KBR - Earnings call transcript Q3 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day and welcome to the KBR Inc.

Third Quarter 2018 Earnings Conference. This call is being recorded.

As a reminder, your lines will be in a listen-only mode for the duration of the call. There will be a question-and-answer session immediately following prepared remarks.

at instructions receive will that time. You

remarks the call opening and Please, introductions, turn to like would over ahead. I go For to Vasquez. Alison

Alison Vasquez

KBR's call. and quarter morning thank for us Good you XXXX for earnings joining third

the Officer, these company's Joining our us Bradie, section Mark Financial questions. Sopp, our Stuart XX-Q call KBR's the reflecting views performance. actual today expectations impact will discussed significantly available cause website. statements kbr.com. from open XXXX. forward-looking Chief results risks to we the turn discuss that Vice results available of Investors and Stuart the like press the financial and third about remind impact events market I at X-K, to will Chief President operations quarter, for After and differ their uncertainties Current the include may on matters and on President and Executive Officer. discussion Mark These and are Executive release, that and and earnings all our highlights Stuart. on the and from our remarks, is now to risks potential are Form involve earnings website our and presentation I Today's could results in future over would Report audience will for on call forward-looking financial our statements. outlook, These this Form

Stuart J. B. Bradie

for morning you start and joining Good slide Thank thank I Alison. us. X. you, on will

commitment deliver performance. the well. you our can don't see, trend to see you is this and level engagement safety huge What performance to continues of As required

across our day to I for wish vigilant thank globe. programs have in, Our Zero Harm And Courage and been the day embraced being them by out. Care people to

is our is great key Which are of all nicely end our strategy story. KBR. And later. a takes As markets is our significant. at Slide good our graphs The More a good strong. safety onto It's delivering to us of tell pipeline be time X. KBR, And business. this metrics. simply across All opportunity we say part

we Third in was surprises, XX%, outperform, business. is our no both Services, pleasing a conversion U.S. which of project quarter XX% growth EPC delivered continues in no industry-leading. reached and of final this issues. improvement lump-sum we budget this organic place ahead There cost we initiatives a good growth from were XX% in Services quarter growth by Technology Hydrocarbons put And think great margins in mechanical project slightly XXXX. year-on-year handed Europe, revenue after was over lump-sum please And, of benefiting growth organic underpinned execution on fact, XX%. the and the margins. In note, legacy was Government and in completion and year-on-year to we've execution

into intensity quarter, But low X.X the at efforts. was and the of level a which for times of is the up consolidated company and quality with the across in replace a significantly has was greater and transformational the of appendices. quarter term the Backlog professional future our legacy in type combined XXXX. core solid clarity in was with And a backlog, In Technology. very steady in mix a backlog times, off Technology we reimbursable had gives on you record we Hydrocarbons bright. only as backlog and venture of on current joint nature Cash control cash the of ruling KBR and conversion on Ichthys significantly the revenue we head Our which market, More the stable been contracts, tailwinds and was five costs. margin past our recurring on these backlog, cost EBITDA reinforces and at conversion Hydrocarbons, if the strong XX%, underpinned projects. the continued projects not and gives favorable which and is our up confidence associated this work Government focus Services demonstrates enhancement. longer but execution by more good later. And capital platform our of X.X bookings year-on-year. the layer of book-to-bill de-risks over the position quarters reflection The our element as technologies, earnings services show this importantly,

offerings a Government going. momentum keeps the spending very outlook. So, in our our all be up, areas very market to healthy. very, slide pleasing service X, that continues Onto to conducive quarter

be scope Our we favors also opportunity for an this This, together and increasing to capability, KBR. selections services course, broad under continues to bundled one are seeing contract. but and pipeline is and for to trend of value and good grow best scale,

industry in UK, our globe. trends the of The significant are an with maritime fuel changing for by substantial our the underpinned Department large above driven performance And and our which we This fertilizers contracts, base. ongoing continues substantial the NASA. is technology we nicely business portfolio the catalyst are And growth including PFI a the we the result significantly. for including demand from earnings by growing in demand Internationally, downstream LOGCAP delayed additional already growing Defense, regulations, expectation capabilities increased have and sector. been across activity the space global the V been of built, we've community, in these has have As until XXXX. has April opportunity across

Coast, continues facilities downstream, also CapEx the growth. is across The all the new outlook from remains stage brownfield focuses we plants technology. including beginning very all business, independent places built very, business maintenance polycarbonate and double-digit pipeline with chemicals, positive. three including In plus, we're gather three presented, scale particularly Gulf commissioning this being only of nicely the With growing and of propriety early in specialty As seeing the us under first-of-a-kind our technologies, for expansion. Brown all many This on services licensor OpEx-facing in previously operation. which commercial or side the Root, of momentum And the future have LNG Hydrocarbons, have & to year.

be of we're a will you but on number that can well-positioned backlog chemicals lumpy, XXXX. As LNG downstream and growth projects into FID know,

down is legacy submitted slide and the billion Ichthys, broken Our under is and X, our Onto today, decisions project. in last to near-term pipeline charts. pie preparation circa awaiting this $XX bids

an So, update.

main the packages, facilities, are scheduled is handed November. trains the they've all et The LNG, both are associated official has customer announced cetera. the opening On as now over first and produced for

Onto really news the power there. So, good station. CCP

door. in leaves steam in nine you again, there. cash based more productivity with to associated And client cost walk now the This We and, course, completion pure growth. finish however, a P&L need done does account no have complete. we've The resulted LNG live then, to working dilution, has trends, plant generators discovered which is will the dealt fact to Mark can into this phase mean, impact Mechanical five we the with three This which, We've will we of send turbine over, slippage a original estimate the XX this to quality gas contractor, final circa scheduled next some this we're the some turbines taking complete current on with commissioning into which the cetera, modest via in now XXXX. so of manage. fix handed issue quarter, and later. now will and schedule additional rework the And through of QX we'll to et weeks. move are

year-end, a will commissioning into continuing into be de-manning head we as So, with small team the we XXXX.

we short, the clear line have end. of in to a So, sight

that ruling contractual seeking very another mentioned joint favorable being this significantly I accordingly. were important be change the venture, As on directly a there a the costs our de-risked was month, JKC, JKC project. by unapproved received is change and recently related which client. portion Ichthys via of earlier, development binding Earlier orders, reimbursable contested this to will This arbitration

full XXXX. XX-Q which CCPP our filed disclosure arbitration both quantum of has for merit have We set today. this we early The for and been in

LNG a sight reached in certainty the resulting favorable for clear (XX:XX:XX) being of with So, on a quarter, finish the in the line power the firm de-risking of and ruling produced, dates arbitration. Ichthys the CCPP station, to a

over Now, to I'll Mark. hand

Mark W. Sopp

slide Thanks, X. up pick Stuart. will I on it

you a let couple things. front, me remind up First, of of

First, QX SGT acquired quarter XXXX. that late for includes we April a full in

consolidation of entities the recognized reminded of earnings in those due previously are the entities profit. subcontracting program the quarter of Defence the now year, earnings and that equity be Aspire gross Additionally, through just first this and to reported in revenue through

to numbers. XXXX on all on the was we financial achieved QX move me where above let or performance favorable fronts. Now expectations at

a We basis. year-to-date for Government consecutive by are been including XX% business organic on driven has growth year, fiscal this topline QX. organic each particularly This revenue consolidated pleased and growth with the by for quarter double-digit quarter also continued the our in growth double-digit second

nicely and basis which growth execution as results across organic with overall QX of our each of been has QX. employees, a revenue margins our we healthy double-digit has including year-to-date in XX% on part driving growth business growth earnings Technology strong to and organic Our market growth translated attributed made our well The rate year, segments conditions. with as moves to growth overall by portfolio transformation, three our all

targets. higher and We're as or with now catalysts consistently which from its margins also momentum an together seeing margin technologies, expansion our at the strong of QX by by about contract package international its in of margin coming its project was services, equipment engineering in solution. digits boosted continued guided sources. Our base bundle from license at proprietary sources offering profits XX% targeted percentage values a Technology closeouts. margins our complete in line across our to X Government our in strategy Government with single with a our project enhanced above favorable run and about base point of growth are third upper than U.S. XX% a

strong continuing Services, line like last Industrial year's which profits highlight grow Services of Hydrocarbons expectations. We Brown well to to the performance joint above Root results. particularly venture is with & was our and For in deliver performance

results. sum significant is the earlier, we the to quarter level impacts mentioned two QX G&A EPC favorable normative quarter forward. million and both rate Stuart in to than normative items, spending would as projects, over mid-$XX range Additionally, the having on quarter. per flat low- was to we The due less lump milestones quarter achieved going timing was expect during

was last into on was year's rate. Non-operating limits guidance that the act. our rate impact due IRS EPS This year. with quarter on forward. to incremental see operations items a tax normative of tax from our higher catch our was mix year-to-date EPS going execution taxes whereas and on business. foreign expense, we as international from fiscal The $X.XX. of rate tax to account increasing our and up than was higher had with ability new QX this new business, take and of X% effect to we this the in across earnings strong the reform XX% the The still than credits tax $X.XX adjusted this GAAP Despite effective largely X% received was offset by So were tax international we guidance basis. our track annual delivered

make progress for expected continue net million on As operating income the above bringing we cash inflows to XX% quarter level. or net in of our flow $XX

attractive margin as and organic to trending mid-XX% program fiscal In Technology year. revenue here, slide highly margin level on recurring increase highlighted of aligned offerings. correlated deliver has forward. demonstrated, revenue this strategically and growth this our selective Professional is in and and levels earnings this going mix and lump of each more markets each and based our with growth to the XX, the to our Government, UK, in strategy said on This Services quarterly exceeded profit Technology we've role greater year. quarter the and fiscal strategy to are healthy consistent addition And margins also SGT, of growth enables continues nicely targeted recently quarter profit sum attributable increase recent pursuit is as projects Defence exposure Moving levels. our are double-digit double-digit and Aspire our to with EPC

Services Profits strong segment, joint For as throughout year Hydrocarbons international registered with to this and particularly Industrial Brown consistently Services also project have expectations. our ventures profitability. been contributed Root earlier The performance within with of ventures, has volatility said & I there's joint tracked targeted and revenue completions more and other in performance adjustments. more our this

Now onto some slide XX remarks. and capital structure

X.X as growth fueled EBITDA and times The Ichthys expected as tracking Our leverage our a fund additional downtick of strong the the which X the is earlier had in financial the final of set the ratio refinancing increasing this quarter is we debt portion targeted in this transaction stages in to we comfortably done project. year. with outpace out of leverage times position the zone coming

cost estimated to to As we Ichthys. mentioned incur complete Stuart expect earlier, additional

As a through result, we year. next completion and $XXX carry of cash us in date to investment the million venture our estimated are QX increasing to joint the by

consistently with the arbitration periods various October a and have expect received As not bolsters adjudication we headroom of through in agreement cash significant and ruling all we we ultimately future consistent negotiations interim. resolving manner disclosed, in we in of our the go confidence how recoveries any in as in we we further with these processes. Favorable to in recoveries have do client There's assumes that our reported. these accommodate credit plenty receive matters

We swap did $XXX represents mitigate on XX%. this of to also rates a variable October of fix-to-float transaction rate ratio We interest executed risk. a to fix in debt. million This

impact that are the we recent of growth performance increased XX back Now guided in is allows earnings flow range Stuart tax million to to QX. EPS to $X.XX guidance $XXX we now bump rate, adjusted us guidance the an turn in onto $X.XX. slide and earlier, remarks. With Despite it that, up cash increased closing to back momentum million $XXX tipped range of Stuart as our guiding of The for I'll to unchanged.

Stuart J. B. Bradie

to XX Mark. up presentation. and today's wrap Thanks, slide Onto

be is As I said time opening remarks, at my KBR. a to in great this

We very of quality momentum, conversion and a have into to and a associated earnings outlook of line beyond. cash sight a importantly backlog more and solid yearend, and XXXX strong healthy

without end business and advantage surprises and material poised we businesses All and Government Our and growing Technology performing right markets our take are are the or above delivering well negative market are upswing. market buoyant downs. Hydrocarbon our of to is

With who it guidance. up business new operator our pipeline continued we EPS significant questions. are hand that, again will is now for and expansion. Our back the growth will increasing to supports I open the call

Operator

Thank Afzal now you. our We question of from KeyBanc. can take Tahira first

Tahira Afzal

and on strong congratulations safe quarter. Hi, folks, to and a your team execution

Stuart J. B. Bradie

you. Thank

Mark W. Sopp

Thanks, Tahira.

Tahira Afzal

the project Stuart, how you of is to the do by moving first confidence fourth the and oil backlog? a the breakout you you much gas that have XXXX? report one all and your of you a if for the half announced parts I guess you question that consequence of And of LNG still could of see look have in into at some timing really LNG so, awards, your as will outsized you your scenario are time second if level opinion quarter, start emerge

Stuart J. B. Bradie

Yeah.

know. within timing I it's think tricky. control mean our is the I really not as you

think thing the to I well pipeline at is where of look and and they the the following that other size thing understands the important market the that projects sit. we're

achieving. a happen year, moved the essentially piece is I we pre And if to part in achieving case breakout V achieving be we early here XXXX. of breakout didn't other we're actually doesn't Technology think that will case pretty will think were as without LOGCAP that good we're the Services that. I that's in Government award the feeling and now our we think April. end of that And to happen the the it we And about into it note of move

interesting to where not the breakout the pipeline case certainly So the area we're that on the the charts and it's market think that. question support I we is showed support in I that of one but opportunities you pie achieving and graphs today, the there think an

Tahira Afzal

their plants confidence more essentially been cushion you power bit a that for is because just high. and a just history little but so perspective? maybe And, me has a into you mixed? it? on Ichthys, have this the Can million you – built how on And Stuart, Yes. more little of a into our much $XXX for end Mark, how and of do Have is put

Stuart J. B. Bradie

Yeah.

are just and the where element. process talk we can about Let in that about talk the Mark station me cash power

to know in joined it know So you're we've gravestones right on first as I and that others as the that KBR. when industry Marshalltown companies that quite and same graveyard, the you you a hear there's station through back for lot of power lived

that pretty scars the through are process. where about we had history. execution went our we this in think I in clearly we've We're

we As what gas exactly going We're earlier, the handed five the well. know over to turbines said we're finishing are are to I we heading line, do.

construction, to the On the turbine themselves, clear line XX% in over got we've end. complete and sight we're well a steam of

in in confident pretty phase. confident productivity based that I'm are on what pretty we've right the terms where I'm construction today. there got the So, of we achieving actually in numbers we're

causing LNG So, we're forecast not looking just appropriate sort plant manner risk actually this delays. of with at acceleration of risk doing live better. and in We've weather that the sort of

cycle we combined the a is we of longer fully So, that commissioning commissioning why Marshalltown that's bumped it and full the we experience. take because a understand we're because – that our out quarter just will from think

think I of the of a got them from line people end. to right got a we've there, the We've clear lot So, sight Marshalltown.

about forecast feeling So, about pretty let I'll Mark and the just I'm that good cash. talk

Mark W. Sopp

required offsets of would what another. expect Tahira, kind increase cost one Stuart which that for that quarter, quite as the in be expect a mentioned client this to we finish of just the and we remainder didn't comfortable – frankly, actually with or majority The us have otherwise inflow us. pay ultimate estimate. And so net is we the way we to $XXX the was a feel down plant, an is some to power million estimated expected would applied the or resolution LDs the effectively road cost

until us we the process out And process. settlement expectation course, we amounts relative or plant the it's some to So, and mentioned other the in that estimate litigation no that an was to the that go of and cost remaining as to the assume the back search there $XXX We'll of on that but due try the or prudent part let way I that difference to market. recoveries power between through million. get other,

prudent So at time. we it's and this number conservative a think

Operator

can from our now We Revich you. next Goldman Sachs. of take Thank Jerry question

Jerry Revich

Yes. Hi. Can you Good morning. hear me?

Stuart J. B. Bradie

(XX:XX:XX) you on Yes. be might Jerry, mute.

Jerry Revich

you would perfect. how from that head about LNG across are specifically than operators we opportunities projects? of potentially in thought number on energy moving talk into have morning, the towards XXXX, Can Good a faster could three we timing what if as the ago. seeing wondering Thanks. about have shifted. FID and forward Okay, everyone. talk major just I LNG guess, marketplace project hearing you're just we're you I'm around other months

Stuart J. B. Bradie

Yeah.

– think Jerry. thanks, similar I

said they're they out and the very You actually it. of to achieve going know, the confident over FID Magnolia came were delaying last still days, and couple

to listen moved are but they Others you quarter what that's If first coming say, forward. to XXXX.

is there the a pricing think the get first heats to I and guess the the get the recognition that market sort that as probably in best and people marketplace things. best of get up, going,

and or I is it's which pie backlog to a we'll terms number and again, looking going move and think Government take back months; So, of reasonably but pipeline would just you fair we will in it's the a share the couple chart those, in there into straight at Hydrocarbon both in tendered to month terms forward year, at substantial next in I opportunities next And growth number coming of of so tendered a be be the of in of picture. volume. drive or a also if in our win on services Services through do we've good that the really shape projects I think that's the that of quickly. But look the preparation

pretty feeling about we're that. So, good

Jerry Revich

portfolio big part – new how some have And KBR in the terms what's in past? of been existing the bid pipeline the is expand the areas opportunity versus you've that portfolio core much Government terms of in can into are opportunity in capabilities is set, to you what how not Services of well that expand within

Stuart J. B. Bradie

Yeah.

and the been ongoing of NASA the which a LOGCAP recently to that are we're not around But business skill combine sort side in on together and do army it's So, the the psychological special by circa right understanding that been really the wheelhouse doing been on is a our circa pulled that and that prove that contract a customer number I the is but absolute sets in And with forces citable that like those today. – there's that It's win. experience of with medical called POTFF of got bid And and a our bids I in new health of our and took $XXX technical that's with obviously an health together would NASA obviously number with part human one bundle awarded that complete side are growth us $X billion by whether that a V be slam the that's past relationship that'd and we've really we've a we or KBR. know altogether. just for story. just dunk million. human of which we've synergy takeaway, performance performance work it's successful announced

a that there's think the in we're think wins of that I I proving with securing. both and combination that space, So, we're

Operator

We reminder question our Suisse Credit more one. and Good now you first Securities next a a take I Jacobs' sell Resource announcement will question, strategic Worley. business to (USA) Energy, that Suisse. Credit my As quarter. guess saw you to and from is to - of Cook their nice L. Stuart, morning Chemicals Obviously Jamie Cook LLC of Jamie Hi.

model more pretty towards lower sort that more of that OpEx a was shifting was I multiple risks. and it business think were the CapEx they or you good got versus

the when you Jacobs terms and going or Thank petrochemical or forward, you. that still you're Services, context, getting think they're question about out labor or that that looking there of these it in to early So to projects get of within importance my some that ensuring big Is move that multiple conditions And any these how is LNG constraints that we're projects sequence the starting about received? business too second are Services to just projects the the do given Hydrocarbon contractors of hearing at Hydrocarbon concern correctly. changing strategic projects of concerned constructive? then

Stuart J. B. Bradie

alluded what the as side KBR so stated aware going its last as it or the very alluded you're had. – presents Jacobs on Yeah, think very than very, it of remarkable business, I I services for does we KBR predictable allows the are Jamie. in capabilities digit to, club over don't few on in us I Mark firm and of different. of know mean double and Thanks, nicely that's growth a that side I Yes. years the business, guess big and the base selective LNG or and project is we side, reputation WorleyParsons; a have as our be do earnings and certainly a little are for to that always more bit our

And base of so us really technology negotiate of the et that strategically are the risk we said along. I think position all firm allows can that of work cetera load it on to we or sort profile deal focused it's we get our as key a right or feel

do important. I think it's So very, very

lower seen transaction marketplace it albeit of but risk. and margin generator very should where valued sits it's be in in the the As business and in lower the Jacobs very with – a strong you've terms a cash

bit the very think So that I'm very very it's well. of grow important. that I we've do business pleased to managed

In projects, I terms too of early larger resource to think it's constraints call. on

the in watch the shifts. and we'll KBR and predicted now, those going a Jamie, to tend be know, people goodness carefully few resources are but it letting FID I getting happened so. probably things dates staged think constraint think we slip concerned go I People ago and it's – as interesting months think think don't how A so people, it's are but was that people me. But were terms changing to I of more rightfully oh They it I about obviously will on projects. never to ramping on up and be market time.

Operator

take Vertical can question Thank We Dudas Please from of go Research. ahead. Michael now next you. our

open. is line Your

Michael S. Dudas

morning, good Hay, Alison. gentlemen,

Alison Vasquez

Good morning.

Stuart J. B. Bradie

Good Mike. morning,

Michael S. Dudas

delay delay; be off the just can the putting. Yeah,

the Looking space, Services, how book-to-bill been Government in probably success at when into above growth any SGT at of some how the that your of look $XXX going level part growth peers business book-to-bills of and most you revenue in project – revenue teeing have of Aspire XXXX? the out other maybe, into that of your and the for know I growth you organic and type look terrific to we million the at of it is XXXX it the of organic the but than start opportunities that as numbers and going (XX:XX:XX) can anniversary which has

Stuart J. B. Bradie

Yeah, Mike, growth. it government, in we that's at we look call why don't out; just the we call actually actual growth organic

year the for other of one to based the on comparison. sort apples apples So from

Michael S. Dudas

Sure.

Stuart J. B. Bradie

So growth why we I that's leading. think terrific is organic that and out. the It is call industry

So think I point. one that's

The second, has part past. I the talked of the part of about part awarded not bid as the it's future; of been just

forward. as So, more? will as growth Mark, that we again, sustain it any we move

Mark W. Sopp

which opportunity Well, I synergy think and well on POTFF piling this, have and presence. opportunity mentioned to commercial Stuart Stuart special is which a really our the geographical to previous Foe a is opportunities with that I'll build synergy business performance one or the one providing customer of health the think operations. questions with We I announced Friend foreign alluded the Identify the up. as are we our and human

Middle positioning on working something UK our through are side also others. the the We East in pretty Government and substantial on

LOGCAP including some some quarters. and opportunity. And in book-to-bill things to Wyle move and are team And across the much V opportunities future talked others HTSI and about in of growth is we've bundling could so needle and which work NASA procurements of the and are those really SGT, incremental that of the very all sizable degree that

of NASA East Some as Middle some opportunity of the such it such such opportunities and the POTFF, all IFF, stuff. as growth is as incremental

base positioning running well the of global current have we're business with across in we So our all elements.

the it's a calculation little So distorted. organic Aspire growth SGT because contributing, is include don't in we

and business business, So and engineering space business, at driving done of are we that Europe XX% look our our year. all our so logistics Asia even and have elements

Stuart J. B. Bradie

been happen final well, to there be now has V, April. growth I LOGCAP and in which awarded confirmed really But expect that to is the think one guess I is significant. sooner we did contract piece surrounding as the it opportunity

Michael S. Dudas

such, my lot passed XXXX, opportunities that you do innovation (XX:XX:XX) into awarding printing have with opportunities bills bundle these comfortable looking level out new been letting spending of driving sense that base DoD. forward follow-up at and confidence with of to the from providing new of current budget and for feeling for and getting and DoD is get about And help going customer type some a the or for the noted. Duly as get win to that (XX:XX:XX) you business increased your maybe skillset lease together writing

Stuart J. B. Bradie

Like, have there's seeing my more and breadth remarks said plays procurement; there's in think our scale of we're really more that and I change, where absolutely. of Yeah, areas I the best and bundling play. we this awards; in that capability value

So, well into sits going it XXXX. think do for I KBR really

Operator

you. We of can Steven next now question take Thank UBS. from our Fisher

Steven Fisher

morning. takes of the what Good I and what in puts $XXX might impact the Ichthys be (XX:XX) million the $XXX if flow. wonder to separately, some on talk ramp ruling. then drives It the clarify here QX? with there related but you And I about of but guess million flow in is up like related cash sounds the just cash cash favorable Thanks. ruling and could

Mark W. Sopp

XX-Q. we've very it's Okay. this disclosure Mark favorable Thanks, but complex, here. robust It's provided Steven. in The a fairly our I know ruling, is why

won't money, this of little morning's we our bit, change million it, Q, pay this to affirms in have pertains directly received that the you've that decision, to that hopefully have it seen of $XXX Within million round number so to we already decision and back. confidence $XXX unapproved we orders about a disclosed roughly that to this

as other main And be orders money, our that in is mitigated. is takeaway out I there's also having out we laid And changed refund already Settlement was relative there but minor may stated it's threat Deed it received that some collectible the was that a of to risk X.X.X, but probably as disclosure. not of the to result a have think a so that in

it that. hopefully year-to-date. sitting clarifies about million. cash $XX So, at so Relative $XX ballpark the net for fourth the flow to we is million positive quarter, income are QX

basis. a to expect convert We on that one-to-one

dividends some would have We from what ventures. our also I pent joint up call

year. We all of have cash our in terms JV's received much not from

expect that's in that We fourth number. change to double digit the a quarter;

that the project were that on didn't one in we happen. retention, quarter; collect a settlement expect in have the to quite pretty also due And a We fourth to Services also get in we Hydrocarbon expect have the significant quarter. fourth we quarter. hoping a then third Government We

in So earnings the get things us the comfortably the number in year-to-date all those plus cash piled range. onto QX

Steven Fisher

from Mark, or to it you NASA how can mix about trajectory of the government does, other of overall growing and increase margins, business Thanks, and potential year, talk would pieces margins that are affect if there headwind? that mix Great. be the then materially over next that here? the offset would Will

Mark W. Sopp

Yeah. Okay.

are that that, bits offset other there's to Steven. growing think I

in we've it little going high-single ballpark. think to to And of be year, might going I going said mid- digits high-single tick next digits, it's that but sort forward. into bit down a

Operator

take Thank of can We now question Deutsche Bank. you. our next Chad Dillard from

Chad Dillard

everyone. Hi. Good morning,

to wanted So, I just (XX:XX:XX)...

Stuart J. B. Bradie

Chad. Morning,

Mark W. Sopp

Chad. Hi, (XX:XX:XX)

Chad Dillard

business how additions comes of So, bit confidence Hi. dig much of the How're pipeline, what you are seeing doing? I project you're that China? any you're there? little a and in the And business. capacity guys into for that T&C to talk just world? seeing you from particular, Can if change about part the in in wanted And you seeing what

Stuart J. B. Bradie

So, no I first. guess, We're that part in seeing first activity. in slowdown in last regards, no confidence – change

at is we know. I pipeline do today in global. bit by as do levels. the business business a Technology China, is Our of record its nature quite We also, But you mean,

year done licenses to So, example. for we've ethylene four this Korea,

So, new bringing I market. it's cylinders. on technologies we're all We're that to think excited the firing about

for good very, It's very about excited returning are technology. We our us. polycarbonate numbers

I think, up, all And so, any not slowdown. seeing we're

there with going other be and maritime in that, things absolutely seeing actually the no fact, particularly, like fuel market. to it's slowdown. very It's seems we're going very, that the behind well. And way. In And momentum changes

Chad Dillard

about over grow versus then, level, this Services pipeline. what's gas? and project the other I of Hydrocarbons your you $XX-odd you to able business, billion have And end it. Got break year? then, is LNG in to And the how mean, backlog much out being confidence your Could oil through

Mark W. Sopp

the have pretty It's is look. petrochem we've So, above that in time. about you that projects majority There clearly are in LNG there I trying can a well talked say XX% talked over we projects LNG. past. about downstream some clear just to in is But was areas

Stuart J. B. Bradie

the – specialty will are EPC you're projects of, project main not (XX:XX:XX) backlogs yet. yet. convert in to into XXXX. in is that other have chemi aware the think, EPC project the backlog secured component those piece we chemicals that Methanex They into project. like is that I things And move is The And that not backlog and

side needle we're just quite So, in guess components as well. feeling there's by nature. their LNG movers But a of very right. the pretty good number I about in there non-LNG some of Mark's the

Operator

Guo & you. from Thank question Lucy take can our Cowen Company. now We next of

Lucy Guo

Mark, a in was Good gave if on submitted, mix takeaway new and Government and to the I roughly be pipeline can new recompetes? the help opportunities. you Services. earlier $X billion morning. $XX your existing opportunities billion Follow-up business of on what's potential host plus quantify, you versus us question wondering

Mark W. Sopp

first, voice. your a Lucy, pleasure you thank the Well, for to call. It's joining hear

as the We there have pretty that – pipeline that opportunity. is well understand, item V an would opportunity. largest been you, in recompete expanded the the pretty single And LOGCAP open be I think,

sustaining So, it's a change structure incremental the that mix of of in and procurement. to and business scope due business

that heard all mix So, $X a incremental pretty that biggest to it it's million call north opportunity and a a that probably command and opportunity in would a working have stock. Saudi include over that work. would we incremental U.K. or related a of the be the that do we're a a quantified one excess all $XXX $XXX of U.S. prepositioned million. a I big not one is the even we bag. a large And – are you recompete than on other are I a that's work. NASA not of Marines is The are saying And are in control, of. with have under that That's opportunity That – mentioned, others couple have opportunities, billion next CXISR

of down I current would a so, this XX% scanning to good is that incremental And the say scope. number list, growth opportunity plus just

Stuart J. B. Bradie

secured before we'll we've POTFF – which Kennedy that is under Award, And layer And end of you hear under which on already that the is BOSS the about which protest. year. if we protest quarter, won last

those and are So takeaways. – both of complete

Lucy Guo

pipeline, your new and what's it existing funded in in your probably revenue current the more orders business sounds your of than mix profile? is like, So,

Mark W. Sopp

LOGCAP correct. excluding absolutely V, that's think, I

Lucy Guo

Right.

you So, other so, in – in large XXXX? the LOGCAP terms recompete in may like you sounds risk maybe coming of of excluding it recompete V, up XXXX. one there's that be calibrate outside do LOGCAP Or would how

Stuart J. B. Bradie

So, our win is above current rate XX%. recompete success

for So, course. of that. very good very, a focus pretty, pretty us, area about strong feeling It's we're

feel – good And it. we I so, we're about guess,

Mark W. Sopp

say strong is impressive logistics that would our that units different very our I rate strongest across And business recompete in It's success business very team, within recompete the a had Yeah. has our business. team. GS

Operator

go Ruttenbur Thank you. can our Please, Brian Drexel from now next of question take We ahead. Hamilton.

is line Your open.

Brian Ruttenbur

much. very you Thank Yes.

I've side, to on So, on and got the the hear your government your going of budgets the around just of opinion couple Services questions Government a forward macro wanted growth. and sustainability

think questions you that to how appears are is about to from out say. talking or so that lot I set. And But it your XXXX. growth. calls there I So, – have your other people XXXX been want hear be to sustainable have talking conference relatively fiscal seems what far of a

growth. the we're how industry and outpacing get to to industry because way is out say trying LOGCAP, figure fast the you're grow going just you Let's

you could the and address macro get of the detail? So, if some into then

Stuart J. B. Bradie

Okay.

today. very of be will will that business I is firm. you're situation. margins. have call Services political affected little got out We part $X would overseas, number delivering do circa is just do think our out to that and point And uncertain those the quite bit any the with critical Government the what And XXXX slowdown highest probably also and programs business, within is by I So, is a it continue. of would it right. the actually portfolio nothing XXXX billion not I of that political situation our with that U.S. a of

its well. In talked about very is today. with fact, before, margins about in Aspire growing makes we've attractive. And return up very capital very, of of that And doing the contract that the business the are and very, XX% associated and this our own right Government

some seeing said good in Ministry So, in coming earlier, growth Defense. through Australia, of double-digit good seeing as Mark We're the we're opportunity UK Middle And into the significant business. via growth. East the growth

So, you're there good quite – we're XXXX right, around there are are of about the that is the feeling growth. (XX:XX:XX). there quite pretty uncertainties But – sustainment

Brian Ruttenbur

just could If follow-up... I

Mark W. Sopp

get generation so we projects new Hopefully, as that much our and under during over wing I A as and very in XXXX those and think seen then thereafter. in in cash on next programs been portfolio, can the can is again. flow capital key that's GS and you've And ramp up. and XXXX, the XX (XX:XX:XX) as focus the deploying months model having and to over successful win contract, as we get under business

Brian Ruttenbur

to LOGCAP several was didn't reason quick on delay give you read already if It's a April? I any that. I that you're But logic you there times. into Do delayed on the So, just on delay out know as got follow up the anything could the V? on that LOGCAP. know

Stuart J. B. Bradie

I their at bureaucratic. just times working think it's just processes And for a it's which big change are the Army. complex

change and causing and with what's change are – I going clearly delay. around it. think the So, to there's such scale, significant it's don't that's sinister anything

it that's I all And so, – is. we think

Brian Ruttenbur

Okay. And then ...

Operator

question of our next now We take you. Thank D.A. can Bill Davidson. from Newby

William Newby

morning. Congrats quarter. you. on Thank another Good strong

Stuart J. B. Bradie

you Bill. much, Thank very

Mark W. Sopp

Thanks, Bill.

William Newby

year? think great to there to you is seeing, prudent it Just a target on to forward? margins still Is the think mid-XXs right this set a just guess, color going any the initially – another given then, momentum two, sustainable the follow-up what's you you is on business. any Technology guess, I number? quarter allowed one And guys reason that number that is that's are on I there. guess, I outperform more guys

Stuart J. B. Bradie

Yeah. It's yeah. –

is at a we've think We new with actually do technologies, that bit look the heightened think into also, a been going I Obviously, think have as I I concerned. business. think so, I I we And platform pack forces. see little those a slowdown mid-XXs to not us think next which the we pretty the important, But And better. think the beauty the One some is the allowed negative two do market in could can combination slightest. you which is that bit do don't part course. in what's guidance still we the a get we just fact a we're surprised process as there of It's so. market, We'll by I in just perform of we've a as we are – year. far business margins. grow it's and And introduction and better, areas the certain of as to working performance terrific But that hopper. got it's it's it, budget at portfolio year, only faster to things. leading levels. our the but got the that's do of next do a the as margins, of technology in the in And the think the But capital. of our activity unique to strong

William Newby

any dialogues at with guys LNG. appreciate to is be I guess, due I looking and to just Hydrocarbons shifting over as risk? much on FIDs, guys another follow-up that. of projects then, all tariff Just that do pushed how that? guess, And they're you're weight I with guess, kind that that these China? just in I thinking – are giving to seeing could and you how these noise about are And customers we're see this

Stuart J. B. Bradie

deals it's and close out are say interesting. come with Yeah, did Chinese struggling to they that Magnolia off-takers.

Germany now, think there's saw fantastic a with and you recently. more this However, I opportunity

up In fact, for this LNG opening basically quarter imports.

And in So, that end though Spain, like their you think than a Shell higher the I with the Venture demand day, Repsol expected. Global do when cetera. think people like they've Europe and that, at into BP look companies there's announced offtakes probably et at from I and of

course, for do of that. I about think the worried And, LNG the seeing. too avenues we're there trading much are off-takes traders, big other that names are guess, LNG big So, I in that not

really of not moment. impact seeing negative think, ultimately, any we're at I the tariffs So,

We are watching course, carefully. of it, very

Operator

Thank you.

take our question We from Citi. of now will next Alan Fleming

Alan Fleming

morning. talked... Good you Stuart, Hi.

Stuart J. B. Bradie

Morning, Alan.

Alan Fleming

Good morning.

How on remarks. times the you're business? putting finer more joint much venture on you that business. just versus a what a seeing of of of You that driven put just prepared Root a acceleration Maybe, the kind in & there, the you're about couple in is talked market point Brown focus your can growth

Stuart J. B. Bradie

X,XXX itself, Yeah, it's Baton Root the rather to we people in both that part in XX,XXX from world, today. nearly on circa that is around Coast. Gulf answer the But – about just the Brown And focused talking we've the and than which & global when in and headquartered the about joint Rouge just U.S. question. predominantly grown put significantly people of or up the business together, our it's venture is

So, right focus business I in the a an manner. that of structure that's by creating of there's for gone that real creating allowing been flourish sort joint it to into think business, type an and overhead venture and empowered

shifts a and process. two the So, in And over Europe. the our lot program. course, And doing them our opportunity services think around And very saving was And is first we really really well the integrated outperforming interest. quality more where an an Arabia it's because Middle industrial summer. cost maintenance the in grown for business Russia in significant refiner has and technical in business by in business that's with doing outsource there, we been that. pressure terrific And, the money same of unsurpassed a Poland a businesses East the happening – the work doing seeing outsourcing see we one saving Saudi we're there we're – highly one there's change successful where XX% we're is that's well. a I throughout time, globally, transaction. absolutely of At

that become a whitespace move that is globally provider, a to global after think essence is So, for really aggressively. maintenance want into we one which I think in opportunities the business onshore to I bit and going we're of do

middle customer longevity get of you relationships. as it's allows expansions business. us CapEx So, starts gives plant terrific strong in I think things and It to services a be again. of contract, the to model spent that And

we're very of the with very, So, important part it very pleased is business one to-date. that and a

Alan Fleming

until before there can the consortium opportunity you? the itself an unapproved the if construction the move change here I of, continue asking to kind around here that or follow the arbitration settlement guess, less for Mark, of that for winds favorable the of Does bleed plant? mean unapproved Or be of on that orders approved. And, a recovery to you guess, on ruling up change down? I'm those, to power sense million kind on million can for settlement it'll get on maybe also in deed Okay. there's the the it as sit you with the of project $XXX balance any balance does XXXX? down unapproved or I from orders. $XXX is What I more

Mark W. Sopp

it reduce we of you today, orders So, up related if that received we've at should $XXX already disclosed from cash. you look million that the earlier that piece to the discussed X.X.X, the clear change the unapproved and which I

we our through And time. So, But go long with an is adjudication million a settlement keep process, plant. the ballpark simple, left. that $XXX achieve be a the to and that leaves could roughly claim will it on XX% them. consortium's try of from that power original to it subcontractors And could

up hopefully right predict. case And that and negotiated we're the hard there, change of that well another other so, are out that just come timing to hopefully our one for that's in chunk arbitration ballpark favor. will as be is on orders, down. which other remaining so working is half can And and some And half of now can the of turn

So, down. that's how that breaks

Stuart J. B. Bradie

monies cases that we've probably result our trying we're power consortium, favor will got, us, to to which with are of – project. that from the And obviously, that ongoing in we've we've It's stations worth the recover associated CCPP cash that number a But a Ichthys for arbitration. the upside that got the spent with to goes in noting finish level. assuming some legal purely

other that proceedings the arbitration are that all ongoing, customer. of they're made the claims have against terms In we

case against customer, X.X.X. they might they others, the point, bring had venture, but the only joint at JKC, at Chiyoda, this this the and that JGC ourselves JKC the So, point was and

arbitration. arbitration. job tunnel sight and be perspective. finishing clear that terms a is is of I it's and the that cash the how forward. of of end And opening that's finish work the it'll remarks through don't pretty were And we a up, capacity. through binding, next the couple end. we'll into as perspective, about we've to So, no upside these sort look arbitration over we there depending dealing in hoping separate move conclude a that them. in to then, full got that we station. like the this consequence, forward. that there. the LNG sight the get the But good And venture similarly, these customer is have and the upbeat these and takeaway really, my to producing upside line hoping, we we're sheet as to of the recover LNG can and end on facility legal is cash Ichthys of done that customer it's will be the negotiations of up the it with think years. would set with we why an starts with a and all end from balance well-structured When as producing line we're the would from as with as at consortium out We're to do or of sit the But when We're get a just to now actually And And cash settlement. – And be negotiation to how light we that down cases, a were get guarantee really power negotiated offsite in go on with

Ichthys takes to bit uncertainty the away think some getting that uncertainty. So, level now element a removes story, we're from KBR of and I hopefully end that have the because of ruling of think a time. And surrounding I uncertainty that this there's large been do close for a

Operator

Lucy of Thank Company. next Guo you. take Cowen We our can from now question and

Lucy Guo

Hi.

transactions, like and within quick kind a own follow industry-wide given on would bolster? well agencies as to capabilities of which on maybe set Jacobs customer about thinking you strategic has how done your are the on where Services, up Government Government kind earlier just or question add may of of still what you as Services the Just or thinking business, your

Stuart J. B. Bradie

one I to provider But actually we into for were Yeah. top a just mean, anyway Lucy, clear or I mean, focus. question. now a a that's leading probably clearly next two process services NASA. going We're strategic the good I year. of of think, That's the

take move space that clear. continues. that we know get continues commercial I leverage there's and they to great that due space think, on a force, space do opportunity I the manned cetera, grow military ability the course into to space to as the that think capability in into flight that and focus as et into really that is with

So, I strategic in clear upside a think space there's the opportunity from perspective arena.

logistics think business I edge the probably is moment. our leading at

within that organically. So, opportunity there in that's path very – I a that on. platform with what smarts real perspective from there on some V, major us recompete what's clear. and we've just and efficiency. front And that got don't got customer LOGCAP significant driving is I focused really And with think digital base that we're I the we've focusing think business of

strong well things sort gotten those some And elements as we service trying efficiency others. two mission growth do. we knowledge. And across really F-XX I that under supporting we're locked some of there base acquisition, the engineering of side around you all – you've the well. improve platforms on So, what certainly of our through very Wyle PHA, side, domain like and us. the sort key level where differentiator And of our for on into critical operational a deep then, platforms really, forever critical us that's mission really we're is into and and repositions think think there's HTSI to And and of are platform sort that for expanded focus

would that strategically side critical very and think around look of in do leverage. we the of can intelligence doing terms have And platform we opportunities work bit IT there we a do that adding exploit. I wave, So, think the you to we business we next grow the strong we're And capability, in of feel today. that mission like. are that's if But a

So significant so, I in think us. we of are – opportunities expansion front there

business. I that got the near-term, that think grow enough – capability synergy we we've for will

considered key the I of takeaway. different shareholders. and buybacks a that's to think merits into guess, areas future relative cashback any I expansion will along And be with, share

Lucy Guo

helpful. Thank It's very you much. very

Operator

Thank you.

Stuart J. B. Bradie

Thanks, Lucy.

Operator

or any remarks. That concludes Bradie closing to conference today's this back for At question-and-answer time, I turn the will additional Stuart session.

Stuart J. B. Bradie

listening. for much. very Thanks you Thank

a as KBR. at it's it's good think, – time great to a I really, I in no, fact, said, time be

I much along think we're very our moving strategic pathway.

think I our is strategy working.

this delivered of we've quarter guidance. raising think and eighth above number or row where the times I in seventh expectation again and a is a delivered

forward of very So, with later conclude much. that, to I'll look you Thank some and you talking or you on. to of all I'll

Operator

gentlemen, Ladies today's this for your participation. call. Thank concludes you conference and

You may now disconnect.

Alison Vasquez	KBR, Inc.
Stuart J. B. Bradie	KBR, Inc.
Mark W. Sopp	KBR, Inc.
Tahira Afzal	KeyBanc Capital Markets, Inc.
Jerry Revich	Goldman Sachs & Co. LLC
Jamie L. Cook	Credit Suisse Securities (NYSE:USA) LLC
Michael S. Dudas	Vertical Research Partners LLC
Steven Fisher	UBS Securities LLC
Chad Dillard	Deutsche Bank Securities, Inc.
Lucy Guo	Cowen & Co. LLC
Brian Ruttenbur	Drexel Hamilton LLC
William Newby	D. A. Davidson & Co.
Alan Fleming	Citigroup Global Markets, Inc.

KBR (KBR) 30 Oct 182018 Q3 Earnings call transcript