KBR, Inc. (NYSE:KBR) Q3 2023 Earnings Call Transcript

Bert Subin: Hey. Hey, good morning. Stuart and Mark, thanks for the question. Hey, maybe just to start out, Stuart, you said STS is expected to over-perform next year. How should we think about the trajectory there? I think last call you mentioned that, you expected sort of double digit organic growth for a while. There could be some lumpiness in that over time. I mean, right now you’re growing 28%. Is there a situation where you just continue to grow at an elevated level in ’24? And then as we think about ’25, I mean, that was supposed to be $300 million in EBITDA by then. Is there any update you can give us on that as we think about, I guess, the new ’25 target?

Stuart Bradie: Yeah, I mean, I don’t think we’re going to get out over our skis on a ’25 target today, but what I would say is that we are well ahead of pace. You’re quite right. We hit a $300 million target. We’re going to blow through that this year. we raised EBITDA guides last quarter and, we’re ahead of pace of that or on pace for that. And I think everyone recognizes, particularly with the Q3 results, that’s all pointing to STS. And I think if you look at the relative performance of STS to KBR, I think year to date it’s circa 40% and the quarter it’s even higher. And so its contribution and its value to KBR is becoming clearer and clearer. And hopefully that reflects in the multiple as well as we go forward in terms of that contribution.

But as we look into next year, we’ll be the double digit growth that we set ourselves will be coming off a much higher base. And clearly that outpaces where we originally thought and even a few months ago thought we would be starting from. So I think that’s probably the best way to look at it. We’ll get to the, we’ve got an invested day, as in sort of May next year and we’ll certainly be realigning those targets by then. We should also have a lot more clarity on home safe by then as well. So I think we can really sort of cover-off where we’re heading in the next couple of years at that juncture.

Bert Subin: Just to clarify there, Stuart, do you say it’s a higher base and so double digit growth will be a challenge or you expect double digit growth off of a higher base?

Stuart Bradie: No, no, no, no, no, no. We firmly expect double digit growth. My point being it’s a much higher starting number that you put the double digits to.

Bert Subin: Got it. Okay, thanks. And then just as a follow-up on the home safe side of things, I mean, I think there was some news out there in September that there was, I guess, challenges or I guess concerns on Transcom part of integrating Mill Move with Home Safe Connect. And it seems like you guys are pretty ready whenever they essentially say go. That expectation, I think, is still January start and then a sort of sequential ramp from there. Can you just give us some of the moving parts or like the things you’re watching to get that turned on and revenue started there?

Stuart Bradie: Yeah, I mean, quite right. It’s the integration of the systems and ensuring their readiness and we don’t want to falter in any way. And I think Transcom are quite right to be quite considered about how they ramp up and it comes back. We do expect moves in Q1. I don’t think it will be January 1. That’s for sure. It will be a little bit later in the quarter. But I think directionally, I’ll reiterate again the relationship, the passion around this on both sides to get it right is absolutely there. I’m not concerned about that at all. But it’s all about being absolutely sure that when we start, we can actually ramp up very quickly and not falter and so I can’t say more than what we said in the prepared remarks and just because I don’t know anymore. And I think that’s kind of where we’re at. I’m sorry, I can’t give more color. It’s just there’s just uncertainty. I’m trying to be truthful.