KBR(KBR) - 2024 Q3 - Quarterly Results

Q3 2024 Financial Results Overview CEO Commentary The CEO highlighted exceptional Q3 results with year-over-year growth across all key financial metrics and raised full-year 2024 guidance following the LinQuest acquisition - KBR reported outstanding third-quarter results with year-over-year growth across all financial metrics: Revenues, Adjusted EBITDA, Adjusted EPS, and Operating Cash Flows[1] - The strategic acquisition of LinQuest, a leader in advanced engineering and data analytics, enhances KBR's capabilities in space, air dominance, and connected battle space missions[1] - Due to strong performance and the LinQuest acquisition, KBR is raising its full-year 2024 guidance for Revenue, Adjusted EBITDA, and Adjusted EPS[1] Business Highlights and New Awards Overall Bookings and Backlog KBR's total backlog reached $22.1 billion with strong QTD and TTM book-to-bill ratios of 1.2x and 1.1x respectively, driven by $3.3 billion in new bookings Backlog and Book-to-Bill Ratios (as of Sep 27, 2024) | Metric | Value | Period | | :--- | :--- | :--- | | Total Backlog and Options | $22.1 billion | As of Sep 27, 2024 | | New Bookings and Options | $3.3 billion | Q3 2024 | | Book-to-Bill Ratio | 1.2x | Quarter-to-Date (QTD) | | Book-to-Bill Ratio | 1.1x | Trailing-Twelve-Months (TTM) | Sustainable Technology Solutions (STS) The STS segment achieved strong book-to-bill ratios and secured key contracts in LNG, sustainable aviation fuel, and blue ammonia, reinforcing its leadership in energy transition - Selected by Lake Charles LNG for a major transformation project including three liquefaction trains to export 16.45 metric tons per annum of LNG[2] - Awarded contracts for sustainable technologies, including PureSAF℠ for sustainable aviation fuel, blue ammonia technology for Samsung and Shell, and ROSE® SDA technology for China's largest refinery[3] - Secured an advisory consulting contract with Kuwait Oil Company to develop a masterplan for producing 17GW of renewables and 25GW of green hydrogen by 2050[3] Government Solutions (GS) The GS segment achieved strong book-to-bill ratios, securing significant contracts with the U.S. military and Australia, while the LinQuest acquisition added new orders - Awarded multiple high-value contracts with the U.S. military, including a $199M contract with the Naval Information Warfare Center, a $153M recompete for Naval Test Wings, and a $230M recompete with the U.S. Air Force[4] - Selected to deliver technical design services to support Australia's sovereign nuclear-powered submarines facilities and infrastructure program[4] - The recently acquired LinQuest secured over $60 million in new orders via the SBIR Phase III contract vehicle, a new vehicle for KBR[5] Sustainability and ESG Achievements KBR achieved top ESG ratings from MSCI and EcoVadis, with 37% of 2023 revenues from sustainability projects, demonstrating strong environmental commitment - Received a top AAA rating from MSCI ESG Ratings for the second consecutive year, placing it among industry leaders in managing ESG risks[6] - Earned a Gold Rating from EcoVadis, placing KBR in the top 5% of assessed companies for business sustainability[6] - In 2023, 37% of KBR's revenues were derived from sustainability-focused projects[6] Financial Performance Q3 2024 Financial Summary KBR reported strong Q3 2024 results with 10% revenue growth to $1.9 billion, 18% Adjusted EBITDA growth to $219 million, and robust operating cash flow of $161 million Q3 2024 Financial Performance (YoY) | Metric | Q3 2024 (Millions) | Q3 2023 (Millions) | Change | | :--- | :--- | :--- | :--- | | Revenues | $1,947M | $1,770M | +10% | | Net Income (to KBR) | $100M | ($21M) | N/A | | Adjusted EBITDA | $219M | $186M | +18% | | Adjusted EBITDA Margin | 11.2% | 10.5% | +70 bps | | Diluted EPS | $0.75 | ($0.16) | N/A | | Adjusted EPS | $0.84 | $0.75 | +12% | | Operating Cash Flows | $161M | ($40M) | +$201M | - Revenue growth was driven by on-contract growth across all Government Solutions business units, the acquisition of LinQuest, and growing demand in Sustainable Technology Solutions[9] - Operating cash flow increased significantly to $161 million, up from a $40 million outflow in Q3 2023, primarily due to strong collections and the absence of a $132 million prior-year legal settlement payment[10] Year-to-Date (Nine Months) 2024 Financial Summary For the first nine months of 2024, KBR's revenue grew 8% to $5.6 billion, Adjusted EBITDA rose 15% to $642 million, and operating cash flow reached $422 million YTD 2024 Financial Performance (YoY) | Metric | YTD 2024 (Millions) | YTD 2023 (Millions) | Change | | :--- | :--- | :--- | :--- | | Revenues | $5,620M | $5,226M | +8% | | Net Income (to KBR) | $299M | ($286M) | N/A | | Adjusted EBITDA | $642M | $559M | +15% | | Adjusted EBITDA Margin | 11.4% | 10.7% | +70 bps | | Diluted EPS | $2.22 | ($2.10) | N/A | | Adjusted EPS | $2.44 | $2.18 | +12% | | Operating Cash Flows | $422M | $248M | +$174M | - YTD revenue growth was driven by Sustainable Technology Solutions and growth across International, Defense & Intel, and Science & Space within Government Solutions, partially offset by a decline in Ukraine-related activity[12] Capital Allocation KBR returned $29 million to shareholders in Q3 2024 and $226 million year-to-date through share repurchases and dividends Capital Returned to Shareholders (in millions) | Period | Share Repurchases (Millions) | Dividends (Millions) | Total Returned (Millions) | | :--- | :--- | :--- | :--- | | Q3 2024 | $9 | $20 | $29 | | YTD 2024 | $167 | $59 | $226 | Segment Financials Government Solutions remained the primary revenue driver at $1.49 billion in Q3 2024, while Sustainable Technology Solutions also showed growth with $457 million in revenue Segment Revenue and Operating Income (Q3 2024 vs Q3 2023, in millions) | Segment | Q3 2024 Revenue (Millions) | Q3 2023 Revenue (Millions) | Q3 2024 Operating Income (Millions) | Q3 2023 Operating Income (Millions) | | :--- | :--- | :--- | :--- | :--- | | Government Solutions | $1,490 | $1,345 | $123 | $108 | | Sustainable Technology Solutions | $457 | $425 | $95 | $84 | Financial Position and Cash Flow KBR's total assets increased to $6.78 billion due to the LinQuest acquisition, with long-term debt rising to $2.56 billion, and operating cash flow reaching $422 million YTD - Total assets increased to $6.78 billion from $5.57 billion at year-end 2023, with Goodwill increasing from $2.11 billion to $2.55 billion, reflecting the LinQuest acquisition[23] - Long-term debt increased to $2.56 billion from $1.80 billion at year-end 2023, primarily to fund acquisition activities[23] - Net cash provided by operating activities for the nine months ended Sep 27, 2024 was $422 million, a significant improvement from $248 million in the prior year period[24] Fiscal 2024 Guidance Updated Full-Year Outlook KBR raised its full-year 2024 guidance for Revenue to $7.5 billion - $7.7 billion and Adjusted EPS to $3.20 - $3.30, reflecting strong performance and the LinQuest acquisition Updated Fiscal 2024 Guidance | Metric | Updated Guidance | Prior Guidance | | :--- | :--- | :--- | | Revenue | $7.5B - $7.7B | $7.4B - $7.7B | | Adjusted EBITDA | $840M - $870M | $825M - $850M | | Adjusted EPS | $3.20 - $3.30 | $3.15 - $3.30 | | Operating cash flows | $460M - $480M | $460M - $480M | Appendix: Non-GAAP Reconciliations Reconciliation of Net Income to Adjusted EBITDA This section reconciles GAAP Net Income to non-GAAP Adjusted EBITDA, showing how Q3 2024 Net Income of $100 million was adjusted to $219 million Adjusted EBITDA Reconciliation of Net Income to Adjusted EBITDA (Q3 & YTD, in millions) | Line Item | Q3 2024 (Millions) | Q3 2023 (Millions) | YTD 2024 (Millions) | YTD 2023 (Millions) | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) attributable to KBR | $100 | ($21) | $299 | ($286) | | Adjustments (Interest, Taxes, D&A, etc.) | $112 | $199 | $329 | $500 | | EBITDA | $212 | $178 | $628 | $215 | | Other Adjustments (Acquisition, Legal, etc.) | $7 | $8 | $14 | $344 | | Adjusted EBITDA | $219 | $186 | $642 | $559 | Reconciliation of Diluted EPS to Adjusted EPS This section reconciles GAAP Diluted EPS to non-GAAP Adjusted EPS, illustrating how Q3 2024 Diluted EPS of $0.75 was adjusted to $0.84 Adjusted EPS Reconciliation of Diluted EPS to Adjusted EPS (Q3 & YTD) | Line Item | Q3 2024 | Q3 2023 | YTD 2024 | YTD 2023 | | :--- | :--- | :--- | :--- | :--- | | Diluted EPS | $0.75 | ($0.16) | $2.22 | ($2.10) | | Adjustments | $0.09 | $0.91 | $0.22 | $4.28 | | Adjusted EPS | $0.84 | $0.75 | $2.44 | $2.18 | Reconciliation of Operating Cash Flow to Adjusted Free Cash Flow This section reconciles GAAP operating cash flow to Adjusted free cash flow, showing how Q3 2024 operating cash flow of $161 million resulted in $142 million Adjusted free cash flow Reconciliation to Adjusted Free Cash Flow (Q3 & YTD, in millions) | Line Item | Q3 2024 (Millions) | Q3 2023 (Millions) | YTD 2024 (Millions) | YTD 2023 (Millions) | | :--- | :--- | :--- | :--- | :--- | | Cash flows from operating activities | $161 | ($40) | $422 | $248 | | Add: Legacy legal settlement (after tax) | — | $132 | — | $132 | | Adjusted operating cash flows | $161 | $92 | $422 | $380 | | Less: Capital expenditures | ($19) | ($22) | ($54) | ($60) | | Adjusted free cash flows | $142 | $70 | $368 | $320 |