Q4 2025 KBR Inc Earnings Call

February 26, 2026

Speaker #1: Hello and thank you for joining us on KBR's fourth quarter and full year 2025 earnings conference call. The call will be starting in approximately 2 minutes' time.

Operator: Hello. Thank you for joining us on KBR's Q4 and full year 2025 Earnings Conference Call. The call will be starting in approximately two minutes' time. During today's call, we will have a Q&A session. If you'd like to register a question during that time, please press Star followed by one on your telephone keypad. To withdraw your question, it's Star followed by two. Thank you. Good morning and good afternoon, everyone. Well, thank you for joining us for KBR's Q4 and full year 2025 Earnings Conference Call. My name is Drew. I'll be the operator on the call today. During the call, after the prepared remarks, we'll have a Q&A session. If you would like to ask a question during that time, please press Star followed by one on your telephone keypad. To withdraw your question, it's Star followed by two.

Operator: Hello. Thank you for joining us on KBR's Q4 and full year 2025 Earnings Conference Call. The call will be starting in approximately two minutes' time. During today's call, we will have a Q&A session. If you'd like to register a question during that time, please press Star followed by one on your telephone keypad. To withdraw your question, it's star followed by two. Thank you. Good morning and good afternoon, everyone. Well, thank you for joining us for KBR's Q4 and full year 2025 Earnings Conference Call. My name is Drew. I'll be the operator on the call today. During the call, after the prepared remarks, we'll have a Q&A session. If you would like to ask a question during that time, please press Star followed by one on your telephone keypad. To withdraw your question, it's Star followed by two.

Speaker #1: During today's call, we will have a Q&A session. If you'd like to register a question during that time, please press star, followed by 1 on your telephone keypad. To withdraw your question, press star followed by 2.

Speaker #1: Thank you. Good morning and good afternoon, everyone. Thank you for joining us for KBR's fourth quarter and full year 2025 earnings conference call.

Speaker #1: My name is Drew, and I'll be the operator on the call today. During the call, after the prepared remarks, we'll have a Q&A session.

Speaker #1: If you would like to ask a question during that time, please press start, followed by 1 on your telephone keypad. And to withdraw your question, it's start followed by 2.

Speaker #1: And as a reminder, we ask that you ask one question and one follow-up. With that, it's my pleasure to hand over to Rachel Goldway, Head of Investor Relations, to begin.

Operator: As a reminder, we ask that you ask one question and one follow-up. With that, it's my pleasure to hand over to Jamie DuBray, Head of Investor Relations, to begin. Please go ahead when you're ready.

Speaker #1: Please go ahead when you're ready.

Speaker #2: I'm Chief Financial Officer.

Jamie DuBray: The Chief Financial Officer. Stuart and Shad will provide highlights from the quarter and full year. Then open the call for your questions. Today's earnings presentation is available on the investor section of our website at kbr.com. This discussion includes forward-looking statements reflecting KBR's views about future events and their potential impact on performance, as outlined on slide two. These matters involve risks and uncertainties that could cause actual results to differ materially from these forward-looking statements, as discussed in our most recent Form 10-K, available on our website. This discussion also includes non-GAAP financial measures that the company believes to be useful metrics for investors. A reconciliation of these non-GAAP measures to the nearest GAAP measure is included at the end of our earnings presentation. I will now turn the call over to Stuart.

Speaker #3: Stuart and Chad will provide highlights from the quarter and full year, and then open the call for your questions. Today's earnings presentation is available on the Investors section of our website, at kbr.com.

Speaker #3: This discussion includes forward-looking statements reflecting KBR's views about future events and their potential impact on performance, as outlined on slide 2. These matters involve risk and uncertainties, that could cause actual results to differ materially from these forward-looking statements as discussed in our most recent Form 10-K available on our website.

Speaker #3: This discussion also includes non-GAAP financial measures that the company believes to be useful metrics for investors. A reconciliation of these non-GAAP measures to the nearest GAAP measure is included at the end of our earnings presentation.

Speaker #3: I will now turn the call over to Stuart.

Speaker #4: Thank you, Rachel, and good morning, everyone. I will pick up on slide 4. As we always do at KBR, I want to start with a brief zero-harm moment.

Stuart Bradie: Thank you, Rachel, and good morning, everyone. I will pick up on slide 4. As we always do at KBR, I want to start with a brief Zero Harm moment. In 2025, we delivered industry-leading safety performance, with our TRIR reaching an all-time low of 0.033, and Zero Harm days reaching an all-time high at 96%. These results really reflect strong discipline and accountability across our operations. More importantly, they speak to the culture we've built inside KBR. We focus on creating an environment where people look out for one another and where safety and well-being are part of how we operate every single day. That culture is especially important as we move through the spin, and it underpins the execution and results we'll walk through today. On to slide 5. Today's call will cover these key topics.

Speaker #4: In 2025, we delivered industry-leading safety performance. With our TRIR reaching an all-time low of 0.033 and zero-harm days reaching an all-time high at 96%, these results really reflect strong discipline and accountability across our operations.

Speaker #4: More importantly, we speak to the culture we've built inside KBR. We focused on creating an environment where people look out for one another, and where safety and well-being are part of how we operate every single day.

Speaker #4: That culture is especially important as we move through the spin. And it underpins the execution and results we'll walk through today. On to slide 5.

Speaker #4: Today's call will cover these key topics. First, I'll start with how we delivered our strategy in 2025. From there, I'll touch on why we see improving momentum and visibility as we move into 2026 across both segments, including how the quality of our earnings continues to improve.

Stuart Bradie: First, I'll start with how we delivered our strategy in 2025. From there, I'll touch on why we see improving momentum and visibility as we move into 2026 across both segments, including how the quality of our earnings continues to improve. It's really important. Finally, Shad will walk through our financial performance for the year and, of course, our guidance for 2026. On to slide 6, strategy. As we enter the year, I want to start with a simple message. We executed our strategy in 2025 despite a very challenging award environment across both segments. We stayed disciplined, focused on what we can control, and made meaningful progress across each of our strategic pillars. Firstly, thrive and expand.

Speaker #4: That's really important. I'll provide an update on the spin itself, and finally, Chad will walk through our financial performance for the year and, of course, our guidance for 2026.

Speaker #4: On to slide 6. And strategy. So, as we enter the year, I want to start with a simple message. We executed our strategy in 2025 despite a very challenging award environment across both segments.

Speaker #4: We stayed disciplined, focused on what we can control, and made meaningful progress across each of our strategic pillars. Firstly, thrive and expand. In sustainable tech, we continue to expand globally.

Stuart Bradie: In sustainable tech, we continue to expand globally, with particular momentum in the global south. You've heard us say that before. We also made deliberate progress in growing our OpEx-facing businesses, both organically and inorganically, and this, of course, reduces our exposure to CapEx cycles. The SWAT acquisition within our Brown & Root joint venture, Brisk, which closed in January, was a key milestone, more than doubling the EBITDA of that business. In Mission Tech, we continued to leverage contract vehicles, including recent Air Force and Space Force awards, which you'll have seen, while expanding internationally and strengthening our presence in Washington. That's to deepen engagement with both the administration and the Pentagon. Second, to deliver innovation. Innovation remains central to our strategy.

Speaker #4: With particular momentum in the global South, and you've heard us say that before. We also made deliberate progress growing our OPEX-facing businesses both organically and inorganically.

Speaker #4: And this, of course, reduces our exposure to CAPEX cycles. The SWOT acquisition within our Browning Group joint venture, BRIS, which closed in January, was a key milestone more than doubling the EBITDA of that business.

Speaker #4: In mission tech, we continue to leverage contract vehicles. Including recent Air Force and Space Force awards, which you'll have seen, while expanding internationally and strengthening our presence in Washington.

Speaker #4: And that's the deepened engagement with both the administration and the Pentagon. Second, to deliver innovation. Innovation remains central to our strategy. In sustainable tech, we launched Insight 3.0.

Stuart Bradie: In Sustainable Tech, we launched Insight 3.0 this quarter through a new venture with Applied, enhancing operational performance across KBR licensed ammonia plants using physics-based AI. We also continued to advance Mura and other technologies as a long-term growth platform. In Mission Tech, our focus on deepening customer relationships and advancing our technology roadmap is paying off. Recognition as a top 10 Australian defense contractor, the Nova Excellence Award from NASA, and the recent Golden Dome SHIELD seat all reflect this progress. For LinQuest, the establishment of a new chief technology officer role and our digital engineering labs are strengthening our position as a true capability partner. Thirdly, drive operational excellence. Operational execution was a clear strength in 2025.

Speaker #4: This quarter, through a new venture with Applied. Enhancing operational performance across KBR licensed ammonia plants using physics-based AI. We MURA and other technologies as a long-term growth platform.

Speaker #4: In mission tech, our focus on deepening customer relationships and advancing our technology roadmap is paying off. Recognition as a top 10 Australian defense contractor, the Novart Excellence Award from NASA, and the recent Golden Dome Shield seat all reflect this progress.

Speaker #4: Post-linquest, the establishment of a new chief technology officer role and a digital design labs are strengthening our position as a true capability partner. Thirdly, thrive operational excellence.

Speaker #4: Operational execution was a clear strength in 2025. We expanded margins by more than 100 basis points, and generated operating cash flow with a conversion rate of 110%, delivering over $30 million in cost savings and expect this margin and cash performance momentum to continue into 2026.

Stuart Bradie: We expanded margins by more than 100 basis points and generated operating cash flow with a conversion rate of 110%, delivering over $30 million in cost savings and expect this margin and cash performance momentum to continue into 2026. Finally, deploy capital effectively. We delivered $413 million in capital to shareholders in a year, and that's the highest in the last decade, successfully integrated LinQuest and delevered the balance sheet within a year. As we prepare for the spin, we remain highly disciplined, ensuring both companies are positioned with appropriate capital structures from day one. With that context, let's come to our segment performance, starting with Sustainable Tech on slide 7.

Speaker #4: And finally, deploy capital effectively. We delivered $413 million in capital to shareholders in a year, and that's the highest in the last decade. Successfully integrated LinQuest and delivered the balance sheet within a year.

Speaker #4: As we prepare for the spin, we remain highly disciplined, ensuring both companies are positioned with appropriate capital structures from day one. With that context, let's turn to a segment performance starting with sustainable tech on slide 7.

Speaker #4: 2025 was a challenging year for sustainable tech. Marked by a sharp decline in petrochemicals CAPEX and a pause in many green projects as customers shifted their focus towards affordability and energy security.

Stuart Bradie: 2025 was a challenging year for sustainable tech, marked by a sharp decline in petrochemicals CapEx and a pause in many green projects as customers shifted their focus towards affordability and energy security. Despite this backdrop, STS proved remarkably resilient. Margins held up well in the first half of the year, and our teams responded really quickly, pivoting towards the Global South, LNG, ammonia, and OpEx-driven markets where demand fundamentals remain strong. That pivot clearly showed up in the results. We delivered strong book-to-bill in both Q3 and Q4 and exited the year with solid work under contract for 2026. Geographically, the Global South was a major source of strength, with wins across Iraq, Saudi Arabia, Kuwait, and Singapore. In LNG, we secured both the Abadi and the Coastal Bend front-end engineering design contract, reinforcing our front-end positioning.

Speaker #4: Now, despite this backdrop, SDS proved remarkably resilient. Margins held up well in the first half of the year, and our teams responded really quickly.

Speaker #4: Pivoting towards the global South, LNG, ammonia, and OPEX-driven markets where demand fundamentals remain strong. That pivot clearly showed up in the results. We delivered strong book-to-bill in both the third and fourth quarters, and exited the year with solid work under contract for 2026.

Speaker #4: Geographically, the global South was a major source of strength. With winds across Iraq, Saudi Arabia, Kuwait, and Singapore. In LNG, we secured both the Abadi and Coastal Bend front-end engineering design contracts.

Speaker #4: Reinforcing our front-end positioning. And in ammonia, awards were truly global, reflecting the durability of our technology portfolio. We also continue to advance emerging technologies, including lithium extraction, and in hydro PRT recycling, after ongoing commissioning challenges I'm pleased to report they are now operating continuously producing on-spec product with ramp-up expected through 2026.

Stuart Bradie: In ammonia, awards were truly global, reflecting the durability of our technology portfolio. We also continued to advance emerging technologies, including lithium extraction and in Hydro-PRT recycling. After ongoing commissioning challenges, I'm pleased to report they are now operating continuously, producing on-spec product with ramp-up expected through 2026. Now, as we look ahead, our growth opportunities in 2026 are directly aligned with these same themes. To anchor that outlook, Q4 book-to-bill was 1.6x, with a trailing 12 months book-to-bill of 1.2x. Backlog ended the year at $4.2 billion, and that's up 5% year-over-year and up more than 20%, excluding Bakken LNG. Our near-term pipeline, excluding LNG, is approximately $5 billion.

Speaker #4: Now, as we look ahead, our growth opportunities in 2026 are directly aligned with these same themes. To anchor that outlook, fourth quarter book-to-bill was 1.6 times.

Speaker #4: With a trailing 12-month book-to-bill of 1.2X. Backlog ended the year at 4.2 billion and that's up 5% year over year and up more than 20% excluding back into LNG.

Speaker #4: Our near-term pipeline excluding LNG is approximately $5 billion with about 80% from repeat customers showing the relationships that we have developed over time. And work under contract covers roughly $63% of our 2026 guidance, putting us above normative levels for this business going into the year.

Stuart Bradie: with about 80% from repeat customers showing the relationships that we have developed over time. Work under contract covers roughly 63% of our 2026 guidance, putting us above normative levels for this business going into the year. With that, let's turn to Mission Tech and onto Slide 8. Mission Tech also faced a challenging environment, as you're well aware, in 25, including award delays, reduced contingency activity, for us, particularly in Europe, and the impact of the government shutdown. Despite those headwinds, MTS performed well. Revenue held up year-over-year, margins improved, and cash performance was excellent. This reflects a disciplined execution approach and the quality of the underlying portfolio. Strategically, we continue to move upmarket. Activity expanded with the U.S. Space Force and Air Force Research Laboratory, validating the LinQuest acquisition.

Speaker #4: With that, let's turn to mission tech and onto slide 8. Mission tech also faced a challenging environment as you're well aware in '25, including award delays, reduced contingency activity and for us, particularly in Europe, and the impact of the government shutdown.

Speaker #4: Despite those headwinds, MTS performed well. Revenue held up year over year. Margins improved. And cash performance was excellent. And this reflects a disciplined execution approach and the quality of the underlying portfolio.

Speaker #4: Strategically, we continue to move up market. Activity expanded with the US Space Force and Air Force Research Lab, validating the LINQUEST acquisition. We secured positions on key multiple award contract vehicles and defended several important re-competes, including HHPC and Djibouti.

Stuart Bradie: We secured positions on key multiple award track vehicles and defended several important recompetes, including HHPC and Djibouti. While we did lose the COSMOS recompete in 2025, this was at the lower end of margin returns within the portfolio. Importantly, there are no material recompete revenues expected in 2026, reducing near-term recompete risk. Internationally, we stand out, particularly Australia, with approximately $800 million in defense award contracts and high single-digit year-over-year revenue growth. While contingency activity declined in certain areas, the broader defense and intelligence portfolio performed well, particularly in missile defense, naval air, digital engineering, and in R&D. Cross-business synergy bids are becoming increasingly important, and we have several opportunities in the pipeline that reflect a similar integrated cross-business approach. Looking ahead, the full year 2026 Defense Appropriations Act has been enacted, and MTS, we believe, is well aligned with this funding.

Speaker #4: While we did lose the Cosmos re-compete in 2025, this was at the lower end of margin returns within the portfolio. Importantly, there are no material re-compete revenues expected in '26, producing near-term re-compete risk.

Speaker #4: Internationally, a real standout particularly Australia with approximately $800 million in defense award contracts. And high single-digit year-over-year revenue growth. While contingency activity declined in certain areas, the broader defense and intelligence portfolio performed well.

Speaker #4: Particularly in missile defense, naval air, digital engineering, and in R&D. Cross-business synergy bids are becoming increasingly important. And we have several opportunities in the pipeline that reflect a similar integrated cross-business approach.

Speaker #4: Looking ahead, the full year 2026 defense appropriations act has been enacted. And MTS, we believe, is well aligned with this funding. We expect award cadence to improve particularly in the supported by strong bid volume and contract vehicle leverage.

Stuart Bradie: We expect award cadence to improve, particularly in the second half of the year, supported by strong bid volume and contract vehicle leverage. To anchor that outlook, the trailing 12 months book-to-bill was 1.0. Backlog and options ended the year at $19.1 billion, and that's up 15% year-over-year, with 40% funded, excluding PFIs. Bids awaiting awards total $17 billion, with 80% of that number representing new business. We expect to bid more than $25 billion in 2026, and that will be up double digits year-over-year. Finally, work under contract already covers approximately 82% of the 2026 guidance, with minimal recompete exposure. On to Slide 9.

Speaker #4: To anchor that outlook, the trailing 12-month book-to-bill was 1.0. Backlog and options ended the year at 19.1 billion and that's up 15% year over year with 40% funded excluding PFIs.

Speaker #4: Bids are waiting awards, total 17 billion with 80% of that number representing new business. We expect to bid more than 25 billion in 2026 and that will be up double digits year over year.

Speaker #4: Finally, work under contract already covers approximately 82% of a '26 guidance. With minimal re-compete exposure. Onto slide 9. Next, I'll provide an update on the spin-off transaction.

Stuart Bradie: Next, I'll provide an update on the spin-off transaction, which remains an important part of our strategy to sharpen focus and drive long-term value creation for shareholders, as you're well aware. Preparations continue to progress in line with our plan, and our targeted distribution is anticipated in the second half of 2026. From a readiness standpoint, we're making steady, tangible progress. Carve-out audits and pro forma financial statements are underway to support the Form 10 process. As committed, we made our initial confidential filing in late December, and we currently expect to file an amendment incorporating full-year audited 2025 financials in March 2026. A similar timeline is progressing for the Private Letter memo with the IRS. All on track. We're also continuing to refine the transaction perimeter to ensure operational clarity and strong standalone positioning for both companies.

Speaker #4: Which remains an important part of our strategy to sharpen focus and drive long-term value creation for shareholders as you're well aware. Preparations continue to progress in line with our plan and our targeted distribution is anticipated in the second half of 2026.

Speaker #4: From a readiness standpoint, we're making steady tangible progress. Carve out audits and pro forma financial statements are underway to support the Form 10 process.

Speaker #4: As committed, we made our initial confidential filing in late December, and we currently expect to file an amendment incorporating full-year audited 2025 financials in March 2026.

Speaker #4: A similar timeline is progressing for the private letter memo with the IRS. So all on track. We're also continuing to refine the transaction perimeter to ensure operational clarity and strong standalone positioning for both companies.

Speaker #4: And as part of that effort, we have decided to move the Fraser-Nash Consultancy business and the UK civil nuclear project portfolio into sustainable tech.

Stuart Bradie: As part of that effort, we have decided to move the Frazer-Nash Consultancy business and the UK civil nuclear project portfolio into Sustainable Tech. We have provided a supplemental financial information sheet for modeling purposes. This is accessible via the QR code. This change has no material impact to our long-term segment growth, CAGRs, or margins. As discussed previously, CEO and CFO recruitment efforts are underway. In the interim, I've appointed Mark Sopp as interim Spin CEO, leveraging his role as Spin Transition Lead. This positions Mark to effectively serve in a capacity while the search for a permanent CEO continues. These efforts, along with early branding initiatives, support the future standalone companies, are progressing in parallel with the broader separation work streams.

Speaker #4: We have provided a supplemental financial information sheet for modeling purposes and this is accessible via the QR code. And this change has no material impact to our long-term segment growth, CAGRs, or margins.

Speaker #4: As discussed previously, CEO and CFO recruitment efforts are underway. And in the interim, I have appointed Mark Sopp as interim spin CEO, leveraging his role as spin transition lead.

Speaker #4: And this positions Mark to effectively serve in a capacity while the search for a permanent CEO continues. These efforts, along with early branding initiatives, support the future standalone companies are progressing in parallel with the broader separation workstreams.

Stuart Bradie: Importantly, a dedicated Spin transaction team continues to drive execution across the organization, really helping to minimize disruption to day-to-day operations while maintaining momentum. I think you can see that in the delivery of the 25 bottom-line results. The level of internal engagement and coordination continues to build, which gives us confidence in our ability to execute the transaction effectively.

Speaker #4: Importantly, a dedicated spin transaction team continues to drive execution across the organization. Really helping to minimize disruption to day-to-day operations while maintaining momentum. And I think you can see that in the delivery of the '25 bottom line results.

Speaker #4: The level of internal engagement and coordination continues to build. Which gives us confidence in our ability to execute the transaction effectively. We'll continue to keep you updated, of course, as we progress.

Jamie DuBray: ... We'll continue to keep you updated, of course, as we progress. With that, I'll turn it over to Shah.

Jamie DuBray: We'll continue to keep you updated, of course, as we progress. With that, I'll turn it over to Shah.

Speaker #4: And with that, I'll turn it over to Shad. Thanks, Stuart.

Shad Evans: Thanks, Stuart, thank you to everyone for joining us today. I'm excited to step into the CFO role at an important time for KBR. Mark Sopp built a strong finance organization and a disciplined foundation, and I'm grateful for his leadership and the opportunity to build on that work. Looking ahead, my focus is straightforward: deliver on our financial commitments, support the financing and investor milestones associated with the spin, and maintain a disciplined financial structure that advances our strategy. With that, let's turn to the Q4 results on slide 11. Revenues were $1.85 billion, down $223 million year-over-year, primarily reflecting award timing in MTS and reductions in EUCOM contingency scope. More importantly, profitability and execution were strong.

Speaker #2: And thank you to everyone for joining us today. I'm excited to step into the CFO role at an important time for KBR. Mark Sopp built a strong finance organization and a disciplined foundation.

Speaker #2: And I'm grateful for his leadership and the opportunity to build on that work. Looking ahead, my focus is straightforward. Deliver on our financial commitments.

Speaker #2: Support the financing and investor milestones associated with the spin, and maintain a disciplined financial structure that advances our strategy. With that, let's turn to the fourth quarter results on slide 11.

Speaker #2: Revenues were $1.85 billion. Down $223 million year over year. Primarily reflected award timing in MTS and reductions in UCOM contingency scope. More importantly, profitability and execution were strong.

Speaker #2: Adjusted EBITDA increased $12 million. And margins were $12.6%, up 190 basis points. Driven by disciplined program execution and favorable mix, this UCOM volumes declined from lower margin work.

Shad Evans: Adjusted EBITDA increased $12 million. Margins were 12.6%, up 190 basis points, driven by disciplined program execution and favorable mix as EUCOM volumes decline from lower margin work. Adjusted EPS was $0.99, up $0.09 year-over-year, reflecting the stronger adjusted EBITDA performance and lower share count following open market repurchases. Turning to slide 12 in our full year results. Revenues were approximately $7.8 billion, up modestly year-over-year, despite the market volatility. We delivered strong performance in defense and intelligence programs, supported by the LinQuest acquisition, continued momentum in Australia aligned with its defense priorities, and sustained demand in STS across our engineering, professional services, and technology offerings. Adjusted EBITDA increased $100 million. Full year margins were 12.4%, up more than 100 basis points year-over-year.

Speaker #2: Adjusted EPS was 99 cents, up 9 cents year over year. Reflecting the stronger adjusted EBITDA performance and lower share count following open market repurchases.

Speaker #2: Turning to slide 12 in our full year results. Revenues were approximately $7.8 billion. Up modestly year over year, despite the market volatility. We delivered strong performance in defense and intelligence programs supported by the linkless acquisition.

Speaker #2: Continued momentum in Australia aligned with its defense priorities. And sustained demand in STS across our engineering, professional services, and technology offerings. Adjusted EBITDA increased 100 million.

Speaker #2: And full-year margins were 12.4%, up more than 100 basis points year over year. As Stuart mentioned, this performance reflects prioritizing high margin growth. Disciplined program execution and continued delivery on cost-saving initiatives across the business.

Shad Evans: As Stuart mentioned, this performance reflects prioritizing high-margin growth, disciplined program execution, and continued delivery on cost-saving initiatives across the business. Adjusted EPS was $3.93, up $0.60 versus prior year, and supported by the increase in adjusted EBITDA and share repurchases, partially offset by higher interest expense and higher income taxes due to international mix in our underlying rate. That same dynamic is reflected in our 2026 ETR guidance, which I'll cover in a moment. Cash was a key highlight. Operating cash flow was $557 million, representing 110% conversion to adjusted net income. We exited the year with strong liquidity heading into 2026. Overall, revenues and adjusted EBITDA were within our ranges for the year, and adjusted EPS and operating cash flow exceeded the top end of our guided ranges.

Speaker #2: Adjusted EPS was $3.93, up 60 cents versus prior year. And supported by the increase in adjusted EBITDA and share repurchases. Partially offset by higher interest expense and higher income taxes due to international mix in our underlying rate.

Speaker #2: That same dynamic is reflected in our 2026 ETR guidance, which I'll cover in a moment. Cash was a key highlight. Operating cash flow was $557 million.

Speaker #2: Representing 110% conversion to adjusted net income. We exited the year with strong liquidity heading into 2026. Overall, revenues and adjusted EBITDA within our ranges for the year.

Speaker #2: And adjusted EPS and an operating cash flow exceeded the top end of our guided ranges. Turning to slide 13, I'll focus on a few financial proof points that support the progress Stuart just outlined in sustainable tech.

Shad Evans: Turning to slide 13, I'll focus on a few financial proof points that support the progress Stuart just outlined in Sustainable Tech. As discussed earlier, the market environment shifted materially in 2025. From a financial standpoint, STS offset those headwinds through mix, geographical expansion, and increased exposure to OpEx-oriented and structurally stronger demand areas. That operating discipline is clearly showing up in the quality of earnings. Adjusted EBITDA has grown 16% since 2023, outpacing revenue growth and reflecting improved mix and cost execution. While margins were modestly elevated in 2025, we are on pace to meet our long-term margin target of 20% plus in 2027. This performance was delivered alongside strong cash conversion of more than 80% and a trailing twelve-month book-to-bill of 1.2, providing good visibility as we enter 2026.

Speaker #2: As discussed earlier, the market environment shifted materially in 2025. From a financial standpoint, STS offset those headwinds through mixed geographical expansion and increased exposure to OPEX-oriented and structurally stronger demand areas.

Speaker #2: That operating discipline is clearly showing up in the quality of earnings. Adjusted EBITDA has grown 16% since 2023. Outpacing revenue growth in reflecting improved mix and cost execution.

Speaker #2: While margins were modestly elevated in 2025, we are on pace to meet our long-term margin target of 20% plus in 2027. This performance was delivered alongside strong cash conversion of more than 80% and a trailing 12-month book-to-bill of 1.2.

Speaker #2: Providing good visibility as we enter 2026. Lastly, due to the recurring nature of risks, an alignment with our OPEX strategy, we plan to update our adjusted EBITDA calculation beginning in 2026 to reflect our share of unconsolidated JV operating income.

Shad Evans: Lastly, due to the recurring nature of risks and alignment with our OpEx strategy, we plan to update our adjusted EBITDA calculation beginning in 2026 to reflect our share of unconsolidated JV operating income. Previously, risks and other unconsolidated JVs were reflected through JV net income. This change improves transparency and aligns EBITDA with how we manage the business. Prior periods will not be recapped as the impact is not material. Turning to slide 14, I'll focus on the financial implications of the mission tech progress Stuart just outlined. From a financial perspective, the portfolio continues to move towards higher quality of earnings, driven by mix improvements, disciplined program selection, and favorable contract structures aligned to the most durable and well-funded national security priorities.

Speaker #2: Previously, risks and other unconsolidated JVs were reflected through JV net income. This change improves transparency and aligns EBITDA with how we manage the business.

Speaker #2: Prior periods will not be recapped as the impact is not material. Turning to slide 14, I'll focus on the financial implications of the mission tech progress Stuart just outlined.

Speaker #2: From a financial perspective, the portfolio continues to move toward higher quality of earnings driven by mixed improvements, disciplined program selection, and favorable contract structures aligned to the most durable and well-funded national security priorities.

Speaker #2: Since 2023, the integration of LinkWest's strong international execution and a more selective business development approach have supported mid-single-digit revenue growth while improving margin quality.

Shad Evans: Since 2023, the integration of LinQuest, strong international execution, and a more selective business development approach have supported mid-single-digit revenue growth while improving margin quality. Importantly, that improvement has been driven by commercial acumen and contract discipline, including a greater focus on fixed price and technically differentiated work, not volume. Even with near-term headwinds from awards, timing, and protest activity, the team remained highly selective in bids and recompetes, prioritizing returns and contract terms over scale. That discipline is showing up in sustained margin performance and a robust pipeline. Against that backdrop, the business is preparing for the spin with improving economics, solid visibility, and strong alignment to long-term national security demands. Turning to slide 15. Capital allocation and balance sheet discipline remain key strengths. In 2025, we returned a record of $413 million to shareholders through buybacks and dividends....

Speaker #2: Importantly, that improvement has been driven by commercial acumen and contract discipline. Including a greater focus on fixed price and technically differentiated work. Not volume.

Speaker #2: Even with near-term headwinds, from award timing and protest activity, the team remained highly selective in bids and recompetes. Prioritizing returns and contract terms over scale.

Speaker #2: That discipline is showing up in sustained margin performance and a robust pipeline. Against that backdrop, the business is preparing for the spend with improving economics.

Speaker #2: Solid visibility and strong alignment to long-term national security demand. Turning to slide 15, capital allocation and balance sheet discipline remains key strengths. In 2025, we returned a record $413 million to shareholders through buybacks and dividends.

Speaker #2: And we ended the year with net leverage of 2.2 times. That reflects both strong cash generation and disciplined deployment. Looking ahead to 2026, our priorities remain unchanged.

Shad Evans: We ended the year with net leverage of 2.2x. That reflects both strong cash generation and disciplined deployment. Looking ahead to 2026, our priorities remain unchanged. We're committed to maintaining an attractive and stable dividend through the spin transaction. To that end, our board approved an annual dividend of $0.66 per share, or $0.165 per quarter for 2026. We also continue to invest selectively where returns are compelling. In January, we invested approximately $115 million to fund our proportionate share of the SWAT OpEx acquisition within Bristk, a strategic transaction that enhances resilience to CapEx cycles and supports our OpEx expansion.

Speaker #2: We're committed to maintaining an attractive and stable dividend through the spin transaction. And to that end, our board approved an annual dividend of $0.66 per share, or $0.165 per quarter, for 2026.

Speaker #2: We also continue to invest selectively where returns are compelling. In January, we invested approximately $115 million. To fund our proportional share of the SWOT OPEX acquisition within BRIS.

Speaker #2: A strategic transaction that enhances resilience to CAPEX cycles and supports our OPEX expansion. As we execute this investment and absorb typical first-quarter cash uses including incentive payments, leverage may trend up modestly in the first half of the year before coming back down below the targeted 2.5 level as cash builds throughout the year.

Shad Evans: As we execute this investment and absorb typical Q1 cash uses, including incentive payments, leverage may trend up modestly in the 1st half of the year before coming back down below the targeted 2.5 level as cash builds throughout the year. Ahead of respective investor days, which we plan to conduct before the spin, each segment will assess its capital deployment priorities based on its standalone profile. I'll now turn to slide 16 in our fiscal 2026 guidance. We're providing full year outlook for consolidated companies to establish a clear baseline. The standalone outlook to be updated for progress towards the planned spin in the 2nd half of 2026. With that in mind, for fiscal 2026, we are guiding revenues in the range of $7.9 billion to 8.36 billion.

Speaker #2: Ahead of respective investor days, which we plan to conduct before the spin, each segment will assess its capital deployment priorities based on its standalone profile.

Speaker #2: I'll now turn to slide 16 and our fiscal 2026 guidance. We're providing full-year outlook for consolidated companies to establish a clear baseline. The standalone outlooks to be updated as we progress towards the planned spin in the second half of 2026.

Speaker #2: With that in mind, for fiscal 2026, we are guiding revenues in the range of $7.9 billion to $8.36 billion. Adjusted EBITDA of $980 million to $1.04 billion.

Shad Evans: Adjusted EBITDA of $980 million to $1.04 billion. Adjusted EPS of $3.87 to $4.22, and adjusted operating cash flow of $560 million to $600 million. At the midpoint, this implies approximately 4% year-over-year growth across all key metrics. We expect transition costs related to the spin to be approximately $140 to $180 million, inclusive of one-time IT capital costs. To ensure transparency around ongoing performance, we will introduce an adjusted operating cash flow and an adjusted free cash flow metric in 2026, that add back spin-related cash outflows, allowing investors to better assess the core cash-generating capabilities of the business. From a modeling perspective, the guide assumes low double-digit growth in FTS at our normative long-term margins of 20%+.

Speaker #2: Adjusted EPS of $3.87 to $4.22. And adjusted operating cash flow of $560 million to $600 million. At the midpoint, this implies approximately 4% year-over-year growth across all key metrics.

Speaker #2: We expect transition costs related to the spend to be approximately $140 to $180 million. Inclusive of one-time IT capital costs. To ensure transparency around ongoing performance, we will introduce an adjusted operating cash flow and an adjusted free cash flow metric in 2026 to add back spin-related cash outflows.

Speaker #2: Allowing investors to better assess the core cash-generating capabilities of the business. From a modeling perspective, the guide assumes low double-digit growth in SPS at our normative long-term margins of 20% plus MTS is expected to grow at low single digits also at a normative margin of 10% plus.

Shad Evans: MTS is expected to grow at low single digits, also at a normative margin of 10% plus, which we expect to continue to improve over time. Capital expenditures are expected to be in the range of $40 to 50 million for the year. Our projected effective tax rate is 26% to 28%, higher than the current year, and as I mentioned earlier, primarily reflecting a greater mix of work in the Global South. Estimated adjusted share count is 127 million, which is exactly where we exited 2025. We expect revenues and adjusted EPS to be weighted approximately 46% to the first half and 54% to the second half of the year. For modeling purposes, we expect Q1 2026 to be largely in line with Q4 2025.

Speaker #2: Which we expect to continue to improve over time. Capital expenditures are expected to be in the range of 40 to 50 million for the year.

Speaker #2: Our projected effective tax rate is 26 to 28%. Higher than the current year and as I mentioned earlier, primarily reflecting a greater mix of work in the global south.

Speaker #2: Estimated adjusted share count is 127 million which is exactly where we exited 2025. We expect revenues and adjusted EPS to be weighted approximately 46% to the first half and 54% to the second half of the year.

Speaker #2: For modeling purposes, we expect Q1 26 to be largely in line with Q4 25. And on a recap basis, we anticipate moderate sequential growth in MTS as UCOM is at its base activity levels.

Shad Evans: On a recast basis, we anticipate moderate sequential growth in MTS as EUCOM is at its base activity levels and partially offset by seasonal sequential declines in FTS. As a reminder, we will be comping against elevated EUCOM contingency in the Q1 and Q2 of 2026, which is roughly $60 to $70 million per quarter. Our guidance includes key assumptions that are worth highlighting given the current political and economic environment. First, we assume the resolution of outstanding protests in the first half of the year, with award cadence and Mission Tech improving as the year progresses. Second, we assume that all material programs we currently support remain in place. Should that change materially, we will, of course, update as appropriate. Third, we assume modest improvement in interest rates in the second half of the year and stable foreign exchange rates relative to current levels.

Speaker #2: And partially offset by seasonal sequential declines in FTS. As a reminder, we will be comping against elevated UCOM contingency in the first two quarters of 26, which is roughly 60 to 70 million per quarter.

Speaker #2: Our guidance includes key assumptions that are worth highlighting given the current political and economic environment. First, we assume the resolution of standing protests in the first half of the year.

Speaker #2: With award cadence and mission tech improving as the year progresses. Second, we assume that all material programs we currently support remain in place. Should that change materially, we will, of course, update as appropriate.

Speaker #2: Third, we assume modest improvement in interest rates in the second half of the year. And stable foreign exchange rates relative to current levels. In closing, our 2026 guidance reflects a disciplined view of the current environment.

Shad Evans: In closing, our 2026 guidance reflects a disciplined view of the current environment. We enter the year with solid work under contract, strong growth momentum, and a highly committed global team. With that, I'll turn it back to Stuart.

Speaker #2: We enter the year with solid work under contract, strong growth momentum, and a highly committed global team. And with that, I'll turn it back to Stuart.

Speaker #1: Thanks, Todd. I'm on slide 17 with some key takeaways. And I'll close with four key messages. First, we executed with discipline in a challenging environment.

Stuart Bradie: Thanks, Todd. I'm on slide 17 with some key takeaways. I'll close with four key messages. First, we executed with discipline in a challenging environment. Despite pressure across awards and funding, we delivered results in line with our updated guidance. We expanded margins and generated strong cash, and returned that cash at record levels to shareholders. That performance under pressure reflects the strength of our operating model and the quality of the people inside KBR, our teams. Second, both segments exit 2025 with improving momentum and, of course, visibility. In Sustainable Tech, the portfolio is better aligned to structurally stronger demand, while in Mission Tech, margin discipline, pipeline strength, and funding visibility position the business well as award cadence improves into 2026. Third, the quality and the durability of our earnings continues to improve. Across the portfolio, we are being more selective-...

Speaker #1: Despite pressure across the wards and funding, we delivered results in line with our updated guidance. We expanded margins, and generated strong cash. And returned that cash at record levels to shareholders.

Speaker #1: That performance under pressure reflects the strength of our operating model. And the quality of the people teams. Second, both segment exit 2025 with improving momentum.

Speaker #1: And of course, visibility. And sustainable tech that portfolio is better aligned to structurally stronger demand by the mission tech margin discipline pipeline strength and funding visibility position the business well as a work cadence improves into 2026.

Speaker #1: Third, the quality and the durability of our earnings continues to improve. Across the portfolio, we are being more selective and continually moving up market.

Stuart Bradie: We're continually moving up market and leaning into innovation and digital differentiation. That focus is really driving better mix, more resilient margins, and stronger cash generation over time. Finally, our spin-off prep is advancing as planned. We're making steady progress on separation readiness, capital structure planning, and leadership and operational clarity, all with the goal of creating two focused, well-positioned standalone companies, and of course, delivering long-term value for our shareholders. With that, I'll turn it over to the operator, who will open the call for Q&A. Thank you.

Speaker #1: And leaning into innovation and digital differentiation. That focus is really driving better mix, more resilient margins, and stronger cash generation over time. And finally, our spinoff prep is advancing as planned.

Speaker #1: We're making steady progress on separation readiness. Capital structure planning. And leadership and operational clarity all with the goal of creating two focused well-positioned standalone companies and of course, delivering long-term value for our shareholders.

Speaker #1: With that, I'll turn it over to the operator to open the call for Q&A. Thank you.

Speaker #2: Thank you. With that, we'll start today's Q&A session. If you would like to ask a question during the call, please press start followed by one on your telephone keypad.

Operator: Thank you. With that, we'll start today's Q&A session. If you would like to ask a question during the call, please press star followed by one on your telephone keypad. To withdraw your question, it's star followed by two. Just a reminder to ask one question and follow up to allow time for all. Our first question today comes from Tobey Sommer from Truist. Your line is now open. Please go ahead.

Speaker #2: by two. And just a reminder to ask one question and follow up to allow time for all. Our first question today comes from Toby Sommer from Truist.

Speaker #2: Your line's now open. Please go ahead.

Speaker #3: Thank you very much. I was wondering if you could describe to us what the pipeline in STS is for sizable projects with Plaquemins closing out probably next year.

Tobey Sommer: Thank you very much. I was wondering if you could describe to us what the pipeline in STS is for sizable projects with Plaquemines, you know, closing out probably next year. Just to give us a sense for how we may be able to fill that hole and even grow. Thank you.

Speaker #3: Just to give us a sense for how we may be able to fill that hole in even grow. Thank you.

Speaker #4: Thanks, Toby. Not an unexpected question. In terms of the book to bill in Q3, Q and Q4, I think you've seen the performance has been impressive.

Stuart Bradie: Thanks, Toby. Not an unexpected question. In terms of the book-to-bill in Q3 and Q4, I think you've seen the performance has been impressive across the spectrum. That includes the technology and obviously the broader capability set in the Middle East, and that's coming through, and particularly in the OpEx area, which we feel is a strategic growth avenue we want to get after, due to the long-term contract nature of that, giving sort of visibility into earnings over time. We've started this year in Q1 very strongly again, in bookings in STS. Again, I think directionally, that's a very positive thing to see and obviously to disclose today. In terms of the broader pipeline, it's, we've got a global business, as you're well aware.

Speaker #4: Across the spectrum. That includes technology and obviously the broader capability set in the Middle East. And that's coming through. And particularly in the OPEX area, which we feel is a strategic growth avenue.

Speaker #4: We want to get after due to its due to the long-term contract nature of that giving sort of visibility into earnings over time. We've started this year in Q1 very strongly.

Speaker #4: Again, in bookings and in STS. So again, I think directionally that's a very positive thing to see. And obviously to disclose today. In terms of the broader pipeline, it's we've got a global business, as you're well aware.

Stuart Bradie: We see significant opportunity across the globe and across our capability set, and that includes ammonia and technology. It includes the broader technology set. I talked a little bit about Mura in my prepared remarks also. They are now running, you know, well. They've come through their 72-hour test, products on spec, and have actually sold that product already. We'll see that ramp up through the course, and they've got a number of projects in their pipeline as well, which, both as an investor and an executor and technology provider, will take advantage of.

Speaker #4: We see significant opportunity across the globe and across our capability set. And that includes ammonia and technology. It includes the broader technology set. I talked a little bit about Mura in my prepared remarks also.

Speaker #4: They are now running well. They've come through their 72-hour test. Products on spec and have actually sold that product already. So we'll see that ramp up through the course and they've got a number of projects in their pipeline as well, which both as an investor and an executor and technology provider will take advantage of.

Speaker #4: In the broader LNG area, which is one aspect of our business. It's not their business. I would say that we've got obviously work going on in the body we've got coastal bend front-end design also ongoing.

Stuart Bradie: In the broader LNG area, which is one aspect of our business, it's not their business. I would say that we've got obviously work going on in Abadi, we've got Coastal Bend front-end design also ongoing, and we've got a number of others that we can't tell you about today, unfortunately, but we're looking at as we move through this year. I think the other key takeaway here is that many have looked at the equity and earnings line and seen that really as just Plaquemines coming through. We talked a few quarters ago about the importance we felt Bris would be delivering in that area over time. They've really sort of outperformed as we headed into the end of this year and have a very strong book-to-bill themselves.

Speaker #4: And we've got a number of others that we can't tell you about today, unfortunately. But we're looking at as we move through this year.

Speaker #4: I think the other key takeaway here is that many have looked at the equity and earnings line and seen that really is just Plaquemins coming through.

Speaker #4: We talked a few quarters ago about the importance we felt BRIS would be delivering in that area. Over time. They've really sort of outperformed as we headed into the end of this year.

Speaker #4: And have a very strong book to bill themselves. And then with the additional swap, we're obviously more than doubling that EBITDA contribution, which is why we're going to be showing you that more transparently going forward.

Stuart Bradie: Then with the additional swap, we're obviously more than doubling that EBITDA contribution, which is why we're gonna be showing you that more transparently going forward. That all comes through the equity and earnings line that will start to hopefully, you know, get people thinking a little bit differently about the quality of earnings and the longevity of that earnings coming through the equity and earnings line. Hopefully that gives you a rounded view of that.

Speaker #4: And that all comes through the equity and earnings line that we'll start to hopefully get people thinking a little bit differently about the quality of earnings in the longevity of that earnings coming through the equity and earnings line.

Speaker #4: So hopefully that gives you a rounded view of that.

Speaker #3: It does. Thank you very much. If I may ask my follow-up on the MTS side, backlog in options growth pretty substantial in the mid-teens.

Tobey Sommer: It does. Thank you very much. If I may ask my follow-up on the MTS side, backlog and in options growth, pretty substantial in the mid-teens, and as well as the sizable, awaiting award category. Maybe you could give us some color as to the drivers of the 15% growth in backlog, as well as the more exciting areas where you've got bids awaiting award.

Speaker #3: And as well as the sizable awaiting award category. Maybe you could give us some color as to the drivers of the 15% growth in backlog as well as the more exciting areas where you've got bids awaiting award.

Speaker #4: Yeah. Thanks, Toby. Obviously, we've announced a number of wins. We talked a little bit about HHPC and Chibui, which come through with a number of year options in them.

Stuart Bradie: Thanks, Toby. obviously, we've announced a number of wins. We talked a little bit about HHPC and Jabouri, which come through with a number of year options in them, which helps in that arena. More recently and very excitingly, the sort of Space Force and Air Force awards in the sort of higher-end digital area, starting to see some momentum around that. Just the broad portfolio internationally has been terrific, as we talked about again in the prepared remarks. That's really the story coming into the end of this year. As we look out into next year, obviously, we've got the work that's under protest. And I know Shad talked about that in his prepared remarks.

Speaker #4: Which helps in that arena. And more recently, and very excitingly, the sort of Space Force and Air Force awards in the sort of higher-end digital area.

Speaker #4: Starting to see some momentum around that. But just the broad portfolio internationally has been terrific as you've as we talked about again in the prepared remarks.

Speaker #4: So that's really the story coming into the end of this year. As we look out into next year, obviously we've got the work that's under protest.

Speaker #4: And I know Chad talked about that in his prepared remarks. And that's quite exciting because it takes us to new customers as well in terms of broadening our reach.

Stuart Bradie: That's quite exciting because it takes us to new customers as well, in terms of broadening our reach. Really the work we're doing in missile defense, the work we're doing with Space Force, et cetera. Obviously, the award of the SHIELD IDIQ really position us well for workflows under the sort of Golden Dome program also. We're really seeing tangible wins in that arena as we've press released already. That sets us up nicely for the future. I am also excited about what's happening internationally, it's a piece of our business that everyone sort of doesn't really talk about enough, with, you know, Australia growing significantly, continually moving up market with an enormous backlog, given its successful wins last year.

Speaker #4: And really the work we're doing in missile defense, the work we're doing with Space Force, etc. And obviously the award of the SHIELD IDIQ really positioned as well for workflows under the sort of golden dome program also.

Speaker #4: And we're really seeing tangible wins in that arena as we've press released already. So that sets us up nicely for the future. But I am also excited about what's happening internationally.

Speaker #4: And it's a piece of our business that everyone sort of doesn't really talk about enough. With Australia growing significantly, continually moving up market with an enormous backlog given its successful wins last year.

Speaker #4: And really the UK as well with increased defense spending happening across not just in the UK, but the broader Europe arena. Really positions us well going into '26.

Stuart Bradie: Really, the UK as well, with increased defense spending happening across, not just in the UK, but the broader Europe arena, really positions us well going into 2026 and actually well beyond, of course. I think that, again, gives you a sort of overall picture. We're very excited about the defense and intel portfolio in the US. The work on the protest is a lot of that's in the R&S segment, of course. We obviously have the international portfolio that's performing extremely well. I'll reiterate that better margins just because of its commercial nature.

Speaker #4: And actually well beyond, of course. So I think that's again gives you a sort of overall picture. We're very excited about the defense and intel portfolio in the US, the work under protest is a lot of that's in the RNS segment, of course.

Speaker #4: And then we obviously have the international portfolio that's performing extremely well. And I'll reiterate that better margins just because of its commercial nature.

Speaker #5: Our next question comes from Mariana Perez Mora from Bank of America. Your line is now open. Please go ahead.

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

Speaker #6: Good morning, everyone. So my first question is going to be to STS. And I think we and all the investment community will welcome more clarity on the EBITDA and the contribution from the joint ventures.

Mariana Perez Mora: Good morning, everyone. My first question is going to be for to STS, and I think we and all the investment community will welcome more clarity on the EBITDA and the contribution from the joint ventures. Like, in the meantime, how should we think about Plaquemines, for how long it's going to contribute at these levels? How should we think about Lake Charles, or at least like Energy Transfer pausing and canceling that project and the impact to that contribution? If we think, I don't know, 3 years from now, what are the opportunities you guys have to maintain that level of contribution from joint ventures?

Mariana Mora: Good morning, everyone. My first question is going to be for to STS, and I think we and all the investment community will welcome more clarity on the EBITDA and the contribution from the joint ventures. Like, in the meantime, how should we think about Plaquemines, for how long it's going to contribute at these levels? How should we think about Lake Charles, or at least like Energy Transfer pausing and canceling that project and the impact to that contribution? If we think, I don't know, 3 years from now, what are the opportunities you guys have to maintain that level of contribution from joint ventures?

Speaker #6: But in the meantime, how should we think about Plaquemins for how long it's going to contribute at this level? How should we think about Charles or at least energy transfer passing and canceling that project and the impact to that contribution?

Speaker #6: And if we think, I don't know, three years from now, what are the opportunities you guys have to maintain that level of contribution from joint ventures?

Stuart Bradie: That's a good strategic question. Probably one best answered more fulsomely at the Investor Day, Mariana. Ultimately, as we said before, the contribution from Plaquemines will run consistently through all this year and into early next year. The increased focus in what we're doing around Brisk and the addition of Smart, we're looking at obviously more organic and inorganic growth in that arena to build out that portfolio. We'll talk about that more as we get through the rest of the year. You know, that bit of the business is performing really well. That will be an increasing part of that equity and earnings contribution, which is why we want to be more transparent around it, to give investors more confidence on the continued equity and earnings performance.

Speaker #4: That's a good strategic question. Probably one best answer more fearsomely at the investor day, Mariana. But ultimately, as we said before, the contribution from Plaquemins will run consistently through all this year and into early next year.

Speaker #4: The increased focus in what we're doing around BRIS and the addition of SWOT and we're looking at obviously more organic and inorganic growth in that arena to build out that portfolio.

Speaker #4: And we'll talk about that more as we get through the rest of the year. And that bit of the business is performing really, really well.

Speaker #4: And so that will be an increasing part of that equity and earnings contribution, which is why we want to be more transparent around it to give investors more confidence on the continued equity and earnings performance.

Speaker #4: But also it's on top line growth. And top line growth and the associated EBITDA generation coming from that portfolio. And I think the book to bill of 1.6 again really demonstrates the momentum that we're having particularly in the global south.

Stuart Bradie: Also it's on top-line growth and the associated EBITDA generation coming from that portfolio. I think the book-to-bill of 1.6, again, really demonstrates the momentum that we're having particularly in the Global South, but ultimately across the portfolio and really sort of delivering, I guess, confidence of future earnings. And that's why we're confident on the sort of double-digit growth on the revenue line for SDS going forward. I think, again, more to come on that at Investor Day. We'll get more into sort of the granular details there, but strategically, that's where we're heading.

Speaker #4: But ultimately across the portfolio, and really sort of delivering I guess confidence of future earnings. And that's why we've we're confident on the sort of double digit growth and the revenue line for STS going forward.

Speaker #4: So I think again, more to come on that at investor day. We'll get more into sort of the granular details there. But strategically, that's where we're heading.

Speaker #6: Thank you. And my follow-up on MTS: you talk about Australia—you have been discussing that for a couple of quarters, how strong it is.

Mariana Perez Mora: Thank you. My follow-up on MTS. You talk about Australia, you have been discussing that for 2 quarters, how strong it is, and now you talk about the UK. How is the award environment in the UK in general going? Like, what is your book-to-bill? How meaningful are the opportunities in the near term, and what are the expectations for growth there?

Mariana Mora: Thank you. My follow-up on MTS. You talk about Australia, you have been discussing that for 2 quarters, how strong it is, and now you talk about the UK. How is the award environment in the UK in general going? Like, what is your book-to-bill? How meaningful are the opportunities in the near term, and what are the expectations for growth there?

Speaker #6: And now you talk about the UK. How is the award environment in the UK in general going? What is your book to bill? How meaningful are the opportunities in the near term and the expectations for growth there?

Speaker #4: Yeah. Good question. '25 was a slow award cadence in the UK due to the typical defense reviews and US speak appropriations and really sort of pointing pounds in this case to where the spend is going to be.

Stuart Bradie: Yeah, good question. 2025 was a slow award cadence in the UK due to the typical defense reviews and in US speak, appropriations and really sort of pointing at pounds in this case, to where the spend is going to be. That process is now behind us. We can see clear spend priorities going into 2026, which is why we're feeling pretty good about where we are and where we're positioned in the UK. Again, more to come, and we'll get more granular in the Investor Day, but I think directionally, you can sense, you know, we've come through what is, you know, a flat year in the UK, and now moving into a growth cycle within our portfolio.

Speaker #4: That process is now behind us. And we can see clear spend priorities going into '26, which is why we're feeling pretty good about where we are and where we're positioned in the UK.

Speaker #4: Again, more to come and we'll get more granular in the investor day. But I think directionally you can sense there's we've come through what is a flat year in the UK.

Speaker #4: And now moving into a growth cycle within our portfolio.

Speaker #6: Thank you so much.

Mariana Perez Mora: Thank you so much.

Mariana Mora: Thank you so much.

Speaker #5: Thank you. Our next question comes from Ian Zafino from Oppenheimer. Your line is now open. Please go ahead.

Operator: Thank you. Our next question comes from Ian Zaffino from Oppenheimer. Your line is now open. Please go ahead.

Speaker #7: Hi. Great. Thank you very much. The question would also be on MTS. Can you maybe give us the kind of the components of the guidance there?

Ian Zaffino: Hi. Great. Thank you very much. You know, question would also be on MTS. Can you maybe give us the, kind of the components, of the guidance there? You know, I'd imagine defense and intel would be very nicely up above kind of the guidance. What should we expect maybe for Readiness & Sustainment, and any other kind of color you could give us on that? Thanks.

Speaker #7: And I imagine Defense and Intel would be very nicely up above kind of the guidance. But what should we expect, maybe, for Readiness and Sustainment?

Speaker #7: And any other kind of color you could give us on that. Thanks.

Speaker #4: Yeah. Quite right. Defense and intel is up as Shad talked about. Science and space is down due to pressure on NASA budgets, as you would expect.

Stuart Bradie: Yeah, quite right. Defense and intel is up, as Shad talked about. Science and space is down, due to pressure on NASA budgets, as you would expect. That's contained in the guide. We've got R&S and the protests that are more aligned to R&S as we look through the course of the year. Assuming that they are successful, we'll grow R&S nicely, as well as the international portfolio we talked about. It's also worth saying that, as I said in my prepared remarks, we did lose some of our recompetes, which were at the lower end of our margin performance.

Speaker #4: So that's contained within the guide. And then we've got RNS and the protests that are more aligned to RNS as we look through the course of the year.

Speaker #4: So assuming that they are successful, we'll grow RNS nicely as well as the international portfolio we talked about. And it's also worth saying that as I said in my prepared remarks, we did lose some of our recompetes which were at the lower end of our margin performance.

Speaker #4: But in terms of the guide, although many of well, not many. Some of them are under protest. A couple of them are under protest.

Stuart Bradie: In terms of the guide, although many of, well, not many, some of them are under protest, a couple of them are under protest, we have not assumed that we will be successful in those protests in the guide. We've taken a fairly firm view that, you know, if we were successful, that would be upside.

Speaker #4: We have not assumed that we will be successful in those protests in the guide. So we've taken a fairly firm view that if we were successful, that would be upside.

Speaker #7: Okay. Thanks. And then you made a comment about doing M&A. How should we think about that? Is this something that's going to wait till after the spin pre-spin?

Ian Zaffino: Okay, thanks. You know, you made a comment about doing M&A. How should we think about that? You know, is this something that's gonna wait till after the spin, pre-spin? I don't wanna jump the gun on the Investor Day, how do you think about, you know, separating these businesses? Is it gonna be, you know, 100%? Are you thinking 80%? Just to get our arms around, you know, how you're thinking about capital allocation, you know, pre and then also post-spin. Thanks.

Speaker #7: I don't want to jump the gun on the investor day. But how do you think about separating these businesses? Is it going to be 100%?

Speaker #7: Are you thinking 80%? Just to get our arms around how you're thinking about capital allocation pre and then also post-spin. Thanks.

Speaker #4: Yeah. No. Thanks. So our statements that we made when we announced the spin still hold. In terms of the leverage, the net leverage we're expecting to come out of those businesses is circa 2x on STS and circa 3x on MTS, which is well within market norms.

Stuart Bradie: Yeah, no, thanks. Our statements that we made when we announced the spin still hold. You know, just in terms of the leverage, where the net leverage we're expecting to come out of those businesses is, you know, circa 2 on STS and circa 3 on MTS, which is well within market norms. We might be a little bit north or south of that, but we're not gonna be far away, so those are good numbers to work from today. In terms of, we've got some firepower, of course, as we go through the year to achieve those leverages.

Speaker #4: We might be a little bit north or south of that, but we're not going to be far away. So those are good numbers to work from today.

Speaker #4: In terms of we've got some firepower, of course, as we go through the year. To achieve those leverages and if we find a creative M&A, we don't want to stand still.

Stuart Bradie: If we find accretive M&A, we don't want to stand still, and I think we've proven that with the acquisition of SWAT to really advance our strategy in the sort of long recurring cycle of OpEx type contracts. We'll be looking to expand in areas of strategic importance. We won't get out over our skis. We won't really sort of, unless it's at some significant transformational thing in the middle of a spin, which would be highly unusual. Ultimately, these will be, you know, fairly modest but accretive and strategic acquisitions. We don't want to stand still in this period, as we've proven through the SWAT acquisition, which is a highly accretive deal for us.

Speaker #4: And I think we've proven that with the acquisition of SWOT to really advance our strategy in the sort of long recurring cycle of OPEX type contracts.

Speaker #4: And we'll be looking to expand in areas of strategic importance. So we won't get out over our skis. We won't really sort of unless it's some significant transformational thing in the middle of a spin, which would be highly unusual, but ultimately these will be fairly modest but a creative and strategic acquisitions.

Speaker #4: We don't want to stand still in this period as we've proven through the SWOT acquisition, which is a highly accretive deal for us.

Speaker #7: Yeah. And maybe just to build on that, Ian, on deployment, the year typically begins as you know with several funded and cash commitments around annual incentive and dividends.

Shad Evans: Yeah, and maybe just to build on that, Ian, on deployment, the year typically begins, as you know, with several funded and cash commitments around annual incentive and dividends. This year we'll also be incurring some spin-related transition costs as well. When you combine those with the strategic investment that Stuart said at the outset, with the normal capital expenditures, they effectively consume a lot of the free cash flow in the first part of the year. As the year progresses, we'll of course, continue to assess the opportunities to deploy any excess cash, obviously in the most effective manner, in close consultation with our board. Our focus really is, as we said all along, is making sure we're setting both of these businesses up with really strong balance sheets out of the gate.

Speaker #7: And this year will also be incurring some spin-related transition costs as well. And so when you combine those with the strategic investment that Stuart said at the outset, with the normal capital expenditures, they effectively consume a lot of the free cash flow in the first part of the year.

Speaker #7: So as the year progresses, we'll of course continue to assess opportunities to deploy any excess cash. Obviously, the most effective manner. In close consultation with our board.

Speaker #7: But our focus really is we set all along is making sure we're setting both of these businesses up with really strong balance sheets out of the gate.

Speaker #5: Our next question comes from Jerry Revich from Wells Fargo. Your line is now open. Please go ahead.

Operator: Our next question comes from Jerry Revich from Wells Fargo. Your line is now open. Please go ahead.

Speaker #8: Hey. This is Kevin Uherag on for Jerry. Just had a question on STS. Would it be possible if you could rank order the growth outlook by end market in 2026?

Kevin Uebeler: Hey, this is Kevin Uebeler on for Jerry. Just had a question on STS. Would it be possible if you could rank order the growth outlook by end market in 2026?

Stuart Bradie: Oh. I think that really is one for Investor Day. We've got, you know, we've said this before, several avenues of growth. You know, we're expanding our footprint in Iraq. We announced major wins there recently. We're expanding our footprint in Saudi Arabia across and both in different areas of the market. We, of course, have picked up the Coastal Bend LNG FEED and Abadi front-end design in LNG. Technology continues to perform. It's difficult to give you a point estimate in that right now because of just of timing. I would say that the way the portfolio performs, that double digit growth is the way to think about it at the consolidated level.

Speaker #4: I think that really is one for investor day. We are we've got we've said this before several avenues of growth. We're expanding our footprint in Iraq.

Speaker #4: We announced major wins there recently. We're expanding our footprint in Saudi Arabia across and both in different areas of the market. We've of course picked up the coastal band LNG feed and the battery front end design in LNG.

Speaker #4: Technology continues to perform. It's difficult to give you a point estimate in that right now because of just of timing. But I would say that the way the portfolio performs that double-digit growth is the way to think about it at the consolidated level.

Speaker #4: And we'll be obviously as a standalone STS business, we'll be digging into this in more detail when we get to investor day.

Stuart Bradie: You know, we'll be obviously, as a standalone STS business, digging into this in more detail when we get to Investor Day.

Speaker #8: Got it. Understood. And then on the mission solutions piece, on UComm, Cadence, does fourth quarter represent the run rate and activity or should we expect to step down in one Q?

Kevin Uebeler: Got it. Understood. On the Mission Solutions piece, on EUCOM cadence, does Q4 represent the run rate in activity, or should we expect to step down in Q1?

Speaker #7: Yeah. Kevin, it does. And so I'll just remind you though that the first and second quarters of '26 have a bit of a tough comp.

Shad Evans: Yeah, Kevin, it does. I'll just remind you, though, that the Q1 and Q2 of 2026 have a bit of a tough comp. $60 to $70 million of what I'll call elevated levels, as that then threw down and is now at its steady run rate coming into 2026.

Speaker #7: 60 to 70 million is what I'll call elevated levels. As that then drew down and is now at its steady run rate coming into '26.

Speaker #5: Our next question comes from Adam Bubes from Goldman Sachs. Your line is now open. Please proceed.

Operator: Our next question comes from Jerry Revich, from Goldman Sachs. Your line is now open. Please proceed.

Speaker #8: Good morning. In MTS, margins for the full year 2025, I think we're 10.4%. And it sounds like mix is improving there. So can you just expand on the puts and takes on the margin outlook?

Jerry Revich: Morning. In MTS, you know, margins for the full year 2025, I think were 10.4%. And it sounds like mix is improving there. Can you just expand on the puts and takes on the margin outlook and for MTS embedded in the 2026 guide?

Speaker #8: And for MTS embedded in the 2026 guide?

Speaker #4: Yeah. So happy to take that, Adam. Despite some of the macro headwinds that Stuart pointed out, I think operational performance throughout '25 is really strong.

Shad Evans: Yeah, happy to take that, Adam. Despite some of the macro headwinds that Stuart pointed out, I think operational performance throughout 2025 is really strong, and as you said, resulted in a 10.4% margin.

Speaker #4: And as you said, resulted in a 10.4% margin, which again is in line with our long-term expectation for this business. And really, I think reflective of the profit-first business development mindset within that organization.

Andy Kaplowitz: which again, is in line with our long-term expectations for this business. Really, I think, reflective of the profit-first business development mindset, within that organization. While we do hope to improve margins over time as we continue to see the mix of that business move towards more fixed-price work, we've not assumed any uplift in 2026. It's flat sequentially from the 2025 run rates.

Speaker #4: While we do hope to improve margins over time as we continue to see a mix of that business move towards more fixed-priced work, we've not assumed any uplift in '26.

Speaker #4: And so it's flat sequentially from the 2025 run rates.

Speaker #8: Got it. Understood. And then you've talked a little bit about today the increasing mix of recurring OPEX and digital solutions. Is there any way to contextualize what percent of revenues today is OPEX-driven and where you think that can head over time?

Jerry Revich: Got it. Understood. Then you've talked a little bit about today, the increasing mix of recurring OpEx and digital solutions. Is there any way to contextualize, you know, what % of revenues today is OpEx driven, and where you think that can head over time?

Speaker #4: So again, I think we obviously more in investor day there. Sorry, I keep saying that, but obviously that's firmly on our minds. But that's part of the reason we are sort of showing more transparency around that OPEX business in BRIS.

Stuart Bradie: Again, I think, we obviously know an Investor Day there. Sorry, I keep saying that, but obviously, that's firmly on our minds. That's part of the reason we are sort of showing more transparency around that OpEx business in Brisk. We do have an OpEx-facing business that we own 100% in the international arena. We'll bring that all together when we meet later in the year for that Investor Day to show you just the opportunity there. We'll describe some of the long-term nature of those contracts. We'll give you an overall margin profile of that particular area, and certainly within a range, and what the outlook is. We, you know, we're excited about that.

Speaker #4: We do have an OPEX-facing business that we own 100% in the international arena. And we'll bring that all together when we meet in later in the year for that investor day to show you just the opportunity there.

Speaker #4: We'll describe some of the long-term nature of those contracts. We'll give you an overall margin profile of that particular area. It's certainly within a range.

Speaker #4: And what the outlook is. But we're excited about that strategically. We do think that assets across the world

Stuart Bradie: Strategically, we do think that assets across the world, of course, have increased, you know, significantly over this last decade. The level of digital solutioning and thinking through how you can help your customer keep the plant up or make it more efficient and do predictive and analytics that support that is exciting, and we're right in the middle of all that. I do think it's as assets age, there's going to be more volume of business in this area. Obviously, it's a, the demand is increasing, and we feel we're very well placed over time to take advantage of that. I think for investors, I think the strategic upside of that is that the contracts are longer term in nature.

Speaker #1: Although of course have increased You know , significantly over this last decade . But the level of digital solutioning and thinking through how you can help your customer keep the plant up and make it more efficient and do predictive analytics that support that is exciting .

Speaker #1: And we're right in the middle of all that . So I do think it's a as I say , it's age . There's going to be more volume of business in this area .

Speaker #1: And obviously it's it's a the demand is increasing and we feel we're very well placed over time to take advantage of that . And I think for investors , I think the strategic upside of that is the contracts are longer term in nature .

Speaker #1: There's greater visibility of earnings and cash across that , across that book of business . So that's directly where we're heading . But more to come again in Investor Day

Stuart Bradie: There's greater visibility of earnings and cash across that book of business. That's directionally where we're heading, more to come, again, in Investor Day.

Operator: Our next question comes from the line of Sangita Jain from KeyBanc Capital Markets. Your line is now open. Please go ahead.

Speaker #2: Next question comes from the line of Sanjeev Jain from KeyBanc Capital Markets . Your line is now open . Please go ahead

Speaker #3: Great . Thank you . Good morning Stuart and Shad , if I can ask two questions on NPS , my first one is are you still exploring a sale of that segment ?

Sangita Jain: Great. Thank you. Good morning, Stuart and Shad. If I can ask two questions on MTS. My first one is, are you still exploring a sale of that segment? Can you speak to the process if you are, and if that's still an option as you move towards the split?

Speaker #3: Can you speak to the process if you are , and if that's still an option as you move towards the split

Stuart Bradie: I mean, you know, I can't answer that question. It's, you know, I mean, we're committed to shareholder value. We've said that many times. It's 100% the truth. We're going through this spin process to prove that out and demonstrate that. We're open to approaches, we're open to anything that will enhance shareholder value. That's all I can really say at this point.

Speaker #1: I mean , you know , I can't answer that question . So it's , you know , we're committed to shareholder value . We've said that many times .

Speaker #1: It's 100% the truth We're going through this spin process to prove that out and demonstrate that we're open to approaches . We're open to anything that will enhance shareholder value .

Speaker #1: That's all I can really say at this point

Speaker #3: Understood . And then on . The MTS Awards in protest , can you provide a little bit of detail on how many awards you're protesting ?

Sangita Jain: Understood. On the MTS awards and protests, can you provide a little more detail on how many awards you're protesting, and if any of them are outsized versus the others, and also the timing that you're anticipating on those resolutions?

Speaker #3: And if any of them are outsized versus the others ? And also the timing that you're anticipating on those resolutions ?

Speaker #1: Yeah , yeah , these are fairly in the public domain . The mission Iraq award is $1 billion . And that's with the state Department .

Stuart Bradie: Yeah. These are fairly in the public domain. The Mission Iraq award is stuck at $1 billion, and that's with the State Department. We have a classified program called K2A, that's in the similar zip code. We did get one out of protest in our favor, which was the pre-positioned stock in Europe, so that's now running through the numbers. That's the key ones at the moment. Obviously, we are protesting the COSMOS loss and the Vega loss as we speak. Again, I would reiterate, those are not in our numbers, the latter two. That's kind of where we're at today.

Speaker #1: Then we have a classified program called Katoa that's in the similar zip code . And then there's some some we did get one out of protest in our favor , which was the pre-positioned stock in Europe .

Speaker #1: So that's now running through the numbers . And that's the key . The key ones at the moment . And obviously we are protesting the cosmos loss and the loss as we speak .

Speaker #1: So but again , I would reiterate those are not in our numbers . The latter two . So that's that's kind of where we're at today

Speaker #3: Great . Thank you Stuart

Sangita Jain: Great. Thank you, Stuart.

Operator: Our final question comes from Andy Kaplowitz from Citigroup. Your line is now open. Please go ahead.

Speaker #2: Final question comes from Andy Kaplowitz from Citigroup . Your line is now open . Please go ahead .

Speaker #1: Hey good morning

Andy Kaplowitz: Good morning, everyone.

Speaker #4: Everyone .

Speaker #1: Morning , good .

Stuart Bradie: Morning, Andy.

Speaker #4: Morning Stuart . Can you talk a little bit more maybe about impacts of AI on KBR ? I think you mentioned briefly in prepared remarks , but how do we think about the mix between software and services in MTS ?

Jerry Revich: Good morning.

Andy Kaplowitz: Stuart, can you talk a little bit more maybe about impacts of AI on KBR? I think you mentioned briefly in prepared remarks, but how do we think about the mix between software and services in MTS? I mean, you mentioned digital and, you know, sort of the growth there. I think there's quite a few security and regulatory barriers that should protect your business versus AI, but maybe you could elaborate on how you think about AI's impacts on KBR's businesses.

Speaker #4: I mean , you mentioned digital and you know , sort of the growth there . I think there's quite a few security and regulatory barriers that should protect your business versus AI .

Speaker #4: But maybe you could elaborate on how you think about AI's impacts on KBR businesses

Speaker #1: Yeah , we talked a little bit about this before . I think in the last quarter that I think there's a number of companies that created AI departments , etc.

Stuart Bradie: Yeah, we talked a little bit about this before, I think in last quarter, that I think there's a number of companies that created AI departments, et cetera, and really, I think they probably spent a lot of money with not a lot of gain. We've been very disciplined around how we approach this, and we very much look at use case solutions that actually drive an ROI. We've got a number of activities inside MTS that are funded by government, as you would expect, as we look at that from an R&D and perspective, and that hangs off the back of our digital engineering labs that we pressed released recently and talked a little bit in the prepared remarks, which are gaining good traction because of the speed to market of R&D projects, et cetera, as you would expect.

Speaker #1: , and I think the the , the probably spend a lot of money with not a lot of gain . We've been very disciplined around how we approach this , and we very much look at use case solutions that actually drive an ROI We've got a number of activities inside MTS that are funded by government .

Speaker #1: As you would expect . As we look at that from an R&D and perspective and a and that hangs off the back of our digital engineering labs that we we press released recently and talked a little bit in the prepared remarks , which are gaining good traction because of the speed to market of R&D projects , etc.

Speaker #1: . As you would expect more in the SDS world Again , looking very strongly at use cases around accelerating engineering , you know , you know , making sure there's checks and balances within that engineering that that avoid human errors , speed up progress .

Stuart Bradie: More in the STS world. Again, looking very strongly at use cases around accelerating engineering, you know, making sure there's checks and balances within that engineering that avoids human errors, speed up progress. At the same time, looking at how we operate facilities across the world, or our customers operate facilities, and using particularly digital twins and applying AI and machine learning to really sort of draw data and get trending over time to know what good looks like and make sure that operators can intercede at the appropriate time or the maintenance crews can intercede at the appropriate time.

Speaker #1: But at the same time, looking at how we operate facilities across the world, or our customers operate facilities, and using particularly digital twins and applying AI and machine learning to really sort of draw data and get trending over time to know what good looks like, and make sure that operators can intercede at the appropriate time, or the maintenance crews can intercede at the appropriate time.

Speaker #1: So it's a it's a multifaceted approach . But ultimately it's driven by use case ROI and we put quite a bit of front end effort into that .

Stuart Bradie: It's a multifaceted approach, but ultimately, it's driven by use case ROI, and we put quite a bit of front-end effort into that, Andy, rather than just saying AI is good and just running at it, we've been quite disciplined. That's on the front of office. I think in the back of office, increasing use of bots to drive efficiency and decrease human error, you know, keep our SG&A in check or reduce it, in fact, over time. We're rolling out Microsoft Dynamics across the STS portfolio, which is really the forefront of a digitalized ERP, because our project controls, which gives us all the project data, hangs off that, and we can look at things real-time and start to make real-time decisions on commercial execution.

Speaker #1: Andy , rather than just saying AI is good and just running at it , we've quite disciplined . And that's on the front of office .

Speaker #1: I think in the back of office , increasing use of bots to drive efficiency and decrease human error , you know , keep our SG&A in check or reduce it .

Speaker #1: In fact , over time , we're rolling out Microsoft Dynamics across the STS portfolio , which is really the the forefront of a digitalized ERP because our project controls , which gives us all the project data hangs off that , and we can look at things real time and start to make real time decisions on on commercial execution .

Speaker #1: And we've also got digital procurement hanging off the back of that . And with a with a similar upside . And so I think that's all digital project execution philosophy .

Stuart Bradie: We've also got digital procurement hanging off the back of that and with a similar upside. I think that sort of digital project execution philosophy, you know, underpinned by really a very modern and digitally enabled ERP, is gonna stand us in really good stead as we come out of the spin. I think it's multifaceted. There's front of office, driven by use case. There's back of office, again, driven by use case, but obviously with different drivers.

Speaker #1: You know , underpinned by really a very modern and digital digitally enabled ERP is going to stand as a really good stead as we come out of the spin .

Speaker #1: So I think it's multifaceted . It's front of office , driven by use case . There's back of office again , driven by use case , but obviously with different drivers

Speaker #4: And so you just mentioned it . But like when I looked at the release for STS margin , you know it mentioned ERP .

[Analyst] (Citigroup): Stuart, you just mentioned it, but like, when I looked at the release for STS margin, you know, it mentioned ERP and, you know, we always think about sort of the ERP implementation as, I guess, a risks actor, but you got it to, you know, over 20% margins again for 2026. How do you think about STS margins? You know, are they kinda gonna be consistent here over the next few quarters, and do we expect improvement in 2026 versus 2025?

Andy Kaplowitz: Stuart, you just mentioned it, but like, when I looked at the release for STS margin, you know, it mentioned ERP and, you know, we always think about sort of the ERP implementation as, I guess, a risks actor, but you got it to, you know, over 20% margins again for 2026. How do you think about STS margins? You know, are they kinda gonna be consistent here over the next few quarters, and do we expect improvement in 2026 versus 2025?

Speaker #4: And so we always think about, sort of, the European implementation as, I guess, a risk factor. But you got to over 20% margins.

Speaker #4: Again for 26 . So how do you think about STS margins ? You know , are they kind of going to be consistent here over the next few quarters .

Speaker #4: And do we expect improvement in 26 versus 25 .

Speaker #1: Yeah , quite right . On the ERP it's typically a risk . Our teams have done a fantastic job . We've we've rolled out dynamics just to be fully transparent .

Stuart Bradie: Yeah, quite right on the ERP. It's typically a risk. Our teams have done a fantastic job. We've rolled out Dynamics just to be fully transparent. We did a pilot in Singapore. It went well. We rolled it out in Australia, added more functionality, went back to Singapore, increased their functionality, rolled it out in India, rolled it out in the UK, and now we're looking at how we roll corporate out in the US, and then we'll move to the Middle East. I think we've proven that we can roll this out without blowing it out, which is always the risk. You know, hats off to our teams and sort of managing the execution and the implementation.

Speaker #1: We we did a pilot in Singapore . It went well . We rolled it out in Australia , added more functionality , went back to Singapore , increased their functionality , rolled it out in India , rolled it out in the UK .

Speaker #1: And now we're looking at how we roll it out in the US . And then we'll move to the to the Middle East .

Speaker #1: So I think we've we've proven that we can roll this out without blowing it out , which is always the risk . So , you know , hats off to our teams and , and sort of managing the execution and the implementation in terms of margins across STS , I think we'll just stick with our statement and that it's 20 plus percent across the portfolio .

Stuart Bradie: In terms of margins across STS, I think we'll just stick with our statement, Andy, that it's 20+% across the portfolio, and as you've seen, we have done, you know, as we, you know, we are prudent in how we account for things, and as we close our projects, you will get ups in certain months. I think over the piece, the portfolio performance is 20+%, and I think that's a good measure to stick with.

Speaker #1: And as you've seen , we have done , you know , as we we you know , we are prudent in how we account for for things .

Speaker #1: And as , as we close out projects , you will get ups and certain months . But I think over the over the piece , the portfolio performance is 20 plus percent .

Speaker #1: And I think that's a that's a good measure to stick with

Speaker #2: Thank you . With that we have no further questions in the queue . So I'll hand back over to Stuart Bradie for some closing remarks

Operator: Thank you. With that, we have no further questions in the queue, so I'll hand back over to Stuart Bradie for some closing remarks.

Speaker #1: Thank you . Thank you very much . So just a few final thoughts . I think as we discussed on the call , 2025 started off as challenging a year as we've seen in many , but I think it really underscored the strength of the KBR portfolio , our geographical reach being truly global and understanding each of the countries in a different drivers was a real plus .

Stuart Bradie: Thank you. Thank you very much. Just a few final thoughts. I think as we discussed on the call, 2025 started off as challenging a year as we've seen in many, but I think it really underscored the strength of the KBR portfolio. Our geographical reach being truly global, and understanding each of the countries and the different drivers was a real plus, a very diversified customer base, and that really drove a lot of, you know, a true lack of concentration risk. Being agile, both in terms of how we do our business and our business model, that gives both Mission Tech and Sustainable Tech real resilience, and I think that came through particularly in the bottom line and the cash performance through the course of the year.

Speaker #1: A very diversified customer base . And that really drove a lot of , you know , a true lack of concentration , risk and , and being agile both in terms of how we do our business and our business model , that gives both Michigan Tech and sustainable tech real resilience .

Speaker #1: And I think that came through in the particularly in the bottom line . And the cash performance through the course of the year .

Speaker #1: So despite external noise , we did execute on our strategy and we did so with discipline . And that's really about our people , the quality of our people and the commitment of our people is unbelievable .

Stuart Bradie: Despite external noise, we did execute on our strategy, and we did so with discipline, and that's really about our people. The quality of our people and the commitment of our people is unbelievable. My hat's off to them. While we faced revenue headwinds, margins did expand, cash was strong, and that really, really, really reinforces the underlying health of the broader portfolio. As we enter 2026, we've got a solid foundation in both businesses, a strong one that work under contract, and as we discussed on the call, a strong pipeline. I think we're really well-positioned in both businesses as we head towards the spin and as we enter 2026. Thank you again for joining today's call.

Speaker #1: And my hats off to them . And so while we face revenue headwinds , margins did expand . Cash was strong . And that really , really , really reinforces the underlying health of the broader portfolio .

Speaker #1: So as we enter 26 , we've got a solid foundation in both businesses , strong wonder at work under contract . And as we discussed on the call , a strong pipeline .

Speaker #1: So I think we're really well positioned in both businesses as we head towards the spin and as we enter 2026 . So thank you again for joining today's call .

Stuart Bradie: I would welcome Chad and Rachel officially to the team in this forum, and obviously, we'll be talking soon. Thank you very much.

Speaker #1: I would welcome Chad and Rachel officially to the team in this forum . And obviously we'll be talking soon . So thank you very much

Stuart Bradie: I would welcome Chad and Rachel officially to the team in this forum, and obviously, we'll be talking soon. Thank you very much.

Operator: Thank you. That concludes today's call. You may now disconnect your line. Thank you for joining.

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