KBR, Inc.

Hello, everyone. Thank you for joining us and welcome to KBR's second quarter 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Rachael Goldwait, head of investor relation. Rachael, go ahead.

Thank you and good morning. Welcome to KBR's second quarter 2026 earnings call. Joining me today are Stuart Brady, president and CEO, and Shad Evans, executive vice president and CFO. Stuart and Shad will cover highlights from the quarter and then we'll open the line for your questions. Today's earnings presentation is available on the investor relations section of our website at kbr.com. As outlined on slide two, today's discussion includes forward-looking statements, and certain non-GAAP financial measures. Additional information, including reconciliations to the nearest GAAP measures, can be found in the presentation appendix. With that, I'll turn the call over to Stuart.

Thanks, Rachael, and good morning, everyone. I will pick up on slide four. Before we get into the meat of the presentation, I wanted to briefly highlight 2025 Sustainability and Corporate Responsibility Report, which we published a few weeks ago. This is our fifth year issuing a report and it reflects an important part of how KBR operates. Sustainability, safety and responsible delivery are embedded in how we manage risk, develop our people and of course deliver for our customers. This year's report highlights record safety performance, continued progress against their environmental commitment and 35% of revenues focused on sustainability. As we move toward operating as two companies, that operating discipline will remain an important part of the culture and the value proposition of both businesses. On to slide five. Today, we will focus on four key messages. First, we delivered a strong first half with the results packing slightly ahead of our planned cadence. We have strong visibility across both the businesses, supported by record backlog in STF and significant awarded work in MTF that has yet to be reflected in backlog. Third, our plan separation remains firmly on track, with transaction, leadership and day one readiness milestones continuing to advance. And finally, we are reaffirming our 2026 guidance and remain focused on execution, cash generation, disciplined capital allocation, and of course, a successful separation. Moving to slide six. This slide highlights our progress against the four strategic pillars that continue to guide KBR. A focus on operational excellence and capital deployment here, and then discuss growth and differentiated solutions on the next two slides. On operational excellence, we continue to execute for our customers while standing up to standalone companies. Very important. Importantly, that work has not distracted us from delivering for customers, growing the business, or executing against our financial commitments. We continue to win in the market, build backlog across both businesses and deliver solid performance, with here-to-date adjusted EBITDA margin of 13%, keeping us on track for another strong year. At the same time, we're taking actions ahead of separation to reduce incremental standalone costs and mitigate dissynergies. Across both businesses, we are simplifying organizational structures, driving productivity and increasing accountability so that each company enters 2027 with a leaner cost base and stronger margin potential. For Spinco, the priority is establishing a standalone public company while maintaining competitive rates and preserving our position across both cost plus and fixed price opportunities. Our objective remains rate neutrality, and we continue to make good progress towards that goal. For new KBR, we're building a lean, scalable organization that can support future growth while maintaining strong margins and disciplined cost management. Next, on capital deployment. We continue to allocate capital in a disciplined manner, investing roughly $190 million in the first half to strengthen the portfolio while also returning an additional $71 million to shareholders, Thank you very much. Preparing both companies for a successful separation and positioning each business to create greater value as a focused standalone company. With that as a backdrop, let's move to slide seven and discuss the SDS business. The demand trends we discussed last quarter continue to strengthen during the second quarter, reinforcing our confidence in the long term for sustainable tech. Demand remains broad-based across energy security, food security, and sustainability-focused investments, supported by both new project activity and long-standing customer relations. Those market dynamics continue to translate into strong commercial results. Second quarter book-to-bill was 1.5 times, and trailing 12-month book-to-bill was 1.3 times. and Backlog ended the quarter at a record $5.5 billion, and that is up 40% year over year. In addition, our near-term pipeline now exceeds $6 billion, excluding large reimbursable LNG EPC opportunities, which do the numbers significantly. Importantly, Work already under contract represents approximately 80% of a 2026 revenue guidance midpoint. We're also seeing an increasing mix of OPEC-related work. Approximately 34% of year-to-date bookings were tied to OPEC-based contracts with activity across both the Middle East and the Americas through Brown and Rood. These contracts are generally longer in duration and further enhance the durability, visibility and resilience of the business. We remain encouraged by the level of OPEX-related opportunities moving through the pipeline. The Middle East remains a significant growth driver where first-half bookings exceeded $900 million across oil, gas, NGL and energy infrastructure projects. We are also seeing encouraging momentum across our technology portfolio, including our first commercial pure SAF license awards and continued demand for our market-leading ammonia technologies, including the recent Tampa Energia Award in the Americas. More broadly, many of these opportunities build on relationships that begin with technology, largely through studies or engineering services, and ultimately expanded to larger project execution or aftermarket schools, creating additional revenue opportunities while improving long-term visibility. Taking together, we believe SDS remains well-positioned for continued growth and provides strong visibility into future revenue and earnings. Onto slide eight. Turning to MTS, we continue to see strong demand across our defense systems modernization base and global mission operations businesses. Our strategy remains focused on combining trusted mission expertise, customer intimacy, and differentiated technology solutions to address some of our customers' most critical priorities. That demand is supported by strong visibility into future performance. Approximately 94% of our full year revenue guidance is already under contract. We have roughly $10.4 billion awaiting award and we expect more than $25 billion of bid volume in 2026. And that's up approximately 50% year over year with significant submissions in the second half. Second quarter book to bill was 0.8 times. with a trailing 12 months ratio of 1.0 times. Importantly, those metrics do not yet reflect approximately $10.6 billion of awarded work currently under protest, including the National Science Foundation Antarctica Award, the Department of State Award in Iraq, and the Classified PACOM Logistics Award. As a result, we believe reported backlog and book-to-bill do not fully reflect the level of awarded work and future revenue visibility in the business today. While the timing of protest resolutions remain outside our control, these are awarded programs supporting enduring customer priorities. More broadly, our success continues to be driven by the mission expertise and customer relationships we've built over decades. The National Science Foundation Antarctica Award is a really good example. While NSF was a new customer for KBR, the award reflects several years of engagement, mission understanding, and demonstrated technical capability highlighting the differentiated approach that continues to create opportunities across the portfolio. We are also increasingly embedding software AI and digital capabilities into missions we already support, helping customers modernize operations, improve decision-making, and deliver faster outcomes. We also see opportunities to support emerging priorities such as Golden Dome, where KBI already supports customers across many parts of the broader mission environment. In short, demand remains healthy across our global market. Visibility remains strong and our differentiated capabilities continue to support long-term growth. As we prepare to launch this business as a standalone company, we're also taking an important step in establishing its identity in the market. Now let me turn to slide nine and introduce the new name for the MTS spin-off, Trinsic. The name is inspired by the word intrinsic and reflects essential built-in capabilities and deep, deep expertise. Intrinsic harnesses the power of technology to support governments, partners and allies across national security and space. We work at the frontier of what is technically possible, bringing new capabilities to the systems the world depends on and giving customers the confidence to act. The tagline for Twinsic is the bold connected. And I think this captures the essence of the business. Twinsic design solutions that hold up when there is no margin for error and in environments where critical systems must perform. Just as importantly, Twinsic gives us the opportunity to tell the story of how this business has evolved. While our foundation remains our deep expertise and trusted performance, today's Trinity is increasingly defined by the way it connects people, technology, and critical systems with speed, precision, and rigor. We believe the brand better reflects both the company we are today and where we are headed next. Very exciting. It also reflects the culture built around collaboration, accountability, and delivering results. As we've discussed on today's call, this business is entering its next chapter with strong customer relationships, differentiated capabilities, global reach, and significant growth opportunities ahead. We believe Trinsic reflects both our heritage and our exciting future, bringing intrinsic value and advantage to customers. On to slide 10. We continue to execute well against our separation plan and remain on track to complete the spin on a target date of January the 4th, 2027. On transaction readiness, we continue to make progress across key regulatory and transaction milestones. We submitted our final private letter ruling request to the IRS in June and expect a final ruling in September. We also continue through the SEC review process for the Form 10 with a public filing expected ahead of our NIC earning call. Operationally, the work is shifting from planning to execution. IT systems, contract bifurcation, procurement separation, corporate budgeting and organisational design are all progressing against plan. Corporate employees have been aligned to their future organizations and the teams focused on filling the remaining critical roles so both companies are ready to operate effectively from day one. We're also building out the intrinsic leadership team. Michael LaRoche will join as CEO of Tessinac in September, bringing nearly 30 years of experience across defense intelligence space, cyber and government services. Nick Vesey joined as CFO designate earlier this month with deep experience across finance, capital markets, M&A and investor engagement. The majority of the Trinsic leadership team is now firmly in place and the boards for both companies are taking shape as we assemble the skills necessary and the experience needed to support each company's standalone strategy. Looking ahead, we're excited to host Investor Days in New York for both New KBR and Trinsic, where we will outline the standalone strategies, the financial framework, and the long-term priorities for each business. Overall, I'm pleased to report the separation is progressing well, the Leadership Foundation is taking shape, and we have strong visibility into the key milestones required to successfully launch both companies. With that, I'll hand over to Shad.