4 th Quarter & Fiscal 2018 Financial Results

Transcription

1 4 th Quarter & Fiscal 2018 Financial Results February 26, 2019 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 forward-looking 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 26, 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, TTM 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, TTM 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 Zero Harm Good Safety is Good Business Total Recordable Incident Rate (TRIR) Performance: KBR IOGP Top Q IOGP Average KBR is focused on an industry-leading commitment to employee safety. Continuing strong in 2018 with an unwavering commitment to achieving zero harm. 4 1 Includes acquisitions; IOGP is International Association of Oil & Gas Producers

5 Highlights 4 th Quarter 2018 $ in millions, except EPS Revenues $1,330 $937 4Q17 4Q18 Adjusted EBITDA 1 Adjusted EBITDA 1 Revenue, Adjusted EBITDA and Adjusted Margin EPS growth fueled by industry leading organic growth and acquisitions $51 4Q17 $107 4Q18 5.4% 4Q17 8.0% 4Q18 42% top line Revenue growth 78% growth in GS, 31% organic 12% growth in Technology, all organic Adjusted EPS 1 Operating Cash Flow Backlog Strong margins and operating cash flow $0.28 $0.39 $129 $2,835 $10,570 $3,683 $13,497 Long-term backlog with quality growth opportunities $(45) KBR overall book-to-bill 2 of 1.6x 4Q17 4Q18 4Q17 4Q18 4Q17 4Q Adjusted EBITDA and Adjusted EPS reconciliations provided in the Appendix 2 Excluding the work off of the long term PFIs

6 Highlights Fiscal 2018 $ in millions, except EPS Revenues $4,913 $4,171 FY 2017 FY 2018 Adjusted EBITDA 1 Adjusted EBITDA 1 Revenue, Adjusted EBITDA and Margin Adjusted EPS growth fueled by industry $414 leading organic growth and acquisitions $333 FY 2017 FY % 8.4% FY 2017 FY % top line Revenue growth 58% growth in GS, 17% organic 10% growth in Technology, all organic Adjusted EPS 1 Operating Cash Flow Backlog Operating cash conversion 2 of 95% $1.49 $1.53 $193 $165 $2,835 $10,570 $3,683 $13,497 Long-term backlog with quality growth opportunities Book-to-bill 3 of 1.2x KBR overall FY 2017 FY 2018 FY 2017 FY 2018 FY 2017 FY Adjusted EBITDA and Adjusted EPS reconciliations provided in the Appendix 2 Excluding non-cash gain on Aspire consolidation 3 Excluding the work off of our long term PFIs

7 Market Outlook: Government Services Expanding and diverse portfolio of full life-cycle capabilities Acquisitions delivering synergistic opportunities Access to multiple funding streams, including international Excellent execution, contract performance and client relationships Healthy government spending, both domestic and international Favorable fiscal 2019 U.S. DOD and NASA budgets Increasing opportunities with best value selections Bundling of procurements favors scale and broad capability 7

8 Market Outlook: Technology Strong market fundamentals and growing opportunity pipeline Proving commercialization of revolutionary technologies (e.g., K-SAAT - safer, cleaner, more efficient) Regulatory mandates are driving demand for our clean refining solutions (e.g., IMO 2020) Ammonia and fertilizer markets are gaining momentum Attractive margins for petrochemical end products driving accelerated investment demand 8

9 Market Outlook: Hydrocarbons Strong momentum across the services and global maintenance markets Under-investment in capital projects in recent years Significant LNG supply shortfall beginning in the early 2020 s Increased investment in higher margin chemicals and petrochemicals facilities Low-priced, plentiful feedstock 9

10 Mark Sopp Chief Financial Officer

11 Consolidated Results ($ in millions, except EPS) 4Q Q 2018 FY 2018 Revenues $ 937 $ 1,330 $ 4,913 Gross Profit $ 65 $ 123 $ 456 Equity in Earnings $ 8 $ 27 $ 81 GP + EE* $ 73 $ 150 $ 537 General & Administrative Expenses ($40) ($53) ($166) Acquisition & Integration Expenses $ 0 ($2) ($7) Gain on Disposition of Assets/Restructuring ($6) ($2) ($2) Gain on Consolidation of Aspire Entities $ 0 ($5) $ 108 Operating Income $ 27 $ 88 $ 470 Net Interest, Other $ 8 ($25) ($72) Noncontrolling Interest ($3) ($6) ($29) Benefit/(Provision) for Income Taxes $ 243 ($14) ($88) Net Income Attributable to KBR $ 275 $ 43 $ 281 Adjusted EBITDA 1 $ 51 $ 107 $ 414 EPS (diluted wtd avg) $ 1.94 $ 0.31 $ 1.99 Adjusted EPS 1 $ 0.28 $ 0.39 $ 1.53 Strong growth in Revenues and Adjusted EBITDA All segments met/exceeded GP + EE targets G&A and interest expense in line with expectations Provision for Income Taxes in line with expectations; Q42017 impacted by special noncash tax benefit Operating cash conversion of 265% in the quarter and 95% annually, excluding non-cash gain on Aspire Diluted weighted average shares Operating Cash Flow ($45) $ 129 $ *Gross Profit + Equity in Earnings 1 Adjusted EBITDA and Adjusted EPS reconciliations provided in the Appendix

12 Segment Performance: Government Services $150 $100 $50 Revenue & GP+EE, by Quarter $1,000 $500 Industry leading organic growth: 31% quarter over quarter; 17% annually New work (e.g., Tyndall AFB and MSOC) On-contract growth in our logistics business $0 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 $0 1.6x book-to-bill 3 in the 4 th quarter; 1.2x 3 annually GS GP+EE GS Revenue Margins as expected Revenue CAGR Targets 5 8% 2018 Actuals 17% Excellent cash conversion; negative working capital GP+EE Margins Upper single % Segment Operating Income Margins Segment Operating Cash Flow Conversion Upper single % % of Net Income 9% 8% 2 122% 2 4 Quarters of double digit organic growth NASA Service Awards 12 1 Organic growth rates 2 As adjusted to exclude the non-cash gain on the consolidation of Aspire of $113 million 3 Excluding the work off of our long term PFIs

13 Segment Performance: Technology $60 $30 Revenue and GP+EE, by Quarter $100 $50 Strong organic growth: 12% quarter over quarter; 10% annually Momentum in petrochemicals and refining Increased contract value with bundling of licenses, services, equipment and catalysts $0 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 $0 1.6x book-to-bill for the 4 th quarter and annually Revenue CAGR 1 Technology GP+EE Technology Revenue 2018 Targets 2018 Actuals 7 10% 10% Margins above expectations due to favorable license mix Excellent cash conversion; negative working capital GP+EE Margins Segment Operating Income Margins Segment Operating Cash Flow Conversion Mid 20s % Mid 20s % % of Net Income 29% 28% 118% 13.5% 10 Year Revenue CAGR 5 Sequential quarters of record backlog 13 1 Organic growth rates

14 Segment Performance: Hydrocarbons Services $150 $600 Revenue and GP+EE, by Quarter Sustainable, predictable results in growing markets $75 $300 Margins above expectations Favorable project close-outs Strong execution from joint ventures $0 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 $0 1.0x book-to-bill for the 4 th quarter, 1.1x annually HS GP+EE HS Revenue 2018 Targets 2018 Actuals Revenue CAGR 1 GP+EE Margins Segment Operating Income Margins Down 5% to flat Mid to upper single % Mid to upper single % Down 31% 13% 10% 15% Industrial Svc annual Op income growth 75%+ Services in HS backlog today Segment Operating Cash Flow Conversion % of Net Income n/a Organic growth rates 2 N/A; use of cash in 2018

15 Capital Allocation and Liquidity Quarter Ending Mar 31, 2018 Jun 30, 2018 Sep 30, 2018 Dec 31, 2018 Ending Cash Balance $ 486 $ 519 $ 581 $ 739 Gross Debt $ 540 $ 1,078 $ 1,169 $ 1,336 Net Debt $ 54 $ 559 $ 588 $ 597 TTM Adjusted EBITDA 1 $ 340 $ 320 $ 358 $ 414 Gross Debt/Adjusted EBITDA Net Debt/Adjusted EBITDA Payments of Dividends to Shareholders $ 11 $ 11 $ 11 $ 11 Decreasing leverage aligned with growing Adjusted EBITDA 15 1 TTM Adjusted EBITDA reconciliations provided in the Appendix

16 2019 Full Year Guidance 2019 Guidance Diluted Earnings Per Share $ $1.44 Adjustments: Legacy Legal Fees Non-Cash Imputed Interest on Conversion Option Acquisition & Integration related Expenses Amortization related to Aspire Consolidation Incremental Interest on Ichthys Funding Adjusted EPS $ $1.73 Mid point 8% growth over 2018 Effective Tax Rate, excluding discrete items 23% - 25% Operating Cash Flow $175M - $205M 16

17 2019 KBR Investor Conference Friday, May 3 New York Stock Exchange 17

18 Final Thoughts Excellent year strong growth, execution, cash collection and bookings High cash conversion on target and projected to continue into 2019 Growing confidence in the restoration of LNG and downstream capital investment cycles Healthy overall BTB supporting our growth outlook and 2019 guidance 18

19 APPENDICES 19 Investor Presentation KBR

20 Appendix: Ichthys LNG Project Status Offsites & Utilities Operations Complex Temporary Power Plant All of the components of the LNG facility, except for CCPP, are complete and turned over to the client GTG 1 Combined Cycle Power Plant GTG 2 STG 1 GTG 3 STG 2 GTG 4 STG 3 GTG 5 Butane Tank Propane Tank CCPP is on track to export combined cycle power in late Q2/early Q3 CCPP Construction progress is 99% with commissioning advancing well at almost 80% LNG Train 2 LNG Train 1 Complete Handover expected by Q2/Q LNG Tank 2 LNG Tank 1 Both LNG trains in production Clear line of sight to completion Cash commitments are holding at $500M 20

21 Financial Snapshot Eight Quarters of Consistent Results Adjusted Earnings Per Share Guidance and Results Annual Guidance $1.10 to $1.40 Raised Guidance $1.25 to $1.45 2Q 17 Raised Guidance $1.35 to $1.50 3Q 17 AEPS $0.35 Achieved Annual Results $1.48 4Q 17 AEPS $0.28 Annual Guidance $1.35 to $1.45 1Q 18 AEPS $0.34 Raised Guidance $1.40 to $1.50 2Q 18 AEPS $0.34 Raised Guidance $1.45 to $1.55 3Q 18 AEPS $0.46 Achieved Annual Results $1.53 4Q 18 AEPS $0.39 Annual Guidance AEPS $1.58 to $1.73 FY Q 17 AEPS $0.57 AEPS $0.28 Note: See Appendix for reconciliation of GAAP EPS to Adjusted EPS (AEPS) 21

22 Appendix: Backlog Trend $ in millions $10,595 $10,324 $10,342 $10,570 $13,157 $13,495 $13,481 $13,497 $1,601 $2,144 $1,898 $1,898 $423 $509 $544 $594 Hydrocarbons Services Technology Majority of KBR backlog is currently associated with long-term, reimbursable, PFI and/or service contracts with a lower risk profile and more predictable cash flows $2,589 $2,173 $1,916 $295 $260 $243 $1,828 $387 GS backlog excludes unexercised options and ID/IQ and MATOC contract values not yet under task order $7,711 $7,891 $8,183 $8,355 $11,133 $10,842 $11,039 $11,005 Government Services Current estimate of $3.7B in additional potential value as of December 31, 2018 Technology Growth over five consecutive quarters 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 HS backlog Stability over five consecutive quarters Note: Includes KBR share of unconsolidated JVs; NSB included with Hydrocarbons 22

23 Non-GAAP Reconciliation: Adjusted EPS Quarter Ending Quarter Ending Mar 31, 2017 Jun 30, 2017 Sep 30, 2017 Dec 31, 2017 FY17 Mar 31, 2018 Jun 30, 2018 Sep 30, 2018 Dec 31, 2018 FY18 EPS (Diluted) $0.26 $0.54 $0.32 $1.94 $3.06 $0.97 $0.30 $0.41 $0.31 $1.99 Add Back: Legacy Legal Fees $0.02 $0.03 $0.03 $0.02 $0.10 $0.01 $0.02 $0.01 $0.01 $0.06 Acquisition & integration related expenses $0.00 $0.00 $0.00 $0.00 $0.00 $0.02 $0.00 $0.01 $0.01 $0.04 Amortization related to Aspire acquisition $0.00 $0.00 $0.00 $0.00 $0.00 $0.01 $0.02 $0.02 $0.02 $0.06 Non-cash imputed interest on conversion option $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.01 $0.01 Aspire (gain) loss on consolidation $0.00 $0.00 $0.00 $0.00 $0.00 ($0.67) $0.00 $0.01 $0.03 ($0.63) Non-cash tax benefit for 2017 Tax Reform $0.00 $0.00 $0.00 ($0.13) ($0.13) $0.00 $0.00 $0.00 $0.00 $0.00 Non-cash tax valuation allowance reduction $0.00 $0.00 $0.00 ($1.59) ($1.58) $0.00 $0.00 $0.00 $0.00 $0.00 Impairment of shareholder loan receivable $0.00 $0.00 $0.00 $0.04 $0.04 $0.00 $0.00 $0.00 $0.00 $0.00 Adjusted EPS $0.28 $0.57 $0.35 $0.28 $1.49 $0.34 $0.34 $0.46 $0.39 $

24 Non-GAAP Reconciliation: Consolidated, Adjusted and TTM Adjusted EBITDA EBITDA is defined as earnings before interest income / expense, income taxes, other nonoperating income / expense (including FX), depreciation and amortization ($ in millions) 4Q Q 2018 FY 2017 FY 2018 Net Income Attributable To KBR $ 275 $ 43 $ 434 $ 281 Add Back: Interest expense $ 5 $ 23 $ 21 $ 66 Provision (benefit) for income taxes ($243) $ 14 ($193) $ 88 Other non-operating (income) expense ($13) $ 2 ($4) $ 6 Halliburton tax sharing agreement $ 14 $ 0 $ 14 $ 0 Depreciation & amortization $ 10 $ 16 $ 48 $ 63 Consolidated EBITDA $ 48 $ 98 $ 320 $ 504 Add Back: Legacy legal fees $ 3 $ 2 $ 13 $ 11 Acquisition & integration related expenses $ 0 $ 2 $ 0 $ 7 Aspire (gain) loss on consolidation $ 0 $ 5 $ 0 ($108) Jun 30, 2017 Sep 30, 2017 Dec 31, 2017 Mar 31, 2018 Jun 30, 2018 Sep 30, 2018 Dec 31, 2018 EBITDA $ 115 $ 82 $ 48 $ 193 $ 95 $ 118 $ 98 add back Legacy Legal Fees $ 4 $ 4 $ 3 $ 3 $ 3 $ 3 $ 2 Acquisition & Integration Related Expenses $ 3 $ 1 $ 1 $ 2 Aspire Gain on Consolidation ($115) $ 0 $ 2 $ 5 Adjusted EBITDA $ 119 $ 86 $ 51 $ 84 $ 99 $ 124 $ 107 March TTM 2018 June TTM 2018 Sep TTM 2018 Dec TTM 2018 TTM EBITDA $ 438 $ 418 $ 454 $ 504 add back Legacy Legal Fees $ 14 $ 13 $ 12 $ 11 Acquisition & Integration Related Expenses $ 3 $ 4 $ 5 $ 7 Aspire Gain on Consolidation ($115) ($115) ($113) ($108) TTM Adjusted EBITDA $ 340 $ 320 $ 358 $ 414 Adjusted EBITDA $ 51 $ 107 $ 333 $