Revenue: First Quarter Fiscal 2024 revenues were $1.8 billion, up 7% year-on-year, marking an all-time high since the company’s transformation in 2020 (excluding peaks of OAW in 2021).
Adjusted EBITDA: Posted a 14% year-on-year increase with margins improving by 70 basis points.
Cash Flow: Cash generation was above expectation at $91 million in Q1, historically the slowest quarter for the company.
Safety and Performance: Highlighted a good start to the year from a safety perspective, emphasizing the importance of reinvigorating the organization post-holidays.
Future Guidance
Consolidated Performance: The company is well ahead of pace, particularly in STS and GS International, with all businesses performing at or above expectations.
Work Under Contract: As of Q1 2024, approximately 84% of work required to meet the year’s guidance is under contract, positioning the company well for future quarters.
2024 Guidance: Reaffirmed guidance for the year on all measures, reflecting strong performance across key metrics which derisks the remaining quarters.
Capital Deployment: Continues to focus on accretive M&A and, lacking such opportunities, expects buybacks and debt management to be priorities. The leverage ratio at the end of Q1 was 2.0, indicating a solid balance sheet.
Trends, Market Conditions, Sentiment
People Development Focus: KBR emphasized dedication to nurturing and developing talent across the globe, which is fundamental to their strategy and business success, acknowledged by a 4-star rating from MSCI in human capital development.
Market Activity in Key Areas: Activity remains high in STS, driven by demand associated with the energy trilemma. The government defense budget’s approval is expected to increase award activity in the U.S., enhancing prospects for the government services segment.
Positive Momentum in Key Markets: Despite expected slowness in EUCOM and readiness and sustainment business due to funding delays in Congress, other areas are performing strongly, including notable advancements in the human health and performance franchise.
Investment in Technology and Innovation: KBR highlighted ongoing success and pipeline strength in ammonia, decarbonization, energy security, and energy transition, signifying robust market alignment with their service offerings.
Operational Excellence: Noted a clean start to the year with “very quiet” operational performance, indicating effective management and operational efficiency.
Notable Quotes
Stuart Bradie, CEO: “KBR is a values-driven organization with our people at the heart of all that we do… developing talent and skills for the future are all key enablers and frankly, the true driver of shareholder value.”
On Growth and Guidance: “So in short, a great start to the year with positive momentum… positions us very well to deliver our ‘24 guidance.”
Mark Sopp, EVP and CFO: “We have a terrific balance sheet with plenty of capital deployment options… Deployment priorities remain the same. We can lever up moderately for accretive M&A should opportunities present themselves and absent that expect buybacks and debt management.”
On STS Performance and Future Potential: “Customer attraction and retention continues to build with STS’ targeted strategy to tap global demand driven by the energy trilemma… We believe the trust being registered with blue-chip customers around the world will offer enduring benefits to this business area and to KBR for years to come.”
