Baird 2018 Global Industrial Conference. November 8, 2018

Transcription

1 Baird 2018 Global Industrial Conference November 8, 2018

2 DISCLAIMER Forward-looking Statements This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of These forward-looking statements include statements regarding our plans, objectives, goals, strategies, future events, future financial performance and backlog information and other information that is not historical information. When used in this presentation, the words estimates, expects, anticipates, projects, plans, intends, believes, forecasts or future or conditional verbs such as will, should, could, or may, and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements are based upon our current expectations and various assumptions. Our expectations, beliefs, and projections are expressed in good faith, and we believe there is a reasonable basis for them. However, there can be no assurance that management s expectations, beliefs, and projections will be achieved. There are numerous risks and uncertainties, many of which are beyond our control, that could cause actual results to differ materially from the forward-looking statements contained in this presentation. These risks and uncertainties include, but are not limited to: current or future economic conditions; our ability to obtain and perform under contracts from existing and new customers, including the U.S. government; exposure to cost overruns, operating cost inflation and potential liability claims and contract disputes; access to trained engineers and other skilled workers; risks relating to operating through joint ventures and partnerships; risks inherent in doing business internationally; potential tax liabilities; maritime risks; changes in the demand for our services and increased competition; protection of intellectual property rights; risks associated with possible future acquisitions; risks related to our information technology systems; impairment of goodwill and/or intangible assets; reduction or reversal of previously recorded revenues; risks relating to audits and investigations, including by governments; compliance with laws and regulations, and changes thereto, including those relating to the environment, trade, exports and bribery; our creditworthiness and ability to comply with the financial covenants in our credit agreement; and other risk factors discussed in our most recently filed Form 10-K, any subsequent Form 10-Qs and 8-Ks, and other Securities and Exchange Commission filings. All forward-looking statements attributable to us, or persons acting on our behalf, apply only as of the date made and are expressly qualified in their entirety by the cautionary statements in this presentation. Except as required by law, we undertake no obligation to revise or update forward-looking statements to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. 2 Investor Presentation

3 KBR Did You Know? Leading service provider to the space community, supporting mission control, astronaut life science, research and operations. Attractive Domestic and International Mix 3 Investor Presentation Enduring Customer Base Serving the UK MoD through a comprehensive construction and facilities management program that extends through Industry-leading Safety Record Life-cycle Services Providing solutions and proprietary technologies that cater to growing demand for cleaner fuels and consumer products. Disciplined Project Delivery Technical Differentiation Delivering clean energy solutions through the design and construction of a third of the world s LNG production. 34,000+ People 40+ Countries

4 Business Overview QTD Highlights $ in millions, except EPS; results for the quarter ended September 30, 2018 Revenues Adjusted EBITDA1 Adjusted EBITDA1 Margin Revenue, Adjusted EBITDA and Adjusted EPS growth fueled by industry leading organic growth and strategic acquisitions $124 $1, % $1, % $86 59% growth in GS, 12% organic 35% growth in Technology, all organic 3Q17 3Q18 Adjusted EPS1 3Q17 3Q18 3Q17 $72 $0.35 Strong margins and operating cash flow Backlog Operating Cash Flow $0.46 3Q18 $2,154 Priced, $3,748 unexercised options $13,481 Book-to-bill of 1.1x KBR overall $10, x GS $28 Reported Backlog 3Q17 3Q18 3Q17 1. Adjusted EBITDA and Adjusted EPS reconciliations provided in the Appendix 4 Investor Presentation Long-term backlog with quality growth opportunities 3Q18 3Q17 3Q18 1.4x Technology

5 Business Overview YTD Results Year to date results through September 30, 2018 GP+EE 1 Revenue Strong YTD performance in 2018 HS 25% Tech 6% Healthy year-over-year revenue growth HS 27% 51% growth in GS, 11% organic $387 M $3.6 B 10.8% GS 69% Tech 16% GS 57% 10% growth in Technology, all organic 30 bps improvement in YTD GP+EE margin driven by strong execution, favorable project close-out and quality equity earnings Government Services Serving government customers globally with capabilities that cover the full lifecycle of defense, space, aviation and other government programs and missions Technology Proprietary technology and solutions primarily focused on the monetization of gas in ethylene and petrochemicals; ammonia, nitric acid and fertilizers; and refining Hydrocarbons Serving blue chip oil and gas clients globally with full lifecycle solutions across onshore oil and gas, Services LNG/GTL, oil refining, petrochemicals, chemicals and fertilizers 1. Revenue and GP+EE proportion percentages exclude results of KBR s Non-strategic Business segment 5 Investor Presentation

6 Business Overview Market Outlook Proposals Submitted, $26 B1 Government Services Technology Growing demand for petrochemical, refining and agricultural technologies Low-priced, plentiful feedstock Regulatory mandates are driving demand Healthy government spending budgets, both domestic and international Breadth of capabilities expands synergy pursuits across the GS landscape Increasing opportunities with best value selections Bundling of procurements favors scale and broad capability Tech; $1 GS; $13 HS; $12 Proposals in Prep, $12 B Tech; $1 Hydrocarbons Services Strong momentum across the maintenance market Recovering CapEx markets Increasing momentum for LNG and petrochemical projects Proposal pipeline continues to build GS; $2 HS; $9 As of September 30, 2018 Buoyant end markets in both the government and hydrocarbons industries 1. HS Proposals Submitted includes proposals formally submitted as well as EPC/EPCm projects awarded that have not achieved FID (e.g., Magnolia and Methanex). FID is not applicable for our GS and Technology prospects. 6 Investor Presentation

7 GS Overview Growing Business, Balanced Portfolio 2018 Government Services Revenue Profile 1 OCO International 34% Industry leading 11% organic growth in % Heavy mix of international profit and cash flow contribution 14% O&M DoD Well-balanced U.S. government services portfolio Top tier space services provider 22% NASA & Other US 15% Blue chip logistics and mission support RDT&E $3.7B 2018 forecast revenue1 Upper single % GP+EE margin Highly technical and professional services across multiple customers; diverse and recurring funding streams, primarily through long-term reimbursable contracts that span the procurement lifecycle 1. Revenue includes KBR share of unconsolidated JVs; 2017 pro forma revenues, includes Aspire and SGT in the International and NASA buckets, respectively. 7 Investor Presentation

8 Technology Overview Strong Business, Strong Margins 2018 Technology Revenue Profile Catalyst Healthy 10% organic growth in % 27% Attractive operating cash flows and negative working capital Expansion of contract values through increased breadth of offerings across license, engineering services, proprietary equipment and catalyst 64% License & Engineering Proprietary Equipment $0.3B 2018 forecast revenue Mid 20s % GP margin Strong demand for petrochemical technologies in feedstock advantaged territories (e.g., North America, Russia and Middle East) and in high growth consumer markets (e.g., China and India) Increasing demand for refining technologies driven by changing regulatory mandates (e.g., IMO 2020) Technology delivers growth and balance in earnings at relatively low risk with potential for selective HS pull-through 8 Investor Presentation

9 HS Overview Well Positioned for CapEx Recovery 2018 Hydrocarbons Services Revenue Profile 1 Upstream Other 14% Healthy, growing maintenance and industrial services, both domestic and international 10% Robust pipeline of opportunities driven by LNG supply / demand rebalance, demand for petrochemicals and abundant supply of competitively priced feedstock 34% 42% LNG Consistent execution and project delivery Diverse Tier 1 customer base Downstream $2.3B 2018 forecast revenue1 Mid to upper single % GP+EE margin Growing base business, breakout growth opportunities represent significant upside potential forecast revenues; includes KBR share of unconsolidated JVs. 9 Investor Presentation

10 Financial Overview 2018 Earnings Guidance Full Year Guidance Increased EPS and Adjusted EPS guidance in 2Q 2018 and again in 3Q 2018 Good market fundamentals across the government and hydrocarbons industries Adjusted EPS1 Excludes Estimated Legacy Legal fees Acquisition & Integration related expense Amortization related to Aspire acquisition Aspire gain on consolidation Effective Tax Rate Operating Cash Flow 1. See Appendix for reconciliation from GAAP 10 Investor Presentation $ $ % - 25% $125M - $175M

11 Final Thoughts Strong execution delivering solid earnings Healthy backlog and BTB Favorable tailwinds across Government Services, Technology and Hydrocarbons Services Growing confidence in the restoration of LNG and downstream capital investment cycles, especially in the US and Middle East where KBR is well positioned Pipeline of near-term pursuits in each segment affords significant growth opportunities and a disciplined risk approach It s a great time to be part of the new KBR! 11 Investor Presentation

12 12 Investor Presentation KBR

13 Appendix KBR Backlog KBR Backlog Trend, by Segment $10.6 $10.3 $2.6 $2.1 $0.3 $0.3 $7.7 $7.9 1Q17 2Q17 $10.3 $1.9 $0.2 $10.6 $13.2 $13.5 $13.5 $1.7 $2.1 $1.9 Hydrocarbons Services $0.6 $0.6 Technology $0.4 $0.4 $8.4 3Q17 4Q17 Backlog excludes priced, unexercised options $11.1 $10.8 $11.0 1Q18 2Q18 3Q18 Note: Includes KBR share of unconsolidated JVs 13 Investor Presentation Quality backlog allows selectivity in EPC bidding $1.8 $8.2 Healthy, growing pipeline of near-term pursuits Government Services Current estimate of $3.7B in potential value as of September 30, 2018

14 APPENDIX Non-GAAP Reconciliations Guidance EPS (diluted) Add Back: Legacy legal fees Acquisition & integration related expenses Amortization related to aspire acquisition Aspire gain on consolidation Adjusted EPS Quarter Ending Sep 30, 2017 EPS (diluted) Sep 30, 2018 $ 0.32 $ 0.41 Legacy legal fees $ 0.03 $ 0.01 Acquisition & integration related expenses $ 0.00 $ 0.01 Amortization related to aspire acquisition $ 0.00 $ 0.02 Aspire (gain) loss on consolidation $ 0.00 $ 0.01 $ 0.35 $ 0.46 Add Back: Adjusted EPS 14 Investor Presentation FY 2018 $ $2.03 $ 0.06 $ 0.05 $ 0.07 ($0.66) $ $1.55