jefferies 2019 industrials conference · 2019. 8. 7. · incremental interest on ichthys funding...

©2019 KBR Inc. All Rights Reserved.

Jefferies 2019 Industrials Conference August 7, 2019

The future, designed and delivered.

Proud history, bright future. ©2019 KBR Inc. All Rights Reserved.

Mark Sopp Executive Vice

President and CFO

Byron Bright President,

Government Services US


Forward-Looking Statements

This presentation contains forward-looking statements regarding our plans, objectives, goals, strategies, future events, future financial performance and backlog information and other information that is not historical. 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. Such statements are based upon our current expectations and various assumptions, which are made in good faith, and we believe there is a reasonable basis for them. However, because forward-looking statements relate to the future, they are subject to inherent risks, uncertainties and other factors that are difficult to predict and which could cause actual results to differ materially from the forward-looking statements contained in this presentation. Additional information about potential risk factors that could affect our business and financial results is included in our Form 10-K filed on February 26, 2019.

We caution you not to place undue reliance on the forward-looking statements included in this presentation, which speak only as of the date hereof. We disclaim any intent or obligation, except as required by law, to revise or update this information to reflect new information or future events or circumstances.

This presentation contains the financial measures “EBITDA”, “Adjusted EBITDA”, “TTM Adjusted EBITDA” and “Adjusted EPS”, which are not calculated in accordance with U.S. GAAP. A reconciliation of the non-GAAP financial measures EBITDA, Adjusted EBITDA, TTM Adjusted EBITDA and Adjusted EPS to the most directly comparable GAAP financial measure has been provided in the Appendix to this presentation.

3


KBR | Executing our Strategy

Delivering disciplined growth; strong market outlook and pipeline

Partnering with customers to develop and provide digital solutions

Fostering a culture of teamwork and safety

Delivering on our financial commitments

4


Government Solutions

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115+ Global locations

18,000+ Employees

~$4B 2019

Revenue (est.)

Deep domain expertise

Mission critical services

Large scale & complex environments

Dedicated client delivery model

Critical Differentiators Diverse Customer Base

International

RDT&E

O&M

OCO

NASA

USGS

Diverse Funding Streams

U.S. Department of Defense

U.K. Ministry of Defence

NASA / space community

Australian Department of Defence

Other government entities


Technology Solutions

6

$0.5M Revenue per

employee

~2-3 New technologies

per year

~$0.3B 2019

Revenue (est.)

Global presence

Prioritize sales efforts in growth markets (Russia, China, Middle East)

Petrochemical & ethylene

Refining and gasification

Ammonia, nitric acid and fertilizers

Clean, sustainable solutions

Brownfields & revamps

PEQ, catalysts and solvents

Advanced automation and digitalization

Technical services

Expand Technology Portfolio Increase Scope Offerings Expand Geographically


Energy Solutions

7

~$1.3B 2019

Revenue (est.)

100+ Years of project

execution

40+ Years of LNG experience

Design and concept

Pre-FEED and FEED

Engineering, procurement, construction and commissioning

Full maintenance services

Recognized leader

Access to all leading LNG technologies

Liquefaction

Regasification

Offshore LNG

Full Life Cycle Capabilities LNG Experts

Reimbursable construction

Downstream and gas monetization consulting

Feasibility and revamp studies

Automation consulting

Project and program management

Industrial services

Expanded Services Portfolio


Quality catalysts for profitable growth

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10-14% Base 2019 – 2022

KBR Revenue CAGR


12018 reflects immaterial, non-cash corrections related to recording the effects of foreign currency on our share of earnings of an unconsolidated joint venture; see our June 30, 2019 Form 10-Q for further information. See Appendix for reconciliation of Adjusted EBITDA and Adjusted EPS 2 Excluding the workoff of the long-term PFIs

$2,305

$2,762

YTD 2018 YTD 2019

Revenues

$183

$223

YTD 2018 YTD 2019

Adjusted EBITDA1

7.9% 8.1%

YTD 2018 YTD 2019

Adjusted EBITDA Margin

1Adjusted EBITDA and Adjusted EPS reconciliations provided in the Appendix 2 Excluding the workoff of the long-term PFIs

YTD 2019 Highlights

Growth fueled by industry leading organic growth in favorable markets

‐ 20% top line revenue growth

• 30% growth in GS, 19% organic

• 38% growth in TS, all organic

‐ EBITDA margin up 20 bps

‐ Adj. EPS up 22% on higher revenue, increased margins and strong execution

Year to date operating cash flow of $81M, or NI conversion of 92%

Backlog increase with a quality of earnings that aligns to our growth and value targets

KBR overall book-to-bill2 of 1.2x

‐ Energy Solutions 2.3x

‐ Government Solutions 1.0x

$ in millions, except EPS

$0.70

$0.77

YTD 2018 YTD 2019

Adjusted EPS1

$(36)

$81

YTD 2018 YTD 2019

Operating Cash Flow

$13,497

$13,824

$2,629 $3,307

YTD 2018 YTD 2019

Backlog

Options

Reported Backlog

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2019 Full-Year Guidance and Long-Term Targets

FY 2019 Guidance

GAAP EPS $1.29 - $1.44

Adjusted EPS1 $1.58 - $1.73

Effective Tax Rate 23% - 25%

Operating Cash Flow $175M - $205M

1 Adjusted EPS reconciliation provided in the Appendix 10

2019-2022 long-term targets

Revenue CAGR, organic 10-14%

EBITDA margin Upper single %

Adjusted EPS CAGR 14-18%

Operating cash conversion 90-110%

ROIC, by 2022 12% +

14-18% Base Adjusted EPS CAGR


Growth Outlook

2018 2019 2020 2021 2022

2019-22 Revenue Growth Profile

Backlog & Options Recompetes & Renewals LNG New Work

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New business: ~27% Our robust pursuit pipeline affords significant growth opportunities.

Today’s book of business: ~63% Our recurring, long-term contracts provide stability and predictability into the future.

* Historical recompete and renewal win rates (>95%)

$68B

$22

$40

$6

$120B

$24

$56

$40

125+ Pursuits > $100M

60+ Pursuits > $100M

*Pursuit pipeline includes opportunities through 2022 only

Our Pursuit Pipeline

One LNG project: ~10%


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Capital structure and deployment priorities

Guiding principles

Maintain low capital intensity

Continued improvements to maximize cash flow

Balanced liquidity profile

Maximize shareholder value on a per share basis

Capital deployment priorities

Fund organic growth

Target 2.75x gross leverage

Return capital to shareholders

Selective, accretive and strategic M&A

2019-22 | Operating Cash Flow Targets


Capital Structure and Liquidity

1TTM Adjusted EBITDA reconciliation provided in the Appendix 13

Net Leverage

Gross Leverage

2Q 2018 3Q 2018 4Q 2018 1Q 2019 2Q 2019

Cash $ 519 $ 581 $ 739 $ 708 $ 611

Gross debt 1,078 1,169 1,336 1,334 1,295

TTM adjusted EBITDA1 316 353 412 436 452

43% TTM EBITDA growth and disciplined debt reductions improved gross leverage a half turn from 2Q 2018.

1.8x 1.7x

1.4x 1.4x 1.5x

3.4x 3.3x 3.2x

3.1x 2.9x


KBR… a growth and value story

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Strong Growth… revenue growth underpinned by industry leading organic growth in GS and TS

Predictable Performance… 10 consecutive quarters of meeting or exceeding expectations

Cash Focus… strong 2019 net income to operating cash conversion of 92%; reducing leverage

Positive Outlook… quality earnings continue to build in backlog

Attractive Value Creation Potential… strong cash flow and excess cash deployment opportunities


APPENDICES


$8,183 $8,355

$11,133 $10,842 $11,039 $11,005 $10,775 $10,689

$243 $387

$423 $509 $544 $594

$547 $500

$1,916 $1,828

$1,601 $2,144 $1,898 $1,898 $2,280 $2,635

3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19

$13,497 $13,481 $13,495 $13,157

$10,570 $10,342

Note: Includes KBR share of unconsolidated JVs; NSB included with Energy Solutions

Majority of KBR backlog is currently associated with long-term, reimbursable, PFI and/or service contracts with a lower risk profile and more predictable cash flows

GS backlog excludes unexercised options and ID/IQ and MATOC contract values not yet under task order

‐ Current estimate of $3.3B in additional potential value as of June 30, 2019

ES backlog – 23% year over year growth

Energy

Solutions

Technology

Solutions

Government

Solutions

Appendix: Backlog Trend $ in millions

$13,602

16

$13,824


Non-GAAP Reconciliations: Adjusted EPS

Adjusted EPS Guidance

2019 Guidance

EPS (Diluted) $1.29 $1.44

Add Back:

Legacy Legal Fees 0.06

Non-cash imputed interest on conversion option 0.06

Acquisition & integration related expenses 0.02

Amortization related to Aspire acquisition 0.06

Incremental interest on Ichthys funding 0.09

Adjusted EPS $1.58 $1.73

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Adjusted EPS Reconciliation

Quarter Ending

2Q18 2Q19

EPS (Diluted) $0.31 $0.34

Add Back:

Legacy Legal Fees 0.02 0.01

Non-cash imputed interest on conversion option 0.00 0.01

Acquisition & integration related expenses 0.00 0.01

Amortization related to Aspire acquisition 0.02 0.02

Incremental interest on Ichthys funding 0.00 0.02

Adjusted EPS $0.35 $0.41


EBITDA is defined as earnings before interest income / expense, income taxes, other non-operating income / expense (including FX) and depreciation & amortization.

Non-GAAP Reconciliation: Consolidated, Adjusted and TTM Adjusted EBITDA

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Adjusted EBITDA ReconciliationSep 30, 2017 Dec 31, 2017 Mar 30, 2018 Jun 30, 2018 Sep 30, 2018 Dec 31, 2018 Mar 31, 2019 Jun 30, 2019

Net Income Attributable to KBR $43 $273 $136 $44 $55 $47 $40 $48

Add Back:

Interest Expense $6 $5 $6 $17 $20 $23 $25 $26

Provision (benefit) for Income Taxes $16 ($243) $34 $18 $22 $12 $16 $18

Other non-operating (income) expense $4 ($13) $2 $1 $1 $2 ($5) ($2)

Halliburton tax sharing agreement $0 $14 $0 $0 $0 $0 $0 $0

Depreciation & Amortization $11 $10 $13 $17 $17 $16 $25 $23

Consolidated EBITDA $80 $46 $191 $97 $115 $99 $101 $113

Add Back:

Legacy Legal Fees $4 $3 $3 $3 $3 $2 $4 $3

Acquisition & integration related expenses $0 $0 $3 $1 $1 $2 $1 $1

Aspire (gain) loss on consolidation $0 $0 ($115) $0 $2 $5 $0 $0

Adjusted EBITDA $84 $49 $82 $101 $121 $108 $106 $117

Jun Sep Dec Mar JunTTM 2018 TTM 2018 TTM 2018 TTM 2019 TTM 2019

TTM EBITDA $414 $449 $502 $412 $428

Add Back:

Legacy Legal Fees $13 $12 $11 $12 $12

Acquisition & integration related expenses $4 $5 $7 $5 $5

Aspire (gain) loss on consolidation ($115) ($113) ($108) $7 $7

TTM Adjusted EBITDA $316 $353 $412 $436 $452

Quarter Ending

jefferies 2019 industrials conference · 2019. 8. 7. · incremental interest on ichthys funding...

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