On Tuesday, KBR (NYSE:KBR) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
Benzinga APIs provide real-time access to earnings call transcripts and financial data. Visit https://www.benzinga.com/apis/ to learn more.
View the webcast at https://events.q4inc.com/attendee/192758066
Summary
KBR Inc reported a solid start to 2026 with disciplined execution, resilient operations, and strong cash generation despite geopolitical challenges.
The company reaffirmed its 2026 guidance, with 67% of STS and 91% of MTS revenue guidance already covered by work under contract.
KBR Inc continues to see strong demand in core markets, showing a steady pipeline and significant bookings, particularly in energy security and infrastructure.
The strategic focus remains on a planned tax-free spin of MTS, with a targeted distribution date of January 4, 2027, to create two independent pure-play companies.
Management highlighted the successful use of the KBR Pulse app during the Middle East conflict to maintain employee safety and communication.
The company is experiencing a mix of headwinds and tailwinds across its segments, with Mission Tech facing award delays but Sustainable Tech showing strong revenue growth.
KBR Inc’s operational highlights include advancements in digital capabilities and strategic partnerships to enhance project execution and maintenance.
Full Transcript
Gabrielle (Moderator)
Hello everyone and thank you for joining KBR Inc’s first quarter 2026 earnings conference call. My name is Gabrielle and I will be coordinating your call today. During the presentation, you can register a question by pressing STAR followed by one on your telephone keypad.. If you change your mind, please press STAR followed by two. Please kindly limit yourself to one question and one follow up. If you have any further questions, please rejoin the queue. I will now hand over to our host, Rachel Goldwaite, Head of Investor Relations. Please go ahead, Rachel.
Rachel Goldwaite (Head of Investor Relations)
Thank you and good morning. Welcome to KBR’s first quarter 2026 earnings call. Joining me today are Stuart Brady, President and CEO and Chad Evans, Executive Finance President and CFO. Stuart and Chad will cover highlights from the quarter and then we’ll open the line for your questions. Today’s earnings presentation is available on the Investors section of our website at kbr.com this discussion includes forward looking statements reflecting KBR’s views about future events and their potential impact on performance as outlined on slide 2. These matters involve risks and uncertainties that could cause actual results to differ materially from these forward looking statements. As discussed in our most recent Form 10-K, 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 earnings presentation. I will now turn the call over to Stuart.
Stuart Brady (President and CEO)
Thank you Rachel and good morning everyone. I’ll pick up on slide 4. Now, before we get into the results, I wanted to share a brief zero Harm moment on staying connected, especially in challenging times at kbr. Zero harm starts with keeping our people informed and supported, even when they’re hard to reach. Whether they’re on a remote site, a project location or in an office. The focus on reaching the unreachable is what led to the launch of the KBR Pulse app. Pulse was not built in response to a crisis. It actually came out of our global employee hackathon, where our teams identified a better way to stay connected across our diverse and distributed workforce. It is employee driven, built by our people, for our people, and it provides easy access to news, safety updates and company resources wherever work happens. When the conflict in the Middle east escalated, Pulse quickly became a critical channel for sharing timely updates and guidance. Most importantly, it helped us stay closely connected with our teams in the region and all of our people have remained safe, supported and informed. Pulse helps us reach employees who are not sitting at desks and reinforces our ability to to act as one team even in the most challenging environments. It is a practical example of how listening to our people and then investing in the right digital tools strengthens our zero harm culture and supports resilience when it most matters. On to slide 5. Today’s call will cover these key topics. Firstly, I’m pleased to report that we started the year well, demonstrating disciplined execution and resilient operations. Secondly, we continue to see demand in our core markets with clear pipeline visibility. Third, we’re advancing our planned spend transactions, more on that later and thus sharpening our strategic focus. And finally, we are reaffirming our 2026 guidance and remain committed to execution, margin discipline and strong cash generation. Moving to slide six where I’ll start by covering the Sustainable Technology Solutions (STS) business Over the last few quarters we’ve seen customer priorities move toward energy security, reliable supply and resilient infrastructure. A more complex geopolitical environment is reinforcing these trends and shaping both capital spending and services demand across our end markets. With that context, I want to provide a bit of colour on where we’re winning work today and how those wins align to our strategy and how that sets up the near term pipeline on the next slide. For the third consecutive quarter, Sustainable Technology Solutions (STS) delivered book-to-bill XLNG well above 1.0. Demand continues to be anchored in energy security, downstream reliability and long duration asset services with a balanced mix of capital projects and recurring services work supporting growth and improving backlog visibility. In energy security and transition, customers are prioritizing execution certainty across upstream, downstream and gas infrastructure. The this quarter highlights include project management services for the Zalif south refinery in Libya, integrated field management services at the Majnoon oil field in Iraq and a long term general maintenance contract at SATORP in Saudi Arabia. These wins reflect continued investment in mission critical assets where reliability really matters, in critical materials and circularity. We are winning life cycle orientated work that extends asset life and improves performance. During the quarter we secured a long term catalyst supply agreement supporting Indorama’s ammonia operations alongside optimization work across chemicals and materials assets in infrastructure and transport. We continue to pursue selective program and project management opportunities including water infrastructure work in the Middle east and sustained activity in Australia across rail, water and defence adjacent infrastructure. Overall, our bookings reflect a capital linked engineering and project foundation for selective layering of recurring operations and maintenance services. This deepens our customer relationships and extends our role across the asset lifecycle and of course improves backlog visibility. We’re also adding digital capabilities where they strengthen our role with the customers. A partnership with Applied Computing supports data driven and AI enabled solutions that are expected to connect project execution to maintenance and operations while staying disciplined within our Capital light model. To put this in context, we with some key metrics Sustainable Technology Solutions (STS) first quarter book to bill XLNG was 1.2 times with trailing 12 month book to bill of 1.2 times. Backlog ended the quarter at approximately $4.7 billion and that is up 9% year over year. The ITAM pipeline, again excluding LNG is more than $5 billion, was roughly 80% from repeat customers and work under contract today now covers approximately 67.67% of our 2026 revenue guidance, which is a good place to be at this time of the year. The momentum we are seeing in bookings is consistent with the pipeline outlook, which brings me to slide 7. This matrix shows where near term pipeline activity is clustering by market and region. It’s directional, not a forecast of timing, size or conversion. Stepping back, the pattern reflects two core dynamics. First, we are seeing broader distribution of critical programs rather than reliance on single large awards. Second, customers are advancing work through early engineering and phased scopes reflecting discipline progression across project life cycles. From there, five themes explain how demand is showing up across regions. First, energy security and Resilience in the Middle east, customers continue to prioritize reliability, redundancy and throughput expansion across critical infrastructure. Recent geopolitical conflict is reinforcing these priorities with increasing emphasis on resilience alongside restoration and rebuilding efforts where needed. Importantly, we have not seen any material change in capital spending priorities as customers continue to fund essential programs already underway. These tend to move as multi year programs that award engineering work early, supporting a steady and visible near term opportunity set. With a strong local footprint and established relationships, KBR remains well positioned to support customers across the region, particularly as they navigate evolving conditions. Second, resource security within critical minerals and circularity across the Middle East, Africa and parts of the Americas, governments and producers remain focused on maintaining an expanding supply of essential inputs, particularly ammonia. This includes continued demand for licensed ammonia technology and proprietary solutions with customers increasingly engaged early with engineering LED scopes again supporting durable near term booking opportunities. Thirdly, pragmatic transition activity In Europe, near term transition demand remains largely engineering driven including design, permitting and modularization across key transition value chains. We are seeing particular demand in areas such as sustainable aviation fuel alongside policy driven feasibility and pre feed studies as customers assess options and navigate regulatory frameworks. Fourth, energy security and critical materials across the Americas, customers are pursuing targeted programs that strengthen energy exports, improve reliability and of course support domestic supply chains, particularly across LNG adjacent infrastructure and processing and separation assets tied to critical materials and finally infrastructure and transport. In Australia, near term opportunities remain concentrated in government funded transportation, defence and enabling infrastructure programs with a strong emphasis on alliances, framework agreements and stage delivery models. Work is predominantly engineering PMC and early works rather than full greenfield execution which supports recurring capital like bookings and reflects customers focus on resilience, capacity expansion and program continuity. Overall, the matrix reinforces the sts. Bookings and near term pipeline are diversified and concentrated in staged programmatic work aligned with resilience and resource security priorities and this plays directly to our engineering led capital like model and repeat customer relationships. Now onto slide 8 for the mission Tech business. As we’ve discussed over the last few quarters, awards are not flowing at historical levels. In this environment our focus remains on what we can control, increasing both the volume and quality of our bid activity, expanding access to the IDIQ vehicles and continuing to position the business for future awards. While several larger opportunities remain pending and in some cases under protest, we continue to win work that aligns with our core capabilities and the government’s most enduring priorities. Recent Mission Tech wins reflect a consistent set of strengths. We’re applying digital engineering and analytics to help accelerate timelines, leverage AI and data driven insights to support higher confidence decisions, and delivering trusted execution and mission critical environments in space and national security. We won new work supporting the US Space Force applying digital engineering and analytics to help accelerate the development and deployment of next generation space capabilities. We also secured a new role providing joint data and analytical support to senior defense leaders focused on translating complex data into actionable insight for critical decisions. On the civilian side, we were awarded a recompete with the Department of Transportation’s Volpe center extending a long standing partnership focused on using AI, analytics and systems engineering to modernize transportation and improve safety. And lastly, we secured contract extension under the Army’s logat program, reinforcing KBR’s role supporting the US military with mission critical logistics and sustainment in complex operating environments. Before moving on, I wanted to briefly address what we’re seeing at NASA. KBR has supported NASA missions for more than 60 years and recently the Administrator has indicated an interest in insourcing certain core workforce competencies. If implemented, these changes would affect the mix of work across some programs and that impact is reflected in our 26 outlook, which Shad will discuss in more detail as he walks through the guidance. Importantly, KBR continues to support NASA in areas for deep mission experience. Independent technical expertise and operational continuity are essential. We are very proud of our team’s contribution to the Artemis 2 mission and of our decades long service to the Agency. As you’ll hear from Shad, these mission tech dynamics are being offset by strength in sustainable tech, so the impact is primarily mixed as we reaffirm our full year guidance, stepping back and looking across the portfolio Recent wins really force Where MTS has differentiated we operate in mission critical environments that demand speed, technical depth and trusted execution with digital and data capabilities playing an increasingly central role in mission success. So to put this in context with some key metrics, MTS’s first quarter book to bill was 1.0 with trailing 12 months book to bill of 1.0 backlog and options ended the quarter at $18.5 billion with 39% of that funded excluding the PFIs. Bids awaiting award totaled $16 billion and work under contract now covers approximately 91% of our 26 revenue guidance and we continue to make progress towards our bid volume goal of $25 billion in 2026 with significant submissions expected in the next two quarters. With that, I’ll turn to Slide 9 and our near Term Pipeline opportunities. This slide provides a directional view of where we see the MTS near term pipeline forming across markets and customer sets. It is not intended to indicate precise timing, size or conversion, but rather to highlight where demand is clustering. Based on our current visibility, we see two core dynamics shaping the pipeline. First, customers are prioritizing a more selective set of enduring mission critical programs with long term relevance and funding durability, a trend evident across US and allied defence markets including Australia. Second, they are increasingly valuing partners who can integrate across domains and translate software and data driven architectures into operational capability at speed. Those dynamics translate into several clear demand themes across the portfolio. First, national Security, Space and Space Mission Operations where programs award technical debt and integrated delivery from digital engineering through operations. This includes long standing work supporting the US Space Force’s military satellite communications mission and related space architecture. Second, integrated air and missile defense including Counter UAS and Directed Energy. Here customers are prioritizing layered scalable solutions that reduce cost per engagement. Our role centers on integrating new capabilities into existing architectures so customers can field solutions faster and of course more affordably. Third, connected Biospace and Decision Advantage as customers invest to compress decision cycles by linking sensors to decisions at the edge. We are supporting architecture and integration efforts aligned with JADC2 objectives including work related to the Air Force Battle Network. Finally, we continue to see durable demand in readiness, sustainment and deployed mission support including allied life cycle programs. These missions place a premium on reliability scale and end to end accountability and we’re increasingly applying AI enabled tools including through our partnership with Tag Up AI to help improve sustainment workflows and readiness outcomes across these areas. The common thread is customers prioritizing speed, integration and measurable mission outcomes, areas where MTS is positioned to deliver onto slide 10 and an update on the Spin Next, I’ll provide an update on the tax free spin of MGS which remains central to our strategy and to sharpen focus and of course create long term shareholder value. The strategic rationale for the separation remains unchanged. The spin reflects the culmination of a decade long portfolio transformation and will result in two independent pure play companies with clearer strategic focus, distinct investment profiles and dedicated leadership aligned to their end markets. As part of this process, we evaluated all strategic alternatives and concluded that a spin is the right path to unlock value and position both businesses to for long term success. We are executing on this path while ensuring the separation is completed in a way that protects continuity, minimizes risk and positions both companies for success. From day one. We continue to believe a quarter end spin is the most practical approach both operationally and financially and and given the scope and complexity of separation, a fourth quarter timeline provides additional Runway to address these complexities. As a result, we are working toward an effective spin date of January 4, 2027 so the first business day of fiscal 27. On the regulatory front, we have confidentially resubmitted our form 10 including the fiscal 2025 audited carve out financials. We expect continued confidential refinement through the SEC review process before transitioning to a public filing which we currently anticipate in September. In parallel, we’re advancing the IRS private letter ruling process to support a tax free transaction. From a leadership standpoint, we are now well advanced on talent migration. The MTS CEO search is in its final stages with board interviews planned for later this month and the CFO process is expected to follow shortly thereafter. At the same time, additional leadership and functional appointments are beginning to be announced across both organizations, helping to build clarity and momentum. Operational separation continues to progress. We have completed the IT Stand Up Project …
This post was originally published here
