• Revenue Growth: Up 10% year-over-year.
• Adjusted EBITDA: Increased by 18% year-over-year.
• Margins: Improved by 70 basis points.
• Cash Flow Conversion: Year-to-date conversion at 129%.
• Book-to-Bill Ratio: 1.2x at the group level.
• Cash Flow: $422 million year-to-date.
• DSOs (Day Sales Outstanding): Averaging about 60 days.
• Government Solutions Book-to-Bill: 1.3x for the quarter.
• Adjusted EPS Guidance: Increased to $3.20 to $3.30.
• Adjusted EBITDA Guidance: Increased to $840 million to $870 million.
• Revenue Guidance: Increased to $7.5 billion to $7.7 billion.

• Warning! GuruFocus has detected 4 Warning Signs with BOM:532343.

Release Date: October 23, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• KBR Inc (NYSE:KBR) reported double-digit year-over-year growth in revenue, adjusted EBITDA, and operating cash flow for Q3 2024.
• The company achieved a book-to-bill ratio of 1.2x, indicating strong demand and a solid foundation for future growth.
• KBR Inc (NYSE:KBR) increased its guidance for revenue, adjusted EBITDA, and adjusted EPS for 2024, reflecting strong performance and the integration of LinQuest.
• The acquisition of LinQuest is progressing well, with over $60 million in new orders secured since the acquisition.
• KBR Inc (NYSE:KBR) continues to expand its global reach, with significant contract wins in the Middle East and strong performance in international markets.

Negative Points

• The HomeSafe program's revenue contribution for 2024 is below expectations, although it does not impact profit due to conservative initial guidance.
• There are potential delays in energy transition projects, particularly in the U.S., which could be influenced by the upcoming election results.
• The company faces skilled labor shortages in the UK, impacting the progress of its plastics recycling technology project.
• KBR Inc (NYSE:KBR) is cautious about the impact of the continuing resolution (CR) on U.S. government bookings, which could delay contract awards.
• The integration of LinQuest, while positive, brings additional interest expenses that slightly offset the earnings contribution.

Q & A Highlights

Q: Can you provide more color on your visibility for 2025, particularly regarding STS growth and the sustainability of the book-to-bill ratio? A: Stuart Bradie, CEO: We are confident in aligning with our 11% to 15% growth expectations for STS going into next year. Our book-to-bill ratio picked up in Q3 and looks strong for Q4. Energy transition projects are seeing more activity, especially in the Middle East. The election results may impact the speed of projects in the US, but overall, we are confident in meeting our targets.

Q: Regarding the guidance and LinQuest's contribution, is there anything else affecting the guidance besides Homesafe? A: Mark Sopp, CFO: Homesafe's revenue is offset by LinQuest, but we did not factor in Homesafe profits. The guidance reflects LinQuest's contribution, with interest expenses considered. We have some seasonality in Q4, affecting labor efficiency, but overall, we are cautiously optimistic about the year-end results.

Q: How do you see the mix of emerging technologies like plastics recycling impacting segment margins over the next few years? A: Stuart Bradie, CEO: We expect margins to remain around 20% with 11% to 15% growth. While there may be some volatility due to mix, our long-term targets remain unchanged. The emerging technologies are exciting, but we don't foresee significant changes to our margin expectations.

Q: Can you discuss the potential election impact on the Lake Charles LNG project and your confidence in meeting growth targets without it? A: Stuart Bradie, CEO: If Democrats remain, some LNG projects may proceed with environmental considerations. Lake Charles is well-positioned for approval. Regardless of timing, we have a strong pipeline and are confident in meeting our growth targets, even without Lake Charles.

Q: Regarding the Saudi projects, can we consider the PMC contract as secure, or is there potential for changes? A: Stuart Bradie, CEO: The final investment decision will depend on EPC pricing, but Aramco is committed. We feel confident in the PMC contract's stability, and it supports our long-term targets. The role we have is significant and aligns with our strategic goals.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.