KBR Announces Fourth Quarter and Fiscal 2022 Financial Results; Issues Fiscal 2023 Guidance

Delivered Strong Q4 and Fiscal 2022 Results
Earnings Momentum Drives Fiscal 2023 Guidance Outlook
Board Approves 12.5%Increase to Regular Dividend

HOUSTON, Feb. 16, 2023 /PRNewswire/ -- KBR, Inc. (NYSE: KBR) today announced its fourth quarter and fiscal 2022 financial results and issued its fiscal 2023 financial guidance.

"We had an excellent 2022 and finished the year strong. Our incredible people do things that matter every single day, and I wish to thank them for all that they do. Once again they delivered outstanding results across all key metrics. Our safety performance was another highlight achieving Zero Harm 91% of all days throughout 2022," said Stuart Bradie, KBR President and CEO.

"We saw organic revenue growth in line with our targets, but the real story was quality of earnings, outstanding operational performance leading to enhanced margins and cash conversion above expectations. We have been carbon neutral since 2019 and continue to make good progress on our 2030 operational net-zero carbon target. We also strengthened unique synergies across our business that enable us to seamlessly deploy our deep domain expertise and differentiated innovations and capabilities in key areas of global importance such as national security, energy security and transition, and space. As a result, we are well positioned in strategic end markets with favorable tailwinds. In 2022, we had annual bookings and options of $8.2 billion and move into 2023 with 70%+ of work already under contract. Sustainable Technology Solutions is significantly ahead of pace, and this is expected to continue into next year and beyond.

Looking ahead, we believe we are primed to continue driving growth and stakeholder value, with ever-growing confidence in our 2025 targets, and we are pleased to announce our fiscal 2023 earnings and cash guidance."

New Business Awards
Backlog and options for the quarter totaled $19.8 billion. Delivered 1.2x trailing-twelve-months book-to-bill1 as of December 31, 2022, including $1.5 billion of awards and options in the quarter, as follows:

• Won two contracts totaling over $120 million to support strategic space system acquisitions through advanced analytics, modeling, estimation, research, integrated program management, acquisition technical assistance, architecture trade studies, data science, and data management.
• Granted a $157 million task order to support capabilities assessment and enhancements for the U.S. Army's Utility Helicopter 60 Variant fleet.
• Received a $69 million task order to deliver critical airborne manned reconnaissance aircraft systems for the Naval Surface Warfare Center Crane and the Naval Air Systems Command.
• Partnered with Deepak Fertilizers and Petrochemicals Corporation Ltd. to help lower emissions and increase production capacity at three plants.
• Engaged to provide front-end engineering design of the baseload power hub for an innovative energy storage project off the coast of the Netherlands.
• Proprietary Vinyl Acetate Monomer technology, offered in alliance with Showa Denko K.K., selected for a 100,00 ton per annum production facility in India.
• In addition, the Court of Federal Claims upheld the Global Household Goods contract award to our joint venture, HomeSafe Alliance, by U.S. Transportation Command with a contract ceiling value of $20 billion and a potential nine-year term, inclusive of all options periods. HomeSafe Alliance is proceeding with work under the contract; however, at this time, only the transition period has been included in backlog.

Financial Highlights for the Quarter Ended December 31, 2022

• Revenue of $1.6 billion, up 23% on an ex-OAW1 year-over-year-basis
• Net income attributable to KBR of $93 million; Adjusted EBITDA1 of $157 million (10% Adjusted EBITDA1 margin)
• Diluted EPS of $0.62; Adjusted EPS1 of $0.69, up 60% on an ex-OAW1 year-over-year basis
• Operating cash flows of $60 million; Adjusted operating cash flows1 of $88 million
• Bookings and options of $1.5 billion during the quarter with 1.2x TTM book-to-bill2

Financial Highlights for the Year Ended December 31, 2022

• Revenue of $6.6 billion, up 9% on an ex-OAW1 year-over-year-basis
• Net income attributable to KBR of $190 million; Adjusted EBITDA1$668 million (10% Adjusted EBITDA1 margin)
• Diluted EPS of $1.26; Adjusted EPS1 of $2.71, up 28% on an ex-OAW1 year-over-year basis
• Operating cash flows of $396 million; Adjusted operating cash flows1 of $424 million with 110% Adjusted operating cash flow1 conversion
• Bookings and options of $8.2 billion during the year with 1.2x TTM book-to-bill2

Commentary on Fiscal 2022 Financial Results
Revenues for the year were $6.6 billion, down 11% compared to 2021 primarily attributable to the completion of work associated with the Operation Allies Welcome (OAW) program in early 2022. Excluding OAW, revenue increased $495 million, or 9%.

Net income attributable to KBR was $190 million, up $163 million compared to 2021, primarily due to an increase in gross profit and a provision for the loss on the Ichthys project dispute in 2021.

Adjusted EBITDA1 was $668 million, up 7% compared to 2021, and Adjusted EBITDA1 margin expanded to 10%, up 166 bps over the same period. Diluted earnings per share and Adjusted earnings per share1 increased due to higher operating income, partially offset by higher interest expense.

Operating cash flows were $396 million, up 42% compared to 2021. Adjusted operating cash flows1 were $424 million, up 33% compared to the 2021, resulting in Adjusted operating cash conversion1 of 110%.

Liquidity, Capital Structure, and Dividends
Capital returned to shareholders totaled $269 million during the year, consisting of $203 million in share repurchases, inclusive of share repurchases to satisfy requirements of equity compensation plans, and $66 million in regular dividends.

On February 10, 2023, the Board of Directors approved an increase of our quarterly regular dividend from $0.12 per share to $0.135 per share effective for the record date and payment date of the next scheduled distribution on March 15, 2023 and April 14, 2023, respectively. This represents the fourth successive year of dividend increases, representing a 12.5% increase from the previous regular dividend amount.

Fiscal 2023 Guidance
The table below summarizes fiscal 2023 guidance and represents our views as of February 16, 2023.

The company does not provide reconciliations of Adjusted EBITDA to the most comparable GAAP financial measures on a forward-looking basis because the company is unable to predict with reasonable certainty the ultimate outcome of legal proceedings, unusual gains and losses, and acquisition-related expenses without unreasonable effort, which could be material to the company's results computed in accordance with GAAP.

Conference Call Details
The company will host a conference call to discuss its fourth quarter and fiscal 2022 financial results and fiscal 2023 guidance on Thursday, February 16, 2023, at 7:30 a.m. Central Time. The conference call will be webcast simultaneously through the Investor Relations section of KBR's website at investors.kbr.com. A replay of the webcast will be available shortly after the call on KBR's website or by telephone at +1.866.813.9403, passcode: 717125.

About KBR
We deliver science, technology and engineering solutions to governments and companies around the world. KBR employs approximately 30,000 people worldwide with customers in more than 90 countries and operations in 34 countries. KBR is proud to work with its customers across the globe to provide technology, value-added services, and long-term operations and maintenance services to ensure consistent delivery with predictable results. At KBR, We Deliver.

Visit www.kbr.com

Government Solutions backlog for the year ended December 31, 2022 totaled $11.5 billion, down $1.1 billion compared to 2021 primarily attributable to negative exchange rate movement in the British pound when compared to the U.S. dollar and delay in contract awards. Sustainable Technology Solutions backlog for the year ended December 31, 2022 totaled $4.0 billion, up $1.7 billion compared to 2021 primarily due to increased demand for technologies and solutions across its offerings portfolio.

Forward-Looking Statements
The statements in this press release that are not historical statements, including statements regarding our expectations for our future financial performance, effective tax rate, operating cash flows, contract revenues, our business strategy, and our plans for raising and deploying capital, paying dividends and settling our convertible notes at maturity, are forward-looking statements within the meaning of the federal securities laws. These statements are subject to numerous risks and uncertainties, many of which are beyond the company's control that could cause actual results to differ materially from the results expressed or implied by the statements. These risks and uncertainties include, but are not limited to: the ongoing conflict between Russia and Ukraine and the related impacts on our business as we wind down our business operations in Russia; the potential adverse economic and market conditions, such as interest rate and currency exchange rate fluctuations, including as a result of pandemics such as COVID-19; the recent dislocation of the global energy market; the company's ability to manage its liquidity; the outcome of and the publicity surrounding audits and investigations by domestic and foreign government agencies and legislative bodies; potential adverse proceedings by such agencies and potential adverse results and consequences from such proceedings; changes in capital spending by the company's customers; the company's ability to obtain contracts from existing and new customers and perform under those contracts; structural changes in the industries in which the company operates; escalating costs associated with and the performance of fixed-fee projects and the company's ability to control its cost under its contracts; claims negotiations and contract disputes with the company's customers; changes in the demand for or price of oil and/or natural gas; protection of intellectual property rights; compliance with environmental laws; changes in government regulations and regulatory requirements; compliance with laws related to income taxes; unsettled political conditions, war and the effects of terrorism; foreign operations and foreign exchange rates and controls; the development and installation of financial systems; the possibility of cyber and malware attacks; increased competition for employees; the ability to successfully complete and integrate acquisitions; and operations of joint ventures, including joint ventures that are not controlled by the company.

The company's most recently filed Annual Report on Form 10-K, any subsequent Form 10-Qs and 8-Ks, and other U.S. Securities and Exchange Commission filings discuss some of the important risk factors that the company has identified that may affect its business, results of operations and financial condition. Except as required by law, the company undertakes no obligation to revise or update publicly any forward-looking statements for any reason.

Non-GAAP Financial Information
The following information provides reconciliations of certain non-GAAP financial measures presented in the press release to which this reconciliation is attached to the most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles (GAAP). The company has provided the non-GAAP financial information presented in the press release as information supplemental and in addition to the financial measures presented in the press release that are calculated and presented in accordance with GAAP. Such non-GAAP financial measures should not be considered superior to, as a substitute for or alternative to, and should be considered in conjunction with, the GAAP financial measures presented in the press release. The non-GAAP financial measures in the press release may differ from similar measures used by other companies.

EBITDA and Adjusted EBITDA
We evaluate performance based on EBITDA and Adjusted EBITDA. EBITDA is defined as Net income (loss) attributable to KBR, plus interest expense, net; provision for income taxes; other non-operating income (expense); and depreciation and amortization. Adjusted EBITDA excludes certain amounts included in EBITDA. EBITDA and Adjusted EBITDA for each of the three- and twelve-month periods ended December 31, 2022 and 2021 are considered non-GAAP financial measures under SEC rules because EBITDA and Adjusted EBITDA exclude certain amounts included in the calculation of net income (loss) attributable to KBR in accordance with GAAP for such periods. Management believes EBITDA and Adjusted EBITDA afford investors a view of what management considers KBR's core performance for each of the three- and twelve-month periods ended December 31, 2022 and 2021 and also affords investors the ability to make a more informed assessment of such core performance for the comparable periods.

Adjusted EPS
Adjusted earnings per share (Adjusted EPS) for each of the three- and twelve-month periods ended December 31, 2022 and 2021 is considered a non-GAAP financial measure under SEC rules because Adjusted EPS excludes certain amounts included in the Diluted EPS calculated in accordance with GAAP for such periods. The most directly comparable financial measure calculated in accordance with GAAP is Diluted EPS for the same periods. Management believes that Adjusted EPS affords investors a view of what management considers KBR's core earnings performance for each of the three- and twelve-month periods ended December 31, 2022 and 2021 and also affords investors the ability to make a more informed assessment of such core earnings performance for the comparable periods.

We have calculated Adjusted EPS for each of the three- and twelve-month periods ended December 31, 2022 and 2021 by adjusting Diluted EPS for the items included in the table below.

We have calculated the 2023 guidance for Adjusted EPS by adjusting Diluted EPS for the items included in the table below.

Adjusted Cash Flows Provided by Operating Activities and Adjusted Free Cash Flows
Adjusted operating cash flows and Adjusted free cash flows are considered non-GAAP financial measures under SEC rules. Adjusted operating cash flows exclude certain amounts included in the cash flows provided by operating activities calculated in accordance with GAAP. Adjusted free cash flows exclude capital expenditures from Adjusted operating cash flows. The most directly comparable financial measure calculated in accordance with GAAP is cash flows provided by operating activities. Management believes that Adjusted operating cash flows and Adjusted free cash flows afford investors a view of what management considers KBR's core operating cash flow performance and also afford investors the ability to make a more informed assessment of such core operating cash generation performance.

We have calculated Adjusted operating cash flows and Adjusted free cash flows for each of the three- and twelve-month periods ended December 31, 2022 and 2021 by adjusting operating cash flow provided by operating activities for items included in the table below.

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SOURCE KBR, Inc.