- Robust revenue growth of 34%; adj. EBITDA growth of 30%; and adj. EPS growth of 45%

- Strong free cash conversion of 128% for the quarter and 110% year-to-date

- Expanded capital deployment optionality

- Raising FY 2021 revenue and earnings guidance

HOUSTON, Oct. 28, 2021 /PRNewswire/ -- KBR, Inc. (NYSE: KBR) today announced its third quarter 2021 financial results and raised its FY 2021 financial guidance.

"I am pleased to announce another fantastic quarter in which KBR continues to drive operational excellence and deliver outstanding results for customers. The focus, agility and commitment of our people have the business performing well across all key metrics – revenue, earnings, cash, awards and safety," said Stuart Bradie, President and CEO of KBR. "Impressive organic growth across each of our government businesses, end-market momentum across the entire portfolio and a significant award in the quarter to provide humanitarian support under Operation Allies Welcome combine to give us confidence in our raised 2021 earnings guidance."

Bradie continued, "The completion of the acquisition of Frazer-Nash Consultancy, a high-end advisory and consulting firm, is a step change in the evolution of KBR's international business. It further extends our reach into technically differentiated sectors and aligns with our mission to deliver high-end technology-enabled solutions and capabilities. Furthermore, its compelling  renewable energy suite fits nicely with KBR's commitment to help our customers achieve their own ESG and sustainability objectives. We are pleased to welcome our Frazer-Nash colleagues to KBR and thank each member of our combined team of teams for their commitment to advancing our strategy to create long-term value for stakeholders."

Financial Highlights for the Quarter Ended September 30, 3021

• Revenue of $1.8 billion, a 34% increase in the quarter, 20% organic, is primarily attributable to the following:
• Government Solutions posted $1.6 billion of revenue in the third quarter, a 54% increase over 2020, 33% organic. The increase in revenue is attributable to organic growth delivered across each of our government businesses, including new work supporting Operation Allies Welcome ("OAW"), and the acquisition of Centauri in October 2020. During the quarter, KBR was awarded multiple task orders to support OAW, a historic humanitarian effort for the U.S. Department of Defense ("DOD") to facilitate the rapid development of vital, temporary infrastructure at military bases in the U.S. and abroad to accommodate thousands of displaced Afghans. KBR recognized almost $400 million of revenue in the quarter associated with this program.
• Sustainable Technology Solutions posted $288 million of revenue in the third quarter, generally in line with our guided annual FY 2021 revenue expectations for this business following the company's 2020 exit from commoditized services.
• Gross profit, operating income, adj. EBITDA and adj. EPS increased in line with the items described above.
• Excluding the impact of OAW, core Government Solutions and Sustainable Technology Solutions profit and adj. EBITDA margins were in line with guided expectations. OAW task orders are cost-reimbursable with EBITDA profit margins in the low-single digits. The net impact is growth in overall gross profit, operating income and adj. EBITDA with some dilution to the margin profile.
• In October 2021, we announced that our JKC joint venture entered into a binding settlement agreement that resolved outstanding claims and disputes between JKC and its client. The settlement agreement is an important de-risking event that reduces significant uncertainty, reduces future legal costs, frees up management time, and increases deployment optionality. In connection with this settlement, KBR recorded a charge of approximately $10 million for its proportionate share of final warranty items. Consistent with our practice, we have adjusted this item out of our adj. EPS for the quarter.
• Adj. EPS increased 45% in line with the items described above as well as favorable jurisdictional tax mix and increased utilization of foreign tax credits.
• The company produced $122 million of operating cash flows (OCF) and $116 million of adj. free cash flows. Adjusted free cash flow conversion was 128% in the quarter and 110% year-to-date.

Recent Developments and New Business

In the quarter ended September 30, 2021, the company recorded $1.6 billion of awards and options, including the following:

• A $127 million recompete contract from the US Department of Transportation Volpe Center to modernize technical and safety-related transportation systems to meet 21st century challenges;
• A new $44 million cyber contract to perform research, analysis, and assessments for the Air Force Life Cycle Management Cyber Systems Engineering Division to protect systems and software from unauthorized access, use, disclosure, disruption, modification, or destruction;
• A historic humanitarian support contract to facilitate the rapid development of vital infrastructure at military bases in the U.S. and abroad being used to accommodate thousands of displaced Afghans for the U.S.DOD;
• A contract to provide our leading ammonia technology for an innovative green ammonia project. KBR will provide technology license, engineering, proprietary equipment, catalyst, and commissioning services for this ground-breaking project;
• A three-year contract to provide KBR INSITE® virtual/remote monitoring and advisory services for a client's integrated ammonia-methanol plant in Texas. KBR will help the client digitally diagnose operational problems, determine probable root causes, and recommend corrective actions to meet operational objectives and minimize environmental impact; and
• A contract to provide technology license, basic engineering design, and proprietary equipment for its leading ethylene technology SCORE™ for Europe's largest petrochemical project in over 20 years.

Capital Deployment

KBR continues to employ a balanced approach to capital allocation, which includes organic and external investments that facilitate sustainable, long-term growth and the prudent return of capital to shareholders. Looking ahead, KBR will continue to leverage its talent, expertise and financial strength to capitalize on industry tailwinds, long-term market dynamics and accretive growth opportunities.

During the quarter, KBR repurchased $25 million of common shares and issued a quarterly dividend of $0.11 per share, an increase of 10% from 2020 levels.  In October 2021, KBR closed on the acquisition of Frazer-Nash Consultancy for approximately $400 million.

Raising FY 2021 Guidance

KBR raised its FY 2021 financial guidance primarily attributable to the new work for Operation Allies Welcome, as follows:

• Consolidated revenue: $7.2 billion to $7.5 billion (from $5.8B to $6.2B)
• Adjusted EBITDA margin: 8% (from 9%); adj. EBITDA margin reflects the impact of the cost reimbursable, low-single-digit OAW contract. Core adj. EBITDA margins for Government Solutions and Sustainable Technology Solutions continue to be on track at originally guided levels.
• Effective tax rate: 24% to 25% (from 25% to 26%)
• GAAP earnings per share (EPS): $0.05 to $0.15; adjusted EPS: $2.30 to $2.40 (updated)
• Updated GAAP and adjusted EPS to reflect OAW earnings
• Updated GAAP and adjusted EPS adjustments to reflect KBR's portion of final warranty items in connection with the client settlement agreement of $10 million or $0.07 per share.
• GAAP OCF: $255 million to $295 million; adjusted OCF: $300 million to $340 million (no change)

Conference Call Details

The company will host a conference call to discuss its third quarter 2021 financial results on Thursday, October 28, 2021 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 +1.719.457.0820, passcode: 3062910.

About KBR

We deliver science, technology and engineering solutions to governments and companies around the world. KBR employs approximately 29,000 people worldwide with customers in more than 80 countries and operations in 40 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

This press release and related comments by KBR management contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Some examples include 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 press release, the words "estimates," "expects," "predicts," "continues," "looking ahead," "well-positioned," "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 press release. 

Mandatory COVID-19 vaccination of employees may impact our workforce which could have an adverse effect on our business, results of operations and/or cash flows.

On September 9, 2021, President Biden issued an Executive Order mandating COVID-19 vaccination for all Federal employees (subject to medical and religious exemptions). President Biden also announced a proposed new rule requiring all employers with at least 100 employees to require that their employees be fully vaccinated or tested weekly. The U.S. Department of Labor'sOccupational Safety and Health Administration ("OSHA") is currently drafting an emergency regulation to carry out this mandate, which is expected to take effect in the coming weeks. At this time, it is uncertain, among other things, if the vaccine mandate will apply to all employees or only to employees who work in the office and how compliance will be documented.

As a company with more than 100 employees, it is anticipated that we would be subject to the OSHA regulation concerning COVID-19 vaccination. As a result, we announced a requirement for all our employees to be fully vaccinated by December 8, 2021. At this time, it is not possible to predict with certainty the exact impact that the proposed new regulation or the Company's vaccine requirement will have on us or on our workforce. Our vaccine requirement and the proposed new regulation, if implemented, may result in employee attrition and difficulty securing future labor needs which could have an adverse effect on our business, results of operations and/or cash flows.

Additional information about potential risk factors that could affect our business and financial results is included in our latest Form 10-K and any subsequent Forms 10-Q and 8-K. We caution you not to place undue reliance on the forward-looking statements included in this press release, 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. We also disclaim any duty to comment on or correct information that may be contained in reports published by investment analysts or others.

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 attributable to KBR, plus interest expense, net; provision for income taxes; other non-operating (income) loss; and depreciation and amortization. Adjusted EBITDA excludes certain amounts included in EBITDA. EBITDA and Adjusted EBITDA for each of the three- and nine-month periods ended September 30, 2021 and 2020 are considered non-GAAP financial measures under SEC rules because EBITDA and Adjusted EBITDA exclude certain amounts included in the calculation of net income 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- and nine-month periods ended September 30, 2021 and 2020 and also affords investors the ability to make a more informed assessment of such core performance for the comparable periods.

Adjusted EPS

Adjusted earnings per share (Adjusted EPS) for each of the three- and nine-month periods ended September 30, 2021 and 2020 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- and nine-month periods ended September 30, 2021 and 2020 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- and nine-month periods ended September 30, 2021 and 2020 by adjusting diluted EPS for the items included in the table below.

We have calculated the Adjusted EPS for the 2021 guidance by adjusting diluted EPS for the items included in the table below.

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- and nine-month periods ended September 30, 2021 and 2020 by adjusting operating cash flow provided by operating activities for items included in the table below.

We have calculated the 2021 guidance for adjusted operating cash flows by adjusting cash flows provided by operating activities for the items included in the table below.

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SOURCE KBR, Inc.