KBR - Earnings call transcript Q4 2017

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Operator

Good day, and welcome to KBR's Fourth Quarter 2017 Earnings Conference Call. This call is being recorded. [Operator Instructions] For opening remarks and introductions, I’d now like to turn the call over to Nelson Rowe. Please go ahead, sir.

Nelson Rowe

Good morning, and thank you for joining us today to discuss KBR's Fourth Quarter and Fiscal Year 2017 Financial Results.

call of Stuart Executive KBR; and Financial today's Chief President Vice on Chief Officer Executive and Officer. us will Bradie, be and President Joining Mark Sopp, market KBR's and discuss for will Mark earnings expectations and operational Stuart results, outlook and XXXX. financial presentation the posted is Investors to in on of kbr.com. refer website the that Please our Section

press on also and a The replay their we take announcing will at webcast Following release for your questions. days be will the quarter being year available KBR's be fourth prepared remarks, Today's website seven website. call XXXX available on and is results XXXX KBR's will also Form kbr.com. fiscal XX-K and

cause statements, These period the the earnings on and from XXXX about future results XX, and year X-K. reflecting like call turn XXXX XX-K to impact press Stuart, to results events discussed to actual and we their and current quarter XXXX, fiscal December audience I performance. Form significantly risks discussions remind fourth today's operations the involve potential These for are KBR's risks matters Form would impact and forward-looking KBR's differ our and Before that financial statement. on uncertainties views over include could that ended release, forward-looking reports our in may

all website find at kbr.com. these the can documents on You

Now, I will turn the call over to Stuart.

Stuart Bradie

your Thanks, for us KBR. in interest and Nelson, you morning thank and this joining

quarter parts underlying but performance busy XXXX performance I are year. number We a We in exciting line this second moving or were to believe, a and or above for up in has as out our these follows: and to the but detail every year very guidance us With and in well key exceeded much will XXXX have talk quarter, a today met with this one, consensus. in full sets pieces about operational QX close we of been beyond. and which what

range with of a was cash QX. Our at strong flow operating the in performance full showing our top year

legacy for GE, train had completing closed Project Ichthys contract CHX, our the abandoned train second liability a due mid-year. we Ichthys the We completion be in for on several powerstation. has and joint clear, first of Our consortium execution. not issues UGL to their To are with the main

have complete works our cost the expect We to and stepped to in these recover from consortium.

the cost in We the recovered to additional review delusion now of have in most associated The completed QX, in-depth powerstation. complete the drove cost will impact which of be XXXX.

further et signed We the on high-end us arguably, IT announce associated solutions our providing U.S. solutions. liquidity as NASA venture. one bang mission-critical our strategy UK, offering. comes strong IT on market are and when time strengthens due mission-critical and In the and solutions fundamentals. Services in [NUA] This to out, addressed Accretive there at from have asset provided advanced in technology also also Aspire agreement have to to this Carillion’s year a this acquire government to a in venture, area, acquisition to expands including SGT, closing the preeminent NASA, to positions assumed pleased we negotiations early responsibility cetera, risk a we the with footprint Aspire have the also operational for Carillion's later. definitive are and I'm more and the liquidation this unique we acquire January, joint joint assets

with funding portfolio, Bill LC out, are excess clean Today, years. close announcing way XX Government course, quarter. program ongoing a technology new ongoing to while and at was we forward. maintenance X.X the capacity, recognize facilitates to Services things the which forward, us in the allows revolver another know delivering benefits lasts This this KBR the added moving X.X, is high-performing we balance a and existing do X.X one of and will capital restructure and the to also Book all our Going adequate a intimately. up ramping which a we, sheet, of in and KBR of program above XXX% of and in can QX works

significant of more forma on XXXX, SGT backlog, with pro and we the again, Aspire addition especially and Going this have into later.

later. Onto have team thank acquisitions incident shows the as excellent the as ratios on the graph to I'd people X. performance the tax pleased a Harm, launched in the in deliver this alignment. year from target even we it on and a this presented markets includes and very May Our conversion in later. day in metric XXXX, our XX% the tax detail expect a couple in XXXX report With of our to A like firm the our more new profile earnings this Again, had high-performance to our in allowed Slide Note, performance opportunity. forced over said, to deliver new sizable the safety. at and discipline to commitment segments for rates. to attractive an And guidance. expected mix rules our The KBR quarter. investor for XXXX. we risk More our that increased that us XXXX is and combined associated that KBR we predict better has I'm risk growth outlook May the base, integration evolving An our have the Zero secondly, across better KBR, performance back this has taking XXXX. and key with is consistent strategic and to performance non-cash reduction new commercial underlying points as belief our in in culture seen continues as company credits all all true. a results that that, and our in gain And happen, all in saw with as On positive X, and of Slide and to making different we business effort. under revaluation this a held profile true be cash key resulted on in is

Government Services the Revenue $XXX Backlog E&C, starting excluding the in left. year-on-year, our decrease Operating pleasing X.X. top in with offsetting the half risk. XXXX guidance we highlights each on was was the while a have on the revenue little a our QX at top-end quarter year latter performance And business up in in cash of flow some of XXXX. Government stabilized was On non-strategic In across expectations million strong of with but guidance. short opening at in is revenue. increases X.X definitely So E&C, in above performance to from individually growth three businesses. key I achieving In very doing beating as in consensus in segments remarks, in well. as EBITDA, the or EPS reported, were my Services consistency, reducing with X.X This the these at said margins we and resulted expect movement Technology Consulting and & onwards. previously year, activity underpinning is QX see book-to-bill was improving and market all

the positive budgeting legacy and leadership throughout future later, and space on markets, three are tailwinds the slide into policy, are for of increasing on business. further as bit space our more KBR's regaining policy the being give really business. in is our performance notables spending the administration's of segment resolve issues all our all Trump agreements Pits. to year, Burn There we're government The but we're XXXX. for On the to set markets and U.S. positioning existing upbeat in color certainty government about USA excited and and scene the continue going exciting We PEMEX X, we’ll a very saying

In by through This strengthen growth space As activity reasons, continue E&C our key environmental are is an SGT. activity from opportunities also hand India More on is helping. have to the is technology and both record over commercial adding and expected in this great but Aspire in good to and in markets, expected confidence bookings for LNG, stability partnership and oil Mark. Gas position the XXXX. QX market XXXX. I'll to into U.S. public traffic to growing excellent is with price arena. is strategic demand increasing Monetization later, is increased on the continues Shale The now levels we see in our The backlog China time expansion

Mark Sopp

Slide of Stuart. continue the you, Thank presentation. on I'll Great. X

I'll First, takeaways and highlights fiscal year. from the and cover QX full few a also

a offsets. took our last performance, were that out quarter. our we for to scope all improving on metrics X% Services us and and core near and significant operating and While profit and fundamentals, laid both equity year coupled the number time & were positioning as to for new We Government At and several saw Technology T&C, more new we Consulting E&C contract and line businesses, work quarter, work. earnings three Gross GS much year in increases on with planned earnings expected good said, all of growth stable to expectations from organic Stuart improving saw as completion fourth segments. without quarter-over-quarter puts the top contract market in income a by as as and there generally driven expected, the same continued across as of and landing projects top with last the in we as was significantly existing takes

a mentioned backlog of XXXX. for XX% operating a building and quarter business, fourth Stuart strong the As had earlier, superb T&C including for margins we exceeded the that

on purposes, finished moment. end strong particularly more finishing cash backed flow which these also large releasing tied sources. improved of the for We've in U.S. in top still was recent this valuation performance tax by for most the reserves, benefit at over quarter far, $XXX a was and during raised driven million million on almost You see the EPS guidance, profit More the those out $XXX gains predictable the KBR's different tax outlook, our can been items XXXX. also earlier, largest Stewart in year. mentioned and the two By adjusted tax non-recurring Operating that of to had

These X, mix, did Moving conference. they attaining and onto investor proportion and higher driver with improved profit pleased May's XXXX's the the achieved for was targeted in to set goal out place contract services segments, XXXX. of targets were the ours our remain Slide of Slide XX. and performance report an revenues execution. so We're year based of improved project these by last during consistently targets for margins important all

United tax confident profitability The items. of up valuation forecast related $XXX for a in Following to with long-term the reduction coming year out all allowance coupled States, forward. was million, three loss going cumulative period on the

more lower that and to from million $XX clearly new re-evaluating the tax service recently were more enacted, federal relates liabilities services recent reform our enablers with this. favorable across our the balance rate. tax legislation new strategic efforts government The to in to for sector Our benefit tax resulted Hydrocarbon the portfolio consequences out deferred

utilizing we tax. potential that Importantly, Slide cash tax. that the $XX from by repatriation unused to avoided XX. foreign effects We offset avoided credits in new about million tax

enabled generation quick to key credit $XXX us Cash summary million Here's changed a cash, to reduced $XXX debt of debt the and debt and over to ratio below our million, our how well reduce our gross statistics leverage year. two. by

million year, We of the regular bought our $XX and maintained dividend. also during back stock

the to time in topic. more been to do refinance advance Slide this on We for have coming meaning one now and some months, XX. more actions this after in the are

a joint venture, prime which remarks, on Stuart's Here's the a LNG project, on $XX of component program the our in the in is building is more where project. the LNG on thorough JKC XX% Ichthys stake contractor involvement billion-plus earlier on-shore the update the

left originally components, is let on to this three is of other, emphasize. will the Form points looking are The There and our complete, completed three power the and of in second that two part a part re-measurable to reimbursable year the in be disclosure project complete a has price parts. please subcontractors on there's be XX-K, has First, main also cost component the in of The this fixed and the through One out fixed included component the check components, at to me power was plant plant, updated this of half first slide, the point projected XXXX. the couple out. basis. is side components price price comprehensive fixed-price fixed half completed project passed

the abandoned our which advanced discussed in the stages be our in XXXX. in project progress. power plant fixed-price their further subcontractors XX-K, At on As time, to they claim portion original of

As construction was completion there more few months, significant discovered subcontractors. stage and shortcomings past of procurements, were the the in deeply actual original the designs, by material over workmanship the engineering

This procurements, higher engaged estimate a of than were completion discovery the rigorous completed included in for QX efforts revealed, the of compressive documentation circumstances. needed significantly in entitlements and shortcomings validate As and re-engineering findings, cost cost demonstrate to assembled we construction in was the these parties have including completed against to recoveries of those our to the we Resulting later litigation. shortcomings previous use our estimate subcontractors reworks and light third these these estimate.

the new Our to joint meet subcontractors and plant complete and has venture to employees our hired obligations. contract funded

in range I'll the Our this our is year, the which will $XXX joint funding next just the of through be facility We dedicated to plan, to cover portion and a venture. fund form to estimated the the be in million requirement in recapitalization moment. expected completion a $XXX borrowing via of million plan within to loans

financing. to recoveries expect receive additional litigation believe matters of entitled to dedicated be which funds of are we other subcontractors We the used from we plus to repay on both will also from these otherwise that damages through We're or the loans. the original clients pursuing settle to,

and loans flows they from recoveries the the terms the occur. financials, as investing as activities presented of as cash will used cash reported activities investing be will provided expected be In in

are than to to more in and recoveries Slide we possibly, it While away, XXXX beyond. expect right reasonable start quite pursuing is XX.

moving now borrowing and the with of to long-term Ichthys capacity to the financing are acquisition tenor forward extend requirements. and the We SDT our finance

a a this as year. a and of to expect financing execute dedicated roughly the facility, of include standard and revolver, first such for secured discussed. financial of a from Ichthys, have loan in as line letter components Components major $X the debt commitment half just credit institution term billion financing element an unfunded We

in will for required, guidance. If and zip think this stakeholder interest but the the of a with rates incorporated XXXX as depend consider, through cap. amount several have Proceeding component we as sizing code our to into equity And one relevant modest will finally, recapitalization an XX% proceed to on equity estimated equity with We factors are relative use component, those not valid our potential get been transaction. debt cost the of an current to of components. we market equity

the on last we of XX, the normalize for same table investor conference in $X.XX we the growth presentation The the last this a XXXX X% In earnings gain. year. incur which basis, to new is is EPS headwind had It for growth those in On years on XXXX mid-point that cost the of initial per to of basis consistent to an to from results target investor forth performance mentioned. growth numbers. XXXX gain moving earnings figures. guidance, set loans the the guidance the for earlier show Stuart appendix PEMEX interest Slide PEMEX also in share, to expect remove topic May's $X.XX is is our with results There's the XXXX XXXX Ichthys above X% to notable excluding the a fund advised projected for to we as represent X% year-over-year to the conference, adjusted

achieve against which $XXX outflows our Operating we million the interest in in I'll XXXX, to slipped $XXX depressed been otherwise which $XX effectively XXXX. add, we're for in cost our into XXXX So this to had claims. planned million, by XX% growing million cash to is roughly recoveries X% expected in elsewhere original are subcontractors flow is midpoint. be pursuing the

the of business Now turn for it and over to I'll more on back on Stuart developments. outlook recent the more discussion

Stuart Bradie

outlook. XXXX Mark. you I'll guidance. that underpins some rationale give details and our the growth Thanks, and

capabilities capability space to arm leadership exciting engineering the is in moon is space evolving ensuring KBRwyle arm, returning SGT the also that that strong Military So franchise opportunities our on to addition Strong future to and U.S. established is the by Mars, on and expanded arm, military President. increasing areas Defense emphasis increased Vice into NASA base Military and clear space area Defense. space should opportunity. benefit growth Leveraging is versa expected consulting a Ministry flights on times. focused the Australian commercial with of the NASA from an funding. with vice in a an and providing high sustainment [indiscernible] end space It of our learnings A onto UK having We envisage with from we and commercial utilize to XX. space the manned a is and - key Services, and and in spending Slide Government and

and new a a Now our growing critical remains mainly and high reimbursable almost to realization, and low storm play. to on performance. both in in suite us technologies. downstream maritime and our capture especially time, with global margin growing X.X technologies XXXX perfect Monetization like our for ammonia, technologies, of QX at refining digits. in are demand to focus business is are including associated fuel XX. backlog technologies, technologies. is the barrel changes. Book are to bottom On market. the an to was Margin ethylene Slide the single allows synergy of high prices feedstock with due outstanding Demand low Bill demonstrated cost expectation this consumer From same et Gas has things specification cetera it's technology, double high a At This demand in demand of the

and benefit is increased business higher prices. oil also consulting seeing the activity Our of

course, in low-XXs. There Downstream exceeded and We happening demand margins Supply have four in continued as awards in going curves market we India activity. are to positive see is expect LNG, growth are XXXX. the fundamentals in years, start in offtake viewed to Slide positive increased into In crossing China and recent demand as with means five QX holding previously or indicators. forward. XX. XXXX FID's been certainly market On and advised, which announcements of need and expectation

LNG Canada a wood project, magnolia, fiber, plus projects. Shale's by in developer involved are We number of

services and risk. allows on retain business expect in while the and continue base KBR's selective we in very EPC both XXXX, XXXX, nicely maintenance us and Services, being U.S. grew this business capability, into project Industrial to increased Our internationally. to

mid backlog to SGT high-end waiver. latest will away a XXXX. people. digits as X,XXX mission technology not with is addition government solutions, on margin engineering, employees to On KBRwyle to agencies. IT the grow growing. It's SGT. is a to just expected single solutions but It and of approach provides incredibly high mission-critical take customer and today with Slide amazing over XX innovative focused, and disciplined great through a performance bit number company services of and detail Key Our to

this. Some of that highest leverage key handful the with comes vehicles software have is clear shown we clear of contract existing KBRwyle, of SGT nicely two Only standing and years. additive for SGT. X level policy on and the capabilities has programs administration our cost service Transaction highlights. and customer few companies than and a very can No certification with plus of times. well-regarded SGT Trump's major number less CMMI It's and base. the key Slide of of XX. an right. To development. Level recognition goals, a XX% with prominent and a are if are franchise, their a to align differentiator NASA exciting Significant the platforms the rationale. recompletes

risk. As this clean pipeline and And strategy grid a integration backlog I highly this and customers right on with KBRwyle, take Great to on robust the is that overlaps are is Slide is run, fit low XX. no regarded all the away market. with a on said, business. On this is the synergy. right, key revenue and capability, and very about There well

Some high level metrics.

$XXX you and attractive, Backlog sits key cash one, with would and multiple deal the billion, and with expect. can government this metrics, options flow margins strong, $XXX by eights million. excluding be are million the of benefits. business synergies GAAP EPS line in we norms, the in of growing, EBITDA annualized after realized The So financials, accretive And associated year free believe close very with costs. price that is as circa financial $X.X purchase XXXX very to transaction revenue tax cash and in low so services are revenues million. of there $XXX

onto Slide XX. So

of operational have venture. joint key and government Aspire KBR started follows: historically talked A works the Aspire taken are which capital is advanced January in in contract with control components shares are joint in also facilities XX-year talked program, and we XXXX includes XXXX, our new the Scope negotiation the are guidance. MoD a it's in on venture From PFI the it we existing earnings with of XXXX. the which next the and as in has The already. maintenance XX about The infrastructure, PFI. Carillion’s purchase a UK's years, full Carillion largest associated of as we UK includes about

couple idea slide, of we Next XXXX with of here. and an a you to would like Aspire what give SGT, look have visuals included

its the In of greater see technology up bottom see, the sum on can represents you left, a As lump that exposure our E&C is less In services. of high-end can now KBR than journey chain doughnut and you the combined a XX% into business. itself, level food X%. this now EPC over continues

billion earnings of majority projects The reflects profile. a is work. which in key backlog mix on and E&C our at portfolio new take are the options, the and results coming in sit risk reimbursable So with This will away. maintenance from $XX right, KBR's

today, So thank of been and long onto and summary presentation of Slide a final listening. is This XXXX. priorities our for XX XXXX our what for slide you the has

year our every So XXXX and results, a project the short results we the top deliver integrating in those a a was was HTSI terrific flow came and through exceeded job of up margin did had guidance, Wyle execution We teams quarter, the this we guidance in for performance wise, met or cash fantastic KBR. short, terrific really our at to also.

markets strong us, going a are the very across into really a targeting strong really segments really, on you've platform growth across guidance of from Mark earnings So three we're seen are XXXX all where and and all growth three segments. fundamentals they as earnings in this sort helping

Aspire, SGT of focus integration and low-risk, the they although very We we and expect. to deliver that are sure focusing make we need they're on the synergies

strategic discipline commercial discipline. of is although, that recovering commercial and our success. course, E&C the continue market We will Because our our discipline to is with critical

you. XXXX. deliver going open to hand to operator into over commitments we on that, up the the our expect to our XXXX, for questions. on delivered who'll call With continue we short, Thank to in and I'll So commitments fully

Operator

Thank Deutsche We’ll you. to Chad first [Operator Dillard Instructions] go Bank. with

Chad Dillard

everyone. good Hi morning,

Stuart Bradie

Chad. morning, Good

Chad Dillard

guided So there, E&C get just slight I three want last that just that a the to get into quarter, on can to where to XXXX. the you you clear line sense also, sight stand of an I guide? the you projects a assumptions wanted for you baked guys update And to revenues how highlighted get in fact?

Stuart Bradie

I help to right. we the quite in was did would The come support think to that That has late guide Yes, that, that. QX – correct. you're through expectation awards slipped the somewhat to

So my expect, the as we cycle feel we're drop through to said, that the cycle. more will lot we do backlog robust in that, activity do, go XXXX number a a and We And seeing, on would we somewhat. expect opportunities. do call I of I remarks, bidding in that what quite

Chad Dillard

And which larger that helpful. around decremental in to color on That’s I margins the XQ I look seems more XQ you you the bit provide issues bit can at are that then cost little thought. than XX%, E&C? little just absorption a called what out a If would've

the this do utilization? the just rate expect site So long have will continue, on you can line run absorb to do do that how absorption issues to expect projects from you any you continue? comment And

Mark Sopp

Chad. This Mark. Hi is

a as transitioning bit little that there. nearing contracts did completed some been expect we so we we're that there's to of contract, And the completion. So of new off to as repivot look in pressure have or inefficiency have XXXX, we some

least will absorb during And of of we course, that on to organic so be, a XXXX doesn't new confident restoration inefficiency, have at some to do growth counting which we'll sequential upon incumbent – see, wins, reduction. we're cost we that that are happen will and

Chad Dillard

you. thank Great,

Operator

Jamie with to go Credit we'll And next Suisse. Cook

Jamie Cook

good Hi, morning.

be is on that's here? to Ichthys. – $XXX clarification term, we E&C, strategic is, strategy some the why? if like number? requirements sheet to Ichthys the you the you you million, up? My taking only longer so, third you fund have to the the clear. just risk Are quarter-to-quarter how today do Xx in potentially maximum funding balance about on get contractor and guys then the go million second would sit how want what swing to question up that, to $XXX And to do term? mean, where is Xx the in Just longer I with One, Thanks. question store, And what's comfort my strategic still think if given I

Mark Sopp

can our are balance I’ll the the clearly respectively. as But address venture are, their XX% end. partners joint two strategic and we Jamie, at sheets question it’s Stuart we're the the Mark. using partners in exact then XX%, open are XX% and proportion and same other

discoveries in thorough so this we as impact cost And and requirements very did seeing, they are constant after remark, the are plant had the second their relative and dialogue with part, them, to quarter in we there, see same to with we'll difference will engaged, did we that are relative I range we're met of drinking our fourth a risk, liquidity the analysis requirement no $XXX power complete I we capital the to on be that the to and other million mentioned. tap $XXX a range we achieve sure to water, made, and confident but is million parties that own and estimate contained. can There's cost, with augment that always weren't within that we make that the confident

expecting So more above completion. we're not number that relative to

Stuart Bradie

on Let us driving guess, came to to really have we sort conclusion execution very terms us clear the to material our understand the want mean, us well I take that me off also put engineering of the more done do complete to water wasn't so now on a course, guess the we bit as we out that had of meat time to bone. some allowed particularly that site to job. give us and And the of execution once addressed. misordered give I around of biggest rework it productivity that's identify we've is were and that's a sort the the shortfalls got that of been also of time true well behind been called some we the productivity of so of and what number able risk material in materials months all affixing, and on I

documents all and So full about of using risk good had set years. we've that managed actually also remark over projects also those a them that out estimate. legacy And of drawings that to that engineering ordered, – a factors, of productivity pretty on. we've team, and a number material a full suite and material now EPC of successfully having a having I'd and projects, has feeling we the few we, last close of management as them were we're number power taken

sure. a is new for for us, area not So this

as stupid. the up KBR, transfer very got then rush areas platform gone general market not of has about from that that us, we've also engaged just us of as had and well not absolutely. E&C the it's food do terms expanded risk finishing recognize somewhat, fact onto of sort the us challenges for was We've all. to strategy of but activity And So that front that, and the this. in to line the in and did that in same path just at into our still depressed your chain wavered sort been looking team other put allowed to reset of business as E&C we've question We stability that something is in – to strategic really

a revenue see XXXX. modest So into revenue stability but from of growth XXXX really there's you'll

quite all recover. we starts very market established retained We've the positioned need services and upswing that. well capability We as in done we've for are strong I to base think So a the we E&C. that

mistake, business. the much no still E&C very we're make So in

Jamie Cook

project And through as when you about the talked well acquisition as guys question the in one you other equity small component. funding potential an for just sorry,

in guys and back Thanks then can you consider sort you under equity? that just of elaborate I’ll scenario go assuming So would queue. on and what

Stuart Bradie

Jamie. Sure,

we consider as are very investing our with alternatives base. we that transparent capital our and important forthright it's First, structure

requires it, that And attractive available at this we to are debt that If wanted less funding we considering to will were market. in of later. I journey at in so some so That card, market category, placement originally has when only less a frankly, private no decide we year consideration this have by that impacted virtue embarked is by activity planning been there stage. add pursue ago so, which play the this time. a through that we it's quite E&C down means consider share the ratings. adversely to surprises that here to That and space the we or and

forward, to it is And And as options do going that of we conjunction we as that, have of ratings in part all have seen. game to with plan you've the we has mindful have us. volatility business, and and so our leverage E&C that being in our available very so be

that, weeks and or what putting targeted the that'll liquidity things can our the a and a stock lot that ratio or the going that on going make to named leverage two, in are to markets this out. May the month credit in the determination ultimate out view and evaluate coming we'll the is table exceptions in we and conference there price X.XX of call, best like ratings so to And shake where the we're to and leverage of consider financing on of case, and be in mix is shake

Operator

to Andrew Citi. next go Kaplowitz We'll with

Andrew Kaplowitz

guys. good Hey, morning

Mark Sopp

Andrew. morning, Good

Andrew Kaplowitz

these especially relatively given Stuart is but sound down sort follow and maybe to And I your have and to on plan contingencies, as about so and quite outlook Government issue in question want equity XXXX? of up bullish if relatively stock you just equity? especially Services, with continue know sensing LNG the its the mean, I you of maybe path, Mark, could depressed, come issuing possibility for Services you start I to that you get that prospects, you comments why sort to would projects on of in bullish on Government back, last

Stuart Bradie

market I around with of something out under balance the the transparent have tax not Mark market. clear and impact been results, very we at anything, In very that sheet, of that. our want the in to to And your the its last sort of the need we of our mean last practically terms to that with as option going And it do assessment, it's the we business. vault, usually but clear as you're transplant any try We've certainly, that be us. of said, about And and surprise to open do restructure and in as is to us, an front quite the performance we're show wanted you all to looking I Mark our review modeled we in that options we'll I to to right suddenly part consideration. mean Well, think was And forward. thing do I do and but strategy we the thing way.

that, so market for it's the you're it allows that play right, the in of in look think E&C team there said, solution activity way our us think been helps think terrific sector options. also I we've I way to way and have I with Mike a not the got that we're ring ring at a I us we because that that the fence disadvantage because settling in you very deal as fence said, am to So shape us for negotiate out. to always dealt bullish, changes those quite in the an is that really that allow option of with to we've But capital a as in excess

So I start but about it’s all upbeat rest transparency really when and its really, business of shape sort the think that's you then at markets really the of really in all look not it's again, to surprising. about And positive. in good

Andrew Kaplowitz

But amount see and over we unapproved what back out the time. loan is that's for cash up helpful. but the get That’s the sort Stuart. our ask just we go to orders in you'd this of up. of endgame, always you we coming is I sort angle see that and to Yes, keep let confident sounding bringing that see continue me have of the guys hate follow-up change you excess,

years get give of over going that? your is more back, maybe us, to help next that So us mind couple confident what's cash this become the around in KBR

Stuart Bradie

the that that I opinions that is The as off GAAP back main clear had U.S. third-parties that issue believe our being up. the to parties of the work wash-up contracts. and of job cost before, this be is, and fulfill claiming strong really we We've said of that mean, much think things. I course, this legal we've got is And that lot support and breach position. your consortium is of because sure to at things I then these to I third the of are make of damages the and higher the able costs we're work of the the are very efficient look a – are needs they're interest here numbers appropriate appropriate. the absolutely clear of spending it's really that a other at way the so and think end, about obligations, for we're that's execution, because that recovery from reasonable, costs taking and us people the we'll the

So out. rightfully higher I are than and much just situation claim the we And a we've think where that is play got overall, so. cost in the to that

Ichthys our all prudent within – that to thing has and to important we've exception. line. things is we've think through contingencies holding from been here the we and a and most I going more approach very is the – do take And our that conservative been the away this that with position we're no project reserves taken

Operator

KeyBanc Tahira to go We’ll Capital Markets. Afzal next with

Tahira Afzal

Hi, hi folks. there,

Stuart Bradie

Hi, Tahira.

Tahira Afzal

competing commitments projects. if else? there's any other offtake – positive Magnolia, coming it are bit, bit topic update whether talk see I We'd get LNG? that or agreements those pretty have on to bodes on guess, to a love takes thoughts offtake we away could your if change a the for about some started any some if We Magnolia somewhere the going of just out to well

Stuart Bradie

I in Tahira. think industry, the for it well general, LNG bodes

think tenure an be. also of to arrangements time, we're signed offtake It mix guess, not some these uses and interesting I being is I we've spots. length levels the activity a of in seeing long-term of acceptance think taking that I seen some clearly of the and what's for terms offtakes of of is

a So for I is they're I their feel project On mean, there LNG terms market guess most really it's me out for but that certainly I not than like the consumers favor to positive. mean, so turning feedback I in their arrangement, for take the that of we and the market well mean, it's long-term their mean a levers that it's I where into are say I mean, is will the it's direction other them I there's think that activity bodes that developer is say. that Magnolia, ongoing. similar. positive think I But upbeat, of to specifically, of

Tahira Afzal

so and about in had it other the indicates complete right from different last should funding this a timing, this of the cycle what point? in sense on important I question got it back, expected the And makes that work even you it little would to And had E&C am guess, from was all get is or coming that SGT, given not, at Stuart. pieces the though positive I now I many see moving perspective, the around I side. a thanks, mix clearly done positioning being Okay, year? lead Why if little a worry you other profile terms the you’ve why so

Stuart Bradie

different Yes. very That’s questions. two

not and don't well. the I think managed run of And needed do sense and our this it's felt this was asset The huge a business. around sometimes company. overlap, they how well was really relationships very timing into was and would about. were where our of had the can't that we've adds And profile It broken mean, no amount something I any sort circa more. we timing SGT, sort I and with that really of guy all they sort that was timing it in have integration grown think it's this I super they with just the is I grow the think, really, like ethical, went very mean, very there of that the different situation to really well life, And really positives you really $XXX I through he's an would it to dictate of you that this, it's the dictate mean, things I in and owner, say our very, well-regarded, to sometimes at knew time a portfolio. associated I whatsoever. they risk to really fit company there the million and

business is a that consider timing that. this the with a we things associated risk the – we that, risk is and the and around remembering integration low, – the so can all with to And of do do means it’s need you standalone how integration

less that piece is of a concern. So

of E&C the about we feel very still activity terms In level market, of still that. bullish the – is

mean, the the fundamentals think just timing the same. is I a right the there's it quarter are still that, I of but very fact, that's no moving – to from just getting be, a to away seems much

Operator

Vertical with Excuse to Research. Michael Dudas me. Move next

Michael Dudas

gentlemen. morning, Good

Stuart Bradie

Mike. morning Good

Michael Dudas

regarding question, First the Stuart, acquisition.

out with So revenue the addition maybe break KBRwyle, you mix? more can the into that assuming a Services, NASA? or sources that give frame of I'm can given how skew maybe into a and to NASA bit the opportunistic? does came it hassles just your is it sense UK, little You out funding into your does strategic Government [indiscernible] past you

Stuart Bradie

into to go the SGT takes technology matter. are I usually and solid nor we've highly mostly, have is all smart no RDT contracts mean up for a mean, there. some mean, as our you or operations move around and I they I the R&D fantastic coming right get engineering company people NASA that into with solutions and and to as that and of very OCO up, food further so differentiated other mean, innovative agencies mean, first. through maintenance. they it's government serve, lot high-end they're the I the is and Aspire is chain SGT money, delivery with I areas reputation. different we'll a strategy and strategic of set into SGT and take

mean, and wouldn't us logistics funding I positive, SGT in us positions very accreted there really an the of and is highly exciting particularly government in that's supports want gross business and the with strategic for but the in today. future, market this, well is based piece also base say OCO we strategic that to where existing funding that highly go. exactly our are So the on I

that they of mean, performed Carillion was joint since well us, liquidation it's a It's upon I mean, very I business, Aspire exceedingly of partner. because were beat attractive XXXX. the venture

standard, I strategically, new place. ongoing they the that Carillion, we contract, put Exxon, that. if associated troubles the at there funding way But the there's us huge cancel that's work government those attractive lending, on put position in are PFI resolve For elsewhere, the under in because model, a more contracts for have far of penalties it's with a contracts where are mean, us to there is years XX contracts than

a we strong well. really long-term, position, really, something returns, really it's very know So contractual great and it's

So low. the continuity is risk

given So contracts differentiated and we associated understand that because really expect differentiation again, it's and margin these – PFI it's UK performance the you'd is in there.

Michael Dudas

Excellent. these And my lines follow-up, along further SGT. to relative

on quarter, This you May lot get think there ownership all close company. you in the in this assume cash is mean, when maybe I or a March, or effected paid all And the are multiple clarity how highlight KBR through? and plays tax said to of just more just tax standpoint. going I a they adjust low I of are retention agreements impact consideration there? of a from from much mix release EBITDA, that about you bit the to multiple little X your Services how the maybe margins a own the could and relative on Government the

Stuart Bradie

thing it's cast and important day from not the number But I got exact is accretive I there. We're X. think Yes. disclosed mean,

that's statement. think first the I

people, are current et said management to roles, the of committed team the terms press In committed their yes, we announcements staying, as they and of in to our staying cetera. will retain

not. we're -- not I'm So

really there? the understand to is want in on the people out It we've as so that. on we've top well, there something business think, really I past, that anymore addressed recognize and you that see we're demonstrated we Mark, we with numbers that fully and of appropriately. a

Mark Sopp

of exactly what expect Well, the being this you'd business NASA are margins Novell concentrated. and

we range they technology here. contained into that software Novell in expect pretty – the high-end those very in business So a that's narrow NASA, the tightly margins while digits. And mid-single should engineering view, in space, and we and that are that are the a

very combine is And capabilities M&A also of really contract a case, work. go with to so SGT's bring space said, synergies. the in important of important KBR revenue And capability. repeatedly what's this of we've SGT they to the vehicles And great in incremental that as IT pursue

when think we but great relatively good capability a small have synergies IT our We there. combined,

top so constrained drives margins, what we're that only that's scale is And growing year at time. fairly to so line growth not in over doing but one, accretion

Operator

Drexel next Brian our take We'll Hamilton. Ruttenbur from with question

Brian Ruttenbur

much. of Yes. questions. Thank you very Lots

SGT, bit First can talk a of all, historical little growth. the about on you

You just couple a wise? of they forward, about hit what what their little profitability, but if going kind you and last the of growth seen they've bit talk years over can see

Stuart Bradie

the Center. got within the machine and years mean, obviously contracts they’ve grew terrific $X is these – And business ago guided Yes, that recently, aside, or and off through through really a something and with a leverage. recent, successful it's month big more goes secured a in big very and small a contract of garage after can mean, of kick been for got people and long-term it's interesting they've I they I programs set they quite we guess, that into period. two I called won hugely built two really with they've NASA. history. from Most Johnson a large changed which BD three SGT Space very contracts billion [indiscernible] they government status business XX and now period this an

forward. bring offering will mix their XXX into XXX part of that on of people going So to the as short

expect in them growth we BD terms very way and services. think with I the expectation well, and you'd in government growing they're of is expirations in the out So they're side rates in line our set strong for growth what they’ve that the

Brian Ruttenbur

Okay.

they've couple XXXX, growth. in market of growth seen XXXX, since the they’ve So seen years this in

Stuart Bradie

underlying well, of in Yes. there, sense pristine really of that going Particularly, profile year. the win the as with this contract into

Brian Ruttenbur

during in the then Okay. – been correct, of this terms time? same, whole And in has profitability their

Stuart Bradie

Yes. Their over margins improved have actually time.

business I a things grow their of working as it's expect, and return. business just which think is through a into programs, sort transformed the business is of some IT smaller actually, margin, economies from of they scale that's higher larger into business, as like would they've larger more these growing you

picked time. up they've So through the margin

Mark Sopp

Brian. to just that, I'll add

machine. BD If you Stuart – they the mentioned

fences have successful their and in top-tier on some contractors So BD in competing they away for they remarkably adorations big costs, procurements when they've from the taking and against and work profitability them. have been swung had

So while of in those store paid portfolio ours. are soon be to the time really investments, time, contracts they off did terms from that now profitability will

Operator

with Fisher Steven to next UBS. move we'll And

Steven Fisher

want the on morning. to E&C I Thanks, off good just side. start

you Just picking growth bookings what that, kind color confidence of in kind little the of gives really related rationale quarter? broader on can curious, in to in first give the the And if a question. building E&C up kind the of on you strategic more Jamie's again,

more Given fixed-price contracts consistent trying pressure does strategy the that to into of deliver to timing and how uncertainty of fit results? seems of going the the be forward, predictable what the

Stuart Bradie

sort I are what's in not what the the market mean, cognizant This we're – grasping I bookings in is are think great. bidding. today from the actually – I Steve, pipeline we're are mean, bookings the I think of fundamentals it, and

awards the a slipped. things at the So while, bidding therefore, moment that for have these under have are the underbid, and actually been

gives what confidence. really the that's so And us

are a profile think there I – in there's we that hopper. opportunities of risk our feel that number that

why making making. the we short So that's of are we are statements

price and game what they not a think very lump wins, really bids I much money don't sum we in no make low along not do that all EPC, differentiation, a buy and we're a is five our said most interested and that's game. that when people

interested really we that's be design in prepared very be ourselves we risk. said are profile of to and our or prepared earlier, the front-end in and three projects this like get still can bidding. we that deals can are along arms been are two of not that. where one differentiate the Where or much execution around heavily certainly or is involved we're involved we And and not sort we're certainly interested, negotiate So the and in in really understand all

in world other I E&C, business really looking really forward, proportion think key is plus us in large of that is Maintenance done of XXXX across out have businesses into well, arena. and that the a it's of given Services that and profile our XX% the points our

coming consistency. that’s exactly the you’ve drives and And seen through that I we’re where the results, that So think heading.

Mark Sopp

we to rest XX% E&C. XXXX got or that of forma you’ve assuming XX% the XX%-ish think as addition mix, from as about the from SGT about close another T&C earnings Helpful and EBITDA business, GS from pro

Aspire So the from business and up the contribution GS the recently has numbers. both over in years bumping that’s transformed SGT of how terms more and

Steven Fisher

how clarification. Can annual you Got us synergies the ramp then it. of of extra just all related you over of And just $XXX taking from much what’s profit by Aspire? up And to a remind SGT? up XXXX million pick then

Mark Sopp

a don’t disclose individual and so the not performance really one of program. have We is single contracts, Aspire

it’s a bump up this taking So in very Carillion’s by risk share over meaningful case. at low

And so as growth. Stuart couldn’t be upon mentioned, we And contribution was for us, delighted. trust the this XXXX helps that more And in SGT… while

Stuart Bradie

X% business I mean, the interest, SGT, business, in I said I X% up is think that disclose in but individual on guys the there with you in XX%. we math. headwind those you growth with growth would just repeat associated there actually Mark – Aspire, Aspire XX%, a and can outpace can do where the the And know the We you said, don’t contracts the the excess underlying question. where the base is

Steven Fisher

by that’s or… be synergies equally split XXXX going to the In

Stuart Bradie

an no cautious will And programs. of NASA, there the some was markets said, win clearly our Yes. the will and assessment losses interesting are these think And increasing of that who time. it include be today. piece and things is, that I combining although I the capabilities of that same we’ll a be it’s reason in certainly in by enhance opposite key together, We of is mean, underbid steady coming will we’re the they by through pretty question, that contract. I particularly probability wins which because say

then And through so will the that these six we and XXXX procurement to to come months, through combined. can we start larger do progressively that over go we nine opportunities as feel next after that,

months So procurement it’ll isn’t steady, real government take quick pretty to you be to start of to thereafter. those synergies a as mean, but I steady a the think the cycle pretty see I nine know generation six I’ll one.

Operator

Jerry our we’ll And Revich Sachs. last question Goldman with take from

Jerry Revich

everyone. Good Hi. morning

top organic delivered bookings XXXX. XXXX. And the you of the growth. effectively – timeframe over you the Can us help on just of ramp book-to-bill. just the You in folks talk can that won of will Can revenue cadence ramp in what in business we generally the of ramp the X.X strong whatever you up that understand in have had underlying an significant timing for you ahead get be up Aspire obviously about excellent really of bookings to XXXX government year the services

Stuart Bradie

Yes.

to probably XXXX from our I just think think to – is that the about easiest aspirations way growth going about to think the way XXXX.

how that come to how include it obviously, SGT through the earnings think up I ramps that forward. I because of. it’s that’s yet in we line. but move doesn’t mean, going closed that’s to haven’t And

earnings talk performance revenue concerned you when other missed. our book-to-bill risk people relative level margin with where on because is QX, going really very Aspire scale, enough business The risk substantial and as performance XXXX, still forma line KBR, technology. comes of pro the a we be business our start very think of X.X enough in other that to to in that that’s flow has it associated people probably with to into of piece that $XX other and gets free your I’m and the book-to-bill our earnings part gets very, the in good of is draw XX% the at thing The I are that is and about that backlog growing. is fact sitting I backlog attractive. grow start perspective. business, just a But the in that's and that technology. as backlog done so SGT it look don't – blind of at attention cash profile good X.X% We’ve really and within XXXX the it’s market far far team the at concerned one in as the don’t really piece looking as a its in the billion at job, And to about And margin job very, done our and in attractive. talk I'm and QX, profile in is a the

business technology sort said, and XX%-plus, KBR at new So and attractive, services government technology of it. Mark reimbursable opposite again, of as which at that XX% very of space, XX% our underpins the business if think is you the high-end engineering look is solutions in high-end I really particularly backlog, which

Jerry Revich

joint XXXX? if in billion, about capital. And of pieces $X.X venture, is level project I in normally know frame it's Okay. the $X.X us I on what you earnings another embedded excess, profitability given this of you for that talking roughly from we're single Ichthys could could and wonder additional within talk billion about don't moving change the the if guidance talk for case, contribution JKC but orders you And just unapproved about

out that what call it us? client? frame dispute is is of $X.X for the that So proportion with with subcontractors? all proportion would just billion, of What the Can you

Mark Sopp

was much pretty The Ichthys from only profit what XXXX. of diluted contribution out is

of majority the continue important except a of and to by we've disclosed leave been to in K. largely it disclosed part achieve in modest contribution Relative But we a of important our overall E&C contract, but our meaningful change change any the we've that's been the a since have in the early amount finish said, of way. amounts, amount to unapproved have get orders along relative it in and time, in but year, elements, its for majority of have orders it's not of as and the numbers, and pace extension all program of I'll shift and the power at funding is like that terms to interruptions funded our talk to unapproved have XXXX, individual all those that that. to about at progress it's for as So the the relative unapproved plant, the to change orders, client the the don’t

any certainly the that costs I completes. pursuing and of was near as at the the setting – term. slow I the the be we But will there. We recoveries the the project think are that and them. And power down will incurring same expect increasing, on so time, But from clear in don't on pace activity expectations plant we're

largely So through negotiating completion, venture some that help? in the have And that. outstanding XXXX. from hopefully, the we'll will and go our that through the success clients will joint we be we be final self-funding Does in amounts project as

Stuart Bradie

run of somewhat. kind over time we've think I Yes,

which I close of think look I'm we a obviously sure calls, forward year. end busy that I to follow-up quite to. the the will

for a you thank that, yes, have with for good a And day. quite to presentation, you. a thank So listening long Thank and lot you listening, quite happening.

Operator

for today. does Thank for conclude Thank that participating. you our you you, Thank and sir. call

disconnect this time. at You may

KBR (KBR) 23 Feb 182017 Q4 Earnings call transcript