KBR, INC. Q1 FY2025 earnings call

• Zero Harm: In 2024, KBR achieved a total recordable incident rate of 0.05, a record low, with 26.8 million consecutive safe work hours, 101 days without a safety incident, and 94% Zero Harm days. In 2025, it has a 98% Zero Harm day rate.
• Financial Performance: Q1 revenues were $2.1 billion, adjusted EBITDA was $243 million, both showing double-digit growth. Adjusted EBITDA margin was 11.8%, up 40 basis points year-on-year.
• Growth Strategy: LinQuest acquisition integration is substantially complete, with synergies realized. The company is successfully executing its growth strategy, increasing bid volumes and winning new contracts.
• Key Contracts/Wins: HomeSafe contract ramping with operational improvement; Plaquemines LNG project progressing exceptionally well; Lake Charles LNG project advancing with MidOcean agreement; LinQuest won Ascent 2 award; multiple DoD and STS contract wins.
• Market Positioning: Well-positioned due to no significant import/export from China, limited exposure to US federal civilian budgets outside NASA, and a diversified global mix aligned with secular growth trends like energy security and sustainability.

Mission Technology Solutions (MTS): Revenues were $1.5 billion, up 14% year-on-year, with adjusted EBITDA of $145 million, up 11%. Margins were slightly lower at 9.6% due primarily to the ramp-up in HomeSafe. Defense and Intelligence generated strong growth of 22%, Readiness and Sustainment was up 10%, and Science & Space and International were steady. Sustainable Technology Solutions (STS): Revenues were $550 million, up 12% year-on-year, with adjusted EBITDA of $124 million, up 20%. EBITDA margins were 22.5%, up 160 basis points over last year, supported by strong performance from the Plaquemines LNG project and the Brown & Root joint venture.

• Reaffirmed 2025 guidance: revenue expected to be $8.7 billion to $9.1 billion, adjusted EBITDA $950 million to $990 million, adjusted EPS $3.71 to $3.95, and operating cash flow $500 million to $550 million.
• HomeSafe move growth is modest in Q2, with incremental step-ups in Q3 and Q4. Monitors troop support in Eastern Europe but assumes relative stability.

• Tariffs: Clients' material cost increases due to tariffs could reevaluate CapEx, but no material customer behavior change currently observed.
• Government Efficiency: Limited exposure to US federal civilian budgets outside NASA, with NASA focus on human space flight not materially affected.
• Economic Slowdown: Diversified global mix provides some protection, but not fully immune to an economic slowdown.

Q: Andy Kaplowitz from Citigroup asked about STS book-to-bill and energy transition vs security.

A: Stuart Bradie responded that they are seeing a shift to energy security in some geographies but have a balanced outlook on energy transition and security.

Q: Steven Fisher from UBS asked about MTS awards under protest and HomeSafe peak season.

A: Stuart Bradie said MTS awards under protest are flat quarter-to-quarter and expect HomeSafe move volumes to be similar to Q1 in Q2 with increases in Q3/Q4.

Q: Michael Dudas from Vertical Research asked about LNG capacity and Brown & Root.

A: Stuart Bradie discussed LNG project stages and Brown & Root joint venture performance.

Q: Samantha Stiroh from BofA asked about MTS international and M&A.

A: Stuart Bradie talked about MTS performance in UK and Australia, and M&A focus on strategic vectors.

Q: Jerry Revich from Goldman Sachs asked about HomeSafe customer satisfaction and LNG final investment.

A: Stuart Bradie discussed HomeSafe customer satisfaction at near 90% and LNG project timings from Energy Transfer's earnings call.

Q: Sangita Jain from KeyBanc asked about HomeSafe ramp and DOGE.

A: Stuart Bradie said HomeSafe ramp is driven by customer satisfaction and no material impact from DOGE yet.

Q: Jean Veliz from D.A. Davidson asked about LinQuest contribution and ammonia projects.

A: Mark Sopp said LinQuest contribution is close to $400 million and ammonia market is strong with pipeline pursuits.