Cowen 41 Annual Aerospace/Defense & Industrials Conference · Cowen 41st Annual Aerospace/Defense &...
Transcript of 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
Proud history, bright future.©2019 KBR Inc. All Rights Reserved.
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.
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Enduring, Diverse
Contracts in Healthy End
Markets
SustainableRevenue and
EBITDA Growth
Strong Free Cash
Generation
Capital Deployment Flexibility
Sustainability Differentiated
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Government Solutions
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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
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Technology Solutions
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$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
24.5%LTM EBITDA Margin
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Energy Solutions
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~$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
7.9%LTM EBITDA Margin
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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
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Healthy Growth Outlook
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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
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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
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Capital Allocation | Executing our deployment strategy
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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
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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
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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
Proud history, bright future.©2019 KBR Inc. All Rights Reserved.
Enduring, Diverse
Contracts in Healthy End
Markets
SustainableRevenue and
EBITDA Growth
Strong Free Cash
Generation
Capital Deployment Flexibility
Sustainability Differentiated
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APPENDICES
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Non-GAAP Reconciliations: Adjusted EPS and Adjusted EBITDA
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($ 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