Cowen 41 Annual Aerospace/Defense & Industrials Conference · Cowen 41st Annual Aerospace/Defense &...

©2019 KBR Inc. All Rights Reserved.

Cowen 41st Annual Aerospace/Defense & Industrials ConferenceFebruary 13, 2020

The future, designed and delivered.

Proud history, bright future.©2019 KBR Inc. All Rights Reserved.

Stuart Bradie

President & Chief Executive Officer

Mark SoppExecutive Vice

President and CFO


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, 2019.

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.

3


Enduring, Diverse

Contracts in Healthy End

Markets

SustainableRevenue and

EBITDA Growth

Strong Free Cash

Generation

Capital Deployment Flexibility

Sustainability Differentiated

4


Government Solutions

5

115+Global locations

18,000+Employees

~$4B2019

Revenue (est.)

Deep domain expertise

Mission critical services

Large scale & complex environments

Dedicated client delivery model

Critical Differentiators Diverse Customer Base

International

RDT&E

O&M

OCO

NASA

USGS

Diverse Funding Streams

U.S. Department of Defense

U.K. Ministry of Defence

NASA / space community

Australian Department of Defence

Other government entities

9.5%LTM EBITDA Margin


Technology Solutions

6

$0.5MRevenue per

employee

~2-3New technologies

per year

~$0.4B2019

Revenue (est.)

Global presence

Prioritized sales efforts in growth markets (Russia, Asia, Middle East)

Greenfield projects

Brownfields & revamps

Clean, sustainable solutions

Petrochemical & ethylene

Refining and gasification

Ammonia, nitric acid and fertilizers

Licensing & engineering

Proprietary equipment

Catalysts and solvents

Advanced automation and digitalization

Technical services

Expand Technology Portfolio Increase Scope Offerings Expand Geographically



Energy Solutions

7

~$1.3B2019

Revenue (est.)

100+Years of project

execution

40+Years of LNG experience

Design and concept

Pre-FEED and FEED

Engineering, procurement, construction and commissioning

Full maintenance services

Recognized leader

Access to all leading LNG technologies

Liquefaction

Offshore LNG

Full Life Cycle Capabilities LNG Experts

Large-scale, complex program management and EPC

Industrial services and O&M

Downstream and gas monetization consulting

Automation consulting

Feasibility and revamp studies

Expanded Services Portfolio



8

LNG mid-/long-term shortfall, over-supply in the short term

Highly fragmented services market

Strong BTB in 2019 sustains growth beyond 2020

Capital optimization through intelligent O&M solutions

Growing DoD, MoD and NASA budgets

High demand for advanced solutions & human performance

Broad, global client-base accessing multiple funding streams

Diverse portfolio of high-end, differentiated, mission critical solutions

Growing demand for clean energy solutions

Growing consumer demand in developing countries

Disruptive, proprietary technology solutions (clean + safe)

Global presence / world class sales force

2018

GS

TS

ES

GS

TS

ES

2022

10-14% CAGRKBR Revenue Growth

2019 – 2022from 2018 actuals

Market Dynamics Catalysts for Profitable Growth

Long-Term Targets | Quality catalysts for profitable growth


Healthy Growth Outlook

9

New business: ~25%Our robust pursuit pipeline affords significant growth opportunities.

Today’s book of business: ~67%Our recurring, long-term contracts provide stability and predictability into the future.

* Historical recompete and renewal win rates (>95%)

$57B

$24

$24

$9

$107B

$26

$45

$36

~110Pursuits > $100M

~60Pursuits > $100M

*Pursuit pipeline as of December 31, 2019 includes opportunities through 2022 only

LNG: ~8%

2018 A 2019 A 2020 F 2021 F 2022 F

10-14% Revenue CAGR

thru 2022

WUC & Options Recompetes & Renewals New Work LNG

$164 billionKBR Pursuit Pipeline

December 31, 2019

Government Contracting

Hydrocarbons


Capital Deployment Priorities

Fund Organic Growth

Maintain Attractive Dividend

Maintain Responsible Leverage

Strategic M&A or Share Repurchase

Completed amendment of our credit agreement in February 2020

Reflects growth and improved credit rating / profile

Enables greater capital deployment flexibility

100 bps reduction in borrowing cost

Extends pro-rata maturities to 2025 ; Term Loan B to 2027

Reduced overall borrowings by $137 million

Gross leverage, post-refinancing, ~2.4x

Allocation priorities are unchanged

10

Capital Allocation | Executing our deployment strategy


2019 Full-Year Guidance and Long-Term Targets

FY 2019 Guidance (raised)

GAAP EPS $1.36 - $1.46

Adjusted EPS $1.64 - $1.74

Operating Cash Flow $200M - $225M

1 2019-22 CAGR over 2018 actual11

2019-2022 long-term targets

Revenue CAGR, organic1 10-14%

EBITDA margin Upper single %

Adjusted EPS CAGR1 14-18%

Operating cash conversion 90-110%

ROIC, by 2022 12% +

14-18% BaseAdjusted EPS CAGR


12018 reflects immaterial, non-cash corrections related to recording the effects of foreign currency on our share of earnings of an unconsolidated joint venture; see our September 30, 2019 Form 10-Q for further information. See Appendix for reconciliation of Adjusted EBITDA and Adjusted EPS2 Excluding the workoff of the long-term PFIs and other adjustments

$3,583

$4,187

YTD 2018 YTD 2019

Revenues

$303

$354

YTD 2018 YTD 2019

Adjusted EBITDA1

8.5% 8.5%

YTD 2018 YTD 2019

Adjusted EBITDA %

Highlights | Nine months ended September 30, 2019

Growth fueled by contributions from all segments

‐ 17% top line revenue growth

• 21% growth in GS

• 31% growth in TS

• 3% growth in ES

‐ Adjusted EBITDA growth of 14% on higher revenue and continued strong execution

Year to date operating cash flow of $199M; NI conversion of 138%

KBR overall book-to-bill2 of 1.5x

Ichthys LNG handover completed within guided funding requirement

Aspire / Army 2020 performing well

$ in millions, except EPS

$1.14 $1.22

YTD 2018 YTD 2019

Adjusted EPS1

$36

$199

YTD 2018 YTD 2019

Operating Cash Flow

$13,481 $14,643

$3,748 $2,788

YTD 2018 YTD 2019

Backlog

Options

Reported Backlog

12


Consistent Backlog Growth

0.8x1.4x 1.0x 1.6x 0.9x 1.5x 2.1x0.9x

1.1x 1.1x1.2x 1.2x 1.3x

1.5x

Trailing 12 months book-to-bill1

Quarterly Book-to-Bill TTM Book-to-Bill

11.1 10.8 11.0 11.0 10.8 10.7 10.7

0.4 0.5 0.5 0.6 0.5 0.5 0.5

1.6 2.1 1.9 1.9 2.3 2.6 3.4

1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19

Backlog, by quarter

$13.1 $13.4 $13.4 $13.5 $13.6 $13.8$14.6

Consistent increase in TTM book-to-bill

2.1x KBR book-to-bill1 during the 3rd

quarter

‐ Government Solutions 1.5x‐ Technology Solutions 1.1x‐ Energy Solutions 3.6x; 79% year-over-year

backlog growth

Backlog does not include LOGCAP V or Freeport Train 4 awards

Backlog does not include ~$2.8B of unexercised options as of September 30, 2019

ES

TS

GS

1 Book-to-bill excludes impact of workoff of long-term PFIs and other adjustmentsBacklog $ in millions; Includes KBR share of unconsolidated JVs; NSB included with Energy Solutions13


Enduring, Diverse

Contracts in Healthy End

Markets

SustainableRevenue and

EBITDA Growth

Strong Free Cash

Generation

Capital Deployment Flexibility

Sustainability Differentiated

14


APPENDICES


Non-GAAP Reconciliations: Adjusted EPS and Adjusted EBITDA

16

($ in millions) FY 2018 FY 2019

Net Income Attributable To KBR $ 234 $ 144

Add Back:

Interest expense $ 43 $ 76

Provision benefit for income taxes $ 74 $ 59

Other non-operating (income) expense $ 5 ($10)

Depreciation & amortization $ 47 $ 76

Consolidated EBITDA $ 403 $ 344

Add Back:

Legacy Legal Fees $ 9 $ 8

Acquisition & Integration Related Cost $ 6 $ 2

Aspire (gain) loss on consolidation ($115) $ 0

Adjusted EBITDA $ 303 $ 354

FY 2018 FY 2019

Diluted GAAP EPS $ 1.66 $ 1.01

Add Back:

Legacy Legal Fees $ 0.04 $ 0.04

Non-cash imputed interest on conversion option $ 0.00 $ 0.04

Acquisition & Integration Related Cost $ 0.03 $ 0.01

Amortization Related to Aspire $ 0.06 $ 0.05

Incremental interest on Ichthys $ 0.00 $ 0.07

Aspire (gain) loss on consolidation ($0.65) $ 0.00

Adjusted EPS $ 1.14 $ 1.22

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