Raises FY 2022 Earnings Guidance; Delivers Excellent Progress Toward 2025 Long-Term Targets
HOUSTON, April 28, 2022 /PRNewswire/ -- KBR, Inc. (NYSE: KBR) today announced its first quarter 2022 financial results and updated FY 2022 financial guidance.
"KBR is off to a fantastic start in 2022, building on its momentum with important program wins and stellar execution to deliver profitable growth, strong cash generation, and healthy bookings," said Stuart Bradie, President and CEO of KBR. "With a passion for solving our clients' most complex challenges, KBR benefits from favorable end-market tailwinds in areas of global importance such as national security, defense modernization, climate change, and plastics circularity. Furthermore, we posted outstanding safety performance in our culture of Zero Harm and reduced future uncertainty with the resolution of a legacy matter."
Bradie continued, "Given the accelerating demand for our domain expertise, innovative solutions, and proprietary technologies, we are increasing our full-year 2022 revenue, adjusted earnings per share, operating cash flow and adjusted operating cash flow guidance. With a growing foundation of enduring, well-funded, long-term contracts delivering mission critical programs that matter, we are confident that the company is well positioned for sustainable growth and value creation over the near- and long-term horizons. Our Team of Teams continues to perform each and every day, and I would like to thank our people for their contributions to KBR and the missions and success of our clients."
Summarized First Quarter 2022 Financial Results
Three Months Ended March 31, | |||
Dollars in millions, except share data | 2022 | 20212 | |
Revenues | $ 1,714 | $ 1,461 | |
Gross Profit | $ 196 | $ 168 | |
Net income (loss) attributable to KBR | $ (71) | $ 49 | |
Adjusted EBITDA1 | $ 154 | $ 135 | |
Earnings (loss) per share: | |||
Diluted earnings (loss) per share | $ (0.51) | $ 0.33 | |
Adjusted earnings per share1 | $ 0.62 | $ 0.48 | |
Cash flows: | |||
Operating cash flows | $ 89 | $ 50 | |
Adjusted operating cash flows1 | $ 89 | $ 57 | |
Adjusted free cash flows1 | $ 83 | $ 51 |
2 | As adjusted for the adoption of ASU 2020-06 using the full retrospective method |
Financial highlights
Recent Developments and New Business
In the first quarter 2022, the company won $1.2 billion of awards and options, including the following:
During the quarter, we were also awarded the $640 million ceiling Ground Systems and Mission Operations contract to support more than 10 NASA exploration missions, including continued efforts on the James Webb Space Telescope, Lunar Reconnaissance Orbiter and Earth Observing System. KBR will provide systems engineering, launch and early orbit support, flight operations, and flight dynamics support to various NASA missions managed by Space Science Mission Operations and Earth Science Mission Operations at NASA's Goddard Space Flight Center. This highly strategic and technical win represents KBR's largest recompete in 2022. This award has not yet been booked into backlog.
Capital Deployment
KBR continues to employ a balanced approach to capital allocation, which includes investments that facilitate sustainable, long-term growth, and prudent return of capital to shareholders. During the quarter, KBR repurchased $33 million of its common shares, inclusive of share repurchases to satisfy requirements of equity compensation plans, paid $15 million in shareholder dividends, and sold a non-core asset for net proceeds of $18 million.
FY 2022 Guidance
KBR combines deep mission understanding, market-leading expertise and technology, and unwavering operational focus to deliver solutions to solve our clients' most complex issues. Our 2022 financial guidance is underpinned by favorable market tailwinds, good bookings momentum, a strong first quarter, and work under contract of over 85% to deliver our 2022 results.
KBR updates its FY 2022 guidance as follows:
Conference Call Details
The company will host a conference call to discuss its first quarter 2022 financial results and updated guidance on Thursday, April 28, 2022, at 7:30 a.m. Central Time. The conference call will be webcast simultaneously through the Investor Relations section of KBR's website at investors.kbr.com. A replay of the webcast will be available shortly after the call on KBR's website or by telephone at +1.929.458.6194, passcode: 510376.
About KBR
We deliver science, technology and engineering solutions to governments and companies around the world. KBR employs approximately 28,000 people worldwide with customers in more than 80 countries and operations in 34 countries. KBR is proud to work with its customers across the globe to provide technology, value-added services, and long-term operations and maintenance services to ensure consistent delivery with predictable results. At KBR, We Deliver.
Visit www.kbr.com
Forward-Looking Statements
The statements in this press release that are not historical statements, including statements regarding future financial performance, are forward-looking statements within the meaning of the federal securities laws. These statements are subject to numerous risks and uncertainties, many of which are beyond the company's control that could cause actual results to differ materially from the results expressed or implied by the statements. These risks and uncertainties include, but are not limited to: the significant adverse impacts on economic and market conditions of the COVID-19 pandemic and the company's ability to respond to the resulting challenges and business disruption; the recent dislocation of the global energy market; the company's ability to manage its liquidity; the outcome of and the publicity surrounding audits and investigations by domestic and foreign government agencies and legislative bodies; potential adverse proceedings by such agencies and potential adverse results and consequences from such proceedings; changes in capital spending by the company's customers; the company's ability to obtain contracts from existing and new customers and perform under those contracts; structural changes in the industries in which the company operates; escalating costs associated with and the performance of fixed-fee projects and the company's ability to control its cost under its contracts; claims negotiations and contract disputes with the company's customers; changes in the demand for or price of oil and/or natural gas; protection of intellectual property rights; compliance with environmental laws; changes in government regulations and regulatory requirements; compliance with laws related to income taxes; unsettled political conditions, war and the effects of terrorism; foreign operations and foreign exchange rates and controls; the development and installation of financial systems; the possibility of cyber and malware attacks; increased competition for employees; the ability to successfully complete and integrate acquisitions; and operations of joint ventures, including joint ventures that are not controlled by the company.
The company's most recently filed Annual Report on Form 10-K, any subsequent Form 10-Qs and 8-Ks, and other U.S. Securities and Exchange Commission filings discuss some of the important risk factors that the company has identified that may affect its business, results of operations and financial condition. Except as required by law, the company undertakes no obligation to revise or update publicly any forward-looking statements for any reason.
KBR, Inc. | |||
Condensed Consolidated Statements of Operations | |||
(In millions, except for per share data) | |||
(Unaudited) | |||
Three Months Ended March 31, | |||
2022 | 20211 | ||
Revenues: | |||
Government Solutions | $ 1,459 | $ 1,164 | |
Sustainable Technology Solutions | 255 | 297 | |
Total revenues | 1,714 | 1,461 | |
Gross profit: | |||
Government Solutions | 159 | 116 | |
Sustainable Technology Solutions | 37 | 52 | |
Total gross profit | 196 | 168 | |
Equity in earnings (losses) of unconsolidated affiliates: | |||
Government Solutions | 10 | 7 | |
Sustainable Technology Solutions | (128) | 5 | |
Total equity in earnings (losses) of unconsolidated affiliates | (118) | 12 | |
Selling, general and administrative expenses | |||
Government Solutions | (54) | (49) | |
Sustainable Technology Solutions | (15) | (14) | |
Corporate and other | (38) | (26) | |
Total selling, general and administrative expenses | (107) | (89) | |
Acquisition and integration related costs | (1) | (1) | |
Restructuring charges and asset impairments | (1) | — | |
Loss on disposition of assets and investments | — | (1) | |
Operating income | (31) | 89 | |
Interest expense | (20) | (19) | |
Other non-operating expense | — | (3) | |
Income (loss) before income taxes | (51) | 67 | |
Provision for income taxes | (19) | (17) | |
Net income (loss) | (70) | 50 | |
Less: Net income attributable to noncontrolling interests | 1 | 1 | |
Net income (loss) attributable to KBR | $ (71) | $ 49 | |
Adjusted EBITDA2 | $ 154 | $ 135 | |
Diluted EPS | $ (0.51) | $ 0.33 | |
Adjusted EPS2, 3 | $ 0.62 | $ 0.48 | |
1 As adjusted for the adoption of ASU 2020-06 using the full retrospective method 2 See additional information at the end of this release regarding non-GAAP financial measures 3 Diluted EPS is calculated using a share count of 140 million and 155 million for the quarters ended March 31, 2022 and 2021, respectively. Adjusted EPS is calculated using a share count of 143 million and 141 million shares outstanding for the quarters ended March 31, 2022 and 2021, respectively. |
KBR, Inc. | ||||
Condensed Consolidated Balance Sheets | ||||
(In millions, except share data) | ||||
March 31, | December 31, | |||
2022 | 20211 | |||
(Unaudited) | ||||
Assets | ||||
Current assets: | ||||
Cash and cash equivalents | $ 412 | $ 370 | ||
Accounts receivable, net of allowance for credit losses of $13 and $13, respectively | 1,035 | 1,411 | ||
Contract assets | 211 | 224 | ||
Other current assets | 116 | 147 | ||
Total current assets | 1,774 | 2,152 | ||
Claims and accounts receivable | 30 | 30 | ||
Property, plant, and equipment, net of accumulated depreciation of $435 and $431 (including net PPE of $18 and $19 owned by a variable interest entity), respectively | 132 | 136 | ||
Operating lease right-of-use assets | 151 | 158 | ||
Goodwill | 2,051 | 2,060 | ||
Intangible assets, net of accumulated amortization of $302 and $291, respectively | 688 | 708 | ||
Equity in and advances to unconsolidated affiliates | 430 | 576 | ||
Deferred income taxes | 212 | 231 | ||
Other assets | 166 | 153 | ||
Total assets | $ 5,634 | $ 6,204 | ||
Liabilities and Shareholders' Equity | ||||
Current liabilities: | ||||
Accounts payable | $ 630 | $ 1,026 | ||
Contract liabilities | 334 | 313 | ||
Accrued salaries, wages and benefits | 272 | 317 | ||
Operating lease liabilities | 43 | 41 | ||
Other current liabilities | 182 | 178 | ||
Total current liabilities | 1,461 | 1,875 | ||
Pension obligations | 64 | 88 | ||
Employee compensation and benefits | 97 | 111 | ||
Income tax payable | 93 | 95 | ||
Deferred income taxes | 70 | 70 | ||
Nonrecourse project debt | 2 | 2 | ||
Long-term debt | 1,870 | 1,875 | ||
Operating lease liabilities | 180 | 188 | ||
Other liabilities | 219 | 217 | ||
Total liabilities | 4,056 | 4,521 | ||
Commitments and Contingencies | ||||
KBR shareholders' equity: | ||||
Preferred stock, $0.001 par value, 50,000,000 shares authorized, none issued | — | — | ||
Common stock, $0.001 par value 300,000,000 shares authorized, 180,645,661 and 179,983,586 shares issued, and 139,821,173 and 139,786,136 shares outstanding, respectively | — | — | ||
PIC | 2,216 | 2,206 | ||
Retained earnings | 1,200 | 1,287 | ||
Treasury stock, 40,824,488 shares and 40,197,450 shares, at cost, respectively | (976) | (943) | ||
AOCL | (876) | (881) | ||
Total KBR shareholders' equity | 1,564 | 1,669 | ||
Noncontrolling interests | 14 | 14 | ||
Total shareholders' equity | 1,578 | 1,683 | ||
Total liabilities and shareholders' equity | $ 5,634 | $ 6,204 |
1 As adjusted for the adoption of ASU 2020-06 using the full retrospective method. |
KBR, Inc. | |||
Condensed Consolidated Statements of Cash Flows | |||
(In millions) | |||
(Unaudited) | |||
Three Months Ended March 31, | |||
2022 | 20211 | ||
Cash flows from operating activities: | |||
Net income (loss) | $ (70) | $ 50 | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||
Depreciation and amortization | 33 | 38 | |
Equity in (earnings) losses of unconsolidated affiliates | 118 | (12) | |
Deferred income tax | 16 | 8 | |
Gain on disposition of assets | — | 1 | |
Other | 12 | 8 | |
Changes in operating assets and liabilities: | |||
Accounts receivable, net of allowance for credit losses | 370 | 24 | |
Contract assets | 14 | (3) | |
Accounts payable | (400) | 33 | |
Contract liabilities | 24 | (62) | |
Accrued salaries, wages and benefits | (43) | 9 | |
Payments on operating lease obligation | (14) | (15) | |
Payments from unconsolidated affiliates, net | 7 | 7 | |
Distributions of earnings from unconsolidated affiliates | 30 | 8 | |
Pension funding | (11) | (11) | |
Restructuring reserve | (4) | (7) | |
Other assets and liabilities | 7 | (26) | |
Total cash flows provided by operating activities | 89 | 50 | |
Cash flows from investing activities: | |||
Purchases of property, plant and equipment | (6) | (6) | |
Investments in equity method joint ventures | (1) | (3) | |
Proceeds from sale of assets or investments | 18 | — | |
Acquisition of technology license | — | (7) | |
Other | 1 | (6) | |
Total cash flows provided by (used in) investing activities | 12 | (22) | |
Cash flows from financing activities: | |||
Payments on short-term and long-term borrowings | (7) | (7) | |
Payments of dividends to shareholders | (15) | (14) | |
Net proceeds from issuance of common stock | 4 | 4 | |
Payments to reacquire common stock | (33) | (4) | |
Other | (1) | (1) | |
Total cash flows used in financing activities | (52) | (22) | |
Effect of exchange rate changes on cash | (7) | 3 | |
Increase in cash and cash equivalents | 42 | 9 | |
Cash and equivalents at beginning of period | 370 | 436 | |
Cash and equivalents at end of period | $ 412 | $ 445 | |
Noncash financing activities | |||
Dividends declared | $ 17 | $ 16 |
1 As adjusted for the adoption of ASU 2020-06 using the full retrospective method. |
KBR, Inc. | |||
Backlog Information (a) | |||
(In millions) | |||
(Unaudited) | |||
March 31, | December 31, | ||
2022 | 2021 | ||
Government Solutions | $ 11,572 | $ 12,628 | |
Sustainable Technology Solutions | 2,412 | 2,345 | |
Total backlog | $ 13,984 | $ 14,973 | |
Award options | 4,564 | 4,732 | |
Total backlog and options | $ 18,548 | $ 19,705 |
(a) Backlog generally represents the dollar amount of revenues we expect to realize in the future as a result of performing work on contracts and our pro-rata share of work to be performed by our consolidated and unconsolidated joint ventures. We generally include total expected revenues in backlog when a contract is awarded under a legally binding agreement. In many instances, arrangements included in backlog are complex, nonrepetitive and may fluctuate over the contract period due to the release of contracted work in phases by the customer. Additionally, nearly all contracts allow customers to terminate the agreement at any time for convenience. Certain contracts provide maximum dollar limits, with actual authorization to perform work under the contract agreed upon on a periodic basis with the customer. In these arrangements, only the amounts authorized are included in backlog. For projects where we act solely in a project management capacity, we only include the expected value of our services on each project in backlog.
We define backlog, as it relates to U.S. government contracts, as our estimate of the remaining future revenue from existing signed contracts over the remaining base contract performance period (including customer approved option periods) for which work scope and price have been agreed with the customer. We define funded backlog as the portion of backlog for which funding currently is appropriated, less the amount of revenue we have previously recognized. We define unfunded backlog as the total backlog less the funded backlog. Our Government Solutions backlog does not include any estimate of future potential delivery orders that might be awarded under our government-wide acquisition contracts, agency-specific indefinite delivery/indefinite quantity contracts, or other multiple-award contract vehicles nor does it include option periods that have not been exercised by the customer.
Within our Government Solutions business segment, we calculate estimated backlog for long-term contracts associated with the U.K. government's privately financed initiatives ("PFIs") based on the aggregate amount that our client would contractually be obligated to pay us over the life of the project. We update our estimates of the future work to be executed under these contracts on a quarterly basis and adjust backlog if necessary.
We have included in the table above our proportionate share of unconsolidated joint ventures' estimated backlog. As these projects are accounted for under the equity method, only our share of future earnings from these projects will be recorded in our results of operations. Our proportionate share of backlog for projects related to unconsolidated joint ventures totaled $2.5 billion at March 31, 2022, and $2.6 billion at December 31, 2021. As a result of our intent to exit commercial projects in Russia, ending backlog was reduced by $56 million as of March 31, 2022.
We estimate that as of March 31, 2022, 29% of our backlog will be executed within one year. Of this amount, 89% will be recognized in revenues on our condensed consolidated statement of operations and 11% will be recorded by our unconsolidated joint ventures. As of March 31, 2022, $71 million of our backlog relates to active contracts that are in a loss position.
As of March 31, 2022, 11% of our backlog was attributable to fixed-price contracts, 46% was attributable to PFIs, 25% was attributable to cost-reimbursable contracts, and 18% was attributable to time-and-materials contracts. For contracts that contain fixed-price, cost-reimbursable, and time-and-materials components, we classify the individual components as either fixed-price, cost-reimbursable, or time-and-materials according to the composition of the contract; however, for smaller contracts, we characterize the entire contract based on the predominant component. As of March 31, 2022, $8.5 billion of our Government Solutions backlog was currently funded by our customers.
Non-GAAP Financial Information
The following information provides reconciliations of certain non-GAAP financial measures presented in the press release to which this reconciliation is attached to the most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles (GAAP). The company has provided the non-GAAP financial information presented in the press release as information supplemental and in addition to the financial measures presented in the press release that are calculated and presented in accordance with GAAP. Such non-GAAP financial measures should not be considered superior to, as a substitute for or alternative to, and should be considered in conjunction with, the GAAP financial measures presented in the press release. The non-GAAP financial measures in the press release may differ from similar measures used by other companies.
EBITDA and Adjusted EBITDA
We evaluate performance based on EBITDA and Adjusted EBITDA. EBITDA is defined as Net income (loss) attributable to KBR, plus interest expense, net; provision for income taxes; other non-operating expense; and depreciation and amortization. Adjusted EBITDA excludes certain amounts included in EBITDA. EBITDA and Adjusted EBITDA for each of the three-month periods ended March 31, 2022 and 2021 are considered non-GAAP financial measures under SEC rules because EBITDA and Adjusted EBITDA exclude certain amounts included in the calculation of net income (loss) attributable to KBR in accordance with GAAP for such periods. Management believes EBITDA and Adjusted EBITDA afford investors a view of what management considers KBR's core performance for each of the three-month periods ended March 31, 2022 and 2021 and also affords investors the ability to make a more informed assessment of such core performance for the comparable periods.
Three Months Ended March 31, | |||
Dollars in millions | 2022 | 20211 | |
Net income (loss) attributable to KBR | $ (71) | $ 49 | |
Adjustments | |||
• Interest expense, net | 20 | 19 | |
• Provision for income taxes | 19 | 17 | |
• Other non-operating expense | — | 3 | |
• Depreciation and amortization | 33 | 38 | |
Consolidated EBITDA | $ 1 | $ 126 | |
Adjustments | |||
• Acquisition, integration and restructuring | 1 | 1 | |
• Non-cash loss (gain) on legal entity rationalization | — | 1 | |
• Ichthys commercial dispute | 132 | 3 | |
• Legacy legal fees | 4 | 4 | |
• Provisions related to exit from Russian commercial projects | 16 | — | |
Adjusted EBITDA | 154 | 135 |
1 As adjusted for the adoption of ASU 2020-06 using the full retrospective method |
Adjusted EPS
Adjusted earnings per share (Adjusted EPS) for each of the three-month periods ended March 31, 2022 and 2021 is considered a non-GAAP financial measure under SEC rules because the Adjusted EPS excludes certain amounts included in the diluted earnings per share calculated in accordance with GAAP for such periods. The most directly comparable financial measure calculated in accordance with GAAP is diluted EPS for the same periods. Management believes that Adjusted EPS affords investors a view of what management considers KBR's core earnings performance for each of the three-month periods ended March 31, 2022 and 2021 and also affords investors the ability to make a more informed assessment of such core earnings performance for the comparable periods.
We have calculated Adjusted EPS for each of the three-month periods ended March 31, 2022 and 2021 by adjusting diluted EPS for the items included in the table below.
Three Months Ended March 31, | |||
2022 | 20211 | ||
Diluted earnings (loss) per share | $ (0.51) | $ 0.33 | |
Adjustments | |||
• Amortization related to acquisitions | $ 0.05 | $ 0.07 | |
• Ichthys interest and commercial dispute costs | $ 0.96 | $ 0.04 | |
• Impact of new convert accounting and bond hedge | $ 0.01 | $ 0.02 | |
• Legacy legal fees | $ 0.02 | $ 0.02 | |
• Provisions related to exit from Russian commercial projects | $ 0.09 | $ — | |
Adjusted EPS2 | $ 0.62 | $ 0.48 |
1 As adjusted for the adoption of ASU 2020-06 using the full retrospective method |
2 Diluted EPS is calculated using a share count of 140 million and 155 million for the quarters ended March 31, 2022 and 2021, respectively. Adjusted EPS is calculated using a share count of 143 million and 141 million shares outstanding for the quarters ended March 31, 2022 and 2021, respectively. |
We have calculated the 2022 guidance for Adjusted EPS by adjusting diluted EPS for the items included in the table below.
FY 2022 EPS Guidance | |||
Diluted earnings per share guidance: | $1.02 | $1.14 | |
Adjustments | |||
• Amortization related to acquisitions | 0.19 | ||
• Ichthys interest and commercial dispute costs | 1.02 | ||
• Acquisition, integration and restructuring | 0.02 | ||
• Impact of new convert accounting and bond hedge1 | 0.09 | ||
• Legacy legal fees | 0.10 | ||
• Provisions related to exit from Russian projects | 0.09 | ||
• Non-cash gain/loss from legal entity rationalization2 | TBD | ||
• Appreciation of fair value of investments2 | TBD | ||
Adjusted EPS Guidance3 | $2.53 | $2.65 |
1 Conversion option will be calculated and adjusted quarterly based on KBR trading price |
2 Adjustment will be based on actual activity in 2022 |
3 Diluted and Adjusted FY 2022 EPS guidance is calculated using a share count of 156 million and 142 million, respectively |
Adjusted Cash Flows Provided by Operating Activities and Adjusted Free Cash Flows
Adjusted operating cash flows and adjusted free cash flows are considered non-GAAP financial measures under SEC rules. Adjusted operating cash flows exclude certain amounts included in the cash flows provided by operating activities calculated in accordance with GAAP. Adjusted free cash flows exclude capital expenditures from adjusted operating cash flows. The most directly comparable financial measure calculated in accordance with GAAP is cash flows provided by operating activities. Management believes that adjusted operating cash flows and adjusted free cash flows afford investors a view of what management considers KBR's core operating cash flow performance and also afford investors the ability to make a more informed assessment of such core operating cash generation performance.
We have calculated adjusted operating cash flows and adjusted free cash flows for each of the three-month periods ended March 31, 2022 and 2021 by adjusting operating cash flow provided by operating activities for items included in the table below.
Three Months Ended March 31, | |||
Dollars in millions | 2022 | 2021 | |
Cash flows provided by operating activities | $ 89 | $ 50 | |
Add back: Major project advance work-off | — | 7 | |
Adjusted operating cash flows | $ 89 | $ 57 | |
Less: Capital expenditures | (6) | (6) | |
Adjusted free cash flows | $ 83 | $ 51 | |
Adjusted free cash flow per share1 | $ 0.58 | $ 0.36 | |
Adjusted earnings per share1 | $ 0.62 | $ 0.48 | |
Adjusted free cash conversion | 94 % | 75 % |
1 Adjusted free cash flow per share and adjusted earnings per share for the quarters ended March 31, 2022 and 2021 are calculated using a share count of 143 million and 141 million shares, respectively |
We have calculated the 2022 guidance for adjusted operating cash flows by adjusting cash flows provided by operating activities for the items included in the table below.
Dollars in millions | FY 2022 Operating Cash Flow Guidance | ||
Cash flows provided by operating activities guidance | $330 | $370 | |
Add: Impact of CARES Act temporary tax repayment | 30 | ||
Adjusted operating cash flows guidance | $360 | $400 |
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SOURCE KBR, Inc.