KBR to Acquire Centauri · 2020. 8. 19. · The future, designed and delivered. Stuart Bradie...
Transcript of KBR to Acquire Centauri · 2020. 8. 19. · The future, designed and delivered. Stuart Bradie...
The future, designed and delivered.The future, designed and delivered.Stuart Bradie – President and Chief Executive OfficerByron Bright – President, Government SolutionsMark Sopp – Executive Vice President and Chief Financial Officer Alison Vasquez – Vice President, Investor Relations
KBR to Acquire CentauriA Highly Strategic, Accretive Acquisition
August 19, 2020
©2020 KBR Inc. All Rights Reserved.
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. These risks and uncertainties include, but are not limited to: the significant adverse impacts on economic and market conditionsof the COVID-19 pandemic; the company’s ability to respond to the challenges and business disruption presented by the COVID-19 pandemic; the recent dislocation of the global energy market; the company’s ability to realize cost savings and efficiencies relating to the streamlining of its Energy Solutions business; the company’s ability to manage its liquidity; the company’s ability to continue to generate anticipated levels of revenue, profits and cash flow from operations during the COVID-19 pandemic and any resulting economic downturn; the outcome of and the publicity surrounding audits and investigations by domestic and foreign government agencies and legislative bodies; potential adverse proceedings by such agencies and potential adverse results and consequences from such proceedings; the scope and enforceability of the company’s indemnities from its former parent; changes in capital spending by the company’s customers, including as a result of the COVID-19 pandemic; the company’s ability to obtain contracts from existing and new customers and perform under those contracts; structural changes in the industries in which the company operates; escalating costs associated with and the performance of fixed-fee projects and the company’s ability to control its cost under its contracts; claims negotiations and contract disputes with the company’s customers; changes in the demand for or price of oil and/or natural gas; protection of intellectual property rights; compliance with environmental laws; changes in government regulations and regulatory requirements; compliance with laws related to income taxes; unsettled political conditions, war and the effects of terrorism; foreign operations and foreign exchange rates and controls; the development and installation of financial systems; increased competition for employees; the ability to successfully complete and integrate acquisitions; and operations of joint ventures, including joint ventures that are not controlled by the company. Additional information about potential risk factors that could affect our business and financial results is included in our Form 10-K filed on February 24, 2020 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 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 terms “Adjusted EBITDA” and “Adjusted EPS” which are not calculated in accordance with U.S. GAAP. 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. Adjusted earnings per share (Adjusted EPS) is considered a non-GAAP financial measure under SEC rules because Adjusted EPS excludes certain amounts included in the diluted earnings per share calculated in accordance with GAAP for such periods.
Forward-Looking Statements
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Highly strategic, complementary, accretive acquisition
▪ Accelerating growth and building long-term value across strategic growth vectors
▪ Centauri – Strategic, high end, accretive
▪ Bolsters KBR’s leadership in space superiority –military/intel, civil (NASA) and commercial
▪ Delivers immediate scale and franchise position in markets critical to national security with strong bipartisan support
▪ Delivers synergies across space, intel, missile defense and cyber
▪ Operates in programs with high barriers to entry
▪ Strong cultural fit
▪ Attractive returns and earnings; high cash efficiency
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Accelerating growth and building long-term value across strategic vectors
Defense Modernization
Sustainable Technology
Human PerformanceSpace Exploitation
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Centauri | A Highly Strategic, Complementary Acquisition
▪ Accelerates KBR’s leadership position in space superiority – civil, commercial, military/intel
▪ Aligns with KBR’s strategic growth vectors of space exploitation and defense modernization
▪ Achieves immediate scale across space, intel, missile defense, and cyber
▪ Broadens and deepens customer set; minimal portfolio overlap
▪ Moves KBR upmarket in classified domains; highly technical, cleared workforce
▪ Operates in programs with high barriers to entry
▪ Centauri track record of double-digit growth and visibility
Why Centauri? Why Now?▪ Strong bipartisan support for investment to
sustain and advance critical national security interests across space, cyber, missile defense and intelligence
▪ Recent favorable trends in M&A valuations
▪ Delivers immediate accretion, while preserving responsible leverage and ample liquidity
International
Engineering
Logistics
Centauri
Pro Forma GS Revenue
Balance across defense, space, intelligence and
international markets
Space & Mission Soln
REVENUE BY CAPABILITY REVENUE BY CLIENT
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Centauri | At a Glance
$700M+FY2021E REVENUE
$1B+BACKLOG & OPTIONS
~80%WIN RATE
~10%EBITDA MARGIN
~1,750EMPLOYEES
~75%TS / SCI+ CLEARANCES
Other
Department of Defense
Intelligence Community
Space Superiority & Missile Defense
Space & ISR Engineering
Intel, Electronic Warfare & Cyber
SPACE SUPERIORITY
SPACE DOMAINAWARENESS
MISSILE DEFENSE CYBER & INTEL
DIRECTED ENERGY
Compelling Growth
Opportunities
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Centauri | Leading Technology & Expertise Enabling End-to-End Space Solutions
Space Domain Awareness
Orbital Threats
US Space Asset
Tracking & Cataloging Space Objects
Foreign SpaceObject
DataInformation
Communications + Intelligence, Surveillance, Reconnaissance & Targeting (ISR&T)
Space Superiority & Missile Defense
Ground Based Sensors Response InfrastructureCommunications & Ground Infrastructure
C2 & Space DomainAwareness
Identify Monitor
CharacterizeExploit
Assess
Situational Awareness
ActionableInformation
Space-BasedDirected Energy
Space Sensor forMissile Warning & Tracking
Foreign MissileLaunch
US MissileInterceptor
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Centauri | Franchise Position at the Center of Space Superiority
Multi-INT
Priority-INT
SIGINT
GEOINT
Multi-INT
ActivityBased
Intelligence
PriorityIntelligence
MASINT &Radar
Signatures
Space Superiority
SIGINT - Signals IntelligenceGEOINT - Geospatial IntelligenceMASINT - Measurement and Signature Intelligence
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Centauri | Deep Expertise across Critical DOD Priorities
A high growth, high margin, high barriers to entry platform aligned with DOD priorities
▪ Tactical 50kw DE solution with multi-billion-dollar production upside
Directed Energy
▪ 140+ FTE NASIC team focused on evaluating foreign space and long-range weapons technology
Missile Defense
▪ Utilizes proprietary space object characterization algorithms to determine identity and intent of enemy space assets
Artificial Intelligence / Machine Learning
▪ Strong history of utilizing ground and space-based sensors to inform mission management and C2
Command, Control and Communications
▪ 1 of 2 contractors with a presence within all NRO flying SPOs
Space Offense and Defense
▪ Key developer of high-performance, IP-protected quantum computing technology to support analysis of space data
Quantum Science and Computing
▪ IP-protected position in verifying RF, digital and analog circuitry
Microelectronics
▪ National experts in positioning, navigation & timing (PNT) and navigational warfare
▪ IP-protected offensive cyber technologiesCyber Security
▪ Leading expertise in computational fluid dynamics and advanced materials rapid prototyping
Hypersonics
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Centauri | Expanding KBR’s Platform for Growth
Platform for Growth
Space domain awareness, military space and intel
&Franchise civil space player; emerging commercial space
Scale and balance across the dynamic space frontier
Trusted microelectronics and electronic warfare capabilities; offensive and defensive cyber
&Cyber range expertise,
vulnerability assessments, and electronic security solutions
Scale across cyber and complementary capabilities
Long-term, trusted client relationships
&Broad portfolio of flexible IDIQ
vehicles accessible across a wide range of new customers
Enabling expanded customer access to flexible IDIQ contract
vehicles
Classified facilities & networks, access to TS-SCI billets,
proprietary IP&
Increased scale, significant pipeline of opportunities, broad systems engineering capabilities
Enhanced synergy win rates
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Centauri | Transaction Overview
EV Multiple ~11x 2021 Adjusted EBITDA
Purchase Price ~$800 million, net of tax benefits
Leverage 2.5x Net Leverage, with ample liquidity
Funding ~$300 million cash, $500 million borrowings
Business Structure
Centauri will become part of the Government Solutions segment
TimelineExpected close late-2020 upon customary regulatory approvals
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©2020 KBR Inc. All Rights Reserved.
Accelerates growth in strategic vectors
Attractive returns and earnings
High cash efficiency
❑ Expands KBR “upmarket” into new, adjacent vectors with highly differentiated capabilities
❑ Minimal overlap
❑ Adds >$700 million of annualized revenue in 2021
❑ >15% CAGR 2020-2024
❑ Low recompetes in 2021 and 2022
❑ Adjusted 2021 EPS accretion $0.25-$0.30 with >80% of 2021 secured
❑ Expands KBR GS EBITDA margin to double digits
❑ Adds >$70 million of adjusted EBITDA in 2021
❑ IRR >15%
❑ ~100%+ cash conversion of net income to operating cash flow
❑ Capital-light business model aligns with KBR
Centauri | Provides Near- and Long-Term Value
IN SUMMARY
✓ Accelerating strategic priorities opposite national security and defense modernization priorities
✓ Expanded high-end capabilities and broadened, deepened customer relationships – great fit
✓ Shared values, mission focus, cultural priorities
✓ Attractive accretion, CAGR, margin expansion and cash generation
✓ Accelerating growth (1+1>2) and building long-term value
Performance-based
Cost reimbursable
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KBR | At a Glance (pro forma with Centauri)
Business Description KBR ensures mission and project success for customers globally with capabilities supporting defense, intelligence, space, aviation and industrial.
KBR creates sustainable value and drives innovation by combining engineering, technical and scientific expertise with its full life cycle capabilities, mission knowledge and future-focused technologies, from research and development, test and evaluation, and systems engineering to program management, operations, maintenance and field logistics. Known for excelling in complex and extreme environments, KBR is trusted to help our clients meet their most pressing challenges today and into the future.
Core Capabilities SCIENTIFIC RESEARCH ▪ Quantum Science and Computing▪ Health and Human Performance ▪ Life Science Research ▪ Directed Energy▪ Earth Sciences ▪ Robotic Space Systems▪ Materials Science
OPERATIONS▪ Command, Control and Communications▪ Space Domain Awareness▪ Human Spaceflight and Satellite Ops ▪ Integrated Supply Chain and Logistics ▪ Technical Training Services ▪ Military Aviation Support ▪ Equipment Maintenance ▪ Portfolio Management
ENGINEERING SERVICES ▪ Systems & Sustainment Engineering▪ Systems and Platform Integration ▪ Test and Evaluation ▪ Aerospace Acquisition Support ▪ Rapid Prototyping▪ Consulting Services ▪ Analysis of Alternatives
TECHNOLOGY▪ Sustainable IP ▪ Advisory Services – Energy Transition▪ Digital Asset Optimization
INFORMATION OPERATIONS ▪ Data Analytics ▪ Offensive and Defensive Space and Cyber ▪ Mission Planning Systems ▪ AI and Machine Learning▪ Assured Microelectronics
Key Factors
Competitive Differentiators
▪ Deep domain expertise in technical disciplines, creating highly defensible market positions▪ Proven and disruptive sustainable IP and digital solutions▪ Solid base of contracts providing stability to pursue future growth opportunities ▪ Global franchise positions with marquee, long-term customers ▪ Experienced management team and highly cleared employee base ▪ Top-tier organic revenue growth with significant cash flow generation
Revenue Profile
LINES OF BUSINESS MAJOR CUSTOMERS CONTRACT TYPE
~9%Adj. EBITDA
MARGIN
NASA & Fed Civ
Intel; undisclosed
Intl Defense
Industrial U.S. DoD
~$6B2021(E)
REVENUE
30,000EMPLOYEES
$16.5BBACKLOG &
OPTIONS6/30/2020
Engineering
Space & Mission Soln.
LogisticsInternational
Centauri
Technology
AppendicesDOING THE RIGHT THING FOR THE PLANET, OUR PEOPLE AND OUR COMMUNITIES WHILE PURSUING BUSINESS GROWTH
Q&A