth Quarter 2024 Conference Call. Matters discussed on today's call that constitute forward-looking statements, including our estimates regarding the company's outlook, involve risks and uncertainties and reflect the company's judgment based on information available at the time of this call. These risks and uncertainties may cause our actual results to differ materially. Additional information regarding these factors is contained in today's press release and the company's SEC filings. We will also refer to certain non-GAAP financial measures. For additional disclosures about these non-GAAP measures, including reconciliations to comparable GAAP measures, please see the slides that accompany this webcast, which are available on the Investor Relations page of our website at ir.hii.com. On the call today are Chris Kastner, President and Chief Executive Officer, and Tom Stiehle, Executive Vice President and Chief Financial Officer. I will now turn the call over to Chris. Thanks, Christie.

Good morning, everyone, and thank you for joining us on our fourth quarter 2024 earnings call. Last year, Huntington Ingalls Industries, Inc. employees remained steadfast in our commitment to our mission of delivering the world's most powerful ships and all-domain solutions in service of the nation. I thank them for these efforts, which contributed to Huntington Ingalls Industries, Inc. reaching critical milestones last year. We remain focused on meeting our commitments to the Navy and all our customers. Before I discuss the 2024 results, operational initiatives, and guidance, I would like to put in context where we are and give you a perspective on the next 24 months, as well as the mid to long-term outlook. Over the next 24 months, we expect to secure over $50 billion of contract awards. These contracts are being and will be negotiated with current performance and economic conditions in our estimates. They are expected to have a more balanced risk equation, be predictable in cost and schedules for our customers, and provide an opportunity to achieve margins more consistent with historical norms. At the same time, we are achieving key milestones on ships contracted prior to COVID. And as our progress continues, these contracts are of our portfolio and less of a drag on our financial results. By 2027, the majority of pre-COVID contracts will be behind us. In addition, our focus on increasing throughput and cost reductions is expected to lead to improved operational execution across the business. With these operational initiatives and the significant demand for our products and services, we expect improved financial performance over the mid to long term. We anticipate growing to $15 billion of annual revenue by 2030, with associated margin expansion, opportunity, and free cash flow growth. Now turning to our 2024 results. We generated sales…

Thanks, Chris, and good morning. Today, I'll review our fourth quarter and full-year results and also provide some additional color regarding our outlook for 2025. 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 6. Our fourth quarter revenues of $3 billion decreased approximately 5% compared to the same period last year. This decline was driven by lower year-over-year revenue at all three segments. Ingalls revenues of $736 million decreased $64 million, 8%, compared to the fourth quarter of 2023, driven primarily by lower volumes on amphibious assault ships, partially offset by higher surface combatant revenues. At Newport News, revenues of $1.6 billion declined $77 million or 4.6% from the fourth quarter of 2023, primarily due to lower RCOH volumes, unfavorable cumulative adjustments on the Virginia class and aircraft carrier construction program, partially offset by higher Columbia class volumes. Mission Technologies fourth quarter 2024 revenues of $713 million decreased $32 million or 4.3% from the fourth quarter of 2023, primarily driven by lower volumes in C5ISR due to nonrecurring product revenue in the fourth quarter of 2023. Moving to Slide 7, segment operating income for the quarter was $103 million, and segment operating margin was 3.4%. This compares to $330 million and 10.4%, respectively, in the fourth quarter of 2023. Fourth quarter 2023 results included two nonrecurring variable items that make for a difficult year-over-year comparison. The first item was a $70.5 million sale of a court judgment at Ingalls. The second was a $49.5 million insurance claim settlement at Mission Technology. Ingalls operating income of $46 million and margin of 6.3% compares to $169 million and 21.1%, respectively, in the fourth quarter of 2023. The prior year period…

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 very much. If you would like to ask a question, please or your question has already been answered, please press star followed by two. Our first question comes from Douglas Harned with Bernstein. Doug, your line is now open. Please go ahead.

Very good. Good morning. Thank you.

Morning, Doug. So sorry for the background noise. We're going through a thunderstorm outside right now, but just bear with us a little bit.

Okay. I've got a snowstorm here too. So

Okay.

So if I go back a few years, there was a margin outlook that had always been talked about in the 9% to 10% level. And knowing that, I mean, the CPI is hardly a good indicator for inflation for you all. But can you give us a sense first when you look at the margin gap that you have now, how much of that would you attribute to inflation versus other operational challenges if you're, you know, looking back at that 9% to 10% projected level?

Yeah. So that's a very interesting question, and I don't have a specific number for you, Doug. We do have some EPA protection on our inflation protection on our Ingalls contracts and limited EPA protection on material on our aircraft carrier contracts. But it's not just directly inflation that impacts you. It's a bit more nefarious than that because you have inflation that adjusts very quickly on some products and services that can be passed along very quickly to a customer where we have long-term contracts that we have to perform against the baseline that was negotiated. You really can't adjust as quickly, which leads to a less experienced workforce and performance challenges. So I hate to say that, you know, I hate to not give you a number related to that, but it's a broader question than just the calculation of the inflation impact on our ship programs. As related to that is in the supply chain, it's even if we have protection for it, the performance of the supply chain because of inflation is not as efficient. So it's a very broad answer. I apologize for not giving you a precise answer. But inflation kind of seeps into various elements of our cost structure, not just paying people more.

Well, just to follow on that, if you look outside of shipbuilding, the Pentagon has frankly not been very helpful at all in providing equitable price adjustments, and that's across many types of programs. And even though you have some, you know, it appears you've been facing a lot of the same problem, and everyone, I think there's universal acceptance of the importance of the Virginia class, the Columbia class. But when you're negotiating new contracts now, and what has been a tough funding environment, do you still see it as possible to get back to those 9% to 10% type margin levels that have been more traditional, or are we living in a different world now where you may have to sort of give in, in a sense, to lower financial performance?

Well, you know, yeah, interesting. I absolutely believe that 9% is possible moving forward. The $50 billion of contracts that, you know, we've negotiated some of those with the bundle, the amp ship bundle down in Mississippi, and we're negotiating the FY24 Block 5 two-boat contract now. The customer's been very receptive to understanding the current economic environment, and we will get inflation protection in those new contracts. I think you saw Congress put an additional $5.7 billion in the anomaly for those FY24 boats. There's a recognition that we need to rebuild this industrial base. There's also a recognition, I believe, that shipbuilders need to earn fair margins. And so we're taking that to the table, and we're going to make sure that that happens. But I absolutely believe that 9% is something that we can achieve. And the reason I believe it, Doug, is simply because I've done it before. Down at Ingalls, we're in the exact same position. We had to negotiate performance post-Katrina into the new dataset of ships. We got that done, and they had a very good run where there was predictable cost and schedule performance because, ultimately, it doesn't do anybody any favor to agree to cost estimates or schedules that are unrealistic. So we're going to make sure that that happens. I think the customer's on board with that. They want realistic, achievable schedules as well. And so I firmly believe that's going to happen.

Okay. Very good. Thank you.

Thanks, Doug.

Our next question comes from Seth Seifman with JPMorgan. Seth, your line is now open. Please go ahead.

Hey. Thanks very much. Good morning.

Good morning.

In the prepared remarks, I think you talked about the guidance. What underpins the guidance, I think, expects for more predictability. Are you basically, what contract awards are you assuming that the company will get this year in the guidance?

Yeah. The summary and contracts, the seventeen boats contemplated by a bunch of support. If the phone, the four laws kind of plan that you've been advocating is assumed in this sense. No. Let me correct you there. It's not a full sol solace plan. We're negotiating FY24 two boats consistent with the acquisition approach that was set forth by Congress and supported by the anomaly. Block six and Columbia Bill two, we're going to have to see the acquisition approach for those boats as they develop. Saws or a derivative of saws, yes, is positive. Anything that brings additional investment into the industrial base that accelerates shipbuilding production is positive. But we're going to take this one step at a time.

So the guidance doesn't assume the seventeen boats get under contract?

It does. It assumes FY24 two boats and then assumes the negotiation of the Block three contracts and the Columbia Bill two contract, yes.

Okay. And do you, I guess, what gives you, have you had communications with the new administrator, what kind of gives you confidence that that's going to happen during this year?

Yeah. So interesting. I have high confidence in the FY24 two boats that'll happen first part of the year. I have had limited conversations with elements of the new administration, and they've assured me that shipbuilding is one of their top priorities. And that's welcome. That makes perfect sense based upon the threat environment. So I believe we'll step right into Block six after we negotiate the last two block five votes.

Okay. Thanks. I'll leave it there for now.

Sure.

Thank you very much. Our next question comes from Scott Mikus with Melius Research. Scott, your line is now open. Please go ahead.

Good morning, Chris. I kind of want to follow up on your answer to Doug's question. When I think about post-Katrina, Northrop had a lot of struggles with the shipbuilding business before spinning it off to form Huntington Ingalls Industries, Inc. Shipbuilding margins initially weren't that great post-spin, but come 2013, there was a meaningful pickup in favorable EAC adjustments, and your stock more than doubled that year. Just curious, what lessons did you learn from the late 2000s and early 2010s that are still relevant and can be applied today? And when do you think investors will see EACs flip from unfavorable to favorable?

Thank you. I'll start this answer, then I'll kick it over to Tom for some timing-related issues. But I have confidence that we can get this done because I've done it before, as you said. And the key is making sure that you're very transparent and disclose current performance, and ensure that you're resolute at the negotiation table. And there's achievable and predictable cost of schedule estimates when you do those negotiations. As I said previously, it doesn't do anybody any favors to miss schedules or miss cost estimates. So we just need to make sure that we estimate them correctly and negotiate them correctly. And that can be done. And there's $50 billion of work that's going to be negotiated here. It's just getting through the pre-COVID contracts is what's important. So I'll let Tom talk about the timing a little bit.

Thanks, Chris. Yes. As Chris had mentioned, both him and myself were down there. I spent ten years from 2011 through 2021. So I saw that march up, and it's really about making sure, one, we get good contracts and have a good cost-equal agreement balance between us and our customer. We've been hit now with COVID and inflation and things of that nature. It's really causing a draw on our production lines. These long-term contracts are being impacted by inflation. The number of heads experienced in the yard and the supportability of the material right now. So one is any of the new awards we get, like the bundle down in Ingles that we have, the FY23 award for destroyers that we received, and now going forward, the plethora of seventeen boats between the VCS one five, six, and Columbia Bill two. You know, getting balanced contracts that we have appropriate, our performance appropriately aligned, our schedules that we see right now are rolling it. The investments both from ourselves and from our Navy partner will have a positive benefit. But ensuring we have a solid program plan and we're putting good commitments on contract. And then, obviously, we've got to execute on our commitments on that front. So it's maintaining our budgets, holding schedules, making progress weekly, monthly, quarterly, and we have a track record of doing that. I'm confident we have the processes and the facilities for the most part, we need more throughput, but the processes and the tools and the facilities are in place right now. It's about building out the workforce we have, strengthening, and more consistent supply chain that we have against our schedules, and then us kind of hitting the mark in cost and schedule on a regular rhythm. That's what we did down at Ingalls. I think we have the pieces in place and where we are short on people, the cost reduction initiatives that we have right now, and we've talked about the contracts. Contract equity going forward here. I think we understand what's causing us a delay in our production programs. Specifically on VCS and some headwinds they have down at Ingles on the destroy program. And I think we're working hard putting the dollars and the pressure in the right areas to find the rhythm that we saw on the Ingalls march up post-Katrina. So we don't have a specific date for you on when we get back to those sort of profitability estimates. But as Tom mentioned in his script, we are transitioning over the next couple of years out of these pre-COVID contracts into the new contracts. And as we transition, there should be an uplift in profitability.

Okay. And then one quick follow-up. So the midpoint of the guidance implies about $540 million of shipbuilding operating income. I'm just curious, is there any assumption baked in there for what net EACs will be for this year?

Yeah. So obviously, we run our EAC process on a quarterly basis. We don't provide, you know, the profitability by ship or by class like that, even by division. So we always bake in EAC and the estimate to complete in the EAC is aligned with our performance that we have right now. With risks and opportunities kind of hedged against that. Right? We know we're throwing additional investment dollars in it. And efforts and improvements of our production lines. We balance that with the risks and opportunities we see in front of us, so that sets the trajectory and how we expect to perform kind of going forward. And, again, that ETC estimate to complete on these EACs gets reevaluated every ninety days when we get another set of actuals. I'm not going to get into the specific details that we have in there, but, you know, we do expect a stabilization and an improvement as we go forward.

Okay. Got it. Thanks for taking the question.

Sure.

Thank you. Our next question is from Pete Skibitski with Alembic Global. Pete, your line is now open. Please go ahead.

I guess just sticking to the shipbuilding margin questions, it sounds like maybe you'd recommend we assume sort of gradual improvements on shipbuilding margin through kind of to the end of the decade, maybe hitting that 9% mark. And I don't know if we should think about a step change improvement in 2027 or just keeping it gradual. And then just wonder if you could talk about the, it sounds like you could potentially get a contract change on CVN 79. Wasn't sure if that, if you did get a contract change, if that would impact margin one way or another. Thanks.

Yeah. So let me start, and I'll let Tom chip in. Let me answer the 79 question first. Then I'll kick the margin timing question over to Tom. 79, yes. We do some additional capabilities that may expect a contract change related to in the ship. Maybe put in the program team's working on that. And with the objective of getting the ship delivered with the most capability and deployed as soon as possible. The program teams are working on that, and there would be a change related to that. But I don't think it's positive or negative. It's just an equitable adjustment related to the capabilities that are added. So with that, I'll send it over to Tom on the margin timing.

Yeah. So specifically, obviously, we don't provide margin guidance for the following year or the out years. Obviously, there is a shape and an expectation we have right here. And, you know, as of Q3 last year, we missed the expectation of where we thought we were. You really got to get down to where we've been impacted. And, again, it's the less experienced labor we have, the throughput, and the support of supply chain. We see areas and we have initiatives to kind of improve all of that. So going forward, that's going to be a lift against all operations we have. Now for contracts that have run through COVID, you know, the older pre-COVID contracts, those contracts have seen increased costs. So there's limited ability to go and get additional profitability on those contracts. As we put the new work, the $50 billion on here, obviously, that didn't run through that. Gonna get the benefit of the current performance and where we stand right now. The opportunity is much greater to have the profitability bounce back. So I would say the way to model that is you follow the revenue in my remarks. I gave you the next and how it blends out. And by 2027, the majority of the work will be post-COVID work. And I do expect a ramp in profitability as we work ourselves through the decade. But always remember, we're pretty conservative when we start out ships. So I do agree it's going to increase. But I wouldn't anticipate a step change.

Okay. For the call, guys.

Yeah.

Our next question is from David Strauss with Barclays. David, your line is now open. Please go ahead.

Thanks. Good morning.

Morning.

Hey, Chris. Could you maybe talk about the opportunity to buy additional shipyard capacity? I think you've made some comments recently in the press around that. Can you kind of size that opportunity? And if I missed that, I apologize on the call. Or in your prepared remarks. What are your hiring plans in 2025 relative to 2024?

Yeah. So we'll hire about the same amount. We've repositioned our hiring a bit, as I said in a previous earnings call, from kind of broadly hiring including entry-level to hiring more experienced people. We've actually made some progress in that regard. And specifically in Newport News, we had been hiring out of the pipeline, which is really the regional development centers. These are people that had chosen shipbuilding as a career. They've been at the 5% to 10% rate. That's increased to 35% at the back half of the year, which is really positive. And we would like it to get to 60% this year, and that's really thanks to the state of Virginia and the federal government for increasing the funding for those regional development centers. We're also targeting additional experience down at Ingalls, where they like to hire 80% experienced people. So while the number's the same, we're repositioning it a bit. Now your question about buying another shipyard, I'm really not interested in that. W International was an opportunity that came along, and they're a quality builder or manufacturer that has been in the shipbuilding industry, and we were concerned they were going to move out of the shipbuilding industry, and that is a problem. So we have a lot of outsource partners, and I'd rather develop outsource partners and have an arms-length relationship. I really don't want to vertically integrate, but this opportunity showed up, and we got 500 world-class shipbuilders with Newport News management team managing them. So this really was a layup for us. It's going to increase our throughput immediately. But I have no plans to right now, unless something very interesting came along, to buy additional manufacturing facilities.

Okay. Thanks. And Tom, a follow-up on free cash flow and capital deployment. In terms of your free cash flow progression beyond this year, I think about 2026, 2027 as the pre-COVID work runs off. Would you expect the free cash flow progression, given the CapEx and working capital investments you've had to make here, would you expect that free cash flow progression back to normal to maybe be faster relative to what we're going to see in terms of the runoff of the pre-COVID work? And then just how you're thinking about capital deployment, given the cash burn in Q1 and the debt maturity in, I think, the beginning of Q2? Thanks.

Yeah. So I would expect, you know, as you work through, as Chris said, the chop in the water for the next twelve to eighteen months, the cash flow would ramp up, you know, and we would get back to more normalized levels as we work ourselves through the pre-COVID contracts that we have here. And you can time that as well as with the margin. The cash flow will follow that in the out years. So that's how that works. From the capital deployment, there's no change. We're still using the same process and the model that we have here. We'll continue to have a, we'll invest in the yard. We'll have a capital, we'll have a dividend that we have annually here. And any excess free cash flow, which we've been doing since 2001, will go back to the shareholders as that materializes. So no change in that policy right now. We did not provide any guidance for share buybacks in 2025. And if something changes on that front, we'll update you on a quarterly earning.

You know, I would add, it's an interesting question on projecting free cash flow right now. And I've spoken of this previously. I don't know if it's been picked up, but the incentive-laden nature of some of these contracts that are being led really lends itself to be difficult to project free cash flow timing. It's always been a challenge for us to project free cash flow timing because of the lumpy, you know, the limited amount of projects, large invoices can move across the period. But with these large incentives and the timing of these incentives and some of them not even being negotiated yet, it makes it a bit of a challenge. We're going to continue to be lumpy going forward, but I agree with Tom 100% it should incrementally improve over the long term.

Thanks very much.

Sure.

Our next question comes from Scott Deuschle with Deutsche Bank. Scott, your line is now open. Please go ahead.

Thanks. Tom, were the Virginia class negative EACs on the block four boats, the block five boats, or both?

A mix of both.

Okay. And I think the block five boats are post-COVID boats. Why should we only be focused on the pre-COVID ship? They were negotiated in 2019.

No. Those were negotiated in 2019.

Yeah. They went in 2019. Yeah.

Okay. And then, Chris, would the contract change on CVN 79 result in a change in delivery timeline for that ship?

We're working through that with the customer right now. Potentially, we're working.

Okay. Can you remind me why the ship was originally delayed from 2024 to 2025? I thought it was something similar to what you're now saying may cause it to go into.

Well, there's a couple of changes, large changes that took place on CVN 79. The first one was related to some significant combat system work that the Navy asked us to do into the baseline work. I think what you're referring to is moving PSC. That was the schedule change previously, where we were going to deliver it, do a significant amount of PSA work, and then get it deployed. They moved that into the baseline, which caused a schedule change. This is additional capability that they've developed based on CVN 78's performance in deployment. And so you always want to get that as you learn. This is the second ship of the class. As you learn, you want to make sure that all the capabilities are in that ship when it gets deployed.

Okay. And did you book a negative EAC on CVN 79 this quarter?

It wasn't material. Yeah. I think there's a modest negative adjustment.

Okay. Thanks, guys. I'll leave it there.

Sure.

Our next question comes from Myles Walton with Wolfe Research. Myles, your line is now open. Please go ahead.

Thanks. Good morning.

Morning, Myles.

I was curious on the shipbuilding margin guidance for 2025, five and a half to six and a half. In the first quarter, you're already at five and a half. I think the full year is predicated on material increases in throughputs and cost reduction as well as the contract word assumptions. So the question is, how much are you assuming is going to happen in the booking rate versus when those things happen, the margins will progress higher?

Yeah. So all of that is included in the guide. Right? The new ships, meeting our throughput and our cost reduction initiatives, the timing of the new ships, an incentive assumption on those new ships. So it's kind of all in the mix. And then we do have a bit of a, it's a bit of a conservative guide related to, we've just had a couple of quarters of negative adjustments here, so we thought it was prudent to make it a bit conservative. So it's all in the mix. I'd like to say I could time it out for you. We'll give you the information every quarter on how we think the next quarter is going to be. But all of that factors into the guide.

I guess the way I was going on is first quarter, you obviously would have the contract. You wouldn't have a lot of these cost improvements. So that five and a half percent, is that low end pretty much reflective of your current situation, ignoring, you know, the improvements you're talking about in throughput and cost improvement?

I think that's probably fair. But we're working hard to get that contract done.

Miles, it's Tom. You know, we give the quota guide, so we're really close to that. And that's how we see it's going to play out. I mean, obviously, there's a timing of, like, the new contract award. There's the list that we expect to get from the initiatives that we have on the objectives page, the operational objectives page. Then there's just the run rate opportunities and risk that we see. Most closest to the slide here. So, I mean, it's in the mix there. Obviously, it's on the bottom end of the range here. Beginning of the year, but they'll be bait hopefully, they'll be bait against the contract awards. The initiatives we have. And then as the programs mature, going forward, we could realize, you know, the medium or the top end of that range.

Okay. And then Chris, maybe a higher-level question. This move towards outsourcing, obviously, there's benefits to that. You could maybe control your cost or have a little bit more visibility on cost, but you're relinquishing some control and quality control in particular. How do you weigh that? And a move to increase it as much as you're talking about, 30%. I don't know what the base level is, so that could be a material number or could be an immaterial number.

Yeah. It's a material number. And the good news is we're outsourcing with partners that we already do outsource work with. So we're very familiar with them. We don't do this lightly. We do pilot projects so that the partners can demonstrate their cost and schedule and quality capability before we do it. So it's a good question because, you know, we've been burned by outsourcing before. I think a lot of people in the industry have, and we just need to make sure we do it right. So it's a fair, it's a risk that we understand and we mitigate because we've done it before.

I would add on the back of that, like, an acquisition, like, W International are bringing it in-house with Newport News people, leadership processes. We put a proven workforce that's there that was up and running. You know, there's work going on down there right now and, you know, having 500 heads ready and moving forward, operationally is a big plus there. So we're doing it really smartly. We're ensuring who we insource to outsource. Putting the bumpers around to make sure we get the performance and expectations. And we anticipate that, you know, we'll be able to execute that work. And be a significant piece of the list that we talked about, about 20% more earn throughput.

Okay. Alright. Thank you.

Thanks.

Our next question is from Ron Epstein with Bank of America. Ron, your line is now open. Please go ahead.

Hey. Good morning. This is Jordan on for Ron.

Hey. Good morning, Jordan.

Morning. On the initiatives that you guys are working on for hiring, what's changed versus what you guys have been doing for the past couple of years? And also, how do you think Huntington Ingalls Industries, Inc. and Mission Tech specifically too, is there any impact from George?

Okay. Yeah. So first, what changes? I previously spoke about it's not only hiring. We've refocused that to target more experienced shipbuilders. Wages are going to help that. The anomaly has workforce development support, and so that will help that process to hire more experienced shipbuilders, and will assist in retention as well. Doge is, you know, it's the new administration. It's good that one of their top priorities is shipbuilding. We're all for reduced regulation. So we'll work with that team to ensure that we have the appropriate level of regulations, and trust me, no one wants less cost and better delivery schedules than I do. So we welcome the initiatives that could be put in place, and we would participate in that going forward.

Great. Thank you.

Thank you.

Our next question comes from Gautam Khanna with TD Cohen. Gautam, your line is now open. Please go ahead.

Hey. Good morning, guys.

Morning, Gautam.

So I have two questions. One, previously, you guys had thought about a cash inflow associated with signing the seventeen submarine contracts. I think it was a release of contract assets to receivable. Is that still true? And if you could quantify how much would be, you know, to be invoiced upon signing that, and then I have a follow-up.

Yeah. There is some cash upside to executing those contracts. We risk adjust all of that, and so we haven't broken that out, Gautam. But that's included in our guide, and there will be some cash receipts related to that.

I recall a quarter ago, a lot of the free cash reduction was in the guidance for 2024 was those contracts moving out to signing. So is it about $500 million, and can you ballpark it for us?

I'd really rather not, Gautam, at this point. There's a lot of moving parts in the cash guide, as Tom mentioned previously. But, yeah, I'd really rather not ballpark that. But we're still in discussions with the government on that contract. We need to negotiate that really holistically. So I'd rather not give you specifics on the cash impact.

I'll probably just like a little color there because I think as you referenced back to the Q3 call, your question's kind of getting your head around. Hey. That was near back half of the year that the omnibus approach, seventeen subs being put on contract was a pathway for us to still make our guide last year. Right? And we had the early question on SARS right now. So although that's viable and that's still out there and the industry still believes that's a very efficient way to get the most ships on contract built fastest. Right now, as you know, the CR just has an anomaly in there for the first two of the seventeen boats, and we're working very closely with the Navy partner to get those on contract near term. So the difference between where we were, say, last quarter and this quarter is just the contracting approach, the mechanisms. Is it an omnibus at all seventeen, which it would impact additional contracts, or is it just two boats for FY24 and incremental approach? Maybe you saw still an opportunity set behind it. But it brings us a little bit of an uncertainty of what was the cash perspective and outlook back in Q3 versus how we're going forward here. All these boats will get on contract. Right? We'll find a good risky equilibrium between us and our Navy partner. Right? And a balance between affordability and profitability. And we'll ensure that the deal on our side obviously meets the requirements and the expectations of our customer, while being true to bringing home a contract that we can go execute the cost and the schedule. It's aligned with our profitability expectations.

Thanks, Tom. And just one last one. In private insurance, first time. We all remember the whole FSA discussion going to more unmanned, lighter ships. Is there any movement afoot? Have you heard anything from the new advanced station about their inclinations to revisit some of the recommendations back then?

Not yet, but it's early. The leadership is still getting confirmed. And we support, obviously, with our unmanned business, we support both. There's a high-low argument and actually a fact that is going to have to be executed. But, no, we've not had those conversations with the new administration yet because they just aren't there yet.

Alright. Fair enough. Thank you, guys.

Thanks.

Thank you very much. I'm not showing any further questions at this time. I would now like to hand the call back over to Mr. Kastner for any closing remarks.

Alright. Thank you for joining the call today. I appreciate everyone's patience. Thank you.

That does conclude today's conference call. You may now disconnect.