Okay. Good morning. I'm Doug Harned, Bernstein's aerospace and defense analyst, and I'm thrilled to have with us today, Chris Kastner, Chairman and CEO of HII. We're going to go right into Q&A here, I think. You promoted me, so. What? Not the Chairman, but I am the President and CEO. I didn't That's okay. Know that. That's okay. Okay We've always had a split governance structure at HII. Oh, Okay. That's okay. That's the first question. That's the first question. Yeah. Got that one right. Anyway. Let's just start, maybe you can just give us an overview of Sure What you're seeing now at HII, what some of the opportunities you have, some of the challenges. Sure. First, safe harbor rules apply here, I'm not going to break any news. At HII right now, we're very focused on throughput. We have five deliveries really over the next 12 months, across a number of different programs. We have LPD 30's got to deliver. We have LPD, excuse me, DDG 129's going to deliver, CVN 79, SSN 800, LHA 8. All those deliveries are going to happen in the next 12 months. We're very focused on delivering the fleet for the U.S. Navy. We've set internal milestones and actually external milestones or goals around throughput. We achieved 14% last year. We expect to achieve 15% this year. We're doing that by growing our labor force and distributed shipbuilding. Both of those have to work in order to execute on our programs, but we're very focused on throughput and meeting the demands, really historic demands, of the U.S. Navy. On that, right now we're looking at a budget. The Trump administration's proposal is $1.5 trillion. Right. We don't know exactly where that's going to go. Maybe as a starting point, and there's a lot of money for shipbuilding in there. Right. As a starting point, can you help us understand how you're viewing that process, given that there's uncertainty and the whole way this is going to move through Congress? Well, it's definitely complicated. As my old boss used to say, Mike Petters, who you know very well, "Look, this is the first step of the process." We're in the initial stages of this process. Very complicated when you think about reconciliation, a supplemental, maybe two reconciliations. The great news is that our ships are in the base budget. All of our 6% revenue growth, the midterm revenue growth that we're talking about, that is all protected in the base budget. If that happens, and as that moves through the process, we're going to be fine. Because one of the worries we've had is that if there is no reconciliation passed and we go to October 1st, then we're back at basically down $155 billion on a CR. Right. Unless you do something. Right. Could be. I don't see a threat to our programs. The vast majority of them are under contract already. Yeah. We need to get Block VI and Columbia done. DDGs will happen as well. I'm comfortable with those. Yeah. We already have the amphib bundle squared away down at Ingalls. We started the Frigate Program down at Ingalls, which is really not even included in our 6% guide. Yeah. We're in a really good place and the budget supports it. If the battleship happens, the nuclear battleship and frigate happen, that's upside of the guidance. Okay. Now, in this budget, there are big increases. You've got those increased Virginia-class, Columbia-class, for amphibs. Right now, you've already got a huge backlog. When you move this money in, one of the struggles we've had is to figure out. It goes back to your comment on throughput. Right How to turn that money into real volume coming out the other side. Right. How do you think about this challenge as the funding continues to rise? It's all about increasing your labor force to meet that demand and then doing distributed shipbuilding. Historically, in shipbuilding, when things get great during the Reagan buildup, you pushed work out of the yards. You identify the core work that you need to keep, and you push everything out. That's happening right now. We doubled our distributed shipbuilding last year. We are going to increase it another 30% this year. We're bringing on partners to help us facilitate that additional demand. Can you elaborate on that a little bit, how you think about the distributed shipbuilding concept? Ten years ago, we wouldn't have been talking about that. We wouldn't have because we didn't need it. We had plenty of capacity in the yards and labor in the yard. How do you manage that today, and how do you identify the next opportunity to expand on that? Well, we've had challenges before. We've done it incorrectly, and we were punished for it on the LPD program when it originated. We're very careful and disciplined in how we do it with the right QA and the right engineering to ensure that when the units come back, they meet our expectations and we can just continue on building the ship. We go to partners, we do initial pilot programs with them. They'll build one or two units. We make sure they have sufficient capital and labor and the technical know-how to execute on it. Once they do that, we'll expand their scope and we'll grow. It makes sense to have some core shipbuilders, and Gulf Copper does that for Ingalls, so they can handle a lot of the capacity. You're going to have to go to a few in order to handle all of the work that needs to get done, both at Newport News and at Ingalls. Are these often traditional players in this space? The reason I ask is, it was such a problem through COVID, when you start to see volumes come down, and you have very specialized suppliers. Right In this industry, and if their volumes come down, they can be in some real financial trouble. Right. Are you basically working with the same base or types of people that you've worked with before and expanding the roles, or are you able to actually bring in a broader spectrum of support? It's both. We're working with established partners that we've had for a long time, where we can expand their capacity. We're also bringing in new entrants that have steel experience, because what we're doing is just the upfront part of the work, and you've been to the shipyard. Yeah. It's just the initial unit work where you're creating units Yeah Prior to them being outfitted. The capability exists. You just need to be able to do the welding that's required to get that done, and have the capacity and the tooling required to get that done. It's both. It's established players and bringing new entrants that already have experience. We're not going to bring someone that has no experience in welding structure together into the space. If I think back to some of the things that Mike Petters said at one time, and this isn't the greatest example, but when you did the UPI acquisition. Right. One of his points there was that there are industries where the type of engineering and production work that you do has similarities to others. That was one of the arguments. There are. There was some synergy there. I'm thinking the other way around. Right. If you're thinking of capabilities, and it could be in energy and other places. It's energy, it's commercial shipbuilding, it's oil and gas. Anyone who's built structure or fundamental simple structure. Yeah We can go to them and see if they have the bona fides to execute. One of the things that this administration, when we were here last year, they had just announced the White House Office of Shipbuilding. Right. The president talked about bringing in Korean support, which I think you have been doing some of that. We have. How effective is that? Our partner is HHI, right? Hyundai Heavy Industries. They're very disciplined as we are in how we allocate capital and whether they're going to make an investment or not. We're being very careful. We need to make sure that if there is a significant investment made in the shipbuilding industry, there's work on the back end. We're still in the evaluation phase with that. The good news is they build ships a lot like we do in the defense space. They've learned from us, we've learned from them. We've been in their shipyards, so we fully understand it. They've been in ours. They've walked our panel line, and really liked it. We're still looking for the right opportunity with them. I think there is a chance that that is successful. Is that more in the Ingalls side, I would think? It's definitely Ingalls, right. Yeah. It's kind of hard to. Right. You don't bring the nuclear work there. Yeah. Okay. Last year, you got the award for the last two Block V Right Virginia-class. In that, you got a big boost which was funding to support labor. Right. Can you talk through a little bit about how that all works and how that's proceeded? Actually very well at Newport News. We adjusted the contracts for the labor. That's kind of a margin neutral sort of Yeah Adjustment that we're fortunate that the nuclear shipbuilding enterprise contributed that for us. It's been successful. Their attrition rates are better, their labor situation's better. They met their throughput goals. They're actually ahead of their throughput goals through Q1, especially in the submarine enterprise, which is very positive. It's worked very well. Yeah. This is one where I was trying to fully understand it. I thought the goal here was to be able to raise wages, wage levels. Right. You could attract maybe a stronger workforce through doing that. Right. That would ultimately turn into higher quality, better throughput, better performance. No doubt. Is that the process? It seems like it would be pretty early to already see results from this. No. You see some results in better cost performance on some of the ships. Okay. Better throughput for sure, because you're attracting more labor. Yeah. It is working. Okay. You're always talking about the balancing hires versus attrition. Right. What does that look like at Newport News now in terms of expanding the workforce? It's positive. There still is some attrition. It's much better than it was before, but the attrition is happening in the right place. We're adding and keeping experienced shipbuilders in Newport News right now. When we think about revenue, one of the things that's been difficult for us is because some of the increase in revenue in Newport News is due to the pass-through on the labor side. Right. If I were to take that out at Newport News, what's your growth rate sort of X the labor? We haven't communicated that externally. Okay. Revenue growth is a combination of the labor increase, throughput increase, but also material flowing through the system. Yeah With just additional work. To watch and pay attention to sales growth, you need to pay attention to all three. Yeah. More important than anything, you need to make your ship deliveries, right? Yeah. If I were to guide people on how to think about HII right now from a shipbuilding standpoint, is if we're getting healthier, those five ship deliveries happen consistent with how I'm talking about it. They're all proceeding, but they're getting into the most difficult part, which is final test. When you talk about 6% growth, I remember like every earnings call, it was like with Mike. Yeah Analysts would say, "No, you're going to grow faster than that, Mike." "No. He would say, "We're flat. We're going to be flat. 3%. He'd Right 3% maybe. I still. Don't put too much I still talk to Mike, and he has a hard time believing what we're doing. He had a lot of confidence in us. He did a great job. Yeah, it was flat. You were saying four not too long ago. We moved to four simply because we saw it. Yeah. Remember that we were dealing with $12 billion budgets, $12 billion-$15 billion annual budgets at the time. Well, it Thought of now. If you want to really go back to it and put it in context, we were really worried about the Columbia-class, if you recall the conversations we would have. I do. Columbia-class we thought would be so big that it would cloud out amphibs. What has happened is the Columbia-class is happening and it's big. There's been inflation, everything's more expensive. Yeah. We want more amphibs. It just didn't happen like we expected it would. Yeah. Fortunately for us, we have the capability and we're creating the capacity to execute on all of it. When you went to say now you're growing at 6%, which is a number we haven't really thought about Right Before. This goes back to this labor pass-through. Is that 6% kind of driven somewhat by that, or is that a sustainable 6% rate? It's pretty sustainable. Remember, we're starting on a year that already had wages included, fundamentally, part of the year. Q3, Q4. Part of the year, right? Yeah. When you think about a CAGR, it's pretty sustainable. I don't want to go beyond Yeah Medium range guidance. For the next four to six years, it's definitely pretty solid. At the 6% type level? Yes. You've just started the same type of program at Ingalls, right? Yes. That's when we will see probably a step up. I do expect The compare is Yeah. I do expect it to step up as well. We see some leading indicators in the labor front with applications, that it will start to grow that workforce at Ingalls. We definitely need it to. Okay. There's a lot of work down there. Yeah. We've already started work on the frigate, which is great. The frigate's done over where you were doing the NSC, right? Exactly. Yeah. Right. Yeah. We had the team, a lot of the team's still in place, all the processes still in place. Design is fixed, really on the hard part of the ship. There's some top side changes that the Navy wants us to incorporate that we've agreed to, that are really not a manufacturing challenge. We think we'll do a great job on those first two frigates. Back in the Newport News, I think throughput was up 14%, I think, last year. Yeah. I think you're talking about 15% Yes This year. What does that mean? I'm trying to figure out, and you and I have talked about this a million times. Right. I'm trying to translate that into this movement from kind of 1.4 Virginia-class a year, getting to that two per year goal collectively. There's a lot of How do we There's a lot of fixation on the two, 2.3 per year. Yeah. It's a tough metric to get to. It's not one I really like very much, because we've reset the Block V boats to an adjusted schedule based on when we think the supply chain's going to show up. Yeah. I know the Navy talks about the beginning of the 2030s. I focus on ship deliveries. Yeah. I focus on ship deliveries. We got two a year last year, two a year the year before. As a submarine enterprise, we're out of the first Columbia-class boat. We've already delivered all of our Yeah Equipment for the first Columbia-class boat. The second Columbia-class is much more efficient. Okay. It's proceeding at a much more efficient basis than the first one, so we're making progress there. I focus on ship deliveries. Yeah. Throughput is simply earned hours. It's not cost. Oh, okay. Yeah. It's not the cost to earn the hour, because sometimes we have distributed shipbuilding, which is at a premium. Overtime is at a premium. It's actually earned hours. Yeah Productive hours that you have to get done. Okay. It's a labor number. It's labor Not materials- It's labor Is it materials too? Plus the value of distributed shipbuilding, which comes in Okay As material, but it's really there's an equivalent labor Yeah Category there. Okay. I see. Okay. Is this, like the 15% type number, is this something that we should expect to continue? Fifteen percent this year, but is that something a year from now you'd be looking at a similar goal? There will be a new number. I don't know if it's going to be 15%. Yeah. We have to finish our plans this year and talk about how we want to guide for next year. The amount of work and earned work will continue to increase. Okay. At one time you were looking for 20% last year. Fifteen sounds pretty good to me. Pretty high goal. Maybe I pushed them a little bit too hard, right? Yeah, 20% was Yeah. The good news is the submarine program has got some traction right now. Yeah. Which is very positive. Really for national security, not just our financials. It's a top priority. Columbia-class, top priority. Virginia-class right after that, especially with the Virginia Payload Module, which are part of Block V. Having the submarine enterprise getting some cadence is really positive. The payload modules, those aren't yours, right? We don't build the module, but we do integrate it. You do the integration. Right. On all the ships that we deliver. The ones you deliver. Okay. I see. There's extra value for you Sure Even though the module itself's up. Well, the work Electric Boat. Yeah There's additional work for us to do the integration, yes. Okay. Block VI. Block VI. We going to hear about it today? What are we about to? Yeah. Very close, right? Very, very close. We essentially are going through the approval process, in the government, to get those contracts done. I fully expect them to be done before the end of Q2. It's just a very large contract. It's a complicated contract. They need to go through the approval processes. I get updated every day on it. Yeah. I still expect it to get done. I know that so much of the challenge here, and I've talked with Tom a lot before about this, is getting past all of those sort of COVID time Right Boats and getting where you never got, I think, properly compensated for the inflation. Right Costs Right You're not alone. Everybody else Got the same. Things, mine are very large, and they last a long time. Yeah, yours are bigger than anybody else's. Yeah, the two largest contracts we signed as a corporation are the CVN-81 contract and Block V. Yeah. Which were signed in 2019. Yeah. You didn't get much help with that, right? I will say the Navy's been very fair on looking for ways to make investments to make us more productive. Yeah. Especially in the nuclear enterprise. No, we didn't get large equitable adjustments to those contracts, but they have been fair. They contributed wages for the submarine program. They have contributed MIB and SIB funding, and given us incentives. Yeah. There has been an effort by the Navy and the administration to support submarines and Newport News. That extends down into the supply chain, right? It does. Where you identify areas where there's problems, and the MID money and the SID money go into increasing their capacity, give them technical help, additional capital to be invested. Because this is one of the things that I've struggled with because the shipbuilding supply chain is so complex. I mean. It is complex. I don't know. Well, it's funny, last year, I remember Phoebe made this comment. She goes, "You think a bomber is hard? You have no idea how hard a nuclear submarine is. Right. In trying to understand that, what does the government and the Navy need to do to really facilitate getting your whole supply chain working? They're helping you with labor. Right. Are there further steps that you're looking toward that the Navy can execute on? Well, yeah. First things first is award the contract on time. We're on long lead for Block VI already. We're on long lead and have continuous build authority on Columbia, which means we're going on Columbia. Yeah Which we don't have the final negotiated contract yet. The most important thing is to order the material on time. Second is identify the critical suppliers that are at risk and ensure that they don't bite you at the end. Right? We've done that. Yeah. They've expanded their castings and forging suppliers, which was a real bottleneck for us. We actually buy a lot from the U.K. right now. It's happening. Is it happening fast enough? You can always go faster, right? Yeah. First things first, order stuff on time, right? Okay. Don't miss that and then expect a miracle to happen and a supplier to show up 12 months early, so that we can make a production schedule. When you look at developing this throughput metric and setting a 15% goal, what are the bottlenecks that you're thinking through? In other words, what determines whether that's a 10%, 15%, or 20% goal? Well, we set our plan every year, based upon where every ship is and the EAC for every ship. Yeah. The supplier schedules, the labor demand, how all the ships interact with each other, where they flow through the yard. That is a complicated process. We've already started it, for next year for our plan. You establish your throughput metric based on all those inputs coming together to say what the schedules will be and how productive the people will be when the suppliers are coming in, when they'll make the deliveries. Yeah. The worst thing in the world in a shipyard is to have a crew show up at a work site and not have the material. Nothing to do. Right? And then it's like, "Okay, what's your second job, foreman? Yeah. Right. "Are you ready? Can you put those people to work, or do they have to sit there all day?" Which is just a bad place to be. I remember you and I saw that many years ago down at Ingalls. We did. In the Yes. We did. We did. That's a horrible place to be. Yeah. We're working really hard on that in both shipyards, to make sure that everything shows up at the right time, and the work packages are actually workable. Yeah. Now, Block VI, can you describe, as you look at Block VI, how this can be a much more attractive structure for you guys than IV and V were obviously negotiated at different times? Well, you just said it. First things first is it's a completely different economic environment, right? Yeah The inflation's different. The supply chain risk is different. The production schedules are different based on where the workforce is. The amount of work in your yard is different. We had to take all that into consideration in establishing that contract. We think that ultimately it'll be a fair contract where we have a real chance Yeah To be successful and make our margin our margin target. It's not overly good or overly bad. It's right down the middle to reflect our current situation. I think back to late 1970s, early 1980s, and how the shipyards performed then when they had a different economic environment. Right. A lot of demand, a lot of inflation, a fragile supply chain. They did pretty well because they reset their contracts to deal with that. Those contracts got diluted over a long time of no growth and no inflation. Yeah. The protective clauses kind of fell away because you didn't really need them, and you lost them at the negotiation table, or they weren't part of a competitive procurement. Right. Well, now they're back. Yeah. It's kind of cyclical. It just hit us at a tough time because we had some very large contracts negotiated in 2019. Yeah. If you think about these new ones coming in, as I try to understand Well, actually, let me back up a second and go to the carriers, because you did have an unfavorable adjustment in Q1. We did. You've had a couple of these on the CVNs. Can you talk about how that program Sure Is just going overall in the different boats? Sure. 78 had an amazing deployment, by the way, and when the Navy releases the data on their sortie rate, you're going to see that EMALS and AAG, and the elevators performed amazingly. That's great, too. It's an amazing ship. The data that comes out of there will be very, very positive. 79 is going to have their second trials here in the summer. It's essentially done. Sailors are operating that ship. We'll get the final delivery if not this year, beginning of next year. 80, as you know, is significantly impacted by the reduction gear and the turbine generators in the bottom of the ship. We've received all of that now. We've done deck over. We've initiated our continued erection of the ship on 80. We'll be 75% erected at the end of the year. They're really making hay on 80. Then 81 will lay the keel this year. It'll be right behind it. Unfortunately, that's a lot of bad performance behind you and a lot of inefficiency behind you. Yeah. If you go into Newport News right now, you're going to see units everywhere. You're going to see units in a parking lot outside staged. Yeah We're out of space because we're just building them, getting them ready to be put in the dock. Yes. Which is positive. You'd like to just build them and put them onto the ship and erect them, but we couldn't because we had that space. They're making good progress. 81's making good progress, challenging what's been behind us, and we had a minor adjustment. We're going to have to deal with that over the next couple of years as we clean up that production schedule on 80. We have to be careful of that and if we have some inefficiencies coming through a quarter, we'll have to deal with them. Well, the carrier program, there's no more complicated program probably than this. RCOH is more complicated. Okay. It is. Well, okay. That's relevant here, too, right? It is. Now you've got the Ford. It's operating, it's performing well. Right. Now that it's in service, does that create any sustainment revenue for you when first in class is in service? I don't know if that's material particularly. It's probably not material. Yeah. There is some sustainment revenue. Yeah Engineering and planning revenue that happens at Newport News in support of aircraft carriers, but it's not significantly material, no. When you go from 78, 79 to 80, are they very different? There's obviously evolution over time. Right How do those crop up? Are there advances that are being pushed through as you move to 81? Major systems are the same. Okay. Right. Radar are the same. EMALS, same. AAG, same. Yeah. All the aircraft systems the same. You're going to have potential analysis done for 82 to increase lethality, and they may look to backfit that into 81 or 80 if they can catch it. Yeah. When I talk about minor adjustments from time to time on 80 and 81, it's going to be around inefficiencies related to how we did the construction at the beginning of the program. Yeah. What were our assumptions relative to how we were going to complete that or continue to build the ship, and did we meet that or not? Okay. You really don't know. You really don't know, because we were so out of sequence on 80. You have to continue to work through that program. When you put this together, we've got this holy grail of 9%-10%-type shipbuilding margins. Right. You look at Newport News. Block VI should come in, be much more attractive. You've got to work through some of the CVN issues. Columbia -class, my assumption, that may be, at this stage, a little bit below. How do you think about the margins and the ultimate path to get to that kind of number? We'll incrementally improve next year. I'm comfortable with our guidance this year. It's going to continue to improve. It's really predicated upon getting those ship deliveries done and transitioning those people into the higher-margin ships. I think both shipyards should be at 9% to 10%, and maybe even north of that, if they're executing well based on these new contracts. Again, 9%-10% is how we forecast the healthy shipyard margin. Yeah. Both of them. It's all transitioning out of the ships that are lower margin into the higher ships. I can't stress enough the value you get from going through a ship delivery. Yeah. We're going to have people that are going through ship deliveries for the first time, and we've got five Yeah Coming. When that happens, the learning just happens. You wouldn't believe the DDGs at Ingalls right now. It's just stacked up, and you've been to Ingalls before. Yeah. You can see it. You can be on LHA 8 right now and look across the yard and see just stacks of DDG-51s. If you can finish your milestone and just walk next door and do the exact same job with the exact same team, you're going to be more efficient. We have lacked that Yeah Probably for 10 years. When you're saying Newport News, you could get to that, it totally makes sense, get to that 9%-10%. Does that come at a time when you've at least, you got a lot of Block VI work is just going to start. Just going to start. Right Do we need to wait until Block VI becomes a majority of the work to get there? I can't really predict it at this point. Yeah. I've obviously got plans on when I think it's going to happen. Yeah A lot of variables that go into that. You don't have to deliver everything in Newport News, both aircraft carriers and all Block V boats before you get there. Yeah. Right. That happens out in the early or mid-2030s. I fully expect to get there before then. Yeah. As I think about this, the margin is always this combination of some double-digit margins Right On fixed price production programs. You've always got development or earlier stage, and it blends out to 9%-10%. That's right. a long time ago at Newport News. Right. You could get, as we saw, and as Mike always tried to dissuade me from, double-digit margins when you got into Ingalls. You were the one that came out. You were the first. Your price target when we came out at 40, you were the one that believed, right? You had the highest price target, you were proven true. I'd been there. Right. I saw Irwin. Right. You know? So did I. Yeah, I know. I'm sure you did. Right. A lot. Right. The thing that was so important, and it's what I'm looking for here, is that you could be down there and see everything is moving toward mature ships. People know how to build them. Right. They're biased toward fixed price mature ships. You could suddenly find yourself in double-digit margins. Right. As much as Mike wanted to say, "Don't assume that." You did. Right. I would think at Newport News, if you look at the mix there, and if you can get, and forgetting the time, but if you're getting into sort of maturity on production on Virginia-class, you move through a little ways on Columbia. CVN, I have a very hard time understanding how. Right That works. The RCOH is a cost type contract, where there's a significant amount of growth work that happens on that ship. Yeah. We should perform well on RCOHs. Yeah. Okay. Can you perform above what, can you get margins above? I'm not going to comment specifically Yeah On what their margin rates are, but it's a cost type ship where you make an assumption about how much growth work you're going to have. Yeah. If it changes, you get consideration for that. You should do well on RCOHs. It's helpful to get you to your target, basically. Yes. Yes. Okay. Going over to Ingalls. This is one where we were just talking about it looks like a pretty mature set of programs today. They are. They really are. What holds you back from getting that kind of 10%+ level margin there? It's the same story. It's less impactful down at Ingalls. There's, I guess, less beta down at Ingalls because they've had a track record of executing on those programs fairly well, and they don't have a new ship program in there either. They negotiated that last DDG contract and a couple of LPDs prior to COVID, right? Okay Two ago, right? They have to come through those, and they need to get into the new DDGs. They need to get into the amphib bundle. When they do that, and when they execute on those deliveries, it's going to step back up. That's a big volume of work, right? It's a lot of work. The DDG work is a lot of work. Assuming that those DDG contracts are good for you guys now. Right This has all the potential, I would think, to revisit those days of a bias toward fixed price mature contracts at a higher volume. Well, they are. And higher They are. are. These are all fixed price Higher margins. Fixed price incentive contracts with fair margins that we have a chance to be successful on. The FFX, can you just sort of dimension how large that will be in terms of your work down there? They're about an $800 million-$1 billion program. Yeah. From price standpoint. The first two are sole sourced to us, and we think we're going to do a great job building those. It's a little murky when you think about the acquisition profile subsequent to that. I think there'll be more than one builder. That's what the Navy has said. That acquisition profile, we're not really comfortable with yet. Yeah If we do the first two very well, we have a great chance to build a lot of frigates. Yeah. It's a ship we know how to build. It was very predictable, a really good team. It's not a lot of content in the shipyard. It's got a very predictable build schedule, where we're very comfortable that we know what that ship costs and how long it takes to build it. Well, it seemed like this was just a natural for you after NSC. We thought, yeah, I'm not going to comment on the award of that contract Yeah To the other company. Very rarely do you get someone say, "Can you help us and build a new ship?" Right. It's usually a very competitive process. Yeah. We're fortunate we had a ship design that was very buildable. Yeah. The Trump-class destroyer. Battleship. Yeah. Trump-class battleship. I can't call it destroyer? Well, it's a battleship. Okay. It's not a destroyer. I thought you can call it battleships. It's a nuclear battleship, actually. It's been identified as a nuclear battleship. Newport News is engaging with the Navy on how that's going to proceed, and how that design's going to proceed, and how they would build that in Newport News, because they're really the only place that can build it. It has to be there, right? It has to be there. Yeah. Based on the size, and because it's nuclear, it has to be in Newport News. What's the trajectory for this? Well, it's just starting. Yeah. Right. We're in the initial stages of discussions with the Navy on the plans for that. You saw it in the 30-year, the shipbuilding plan and the quantities. Yeah. We need to get to the design, understand what the design is, and engage in that with the Navy. Yeah. Think about how we'd integrate it into the shipyard if we were to build it there, when we build it there. It's just in the initial stages. It's not in our guidance. I think it's positive, and it's broadly supported in the government. Okay. Yeah, I mean, I've heard a lot of controversial comments about it. I listen to comments by the President, the CNO, the SECNAV. Yeah. All of those are very positive on the nuclear battleship. That's who I'm going with. Okay. That's who I'm going with. What I would ask is, do you invest ahead of this, or do you need to know more? I don't need to make significant investment ahead of this. Okay. Yeah. Right. All right. If I do, we'll be very disciplined in how we do it. Okay. Yeah. On Mission Technologies, and we've discussed this in the past, so maybe you can just help us understand a little more about what holds that whole business together. Sure. They're different things. Well, think about the acquisitions that pulled together Mission Technologies. Yeah. There's really three major acquisitions. Hydroid, which is really the largest unmanned underwater vehicle provider in the world. Yeah. Made that acquisition. SIS, which was a very good unmanned surface provider. SIS in Virginia Beach. Alion, which is technology. Alion has always been an R&D house. A lot of cost type contracts, electronic warfare, C4ISR training. Yeah. Really good cyber capability for Cyber Comm. That pulled it all together. We add nuclear into that mix, which is really bullish on nuclear right now. A lot of opportunity, a lot of projects that we're pursuing and competing on that I think have a good chance to win on those, and generate some revenue in commercial nuclear, actually, where we actually build part of the structure. That's very interesting. Unmanned is probably the most interesting thing right now when you look at the budget. Yeah. What happened in reconciliation, what happened in this year's budget, I think we are nearing that inflection point in unmanned, where it's going to be a more tangible part of the Navy fleet. They're going to buy more product, and they're going to get it out there and see how it works. We're fortunate we made the investments ahead of this. Not only in the companies that can build a product, but our Odyssey autonomy suite is a combination of the SIS autonomy suite and the Hydroid autonomy suite, and we combined them into Odyssey. Open architecture, like the Navy wants, built to Navy standards. We've got world-class partners like Shield AI that we can plug right into it Yeah To compete. There are a lot of opportunities that we're competing on in the unmanned space. Obviously, we've got a large contract for small underwater vehicles. There's both international and domestic competitions in the unmanned surface space. We think we made the right investments. We think we're in a great place to compete. Now, it's low barriers to entry, a lot of competitors. I'd put us up against anyone, and I actually think because of our background, and we understand how manned, unmanned teaming has to happen. Yeah. We understand the Minotaur technology, which is on P-8 relative to, not mission management, but the battlefield management of the assets on the battlefield. We understand that as well. The frigate's going to have a module in it to control unmanned boats. There's U.K. initiatives around the armour program or their frigate, which Babcock builds, that we have a relationship with, is going to potentially team with the ROMULUS family vehicle that we provide to expand their presence and their reach in the North Sea. We're all over this in support of the Navy's hedge fleet. I think there's real opportunity there, and we're entering this what we talk about as an inflection point Yeah In unmanned in support of the Navy. Yeah. It is also a complicated market to sort through. It's complicated. because there's so many different types of plays here. Different acquisition approaches, different investment approaches as well because you have to build these things and demonstrate them before they buy them. Yeah. Right? Now, fortunately, they're not a billion-dollar ship, right? These are not low dollar value, but less dollar value of $20 million-$40 million sort of products when you think about 150-foot surface vehicles. That's an investment Yeah That they're going to have to do. It's worth it when you think about how the Navy is evolving with their hedge fleet. I mean, the session before was the Anduril, and they're in this market too. Yes. I'm sure as you've heard, there are others like Saronic Right Other places, and that they'll all talk about their speed to market, speed of development. Right. And there's also, I would call it a favorable Right View inside the Pentagon today of new entrants, whether or not they can do the job. Right There's a real openness to that. Yes. How do you look at your positions here, and against these new entrants, but also L3Harris, a lot of people. Yeah, low barriers to entry, and as you recall, I was on Global Hawk. Yeah For Northrop. Right, yeah. We thought we were going to dominate. Unmanned, yeah. UAV space. Yeah. Right? It was just too expensive and the entrants, GA came in with their product and did very well. Yeah. There's a lot of other UAVs that came into the market and did niche sort of missions. I think this will develop in a similar fashion. There are large quantities of surface vehicles that are going to be bought. The beauty of our position is, we've had a bit of a head start. Yeah. Right, especially in the unmanned undersea. We have some very large contracts. We've been working very hard on our autonomy for a long time. Yeah. We built it knowing that we needed to plug in new commercial tech into it. We're doing that right now. The other issue is you get to demonstrate it. Yeah It's not marketing when you're out on the water. First of all, I welcome Saronic, Anduril, all the commercial tech. Bringing young, smart people in the industry, as an American, I like. Yeah. That's positive. I need to be given a fair chance to win. When you're going to a demonstration, there's nothing more fair than that. There's a clear criteria on how you need to execute. If you execute, then you can win. Yeah. All I want is a chance to compete, and I think I have that. Are there certain segments within the unmanned undersea that are particularly well-suited for you? Well, unmanned undersea, I think all of it is well-suited for us because we've been doing it for so long. Yeah. Unmanned surface is a little different. Yeah. Right. It's a pretty open market right now. Yeah Very small boats. I'm not really sure if that's suited for us, although we did just deliver some relatively small boats to the Marines a couple of months ago that are working great Yeah With the Odyssey software on it. Again, we're going to have to evaluate each opportunity. I think you have to choose, because they're going to settle up on a size- Okay I think. In the right place. Swimming towards that Yeah That right size. If we look, it's a hot area, but the revenue dollars are relatively small today. With high quantities, it can start to add up. That's what I was going to get at. Right. Well, in five years, how large could you see this business being? I don't necessarily want to project that. Yeah I do think there's interesting models, not only in how you sell them, but how you monetize it. Yeah Right, with the software. If you're able to sell these and sell the software potentially independently, and get recurring revenue streams on the software, and we think we have very good software in this space, that's interesting. Yeah. Yes, there are small dollar values for each asset, and I don't really want to project how big it's going to get, although I think if you just look at the budget, you're going to see it's going to get bigger, and we'll get a piece of that. Yeah. I do think there's just great opportunity, both top line and bottom line. Okay. Overall, you've guided to free cash flow of $500 million-$600 million this year. Yes. What things should we be looking for to see, could you be the high end of that? What will determine why you've come out in that range? Make the ship deliveries. Yeah. We need to get Block VI and Columbia done, which will contribute to free cash flow in the year. We need to make our ship deliveries. They're not all five of them in this year. We need 800 done this year, and we need LPD 30 done this year. Yeah. We need to make our throughput commitment, because our billing clauses are based on earning the hours, deliver our ships, get Block VI and Columbia done, and then we'll be fine. Okay. I'm just curious, there have been some concepts in the past that we haven't seen actually come to fruition. Like LX(R) was going to be the next LPD. Right LPDs just keep on going. Well, it's a great ship. A lot of room on that ship, a lot of ability to upgrade it based on technology. I think they'll always evaluate different alternatives, but I think that the LPD, the large deck in the LHAs, and the MEU concept for the Marines. Yeah I think has got a lot of legs, and it's done a very good job. Yeah. Why mess with something that's doing very well for you? Yeah. Okay. Well, Chris, great. Good. It's great to see you here. Great. Yeah, we're out of time. Oh, are we? Okay. Great. Well, thanks, Doug. Thanks a lot. Yeah, appreciate it. Great to see you.