©2019 KBR Inc. All Rights Reserved.
4th Quarter & FY 2019 Financial Results and 2020 Guidance February 20, 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
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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,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,” “forecasts” or future or conditional verbs such as “will,” “should,” “could,” or “may,” and variations of such words or similar expressions are intended to identify forward-looking statements. Such statements are based upon our current expectations and various assumptions, which are made in good faith, and we believe there is a reasonable basis for them. However, because forward-looking statements relate to the future, they are subject to inherent risks, uncertainties and other factors that are difficult to predict and which could cause actual results to differ materially from the forward-looking statements contained in this presentation. Additional information about potential risk factors that could affect our business and financial results is included in our Form 10-K filed on February 26, 2019.
We caution you not to place undue reliance on the forward-looking statements included in this presentation, which speak only as of the date hereof. We disclaim any intent or obligation, except as required by law, to revise or update this information to reflect new information or future events or circumstances.
This presentation contains the financial measures “EBITDA,” “Adjusted EBITDA,” “Adjusted EPS” and “Adjusted Operating Cash Flow,” which are not calculated in accordance with U.S. GAAP. A reconciliation of the non-GAAP financial measures EBITDA, Adjusted EBITDA, Adjusted EPS and Adjusted Operating Cash Flow to the most directly comparable GAAP financial measure has been provided in the Appendix to this presentation.
2
Proud history, bright future. ©2019 KBR Inc. All Rights Reserved.
Stuart Bradie
President
& Chief Executive
Officer
Proud history, bright future. ©2019 KBR Inc. All Rights Reserved.
D O I N G T H E R I G H T T H I N G F O R T H E P L A N E T ,
O U R P E O P L E A N D O U R C O M M U N I T I E S W H I L E
P U R S U I N G B U S I N E S S G R O W T H
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KBR Sustainability Platform
5
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2019 Scorecard
Meeting or exceeding 2019 targets
Strong FY 2019 financial results
Finish Ichthys
De-lever
Grow backlog
Win LOGCAP V
Win LNG – EPC Award; Pending FID
Internal efficiency
Costpoint ERP
Workday HRIS
Transformational agenda
New brand
New website
GICS code change
6
Proud history, bright future. ©2019 KBR Inc. All Rights Reserved.
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12018 reflects immaterial, non-cash corrections related to recording the effects of foreign currency on our share of earnings of an unconsolidated joint venture; see our December 31, 2019 Form 10-K for further information. See Appendix for reconciliation of Adjusted EBITDA and Adjusted EPS 2 Excluding the workoff of the long-term PFIs and other adjustments
$4,913
$5,639
2018 2019
Revenues
8.4% 8.4%
2018 2019
Adj. EBITDA Margin
Highlights | FY 2019 $ in millions, except EPS
$1.53
$1.69
2018 2019
Adjusted EPS1
$165
$256
2018 2019
Operating Cash Flow
$13,497 $14,636
$3,683 $2,755
2018 2019
Backlog
Options
Backlog
7
$412
$471
2018 2019
Adjusted EBITDA1
15% Growth
127% NI Conversion
1.3x Book-to-bill2
10% Growth
14% Growth
Aligned with LT targets
All segments
contributing double digit
growth
All segments
achieving > 1x BTB2
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$0.41 $0.46
4Q18 4Q19
Adjusted EPS1
12018 reflects immaterial, non-cash corrections related to recording the effects of foreign currency on our share of earnings of an unconsolidated joint venture; see our December 31, 2019 Form 10-K for further information. See Appendix for reconciliation of Adjusted EBITDA and Adjusted EPS
$1,330
$1,452
4Q18 4Q19
Revenues
$109 $117
4Q18 4Q19
Adjusted EBITDA1
8.2% 8.1%
4Q18 4Q19
Adj. EBITDA Margin
Highlights | 4th Quarter 2019 $ in millions, except EPS
$13,497
$14,636
$3,683 $2,755
4Q18 4Q19
Backlog
Options
Reported Backlog
8
$165
$256
2018 2019
Operating Cash Flow Year-ended 2018 and 2019
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Market Outlook
9
Outlook KBR's Competitive Advantage
Go
vern
men
t M
arke
t
FY 2020 defense budget prioritizes restoration of military readiness & modernization, near peer threats, creation of U.S. Space Force and innovation to meet emerging threats
Continued international investment to strengthen allied defensive posture and cyber defense capabilities
Growing investment in NASA to fund expanded human space flight programs; expanded commercialization of LEO
Expanded funding for study and analysis of global climate change
Domain expertise across a diverse set of mission-critical, long duration programs
Preeminent experts in the science and operations of human space flight
Global footprint serving U.S. DoD, NASA, USGS, U.K. MoD, Australian DoD and others
Low 2020 recompete risk
Ener
gy M
arke
t Growing demand for and transition to sustainable, low-carbon solutions
Mid-/long-term LNG supply shortfall; near-term energy, LNG and downstream market volatility and oversupply
Diverse portfolio of innovative, sustainability-focused technologies and capabilities
Strong 2019 BTB sustains growth thru 2020
2020 EBITDA (est.): ~50% O&M, industrial and brownfield services
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2018 A 2019 A 2020 F 2021 F 2022 F
10-14% Revenue CAGR
thru 2022
WUC & Options Recompetes & Renewals
New Work (to 10% CAGR) New Work LNG (to 14% CAGR)
KBR Growth Outlook
10
New business: ~33% Our robust pursuit pipeline affords significant growth opportunities; LNG ~8%
Today’s book of business: ~67% Our recurring, long-term contracts provide stability and predictability into the future.
Historical recompete and renewal win rates (>95%)
$57B
$24
$24
$9
$107B
$26
$45
$36
~110 Pursuits > $100M
~60 Pursuits > $100M
*Pursuit pipeline as of December 31, 2019 includes opportunities through 2022 only
$164 billion KBR Pursuit Pipeline
Government Energy
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11.1 10.8 11.0 11.0 10.8 10.7 10.7 10.9
0.4 0.5 0.5 0.6 0.5 0.5 0.5 0.6 1.6 2.1 1.9 1.9 2.3 2.6 3.4 3.1
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19
Backlog, by quarter
$13.1 $13.4 $13.4 $13.5 $13.6 $13.8 $14.6 $14.6
ES
TS
GS
Bookings Momentum and Backlog Growth
Backlog $ in millions; Includes KBR share of unconsolidated JVs; Book-to-bill excludes impact of our long-term PFIs and foreign exchange 11
1.1x Government Solutions
1.0x Technology Solutions
1.9x Energy Solutions
$2.8 billion unexercised options not in backlog as of December 31, 2019
LOGCAP V and Freeport LNG Train 4 not in backlog as of December 31, 2019
FY 2019 segment book-to-bill
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Mark Sopp
EVP & Chief
Financial Officer
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FY 2019 Consolidated Results
13 See Appendix for reconciliation of Adjusted EBITDA and Adjusted EPS 1ROIC is defined as NOPAT divided by total debt + shareholder’s equity; Post our February 2020 refinancing, ROIC increased to 9.4%
15% revenue growth, 12% organic
14% Adjusted EBITDA growth
10% Adjusted EPS growth impacted by full year of borrowing cost and benefitting from favorable tax planning
127% net income conversion to OCF primarily attributable to improvement in working capital management and collection of a long-term receivable
127%
Revenue
(Organic growth)
Operating Cash (Net Income conversion)
2019 Actuals
12%
Adjusted EBITDA Margin 8.4%
90 – 110%
2019 – 2022 Targets
10-14% CAGR
Upper single %
9% ROIC1 12% by 2022
($ in millions, except EPS) FY 2018 FY 2019
Revenues $ 4,913 $ 5,639
Gross Profit 584 653
Equity in Earnings 79 35
Selling, General & Administrative Expenses (294) (341)
Acquisition & Integration Expenses (7) (2)
Gain (Loss) on Disposition of Assets (2) 17
Gain on Consolidation of Aspire Entities 108 -
Operating Income $ 468 $ 362
Interest Expense (66) (99)
Other Non-Operating Income (loss) (6) 5
Income Before Taxes and Noncontrolling Interest $ 396 $ 268
Provision for Income Taxes (86) (59)
Noncontrolling Interest (29) (7)
Net Income Attributable to KBR $ 281 $ 202
Diluted EPS $ 1.99 $ 1.41
Adjusted EPS $ 1.53 $ 1.69
Adjusted EBITDA $ 412 $ 471
Operating Cash Flow $ 165 $ 256
YTD
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Segment Performance: Government Solutions
14 See Appendix for reconciliation of EBITDA and Adjusted EBITDA 1 Disaster recovery work at Tyndall Air Force Base contributed ~$100 million and ~$150 million of revenue in 2018 and 2019, respectively. 2 Excluding the workoff of the long-term PFIs and other adjustments
$0
$500
$1,000
$0
$50
$100
$150
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19
Quarterly Revenue & Adjusted EBITDA
Adjusted EBITDA Revenue
14% revenue growth in 2019, 9% organic, led by new programs, on contract growth, and completion of work at Tyndall AFB1
25% Adjusted EBITDA growth in 2019 benefitting from strong execution
on Aspire Program and upsides from project close-out and asset sales
1.1x book-to-bill2 for the year; excludes LOGCAP V award
Revenue
(Organic growth)
2019 Actuals
9%
Adj. EBITDA Margin 10%
2019 – 2022 Targets
6-10% CAGR
Upper single %
Strong 2019 results against long-term targets
($ in millions) FY 2018 FY 2019
Revenue 3,457$ 3,925$
Gross Profit 350 430
Equity Earnings 32 29
SG&A (109) (134)
Acquisition & Integration (7) (2)
Gain on Aspire / Dispositions 117 12
Operating Income 383$ 335$
Adjusted EBITDA 321$ 402$
Adjusted EBITDA Margin 9.3% 10.2%
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Segment Performance: Technology Solutions
15 See Appendix for reconciliation of EBITDA and Adjusted EBITDA
26% revenue growth driven primarily by increased proprietary equipment and catalyst deliveries
26% Adjusted EBITDA margins in line with plan
1.0x book-to-bill for FY 2019; 2.1x in the 4th quarter 2019
Revenue
(Organic growth)
2019 Actuals
26%
Adj. EBITDA Margin 26%
2019 – 2022 Targets
10-14% CAGR
Mid-20%
2019 results aligned with long-term targets
$0
$50
$100
$0
$20
$40
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19
Adjusted EBITDA Revenue
($ in millions) FY 2018 FY 2019
Revenue 297$ 374$
Gross Profit 106 118
SG&A (24) (28)
Operating Income 82$ 90$
Adjusted EBITDA 86$ 96$
Adjusted EBITDA Margin 29% 26%
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Segment Performance: Energy Solutions
16 See Appendix for reconciliation of EBITDA and Adjusted EBITDA
16% revenue growth; double digit growth for 3 sequential quarters
2018 equity earnings favorably impacted by strong execution and substantial completion of multiple projects
1.9x book-to-bill in 2019; excludes Freeport LNG
$0
$250
$500
$0
$20
$40
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19
Quarterly Revenue & Adjusted EBITDA
Adjusted EBITDA Revenue
Revenue
(Organic growth)
2019 Actuals
16%
Adj. EBITDA Margin 6%
2019 – 2022 Targets
20-30% CAGR
Mid single %
2019 results aligned with long-term targets
($ in millions) FY 2018 FY 2019
Revenue 1,157$ 1,339$
Gross Profit 134 100
Equity Earnings 50 19
SG&A (64) (63)
Loss on Dispositions (2) -
Operating Income 118$ 56$
Adjusted EBITDA 101$ 75$
Adjusted EBITDA Margin 9% 6%
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Capital Deployment Priorities
Fund Organic Growth Maintain Attractive Dividend Maintain Responsible Leverage Strategic M&A or Share Repurchase
FY 2019 Gross and Net Leverage of 2.7x and 1.2x, respectively
Completed amendment of our credit agreement in February 2020
Reflects growth and improved credit rating / profile
Enables greater capital deployment flexibility
100 bps reduction in borrowing cost
Extends pro-rata maturities to 2025; Term Loan B to 2027
Reduced overall borrowings by $137 million
Gross leverage, post-refinancing, ~2.4x
25% increase in our quarterly dividend
Share repurchase authorization replenished to $350 million
Deployment priorities are unchanged
17
Capital Structure and Deployment
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2020 Full-Year Guidance
18
2020 Guidance
Diluted GAAP Earnings Per Share
Adjustments: Legacy Legal Fees Non-Cash Interest and Conversion Hedge1 on Convertible bonds Amortization related to Aspire Consolidation Ichthys Interest and Commercial Dispute Costs
$1.46 - $1.58
0.05 0.06 0.07 0.16
Adjusted EPS $1.80 - $1.92
Midpoint: 10% growth y/y
Effective Tax Rate 25% - 27%
Adjusted Operating Cash Flow2 $200M - $250M
1 Conversion hedge will be calculated and adjusted quarterly based on KBR trading price
2 2020 operating cash flow targets exclude the impact of Major Project advances and work-off of Aspire Capital Works advances; potential recoveries from Ichthys LNG commercial settlements are excluded as well
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KBR… Growth and Value
19
Strategic Market Position… diversity of clients and longevity of contracts provides long-term resilience, stability and growth
Balanced Portfolio Contributions… all segments contributing growth, cash and bookings in 2019; favorable 2020 outlook
Consistent Performance…3 consecutive years meeting or exceeding our financial targets; attractive 2020 guidance
Capital Deployment Optionality… 25% increase in quarterly dividend; replenished share repurchase authorization
Differentiated Safety and
Sustainability
Attractive Backlog
Sustainable Growth
Strong Free Cash
Capital Deployment
Flexibility
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APPENDICES
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Non-GAAP Reconciliations: Adjusted EPS & Adjusted Cash Flow Guidance
21
Adjusted EPS Reconciliation
Quarter Ending Year Ending
4Q18 4Q19 2018 2019
EPS (Diluted) $0.33 $0.40 $1.99 $1.41
Add Back:
Legacy Legal Fees 0.01 0.01 0.06 0.05
Non-cash imputed interest on conversion option 0.01 0.02 0.01 0.06
Acquisition & integration related expenses 0.01 0.00 0.04 0.02
Amortization related to Aspire acquisition 0.02 0.02 0.06 0.08
Incremental interest on Ichthys funding 0.00 0.01 0.00 0.07
Aspire (gain) loss on consolidation 0.03 0.00 (0.63) 0.00
Adjusted EPS $0.41 $0.46 $1.53 $1.69
Adjusted Operating Cash Flow 2020 Guidance
Low High
Cash flows provided by operating activities $125 $175
Adjustment: Add back impact of major project advance workoff $75
Adjusted Cash flows provided by operating activities $200 $250
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EBITDA is defined as earnings before interest income / expense, income taxes, other non-operating income / expense (including FX) and depreciation & amortization.
Non-GAAP Reconciliation: Consolidated & Adjusted EBITDA
22
Adjusted EBITDA Reconciliation Year Ending Year Ending
Mar 31, 2018 Jun 30, 2018 Sep 30, 2018 Dec 31, 2018 Dec 31, 2018 Mar 31, 2019 Jun 30, 2019 Sep 30, 2019 Dec 31, 2019 Dec 31, 2019
Net Income Attributable to KBR $136 $44 $54 $47 $281 $40 $48 $56 $58 $202
Add Back:
Interest Expense $6 $17 $20 $23 $66 $25 $26 $25 $23 $99
Provision (benefit) for Income Taxes $34 $18 $22 $12 $86 $16 $18 $24 $1 $59
Other non-operating (income) expense $2 $1 $1 $2 $6 ($5) ($2) ($3) $5 ($5)
Halliburton tax sharing agreement $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Depreciation & Amortization $13 $17 $17 $16 $63 $25 $23 $28 $28 $104
Consolidated EBITDA $191 $97 $114 $100 $502 $101 $113 $130 $115 $459 0
Add Back:
Legacy Legal Fees $3 $3 $3 $2 $11 $4 $3 $1 $2 $10
Acquisition & integration related expenses $3 $1 $1 $2 $7 $1 $1 $0 $0 $2
Aspire (gain) loss on consolidation ($115) $0 $2 $5 ($108) $0 $0 $0 $0 $0
Adjusted EBITDA $82 $101 $120 $109 $412 $106 $117 $131 $117 $471
Quarter Ending Quarter Ending
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EBITDA is defined as earnings before interest income / expense, income taxes, other non-operating income / expense (including FX) and depreciation & amortization.
Non-GAAP Reconciliation: Segment EBITDA and Segment Adjusted EBITDA
23 1 Reflects the reclass of MMM JV to Non-strategic Business
Mar-18 Jun-18 Sep-18 Dec-18 Mar-19 Jun-19 Sep-19 Dec-19
Net Income Attributable To Government Solutions $ 170 $ 63 $ 73 $ 72 $ 69 $ 91 $ 87 $ 88
Add Back:
Interest expense $ 1 $ 1 $ 1 $ 1 $ 1 $ 1 $ 1 $ 0
Provision for income taxes $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other non-operating (income) expense $ 0 $ 0 $ 0 ($0) $ 0 ($1) $ 0 ($1)
Depreciation & amortization $ 7 $ 13 $ 11 $ 10 $ 15 $ 13 $ 17 $ 13
EBITDA - GS $ 178 $ 77 $ 85 $ 83 $ 85 $ 104 $ 105 $ 100
Add Back:
Legacy Legal Fees $ 3 $ 3 $ 3 $ 2 $ 4 $ 3 $ 1 $ 2
Aspire (gain) loss on consolidation ($115) $ 0 $ 2 $ 0 $ 0 $ 0 $ 0 $ 0
Adjusted EBITDA - GS $ 66 $ 80 $ 90 $ 85 $ 89 $ 107 $ 106 $ 102
Net Income Attributable To Technology Solutions $ 15 $ 21 $ 23 $ 23 $ 20 $ 18 $ 24 $ 26
Add Back:
Interest expense $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Provision for income taxes $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other non-operating (income) expense $ 0 ($0) ($0) ($0) ($0) ($0) ($1) $ 1
Depreciation & amortization $ 1 $ 1 $ 1 $ 1 $ 2 $ 1 $ 1 $ 2
EBITDA - TS $ 16 $ 22 $ 24 $ 24 $ 22 $ 19 $ 24 $ 29
Net Income Attributable To Energy Solutions $ 18 $ 23 $ 22 $ 30 $ 24 $ 16 $ 9 $ 6
Add Back:
Interest expense $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Provision for income taxes $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other non-operating (income) expense $ 3 ($2) $ 0 ($1) ($1) ($0) ($1) $ 1
Depreciation & amortization $ 2 $ 2 $ 2 $ 2 $ 5 $ 5 $ 5 $ 6
EBITDA - ES1
$ 23 $ 23 $ 24 $ 31 $ 28 $ 21 $ 13 $ 13
Quarter Ending