KBR Q3 Earnings Call Highlights

Key Points

• KBR delivered profitable growth in Q3 2026: Revenue rose 5% to approximately $2.03 billion, adjusted EBITDA increased 12% to $268 million, margins expanded to 13.2%, and adjusted EPS grew 10% to $1.12. The company reaffirmed its full-year outlook.
• Sustainable Tech was the primary growth engine: Revenue increased 26% to $762 million, while backlog reached a record $5.8 billion, supported by a 1.3x book-to-bill ratio and awards across energy, infrastructure and sustainable fuels projects.
• Mission Tech faced NASA-related revenue pressure but improved profitability: Revenue fell 5% as NASA work was insourced, yet adjusted EBITDA rose 5% and margins expanded to 11.5%. KBR also said its planned separation into KBR and Trinzic remains on track for Jan. 4, with debt-offering preparations underway.

KBR NYSE: KBR reported third-quarter 2026 revenue growth, higher adjusted earnings and expanding margins as strong performance in its Sustainable Tech business more than offset expected NASA-related headwinds in Mission Tech. The company also reaffirmed its full-year outlook and said preparations remain on track for its planned separation into KBR and Trinzic, expected Jan. 4.

“The headline is another quarter of profitable growth with strong execution driving higher revenue, adjusted EBITDA, and adjusted EPS,” Executive Vice President and CFO Shad Evans said during the company’s earnings call.

Third-quarter revenue was approximately $2.03 billion, an increase of $97 million, or 5%, from the prior-year period. Adjusted EBITDA rose $28 million to $268 million, while adjusted EBITDA margin expanded 80 basis points to 13.2%. Adjusted earnings per share increased 10% year over year to $1.12.

Evans said adjusted EPS benefited from stronger operating performance, lower below-the-line expenses and a lower share count following repurchase activity over the past year. The quarter included $15 million of interest income related to a discrete tax benefit, which KBR excluded from adjusted EPS. The company said its underlying tax rate remains within its previously guided 26% to 28% range.

Sustainable Tech Backlog Reaches Record

Sustainable Tech revenue increased 26% year over year to $762 million, driven by the conversion of strong prior booking activity into project execution. The segment’s adjusted EBITDA rose 15% to $147 million.

CEO Stuart Bradie said the business is benefiting from structural demand tied to energy security, food security and critical infrastructure. Sustainable Tech posted quarterly book-to-bill of 1.3x, while backlog reached a record $5.8 billion, more than 50% above the year-earlier level.

Revenue rose 13% sequentially as projects ramped across the portfolio, keeping the company on pace for its mid-teens full-year revenue-growth outlook for the business, Bradie said. Excluding the Brown & Root joint venture, year-to-date book-to-bill was 1.5x.

KBR cited several recent awards, including new project management consultancy work with ADNOC in Abu Dhabi, an expanded role on Aramco’s Marjan offshore field, and a central program management role at Saudi Arabia’s Diriyah Gate development. The company also won a major program engineering and integration award in Texas.

In technology, SABIC selected KBR’s Purifier technology for a 3,500-metric-ton-per-day facility in Saudi Arabia. The company also received ammonia revamp awards in Europe and another PureSAF award for Kazakhstan’s first sustainable aviation fuel project.

However, Bradie said bookings in one area of the business were softer as operators deferred maintenance and shutdowns because of market conditions. KBR expects those deferrals to continue into the fourth quarter, with activity expected to recover in 2027 as critical maintenance needs are addressed.

Adjusted EBITDA margin in Sustainable Tech was 19.3%, compared with 21.2% a year earlier, primarily because of a higher contribution from an LNG joint venture in the prior-year period. Excluding that joint venture, adjusted EBITDA margin was 13.9% for the quarter and 14.3% year to date, consistent with KBR’s mid-teens full-year margin outlook.

Mission Tech Margins Rise Despite NASA Volume Decline

Mission Tech revenue was approximately $1.27 billion, down 5% from a year earlier, reflecting anticipated reductions in NASA-related programs. The decline was partly offset by growth in defense and intelligence work and international government customers.

Despite the lower revenue, Mission Tech adjusted EBITDA increased 5% to $145 million and adjusted EBITDA margin expanded 110 basis points to 11.5%. Evans attributed the improvement to higher unconsolidated joint-venture contributions, favorable portfolio mix following the roll-off of lower-margin NASA work, and earlier-than-expected favorable closeouts.

KBR said the NASA headwinds stem from insourcing on the IMOC contract and the prior loss of MSOC, which has since been insourced. Evans said the IMOC impact remains within the roughly $60 million effect the company outlined in the first quarter, and the removal of remaining out-year contract value from backlog does not create an additional profit-and-loss impact in 2026.

Bradie said KBR expects the NASA insourcing process to be completed this year. The company expects the first two quarters of 2027 to present difficult comparisons because NASA had been operating at a full run rate during the corresponding 2026 periods.

Mission Tech’s book-to-bill was 0.8x excluding the NASA insourcing de-booking, or 0.6x on a reported basis. Bradie said U.S. procurement timelines have extended, though customer funding and priorities generally remain intact. The company ended the quarter with $9.9 billion of submitted proposals awaiting customer decisions and said wins under protest and submitted proposals represented $20.5 billion of opportunity outside backlog, about 80% of which was new business.

Guidance Reaffirmed as Separation Advances

KBR reaffirmed its full-year 2026 guidance across all metrics. For the fourth quarter, it expects Mission Tech revenue to be flat to modestly lower sequentially and Sustainable Tech to deliver low-double-digit sequential growth.

Year-to-date adjusted operating cash flow was $371 million, representing 95% conversion, supported by improved collections. KBR said it expects full-year cash flow to be weighted toward the fourth quarter. Continued collection delays in the Middle East could shift approximately $25 million to $50 million of cash flow beyond year-end, though Evans said the company still expects to remain within its full-year cash flow guidance range.

Net leverage ended the quarter at 2.1x, below the company’s 2.5x target. KBR returned $21 million to shareholders through its regular dividend during the quarter.

On the planned separation, Bradie said leadership teams are in place, boards for both companies have largely been established, and KBR expects to announce the KBR and Trinzic boards in coming weeks. The Form 10 for Trinzic is public, SEC comments have been resolved to date, and KBR expects formal notification soon concerning the transaction’s tax-free treatment.

The company said preparations for Trinzic’s debt offering are progressing, with a launch currently expected in mid-November. KBR and Trinzic will hold Investor Days in two weeks to provide further details on each company’s strategy, opportunities and financial outlook.

About KBR (NYSE:KBR)

KBR, Inc is a global engineering, science and technology company that provides solutions to government and commercial customers. Its services include program management, engineering and integration, consulting, mission operations, logistics, cybersecurity, digital transformation and technical support.

Through its Government Solutions business, KBR supports defense, intelligence, space, civil government and national security programs. The company provides mission support, research and development, systems engineering, training, operations and maintenance services to government agencies and other public-sector customers.

KBR's Sustainable Technology Solutions business serves energy, chemicals and industrial customers with technology licensing, engineering, project delivery and consulting services.

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