KBR, Inc.

Second-quarter revenue was approximately $2 billion, up $32 million or 2% year over year. Adjusted EBITDA was $258 million, up $16 million, and adjusted EBITDA margin was 13%, up about 60 basis points. Adjusted EPS was $0.99, up $0.08. On cash flow, first-half adjusted operating cash flow was $183 million, with adjusted OCF conversion of about 74%. Segmentally, STS revenue was $676 million, up 10% year over year, with adjusted EBITDA of $123 million and margin of 18.2%; MTS revenue was $1.3 billion, down $28 million year over year, with adjusted EBITDA of $158 million and margin of 12.1%. For the full year, management reaffirmed guidance across revenue, adjusted EBITDA, adjusted EPS and adjusted operating cash flow. Management also said approximately 89% of expected annual revenue is already in hand, including 80% for STS and 94% for MTS.

Stuart Bradie’s message was that both businesses are executing well while the separation process stays on track. He emphasized record STS backlog, substantial MTS awarded work, and progress toward Day 1 readiness, saying the spin is still targeted for January 4, 2027. His tone was confident and upbeat, with repeated emphasis on visibility, disciplined capital allocation and the ability of both New KBR and Trinzic to create more value as focused stand-alone companies.

Shad Evans focused on the numbers and reiterated that KBR is tracking ahead of plan in the first half. He cited revenue of approximately $2 billion, adjusted EBITDA of $258 million, adjusted EPS of $0.99 and first-half adjusted operating cash flow of $183 million, while noting leverage ended the quarter at about 2.3x trailing adjusted EBITDA, flat sequentially and below the 2.5x target. He also highlighted STS year-to-date adjusted EBITDA margin ex LNG JV earnings of about 14.5% and MTS year-to-date margins of 11.4%, and said the company repurchased about $25 million of shares in the quarter after deploying roughly $190 million on portfolio investment and $71 million to shareholders in the first half.

Analysts pressed on how the two spin-off businesses will be capitalized and what cost structure changes are left to do before separation. Management said both businesses should carry normative leverage ratios, that real estate rationalization and organizational simplification are already underway, and that Trinzic is being built for rate neutrality while New KBR is being designed as a leaner, more scalable company. Questions also focused on STS margin variability, Middle East award mix and cash-flow timing; management said quarterly margin swings are normal because of project mix and procurement content, and that Middle East cash softness was a timing issue rather than a structural problem. On MTS, management said margins are running around 11% year to date but long-term 10%+ modeling remains appropriate, and it said the $8 billion Antarctic award ramps over the first couple of years with the incumbent currently running at roughly $150 million to $300 million annually.