2Q 2018 Financial Results

Transcription

1 2Q 2018 Financial Results July 30, 2018 Stuart Bradie President and Chief Executive Officer Mark Sopp Executive Vice President and Chief Financial Officer Alison Vasquez Vice President, Investor Relations

2 Forward Looking Statements This presentation contains forward looking statements regarding our plans, objectives, goals, strategies, future events, future financial performance and backlog information and other information that is not historical. 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. Such statements are based upon our current expectations and various assumptions, which are made in good faith, and we believe there is a reasonable basis for them. However, because forward looking statements relate to the future, they are subject to inherent risks, uncertainties and other factors that are difficult to predict and which could cause actual results to differ materially from the forwardlooking statements contained in this presentation. Additional information about potential risk factors that could affect our business and financial results is included in our Form 10 K filed on February 23, We caution you not to place undue reliance on the forward looking statements included in this presentation, which speak only as of the date hereof. We disclaim any intent or obligation, except as required by law, to revise or update this information to reflect new information or future events or circumstances. This presentation contains the financial measures EBITDA, Adjusted EBITDA and Adjusted EPS, which are not calculated in accordance with U.S. GAAP. A reconciliation of the non GAAP financial measures EBITDA, Adjusted EBITDA and Adjusted EPS to the most directly comparable GAAP financial measure has been provided in the Appendix to this presentation. 2

3 Stuart Bradie Chief Executive Officer

4 Good Safety is Simply Good Business Total Recordable Incident Rate (TRIR) Performance: 2012 Q Q KBR IOGP Top Q IOGP Average The data set above represents the KBR current portfolio including all acquisitions. IOGP = International Association of Oil & Gas Producers KBR is focused on an industry-leading commitment to employee safety. Strong start to 2018 with an unwavering commitment to achieving zero harm. 4

5 Financial Snapshot $35 $1,059 Revenues Adjusted EPS 1 Top line revenue growth, underpinned by healthy organic $0.18 growth, long term stability from Aspire and strategic acquisition of SGT in April 2018 $1,267 Adjusted EBITDA 1 Margin 2.9% 8.0% 7.8% $0.39 $0.34 Operating Cash Flow $344 $(19) $94 Solid bookings in the quarter with two segments achieving over 2x book to bill for the quarter Adjusted EPS on track for quarter; above expectations for the first half of the year Strong operating cash flow Quality project execution 5 1 Adjusted EBITDA and Adjusted EPS reconciliations provided in the Appendix Impact of PEMEX settlement reached in Q2 2017

6 Segment Highlights and Outlook Government Services Highlights: 11% organic growth for the second consecutive quarter; Over $9B of bids in source selection Market Outlook: Strong outlook with continued tailwinds in domestic and international government spending budgets across space and defense Technology Highlights: Backlog continues to build with 2.2x book to bill; profitability 30%; growing portfolio of technologies and solutions spanning wellhead to specialty chemicals Market Outlook: Increasing demand for petrochemical technologies, niche refining technology and new / revamp projects largely driven by improving market fundamentals Hydrocarbons Services Highlights: Strategically aligned awards with an acceptable risk profile; 2.6x book to bill in the quarter with opportunities for breakout growth driving momentum into 2019 Market Outlook: Positive outlook for renewed capital investment, especially in feedstock advantaged territories and strong consumer markets, driven by downstream, gas, LNG supply demand re balance and oil price recoveries Markets are buoyant across all three sectors with a growing and significant base of professional services and technology based income, underpinned by strong, consistent execution across the business. 6

7 Ichthys LNG Status Operations Complex Temp. Power Plant Butane Tank Propane Tank Combined Cycle Power Plant GTG 1 GTG 2 GTG 3 GTG 4 GTG 5 STG 1 August 18 STG 2 Q1 19 STG 3 Structural & Mechanical substantially complete E&I and Commissioning remaining LNG Train 2 RFSU Achieved LNG Tank 2 Offsites & Utilities LNG Train 1 RFSU Achieved / Production Ready LNG Tank 1 Complete Construction complete/commissioning in progress Substantially mechanically complete Complete in Q Main facilities are on track for handover and the combined cycle power plant is progressing as expected. 7

8 Mark Sopp Executive Vice President

9 Consolidated Results Quarter Ending ($ in millions, except EPS) Jun 30, 2017 Jun 30, 2018 Revenues $ 1,094 $ 1,267 Gross Profit $ 108 $ 130 Equity in Earnings $ 32 $ 10 GP + EE* $ 140 $ 140 General & Administrative Expenses ($38) ($41) Acquisition & Integration Expenses $ 0 ($1) Gain on Disposition of Assets/Restructuring $ 1 $ 0 Operating Income $ 103 $ 98 Provision for Income Taxes ($21) ($18) Net Interest, Other ($3) ($18) Noncontrolling Interest ($2) ($20) Net Income Attributable to KBR $ 77 $ 42 Adjusted EBITDA 1 $ 119 $ 99 EPS (diluted wtd avg) $ 0.54 $ 0.30 Adjusted EPS 1 $ 0.57 $ 0.34 Diluted weighted average shares Restored growth to KBR top line GS revenue growth includes a mixture of organic, Aspire and SGT Continued momentum in Technology Equity in earnings impacted by the consolidation of Aspire and reduction on Ichthys Completed refinancing transaction in April Interest expense of $17M; 2H 2018 range of $18 $20M Strong operating cash flow at greater than 2x net income Operating Cash Flow $ 325 $ 94 9 *Gross Profit + Equity in Earnings 1 Adjusted EBITDA and Adjusted EPS reconciliations provided in the Appendix

10 Segment Results Government Services (GS) Revenue GP + EE GP + EE Margin Organic revenue growth driven by Logistics & Mission Support and Engineering $543 $868 $55 $ % 8.9% Revenues reflect full quarter of Aspire and partial quarter of SGT GP+EE up due to organic growth and acquisitions at solid margins Margins strong; 50 points dilution on higher amortization Industry leading organic growth, strong performance across all major programs, and diversified portfolio serving US DOD, UK MOD, NASA and others 10

11 Segment Results Technology Revenue GP GP Margin Market conditions and KBR positioning are driving continued growth and high profitability $70 $72 $17 $ % 30.5% Strong backlog growth of 20% in the quarter with book to bill of 2.2x Major awards across our diverse portfolio of technology, equipment, catalyst and services Expanding portfolio of technologies and solutions delivering growth and higher margins 11

12 Segment Results Hydrocarbons Services (HS) Revenue (net of NCI) GP + EE (net of NCI) GP + EE Margin (net of NCI) Steady revenue over the last three quarters $439 $34 7.8% 7.2% $308 $ Results in line with expectations Strong backlog growth (34% in the quarter) with book to bill of 2.6x Good momentum supported by healthy backlog, expanding services portfolio and favorable project closeout 12 1 Q excludes the impact of PEMEX Settlement gain 2 Q is presented net of the impact of the NCI interest in revenue, GP+EE and GP+EE Margin of $19, $19, and 5.4%, respectively

13 Cash, Debt and Leverage Position Quarter Ending Jun 30, 2017 Jun 30, 2018 Ending Cash Balance $ 491 $ 519 Gross Debt $ 470 $ 1,078 Net Debt $ (21) $ 559 TTM Adjusted EBITDA 1 $ 120 $ 319 Gross Debt/Adjusted EBITDA Net Debt/Adjusted EBITDA 1 (0.2) TTM Adjusted EBITDA reconciliations provided in the Appendix

14 2018 Guidance Increasing full year Adjusted EPS 1 guidance to $1.40 $1.50 Adjusted EPS excludes: legacy legal fees acquisition and integration related expenses new amortization associated with Aspire acquisition gain from consolidation of Aspire Effective Tax Rate: 22% 24% Operating Cash Flow range $125M $175M 14 1 Guidance Adjusted EPS reconciliation provided in the Appendix

15 Summary Solid quarter, consistent & predictable results 11% organic revenue growth in Government Services Improving market fundamentals across Government, Technology & Hydrocarbons Strong backlog performance in HS and Technology > 90% of earnings secured for 2018 Aspire and SGT integrations on track Increasing full year guidance 15

16 Appendix

17 2018 Backlog Significantly Lower Risk Profile Backlog by Contract Type > 90% of earnings for 2018 secured in backlog Cost Reimbursable, PFI & Services Contracts 93% 6% 1% Fixed Price Contracts (GS, Tech) Low Risk Fixed Price Contracts, HS Majority of KBR backlog is currently either long term, reimbursable, PFI or service contracts with a lower risk profile and predictable cash flows GS backlog excludes unexercised options and ID/IQ and MATOC contract values not yet under task order Current estimate of $4.3B in unexercised options Total KBR Backlog At 6/30/18: $13.5B 17

18 Non GAAP Reconciliation: Adjusted EPS Quarter Ending Jun 30, 2017 Jun 30, 2018 EPS (diluted) $ 0.54 $ 0.30 Add Back: Legacy legal fees $ 0.03 $ 0.02 Acquisition & integration related expenses $ 0.00 $ 0.00 Amortization related to aspire acquisition $ 0.00 $ 0.02 Aspire gain on consolidation $ 0.00 $ 0.00 Adjusted EPS $ 0.57 $

19 Non GAAP Reconciliation: Consolidated, Adjusted and TTM Adjusted EBITDA Quarter Ending ($ in millions) Jun 30, 2017 Jun 30, 2018 Net Income Attributable To KBR $ 77 $ 42 Add Back: Interest expense $ 5 $ 17 Provision for income taxes $ 21 $ 18 Other non-operating (income) expense ($2) $ 1 Depreciation & amortization $ 14 $ 17 Consolidated EBITDA $ 115 $ 95 Add Back: Legacy legal fees $ 4 $ 3 Acquisition & integration related expenses $ 0 $ 1 Aspire gain on consolidation $ 0 $ 0 Quarter Ending Sep 30, 2017 Dec 31, 2017 Mar 31, 2018 Jun 30, 2018 TTM 2018 EBITDA $ 82 $ 48 $ 193 $ 94 $ 417 add back Legacy Legal Fees $ 4 $ 3 $ 3 $ 3 $ 13 Acquisition & Integration Related Expenses $ 3 $ 1 $ 4 Aspire Gain on Consolidation ($115) $ 0 ($115) Adjusted EBITDA $ 86 $ 51 $ 84 $ 98 $ 319 Quarter Ending Sep 30, 2016 Dec 31, 2016 Mar 31, 2017 Jun 30, 2017 TTM 2017 EBITDA ($61) ($20) $ 75 $ 115 $ 109 add back Legacy Legal Fees $ 1 $ 4 $ 2 $ 4 $ 11 Adjusted EBITDA ($60) ($16) $ 77 $ 119 $ 120 Adjusted EBITDA $ 119 $ 99 Note: EBITDA is defined as earnings before interest income / expense, income taxes, other non-operating income / expense (including FX, excluding settlement), depreciation and amortization 19

20 Non GAAP Reconciliation: Adjusted EPS Guidance Guidance FY 2018 EPS (diluted) $ $1.98 Add Back: Legacy legal fees $ 0.07 Acquisition & integration related expenses $ 0.05 Amortization related to aspire acquisition $ 0.07 Aspire gain on consolidation ($0.67) Adjusted EPS $ $