Financial Performance - The company reported second quarter sales of $3.1 billion and earnings per share of $3.86, with a backlog of $56.9 billion [5][14] - Free cash flow was $730 million, with capital expenditures of $93 million [6][20] - Revenues increased by 3.5% year-over-year, driven by growth across all divisions [14] Business Line Performance - Ingalls revenues were $724 million, up 1.7% year-over-year, primarily due to higher volume on the guided missile destroyer program [15] - Newport News revenues reached $1.6 billion, a 4.4% increase, driven by higher volumes on Columbia and Virginia class submarine programs [15] - Mission Technologies revenues were $791 million, up 3.4%, supported by a favorable resolution related to a C5ISR contract [15] Market Data - The company secured contract awards totaling $11.9 billion, including two Block V submarines and investments in workforce development and technology [5][12] - The reconciliation bill and FY 2026 budget include significant support for shipbuilding programs, reflecting a strong funding environment [13] Company Strategy and Industry Competition - The company is focused on increasing throughput, achieving cost reductions, and capturing new contract awards [13][26] - A technology partnership with C3AI aims to leverage digital technologies and AI to enhance shipbuilding efficiency [8] - The industrial base is expanding with significant outsourcing, which is expected to increase shipbuilding capacity [11] Management Commentary on Operating Environment and Future Outlook - Management acknowledged challenges in transitioning from pre-COVID contracts to new contracts, but expressed confidence in achieving operational initiatives [10][12] - Positive trends in labor pipeline and retention were noted, with expectations for continued stability in the supply chain [11] - The company reiterated its revenue and operating margin guidance for the year, expecting shipbuilding revenue between $8.9 billion and $9.1 billion [21][22] Other Important Information - The company ended the quarter with a cash balance of $343 million and liquidity of approximately $2 billion [21] - A cash dividend of $1.35 per share was paid, totaling $53 million [20] Q&A Session Summary Question: How to reconcile the increase in throughput with the modest revenue guidance? - Management explained that the revenue forecast considers wage increases and improvements in outsourcing, which will contribute to throughput in the latter half of the year [31][32] Question: Is the five-year cumulative free cash flow target back on the table? - Management clarified that they are focused on annual guidance and have not reinstated the five-year target at this time [40][41] Question: What is the impact of the CVN 79 schedule slip to 2027? - Management indicated that the schedule slip was factored into guidance and there was no material financial impact [45][46] Question: How does the reconciliation funding affect the timeline and quantification? - Management stated that all programs are supported by the funding and it is included in the long-term revenue guidance [49][50] Question: What is the expected impact of changes in R&D tax code? - Management noted a positive impact from the tax changes, increasing free cash flow guidance due to the new treatment of R&D expenses [71][72] Question: What is the outlook for the unmanned undersea business? - Management expects outsized growth in the unmanned vehicle segment, with significant opportunities funded within the reconciliation bill [76][78] Question: How does the company view AUKUS and partnerships with international shipbuilders? - Management expressed strong support for AUKUS and highlighted strategic partnerships that could enhance throughput and industrial base capacity [82][85] Question: How many employees were hired in the quarter? - Management reported hiring approximately 2,400 experienced employees, with improvements in retention metrics noted [86]