KBR Announces Second Quarter 2021 Financial Results; Updates FY 2021 Guidance

HOUSTON, July 29, 2021 /PRNewswire/ -- KBR, Inc. (NYSE: KBR) today announced its second quarter 2021 financial results and updated FY 2021 financial guidance.

"KBR delivered an outstanding quarter with excellent results across all core metrics of growth, profitability, bookings and cash conversion," said Stuart Bradie, KBR President and CEO. "The impressive double-digit top-line growth, terrific organic growth in Government Solutions, strong adjusted EBITDA margins delivering adjusted EBITDA growth of almost 50%, superb free cash conversion, and healthy book-to-bill of 1.1x all demonstrate the unwavering focus and superb execution of our team. Importantly, we also continued to deliver outstanding safety and operational performance, and we continued to reduce uncertainty by making meaningful progress in resolving legacy matters."

Bradie added, "Today, KBR is well-positioned in growing end markets – advancing national security priorities, defense modernization, energy transition and sustainability.  Given our strong operating performance, growing backlog, and continued confidence in our cash-generative business model, we are increasing our full-year 2021 cash guidance. With a foundation of enduring long-term contracts and strong macro-tailwinds that align with our expertise, we are confident that the company is well positioned for sustainable growth and value creation as we progress toward our 2025 goals and beyond."

Financial Highlights for the Quarter Ended June 30, 3021

• Revenue of $1.5 billion, an 11% increase in the quarter, is aligned with management's consolidated revenue guidance for the year of circa $6 billion.
• Government Solutions posted $1.2 billion of revenue in the second quarter, a 29% increase over 2020. This increase reflects 13% organic growth with each government business unit delivering organic growth from new program wins and on-contract expansion driven by strong execution. Additionally, Centauri, acquired in October 2020, recorded over $180 million of revenue in the quarter, delivering healthy organic growth of 30% on top of acquisitive growth.
• Sustainable Technology Solutions posted $0.3 billion of revenue in the second quarter, which is in line with our guided annual FY 2021 revenue expectations for this business following the company's 2020 exit from commoditized services.
• Gross profit, operating income (loss) and adjusted EBITDA were impacted by the following:
• Gross profit and adjusted EBITDA each increased almost 50% period over period due to excellent Government Solutions organic growth, strong execution across the business and the acquisition of Centauri. Additionally, the company benefited from the net favorable resolution of and provisioning for legacy matters in Sustainable Technology Solutions that resulted in a net benefit of $16 million with attendant favorable operating cash flow.
• Operating income (loss) was impacted by a non-cash charge to equity in earnings of unconsolidated affiliates in the amount of $193 million recorded based on the progress of settlement discussions during the quarter with the Ichthys LNG client. This charge reflects KBR's proportionate share of unfunded client change orders and claims. Consistent with the company's practice to present adjusted earnings net of Ichthys commercial recovery and settlement costs, this non-cash charge is excluded from adjusted EBITDA and adjusted EPS. Furthermore, this non-cash charge does not impact pursuit of, or positions related to, subcontractor claims associated with the combined cycle power plant for which the company continues to expect a favorable cash award or settlement upon resolution.
• Selling, general and administrative expenses of $103 million increased $30 million compared to 2020, principally due to the acquisition of Centauri and an increase in corporate expenses associated with return to the office, increased travel and other initiatives, all in line with expectations.
• In 2020, operating income (loss) was impacted by non-cash restructuring and impairment charges of $96 million that did not recur in 2021 in connection with the transformation of its operating model to narrow its strategic focus and reduce risk.

Recent Developments and New Business

In the quarter ended June 30, 2021, the company delivered 1.1x book-to-bill and was awarded approximately $1.9 billion in backlog and options, as follows:

• Expanded footprint through new project/program wins, including a $51 million contract from the National Oceanic and Atmospheric Administration to develop, deploy and operate the agency's Space Weather Follow-On Antenna Network to support forecasts of space weather and protection of lives and livelihood around the planet; and a $531 million contract awarded to a KBR joint venture to provide engineering services for spaceflight and ground systems, including the development and validation of new technologies for future space and science missions.
• Continued track record of innovation, bringing new technologies and solutions to market, including the award of a contract to provide industry-leading, disruptive Hydro-PRT℠ plastics recycling technology to Mitsubishi Chemical Corporation; the award of a contract to provide industry-leading fluid catalytic cracking licensed technology and engineering design support; and an award to provide our AI- and data-enabled INSITE® solution, part of KBR's digital sustainability suite, which leverages data, machine learning and our deep domain expertise to enable clients to proactively monitor and optimize plant operations.

Capital Deployment

KBR continues to employ a balanced approach to capital allocation, which includes organic and external investments that facilitate sustainable, long-term growth and the prudent return of capital to shareholders. Looking ahead, KBR will continue to leverage its talent, expertise and financial strength to capitalize on industry tailwinds, long-term market dynamics and accretive growth opportunities.

During the quarter, KBR repurchased $28 million of common shares and issued a quarterly dividend of $0.11 per share, an increase of 10% from 2020.

Updating FY 2021 Guidance

KBR updated its FY 2021 financial guidance, as follows:

• Consolidated revenue: $5.8 billion to $6.2 billion (no change)
• Adjusted EBITDA margin: ~9% (no change)
• Effective tax rate: 25% to 26% (no change)
• GAAP earnings (loss) per share (EPS): $(0.10) to $0.10; adjusted EPS: $2.00 to $2.20 (updated)
• Updated GAAP EPS to reflect a $1.42 non-cash charge for Ichthys commercial dispute costs to reflect the progress of settlement discussions with the client during the quarter. Consistent with our practice to present our adjusted earnings net of Ichthys commercial recovery and settlement costs, we have excluded this non-cash charge from our adjusted EPS. This non-cash charge does not impact JKC's position or pursuit of subcontractor claims, including those for the combined cycle power plant.
• Updated GAAP EPS to reflect a $0.05 non-cash expense for the estimated impact of the enactment of a change to the UK statutory rate to 25% effective in 2023 on our net UK deferred tax liabilities. This item has been added back to Adjusted EPS.
• GAAP operating cash flow (OCF): $255 million to $295 million; adjusted OCF: $300 million to $340 million (raised)

Conference Call Details

The company will host a conference call to discuss its second quarter 2021 financial results on Thursday, July, 29, 2021 at 7:30 a.m. Central Time. The conference call will be webcast simultaneously through the Investor Relations section of KBR's website at investors.kbr.com. A replay of the webcast will be available shortly after the call on KBR's website or by telephone at +1.719.457.0820, passcode: 5634287.

About KBR

We deliver science, technology and engineering solutions to governments and companies around the world. KBR employs approximately 29,000 people worldwide with customers in more than 80 countries and operations in 40 countries. KBR is proud to work with its customers across the globe to provide technology, value-added services, and long-term operations and maintenance services to ensure consistent delivery with predictable results. At KBR, We Deliver.

Visit www.kbr.com

Forward-Looking Statements

This press release and related comments by KBR management contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Some examples include 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 press release, the words "estimates," "expects," "predicts," "continues," "looking ahead," "well-positioned," "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 press release. 

Additional information about potential risk factors that could affect our business and financial results is included in our latest Form 10-K and any subsequent Forms 10-Q and 8-K. We caution you not to place undue reliance on the forward-looking statements included in this press release, 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. We also disclaim any duty to comment on or correct information that may be contained in reports published by investment analysts or others.

Non-GAAP Financial Information

The following information provides reconciliations of certain non-GAAP financial measures presented in the press release to which this reconciliation is attached to the most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles (GAAP). The company has provided the non-GAAP financial information presented in the press release as information supplemental and in addition to the financial measures presented in the press release that are calculated and presented in accordance with GAAP. Such non-GAAP financial measures should not be considered superior to, as a substitute for or alternative to, and should be considered in conjunction with, the GAAP financial measures presented in the press release. The non-GAAP financial measures in the press release may differ from similar measures used by other companies.

EBITDA and Adjusted EBITDA

We evaluate performance based on EBITDA and Adjusted EBITDA. EBITDA is defined as Net income attributable to KBR, plus interest expense, net; provision for income taxes; other non-operating expense (income); and depreciation and amortization. Adjusted EBITDA excludes certain amounts included in EBITDA. EBITDA and Adjusted EBITDA for each of the three- and six-month periods ended June 30, 2021 and 2020 are considered non-GAAP financial measures under SEC rules because EBITDA and Adjusted EBITDA for each such period exclude certain amounts included in the calculation of net income attributable to KBR in accordance with GAAP for such periods. Management believes EBITDA and Adjusted EBITDA afford investors a view of what management considers KBR's core performance for each of the three- and six-month periods ended June 30, 2021 and 2020 and also affords investors the ability to make a more informed assessment of such core performance for the comparable periods.

Adjusted EPS

Adjusted earnings per share (Adjusted EPS) for each of the three- and six-month periods ended June 30, 2021 and 2020 is considered a non-GAAP financial measure under SEC rules because the Adjusted EPS for each such period excludes certain amounts included in the diluted earnings per share calculated in accordance with GAAP for such periods. The most directly comparable financial measure calculated in accordance with GAAP is diluted EPS for the same periods. Management believes that Adjusted EPS affords investors a view of what management considers KBR's core earnings performance for each of the three- and six-month periods ended June 30, 2021 and 2020 and also affords investors the ability to make a more informed assessment of such core earnings performance for the comparable periods.

We have calculated Adjusted EPS for each of the three- and six-month periods ended June 30, 2021 and 2020 by adjusting diluted EPS for the items included in the table below.

We have calculated the Adjusted EPS for the 2021 guidance by adjusting diluted EPS for the items included in the table below.

Adjusted Cash Flows Provided by Operating Activities and Adjusted Free Cash Flows

Adjusted operating cash flows and adjusted free cash flows are considered non-GAAP financial measures under SEC rules.   Adjusted operating cash flows exclude certain amounts included in the cash flows provided by operating activities calculated in accordance with GAAP. Adjusted free cash flows exclude capital expenditures from adjusted operating cash flows.  The most directly comparable financial measure calculated in accordance with GAAP is cash flows provided by operating activities. Management believes that adjusted operating cash flows and adjusted free cash flows afford investors a view of what management considers KBR's core operating cash flow performance and also afford investors the ability to make a more informed assessment of such core operating cash generation performance.

We have calculated adjusted operating cash flows and adjusted free cash flows for each of the three- and six-month periods ended June 30, 2021 and 2020 by adjusting operating cash flow provided by operating activities for items included in the table below.

We have calculated the 2021 guidance for adjusted operating cash flows by adjusting cash flows provided by operating activities for the items included in the table below.

SOURCE KBR, Inc.