Q3 2023 KBR Inc Earnings Call

Hello, and thank you for your patient KBR, Inc. Third quarter 2023 on a topical will begin in approximately two minutes.

Speaker 1: Hello all and thank you for your patience. KBR Inc's third quarter 2023 earnings conference call will begin in approximately two minutes.

[music].

Speaker 2: The.

Speaker 1: Hello all and welcome to KBR Inc's third quarter 2023 earnings conference call. My name is Lydia and I'll be your operator today.

Hello, and welcome to the KBR, Inc. Third quarter 2023 earnings Conference call.

My name is Lydia and there'll be your operator for today.

Speaker 1: If you'd like to ask a question during the call, you can do so by pressing star followed by the number one on your telephone keypad. We kindly ask that you limit yourself to one question and one follow up only. It's my pleasure to now hand you over to your host, Jamie to Bray, VP of Investor Relations to begin. Please go ahead.

If you'd like to ask a question during the call you can do some quick question Star followed by the number one on your telephone keypad.

We kindly ask that you limit yourself to one question and one follow up only.

It's my pleasure to now enjoy the G O hi, Jamie to Bray VP of Investor Relations to begin. Please go ahead.

Speaker 3: Thank you. Good morning and welcome to KBR's third quarter fiscal year 2023 earnings call. Joining me are Stuart Reid, President and Chief Executive Officer, as well as Mark Fop, Executive Vice President and Chief Financial Officer.

Thank you good morning, and welcome to Kbr's third quarter fiscal year 2023 earnings call. Joining me are Stuart Reid, 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.

Speaker 3: Do it in March. We'll provide highlights from the quarter and then open the call for your question.

Speaker 3: Today's earnings presentation is available on the Investor section of our website at kbr.com. This discussion includes forward looking statements reflecting KBR's views about teacher events and their potential impact on performance as outlined on slides two.

Today's earnings presentation is available on the investors section of our website at <unk> Dot com.

That can include forward looking statements, reflecting <unk> views about future events and their potential impact on performance as outlined on slide two.

Speaker 3: 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 10k available on our website.

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.

Speaker 3: 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 gap measure is included at the end of our earnings presentation. I will now turn the call over to Stuart.

Conciliation of these non-GAAP measures to the nearest GAAP measure is included at the end of our earnings presentation.

Now I'll turn the call over to Stuart.

Thank you, Jamie and a warm welcome to our Q3 earnings presentation. So let's start on slide five.

Speaker 4: Thank you, Jamie, and a warm welcome to a Q3 earnings presentation. So let's start on slide five.

Speaker 4: A zero-hour moment today attempts to give you a high-level view of how KBR is engaged in space sustainability and security.

Zero harm order today it tends to give you a high level view of our KBR is engaged in space sustainability unsecured.

This loss is both wrong space linking back to Earth.

Speaker 4: This virus is both from space-looking bacteria and in space environment itself.

And the space environment itself.

Speaker 4: So starting on the left of this slide, we have highlighted a couple of programs from which data is generated through space to enhance environmental understanding of what is happening on our planet.

So starting on the left of the slide we have highlighted a couple of programs for which data is generated and space to enhance our environmental understanding of what it is.

On our planet.

Speaker 4: So this gives real-time analysis and trending of things like deforestation, other online development, et cetera.

And this gives us real time analysis on trending of things like deforestation audible on development et cetera.

In the middle we have highlighted our proprietary technology iron stallion.

Speaker 4: In the middle, we have highlighted our proprietary technology, Iron Stallion, that digitally track satellites and space debris using proprietary algorithms, advanced AI and machine learning to predict estimates and validate future events.

Satellites and space debris.

<unk> proprietary algorithms advanced AI and machine learning to predict estimate invalidate future events.

Speaker 4: In addition to the US DoD, two of our allies have acquired and are using iron stallion today.

In addition to the U S. D O D. Two of our allies have acquired and are using our installed today.

And on the right. We have highlighted two programs focused on going to space walking on next generation satellites for us monitoring.

Speaker 4: And on the right, we have highlighted two programs focused on going to space, working on mixed generation satellites for us monitoring, with the added objective of resetting and recycling existing assets to minimize this junk. And the exciting work being done at NASA Ames, which is in Silicon Valley, a key reset center for NASA where KBR has been engaged for many years, looking at water and ice on the moon to sustain human exploration.

Other objective of resurfacing and recycling existing assets to minimize its junk.

And the exciting work being done.

NASA Ames, which is in Silicon Valley, our key research centre for NASA, where KBR has been engaged for many years looking at water ice on the moon to sustain human exploration.

Speaker 4: This is KBR playing in the knowledge economy in the space vertical across both civil and military space developing and deploying differentiated know-how and technologies and I have to say it's pretty cool stuff People really do amazing things that matter every day

Well this is caveat playing in the knowledge economy in the space of ethical across both civil and military space developing and deploying differentiated mill high on technologies and I have to say, it's pretty cool stuff.

People really do amazing things that matter every day.

Speaker 4: So on to slide six and a quick look at our overall business well-being and business health slide. On the people front, we have increased headcount by no double digits since this time last year. I think a good indicator of managed sustained growth in a services and technology business.

So on to slide six on a quick look at our overall business, while being a business house like on the people front.

We have increased headcount by low double digits since this time last year.

Good indicators of managed sustained growth in our services and technology business.

Speaker 4: from an innovation perspective or in the middle of our first global hackathon. Now this is a competition when volunteers competed in 145 teams across the world innovating to develop and present solutions in the areas of sustainability, digitalization AI, and branding.

From an innovation perspective, we're in the middle of a global Hawk I thought Oh.

This is a competition with volunteers completed and 145 teams across the world innovating to develop and present solutions in the areas of sustainability digitalization AI and branding.

Speaker 4: The 6th Regional winners will be coming together to compete in the final later this month.

Six regional Windows will be coming together to compete in the final later this month.

Speaker 4: The leadership driven myself of all reviewed the six final submissions and I have to say they were absolutely terrific and will certainly be taking a number of their ideas and solutions forward.

The leadership driven myself of all reviewed the six final submissions and I have to say they are absolutely terrific and we'll certainly be taking a number of their ideas and solutions Walmart.

Speaker 4: So I think really, truly a value-add process.

So I think really truly a value added process. So also in a world where there is more working from home.

Speaker 4: So also in a world where there is more working from home, and not that I think a greater risk of creating silos, this is the added benefit of connecting people and fostering collaboration across non-traditional, bangly, so very, very successful.

A greater risk of creating silos, that's the added benefit of connecting people and fostering collaboration across non traditional foundries, so very very successful.

Speaker 4: And lastly, on the people front, we were notified within the last week that we have been once again recognized by Forbes as one of the world's top companies for women in 2023. And this recognition, I think, for the third consecutive year, really underscores our commitment to fostering an inclusive and empowering environment for all our employees, and we are proud to be forward in gender equality in the work.

Lastly on the people front, we were notified within the last.

Once again recognized by Forbes as one of the worlds top companies for women in 2023, and this recognition I think for the third consecutive year really underscores our commitment to fostering an inclusive and empowering environment for all our employees and we are proud to be forging forward in gender equality.

Workplace.

Now onto H S E.

Our people continue to really impressed with their unparalleled commitment to health safety security under the environments, they're working and looking after themselves and those around them.

I think the statistics really speak for themselves and not really truly best in class. That's obviously helps with recruitment and it's very clear example of our values and culture and it's also a key differentiator with clients and partners around the world.

Well as you know zero harm is our broader ESG and sustainability program.

Speaker 4: As you know, GeoHarm is a broader ESG and sustainability program. And internally we link our activities to the UN Sustainability Development.

Internally, we link our activities to the UN sustainability development goals.

Speaker 4: So we thought we would present what KBR is doing opposite one of these goals each quarter going forward. So we started today.

So we thought we would present what KBR is doing opposite one of these goals each quarter going forward.

So we started to date with water and sanitation.

Just to give you a flavor came out today runs the commvault combat water supply for the U K military.

Speaker 4: We run both portable and wastewater in the member of sites across the world from Jiburri to Kosovo.

We run both portable and wastewater and the number of sites across the world from Djibouti to Kosovo.

We are heavily engaged across Australia supporting major water authorities in upgrades expansions modernizations of the various cities water and wastewater infrastructure.

And we engage with local communities on schools to educate on plastics in the oceans.

Organized river and beach clean ups et cetera through our one ocean program, we've seen that before.

So just as we did for space sustainability I think this gives you a different lens into and across KBR.

Onto business growth on the bottom left.

Really really strong bookings quarter, reflecting continued momentum as we continue to 'twenty four and beyond.

Speaker 4: As you would expect a work under contract to allow us to finish strongly this year is over 95%.

As you would expect of work under contract to allow us to finish strongly this year is over 95%.

And onto the financials at a high level, 9% growth all organic I'll say that again, 9% organic at the revenue line with margins at the group level of 11% a really terrific performance from our people around the world.

Speaker 4: I don't do the financials at a high level. 9% growth, all organic. I'll say that again, 9% all organic at the revenue line with margins at the group level of 11% are really terrific performance from our people around the world. Delivering for customers, for each other, and ultimately, I share.

Delivering for customers for each other and ultimately our shareholders.

Cash was a standout in the quarter with conversions ahead of pace at 125%.

Speaker 4: Cash was a standout in the quarter with conversions ahead of pace at 125%.

Speaker 4: In a world of higher interest rates and volatility, this was a critical focus area for us, as I'm sure it is for many, many companies out there, but our people really stepped up once again. Mark will also cover other positive activities in cash in a moment, which all help to provide deployment optionality.

In a world of higher interest rates and volatility. This was a critical focus area for us as I'm sure. It is for many many companies out there that are people really stepped up once again.

Mark will also cover other positive activities and cash in a moment, which all helped to provide deployment optionality.

Speaker 4: And as promised, and of course linked to cash, one subsequent event of note is that we retired the remaining convertible principal of $250 million in cash on the 1st of the month as it matured. That's the 1st of November . A clear demonstration of our belief in the value upside of KBR.

And as promised and of course linked to cash one subsequent event of note is that we retired the remaining convertible principal of $250 million in cash on the first of the month as it matured what's the cost of November a clear demonstration of our belief in the value up.

Side of KBR.

Now onto slide seven.

Speaker 4: The markets remain buoyant across the energy trilemma, as we've discussed previously. Ongoing geopolitical instability, I think, only adds to this, particularly in the energy security area.

The market is the main point across the energy trilemma as we've discussed previously.

Ongoing geopolitical instability I think only adds to this particularly in the energy security.

And we continue to see high levels of activity across aging assets as owners continually recognized the need to become more efficient, but also in a decarbonize way using a variety of science engineering technologies, including digital and data enabled tools.

Speaker 4: And we continue to see high levels of activity across aging assets, as owners continually recognize the need to become more efficient, but also in a decarbonized way using a variety of science, engineering technologies, including digital and data-enabled tools.

Speaker 4: STS Trailing 12 Month Book to Bill was 1.3 and we've highlighted three of multiple awards this quarter.

STS trailing 12 months book to Bill was 1.3, and we've highlighted three of multiple awards this quarter.

Speaker 4: Firstly, we announced that we had been awarded the world's first commercial ammonium crafting project with Daesan in Korea.

Firstly, we announced that we had been awarded the world's first commercial ammonium tracking project with <unk> in Korea.

Speaker 4: This is effectively taking liquid ammonia and cracking it back into hydrogen so that you can transport and utilize it as a gas in existing facilities, infrastructure, and networks.

This is effectively taking liquid ammonia and cracking it back into hydrogen so that you can transport and utilize it as a gas and existing facilities infrastructure and networks.

Speaker 4: Now this is a big deal and a real enabler as it allows countries committed to a hydrogen future to deliver on that commitment and importantly for KBR can have the effect of significantly increasing demand for ammonia production where of course as you know we have a very high market share.

Is a big deal and a real enabler.

It allows countries committed to a hydrogen future to deliver on that commitment and importantly for KBR can have the effect of significantly increasing demand for ammonia production would of course as you know we have a very high market share.

Speaker 4: In the UK, we are deeply engaged with EET Hydrogen and the UK's leading industrial decarbonization project.

In the U K, we are deeply engaged with ETE hydrogen in the U K 's, leading industrial Decarbonization project.

Speaker 4: This project is the largest blue hydrogen project in the UK.

This project is the largest blue hydrogen project in the UK.

And is a fantastic example of synergy across all our sustainable technology solutions that combines our innovative decarbonizing IP with best in class Engineering services and digitalization.

Speaker 4: and is a fantastic example of synergy across all of sustainable technology solutions.

Speaker 4: It combines our innovative decarbonizing IP with best-in-class engineering services and digitalization.

And finally in the energy security market.

Speaker 4: And finally, in the energy security market, where we believe gas is the transition fuel, we were awarded a reimbursable EPCM fully aligned to our existing list profile, services contract for the Pluto LNG train one modifications in Australia for Woodside.

We believe gas is the transition fuel we were awarded a reimbursable EPC and really align to our existing risk profile services contract for the Pluto LNG train, one modifications and Australia for Woodside.

Now onto government. So on the government side the market in the U S continues to be robust as we look beyond with budgets in critical areas in emerging technologies growing with.

Speaker 4: Now on to government. So on the government side, the market in the U.S. continues to be robust as we look beyond with budgets in critical areas and emerging technologies growing.

Speaker 4: with a focus on operationalizing these as quickly as possible, which is a sweet spot for KVR, as we've discussed many times.

Our focus on operational argument as quickly as possible, which is a sweet spot for KBR as we've discussed many times.

Speaker 4: Ongoing and recent world events elevate these priorities and the need for greater multi-government collaboration.

Ongoing and recent world events elevate these priorities and the need for greater multi government collaboration.

Like August.

Speaker 4: like AUKUS, which emphasizes the significance and value of our global GS segment as we can play a critical role in addressing these challenges.

Emphasizes the significance and value of our global GFS segment as we can play a critical role in addressing these challenges.

Speaker 5: We believe that our GS international business is a real differentiator, engaged in high-end consulting services in critical areas of defense, energy transition, and critical infrastructure.

We believe the <unk> International business is a real differentiator engaged in high end consulting services in critical areas of defense and as we transition and critical infrastructure.

Speaker 5: Route to build this quarter was excellent. GS alone was 1.6, bringing our trailing 12 months for the whole segment back up to 1.1 times.

Book to Bill this quarter was excellent.

The loan was one six.

Our trailing 12 months for the whole segment back up to one one times.

Speaker 5: You may recall GS International had a strong bookings last quarter, so the whole segment is well positioned as we move into 2024.

You may recall <unk> International had a strong bookings last quarter. So the whole segment is well positioned as we move into 2024.

Speaker 5: We've highlighted a number of awards for the quarter in a science and space business. In total, these awards are well over 2.5 billion dollars and importantly are all

We've highlighted a number of awards for the quarter and our science and space business. In total these awards are well over $2 5 billion.

And importantly are all multi year.

Speaker 5: These are what's coming through in Q3 and the IMOC recompete increasing in value by several hundred million dollars and with OMS and SEES all being additive as both were takeaways.

With these and what's coming through in Q3.

It was a recompete increasing in value by several hundred million dollars and with <unk> on CS all being additive as both were takeaways. It's.

Speaker 5: easy to see that on a full run rate basis 2024 for science and space should be a good course year.

It's easy to see that on a full run rate basis 'twenty 'twenty four for sciences space should be a good growth here very excited.

Speaker 5: Similarly in defense and intel, we've had several key awards in the quarter. Some real nice wins in the intel side with customers like the NRO, but unfortunately we can't say too much more about these. And it was also nice to see awards under the IAC Mac contract vehicle pick up cadence in the quarter.

Suddenly in defense and Intel we've had several key awards in the quarter, some real nice wins in the Intel side with customers like the NRO.

Fortunately, we can't say too much more about leads and it was also nice to see awards under the Mark contract vehicle pickup cadence in the quarter. So similar to signs of space, our defense and Intel business.

Speaker 5: So similar to signs and space, our defense and intel business are a real good shape for growth as we move into 24.

Real good shape for growth as we move into 'twenty four.

Speaker 5: From a technology perspective, KBR's proprietary secured cloud and mission services platform has been prioritized for the federal risk management program.

From a technology perspective, caveats proprietary secured cloud admission services platform.

It's been prioritized for the federal risk management program.

Speaker 5: A platform called Vault is one of only six prioritized platforms and is just one example of the investment we are making in the AI space.

Our platform called vault is one of only six prioritize platforms and is just one example of the investments we are making in the AI space investing.

Speaker 5: Investments in this area continue to open new opportunities for KBR, both with government and with commercial customers.

Investments in this area continue to open new opportunities for KBR, both with government and with commercial customers.

And although not specifically shown on the slides registering sustainment after a flattish to slightly down few months in Europe.

Speaker 5: And although not specifically shown on the slides, registered sustainment after a slightly down few months in Europe has been awarded new multi-year task orders that will also provide opportunity as we head into 2024.

Been awarded new multiyear task orders, but will also provide opportunity as we head into 2004.

The final point to make on new businesses, while caveat generated 9% organic growth in Q3. We also finished the quarter to record high backlog and options since that transformation I think really indicative of great momentum and demand across all of KBR.

Speaker 5: The final point to make on new businesses while KBR's generated 9% of organic growth in Q3, we also placed the quarter to record high backlog and options since our transformation. I think really indicative of great momentum and demand across all of KBR.

Speaker 5: And not to forget on HomeSafe, as Transcom leadership said in early October , the programme hasn't quite started yet as readiness is still being evaluated.

And not to forget on home Safe Transport leadership said in early October the program hasn't quite started yet is readiness is still being evaluated.

Speaker 5: As you're aware, the number one priority of this effort is to improve the moving experience of service members, civilians and their families and Transcom and ourselves are fully committed to delivering this via HomeSafe from day one and thus we are jointly adopting a careful and calculated approach to ensuring this outcome.

As you're aware the number one priority of this effort is to improve the moving experience of service members civilians on their families and.

I'm trying to call them and ourselves are fully committed to delivering this via home safe.

<unk> one.

Thus, we are jointly adopting a careful and calculated approach to ensure this outcome.

I'm sure you'll recall that we assumed no moves this year and our targets with a significant ramp up during 2024 with modest initial margins, mainly due to the newness of the program.

Speaker 5: I'm sure you'll recall that we assumed no moves this year and our targets for the significant ramp up during 2024 with modest initial margins, mainly due to the newness of the program.

Speaker 5: Although it hasn't started yet, we do expect moves to start in Q1 2024 and ramp progressively. But today, it still remains unclear what that ramp will look like.

Although it Hasnt started yet we do expect moves to start in Q1 of 2024 and got progressively but today. It still remains unclear what that ramp will look like.

Speaker 5: There should be more clarity when we report through your results and 24 guidance in late February next year.

There should be more clarity when we report full year results on 24 guidance in late February.

No.

Speaker 5: Now, we've always said, given the uniqueness and the dynamic nature of the markets and the businesses that we are in, that there were many ways to meet our targets, and interestingly, the overperformance of STS will fill the EBITDA we plan for HomeSafe in 2024.

We've always said given the uniqueness and the dynamic nature of the markets and the businesses that we are in that there were many ways to meet our targets.

Interestingly the over performance of STS will fill that EBITDA, we plan for home safe and 2024.

Speaker 5: If one nine as soon as we do get started with Moose in 24, we should be in real good shape from an even darker perspective at the group level.

One that assumes that we do get started with moves in 'twenty four we should be in real good shape from an EBITDA perspective at the group level.

Speaker 5: As we've said consistently for many quarters, KBR is a company with multiple pathways to earnings growth and the real focus needs to be on EBITDA for the whole corporation.

As we said consistently for many quarters KBR is a company with multiple pathways to earnings growth and the real focus needs to be on EBITDA for the whole confirmation.

Speaker 5: So in short, KBR continues to move up market, increasingly playing in the knowledge economy, growing EBITDA, delivering strong cash, and truly performing, and has secured the right work and exciting well-funded verticals to keep on pace to close at 23 and keep momentum as we head into 24 and beyond.

So in short KBR continues to move upmarket increasingly playing in the knowledge economy growing EBITDA, delivering strong cash and truly performing and.

And have secured the right work and exciting well funded two goals to keep on pace to closeout twenty-three keep momentum as we head into 'twenty four and beyond.

Speaker 6: With that, I will now hand over to Mark, who will add his own color, of course, and back up at once with the numbers. Mark. All right, thank you, Stuart. Hello, everyone. I'll start on page 9 or slide 9.

With that I will now hand over to Mark who will add his own color of course on backup what's with the numbers Mark.

Alright, Thank you Stuart and Hello, everyone I'll start on page nine of our slide nine.

Speaker 6: So we're certainly pleased with our key disability to deliver strong and well-rounded performance in the third quarter. As you see in the Stuart Stad Reven, who's up nine percent all organic, with liking a balance of ramp up on recent wins, and production of on-contract growth across the segment.

So we're certainly pleased with our team's ability to deliver strong and well rounded performance in the third quarter.

You'll see in our storage revenues were up 9% all organic.

Collecting AR balance and ramp up of our recent wins and production of on contract growth across both segments.

Speaker 6: Adjusted EBIT dollars up the same on constant margins and at the levels we expected.

Adjusted EBITDA was up the same on constant margins and at the levels we expected.

Speaker 6: Focus program execution is required to deliver these healthy margins. I said that before. This continued to be the case across all of our operations in Q3. So a big shout out to the people who constantly deliver on this front across KVR. Amazing.

Focused program execution is required to deliver these healthy margins I've said that before this.

This continued to be the case across all of our operations in Q3, So a big shout out to the people who constantly deliver on this front across KBR amazing.

Adjusted EPS grew 15% to 75 cents per share driven by the EBITDA growth and net favorable below the line items compared to last year.

Speaker 6: Adjust the DBS grew 15% to 75 cents per share, driven by the EBITDA growth, and net favorable below the line items compared to last year.

Our interest expense was higher year over year as expected the team really pulled together to generate strong cash flow and also debt reduction actions with financing costs in check.

Speaker 6: While interest expense was higher year over year as expected, the team really pulled together to generate strong cash flow and also debt reduction actions which kept financing costs in check.

While the effective tax rates are also trending up a bit.

Speaker 6: While effective tax rates are also trending up a bit, we did have a favorable resolution of an R&D tax credit, which did keep us in line with our tax rate guidance as well.

We did have a favorable resolution of an R&D tax credit, which did keep us in line with our tax rate guidance as well.

Speaker 6: So our treasury and tax folks really did a superb job mitigating the more challenging interest and tax environment that we have today.

So our treasury and tax folks really did a superb job mitigating the more challenging interest and tax environment that we have today.

Speaker 6: I just mentioned cash flow was strong again in Q3 at about 90 million with year-to-date adjusted up cash flow of 380 million reflecting a conversion ratio of approximately 125 percent.

I just mentioned cash flow was strong again in Q3 at about $90 million with year to date, adjusted op cash flow of $380 million, reflecting a conversion ratio of approximately 125%.

Quite good.

Speaker 6: Consolidated DSOs improved two days on increased focus by the team across the board. This will continue to improve.

Consolidated Dsos improved two days, our increased focus by the team across the board.

This will continue to be for us of course.

Speaker 6: Three cash low year today is 320 million, and I'll remind you, CapEx is running about twice, the moment of the right this year, due to two specific project requirements.

Free cash flow year to date is $320 million and I'll remind you capex is running about twice the enormity of the rate this year due to two specific project requirements.

So thats the big picture for the enterprise results now onto slide 10 for segment performance.

Speaker 6: So that's the big picture for the enterprise results. Now on to slide 10 for segment performance.

Starting with Sps, we're seeing tremendous growth and profit margins.

Speaker 6: Starting with SPS, we're seeing tremendous growth and profit margin.

Speaker 6: In addition, while not shown here, SPS is generating excellent cash flow as well, with year-to-date free cash flow conversion of well over 100%.

In addition, while not shown here Sps are generating excellent cash flow as well with year to date free cash flow conversion of well over 100%.

This entire segment in line with our negative working capital said that before that remains the case.

Speaker 6: This entire segment runs a negative working capital. We said that before, that remains the key.

Topline growth was almost 30% and balanced across technology and sustainable services.

Speaker 6: Top line growth was almost 30% and balanced across technology and sustainable services.

EBITDA margin was 21% EBITDA totaling just under $90 million.

Speaker 6: Ebit.Marge was 21% with Ebit.Toeling just under 90 million.

Speaker 6: As is evident in Stuart's remarks back on slide seven, we're seeing high demand and increasing adoption of our proprietary solutions and technology service offerings all around the world.

As is evident in Stuart's remark stuck on slide seven we're seeing high demand and increasing adoption of our proprietary solutions and technology service offerings all around the world.

Speaker 6: and we are improving the sustainability position for our clients.

And they are improving the sustainability position for our clients.

That's what we do.

Over to government organic growth was 4% in Q3, which was pretty consistent across the four business units.

Speaker 6: Over the government, organic growth was 4% in Q3, which is pretty consistent across the full of business units.

Speaker 6: As Stuart mentioned, strong bookings in Q3 provide opportunity for improved growth prospects moving forward as we head into 2024.

As Stuart mentioned strong bookings in Q3 provide opportunity for improved growth prospects moving forward as we head into 2024.

On to slide 11 and capital matters.

Speaker 6: With long year-to-date adjusted cash flow of, again, 380 million effective cash repatriation actions, and with year-to-date adjusted EBITDA growth of almost 10%, at the end of Q3, we actually kept our leverage ratio steady from the start of the year at 2.0 times.

With strong year to date adjusted cash flow of again $380 million effective cash repatriation actions.

And with year to date adjusted EBITDA growth of almost 10% at the end of Q3, we actually kept our leverage ratio steady from the start of the year at two zero times.

That's really saying something after deploying over $200 million on buybacks dividends and some modest M&A.

Speaker 6: That's really saying something after deploying over $200 million on buybacks, dividends, and some modest M&A, $200 million on the convert and related warrants.

$200 million on the convert and related warrants $130 million on the legacy legal settlement and higher interest costs. So.

Speaker 6: 130 million on the legacy legal settlement and higher interest costs. So quite an accomplishment keeping the leverage ratio steady after going through all of that.

Quite an accomplishment keeping the leverage ratio steady after going through all of that.

Speaker 6: Consistent with our messaging at the beginning of the year, our capital priority was and is to resolve the maturity of the convertible notes that mature November 1 and the attendant warrants which expire.

Consistent with our messaging at the beginning of the year, our capital priority was and is to resolve the maturity of the convertible notes that mature in November one.

And the attendant warrants, which expire a little later.

Speaker 6: So as Stewart just said, we did retire the note yesterday, November 1, which culminated in a cash payment of $250 million. That was funded with $200 million of revolver debt and $50 million of cash on hand accumulated from pre-cash flow.

As Stuart just said, we did retire the notes yesterday November one which culminated in a cash payment of $250 million that was funded with $200 million of revolver debt and $50 million of cash on hand, and accumulated from free cash flow.

Speaker 6: As for the warrants, there's an open window to seek early settlement of those in the next two months or so.

As for the warrants Theres, an open window to seek early settlement of those in the next two months or so.

Doing so will depend on what terms can be negotiated so we'll see.

Speaker 6: Doing so will depend on what terms can be negotiated, so we'll see how that goes, but we certainly have the capital capacity to do so. On the slide 12 for forward guidance.

How that goes but we certainly have the capital capacity.

So.

On to slide 12 for forward guidance.

While the numbers through Q3 suggest we are ahead of pace.

Speaker 6: including the raised EBITDA guide from last quarter, there is seasonality to factor in to Q4, including having fewer productive days due to holidays and things like that.

Including the raised EBITDA guide from last quarter, there is seasonality to factor in Q4, including having fewer productive days due to holidays and things like that.

With excellent growth margins cash flow and EPS production embodied in our current guide we're sticking to that outlook for the rest of the year.

Speaker 6: With excellent growth, margins, cash flow, and EPS production embodied in our current guide, we're sticking to that outlook for the rest of the year.

With all that's happening in the world and KBR, Here's a quick update on how we're tracking toward our long term 2025 targets.

Speaker 6: With all that's happening in the world in a KBR, here's a quick update on how we are tracking toward our long-term 2025 target.

Speaker 6: For things under our control, we are well ahead of pace on EBITDA and on pace for cash flow.

So things under our control we are well ahead of pace on EBITDA and on pace for cash flow.

For EPS, which is more influenced by external factors.

Speaker 6: For EPS, which is more influenced by external factors.

Speaker 6: $4.75 EPS by 2025 is looking much harder to achieve. Primarily due to the uncertainty that we have on the ramp up of home safe.

$4 75 in EPS by 2025 is looking much harder to achieve primarily due to the uncertainty that we have on the ramp up of home safe.

Speaker 6: and with interest rates now expected to stay higher for longer and all the implications of that.

With interest rates now expected to stay higher for longer and all the implications of that.

For the more controllable factors, we see our end markets as strong or stronger than our original baseline.

Speaker 6: For the more controllable factors, we see our end markets as strong or stronger than our original baseline and our ability to capture demand for our offerings is the same.

And our ability to capture demand for offerings is the same.

Speaker 6: Government is on pace to meet our targeted EBITDA, and as Stuart said, SPS is well ahead of time.

Government is on pace to meet our targeted EBITDA and as Stuart said Sps as well ahead of pace.

Speaker 6: We see this moment of continuing fruits 2025 and beyond.

See this momentum continuing through 2025 and beyond.

Speaker 5: So that's it for me for the quarter, pretty short report. I'll turn it back to Stuart to wrap it up. Thanks, Mark, great job. But just to emphasize what Mark said a few moments ago, our EBITDA trajectory is well ahead of pace, including associated cash conversions. However, there are headwinds due to external factors beyond our control, making the 25 EPS target of 475 more difficult to achieve.

So thats it for me for the quarter pretty pretty short report I'll turn it back to Stuart to wrap it up.

Great job on but just to emphasize what Mark said, a few moments ago, our EBITDA trajectory as well ahead of pace, including associated cash conversions.

However, there are headwinds due to external factors beyond our control, making with 25 EPS target of 475 more difficult to achieve.

Speaker 5: With that, now let me summarize the key takeaways that are in our control undergoing really well.

With that now let me summarize the key takeaways that are in our control undergoing really well.

Speaker 5: Firstly, we continue to deliver for our customers, our shareholders, and other key stakeholders through our people-centric values-driven culture. Consistent

Firstly, we continue to deliver for our customers our shareholders and other key stakeholders through our people centric values driven culture.

Consistent delivery resilient.

Speaker 5: organic growth and increasingly so into the knowledge economy with another great quarter.

Organic growth and increasingly so into the knowledge economy with another great quarter.

Continued strong organic growth across all businesses and the group as a key takeaway.

Speaker 5: Continued strong organic growth across all businesses and the group is a key takeaway.

Speaker 5: Cash Monument was absolutely terrific across many elements as Mark said. Departuation of Crop Cash, DSO Reduction, Incust Management, et cetera.

Cash monitoring was absolutely terrific across many elements as Mark said repatriation of trapped cash DSO reduction interest management et cetera.

Speaker 5: We have paid the Convert Principling Cash as we promised. Once again, doing what we said we would do.

We have paid the contract principal in cash as we promised once again doing what we said we would do.

Responsible leverage on strong cash management it gives us optionality on capital deployment going forward.

Speaker 5: Responsible leverage and strong cash management gives us optionality on capital deployment going forward. That's another

Another key takeaway.

Speaker 5: Prickings were strong across the group, especially in GSUS and the court.

Bookings were strong across the group, especially in <unk> in the quarter.

Speaker 5: Now with a light reconfigure year in 2024, the inbuilt organic growth as a consequence of bookings happening in a lot of half will deliver targeted growth into next year.

No. It was a light recompete year in 2024.

Inbuilt organic growth as a consequence of bookings happening and a lot of half will deliver targeted growth into next year.

Speaker 5: STS continues to win work across the energy dilemma and energy transition without standing delivery growth and margin performance as you see quarter on quarter.

SCS continues to win across the energy Trilemma energy transition with outstanding delivery growth and margin performance as you see quarter on quarter.

So the key takeaway here is strong bookings underpin continued momentum.

Speaker 5: So the key takeaway here is strong bookings underpinned continued momentum and organic growth into 2020.

And organic growth into 2024.

Home safe moves should ramp up in 2024, but likely at a slower pace than originally was expected and when we were much more by yearend earnings. However, we do expect STS to over perform thus mitigating any shortfall EBITDA from home safe and 2024.

Speaker 5: Home Safe Moves should ramp up in 2024, but likely at a slower pace than the originally expected. And we'll know much more by year end earnings. However, we do expect STS to overperform thus mitigating any shop fall, even DAH from Home Safe in 2024.

Finally, the key takeaway here is that there are multiple pathways to EBITA success. This.

Speaker 4: Finally, the key takeaway here is that there are multiple pathways to even to our success.

Speaker 5: This is a result of our differentiated, diversified global and resilient business model operating across multiple verticals within the knowledge economy.

This is a result of our differentiated diversified global and resilient business model operating across multiple verticals within the knowledge economy.

Speaker 5: Thank you again for listening, and I will now hand the call back to the operator who will open it up for questions. Thank you.

Thank you again for listening and I will now hand, the call back to the operator, who will open it up for questions. Thank you.

Thank you. Please press star followed by the number one if you'd like to ask a question I'm sure that your devices on mute like Cleveland or to anticipate it.

Speaker 1: Please press star followed by the number one if you'd like to ask a question and ensure that your device is unmuted locally when it's your turn to speak. If you change your mind or your question has already been answered, you can withdraw your question by pressing star followed by the number two. As a gentle reminder, please limit yourself to one question and one follow-up only.

Would you change your mind. Your question that's already been aren't that you can withdraw your question. My question Scott followed by the number of it.

Just a reminder, please limit yourself to one question and one follow up only.

Speaker 1: As first question today comes from Toby Summer of Truist. Your line is open, please go ahead.

Our first question today comes from Tobey Sommer of choice.

Your line is open. Please go ahead.

Speaker 7: Hey, good morning. This is Jasper Vibon, for Toby. I can appreciate that there's still quite a bit of uncertainty on home safe here. But any additional color you could share with us on the ramp would be appreciated. With the expectation of the first moves happening in 1, 2, 24, there are an underlying expectation there for the share of poval volume that you're going to be taking over at that point. Do you think it's still feasible to hit the full revenue run rate at some point in 2025?

Hey, Good morning. This is Jasper bibb on for Tobey I can appreciate that there is still quite a bit of uncertainty on home safe here.

But any additional color you could share with us on the ramp would be appreciate it and I think with the expectation of the first moves happening in <unk> through 'twenty. Four is there an underlying expectation there for the share of total volume, but youre going to be taking over at that point and do you think it's still.

Feasible to hit the full revenue run rate at some point in 2025.

Speaker 5: I mean, it still looks clear what the ramp is like and I would try to be quite distinctive about that in a prepared remarks. Is it possible we can still get to full run rate by somewhere 25 yesterday?

I mean.

It's still not clear what the ramp is like and I tried to be quite distinct about that.

Our prepared remarks is it possible, we can still get to full run rate by 25, yes. It is.

Speaker 5: But until we get through the next few months and get to February , as we said, we'll have more clarity then. But yeah, it's difficult to say what's gonna happen in 24. Could you get to full run rate by 25 years? Yes, is that going to be no? And that's just...

But until we do.

We get through the next few months.

Get to February as we said, we'll have more clarity to that.

Yes, it's difficult to say, what's going to happen in 'twenty four could you get to full run rate by 25. The answer is yes, it's not guaranteed.

Speaker 5: The day of truth of it today, where we're not filling any punches, that's just the facts. And there's so much uncertainty at the moment on timing, because of what's happening across the world. As I'm sure you can understand totally not control. But that's just the way it is. And we're trying to be very upfront and transparent in that.

The truth of it today, but we're not feeling any punches that just that's just the Fox and there's so much uncertainty at the moment on timing because of what's happening across the world as I'm sure you you.

You can understand totally not in our control.

But but.

That's just the way it is.

We're trying to be very upfront and transparent and not message.

Speaker 7: No, that that definitely makes sense. And then I think you said it was going to be harder to hit the, the 475 target because of higher interest rates. Just just curious if you could frame the relative headwind from from those higher rates. Versus your initial plan, like, is there a had 1 that you could type of that?

No that definitely makes sense and then I think you said it was going to be harder to hit the 475, EPS target because of higher interest rates.

Just curious if you could frame the relative headwind from from those higher rates versus your initial plan like is there.

Etfs had one that you can tie to that.

It's more specific.

Yeah, I mean, there's two factors of course that 475.

Speaker 5: Yeah, I mean there's two factors of course, 475, whether they embed a ground up on home of everything there but it won't look that way for sure we're totally out for

Embedded ramp up on home safe, which may or may not be achievable as we've just talked about and in terms of interest rates I think the difference that's happened over the last three four months in particular is the.

Speaker 5: me and me not the achievable as we just talked about. And in terms of interest rate, I think the difference that's happened over the last three, four months in particular is the yield curves that are now looking that interest rates are higher for longer. They were coming down, and if you went back a few months, the yield curves would say they were coming down, which means

Yield curves now lifting the interest rates are higher for longer that we're coming to iron who if you went back a few months the deal because lets say that are coming down, which which means of course, it's accretive to borrow the money and then buy back stock and the moment that that losses on the edge I would say in and.

Speaker 5: It's a creative to borrow money and then buy back stock at the moment that that mass is on the edge, I would say. And so obviously if you're using free cash flow, it's a creative, if you're putting it on your balance sheet, it's a more difficult decision. And I think that's really the message we're trying to give around that and the implications of the higher interest rate.

So obviously, if youre using free cash flow accretive if you're putting on your balance sheet.

It's a more difficult decision and I think that's really the message we're trying to give a rundown on the implications of the higher interest rate lock and.

Speaker 6: Yeah, I think that an opportunity is to clarify that, you know, absent real compelling M&A, we intend to use all of our free cash flow for buybacks. We think that's a terrific return over the long term for our shareholders.

Yes, I think there's an opportunity just to clarify that absent real compelling M&A, we intend to use all of our free cash flow for buybacks, we think thats a terrific return over the long term for our shareholders.

Speaker 6: but a story suggested, you know, these days to level up and buy back stock is kind of a push from an accretion perspective that would not are assumption in the original target.

But as Stuart suggested.

These days to lever up and buy back stock its kind of a push from an accretion perspective that was not our assumption in our original targets.

Speaker 6: when we had lower rates and so forth and so that that part

When we had lower rates and so forth and so that's that part.

Speaker 6: uh, won't deliver the accretion we once assumed, but all other um, things operationally, as we said in our prepared remarks, really strong, more stronger than planned.

Won't deliver the accretion that you want to assume but all other.

Operationally as we said in our prepared remarks were really strong or stronger than planned.

Speaker 6: A little bit of headwind on tax rates and effects since the derivation of those targets, but uh

A little bit of headwind on <unk>.

Tax rates and FX essentially the elevation of those targets but.

Speaker 6: not that traumatic relative to the interest rates which are the biggest movers as well at the home safe timing which is uncertain.

Not that dramatic relative to interest rates, which are the biggest.

Well, let the home safe timing, which is uncertain.

I appreciate the detail there thanks for taking the questions guys.

Thanks, Josh.

Speaker 8: And next question today comes from but, Fubin of Feeful, your line is open. Hey, good morning.

Question today comes from Susan of Stifel.

Your line is open.

Hey, good morning, Mark Thanks for the question.

And that.

Hey, maybe just to start out.

Speaker 9: Hey, maybe just to start out, Stuart, you said STS is expected to overperform.

Stuart you said STS is expected to over perform.

Speaker 9: Next year, how should we think about the trajectory there? I think last call you mentioned that you expected sort of double digit organic growth for a while. There could be some lumpiness in that over time.

Next year, how should we think about the trajectory. There I think last call. You mentioned that you expected sort of double digit organic growth for a while there could be some lumpiness in that over time.

Speaker 9: I mean, right now you're growing 28% as there is a situation where you just continue to grow in an elevated level in 24. And then as we think about 25, I mean, that was supposed to be 300 million in EBITDA by then. Is there any update you can give us on that as we think about, I guess, the new 25 target?

I mean, right now you're growing 28% is there a situation where you just continue to grow at an elevated level in 2004.

And then as we think about 25, I mean that was supposed to be 300 million in EBITDA by then.

Is there any update you can give us on that as we think about I guess, the new 25 target.

Speaker 5: Yeah, I mean, I don't think we're going to get out over our skis on a 25 target today, but what I would say is that we are well ahead of pace. You're quite right. We had a 300 million target. We're going to blow through that this year. You know, we raised the guide last quarter and we're ahead of pace of that, or on pace for that, and I think everyone recognizes.

Yeah I mean.

I think we're going to get over our skis and a 25 target today, but what I would say is that we are well ahead of pace, you're quite right. We had a 300 million target we're going to blow through that this year you know, we raised EBITDA guidance last quarter.

The pace of that are on pace for that.

Everyone recognizes particularly with the Q3 results, that's all pointing to to Sds and I think if you look at the relative performance of the STS to KBR I think year to date, it's circa 40% in the quarter, it's even higher and so its contribution in this volume.

Speaker 5: that's all pointing to SDS. And I think if you look at the relative performance of SDS to KBR, I think you have to date at about 40% and the quarter is even higher. So it's contribution and its value to KBR is becoming clearer and clearer and hopefully that reflects in multiple as well as we go forward in terms of that contribution.

<unk> is becoming clearer and clearer and hopefully that reflects in the multiple as well as we go forward in terms of that.

That contribution but.

Speaker 4: As we look into next year, you know, we'll be the double digit growth that we set ourselves as we come off of much higher base.

If you look into next year.

The double digit growth that we set ourselves will be coming off a much higher base.

Speaker 4: and clearly that that outpaces where we originally thought and even a few months ago thought we would be starting from. So I think that's probably the best way to look at it. You'll get to the, we've got an invested day as you know in sort of May next year and you'll certainly be reallinding those targets by then. We should also have a lot more clarity on homesick by then as well. So I think you can really sort of cover off where we're heading in the next couple of years at that.

Clearly that pieces.

I originally thought even a few months ago, we would be we'd be starting from so I think thats, probably the best way to look at it we will get to that we've got an investor day as you know in sort of May next year, and we will certainly be realigning those targets. By then we should also have a lot more clarity on home safe by then as well so I think we can.

Can really sort of.

So I cover off where we're heading in the next couple of years that Georgia.

Just to clarify there Stuart did you say, it's a higher base and so double digit growth will be a challenge or you expect double digit growth off of a higher base.

Speaker 4: Just to clarify, there's Stuart, do you say it's a higher base, and so double digit growth will be a challenge, or do you expect double digit growth off of a higher base? No, no, no, no, no, no, no, no, no, no, no, no, no, no, we firmly expect double digit growth, my point being it's a much higher starting number that you put the double digits to.

No no we firmly expect double digit growth.

My point being that it's a much higher stocking number that you put in the double digits too.

Got it okay. Thanks, and then just as a follow up on the home safe side of things I mean, I think there was some news out there in September that there was I guess challengers are I guess concerns on transcon part of integrating mill move with home safe connect and it seems like you guys are pretty ready whenever.

Speaker 9: Got it. Okay. Thanks. And then just as a follow up on the home safe side of things, I mean, I think there was some news out there in September that.

Speaker 9: There was, I guess, challenges or I guess, concerns on transcom part of integrating Mill Move with Homestay Connect. And it seems like you guys are pretty ready whenever they essentially say go. That expectation, I think, is still January start and then a sort of sequential ramp from there. Can you just give us some of the moving parts like the things you're watching to get that turned on and revenue started there?

They are essentially say go.

That expectation I think is still January start and then sort of sequential ramp from there.

Can you just give us some of the moving parts like the things you're watching to get that turned on in revenue started there.

Yes.

Speaker 4: Yeah, I mean quite right, it is the integration of the systems and the shooting there, you know, readiness and, you know, we don't want to falter in any way and I think transcom are quite right to be quite considered about how they ramp up and there comes back. If we do expect moves in Q1, I don't think it will be January 1, that's for sure, it will be a little bit later than the quarter.

Right.

The integration of the systems and shooting there.

Genus.

We don't want to falter in any way and I think transco were quite right to be quite considered about how do they ramp up and then it comes back we do expect moves in Q1 I don't think it will be January one that's for sure, but it would be a little bit later in the quarter.

Speaker 4: But I think directionally I'll reiterate again the relationship, the passion around this unboss saying to get it right is absolutely there. I'm not concerned about that at all, but the way.

But I think Directionally I will reiterate again the relationship.

The passion around this on both sides to get it right it's absolutely there.

Im not concerned about that at all.

It's all about.

Speaker 4: you know, being absolutely sure that when we start, we can actually ramp up very quickly and not falter until...

Being being absolutely sure that when we start we cannot see ramp up very quickly and not falter until.

Speaker 4: So that's, I can't say more than what we said in the prepared remarks and just because I don't know anymore. And I think that's kind of where we're.

So I can't say more than what we said in the prepared remarks interest because I don't know anymore.

And I think that's kind of where we're at.

Speaker 4: I'm sorry I can't give more color. It's just, it's just better. Once that thing, try to be truthful.

Sorry, I can't give more color.

Hello, everyone.

I'm trying to be truthful.

Okay. Appreciate the color. Thank you.

The next question today comes from Tom corner of JD Cowen. Please go ahead.

Speaker 1: The next question today comes from Bhatam Karnat of PD Cowan. Please go ahead.

Okay.

Hi, guys.

Speaker 10: Hi guys, two questions. First.

Two questions.

Yes.

On home space I'm, just curious about your confidence on execution given some of the logistics partners may have agreed to.

Speaker 10: On home space, I'm just curious about your confidence on execution given some of the logistics partners may have agreed to.

Speaker 10: Contract terms prior to the runaway inflation we fell last year and for part of this year.

Contract terms prior to the runaway inflation, we saw last year in for part of this year.

Speaker 10: just what kind of contractual, what's your confidence that stuff doesn't have to get renegotiated?

Just what kind of contractual.

Is your confidence that that stuff doesn't have to get re negotiated.

And then I have a follow up.

Speaker 4: Yeah, I think, Gopham, I think we have support from the supply chain deliver to deliver the initial ramp and the commitments around that, even if we started tomorrow, never mind in a few months.

Yes, I think both of them I think the.

We have support from the supply chain to deliver to deliver the initial ramp in the commitments around that.

Even if we started tomorrow never mind in a few months I think the heat has come out of that market somewhat in Transco Omer.

Speaker 4: I think the heats come out of that market of what and transcomer are thinking that those rates should naturally come down as the heat comes out of the market in any event. So I think in terms of our confidence levels, we feel we've got the right partners who've got the right people in the supply chain and we're feeling really good about that. It's not really a question that we're concerned about.

I was thinking that those rates should not should it come down as it comes out in the market and the effect. So I think in terms of our confidence levels. We feel we've got the right partners who've got the right people in the supply chain and we're feeling really good but it's not really a question that we have.

We're concerned about.

Okay.

Speaker 10: And then just a quick follow-up on the 2025-475 target, you know, knowing what you know today, what is the variance, earnings per share variance?

And then just a quick follow up on the 2025 475 target knowing what you know today, what is the variance earnings per share variance.

Speaker 10: to that from interest expense, you know, a higher share count.

To that from interest expense a higher share count.

Speaker 5: etc. I mean take take home space out of it, which I think was about 50 cents, right?

Et cetera.

Take homesites out of it which I think was about 50 right.

Speaker 10: to the target when you guys, when you guys updated for the home safe win.

To the target when you guys. When you guys updated for the Homestake win.

Speaker 10: Where do you stand? Is it 425? Yeah, what do you look in here?

We're doing a damn.

425%.

What do you what can you see.

I mean, so so.

Speaker 5: Oh, I mean, it's so tricky because we don't know the ramp on home safe and as Mark was alluding to in terms of free cash, what we were used to do by back there was a big...

So tricky because we don't know what the ramp on home safe and as Mark was alluding to in terms of free cash flow will be used to do buybacks. So it was a big.

Speaker 5: I have peace of that in the initial calculation then.

Piece of that in the initial calculation and so I think that I think the challenge for US Gulf of if you look back is that when we set our targets initiated I think it was $4 435, and 475 with wholesale there was a base set of assumptions that surrounded around.

Speaker 5: So I think the challenge for us, God, and the feeling back is that when we set our targets, initially, I think it was $4.25 and then $4.75 with a whole set.

Speaker 5: was a base set of assumptions that surrounded that around, you know, interest rates and, you know, accretion dilution mass around buybacks and things like that, and average share prices and things. So, but ultimately, everyone forgets about those assumptions and everyone just goes and remembers the EPS target. And so I think the things that we can control are probably a better way to think about how we should be measured. And I think that really is EBITDA.

Interest rates.

Accretion dilution mass around buybacks and things like that.

And I'll be share prices and things, so, but ultimately everyone forgets about those assumptions and everyone. Just goes to the members of the EPS target.

And so I think the things that that we can control are totally a better way to think about how we should be measured and I think that really is EBITDA.

Speaker 5: and you know, as we've come with these external factors and the volatility in the world today, you know, we can't control interest rates and FX movements of things like that, but our EBITDA generation is within our control as a organic growth and win, and I think that's how we will be.

This has come with these external factors and the volatility in the world today, we can't control interest rates and FX movements and things like that but our EBITDA generation is within our control.

Growth in wins and I think.

That's how we will be.

Speaker 5: I guess projecting our future, if you like, that doesn't mean that EPS, particularly short-term EPS, will not, will certainly be part of the executive compensation, but longer-term EPS with such volatility and movements is something we're probably gonna move away from and think more about even.

Again projecting our future if you like that doesn't mean that EPS, particularly short term EPS.

Certainly part of the executive compensation, but that longer term EPS with such volatility movements.

It's something we're probably going to move away from and think more about EBITDA.

And do you have an updated EBITDA target for 25.

Speaker 10: And do you have an updated DBDA target for 25, you know, recognizing home safe, ex-home safe?

Recognizing home safe X home safe.

I think so it was very clear in his remarks that we're ahead of pace by a lot in STS and on pace for a government excellent and safe and we still believe home safe is there it's a matter of time.

Speaker 6: I think Stuart was very clear in his remarks that we're ahead of pace by a lot in STS and on pace for government ex-HomeSafe, and we still believe HomeSafe is there. It's a matter of time. So, putting a precise date in 2025 in HomeSafe's contribution is a little hard, but we still are optimistic it will deliver, you know, the originally intended EBITDA over time once we get through, you know,

So.

Putting a precise.

In 2025.

Home safe contribution is a little hard, but we still are optimistic that we will deliver.

The originally intended EBITDA over time.

Once we got through the first moves and everyone is comfortable with the quality that was intended can be delivered.

Speaker 6: First moves and everyone is comfortable that the quality that was intended can be

Speaker 6: So, the great news is that relative to the original target, the most important driver, which is Ibiza, is ahead of time.

So the great news is that relative to the original targets. The most important driver because EBITDA is ahead of pace.

Speaker 6: We haven't quantified that yet. You can maybe do your own calculation on SDS's run rate.

We haven't quantified that yet.

And you can maybe doing your own calculations on SCS as run rate.

Speaker 6: and where they're heading trajectory-wise, which we think will continue. But I think it's best to wait for the 24 guide.

And where they're heading trajectory wise, which we think will continue but I think it's best to wait for the 24 Guy in the in the Investor day to be more precise on that exact level for 25, and then certainly as we move into 'twenty four we're very confident of our EBITDA targets and meeting them as the visit.

Speaker 5: the investor day to be more precise on that exact level for 25. I mean certainly as we move into 24 we're very confident of our EBITDA targets and meeting them as the pathway that we explained with SDS outperforming and opposite any shortfall in home safe will certainly be made up by SDS. So we're not we're not worried about that pathway at all. Awesome.

The pathway that we explained with Sps high performing and.

Opposite.

<unk> and wholesale channels that will be made up by us there.

We're not worried about that possibly at all.

Thank you.

Our next question today comes from Michael Dudas of that.

Speaker 11: And next question today comes from Michael Dudas of vertical research partners. Please go ahead. Your line is open. Good morning, Jamie. Mark Stewart. Morning, Mike.

Research Partners. Please go ahead your line is open.

Yeah.

Yeah.

Good morning, Jamie Mark Stewart.

Good morning.

Hello.

Alright can you hear me.

Okay, great Yeah.

Thanks, Good morning, everybody.

So just wanted to.

Speaker 11: They move towards STS. There's a lot of news, last couple of weeks of the funding in the US for hydrogen hubs. So certainly the hydrogen market continues to get a lot of visibility in New Slow. Maybe we can explain a little bit about how KBR and its clients are thinking about that and how that could drive some more opportunities, you know, on top of what you've already described in the ammonia and at Mijgin Business for the next of the next couple of years.

It moves towards STS, there's a lot of news.

A couple of weeks of.

Funding in the U S for hydrogen hubs. So certainly the hydrogen market continues to get a lot of visibility new slow maybe you can explain a little bit about how KBR and its clients are thinking about that and how that could drive some more opportunities you're on top of what you've already.

<unk> described in the ammonia and at margin business for the next several years.

Speaker 5: Yeah, I mean, I think of the 7 billion, I think half of it or so will be spent in construction and the implementing I think 68 hydrogen hubs, I think targeted, I think for 2030 max to be online.

Yes, I mean I think.

Of the $7 billion I think half of it. So it will be spent in construction, enabling I think six to eight hydrogen hubs I think.

I think for 2013, Mike to be online.

Speaker 4: And I think however, we've got customer sets all around the world.

And I think however, we've got customer sets all around the world.

Speaker 5: some of which are more funding and I'm moving far faster with greater urgency and we talked a little bit about hydrogen cracking and the things we're doing in that area and as you well know we're in position in hydrogen opposite ammonia as well. So I think the US stimulus is a good place.

Some of which have more funding.

Moving far faster with greater urgency and we talked a little bit about hydrogen cracking and the things we're doing.

In that area and as you well know where we're positioned in hydrogen opposite of ammonia as well. So I think the U S. Stimulus is a good part of the story.

Speaker 5: But I guess probably in the near term, it's only part of the story, and I think there's great growth outside of the U.S. as well as in it, and so I think it's a terrific opportunity for KBR.

But I guess, that's probably the near term.

Part of the story and I think there's great growth outside of the U S as well as in it.

So I think it's a terrific opportunity for KBR.

Speaker 5: how we play in that and the way we're thinking about it is evolving. It's only recently announced of course.

Are we playing not in the way we're thinking about it is evolving.

We recently announced of course, but we are really busy elsewhere in the world, which of course, because it's amazing credentials and capability to bring back into the U S.

Speaker 5: But we are really busy elsewhere in the world, which of course gives us amazing credentials and capability to bring back into the US.

Terrific. Thank you Steve I appreciate it.

Yeah.

Speaker 1: The next question today comes from Gerry Rivitch of Goldman Sachs. Please go ahead.

The next question today comes from Jerry Revich of Goldman Sachs. Please go ahead.

Yeah.

Hi, This is Adam on for Jerry today. Thanks for taking my question I was wondering if you could.

Speaker 12: Hi, this is Adam on FurJerry today. Thanks for taking my question. I'm wondering if you could help us understand the growth outlook by platform for 2024 and government solutions, how you're thinking about that, excluding home safe and particularly interested in how you're thinking about the international peace given some of things going on in the world.

Help us understand the growth outlook by platform for 2024, and government solutions, how youre thinking about that excluding home safe and particularly interested in how the.

How youre thinking about the international piece.

Even some of things going on in the world.

Yes, So I think I think our guide ex home safe is somewhere between 5% to 8% in terms of growth and I think we are.

Speaker 5: Yeah, so I think I think our guide X home safe is somewhere between 5 and 8% in terms of growth, and I think we're well aligned on that as I saw in the prepared remarks covered off. I think science and space is in a terrific place with its recent wins, particularly the takeaways and the additional scope and contract values have taken on board as we move into 24 for good growth.

We're well aligned on that.

So in the prepared remarks covered off I think scientists spaces in a terrific place with this recent wins, particularly the takeaways in the additional scope in contract volumes have taken onboard as we move into 'twenty four for good growth.

Speaker 5: We've got a lot going on in the intelligence community, as you would likely expect at this time, and we've secured quite a bit across our DNI portfolio, and there's more to come, I think, in Q4.

We've got a lot going on in the intelligence community as you would expect at this time.

We secured quite a bit across of DNI portfolio and there is more to come I think in Q4.

Speaker 5: So, again, we're feeling really strongly about organic growth there. And R&S is the one where we've seen a little bit of softness, I think, in the last couple of months. But as I said, again, I think with the recent cash orders, all multi-year.

So again, we're feeling really strongly about organic growth there.

<unk> is the.

Is the one where we've seen a little bit of softness I think in the last couple of months, but as I said again I think with the recent task orders all multiyear.

Speaker 5: We're expecting that to so that pack up as we move into the

We'd expect it not to.

Not back up as we move into next year.

Speaker 11: The international piece is interesting. Great, thank you.

The international pieces is interesting okay, great. Thank you.

Speaker 5: Okay, well I think the international piece is probably growing faster than most. I think we're looking at sort of double-digit growth there as a consequence of what's happening in the world and the stronger collaboration.

Okay.

I think the international piece is probably.

Growing faster than most I think we're looking at sort of double digit growth there.

As a consequence of what's happening in the world and the stronger collaboration.

Speaker 5: and I think the markets there have settled down, there's been only government in the Syria a few months ago, and that they'll settle down and come through that. We can see there actually where the spending and we're lined up nicely opposite those factors. So I think all up, we're feeling pretty good about our overall GS growth range, and that's a sort of breakdown across that portfolio.

I think that the markets that have settled down and there's been a new government in Australia, a few people.

Months ago, and that's all settled out and that come through that.

We can see directionally, where the spending and we're lined up nicely opposite affect us. So I think all up.

Pretty good about our overall GFS growth range and that's just.

Sort of a breakdown across that portfolio so that helps.

Speaker 12: very helpful and then in sts can you talk about any major new contracts that you might be targeting and expected timing of any award decisions there

Very helpful. And then in Fts can you talk about any major new contracts that you might be targeting an.

The timing of.

Any award decisions there.

Yes, I guess the biggest I mean, there is a lot happening in STS across the world.

Speaker 5: Yeah, I guess the biggest, I mean, there's a lot happening in SDS across the world. It's a multifaceted portfolio. We do a lot for

Multifaceted portfolio, we do a lot for.

For for many different customer sets across the energy Trilemma is as we explained I would say that the largest.

Speaker 5: for many different customer sets across that energy trilemma as we explained. I would say that the largest news I think in the market really is probably coming out of Saudi. I mean they're expected to be the largest economy or the largest growing economy or the fastest growing economy for the next couple of years as you're probably aware.

News I think in the market really is probably coming out of Saudi.

They are expected to be the largest component whether its largest growing economy of the fastest growing economy for the next couple of years as you're probably aware.

They're putting a lot of capital to work as they diversify their economy.

A lot going on from Decarbonization thematic ware.

Sure.

Stopping burning crude for power, replacing that with gas and we're heavily engaged in not a number that could that time to extend the value chain by coming into petrochemicals.

Speaker 5: And so there's a substantial new program with, you know, four or five major crackers associated with it. And it's a huge integrated portfolio of investment, you know, running up hundreds of billions of dollars.

So theres a substantial new program with.

You know four or five major crackers associated with it and.

This is a huge integrated portfolio of investment running up.

Hundreds of billions of dollars.

Speaker 4: out for a bid now in terms of pre-feed and feed and project management and you know if that comes through I think if we can win our fair share of that and we've got a good relationship in Saudi and we really like working with Aramco, we really understand how they operate and we've got a long history of doing well mutually.

That's up for bid and.

Tons of pre feed and feed and project management.

And if.

If that comes through I think if we can win our fair share of that and we've got a good relationship in Saudi and we really like working with Aramco, we really understand how they operate and we've got a.

A long history of doing well mutually.

Speaker 5: And so if we can win our fair share there, that's very exciting and quite sizable in multi-year. And I think that's probably the largest we think that there'll be noise about that coming through in Q4.

So if we can win our fair share there, that's very exciting and quite sizable multi year and I think that's probably the largest we think that there'll be there'll be.

Noise about that coming through in Q4.

Speaker 5: That's probably the largest one out there and I think is that come through. I think also nice coming through in this quarter was was more reimbursable LNG work, which I know a number of people felt that that placements could not be, you know, would be more than just placements and I think we've...

That's probably the largest one there and I think.

That comes through I think also nice coming through in this quarter was.

Was more Reimbursable LNG work, which.

I know a number of people felt that plaquemines could not be.

It would be more than just <unk> and I think we've proven that that's not the case.

Speaker 11: proven that that's not the case and that there are mature customers out there that like to work in the risk model that we can tolerate and take our sort of high-end capability to help them succeed.

Your customers there.

Like to work in the risk model that we can tolerate and we can take our sort of high on capability to help them succeed.

Speaker 5: as we look to use, I guess, gas as a transition fuel and also around energy security. So I think that's all good, but lots happening across the world in terms of ammonia, in terms of more ammonia cracking opportunities.

As we look to to use against gas as a transition fuel and also run that as a security. So so I think that's all good.

But what's happening across the world in terms of ammonia and tons of more ammonia crafting opportunities you probably saw that.

Speaker 5: And we have finally seen ahora of plastic recycling. David Lord

Plastics recycling.

Our partner or the investment we have in mirror that they've opened the doors. If you like for business and so it was a big delegation that was in fact just last week.

Speaker 5: partner or the investment we have in Mura that they've opened the doors, if you like, for business. And there was a big delegation there, in fact, just last week and as with the CEO at the tail end of last week, and very positive of ramping up production as we move into Q1 next year. So again, I think that's all exciting. So more will come once that's happening, I'm sure, in the plastics recycling arena. So.

I was with the CEO at the tail end of last week and very positive of ramping up production as we move into Q1 next year or so so again I think that's all exciting so.

More will come once that's happening I'm sure in the plastics recycling arena, so sorry, a long answer to a short question, but there's so much excitement around SD asked there's a lot happening across across the portfolio.

Speaker 5: Sorry, a long answer to a short question, but there's so much excitement around SDS. There's a lot happening across across the portfolio and and that goes from obviously the orphans opportunities in Saudi to the.

That goes from obviously, the olefins opportunities in Saudi to the to the global ammonia opportunities to hydrogen cracking in Korea.

Speaker 5: to the global immemorial opportunities to hydrogen cracking but in Korea to what's happening across the world in the story and energy security, etc. So at the very global business and not to mention what's happening in the US with all the additional funding around the de-capitalization, to market in the Arab world.

Two to what's happening across the world in Australia in energy security et cetera, So, it's a very global business and not <unk>.

What's happening in the U S with all the additional funding around the decarbonization thematic and IRA business. So I think all good and not enough.

Speaker 5: I think it's all good in that arena. Sorry. Sorry it's a long answer, but we're quite excited about FDA.

Oh, sorry, sorry, it's a long answer, but we're quite excited about.

Okay.

Terrific. Thanks, so much.

Speaker 1: Our next question today comes from Marianna Perez-Mora of Thanks America. Your line is open. Please go ahead.

Our next question today comes from Mariana Perez Mora of Bank of America. Your line is open. Please go ahead.

Hi, Good morning, this isn't apples styron from Marianna.

Speaker 13: Hi, good morning. This is Samantha. I'm from Mariana. I was just wondering about, you talked a little bit about at the beginning, the headcount ramp what you're seeing with that. And then, particularly, as you see the strong growth in, do you have the headcount in place already to kind of keep up with that?

I was just wondering about you talked a little bit about that at the beginning of the head count ramp.

What youre seeing with that and then particularly as you see the strong growth in STS do you have the headcount in place already to kind of keep up with that.

Speaker 5: Yeah, I mean, we're, we're firing just slightly ahead of it. Some there, I think we're a TV's doing extremely well. And we've got a large presence in India that allows us a little bit of relief valve there. And we've got a terrific.

Yes.

We're hiring just slightly ahead of the curve some there I think where the team.

He was doing extremely well and we've got a large presence in India that allows us a little bit of relief there.

Terrific.

Speaker 5: a lady who leads up business and as highly respected in the marketplace so we're able to attract real talent and diversified talent, which is terrific.

Lady who leads that business.

It is highly respected in the marketplace that we're able to attract real comment on diversified talent, which is terrific.

Speaker 5: So I think so far, so good, and there will become, I'm sure, you know, constraints and certain elements like that in the world's gone past, things like in the process side and things like that. But so far, we're keeping on pace and no real issues, but we've got a very strong...

So I think so far so good and that will become im sure.

Constraints in certain elements like this and the wells gone past that things like in the process side and things like that but so far.

We're keeping on pace and no real no real issues, we've got a very strong.

Speaker 5: recruitment team, but I think ultimately, you know, that where we sit in the marketplace around sustainable solutions is a big draw for talent.

Recruitment team, but I think ultimately.

Is that where we sit in the marketplace around sustainable solutions as a big draw for talent.

Speaker 5: You know, particularly younger talent, they really value being part of a company that's actually trying to address climate change issues and decarbonisation to my teacher.

Particularly the younger talent, they really value being part of a company that's actually tied to address climate change issues and decarbonization somatic.

Speaker 11: as well as what we do in government around security and sustaining, you know, our way of life and things like that. So it's, you know, our overall reputation helps where we are in the markets and the things we do help, but we really look after our people once they're here.

As well as to what we do and government are unsecured and sustaining.

We have licensed things like that so it's a.

It's.

Our overall reputation helps us where we are.

Our and the markets and the things, we do help but that but we really look after our people. Once they are here and recruitment is only one aspect I think retention is another aspect.

Speaker 4: and recruitment is only one aspect. I think retention is another aspect and certainly we're doing very well in that area. So I think so far so good.

We're doing very well in that area. So so I think so far so good.

Okay, Great I'll keep it to one thank you.

Thanks.

Our final question today comes from Sahil <unk> of Deutsche Bank. Please go ahead.

Speaker 1: Our final question today comes from Sahil Manocha of Citibank. Please go ahead.

Speaker 14: Hi, good morning. Just a homeowner challenge for any capital.

Hi, Good morning, just Tahoe mono channel on for Andy Kaplowitz.

Speaker 14: So, another government shutdown deadline is approaching in, in, in November . Could you provide some color on the on how a short to medium term shutdown could impact the government solution.

Yeah.

So another government shutdown deadline approaching.

In November could you provide some color on the on how its short term medium term shutdown could impact the government solutions business.

Yeah. Thanks, So I mean I'm sure lots of companies that do what we do in getting that question for us.

Speaker 5: Yeah, thanks, thanks for Hello. I mean, I'm sure lots of companies that do what we do are getting that question for us.

Speaker 5: You know, this is nothing new. I mean, it seems to happen every year, but the CR are a short shutdown. And I think we've pulled them after a year, but very resilient. We understand what we're doing.

This is nothing new I mean, it seems to happen every year, but the CR.

Diamond I think we've proven after a year of a very resilient, we understand what we're doing there.

Speaker 5: You know, remember that our SDS business and our government international business is completely immune to that. So we've got.

Remember that our Sps business and our government international business is completely immune to that so we've got some inbuilt immunity.

Speaker 5: Some inbuilt immunity. We've got a lot of funding on what I've had called tip of the sphere of critical operational missions. And people who are that to the Europe of the space station or whatever it doesn't matter where, and the intelligence, what we do across that whole defense portfolio.

While our funding on our agriculture tip of the spear critical operational missions and whether that's in Europe, the space station or whatever it doesn't matter, where the intelligence, what we do across our whole defense portfolio. So.

Speaker 5: We're not concerned about that, you know, I think ultimately we've been engaged in it so many times and I'm sure the answer is the same for many of our peers in the government realm.

We're not we're not concerned about that.

Ultimately its a.

Been engaged in it so many times, it's and I'm sure. The answer is the same for many of our peers in the government realm. So so yes.

Speaker 5: I'm not, not, I mean it's one of those things that it'd be great to be avoided, but if it does happen, I don't think it's going to impact you there.

I mean, it's one of those things.

To be avoided but if it does happen I don't think it's going to impact caveat too much.

Yeah.

That's helpful. And then I know you provided some color on your in the opening remarks, but could you just provide an update on your plans to settle the remaining warrants which mature in the first half of 2024 has a decision been made on whether they will be settled in cash or shares.

Speaker 14: and then I know you provided some color on your in the opening remarks, but could you just providing up data on your plans that settled the remaining warrants which mature in the first half of 2024, has a decision been made on whether they'll be settled in cash or shared?

Yeah, I think I think it depends.

Speaker 5: Yeah, I think I think it depends how we how we go. I mean, we're not allowed to under the rules of engagement to start that dialogue with the warrant holders until we're in the open window, which we will be in tomorrow. So we can start that negotiation and, as Mark said, if we, if we can cut a reasonable deal around premiums and things, we have options to settle in an accelerated fashion.

I mean, we are not allowed to under the rules of engagement to start that dialogue with the warrant holders until we're in an open window, which we will be in tomorrow. So we can start that negotiation and as Mark said, if we if we can reasonable deal around premiums and things we have option.

<unk> to settle in an accelerated fashion.

Speaker 5: I think the interesting fact pattern around that is that if we do decide, depending on how negotiations go, to settle early, it will be quite a reduction in share count for the year the way these things are calculated that will push up our EPS for 2023.

I think the.

The interesting fact pattern around that is that if we do decide depending on how the negotiations go to settle early.

We will be quite a reduction in share count for the year. The way. These things are calculated that will push our EPS for 2023.

Speaker 5: a bit just because of Sharecat. So there's some good fact patterns there to be taken into consideration as well. So.

A bit just because of share count so with some good partners there to be taken into consideration as well so.

Speaker 6: Mark any more color on that? Yeah, I'll just add because I know this has been a pretty Complex story, but the last remaining piece after yesterday are the warrants

Any more color on that yes, I'll just add because I know this has been a pretty.

Complex story, but the last remaining piece after yesterday are the warrants.

Speaker 6: And today's open, the value of those warrantes roughly 200 million give or take. And that does vary with the.

And at today's open.

The value of those warrants is roughly $200 million give or take.

And that does vary with the stock price roughly $10 of value per $1 of movement.

Speaker 6: roughly $10 of value per one dollar of movement. And so that gives you some sensitivity.

So.

That gives you some sensitivity to.

That will go into our thinking.

Speaker 6: And so we'll evaluate what the market bears. There are counterparty to those instruments, and that is a negotiation, and we'll undertake that, and we'll see where it goes, and we'll advise accordingly.

And so we'll evaluate what the market bears are there our counterparties those instruments and that is a negotiation and we'll undertake that and we'll see where it goes and we'll advise accordingly.

Yeah.

Very helpful. Thank you very much.

Thank you.

We have no further questions. So I'll turn the call back to Stuart Brady for any final remarks.

Speaker 1: We have no further questions in the queue so I'll turn the call back to Stuart Brady for any final remark.

Speaker 5: Thank you. Thanks again. Thanks for taking the time to listen this morning and thank you for your questions. I think you can ascertain where we've got control over our destiny. We're feeling really good about the company, the bookings, the performance, the margins. We look ahead into 24 with bookings very strong in Q3 and obviously some very strong prospects we discussed in Q4, feeling really good about continued momentum.

Thank you thanks again.

Thanks for taking the time to listen in this morning, and thank you for your questions.

You can ascertain where we've got control over our destiny and we're feeling really good about the company the briefings that performance the margins that we would.

Look ahead into 'twenty four with bookings very strong in Q3, and then obviously some very strong prospects we discussed in Q4.

Really good about continued momentum.

Obviously, we've been very clear and very truthful about I'm not trying to pull any punches about uncertainty on home safe on ramp we're feeling quite good about the program in general So please take that as we've said it but.

Speaker 5: Obviously, we'll be very clear and very truthful about and not trying to pull any punches about uncertainty and home safe on ramp. We're feeling very good about the program in general. So please take that as we said it. And but we don't know what the ramps going to look like. We will start in 24 and it will ramp up over time, but until we get clarity, it's difficult to give you any more than that.

But we don't know what the ramp is going to look like we will start in 'twenty four and it will ramp up over time, but until we get clarity it's difficult to give you any more than not there is a path to get to full ramp by 'twenty, five, but but again that cost is unclear and uncertain. So again apologies that we can give more than dissipate. This at this time.

Speaker 5: There is a path to get to full ramp I-25, but again, that path is unclear and uncertain. So again, apologies that we can't give more than the sopaqueness at this time.

Speaker 5: That's probably a good place to leave it. And I'm sure we'll be talking to you one on one and others as we progress. But thank you for your interest in KBR and we look forward to a strong finish to 23 and that was an almost a 24. Thank you.

<unk>.

That's probably a good place to leave it and I'm sure we'll be talking to you one on one and others as we as we progress but thank you for your interest in KBR and we look forward to a strong finish to 'twenty three.

And almost 24, thank you.

Speaker 1: This concludes today's call. Thank you for joining. You may now disconnect your line.

This concludes today's call. Thank you for joining you may now disconnect your lines.

Speaker 2: The to.

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Okay.

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