KBR - Earnings call transcript Q3 2020

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Operator

Good day, and welcome to KBR Third Quarter 2020 Earnings Conference Call. 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.

You will receive instructions at that time.

the to now Alison and the to remarks over conference Vasquez. opening introductions, like I'd turn For Please go ahead.

Alison Vasquez

Thank you. quarter third for attending Good morning and XXXX thank earnings you KBR's call.

outlined Officer; Stuart Chief and Officer. of present remarks, quarter, actual Stuart forward-looking provide questions. on about and and matters this KBR's our these views in today After our a Vice will These statements statements. Stuart. over that to Financial the their website. Bradie, Mark from involve future discussed These differ we are us Sopp, website Executive risks our the are include on section call I and Chief Today's potential impact reflecting Joining the presentation guidance. our the risks results slide remind performance Executive recent highlights financial available and on for and market operations from results and will Mark President and I uncertainties to President the X. updated call XX-K and discussion kbr.com. turn available earnings may now as is Investors could to would our will cause at events open update like most that forward-looking impact our audience significantly on Form

Stuart Bradie

morning. Alison for like would I to this all you start us you, Thank slide joining another perfect thank lead-in. for on X. And

huge today. that KBR, across Courage new Care the before them Zero report particularly focuses At is organization pillars. what nothing organization our directly platform to our kick-off one are Harm here. has very and on Harm they have You globally relevant we business the a above been sustainability way the I'm across the pleased branding, right rolled to to so passionate allows really in with what about under expectation XX on has now our and promote others This seen their enthusiasm. expanded that people take-up Zero meeting and educate to every been And this of moment or out

ESG an slide more the I this sustainable health aware a really really topic facilitated us you're sure of different on I and of today to shift covering I'm isolation, important towards pressures with course from and So has burn-out fitness. which company particularly mental perhaps the is and a creates maturing perspective, stress People which a some nicely KBR experiencing increase cetera, from X, this potential guess schooling. takes for this far responsible cultural really all as anxiety and home, with associated et aware, general COVID-XX levels. working home some are can course, the mean

well-being Officer we these our So at in mental force. ensure Myles, This times. uncertain our is Jenni to health task by formed supported led Chief a global People are people KBR and

like do we're As the program to to And the to each support to the these quarter you physical town our really from some because and shared can work knowledge, a curve they us fitness On that to global culture similar really strong the as a way globe and a level organized about both all ensure focuses in feel Personally, rewarding we we hall And value the And leading tips together, see resilient to the much do and great a forces. improve times. physical and in we awareness in resources our all really the on fit. strategy about healthy like of as objective maintain prove on KBR mental it and about of equipping with and start health are of difficult our they across improve and engagement takeaways. we fitness. some really people also health typically experts at we advice, fitness. health I continues our we volatile have U.S. also practical people thinking physical capability. course course, balance. KBR our couple of We're and mental fitness all times destigmatizes to we're ways the fitness with feel POTFF on this for think when of for in-house mental the want all fitness. that add internally ago less fitter We're looking And X. to when and approach and positive the I mental work There creating focused special see experts our think times is weeks was our with fitness talk slide to well externally. and to third going key can mental

the science higher-end upmarket in paying momentum is health technology, is Our growth into offerings really businesses to our the I'd in and of that welcome defense engineering quarter. family deal high-end Xst October. strategy and of new clearly human Which of course cyber, of moving like formally technical the and aligns performance, off. as our with space, colleagues evident also introduction KBR on to The the well and closed Centauri we

numbers met reflected Their operational mission cash Earnings think once job were perspective segments excellence. an deliver is EBITDA a targets absolutely do all I they unwavering. a this Our amazing without or in result. exception And and exceeded from terrific to margins. and strong. and margin quarter commitment is again this wealth execution people the the truly And

ensure TS particularly in have the and robust will momentum across We resilience great the and business continues. and help our this momentum book-to-bill, GS

of raise of with the attractive also the range. profile combined thus Coming across of cash closing Mark. performance More teams business and sheet on combined deployable on book guidance. at funding QX, of later course And be again, of once post solid out optionality. our we'll the the flow of cash, our And our park this October kind to X EPS of guidance. world increasing a bottom with from Centauri our out allows the knocked year-to-date is risk leverage gives us on us our balance our so Our the of in gate Centauri, strength

X. on long, the our time our we slide strategic XXXX. a all is May same Now It one, model. seems this Day at now especially Investor presented year. to ago, This long happened It's in this with

In we and very felt hugely of culture The might ethos to and center all of are. be uplifting. it and we talent So the we team useful memories. refresh people's quality just the powerful focus are of our who at is collaboration, people do mission and short,

that do Our people things matter they and care.

remains will resilient long-term attractive contracts solid in that domain strong and we will and business robust Our areas seen of that you've have ensure market and core continue. this help as that this really expertise the

Our growth remain themes factors – strategic intact. on

modernization think and our the I defense alignment acquisition, important to should Centauri clear. strategic is space is have discipline essential strategic in this the been fit presented superiority times. volatile we and When

We markets. and strategy. read continue the and that here will well-funded the all bullets, future we not attractive end strategy takeaway to move upmarket, focus and are is but I our valid remains executing our on that

base conversion more XX% demonstrated. the customers across really course The government our see giving predictable excellent is and access streams of balance cash can we risk terrific, is XX% of across As multiple and the areas as and commercial. customer around you to and funding earnings today business profile across absolutely our our is globe. from wheel, the have delivers focus consistent it And

well in positioned continue work that are markets and secure continued We to support end attractive growth.

markets. at So, drivers and our key look let's now end market the have a

X. slide to on So

We've start we'll segment and DoD. with been as terrific. off So mission existing this space The solutions. growth growth and attractive well programs both performed seen in on-contract has across absolutely year-on-year NASA

the up continue next contracts solutions much $X.X outlook perform domain, of and a As is in data years. space. we see analytics IT we few across Space to can market and a revenue billion and like greater sets high-end you about thus perspective, collaboration backlog cyber to on solutions. right, From us see the the mission for billion $X saw continue well having to business win we

aligns military presence and intelligence space position well. Centauri NASA Our and within our and via

and factor in defense forward. On health growth year-on-year, technical engineering. a systems double-digit KBR quarter, X, contracts this forces performance this within really is and all we areas. for believe special NASA the the for business, and book-to-bill brilliant to slide Again, also going growth strategic high-end human Our and fits a in

right the on R&D for defense needs. see on emerging next-gen engineering for is few modernization can highlights, for systems electronics, warfare, naval a This high-end work You R&D missile and unmanned systems.

the is business arguably again near threats pursuits sets the a contracts is this few IDIQ intimacy. the are thrives annual Lots a that backlog away projects. again forward. going of As about well perspective, and billion limited From explained competition scale, not up and smaller are consequence, on an as us $X.X outlook protests billion but $X Very peer before, increasing. of via and revenue we've customer going

is the days. investment business lined years a to up existing The of yet tendency well XX, area is opposite holistically War different reflect be many to on this we is are and and this least what introduction very reduction KBR. course slide budgets. The is OCO. this seen back clear, here security numbers are not KBR enhanced shape We focus relate what do engineering well with slide readiness et Centauri. business understood our The within we to and major our doing for do priorities community think has sustainment in cetera, business funded mix the was only defense To a today. much by very contract Centauri. the ago of system have Through funded recurring very, of business this, On logistics. wins activities and I This the national O&M by on of Iraq

of in the quarter and very, the UAE the readiness in in momentum reflected very not recent areas. yet book-to-bill was continued our and And BOSS Our win is supports sustainment X.X backlog. pleasing

for more sustaining digitalization. and more our this continue to activities. to our more on of far are is see have O&M cetera. this in But likely fuel and which of training Middle business future. significantly systems, the demand has side, more proportional modernizing outlook are have billion. with reduced KBR the $X sets smart the the in our And digitally and line can in fits with is increased, Saudi, we over to the presume. as all on the to readiness again Europe The this Troop contracts as efficiency Djibouti earlier. associated the You for XX. long-term streams. changing handling level transition East, of volume right-hand business predictability both Also et chain predictable which levels about has this up we as automated funding enabled transitioned impacts to NORTHCOM, these course of focused supply margins via could effort. reduce increasing complexity exposure upgrading as and environment just and backlog very are well the and The us on The capabilities overall end for strong KBR our revenue low not the you On bookings The may at with and slide for outlook highlighted

clear under business and differentiator is a international Our is just in billion revenue. GS $X

the the the defense In at resilient is business, which by defense long-term, the forefront Australia, PFI spending and systems aware, and which but forces. to the very advance recovery, planning, COVID, the not times through as reality, software in recent training. in you're and engineering In development sizable increased as strong sustainment, been economic of backlog. their also underpinned look A I reflected challenges implementation think Brexit. high-performing government modernizing important naval of augmented Australia, has business business our and while virtual from As is particularly actually mission very is Australian U.K. is manages only contracts, predictable

see, growth into up can set has very you on the year. impressive. recent And as in As next we the year-on-year right been nicely wins Australia us move

sum announced lump today will our the low-margin to and hire construction concentrate including direct commoditized EPC on exit With XX. services, realigned we on our Now slide from exit solutions. from technology

again that stated in circa an the to mid-teens XXXX, margin we billion in previously, be $X revenue with we overall we business forecast today. and this As reaffirm in

The drive strategic well realignment market removing positive advisory to our pursuits we the also We're diversification our moment energy culminate slide area to $X.X we've Mark recent productions, the also In this and of XX. deliver distributed quarter billion, From A we continues. segment this to when and you'll the IP-enabled more right margin higher-end in technologies shift green plastics continues olefins portfolio, standards product transition. of and diversification, demonstrate these meet this. across sustainable X.X. margins is increasingly tighter momentum, and shift a strong traction With in see takes highlighted booking our see strategic had combined efficiency ammonia the positive into activity to very, and to As demand refining backlog technology-enabled and significant more continue performance KBR, for And for emissions, across and some costs. technology environmental book-to-bill amazingly across a more solutions non-single-use product summary, services. in pipeline advanced in is energy overhead a a heritage to IP in for food about gaining maintenance increasing in technologies successes significant very particularly solutions a healthy of and lower dynamics perspective, portfolio. with market to On clear. over, our for feel for on

on new low XXXX and on objective. this and XXXX recompete business As laser-focused years, winning absolutely is we've enabling increased focus previously, mentioned team the are

that $XX to run very have months. add the times excludes three over is rate, the XX six a indeed. quarter. fourth billion We be almost metric And in sort next which in we'll annual will And this awarded this Centauri, healthy of pursuits revenue

So it's good. all in short,

over now detail. more in will Mark, through Mark? little hand walk So, the who to bit I numbers you a will

Mark Sopp

XX, and quarter. the performance pick which financial you, thank for it out key slide our Stuart. Terrific I'll on up metrics lays

is overall, each ahead of plan or business metrics. So on Stuart these on summarized, tracking as the key of

our continued And commoditized earlier by more and military expected scale support cash in more have going resiliency business, bookings is forward. work as mix driven of predictability made business, less in Our people, and growth shown collectively summarized. On OPTEMPO in our this profitability, in grown in as select year. revenues in primarily technology-led our are the we the business areas and volatile. remarkably is Stuart which our by these we areas. a and to as our just strategy Revenues our This mix portfolio upmarket changes to prioritized targets strong offset business of Energy shift higher-end services balanced have current businesses solutions. changes exiting for shifting environment, greater hence we derisking flow Government reduction some healthy is the well that good higher-margin seeing from This reductions measured and consistently good for are funded enabling in contingency our solutions this business also support, in in and energy,

this both cash total X% you pretty upgrades. non-operating profitability year-to-date business about we certainly circa $X.XX up million with op profit guidance annualized $XXX earnings is areas was acquisition flow share at is running double-digit see due profits, cash the driver the again for contingency recent As scale were for our and On where across under the moment. primarily this credit last results. has all as see. and component results future. processes, here back announcement in EBITDA the LOGCAP flow in for new been million. defense expectations. East Adjusted slide a with and at main winning in being had nice Incidentally well last to and project said the transition in of Afghanistan balance V X.X our systems with at a contingency with with was segment year-over-year COVID offset in and consistent rounding flow for quality engineering in cash is of to offering most consistent business levels flow August. $XX with cash $XXX you year Stuart basis over XX Centauri million, was X% up nicely of to year, exceeding of items in quarter troops I'll This flow well-demonstrated with both much add QX contributing slightly Government out across in Cash per book-to-bill credit situation. growth the in in complemented and low-risk lower the and Adjusted we and recently consistent quantum continued gave execution, for really the income space We Middle offset which bump business logistics the with strong all are again XXXX in the for representing in outlook, QX and conversion. result The of cover strong now is role the that segments exceeds the delay I'll to to course logistics. bookings the the good good boded

win out component up O&M and most Stuart part baseline are accounts and LOGCAP important earlier just like more budget is of command the nicely. activities NORTHCOM the of Furthermore, thus stable defense is of V of ramping the indicated funded this work the northern our these is of the predictable. in DoD as However, and

deliveries, a Moving over a better had This contrast in proprietary quarter mix quarter to as year to great margins drove is last but high concentration higher as equipment higher bookings lower sales Energy margins you this technology. recall. in and That of and significantly of wins. mix a volume, of year. last QX new planned. Tech license of with in might to recent performing led transitioning

We nice here with made tech-led with profitability have in overhead earlier costs well. delivered and this how and high-end QX advisory are guided. the we've ramping At the in transition together accordance solutions through commoditized professional down our services same industrial this are with time, accordance elements we year. margins the offerings as working managed we here gaining decisions These modest in we are posting and as and activities traction

tech our As is in new margins. mid-teen with billion $X solutions for revenue in mentioned, XXXX roughly outlook Stuart EBITDA

chart. toward this making goal progress You can see on been right this the have we here

we was and on transitioning annualized wraps about the right solutions, we'll ES Here on overhead over cost implied reflects This outlook. reductions combined progress the our my with slide ES the a million, $XX of TS, made synergistic now have been XXXX quarter we reimagining and production solutions $XXX good the that of on in you comments XX. an elements that's see TS are move in and we business profit basis plus to business, up heritage EBITDA That line just the quarter tech making. in tech the to the attractive this can profitable significant and profit stable million have

Here transaction. are on just points few a Centauri the

higher-priority KBR, we comments, revealing of The of strategic with programs earlier its value Just NASA financing Space remarkable are reiterating can the already efforts form are integration the all same this generate connections about going our we at X, the These transaction excellent where the components super excited cultural seeing combined integrated with Stuart's areas day of October are leadership fit the business. strategy for acquisition and vital these We commercial our terms capabilities and communities position QX of customers a with together and leadership U.S. transactions KBR position our with synergistic and on completed with Force leading and other military also today. and national of offerings the catapults the associated community, first some highly that shareholders. The are space course higher particularly and sticky technology our space security as areas enables of intelligence directly areas rates. forward. closed serving course to the

all balances see in of of the end closed of QX full a and debt true with financing and couple transaction the our late effects cash a That course One offering did will bump at the you'll of elements up months. up cause the QX. in in bond that in of reported September

EPS with going which deal from Consistent be with and our Centauri, flow to more practice, past with of onetime together excluding the for are determined quarter inclusion we amortization that quarter. As I'll forward. will moment. a intangibles, EPS financing of and non-cash later we XXXX incremental we one costs guidance in the expense the hit ultimate costs adjusted purchased this have its guidance full up cash bumping reflect are will

Now slide XX. on to

liquidity low this coupled Centauri the position after ratio. leverage predictable reiterate This side of us KBR for and Post our cash a deal. at for acquisition capital and also attractive net strong our at Here time the capital allows this Centauri, structure leverage flows in which overall an excellent. And targeted deployments. completing today the enabled future is I'll is with opportune leaves ongoing

above this in Our priorities fourth with have in We cash through excess now year, XX, And on Centauri we we this and operating have what earnings particularly at accretive which are the in in in line expectations quarter, finishing to QX be capital for is deploying slide regard. with unchanged adjusted announced back to performed or August. flow flow. expected cash and up

EPS guidance to adjusted $XXX up raising sums $X.XX picture. raising flow and are That $XXX to to operating We financial the million. to adjusted $X.XX million cash

to Now finish back Stuart remarks. to up his

Stuart Bradie

Mark. finish I'll I'll move Thanks, Brilliant. XX. on on and up slide

key across quarter metrics: earnings, all cash, strong book-to-bill margins. Another and

know and the areas that terrific think across differentiated and a positioned deal, we with business is of We clearly is and announced this quarter. beyond. X%. customer outlook government is is year-on-year closed. on of Centauri TS gave this outlook stated. be comes the with attractive new have holds. security outlook. The but be a with backlog and national billion although momentum well acquisition of circa and you with well would is strong defense across next extremely obviously as gave obviously to of right opposite When group as margin growth $X Centauri going I execution continued optionality. our forma Centauri we the and set XX% we areas, balanced and business and described priorities the Post robust the said and this performance line earlier, XXXX group is bookings we Centauri achieved from and have in advanced Mark our And guidance Over a with up year pro high-end as see today, around level, we sit what color a At XXXX our Centauri bipartisan deployment well revenues operational into gave different margin markets this. Mark strong are that we and now And in a with sheet we us our for you as in retained we'd deliver out quarter, XX% support what next and healthy we to can base strong the clear additive to this formal balance pipeline line towards commercial. have is book sight not EBITDA well heading you

for So listening, I now to it the thank will who hand questions. the will you call Thanks. for and back up open operator

Operator

will take you. Instructions] from Credit our Thank [Operator We now first question from Suisse. Jamie Cook

line Please Your open. is go ahead.

Jamie Cook

This out quarters sort Solutions I of guys backlog XX view the of been that the of organic market organic Thank XX from Solutions has we accelerate line should been understanding on pertains expectations, sort growth that than the the and there little here, the trajectory the about of potential how to to Government the next we the but it things business robust you do to growth over upside on you. business, out think to ability that on couple the harvest have the the a the lower been over over top And Government you longer Government in slides, business have do Solutions you about months? the margins? term. of mean has then, past expect pointed growth or the of But the appear talked some slides understanding

Stuart Bradie

Jamie. Thanks,

So I think story. is real that this news a good

has mix think through, how a was actual I I been logistics the of little the business the bit as before revenue -- If flowed misunderstood. told you has at look

to business OCO to OCO you've I funding, which has KBR, think minds. seen people's changed played our we has obviously more mix at exposure it's is volatile significantly. as as through And change exposure time the on

through space And the numbers time, funding on as sort and growth course our -- that the I and offset presented. And in Middle is we of NORTHCOM, So engineering And same to potential we've our troop organic has that down East. business and any we've Mark that levels fantastic. science business area growth see actually in and systems the said. in really at business mix around maintenance transitioned had that which that reduction coming with is engineering of can of guess, coming operations as on the our you

So again, going far less predictable volatile forward. and more far

we and would So And We'll bit momentum shift this around that a businesses a really evident and engineering really, the expect I and more space a science high-end on shift. it's and is give have back The introduction color to next up. in you synergy I'm have And continue. about think quite in our think obviously I the is quality October. And quantums I around the And Centauri into is story. pipeline -- coming that quarter, they're areas to then the in. individual get that good in significant excited we but ability the the news the growth drive businesses closed managed it programs early Centauri the of of that as super on. to

synergy there's opportunity -- going really more than deal. envisaged into that we probably think this there we I

partner upmarket. of growth an culminates I think forward the you're I I supports that I talking of about the think all acquisitive Jamie, organic So through now in for the well think going that all And numbers. coming shift strategic growth -- really overall we'll course, future. it's be it overall in seeing but that bears think and

Jamie Cook

I guess, Stuart. more And question. one then

Just on traditional portfolio transition. that this get basis, relative investors Solutions on in of think or energy maybe a questions about the lot of sort I go-forward business focus Technology energy energy to Energy greener from a a

of Technology of can energy and more of and business greener think about Thanks you I'll can the key it view energy should historically? queue. just KBR talk get we whether the and drivers traditional in how the be sort So Solutions back about transition versus

Stuart Bradie

driven around it all by, context. sustainable around is planet which in as but space. production and in driven olefins terrific many how food which ammonia, growth should and and one say three terrific to got plastics, growth. again GDP production. then slides around business has the class leader major around you exactly buildings gives the has driven food secondly by -- in they're the a is laid and that, Again this and really like is people more that's normally is that. business out it's opportunity be things GDP are in moving And tech and The elements: cars a future and plastics into for question KBR in thinking used arguably that's about non-single-use moving we're many, a And people into world Jamie, middle me great been I've middle by that class years over that itself

be leaders there heavily course our And NASA for world And third well. because and around as have talked efficiency really not refining So that technology their again think about in around do dynamics then really hydrogen green that of governments perspective. driven fuel course oil companies technologies about we And going we've certain the that's you we're happen one, we technology and our be our advisory we number storage And the portfolios is a the in being -- market we're that of area we've all in I've energy And all the that effort from sustainable are which we and but store at once transportation in they continue key rockets. a engaged advising put in position where demand. how all developed, the to hydrogen, carbon just about a at and medium by hydrogen technology a and side positioning also is times of talked of many and to gas. business. hydrogen lot strong traditional of very all in reduction is transition see and likely do to time, into what ammonia. in around not and the leaders And forward same energy component

those So bear energy as at because cetera evolves happening throughput today. actually we're a we actually we've energy got knowledge can our lot reduce is critical we lot about central that from that about way momentum looking customers sort our then traction the very have production we enhance can industrial we talked IP. And gains means remote more -- world to of the that bring business. of solutions proven and a components today IP-led, around bit what of a hub really facilities to the we maintenance And and of which seeing digital transition advise services. on little technology-led our of And et and how can a is monitor

in and in TS everything of I technology energy transition happening that's future-facing to all aspects and climate new change. -- connected So guess is that

moved much traditional that's energy very it's have here. So focus away KBR how from and part thought historically a the message your about of key you or would

Jamie Cook

you. Great. question. ask let Okay. someone Thank will else I

Operator

our Truist. We from next Please will go Sommer ahead. take now question Tobey from

Tobey Sommer

stimulus which prospects aspects about? debt federal Thank continued you. following feel you you Government spending the less are your get And If business we best has of decline accumulation, the which for do confident all a growth? ones

Stuart Bradie

there we're tried up lot got doing we're you've lined there's think at differentiated we're I I mean happening is I international is U.S. security perspective, today we've that looking opposite patterns an the much NASA, remember, national really with Tobey, to fact think of the with by our across very what's we're come business presentation a I our profile actually demonstrate DoD overall from into priorities. that, what when today, in and not nor you government for the business. back to think really what And tech impacted

we're matter. a that away the of end And We're very going not those things fact. as proud Space we it's and well do supporting do, very people not of at assets International away. the are much operational Station, going lot that of Our what

the think that of that mainstay about and the I one probably business, contracts think is worried not so, that So, got I really the I'm performance. long-term we've underpin -- area really

to funding. because defense involved -- is are it in growth I that And the QX we've long-term going OCO far guidance be we away. next not material get as government may forward well in at looking think we'll depending I had. exposure The change quantums it. it to reduction be spending predictable paying our But, it's reducing going near more got off, is strategy going for Middle are a the space and our continue. community, we won't superiority year, think to happens may there. in Again, color peer intelligence some again, give outlook we've not when of than -- on think Afghanistan. Those a modernization, area in our to and And threats and East the I what

the mitigated be would think we've area, that significantly. So but I that risk

Tobey Sommer

in for sort about setting basis company, do go-forward you at you the the comment Day an Just kind that growth that two plan point could in And algorithm Investor years? medium-term a formal over on of of update XXXX? sort of maybe three a question a or to more some in

Stuart Bradie

Yeah.

I to we Tobey. have think

business And the next we've of of what has around it's that we'll clearly, really -- portfolio focus changed happens take think I And Obviously the then, the see changed. introduction well. our consideration. course, as think into Centauri, obviously, we'll with week. technology I

longer-term into, So, come an I that we'll broadly about need our Day talk do targets think into XXXX back the growth more at sure. and do Investor to over and for we

Tobey Sommer

you. Thank Okay.

Operator

now ahead. from will UBS. our take from We next Please Steven Fisher question go

Steven Fisher

and morning quarter. nice Good Thanks. a

stronger was the So, than cash flow expected.

up color your a Mark considering? that maybe just your cash sounds like the are at and why then, more you more behind that how there little Centauri for And is since swirling not flow opportunities are deployment you're attractive with extent raised end step you? guidance. are now And the more you It capital can Centauri, this leverage your But, You of To of do point? reiterated option at give range, around some acquisition you there? that know I what buyback priorities. lower

Mark Sopp

appreciate quarter. the Steve on that. comments thanks for We the Well,

We're say terms see really really And is Centauri. teamwork, process made. so performance it know, really is in to of or we're through and of first KBR the the great the to is I'd improvements ahead sport well a flow attributable a pleased and testament before as cash a that. we've overperformance And team QX, year last cash that to team you already

And on of so, we number QX the the to but in going one. Centauri outlook day our last will know forward, what's the pretty given guidance, never you the on flows year happen add going cautious cash were

the costs flow. in the coming do through cash deal have also We fourth quarter that will hit

be flow the to quarter cautious that's And Centauri the But both so And going cash alone. just why and really of before produce cash stated, at of free in does that on enable fourth flow. the the we're leverage overall deployment and reason target attractive. production business, is our will after capital top low the for you forward, we're end of optionality attractive terms as of what going we

meets part be that, So, as the what comes continue strict we transformation relative to market was that for in nothing with resiliency an do criteria, are been pretty this restriction performance. or when you And enabled criteria. consistently any the allowed absent that that on if done done, instrumental an been are that, to while, was while. have but we've M&A I think buybacks And to that of a And and M&A I evaluate restrictions. restriction option the one we've we we'll agile and clear and now think our see attractive has a for very so a

So some well. as of that's lifted

great So going any event. balanced we of have the approach long-term a idea like in kind both forward, opportunity to the we do and of over

Steven Fisher

of book-to-bill with digits also what exception the segments taking for as helpful a your away growing work. is the to helpful. Solutions And have that I'm these at was segment. LOGCAP follow-up. each double and strong Xx is It well the you And separate slides That's Okay. over the of see Government

at rate figure ex-LOGCAP? when guess think just be of And to kind then this should could I LOGCAP that that assuming wondering is a out business and so that drag double-digit I'm you And much we of neutralize? business a how overall growing is trying

Mark Sopp

that earlier, we parts there also that of We're higher-end Stuart out are proud point growth team in with really mentioned and of the our so well as this I seeing And regard. our the main areas in portfolio space customers are in with pleased that Australia. the mentioned which did we also two part volatile. then the is and DoD our less plays more and in in part more the contingency there's a more allied U.K. scientific control of and logistics. have we There's the O&M And over

we've away from that. chunk business really big pivoted the so of And a dependency in

up flow I so that have will go that And go and will honest be there geopolitical the contingency just with will that has and that past I and have And ebb serve issues results. as to affect down be the think the we in line part asked. it will to -- when top we'll

very focused pipeline well control business an else and I we're on having So that executing and that do as think attractive proven. really and winning we everything we've

to I that We'll of double all that shows quarters for confident profitability growth there. areas. see catalyst logistics we see And going to will time. growth it we're that. we'll a smartly talked and strong Centauri attractive reasons further do is we're have synergies expect we areas and do high-end XXXX the But deploy that piece the think And really to the will about. at with have impact provide in cash couple wait past the government for so and in that and for we've to But control. attractive what possible quantum very appropriate on provide how And the there'll just come digits be these only the certainly wants flow

Stuart Bradie

pretty good as it quarter And what O&M the UAE BOSS East. performing as that in which is honest it's fantastically for long-term it's in of the business. into think I none albeit the the a that be the Spain logistics Middle words Steve And I the that book-to-bill as to complex that won mean business logistics a contract and I included with we we're I that And reason a we've Turkey for and that majority cautious think contract O&M like shouldn't funded forget really the cycle. with well. of and almost budget the really And good moved feeling I'm OCO Yes. doing that about at work. X.X in is the good business exposure area was haven't in huge anyone is fact we the

once which in protests think good logistics line have a for arena. we sight should growth QX, comes that can I happen through So in think of the I

significantly continued has to -- Mark good for segment. changed in And is that, us should that So in may pretty right the won balance that. time. I'm there perspective when about a growth think a see recently that piece. you'll I OCO work And QX from downward material a underpin pressure that we over feeling we've But be in the get

Steven Fisher

thanks. Very helpful,

Stuart Bradie

Thank you.

Operator

ahead. take Capital. KeyBanc from from will our go Sean We now next Eastman question Please

Sean Eastman

question. my Hi, thanks for taking

that to thinking about from you broad wondered around me may guys algorithm? income standing next into does year by Centauri? else is, to are sort the anything the to is First I just free flow XX% we combined conversion change holds, of be or one of cash there XXXX XXX% need framework for with framework that that

Stuart Bradie

I way mean the certainly, team that the is know the our focus Sean and I I think resulting Mark No. and there is and and this a and in now we've performed team right year that on culture systems got and Mark's clear it. cash at We've going see right changing all and got all the processes think I we've the forward. sport. don't I over And output

one is impossible. I doing we're we But that those -- this an think job numbers be where we've demonstrating amazing is terrific having And driving conversion the coming sorts the cash that. really business. done hold forever a above year I will course of and of we're think into

appropriate that probably you that's So fashion. cash, I think how in I if model mean you're

Mark Sopp

affirm special view would nothing the for to that see XXXX it just that. relative as XX% to There's today. we I'll XXX% change Correct. our

see, be attractive but all is that you the and but net we're can Its be be both cash flow, operating free It predictability So really there the probably is extremely should this that flow part. and the cash normal. flow to very not will income. relative only range strong will which as be cash conversion above important year op confident

we really So about get excited optionality deployment that. the from we're

Sean Eastman

the the outlined And mid-teens up high-teens years. you trajectory terrific. from coming pretty quarter, Last segment. to margin in XXXX That's kind ambitious to back in of technology new going a

teens. try revenue bridge of driver on the I think some wanted touched color high and on, But get I to angle. sort you from that mid-to more

What as against, guys newly you tracking need to that? driving be follow what's this Just combined segment? we we

Stuart Bradie

Yeah.

returns that guess Mark, to job look that them. of it's or highly it's annualize insurmountable ask combined returns credible when I a and you the think very it's sort good I the not this and at that explaining business of look big at did a not quarter

to So lines numbers the credibility we gave. hopefully that

then and there's time In upwards think that terms there. two I real next of over from year's moving levers moving mid-teens

margins. business. think think business. margin-driven IP growth -- strong business can see see technology base with can performance. upward those of We I as maintenance And very then And business margin grow to in growth see -- in very I you'll is the we the high pressure those in the business a and which you in all we're advisory come the relative

company that. in are to piece reduction increase think second XXX is realigned both in with reduction zip we're but time get of that's take which cost think I it's proud complexity to of to credible. saying The there retire years comes XXX that over of line and out sort year X% that sort pull taking we're we've -- entities. And time, code. KBR sight levers up highly a that as do reduction of happens good teens years high And think efficiency We've over be it company, XXX-year we to type of time I low-XX until margin I very the complexity. and but And to whole particularly audit there's to and entity now we got of per two X% does why and And we're fees segment.

Sean Eastman

Great. And very helpful guys. response. Thanks

Stuart Bradie

Sean. Thanks,

Operator

Cowen. from Khanna our now next We will ahead. take Gautam from question Please go

Scott McCrery

on Scott for is This Hi. Gautam.

first XXXX questions, direct do orders have you one solution already? predicated how Centauri on any And much is solution? two in the growth energy Just for of that the in

Stuart Bradie

said So launch. acquisition did what when Centauri good we question the we reiterate I'll and

of layman's to it's is, So -- And time our that. excludes into a record has exciting be of out of come But two really happens so OEMs it the that of the the terms fruition. who opportunity type because lead when like growth are because in to duking laser. sort And the program of business is energy very, across integrator directed piece the to very both forecast to record. that things Centauri exactly of that really programs take is it unclear of winner move lasers

So it's all upside.

their and core energy. highlighting unique work the fact in at base really business arena, we again, key the And of laser, is We're directed recently of the capacity so arena. won do. excited in about so very in really And that skills different capability looking more Centauri presented that they that opportunity they've in what a

So opportunity the we presented one upside time is today growth an we numbers think around. that's and in that amazing that not reflected last

that's hope I clear. So

Scott McCrery

Okay. for me. just a No. you. clear. question Then, Thank That is second

at of XXXX. about talked have but number? Government growth people reaching the all win any to do expected double-digit recent Solutions the you're about concern you in some it protests that have And But

Stuart Bradie

No.

with got The Huntsville in and mean say in I aware upheld. of go for And I obviously to was MOSSI. right. well we winner did would are people I it's happened that think protest what re-bid. we had of through in back everything and confirmed fault we've announced our own Alabama, that This wrong is the that. project where no NASA and the -- nothing that KBR were did

that because our at no a ramping big time work terms it. when because timings factor do into when because things, not when if you in But goes think bit in we'll -- after than we nothing outlook it But the on of So now. protesting a norm it's be obviously that's often exception little of and back unique is really, and frustrating. they programs, don't really it and and of go the I and the circumstance -- frustrating actually the in bid not we're the to rather up accelerated that's the like start of melting being through try part you kind looking wrong no,

of protest about by business engineering the you IDIQ is defense the I [Technical our business talked one very engineering contract level driven allows systems the that my nice vehicles very, in that's IDIQ think and sort of low. I was things, prepared use remarks within to the Difficulty]

So that contract allows you to quicker. far get on

the for we But holds. area that company did when of guess, tend which big consideration. that, the in some growth good we overall there's the the Centauri So to opposite, dynamic into no I it understand programs, take acquisition – and And that be protested. we gave outlook we

Mark Sopp

just grown that quite the pipeline provided greater year opportunities through information the pipeline fiscal in add you than this $XXX we GS some I'll XXX all And continue high-level a categories. pipeline. have And than more are but have million bit we the to

has and but opportunities rotating win really longer there's really to this good the team catalysts on look growth ongoing including there for lot term preserving through the a We'll rate, And for of a also good done growth nice a the the that. very re-competes, job, so of future focusing in area.

Operator

question take We ahead. will Revich Goldman Please now our Jerry next from go Sachs. from

Ashok Sivamohan

Revich. Jerry This on Sivamohan there. Ashok Hi, is for

within So SG&A. was from the this you the be increase about rate and strong Government run embedded about Can should how thinking drivers Solutions higher we talk the here? margins of quarter

Mark Sopp

rate Yes, in We actually in The odd. Mark a a year-over-year of from had reduction here. sort looks adjustment year. QX a of G&A last little

in a ago. a opportunities are exciting. flow volatility. will sometimes that now, $XX disconnect or norm from and But pursuing, million But the But that mentioned indicative ebb $XX higher the a $XX there's the little current last relative of I moment couple costs, million has and to above quarters, bid that is was be we and are should just normal a So than comparable a of area. we in which of there. million, right is little which this And amount with a it's really produced think below pipeline little greater proposal the that that

So we believe that's where the investment.

Ashok Sivamohan

logistics, LOGCAP the weren't today, talk what run following on you implementation? the on discussion helpful. delayed would if rate can like the you That's on And revenue V about up COVID look by

Stuart Bradie

was don't – – in and specific I historical in the today. really on historically what mean, past mean, happened terms could it quite I we that's detail substantially give of detail in think has we've one and that what the is higher only probably I given Iraq the than

we'll and So bit at more try we that. QX that give haven't guidance in color really and given around all a

revenue not Mark So head. numbers of more that. off my to on yeah, you think top bit I give give just the hang the answer. until there can right just around have reticent a to anything It's you then

Mark Sopp

I down and where to just earlier due to said into it about Afghanistan quantitative be from as on get the is to last now, Northern under five, quality and I East want well issues also. inability Middle we Command we're a year happy and the to OPTEMPO the but don't is going was but that stability place Command growth great European about front. front the positioned so be remarkably transition the on well that's And that will

Stuart Bradie

up the I guess would we've talk I in going mean, that great we're areas sort is multiple one I what programs, of and to various, multiple business base. the to I than I say built that you're of in flows And streams that business multiple of today client level in you global ebbs funding And the specific attributes guess, a have access of world bring the a is we're I'd rather again the in. in a sort think of – about

our at strong top is strong of areas strong – X% year I – strong, sure that is to is do in overall, the we've trick think because I business. areas doing I you the all teams funding of accessing and performance we're given that sort that our margins billion are I again, doing looking where here is really regard. think growth And exists. cash that that the outlook our in – EBITDA with overall heading back, around actually think I across the think end is margin I conversions and take group the an the make with towards level And do next company amazing that at job where managing $X really

to you that's where So that I bringing keep do back – think created. shareholder is I really the that because it's value – would – I

Ashok Sivamohan

Thanks. I the discussion. appreciate

Operator

will Vertical our from ahead. take Michael We Please next now Research. from Dudas question go

Michael Dudas

Alison. Mark, Stuart, morning, Good

Can where they maybe on they and XXXX XXXX provide refresh update six year a question. and stand your where on one versus expectations into overall been you us Ichthys? have to maybe maybe Just into negotiations about ago? would going an now expectations And months timing

Stuart Bradie

Yeah.

multiple it's process been process, time. legal Ichthys that delay more legal there's So the some cases in remains for cases. as than some COVID will others

actually cases than the things witnesses ones less are that As you're aware, more like that. and face-to-face require impacted technical the

couple will COVID environment of core the So years person. course see cases legal I go progressively under next and system over is more think sort themselves I of think the them in through resolved rather we virtually working the than process getting as and doing to a more of complex the

that So maturing. is I think

to the with frame GE our expected just station months because dispute to think COVID-driven. in so. piece It's to probably And which CCPP, is delayed Jacobs we to power Mike, the the that and or now August, pushed of that October just costs out So that's and we're happen there the I anything. -- CIMIC or effectively again has trying think six nothing February been is on get -- we sinister in September, time there There's COVID. going recover

happening the think next terms mean, we I some of next I year. sure some cases then And in I impacts So -- are that coming and in XXXX. any two well the opposite going likely opportunity XXXX and mean recoveries some year of But And year number into monies cash for be there's over a -- of there progressively cash, this timings is thereafter, ongoing wouldn't flow there'll after to they as the in progress. XXXX. of for an happen we've But and then got couple XXXX. bulk later are will of a

And amicably, be -- do we're always do to I'm we to to get again, making would so so. a we it's hear negotiations, of EPS. but news efforts that from -- detail just resolve But really sure, adjusted reasonable in that's if it's not think things, of much prefer you there's give It's you we give year. any that terms could to as sense. timing. difficult why And In our on I updates excluded next mean kind this I we'll opportunity we'll

Michael Dudas

Appreciate. Stuart. you. Thank Understood,

Stuart Bradie

Mike. Thanks, Yeah.

Operator

D.A. now take next our will Please from Brent We Thielman ahead. go question Davidson. from

Brent Thielman

more today. bid packages on just this unusual Any government see in a Great. to in book-to-bill moving Stuart, opportunities COVID perhaps But terms forward, the sort that it seeing of if result got of business. of delays contracting Thank you. usual you're just as wondering delays. quarter? question might It's tough push the in transpire Government you've upfront than

Stuart Bradie

Brent. really, Not

the they're had contract. in the And think oiled driven get we -- I workings seen going that being environment. which -- strong of to actually think of book-to-bill in GS if the you've on quicker, and is to a think through I are well people think X.X. a fact the And I as COVID they -- DoD particularly I they're try look outside, I Australia, testament

time, and So us well. which also -- of they're terrific paying is ahead as

proof the pudding X.X posting of the the too really, not is in slowdown. at the And really and there we guess numbers eating the seeing So -- look I'm it's is mistaken, proof and if think that terrific much I'm I not is the X.XX -- across I year, something And I in think last this and over like X.X. it's I three unless been the book-to-bill It's quarter. quarters.

of a business. book-to-bill for So Government that been run it's terrific

Brent Thielman

smaller just And capabilities revenue Okay. of think sort some view. to Great. of that you few over growing push and we've thoughts Stuart, the then talked non-U.S. of a picture the Government a how rapidly. but case, Centauri's but that there? to If not in of it base, maybe plays next overseas I'd some ownership bigger these to of of international really part curious get second markets, event? about that's of I'd Australia love my markets. kind I the before, some of those the terms out your two, touched on components of think hear, years? it's into piece three Just don't a year you your is know love Well I year

Stuart Bradie

Yes.

sort is recent and our I like moved lot things And and So IT and as their dividends about and in in opportunities today. in we're existing capability no, excited growth upgraded it's upmarket whole almost we've times naval mission fleet very broadened to look a they think of in offerings their international. the in paying of training Australia really renew being

engaged So we're you can heavily imagine. as that in

continue. the think going momentum I So is to there

there to market certainly, our maturing come the with our really bigger helping of market. think these programs position that growing. I -- And business is our as is

positioned very arena. the So think I continue growing do to international well we're with in

aligned So I of program like drive they Centauri, not under programs into across capability, like they're all. fall would acquire one to the wouldn't and synergy exciting expect that to trying Centauri, trying recently to it main single put and bring things to in -- a at have it in get allies maybe question, obviously we U.S. be are globally. about guess answer things up your think But just the as the sales PATRIOT borders of leadership do I drivers less -- get terms to GS I any that I And but the broader whether from supported with be how allies is to whether military missile that. or back

GS So I a broaden by that have capability the to we do that internationally U.S. the think opportunity in significant broader we're offering is there that doing leveraging the

classified. in be will the is I a itself because think what do is lot Centauri of highly intelligence trickier they community and

that's think things is I doing ask. in that there fantastic engineering are be the and things health like opportunities think we're like a globally. think would in of the and performance terms in human broader capability, and -- I So -- stuff obviously But harder defense have that. we There we

Brent Thielman

Great. Thank you.

Stuart Bradie

Thanks.

Operator

our final go Lee ahead. question take from now Citi. will Please We from Andrew

Andrew Lee

Andy on This thanks. Lee Hey, is Kaplowitz. Andy for

two Just questions.

X, So on on there about the what with what some completed acquisition with highlight you thoughts give on October could you're to initial the talked call? was you one Centauri is than business? the want other us seeing anything August And

Stuart Bradie

I quite think, new sense. it's in that Andy, still

people in and there's things opportunity mean, by leaders really they people. they that technical. I world do to the think that I business. do And go centers absolutely the quality And, within and was main say, thrilled in did And in I said and I Ohio. and Dayton, and I to in my earlier, Huntsville, have three their Chantilly travel went fantastic I have of offices As Alabama around to they

So talking face-to-face. people to I was more and excited after more visiting

all and it I outstanding. absolutely about they people business of think within is the quality that are the

next in very in recently we It's into energy a year. more of And good realm. really for high they've won So numbers feel we've about some level work underpinned just put work by the laser-directed our what hand.

that, So yeah as say. I color upbeat, but it's -- new, we bit very but a get we'll do more give into it's would still think I

Andrew Lee

about And seems quarters? still bit XXXX. revenue current for talk ES think few Great. the what cadence a the versus over rate Okay. a high then we're second bit next I legacy run question, the you can more expecting

any color that would on be just great. So,

Stuart Bradie

And we're why zero past that's projects working realign we'll those high be mean, year. down due call into they out and type what margin or next effectively low our of we move margin I I as would Yeah. revenue, mid-teens will of billion explained. very a a And the with business but circa lot looks revenue in looks zero sort type through -- revenue lower today, we revenue bit margin. the as a high $X to the margins coming there's portfolio of it

in we have to type something those how to actually the not EBITDA step deliver it's of big think next code zip $XXX two see million margins at would look I you annualized an year. And that level. is businesses what combined a at

year that into in backs think to And base a about make sure got year. and do billion that are we it, well we're cost that's of backlog driving today. next next very working but out to business move what the going very, solid we've into I as with to So cost probably we going those the off way $X.X think up

almost about on resetting a as as times plan. made thought business, out in realignment, this an position well volatile basis, And progress not make two very a I through to as that cost it actually is it's very well. in. color around annualized it's we're we so again, well strong of in a think we give money coverage not The it's be So, And good very, volatility, projects that hopefully getting don't base any about and advanced your Street can understand more

$X revenue move that down number see you'll billion we the align year. next it number you'll as to circa again, come see and So, into

Andrew Lee

Okay. Great. Thanks.

Operator

hand now Bradie call Stuart the any closing to will or I you. remarks for back Thank additional

Stuart Bradie

thank again, you very So, much.

talked adorably the thank quarter. very forget is being taking base Very, Centauri terrific think you but all not let's the and part performing as about, the we've pleased looking We're company, family stands brings these is highly for proving the resilient today times. that and to KBR I business of the obviously unprecedented in good with but time. that the as a metrics all it forward

the for talking for you not the in time to tomorrow we'll over taking and day listening. if obviously, thank So, And coming weeks. be the later all and some

very you much. thank So,

Operator

gentlemen, today's That call. participation. Ladies will may now you you. Thank disconnect. Thank conclude conference you for and your

KBR (KBR) 29 Oct 202020 Q3 Earnings call transcript