Slide 1: 3rd Quarter 2020 Financial Results
3rd Quarter 2020 Financial Results October 29, 2020 The future, designed and delivered. Stuart Bradie – President and Chief Executive Officer Mark Sopp – Executive Vice President and Chief Financial Officer Alison Vasquez – Vice President, Investor Relations ©2020 KBR Inc. All Rights Reserved.
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation contains forward-looking statements regarding our plans, objectives, goals, strategies, future events, future financial performance and backlog information and other information that is not historical. When used in this presentation, the words “estimates,
Slide 3: Stuart Bradie
Stuart Bradie President & Chief Executive Officer
Slide 4: KBR Sustainability Platform
KBR Sustainability Platform Proud history, bright future. 4 ©2020 KBR Inc. All Rights Reserved.
Slide 5: A Focus on Mental Health and Well-Being
A Focus on Mental Health and Well-Being HEALTH, SAFETY WHAT WE’VE DONE & SECURITY Formed an active, diverse Global Mental Health and Well-being task force to guide policies Implemented a comprehensive strategy to support our people’s mental health ▪ Creating the right culture, in which employees kno
Slide 6: 3rd Quarter Takeaways
3rd Quarter Takeaways ▪ Q3 results ▪ Continued momentum and growth in high-end technical solutions – Space & Mission Solutions, Defense Systems Engineering and Technology ▪ All segments met or exceeded EBITDA margin targets ▪ Strong earnings and cash performance across the company ▪ 1.1x overall BTB
Slide 7: KBR's Strategic Model
KBR’s Strategic Model ATTRACTIVE, RESILIENT BUSINESS MODEL ▪ Well-funded end markets INVESTMENT THESIS THE PEOPLE OF KBR ▪ Innovative, digitally enabled, ADVANCE OUR STRATEGY differentiated solutions ▪ Attractive growth and ▪ Highly technical, scientific, profitability outlook ▪ Connected classified
Slide 8: Market Outlook | Space & Mission Solutions
Market Outlook | Space & Mission Solutions RECENT TRENDS & WINS SPACE & MISSION 13% $2.3B ▪ Progressive engagement SOLUTIONS REVENUE BACKLOG & and expansion on existing GROWTH OPTIONS NASA and DOD programs (v Q3 2019) driving consistent growth ▪ Won mission-critical IT, software and systems engineer
Slide 9: Market Outlook | Defense Systems Engineering
Market Outlook | Defense Systems Engineering RECENT TRENDS & WINS DEFENSE SYSTEMS 10% $2.1B ▪ Achieved 2.4x overall book-to- ENGINEERING REVENUE BACKLOG & bill in the quarter; increasing GROWTH OPTIONS average contract value and (v Q3 2019) tenor ▪ Won new R&D work for Air Force Research Lab on nove
Slide 10: Market Outlook | Logistics
Market Outlook | Logistics RECENT TRENDS & WINS READINESS & 1.4X $2.2B ▪ Won a contract to upgrade SUSTAINMENT YTD BOOK-TO-BILL BACKLOG & and modernize automated OPTIONS fuel handling equipment systems for DLA ▪ Won a contract to provide sustaining base operational services at a strategic air MARKET
Slide 11: Market Outlook | International Defense & Gov't
Market Outlook | International Defense & Gov’t RECENT TRENDS & WINS INTERNATIONAL 70% $7.3B ▪ Won a contract to provide software development, YTD REVENUE BACKLOG systems engineering, data GROWTH IN GS management, security and AUSTRALIA architecture support for the Australian Army’s land range safety
Slide 12: Market Outlook | Technology & Energy
Market Outlook | Technology & Energy RECENT TRENDS & WINS TECHNOLOGY 1.3X $1.9B ▪ Entered into strategic SOLUTIONS HERITAGE TS BACKLOG alliance with Johnson YTD BOOK-TO-BILL (TS AND ES) Matthey to license innovative ammonia- methanol co-production process technology ▪ Awarded two contracts to MARKET
Slide 13: Market Outlook | In Summary: KBR Pursuit Pipeline
Market Outlook | In Summary KBR Pursuit Pipeline ▪ Pursuit pipeline well- balanced across the Lead $54B 150+ business ▪ Robust pipeline and PURSUITS > $100M healthy book-to-bill increase visibility of Positioning & Pursuit $30B future growth and resilience Proposal & Negotiation $19B 10+ ▪ Low recom
Slide 14: Mark Sopp
Mark Sopp EVP & Chief Financial Officer
Slide 15: 3Q 2020 | Financial Snapshot
3Q 2020 | Financial Snapshot REVENUE ADJUSTED EBITDA1 ADJUSTED EBITDA MARGIN1 $131 9% 9% $1,425 $125 $1,379 3Q19 3Q20 3Q19 3Q20 3Q19 3Q20 ADJUSTED EPS1 ADJ. OPERATING CASH FLOW1 BACKLOG2 $118 $3B $3B OPTIONS $0.45 $0.44 $90 BACKLOG $13B $13B 3Q19 3Q20 3Q19 3Q20 3Q19 3Q20 $ in millions, except EPS an
Slide 16: Q3 2020 | Segment Results
Q3 2020 | Segment Results Government Solutions Technology Solutions Energy Solutions Revenue Adj. EBITDA Revenue Adj. EBITDA Revenue Adj. EBITDA 10.8% 10.8% 25% 35% 978 980 96 106 106 24 25 351 327 71 4% 4% 13 12 3Q19 3Q20 3Q19 3Q20 3Q19 3Q20 3Q19 3Q20 3Q19 3Q20 3Q19 3Q20 ▪ 13% growth in Space & Mis
Slide 17: Acquisition of Centauri
Acquisition of Centauri STRATEGIC, ACCRETIVE FY 2020 GUIDANCE ACQUISITION CLOSE ASSUMPTIONS ACQUISITION THESIS • Transaction closed October 1, 2020 • Immediately accretive; reflected • Accelerates KBR’s leadership • Cash consideration of $827 in increased FY 2020 Adjusted position in space superiori
Slide 18: Capital Deployment and Liquidity Profile
Capital Deployment and Liquidity Profile CAPITAL HEALTHY LIQUIDITY PROFILE DEPLOYMENT NET Net Leverage Target PRIORITIES LEVERAGE ▪ Target net leverage set at 2.5x-3.0x TARGET ▪ Reflects shift in portfolio toward sustaining, differentiated, cash Fund Organic Growth generative portfolio 2.5x to 3.0x
Slide 19: Raising FY 2020 Guidance
Raising FY 2020 Guidance FY 2020 Guidance (updated) Adjusted EPS1 $1.60 - $1.80 Effective tax rate 25% - 27% Adjusted operating cash flow1 $270M - $290M (1) See Appendix for reconciliation of Adjusted EPS and Adjusted Operating Cash Flow Proud history, bright future. 19 ©2020 KBR Inc. All Rights Res
Slide 20: In Conclusion
IN CONCLUSION ▪ Momentum in high-end differentiated areas ▪ Strong Q3 earnings; raised Adj. EPS guide ▪ Stellar cash; raised Adj. operating cash flow guide ▪ Healthy pipeline and BTB build confidence in the future ▪ Completed strategic, accretive Centauri acquisition ▪ Strong balance sheet and capit
Slide 21: Appendices
Appendices Appendices DOING THE RIGHT THING FOR THE PLANET, OUR PEOPLE AND OUR COMMUNITIES WHILE PURSUING BUSINESS GROWTH
Slide 22: Non-GAAP Reconciliations: Adjusted EPS & Adjusted Cash Flow
Non-GAAP Reconciliations: Adjusted EPS & Adjusted Cash Flow Adjusted EPS Reconciliation Adjusted EPS Guidance Quarter Ending 2020 Guidance 3Q19 3Q20 EPS (Diluted) $(0.58) $(0.38) EPS (Diluted) $0.39 $0.36 Add Back: Add Back: Restructuring and impairment charges 1.86 Ichthys interest and commercial d
Slide 23: Non-GAAP Reconciliation: Consolidated & Adjusted EBITDA
Non-GAAP Reconciliation: Consolidated & Adjusted EBITDA EBITDA is defined as earnings before interest income / expense, income taxes, other non-operating income / expense (including FX) and depreciation & amortization. Adjusted EBITDA Reconciliation Quarter Ending Dec 31, 2018 Mar 31, 2019 Jun 30, 2
Slide 24: Non-GAAP Reconciliation: Segment EBITDA and Segment Adjusted EBITDA
Non-GAAP Reconciliation: Segment EBITDA and Segment Adjusted EBITDA EBITDA is defined as earnings before interest income / expense, income taxes, other non-operating income / expense (including FX) and depreciation & amortization. Quarter Ending Dec-18 Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-2
Slide 25: Operating Income by Segment
Operating Income by Segment 3Q20 ($ in millions, except EPS) GS TS ES NSB Other Total KBR Revenues $ 980 $ 71 $ 327 $1 $0 $ 1,379 Gross Profit $ 129 $ 30 $ 15 ($2) $0 $ 172 Equity in Earnings 9 - 4 - - 13 SG&A (43) (6) (15) - (25) (89) Acquisition & Integration - - - - (2) (2) Restructuring and Impa