Q1 2024 KBR Inc Earnings Call
Unknown Executive: to empower them to reach their full potential and, of course, have fulfilling careers. In recent years, our Chief People Officer, Jenny Miles, has greatly expanded our talent development programs, spanning all parts of the globe. And from new hires to senior leadership, there are development opportunities for every level. And I'm pleased to say that this has actually been recognized recently by MSCI, where we received a four star rating, their top rating, in human capital development this year, an exceptional milestone and recognition.
We will potential and of course half fulfilling careers.
Recent years, our Chief people Officer, Jenny miles has greatly expanded our talent development programs spanning all parts of the globe and from new hires to senior leadership. There are development opportunities for every level and I am pleased to say that this has actually been recognized recently by MSCI. We've received a four star rating.
They are top rating oxalate and human capital development this year and exceptional milestone on recognition.
Unknown Executive: Now, I won't spend too much time on this slide, but as you can see, we've highlighted a few examples of these global programs, from mentoring to internal career mobility, and importantly, communities of interest and development around skills of the future. This, in particular, is an area that we have recognized as really important, and we're positioning ourselves to get in front of. Nurturing key talent for the future is a challenge that almost all businesses across the world are facing today.
So I won't spend too much time on this slide but as you can see we've highlighted a few examples of these global programs for mentoring to internal career mobility, and importantly communities of interest and development around skills of the future.
This in particular is an area that we have recognized is really important and we're positioning to get in front of.
Not sharing key talent for the future is a challenge that almost all businesses across the world are facing today and we've talked often.
Unknown Executive: And we've talked often, and for quite a while, actually, about our people focus at KBR to help mitigate this risk, but it will be an ongoing part of our future, no doubt. So, to conclude, as you've heard me say before, KBR is a values-driven organization with our people at the heart of all that we do. Our unwavering commitment to hiring the best and the brightest, rewarding and recognizing our people at all levels, and developing talent and skills for the future are all key enablers and, frankly, the true driver of shareholder value in the short, medium, and longer term. So now on to slide six, and I'll cover our consolidated performance. Today, our presentation will actually be quite short.
For quite a while actually about our people focus at KBR to help mitigate this risk, but it will be an ongoing part of our future no doubt.
To conclude as you've heard me say before <unk> is a values driven organization with our people at the heart of all that we do our unwavering commitment to hiring the best on the brightest rewarding and recognizing our people at all levels and developing talent and skills for the future are all key enablers on Frac.
The true driver of shareholder value short medium and longer term.
Speaker Change: So now onto slide six and I'll cover our consolidated performance.
Today, our presentation will actually be quite short it's been a great start to the year with a very clean quarter.
Unknown Executive: It's been a great start to the year with a very clean first quarter. From a safety perspective, we started the year well, which is always pleasing, as reinvigorating the organization post the holidays is a task we take very seriously. Now looking at financial performance, we started the year well and ahead of pace, especially in SGS and GS International. All businesses delivered at or above expectations, which was absolutely great, and the expected slowness in UCOM in our readiness and sustainment business continued, reflecting funding delays in Congress.
Speaker Change: From a safety perspective, we started the year, well, which is always pleasing as reinvigorating the organization post the holidays is a task we take very seriously.
Speaker Change: Now looking at financial performance, we started the year, well and ahead of pace, especially.
Speaker Change: Especially in STS and <unk> International.
Speaker Change: All businesses delivered at or above expectation, which was absolutely great and the expected slowness in new column and a readiness and Sustainment business continued reflecting funding delays in Congress.
Unknown Executive: Consolidated revenues were $1.8 billion, up 7% year on year, and was actually an all-time high since our transformation in 2020, when you exclude the peaks of OEW in 2021. Adjusted EBITDA outpaced expectations with a 14.14% year-on-year increase, with margins bumping up 70 bps, so very pleasing. Cash was also a bit above expectation at $91 million, and given Q1 is typically the slowest quarter, we're very pleased with this result. The strong performance across all key metrics certainly de-risks the following quarters and positions us very well to deliver our 24 guidance. As of Q1, we have circa 84% of work under contract to deliver that guide. Now on to slide 7 and some key awards.
Speaker Change: Consolidated revenues was $1 8 billion up 7% year on year and was actually an all time high since of transformation in 2020, when you exclude the peaks of Hawaii that we use in 2021.
Speaker Change: Adjusted EBITDA outpaced expectations with a 14, one 4% year on year increase with margin bumping up 70 bps. So very pleasing cash was also a bit above expectation at $91 million and given Q1 is typically the slowest quarter. We're very pleased with this result.
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Speaker Change: The strong performance across all key metrics certainly de risks the following quarters and positions us very well to deliver our 24 guidance.
Speaker Change: As of Q1, we have circa 80, 484% were under contract to deliver that guide now.
Speaker Change: Now onto slide seven on some key awards.
Unknown Executive: For STS, activity levels remain high, opposite the energy trilemma, as we covered in the STS primer webinar recently. And we've highlighted a couple of key wins and milestones that happened in Q1. Now, these have been announced during the quarter, so I won't read them all again. But collectively, you can see that ammonia, decarbonization, energy security, and energy transition remain the key drivers.
Speaker Change: For STS activity levels remain high opposite the energy trilemma as we covered in the STS primary webinar recently and we've highlighted a couple of key wins and milestones that happened in Q1 now.
Now these have been announced during the quarter. So I won't read them all again, but collectively you can see that ammonia decarbonization energy security and energy transition remain the key drivers.
Unknown Executive: As everyone is aware, the one key change from last quarter in the government side was the government defense budget was approved, which should increase award activity in the U.S. going forward. We also expanded our human health and performance franchise to include U.S. Air Force Combat Command, in addition to our ongoing work with NASA and the special forces that you're aware of. Another nice one of note in the quarter was an effectively a four-year IDIQ award to provide cyber security services and risk management to the Defense Health Agency.
Speaker Change: As everyone is aware the one key change from last quarter and the government side was the government defense budget was approved which should increase the award activity in the U S going forward.
Speaker Change: We also expanded our human health and performance franchise to include U S. Air Force Combat Command. In addition to our ongoing work with NASA and the special forces that you're aware of.
Another nice one of note in the quarter was effectively a four year <unk> award to provide cyber security services and risk management to the defense Health Agency.
Unknown Executive: GSI, as I said earlier, had an excellent quarter, growing year on year in the mid-teens and securing the post-PFI award for the heavy equipment transport contract being the standout. This is a multi-year contract with margins aligned with expectations for GSI, so a great outcome. I'm also very pleased to announce that we have successfully completed our first moves under the Home Safe Alliance. This is a significant milestone. As planned, these were all in-state moves, and the volume will slowly ramp up in the coming months. Brookings, in both segments, was actually very, very similar at 1.2 times on a trailing 12-month basis. Why do you exclude the large burn on the LNG project in STS?
Speaker Change: GSI as I said earlier had an excellent quarter growing year on year in the mid teens and securing that post <unk> award for the heavy equipment transport contract being the standout. This is a multi year contract with margins aligned with expectations for GSI, So a great outcome.
Speaker Change: I'm also very pleased to announce that we have successfully completed our first moves under the home Safe Alliance. This is a significant milestone.
Speaker Change: As planned these were all in state moves on the volume will slowly ramp up in the coming months.
Speaker Change: Bookings in both segments, we are actually very very similar up one two times on a trailing 12 months basis. When you exclude the large burn on the LNG project and STS as.
Unknown Executive: As you'll see on the slide, SDS's trailing 12-month book-to-bill was 0.9 times due to that large burn, but the rest of its performance continues to be strong, delivering a 1.1 book-to-bill in the quarter. Historically, Q1 is a slow booking quarter, and we are pleased with the result, especially the strength of the pipeline. So, in short, a great start to the year with positive momentum outside of the normal course of business. This quarter was very quiet, which was very pleasing.
Speaker Change: As Youll see on the slide STS trailing 12 month book to Bill was <unk> nine times due to that large barn, but the rest of Sts's performance continues to be strong delivering.
Speaker Change: One one book to Bill in the quarter.
Speaker Change: Historically Q1 is a slow bookings quarter and we are pleased with the results, especially with the strength of the pipeline.
Speaker Change: So in short a great start to the year with positive momentum outside of the normal course of business. This quarter was very quiet, which is very pleasing and now ill hand off to Mark who will take you through the numbers in a bit more detail mark.
Unknown Executive: And now I'll hand on to Mark, who will take you through the numbers in a bit more detail.
Mark W. Sopp: Fantastic. Thank you, Stuart. Hello, everyone.
Mark: Fantastic. Thank you Stuart Hello, everyone I'll pick up on slide nine.
Mark W. Sopp: I'll pick up on slide nine. So, reiterating Stuart's remarks a little bit, the team is off to a great start for the year with ongoing growth. This quarter, up 7% in revenue and particularly strong adjusted EBITDA growth at 14% on a substantially improved margin. Core profitability has been consistent from quarter to quarter. We're really pleased to see that. That's a key element of our strategy, of course. We also had some profit pull forward in STS from things planned later in the year, bumping up the consolidated adjusted EBITDA margin to about half a percent. I'll hit that on the segments chart here in a moment.
So reiterating Stewart's remarks, a little bit the team is off to a great start for the year with ongoing growth this quarter up 7% and revenue and particularly strong adjusted EBITDA growth at 14% on substantially improved margins.
Mark: Core profitability has been consistent from quarter to quarter, we're really pleased to see that that's a key element of our strategy of course.
We also had some profit pull forward in STS from things planned later in the year.
Mark: Moving up the consolidated adjusted EBITDA margin to about a half a percent.
Mark: Hit that in the segments chart here in a moment.
Mark W. Sopp: Adjusted EPS was $0.77, up 15%, consistent with the EBITDA growth. However, below the line expenses were up quite a bit, primarily from a $5 million non-recurring charge for the cost to complete our refinancing transactions in January. That headwind was offset by the lower share count, enabled by the buybacks we've been making over the past year, and vitally important cash flow was terrific, registering at 91 million. Great job by the team.
Mark: Adjusted EPS was <unk> 77.
Mark: Up 15% consistent with the EBITDA growth.
Mark: Below the line expenses were up quite a bit primarily from a 5 million nonrecurring charge for the cost to complete our refinancing transactions in January.
Mark: That headwind was offset by the lower share count.
Mark: Enabled by the buybacks, we've been making over the past year.
Mark: And vitally important cash flow was terrific registering at $91 million great job by the team.
Mark W. Sopp: This demonstrates, of course, the good quality of earnings and our low capital intensity model, also central to our strategy. I'll move on to slide 10 for the segment results. On the left, STS is continuing to drive great momentum with 15% top line and adjusted EBITDA growth. Customer attraction and retention continue to build with STS's targeted strategy to tap global demand driven by the energy trilemma. We'll talk quite a bit about that on IR day.
Mark: This demonstrates of course, good quality of earnings and our low capital intensity model also central to our strategy.
Mark: I'll move on to slide 10 for the segment results.
Mark: On the left STS is continuing to drive great momentum with 15% top line and adjusted EBITDA growth.
Mark: Customer attraction and retention continues to build with Sts's targeted strategy to tap global demand driven by the energy Trilemma, we'll talk quite a bit about that in the IR day.
Mark W. Sopp: We believe the trust being registered with Blue Chip customers around the world will offer enduring benefits to this business area and to KBR for years to come. The adjusted EBITDA margin of 22% was a little higher than expected. Here's where we had a favorable closeout in Q1, which benefited the segment margins by about two percentage points. However, we had planned that to spread over the full year, so that benefit shifted less. I am always happy to have that happen.
Mark: We believe the trust being registered with Blue chip customers around the world will offer enduring benefits to this business area and to KBR for years to come.
Mark: The adjusted EBITDA margin of 22% was a little higher than expected, here's where we had a favorable closeout in Q1, which benefited the segment margins by about two percentage points.
Mark: We had planned that to spread over the full year, so that benefit shifted left.
Speaker Change: Always happy to have that happen.
Mark W. Sopp: Over to Government Solutions on the right side of the chart. The top line was up about 4.5%, with adjusted EBITDA up 6% on modestly higher margins. This can be attributed to MIX as the stronger growth drivers in the corridor with higher margin international and D&I business units, defense and intelligence. Defense and Intel and International had double-digit growth. S&S science and space was at 7% R&S contracted by about 12%, and as Stuart said earlier, this is tied to activities in the European command theater, which have been soft given the lack of progress on funding to support Ukraine.
Speaker Change: Over to government solutions on the right side of the chart.
Speaker Change: Top line was up about four 5% with adjusted EBITDA up 6% on modestly higher margins.
Speaker Change: This can be attributed to mix as the stronger growth drivers in the quarter with a higher margin international and DNI business units defense and intelligence.
Speaker Change: Defense and Intel and international had double digit growth SNS science and space was at 7% Rns contracted about 12% and as Stuart said earlier. This is tied to activities in the European Command theater, which had been soft given the lack of progress on funding to support Ukraine.
Mark W. Sopp: I move over to slide 11 on capital matters. The refinancing we did at the beginning of this year and discussed in our previous Q4 call sets us up well for capital expenditures in 2024 and beyond. We have a terrific balance sheet with plenty of capital deployment options. For starters, the team generated terrific cash flow, as I said earlier, of $91 million in Q1 despite that being a seemingly low quarter for cash. You recall, we increased the dividend by about 10% this quarter and also completed $50 million in buybacks.
Speaker Change: And we will go to slide 11 on capital matters the.
Speaker Change: The refinancing we did at the beginning of this year and covered in our previous Q4 call sets us up well for capital matters in 2024 and beyond.
We have a terrific balance sheet with plenty of capital deployment options for.
Speaker Change: For starters the team generated terrific cash flow I said earlier of $91 million in Q1, despite that being a seasonally low quarter for cash.
Speaker Change: Youll recall, we up the dividend about 10% this quarter and also completed $50 million in buybacks.
Mark W. Sopp: With that, we exited Q1 with a leverage ratio of 2.0, quite important as the high interest rate environment seems stickier than the market had expected. You might recall us saying that we expected the interest rate environment to stay higher for longer, and so far, so true. Deployment priorities remain the same; we can lever up moderately for accretive M&A should opportunities present themselves. And absent that, expect buybacks and debt management. I'll finish up on slide 12.
Speaker Change: With that we exited Q1 with a leverage ratio of two zero.
Speaker Change: That's important as the high interest rate environment seems stickier than the market had expected.
Speaker Change: You might recall us, saying that we expect that the interest rate environment stays.
Speaker Change: Higher for longer and so far so true.
Speaker Change: Deployment priorities remain the same we can lever up moderately for accretive M&A should opportunities present themselves.
And absent that expect buybacks and debt management.
Speaker Change: I'll finish up on slide 12, we are off to a really good start in Q1 with excellent work under our contract coverage for the remaining quarters and as such we are reaffirming our guidance for the year on all measures.
Mark W. Sopp: We're off to a really good start in Q1 with excellent work under contract coverage for the remaining quarters. And as such, we're reaffirming our guidance for the year on all measures. Finally, as with the rest of the folks around the table here, we're looking forward to seeing you at our IR day on May 8. Can't wait for that to happen.
Finally, as with the rest of the folks around the table here. We're looking forward to seeing you at our IR day on May eight so can't wait for that to happen.
Speaker Change: With that I'll turn it back over to Stuart.
Stuart J. B. Bradie: Thanks, Mark, and very concise. I'll finish up on slide 13 with some key takeaways. Firstly, a strong start to the year across all key metrics, so really pleasing. Continued momentum in our key markets, with the exception of R&S, of course, due to Ukrainian funding delays, as we've covered a few times in this presentation. Solid bookings and backlog in what is typically a slow quarter, so a good start again in that area.
Stuart: Thanks, Mark and very concise I'll finish up on slide 13, with some key takeaways.
Stuart: Our strong start to the year across all our key metrics, so really pleasing.
Stuart: Momentum in our key markets with the exception of Iron as of course due to Ukraine funding delays as we've covered a few times in this presentation.
Stuart: Solid bookings and backlog and what is typically a slow quarter. So a good start again in the area and circa eight 4% of our work under contract plus a strong Q1 really de risk future quarters, and we're well positioned to deliver that.
Stuart J. B. Bradie: And circa 8.4% of our work under contract, plus a strong Q1, really de-risk future quarters, and we're well positioned to deliver the full year 24 guide. First home-safe moves successfully completed, another great milestone in the quarter. So, like Mark, I look forward to seeing you all on May 8th in New York for Investment Day. And with that, I'll say thank you for listening, and I'll now hand the call back to the operator, who will open the call to questions. Thanks.
Stuart: Full year 'twenty guidance.
Stuart: First home safe moves successfully completed another great milestone in the quarter. So like Marc I look forward to seeing you all on May the eighth in New York for our Investor day and with that.
Speaker Change: Okay. Thank you for listening and I'll now hand back to the operator, who will open the call up for questions.
Operator: Thank you. We will now start today's Q&A session. To register a question, please press star followed by one on your telephone keypad. To withdraw your question, please press star followed by two. We ask that you please ask one question and one follow-up. Our first question today comes from Andy Kaplowitz from Citigroup. Your line is now open; please go ahead.
Speaker Change: We would ask that today's Q&A session to register a question. Please press star followed by one on your kind of thank you Pat.
Speaker Change: Your question. Please press star followed by <unk>.
Speaker Change: We ask that you. Please ask one question and one follow up.
Speaker Change: Our first question today comes from Andy Kaplowitz from Citigroup. Your line is now open. Please go ahead.
Andrew Alec Kaplowitz: Hey, good morning, everyone.
unknown: [inaudible]
Andrew Alec Kaplowitz: Hi, Andy.
Stuart J. B. Bradie: Stuart or Mark, you mentioned Q1 does tend to be a little lighter seasonally in terms of STS bookings, and I think you said 1.1x the LNG burden, but could you elaborate on the pipeline of opportunities you're seeing, any delays across the end markets in that business, and what's your confidence level at this point regarding continued double-digit EBITDA growth in STS?
Andrew Alec Kaplowitz: Julien Mark you'd mentioned Q1 does tend to be a little lighter seasonally in terms of SaaS bookings and I think you said $1, one XD LNG burn, but could you elaborate on the pipeline of opportunity are you seeing any delays across the end markets in that business and what's your confidence level at this point regarding continued double digit EBITDA growth in that.
Andrew Alec Kaplowitz: Yes.
Andrew Alec Kaplowitz: Yes.
Andrew Alec Kaplowitz: I think we are quite clear on de in the call the ex BG.
Stuart J. B. Bradie: Yeah, I mean, I think we're quite clear, Andy, on the call that XVG's book to bill for STS in two to 12 months is 1.2, which really underpins sort of, you know, I guess, 20% growth. And the quarter standalone was 1.1.
Andrew Alec Kaplowitz: To build for STS and retail months is one two.
Andrew Alec Kaplowitz: Which really underpins sort of I guess, 20% growth.
Andrew Alec Kaplowitz: And on the quarter stand alone was $1, one so our pipeline of opportunities the activity levels in the ammonia market the olefins markets.
Stuart J. B. Bradie: So our pipeline of opportunities, the activity levels in the ammonia market, the olefins markets, and really this energy trilemma that we've discussed in the primer are continuing, unabated, in truth, and we're seeing, you know, high levels of bid activity, and we're seeing, you know, good momentum in the market. So we're very confident in the continued growth and the continued performance of STS And, you know, that's been the case for some time, and we see that continuing going forward.
Andrew Alec Kaplowitz: I am really this energy trilemma.
Andrew Alec Kaplowitz: We've discussed in the primary.
Andrew Alec Kaplowitz: Continuing.
Andrew Alec Kaplowitz: Unabated truth on and we're seeing high levels of bid activity we're seeing.
Andrew Alec Kaplowitz: Good momentum in the market. So we're very confident on the continued growth and the continued performance of STS.
Andrew Alec Kaplowitz: That's been the case for some while and we see that continuing going forward and we'll talk a bit more about that at Investor day, and give you more we'll build on the STS primer, particularly around the ammonia story.
Andrew Alec Kaplowitz: And particularly around the <unk> associated with that business. So I think it's.
Stuart J. B. Bradie: And we'll talk a bit more about that investor day and give you more, we'll build on the STS primer, particularly around the ammonia story and particularly around the ROIC associated with that business. So I think it's a very positive outlook for that.
Andrew Alec Kaplowitz: It's a very positive outlook for that business.
Andrew Alec Kaplowitz: Very clear and then maybe on the GFS side more color into how youre thinking about revenue growth moving forward do you see the Ukraine supplemental is beginning to positively affect the rns as early as Q2 is it more second half and maybe the other businesses.
Stuart J. B. Bradie: Very clear. And then maybe on the GS side, more color into how you're thinking about revenue growth moving forward. Do you see the Ukraine supplementals beginning to positively affect RMS as early as Q2? Or is it more the second half and maybe the other businesses' breakdown of momentum in those businesses? Yeah, again, we'll give more color and
Andrew Alec Kaplowitz: Dan of momentum in those businesses in GFS.
Dan: Yes, again, we will give more color at Investor day, but I guess at a high level I think those.
Dan: <unk>.
Dan: The performance in Iron Astro, we're very clear on that was down 12% year on year, we had high levels of activity Q1 in Ukraine due to Ukraine.
Dan: The delayed funding impacted that.
Dan: I think there'll be some.
Dan: We'll have to see it is it kind of too early to call to call out, but logic would dictate that would be some level of at least modest increase in activity and in the European Theater is a consequence of the increase funding as it moves through the year, which quarter that will impact at this point, Andrew we can't be clear, but I think theres a theres a good balance to the overall and autodesk portfolio with home safe.
Stuart J. B. Bradie: Yeah, again, we'll give more color and invest today. But I guess at a high level, I think there's the, you know, we, the performance in RNS, we're very clear on that was down 12% year on year, we had high levels of activity Q1 in Ukraine, due to Ukraine, that the delayed funding impacted that and I think there'll be some, we'll have to see it's a kind of too early to call to call that but logic would dictate there would be some level of at least modest increase in activity in the European theater as a consequence of that increased funding as we move through the year, which quarters that will impact at this point, Andy, we can't be clear, but I think there's a there's a good balance to the overall and RNS portfolio with HomeSafe now starting moves again, we're being quite cautious there just with a slower ramp expected, but I think there's a good balance across that segment.
Dan: Starting moves again, we're being quite cautious there just with a slower ramp expected, but I think those coupons across that segment. So I think thats rns in a nutshell.
Dan: But we're seeing double digit growth and at a high level in GSI, we're seeing similar in DNI as Mark said and these are high margin areas. So that's really pleasing.
Dan: <unk> as we said before we'll talk a little bit more but thats going to growing modestly in single digits and.
Dan: So I think I think all off the portfolio is performing between the 5% to 8% that we said.
Speaker Change: Can I ask Jose fund.
Stuart J. B. Bradie: So I think that's RNS in a nutshell. But we're seeing, you know, double digit growth at a higher level in GSI, we're seeing similar in DNI, as Mark said, and there are high margin areas. So that's really pleasing. SNS, as we said before, we'll talk a little bit more, but that's kind of growing modestly in single digits. And, you know, so I think, I think all up, the portfolio is performing between the five to 8% that we said, kind of ex-HomeSafe and, and there's puts and takes, but I think you'll see more balance coming into RNS as the year progresses.
Jose: And this puts and takes but I think youll see more bonds coming into rns as the as the year progresses.
Jose: Okay.
Speaker Change: Very helpful.
Speaker Change: Okay.
Speaker Change: Our next question comes from <unk>.
Speaker Change: We saw that from Jeremy Your line is now open. Please proceed.
Speaker Change: Yes.
Jeremy: Thank you I was wondering if you could comment on your.
Jeremy: Customer relationship and home safe and there the customer sort of enthusiasm and conviction for what has been a long customer long sort of vendor transition.
Speaker Change: [laughter] well it does it.
Jeremy: This has its ups and downs, but I think I think through at all.
Operator: Our next question comes from Tobey Sommer from Truist. Your line is now open, please proceed.
Jeremy: The relationship with transform has been terrific.
Jeremy: Their commitment to the program that representation to Congress of why they're doing this program.
unknown: Thank you. I was wondering if you could comment on your Customer Relationship and HomeSafe and in there the customer sort of enthusiasm and conviction for what has been a long, customer a long sort of vendor transition. Thanks.
Jeremy: <unk> faced a more cautious approach is has resonated in Congress.
Jeremy: And with.
Jeremy: The folks themselves. The first moves have gone while I think the feedback from the past and now we've moved has been hugely positive.
Jeremy: But.
Stuart J. B. Bradie: gone well. I think the feedback from the personnel we've moved has been hugely positive. But we've got to scale that up over time. And so, rightfully, they are being considered about how they do that, and we're very supportive of that. But the commitment from Transcom has been unwavering. Their relationship is actually terrific, zippered all the way
Jeremy: We've got to scale that up over time, and so I think rightfully.
Jeremy: Theyre being considered about how do they do that and we're very supportive of that but the commitment from <unk> has been unwavering the relationship is actually true.
Jeremy: Terrific all of the zippered, all the way up through our organization on theirs.
Jeremy: It really is.
Focused on when this program that really is effectively started.
Its just ramping up over time and I think so.
Jeremy: So far so good.
unknown: Thank you. I was wondering if you could comment also on the Mura plants and licensed plants and maybe speak to update us on the pipeline of interested parties, watching the efficacy of that process in potential sales for the company out in the West. Yeah, I think we covered this a little bit, Elliot.
Thank you I was wondering if you could comment also on the.
Jeremy: <unk>.
Jeremy: Your plants and licensed plants and maybe speak to.
Jeremy: Update us on the pipeline of interested parties watching the efficacy of that process and potential sales for the company out in the future.
Speaker Change: Yes, I think we covered this a little bit later on.
Stuart J. B. Bradie: Yeah, I think we covered this a little bit earlier on. I mean, I think there's continued delay at the Wilton site due to the really availability of resources on the contractor site. It's still looking likely that they'll produce their first material as we head into next quarter. They will then get that plant commissioned and up at full capacity as we head into late Q2, early Q3. As we sit today, But I think coming in behind it, and I think impressively so, is the Korean facility where we modularized the solution, and that's moving far faster.
Speaker Change: I think Thats continued delay in the Wilton site due to really availability of resources.
Speaker Change: On the contract the contract side, it's still looking likely that they will produce fresh material as we head into next quarter.
Speaker Change: They will then get that plant commissioned and up at full capacity as we as we head into late Q2 early Q3 as we as we sit today, but I think coming in behind it and I think impressively so as the Korean facility, where we modularized solution, that's moving far faster than.
Stuart J. B. Bradie: And there is actually an opportunity, although they started probably a year later, for that facility to actually get up and running before the one in the UK, so again in the summertime. And then behind it is the Mitsubishi facility, which is later in the year in Japan.
Speaker Change: There is actually an opportunity with Stephens Inc.
Speaker Change: Later for that facility to actually get up in mind before the one in the UK. So again in the Summertime and then behind that is the Mitsubishi facility, which is later in the year and Dupont So.
Speaker Change: I think before as the year progresses.
Speaker Change: No.
Speaker Change: We'll see.
And all of that.
Speaker Change: Those facilities, producing I think the enthusiasm for the technology and actually going ahead with the licenses, we sold which is a.
Stuart J. B. Bradie: So I think before, as the year progresses, you know, we'll see, you know, that those facilities are producing. I think the enthusiasm for the technology and actually going ahead with the licenses we sold, which is eight, for us is when you look at the way that we develop and bring technology into KBR, and then, I guess, commercialize that, and globalize the opportunity through our global sales pipeline and our terrific staff.
Speaker Change: I think so far eight nine licenses and with cornerstone pipeline looking into the future, but I guess, it's everyone's as ever with new technology. They want to see the first facility up and running and I think that will be the bottleneck and actually once that's done.
Speaker Change: That will free up the market opportunity around this quite considerably as you move towards.
Later in the year and into next year and I think the other important thing for US is when you look at the way that we develop and bring technology into KBR, and then I guess commercialize that and globalize the opportunity through our global sales pipeline.
Speaker Change: On personnel who are terrific.
Stuart J. B. Bradie: Again, the ROIC returns are terrific, and again, we'll highlight some test cases around that and relate it back to Mura and other technologies as we move forward. So more on that on Investor Day, but a very good, in fact, a very good lead in to one of the key points we want to make on Investor Day about how we actually commercialize technology and the value it brings to KBR and the shareholders. Thank you very much.
Again.
Speaker Change: <unk> see returns are terrific.
Speaker Change: Again, we'll highlight some test cases around.
Relate it back to <unk> and other technologies as we move forward so more on that on Investor day, but a very.
Speaker Change: Very good lead in to one of the key points, we want to make in Investor day about how we actually commercialize technology into volume brings to keep your eye on the shareholders.
Speaker Change: Thank you very much.
Speaker Change: Okay.
Operator: Our next question comes from Bert Subin from CYFL. Your line is now open, please go ahead.
Speaker Change: Our next question comes from Betsy <unk> from Stifel. Your line is now Anthony. Please go ahead.
Betsy: Hey, good morning.
Betsy: Good morning.
Betsy: Okay.
Stuart J. B. Bradie: I just want to ask, I guess first, just about the thought process on guidance. It seems like you got off to a good start to the year, you know, core performance, even though it was a little better. You've got the supplemental, which should drive some incremental improvement in R&S, and it sounds like you feel pretty good about the book to build across the business, and you started repurchasing shares. So as we think about, I guess, that relative to 90 days ago, is it just sort of taking a cautious approach to, you know, as things unfold?
Betsy: I just wanted to ask first just about.
Betsy: What's sort of the thought process on guidance. It seems like you got off to a good start to the year.
Betsy: Core performance EBITDA was little better you've got the supplemental which should drive some incremental improvement in rns.
Betsy: And it sounds like you feel pretty good about the book to bill across the business and he started repurchasing shares so.
Betsy: So as we think about I guess that relative to 90 days ago is is it just sort of taking a cautious approach.
Stuart J. B. Bradie: Because it seems like your work under contract is essentially the exact same as it was last year. So, I'm just curious, you know, how you're thinking about the next few quarters relative to how you were thinking about them.
Betsy: I think the bold because it seems like youre work under contract.
Betsy: Essentially the exact same as it was last year.
Betsy: Just curious how youre thinking about the next few quarters relative to how you were thinking about them.
Stuart J. B. Bradie: Yeah, I love it. I mean, I think it's a question we debated, as you can imagine, Bert, internally for some time, but I think where we landed, sorry, for Scottish conservatism, but we decided that we would look to see how the supplemental started to flow through into the next quarter. We wanted to get through our investor day and just get those messages clear and resonate. And again, just with HomeSafe now going, just get a little bit more clarity.
Betsy: Yes.
Betsy: I mean I think.
Speaker Change: It's a question we debated as you can imagine back antenna.
Speaker Change: Some time, but I think where we landed sorry for Scottish conservatism, but we decided that we would.
Look to see how the supplemental start to flow through into next quarter.
Speaker Change: We wanted to to get to our Investor day, and just get those messages are clear and resonate.
Again, just with home safe now going just get a little bit more clarity. We've done successfully the first move just what is the the program ramp associated with that et cetera. So I think too early in the year. If you annualize. Although we're ahead of pace I think we had said originally $45 55, obviously is more imbalanced.
Stuart J. B. Bradie: You know, we've done successfully the first move, just what the program ramp associated with that, et cetera. So I think too early in the year, if you annualize, although we're ahead of pace, I think we had originally said 45, 55, you know, that obviously is more in balance now in terms of percentages first half, second half. And I think if you annualize 77 cents, you come up with 308 or something, which is still below our midpoint in our guide.
In terms of percentages first half second half.
Speaker Change: If you annualize 77 set should come at Coa is something which is still below our midpoint of our guide. So I think all up we on balance we thought fantastic start to year, but ahead of pace on book to bills terrific businesses performing.
Stuart J. B. Bradie: So I think, all up, on balance, we thought a fantastic start to the year, we're ahead of pace, I've booked the bills terrifically, the business is performing, and, you know, we will certainly look at whether we should be, you know, maintaining, reviewing, or changing guidance as we head through Q2. But I think it was too early in Q1, and all our focus and truth is actually really explaining the business better and investing in what this business can do, not just this year, but actually into future years.
Speaker Change: And we will certainly look at whether we should be.
Speaker Change: Maintaining a reviewing our changing guidance as we head through Q2, but I think it was too early in Q1 and all of our focus in truth is obviously and really explaining the business better in Investor day, and what this business can do not just this year, but actually into the future years.
Speaker Change: That's where the energy has gone over the last little while and rightfully so given what's happening next week.
Stuart J. B. Bradie: Got it. Okay, that helps Stuart. On, I guess as a follow-up question, maybe focusing more on SPS. I guess this is the first fall sort of since the primer, and in the primary, you talked about Middle East growth being sort of 20% plus over the next half decade. I think a little bit of that is predicated on some significant awards in Saudi Arabia. I was wondering if there's sort of any update as we think about that and if there's any update on some of the transition that we've seen in NEOM and whether that's been, you know, a positive, neutral, or negative as it pertains to your business over there.
Speaker Change: Got it okay that helps.
Speaker Change: I guess as a follow up question, maybe focusing more on an Sts.
Speaker Change: I guess, the first fall sort of since the primary and the primary you talked about middle east growth being sort of 20% plus over the next half decade.
Speaker Change: I think a little bit of that is predicated on some some significant awards in Saudi Arabia I was wondering if there is there sort of any update as we think about that and if there's any update on some of the transition that we've seen in neon, but whether that's been a positive neutral or negative as it pertains to your business over there.
Mark W. Sopp: Hey, Bert, Mark. Yeah, as you'll see in the queue filed shortly, the Middle East performance continues to grow really well year over year. That's been the case for some time, and that is our expected case going forward. And Stuart said, you know, relative to an earlier question, the zippered-up relationships we have not only in HomeSafe but in the Middle East are fantastic, led by Jay Ibrahim, our leader there, and his, you know, large team.
Speaker Change: Hey, Bert Mark.
Bert: Yes, as Youll see in the Q filed shortly the Middle East performance continues to go really well year over year. That's been the case for some time that is our expected case going forward.
Bert William Subin: And Stuart said.
Bert: Relative to earlier question, the zippered up relationships, we have not only at home safe, but in the middle East are fantastic.
Bert William Subin: Hey, Ebrahim, our leader there and us.
Bert William Subin: Large team.
Mark W. Sopp: Relative to new awards, you know, we are, we've announced some, but we are subject to some customer requirements on some others, and so those pace accordingly. And I think for some that are talked about in the market, some big ones, all I'll say is we are very well positioned with those customers. They trust us, and we expect to be part of many of the developments that happen in that part of the world as it pertains to energy security and energy transition for years to come.
Bert William Subin: Relative to New awards, we are we've announced some but we are subject to some customer requirements on some others and so those pace accordingly.
Bert William Subin: And I think for us for some that are talked about in the market. Some big ones. All I'll say is we are very well positioned with those customers They trust us.
Bert William Subin: And we expect to be part of.
Bert William Subin: Many of the developments that happened in that part of the world as it pertains to energy security and energy transition for years to come.
Bert William Subin: And I think just to layer on but I think theres a lot of focus on Saudi and.
Stuart J. B. Bradie: as well which is terrific but the Saudi isn't the only story in the Middle East and we'll expand on that and invest a day we've got a significant presence in in the UAE and certainly companies like AdNoc have got a huge capital spend program themselves and you know we I think we're well over a thousand people now in the UAE we support Iraq from an engineering perspective there and there's a lot of activity in Iraq right now and we are supporting multiple efforts to stop flaring and things like that that are very aligned with a sustainability mission but also energy security for that country so I think again terrific we're now established in Kuwait we didn't have a presence there two years ago now we do we've got a five-year contract that's starting to build up there we just announced wins in Qatar as well around more sort of smart maintenance solutions and things so we've got a very very strong presence across the Middle East and the capital spend profile a lot of the attention goes to Saudis I say rightfully so but but it's a it's a it's a market trend across the Middle East and and our history and our positioning our ability to operate globally I think uniquely allows us to take advantage of those trends.
Bert William Subin: And rightfully so given the capital spend in 2030 vision.
Bert William Subin: We've been in that market now.
Bert William Subin: I think over 60 years, very well positioned there with.
Bert William Subin: <unk> established relationships on capability and allows 70 workforce, including.
Bert William Subin: A large percentage of good gender balance there as well which is terrific.
Bert William Subin: But the Saudi isn't the only story in the Middle East and we will expand on that in Investor Day, We've got a significant presence in the UAE and certainly companies like <unk> got a huge capital spend program themselves.
Bert William Subin: I think we're well over 1000 people now in the UAE, we support from an engineering perspective, there is a lot of activity in Iraq right now and we are supporting multiple efforts to stop flaring and things like that that are very aligned with our sustainability mission, but also energy security for that country. So I think.
Bert William Subin: Again terrific. We're now established to wait we didn't have a presence there two years ago now we do we've got a five year contract to start to build up there.
Bert William Subin: We just announced wins.
Bert William Subin: Sure.
Bert William Subin: In Qatar as well around.
Bert William Subin: More sort of smart maintenance solutions and things. So we've got a very very strong presence across the middle east on the capital spend profile lots of attention gross decided to use to say rightfully, so but but.
Bert William Subin: It's a market trend across the middle East.
Bert William Subin: In our history, and our positioning our ability to operate globally.
Bert William Subin: I think uniquely allows us to take advantage of those trends.
Operator: Very helpful. Thanks, Stuart and Mark. Our next question comes from Mariana Perez.
Speaker Change: Very helpful. Thanks, Mark.
Bert William Subin: Okay.
Speaker Change: Our next question comes from Mariana Perez Mora from Bank of America. Your line is now open. Please go ahead.
Operator: Our next question comes from Mariana Perez Moore from Bank of America. Your line is now open, please go ahead.
Speaker Change: Okay.
Speaker Change: Okay Mariana.
Speaker Change: I was wondering if you could dig into that growth seen in DNI and kind of where that is stemming from.
Mark W. Sopp: Hi Mariana, Mark here. Thanks for calling today.
Speaker Change: Okay.
Speaker Change: Hi, Mariana, it's mark here.
Mark W. Sopp: So D&I, as we've said many times, is the part of GS that is higher technology advanced space. Command and Control, Electronic Warfare, Modernization, etc. In addition to that technical presence and leadership across primarily the Air Force, Space Force, and the upper parts of the Navy and some intelligence agencies, we have a very strong IDIQ portfolio. We've said that a number of times, particularly IACMAC, and we've been a leader in generating business out of that vehicle for a long time.
Mark: For calling today, so DNI as we've said many times.
Speaker Change: Is.
Mark: The part of it.
Mariana: Yes that is a higher technology advanced space.
Mariana: Command and control electronic warfare.
Speaker Change: Modernization et cetera. In addition to that technical presence and leadership across primarily Air Force.
Speaker Change: <unk> for us and.
Speaker Change: The upper parts of Navy and some Intel agencies.
Speaker Change: We have a very strong Iq portfolio.
Speaker Change: <unk> said that a number of times, particularly IAC Mac and we've been a leader on generating business out of that vehicle for a long time that vehicle is often used to.
Mark W. Sopp: That vehicle is often used to buy agencies for RDT&E funds, which we've seen increase quite a bit in the defense budget, and rightfully so given the threats we're facing. And so the tapping of the IDIQ portfolio there has been strong by our customer and, in turn, D&I, the recipient. So it's particularly effective when the procurement process struggles in the government for bigger single awards. And so the team is more agile that way, and it helps the customer put missions together quickly.
Speaker Change: By agencies for Rd, <unk> funds, which we have seen increased quite a bit in the defense budget.
Speaker Change: And rightfully so given the threats, we're facing and so the tapping of the IQ portfolio. There is a strong by our customer and in turn DNI the recipients so.
Speaker Change: It is particularly effective when the procurement process struggles.
Speaker Change: In the government for bigger single awards and so.
Speaker Change: The team is more agile that way and it helps the customer put put emissions, who together quickly and so that's really the hallmark of the ability of that business to grow with a combination of technical expertise and commercial acumen relative to tapping the idea Iq portfolio.
Mark W. Sopp: And so that's really the hallmark of the ability of that business to grow. It's a combination of technical expertise and commercial acumen relative to tapping the IDIQ portfolio. Space superiority is a pretty common driver of our capabilities there, for capabilities we had prior to the Centauri acquisition but certainly amplified by the Centauri acquisition a couple years ago, so that capability is quite strong. And I think it's quite interesting when you look at the budgets that have come out recently.
Speaker Change: Space space superiority is a pretty common driver of our capabilities there.
Speaker Change: For capabilities, we had prior to the Centauri acquisition, but certainly amplified by the <unk> acquisition, a couple of years ago. So that capability is quite strong.
Speaker Change: And I think it's quite interesting when you look at budgets that have come out recently.
Mark W. Sopp: And I think it's quite interesting when you look at the budgets that have come out recently, including the ACR behind us, but on the face of it, it looks like things like the Space Force budget is flat, but it's so co-mingled with what happens in the Air Force, a bit like, I guess, the reasons inside the Navy budget, same sort of similar dynamic there. And a lot of what they do is in the intelligence side, which is a budget that's not disclosed openly, as you can imagine, so I think there's, you know, on the face of it, you might think things like Space Force are flat, but actually, the activity levels are really high within that within that budget environment, so again, I think those dynamics and where we're positioned are driving a lot of activity in that realm.
Speaker Change: <unk> is not behind us but.
Speaker Change: On the face of it it looks like things like the space Force Budges flopped.
Speaker Change: But it's so commingled with <unk> and Air force a bit like I guess.
Speaker Change: Inside the Navy budget same saw a similar similar dynamic there and a lot of what they do is in the intelligence site, which is.
Speaker Change: As a budget that's not disclosed openly as you can imagine so I think on the face of it you might think things like space forces flop, but actually the activity levels are really high within not than.
Speaker Change: And that budget environment, so, but again I think those dynamics and where we're positioned are driving a lot of activity in that realm.
Speaker Change: Great. Thank you so much I'll leave it at one.
Speaker Change: Okay.
Operator: Our next question comes from Sangita Jain from KeyBank. Your line is now open; please proceed.
Sangita Jain: Our next question question comes from <unk> Jain from Keybanc. Your line is now open. Please proceed.
Operator: Yeah, hi, thanks for taking my question. So I just wanted to ask about your initial experience with Homesafe. Any internal learning that you feel could possibly change the cadence of moves for the rest of the year versus what you guys did last quarter?
Ankit Jain: Yes, hi, thanks for taking my question.
Ankit Jain: I just wanted to ask about your initially and with whom.
Sangita Jain: Any internal learning at.
Sangita Jain: Possibly change the cadence for the rest of the year versus the last quarter.
Stuart J. B. Bradie: Yeah, good question. I think certainly, you know, as we start to do actual real moves, I think there's always going to be learnings, I think tweaks in the system, and making sure there's enough flexibility for small moves and large moves and things that happen in one day versus multiple days. If you think of, you know, houses being packed up and shifted the next day, if it's a small load, it all happens in one day.
Speaker Change: Yes. Good question I think set may.
Speaker Change: As we start to do actual real moves I think there is always going to be learnings I think tweaks in the system and making sure there's enough flexibility for a small moves in large moves and things that happened in one day versus multiple days, if you think of.
Speaker Change: How does this being packed up and shifted the next day emphasis small lauder all arms in one day, so just making sure that is agility and flexibility in that operationally. We can we can actually scale for these various different elements within the system environment. So I think we are landing on that both ourselves and transform our aligned to make sure the interest.
Stuart J. B. Bradie: So just making sure there's agility and flexibility and that operationally, we can actually scale for these various different elements within the system environment. So I think we are learning on that, and both ourselves and Transcom are aligned to make sure the interface between the two systems is actually working very, very well. I think what has been quite nice to see, if you like, is that, you know, we've got this digitally enabled system, which is working very well for the service person.
Speaker Change: Base between the two systems is actually working very very well I.
Speaker Change: I think what has been quite quite nice to see if you like is that.
Speaker Change: We've got obviously this digitally enabled system, which is working very well for the for the Savage passion.
Stuart J. B. Bradie: And the digitally enabled service person has gone online and, you know, registered, and boom, boom, and it's all happened very quickly and probably quicker than we expected, in fact. And so there's a bit of learning there, but that's a really, really good sign.
Speaker Change: And digitally enabled Satispassion has gone online.
Speaker Change: Registered and <unk> has all happened very quickly and probably quicker than we expected in fact, and so there's a bit of learning there, but that's a really really good sign we're happy for that to happen, but the other piece that what.
Stuart J. B. Bradie: We're happy for that to happen. But the other piece that worked well in this, and something we've got to make sure that we continue as we scale up, was that the service men and women who were not tech savvy actually phoned the help desk, talked to a real person, not a bot, and were able to basically do what they needed to do over the phone rather than online. And so, you know, enabling both sides of that equation has been a key part of the learning as well.
Speaker Change: While in this and so we've got to make sure that we continue to scale up as the <unk>.
Speaker Change: Service men and women, who were not tech savvy actually for them to help desk talk to a real passion.
Speaker Change: And we're able to to basically do what they needed to do over the phone rather than digitally and so enabling both sides of that equation has been a key part of the lending as well and we'll keep that going so so I think as we as we scale up I think we continue to align and I think the openness of our team.
Stuart J. B. Bradie: And, you know, we'll keep that going. So I think as we scale up, I think we will continue to learn. I think the openness of our team to do that, we've got the right level of capability operational focus there today, as does Transcom and as do the various services themselves, who, as you can imagine, new system, new processes, new provider. They had, you know, quite a few quality control people involved in those first moves, and the reports coming back are very positive. So I think, yeah, but still lots to learn for sure. I mean, we don't want to overplay that. I'm sure there's got to be lots of learnings as we go forward and scale this.
Speaker Change: Two to do that we've got the right level of capability operational focus there today as does transform on as does the various services themselves as you can imagine new system, new processes new provider they had.
Speaker Change: Quite a few quality control people involved in those first moves in reports coming back are very positive. So so I think yes, but still lost the line for sure.
Speaker Change: We don't want to overplay that and I'm sure there's going to be lots of learnings as we go forward and scale. This thing.
Stuart J. B. Bradie: Great, thanks so much. And if I can follow up with one on the LNG landscape, now that we know black mines may be coming online sometime later this year, on your thoughts on how you could potentially backfill that backlog and what you may be seeing from the US LNG review.
Speaker Change: Great. Thanks, so much and if I can follow up with one on the LNG landscape now, let me know black lines, maybe coming online sometime later this year.
Speaker Change: On your thoughts on how you could potentially backfill that backlog and what you may be seeing on what can come out of the U S. <unk>.
Stuart J. B. Bradie: Yeah, I think just to put Plaquemines in context, I think we should remember these are like half a million ton trains. There are 20 million tons of LNG across phase one and phase two. So, you know, although we'll produce LNG later in the fall, it's one train after another, after another, after another for quite a while into the future through into 26. So I just want to put that in context.
Speaker Change: Yes, I think.
Speaker Change: Just to put <unk> in context, I think we remember. This is these are like 5 million ton trains is 20 million tonnes of LNG across phase, one and phase two so.
Speaker Change: Although we will produce LNG later in the fall. It's one train after another after another after another for for quite a while into the future through into 26, So I just want to put that in context.
Stuart J. B. Bradie: In terms of activity levels, I think we're seeing quite a bit of activity inside the DOE itself looking at, you know, the future of LNG, I guess, in a decarbonized way within the US context. I think everyone recognizes that, ultimately, LNG will go forward, but it will go forward using electric drives or with CO2 sequestration or whatever it might look like from a lesser carbon footprint perspective. So I think some of the projects will have to be reconfigured.
Speaker Change: In terms of the activity levels, I think we're seeing quite a bit of activity inside the.
Speaker Change: Themselves.
Speaker Change: Looking at the.
Speaker Change: The future of LNG, I guess on a decarbonize weight within.
Speaker Change: The U S context I think.
Speaker Change: <unk> recognizes that.
Speaker Change: Ultimately LNG will go forward, but it will go forward with using electric drives with Sidoti sequestration or whatever whatever it might look like from a from a lessor carbon footprint perspective. So I think some of the projects will be reconfigured, but the activity levels. We are very upbeat about the future of LNG in the U S. We've got <unk>.
Stuart J. B. Bradie: But the activity levels, we are very upbeat about the future of LNG in the US. We've got cheap gas in this country, and you know, that needs to be monetized one way or the other. And if it's not through LNG, it'll be through ammonia or hydrogen or some other activity.
Speaker Change: Gas in this country and that needs to be monetized, one where they are and if it's not through LNG through ammonia or hydrogen or some other activities, but but LNG itself Im sure. It will be an attractive market going into the future and there will be opportunities for us to continue with vg themselves have ambitious bonds.
Stuart J. B. Bradie: But LNG itself, I'm sure, will be an attractive market going into the future, and there will be opportunities for us to continue with VG, who have ambitious plans. And as long as we do well, I'm sure we'll be part of those plans going forward. But there are certainly others in the market that are very active and, you know, waiting for this LNG, I guess, reconfiguration of the landscape to be sort of clear as we head towards the end of the year.
Speaker Change: As long as we do I'm sure will be part of those bonds going forward.
Speaker Change: There are certainly others in the market.
Speaker Change: Very active in.
Speaker Change: Waiting for this LNG I guess reconfiguration of the landscape to be sort of clear as we as we head towards the end of the year, but there's a good opportunity I think for some of these to go ahead, even before the end of the year.
Stuart J. B. Bradie: But there's a good opportunity, I think, for some of these to go ahead even before the end of the year. But we'll see how that plays out. There's no, there's just noise in the market that there's some softening around that. We'll see how that plays out in the next little while.
Speaker Change: How that plays out because.
Speaker Change: There's just noise in the market.
Speaker Change: Some softening around that we'll see how that plays out in the next little while.
Speaker Change: Okay.
Operator: Alright, thanks so much. See you next week.
Speaker Change: Great. Thanks, so much see you next week.
Speaker Change: See you next week.
Operator: Our next question comes from Jerry Revich from Goldman Sachs. Your line is now open, please proceed.
Speaker Change: Our next question comes from Jerry Revich from Goldman Sachs. Your line is now open. Please proceed.
Operator: Hi, this is Adam speaking on behalf of Jerry today. Thanks for taking our question. Can you update us on your ammonia prospect list? How many plants do you expect to reach final investment decisions this year? How does that compare to 2023?
Speaker Change: Hi, This is Adam on for Gary today, Thanks for taking our question.
Adam: Can you just update us on your ammonia prospect list, how many plants do you expect to reach final investment decision. This year how does that.
Adam: Compare to 2023.
Stuart J. B. Bradie: Yeah, I mean, the trend is obviously positive, and we are going to cover the ammonia story in some depth at an investor day. I think the EBITDA contribution opportunity to KBR as we look into the future, given the demand for ammonia as it relates to not only ferrolyzers but hydrogen and sources of energy going forward, is very, very attractive in terms of... Remember, FID for us is only part of the journey.
Speaker Change: Yes, the trend is obviously positive.
Speaker Change: We are going to cover the ammonia story in some depth in Investor day.
Speaker Change: I think the EBITDA contribution opportunity to KBR as we look into the future given the demand on ammonia as it relates to not only finalize us about hydrogen.
Adam: Sources of energy going forward is very very attractive in terms of.
Adam: Remember for US is only part of the journey when the project actually has initiated we get involved with the license fee.
Stuart J. B. Bradie: When the project actually is initiated, we get involved with the license fee and basic engineering and cost estimation and things like that. So even pre-FID, it's very attractive for us to be in that market. And so FID isn't really the piece for us. It's actually when the license is sold and the project starts to move forward. Even pre-FID, we've got some very good returns in our portfolio. So, if you don't mind, I think the way I cover this high level is to say that the ammonia market remains extremely attractive, and we're going to do quite a deeper dive into ammonia, the ammonia story, and its impact on KBR next week. And you'll be very pleased and pleasantly surprised what a modest increase in the number of plants per year does for Aribidone.
Adam: And basic engineering and cost estimation and things like that so even pre FID.
Adam: <unk> attractive for us to be in that market.
Adam: So it isn't really the piece for us actually.
Adam: When the licenses sold and project starts to.
Adam: Move forward, even pre FID.
Adam: We've got some very good returns.
Adam: Our portfolio.
Adam: So I think if you if you don't mind.
Adam: The way I cover this high level as to say that.
Adam: The ammonia market remains extremely attractive and we're going to do quite a deeper dive into ammonia the ammonia story and its impact to KBR and next week.
Adam: And you'll be very pleased and pleasantly surprised.
Adam: Modest increase in number of plants per year industrial our EBITDA.
Stuart J. B. Bradie: understood. Look forward to that. And could you just provide some color on the M&A pipeline? So you know, how active is the pipeline on the technology side versus government solutions right now?
Speaker Change: Understood look forward to that and could you just provide some color on the M&A pipeline. So.
Speaker Change: How active is the pipeline on the technology side versus government solutions right now.
Stuart J. B. Bradie: Yeah, I mean, technology for us is, you know, we're always open to acquiring smart technology and new technologies. And we did, we launched a number of those last year, as we disclosed in the primer.
Speaker Change: Yes, I mean technology for US is we're always open to acquire smart technology and new technologies and we did we launched a number of those last year as we disclosed in the primer.
Stuart J. B. Bradie: But it's difficult to acquire because it doesn't come to market; you've got to be ready. So that pipeline is more, although it's strategic for us, and we know what we'd like, it's kind of opportunistic. If things come to market, we're more likely, I think. So, you know, I don't think acquisition is often the best source of funds. I think internal development and protection of IP in that realm is a good place to spend our money and time. And we'll talk more about that next week also. In terms of GS, I think activity levels will stay down a little higher for longer, as Mark said.
Adam: But it's difficult to acquire because it doesn't come to market you've got to be ready. So that pipeline is more although it's strategic for us and we know what we like it's kind of opportunistic if things come to market. We're more we're more likely I think.
Adam: Unless something changes too.
Adam: Luca I would say newer technologies that are being developed the thing at the same way we saw identified mirror our soft technologies.
Adam: Enhanced those work with people, who didn't quite courts, if you'd like to develop them and try and commercialize them.
Adam: Mobile way, so that's kind of where the focus area is in.
Adam: <unk> business, we've got existing technologies that you've got a lot of headroom I think going forward. So.
Adam: I don't think acquisition is often the best source of funds I think internal development and protection of IP in that realm as a good place to spend our money and time and we'll talk more about that next week also tens and tens of Geos.
Stuart J. B. Bradie: I think there's, you know, belief that there is stability now and that, over time, prices will come down. So you're starting to see more activity, I think, in the GS world. And certainly, there are more things coming across the desk that we're looking at. But I'll reiterate, we're in a really good organic growth state. The best use of funds is to support organic growth, you know, but if there's something that's compelling, accretive, strategic, and fits our values, then we've got the balance sheet to be able to pounce.
Adam: I think activity levels interphase.
Adam: Loan higher for longer as Mark said I think this is bill.
Adam: Belief that the stability and the overtime it will come down so you're starting to see more activity I think in the <unk> world and suddenly there is more and more things coming across the desk that we are looking at but.
Adam: I'll reiterate we're in real good organic growth stay the best use of funds is to is to support organic growth.
Adam: But if there's something that's compelling accretive strategic fits our values then we've got the balance sheet to be able to pumps.
Stuart J. B. Bradie: And I think, you know, speed to market is going to be important, particularly as we head through an election year as well. So I think, yeah, so in short, more activity in the GS space, but it's got to make sense. It's got to take us upmarket, be digitally enabled, give us, you know, margin accretion, et cetera, and good synergy opportunities. And in tech, I think it's more opportunistic. But I mean, our organic growth outlook is terrific, and, you know, that's got to be the focus for us unless it's compelling.
Adam: And I think speed to market is going to be important, particularly as we head through an election year as well. So so I think yes.
Adam: Yes.
Adam: And shot more activity in the Gi space, but it's got to make sense, it's going to take us upmarket be digitally enabled give us margin accretion et cetera, and good synergy opportunities on.
Adam: <unk> I think it's more opportunistic.
Adam: Our organic growth outlook is terrific.
Adam: And that's going to be the focus for us and messages compelling.
Operator: Great, thanks so much.
Speaker Change: Great. Thanks, so much.
Operator: Great. Thanks so much.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Our next question comes from Michael that data from that research. Your line is now open. Please go ahead.
Operator: Our next question comes from Michael Dudas from Vertical Research. Your line is now open, please go ahead. Transcription by ESA
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Okay.
Michael: Good morning.
Michael: Good morning, Michael we can barely hear you.
Michael: Okay.
Operator: Good morning, Mike.
Michael: Yeah.
Michael: Better.
Speaker Change: There you go.
Speaker Change: Great. Thank you.
Stuart J. B. Bradie: I'm more of a phone guy than a digital guy, as you can tell. Um, so, on the, on the SDS front, just as you indicated about the strong book to bill and the pipeline bringing in good revenue and EBITDA flow this year, how's that in the context of the four phases that you discussed in the primer that we had last month and where that stands and how that can impact the kind of how EBITDA growth and margins flow this year, maybe into next.
Speaker Change: A more of a phone guy than the digital guys you can tell.
Speaker Change: So.
Speaker Change: On the.
Speaker Change: <unk>.
Speaker Change: Regarding on the STS front just.
Speaker Change: As you indicated about the strong book to Bill in the pipeline being good and how revenues are growing and EBITA flow. This year, how is that in the context of the four phases that you discussed in the primer that we had last month and where that stands and how that can impact the kind of how the EBITDA growth and margins flow. This year maybe into next.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Yeah.
Stuart J. B. Bradie: Yeah. I mean, yeah, sorry, sorry, Michael. Just break it up a little bit.
Speaker Change: Yes.
Speaker Change: Sure.
Speaker Change: I mean, yeah, sorry, sorry, Michael just breaking up a little bit yes. So I think what you're asking was really through the I guess the project lifecycle and the phases across when we sell technology and we could then get engaged in.
Stuart J. B. Bradie: Yeah. So I think what you're asking was really the project life cycle and the phases across, you know, when we sell technology, we can then get engaged in, obviously, the basic design, and then PMC or execution or whatever, those four phases. We'll cover that a bit next week, and we'll get Jay to do that himself. But, you know, where are we at in that cycle? I think the more that we do in technology, and particularly, that's the core catalyst for what we do in the services business as well, I think, the bigger that phase four, three, and four opportunity becomes.
Speaker Change: And obviously the basic design and then <unk>.
Speaker Change: <unk>, our execution or whatever those four phases will cover that next week, we will we will get Jay to do that himself.
Speaker Change: But where do we are in that cycle I think the more that we do in technology and particularly that's the core catalyst for what we do and the services business as well I think.
Speaker Change: That phase four three and four opportunity becomes.
Stuart J. B. Bradie: And, you know, our bookings in Q1 would suggest that that trend is continuing and is really starting to build out and giving us a greater opportunity to move into phase three and phase four. And we're seeing that across the globe at the moment, particularly in what is called the global south, which is this new economic term for a lot of the southern hemisphere where growth is outpacing the northern hemisphere. Excellent. Thank you, Stuart.
Speaker Change: <unk>.
Speaker Change: Our bookings in Q1 would suggest that that trend is continuing and.
Speaker Change: And really starting to build that in.
Unknown Executive: And giving us.
Speaker Change: Attractive longer term books of business and I think that again, we're going to work pretty hard to demonstrate the non cyclical nature of this business.
Speaker Change: And in New York next week, so so I think it is.
Speaker Change: All shaping up as we predicted.
Speaker Change: It's not Patrick of course, but I think the market trending is.
Speaker Change: As we described.
Speaker Change: And the primary.
Speaker Change: And of course, the more technology, we sell the greater the opportunity as you move into phase III and phase four and we're seeing that.
Speaker Change: And across the globe at the moment and particularly in what is called the global South which.
Speaker Change: This new economic time for really a lot of the southern hemisphere.
Speaker Change: Growth is outpacing the northern hemisphere.
Speaker Change: Excellent. Thank you Stuart.
Operator: As a reminder, if you would like to ask a question, please press star, followed by one on your telephone keypad. To withdraw your question, please press star, followed by two.
Speaker Change: Yeah.
Stuart Bradie: As a reminder, if you would like to ask a question. Please press star followed by one on your telephone keypad to withdraw your question. Please press star followed by <unk>.
Operator: Our next question comes from Gautam Khanna from TD Cohen. Your line is now open, please proceed. Gautam, your line is now open, please proceed. We're currently getting no audio from Gautam. We have no further questions in the queue. So I will hand back over to Stuart Brady for any closing remarks.
Operator: Our next question comes from Guam corner from TD Cowen. Your line is now open. Please proceed.
Speaker Change: Okay.
Operator: Okay.
Speaker Change: <unk>. Your line is now open. Please proceed.
Operator: We're currently getting.
Operator: We have no further questions in the key I will hand back to Stuart Brian Brady for any closing remarks.
Stuart J. B. Bradie: Thank you. Thanks, Drew.
Stuart J. B. Bradie: Thank you.
Stuart J. B. Bradie: And so just to close out a fairly shorter call, given we've got Investor Day coming up next week, clean quarter, very strong start to the year. I think key takeaways, continued momentum in SDS, strong margin performance across the businesses. I think outside of R&S, really strong performance in government also, milestones in HomeSafe with successful first moves.
Stuart J. B. Bradie: Thanks, and so.
Stuart J. B. Bradie: So just to close out.
Stuart J. B. Bradie: Fairly shorter call given we've got Investor day coming up next week.
Stuart J. B. Bradie: Clean quarter very strong start to the year I think key takeaways.
Stuart J. B. Bradie: Continued momentum in STS strong margin performance across the businesses I think outside of Rns really strong performance in government also.
Stuart J. B. Bradie: <unk> and home safe was successful fast moves.
Stuart J. B. Bradie: And obviously, the Ukrainian supplement in terms of funding looks positive as we move into the latter parts of the year. So I think a really strong start to the year sets us up nicely to really build on that and Investor Day. And we look forward to seeing you on the 8th in New York. So with that, I'm going to turn it over to you, Drew, to close out the call. Close the call, and thank you very much.
Stuart J. B. Bradie: And obviously the Ukrainian supplemental in terms of funding looking positive as we move into the latter parts of the year. So I think really strong start to the year sets us up nicely to really build on that in Investor day.
Drew: And we look forward to seeing you on the eighth.
Drew: In New York, So with that we will close the call and thank you very much.
Operator: That concludes today's call. You may now disconnect your line.
Drew: That concludes today's call you may now disconnect your lines.
Operator: Okay.
Operator: Okay.
Operator: [music].