Credit Suisse 6th
Annual Industrials Conference
November 28, 2018
DISCLAIMER | Forward-looking Statements
2 | Investor Presentation
This presentation contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
These forward-looking statements include statements regarding our plans, objectives, goals, strategies, future events, future financial performance and backlog information and
other information that is not historical information. When used in this presentation, the words “estimates,” “expects,” “anticipates,” “projects,” “plans,” “intends,” “believes,”
“forecasts” or future or conditional verbs such as “will,” “should,” “could,” or “may,” and variations of such words or similar expressions are intended to identify forward-looking
statements. All forward-looking statements are based upon our current expectations and various assumptions. Our expectations, beliefs, and projections are expressed in good
faith, and we believe there is a reasonable basis for them. However, there can be no assurance that management’s expectations, beliefs, and projections will be achieved.
There are numerous risks and uncertainties, many of which are beyond our control, that could cause actual results to differ materially from the forward-looking statements
contained in this presentation. These risks and uncertainties include, but are not limited to: current or future economic conditions; our ability to obtain and perform under contracts
from existing and new customers, including the U.S. government; exposure to cost overruns, operating cost inflation and potential liability claims and contract disputes; access to
trained engineers and other skilled workers; risks relating to operating through joint ventures and partnerships; risks inherent in doing business internationally; potential tax
liabilities; maritime risks; changes in the demand for our services and increased competition; protection of intellectual property rights; risks associated with possible future
acquisitions; risks related to our information technology systems; impairment of goodwill and/or intangible assets; reduction or reversal of previously recorded revenues; risks
relating to audits and investigations, including by governments; compliance with laws and regulations, and changes thereto, including those relating to the environment, trade,
exports and bribery; our creditworthiness and ability to comply with the financial covenants in our credit agreement; and other risk factors discussed in our most recently filed Form
10-K, any subsequent Form 10-Qs and 8-Ks, and other Securities and Exchange Commission filings.
All forward-looking statements attributable to us, or persons acting on our behalf, apply only as of the date made and are expressly qualified in their entirety by the cautionary
statements in this presentation. Except as required by law, we undertake no obligation to revise or update forward-looking statements to reflect events or circumstances that arise
after the date made or to reflect the occurrence of unanticipated events.
Life-cycle
ServicesEnduring
Customer Base
Attractive Domestic
and International MixIndustry-leading
Safety Record
Technical
DifferentiationDisciplined Project
Delivery
KBR | Did You Know?
Delivering clean energy
solutions through the
design and construction of
a third of the world’s LNG
production.
Serving the UK MoD
through a comprehensive
construction and facilities
management program that
extends through 2041.
Providing solutions and
proprietary technologies that
cater to growing demand for
cleaner fuels and consumer
products.
Leading service provider to
the space community,
supporting mission control,
astronaut life science,
research and operations.
34,000+
People40+ Countries
3 | Investor Presentation
8.3%
9.7%
3Q17 3Q18
Adjusted EBITDA1
Margin
$10,342
$13,481$2,154
$3,748
3Q17 3Q18
Backlog
Reported Backlog
Priced, unexercised options
1. Adjusted EBITDA and Adjusted EPS reconciliations provided in the Appendix
Business Overview | QTD Highlights
$1,034
$1,278
3Q17 3Q18
Revenues
$0.35
$0.46
3Q17 3Q18
Adjusted EPS1
$28
$72
3Q17 3Q18
Operating Cash Flow
$86
$124
3Q17 3Q18
Adjusted EBITDA1 Revenue, Adjusted EBITDA and
Adjusted EPS growth fueled by industry
leading organic growth and strategic
acquisitions
‐ 59% growth in GS, 12% organic
‐ 35% growth in Technology, all
organic
Strong margins and operating cash flow
Long-term backlog with quality growth
opportunities
Book-to-bill of 1.1x KBR overall
‐ 1.3x GS
‐ 1.4x Technology
$ in millions, except EPS; results for the quarter ended September 30, 2018
4 | Investor Presentation
5 | Investor Presentation
1Q ‘17 AEPS $0.28
• Annual Guidance $1.10 to $1.40
2Q ‘17 AEPS $0.57
• Raised Guidance $1.25 to $1.45
3Q ‘17 AEPS $0.35
• Raised Guidance $1.35 to $1.50
4Q ‘17 AEPS $0.28
• Achieved AnnualResults - $1.48
1Q ‘18 AEPS $0.34
• Annual Guidance $1.35 to $1.45
2Q ‘18 AEPS $0.34
• Raised Guidance $1.40 to $1.50
3Q ‘18 AEPS $0.46
• Raised Guidance $1.45 to $1.55
Business Overview | Seven Quarters of Consistent ResultsAdjusted Earnings Per Share Guidance and Results
Buoyant end markets in both the government and hydrocarbons industries
Government
Services
Healthy government spending budgets, both domestic and international
Breadth of capabilities expands synergy pursuits across the GS landscape
Increasing best value selection opportunities and bundling of procurements
Technology
Growing demand for petrochemical, refining and agricultural technologies
Low-priced, plentiful feedstock
Regulatory mandates are driving demand
Hydrocarbons
Services
Strong momentum across the maintenance market
Recovering CapEx markets; increasing momentum for LNG and petrochem
Proposal pipeline continues to build
GS, $13
HS, $12
Tech, $1
Proposals Submitted, $26 B1
GS, $2
HS, $9
Tech, $1
Proposals in Prep, $12 B
As of September 30, 2018
1. HS “Proposals Submitted” includes proposals formally submitted as well as EPC/EPCm projects awarded that have not achieved FID (e.g., Magnolia and Methanex). “FID” is not applicable for our GS and Technology prospects.
Business Overview | Outlook
6 | Investor Presentation
Segment GP+EE margin
Government
Services9%
Heavy mix of internationally funded contracts; well-balanced U.S. portfolio
Top-tier space services provider; blue chip logistics and mission support
Technology 28% Expansion of contract values through increased breadth of offerings
Attractive operating cash flows with negative working capital
Hydrocarbons
Services12%
Healthy, growing maintenance and industrial services, both domestic and international
Consistent execution and project delivery
Financial Overview | 2018 Results to Date
1. Gross Profit and Equity Earnings (GP+EE) proportion percentages exclude results of KBR’s Non-strategic Business segment
GS57%Tech
16%
HS27%
GS69%
Tech6%
HS25%
$3.6 B $387 M 10.8%
Revenue GP+EE 1
Healthy 11% year-over-year revenue growth
‐ 51% growth in GS; industry-leading 11% organic
‐ 10% growth in Technology, all organic
30 bps improvement in YTD GP+EE margin driven by strong
execution, favorable project close-out and quality equity earnings
7 | Investor Presentation
Year to date results through September 30, 2018
Ending Stock Price $21.00 $23.00 $25.51 $30.00 $32.00 $35.00 $40.02 $43.00 $45.00 $50.00 $55.00 $60.00
Premium to Current 5% 15% 27% 50% 60% 75% 100% 115% 125% 150% 175% 200%
Total Shares Issued (1) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.95 1.52 2.74 3.74 4.57
% of Shares Outstanding (1) 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.7% 1.1% 1.9% 2.7% 3.2%
0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.95
1.52
2.74
3.74
4.57
0.00
1.00
2.00
3.00
4.00
5.00
Net
Sh
ares
Issu
ed (m
ms)
Net Shares Issued Upon Conversion
____________________1. Assumes ~140.9M shares outstanding. See reconciliation of GAAP and non-GAAP Total Shares Issued in the Appendix.
New Convertible + Call Spread
Transaction Details Proactively Managing Dilution
2 Methods of Dilution Protection
Call Spread Overlay:
– KBR entered into a bond hedge and warrants transaction to mitigate dilution until the stock price increases above 100% of the current price
Net Share Settlement
– KBR intends to settle conversions in cash for the par amount of bonds outstanding and any additional value in net shares
Gross / Net Proceeds & Tax Benefit: $350M / $316M
Stock Price at Issue: $20.01
Conversion Premium / Price: 27.5% / $25.51
Upper Strike / Price: 100.0% / $40.02
5-Year Maturity: 2023
Coupon / Pre-Tax Equivalent Yield: 2.5% / 4.74%
1
2
Conversion Price
Upper Strike100% above Stock
Price at Issue
Restores availability and LC capacity
for growth
Actively mitigates potential dilution
with bond hedge and warrant
transactions (100% premium)
Reduces cash interest rate to <5%
Increases fixed-to-float debt
Improves secured to unsecured mix
Intent to settle the principal in cash
Closed November 15, 2018
Economic Share Issuance Upon Conversion
8 | Investor Presentation
Financial Overview | Convertible Senior Notes Due November 2023
Strong execution delivering solid earnings
Healthy backlog and BTB
Growing confidence in the restoration of LNG and
downstream capital investment cycles, especially in the US
and Middle East where KBR is well positioned
Pipeline of near-term pursuits in each segment affords
significant growth opportunities and a disciplined risk
approach
Strong balance sheet and liquidity to enable growth
It’s a great time to be part of the ‘new’ KBR!
Final Thoughts
9 | Investor Presentation
Investor Presentation | KBR10
APPENDIX | Non-GAAP Reconciliations
11 | Investor Presentation
Full Year 2018$1.93 - $2.03
$ 0.06 $ 0.05 $ 0.07
($0.66)
$1.45 - $1.55
Quarter Ending
($ in millions, except EPS) Sep 30, 2017 Sep 30, 2018
Net Income Attributable To KBR $ 45 $ 58
Add Back:Interest expense $ 6 $ 20 Provision for income taxes $ 16 $ 22 Other non-operating (income) expense $ 4 $ 1 Depreciation & amortization $ 11 $ 17
Consolidated EBITDA $ 82 $ 118
Add Back:Legacy legal fees $ 4 $ 3 Acquisition & integration related expenses $ 0 $ 1 Aspire (gain) loss on consolidation $ 0 $ 2
Adjusted EBITDA $ 86 $ 124
EPS (diluted) $ 0.32 $ 0.41
Add Back:Legacy legal fees $ 0.03 $ 0.01 Acquisition & integration related expenses $ 0.00 $ 0.01 Amortization related to Aspire acquisition $ 0.00 $ 0.02 Aspire (gain) loss on consolidation $ 0.00 $ 0.01
Adjusted EPS $ 0.35 $ 0.46
Ending Stock Price $21.00 $23.00 $25.51 $30.00 $32.00 $35.00 $40.02 $43.00 $45.00 $50.00 $55.00 $60.00
GAAP Convertible Shares 0.00 0.00 0.00 2.05 2.78 3.72 4.97 5.58 5.94 6.72 7.35 7.89
GAAP Warrant Shares 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.95 1.52 2.74 3.74 4.57
Total GAAP Diluted Shares 0.00 0.00 0.00 2.05 2.78 3.72 4.97 6.53 7.46 9.46 11.09 12.45
Less: Impact of Bond Hedge - - - -2.05 -2.78 -3.72 -4.97 -5.58 -5.94 -6.72 -7.35 -7.88
Economic Shares Issued 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.95 1.52 2.74 3.74 4.57
Appendix | Non-GAAP Reconciliations
12 | Investor Presentation
Reconciliation of GAAP Diluted Share to Economic Share Issuance Upon Conversion