KBR announces Third Quarter Fiscal 2024 Financial Results

Oct 23, 2024

"KBR's exceptional team has once again exceeded expectations with outstanding third-quarter results," stated Stuart Bradie, KBR's President and CEO. "Our team's dedication to our customers has resulted in year-over-year growth across all financial metrics, including Revenues, Adjusted EBITDA², Adjusted EPS², and notably, Operating Cash Flows. The bookings and awards this quarter align well with our focus areas of energy security and transition, national defense, and sustainability, and bolster our confidence for the rest of 2024 and heading into 2025."

"During the quarter, we strategically shaped our portfolio and allocated capital in a thoughtful, balanced way," Bradie continued. "Our acquisition of LinQuest, a leader in advanced engineering, data analytics, and digital integration, enhances our capabilities in space, air dominance, and connected battle space missions and introduces KBR to new U.S. government customers and contract vehicles. With strong performance across KBR and the integration of LinQuest progressing well, I am pleased to announce an increase in Revenue, Adjusted EBITDA², and Adjusted EPS² guidance for 2024. We welcome our new colleagues to the KBR family and look forward to the opportunities to shape the future together."

New Business Awards
Backlog and options as of September 27, 2024 totaled $22.1 billion. Delivered 1.2x quarter-to-date (QTD) and 1.1x trailing-twelve-months (TTM) book-to-bill¹ as of September 27, 2024. Awarded $3.3 billion of bookings and options¹ in the quarter.

Sustainable Technology Solutions (STS) delivered 1.0x QTD and 1.1x TTM book-to-bill¹ as of September 27, 2024, including awards and achievements in the quarter as follows:

Announced that KTJV, a KBR and Technip Energies joint venture, has been selected by Lake Charles LNG Export Company, a subsidiary of Energy Transfer LP, for its Lake Charles LNG transformation project that includes the delivery of three liquefaction trains and modifications to existing storage and dock facilities designed to enable the export of 16.45 metric tons per annum of LNG. Under the terms of the agreement, KTJV will provide high-end engineering, procurement, construction management, construction, commissioning, startup and other related services, subject to Lake Charles LNG's decision to issue a notice to proceed for the project.
Awarded an engineering and procurement services contract for the Beachfield Manatee upgrade, the onshore portion of Shell's Manatee gas field project located in the East Coast Marine Area of Trinidad and Tobago. The Manatee gas field supports global energy security and natural gas production, providing gas for the country's Atlantic LNG facility.
PureSAF℠ technology, which is exclusively licensed by KBR worldwide, was selected by Avina Clean Hydrogen Inc. for its project in the U.S. Under the terms of the contract, KBR will provide technology licensing, proprietary engineering design, and front-end engineering design for Avina's facility to produce 120 million gallons of sustainable aviation fuel per year.
Awarded a conceptual study contract for floating blue ammonia production from Samsung Heavy Industries (SHI), one of the world's largest shipbuilders in South Korea. The study will utilize KBR's innovative blue ammonia technology, suitable for offshore production, and leverage SHI's expertise in the design of mega floating vessels.
Awarded engineering contracts by Seatrium Group to develop topsides facilities for two new high-production, energy-efficient floating production storage and offloading units. The units are being designed for Petrobras' Atapu and Sepia fields in the Santos Basin, Brazil.
KBR's ROSE® supercritical Solvent De-Asphalting (SDA) technology was selected by Zhejiang Petroleum & Chemical Co. Ltd., the operator of China's largest refinery. KBR is a global leader in SDA technology with the largest installed base and has been involved in the licensing, design, engineering, and commissioning of 72 ROSE units worldwide with a combined licensed capacity of nearly 1.66 million barrels per day.
Awarded an advisory consulting contract by Kuwait Oil Company for the development of a country wide masterplan for the production of 17GW of renewables and 25GW of green hydrogen by 2050.
KBR's blue ammonia technology selected by Shell for its Blue Horizons low-carbon hydrogen and ammonia project in Duqm, Oman. The facility will utilize KBR's leading ammonia synthesis loop technology to deliver cost-competitive and low-carbon intensity ammonia.

Government Solutions (GS) delivered 1.3x QTD and 1.1x TTM book-to-bill¹ as of September 27, 2024, including awards and achievements in the quarter as follows:

Awarded an estimated $199 million cost-plus-fixed-fee contract supporting the Naval Information Warfare Center Pacific Program Executive Office Digital and Enterprise Services Technical Director's Office. KBR was awarded this contract under the Department of Defense Information Analysis Center's multiple-award contract vehicle.
Awarded the follow-on Space Science Instruments and Experimental Payloads (SSIEP) 3 contract by the U.S. Navy for continued development of space science instrument systems at the Naval Research Lab (NRL) in Washington, D.C. This award maintains KBR's presence at NRL where it has supported SSIEP 1 and 2 since 2015.
Awarded an estimated $153 million cost-plus-fixed-fee recompete contract to support Naval Test Wings Atlantic and Pacific Aircrew Services over a five-year period. This strategic win builds on KBR's 45 years of aircrew services and flight test support for the U.S. Navy.
Awarded a 60-month cost-plus-fixed-fee recompete IAC MAC task order with an estimated value of $140 million to provide operational safety, suitability, and effectiveness engineering tasks supporting the Air Force Life Cycle Management Center. As the U.S. Air Force's trusted partner, KBR will continue to perform research and analyses at Hill Air Force Base in Clearfield, Utah, and other U.S. Air Force locations.
Awarded an estimated $230 million cost-plus-fixed-fee recompete IAC MAC contract by the U.S. Air Force's 774th Enterprise Sourcing Squadron to develop and create new knowledge for the enhancement of the DTIC repository and the R&D and S&T community. The work will be primarily performed at Naval Air Station Patuxent River, Maryland and Huntsville, Alabama over a period of five years.
Awarded an estimated $113 million IAC MAC task order to perform aeronautical systems research, development, test and evaluation for the Air Force Life Cycle Management Center Mobility Directorate at Wright-Patterson Air Force Base, Ohio over a period of five years.
Awarded a contract to continue to deliver technical design services at HMAS Stirling by the Security and Estate Group and the Australian Submarine Agency. This work will support the sovereign nuclear-powered submarines facilities and infrastructure program, enabling the Submarine Rotational Force – West, and accelerating Australia's ability to safely own, operate, maintain and sustain its own future nuclear powered submarine fleet.
In the month since the acquisition closed, LinQuest secured over $60 million of new orders under a unique contract vehicle that KBR does not currently utilize — SBIR Phase III, which allows for the commercialization of technologies designed by small businesses.
Selected as NASA's Agency-Level Large Business Prime Contractor of the Year. This win underscores KBR's ongoing commitment to critical programs at Goddard Space Flight Center, where it holds three prime contracts, including Ground Systems and Missions Operations III, as well as multiple subcontracts and joint ventures.

KBR recently published its 2023 Sustainability Report and received the following awards and achievements in the quarter:

Received an AAA designation in MSCI's 2024 ESG (environmental, social and governance) Ratings. The AAA rating is MSCI's highest and is given to companies that are leading their industries in managing the most significant ESG risks and opportunities. This is KBR's second consecutive year receiving this designation.
Earned a Gold Rating from EcoVadis, one of the world's largest and most trusted providers of business sustainability ratings for global supply chains. The Gold Rating places KBR in the top 5% of assessed companies.
Recognized by USA Today as one of America's Climate Leaders for 2023. This data-driven recognition ranks U.S.-based companies that have cut their carbon footprint in recent years.
Achieved an industry leading 93% Zero Harm days in 2023 and delivered 37% of KBR's 2023 revenues from sustainability focused projects.

Summarized Third Quarter 2024 Financial Results

	Three Months Ended		Nine Months Ended
	September 27,	September 29,	September 27,	September 29,
Dollars in millions, except share data	2024	2023	2024	2023
Revenues	1,947	1,770	$ 5,620	$ 5,226
Operating income	173	147	520	301
Net income (loss) attributable to KBR	100	(21)	299	(286)
Adjusted EBITDA²	219	186	642	559
Operating income margin %	8.9 %	8.3 %	9.3 %	5.8 %
Adjusted EBITDA² margin %	11.2 %	10.5 %	11.4 %	10.7 %
Earnings per share:
Diluted earnings per share	$ 0.75	$ (0.16)	$ 2.22	$ (2.10)
Adjusted earnings per share²	$ 0.84	$ 0.75	$ 2.44	$ 2.18
Cash flows:
Operating cash flows	161	(40)	422	248
Adjusted operating cash flows²	161	92	422	380
Adjusted free cash flows²	142	70	368	320

Financial Highlights for the Three Months Ended September 27, 2024

Revenue of $1.9 billion, up 10% on a year-over-year-basis
Net income attributable to KBR of $100 million; Adjusted EBITDA² of $219 million, up 18% on a year-over-year basis (11.2% Adjusted EBITDA² margin)
Diluted EPS of $0.75; Adjusted EPS² of $0.84, up 12% on a year-over-year basis
Operating cash flows of $161 million
Bookings and options¹ of $3.3 billion during the quarter with 1.2x QTD book-to-bill¹

Financial Highlights for the Nine Months Ended September 27, 2024

Revenue of $5.6 billion, up 8% on a year-over-year-basis
Net income attributable to KBR of $299 million; Adjusted EBITDA² of $642 million, up 15% on a year-over-year basis (11.4% Adjusted EBITDA² margin)
Diluted EPS of $2.22; Adjusted EPS² of $2.44, up 12% on a year-over-year basis
Operating cash flows of $422 million
Bookings and options¹ of $6.7 billion during the year to date period with 1.1x TTM book-to-bill¹

Commentary on the Three Months Ended September 27, 2024
Revenues were $1.9 billion, up 10% compared to 3Q'23, primarily due to on-contract growth across all of the Government Solutions business units, the acquisition of LinQuest, and growing demand in Sustainable Technology Solutions from engineering and professional services and technology licensing.

Net income attributable to KBR was $100 million, up $121 million compared to 3Q'23, primarily due to a non-cash charge of $114 million in 3Q'23 in connection with the election of cash as the settlement method for our Convertible Notes that did not recur in the current year.

Adjusted EBITDA² was $219 million, up $33 million compared to 3Q'23, with Adjusted EBITDA² margins of 11.2%, up 74 bps year-over-year.

Diluted earnings per share was $0.75, up $0.91 compared to 3Q'23, primarily due to the increase in Net income attributable to KBR noted above and the decrease in diluted weighted average common shares outstanding in the current year. Adjusted earnings per share²was $0.84, up $0.09 compared to 3Q'23, due to increases in gross profit, partially offset by higher selling, general and administrative expenses, interest expense, and provision for income taxes.

Operating cash flows were $161 million, up $201 million compared to 3Q'23, primarily due to a $132 million after-tax outflow in connection with the settlement of a legacy legal matter in the prior year and strong customer collections in the current year. Adjusted operating cash flows were $161 million, up $69 million compared to 3Q'23, primarily due to cash from strong collections in the current year.

Capital returned to shareholders totaled $29 million during the quarter, consisting of $9 million in share repurchases, inclusive of $8 million of open market repurchases and $1 million of repurchases to satisfy requirements of equity compensation plans, and $20 million in regular dividends.

Commentary on the Nine Months Ended September 27, 2024
Revenues were $5.6 billion, up 8% compared to YTD 3Q'23, primarily due to growth across Sustainable Technology Solutions; and within Government Solutions, new and on-contract growth across International, Defense & Intel, and Science & Space, partially offset by decline in Ukraine activity in Readiness & Sustainment.

Net income attributable to KBR was $299 million, up $585 million compared to YTD 3Q'23, primarily due to a $132 million settlement of a legacy legal matter in the prior year, as well as a non-cash charge of $428 million recorded in connection with the election of cash as the settlement method for our Convertible Notes and the repurchase of a portion of our Convertible Notes in the prior year that did not recur in the current year.

Adjusted EBITDA² was $642 million, up $83 million compared to YTD 3Q'23, with Adjusted EBITDA² margins of 11.4%, up 73 bps year-over-year.

Diluted earnings per share was $2.22, up $4.32 compared to YTD 3Q'23, primarily due to the increase in Net income attributable to KBR noted above and the decrease in diluted weighted average common shares outstanding in the current year. Adjusted earnings per share²was $2.44, up $0.26 compared to YTD 3Q'23, due to increases in gross profit and equity in earnings of unconsolidated affiliates, partially offset by higher selling, general and administrative expenses, interest expense, other non-operating expenses, and provision for income taxes.

Operating cash flows were $422 million, up $174 million compared to YTD 3Q'23, primarily due to a $132 million after-tax outflow in connection with the settlement of a legacy legal matter in the prior year and strong customer collections in the current year. Adjusted operating cash flows were $422 million, up $42 million compared to YTD 3Q'23, primarily due to strong collections in the current year.

Capital returned to shareholders totaled $226 million during the year to date period, consisting of $167 million in share repurchases, inclusive of $154 million of open market repurchases and $13 million of repurchases to satisfy requirements of equity compensation plans, and $59 million in regular dividends.

Updated Fiscal 2024 Guidance
The table below summarizes updated Fiscal 2024 guidance and represents our views as of October 23, 2024. Updated guidance reflects KBR's strong operational performance and the acquisition of LinQuest.

	Updated Fiscal 2024 Guidance	Prior Fiscal 2024 Guidance
Revenue	$7.5B - $7.7B	$7.4B - $7.7B
Adjusted EBITDA	$840M - $870M	$825M - $850M
Diluted EPS^*	$2.91 - $3.01	$2.94 - $3.09
Adjusted EPS^*	$3.20 - $3.30	$3.15 - $3.30
Operating cash flows	$460M - $480M	$460M - $480M


*	Fiscal 2024 Diluted and Adjusted EPS guidance is calculated using a share count of approximately 135 million.

The company does not provide a reconciliation of Adjusted EBITDA to the most comparable GAAP financial measure on a forward-looking basis because the company is unable to predict with reasonable certainty the ultimate outcome of legal proceedings, unusual gains and losses, and acquisition-related expenses without unreasonable effort, which could be material to the company's results computed in accordance with GAAP.