KBR, Inc.

Good morning everyone and welcome to KBR's third quarter 2024 earnings conference call. My name is Emily and I'll be coordinating your call today. After the presentation, there will be the opportunity for you to ask any questions, which you can do so by pressing start followed by the number one on your telephone keypad. I will now turn the call over to our host, Jamie Dubre, Vice President of Investor Relations. Please go ahead, Jamie.

Thank you, Emily. Good morning and welcome to KBR's third quarter fiscal 2024 earnings call. Joining me are Stuart Brady, President and Chief Executive Officer, as well as Mark Sops, Executive Vice President and Chief Financial Officer. Stuart and Mark will provide highlights from the quarter and then open the call for your questions. Today's earnings presentation is available on the investor section of our website at KBR.com. This discussion includes 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 cause actual results to differ significantly from these forward-looking statements as discussed in our most recent Form 10-K available on our website. This discussion also includes non-GAAP financial measures that the company believes to be useful metrics for investors A reconciliation of these non-GAAP measures to the nearest GAAP measure is included at the end of our earnings presentation. I will now turn the call over to Stuart.

Thank you, Jamie, and welcome to our third quarter earnings presentation. I would like to start on slide four, if I may. Now, we show this on every earnings presentation, so no surprise. It lays out our zero harm program and the pillars, both environmental and social, that underpin that program. Now, the progress we've made in each of these pillars is highlighted in our annual sustainability report, which takes me nicely onto slide five. So this month, we issued our 2023 sustainability report. I mean, the team does an amazing job in showcasing all that we're doing across these pillars. We've shown only a few highlights on the slide here, and I'll pick up on a few. Our health and safety performance is once again top quintile. really demonstrating our commitment to really looking after our people. 37% of KBR Group 23 revenue, actually over $2.5 billion, is directly linked to sustainability, and I think thus shows clear alignment with shareholder value, which we've talked about before, is a clear differentiator for KBR. The result from our people survey, which is run by an independent company and done anonymously, resulted in KBR being classified as a great place to work in multiple countries. Now, the survey showed us a couple of things. I think the first, that our focus on people is truly making a difference, and secondly, that of course we are not perfect and we still have work to do. On the side of the slide, you will see our continued commitment to strong governance, and we continue to make progress in IND advancing our agenda on multiple fronts. Our maturity and commitment and delivery of sustainability has been externally scored by various agencies. And you've seen that before. And MSCI, we believe, is the most cited. And we're, of course, delighted to have achieved for the second consecutive year the very highest ranking of AAA. As I said, these are only a few highlights. And I would encourage you, if you have time, to have a look at the full document, which is on our website. Now on to slide six. and the group financial highlights for the quarter. This was another clean quarter and frankly, another set of terrific and consistent results. Group revenue was up double digit at 10% year on year. Adjusted EBITDA increased 18%, won 8% over the same period. I think once again, demonstrating the focus and discipline to deliver on a strategy to winning the right work and then executing with excellence with prudent cost management, and this has resulted, as you would expect, in enhanced margins, which were up 70 bps. Cash was once again a standout, with year-to-date conversion at 129%, an absolutely spectacular performance. Now on to book-to-bill. Now, as you know, we've been providing a book-to-bill figure ex the Plaquemines project for the last several quarters, to convey underlying business performance without the large LNG burn. And beginning this quarter, we will switch to only using this figure in our materials, especially in light of the new GV with technique, which I'll cover in a moment. On this basis, I'm really pleased to report that our book to bill at the group level was 1.2x in the quarter, and both STS and GS in particular had a strong quarter. And this sets us up well to close out the year, but this together with our attractive pipeline really gives the group a solid foundation heading into 25 and increases confidence to achieve our industry-leading long-term targets. At this point, I would like to publicly recognize and thank our people all across the world who continue to deliver every day doing what truly matters. and without them, these results would not be possible. Now, as you're also aware, we closed on the Lindquist acquisition, and I'm pleased to report that the integration is well underway and the expected alignment in values and culture are shining through. We've had numerous town hall meetings with Lindquist employees all over the country, and we could not be more pleased with their warm reception to KBR, their deep domain expertise, really outstanding technical capability, and their dedication to serve the mission of the customer, which is 100% aligned with how we operate, doing things that matter. Lastly, I'm pleased to report that we will be increasing our guidance for revenue, adjusted EBITDA, and adjusted EPS this year to reflect the addition of Lindquist and our ongoing organic strong performance. Now onto slide seven and some key awards. Let me start with STS and Saudi Arabia. Now, there's been quite a bit of speculation on this, and we're now in a position to talk about our role on the Liquid to Chemicals project for Aramco LTC. As we've discussed previously, there was an opportunity across multiple world-scale projects. Four olefin crackers were initially tendered as pre-front-end design, front-end design, and PMC project management contracts. Plus, there was an overarching coordinating project management contract, or CPMC. Now, KBR won one of the crackers and the overarching CPMC, and this was actually the maximum any single company could win. Now, the cracker project that KBR secured due to competing Aramco priorities was actually suspended, and this has been made public. That said, the CPMC, we believe, is the key role. This is a multi-year endeavor, employing critical resources, covering and not only touching all the Olyphans projects at all stages, but also developing and working the integrated schedule, supply chain management strategy, data and digital management. First for Aramco, really managing the data in a digitalized way, and really sort of looking at continuity of safety systems and the data digitalization of those safety systems, and being the project-wide technical authority. And to be clear, we will have teams embedded in each of the pre-feed-feed PMC contractors doing the other large projects on Aramco's behalf. Now, this will ramp up progressively through the rest of this year and in 2025. And as a matter of fact, we'll continue well beyond our long-term targets. Now, to give you a feel, revenue through the pre-feed will be between $50 to $100 million. And then going through feed and into execution, revenue will be several times this magnitude, so quite significant. In addition, again with Aramco, we have also secured another of the offshore gas development front-end designs. this is our third to date, that are really key enablers for the LTC program itself. This is another substantial and important piece of work, again, setting us up well for 2025 and a significant contribution to our long-term targets. I would remind you that Aramco are replacing crude by gas, with gas, sorry, to generate power. And the crude will then go via the LTC program LTC program into various petrochemicals. This is both value add for the crude, but reduces the carbon footprint of energy production in the kingdom significantly. So now let me turn to LNG. Again, quite a bit of speculation on this market. So firstly on Plaquemines. We expect first LNG before year end. This will be one of the industry benchmarks for speed to market. Now, further LNG will be produced as the individual smaller trains are commissioned progressively through 2025 and into 2026. In the quarter, we secured the Lake Charles project in Jaunt Venture with Technique. This is a partner we've worked with successfully many times who have strong construction and fabrication capability, and the customer is Energy Transfer. To be clear, The contract terms are firmly aligned with our stated risk profile, and KBR will be performing management and technical services similar to our role on Plaquemines. And again, similar to Plaquemines, this will be reported through equity and earnings. Energy Transfer is making solid progress in off-takes and has the balance sheet to move the project through to final investment decision. In fact, they've actually placed long lead orders already. That said, there's a bit more wood to chop on this, and I think the election will have an impact on timing. We do not expect FID until the second half of 2025. In addition, and also in the LNG market, in this quarter, we secured the front end design for an additional LNG train for a confidential LNG producer in the Middle East, which could lead to bigger things as that project progresses. And also in LNG, we secured the project management contract, the PMC, for on behalf of ADNOC, the Abu Dhabi National Oil Company, for the new LNG project in Abu Dhabi. To be clear, this is for the execution phase. So again, this is multi-year and valued at circa $130 million. And this follows on from a successful PMC of the front end design that we completed earlier in the year. And finally, we just announced the award of the Shell Manatee Gas Project in Trinidad. And this is an enabler for LNG in that part of the world. As we said previously, LNG is a global business that truly affords KBR attractive opportunities aligned with our desired risk profile and leveraging our differentiated capability. Now let me shift a little bit to emerging technology areas. We announced our acquisition of sustainable aviation fuel technology early in 2024. And since then, we have digitalized and modularized the tech while ensuring we can deliver an end-to-end solution. And this solution, now trademarked as pure SAF, is the first ASTM-certified SAF technology. And we're particularly excited for what's to come as we're now an intersection of increased demand, supportive legislation across the world, and progressive incentives. And the project we announced with Avina is the first in an exciting pipeline of opportunities, and obviously more to come through 2025. On circularity, and in particular related to our investment in MURA and Hydro PRT plastics recycling technology, I personally visited the site in the UK at Wilton and saw the progress firsthand recently. Commissioning is well advanced, and although progress was impacted by skilled labor shortages due predominantly to Brexit, the plant will be producing product before year end. The LG Chemicals plant in Korea, our first modular solution, is on the same timetable, and the Mitsubishi plant in Japan is looking to produce product in early 2025. So in the world of new technology, having the first at scale plant is absolutely terrific. But three operating at scale plants is actually the watershed. And we believe this will catalyze new license and project partnership opportunities in 2025 and beyond. So again, very, very exciting. STS book to build was 1.0 in the quarter. But actually, this does not include the large ADNOC LNG PMC I referred to earlier. That was signed a few days after quarter closed and would be booked in Q4. And now with this and what's in the hopper, we expect Q4 to be a strong booking quarter for STS. Now on to government solutions. In the U.S., as expected, Q3 was a strong bookings quarter due to Department of Defense annual budget cycles. However, our international business also had a great quarter, and together achieving 1.3x for the quarter and 1.1 on a 12-month basis. As some highlights, this quarter were nine awards in a systems engineering business via the IAC contract vehicles we've talked about many times. Actually, this year we have been awarded approximately $1.5 billion in task orders under that contract, $1.2 billion of which were actually in Q3. Now, as you're aware, we book only backlog that's funded, and the $1.2 billion this quarter is the ceiling value of those combined contracts, which we will expect to book and burn over time. So one significant contract worth highlighting contained within that 1.2 billion reflects the increased attention, focus, and funding expected for the Pacific. With a circa $200 million multi-year contract supporting the Naval Warfare Center Pacific program, which is actually a new digital customer for KBR, where we will play a significant role in introducing and testing new technology as we progress the digital transformation and zero-trust environment for that customer. In space, as you know, a key strategic vector for KBR, we continued momentum with a follow-on strategic award by the Naval Research Lab, as shown on the slide. The acquisition of Linkwist was made to accelerate our growth in military space, interoperability, and digital engineering. And in the months since we've closed, Lindquist has secured over $60 million of new orders under a unique contract vehicle that KBR does not currently utilize. And note Lindquist actually does not utilize IAC Max. So with KBR and Lindquist now able to use each other's contract vehicles, the revenue synergy opportunities are exciting because the procurement cycles for these are very, very quick. Now before I move on, I would be remiss if I did not give you a home safe update. The systems testing for the interstate moves were successful and moves have started now. This is very significant as a significant milestone as it clears the way for essentially full domestic moves. While we expect to see an increase in moves in Q4 as new lanes are turned on, revenue for the full year 2024 will be below our expectation. Now, to be clear, there's no impact to profit, because as you're aware, we were conservative in our original guide for 2024. And as a matter of fact, our long-term targets also contain a conservative ramp as presented at Investor Day, so the lower volume in 24 has no impact at all to our targets. A solid relationship with Transcom continues to be collaborative, and we look forward to progressively ramping up on the program and enhancing the moving experience for our men and women in uniform and their families through 25 and beyond. I will now hand over to Mark, who will take you through the Q3 performance in a bit more detail, including the 2024 guidance increase. Mark.