KBR, Inc. Q1 FY2026 earnings call

Stuart Brady started by sharing a zero harm moment on staying connected with the KB Arc Pulse app. He then covered STS business, noting book-to-bill XLNG above 1.0 for third consecutive quarter, with wins in energy security, critical materials, infrastructure, and adding digital capabilities. Mission tech business had awards not flowing at historical levels but won work aligning with core capabilities. Update on the spin of MTS, including strategic rationale, progress on regulatory, leadership, and operational separation. Chad Evans discussed consolidated first quarter results, with revenues down, adjusted EBITDA increased, adjusted EBITDA margin expanded, adjusted EPS down, but strong cash flow.

Sustainable Tech: Revenues down $10 million year-over-year, adjusted EBITDA increased by $2 million, margins expanded ~70 basis points to 21.9% (16.1% excluding LNG project). Mission Tech: Revenues down $85 million year over year, adjusted EBITDA essentially flat, margins expanded to 10.6%. STS first quarter book-to-bill XLNG was 1.2 times, trailing 12-month book-to-bill of 1.2 times. Backlog ended the quarter at approximately $4.7 billion, up 9% year over year. Year-time pipeline, excluding LNG, is more than $5 billion, ~80% from repeat customers. Work under contract now covers approximately 67.67% of 2026 revenue guidance. MTS's first quarter book to bill was 1.0, trailing 12 months book to bill of 1.0. Backlog and options ended the quarter at $18.5 billion, with 39% funded, excluding the PFIs. Bids awaiting award totaled $16 billion. Work under contract now covers approximately 91% of 2026 revenue guidance.

Reaffirming full-year guidance. In Mission Tech, revenue expected flat to modestly down year over year due to unresolved protests and potential NASA workforce changes. In Sustainable Tech, expected mid-teens year-over-year revenue growth. No changes to adjusted EBITDA, adjusted EPS, or adjusted operating cash flow guidance. May see volatility in adjusted operating cash flow during second quarter as Middle East conflict resolves.

Geopolitics and policy shifts across U.S. and Australia can create opportunity and funding risk. Awards not flowing at historical levels for Mission Tech. Uncertainty around potential program level changes at NASA relating to workforce directive. Impact of Middle East conflict on operations and bookings could be a risk. Complexities in the spin transaction process could pose risks.

Q: Adam Hoops asked about margin and Brown and Root equity income contribution.

A: Chad Evans said margins in line with long-term targets, LNG project contribution to continue into early 2027, and M&A pipeline is being looked at.

Q: Andrew Kaplowitz asked about SDS margins.

A: Stuart Brady and Chad Evans discussed SDS margin profile, with base business around 15% and margin expansion opportunities on mix.

Q: Jerry Revich asked about NASA bookings and STS LNG project backfill.

A: Stuart Brady talked about NASA workforce insourcing impact and STS bookings momentum.

Q: Ian Zafino asked about Middle East bookings and MTS troop movement impact.

A: Stuart Brady provided positive outlook on Middle East bookings and no material impact from troop reduction in Europe.

Q: Mariana Perez Mora asked about STS closeout and growth trajectory.

A: Stuart Brady talked about STS closeout resolution and growth themes for SDS and MTS.

Q: Toby Sommer asked about STS and NASA.

A: Stuart Brady discussed STS customer planning and NASA human spaceflight engagement.

Q: Steven Fisher asked about guidance and STS project progress.

A: Stuart Brady said not raising guidance yet and STS projects are in maturing stages with good drivers