naval battle
HII President Chris Kastner greets interns at HI-PIC on Monday, August 15, 2022 in Honolulu. (Photo by Marco Garcia, courtesy of HII)
SEA AIR SPACE 2024 — Prior to 2020, HII maintained a public profile as a solid naval shipyard. This company was one whose main focus was bending large pieces of steel to make them ostensibly seaworthy forever. The idea of one day expanding into the C5ISR, unmanned vehicle, and electronic warfare ecosystem was limited to internal discussions.
However, HII's chief executive told Breaking Defense in an exclusive interview last week that within the company the transition to becoming a technology company rather than a pure shipbuilding company was seen as not only necessary but inevitable. Ta. It is seen as an important source of future growth.
“We never set out to be just a shipbuilder,” Chris Kastner said ahead of this year's Sea, Air and Space Conference. “We knew shipbuilding was always going to be the focus. But we knew we had to go beyond that. We needed to grow as a publicly traded company.”
The goal: to evolve HII “from someone who just bends steel to someone who looks forward to solving tomorrow's solutions.”
So in 2020, the shipbuilding company most closely associated with the U.S. Navy's aircraft carriers and flying boats is Mission Technologies, a third division focused solely on the cutting-edge technologies listed in the Department of Defense's National Defense Strategy. launched. After three years, Mission Technologies nearly matched the revenue brought in by its Mississippi-based shipyard, Ingalls Shipbuilding, according to slides from the company's latest investor day.
This growth comes as no surprise to Kaestner. His history with HII dates back to when the company was still a subsidiary of Northrop Grumman, known as Ingalls Shipbuilding. And the hope is that Mission Technologies will continue to grow bigger and faster than the company's shipyards, he said.
“I don't have anything specific, but [revenue percentage] Target in mind. “We know they will grow faster than the shipyards because of the nature of the business,” he said. “The thirst for technology over there is growing. Last year's growth rate was 13%, which is a pretty big number. In the future, he is expected to grow by 5%. [based] Because it's about market growth…and that's a priority for the Department of Defense right now. ”
The crew of the HII-owned boat prepares to deploy the Remus 300 into the water. (Photo by Justin Katz/Breaking Defense)
Look at the numbers
Mission Technologies brought in about $2.7 billion in fiscal 2023, according to a breakdown the company provided to investors in March. That's just shy of Ingalls' $2.8 billion and less than half of Newport News Shipyard's $6.1 billion.. The mix of technologies that HII's newest business unit has adopted since its founding is in part a reflection of how that department was formed, and in part a reflection of the Department of Defense's own priorities. .
Within Mission Technologies, C5ISR accounted for 43% of the department's workload in 2023. His three other divisions, Cybersecurity and Electronic Warfare, Fleet Sustainment Contracts, and Live, Virtual and Constructive Technology, each accounted for less than a quarter of overall revenue. As for where the money comes from, the bulk comes from joint Pentagon agencies such as Combatant Command, with an even smaller amount coming from Navy and Air Force deals.
The diverse portfolio reflects the strategy HII has adopted to rapidly build a modern division. Over the course of about a year, from March 2020 to August 2021, HII acquired three separate companies that currently make up Mission Technologies: unmanned systems manufacturer Hydroid, autonomous driving business SIS, and science and technology developer Alion. Acquired small businesses.
Taken together, these three businesses “provide the driving force for the company to have the business model needed to succeed in a new technology space that operates differently than traditional shipbuilding,” another HII executive said on the background. told Breaking Defense.
Kaestner said that C5ISR makes up the overwhelming majority of the breakdown, pointing to the fact that big data and the need for its collection, classification and analysis are currently driving the defense technology market. .
And indeed, it is well known in the industry that the Department of Defense is interested in big data. Kaestner did not mention Joint All Domain Command and Control, also known as JADC2, but the desire to flow information across the battlespace and analyze it accordingly is at the very heart of the Pentagon's first joint program.
“I don't necessarily consider [C5ISR] “It’s the golden child, but it’s just the biggest business at the moment and I think it will continue to be that for the foreseeable future,” he said.
Part of the aft section of the future USS Enterprise (CVN-80) under construction in dry dock at HII's Newport News Shipyard. (Justin Katz/Defense Breaker)
more than a ship
HII has probably felt the ups and downs of shipbuilding budgets more acutely than other defense contractors in recent years. Since 2020, the company has experienced delays in planned aircraft carrier purchases, impromptu stops and starts in amphibious shipbuilding, and the Navy accelerates the pace of submarine construction in time for the success of the AUKUS trilateral security agreement. are under extreme pressure. Leaders have no bones about publicly unloading on the industry.
Related: Navy announces long delays in shipbuilding, rare public accounting report
Kaestner and other HII executives stopped short of saying that Mission Technologies was built to protect the company from fluctuations in shipbuilding budgets. However, the chief executive said that “holding his 25% of the business definitely reduces the risk of the portfolio”. [being] It's not just shipbuilding. ”
“There is some diversification, but it's diversification in areas that we know well,” he said. “It's not diversifying into adjacent regions that are significantly outside of our core competency. It really helped that Arion had his 30% to 40% of the business in the naval business.”
After launching Mission Technologies in 2020 and successfully acquiring Arion, Hydroid, and SIS in the months that followed, HII entered the maritime airspace in 2022 with a specific message: Huntington Ingalls Industries used to be a shipbuilding company, but now it has a message: “We are HII.” (Company's twitter handle It literally says the same thing. )
The relaunch of the brand was an opportunity for the contractor's public image to catch up with the new portfolio. If the company spun out of Northrop Grumman in the early 2010s was a stalwart naval shipyard, HII in 2024 is decisively trying to transform itself into something more — a history that Kaestner makes clear. It straddles the gap between what we see in the future.
