Q2 2024 KBR Inc Earnings Call
Good morning, everyone. Thank you for joining KB Earth's second quarter 2024 RNN's conference call. During the presentation, you will have the opportunity to ask a question by pressing star followed by 1 on your telephone keypad. If you change your mind, please press star followed by 2.
The call will begin very shortly. Thank you.
Kiki: Good morning, everyone. Welcome to KB Earth's second quarter 2024 earnings conference call. My name is Kiki, and I will be your conference operator today.
Operator: This concludes today's conference call. During the presentation, you will have the opportunity to ask a question by pressing a star followed by 1 on your telephone keypad. If you change your mind, please press a star followed by 2.
Kiki: During the presentation, you will have the opportunity to ask a question by pressing star followed by 1 on your telephone keypad. If you change your mind, please press star followed by 2.
Kiki: I will now hand you over to your host, Jamie DuBray, Vice President of Investor Relations to begin. Jamie, please go ahead.
Operator: The call will begin very shortly. Thank you. ,,,,,,,,,,,, Good morning, everyone.
Kiki: Welcome to KBEA's second quarter 2024 earnings conference call. My name is Kiki, and I will be your conference operator today. During the presentation, you will have the opportunity to ask a question by pressing star followed by 1 on your telephone keypad. If you change your mind, please press star followed by 2.
Jamie DuBray: Thank you. Good morning and welcome to KBR's second quarter fiscal 2024 earnings call. Joining me are Stuart Brady, President and Chief Executive Officer, as well as Mark Sopp, Executive Vice President and Chief Financial Officer.
Jamie DuBray: I will now hand you over to your host, Jamie DuBray, Vice President of Investor Relations, to begin. Jamie, please go ahead. Thank you. Good morning, and welcome to KVR's second quarter fiscal 2024 earnings call. Joining me today are Stuart Brady, 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 to your questions.
Jamie DuBray: Today's earnings presentation is available on the investor section of our website at KBR.com. This discussion includes forward-looking statements reflecting KVR's views about future events and their potential impact on performance, as outlined on slide 2. 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.
Speaker Change: Stuart and Mark will provide highlights from the quarter and then open the call for your questions.
Speaker Change: Today's earnings presentation is available on the investor section of our website at KBR.com.
Speaker Change: This discussion includes forward-looking statements reflecting KVR's views about future events and their potential impact on performance as outlined on slide 2.
Speaker Change: 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.
Stuart: This discussion also includes non-GAAP financial measures that the company believes to be useful metrics for investors. A reconciliation of these non-GAAP measures to the nearest GAAP measure is included at the end of our earnings presentation. I will now turn the call over to Stuart.
Jamie DuBray: This discussion also includes non-GAAP financial measures that the company believes to be useful metrics for investors. A reconciliation of these non-GAAP measures to the nearest GAAP measure is included at the end of our earnings presentation. I will now turn the call over to Stuart. Thanks, Jamie, and welcome to our second quarter earnings presentation. I will start on slide five.
Stuart: Thanks Jamie and welcome to our second quarter earnings presentation.
Stuart J. B. Bradie: As you've heard me say many, many times, KBR is a company that puts its people first. We strive to ensure our people have a strong sense of belonging, that they feel connected to each other and the company, of course, and can grow within an environment where they can bring their whole selves to work every day. Now, to test that we're actually delivering for people in a broader sense, we regularly do a people survey, which is, in fact, anonymous.
Stuart: I will start on slide five. As you've heard me say many, many times, KBR is a company that puts its people first.
Stuart: We strive to ensure our people have a strong sense of belonging, that they feel connected to each other and the company, of course, and can grow within an environment where they can bring their whole selves to work every day.
Unknown Executive: So to test that we're actually delivering for people in the broader sense, we regularly do a people survey, which is in fact anonymous, and the feedback ensures we are focusing in the right areas as we seek continual improvement, and it really helps us avoid any complacency. The survey results are also important, particularly as we bring new entities into KBR, or new employees into the company. This year, the participation levels increased 10%, and we're over 70%, which is actually a highest-to-date, and we feel gives a solid representation of how our people are feeling about being part of KBR.
Stuart: Now, to test that we're actually delivering for people in a broader sense, we regularly do a people survey, which is, in fact, anonymous, and the feedback ensures we're focusing in the right areas as we seek continual improvement, and it really helps us avoid any complacency.
Stuart J. B. Bradie: And the feedback ensures we are focusing on the right areas as we seek continual improvement, and it really helps us avoid any complacency. The summary results are also important, particularly as we bring new entities into KBR or new employees into the company. This year, the participation levels increased 10%, and we're over 70-70%, which is actually our highest to date and we feel gives a solid representation of how our people are feeling about being part of KBI.
Stuart: The summary results are also important, particularly as we bring new entities into KBR or new employees into the company.
Stuart: This year the participation levels increased 10% and we're over 70% which is actually our highest to date and we feel gives a solid representation of how our people are feeling about being part of KBR.
Stuart J. B. Bradie: I'm pleased to share with you that we've been certified as a great place to work in 13 countries, and over 84% of our team members feel KVR is indeed a great place to work, and they would recommend KBR to friends. From an inclusion perspective, 85% feel they can be themselves, are heard, and that this is very much a value I hold very, very dear. So good performance there.
Stuart Bradie: I'm pleased to share with you that we've been certified as a great place to work in 13 countries, and over 84% of our team members feel KBR is indeed a great place to work, and they would recommend KBR to friends. From an inclusion perspective, 85% feel they can be themselves are had, and that this is very much a value, I hope, very, very dear. So good performance there.
Stuart: I'm pleased to share with you that we've been certified as a great place to work in 13 countries and over 84% of our team members feel KVR is indeed a great place to work.
Stuart: and they would recommend KBR to friends.
Stuart: From an inclusion perspective, 85% feel they can be themselves, are heard, and that this is very much a value I hold very, very dear, so good performance there.
Stuart J. B. Bradie: Obviously, we are not perfect, but hopefully this gives you a good feeling that we walk the talk when it comes to our people. And a big shout out to our people, in fact. So let's move on to slide six and discuss the quarter a little. So Q2, similar to the first quarter, was a clean quarter with the businesses performing at or above expectations across all key metrics. As you can see, revenue is up 6% year on year, but more importantly, adjusted EBITDA was up 13%, 1.3%, with margins at the group level up 75%. Year-to-date cash conversion was a terrific 121%.
Unknown Executive: Obviously, we are not perfect, but hopefully this gives you a good feel that we want the talk when it comes to our people, and a big shout-out to our people, in fact.
Stuart: Obviously, we are not perfect, but hopefully this gives you a good feel that we walk the talk when it comes to our people.
Unknown Executive: So let's move on to slide six and discuss the quarter on this. So Q2, similar to the first quarter, was a clean quarter, with the businesses performing at or above expectations across all key metrics. As you can see, the revenue is up to 6% year-on-year, but more importantly, adjusted EBITDA was up 13% 1,3% with margins at the group level up 75 bits.
Stuart: and a big shout out to our people, in fact. So let's move on to slide six and discuss the quarter a little. So Q2, similar to the first quarter, was a clean quarter with the businesses performing at or above expectations across all key metrics.
Stuart: As you can see, the revenue is up 6% year-on-year, but more importantly, adjusted EBITDA was up 13%, 13%, with margins at the group level up 75 bits.
Unknown Executive: You today casket version was a terrific 121%. So, following on from a strong Q1, this gives us confidence to raise guidance, which might all cover in a moment. But in short, our people and thus KBR continue to deliver. On the business growth site, our group booked a bill on a tailing 121 basis was 1.0, and after adjusting for the large LNG project was 1.2 times, which, considering we also have substantially increased bid volume and awards awaiting decision, this really represents a strong quarter. We booked circa $2 billion at the group level and currently sit at 92, 92% of work under contract for 2024, and this is an important takeaway, especially with continued volatility, both politically and geographically.
Stuart: Year-to-date cash conversion was a terrific 121%. So following on from a strong Q1, this gives us confidence to raise guidance which Mark will cover in a moment.
Stuart J. B. Bradie: So following on from a strong Q1, this gives us confidence to raise guidance, which Mark will cover in a moment. But, in short, our people, and thus KBR, continue to deliver. On the business growth side, our group's book-to-bill on a trailing 12-month basis was 1.0, and after adjusting for the large LNG project, was 1.2 times.
Mark: But in short, our people, and thus KBR, continue to deliver.
Mark: On the business growth side, our group book-to-bill on a trailing 12-month basis was 1.0, and after adjusting for the large LNG project,
Stuart J. B. Bradie: Which, considering we also have substantially increased bid volume and awards awaiting decision, this really represents a strong quarter. We've got circa $2 billion at the group level and currently sit at 92, 92% of work under contract for 2024. And this is an important takeaway, especially with continued volatility, both politically and geopolitically. Now on to slide seven.
Mark: was 1.2 times.
Mark: Which, considering we also have substantially increased bid volume and awards awaiting decision, this really represents a strong quarter.
Mark: We've got circa $2 billion at the group level and currently sit at 92% of work under contract for 2024. And this is an important takeaway, especially with continued volatility, both politically and geopolitically.
Unknown Executive: Now on to slide 7. Firstly, we'll start on STS. The book to bill, after adjusting for the large LNG project, sits at 1.1 for the quarter, so good performance, and 1.2 on a trailing 121 basis. Now, as you can see from there, what's highlighted below, we continue to lead the market in green ammonia for that first project in India and 10th project overall.
Stuart J. B. Bradie: Firstly, we'll start on STS. The book-to-bill after adjusting for the large LNG project sits at 1.1 for the quarter, so good performance, and 1.2 on a trailing 12-month basis. And as you can see from the awards highlighted below, we continue to lead the market in green ammonia with our first project in India and 10th project overall. Blue ammonia, however, continues to be more prominent due to affordability, and the contract with OCI reflects that.
Mark: Now on to slide seven.
Mark: Firstly, we'll start on STS. The book-to-bill after adjusting for the large LNG project sits at 1.1 for the quarter, so good performance, and 1.2 on a trailing 12-month basis.
Mark: And as you can see from the awards highlighted below, we continue to lead the market in green ammonia with our first project in India and 10th project overall.
Unknown Executive: Blue ammonia, however, continues to be more prominent due to affordability, and the contract with OCI reflects. We've seen delivering for our clients in critically important missions and projects around the world as a key available for the people survey results that Stuart just covered.
Mark: Blue ammonia however continues to be more prominent due to affordability and the contract with OCI reflects this.
Stuart J. B. Bradie: It's critical that we continue to ensure there is value added by delivering solutions that drive efficiency and improve yield. This enables the energy transition, and I really think it's a key area of differentiation for KBR. In fact, there are actually only two blue ammonia projects in the world that have actually FID'd, or Final Investment Decision. Both are using KBR's technology. These are the OCI plant in Bowman, Texas, and Fertiglobes in the UAE, which will make KBR's proprietary process technology the first to produce blue ammonia.
Mark: It's critical that we continue to ensure there is value-add by delivering solutions that drive efficiency and improve yield. And this enables the energy transition, and I really think it's a key area of differentiation for KBR.
Mark: In fact, there's actually only two blue ammonia projects in the world that have actually FID'd.
Mark: Final Investment Decision.
Mark: Both are using KVR's technology.
Mark: These are the OCI plant in Bowman, Texas, and Fertigloves in the UAE.
Stuart J. B. Bradie: So this, in addition to our industry position in green ammonia as measured by licenses awarded, puts us in a very, very strong position. We're also very, very excited about the award of a five-year contract to help the Iraqi government develop its future plans across infrastructure, energy, and sustainable development. I believe this demonstrates a strong position in the Middle East that we highlighted at Investor Day and ensures we are very much part of the early development conversation. On the government side, our book to bill ratio sits at 1.1 times in the quarter and at 1.2 times on a trailing 12 month basis. Again, a terrific performance.
Mark: which will make KBR's proprietary process technology the first to produce blue ammonia. So, this in addition to our industry position in green ammonia, as mentioned by licenses awarded, puts us in a very, very strong position.
Mark: We're also very, very excited about the award of a five-year contract to help the Iraqi government develop their future plans across infrastructure, energy, and sustainable development.
Mark: I believe this demonstrates a strong position in the Middle East that we highlighted at Investor Day and ensures we are very much part of the early development conversations.
Mark: On to the government side, our book-to-bill sits at 1.1 times in the quarter.
Stuart J. B. Bradie: Awards under the IAC-MAC IDIQ contract vehicle continued to be solid, and we've highlighted in the slide the recompete win on the B52 program that we've had for actually eight years, which had a significantly increased value and additional scope for cyber security. It's a bit of a trend that we do expect award volume to pick up in Q3 in this area, with over two billion dollars worth of bids submitted and awards under the IAC MAC program alone. Quite substantial in that area. We've highlighted two large multiple award contract wins in the quarter. Both are effectively a license to hunt and enable rapid response mobilization if required.
Mark: and at 1.2 times on a trailing 12-month basis, again, terrific performance.
Mark: Awards under the IAC MAC-IDIQ contract vehicle continued to be solid. And we've highlighted in the slide the re-compete win on the B52 program that we've had actually for eight years.
Mark: which had a significantly increased value and additional scope for cyber security. It's a bit of a trend.
Mark: Now we do expect award volume to pick up in Q3 in this area with over $2 billion worth of bids submitted and awaiting award under the IACMAC program alone, quite substantial in that area.
Mark: We've highlighted two large multiple award contract wins also in the quarter. Both are effectively a license to hunt and to enable rapid response mobilization if required.
Stuart J. B. Bradie: Now, notably, MQS2 is with a new customer, which is always positive, the Defense Health Agency, and we'll report ongoing progress as we move on to task orders under these contract vehicles in the coming months. As we highlighted yesterday, our volume of bids overall in the government business and across that whole portfolio has increased significantly in 2024 and currently sits at over $8 billion. I will now hand over to Mark, who will give more detail on the financial performance. Mark
Mark: Now, notably, NQS2 is with a new customer, which is always positive, the Defense Health Agency. And we'll report ongoing progress as we move on to task orders under these contract vehicles in the coming months.
Mark: As we highlighted investor day, our volume of bids overall in the government business
Mark: and across that whole portfolio has increased significantly in 2024 and currently sits at over $8 billion. I will now hand over to Mark who will give more detail on the financial performance. Mark.
Mark W. Sopp: Fantastic. Hello, everyone. Thanks, Stuart. I'll pick up on slide nine.
Mark: Fantastic. Hello, everyone. Thanks, Stuart. I'll pick up on slide nine.
Mark W. Sopp: So, as you've just heard, we're really pleased with our Q2 performance, and that follows an already strong Q1, registering healthy top-line growth, strong profit margins, double-digit adjusted EPS growth, and year-to-date cash flow conversion of over 120%, all leading to a bump up in our full year guide. As I have said a number of times before, the day to day project performance across hundreds of engagements is the foundation of our consistently strong financial results.
Mark: So as you've just heard, we're really pleased with our Q2 performance, and that follows an already strong Q1.
Mark: Registering healthy top-line growth, strong profit margins, double-digit adjusted EPS growth, and year-to-date cash flow conversion of over 120%, all leading to a bump up in our full-year guide.
Mark W. Sopp: This also pays recurring dividends with respect to client retention and employee engagement. We've seen that delivering for our clients in critically important missions and projects around the world is a key enabler for the people survey results that Stuart just covered. As a particular note, adjusted EBITDA margins came in at about 11.5%.
Mark: As I said a number of times before, the day-to-day project performance across hundreds of engagements is the foundation of our consistently strong financial results. This also pays recurring dividends with respect to client retention and employee engagement.
Mark: We've seen delivering for our clients in critically important missions and projects around the world is a key enabler for the People Survey results that Stuart just covered.
Unknown Executive: A particular note, adjusted EBITDA margins came in at about 11.5%. This reflects superb client delivery and good cost discipline. Operating cash flow was 170 million for the quarter and 261 million year-to-date as we continue progress on driving a lower DSO's and overall demonstration of our low capital intensity business model.
Stuart: A particular note, adjusted EBITDA margins came in at about 11.5%.
Mark W. Sopp: This reflects superb client delivery and good cost discipline. Operating cash flow is $170 million for the quarter and $261 million year to date as we continue progress on driving lower DSOs and overall demonstration of our low capital intensity business model. On to slide 10 for details on the segments.
Stuart: This reflects superb client delivery and good cost discipline.
Speaker Change: Operating cash flow is $170 million for the quarter and $261 million year-to-date as we continue progress on driving lower DSOs and overall demonstration of our low capital intensity business model.
Unknown Executive: On the slide 10 for details on the segments. Sustainable tech has continued to deliver double-digit year-over-year growth, excellent profit margins, and equally good contribution to enterprise cash flow generation. Revenants grew 14% to 458 million, with all parts of the business contributing to that result. Margins were 21.4%, up from last year on a combination of intellectual property license mix, joint venture performance, and its highly efficient cost structure. For government revenue grew to 3% overall, where again, we saw growth in international defense and intelligence and science and space, those of 11%, 5%, and 1% respectively.
Mark W. Sopp: Sustainable tech has continued to deliver double-digit year over year growth, excellent profit margins, and an equally good contribution to enterprise cash flow generation. Revenues grew 14% to $458 million, with all parts of the business contributing to that result, and margins were 21.4%, up from last year on a combination of intellectual property license mix. Joint Venture Performance, and its highly efficient cost structure. For government revenue, grew 3% overall, where again we saw growth in international defense and intelligence and science and space go up 11%, 5%, and 1%, respectively. This is offset in part by contraction in readiness and sustainment, particularly for UCOM activity, as funding delays earlier in the year are still trickling through related to the Ukraine conflict.
Speaker Change: On to slide 10 for details on the segments.
Speaker Change: Sustainable Tech has continued to deliver double-digit year-over-year growth, excellent profit margins, and equally good contribution to enterprise cash flow generation.
Speaker Change: Revenues grew 14% to $458 million with all parts of the business contributing to that result.
Speaker Change: Margins were 21.4% up from last year on a combination of intellectual property license mix, joint venture performance, and it's highly efficient cost structure.
Speaker Change: For government, revenue grew 3% overall, where again we saw growth in international defense and intelligence and science and space, those up 11%, 5%, and 1% respectively.
Unknown Executive: This is offset and part by contraction in the readiness and sustainment, particularly for you come activity down as funding delays earlier in the year are still trickling through related to the Ukraine conflict. However, this is beginning to reverse as sequential growth from Q1 was up 7% in the U.S. and sustainment segment, pretty much attributed to this Ukraine area.
Speaker Change: This is offset in part by contraction in readiness and sustainment, particularly for UCOM activity down as funding delays earlier in the year are still trickling through related to the Ukraine conflict.
Mark W. Sopp: However, this is beginning to reverse as sequential growth from Q1 was up 7% in the readiness and sustainment segment, pretty much attributed to this Ukraine area. Profit margins hit 10.4%, pretty much in line with expectations for GS in Q2. Now on to slide 11.
Speaker Change: However, this is beginning to reverse as sequential growth from Q1 was up 7% in the readiness and sustainment segment, pretty much attributed to this Ukraine area.
Unknown Executive: Prof. Margins hit 10.4%, pretty much in line with expectations for GS and Q2.
Speaker Change: Profit margins hit 10.4% pretty much in line with expectations for GS and Q2.
Mark W. Sopp: Good capital deployment starts with good cash flow generation, which, as discussed earlier, was terrific for Q2. This enabled higher buybacks this quarter and also year to date, yet still reduced our leverage, which finished the quarter at 1.9x trailing 12 adjusted EBITDA. Specifically, we've bumped up our buybacks to about $100 million in Q2, on top of the $50 million in Q1. Together with increased dividends in Q1, we have returned almost $200 million in cash to shareholders through the first half.
Unknown Executive: Now on to slide 11, good capital deployment starts with good cash flow generation, which is discussed earlier was terrific for Q2. This enabled higher buybacks this quarter and also year-to-date, yet still reduced our leverage, which finished the quarter at 1.9x trailing 12 adjusted EBITDA.
Speaker Change: Now on to slide 11. Good capital deployment starts with good cash flow generation, which as discussed earlier was terrific for Q2.
Speaker Change: This enabled higher buybacks this quarter and also year-to-date, yet still reduced our leverage which finished the quarter at 1.9x trailing 12 adjusted EBITDA.
Unknown Executive: Specifically, we bumped up our buybacks to about 100 million in Q2, on top of the 50 million in Q1. Together with increased dividends in Q1, we have returned almost 200 million in cash to shareholders through the first half.
Speaker Change: Specifically, we bumped up our buybacks to about $100 million in Q2, on top of the $50 million in Q1.
Speaker Change: Together with increased dividends in Q1, we have returned almost $200 million in cash to shareholders through the first half.
Unknown Executive: Now let me briefly cover how we plan to finance the acquisition of linguists. While we have cash in current below capacity to cover the full purchase price, we have commenced the process of tapping additional term loans to maximize our liquidity. Assuming we do that, we expect any new debt to be at the same or better rates than our existing debt. We'll also structure any new debt to allow for repayments, so we have the option of delivering as cash flows are generated down the road. We expect the transaction to raise our pro-form and net leverage to approximately 2.7x, give or take host closing.
Mark W. Sopp: Now, let me briefly cover how we plan to finance the acquisition of WingQuest. While we have cash and current revolver capacity to cover the full purchase price, We have commenced the process of tapping additional term loans to maximize our liquidity. Assuming we do that, we expect any new debt to be at the same or better rates than our existing debt. We'll also structure any new debt to allow for repayments, so we have the option of de-levering as cash flows are generated down the road. We expect the transaction to raise our pro forma net leverage to approximately 2.7x, give or take, post-closing. However, this leverage ratio is still at a comfortable level.
Speaker Change: Now let me briefly cover how we plan to finance the acquisition of WingQuest.
Speaker Change: While we have cash and current revolver capacity to cover the full purchase price, we have commenced the process of tapping additional term loans to maximize our liquidity.
Speaker Change: Assuming we do that, we expect any new debt to be at the same or better rates than our existing debt.
Speaker Change: We'll also structure any new debt to allow for repayments, so we have the option of delevering as cash flows are generated down the road.
Speaker Change: We expect the transaction to raise our pro forma net leverage to approximately 2.7x, give or take, post-closing.
Unknown Executive: This leverage ratio is still at a comfortable level, and thus we still have capital deployment optionality across M&A, buybacks, and debt reduction option.
Mark W. Sopp: And thus, we still have capital deployment optionality across M&A buybacks and debt reduction options. Now on to slide 12, forward guidance. We are raising our guidance for the year on profit and cash metrics, which is all organically driven. We are not factoring in any expected contribution from WingQuest until it closes. We will consider an update then, depending on when the curves are closed and the materiality to the year at that point. Revenue guidance is unchanged at $7.4 billion to $7.7 billion.
Speaker Change: This leverage ratio is still at a comfortable level, and thus we still have capital deployment optionality across M&A buybacks and debt reduction options.
Speaker Change: Now on to slide 12, Forward Guidance. We are raising our guidance for the year on profit and cash metrics, which is all organically driven.
Speaker Change: We are not and will not factor in any expected contribution from WingQuest until it closes.
Speaker Change: We will consider an update then, depending on when closing occurs and the materiality to the year at that point in time.
Mark W. Sopp: However, with a strong first half operating performance, we are bumping up adjusted EBITDA to a range of $825 to $850 million with a midpoint of $838 million. Our adjusted EPS guidance is also increasing to $3.15 to $3.30 with a midpoint of $3.23. And finally, with a strong year-to-date cash flow conversion, we're increasing our adjusted operating cash flow guidance to between $460 million and $480 million. In summary, the core business is performing really well. And we're increasing the outlook for profit and cash flow production. Certainly a great testament to the performance of STS and the GS operating team.
Speaker Change: Revenue guidance is unchanged at $7.4 billion to $7.7 billion. However, with a strong first half operating performance, we are bumping up adjusted EBITDA to a range of $825 to $850 million with a midpoint of $838 million.
Speaker Change: Our adjusted EPS guidance is also increasing to $3.15 to $3.30 with a midpoint of 3.23.
Speaker Change: And finally, with a strong year-to-date cash flow conversion, we're increasing our adjusted operating cash flow guidance to $460 million to $480 million.
Speaker Change: In summary, the core business is performing really well and we're increasing the outlook for profit and cash flow production, certainly a great testament to the performance of our STS and GS operating teams.
Mark W. Sopp: In addition, we're truly excited about the addition of Linkwest. In fact, I've known this business for a really long time and have high confidence that we will be an excellent home for their employees. The cultures align really well, and we expect robust synergy and customer delivery benefits for years to come. All of us really just can't wait to get started with our new colleagues on this exciting front. With that, back to Stuart. Thanks, Mark. Terrific job as always. And on to slide 13. And really, to talk about Linguist.
Speaker Change: In addition, we're truly excited about the addition of LinQuest. In fact, I've known this business for a really long time and have high confidence we will be an excellent home for their employees.
Speaker Change: The cultures align really well, and we expect robust synergy and customer delivery benefits for years to come.
Speaker Change: All of us really just can't wait to get started with our new colleagues on this exciting front.
Speaker Change: With that, back to Stuart.
Stuart J. B. Bradie: What you see on the slide is the same as we published in our announcement last week, so I thought I would cover only a couple of points. And then I would touch on how the feedback has been since the acquisition was announced and how we're thinking about integration. So Linqvist, they're 1,500 plus people; they really do amazing work.
Stuart: Thanks Mark, terrific job as always and on to slide 13.
Stuart: and really to talk about Lindquist. What you see on the slide is the same as we published in our announcement last week. So I thought I would cover only a couple of points and then I would touch on how the feedback has been since the acquisition was announced and how we're thinking about integration.
Stuart: So, Linquists, they're 1,500 plus people, they really do amazing work, and they do that across national security space, so think Space Force.
Stuart J. B. Bradie: And they do that across the national security space, so think Space Force, future air dominance, so think Air Force and JADC2, and connected battle space, so think interoperability and digital. I mean, their capability is highly complementary to KBR's with little overlap, which I really think gives exciting synergy opportunities. We're also excited by the fact the margins are double digits, as is the pre-synergy growth So absolutely terrific
Stuart: Future Air Dominance, so think Air Force and JASI-2, and Connected Battlespace, so think interoperability and digital.
Stuart: I mean their capability is highly complementary to KBR's with little overlap, which I really think gives exciting synergy opportunities and we've highlighted how those work on the slide in there.
Stuart: We're also excited the fact the margins are double-digit, as is the pre-Synergy growth profile, so absolutely terrific.
Stuart J. B. Bradie: And from a people perspective, the feedback on the announcement has been incredibly positive. In fact, positive on both sides. We hosted our first town hall with the Linqvist team last week, and there's a lot of excitement.
Stuart: And from a people perspective, the feedback on the announcement has been incredibly positive. In fact, positive on both sides.
Stuart: We've hosted our first town hall with the Linqvist team last week.
Stuart J. B. Bradie: Linqvist is a business we know very well, as Mark said earlier. We're located in many of the same locations. We've worked with them on numerous occasions. And, importantly, the people know and respect each other, which I think is absolutely unique.
Stuart: and there's a lot of excitement.
Stuart: Lindquist is a business we know very well. As Mark said earlier, we're located in many of the same locations. We've worked with them on numerous occasions.
Speaker Change: and importantly that people know and respect each other which I think is absolutely unique. We have common values, we have commitment to mission and I think from a cultural perspective we see this as really really a terrific fit.
Stuart J. B. Bradie: We have common values. We have commitment to mission, and I think from a cultural perspective, we see this as really, really a terrific fit. In terms of integration, we're actually feeling really good about it. Linguist already operates on many of the same ERP platforms. And for those that have done this before, that really is a big deal.
Speaker Change: In terms of integration, we're actually feeling really good about it. Inquist already operates on many of the same ERP platforms, and for those that have done this before, that really is a big deal. So this greatly reduces the risk and, importantly, the burden on the teams doing the integration.
Stuart J. B. Bradie: So this greatly reduces the risk and, importantly, the burden on the teams doing the integration. So I'm sure you can tell we're super excited about Lindquist joining the KBR family. This is not only a great fit with little overlap, but an acquisition that's absolutely bang on strategy and focused on delivering revenue synergies in a very well funded and critical Enmark. Now, obviously, in the coming weeks, we'll be working through the HSR process, and hopefully, we'll close soon, with more to come, and we'll update you on that next evening. Now on to slide 14, and I'll finish with some key takeaways.
Speaker Change: So I'm sure you can tell we're super excited about Lindquist joining the KBR family. This is not only a great fit with little overlap, but an acquisition that's absolutely bang-on strategy and focused on delivering revenue synergies in very well-funded and critical end markets.
Speaker Change: Now obviously in the coming weeks we'll be working through the HSR process and hopefully we'll close soon and more to come and we'll update you at our next earnings call.
Stuart J. B. Bradie: Firstly, we've delivered a really strong first half performance across all key metrics. And as a result, as Mark presented, we are pleased to raise full year 24 guidance on profit and cash. Secondly, our work under contract for 2024 today is at 92%, and bookings also ensure continued momentum, and the bid submitted and awaiting awards are at very, very high levels, as we explained earlier. Thirdly, Lindquist, as I said earlier, is bang on strategy, and we are super excited about it.
Speaker Change: Now on to slide 14 and I'll finish with some key takeaways.
Speaker Change: Firstly, we've delivered a really strong first half performance across all key metrics, and as a result, as Mark presented, we are pleased to raise full year 24 guidance on profit and cash flow.
Speaker Change: Secondly, our work under contract for 2024 today is at 92% and bookings also ensure continued momentum and the bids submitted and awaiting awards are at very, very high levels as we explained earlier.
Speaker Change: Thirdly, Lindquist, as I said earlier, is bang on strategy and we are super excited about it. Double digit growth and double digit margins. Really, really cool business.
Stuart J. B. Bradie: Double-digit growth and double-digit margins, really, really cool business. Lastly, at Investor Day, we emphasized our vision to continually move KBR into technology-enabled markets where our high-end technical, digital, and deep domain expertise really allow us to differentiate while adding value in critical areas for our customers all across the world.
Speaker Change: Lastly, I've been best today.
Speaker Change: We emphasized our vision to continually move KBR into technology-enabled markets where a high-end technical
Speaker Change: Digital and Deep Domain Expertise.
Speaker Change: really allow us to differentiate while adding value in critical areas for our customers all across the world.
Speaker Change: Now following on these themes from IR Day and with Linguist as a catalyst, we believe there are opportunities to realign our business to operate even better based on our capabilities and markets.
Stuart J. B. Bradie: Day and with Lindquist as a catalyst. We believe there are opportunities to realign our business to operate even better based on our capabilities and market. The objective of this realignment will be to reduce complexity, and realize synergies like AUKUS and One Saudi, as we presented at Investor Day. And it's likely we will manage both segments globally to allow greater standardization and business process optimization, which should drive efficiency. Then we'll be working on this through the remainder of 2024 with an expectation to report along these lines in full year 25. And to be clear, the segments and the enterprise targets for 2027 will remain intact through this realignment.
Speaker Change: The objective of this realignment will be to reduce complexity,
Speaker Change: Realized synergies like Ocus and One Saudi as we presented at Investor Day.
Speaker Change: and it's likely we will manage both segments globally.
Speaker Change: To allow greater standardization and business process optimization, which should drive efficiency.
Speaker Change: Now, we'll be working on this through the remainder of 2024, with an expectation to report along these lines in full year 25. And to be clear, the segments and the enterprise targets for 2027 will remain intact through this realignment.
Stuart J. B. Bradie: This is very much a heads up, and we're going to continue to work on this through the remainder of the year, and we'll update you as we make progress. So please stay tuned. Thank you again for listening.
Speaker Change: This is very much a heads up and we're going to continue to work on this through the remainder of the year and we'll update you as we make progress so please stay tuned. Thank you again for listening and I'll now hand back to the operator who will open the call up for questions.
Operator: And I'll now hand back to the operator, who will open the call for questions. Thank you. If you would like to ask a question, please press star followed by 1 on your telephone keypad now. If you change your mind, please press star followed by 2. Please ask only one question and one follow-up. When preparing to ask a question, please ensure your device is in a muted location.
Speaker Change: Thank you.
Speaker Change: If you would like to ask a question, please press star followed by 1 on your telephone keypad now. If you change your mind, please press star followed by 2. Please ask only one question and one follow-up.
Speaker Change: When preparing to ask a question, please ensure your device is unmuted locally.
Operator: The first question we received is from Tobey Sommer from Truth. Tobey, your line is now open, please go ahead. Thank you. Good morning.
Speaker Change: The first question we received is from Tobey Sommer from Troost.
Speaker Change: To its company. Tobey, your line is now open. Please go ahead.
Tobey O'Brien Sommer: I was wondering if you could expand on that last bit and offer some more color Stuart on the realignment and what you think that will achieve for the firm. Thank you. Yeah, thanks Tobey.
Tobey O'Brien Sommer: Thank you. Good morning. I was wondering if you could expand on that last bit and offer some more color, Stuart, on the realignment and what you think that will achieve for the firm. Thank you.
Stuart J. B. Bradie: The objective will be, as I said, to reduce complexity. We'll move from three business units to two, effectively, with bits of what we've been describing as GSI. And I'll give you a good example.
Stuart: Thanks, Tobey. The objective will be to, as I said, reduce complexity. We'll move from three business units to two, effectively, with...
Speaker Change: bits of what what we've been describing as as GSI and I'll give you a good example
Speaker Change: New Sustainable City in Saudi Arabia, and that currently sits in the government segment.
Stuart J. B. Bradie: The Daria Gate project, which is a full-on project management of a new sustainable city in Saudi Arabia. That currently sits in the government segment but could, given its commercial contractual basis, given its program management at scale, and given where it is in Saudi Arabia, to realize our One Saudi vision and leverage our position across a broader customer base, that sort of project will move into STS going forward. So another example would be the Sellafield decommissioning that we do in the nuclear arena.
Speaker Change: but could, given its commercial contractual basis,
Speaker Change: Given its program management at scale and given where it is in Saudi, to realize our One Saudi vision and leverage our position across a broader customer base.
Speaker Change: That sort of project will move into SDS going forward.
Speaker Change: Another example would be the Sellafield decommissioning that we do in the nuclear arena.
Stuart J. B. Bradie: Very much a sustainable project, currently sits within GSI. Big programmatic, reducing the carbon footprint, obviously managing a very tricky nuclear decommissioning piece of work and managing quite a significant supply chain there, very much in the bailiwick of STS also. So that's the sort of thing we'll be pushing across. STS will get bigger. As a consequence, as I said, the guide that we've given won'
Speaker Change: Very much a sustainable project, currently sits within GSI.
Speaker Change: Big Programmatic, Reducing Carbon Footprint.
Speaker Change: Obviously managing a very tricky nuclear decommissioning piece of work and managing quite a significant supply chain. They are very much in the bailiwick of STS also. So that's the sort of thing we'll be pushing across, STS will get bigger.
Speaker Change: As a consequence, as I said, the guide that we've given won't change, so we expect margins to hold up in SDS as we go through this.
Stuart J. B. Bradie: So we expect margins to hold up in STS as we go through this, but it certainly will obviously give us, I guess, an overhead advantage as well, as we go from three to two. And I think it allows standardization and more commercial acumen in the areas where it's required.
Speaker Change: But it certainly will obviously...
Speaker Change: Give us, I guess, an overhead advantage as well as we go from three to two. And I think allow us standardization and more commercial acumen in the areas where it's required. But the clear objective is to realize the synergies that we laid out yesterday.
Stuart J. B. Bradie: But the clear objective is to realize the synergies that we laid out. So that makes sense. Absolutely. If I may sneak in a follow-up from a geographic perspective, where do you see the most rapid growth across the enterprise over the next year or two? I mean, I think it's
Speaker Change: Does that make sense?
Speaker Change: Absolutely. If I may sneak in a follow up, from a geographic perspective, where do you see the most rapid growth across the enterprise over the next year or two?
Stuart J. B. Bradie: I think ultimately, you're going to see a lot of growth in what we described as a Golden South, particularly in the Middle East. And I think you've seen that, and if you look at our documents, you know, and that we for this quarter, you'll see an increase in activity in the Middle East, in particular. So, I do see that from an energy perspective, it will be an area of significant activity.
Speaker Change: I mean, I think it's.
Speaker Change: I think ultimately you're going to see a lot of growth in what we described as a Golden South, particularly the Middle East.
Speaker Change: and I think you've seen that and if you look at our...
Speaker Change: In our documents for this quarter you'll see the increase in activity in the Middle East in particular.
Speaker Change: So, I do see that, from an energy perspective, going to be the area of significant activity.
Stuart J. B. Bradie: In terms of the government side, obviously, with the Lindquist acquisition, we obviously see a lot of activity happening in the U.S. Also, but also, I think, continued emphasis in the Pacific, so we do see increasing activity across things like AUKUS and sharing intelligence data and things across the allied forces. So I think you're going to see it in many places, depending on which business, Tobey. Thank you. The next question on the line comes from Michael Dudas of Vertical Research. Please go ahead. Good morning, Jamie, Stuart, Mark. Good morning, Mike. Morning Mike.
Speaker Change: In terms of the government side, obviously, with the Lindquist acquisition, we obviously see a lot of activity happening in the U.S. also. But also, I think, continued emphasis.
Tobey O'Brien Sommer: on in the Pacific so we do see increasing activity across things like AUKUS and then sharing intelligence data and things across the the Allied forces so so I think I think you're going to see it in multi places and depending on which business Toby
Tobey O'Brien Sommer: Thank you.
Speaker Change: The next question on the line comes from Michael Dudas of Vertical Research. Please go ahead.
Operator: You're welcome. Bye. Bye. Bye. Bye.
Michael Stephan Dudas: Good morning, Jamie, Stuart, Mark.
Operator: Stuart, you talked about visibility in the pipeline and you highlighted some government service opportunities. Maybe you could share a little bit on the STS side of the pipeline and, looking at 2025, you know, how comfortable are you relative to what's in the backlog and near-term bookings today to at least achieve the growth targets that you have? Yeah, I think as we presented, the bookings in SDS in the quarter, excluding the LNG project, were 1.1, so there's strong momentum there.
Michael Stephan Dudas: [inaudible]
Michael Stephan Dudas: [inaudible]
Michael Stephan Dudas: Stuart, you talked about visibility in the pipeline and you highlighted some government service opportunities. Maybe you could share a little bit on the STS side on the pipeline.
Speaker Change: Looking at 2025, you know, how comfortable are you relative to what's in backlog and near-term bookings today to at least achieve the growth targets that you have?
Operator: I think that's similar to last quarter, actually, and on a trailing 12 months basis, sitting at 1.2, so good continued bookings in SDS, a strong pipeline, really globally, but as I said earlier, I think there is a lot of activity in the Middle East. In fact, I was in Saudi Arabia last week with Jay, and so continued confidence in their investment profiles there. So we're not seeing a slowdown at all in that area, and energy security is very much on the agenda in a decarbonized way, as we've talked about before, as well as energy transition, probably energy transition moving a little bit slower due to affordability questions, but which just brings energy security more to the fore, because the demand for energy is still very much the same.
Speaker Change: Yeah, I think as we presented, I mean, the bookings in SDS and the quora excluding the LNG project were 1.1.
Speaker Change: So there's strong momentum there. I think that's similar to last quarter actually and on a trailing 12 months basis sitting at 1.2 so.
Speaker Change: Good continued bookings in SDS, a strong pipeline.
Speaker Change: really globally but as I said earlier I think a lot of activity in the Middle East in fact I was in Saudi last week with Jay and so continued continued confidence in their investment profiles there
Speaker Change: So, you know, we're not seeing a slowdown at all in that arena, and energy security is very much on the agenda in a decarbonized way, as we've talked about before, as well as...
Speaker Change: Energy Transition, probably Energy Transition moving a little bit slower.
Speaker Change: Due to affordability questions. But which just brings energy security more to the fore because the demand in energy is still very much the same. So, so yeah, no no real, no real change to really what we presented in investor day around that, around that, Mike.
Operator: So, so yeah, no real, no real change to really what we presented in the best today around that. Thank you. My follow-up question is, any early read on the new government in the UK and how things may shake out? Yeah, good question. The UK moves a bit quicker than some jurisdictions in this election process. You know, it sort of happened in a few weeks.
Speaker Change: Thank you. My follow-up is any early read on the new government in the UK and how things may shake out?
Speaker Change: Yeah, good question. The, I mean, the UK moves a bit quicker than some jurisdictions in this election process.
Stuart J. B. Bradie: The new governor was elected on July 4th, and the cabinet was in place by July 5th, happening to support Ukraine, and already the defense and foreign ministers have engaged with, in fact, Zelensky was in the UK last week. And so we don't see any slowdown in commitment there. And in terms of their commitment to new energy, I think Labour is actually even more committed to the energy transition, so we see that as a good opportunity going forward. Thank you, Stuart.
Speaker Change: You know, it sort of happened in a few weeks, the new government was elected on July the 4th and the cabinet was in place by July the 5th.
Operator: Thank you. The next question is from Bart Subin from Stifel. Your line is now open, please go ahead.
Speaker Change: So, it's a fully operational government, Parliament's back, they will go back on holiday of course in August like most places, but it's all working.
Speaker Change: I do think there'll be, as there always is with new governments, a review process, whether in defence or in other areas.
Speaker Change: But what we've seen so far is that the UK is very, very committed to NATO and what's happening in supporting Ukraine, and already the defence and foreign ministers have engaged with, in fact Zelensky was in the UK last week.
Speaker Change: And so we don't see any slowdown in commitment there. And in terms of their commitment to new energy, I think labor is actually even more committed to energy transition. So we see that as a good opportunity going forward.
Speaker Change: Thank you, Stuart.
Speaker Change: Thank you.
Speaker Change: The next question.
Speaker Change: It's from Bert Subin from Stifel. Your line is now open. Please go ahead.
Operator: Hey, thank you. Good morning, Sasha, afternoon, Mark, and Stuart. [inaudible] Maybe just to kick off, it was a really strong second quarter for SDS, I mean EBITDA growth was quite a bit better than expected, and sales growth continues to be robust. You know, I know you look at the book to bill on this business, and there are some questions around, like, as Ellen, as Clack of Wines starts to step back, you know, what the direction of the business is going to be.
Bert William Subin: Hey, thank you. Good morning, Sasha, afternoon, Mark and Stuart.
Bert William Subin: Hi.
Bert William Subin: Hi Bert. Maybe just to kick off, it was a really strong second quarter for SPS. I mean the EBITDA growth was
Operator: So could you give us some commentary just maybe on what you're seeing in the second half? Do you expect these kind of growth rates to persist? And then if you think out the 25, 6, 7 and beyond, I mean, you highlighted the Middle East, you know, the big program we're still sort of waiting to hear from is Liquid to Chemicals, RAMCO. I'm just curious if there are any, Yeah, I mean, I think in short, I mean, we're standing by our guide. I mean, I was very clear about that.
Speaker Change: This is quite a bit better than expected.
Speaker Change: Sales growth continues to be robust, you know, I know you look at the book to bill on this business and there's some questions around like as Ellen, as Clackamines starts to
Speaker Change: So, let's just step back, you know, what the direction of the business is going to be. So could you give us some commentary just maybe on like what you're seeing in the second half? Do you expect these kind of growth rates to persist?
Speaker Change: And then as you think out the 25, 6, 7, and beyond, I mean, you highlighted the Middle East, you know, big program we're still sort of waiting to hear from is Liquid to Chemicals, the RAMCO. I'm just curious if there's any update there.
Stuart J. B. Bradie: Well, we've upped the guidance a bit for this year, obviously, but our 27 guide and our growth rates that we committed to at Investor Day are still there and very robust, and we think we can achieve them. That's probably the first statement that you can get your arms around. SDS is performing really, really well. I do think that we're seeing some movement in the LNG industry as well, post the Biden sort of monitorium there.
Speaker Change: Yeah, I mean, I think, in short, I mean, we're standing by our guide. I mean, I was very clear on that, Bert, and, well, we've upped the guidance a bit for this year, obviously, but our 27 guide and our growth rates.
Speaker Change: that we committed to at Investor Day are still there and very much robust. We think we can achieve them. That's probably the first statement. You could get your arms around. SDS is performing really, really well.
Stuart J. B. Bradie: I think some projects have been released, and I think that will be progressive until Election Day in November, and I think that the market will start to move again, so we're feeling pretty upbeat about that. And in terms of the Middle East, I think I covered it at Investor Day that, you know, the Middle East is more than just LTC, and Saudi Arabia is more than just LTC with commitments around ammonia, commitments around new gas development, and etc. And that's the same in the UAE, it's the same in Kuwait, and it's the same in Oman.
Stuart J. B. Bradie: So, I think there's lots going on across that area, and we're very well present in all those markets. LTC, I know very much is frustrating, but we have been, you know, we were very client-friendly, as you can be well, well, well aware and appreciate, and we have not been able to announce anything on that program. We still feel really good about it. But we're not yet at liberty to disclose anything until we get permission from the customer, and that is yet to be forthcoming. So I apologize, but that's the best I can do right now. I'd say that we're again feeling pretty good about where we are. That's super helpful.
Stuart J. B. Bradie: Thank you, Stuart. Just as a follow-up on the other side of the house, you talked about a pretty substantial ramp-up in bids, and it sounds like you're starting to see that. Could you maybe just help us understand, like, what the... What changes by segments you had, based on what I think Mark said, 5% growth in D&I, 1% in S&S, so how did those ramp up into the targets you've given at Investor Day? And then, regarding R&S, can you just give us some color on maybe the early days of homesteading?
Stuart J. B. Bradie: Yeah. So, I think our big target for this year is circa $12 billion in GS, and I think we've achieved eight to date, so we're well on the path to achieve that, which is terrific. And what we've done is we've refined costs in other areas and put more effort into BD to ensure our rates are still competitive. We've centralized our big, I guess, our big acquisitive project group into a centralized group that oversees and drives more, I guess, more volume, but obviously more quality through that pipeline, and we're seeing that manifest itself. And I think, as I described earlier, we've really got a very strong IDIQ machine opposite IACMAC.
Speaker Change: Our beds are bid target for this year is circa $12 billion in GFS and I think we've achieved to date. So we're well on the path to achieve that which is terrific.
Speaker Change: What we've done is we've we've refined costs in other areas and put more effort into BD to ensure our rates Cisco competitive.
Speaker Change: We have centralized our big I guess, a big acquisitive.
Speaker Change: <unk> group into a centralized group that.
Speaker Change: Overseas and drives more I guess more volume, but I will say more quality.
Through that through that pipeline.
Speaker Change: And we're seeing that manifest itself.
Speaker Change: And I think as I described earlier, we've really got a very strong IQ machine opposite IAG Mark We've got 2 billion awaiting award in that program alone and that is absolutely significant.
Stuart J. B. Bradie: We've got $2 billion in awards in that program alone, and that is absolutely significant. And we do expect, I guess, some ramp-up in volumes of awards between now and October, just because of the cycle of government, and hopefully we'll see that coming in Q3. But this was all part and parcel of how we positioned Investor Day, very strategically how we aligned our targets, and how we thought through how we could achieve those targets.
Speaker Change: And we do expect.
Speaker Change: I guess some ramp up in volumes of awards between now and October just because of the cycle of government and hopefully, we'll see that come in coming into Q3.
Speaker Change: But this was all part of part and parcel of how we positioned investor day very much strategically how we aligned our targets how we thought through how we can achieve those targets. So I think what youre showing his strategy in action.
Stuart J. B. Bradie: So I think what you're showing is strategy in action, and for strategy to work and achieve your outcomes, you've got to also just deliver, and I think our teams are actually doing just that. So that's probably the best way to put that. Okay, and then just on the Chrome safe.
Speaker Change: For strategy to work and achieve your outcomes you've got to also deliver and I think our teams are actually doing just that so that's probably the best way to put that.
Speaker Change: Okay, and then just on the club's Dave.
Stuart J. B. Bradie: Unknown Speaker April I think when we spoke, it was just starting, so you know maybe how that's progressing. Yeah, I mean, the early moves have gone very, very well. The feedback on the quality and the service has been terrific. As you can imagine, the volumes are quite low, so we're all over that, so you would expect it. But so far, so good in that sense.
Speaker Change: On the wholesale April I think.
Dave: Just starting so maybe how that's progressing so far.
Speaker Change: I mean, the early moves have gone very very well the feedback on the quality and the <unk>.
Speaker Change: <unk> have been terrific as you can imagine the volumes are quite low. So we're all over that so you would expect it so.
Speaker Change: But so far so good in that sense.
Speaker Change: Yes.
Speaker Change: We've got the supply chain lined up in terms of what we're thinking about we've got to achieve in the next little while so no issues there.
Stuart J. B. Bradie: We know we've got the supply chain lined up in terms of what we're thinking about we've got to achieve in the next little while, so no issues there. In terms of public statements, Transcom came out in May and basically said that, you know, we'll be progressively ramping up, particularly in the fall as we look at interstate moves, which is aligned with our program. We're testing for that, the systems right now.
Speaker Change: In terms of public statements Transco came out in May and basically said that we will be progressively ramping up particularly in the fall as we look at the state moves which is aligned with our program. We are testing for that the systems right now.
Stuart J. B. Bradie: And so far, so good. With a view that we'll be doing full domestic moves in the busy season of 2025. Now, obviously, the targets that we gave on Investor Day are a bit more conservative than that, and rightfully so. It's a new program, but we're doing all we can to achieve that and line up behind that expectation. But, you know, that's kind of where we sit today. Thanks very much.
Speaker Change: And so far so good.
Speaker Change: With a view that we'll be doing through domestic moves in the busy season of 2025 now obviously the targets that we gave at Investor day are a bit more conservative than not and rightfully. So it's a new program but.
Speaker Change: We're doing all we can to achieve that and might not behind that expectation.
Speaker Change: But.
Speaker Change: That's kind of where we sit today.
Stuart: Thanks, very much Stuart.
Thanks.
Stuart: Thank you.
Stuart J. B. Bradie: Thank you. The next question is from Brent Hillman from D.A.
Speaker Change: The next question is from Brent <unk>.
Operator: Davidson. Your line is now open. Please go ahead. Hey, thanks. Good morning.
Speaker Change: Human from D. A Davidson your line is now open. Please go ahead.
Stuart J. B. Bradie: Mark or Stuart, can you talk about your expectations for RNS and, I guess, particularly your activities in Europe as you're moving into the second half of the year and what's embedded in your outlook? Yeah, I'll start, and Mark can jump in.
Brent: Hey, Thanks, good morning.
Martha Stewart: Martha Stewart.
Speaker Change: Talk about your expectations for rns.
Speaker Change: Particularly your activities in Europe, which are moving into the second half of the year and what's embedded in your outlook.
Stuart J. B. Bradie: I mean, RNS is actually quite interesting in what's happening there and its activity level. So, as you know, it slowed down a bit with the Ukraine supplemental not being approved for some time, and a bit of CR. But both of them are behind us.
Speaker Change: Yes, I'll start and Mark can jump in I mean, rns as that's a quite interesting and whats happening there and if activity levels.
Speaker Change: So as you know.
Speaker Change: It slowed down a bit with the you create supplemental not being approved for some time on the <unk> CR.
Speaker Change: Both of them are behind us.
Stuart J. B. Bradie: And we're seeing some movement there in EUCOM, but actually, if you look at the sequential growth, been active, you know, as we talked about upping the bid. Submittals by 50% this year, they're very much included. And they've expanded their reach in their markets and are doing really well. On Ukraine, we will see. I did say that the trickle down was a little slow in Q2, but it did pick up toward the end. So we're optimistic the second half will be a little bit better than the first. And then we'll just, you know, play that as the government dictates for the longer term.
Mark: And we're seeing some some movement there and you come but actually if you look at the sequential growth much of the sequential growth in iron assets actually coming from non lockup activities. So really a broader base operational support business, which as I say a terrific Fox at because we do expect new column.
Mark: The impact of you come to come through in Q3 and Q4.
Mark: Based on our outlook. So so I think that's quite an interesting dynamic there marketing more to say on that.
Speaker Change: He said and I think rns is more diversified than one might think and so they have been active as.
Speaker Change: As we talked about upping the bids.
Speaker Change: Metals by 50% this year Theyre very much included and they've expanded their reach and their markets and are doing really well.
Speaker Change: In Ukraine, we will see I did say that the trickle down with a little slow in Q2. It did pick up towards the end. So we are optimistic the second half will be a little bit.
Speaker Change: Other than the first and then we'll just.
Speaker Change: Play that as the government dictates longer term.
Stuart J. B. Bradie: Yeah, and we've got a couple of recent bids that, you know, as ever, you're told you've won, and then they go into protest. And, you know, we do think these will be additive if the protest was all in our favor. But we'll obviously update you on that, hopefully, in Q3 earnings. So we're feeling pretty good about R&S and that whole business performance.
Speaker Change: Yes.
Speaker Change: A recent beds that we have.
Speaker Change: As I've already told you have one and then they go into protest.
Speaker Change: We do think these are the additive of the protest resolved in our favor, but we'll obviously update you and hopefully.
Speaker Change: <unk> and <unk>.
Speaker Change: Feeling pretty good about rns.
Speaker Change: <unk> business performance.
Stuart J. B. Bradie: Okay. And then Stuart, just your answer to one of the previous questions, talking about some of the opportunities, and LMG percolating. I guess, in particular, some of the opportunities here in the U.S. What might be embedded into your 2027 financial targets for SPS? versus what isn't, especially related to those types of opportunities here in the U.S. Yeah, I mean, in the 27 numbers, and the reason we put it out to 27 is to really answer that question.
Stuart: Got it Okay, and then Stuart just your answer to one of the previous question pocket around from the opportunity.
Stuart: And LNG percolating.
Speaker Change: I guess in particular some of the opportunities here in the U S.
Speaker Change: What might be embedded into your 2027 and the.
Stuart: Financial targets for STS scores versus what is especially related to those types of opportunities here in the U S.
Stuart: Yes.
Stuart: The 27 numbers.
Stuart: And the reason, we put out to 'twenty seven is to us.
Stuart: To really answer that question, we do we do believe there's enough.
Stuart J. B. Bradie: We do believe there's enough LNG globally, not just in the US. And we've talked about our project management work in Abu Dhabi, and we've talked about where we are in the Middle East, in the broader Middle East as well, and the activities we're doing in and around Oman. So I think that LNG will also pick up in the US. But really, our targets in 27 are not dependent on LNG. We think the markets are broader, and we think our positioning in those markets is strong enough to achieve targets. You know, LNG does factor in, you know, a bit, but we're not absolutely holistically dependent on that.
Stuart: <unk> and <unk>.
Stuart: LNG not just the U S and we've talked about our project management work in Abu Dhabi, and we've talked about where we are in in the middle East in the broader middle east as well and the activities, we're doing in and around demand. So I'm thinking that LNG will pick up also in the U S, but but really are.
Stuart: Targets in 2007 are not dependent on LNG, we think the markets are broader we think our positioning in those markets are strong enough to achieve targets.
Stuart: LNG does factor in.
Stuart: A bit, but we're not absolutely holistically dependent on that as you know we run a probabilistic model.
Stuart J. B. Bradie: And as you know, we run a probabilistic model where we see what the chance of projects going ahead is, what their chances of getting them. So there's a whole mix of opportunity in there. And if we win a fair share, I think we can, you know, if we win LNG, that's great. But at the end of the day, I think there's enough opportunity to stand behind those targets.
Speaker Change: What's the chances of projects going ahead, what's the chances of them getting them.
So it's a whole mix of opportunity in there and if we win our fair share I think we can.
Speaker Change: Hopefully when LNG that's great.
Speaker Change: At the end of the day I think there is enough opportunity to stand behind those targets.
Speaker Change: Yeah.
Stuart J. B. Bradie: Very good. Thank you. Thank you. The next question is from Steven Fisher from UBS. Your line is now open, please go ahead. Thanks. Good morning.
Speaker Change: Very good thank you.
Speaker Change: Thank you.
Speaker Change: The next question is from Steven Fisher from UBS. Your line is now open. Please go ahead.
Operator: Nice to see the guidance increase. I'm just curious about that guidance increase; if you could maybe bridge us between the old EBITDA and EPS guidance to the new guidance, I'm curious, you know, was it more kind of contingency captures in the first half that drove the increase? Or was it, you know, more on the business wins?
Steven Fisher: Thanks, Good morning.
Steven Fisher: Nice to see the guidance increase I'm just curious on that guidance increase if you could maybe bridge us between the old EBITDA and EPS guidance to the new guidance I'm curious was it more kind of contingency captures in the first half that drove the increase or was it more on the business wins.
Steven Fisher: And then I'm curious to know if there was anything that was restraining the outlook there and any new headwinds that came up that had to be, you know, blended in that guidance change. Now, Steve, the increase in guidance was driven by operational performance, full stop. I mean, our people deliver day in, day out.
Speaker Change: And then I'm curious to know if there was anything that was a restraining the outlook there any new headwinds that came up that had to be blended in that guidance changed.
Speaker Change: No.
Speaker Change: Steve.
Speaker Change: The.
Steve: The increase in guidance was driven by operational performance full stop.
Dan: You may not people deliver Dan day, I've said it many times they are absolutely terrific and they continue to perform so so really really strong operational performance drove the guide.
Stuart J. B. Bradie: I've said it many times. They're absolutely terrific, and they continue to perform so well. So really, really strong operational performance that drove the guide. In terms of our outlook, you know, we gave a, I guess, modest increase in guidance, but an increase nonetheless. And, you know, we're about to enter quite volatile times in the U.S., as you can imagine, with elections looming and all the noise before then and probably after then also. So we've been a little bit sensible and prudent in terms of how much we raised.
Dan: In terms of our outlook.
Speaker Change: We gave I guess modest increase in guidance by an increased nonetheless.
Speaker Change: We're about to enter a quite volatile times in the U S. As you can imagine with elections looming in all the noise before then and probably after then also so we've been a little bit.
Speaker Change: Sensible and prudent in terms of how much we raised and we will see where we land in Q3, and we will see what's in the backlog and how were performing and what impacts some of this volatility hospital both in the U S on that side of course.
Stuart J. B. Bradie: And we'll see where we land in Q3 and, you know, we'll see what's in the backlog and how we're performing and what impact some of this volatility has, both in the U.S. and outside, of course. And that's really the basis of why we've guided up, but perhaps been quite prudent in doing so. Okay, that's helpful.
Speaker Change: And that's really the basis of why we've guided up but perhaps being quite prudent in doing so.
Steven Fisher: And then related to Lindquist, relative to the 12% plus growth rate that you cited in 2024, what's the growth rate that you're embedding in there in the multiple that you called out, or I guess implied EBITDA for 2025? It seems like you're implying around 65 to $70 million of EBITDA next year, but it's a little hard to tell based on the tax benefits that you' And then, is that going to be immediately accretive upon close? Or will it take some time to be accretive?
Speaker Change: Okay. That's helpful and then related to the Linde quest relative to the 12% plus growth rate that you cited in 2024, what's the growth rate that you're embedding in there in the multiple that you called out.
Speaker Change: I guess implied EBITDA for 2025, it seems like youre, implying around $65 million to $70 million EBITDA next year, but it's a little hard to tell based on on the tax benefits trying to back into it and then is that going to be immediately accretive upon close or will it take some time to be accretive.
Stuart J. B. Bradie: Yeah, the growth that we've looked at going into 2025 is in the low double digits, and we think, well, through diligence, they've got the backlog and the contract vehicles to achieve that, and that excludes synergies. So I think we're feeling really good about that. And in terms of accretion, yeah, it's accretive from day one on a cash basis. And, as you would expect with something of that growth and those margin performance. And I think we paid a, you know, a sensible multiple for it that we were, we had, you know, quite, we didn't get deal fever or anything like that.
Speaker Change: Yes.
Speaker Change: Yes, I think the growth that we've looked at going into 'twenty five is in low double digits.
Speaker Change: And.
Speaker Change: We think while we know through <unk> got the backlog and the contract vehicles to achieve that.
Speaker Change: And that excludes synergies.
Speaker Change: So I think we're feeling really good about that.
Speaker Change: And in terms of.
Speaker Change: Accretion, yes, its accretive from day, one on a cash basis.
Speaker Change: Yes, as you would expect with something.
Speaker Change: Something of that growth in those margin performances.
Speaker Change: And I think we paid up.
Speaker Change: Sensible multiple for us that we were we had.
Speaker Change: Right.
Speaker Change: We didn't get deal fever, or anything like that we had a very sensible discussion with windows Madison Dearborn.
Stuart J. B. Bradie: We had a very sensible discussion with the owners, Madison Dearborn, and I think they recognized KBR was a good home for this business, and certainly the two management teams got on very well, as I said, through the process. So we're feeling really good about it. Great, thank you very much. The next question is from Mariana P.S. Mora from Bank of America. The line is now open; please go ahead. Hi, this is Samantha Styro. I'm from Mariana.
Speaker Change: Think they recognize KBR was a good hope for this business.
Speaker Change: And certainly the two management teams has gone very well as I said through the process. So so we're feeling real good about it.
Great. Thank you very much.
Speaker Change: Thanks.
Speaker Change: Thank you.
Speaker Change: The next question is from Mariana <unk>.
Mariana Perez Mora: Mora from Bank of America. Your line is now open. Please go ahead.
Operator: So you mentioned that the volume of bids at GS is increasing substantially. So for those new bids, is it kind of a greater volume of the same types of work? Or have you been seeing KBR able to address maybe a wider scope of types of work, if that makes sense? Yeah, it does.
Samantha Stallone: Hi, This is samantha style onto Marianna.
Speaker Change: So you mentioned that the <unk>.
Speaker Change: Volume of bid GFS is increasing substantially so for those new beds.
Speaker Change: Kind of a greater volume of the same types of work or have you been seeing KBR able to address maybe like a wider scope of type of work if that makes sense.
Samantha Stiroh: I think it's a bit of both. I certainly think that, you know, with the In that there are obviously similar pieces of work as we do now because we're very ever-present in those markets. But we are seeing, I guess, a lot of activity in things like human health performance that, you know, we got involved in through, initially, NASA and then the Port of Contract. And we're seeing, you know, we strategically went forward there.
Speaker Change: Yes, It does I think it's a bit of both.
Speaker Change: I certainly think that.
Speaker Change: There are obviously several pieces of work as we do not because of an ever present in those markets.
Speaker Change: But we are seeing.
Speaker Change: Yes, a lot of <unk>.
Speaker Change: Activity in things like human health performance.
Speaker Change: We got involved in through Additionally, NASA and the port of contract and we are seeing we strategically led forward. There. We think we've got great differentiation and performance.
Stuart J. B. Bradie: We think we've got great differentiation in performance, and we're obviously penetrated into new customers, as we presented today. So I think it's really a bit of both.
We're obviously penetrated into new customers as we presented today.
Speaker Change: So I think thats really a better both we're seeing far more opportunity in the digital cyber world than we've seen historically.
Stuart J. B. Bradie: We're seeing far more opportunity in the digital cyber world than we've seen historically. And, you know, that's, again, obviously, that's obviously market driven, but I think our credentials stand up to scrutiny there. So I do think it's a bit of both, but we're forever aligning on our vision.
Speaker Change: And that's again, obviously thats OSA market, driven, but I think our credential stand up to scrutiny. There. So so I do think it's a better both part, but we're forever aligning on our vision and nuts to continually move up market and be differentiated based on our technologies and our capabilities.
Stuart J. B. Bradie: And that's to continually move up the market and be differentiated based on our technologies and our capabilities. And those are the new, new type bids we're going to. Great, okay, I'll keep it at one.
Speaker Change: And those are the.
Speaker Change: So those are the new new tightens, we're going after.
Samantha Stiroh: Thank you so much. Thank you. Thank you. The next question is from Andy Kaplowitz from Citigroup. Andy, your line is now open, please go ahead. Hey, good morning, everyone. Good morning, Andrew.
Speaker Change: Great. Okay I'll keep it at one thank you so much.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: The next question is from Andy Kaplowitz from Citigroup. Your line is now open. Please go ahead.
Andrew Alec Kaplowitz: Hey, good morning, everyone.
Andrew Alec Kaplowitz: Good morning, Andy.
Operator: Good morning, Stuart. Obviously, you're still bullish on STS-GS. But just to be clear, with the understanding that Plaquemines will still burn, do you think you could grow back luck from here over the next few quarters in STS and maybe elaborate on this transition from energy transition type projects in STS to energy security? Some of it could be L&G, as you said, but what are other types of energy security projects that you're seeing that could offset or more than offset if energy transition works a little slower?
Good morning, Stuart, obviously, you're still bullish on Sps GFS, but just to be clear we understand the parkman, we'll still burn do you think you could grow backlog come here over the next few quarters in STS and maybe elaborate on this transition from energy transition type projects in STS to energy security it sounds like could be LNG as you.
Speaker Change: But what are the other person energy security projects that youre seeing that could offset or more than offset of energy transition works a little slower.
Operator: Yeah. So just on the market in general, to start there, energy demand is growing, and it's growing significantly, particularly in the Global South, as the more developing nations become more developed, and you can see that.
Speaker Change: Yeah.
Speaker Change: So just on the market in general to start there. So the energy demand is growing and it's growing significantly, particularly in the global south.
Speaker Change: Is that the more developing nations become more developed.
Speaker Change: And you can see that.
Stuart J. B. Bradie: So that dynamic is not going away. Energy transition projects are still growing, but I think the whole market believed they would grow faster. But there are affordability issues, particularly around green molecules versus, say, blue, and I presented a bit of that in my prepared remarks.
Speaker Change: So that dynamic is not going away.
Speaker Change: <unk> transmission projects are still growing but I think the whole market believe they would grow faster.
Speaker Change: But there are affordability issues, particularly around green molecules fast as a blue.
Speaker Change: That presented a bit of that in my prepared remarks. So we are seeing energy transition growing but to meet demand energy security has to grow faster.
Stuart J. B. Bradie: So we are seeing the energy transition growing, but to meet demand, energy security has to grow faster, albeit in a decarbonized way. So I think the programs that were mentioned earlier, things like liquid to chemicals, gas monetization, LNG projects, all your traditional sort of hydrocarbons, transition fuel type opportunities, as I say, with electric drives or using renewable power or carbon sequestration, et cetera, to make them more blue, are really sort of at the forefront.
Speaker Change: Albeit in a de Carbonize decarbonize away. So I think the programs that were mentioned earlier things like liquid chemicals gas monetization LNG projects.
Speaker Change: Paul your traditional sort of hydrocarbons transition fuel type opportunities.
Paul: As I say with them I think drives are using renewable power carbon sequestration et cetera to make them more blue.
Speaker Change: Really sort of at the forefront so that's kind of where the market is heading today and certainly that was echoed by Aramco when I met the CEO last week.
Stuart J. B. Bradie: So that's kind of where the market is heading today. And certainly, that was echoed by Aramco when I met the CEO last week. It was echoed by Savick when I met the CEO there last week. And I think you're hearing it from the majors like BP and Shell and Exxon, et cetera.
Speaker Change: Echo <unk>.
Speaker Change: Last week, and I think youre hearing it from the majors like BP and shell.
Speaker Change: Excellent et cetera.
Stuart J. B. Bradie: So, but at the same time, you are seeing companies like BP and Shell move into the ammonia market for the very, very first time, and I think our recent announcements and our successes with those international energy companies as they diversify their portfolio to get ready for the energy transition are clear. So, I think we're really, you know, very well positioned on both sides. And as I say, demand overall is not declining.
Speaker Change: But at the same time, you are seeing companies like BP and shell move into the ammonia market for the value very first time.
Speaker Change: And I think our recent announcements and our successes with you.
Speaker Change: There was international energy companies as they diversify the portfolio to get ready for energy transition is clear. So I think we're really.
Speaker Change: Very well positioned in both sides.
Stuart J. B. Bradie: Fulfilling that demand and the balance between it may differ a little, but I think we're very well placed to take advantage of both sides and actually take advantage of the overall demand. And given where a lot of that demand is happening, again, you have to be ever present or omnipresent there.
Speaker Change: And as I say demand overall is not reducing.
Speaker Change: <unk> that demand and the balance between May may differ a little but I think we're very well placed to take advantage of both sides.
Speaker Change: As we take advantage of the overall demand and given where it's a lot of that demand is happening again, you have to be ever present, our omni present, there and I think we have presented at Investor day that we're very well positioned in these markets. So I think thats why youre seeing strong performance in STS. That's why we remain very bullish on the performance.
Stuart J. B. Bradie: And I think we presented at investor day that we're very well positioned in these markets. So, I think that's why you're seeing strong performance in SDS. That's why we remain kind of bullish on the performance and the outlook for SDS. And so may it continue. And then Stuart or Mark, equity and earnings of unsolicited affiliates are continuing to pick up in Q2 is higher again, is that Plaquemines contribution continuing to pick up, or is anything else helping, and is the run rate in Q2 the right level of equity and earnings to model moving forward? I think I would say, Andy.
Speaker Change: <unk> on the outlook for STS.
Speaker Change: And so may it continue.
Stuart: And then Stuart.
Stuart: Mark equity and earnings of unconsolidated.
Speaker Change: Necessarily it does continue to pick up in Q2 was higher again is that <unk> contribution.
Speaker Change: It is beginning to pick up presenting of helping and as the run rate in Q2, the right level of equity earnings to model going forward.
Speaker Change: I think I would say Andy that.
Mark W. Sopp: Plaquemines, or VG sometimes said, is pretty much at its peak right now. And so that is contributing quite a bit to the equity and earnings that you're seeing. It'll stay strong, and it'll start to wane off from that project, you know, a little bit in 25 and more so in 26. What we're also seeing, which is terrific, really strong programs like Aspire, and our Brown Root Joint Venture is benefiting from the energy security dynamics that Stuart mentioned earlier, and those contributions have continued to grow, you know, not at quite the pace as the LNG project, as it has ramped up to its peak here, but have really come along really well.
Speaker Change: Plaquemines.
Andrew Alec Kaplowitz: <unk> or <unk>, sometimes you said is pretty much at peak right now.
Speaker Change: And so that is contributing quite a bit to the equity in earnings that youre seeing.
Speaker Change #100: It will stay strong and it'll start to wane off from that project, a little bit in 'twenty, five and more so in 'twenty six.
Speaker Change #101: We're also seeing which is terrific as really strong programs like aspire, our brown <unk> root joint venture is benefiting from the energy security dynamics that Stuart mentioned earlier.
Speaker Change #101: And that those contributions that continue to grow not at quite the pace.
Speaker Change #101: As the LNG project as it is ramped up to it.
Speaker Change #102: Peak here, but has it really come along really well and so it's more diversified than you might think in that line.
Mark W. Sopp: And so it's more diversified than you might think in that line. And you know, that is healthy for a lot of reasons. And, but, you know, that number might dissipate just a little bit this year from the 40 you see this quarter, but not much; it's pretty steady. Appreciate the color.
Speaker Change #102: That is healthy for a lot of reasons.
Speaker Change #102: And.
Speaker Change #102: But that number might dissipate a little bit this year.
Speaker Change #103: From the <unk> 40, you see this quarter, but not much pretty steady.
Speaker Change #102: Sure.
Speaker Change #104: Appreciate the color.
Speaker Change #105: Thank you.
Operator: The next line is from Sangita Jain from Key Bond Capital Markets. Your line is now open. Please go ahead. Hi, thanks for taking my questions. So the first one on plaquemines, can you tell us when we should expect that book to build headwind to go away? I understand it's burning at peak rates right now. But just from a modeling perspective, when should we think of that normalizing?
Speaker Change #105: Our next line is from thank you Doug Chiang from Keybanc capital markets. Your line is now open. Please go ahead.
Sangita Jain: Probably halfway through next. Okay, got it. And as a follow-up, can I ask you about the Lindquist acquisition? Seems like it was an acquisition from a private equity firm. Was that a competitive process? And are you seeing more or less of those kinds of deals coming through your way these days?
Doug Chiang: Hi, Thanks for taking my questions.
Doug Chiang: So the first one on <unk> can you tell us when we should expect that book to Bill headwind to go away I understand it's burning at peak rates right now, but just from a modeling perspective, when should we think of that normalizing.
Doug Chiang: Oh.
Speaker Change #107: Probably halfway through next year.
Speaker Change #108: Okay got it and as a follow up can I ask you about the linquist acquisition it.
It seems like it was an acquisition from a private equity firm.
Speaker Change #109: Was that a competitive process and are you seeing more or less of those kind of deals coming through these.
Speaker Change #110: These days.
Stuart J. B. Bradie: Yeah it was a competitive process and but I you know the through that through that process I think that we we very much aligned with management on values and outlook and opportunity and I think that played a part into us getting into a very strong position at the at the end but yes it was a competitive process that was circumvented somewhat and narrowed down quite quickly which was terrific but again I would say that we we kept our discipline through the process. In terms of what we're seeing yeah there's quite a bit in the market today and you know but but like like all things in this area we have to be well they have to be at a reasonable price but also they have to fit strategically we don't buy to bulk out we buy for strategic acceleration etc so we'll continue to look as Mark said you know we we do have some firepower we are happy for the leverage to take up a bit if if it makes sense and we've got a deleveraging story and we're still very much in the healthy balance seat zone so but yeah the market's quite active just now.
Speaker Change #109: Yeah.
Speaker Change #111: Yes, it was a competitive process.
Speaker Change #112: But the three that through that process I think the we.
Speaker Change #112: We very much aligned with management on volumes or not.
Speaker Change #112: Opportunity.
Speaker Change #112: I think that played a part in to us getting into.
Speaker Change #112: Very strong position at the end.
Speaker Change #112: But yes, it was a competitive process.
Speaker Change #112: Circumvented somewhat narrow down quite quickly.
Speaker Change #112: Terrific.
Speaker Change #112: But again I would say that we kept our disciplined through the process.
Speaker Change #112: In terms of what we're seeing yes, there's quite a bit in the market today.
Speaker Change #112: And.
Speaker Change #112: But like all things in this area, we have to be well.
Speaker Change #112: They have to be.
Speaker Change #112: At a reasonable price, but also they have to fit strategically we don't buy to bulk out we buy it for strategic acceleration et cetera. So.
Speaker Change #112: We'll continue to look as Mark said, we do have some firepower.
Mark: We are happy for the Bovis to tick up a bit.
Mark: If it makes sense and we've got a deleveraging story and we're still very much in the healthy balance sheet zone, so, but yes. The market is quite active.
Yeah.
Stuart J. B. Bradie: In saying all that, we need to close Lindquist, get through HSR, do the integration, and deliver. If there's any upside to that, deliver it this year and really get that business off to a firm footing. And that's really our primary mission. I understand. Thank you. Thanks. Thank you. The next question is from Gautam Khanna from TD Kovan. Your line is now open. Please go ahead. Thanks. Good morning.
Speaker Change #115: Great. Thank you very much.
Speaker Change #115: And saying all that we need to close link cost related.
Mark: Through the integration deliver.
Speaker Change #116: Is there any upside to that deliver it this year and really get that business off to a firm footing and announced.
Speaker Change #116: And that's really our primary mission.
Speaker Change #113: Understood. Thank you.
Speaker Change #113: Thanks.
Speaker Change #114: Thank you.
Speaker Change #114: The next question is from Watkins.
From TD Cowen. Your line is now open. Please go ahead.
Watkins: Thanks, Good morning.
Sangita Jain: I was curious about the mechanics that you expect on liquid to chemicals, like how that appears in the backlog and when, like what sort of milestones that we should be looking for and is it going to be like a major, can a lump sum booking at some point in the next couple quarters or is it going to be more incremental over a number of years? If you could frame that.
Watkins: I was curious.
Speaker Change #118: The mechanics that you expect.
Speaker Change #119: Liquid chemicals like how does that.
Speaker Change #120: Appearing backlog and web like what sort of milestones that we should be looking for and is it going to be like a major.
Speaker Change #121: Kind of a lump sum booking that at some point in the next couple of quarters or is it going to be more incremental over a number of years, if you could frame that for us.
Operator: Yeah, I think Gautam, the way that Aramco typically works in these big programs is they do things called WEIRS, which is a work authorization request, and you agree about the level of effort there. So it's more incremental than the big bank bookings, and you know that's the way it's going to come through in the backlog. So I think the best way that we when we can talk about it, we will describe what we think it could be, but we will be very clear about what is and what is not in backlog and how we see that coming through over time, but typically, it's more of a slow burn than a big, Okay, and didn't just put a finer point on the second quarter SDS bookie, recognize the backlog came down, but you Well, it was 1.1 times the burn rate, excluding.
Speaker Change #122: Yes, I think most of the way the Aramco typically work in these big programs.
Speaker Change #123: They do things called where switches of work authorization request than you are now.
Speaker Change #124: Agree what the level of effort is there so it's more incremental than a big Bang bouquet.
Speaker Change #125: And so that's the way it's going to come through in backlog. So I think the best way that we when we can talk about it we will describe what we think it could be.
Speaker Change #125: But we'll be very clear.
And what is not in backlog and how we see that coming through over time, but typically it's at.
Speaker Change #125: That's more of a slow burn in a big Bang.
Speaker Change #125: Yes.
Speaker Change #125: Okay.
Speaker Change #126: Just to put a finer point on the second quarter Sts bookings.
Speaker Change #126: Recognize that the backlog came down but some of that reflects.
Speaker Change #127: The lack of <unk> what were the orders the actual dollar value of orders that we received in the quarter for Sds.
Gautam J. Khanna: Yeah, it's 1.1 times the revenue that I stated, because obviously the Plaquemines burn doesn't come through revenue, roughly $500. I'll give her a take. Yeah. Okay, roughly.
Speaker Change #128: Well it was one one times the burn excluding $1 one times the revenue that's actually stated yes.
Speaker Change #129: Because obviously the pocket lens burden doesn't come through revenue roughly 500 million give or take yes.
Speaker Change #128: Yes.
Speaker Change #130: Okay perfect.
Stuart J. B. Bradie: And then last question on LinQuest. I was curious, do they have any... a set aside business that may fade over time, or is it 100% full and open? It's 100% full and open. There's no small business in there at all.
Speaker Change #131: And then last question on linked question I was curious did they have any.
Speaker Change #132: Set aside business that may fade over time or is that a 100% full and open.
Speaker Change #133: It's 100% full and open there is no there is no small business in there at all.
Stuart J. B. Bradie: Thanks a lot. Thanks, guys. The next question is from Jerry Revich from GoMassage. Your line is open, please go ahead. Hi, this is Adam on behalf of Jerry.
Speaker Change #134: Thanks, a lot guys.
Kevin: Thanks, Kevin.
Speaker Change #136: Thank you.
The next question is from Jerry Revich from Goldman Sachs. Your line is open. Please go ahead.
Operator: Good morning. You were selected as one of the 11 awardees on the $43 billion MQS2 contract. You know, what percent of that $43 billion could flow to KBR over time? And how are you thinking about the timing of that ramp? Yeah, as I said, we're very excited about the award. I mean, it's a substantial ceiling value.
Speaker Change #136: Hi, This is Adam on for Jerry Good morning.
Speaker Change #136: Okay.
Speaker Change #137: You were you were selected as one of the 11 <unk> on the 43 billion.
Speaker Change #137: <unk> two contract.
Speaker Change #138: Percent of that $43 billion could flow to KBR over time, and how you think about the timing of that ramp.
Speaker Change #139: Yes, as I said, we're very excited about the award I mean, thats a substantial ceiling value.
Adam Samuel Bubes: We are very excited. It's a new customer and really sort of reinforces our credentials on the human health side of our business. But I'm absolutely speculating, we're just brand new to this, we think it could do very well for us, but I don't want to get out in front of a camera, I would very much say it's new business for us, so it's kind of upside. And as we get into it a bit more, I'm sure we can report, I guess, some activities there.
Speaker Change #140: We are very excited it's a new customer and really sort of reinforces our credentials in the human health side of our business.
Speaker Change #140: But given it's a new customer and a new contract and I really don't want to speculate Adam as to the volume that could come through each of the awards as a separate work order if you like.
Speaker Change #140: <unk>.
Adam: I think.
Could get up to well, we don't know the answer but $40 $50 $60 million a year.
Speaker Change #142: As I sort of base.
Speaker Change #142: If it's less or more than that I guess, we'll tell you but.
Speaker Change #142: Absolutely speculating with just Brian Yuen.
Speaker Change #142: We think it could do very well for us, but I don't want to get out in front of our skis.
Speaker Change #142: I must say, it's new business for us.
Speaker Change #142: So it's kind of upside.
Speaker Change #142: As we get into a bit more I'm sure. We could report I guess sort of activities there but.
Adam Samuel Bubes: But I think you should view it as very, very good news. I think you should view it as a step forward strategically in that arena. And I think you should see it as potential upside as we move forward. And I'll add that, you know, we've really been on a good run in this area; as we said earlier, health and human performance is a real niche and a great performer within our portfolio. I'll also add that in this particular award, We're really the only quote unquote household name of the awardees. And so there are niche players in the other 10.
Speaker Change #142: But I think you should view as very very good news I think you should view.
Speaker Change #142: Step forward strategically in that arena, and I think you should see as potential upside as we move forward.
Speaker Change #142: And I'll add that.
Speaker Change #142: We've really been on a good run in this area as we said earlier health and human performance as a real niche.
Speaker Change #142: And great performer within our portfolio I'll also add that on this particular award.
Speaker Change #142: We're really the only quote unquote household name of the Awardees.
Speaker Change #142: And so there are niche players in the other 10.
Stuart J. B. Bradie: But we're, I think, the biggest and the most recognizable, maybe the most able to deliver a wide variety of capabilities here. So pretty excited about that. But it's early days.
Speaker Change #142: But where I think the biggest.
Speaker Change #142: And most recognizable navy most able to deliver a wide variety of capabilities here, so pretty excited about that but it's early days towards that.
Mark W. Sopp: And then in STS, can you just update us on your plastics monetization progress? Where do we stand in the construction progress on projects that have moved forward so far? And what's the timing of additional projects moving into the construction phase?
Speaker Change #143: And then in STS can you just update us on your plastics monetization progress where do we stand in the construction progress on projects that have moved.
Moving forward, so far and what's the timing of additional projects moving to construction phase.
Adam Samuel Bubes: Yeah, so we've got, again, as we I think we said this investor day, we've got three under construction today, been proven that we've taken a year off the execution schedule as a consequence, and they're looking to reach mechanical completion at the end of Q3, so very much on schedule and doing very, very well, and then the third one's in Japan, which will be in Q1 next year, again, we've been party to that, so I think that's where the three under construction sit. Over and above that, we have opportunities in Europe and North America that are very well mature, the key to unlock is actually, this is a Stuart view if you like, is actually producing product in one of these sites, but probably in the UK, we've had a number of interested parties through the site to see progress and to see what the plant looks like and face to face if you like, and all very, very positive, so there's a number coming behind it, but the key to unlock the market is to buy all new technologies, although we're very, very confident we've got to get this facility up and running and producing, and I think once that happens, I think you'll see a lot of activity in that marketplace. Great, thank you.
Speaker Change #144: Yes, so we've got.
Speaker Change #145: As we I think we said this at Investor Day, we've got three under construction today.
Speaker Change #146: The one in the U K the <unk> site.
Speaker Change #147: Site as a stick built.
Speaker Change #147: Before we got involved with mirror.
Speaker Change #147: They have progressed slower than expected.
Speaker Change #147: We do expect them to be producing product in Q3.
Speaker Change #147: And so that's right.
Speaker Change #148: On the other one where we have been involved is in Korea with LG Cam or we modularized the solution.
Speaker Change #148: It's been proven that we've taken a year off the execution schedule as a consequence.
Speaker Change #148: Theyre looking to reached mechanical completion at the end of Q3, so so very much.
Speaker Change #148: On schedule on doing very very well and then the third one is in Japan, which will be in Q1 next year again, we have been party to that so I think thats, where the three under construction set.
Speaker Change #148: Over and above that.
Speaker Change #148: We have opportunities in Europe, and North America, very well mature.
The key the key to unlock because actually.
Stuart: This is Stuart if you like is actually producing product in one of these sites, but probably in the U K.
Stuart: We've had a number of.
Stuart: Of interested parties through the site to see progress and to see what the plan looks like and face to face if you like and.
Stuart: All very very positive. So there is a number coming behind it but the key to unlock the market is to buy call new technologies, Although we're very very confident.
Stuart: Got to get this facility up and running and producing and I think once that happens I think youll see a lot of activity in that marketplace.
Speaker Change #149: Great. Thank you.
Speaker Change #149: Thank you.
Stuart J. B. Bradie: Thank you. As we currently have no further questions, I will now hand the floor back to Stuart Bradie for closing remarks. Thank you, Kiki.
Speaker Change #149: We currently have no further questions I will now hand back to Stuart.
Stuart: No closing remarks.
Stuart J. B. Bradie: So thank you again for taking the time to listen to our prepared remarks and the questions, obviously, today. We're very excited about the addition of LinkWEST, as you've heard on numerous occasions during this call. We think it's a terrific acquisition and really accelerates our strategy, particularly around the mission IT set. It's a real capability and customer play for us, and there are really strong synergies opportunities. I'll reiterate, none of that is in the guidance.
Stuart: Thank you.
Speaker Change #150: So thank you again for taking the time to listen to our prepared remarks on the questions. Obviously today.
Stuart: We're very excited about the addition of linked quest as you can see <unk> had numerous occasions through this call.
Stuart: Terrific acquisition, then really accelerates our strategy.
Speaker Change #151: Particularly around the mission set that's a real capability and customer play for us.
Speaker Change #151: And really strong synergy opportunities.
Speaker Change #152: Reiterate none of that is in the guidance.
Speaker Change #152: And so once we get through HSR and close obviously, we will be having a look at that.
Stuart J. B. Bradie: And so once we get through HSR and close, obviously, we'll be having a look at that. But to get halfway through the year with a little bit of overperformance and prudently raise guidance in a volatile world, I think really sends a strong signal to the market. We're feeling really good about our operational performance and our backlog and also our pipeline of potential bookings going forward. So all up, we're very pleased with where the company is at halfway through the year. There is a lot of work and a lot of wood to chop, obviously, to get to the end of the year.
Speaker Change #152: But to get halfway through the year with a little bit of over performance.
Speaker Change #152: Prudently raise guidance in a volatile world like really sends a strong signal to the market. We're feeling really good about our operational performance in our backlog and also our pipeline of.
Speaker Change #152: Potential bookings going forward so very.
Speaker Change #152: Very pleased with where the company is that halfway through the year a lot of what can a lot of wood to chop, obviously to get to the end of the year, but so far so good. So thank you very much.
Operator: But so far, so good. So, thank you very much. This concludes today's conference call. You may now disconnect your lines. Thank you.
Speaker Change #153: This concludes today's conference call you may now disconnect your lines. Thank you.
Speaker Change #152: [music].