KBR, INC. Q4 FY2024 earnings call

• Zero Harm program: Celebrating 10th anniversary, highlighting circularity and Mura's progress with commercial scale facilities for advanced plastics recycling.
• 2024 financial performance: Delivered $2.1 billion in Q4 revenue and $7.7 billion for the full year, exceeding guidance. Adjusted EBITDA was $228 million in Q4 and $870 million for the full year, with a 11.2% adjusted EBITDA margin.
• Key contracts and wins: HomeSafe ramp increasing, Plaquemines LNG project achieving first LNG production, new contract wins in defense and LNG markets.
• Strategy execution: Four pillars - Thrive and Expand (securing contracts, winning work with new customers), deliver innovation (partnerships and digital accelerator program), drive operational excellence (segment realignment and margin expansion), effective capital deployment (over $1 billion in cash deployment, acquisition of LinQuest).
• Business model: Positioned for resilience and growth with agile leadership, customer-centric operations, domain expertise, and elevated technology positioning.

Government Solutions

• Q4: Revenues increased 20% to $1.6 billion, with $150 million in adjusted EBITDA and margins at 9.4%. Defense and intel revenue growth was particularly strong, up 33% supported by the LinQuest acquisition and organic growth. International also performed well with a 20% increase driven by core UK and Australia defense programs and infrastructure work. Book-to-bill in the quarter was 0.9 times.
• Full year: Revenues were $5.9 billion, up 10% with adjusted EBITDA of $587 million, also up 10% at a 10% margin.

Sustainable Tech

• Q4: Revenues were up 30% with $108 million in adjusted EBITDA and margins at 20.6%. Drivers include ammonia technology, program management, consulting services, and LNG projects. Book-to-bill was 1.3 times.
• Full year: Revenues were $1.9 billion, up 17% with adjusted EBITDA of $398 million, up 18% and at a margin of 21.3%. Book-to-bill for the full year was 1.1 times

• 2025 outlook: Revenue expected to be in the range of $8.7 billion to $9.1 billion (15% midpoint growth). Adjusted EBITDA anticipated to be $950 million to $990 million (11% midpoint growth). Adjusted EPS expected to be $3.71 to $3.95 (15% midpoint growth). Operating cash flows expected to be $500 million to $550 million (14% midpoint growth). CapEx between $50 million and $65 million. Effective tax rate 25% to 27%. EPS phasing: 47% in first half, 53% in second half.
• Assumptions: Material programs supported remain in place, full year continuing resolution assumed, HomeSafe ramping but not at full domestic pace, no material effects from proposed tariffs, static interest and foreign exchange rates.

• Political and economic environment: Changes in government programs and funding can impact project存续 and revenue.
• Continuing resolution: Uncertainty around US government fiscal 2025 continuing resolution can affect government project tasking and awards.
• Protests: Significant awards in favor remain in protests, which may delay future quarter results.

Q: Brent Thielman asked about LinQuest's contribution to 2025 and integration.

A: Mark Sopp responded that LinQuest is an inorganic addition of about $400 million to 2025 numbers, performing great with good collaboration between BD teams and strong pipeline.

Q: Brent Thielman asked about Plaquemines LNG and future discussions.

A: Stuart Bradie said the LNG market is buoyant with activity from multiple customers, including expansions and debottlenecking of existing facilities.

Q: Mariana Perez Mora asked about 2025 growth drivers and international contribution.

A: Stuart Bradie said international growth includes increased spending from governments, activity in Europe and Australia, and strong presence in energy markets like Middle East and Asia.

Q: Mariana Perez Mora asked about EBITDA margins for HomeSafe.

A: Mark Sopp said HomeSafe is in ramp-up phase with negligible profitability contribution in 2025 due to transformational program ramp-up challenges.

Q: Steven Fisher asked about mission technology bids and bookings.

A: Stuart Bradie said there's $1.5 billion under protest, $17 billion waiting for award, and 75% of work under contract, with potential award in Q1/Q2 from protested wins.

Q: Steven Fisher asked about HomeSafe's progress and assumptions.

A: Stuart Bradie said HomeSafe ramp is progressing with increased moves, but being cautious about delivery to ensure long-term success.

Q: Jerry Revich asked about risk factors to 2025 government solutions guidance.

A: Stuart Bradie said guide is balanced with multiple pathways, including LinQuest, HomeSafe, and international growth, and confident in hitting guidance.

Q: Jerry Revich asked about equity income and Plaquemines' earnings contribution.

A: Mark Sopp said Q4 had noncash adjustments and scope increase on Plaquemines project affecting equity earnings, but not substantive to overall business.

Q: Michael Dudas asked about business realignment and opportunities.

A: Stuart Bradie said realignment is done, integration of LinQuest is substantial, cost out exercise achieved, and book of business is exciting with strong customer engagement.

Q: Michael Dudas asked about capital allocation and share repurchase.

A: Mark Sopp said bias to do more buybacks with Board authorizing increase in stock buyback authorization to $750 million, and confident in using capital for buybacks and dividends.

Q: Andy Kaplowitz asked about SDX demand and MTS bookings.

A: Stuart Bradie said SDX demand is durable with LNG and Middle East spend, and MTS bookings may be slower due to continuing resolution and protests, but $1.5 billion under protest may boost bookings in Q1/Q2.

Q: Sangita Jain asked about HomeSafe ramp and Mura's P&L impact.

A: Mark Sopp said HomeSafe ramp is sequential with domestic and international, and Mura is a growth pathway with multiple licensing and equipment opportunities