KBR — Third Quarter Fiscal 2026 Earnings Summary

Financial Performance:

• Consolidated revenues were $2.0 billion for the quarter, up 5% year-over-year, and $5.9 billion for the nine months, up 1% year-over-year.
• Net income attributable to KBR was $133 million for the quarter, up 16% year-over-year, and $331 million for the nine months, up 9% year-over-year.
• Operating income was $186 million for the quarter, down 3% year-over-year with a margin of 9.2%, and $538 million for the nine months, down 8% year-over-year with a margin of 9.1%.
• Adjusted EBITDA was $268 million for the quarter, up 12% year-over-year with a margin of 13.2%, and $777 million for the nine months, up 6% year-over-year with a margin of 13.1%.
• Diluted EPS attributable to KBR was $1.06 for the quarter, up 18% year-over-year, and $2.60 for the nine months, up 12% year-over-year.
• Adjusted EPS was $1.12 for the quarter, up 10% year-over-year, and $3.06 for the nine months, up 4% year-over-year.
• Operating cash flows from continuing operations were $171 million for the quarter, down 14% year-over-year, and $331 million for the nine months, down 35% year-over-year.
• Adjusted operating cash flows were $188 million for the quarter, down 5% year-over-year, and $371 million for the nine months, down 27% year-over-year.
• Net debt was $2.118 billion as of October 2, 2026, with a net leverage ratio of 2.1x.
• Liquidity totaled approximately $1.1 billion, comprising $625 million in borrowing capacity under the revolving credit facility and $439 million in cash and cash equivalents.

Guidance and Future Outlook:

• KBR reaffirmed full-year fiscal 2026 guidance: Revenues of $7.90 billion to $8.36 billion; Adjusted EBITDA of $980 million to $1.04 billion; Adjusted EPS of $3.87 to $4.22; and Adjusted operating cash flows of $560 million to $600 million.
• The company targets the completion of the spin-off of Mission Technology Solutions (Trinzic) on January 4, 2027, subject to Board approval and SEC registration effectiveness.
• KBR and Trinzic will host separate Investor Day events in New York City on November 11 and November 12, 2026.

Business Segments and Product Lines:

• Mission Technology Solutions (MTS) revenues were $1.3 billion, down 5% year-over-year, driven by lower U.S. Government Federal Civilian volumes and NASA headwinds, partially offset by growth in Defense & Intelligence and International Government.
• MTS operating income was $115 million, up 2% year-over-year, with an operating margin of 9.1%.
• MTS Adjusted EBITDA was $145 million, up 5% year-over-year, with a margin of 11.5%.
• MTS backlog and options totaled $17.3 billion; book-to-bill was 0.6x (0.8x excluding NASA insourcing debooking).
• Sustainable Technology Solutions (STS) revenues were $762 million, up 26% year-over-year, driven by the conversion of strong bookings into revenue.
• STS operating income was $124 million, up 4% year-over-year, with an operating margin of 16.3%.
• STS Adjusted EBITDA was $147 million, up 15% year-over-year, with a margin of 19.3%.
• STS backlog reached a record $5.8 billion; book-to-bill was 1.3x.
• New business awards included a re-awarded $8 billion ceiling Antarctic Science and Engineering Support Contract, a $208 million U.S. Army Tactical Aviation and Ground Munitions task order, a $60 million NATO PATRIOT support contract, and various engineering and technology contracts in Saudi Arabia, Kazakhstan, and Europe.

Market and Competitive Landscape:

• The company cites strong customer demand across both business segments as a key market driver.
• MTS secured a re-award of a major 20-year single-award IDIQ contract following the resolution of a GAO protest.
• STS leveraged proprietary technologies (Purifier® ammonia, PureSAF®) for new projects in the energy transition and industrial sectors.

Risks and Challenges:

• Operating income was negatively impacted by higher spin-off costs, increased selling, general and administrative expenses, and lower equity in earnings from unconsolidated joint ventures.
• MTS revenues faced headwinds from anticipated NASA program reductions and lower U.S. Government Federal Civilian volumes.
• Adjusted operating cash flows decreased due to working capital changes and spin-off related costs.
• The company notes risks related to government funding, regulatory changes, geopolitical volatility, and potential contract disputes or bid protests.

Management Commentary and Tone:

• Stuart Bradie, President and CEO, described the quarter as "strong" with "profitable growth and solid execution."
• Management expressed confidence in the full-year outlook and noted the successful implementation of key standalone systems and infrastructure for the upcoming separation.
• The tone indicates readiness for the launch of KBR and Trinzic as independent companies with distinct capital allocation priorities.

Other Key Points:

• Bookings and options totaled $2.4 billion for the quarter with a book-to-bill ratio of 0.9x; backlog and options as of quarter-end were $23.1 billion.
• KBR returned $21 million to shareholders via regular dividends in the third quarter.
• Payments to repurchase common stock were $0 for the quarter and $29 million for the nine months.
• A settlement agreement was reached with U.S. TRANSCOM regarding the Global Household Goods Contract, converting a termination for default to a termination for convenience.
• Trinzic is expected to launch with more than $5 billion in annual revenue, 20,000 employees, and a global footprint.