KBR, Inc.

Good day and welcome to the KBR Incorporated First 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. For opening remarks and introductions, I would like to turn the call over to the VP of Investor Relations, Ms. Alison Vasquez. Please go ahead.

Thank you, Molly. Good morning, and thank you for attending KBR's first quarter 2020 earnings call. Joining us today are Stuart Brady, President and Chief Executive Officer, and Mark Salk, Executive Vice President and Chief Financial Officer. Stuart and Mark will provide an operational update, and we'll discuss highlights from the quarter, the market outlook, and our updated guidance. After these remarks, we will open the call for questions. Today's earnings presentation is available on the investor section of our website at KBR.com. I would like to remind the audience that this discussion may include forward-looking statements reflecting KBR's views about future events and their potential impact on performance, as outlined on slide two. These matters involve risks and uncertainties that could impact operations and financial results and cause our actual results to differ significantly from our forward-looking statements. These risks are discussed in our most recent Form 10-K, available on our website. I will now turn the call over to Stuart.

Thank you, Alison, and many thanks for joining us today. I will start on slide four. Last earnings, we introduced KBR's sustainability platform, and since then, we have rolled out the program across KBR. The response has been incredibly positive, and if anything, COVID-19 has helped advance our sustainability agenda. I'm sure you all have seen the positive impact across the world on climate change, and in a small way, we believe we can continue to contribute post-COVID-19, which takes us on to slide five. If there is one benefit of today's situation, it is that we have been allowed to reimagine how we deliver our work. We have all proven that working remotely is truly achievable, that customer intimacy and interpersonal relationships can be managed, and that greater flexibility can actually lead to greater productivity. This is, of course, still a definite need for face-to-face and typical office interaction, but there is certainly a great opportunity for industries like our own to leap forward. On to slide six. The sustainability upside is obvious, you know, less commuting, less energy consumption, less waste. But we also believe greater flexibility facilitates greater diversity. It enables a truly global workforce, enhancing the ability to use high value centers. It improves job satisfaction and increases productivity with less absenteeism, etc. There are, of course, obvious cost advantages with the need for less space, less travel, and, of course, reduced meeting costs. The why is compelling, and this is a well-proven path in some industries, so we've got some really good go-bys. I know we will not be alone in this endeavor, but I wanted you to know we were firmly on this path and that COVID-19 has really allowed us to accelerate our plans of reimagining how we deliver. On to slide seven. I want to start with some key messages right up front. At the time, I didn't think it was lucky that we had operations in China and a substantial workforce in South Korea as COVID-19 broke. But in hindsight, it was. We took the threat seriously and we took it early. And we stood up our global crisis team and started to test our business resilience plans, stress test our IT infrastructure, I've trialed working days from home, work out comms plans, and focus early on key things like safety and, of course, liquidity. We were not perfect, but as a whole, we transitioned under COVID-19 very smoothly, and we continue to deliver for our customers. The Q1 results you see today and our forward guidance that we will present really reinforce that the transformation of KBR is delivering a resilient and predictable business model. Our historical and persistent focus on cash, we talk about it all the time, and our refinancing earlier in the year has really put us in a strong, strong liquidity position, which actually has been recognized last week by the rating agencies, and Mark will talk about that later. You may recall at our last earnings presentation, our guidance included a slowdown in technology bookings in Q1, and this proved to be prudent. But it's also worth noting we are seeing activity again in China, which is promising. We were also very transparent in our outlook on the energy market. We had already factored in a soft LNG market in 2020 and greater downward pressure in CapEx in general. The situation has, of course, deteriorated further and quickly, and our customers have acted very quickly. But the point I want to get across today is that we were already primed and the teams moved from plan to action quickly. And this enabled us at a time when our actual exposure to the energy market is at an all-time low to take costs out ahead of the curve. We have pulled the levers to simplify the business retire brands, give up unnecessary space, including taking into consideration the flexible working upside. It's allowed us to assess goodwill and implement cost reductions. As you will have seen, this has resulted in a mostly non-cash, non-recurring charge in Q1. More from Mark on this later, but as we look beyond the first quarter and at the underlying operational performance of KBR, this reset we believe is very timely. The significant majority of KBR's portfolio is proving very resilient in these volatile times. And as a consequence, and I guess to put our money where our mouth is, we believe it is important that we continue to give guidance for 2020, so we have done so. To give our investors a greater level of confidence in this guide, we've taken a forward-leaning and conservative approach as it relates to energy solutions. More on this later. Our objective today, and to some extent COVID-19 and the energy market disruption have helped us, is to truly demonstrate the transformation of KBR. But let's talk about quarter one first. On to slide eight. I want to say very clearly that the response and support from our customers in general, but especially our government customers in the U.S. and across the world, has been excellent. They moved quickly to ensure the safety of our people, were extremely flexible in ensuring continuity of work and employment, and ensured payments flowed on time and that the cadence of ongoing bids where possible was not interrupted. This really helped our people stay focused on the mission. Our bookings and government solutions in Q1 were strong. Our track record of winning re-competes continued, touch wood. And it's worth noting that in 2020 and in 2021, actually, the level of re-competes is unusually low. And we've already been awarded our largest re-compete for 2020. Government Solutions book to bill of 1.3 is especially pleasing because all of our business units within Government Solutions achieved a book to bill of 1.0 or above. So a nice, nice balance. Our fastest growing business organically in KBR is actually our Government Solutions business in Australia. The defense modernization program in Australia, especially with a number of new naval platforms, is moving full steam ahead. To enhance our position as a provider of high-end technical training to the Australian Armed Forces and Navy in particular, we completed the acquisition of the assets of SMA. This is a modest but highly strategic acquisition and positions us really well as the demand for training ramps up as these new platforms continue to be built and come into operation. Overall, from a safety perspective, even in these challenging times, a culture of zero harm has endured, resulting in top quintile safety performance yet again, and actually we received a couple of nice safety recognitions from key clients in the quarter. Overall, our underlying results in Q1 were in line with our expectations in adjusted EPS, and more importantly, above expectation in cash. I will now hand over to Mark, who will give you a bit more detail. Mark.