KBR Q1 2025 Earnings Report

KBR EPS Results

• Actual EPS: $0.98
• Consensus EPS: $0.88
• Beat/Miss: Beat by +$0.10
• One Year Ago EPS: $0.77

KBR Revenue Results

• Actual Revenue: $2.06 billion
• Expected Revenue: $2.09 billion
• Beat/Miss: Missed by -$31.47 million
• YoY Revenue Growth: +13.00%

KBR Announcement Details

• Quarter: Q1 2025
• Date: 5/6/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, May 6, 2025
• Conference Call Time: 8:30AM ET

KBR (NYSE:KBR) provides scientific, technology, and engineering solutions to governments and commercial customers worldwide. It operates through Government Solutions and Sustainable Technology Solutions segments. The Government Solutions segment offers life-cycle support solutions to defense, intelligence, space, aviation, and other programs and missions for military and other government agencies in the United States, the United Kingdom, and Australia. Its services cover research and development, advanced prototyping, acquisition support, systems engineering, cyber analytics, space domain awareness, test and evaluation, systems integration and program management, global supply chain management, and operations readiness and support, as well as command, control, communications, computers, intelligence, surveillance, and reconnaissance services. This segment also provides various professional advisory services to the defense, renewable energy, and critical infrastructure sectors. The Sustainable Technology Solutions segment operates portfolio of various proprietary process technologies for ammonia/syngas, chemical/petrochemicals, clean refining, and circular process/circular economy solutions. This segment also provides synergistic services, including advisory and consulting focused on broad-based energy transition and net-zero carbon emission solutions; high-end engineering, design and program management centered around decarbonization, energy efficiency, environmental impact and asset optimization; and digitally-enabled operating and monitoring solutions. KBR, Inc. was founded in 1901 and is headquartered in Houston, Texas.

KBR Q1 2025 Earnings Call Transcript

Key Takeaways

• In Q1, KBR delivered double-digit growth with revenues of $2.1 billion (+13% YoY) and adjusted EBITDA of $243 million (+17%), achieving an 11.8% margin and raising adjusted EPS 27% to $0.98.
• The company reaffirmed its 2025 guidance (revenues $8.7–9.1 billion; adjusted EBITDA $950–990 million; EPS $3.71–3.95; operating cash flow $500–550 million) and expects stable cash flows despite a modest volume ramp in its HomeSafe contract in Q2.
• KBR highlighted its industry-leading safety performance with a record-low total recordable incident rate of 0.05 and multiple safety milestones in 2024, underscoring its “Zero Harm” commitment.
• Key project wins and operational updates include the HomeSafe relocation program with ~90% customer satisfaction, the Plaquemines LNG project ahead of schedule, a 30% equity agreement on Lake Charles LNG, and LinkQuest’s $970 million ASCEND II contract with the U.S. Space Force.
• Capital allocation remained disciplined, with over $150 million of share repurchases in Q1, a net leverage of 2.6×, $600 million remaining under the buyback authorization, and continued focus on bolt-on M&A for strategic growth.

Presentation

[Operator]

Hello, everyone, and thank you for joining us for today's KBR's First Quarter twenty twenty five Earnings Conference Call. My name is Drew, and I'll be the operator today.

[Operator]

During today's call, after the prepared remarks, there will be a Q and A session. It's now my pleasure to hand over to Jamie DeBray to begin. Please go ahead when you're ready.

[Jamie DuBray, Investor Relations at KBR]

Thank you. Good afternoon, and welcome to KBR's first quarter fiscal twenty twenty five earnings call. Joining me are Stuart Brady, President and Chief Executive Officer and Mark Soff, Executive Vice President and Chief Financial Officer. Stuart and Mark will provide highlights from the quarter and then open the call for your questions. Today's earnings presentation is available on the Investors section of our website at kbr.com.

[Jamie DuBray, Investor Relations at KBR]

This discussion includes forward looking statements reflecting KBR's views about future events and their potential impact on performance as outlined on Slide two. These matters involve risks and uncertainties that could cause actual results to differ significantly from these forward looking statements as discussed in our most recent Form 10 ks available on our website. This discussion also includes non GAAP financial measures that the company believes to be useful metrics for investors. A reconciliation of these non GAAP measures to the nearest GAAP measure is included at the end of our presentation. I will now turn

[Jamie DuBray, Investor Relations at KBR]

the call over to Stuart.

[Stuart Bradie, President & Chief Executive Officer at KBR]

Thank you, Jamie, and good morning, everyone. I will pick up on Slide four. Before discussing our financial performance in the quarter, we'll take a moment dedicated to Zero Harm. Today, we are highlighting our industry leading safety performance in 2024.

[Stuart Bradie, President & Chief Executive Officer at KBR]

At KBR, we are focused on maintaining the highest levels of safety, and we are constantly looking for ways to improve and to ensure that our people can work safely each and every day. Our total recordable incident rate for 2024 was a record low at 0.05. That's notably lower than the national average of 0.37 and representing our third consecutive year of improvement. In 2024, we also set three new safety records. We achieved 26,800,000 consecutive safe work hours.

[Stuart Bradie, President & Chief Executive Officer at KBR]

Secondly, we had a consecutive run of one hundred and one days without a safety incident. And thirdly, we attained 94 harm days. We're doing even better thus far this year at 98 harm day rate. I thank all of our 38,000 global employees for their consistent dedication to safety every single day. And as I often say, good safety is good business.

[Stuart Bradie, President & Chief Executive Officer at KBR]

Now on to Slide five. Today, have five key messages. First, we delivered strong performance in the first quarter, including revenues of $2,100,000,000 and adjusted EBITDA of $243,000,000 both representing double digit growth. Through a strong execution and focus, we generated an adjusted EBITDA margin of 11.8%, now that's up 40 basis points year on year. Second, we continue to successfully and methodically execute our growth strategy.

[Stuart Bradie, President & Chief Executive Officer at KBR]

The Linklist acquisition continues to contribute. We are increasing our bid volumes and we are agile and well aligned to our markets and our customers across the world. Third, our business is balanced, resilient and well positioned to perform in today's environment and we are taking proactive steps to ensure we remain prepared as conditions evolve. Fourth, we are leveraging our strong balance sheet and cash flow to deliver on our capital allocation priorities. Returning record levels of capital to shareholders this quarter through share repurchases and dividends.

[Stuart Bradie, President & Chief Executive Officer at KBR]

Finally, we remain confident in our financial outlook for 2025 and are reaffirming our previously provided guidance. Our cost reductions heading into 2025, our continued laser focus on execution with excellence and strong cash management are serving us well in volatile times. Now Mark will provide further details later. On to Slide six. I will start with an update on our key contracts and recent wins.

[Stuart Bradie, President & Chief Executive Officer at KBR]

Now starting with HomeSafe, our contract continued to ramp during Q1 and we saw significant operational improvement throughout the quarter. Our mission is to improve the move experience of the service men and women while saving taxpayers money as we replace the inefficient and costly legacy program. We are making solid progress against these objectives with customer satisfaction rising nicely. As we move into the summer peak season, we continue to work with Transcom to synchronize moves to supplier capacity. Now this synchronization is healthy for the long term program as it emphasizes quality and timeliness of the moves first.

[Stuart Bradie, President & Chief Executive Officer at KBR]

We accordingly expect pace of move growth to be modest in Q2 with incremental step ups in Q3 and Q4. The HomeSafe Transcom relationship is strong with a commitment on both sides to make this program successful. On Plaquemines, the project is progressing exceptionally well. Following first gas in Q4, LNG exports are either on or ahead of schedule. The success is due to the excellent execution by our joint venture and strong partnership with our customer Venture Global.

[Stuart Bradie, President & Chief Executive Officer at KBR]

Our financial performance this quarter has been strong due to the successful delivery of key project milestones. I think the takeaway here is that our extensive experience in LNG coupled with the advantageous characteristics of this commercial business model are delivering significant results. Lastly, Lake Charles LNG. Our customer Energy Transfer has entered into an agreement with Mid Ocean to jointly develop the project. Mid Ocean will acquire a 30% equity stake in the project with a 5,000,000 tonne offtake.

[Stuart Bradie, President & Chief Executive Officer at KBR]

With the Mid Ocean agreement and other offtakes agreements that were recently secured, the project is progressing. Now on to Lindquist. Integration is now substantially complete and we're already realizing synergies. As an example, Linklist was able to leverage KBR's financial backing and facility footprint in Colorado Springs to compete and win the recent ASCEND II award with the U. S.

[Stuart Bradie, President & Chief Executive Officer at KBR]

Space Force, a $970,000,000 ceiling value single award IDIQ, which runs through 02/1935. Now ASCEND stands for Advanced Solutions for Collaborative Engineering and Digital Development. This contract provides for digital engineering and decision support capabilities, including digital environments and leverages our product agnostic approach as a hybrid integrator. Very exciting. We were pleased to announce a number of new contract wins during the first quarter, a few of which I will highlight.

[Stuart Bradie, President & Chief Executive Officer at KBR]

First, we had several wins with the Department of Defense indicating that the U. S. Government continues to award contracts in priority areas. Our new wins include ASTRO, which I cover in more detail later, plus our 85,000,000 procurement as a service contractor for airfield repair kits with the U. S.

[Stuart Bradie, President & Chief Executive Officer at KBR]

Air Force and a $229,000,000 contract for U. S. Army Cargo Helicopter Systems. KBR's long standing and differentiated involvement in aircraft operations with a deep mission expertise provides us a strong position from which we earn contract wins such as these. Through our daily work, we know what is required to modernize army aircraft and this yields unique insights that allow us to best serve our defense department customer.

[Stuart Bradie, President & Chief Executive Officer at KBR]

In SDS, we achieved strategic wins through a customer centric initiative. We executed a global agreement with BP for engineering procurement and construction management services and are currently managing over circa $100,000,000,000 of work for BPE's projects worldwide. We also signed a delivery partner agreement with TerraPower, a pioneer in new commercial scale reactor technologies focused on delivering scalable, cost effective energy solutions globally. In this partnership, KBR contributes its expertise in engineering complex systems and large scale capital project delivery. Our first small module reactor, SMR, project will be located in Wyoming with plans for further reactor deployments into the 2030s, again very exciting development.

[Stuart Bradie, President & Chief Executive Officer at KBR]

We ended the quarter with a 1.1 times TTM book to bill and over $20,000,000,000 in backlog and options. On the Mission Tech side, we maintained a high level of bidding activity in Q1. Our pipeline remains consistent with last quarter with roughly $17,000,000,000 of bids awaiting award in MTS and $2,000,000,000 in protest, which we believe will start to move forward as the year progresses. On the sustainable tech side, we see a growing pipeline of LNG and energy security projects, and ammonia demand remains strong. It is worth noting that a number of our wins this quarter came from the global South.

[Stuart Bradie, President & Chief Executive Officer at KBR]

The United Arab Emirates, Saudi, Iraq, and Indonesia to name but a few, demonstrating the importance of this part of the world to future energy and KBR's positioning, commitment and strong reputation. Onto Slide seven. As we are focused on executing across all four pillars of our growth strategy, we are providing additional detail today on our first pillar, how we are thriving and expanding in core markets and new geographies

[Stuart Bradie, President & Chief Executive Officer at KBR]

to capture breakout growth. Our recent contract win with the Air Force Research Laboratory is an excellent example of winning in one of our core markets and successfully building upon a strong existing customer relationship. We are experiencing continued growth in the military space market, marked by a recent $176,000,000 contract win to support advanced space technology, research and optimization. The Astral contract represents a significant achievement and enhances our existing support operations at the Maui Space Surveillance Complex in Hawaii. The Maui facility is focused on monitoring man made objects in space, a critical national security capability in today's increasingly crowded and competitive space environment.

[Stuart Bradie, President & Chief Executive Officer at KBR]

In bidding for this important seven year contract, we were able to displace the incumbent winning with our optical imaging capabilities, space domain awareness expertise and excellent project execution track record. On to Slide eight. In view of the near term risk we read about on a daily basis, we would like to provide some additional perspective on how KBR is well positioned in today's uncertain environment. First, with regard to tariffs. KBR, as you know, is a high end technology and professional services business and does not import or export products as a significant part of our business.

[Stuart Bradie, President & Chief Executive Officer at KBR]

Furthermore, we do not procure raw materials nor do any manufacturing in China. That said, if our clients experience the cost of material increase due to tariffs, CapEx budgets may be reevaluated. As of now, we are not seeing a material change in customer behavior, but Gulf Coast continued to monitor the situation. With steady global energy demand, KBR's international operating capability positions us to capture any potential geographical shifts in energy markets and I think that's a key point. Secondly, government efficiency initiatives have also been a key area of focus in recent months.

[Stuart Bradie, President & Chief Executive Officer at KBR]

KBR has not experienced direct impacts from project cancellations. As noted last quarter, KBR has limited exposure to U. S. Federal civilian budgets outside of NASA, which have been the primary focus of the efficiency reductions to date. Within NASA, KBR does not have material exposure to the science efforts, which are under scrutiny as you may have read.

[Stuart Bradie, President & Chief Executive Officer at KBR]

KBS focus is primarily on human spaceflight missions where our decades of operational experience bring irreplicable capabilities, which will continue to be valued and are necessary. Lastly, although we are not fully immune to an economic slowdown, we do believe we are well positioned due to our diversified global mix of business, including our role as a provider of mission critical services to our customers globally, including the U. S. Government. We are well aligned with strong secular growth trends, including global national and energy security, sustainability and digitalization.

[Stuart Bradie, President & Chief Executive Officer at KBR]

In addition, we are proactively taking actions such as reducing indirect costs and will control what we are able to control through our capital light, flexible and largely variable cost structure. One of KBR's strengths is that our portfolio offers multiple paths to achieving our objectives, allowing us to successfully navigate different macro environments. In summary, we remain confident in our resiliency and ability to navigate today's challenging and changing conditions. And with that, I'll turn over to Mark.

[Mark Sopp, Executive VP & CFO at KBR]

Great. Thank you, Stuart. Good morning, everyone. Thanks for joining us. I'll start on Slide 10 covering our Q1 financial performance.

[Mark Sopp, Executive VP & CFO at KBR]

Revenues in the quarter were $2,100,000,000 up 13% versus the prior year, driven by growth across both segments as well as the LinkWest acquisition we made in the third quarter of last year. Organic growth was 5% in Q1. Adjusted EBITDA was $243,000,000 that's up 17% over last year with margins at 11.8, an increase of 40 basis points against last year. This improvement came from SPS performance and I'll cover that here in a moment. Adjusted EPS was $0.98 in the quarter, up 27%.

[Mark Sopp, Executive VP & CFO at KBR]

This exceeded the adjusted EBITDA growth rate, driven primarily by a lower share count on repurchases that we've made over the last year, which we substantially increased this past quarter. As you can see in the release, below the line items were flat year over year, so with increased operating profit, this contributed to EPS growth as well. Operating cash flow was $98,000,000 an increase of 8% versus the prior year. As you might know, Q1 is typically a lower cash flow quarter seasonally, so pace should increase going forward and we remain on track to meet our full year guide. Now on to Slide 11 and our segment performance.

[Mark Sopp, Executive VP & CFO at KBR]

As we previewed in January, our operating segments are now Mission Technology Solutions or MTS and Sustainable Technology Solutions or STS. So I'll use those acronyms going forward. Starting with MTS, revenues of $1,500,000,000 were up 14% versus the prior year with adjusted EBITDA of $145,000,000 up 11%. Margins were slightly lower at 9.6% and consistent with our expectations due primarily to the ramp up in HomeSafe. By business unit, Defense and Intelligence generated strong growth of 22%, Readiness and Sustainment was up 10%, and Science and Space and International were steady.

[Mark Sopp, Executive VP & CFO at KBR]

MTS ended the quarter with a one point zero times book to bill on a trailing 12 basis. And as Stuart noted earlier, there were no de bookings from government efficiency actions. In STS, revenues of $550,000,000 were up 12% with adjusted EBITDA of $124,000,000 up 20%. EBITDA margins were 22.5%, up 60 basis points over last year, supported by strong performance from the Plaquemines LNG project that Stuart mentioned earlier. Also ongoing strong performance by our Brown and Root joint venture and healthy increases in our international portfolio, including infrastructure work in Australia and also in The Middle East.

[Mark Sopp, Executive VP & CFO at KBR]

As for our Brown and Root joint venture, this is not a project but is an end to end industrial services business in the energy and chemical sector. This business continues to grow and approximates £1,400,000,000 in annualized revenue with consistent profits and cash flow normative for this sector. Our 50% ownership continues to be a healthy contributor to STS financial performance, so we're really pleased with that. On to Slide 12 and balance sheet and capital matters. As you can see here in Q1, we were more assertive in returning cash to shareholders.

[Mark Sopp, Executive VP & CFO at KBR]

In addition to our increased dividend taking effect in March, buybacks exceeded $150,000,000 this past quarter. This is one of the largest amount of buybacks we've ever made in a quarter, reflecting our high confidence in our outlook and in our intrinsic value. Net leverage finished Q1 at 2.6 times, in line with last quarter. Our capital allocation priorities remain unchanged. First, we are focused on funding organic growth and operating excellence through investment.

[Mark Sopp, Executive VP & CFO at KBR]

Second, we are targeting a leverage ratio below 2.5 times. Growth in EBITDA should get us here quite soon. Our next priority is returning capital to shareholders through buybacks and dividends. Our recently approved share repurchase program has approximately $600,000,000 remaining under its authorization. And finally, we will continue to take a disciplined approach to acquisitions focusing on bolt ons that have strong strategic fit with an attractive financial profile.

[Mark Sopp, Executive VP & CFO at KBR]

So before moving on to guidance, I wanted to call your attention to a change we're making to our supplemental financial disclosure, specifically regarding our disclosure of disaggregated revenues. To date, we have provided disaggregated revenues by contract type, business unit and geography. After evaluating peer disclosures and consulting with third party advisers, we are revising our disclosures to better align with industry standards. This quarter, we are also providing revenues by customer type. We'll continue to provide revenues by business unit for the next three quarters and we'll phase out the business unit disclosure by the end of twenty twenty five.

[Mark Sopp, Executive VP & CFO at KBR]

We believe this provides our investors and analysts ample time to adjust to the new reporting approach. There's a slide in the appendix which outlines the phasing of our disclosure change for your reference. So with that, let me shift to our outlook for the balance of the year on to Slide 13. We are reaffirming our guidance for fiscal twenty twenty five. We expect revenue of $8,700,000,000 to $9,100,000,000 We expect adjusted EBITDA of $950,000,000 to $990,000,000 We expect adjusted earnings per share of $3.71 to $3.95 And lastly, for operating cash flows, expect $500,000,000 to $550,000,000 Regarding revenue, as we previously stated, our guide included an estimated revenue range for HomeSafe of 300,000,000 to $500,000,000 for this year.

[Mark Sopp, Executive VP & CFO at KBR]

As Stuart mentioned, we expect the pace of move growth to be modest in Q2 with incremental step ups in Q3 and Q4, and we'll provide an update on the ramp in our next Q2 call in late July. Additionally, within the greater macro, one of the areas of uncertainty continues to be the level of troop support in Eastern Europe. While we have not observed any significant impacts at this time, we continue to monitor the situation. Our guide assumes relative stability, and I'll remind you that the run rate for this support is circa 200 to £400,000,000 on an annualized basis. As we have stated before, these two programs are not consequential to profit and cash production in 2025, and thus we remain confidently positioned to achieve our adjusted EBITDA, adjusted EPS and cash flow in accordance with our original guidance.

[Mark Sopp, Executive VP & CFO at KBR]

All other assumptions in our guidance are unchanged, including tax rates, capital expenditures and interest expense. And in closing, we are pleased to have capabilities and a global footprint that enables the strong and consistent profit and cash flow production that you've come to expect from KBR. With that, I'll turn

[Mark Sopp, Executive VP & CFO at KBR]

it back to Stuart.

[Stuart Bradie, President & Chief Executive Officer at KBR]

Thanks, Watt. Great job as always. I'm on Slide 14 with some key takeaways. We delivered strong financial performance in the first quarter with double digit revenue and EBITDA growth.

[Stuart Bradie, President & Chief Executive Officer at KBR]

Our people continue to deliver with excellence. We continue to successfully and methodically execute our growth strategy, increasing our bid volumes and winning new contracts. We have a balanced and resilient business portfolio offering multiple pathways to growth. We are preparing proactively amid macro uncertainty. We are controlling the controllable, being prudent on cost and remaining agile.

[Stuart Bradie, President & Chief Executive Officer at KBR]

We are maintaining a disciplined approach to capital allocation, actioning on our share buyback authorization and returning capital to shareholders as Mark described earlier. Finally, we remain confident in our outlook for 2025 and are progressing well towards our 2027 objectives. With that, we're happy to take questions, and I'll hand the call back to the operator. Thank you.

[Operator]

Thank you. We will now start today's Q and A session. Our first question today comes from Andy Kaplowitz from Citigroup. Your line is now open. Please go ahead.

[Andrew Kaplowitz, Managing Director at Citi]

Hey, good morning everyone.

[Jamie DuBray, Investor Relations at KBR]

Morning,

[Andrew Kaplowitz, Managing Director at Citi]

Good morning, Book to bill of 1.1 times in STS was good and I think you sound confident of continued backlog growth. But can you give more color into what you're seeing? It doesn't seem like you're seeing any sort of energy transition type delays, but could you comment on that? And do you still expect the primary regions of strength in your business to be The Middle East and The U. S?

[Stuart Bradie, President & Chief Executive Officer at KBR]

Thanks, Andy. I think we have discussed this previously. Are seeing in certain geographies a move away from energy transition or sustainable projects and more into energy security. And that is a thematic, I think, that's happening globally, predominantly due to affordability issues. But in some regions, Europe in particular, we're still seeing energy transition high on the agenda and we continue to work across both segments, if you like, markets.

[Stuart Bradie, President & Chief Executive Officer at KBR]

So it's we've got to be agile, as we said on the call. We're very global, as we said on the call, and we have intimate relationship with customers depending on their needs and depending on what's happening geopolitically in their environment. So yes, we are very confident looking forward with the STS portfolio and I think we've got a very balanced outlook in the way we look at energy transition and energy security.

[Andrew Kaplowitz, Managing Director at Citi]

Helpful, Stuart. And maybe like kind of a similar question on the MPS side. I know I think you've dialed in like mid single digit organic growth for the year ex HomeSafe and Linquest. Given what you see out there, I mean, the new President's budget just came out, emphasized defense, as you know, deemphasized mass a little bit. So how confident are you of that mid single digit growth?

[Andrew Kaplowitz, Managing Director at Citi]

Are the growth drivers changing at all? Or is it still very much your defense business is going to lead growth? And how do you think about sort of the NASA business now?

[Stuart Bradie, President & Chief Executive Officer at KBR]

So correct. There is a $1,000,000,000,000 defense budget with $150,000,000,000 we can certainly impact in motion as you are well aware. Our initial look at this is kind of hot off the press as investment priorities look like being things like Golden Dome for the missile defense agencies, munitions, shipbuilding, nuclear deterrence, space dominance and of course border security. Many of these areas of course are well aligned to what we do today. And increases in funding are expected to flow into RDT and E where we're very strong and in procurement.

[Stuart Bradie, President & Chief Executive Officer at KBR]

And so overall, I believe we're very well positioned opposite these budget priorities. And in terms of NASA, it appears there's increased funding to human space exploration and whether that's to moon and Mars missions, we'll find out later. But that's very much aligned to our differentiated capabilities as we talked about many times. We are a leader in human spaceflight and that seems to be where the focus is. And I think the recommitment to fund the International Space Station through 02/1930 is also a good a good point, and we'll have a role as they transition to commercial replacement.

[Stuart Bradie, President & Chief Executive Officer at KBR]

So all up, I think it's a very strong alignment with where KBR sits and where we position the business going forward. And we feel confident that we're in the right places.

[Operator]

Our next question comes from Steven Fisher from UBS. Your line is now open. Please proceed.

[Steven Fisher, Managing Director & Equity Research Analyst at UBS Group]

Thanks. Good morning. Just wanted to follow-up Technology discussion. And sorry if I missed this, there's some overlapping calls before. But if you could just give us a status of I think you cited a $2,000,000,000 of awards under protest.

[Steven Fisher, Managing Director & Equity Research Analyst at UBS Group]

I think that was up from maybe $1,000,000,000 last quarter. You can correct me if I'm wrong. What's sort of the in what's moving in and out of that? Kind of what's progressing, what isn't? And generally, the potential to see bookings activity pick up in the Mission Technology segment for the next couple of quarters?

[Stuart Bradie, President & Chief Executive Officer at KBR]

Thanks Steve. Unfortunately, is a trend in government awards that there's protests almost on every major award. We are flat quarter to quarter. It was circa 1,800,000,000.0 or so, so $2,000,000,000 this quarter. And there is a process that one has to go through.

[Stuart Bradie, President & Chief Executive Officer at KBR]

There's a number of days that the government has to respond to these protests. And we said in the prepared remarks, expect these to be resolved going into the second half of the year.

[Steven Fisher, Managing Director & Equity Research Analyst at UBS Group]

Okay. That's helpful. And then again, not sure if I missed this, but in terms of HomeSafe, just how would you characterize the scope of the work that you're going to be capturing during the peak moving season here? And how much that could still shift around as the next few months unfold?

[Stuart Bradie, President & Chief Executive Officer at KBR]

Good question Steve. It is seasonal as you're aware. We said in our prepared remarks, we expect volumes in Q2 to be kind of similar to Q1 with increases going into into Q4. We are very happy with the performance on HomeSafe. Again, we covered that in our prepared remarks.

[Stuart Bradie, President & Chief Executive Officer at KBR]

Customer satisfaction rates are up. And remember that's the primary objective is to improve the move experience for the servicemen and women. The second objective is to save the taxpayers' money and we're achieving that also. So we're very happy with how things are going. The relationship with Transcom is excellent and we look forward to progressing with what is fantastic transformational program deploying IT at scale, using a lot of digital tools, and really transforming an industry to be more efficient and more accountable as we go forward.

[Stuart Bradie, President & Chief Executive Officer at KBR]

So feeling really good about where HomeSafe sits today.

[Operator]

Our next question today comes from Michael Dudas from Vertical Research. Your line is now open. Please proceed.

[Michael Dudas, Equity Research Analyst at Vertical Research Partners]

Good morning, Jamie. Stuart, work.

[Jamie DuBray, Investor Relations at KBR]

Good morning, Mike.

[Michael Dudas, Equity Research Analyst at Vertical Research Partners]

Stuart,

[Michael Dudas, Equity Research Analyst at Vertical Research Partners]

well, some positive news certainly from Plaquemines and certainly on Lake Charles. What's your thoughts on additional capacity for us with such incoming opportunities for the industry in general? I'm sure KBR in particular of capacity and how you'd want to structure any additional type contracts in LNG? And maybe also the Brown and Root discussion that Mark shared was pretty interesting. Any kind of flow business activity insight that you could share that kind of supports where maybe people are thinking about whether in that business or around Energy and Industrials in The U.

[Michael Dudas, Equity Research Analyst at Vertical Research Partners]

S?

[Stuart Bradie, President & Chief Executive Officer at KBR]

I will answer the LNG question first on the May. The LNG activity has increased over the past couple of quarters as you would expect. I think the performance in Plaquemines has been a true demonstration of our capability and our delivery excellence in that market, but also demonstrates our commercial discipline. And we would not be entering into any contract in the future that had any levels of lump sum EPC or any machinations that were like that. So we'll we'll keep our commercial discipline.

[Stuart Bradie, President & Chief Executive Officer at KBR]

But today, we have LNG, obviously, in The US. We've started work on a program in Indonesia. We're working a program in Oman. We're project managing in Abu Dhabi, quite a large LNG development there. So the activity levels are high across the world.

[Stuart Bradie, President & Chief Executive Officer at KBR]

It's a very global business, LNG and energy in general, as you're well aware. So we're feeling pretty good about the outlook for that. In terms of the Brown and Root joint venture, Mark was quite right. We haven't really talked much about Brown and Root joint venture as it doesn't really impact our revenue line, but that business over the past since COVID has really recovered extremely well. It did well during COVID, but obviously had activity levels down like most businesses.

[Stuart Bradie, President & Chief Executive Officer at KBR]

And since then has really picked up pace. It's got a fantastic reputation, in the Southern States. It's delivering on its promises to customers and winning more work as a consequence and has grown nicely to the $1,300,000,000 1 point 4 billion dollars revenue that Mark cited with typical margins for that venture. And we see as new facilities, particularly moving into areas like LNG and into the broader refining chemicals markets, it's quite an exciting area for that business to move into. So it really helps us as well in terms of having a strong footprint in operational side, so the OpEx side of the spend,

[Mark Sopp, Executive VP & CFO at KBR]

and we couldn't be happier with the performance. That's one reason I brought it up, Mike, is I think a real key skill set this company has is managing risk and tapping opportunity through joint venture relationships like Brownroot and others, Aspire, Plaquemines, etcetera. And so as Stuart mentioned, having access to the OpEx market, particularly as you go through cycles, is a healthy, you know, way to achieve multiple paths, you know, one of the things that Stuart talked about in his prepared remarks. So and just enabling as many opportunities as we can to leverage the strengths of our legacy, in this case, with fruitful benefits has really been great to see.

[Michael Dudas, Equity Research Analyst at Vertical Research Partners]

Well said. Thank you, gentlemen.

[Operator]

Our next question today comes from Mariana Perez Mora from Bofa. Your line is now open. Please go ahead.

[Samantha Stiroh, Global Research Analyst at Bank of America]

Hi, this is Samantha Styro on for Mariana this morning. I was wondering, I know you talked a little bit about the energy transition and energy security dynamics internationally. Was wondering if you could touch a little more on the international side, as it relates to MTS.

[Stuart Bradie, President & Chief Executive Officer at KBR]

So MTS for KBR is really in two countries in the main, it's in The UK and in Australia. The business performance in The UK is underpinned by very, very long term contracts. Aspire, we've talked about many times, which runs out to 02/1941. The UK has come through elections recently as you're well aware. They are announcing they're coming out with their defense review on the May 8 actually.

[Stuart Bradie, President & Chief Executive Officer at KBR]

And so we'll have more clarity into the strategic spend priorities of the U. K. Government as it moves forward. But what has been public is the increasing spending opposite GDP up to 2.5%, which I think is a good indicator of increased spending in the MTS arena internationally in The UK. In Australia, we continue to do extremely well.

[Stuart Bradie, President & Chief Executive Officer at KBR]

That business has outperformed in truth, and continues to book very solid long term contracts, multiyear contracts in attractive areas related to digitalization and mission IT and also in the areas of sustainment and things like satellite communication. So it's a very, very good business in both countries and we expect the margins are attractive in these countries also, being a little bit less regulated. And we continue to perform really well in both The UK and Australia and we're excited about their future.

[Samantha Stiroh, Global Research Analyst at Bank of America]

Thank you. And then switching gears a little bit, I was wondering if you could discuss the M and A environment and where some of these bolt on acquisitions, what kind of technologies you're looking at?

[Stuart Bradie, President & Chief Executive Officer at KBR]

So we are very clear about our strategic priorities and the strategic factors that we wish to grow into. We do not do anything for bulk or anything like that. We acquire to strategically accelerate in the growth factors that we've identified. And those strategic vectors are, you know, expansion internationally in the government arena, into more areas where we're probably not as present as we could be in the intelligence community, in in areas like that, would be attractive to us. And we're always looking in the STS portfolio for additional technologies and innovative and entrepreneurial ways to tap into emerging technologies, and we've done so with plastics recycling, as you're aware, with sustainable aviation fuel.

[Stuart Bradie, President & Chief Executive Officer at KBR]

And more recently, with our pure lithium offering, which is taking wastewater and being able to extract lithium, which could be a very, very attractive technology of the future given how much wastewater there is around the world, particularly in the energy market. So we continue to look for those and trying to be as innovative and creative as we can be as we look to what will be in demand in the future as well as what's in demand today.

[Samantha Stiroh, Global Research Analyst at Bank of America]

Great. Thank you.

[Operator]

Our next question today comes from Jerry Revich from Goldman Sachs. Your line is now open. Please go ahead.

[Jerry Revich, Senior Investment Leader & Head of US Machinery, Infrastructure, Sustainable Tech franchise at Goldman Sachs]

Yes. Hi. Good morning, everyone. Stuart, I could just trouble you to expand. Stuart, can you just expand on the progress that you folks are making on home safety?

[Jerry Revich, Senior Investment Leader & Head of US Machinery, Infrastructure, Sustainable Tech franchise at Goldman Sachs]

You mentioned improving customer satisfaction scores. Can you just quantify how that's trending? And also, you just give us an update please on vendor sign ups? How is that going relative to plan and relative to the ultimate target of moves on a multiyear basis?

[Stuart Bradie, President & Chief Executive Officer at KBR]

Customer satisfaction has increased to just under 90%, is the number we've achieved to date, but it has increased markedly over week over the past several weeks. The main the main reason for that is the adoption of the technology. We put a lot of effort into training drivers and as well as the companies who utilize the technology. And as a consequence of that, adoption by suppliers is increasing. At the same time, we've really put a lot of effort into our customer care service and increased the level of staffing and training from our side into that capability and that's proving a real winner with the service men and women.

[Stuart Bradie, President & Chief Executive Officer at KBR]

We have not computers or robots that answer the phone, but real people that help them with whatever issue they may have. Another part to this is that there are always issues in moving anyone who's evolved on this call I'm sure And there's always issues, but we have settled 100% of all of the claims on time as it relates to any disgruntlement or anything that's been damaged etcetera by the movers themselves. So I think all up I think that's what's driving the performance and customer satisfaction. We've put a lot of effort Jerry into synchronizing moves with Transcom and really making sure that we don't impact service members, making sure we've got the supply chain to actually execute the moves and our capacity continues to increase. And as we head into the peak season or the busy season or summer season as some call it, there are different dynamics during that season and we're working daily with Transcom to make sure the right decisions are made by this for the service members.

[Stuart Bradie, President & Chief Executive Officer at KBR]

That's our priority. So I think we are very much lockstep with Transcom. Transcom went to Congress and the House Sam Service Committee recently and reaffirmed their commitment to the program, and have done so publicly and politically and we are absolutely in lockstep with them in that commitment. And as I said in my other statement, we're very confident in the future of this program.

[Jerry Revich, Senior Investment Leader & Head of US Machinery, Infrastructure, Sustainable Tech franchise at Goldman Sachs]

Super. Yes, think many of us would sign up for 90% customer satisfaction in our personal moves. In terms of on the LNG side, can we just expand on that? Thank you for the update on the offtakes on Lake Charles. When are you expecting final investment at this point?

[Jerry Revich, Senior Investment Leader & Head of US Machinery, Infrastructure, Sustainable Tech franchise at Goldman Sachs]

And any particular timelines on additional potential projects that you folks are bidding on? Any timelines that you might be able to share with us in terms of other opportunities for sizable LNG work?

[Stuart Bradie, President & Chief Executive Officer at KBR]

Thanks, Jerry. It's actually Energy Transfer's earnings day today. So I would point you to that call if you want a real update from, I guess, on the horse's mouth on their thinking and their view of the timing and progress on the project. Rather than us do that for them, I would point you to their earnings, which unfortunately is the same as ours today. In terms of the future LNG and timings, most of the projects are at the other than the big project in Abu Dhabi, we're project managing, which is in the execute phase.

[Stuart Bradie, President & Chief Executive Officer at KBR]

So we've got a few years of project managing that to conclusion. The work in Indonesia is early stages. The work in Oman is just completing the front end design, so that will move into the execute phase later this year. And so I I it's it's they're all at different stages, Jerry, which is a good fact pattern because you get in early and and therefore you can move resources and capability where the needs are. Not everything is hitting at once.

[Stuart Bradie, President & Chief Executive Officer at KBR]

So I think it's a good fact pattern for for us to really it's a good question because it allows us to make that statement that we're very well placed to care for these projects as we move through these different phases.

[Operator]

Our next question on today's call comes from Sanjeetah Jain from KeyBanc. Your line is now open. Please proceed.

[Sangita Jain, Senior Analyst at KeyBanc Capital Markets]

Hi, good morning. I just have a couple of brief follow ups. On HomeSafe, should we think of the ramp as something that is entirely as you improve your customer satisfaction? And does increased moves or does is Transcom looking for some kind of a metric before they unlock more capacity for you?

[Stuart Bradie, President & Chief Executive Officer at KBR]

I believe we have performed really strongly in terms of the tech and the interface with TransConstech. We've proven that that works. We've proven the operation can deliver not just in terms of technology, but customer satisfaction. And we've proven we can educate and train the supply chain in the way that they need to be adopters of the technology. All that is a good fact pattern in terms of moving forward with the program and attracting more of the supply chain as we move into the rest of this year.

[Stuart Bradie, President & Chief Executive Officer at KBR]

There is no real metric that Transcom laid down, but customer satisfaction is a key area they look at because their mission is to improve like ours, the move experience of the servicemen and women. So that would be the one metric they look at. I think the level of synchronization we have with Transcom today is really improving our ability to respond, our ability to pick up on time, deliver on time and that all flows down to the customer satisfaction reports of course. So there's no real one metric or one key thing. I think it's just proving that we're committed and we're executing and that we're growing the supply chain.

[Stuart Bradie, President & Chief Executive Officer at KBR]

And as that grows, we'll do more moves.

[Sangita Jain, Senior Analyst at KeyBanc Capital Markets]

Got it. And just one on Doge. Hasn't come up in a while and it doesn't look like that was an impact on your 1Q. So just trying to see if there is if that is still, an overhang on how things are being done in in Washington.

[Stuart Bradie, President & Chief Executive Officer at KBR]

In our prepared remarks, we're very clear. We've not seen any impact to date from government efficiency initiatives. That work, I'm assuming, in Washington is not yet done. So who knows what the future holds, but but we do I think the I think the key part is really looking at where our business is is is sort of pointed and the areas that are aligned with the skinny budget that's been put forward. We're very well placed.

[Stuart Bradie, President & Chief Executive Officer at KBR]

So, so far no real impacts from government efficiency.

[Operator]

Our next question comes from Genevieve from D. A. Davidson. Your line is now open. Please go ahead.

[Jean Veliz, Senior Research Associate at D.A. Davidson Companies]

Hi, good morning and thank you for the time.

[Mark Sopp, Executive VP & CFO at KBR]

Good morning.

[Stuart Bradie, President & Chief Executive Officer at KBR]

Good morning.

[Jean Veliz, Senior Research Associate at D.A. Davidson Companies]

Good morning. For my first question regarding Lindquist, are we still expecting about a $400,000,000 contribution for 2025?

[Mark Sopp, Executive VP & CFO at KBR]

Sorry, was talking to Jamie for a moment. Gene, could you repeat that question, please? This is Mark.

[Jean Veliz, Senior Research Associate at D.A. Davidson Companies]

Yeah. No. No problem. Just regarding the Linqus, are we still expecting somewhat 400,000,000 contribution for this year for 2025?

[Mark Sopp, Executive VP & CFO at KBR]

From an inorganic perspective, yes. So there was just short of 200,000,000 last year, and it's a 600,000,000 ish business, give or take, so you're close. That's not the total business. That's just the inorganic piece, if that's what you're looking for.

[Jean Veliz, Senior Research Associate at D.A. Davidson Companies]

Yes. That's right. Thank you. And could you provide some color around the ammonia industry? And perhaps what type of projects are you seeing in your pipeline currently?

[Stuart Bradie, President & Chief Executive Officer at KBR]

We stated in our prepared remarks that ammonia market remains strong. We have a number of pursuits that are in our pipeline today, many of which are really driven more to the fertilizer usage, would say, rather than hydrogen usage just given what's changed in the markets recently. But there's still it's still a very attractive part of our business going forward.

[Jean Veliz, Senior Research Associate at D.A. Davidson Companies]

Perfect. Thank you. Appreciate the time.

[Operator]

Perfect. We have no further questions in the queue at this time. So that does conclude today's Q and A session. I'll now hand back over to Stuart Brady for closing remarks.

[Stuart Bradie, President & Chief Executive Officer at KBR]

Thank you very much. Thank you all for taking the time to listen in. I know this has been a busy day for earnings on the Street. So thank you for your time and your questions and your interest. So really the key takeaways for me and the investment thesis for KBR really, we remain excited about the path for KBR in 2025 and beyond.

[Stuart Bradie, President & Chief Executive Officer at KBR]

And we're confident in our ability to continue creating value for our shareholders. We have completed a multi year transformation and you've had a ring seat for that. We've become a leader in providing differentiated innovative upmarket science and technology and engineering solutions with large scale and global reach. We serve diverse attractive end markets aligned with strong secular growth trends as we've presented. And I truly believe we have top talent combining deep domain expertise, proprietary technologies and an unwavering focus on execution that really has delivered fantastic results on an enduring basis.

[Stuart Bradie, President & Chief Executive Officer at KBR]

We are excellent partners as Mark said. We're operating in dynamic teams to solve our customers' most complex challenges, which has resulted in recurring long term engagements. We have many long term contracts to underpin future earnings and over £20,500,000,000 in backlog and options. Our diversification, our global footprint, our asset light model and disciplined capital allocation generate stable predictable cash flows and compelling shareholder returns. We have growth and margin expansion plans in flight.

[Stuart Bradie, President & Chief Executive Officer at KBR]

Finally, we remain alert and agile monitoring the current dynamic environment as you would expect and taking precautionary and proactive actions to ensure KBR remains very well positioned to deliver for our employees, our customers and of course our shareholders. I'd like to extend my sincere thanks to our 38,000 employees all around the world for their hard work and dedication in delivering solutions for our customers each and every day. They do a terrific job. So thank you again for joining today's call and for your interest in KBR, and we look forward to updating you again next quarter. Thank you.

[Operator]

That concludes today's call. You may now disconnect your line.

Participants

Executives

• Jamie DuBray, Investor Relations
• Stuart Bradie, President & Chief Executive Officer
• Mark Sopp, Executive VP & CFO

Analysts

• Andrew Kaplowitz, Managing Director at Citi
• Steven Fisher, Managing Director & Equity Research Analyst at UBS Group
• Michael Dudas, Equity Research Analyst at Vertical Research Partners
• Samantha Stiroh, Global Research Analyst at Bank of America
• Jerry Revich, Senior Investment Leader & Head of US Machinery, Infrastructure, Sustainable Tech franchise at Goldman Sachs
• Sangita Jain, Senior Analyst at KeyBanc Capital Markets
• Jean Veliz, Senior Research Associate at D.A. Davidson Companies