KBR has announced its first quarter 2020 financial results, noting strong business continuity, safe and effective transition to teleworking amidst COVID-19, healthy liquidity profile and operating Cash Flow $41 million, Adjusted Operating Cash Flow $65 million, the company reported on Wednesday.
“I am pleased to announce the company’s first quarter 2020 financial results,” said Stuart Bradie, President and CEO of KBR. “With more than 85% of our portfolio supporting mission critical government services and delivering proprietary technology solutions, our business continues to be resilient amidst the COVID-19 pandemic and energy market downturn,” KBR CEO Stuart Bradie said.
KBR has maintained a healthy liquidity profile and produced strong free cash flow in the first quarter 2020. The company’s $500 million revolving credit facility is essentially untapped, and based on expected free cash flow for the year, KBR does not plan to draw on this source of funds for operating purposes in 2020.
The company’s Government Solutions division has delivered 1.3x book-to-bill (BTB), excluding the workoff of PFIs, defending its largest recompete of 2020 and achieving BTB of greater than 1x in each of its three major service lines.
In February, the company acquired contracts from SMA in Australia under which we will deliver technical training, curriculum development, technical documentation and data analysis to the Royal Australian Navy. Government Solutions Australia team has leveraged the company’s specialized, technology-enabled capabilities as the Australian Department of Defence modernizes and renews its platforms.
The Technology division will continue to benefit from a strong 2019 backlog. Bookings in the first quarter were lower due to COVID-19 and have been further impacted with the disruptions in the energy market.
Within KBR’s Energy Solutions, COVID-19 has adversely impacted the division by the energy market. Management will continue to monitor capital investment and spending modifications across its client base and has taken the following proactive measures to immediately reduce costs and increase resilience for the future.
The company recorded a pretax charge of $178 million during the first quarter 2020, of which almost 90 percent was non-cash to impair goodwill, equity investments, real estate and other assets. The charge had a minimal impact on financial liquidity.
Government Solutions Adjusted EBITDA of $106 million, an increase of $17 million compared to Q1 2019, from strong operational performance in the U.S. and internationally. Revenue of $955 million was down slightly compared to 2019 due to the completion of the Tyndall disaster recovery work in mid-2019 and slightly lower volume on overseas contingency programs.
The growth in Adjusted EBITDA resulted from excellent margins in the current quarter associated with continued strong execution on the Aspire Capital Works program as well as successful resolution of certain legacy claims with the U.S. government.
Technology Solutions (TS) Adjusted EBITDA of $23 million, an increase of $1 million or 5% compared to Q1 2019 due to a change in mix, primarily increased license and engineering services. Revenues were down slightly due to higher volumes of proprietary equipment deliveries in 2019.
Energy Solutions Adjusted EBITDA of $11 million, a decrease of $17 million or 61% compared to Q1 2019. While revenue grew significantly associated primarily with reimbursable EPC projects commenced in 2019 along the U.S. Gulf Coast and expanded services globally, margins were compressed by higher volumes of low risk, reimbursable construction services. Margins benefited in 2019 from favorable project completion and close-outs that did not recur in 2020.
The company has expanded its Government Solutions Systems Engineering portfolio through multiple recompete and new business expansions supporting next generation technologies, including $139 million in NAVAIR engineering contracts and several new task orders to provide avionics product and life cycle analysis for the U.S. Air Force.
KBR successfully defended the company’s largest Government Solutions recompete of the year, NASA Ames ISRDS, strengthening the company’s NASA franchise. Under the contract, KBR will perform research and development within artificial intelligence, knowledge discovery, and nanotechnology information processing and sensors.
The company also won seats on two important Government Solutions IDIQ contracts: an 8-year IDIQ contract to provide integrated technology solutions to secure U.S. Air Force bases globally, and an 11-year IDIQ contract for the U.S. Air Force to support contingency and humanitarian operations.
“We produced excellent cash flow in the quarter and core operating results were in line with our expectations. Strong liquidity combined with our ability to generate healthy free cash flow in the current environment is an indicator of the long-term sustainability and durability of our company,” Bradie noted.
About KBR, Inc.
KBR is a global provider of differentiated professional services and technologies across the asset and program life cycle within the Government Services and Hydrocarbons sectors. KBR employs approximately 37,000 people worldwide (including our joint ventures), with customers in more than 80 countries, and operations in 40 countries, across three synergistic global businesses: Government Solutions, Technology Solutions, Energy Solutions.