KBR, Inc.

Good afternoon. Thank you for attending today's KBR's fourth quarter and full year 2024 earnings conference call. My name is Tamiya, and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press star 1 on your telephone keypad. I would now like to pass the conference over to your host, Jamie Dubre, Vice President of Investor Relations.

Thank you. Good afternoon and welcome to KBR's fourth quarter and fiscal 2024 earnings call. Joining me are Stuart Brady, President and Chief Executive Officer, and Mark Sopp, Executive Vice President and Chief Financial Officer. Stuart and Mark will provide highlights from the quarter and full year 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 2. 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.

Thanks, Jamie, and good afternoon, everyone. I will pick up on slide four. As you know, we start every earnings call with a zero harm moment. And in fact, this month, we are celebrating our 10th anniversary of a zero harm program at KBR. Today, I would like to highlight circularity and give an update on MURA's progress. Moora Technology is the global pioneer of a next-generation advanced plastic recycling technology called Hydro PRT. And KBR is proud to be Moora's exclusive global licensing partner and preferred engineering partner, and of course, we're an investor in the Hydro PRT process itself. Now, there are three commercial-scale facilities all being built almost in parallel. Moora's in Wilton, UK, LG Chem's in Korea and Mitsubishi's plant in Japan. Now, the Mura and LG Chemicals plants have had several successful operational runs, and both plants aim for commercial operations by March, with key customers like Dow and Nestle looking to incorporate recycled feedstocks to enhance their sustainability in the plastics manufacturing. The facility in Japan is scheduled to come on stream a few months later. Now we're excited about what this means for the circular economy and to KVR, of course. To give you a feel for the positive impact, over the course of the year, the UK facility will recycle the annual plastic packaging waste of approximately 700,000 residents and replacing an equivalent of roughly 100,000 barrels of fossil oil. Quite impressive. So on to slide five and some key messages. We delivered very strong fourth quarter and full year 2024 performance, which actually exceeded our previous expectations. Starting with our financial performance at a high level, we delivered $2.1 billion of revenue in the fourth quarter, and that brought our 2024 total to $7.7 billion, which is over the top of our guidance range. Now this represents double digit growth of 23% for the quarter, and 11% for the year. Organic growth for the full year was 9%. We generated strong adjusted EBITDA of $228 million in the quarter and $870 million for the full year, also at the top of our guidance range. Due to a combination of strong execution and operational efficiency, we delivered 11.2% adjusted EBITDA margin up roughly 50 basis points year over year. Now we continue to successfully and methodically execute our growth strategy. We are winning work with new customers and in markets globally, and are continuing to move up market with our acquisition of Lindquist. With our segment realignment and our leadership updates, which were the key topics of our webinar in early January, we are now more agile and better aligned to our markets. We will also highlight our resilient business model and alignment to strong secular growth trends more in a minute. Finally, we are issuing our 2025 financial outlook, which equates to double digit growth at the midpoint across all guidance metrics supported by discipline, strategic execution as we advance towards our 2027 objectives. Now onto slide six. I'll start with an update on our key contracts and recent wins, starting with HomeSafe. Following successful test moves in Q4, the ramp increased markedly in January this year, and now we're taking in roughly 300 moves per day from Transcom. With the program progressing significantly, there is increased interest from new suppliers. The move volume has really just started in earnest, So we are in the early months of execution and bought as a 10 year transformational program and both HomeSafe and Transcom remain completely committed to a successful transformation. Over to a joint venture supporting the Plaquemines LNG project. Our customer announced first LNG production in December, as you know, achieving this milestone just 30 months from its final investment decision which makes Plaquemines LNG one of the fastest greenfield projects ever to be built. Work is progressing well to deliver the fully planned capacity over 2025 and 2026. And lastly, with the executive order now reversing the LNG ban, the Lake Charles LNG project is advancing their offtakes and limited notice to proceed is anticipated by mid 2025 with final investment decision expected later in the year. We were pleased to announce a number of new contract wins during the fourth quarter, and a few are highlighted here to deliver strong results in 2025 and beyond. The new administration has emphasized the need for technological advancements in the areas of unmanned systems, hypersonics, microelectronics, and directed energy. This $445 million contract win for the Department of Defense Joint Mission Environment Test Capability Program and our $88 million contract win for rapid prototyping aligns nicely with these priorities. And in particular, I think these wins demonstrate expertise in systems design, test, and interoperability. Secondly, KBR's market-leading ammonia process technology was selected for two new projects one in Angola and one in Kazakhstan, which will, of course, produce fertilizer critical to supporting growing populations. And we think this demonstrates our market leading position and really builds on our installed base of 260 facilities across the world, bringing the number of ammonia projects we've won in 2024 to seven. Lastly, KBR was chosen for several significant engineering and project management roles in the quarter, including Shell's Manatee LNG project, the Oman LNG project, and Saudi Aramco's Sheba gas increment project. In addition, KBR also signed a global agreement with BP for engineering and project management across their portfolio. These project wins demonstrate the momentum in the gas market and the greater need for energy security. And I think KBR is very well positioned to address this market through its differential capabilities and extensive global presence. In short, our book of business is strong and we ended the year with a 1.1 times trailing 12 month book to bill and over $21 billion in backlogging options. And one of KBR's strengths is that our portfolio offers multiple paths to achieving our growth objectives, allowing us to successfully navigate different macro environments. And I'll go into this more a bit later on. Onto slide seven. Delivering on our strategy in 2024. So sort of doing what we said we would do. Now our strong financial performance was supported by execution across the four pillars of our strategy. And we made significant progress on each area over the past year. Firstly, under thrive and expand, We secured a contract for the Lake Charles LNG project, a planned $10 billion plus project with our partner, Technique. By effectively using the Information Analysis Center's multiple award contract vehicle, IACMAC, we won over $1.5 billion of work as IDIQ. And this means quicker procurement, enabling more timely delivery of mission-critical national security needs for our customers, and a more resilient revenue stream for us. We also won work with new customers in the Defense Health Agency, the Department of State, and with the government of Iraq, where we started a five-year strategic partnership to help develop their future vision, including energy and infrastructure. And lastly, outstanding bid value awaiting decisions climbed to over $17 billion, yeah, $17 billion in MTS. really delivering on our commitment to increase bid volume this year by over 50% plus. Second is to deliver innovation. In partnership with Geolith, we added a new proprietary technology called Pure Lithium, which enables zero-emission direct lithium extraction from produced wastewater, which is a typical byproduct from oil and gas production. We recently announced that this technology was selected by Weardale for the demonstration plant in the UK. With the Naval Information Warfare Center, we are integrating prototype components and designs into new or existing information warfare systems, including command and control systems, intelligence, surveillance, and reconnaissance systems, and cyber systems. We also launched a digital accelerator program and completed the stand-up and connection of our four digital engineering labs in Alabama Maryland, Virginia, and Pennsylvania. This adds core modeling and simulation capabilities, and we're already seeing on contract growth across several of our Army, Navy, and Intel customers. And now these are important enablers as the market continues to grow around interconnected systems and data. Our third pillar is to drive operational excellence globally. As we discussed earlier, we have delivered adjusted EBITDA margin expansion of 50 bits year over year, really down to strong project execution and operational efficiency. And as we described during a special webcast in January, we realigned our segments to mission tech and sustainable tech with the associated synergy and cost benefits, and so doing, making both segments more self-sufficient. Our fourth pillar focused on effective capital deployment, very important. And during the year we deployed over $1 billion in cash. We returned nearly $300 million to shareholders through buybacks and regular dividends. And secondly, of course, we acquired Lindquist. Lindquist expands KBR's mission expertise, particularly in the military space domain and in the digital arena with advanced interoperability and model based systems engineering capabilities. Now these capabilities will be in high demand going forward, and this is evidenced by Lindquist direct award contracts of over $2 billion of available ceiling value over the next four plus years. So very exciting. Now we've included an additional slide in the appendix with some key details on Lindquist. So these actions are built upon our differentiated business model, which I'll now cover onto slide A. KBR is positioned for resilience and growth. And thanks to our unique business model and alignment with strong secular growth trends, it really enables multiple pathways to achieving those objectives. Our model focuses on agile leadership, customer-centric national operations, that's really important, in multiple countries across the globe, domain expertise, and elevated technology positioning. And these strengths are supported by a capital-like structure, strong cash flows, and cost discipline leading to resilient financial performance. Now in the chart, you can see a 2024 adjusted EBITDA mix showing roughly 60%, 60% comes from non-US government customers, notably from sustainable tech and a sizable business with allied government customers in the UK, Australia, and the Middle East. The remaining 30% EBITDA, 30 plus percent EBITDA generation from the US government is concentrated in serving mission critical, operationally focused, and technology development roles in areas like military space, missile defense, digital warfare, and direct support to our war fighters, all critical. We believe our business is very well positioned with the new administration priorities. And most of the NASA work is the literal operations of human and satellite space missions, including those supporting commercial missions such as SpaceX, Blue Origin, and Axiom. And notably, less than 2% of our adjusted EBITDA relates to federal civilian agencies outside of NASA. So less than 2% opposite FedSiv. And now let me touch on how KBR is aligned to strong secular growth trends onto slide nine. Our strategy is to align with exciting growing high-end markets, as you know, where we are differentiated. Now I won't read the entire slide to you, but you can see that our book of business is well aligned to strong secular growth trends. So just picking a couple. In US defense, we are aligned to mission priorities of the new administration, as we just discussed, particularly our tip of the spear operational focus. In international defense, we're positioned for both resilience and growth from increased international defense spending. And I'll remind you that KBR historically has supported both the UK MOD and NATO in overseas missions. As we've discussed many times, energy has real momentum and is a global priority of which KBR is very well positioned in this market. And infrastructure includes strong tailwinds from broadening industrial base and diversifying economies, particularly in the Middle East. KBR's business model, combined with a differentiation and an alignment to strong secular growth trends, really informed our market outlook for fiscal year 2025. And Mark will cover this shortly. And in fact, with that, I'll turn over to Mark.