KBR Announces First Quarter 2021 Financial Results

Source: www.gulfoilandgas.com 4/29/2021, Location: North America

- Delivered $89 million of operating income and >20% growth in adjusted EBITDA

- Achieved strong cash generation; 109% adjusted free cash conversion of net income

- Awarded $1.6 billion of contracts and options in high-end, technical, upmarket areas

- Reaffirming FY 2021 guidance that reflects 20% embedded earnings growth over 2020

KBR, Inc. (KBR) announced its first quarter 2021 financial results and reaffirmed FY 2021 financial guidance.

"KBR is off to a strong start in 2021, building on its momentum with new program wins, innovative technologies and solid execution and safety performance, all contributing to profitable growth in the first quarter," said Stuart Bradie, President and CEO of KBR. "We posted key wins in trusted microelectronics, automation, rapid prototyping, sustainable technology licensing, energy transition and more. At the same time, we continued advancing innovations in important high-growth areas such as climate change, cyber analytics and space superiority. Thanks to the unrelenting focus of our talented people, KBR is poised to continue generating strong free cash flow and to delivering revenue and profitability in line with our expectations and long-term objectives. Given KBR's solid 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."

Key Financial Highlights

- Revenue of $1.5 billion is aligned with management's consolidated revenue guidance for the year of circa $6 billion.

- New programs, on-contract expansion and acquisitive growth, as follows: approximately $145 million, or 71%, growth in Defense and Intel, 5% organic; approximately $45 million, or 15% growth, all organic, in Readiness & Sustainment, predominantly in enduring O&M programs such as planning, scheduling, and supporting training rotations at the National Training Center; and approximately $10 million, or 4%, organic growth in Science & Space;

- A reduction of approximately $275 million primarily attributable to the non-recurrence of non-core Sustainable Technology activities exited in 2020 and a reduction in the International government business primarily attributable to the substantial completion of a program in 2020.

- Selling, general and administrative expenses of $89 million declined $8 million compared to 2020, principally due to the company's 2020 restructuring and exit from non-core businesses as well as reduced travel associated with the ongoing pandemic. These decreases were partially offset by an increase in SG&A associated with our acquisition of Centauri in late 2020.

- Adjusted EBITDA of $135 million increased 21% principally due to strong performance in the Sustainable Technology business, the acquisition of Centauri and SG&A savings.

Recent Developments and New Business

In the quarter ended March 31, 2021, the company was awarded approximately $1.6 billion in backlog and options, as follows:

- Expanded footprint through new project/program wins, including a new five year, $195 million ceiling IDIQ contract to provide high-end technical services in the emerging areas of trusted microelectronics; a new five year, $470 million contract won by a KBR joint venture to provide technology-led, data driven facilities management support to the U.K. MoD; and a new contract to assist in the development and management of the navigation training system for the Royal Australian Navy's premier maritime warfare training establishment.

- Continued track record of innovation, bringing new technologies to market, including:

- Won a contract to provide KBR's proprietary K-COT™ catalytic olefins technology that converts naptha to propylene. Because of its differentiated fluidized bed continuous cycle process, K-COT™ produces larger volumes of high demand propylene at a significantly lower capex and opex cost and with a more attractive environmental footprint compared to competing technologies;

- Won a contract to provide KBR's proprietary K-PRO™ propane dehydrogenation technology that converts propane to propylene. K-PRO™, a new technology introduced in 2019, is a disruptive alternative enabling clients to measurably reduce cost and improve environmental footprint. Unlike competing technologies, the catalyst does not contain semi-precious metals or chromium, significantly reducing processing cost and eliminating the need to treat or dispose of chromium byproducts;

- Awarded a new contract by the National Renewable Energy Laboratory (NREL) to provide engineering, test and evaluation services to advance NREL's R&D in the area of renewable energy, energy efficiency, energy systems integration, and sustainable transportation;

- Won a feasibility study for our groundbreaking ammonia-methanol co-production process. This technology combines KBR's market-leading ammonia technology and Johnson Matthey's market-leading methanol technology to give clients superior flexibility in end product diversification.

Capital Deployment

KBR continues to employ a balanced approach to capital allocation, which includes investments that facilitate sustainable, long-term growth and prudent return of capital to shareholders. During the quarter, KBR's Board of Directors increased the company's quarterly dividend 10% to $0.11 per share.

Reaffirming FY 2021 Guidance

KBR has reaffirmed its expectations of FY 2021 financial results, including:

- Consolidated revenue: $5.8 billion to $6.2 billion

- Adjusted EBITDA margin: ~9%

- Effective tax rate: 25% to 26%

- Earnings per share (EPS): $1.39 to $1.59; adjusted EPS: $2.00 to $2.20

- Operating cash flow (OCF): $243 million to $283 million; adjusted OCF: $280 million to $320 million

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