KBR Announces Fourth Quarter and Fiscal 2023 Financial Results; Issues Fiscal 2024 Guidance

"Lastly, we have a more defined path forward on HomeSafe and together with our customer remain unwavering in our commitment to harness our collective expertise and focus on innovation, with the aim of providing an unparalleled and more sustainable moving experience for military personnel and their families."

New Business Awards
Backlog and options as of December 29, 2023 totaled $21.7 billion. Delivered 1.1x trailing-twelve-months (TTM) book-to-bill¹ as of December 29, 2023. Awarded $1.7 billion of bookings and options in the quarter, bringing fiscal 2023 bookings and options to $10.5 billion.

Sustainable Technology Solutions (STS) delivered 1.1x TTM book-to-bill¹ as of December 29, 2023, including awards and achievements in the quarter as follows:

• Awarded a Front-End Engineering Design contract by Fidelis New Energy for Project Fyrkat, one of the first onshore liquid carbon dioxide sequestration facilities, located at a receiving terminal at the Port of Aalborg, Denmark.
• KBR's Purifier™ ammonia technology selected by PT Pupuk Sriwidjaja Palembang, a subsidiary of PT Pupuk Indonesia, for a planned ammonia plant to be built in South Sumatera Province, Indonesia. This will be KBR's 12^th ammonia plant licensed to Pupuk Indonesia.
• KBR's K-GreeN® technology selected by a consortium consisting of Lotte Chemical, Korea National Oil Corp and Samsung Engineering for Lotte Chemical's H2biscus green ammonia project that will produce 800 KTA of green ammonia from hydropower in Sarawak, Malaysia.
• KBR's market-leading low-carbon blue ammonia technology selected by Tokyo-based INPEX Corporation and Oklahoma City-based LSB Industries for a 1.1 million tonnes per annum ammonia production and export project in the US Gulf Coast.
• Extended collaboration with ISU Chemical through a memorandum of understanding. Under the terms, KBR will provide licensing, proprietary engineering design, proprietary equipment and catalyst for the planned 10 MTPD hydrogen production unit, employing KBR's innovative technology, H2ACT℠, which has rapidly emerged as the industry's leading ammonia cracking technology.

Government Solutions (GS) delivered 1.2x TTM book-to-bill¹ as of December 29, 2023, including awards and achievements in the quarter as follows:

• Awarded two additional DEM-Shorad vehicle prototypes, on top of the four delivered to the Army earlier this year, underscoring the growing significance of directed energy capabilities.
• Awarded additional scope to support the development of new energy technologies, systems, and processes as part of the UK government's drive to net zero carbon emissions by 2050. Frazer-Nash Consultancy, a KBR company, supports the Department for Energy Security and Net Zero to develop its programs and to assess and monitor the projects being delivered within its net zero innovation portfolio.
• Awarded all three one-year options on the Preservation of the Force and Family (POTFF) program for the continued support of the physical, mental, social and spiritual readiness of the Special Operations Forces and their families.
• Awarded a two-year contract extension with the Australian Defence Force to help modernize, integrate and optimize Australia's military capability. KBR supports the modernization, integration and optimization of Australia's military capability through its unique expertise, particularly in Command and Control and bespoke information and communication technology systems.
• Awarded 2023 Large Business Prime Contractor of the Year at both NASA Johnson Space Center and NASA Goddard Space Flight Center, marking a two-year winning streak at Goddard.
• Joined forces with The Henry M. Jackson Foundation for the Advancement of Military Medicine on an important contract to support neuroscience research for service members. This new award focuses on those affected by traumatic brain injuries, and research will be done in collaboration with the Uniformed Services University (nation's only federal health sciences university) and the University of California San Francisco.

Summarized Fourth Quarter and Fiscal 2023 Financial Results

Financial Highlights for the Three Months Ended December 29, 2023

• Revenue of $1.7 billion, up 8% (organic) on a year-over-year-basis
• Net income attributable to KBR of $21 million; Adjusted EBITDA² of $188 million (10.9% Adjusted EBITDA² margin)
• Diluted EPS of $0.15; Adjusted EPS² of $0.69
• Operating cash flows of $83 million
• Bookings and options of $1.7 billion during the quarter with 1.1x TTM book-to-bill¹

Financial Highlights for the Year Ended December 29, 2023

• Revenue of $7.0 billion, up 6% (organic) on a year-over-year basis and 11% on an (organic) ex-OAW² year-over-year-basis
• Net income attributable to KBR of $(265) million; Adjusted EBITDA² of $747 million (10.7% Adjusted EBITDA² margin)
• Diluted EPS of $(1.96); Adjusted EPS² of $2.91
• Operating cash flows of $331 million; Adjusted operating cash flows² of $463 million
• Bookings and options of $10.5 billion during the year to date period with 1.1x TTM book-to-bill¹

Commentary on the Three Months Ended December 29, 2023
Revenues were $1.7 billion, up 8% (organic) compared to 4Q'22, primarily due to new and on-contract growth across Defense & Intel, Science & Space, and International within Government Solutions and growing demand broadly across Sustainable Technology Solutions.

Net income attributable to KBR was $21 million, down $72 million compared to 4Q'22, primarily due to a non-cash charge of $40 million recorded in connection with the convertible notes settlement method election made in 2Q'23 and a charge of $26 million recorded in connection with the settlement of warrants (discussed below).

Net income attributable to KBR ex-Nonrecurring Charges² was $87 million, down $6 million compared to 4Q'22, primarily due to increases in gross profit offset by higher interest expense, foreign exchange gains that did not recur in 2023, and higher provision for income taxes due to credits that did not recur in 2023.

Adjusted EBITDA² was $188 million, up 20% compared to 4Q'22, with Adjusted EBITDA² margins of 10.9%, up 110 bps over 4Q'22.

Diluted earnings per share were in line with the decrease in Net income attributable to KBR. Adjusted earnings per share² remained flat primarily because the decrease in Net income attributable to KBR ex-Nonrecurring Charges² was offset by the reduction in Adjusted weighted average common shares outstanding due to repurchases and the cash settlement of warrants.

Operating cash flows were $83 million, up 38% compared to 4Q'22. Adjusted operating cash flows were $83 million, down 6% compared to 4Q'22.

Commentary on the Year Ended December 29, 2023
Revenues were $7.0 billion, up 6% (organic) compared to FY22. Revenue ex-OAW² (organic) increased $705 million, or 11%, due to new and on-contract growth across all Government Solutions business units and growing demand across Sustainable Technology Solutions.

Net income attributable to KBR was $(265) million, down $455 million compared to FY22, primarily due to a current year charge of $494 million recorded in connection with the convertible notes settlement method election made in 2Q'23 and repurchase and termination of the convertible notes, note hedge and warrants (discussed below) and after-tax cash charge of $132 million in connection with the settlement of a legacy legal matter, partially offset by non-cash charge of $137 million in equity in earnings related to the resolution of a subcontractor dispute that did not recur in FY23.

Net income attributable to KBR ex-Nonrecurring Charges² was $361 million, up $34 million compared to FY22, primarily due to increases in gross profit and equity in earnings from unconsolidated affiliates partially offset by increases in selling, general and administrative expenses, interest expense, higher provision for income taxes due to credits that did not recur in FY23, as well as prior year gains on sale of non-core assets and unrealized gain on other investment that did not recur in FY23.

Adjusted EBITDA² was $747 million, up 12% compared to FY22, with Adjusted EBITDA² margins of 10.7%, up 56 bps.

Diluted earnings per share were in line with the decrease in Net income attributable to KBR and the reduction in Diluted weighted average common shares outstanding. Adjusted earnings per share² increased in line with Net income attributable to KBR ex-Nonrecurring Charges² and the reduction in Adjusted weighted average common shares outstanding due to repurchases and the cash settlement of warrants.

Operating cash flows were $331 million, down 16% compared to FY22 due to the after-tax cash charge of $132 million in connection with the settlement of a legacy legal matter. Adjusted operating cash flows² were $463 million, up 9% compared to FY22, primarily due to increased Net income attributable to KBR ex-Nonrecurring Charges².

Capital returned to shareholders totaled $210 million during the year to date period, consisting of $138 million in share repurchases, inclusive of $125 million of open market repurchases and $13 million of repurchases to satisfy requirements of equity compensation plans, and $72 million in regular dividends.

On February 19, 2024, the Board of Directors approved an increase of our quarterly regular dividend from $0.135 per share to $0.15 per share effective for the record date and payment date of the next scheduled distribution on March 15, 2024 and April 15, 2024, respectively. This represents the fifth successive year of dividend increases, representing an 11% increase from the previous regular dividend amount.

Additionally, on February 19, 2024, the Board of Directors authorized replenishment of our share repurchase authorization to $500 million.

Cash Settlement Method Election and Repurchase of Convertible Notes
During 4Q'23, KBR settled the remaining convertible notes in cash, settled the corresponding note hedge and also entered into agreements with the option counterparties to settle the remaining warrants in cash. These agreements resulted in the warrants no longer qualifying for the equity scope exception under ASC 815 Derivatives and Hedging, and as a result, the warrants required fair value measurement between the initial recognition date (agreement date) and settlement date for each counterparty.

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