Q2 2023 KBR Inc Earnings Call
And I will be your moderator for today's call.
All lines are on mute for the presentation portion of the cool.
When opportunity for questions and answers at the end.
If you'd like to ask a question. Please press Star then one when he was telephone keypad.
I would now like to turn the conference over to your host Jamie debris. So Jamie. Please go ahead when you're ready.
Thank you good morning, and welcome to Kbr's second quarter fiscal year 2023 earnings call.
Joining me are Stuart <unk>, President and Chief Executive Officer, as well as Mark Sopp, Executive Vice President and Chief Financial Officer, Stuart and Mark will provide highlights from the quarter and then open the call for your questions.
Today's earnings presentation is available on the investors section of our website at KBR Dot com.
This discussion includes forward looking statements, reflecting kbr's views about future events and their potential impact on performance as outlined on slide two.
These matters involve risks and uncertainties that could cause actual results to differ significantly from these forward looking statements as discussed in our most recent Form 10-K available on our website.
This discussion also includes non-GAAP financial measures that the company believes to be useful metrics for investors. A reconciliation of these non-GAAP measures to the nearest GAAP measure is included at the end of our earnings presentation.
I'll now turn the call over to Stuart.
Thank you Jamie on a warm welcome to our Q2 earnings presentation, we've actually got quite a bit to get through today. So let me dive stood Ed I'll start on slide five.
Zero harm so we recently issued our sustainability report for 2022.
ESG commitment and alignment to shareholder value is unwavering.
It was highlighted a number of key stats on the slide but I would urge you to read the sustainability report is obviously there is a lot more than we can show you today a.
A few key stops and some takeaways from the volume of revenue directly impacting sustainability for our customers across the $2 billion threshold in 'twenty two.
I think this is a clear indication of increasing alignment with shareholder value as we progress our ESG agenda, I think a real differentiator for KBR.
2022 was a four <unk> fourth consecutive year of carbon neutrality, and we will continue with offsets as we head towards our operational net zero target in 2013.
There are a number of external recognitions on the right hand side, some of which you have seen before like fortune's most admired companies on forbes' top female friendly companies. But in addition, we were recently recognized by <unk> as a gold standard sustainable company and by USA today as a climate leader.
<unk> this year.
This quarter, which we did announce we achieved msci's highest ESG rating of Triple a all of which were very very proud of but all of which we could not have achieved without the commitment of our amazing people. So a big shout out and thank you to.
To them.
So on to slide six and the business health.
On the people front, we've increased our overall head count through the end of June by 18, one 8% year over year. Now this is not the only measure, but I think it is a solid indicator.
Talent acquisition investments are working.
Our businesses continue to grow.
As you know in summer and was extreme heat across the world don't we know it is.
It's timely we update you on our future talent and intern programs.
KBR offers summer internships to hundreds of students each year with full time offers ultimately extended to the majority of candidates, which is a good fact I think.
We recruit the students through University partnerships in fact, we have over 158 universities across the world that we partner with including minority serving institutions to oversee encourage minority participation support our diversity efforts and of course foster inclusion.
Once students graduate and joined KBR, we provide an early career rotational program, which is actually full time for two years. The consists of four rotations and importantly, including one international rotation and this happens both in the business and the functional areas and we're seeing great success with these programs thus far.
And they really continue to bolster our talent pipeline, which I'm sure you will agree is very important.
Moving to zero harm on the top right. We've covered a number of key points already but I'd just like to highlight our safety performance. This year continues to be top quintile and this is all about looking after our people and as I've said many times before good safety is frankly, good business. So another shout out to our people.
Who continue to deliver every single day.
Now moving to business growth bookings across the group were pleasing with trailing 12 month book to Bill of one one times now this resulted in an increase to backlog to $21 $1 billion, which I believe is a strong reflection of converting a pipeline, which really remains.
Attractive across the segments.
With no Big awards in the quarter itself. This once again shows the resiliency of our business model.
For 2023, we now have over 90%, 90% of the work required to deliver on 2023, what quite a feat at the end of June .
Other good indicator I think of the resiliency and the predictability of our business model, although outlook and ultimately our targets.
So I want to the high level financials.
Our revenue grew in line with our targets at 8% and Thats, even higher ex OE W.
But with an associated operational EBITDA growth of 16% one 6%.
Terrific that you may recall, we sold some non core assets some legacy investments in roads in the UK and our U S property in Q2 last year, which we have adjusted out. So you can see the true operational performance year on year.
This clearly reflects the increased margin performance across the business, but in STS in particular on the <unk>.
This is having at the group level.
Cash performance was terrific after a typical sluggish start in Q1 and.
And we are at 147% conversion year to date again, absolutely outstanding.
We continued in fact, we upped our share repurchases and coupled with dividends, we returned $95 million to shareholders in the quarter for a total of $172 million in the first half of 'twenty three.
Im also very pleased that we retired the remaining legacy issue from Logcap, III, which removed a sizeable legacy risk and gives us certainty of outcome.
We're very pleased with.
As you know, we said we would seek to settle the convertible note and avoid dilution this year.
And in the quarter, we made a formal election to settle the convertible notes in cash now and making this cash election, and partially retiring the convertible notes and no hedge we triggered an accounting impact which caused a special charge of $314 million.
Hit the P&L this quarter.
Just think derivative accounting so mark will cover this in detail in a moment, but the technical accounting for the convert notes does not change the underlying economics of how we settle the maturity with a minimum impact to KBR.
And this charge was adjusted out although results and appropriately so.
Now in addition to the cash election.
We extinguished almost 30% of our convert liability this quarter, so getting a good chunk of that obligation behind us, while maintaining a strong balance sheet and leverage so great outcome.
So in short we've had a terrific first half to 23.
We will be raising our EBITDA guidance, accordingly, and Mark will cover later.
Now on to slide seven and a few words on our key markets.
Firstly sustainable technology continues to outperform.
Just in financials, but in bookings as we continue to leverage the energy trilemma, we've talked about that many times and taking advantage of these market drivers, we discussed last quarter, resulting in a book to bill of one four on a trailing 12 months basis.
Real real solid indicator for our future earnings backlog pushed across the $5 billion hurdle and is a great indicator for our continued momentum.
The quality of what we are winning is really impressive.
Highlighted three on the slide are firmly in the energy transition space, we have a strong capability in lithium that we acquired a few years ago technology and Knowhow focused on lithium extraction that has been expanded upon as we look to the next generation battery technology with Ias <unk> chemicals.
After a number of ammonia awards last quarter, we were again pleased to announce the arena clean hydrogen has chosen KBS key green technology solution for this green ammonia project. This is a 20 to 100 tons per day plant. So very much at scale, so very exciting.
And finally in the Green defining area Hindustan Petroleum has chosen our rose technology, we've talked about that many times and I think that's really just demonstrates continued activity in this area.
Now onto government solutions.
Obviously, the highlight for the quarter, which was in everyone's mind was to get through the debt ceiling process.
Our award of large contracts still remains fairly slow and what do we think we will come through a bit lumpy and somewhat difficult to predict as the year progresses.
Spending priorities as we highlight on the slide and have discussed previously are very much in our wheelhouse and ask about last quarter I would highlight the resilience of our business model with a book to bill in the quarter of one <unk> and on a trailing 12 month basis 0.9 X.
This has been achieved without a significant awards in the quarter. So a highly resilient and agile business model. However, in saying that as you've seen in July we could not have been awarded the Imo's III contract by NASA, which will come through in our Q3 numbers, which is significant.
As you are aware, we have a conservative booking policy and we do not book Awards under protest. So also in Q3, we should hopefully see resolution of the <unk> three on the six two contracts, which are both under protest both of what you are well aware of so Q3 is actually shaping up to be one of them.
On leverage so great outcome.
So in short we've had a terrific first half to 23.
We will be raising our EBITDA guidance, accordingly, and Mark will cover later.
Those positively lumpy bookings quarters, so quite a very exciting.
Now on to slide seven and a few words on our key markets.
So there are a few highlights from the quarter on the bottom right on Mark three the volume has gone up quite a bit. Unlike most launch NASA contracts. It has a long period of performance that will run for five years base with four additional years an option. So nine years in total and <unk> III is also strategically important as the whatnot.
Firstly sustainable technology continues to outperform.
Not just the financials, but in bookings as we continue to leverage the energy trilemma, we've talked about that many times and taking advantage of these market drivers, we discussed last quarter, resulting in a book to bill of one four on a trailing 12 months basis.
It covers the international space station, but it has an increasing focus on octopus and an Orion as we return to the Moon.
Real real solid indicator for future earnings backlog pushed across the $5 billion hurdle and is a great indicator for our continued momentum.
I'm just thinking to NASA, it's worth highlighting the mission integration contract that we secured walking with a small business.
We view small businesses are strategic stakeholders and our teams are flushed, some really strong and trusting relationships that have not only resulted on contract wins like this one but we have also been recognized by our customers for excellence in small business utilization, which I think is very important strategically.
The quality of what we are winning is really impressive.
Highlighted three on the slide are firmly in the energy transition space.
We have a strong capability in lithium that we acquired a few years ago technology and Knowhow focused on lithium extraction that has been expanded upon as we look to the next generation battery technology with ISG chemicals.
Strategically important we expanded our base of operations presence securing support services.
Pacific. This is an area of increased focus and presence for the U S military and of course August into the future.
After a number of ammonia awards last quarter, we were again pleased to announce the arena cleanup hydrogen has chosen kbr's K Green technology solution for this green ammonia project. This is a 2200 tons per day plant. So very much at scale, so very exciting.
I will now hand over to Mark.
Okay, great. Thank you Stuart.
Going to focus on our core operational performance upfront where.
Where we did have terrific results and then I'll address the legal charge in the technical accounting charge on the convertible notes and then finish up with guidance.
And finally in the Green defining area Hindustan Petroleum has chosen our rose technology, we've talked about that many times and I think that's really just demonstrates continued activity in this area.
So with that I'll pick up on slide nine.
Now on to government solutions.
The core operational numbers really continued to trend well in Q2 have you heard from Stuart.
Obviously, the highlight for the quarter, which was in everyone's mind was to get through the debt ceiling process.
Our agile diversified and global business model has consistently delivered growth as.
Award of large contracts still remains fairly slow and I want to we think will come through a bit lumpy and it's somewhat difficult to predict as the year progresses.
As we are able to tap opportunities.
Evolving markets we serve.
Top line was up 8% and even a little more ex olay W with contribution from both segments.
Spending priorities as we highlight on the slide and have discussed previously are very much in our wheelhouse and ask about last quarter I would highlight the resilience of our business model with a book to bill in the quarter of one <unk> and on a trailing 12 month basis, a 0.9 X.
As Stuart mentioned earlier EBITDA growth in Q2 was even more pronounced registering at a strong 16% in the quarter, excluding the gain from disposal of non strategic assets. We had in Q2 of last year.
Both segments also contributed to the strong EBITDA growth and it's also true.
This has been achieved without a significant awards in the quarter. So a highly resilient and agile business model. However, in saying that as you've seen in July we could not have been awarded the <unk> contract by NASA, which will come through in our Q3 numbers, which is significant.
Margins at the consolidated level are continuing to improve as sts's covering a bigger portion of the mix.
Adjusted EPS on the same basis is up double digits, 16%.
For all the same reasons.
As you are aware, we have a conservative booking policy and we do not book Awards under protest. So also in Q3, we should hopefully see resolution of the <unk> three on the six two contracts, which are both under protest both of what you are well aware of so Q3 is actually shaping up to be one of them.
And actually a little ahead of our plan for the first half of the year.
However, as you would expect with higher interest rates, our election to accelerate paying off some of the convertible notes maturing later this year.
And with the legal settlement recently announced interest expense will grow quite a bit in the second half.
Those positively lumpy bookings quarters, so quite very exciting.
This increase will counterbalance the growth in EBITDA, we are seeing from operations, which plays into holding our forward EPS guidance steady.
So there are a few highlights from the quarter on the bottom right on <unk> III the value has gone up quite a bit. Unlike most launch NASA contracts. It has a long period of performance that will run for five years base with four additional years an option. So nine years in total and <unk> III is also strategically important as the whatnot.
We think all things considered that's a good outcome given the risks were retiring.
More on this in a bit.
Adjusted EBITDA and EPS exclude two significant nonrecurring charges worth discussing a little bit more here.
It covers the international space station, but has an increasing focus on octopus under an Orion as we return to the Moon.
The first is the 144 million pre tax charge to settle the Logcap III qui Tam case that we announced on July three.
And sticking to NASA, it's worth highlighting the mission integration contract that we secured walking with a small business now.
This was excluded from adjusted EPS as it represents a legacy item from about a dozen years ago.
We view small businesses are strategic stakeholders and our teams are flushed, some really strong and trusting relationships that have not only resulted on contract wins like this one but we have also been recognized by our customers for excellence in small business utilization, which I think is very important.
The second is for the 314 million accounting charge Stuart cover that earlier related to actions, we took to settle our convertible notes in cash and also the early retirement of $100 million in principle.
<unk> notes.
Strategically important we expanded our base operations presence securing support services in the Indo Pacific. This is an area of increased focus and presence for the U S military and of course <unk> into the future.
I'll cover this in more detail shortly in terms of the accounting treatment, but it's important to note that due to the nature of these charges and as confirmed with our bank group. Both of these will have no adverse impact on our EBITDA for credit borrowing based purposes and for covenant compliance purposes and thus.
Hand over to Mark.
Okay, great. Thank you Stuart I'm going to focus on our core operational performance upfront.
They will have no impact on liquidity Big point.
Where we did have terrific results and then I'll address the legal charge in the technical accounting charge on the convertible notes and then finish up with guidance.
At the same time, both of these resolved or mitigate risk going forward, which is a positive.
Over to cash cash flow from operations was really strong in Q2 over 250 million with year to date cash conversion of almost 150% of adjusted net income.
So with that I'll pick up on slide nine.
The core operational numbers really continued to trend well in Q2 have you heard from Stuart.
So hats off to the teams across both segments were strong performance negotiating smarter commercial terms.
Our agile diversified and global business model has consistently delivered growth as.
As we are able to tap opportunities in the evolving markets we serve.
Strong client collections and also other aspects of working capital management, which were spot on.
Top line was up 8% and even a little more OE W with contribution from both segments.
Now I'll move on to slide 10 with more details on the two segments.
STS continues to have just a stellar year with revenues up 32% and EBITDA production up 45% all organic.
As Stuart mentioned earlier EBITDA growth in Q2 was even more pronounced registering at a strong 16% in the quarter, excluding the gain from disposal of nonstrategic assets. We had in Q2 of last year.
And Stuart covered earlier strengthened STS is well balanced across demand for energy transition and also energy security with.
Both segments also contributed to the strong EBITDA growth and it's also true margins at the consolidated level are continuing to improve as sts's covering a bigger portion of the mix.
With clients increasingly trusting KBR to help drive the carbonization solutions all around the world.
EBITDA margins were 20% for Q2 again aided by strong licensing mix and also increased activity on our joint venture projects.
Adjusted EPS on the same basis is up double digits at 16%.
For all the same reasons.
And actually a little ahead of our plan for the first half of the year.
The government solutions revenues were up 6% on an ex <unk> basis good growth there.
However, as you would expect with higher interest rates, our election to accelerate paying off some of the convertible notes maturing later this year.
Our team continues to demonstrate ability to drive on contract growth across its diverse book of business.
And with the legal settlement recently announced interest expense will grow quite a bit in the second half.
It is a real vital important strength for KBR.
International contribution and strong performance based fees helped drive margins up to 11% in Q2.
This increase will counterbalance the growth in EBITDA, we are seeing from operations, which plays into holding our forward EPS guidance steady.
Which obviously complemented the strong STS margins for an excellent quarter overall in terms of profitability.
We think all things considered that's a good outcome given the risks were retiring.
More on this in a bit.
Now on to slide 11 on capital and cash flow matters.
Adjusted EBITDA and EPS excludes two significant nonrecurring charges worth discussing a little bit more here.
With dividends being increased earlier this year and with buybacks as Stuart said $95 million was returned to shareholders in Q2, which together with Q1 amounts to over $170 million for the first half.
The first is the $144 million pre tax charge to settle the Logcap III qui Tam case that we announced on July three.
In addition, as previously announced we used about $200 million to accelerate the maturity of about 30% of our outstanding convertible notes and the associated note hedge and warrant.
This was excluded from adjusted EPS as it represents a legacy item from about a dozen years ago.
The second is for the 314 million accounting charge Stewart covered that earlier related to actions, we took to settle our convertible notes in cash and also the early retirement of $100 million in principle of such notes.
We did this to contain the overall cost of the maturity in the event, we continue to see growth in our stock price as the year progresses.
Having deployed this amount of capital. It is indeed notable our leverage ratio just nudged up a notch.
I'll cover this in more detail shortly in terms of the accounting treatment, but it's important to note that due to the nature of these charges and as confirmed with our bank group. Both of these will have no adverse impact.
One nine last quarter to two dot zero this quarter.
Attributed to the strong growth we had in EBITDA and also the strong cash flow production in Q2.
On our EBITDA for credit borrowing based purposes and for covenant compliance purposes, and thus they will have no impact on liquidity Big point.
Now, let me shed some light on how we see our capital position evolving in the next couple of quarters.
While we took the P&L charge from the legacy legal settlement in Q2, the associated payment actually went out the door in Q3, so that will be reported in the third quarter.
At the same time, both of these resolved or mitigate risk going forward, which is a positive.
Over to cash cash flow from operations was really strong in Q2 over $250 million with year to date cash conversion of almost 150% of adjusted net income.
After that event, we have to deal with what remains of the convertible notes in the note hedged and the associated warrants.
As reported in publicly filed transaction documents the maturity of the notes and the note hedge is November one of this year.
So hats off to the teams across both segments were strong performance negotiating smarter commercial terms.
Has the warrants mature between February and May of next year.
<unk> client collections and also other aspects of working capital management, which were spot on.
At a $65 stock price assumption the aggregate net value of the amount that remains outstanding across all three of these instruments is approximately $500 million.
Now I'll move on to slide 10 with more details on the two segments.
STS continues to have just a stellar year.
With revenues up 32% and EBITDA production up 45% all organic.
This of course will float with any changes to our stock price.
About half of that $500 million value is attributed to the convertible notes and the associated hedge again maturing November one.
As Stuart covered earlier strengthen STS is well balanced across demand for energy transition and also energy security with clients increasingly trusting KBR to help drive the carbonization solutions all around the world.
We've elected to settle in cash.
The other half is attributable to the warrants, which may be settled in cash or shares and we'll make the decision on those two methods later this year.
EBITDA margins were 20% for Q2 again aided by strong licensing mix and also increased activity on our joint venture projects.
We will of course pursue maximizing free cash flow to fund these needs.
But do you expect borrowings to increase.
The government solutions revenues were up 6% on an ex <unk> basis good growth there.
Must have provided more interest expense.
The outlook for the rest of this year.
So I'll hit that in guidance here in a moment.
Our team continues to demonstrate ability to drive on contract growth across its diverse book of business.
Now, let me touch on the accounting treatment for the convertible notes and note hedge.
Which is a real vital important strength for KBR.
And indeed, the new rules.
International contribution and strong performance based fees helped drive margins up to 11% in Q2.
Derivatives and hedge instruments do make this particularly complicated so please bear with me.
Which obviously implemented the strong STS margins for an excellent quarter overall in terms of profitability.
We said in prior calls we intended to settle the convertible notes and note hedge in cash.
And in April we made the required election to ensure that outcome.
Now onto slide 11 on capital and cash flow matters.
That election triggered different accounting treatment for the convertible notes and then hedge.
With dividends being increased earlier this year and with buybacks as Stuart said $95 million was returned to shareholders in Q2, which together with Q1 amounts to over $170 million for the first half.
Previously the notes and hedge qualify for equity exemption.
Under accounting rule, ASC 815 on derivatives and hedging.
In addition, as previously announced we used about $200 million to accelerate the maturity of about 30% of our outstanding convertible notes and the associated note hedge and warrant.
Because share settlement was an available option.
However, once the cash settlement election was made.
The convertible notes and note hedged no longer qualified for that exemption and consequently became subject to fair value measurement on the date, we made an election.
We did this to contain the overall cost of the maturity in the event, we continue to see growth in our stock price as the year progresses.
Oddly the new rules apply this fair value treatment differently for the convertible notes on one hand, and the corresponding hedge on the other.
Having deployed this amount of capital. It is indeed notable our leverage ratio just nudged up a notch from one nine last quarter to two dot zero this quarter.
We're required to expense the fair value of the notes in the P&L.
<unk> added to the strong growth we had in EBITDA and also the strong cash flow production in Q2.
And over quarters, two three and four of this year until they mature.
Whereas the economic benefit delivered by the hedge is recorded to equity.
Now, let me shed some light on how we see our capital position evolving in the next couple of quarters.
That means the P&L does not reflect the economic benefit that the hedge truly delivers that's the.
While we took the P&L charge for the legacy legal settlement in Q2, the associated payment actually went out the door in Q3, so that will be reported in the third quarter.
Pardon.
So as a result of all of that we recorded a noncash charge in the P&L of the $314 million related to the convertible notes.
After that event, we have to deal with what remains of the convertible notes in the note hedged and the associated warrants.
And we'll also recorded an additional noncash charge of $152 million spread out over Q3, and Q4 of this year to reflect this accounting treatment I just summarized.
As reported in publicly filed transaction documents the maturity of the notes and the note hedge is November one of this year.
Whereas the warrants mature between February and May of next year.
So that sums it up let me just reemphasize the underlying economics to resolving all three of these elements of the convert are not different than what we have previously communicated.
At a $65 stock price assumption the aggregate net value of the amount that remains outstanding across all three of these instruments is approximately $500 million.
Our approach to resolve the whole matter remains as stated and again the accounting charges do not have any impact on our liquidity. So they do distort the P&L pretty significantly but bear in mind, we're continuing to do as we said we would do get past this and maintain strong liquidity throughout and do so with minimal.
This of course will float with any changes to our stock price.
About half of that $500 million value is attributed to the convertible notes and the associated hedge again maturing November one.
Which we've elected to settle in cash.
Back to KBR. So that's our that's certainly our commitment.
The other half is attributable to the warrants, which may be settled in cash or shares and we'll make the decision on those two methods later this year.
Thanks for bearing all of that I'm going to move onto our guidance on slide 12.
Revenue guidance is unchanged at $6 9 billion to $7 1 billion for the year.
We will of course pursue maximizing free cash flow to fund these needs.
However, with our strong operational performance in the first half we are bumping up adjusted EBITDA to $730 to $750 million.
But do you expect borrowings to increase and thus have provided more interest expense.
The outlook for the rest of this year.
Our adjusted EPS guidance is unchanged at $2 76 per share to $2 96 per share.
So I'll hit that in guidance here in a moment.
Now, let me touch on the accounting treatment for the convertible notes and note hedge.
In short the outflows for the convert and the legal settlement are considerably more than we anticipated at the start of this year.
And indeed, the new rules.
Derivatives and hedge instruments do make this particularly complicated so please bear with me.
And borrowings to cover those amounts are driving up interest expense that are offsetting the improved profit production, we see from our operations.
We said in prior calls we intended to settle the convertible notes and note hedge in cash.
And in April we made the required election to ensure that outcome.
And finally, our adjusted operating cash flow guidance is unchanged at 425 million to $460 million and that excludes the qui Tam legal settlement as it would otherwise truly distort the cash flow performance that the business is producing.
Election triggered different accounting treatment for the convertible notes and the note hedged.
Previously the notes and hedge qualify for equity exemption.
So summarizing this the core business is performing really well and we're increasing the outlook for production of operating profit from the business a great Testament to the performance of both STS and GFS.
Under accounting rule, ASC 815 on derivatives and hedging.
Because share settlement was an available option.
However, once the cash settlement election was made.
This strong performance allows us to retain our adjusted EPS at the same level that we set out at the start of the year despite increased interest costs from higher rates.
The convertible notes and note hedged no longer qualified for that exemption and consequently became subject to fair value measurement on the date, we made that election.
The interest associated with resolving the legacy matters and managing the converted as we said here.
Oddly the new rules apply this fair value treatment differently for the convertible notes on one hand, and a corresponding hedge on the other.
And all doing so at a significantly higher stock price.
So all things considered remarkable story of positioning the business to tap attractive markets generating strong cash flows and clearing the way with fewer constraints going forward.
We're required to expense the fair value of the notes in the P&L.
And over quarters, two three and four of this year until they mature.
Whereas the economic benefit delivered by the hedge is recorded to equity.
As we generate attractive levels of cash flow in future quarters, we expect to conduct a combination of buybacks debt reduction and M&A.
That means the P&L does not reflect the economic benefit that the hedge truly delivers that's the odd part.
To stay on course of our long term targets, which we remain confident in achieving.
So as a result of all of that we recorded a noncash charge in the P&L of the $314 million related to the convertible notes.
With that I'll turn it back to Stuart.
Thanks, Mark great job on onto Slide 13 on last slide for today.
And we'll also recorded an additional noncash charge of $152 million spread out over Q3, and Q4 of this year to reflect this accounting treatment I just summarized.
At a high level. The business continues to operate really really well, which has of course resulted in an adjusted EBITDA Guide increase.
Better business mix and margin performance has offset increased expense from external factors, mainly interest expense and I think that's a key takeaway today.
So that sums it up let me just reemphasize the underlying economics to resolving all three of these elements of the convert are not different than what we have previously communicated.
Getting the right work has been a constant thematic for KBR and this continues with solid book to Bill a good indicator of our end market volume say under business model resiliency.
Our approach to resolve the whole matter remains as stated and again the accounting charges do not have any impact on our liquidity. So they do distort the P&L pretty significantly but bear in mind, we're continuing to do as we said we would do get past this and maintain strong liquidity throughout and do so with minimal.
Q3 book to Bill as we talked about earlier is already looking strong with the <unk> Award.
What's under contract is above 90%, 92% a great Q2 takeaway. So the focus now is about delivering for our customers. It's about cash which was actually excellent in Q2 and of course positioning for a strong 2024.
Back to KBR. So that's our that's certainly our commitment.
Thanks for bearing all of that I'm going to move onto our guidance on slide 12.
Revenue guidance is unchanged at $6 9 billion to $7 1 billion for the year.
However, with our strong operational performance in the first half we are bumping up adjusted EBITDA to $730 to $750 million.
MSCI AAA rating I believe is a direct reflection of our continued ESG progress on our sustainability commitment.
Our adjusted EPS guidance is unchanged at $2 76 per share to $2 96 per share.
And I will finish as Mark did reiterating our long term 2025 targets remained firmly in our sights.
In short the outflows for the convert and the legal settlement are considerably more than we anticipated at the start of this year.
There's been quite a bit of noise out there around interest cost versus buybacks et cetera, but as long as our business meets expectations and deliver strong free cash flow, which it has done historically, we're very confident on the 475.
And borrowings to cover those amounts are driving up interest expense that are offsetting the improved profit production, we see from our operations.
And finally, our adjusted operating cash flow guidance is unchanged at 425 million to $460 million and that excludes the qui Tam legal settlement as it would otherwise truly distort the cash flow performance that the business is producing.
Thank you very much and I'll now hand back to the operator, who will open the call for questions.
Thank you.
As a reminder, you would like to ask a question. Please press Star then one on your kind of thank you Pat.
So summarizing this the core business is performing really well and we're increasing the outlook for production of operating profit from the business a great Testament to the performance of both STS and GFS.
Let me ask you that you limit yourself to one question and one follow up.
Next question gentlemen.
This strong performance allows us to retain our adjusted EPS at the same level that we set out at the start of the year despite increased interest costs from higher rates.
The interest associated with resolving the legacy matters and managing the convert as we said here.
We will have to ask a question on the line from Sean Eastman with Keybanc capital. Please go ahead.
And all doing so at a significantly higher stock price.
And you are ready.
So all things considered remarkable story of positioning the business to tap attractive markets generating strong cash flows and clearing the way with fewer constraints going forward.
Hi team. Thanks for thanks for taking my questions.
I wanted to dive in on GFS, a little bit I mean in the last couple of quarters, we've talked about how STS is running two years ahead of the 2025 plan.
As we generate attractive levels of cash flow in future quarters, we expect to conduct a combination of buybacks debt reduction and M&A.
But just with the strong on contract growth.
Seeing the larger frameworks yet to be put in the backlog.
To stay on course of our long term targets, which we remain confident in achieving.
How are you guys feeling on the on the GFS component of that bridge to the 2025 target.
With that I'll turn it back to Stuart.
Thanks, Sean Good question and good that we get our government question first Rod STS which has been the trend recently there.
Thanks, Mark great job on onto Slide 13 last slides for today.
At a high level. The business continues to operate really really well, which has of course resulted in an adjusted EBITDA Guide increase.
I think we're feeling really good about it.
I think the resiliency of the business model, we've reflected on last quarter on this and I think thats the.
Better business mix and margin performance has offset increased expense from external factors, mainly interest expense and I think that's a key takeaway today.
The proof of the Prudence and the eating which is in the book to Bill. So so that's really strong and we're seeing of course sign up the award of three and these protests shake.
Shaking out in Q3, hopefully, which will really start to drive additional revenue as we head into 'twenty four.
Getting the right work has been a constant somatic for KBR and this continues with solid book to Bill a good indicator of our end market volume say under business model resiliency.
And also we Havent talked about this on the call, but the work on home Safe continues to go really really well and so our expect to sort of ramp up on that as we start some of the early early work on deliveries and things to make sure that we're all set running into 'twenty four is going to plan. So.
Q3 book to Bill as we talked about earlier is already looking strong with the <unk> Award.
What's under contract is above 90%, 98% a great Q2 takeaway. So the focus now is about delivering for our customers. It's about cash which was actually excellent in Q2 and of course positioning for a strong 2024.
Feeling really really strongly about the guide we've given for <unk> and not see achieving the revenue growth through setup.
Okay excellent.
MSCI AAA rating I believe is a direct reflection of our continued ESG progress on our sustainability commitment.
If I'm being honest my eyes are glazing over through most of Mark's.
Prepared remarks today.
But I guess, yes.
Yes, I guess.
And I will finish as Mark did reiterating our long term 2025 targets remained firmly in our sights.
I guess the way I would approach. The question is just as we're thinking about the bridge to 2024.
There's been quite a bit of noise out there around interest cost versus buybacks et cetera, but as long as our business meets expectations and deliver strong free cash flow, which it has done historically, we're very confident on the 475.
How should we contemplate the kind of year on year interest expense headwind and.
How does the share count look next year versus this year, maybe thats the best way for me to make sure I've got this right in the model.
Thank you very much and I'll now hand back to the operator, who will open the call for questions.
Yeah well.
Passion for you to sleep answer that question, but but in more detail, but but I think we both reiterated our commitment to the 475, we've done the math around around generating free cash flow to be able to buyback to get there, but mark over to you.
Thank you.
As a reminder, if you'd like to ask a question. Please press.
When you kind of think Keybanc.
Let me ask you that you limit yourself to one question and one follow up.
Yes, Sean well look we we had a lot of time with the accounting this quarter. So we wanted to share some of that with all of them.
Please.
Next question gentlemen.
But it did try to simplify it to the best we could.
I want to say something relative to your last question on GFS.
Take it for granted that margins are somewhat.
Sure.
Fixed in GFS, but theyre not you really have to perform everyday on programs you have to earn it.
We will have to ask a question on the line from Sean Eastman with Keybanc capital. Please go ahead.
Incentive base fees that really are driven by very quantitative performance by a lot of different folks in the government and time and again our group delivers just incredibly strong contract performance they get Great Award fee scores.
When you are ready.
Yes.
Hi team. Thanks for thanks for taking my questions.
I wanted to dive in on GFS, a little bit I mean in the last couple of quarters, we've talked about how STS is running two years ahead of the 2025 plan.
And cranking out of 11%.
Quarter, well this quarter you know the quarters is more like 10, but that's just really great performance on our projects very consistently and that's been the case for a long time, so just hats off to them on that and.
But just with the strong on contract growth Ges is seeing the larger frameworks yet to be put in the backlog.
And when you do that you win Recompete and you in on contract growth and it all are interrelated and that shouldnt be.
How are you guys feeling on the on the GFS component of that bridge to the 2025 target.
Mist.
On <unk>.
Thanks, Sean Good question and good that we get our government question first Rod STS which has been the trend recently.
<unk> to 'twenty, four and share count and interest.
The interest is pretty much up dollar for dollar for the increase in EBITDA that we guided to today for this year.
We're feeling really good about it.
It's too early to tell how we'll guide interest for next year. It will depend on what the fed does and will depend on.
<unk>.
I think the resiliency of the business model, we've reflected on last quarter on this and I think thats.
How we manage the capital structure, there may be opportunities.
The proof of the Prudence and the eating which is in the book to Bill. So so that's really strong and we're seeing of course sign up the award of three and these protests shaking.
For new capital Thats may be cheaper than something that's available today. So I think we need to just focus on running our business executing our contracts generating cash and then toggling between buybacks and debt reduction.
Shaking out in Q3, hopefully, which will really start to drive additional revenue as we head into 'twenty four.
Which will do sort of lead to be committed to maximizing the returns for KBR and marching towards those targets, but I. Just think we will have to give you more guide later on that as the capital markets develop.
And also we Havent talked about this on the call, but the work on home Safe continues to go really really well and so our expect to sort of ramp up on that as we start some of the early early work on deliveries and things to make sure that we're all set running into 'twenty four is going to plan. So.
Okay understood I'll turn it over thanks very much guys.
Okay.
Thank you.
Feeling really really strongly about the guide we've given for <unk> and not see achieving the revenue growth through setup.
We now have.
Steven Stifel. Please go ahead, when you're ready.
Hey, good morning.
Okay excellent.
Stuart I guess I'll shift it back to Ses.
If I'm being honest my eyes are glazing over through most of Mark's.
That seems to be the topic disorder.
So FBS continues to outpace expectations pretty handily and presumably the better global economic outlook will help that trajectory as we think through the rest of 'twenty three.
Prepared remarks today.
But I guess, yes.
Yes, I guess.
I guess the way I would approach. The question is just as we're thinking about the bridge to 2024.
However seems to be a pretty wide range of expectations for how SDN is going to do in 'twenty four if the economy does slow.
How should we contemplate the kind of year on year interest expense headwind and.
Just curious if you have any thoughts on sort of how youre assessing the economic sensitivity of the business and do you still see that low double digit growth CAGR over time as appropriate or do you think some of that strength was pulled forward by moving the EBIT guide up.
How does the share count look next year versus this year, maybe thats the best way for me to make sure I've got this right in the model.
Yeah well.
No I think I think as it sits today I think that that sort of low double digit as is appropriate in terms of where we're thinking we can take the business on.
The passion for you to sleep answer that question, but but in more detail, but but I think we both reiterated our commitment to the 475, we've done the math around around generating free cash flow to be able to buyback to get there, but mark over to you.
And certainly the book to Bill that we've achieved in the quality of earnings being derived from that book to Bill would support that thesis.
Yes, Sean well look we we had a lot of time with the accounting this quarter. So we wanted to share some of that with all of them.
I think the overall contribution is ahead of pace as you as you rightly pointed out and maybe even growing.
But I did try to simplify it to the best we could all I want to say something relative to your last question on GFS.
To take it for granted that margins are somewhat.
Faster than we've described historically and.
Yeah.
Fixed in GFS, but theyre not you really have to perform everyday on programs you have to earn it.
But what that does for KBR has just really helps us on our 2025 targets overall.
Incentive base fees that really are driven by very quantitative performance by a lot of different folks in the government and time and again our group delivers just incredibly strong contract performance they get Great Award fee scores.
So the way that we think about it is it just derisk the 475 target as we outperform in EBITDA.
And obviously.
475 is modeled on a certain EBITDA and I think we're ahead of pace there and so so I think that all plays plays while on but we are seeing no slowdown in certainly the the bookings momentum of the pipeline in STS and so I think not double digit low double digit growth is highly appropriate.
And cranking out 11%.
Quarter, well this quarter you know other quarters, it's more like 10, but that's just really great performance on our projects very consistently and that's been the case for a long time, so just hats off to them on that and.
And when you do that you weren't recompete and you win on contract growth and it all is interrelated and it shouldn't be.
Great and then maybe shifting back just.
Mist.
On <unk>.
A follow up question on your home save comments.
<unk> to 'twenty, four and share count and interest.
We go through the timeline that that made it through the last hurdle I think end of last October .
The interest is pretty much up dollar for dollar for the increase in EBITDA that we guided to today for this year.
Transition period was initially expected to be nine months, but I think.
It's too early to tell how we'll guide interest for next year will depend on what the fed does and will depend on.
Transcon sort of said they wanted to push that out a little bit because of the summer movie season can you just help us understand what's been happening since last October and sort of what happens from here.
How we manage the capital structure, there may be opportunities.
For new capital Thats may be cheaper than something that's available today. So I think we need to just focus on running our business executing our contracts generating cash and then toggling between buybacks and debt reduction.
Yes, so lots of work going on as you can imagine in terms of system implementation and testing of those systems ongoing right now.
Which puts us which is going well.
Which will do sort of lead to be committed to maximizing the returns for KBR and marching towards those targets, but I. Just think we will have to give you more guide later on that as the capital markets develop.
We've engaged heavily with our supply chain as you would expect and starting to walk through the commercial arrangement with the supply chain. So that that's all ready to go for the early moves and I'm pleased to report that we're in good shape. There also.
Okay understood I'll turn it over thanks very much guys.
So as we as we had the <unk>.
<unk> season will be appropriately ready to start testing the systems.
Okay.
Thank you.
And executing and in terms of real news.
We now have Steve.
Steven Please go ahead when you're ready.
I think what we'll do is we'll get that market really well as we head to the end of the year. So that we start to ramp up and down as we move into the into next year.
Hey, good morning.
Stuart I guess I'll shift it back to Ses.
That seems to be the topic disorder.
Thanks, Stuart and thanks Mark.
So FBS continues to outpace expectations pretty handily and presumably the better global economic outlook will help that trajectory as we think through the rest of 'twenty three.
Thanks, Steve.
Thank you.
Yeah.
We now have Jamie camera.
However seems to be a pretty wide range of expectations for how SDN is going to do in 'twenty four if the economy does slow.
For clarity.
Hi.
Yeah.
Okay.
Just curious if you have any thoughts on sort of how youre assessing the economic sensitivity of the business and do you still see that low double digit growth CAGR over time as appropriate or do you think some of that strength was pulled forward by moving the EBIT guide up.
Hum.
Our next question comes from.
John with credit Suisse.
Hi, good morning.
I guess just one question as I think about you know the headwinds to 2025 targets I mean cash outflows associated with things that were unexpected or just greater when you think about settling the logcap legacy issue, it's taking you more money.
No I think I think as it sits today I think that that sort of low double digit as is appropriate in terms of where we're thinking we can take the business and certainly the book to Bill that we've achieved in the quality of earnings being derived from that book to Bill would support that thesis.
To get rid of the convert.
You know so I'm just trying to understand one why didn't you asked that because cash flow has to be.
I think the overall contribution is ahead of pace as you as you rightly pointed out and maybe even growing.
You get rid of the convert in the legacy legal issues.
Faster than we've described historically and.
Not as much cash.
We buy back the stock.
But what that does for KBR has just really helps us on our 2025 targets overall.
Trying to understand.
You mean like the opposite there to make it comparable and capital allocation in terms of M&A and share repurchase more of a back half of 2020 for 2025 opportunity versus.
So the way that we think about it is it just derisk the 475 target as we outperform in EBITDA.
And in oversea.
475 is modeled on a certain EBITDA and I think we're ahead of pace there and so so I think that all plays plays while on but we are seeing no slowdown in certainly the the bookings momentum of the pipeline in STS and so I think not double digit low double digit growth is highly appropriate.
The next door.
I don't know.
Six nine months and then.
My second question as it relates to the 2025.
Because of all these issues and with the household Greg.
And.
Alright, thank you.
In terms of when it starts to grow again.
Sure.
Okay.
Great and then maybe shifting back just.
To achieve the 2025 target it really seems like it has.
A follow up question on your home save comments.
The earnings ramp it's all very much.
We go through the timeline that that made it through the last hurdle I think end of last October .
Related to the 2025.
The significant ramp in 2025, you know what I mean.
Transition period was initially expected to be nine months, but I think.
To that your target.
Transcon sort of said they wanted to push that out a little bit because of the summer movie season can you just help us understand what's been happening since last October and sort of what happens from here.
That makes sense, so I'll stop there thanks.
Thanks, Jamie.
Yes.
I mean, this very simple answer to these questions I think ultimately we had a quite a conservative deploy.
Yes, so lots of work going on as you can imagine in terms of system implementation on those as a testing of those systems ongoing right now.
Deployment of our own just 50%. So there was had driven deployment through the 'twenty four 'twenty five period. So.
Which is which is going well.
We knew that.
We've engaged heavily with our supply chain as you would expect and starting to walk through the commercial arrangement with the supply chain. So that that's all ready to go for the early moves and I'm pleased to report that we're in good shape. There also.
Why we set it at that level, so that we had a little bit of headroom.
And secondly, we are now expecting as I, just said in the previous remarks more EBITDA.
Ahead of pace in EBITDA, we don't expect that to slow down.
And I'll just say when you do the master grew the EBITDA.
So as we as we had the <unk>.
Z season will be appropriately ready to start testing the systems.
The more achievable targets.
Have to deploy a little bit more cash will still be well south of our three <unk> leverage target. So again, we're feeling really good about that and I've said, we've done the math and I was pretty clear in my prepared remarks.
On executing and in terms of real news.
I think what we'll do is we'll get that working really well as we head to the end of the year. So that we start to ramp up and down as we move into into next year.
As long as the businesses perform.
Thanks, Stuart and thanks Mark.
What's the Julie doing as long as regenerative cash then we're very confident on the $4 75 and sticking by those targets.
Thanks, Steve.
Thank you.
Not using interest or anything else as an excuse not to achieve them, but I'd say over coming on by over performance.
Yeah.
We now have Jamie camera.
The Cherokee.
Okay.
Hi.
Okay. Thank you thanks Stewart.
Yeah.
Okay.
That would be a very much backend loaded.
Hum.
You mean like to get to the 2025 targets like do you think about household good contract you know what I mean.
Our next question comes from.
John with credit Suisse.
The ability to use the balance sheet.
Hi, good morning.
It is very much backend loaded story.
I guess just one question as I think about you know the headwinds to 2025 targets I mean cash outflows associated with things that were unexpected or just greater when you think about settling the logcap legacy issue, it's taking you more money.
I mean, I think I think I think that's probably correct Jamie.
But youll see progressive movement towards it in 'twenty four and <unk>.
As we as we continue with our capital deployment priorities and.
I would say it begins to ramp up so I think.
You'll really start to see the signals and believe as we believe that its certainly within our sites and as we get to the end of 'twenty for you right.
You know so I'm just trying to understand one what did you asked that.
Because cash flow has to be.
Remember this is the last legacy legal issue for us in terms of low cap and so.
You get rid of that.
And the legacy legal issues.
So it clears the path to free up capital deployment, and we don't have to be quite so conservative because we don't have such risks to mitigate into the future.
As much cash.
Buy back the stock.
I'm just trying to understand.
You know what I mean, like the opposite there to make it comparable and it.
We're in a good spot we're firmly committed to these 475 targets.
Capital allocation in terms of M&A and share repurchase more of a back half 2020 for 2025 opportunity versus <unk>.
You're probably right, probably a little bit more twenty-five weighted in 'twenty four weighted but there'll be clarity a path to get there as we progress through 'twenty four for sure.
The next door.
I don't know.
Nine months and then you know.
Okay. Thank you I appreciate the color.
My second question as it relates to the 2025 target because of all these issues and.
Thank you.
That's helpful. Greg.
Our next question comes from Steven Fisher of UBS.
And.
Please go ahead.
Alright, thank you.
And it starts to grow again.
Thanks, Good morning.
Okay.
To achieve the 2025 target it really seems like it has.
You guys cited the better business mix as part of the operational.
The earnings ramp it's all very much.
Outside to the guidance for this year.
Related to 2025.
Before that being offset by the interest so I guess I'm curious what were the elements of the more favorable business mix.
The significant ramp in 2025, you know what I mean to get to that your target if that makes sense. So I'll stop there. Thanks.
That sort of the mix of licensing.
Within Sts.
Thanks, Jamie.
Yes.
And if so.
I mean, this very simple answer to these questions I think ultimately we had a quite a conservative deploy.
A nice amount of bookings there this quarter or what's sort of the.
The visibility you have to more of that going forward.
Deployment of our own just 50%. So there was had driven deployment through the 'twenty four 'twenty five period. So.
Yes, I think.
It's a multi headed statement in a way Steve we did very well in the technology bookings for sure and certainly a lot of activity in that market for that to continue.
We knew that in that.
Why we set it at that level, so that we had a little bit of headroom.
And secondly, we are now expecting as I, just said in the previous remarks more EBITDA.
We're ahead of pace in EBITDA, we don't expect that to slow down.
But in general STS bookings were very very strong. So overall group margin sense. The contribution from STS overall was increased in the mix, but not only that as Mark said earlier, the GFS business that terrifically well in and.
And I'll just say when you do the math the greater the EBITDA.
The more achievable targets.
You have to deploy a little bit more cash will still be well south of our three <unk> leverage target. So again, we're feeling really good about that and I've said, we've done the marks and I was pretty clear in my prepared remarks.
Did very well and award fees and et cetera, coming and restore margins also so it's really across the board.
As long as the businesses perform.
In terms of the performance of the business.
Which the Giulia doing his own regenerative cash then we're very confident on the $4 75, and sticking by those targets and not using interest or anything else as an excuse not to achieve them, but I'd say, what we're counting them by over performance.
Okay. So I guess, just as we think about the FCS margins for the SEC.
Half of the year, any particular kind of expectation to set here I mean can we kind of sustain high are you assuming similar levels to what we achieved in the second quarter based on that mix.
Okay. Thank you Stuart.
We are very much backend loaded.
Yes.
You mean like to get to the 2025 targets like when you think about the household good contract.
I mean, we have this we have this question I think every quarter.
The guide is the guide we said we're trending ahead of that in the high teens.
The ability to use the balance sheet.
It is very much backend loaded story.
Perhaps low twenty's. So it's in that ZIP code for sure for the rest of the year.
I mean, I think I think I think thats, probably correct Jamie.
But you'll see progressive movement towards it in 'twenty four.
Okay, and then maybe just to follow up on the.
And as we as we continue with our capital deployment priorities and.
The budget process.
And the comments you had earlier can you just maybe expand on that a little bit what are the areas that you're most confident in the growth versus those that maybe are still being a bit more debated.
So it begins to ramp up so I think youll.
You'll really start to see the signals and believe as we believe that its certainly within our sites and as we get to the end of 'twenty for you right.
Remember this is the last legacy legal issue for us in terms of low cap and so.
I mean I think the.
So it clears the path to free up capital deployment, and we don't have to be quite so conservative because we don't have such risks to mitigate into the future.
I think we're very confident overall I mean, we've got an STS business. That's outperforming I don't think we need to reiterate not too strongly science and space business grew and Youll see this grew 12% I think mark.
We're in a good spot we're firmly committed to these 475 targets.
Youre, probably right there probably a little bit more twenty-five weighted in 'twenty four weighted but there'll be clarity a path to get there as we progress through 'twenty four for sure.
And.
And obviously with immensely strong bookings coming through so that's that's going to continue.
Our readiness and Sustainment business and the continued work in the European Theater.
Okay. Thank you I appreciate the color.
Thank you.
As also.
Our next question comes from Steven Fisher with UBS.
Set to continue and we've got increased activity, obviously in the Indo Pacific area that we discussed on the call also so feeling really good about that GSI. This quarter had a book to bill of over one.
Please go ahead.
Thanks, Good morning.
You guys cited the better business mix as part of the operational.
Australia has a change of government in a bit of a reset actually kind of realign that platform very strongly and doing well.
Up side to the guidance for this year.
Before that being offset by the interest so I guess I'm curious what are the elements of the more favorable business mix was that sort of the mix of licensing.
The UK business through Frazer Nash continues to really perform strongly with good bookings also so so everything goes back to defense and Intel and really the defense modernization the systems engineering business as it continues to do really well with the Zaire type resilient type business.
Within Sts.
And if so you had a nice amount of bookings there this quarter or what's sort of the.
The visibility you have to more of that going forward.
Yes, I think.
Modeling and the intelligence piece was probably the one that was lagging a little bit behind but we've announced recent awards.
It's a multi headed statement in a way Steve we did very well in the technology bookings for sure and certainly a lot of activity in that market for that to continue.
Allowed us to be very excited about what's going to happen to the next year or so so I am excited across all the segments. Steve is the answer to the question Im sorry, if that sounds a little bit sort of.
But in general STS bookings were very very strong. So overall group margin sense. The contribution from STS overall was increased in the mix, but not only that as Mark said earlier, the GFS business did terrifically well and.
Everything is going well, but thats actually the truth.
On.
And really obviously they won't grow at the same pace and they won't always work in the same quarter, but but overall the trend and the momentum in each of those businesses is really positive.
Did very well and award fees and et cetera, coming and restore margins also so it was really across the board.
In terms of the performance of the business.
Thank you very much.
Okay.
Yeah.
Okay. So I guess, just as we think about the FCS margins for the SEC.
Thank you, we now have Jerry Revich with Goldman Sachs.
Okay.
Half of the year, any particular kind of expectation to set here I mean can we kind of sustain.
Hi, this is clay on for Terry.
Can you give us an update on the timing of the home safe contract and that revenue burn that you expect in 2024.
Feeling similar levels to what we achieved in the second quarter based on that mix.
Yeah.
Okay. So as you know we've got we've got.
I mean, we have this we have this question I think every quarter.
And 'twenty and this year, we've got nothing for home safe no moves in the forecast.
The guide is the guide we said we're trending ahead of that in the high teens.
And I think thats, probably appropriately we will do some of course, but there'll be very very modest.
Perhaps low twenties.
Code for sure for the rest of the year.
And so the ramp up is progressive through the course of next year I think we've been quite clear, we're going to get $2 billion in revenue by the end of the year and cadence.
Okay, and then maybe just to follow up on the.
The budget process.
And the comments you had earlier can you just maybe expand on that a little bit what are the areas that you're most confident in the growth versus those that maybe are still being a bit more debated.
And then that will continue into 'twenty five.
Thanks, and as a quick follow up separately could you update us on the pipeline of ammonia projects that you're tracking and talk about the supply limitations that you have on your side regarding the number of projects you can be working on at a time.
I mean I think the.
I think we're very confident over all I mean, we've got an STS business. That's outperforming I don't think we need to reiterate dot too strongly science and space business grew and you'll see this in grew 12% I think mark.
Yes, I think because it's a.
Our license business that we were not really bumping up against constraints on the numbers. We can do we can do obviously several.
We announced a number of projects ammonia projects across the green Blue and Green spec.
And obviously with immensely strong bookings coming through so that's that's going to continue.
Spectrum last quarter.
The activity levels.
Our readiness and Sustainment business and the continued work in the European Theater.
Again across all three is still high and we've got a lot in our pipeline.
Obviously the.
As also.
Sure.
Set to continue and we've got increased activity, obviously in the Indo Pacific area that we've discussed on the call also so feeling really good about that GSI. This quarter had a book to bill of over one.
The Green solution, we announced this quarter was very exciting just given its scale.
So we don't really disclose the level.
Exactly what we have in pipeline in the various areas, but but.
Australia has a change of government in a bit of a reset actually kind of realigned that platform very strongly and are doing well.
But ammonia continues to be very strong.
Both in terms of Green ammonia, just four for normal I guess supply demand on the ammonia side, but also in blue and green ammonia for different applications.
The UK business through Frazer Nash continues to really perform strongly with good bookings also so so everything goes back to defense and Intel and really the defense modernization. The systems engineering businesses that continues to do really well with the Zaire type resilient type business.
Thanks I appreciate it.
Thanks Clay.
Yes.
Thank you.
We now have Michael Ddos does that cash.
Model and the intelligence piece was probably the one that was lagging a little bit behind but we've announced recent awards.
Okay.
Good morning, Jamie Stewart.
Nicole.
Allowed us to be very excited about what's going to happen to the next year or so so I'm excited across all the segments. Steve is the answer to the question I'm, sorry, if that sounds a little bit sort of.
Okay.
Thank you.
On the ammonia questions sure.
<unk> is the first half of the year as you look out over the next several quarters the regional breakdown of where.
Everything is going well, but thats, obviously the truth.
The opportunities have been coming on the STS front from the licensing.
On.
And really obviously they won't all grew at the same pace and they won't always work in the same quarter, but but overall the trend and the momentum in each of those businesses is really positive.
Project area.
What are the maybe other pneumonia. The other couple of areas that are seeing much more interest in your opex and the opportunities that you can engage with the clients and how or is it other emerging technologies other companies starting to see the success that youre driving here and Youre getting more.
Thank you very much.
Okay.
Yes.
Thank you, we now have Jerry Revich with Goldman Sachs.
Okay.
Our incoming activity that can expand the portfolio on that front.
Hi, this is clay on for Jerry.
Can you give us an update on the timing of the home safe contract and that revenue burn that you expect in 2024.
Okay.
Yes, so I mean.
We've talked about this before Mike. It's it is a very global business and in each quarter, there seems to be activity levels in one region or another.
Okay. So as you know we've got we've got.
And 'twenty and this year, we've got nothing and home safe no moves in the forecast in and I think thats, probably appropriately we will do some of course, but there'll be very very modest.
And so it's a one quarter homes to be in the middle East in the next quarter homes to be in that we talked about Hindustan petroleum in India et cetera. So it's been in Asia Asia is obviously growing fast.
And so the ramp up is progressive through the course of next year I think we've been quite clear, we're going to get to about a billion dollars in revenue by the end of the year and cadence.
Economically.
So it's everywhere and this obviously picked up in the U S as well more so than than.
And then that will continue into 'twenty five.
Historic so.
Very difficult question to answer I would just say that we've got wins happening all across the world.
Thanks, and as a quick follow up separately could you update us on the pipeline of ammonia projects that you're tracking and.
China has been probably slower than historically highest in that starting to pick up a better pace again, so which is a good fact pattern.
Talk about the supply limitations that you have on your side regarding the number of projects you can be working on at a time.
And in terms of.
Yes, I think because it's a.
Emerging technologies and the success, we're having obviously we were and we're in discussions with I mean, one of the great things about.
Our license business that we are not really bumping up against constraints on the numbers. We can do we can do obviously several huh.
We announced a number of projects ammonia projects across the green Blue and Green.
Technology group as they are really good about monetizing new technologies and getting.
Getting them to scale and obviously the.
Spectrum last quarter.
We've been working on the plastic recycling to do just that and.
The activity levels.
Again across all three are still high and we've got a lot in our pipeline.
The first plants on track to produce later this year.
Obviously the.
Which I think will really accelerate the plastics recycle piece.
<unk>.
The Green solution, we announced this quarter is very exciting just given its scale.
And then secondly, things like the Swedish biofuels around sustainable aviation fuel technologies, and again, we just announced that last quarter. So the marketing opportunities around that but we're looking at those constantly.
So we don't really disclose the level exactly what we have in pipeline in the various areas, but but.
But ammonia continues to be very strong.
And making sure that we can get them for a good accretive value for KBR and <unk>.
Both in terms of Green ammonia, just four for normal I guess supply demand in the ammonia side, but also in blue and green ammonia for different applications.
Shareholders, but at the same time thinking through where they sit in the monetization cycle. So so lots of activity in and across technology and really across all the areas in the portfolio and we tried to highlight that a little bit with.
Thanks I appreciate it.
Thanks Clay.
Yes.
The awards from the Green refining area to the to the green sort of ammonia on the ammonia market.
Thank you.
We now have Michael Ddos does that trickle research.
Okay.
Obviously.
Good morning, Jamie Stewart.
Looking at your cost of spectrum in things like lithium in our in our capability in that arena.
Hey, Mike.
Nicole.
It's a very broad offering and I've said this before it's kind of a perfect storm and we're kind of firing on all cylinders.
Uh huh.
Thank you.
On the ammonia questions sure.
The first half of the year as you look out over the next several quarters the regional breakdown of where.
Excellent Stuart Thank you.
The opportunities have been coming on the STS front from the licensing.
We now have.
Mariana Perez Mora with BMA, Keith will help on the royalty.
Project area.
What are the maybe.
Thank you very much good morning.
Other pneumonia. The other couple of areas that are seeing much more interest in your opex and the opportunities that you can engage with the clients and how or is it other emerging technologies other companies starting to see the success that youre driving here and youre getting more incoming activity that can expand the portfolio on that front.
Good morning.
Question is about <unk> solutions.
If you have any important awards that we should look at that.
Tommy in the next 12 months.
Yeah.
Yeah.
Robert.
So we're getting an echo.
Okay.
Really covered off on and we do actually try and call out specific awards.
Yes, so I mean, I think we've talked about this before Mike. It's it is a very global business and on each quarter, there seems to be activity levels in one region or another.
We sort of talked about the size of our pipeline. We've got several awards to greater than $1 billion that were waiting for use on them. We've said you know these will come through quite lumpy.
And so one quarter homes to be in the middle East in the next quarter homes to be and that we talked about Hindustan petroleum in India et cetera. So it has been in Asia Asia is obviously growing fast.
We continue to have.
Numerous in the $100 million range as we've talked about previously.
Economically.
Those come through a little bit quicker.
So it's everywhere and that's obviously picked up in the U S as well more so than than than historic so.
Particularly.
The contract vehicles, we have so I haven't really we're not really going to call out anything specific.
Very difficult question to answer I would just say that we've got witness happening all across the world China has been probably slower than historically highest in that starting to pick up a better pace again, so which is a good fact pattern.
But the pipeline is robust the number of large projects within there is attractive it's across all the segments.
So it's very balanced.
And in terms of <unk>.
Thank you and then about people you mentioned hiring was strong in the quarter what are the challenges on opportunities you see near term.
Emerging technologies and the success, we're having obviously we were and.
We're in discussions with one of the great things about our technology group as they are really good about monetizing new technologies and.
Yes, certainly.
What could a huge huge of effort.
Getting them to scale and obviously the <unk>.
Company into our people and we want that every single day and as I said before our people are absolutely terrific.
<unk> been working on the plastic recycling to do just that in.
The.
The first plants on track to produce later this year.
Our big focus has been very much on retention and making the employee experience as good as it can be at KBR, making KBR a terrific place to work.
Which I think will really accelerate the plastics recycle piece.
And then secondly, things like the Swedish biofuels around sustainable aviation fuel technologies, and again, we just announced that last quarter. So the marketing opportunities around that but we're looking at those constantly.
Making heightened inclusive lithium extremely diverse and.
And the external awards, we mentioned earlier.
Guess recognition third party recognition that we're making progress in those areas, we're not perfect, but we're certainly making progress so our attrition rate has actually improved.
And making sure that we can get them for a good accretive value for KBR and shareholders, but at the same time thinking through where they sit in the monetization cycle. So.
As the year has progressed because of the focus we've had on not just benefits, which are easy wins, but actually a lot in the development and talent management area as well.
So lots of activity in and across technology and really across all the areas in the portfolio and we tried to highlight that a little bit with the.
And then second to that and then second.
The war on talent actually got going.
The awards from the Green refining area to the to the green sort of ammonia on the ammonia market.
Following the end of last year and coming out of Covid and things we are.
We really double down in our talent acquisition.
Obviously.
Looking at your cost of spectrum in things like lithium in our in our capability in that arena.
Our recruitment efforts.
Mature so so I think we've done a lot in that area and we just can we just I think the challenge is to ensure that we don't get complacent that we stay vigilant and we stay up slightly 150% crew to was that we had a people company.
It's a very broad offering and I've said this before it's kind of a perfect storm and we're kind of firing on all cylinders.
Excellent Stuart Thank you.
Yeah.
We now have.
People feel really really valued for the amazing work that they do and if we do that then we will continue to issue I'm sure and build momentum.
Mariana Perez Mora with BMA, Keith will help on the royalty.
Thank you very much good luck.
And that's.
With what we're going to do.
Good morning.
Okay.
My question is about <unk> solutions.
Thanks, so much.
If you have any important awards that we should look at that.
Thank you.
We will now take our next question from Zack.
Tommy in the next 12 months.
Alan.
Yeah.
Yeah.
Hi, This is spenser <unk> on for Gautam. Thanks for taking the question I was wondering if you could touch on any of your competes over the next 18 months now that <unk> is out of the way.
Robert.
So we're getting an echo that havent.
Really covered off on and we don't actually try and call out specific awards.
And any trends or revenue cover color for euro com. Thank you.
We sort of talked.
<unk> talked about the size of our pipeline, we've got several awards to greater than $1 billion that were waiting for use on them. We've said you know these will come through quite lumpy.
Yeah.
Yes.
Question first.
Actually in and around you come last week visit.
We continue to have.
Numerous in the $100 million range as we've talked about previously.
Visiting some of the offices and the sites there I think.
I mean the <unk>.
Those come through a little bit quicker.
<unk> is very enduring.
Particularly.
We're not seeing any levels of slow down in fact.
Contract vehicles, we have so I haven't really we're not really going to call out anything specific.
Obviously, we're getting in some of our time and we're seeing this also a little bit in the middle East as well there.
But the pipeline is robust the number of large projects within there is attractive it's across all the segments.
We're doing exercises and things like that so so I think the cadence is strong the.
So it's very balanced.
In jewelry ability if thats even award.
Okay.
Thank you and then.
You know what I mean is strong so I think all positive all positive there.
People you mentioned hiring was strong in the quarter what are the challenges on opportunities you see near term.
<unk>.
In terms of re competes Youre right. We won our largest recompete of the year very good to get that behind us, particularly in the fashion. We did so we.
Yes, certainly.
What could a huge huge of effort.
Company into our people and we want that every single day and as I said before people are absolutely terrific.
This is a very technical bid.
We're not expecting any protests or anything like that so I think.
The.
Our big focus has been very much on retention and making the employee experience as good as it can be at KBR, making KBR a terrific place to work.
Good with <unk> three years, we as we head forward through this year, so well, let's say for the next six months very very little in terms of re competes and as we move into next year.
Making heightened inclusive lithium extremely diverse and.
We've got at the end of the year, we've got a couple of the larger.
And the external awards, we mentioned earlier.
Guess recognition third party recognition that we're making progress in those areas, we're not perfect, but we're certainly making progress so our attrition rate has actually improved.
NASA bits that will come up for Recompete, but they won't really be awarded until the year after and they represent 25 25. So I think it's a fairly low recompete year next year once again there'll be there'll be nothing huge in terms of a run rate.
As the year has progressed because of the focus we've had on not just benefits, which are easy wins, but actually a lot in the development and talent management area as well.
And then second to that and then second word.
<unk>.
So I think what we're going after and the work that we're bidding now assuming it.
The war on talent actually got going at the end of last year and coming out of Covid and things we are.
Even if it comes through in a lumpy basis will that will be additive to the story.
We really double down in our talent acquisition area.
Yeah.
Yeah.
Our recruitment efforts.
Thank you.
Mature.
So I think we've done a lot in that area and we just we just I think the challenge is to ensure that we don't get complacent that we stay vigilant and we stick to stay up slightly 150% <unk> was that we had a people company.
Our next question comes from Sahil.
Manager of Citibank.
Yeah.
Hi, this is <unk>.
<unk> on for Andy Kaplowitz.
So we're seeing robust capex spend coming out of the middle East can you can you just maybe touch on your pipeline of work and opportunities in the region.
People feel really really valued for the amazing work that they do and if we do that then we will continue to issue I'm sure and build momentum.
And that's exactly what we're going to do.
Right.
Yeah.
It's enormous.
Thanks, so much.
I mean.
Yeah.
We've got we've got.
Thank you.
A significant business today in Saudi Arabia, we've got.
We will now take our next question from Zack.
Of Cowen.
We announced we won quite a significant contract in Kuwait.
Hey, this is expensive rights here on for Gautam. Thanks for taking the question I was wondering if you could touch on any of your competes over the next 18 months now that <unk> is out of the way and any trends or revenue cover color for <unk> com. Thank you.
The buildup of people there is in the hundreds today.
We're up to a thousand people in Abu Dhabi, mostly doing project management work across the Capex portfolio for I would not.
And again, we recently announced that ongoing work with BP and others in and around.
Yes.
Second question first.
It was actually in and around your call last week.
Southern Iraq again quite important for us.
Visiting some of the offices and the sites there I think.
So the capex spend is across the whole of the of the middle East.
I mean the <unk>.
<unk> is very enduring.
The biggest spender of course is Saudi I mean, they've just announced that they're going to do a program with seven crackers.
We're not seeing any levels of slow down in fact.
Obviously, we're getting in some of our time and we're seeing this also a little bit in the middle East as well there.
And their flooring notes of interest for that today and obviously, we're very interested not just in the technology, but the project management and the support that surround XOMA.
We're doing exercises and things like that so so I think the cadence is strong the.
So I think we're very well positioned there.
And Judy ability if Thats even award.
Aramco.
I mean is strong so I think all positive all positive there.
Looking to obviously move quickly.
Away from burning oil for electricity and gas and we are already supporting them on the gas developments.
Yeah.
In terms of re competes you are right. We won our largest recompete of the year very good to get that behind us, particularly in the fashion we did so.
Duke front, and just sort of high end front end Decarbonizing work there.
But also they're looking at hydrogen solutions on ammonia as part of their long term strategy. So so I think across the portfolio, we're very well positioned.
This is a very technical bait.
Yes.
We're not expecting any protests or anything like that so I think all good with <unk> three years as we head forward through this year, so well, let's say for the next six months very very little in terms of re competes and as we move into next year.
If we win our fair share that's an enormous volume of work just in Saudi in itself.
Just in the energy Arena, we're also.
<unk>.
We're doing the project management work for.
We've got at the end of the year, we've got a couple of the larger.
New city outside Riyadh called Dirty a gate.
We are engaged in <unk> with a number of services across that portfolio.
NASA bids that will come up for Recompete, but they won't really be awarded until the year after and they represent 25 25. So I think it's a fairly low recompete year next year. Once again there'll be there'll be nothing huge in terms of a run rate basis.
And so we continue to see quite a bit of activity I would say in the high level programmatic type arena and in around the middle East in particular in Saudi itself.
And then Abu Dhabi, I think where we're at.
We're managing several billion.
So I think what we're going after and the work that we're bidding now assuming it.
Capex in our project management.
Capacity.
I must have trusted partner for it.
Even if it comes through in a lumpy basis will all be additive to the story.
To do that and as they continue to invest to maintain market share and diversify their energy solutions with again very very well positioned. So so I think it's a it's a good story the middle East for KBR I think our reputation is really good there and we work very hard at the relationships and.
Thank you.
Our next question comes from Sahil.
Manager of Citibank.
Hi, everyone.
Levering and making sure we're adding value to the customer sat there and understanding what their desire and needs are as we move forward. So so yeah.
<unk> on for Andy Kaplowitz.
So we're seeing robust capex spend coming out of the middle East can you can you just maybe touch on.
A very exciting place to be and I think it will continue to be so for a number of years just given the the capital commitments and the fact that they've actually got the cash to fulfill those capital commitment.
Pipeline of work and opportunities in the region.
Right.
It's enormous.
I mean.
We've got we've got.
Yeah.
A significant business today in Saudi Arabia.
Great.
One other on IRR.
Got it.
Sure.
Anything that you've seen so far and it's just more of the 24.
We announced we won quite a significant contract in Kuwait.
Tailwind for the business.
Recently in the buildup of people than is in the hundreds today.
Yes, I think it's more of a 'twenty four tailwind I think the K green.
We're up to a thousand people in Abu Dhabi, mostly doing project management work across the Capex portfolio for <unk>.
So when we had this quarter has been obviously facilitated somewhat by by the IRA Bill obviously with a number of concessions and tax breaks and things that makes the internal rates of return far more attractive.
And again, we recently announced that ongoing work with BP and others in and around.
Southern Iraq again quite important for us so the capex spend is across the whole of the of the middle East.
But as we move into the latter part of this year.
Lot sitting there we've talked a little bit about.
The biggest spender of course is Saudi I mean, they've just announced that they're going to do a program of seven crackers.
Switch sides hydrogen project in Oklahoma.
That's getting to two point, whether they are exiting because.
And for their flooring lots of interest for that today, and obviously with the <unk>.
Making final investment decisions.
I think youre going to see a lot more like that as well so.
Interested not just in the technology, but the project management and the support that surround XOMA.
Okay.
So I think we're very well positioned I mean, there I mean aramco.
So I think it's.
Yes, I think it's a tailwind going into next year I think we're only starting to see projects mature enough to be awarded by two.
Looking to obviously move quickly.
Companies like yourselves.
Away from burning oil for electricity and gas and we are already supporting them on the gas developments.
Thank you.
Okay.
<unk> front, and just sort of high end front end decarbonizing work there.
Okay.
Thank you.
Yes.
But also they're looking at hydrogen solutions on ammonia as part of their long term strategy. So so I think across the portfolio, we're very well positioned.
All of that.
That's D a davidson.
Please go ahead.
Yes.
Yeah.
Guys I'm sitting in for Brent Thielman. Thanks, So much for taking my call I was wondering if you guys could provide an update on the opportunities around the direct energy programs for the government solutions segment seems like an area of increased attention.
If we win our fair share that's an enormous volume of work just in Saudi and itself and not just in the energy Arena. We're also.
We're doing the project management work for a new city outside Riyadh called Dirty a gate.
<unk> are well positioned here, how big of an opportunity could this be.
And are there any specific potential pursuits, we could hear about in the near to medium term, particularly in a time of such tumultuous. This internationally.
<unk> engaged in <unk> with a number of services across that portfolio.
And so we continue to see quite a bit of activity I would say in the high level programmatic type arena and in around the middle East in particular, Saudi itself.
Yeah, it's a good thats something <unk> talked about <unk> and the directed energy program.
It's progressed, while the I think through the rapid.
And then Abu Dhabi, I think where we're at.
Prototypes office has matured significantly.
Managing several billion.
No.
Capex in our project management.
Extended the scope into additional vehicles, which we announced earlier.
Capacity and we're very much a trusted partner.
To do that and as they continue to invest to maintain market share and diversify their energy solutions with <unk>.
This quarter this quarter $150 million roughly.
<unk>.
It moves it moves forward into.
<unk> very very well positioned so so I think it's.
Testing.
More live environment.
It's a good story the middle East.
Those tests have gone really really well and.
<unk> I think our reputation is really good there and we work very hard at the relationships and delivering and making sure we're adding value to the customer sat there and understanding what their desire and needs are as we move forward. So so yeah. It is.
And I mean, how big could it be I mean, if it moves into a program of record it could be very significant but it's very difficult to put numbers on that but it's.
Certainly one to watch for the future for KBR that's for sure.
Excellent. Thanks, so much.
A very exciting place to be and I think it will continue to be so for a number of years just given the the capital commitments and the fact that they've actually got the cash to fulfill those capital commitment.
Just.
Quickly do you guys have an update on the status of the Australian government business, we understand theres been some repositioning and re prioritization when could that begin to contribute more growth overall this segment.
Great and just.
One other on IRR.
Okay.
Yeah. So so.
What if anything have you seen so far and it's just more of the 24.
In the us.
I think we're all aware of we had a change of government in Australia, and they did a strategic review, which came out in March.
Tailwind for the business.
Yes, I think it's more of a 'twenty four tailwind I think the K green.
Shifted priorities.
And I think for us it resulted in.
So when we had this quarter has been obviously facilitated somewhat by the.
Quite a number of significant awards in the major services provider area that came through in the quarter, which is terrific.
The IRA Bill.
With a number of concessions and tax breaks and things that makes the internal rates of return far more attractive.
But also quite a focus on things like <unk>.
And really the sort of the linkages back to to the UK and the.
But as we move into the latter part of this year.
Second there we've talked a little bit about.
The U S in particular to ensure that.
There was a level of readiness.
Which sites hydrogen project in Oklahoma.
Opposite sort of peer threats in the region. So I think a lot of effort going on there and we're very well positioned as that progresses and we're already engaged as youre well aware in August program in an already providing services across that portfolio.
That's getting to two point, whether they're getting close to making final investment decisions.
I think youre going to see a lot more like that as well so.
Okay. So so I think it's.
Yes, I think it's a tailwind going into next year I think we're only starting to see projects mature enough to be awarded by two.
So so we're feeling pretty good about the future of where that business sits today both in the in the infrastructure side.
Companies like yourselves.
And I guess.
The most out of Defence engineering technical side.
Thank you.
Okay.
Yeah.
Excellent. Thank you guys. So much for taking my call.
Okay.
Thank you.
Got it thanks Oliver.
Yes.
All of that.
Yes.
Thank you.
That's D a davidson.
You have no further questions I'd like to hand back to us.
Please go ahead.
Okay.
Sure. Thank you for some final remarks.
Guys I'm sitting in for Brent Thielman. Thanks, So much for taking my call I was wondering if you guys could provide an update on the opportunities around the direct energy programs for the government solutions segment. It seems like an area of increased attention.
Thanks breakout so just to just to close.
No one actually said that's like good quarter, but it was an absolutely terrific quarter.
We beat consensus we grew EBITDA in the teens.
ABR well positioned here, how big of an opportunity could this be.
We delivered outstanding outstanding cash.
And are there any specific potential pursuits, we could hear about in the near to medium term, particularly in a time of such a tumultuous this internationally.
The accounts were to start a little bit in Saudi market, you all to sleep, explaining all of the accounting treatment there, but the bottom line and not as he said it was it was typically odd accounting treatment.
Yeah, it's a good it's been a while so I've talked about <unk> and the directed energy program.
And obviously not part of our two operating performance.
It's progressed, while the I think through the the rapid prototypes office has matured significantly.
Bookings were terrific bookings going into Q3 and already terrific. So.
And I think really a company that's outperforming in the operating line offsetting.
No.
Extended the scope into additional vehicles, which we announced earlier.
Things.
<unk> interest and things like that that are somewhat.
This quarter this quarter $150 million roughly.
With our control is a terrific outcome, we don't make excuses I know some other companies give targa.
It.
It moves and moves forward into.
Testing.
More live environment and those tests have gone really really well.
Targets, excluding increase in interest and things that we don't we just tell us how it is so so I think a really strong operational performance I'm really happy with the position of the company and I'm really pleased with where we are in the people agenda and with the bookings. The outlook is very very positive and I would leave you with the statement that were for.
And I mean, how big could it be I mean, if it moves into a program of record it could be very significant but it's very difficult to put numbers on that but it's.
Thats certainly one to watch for the future for KBR that's for sure.
Yes.
Excellent. Thanks, so much.
Really really good about our 475 targets. So thank you for listening today, and we look forward to talking to you in the near future. Thank you.
And just quickly.
Quickly do you guys have an update on the status of the Australian government business.
We understand there has been some repositioning and re prioritization when could that begin to contribute more growth overall for the segment.
Thank you for joining I can confirm that does conclude today's call. Please have a lovely rest your day and you may now disconnect your lines.
Okay.
Yes, so so.
Yeah.
In the us.
I think we're all aware of we had a change of government in Australia, and they did a strategic review, which came out in March.
Shifted priorities.
And I think for us it resulted in.
Quite a number of significant awards in the major services provider area that came through in the quarter, which is terrific.
But also quite a focus on things like <unk>.
And really the sort of the linkages back to to the U K and the U S in particular to ensure that.
There was a level of readiness.
Opposite sort of peer threats in the region. So I think a lot of effort going on there and we're very well positioned as that progresses, and we're already engaged as youre well aware in the <unk> program in an already providing services across that portfolio.
So so we're feeling pretty good about the future of where that business sits today both in the in the infrastructure.
Syed.
And I guess.
The more sort of defence engineering technical side.
Excellent. Thank you guys. So much for taking my call.
Got it thanks Oliver.
Thank you.
We have no further questions I'd like to hand Jesse.
Thank you for some final remarks.
Thanks breakout.
Just to just to close.
No one actually said that's like good quarter, but it was an absolutely terrific quarter.
We beat consensus we grew EBITDA and the teams we.
We delivered outstanding outstanding cash.
The accounts were to start it a little bit in Saudi market you all to sleep.
Planning all of the accounting treatment, there, but the bottom line and not as he said it was it was that typically odd accounting treatment.
And obviously not part of our operating performance.
So a terrific bookings going into Q3 and already terrific. So.
And I think really a company that's outperforming in the operating line offsetting.
Things.
<unk> interest and things like that that are somewhat.
With our control is a terrific outcome, we don't make excuses I know some other companies give.
Targets, excluding increase in interest and things that we don't we just tell us how it is so so I think a really strong operational performance I'm really happy with the position of the company and I'm really pleased with where we are in the people agenda and with the bookings. The outlook is very very positive and I would leave you with the statement that we are.
Feeling really good about our 475 targets. So thank you for listening today, and we look forward to talking to you in the near future. Thank you.
Thank you for joining I can confirm that does conclude today's call. Please have a love me back to your day.
And you May now disconnect your lines.
[music].