What are the drivers behind the 15% growth in MTS backlog and the significant value of bids awaiting award?

The backlog growth is driven by wins like HHPC and Tubuti, as well as Space Force and Air Force awards in the digital area. International performance, especially in Australia and the U.K., also contributed. Bids awaiting award include work under protest, which could expand reach to new customers in missile defense and Space Force. The SHIELD IDIQ award also positions them well. “But just the broad portfolio internationally has been terrific as you -- as we talked about again in the prepared remarks. So that's really the story coming into the end of this year.”

How long will Plaquemines contribute at current levels, what is the impact of the Lake Charles project cancellation, and what are the opportunities to maintain JV contribution in the next three years?

Plaquemines contribution will run consistently through FY26 and into early FY27. The increased focus on BRIS and the SWAT acquisition, along with organic and inorganic growth in that area, will build out the portfolio and increase equity and earnings contribution. The 1.6x book-to-bill demonstrates momentum for future earnings, supporting double-digit revenue growth for STS. “But ultimately, as we said before, the contribution from Plaquemines will run consistently through all this year and into early next year.”

How should we think about M&A pre- and post-spin, and what are the capital allocation plans for the separated businesses?

The company is committed to shareholder value and open to accretive M&A, as demonstrated by the SWAT acquisition. They will not 'get out over their skis' with large transformational deals during the spin. Post-spin, STS is expected to have ~2x net leverage and MTS ~3x. The focus is on setting up both businesses with strong balance sheets, with excess cash deployment assessed throughout the year. “And if we find accretive M&A, we don't want to stand still. And I think we've proven that with the acquisition of SWAT to really advance our strategy in the sort of long recurring cycle of OpEx type contracts, and we'll be looking to expand in areas of strategic importance.”

KBR

KBR (KBR) Q4 FY25 earnings call: guidance and Q&A

Earnings call· Dec 2025 (Q4 FY25)· Industrials· Feb 26, 2026

Source: earnings call transcript

Executive summary

KBR Q4 FY25 — Strong Execution and Spin-off Progress Amidst Challenging Environment

KBR delivered strong financial results in Q4 and full-year FY25, exceeding cash flow and EPS guidance, despite a challenging market. The company is progressing with its planned spin-off into two independent entities, Sustainable Tech and Mission Tech, targeting H2 2026. Both segments are demonstrating improved momentum and earnings quality, driven by strategic pivots, disciplined execution, and a focus on higher-margin work, positioning them for continued growth and value creation.

Highlights

Adjusted EBITDA increased $100 million year-over-year for FY25, reaching $980 million to $1.04 billion for FY26 guidance.
Operating cash flow was $557 million for FY25, representing 110% conversion to adjusted net income, exceeding guided ranges.
Returned a record $413 million to shareholders in FY25 through buybacks and dividends.
Sustainable Tech (STS) achieved a Q4 book-to-bill of 1.6x and a trailing 12-month book-to-bill of 1.2x.
Mission Tech (MTS) backlog and options grew 15% year-over-year to $19.1 billion.

Concerns

Revenues were down $223 million year-over-year in Q4 FY25, primarily due to award timing in MTS and reduced EUCOM contingency scope.
Sustainable Tech faced a challenging year in 2025 with a sharp decline in petrochemicals CapEx and a pause in many green projects.
Mission Tech experienced award delays, reduced contingency activity in Europe, and the impact of a government shutdown in 2025.
The COSMOS recompete was lost in 2025, though it was at the lower end of margin returns.
Projected effective tax rate for FY26 is 26% to 28%, higher than the current year, reflecting a greater mix of work in the Global South.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year 2026 Revenue	$7.9 billion to $8.36 billion high materiality	FY26	High
Full-year 2026 Adjusted EBITDA	$980 million to $1.04 billion high materiality	FY26	High
Full-year 2026 Adjusted EPS	$3.87 to $4.22 high materiality	FY26	High
Full-year 2026 Adjusted Operating Cash Flow	$560 million to $600 million high materiality	FY26	High
Full-year 2026 Sustainable Tech (STS) Revenue Growth	low double-digit growth medium materiality	FY26	High
Full-year 2026 Sustainable Tech (STS) Margin	20% plus medium materiality	FY26	High
Full-year 2026 Mission Tech (MTS) Revenue Growth	low single digits medium materiality	FY26	High
Full-year 2026 Mission Tech (MTS) Margin	10% plus medium materiality	FY26	High
Full-year 2026 Capital Expenditures	$40 million to $50 million low materiality	FY26	High
Full-year 2026 Effective Tax Rate (ETR)	26% to 28% low materiality	FY26	High
Full-year 2026 Estimated Adjusted Share Count	127 million low materiality	FY26	High
Spin-off Transaction Target Distribution	second half of 2026 high materiality	H2 FY26	High
Spin-related Transition Costs	approximately $140 million to $180 million medium materiality	FY26	High
Annual Dividend	$0.66 per share medium materiality	FY26	High
Q1 FY26 Revenue and Adjusted EPS Weighting	46% to the first half and 54% to the second half low materiality	FY26	High
Q1 FY26 Performance Outlook	largely in line with Q4 FY25 low materiality	Q1 · FY26	High
MTS Sequential Growth (Recast Basis)	moderate sequential growth low materiality	Q1 · FY26	High
Leverage Trend	trend up modestly in the first half of the year before coming back down below the targeted 2.5 level medium materiality	H1 FY26	High
Sustainable Tech (STS) Long-term Margin Target	20% plus medium materiality	FY27	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Sustainable Tech (STS) STS demonstrated resilience despite challenging market conditions, pivoting towards Global South, LNG, ammonia, and OpEx-driven markets. Strong book-to-bill and backlog growth provide good visibility for 2026. Margins held up well, and the segment is on pace to meet its long-term target of 20% plus by 2027. The SWAT acquisition is expected to more than double BRIS's EBITDA contribution. Q4 Book-to-bill: 1.6xTrailing 12-month Book-to-bill: 1.2xBacklog: $4.2 billionBacklog YoY change: +5%Backlog (excluding Plaquemines LNG) YoY change: +20%Near-term pipeline (excluding LNG): ~$5 billionWork under contract coverage for 2026 guidance: ~63%Adjusted EBITDA growth since 2023: +16%Cash conversion: >80%	—	low double-digit growth (FY26 guide)	—	20% plus (normative long-term)
Mission Tech (MTS) MTS performed well despite headwinds like award delays and reduced contingency activity. The segment continued to move upmarket, expanding with Space Force and Air Force. International performance, particularly in Australia, was a standout. Margin quality improved due to mix and disciplined program selection. No material recompete revenues are expected in 2026, reducing near-term risk. Trailing 12-month Book-to-bill: 1.0xBacklog and options: $19.1 billionBacklog and options YoY change: +15%Backlog and options funded (excluding PFIs): 40%Bids awaiting awards: $17 billionBids awaiting awards (new business): 80%Expected bids in 2026: >$25 billion (up double digits YoY)Work under contract coverage for 2026 guidance: ~82%Revenue growth (since 2023): mid-single-digit	—	low single digits (FY26 guide)	—	10% plus (normative)

KBR operating KPIs by quarter

KBR operating KPIs stated on its earnings calls, by fiscal quarter
KPI	Mar 2026 Q1 FY26	Jun 2026 Q2 FY26	Change vs prior quarter
Backlog Sustainable Tech	~$4.7B Backlog ended the quarter at approximately $4.7 billion, and that is up 9% year-over-year. Source: earnings call transcript	$5.5B And backlog ended the quarter at a record $5.5 billion, and that is up 40%, 4-0% year-over-year. Source: earnings call transcript	—
Book-to-bill ratio Mission Tech	1 ratio So to put this in context with some key metrics, MTS' first quarter book-to-bill was 1.0 with trailing 12 months book-to-bill of 1.0. Source: earnings call transcript	0.8 ratio Second quarter book-to-bill was 0.8x, with a trailing 12-month ratio of 1.0x. Source: earnings call transcript	-20%

Operating figures the company stated on at least two of the calls shown, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Orderbook & backlog

Sustainable Tech (STS) Backlog $4.2 billion FY25 end

up 5% YoY

Up more than 20% excluding Plaquemines LNG. Work under contract covers ~63% of 2026 guidance.

Mission Tech (MTS) Backlog and Options $19.1 billion FY25 end

up 15% YoY

40% funded, excluding PFIs. Work under contract covers ~82% of 2026 guidance.

Mission Tech (MTS) Bids Awaiting Awards $17 billion FY25 end

80% of this represents new business.

Product announcements

Product	Type	Timeline	Details
INSITE 3.0	launch	Q4 FY25
Mura technology	milestone	Q4 FY25

Deals & partnerships

SWAT Acquisition within Brown & Root joint venture BRIS, enhancing OpEx-facing businesses. approximately $115 million (KBR's proportional share)

The SWAT acquisition closed in January 2026. KBR invested approximately $115 million for its proportional share.

Frazer Nash Consultancy Business realignment for spin-off.

The Frazer Nash Consultancy business is being moved into Sustainable Tech as part of refining the transaction perimeter for the spin-off.

U.K. Civil Nuclear project portfolio Business realignment for spin-off.

The U.K. Civil Nuclear project portfolio is being moved into Sustainable Tech as part of refining the transaction perimeter for the spin-off.

Risks & headwinds

Challenging award environment FY25

Revenues down $223 million YoY in Q4 FY25

Mitigation:Disciplined execution, focus on what can be controlled, pivot to Global South and OpEx-driven markets.

Decline in petrochemicals CapEx and pause in green projects FY25

Sharp decline in petrochemicals CapEx; pause in many green projects

Mitigation:Pivoting Sustainable Tech towards Global South, LNG, ammonia, and OpEx-driven markets where demand fundamentals remain strong.

Award delays, reduced contingency activity, and government shutdown FY25

Impacted Mission Tech performance

Mitigation:Disciplined execution, focus on higher-margin work, strong international execution, and selective business development approach.

Loss of COSMOS recompete FY25

COSMOS recompete lost

Mitigation:This was at the lower end of margin returns within the portfolio; no material recompete revenues expected in FY26, reducing near-term recompete risk.

NASA budget pressure FY26

Science and Space segment down

Mitigation:Contained within the overall MTS guidance; focus on other growth areas within MTS.

Protests on awards Ongoing, resolution expected H1 FY26

Mission Iraq award (circa $1 billion) and classified K2A program under protest; COSMOS and Diego losses also protested.

Mitigation:Guidance does not assume success in protests, providing potential upside. Award cadence in Mission Tech expected to improve as protests resolve.

Elevated EUCOM contingency levels Q1 & Q2 FY26

$60 million to $70 million per quarter

Mitigation:The company will be comping against these elevated levels, but EUCOM is now at its base activity levels, and MTS is expected to show moderate sequential growth on a recast basis.

What to watch in Q1 FY26

Spin-off Form 10 amendment filing

March 2026

Current Initial confidential filing made in late December 2025

Target Amendment incorporating full year audited FY25 financials

Why it matters

This is a key regulatory milestone for the planned spin-off, indicating progress towards the H2 2026 distribution.

As committed, we made our initial confidential filing in late December, and we currently expect to file an amendment incorporating full year audited '25 financials in March '26.

Find out whether KBR delivers this. Inve re-checks your case every morning.

Q&A highlights

What is the pipeline for sizable STS projects to fill the gap and grow beyond Plaquemines, which is closing out next year?

Management highlighted strong Q3/Q4 book-to-bill, particularly in the Global South, LNG, ammonia, and OpEx areas. They noted the Mura technology ramp-up and ongoing LNG front-end design contracts. The BRIS joint venture, with the SWAT acquisition, is expected to significantly increase EBITDA contribution, providing transparency and longevity to equity and earnings.

“We've started this year in Q1 very strongly again in bookings in STS. So again, I think directionally, that's a very positive thing to see and obviously to disclose today.”

asked by Tobey Sommer · answered by Stuart Bradie

2 min read 6 chapters

Detailed narrative

Strategy Execution in 2025

Despite a challenging award environment, KBR successfully executed its strategy in 2025, expanding margins by over 100 basis points and generating operating cash flow with a 110% conversion rate. The company delivered $30 million in cost savings and returned $413 million in capital to shareholders, the highest in a decade.

Strategic pillars included expanding in sustainable tech, leveraging contract vehicles in mission tech, and advancing innovation through initiatives like INSITE 3.0 and digital design labs.

Sustainable Tech (STS) Performance and Pivot

STS faced headwinds from declining petrochemicals CapEx and a pause in green projects in 2025. However, the segment demonstrated resilience by pivoting towards the Global South, LNG, ammonia, and OpEx-driven markets. This pivot resulted in strong book-to-bill ratios of 1.6x in Q4 and 1.2x for the trailing 12 months, with backlog ending at $4.2 billion, up 5% year-over-year.

Work under contract covers approximately 63% of the 2026 guidance, above normative levels.

Mission Tech (MTS) Performance and Upmarket Move

MTS navigated award delays, reduced contingency activity, and government shutdown impacts in 2025, maintaining revenue year-over-year and improving margins. The segment continued its upmarket shift, expanding with the U.S. Space Force and Air Force Research Lab, validating the LinQuest acquisition.

International performance, particularly in Australia, was strong with $800 million in defense awards. Backlog and options grew 15% year-over-year to $19.1 billion, with 82% of 2026 guidance covered by existing contracts.

Spin-off Transaction Update

Preparations for the spin-off are progressing as planned, with a targeted distribution in the second half of 2026. Carve-out audits and pro forma financial statements are underway, with an initial confidential Form 10 filing made in December and an amendment expected in March 2026.

The Frazer Nash Consultancy business and U.K. Civil Nuclear project portfolio are being moved into Sustainable Tech to ensure operational clarity for both future companies. Mark Sopp has been appointed Interim Spin CEO.

Capital Allocation and Balance Sheet Discipline

KBR maintained strong capital allocation and balance sheet discipline, returning a record $413 million to shareholders in 2025 and ending the year with net leverage of 2.2x. The company approved an annual dividend of $0.66 per share for 2026. A strategic investment of $115 million was made in January to fund the proportional share of the SWAT OpEx acquisition within BRIS, enhancing resilience to CapEx cycles.

Leverage is expected to modestly increase in H1 2026 before declining below 2.5x by year-end.

AI Impact and Digital Transformation

KBR is disciplined in its approach to AI, focusing on use-case solutions that drive ROI. In MTS, AI is applied to R&D projects through digital engineering labs. In STS, AI is used to accelerate engineering, prevent human errors, and optimize facility operations through digital twins and predictive analytics.

The company is also implementing AI in back-office functions to improve efficiency and reduce SG&A, including a Microsoft Dynamics ERP rollout across the STS portfolio to enhance real-time decision-making and digital procurement.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.