KBR, Inc.

Hello everyone and thank you for joining us for today's KBR's first quarter 2025 earnings conference call. My name is Drew and I'll be the operator today. During today's call after the prepared remarks there will be a Q&A session. If you would like to register a question please press star followed by one on your telephone keypad and to withdraw your question it's star followed by two. It's now my pleasure to hand over to Jamie Debray to begin. Please go ahead when you're ready.

Thank you. Good afternoon and welcome to KBR's first quarter fiscal 2025 earnings call. Joining me are Stuart Brady, President and Chief Executive Officer, and 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 presentation. I will now turn the call over to Stuart.

Thank you, Jamie, and good morning, everyone. I will pick up on slide four. Before discussing our financial performance in the quarter, we'll take a moment dedicated to zero harm. Today, we are highlighting our industry-leading safety performance in 2024. At KBR, we are focused on maintaining the highest levels of safety and we're constantly looking for ways to improve and to ensure that our people can work safely each and every day. Our total recordable incident rate for 2024 was a record low at 0.05. That's notably lower than the national average of 0.37 and representing our third consecutive year of improvement. In 2024, we also set three new safety records. We achieved 26.8 million consecutive safe work hours. Secondly, we had a consecutive run of 101 days without a safety incident. And thirdly, we attained 94% zero harm days. We're doing even better thus far this year at 98% zero harm day rate. I thank all of our 38,000 global employees for their consistent dedication to safety every single day. And as I often say, good safety is good business. Now on to slide five. Today we have five key messages. First, we delivered strong performance in the first quarter, including revenues of $2.1 billion and adjusted EBITDA of $243 million. both representing double digit growth. Through a strong execution and focus, we generated an adjusted EBITDA margin of 11.8%. Now that's up 40 basis points year on year. Second, we continue to successfully and methodically execute our growth strategy. The Lindquist acquisition continues to contribute. We are increasing our bid volumes and we are agile and well aligned to our markets and our customers across the world. Third, our business is balanced, resilient and well positioned to perform in today's environment. And we are taking proactive steps to ensure we remain prepared as conditions evolve. Fourth, we are leveraging our strong balance sheet and cash flow to deliver on our capital allocation priorities. returning record levels of capital to shareholders this quarter through share repurchases and dividends. Finally, we remain confident in our financial outlook for 2025 and are reaffirming our previously provided guidance. Our cost reductions heading into 2025 are continued laser focus on execution with excellence and strong cash management are serving as well in volatile times. Now Mark will provide further details later. Onto slide six. I will start with an update on our key contracts and recent wins. Starting with HomeSafe, our contract continued to ramp during Q1 and we saw significant operational improvement throughout the quarter. Our mission is to improve the move experience of the service men and women while saving taxpayers money as we replace the inefficient and costly legacy program. We are making solid progress against these objectives with customer satisfaction rising nicely. As we move into the summer peak season, we continue to work with Transcom to synchronize moves to supplier capacity. This synchronization is healthy for the long-term program as it emphasizes quality and timeliness of the moves first. We accordingly expect pace of mood growth to be modest in Q2 with incremental step ups in Q3 and Q4. The home safe transcom relationship is strong with a commitment on both sides to make this program successful. On Plaquemines, the project is progressing exceptionally well. Following first gas in Q4, LNG exports are either on or ahead of schedule. The success is due to the excellent execution by our joint venture and strong partnership with our customer, Venture Global. Our financial performance this quarter has been strong due to the successful delivery of key project milestones. I think the takeaway here is that our extensive experience in LNG, coupled with the advantageous characteristics of this commercial business model, are delivering significant results. Lastly, Lake Charles LNG. Our customer energy transfer has entered into an agreement with MidOcean to jointly develop the project. MidOcean will acquire a 30% equity stake in the project with a 5 million tonne offtake. With the MidOcean agreement and other offtakes agreements that were recently secured, the project is progressing. Now on to Lindquist. Integration is now substantially complete and we're already realizing synergies. As an example, Lincolns was able to leverage KBS financial backing and facility footprint in Colorado Springs to compete and win the recent Ascend 2 award with the US Space Force, a $970 million ceiling value single award IDIQ, which runs through 2035. Now, Ascend stands for Advanced Solutions for collaborative engineering and digital development. This contract provides for digital engineering and decision support capabilities, including digital environments and leverages a product agnostic approach as a hybrid integrator. Very exciting. We were pleased to announce a number of new contract wins during the first quarter, a few of which I will highlight. First, we had several wins with the Department of Defense, indicating that the U.S. government continues to award contracts in priority areas. Our new wins include ASTRO, which I cover in more detail later, plus our $85 million procurement as a service contractor for airfield repair kits with the U.S. Air Force and a $229 million contract for U.S. Army cargo helicopter systems. KBR's long standing and differentiated involvement in aircraft operations with a deep mission expertise, provides us a strong position from which we earn contract wins such as these. Through our daily work, we know what is required to modernize Army aircraft and this yields unique insights that allow us to best serve our Defense Department customer. In SDS, we achieved strategic wins through a customer-centric initiative. We executed a global agreement with BP for engineering, procurement, and construction management services and are currently managing over circa $100 billion of work for BP's projects worldwide. We also signed a delivery partner agreement with TerraPower, a pioneer in new commercial-scale reactor technologies. focused on delivering scalable, cost-effective energy solutions globally. In this partnership, KBR contributes its expertise in engineering complex systems and large-scale capital project delivery. Our first small module reactor, SMR, project will be located in Wyoming with plans for further reactor deployments into the 2030s. Again, very exciting development. We ended the quarter with a 1.1 times TTM book to bill and over 20 billion in backlog and options. On the mission tech side, we maintained a high level of bidding activity in Q1. Our pipeline remains consistent with last quarter with roughly $17 billion of bids awaiting award in MTS and $2 billion in protest. which we believe will start to move forward as the year progresses. On the sustainable tech side, we see a growing pipeline of LNG and energy security projects and ammonia demand remains strong. It is worth noting that a number of our wins this quarter came from the Global South, the United Arab Emirates, Saudi, Iraq and Indonesia, to name but a few, demonstrating the importance of this part of the world to future energy, and KBR's positioning, commitment, and strong reputation. On to slide seven. As we are focused on executing across all four pillars of our growth strategy, we are providing additional detail today on our first pillar, how we are thriving and expanding in core markets and new geographies to capture breakout growth. Our recent contract win with the Air Force Research Laboratory is an excellent example of winning in one of our core markets and successfully building upon a strong existing customer relationship. We are experiencing continued growth in the military space market marked by a recent $176 million contract win to support advanced space technology, research and optimization. The Astro contract represents a significant achievement and enhances our existing support operations at the Maui Space Surveillance Complex in Hawaii. The Maui facility is focused on monitoring man-made objects in space, a critical national security capability in today's increasingly crowded and competitive space environment. In bidding for this important seven-year contract, we were able to displace the incumbent, winning with our optical imaging capabilities space domain awareness expertise, and excellent project execution track record. On to slide eight. In view of the near-term risks we read about on a daily basis, we would like to provide some additional perspective on how KBR is well positioned in today's uncertain environment. First, with regard to tariffs. KBR, as you know, is a high-end technology and professional services business and does not import or export products as a significant part of our business. Furthermore, we do not procure raw materials nor do any manufacturing in China. That said, if our clients experience the cost of material increase due to tariffs, CAPEX budgets may be re-evaluated. As of now, we are not seeing a material change in customer behavior. But Gulf Coast continued to monitor this situation. With steady global energy demand, KBR's international operating capability positions us to capture any potential geographical shifts in energy markets, and I think that's a key point. Secondly, government efficiency initiatives have also been a key area of focus in recent months. KBR has not experienced direct impacts from project cancellations. As noted last quarter, KBR has limited exposure to US federal civilian budgets outside of NASA, which have been the primary focus of the efficiency reductions to date. Within NASA, KBR does not have material exposure to the science efforts, which are under scrutiny, as you may have read. KBR's focus is primarily on human spaceflight missions, where our decades of operational experience bring irreplicable capabilities, which will continue to be valued and are necessary. Lastly, although we are not fully immune to an economic slowdown, we do believe we are well positioned due to our diversified global mix of business, including our role as a provider of mission critical services to our customers globally, including the US government. We are well aligned with strong secular growth trends, including global national and energy security, sustainability, and digitalization. In addition, we are proactively taking actions such as reducing indirect costs and will control what we are able to control through our capital light, flexible, and largely variable cost structure. One of KBR's strengths is that our portfolio offers multiple paths to achieving our objectives. allowing us to successfully navigate different macro environments. In summary, we remain confident in our resiliency and ability to navigate today's challenging and changing conditions. And with that, I'll turn it over to Mark.