Kbr, Inc.: Q2 FY2026 earnings call

What management said about Q2 FY2026, from the documents filed with the SEC on 30 July 2026: press release. Guidance figures: 4 kept. The quarter’s numbers.

Read the filing

Key takeaways

• Revenue rose 2% on ramp-ups: Revenues were $2.0 billion, up 2% or $32 million, from ramp-up of recent STS awards and International Government Clients growth in MTS. U.S. Defense and Intelligence revenue declined on EUCOM runoff; excluding it, revenue rose. Source
• Operating income fell 11% on spin costs: Operating income was $172 million, down 11% or $22 million. Higher gross profit was more than offset by one-time spin-off costs and other charges tied to the planned separation. Source
• Adjusted EBITDA rose 7% to $258 million: Management attributed Adjusted EBITDA of $258 million, with a 13.0% margin, to project execution including unconsolidated JVs, favorable portfolio mix and cost discipline across the enterprise. Source
• MTS Adjusted EBITDA rose 16%: MTS Adjusted EBITDA was $158 million, up 16%, with a 12.1% margin against 10.2% a year earlier, on favorable portfolio mix, cost management and contract closeouts. Source
• Protested awards kept out of backlog: About $10.6 billion of awarded work under protest, including the NSF Antarctica contract, is excluded from reported backlog and book-to-bill. Management expects it to add visibility as protests conclude. Source
• Operating cash flow fell 77%: Operating cash flows from continuing operations were $50 million, down 77%. Adjusted operating cash flows were $64 million, down 71%, with adjusted operating cash conversion of 51%. Source
• Completion targeted January 4, 2027: The spin-off is targeting completion on January 4, 2027, the first business day of fiscal 2027, subject to final Board approval and other customary conditions. Source

“We delivered a strong first half while continuing to position both businesses for long-term success as we advance toward separation,”

Stuart Bradie, President and Chief Executive Officer

Guidance

What changed from last quarter

• Guidance kept: Full-year fiscal 2026 guidance was reaffirmed for the consolidated company, with standalone updates to follow the spin transaction. Source
• New: Michael LaRouche was named President and Chief Executive Officer-designate of the planned spin-off entity. Source
• New: Nicholas Veasey was named Executive Vice President and Chief Financial Officer-designate of the planned spin-off entity. Source
• New: KBR unveiled Trinzic as the name of the future standalone company, with a new corporate brand and identity. Source
• New: MTS was awarded the $8 billion ceiling ASESC single-award IDIQ contract for the National Science Foundation, not yet recorded in backlog. Source
• Ended: Bookings and book-to-bill no longer exclude the Plaquemines LNG project; they continue to exclude long-term UK PFIs. Source

Results and growth drivers

• Revenue rose 2% on ramp-ups: Revenues were $2.0 billion, up 2% or $32 million, from ramp-up of recent STS awards and International Government Clients growth in MTS. U.S. Defense and Intelligence revenue declined on EUCOM runoff; excluding it, revenue rose. Source
• Operating income fell 11% on spin costs: Operating income was $172 million, down 11% or $22 million. Higher gross profit was more than offset by one-time spin-off costs and other charges tied to the planned separation. Source
• Net income attributable to KBR rose 32%: Net income attributable to KBR was $96 million, up 32%, reflecting higher gross profit, lower SG&A and interest expense, and no prior-year HomeSafe discontinued losses, partly offset by separation charges. Source
• Per-share earnings rose on fewer shares: Diluted EPS attributable to KBR was $0.75, up 34%. Adjusted EPS was $0.99, up 9%, on higher adjusted EBITDA and lower below-the-line expenses, with fewer shares from buybacks. Source
• Adjusted EBITDA rose 7% to $258 million: Management attributed Adjusted EBITDA of $258 million, with a 13.0% margin, to project execution including unconsolidated JVs, favorable portfolio mix and cost discipline across the enterprise. Source

Segment results

• MTS revenue down 2% on EUCOM runoff: MTS revenues were $1.3 billion, down 2%. International Government growth in Australia and the UK was more than offset by lower EUCOM contingency activity and reduced Federal Civilian activity. Source
• MTS Adjusted EBITDA rose 16%: MTS Adjusted EBITDA was $158 million, up 16%, with a 12.1% margin against 10.2% a year earlier, on favorable portfolio mix, cost management and contract closeouts. Source
• MTS operating income rose 7%: MTS operating income was $116 million, up 7%, driven by favorable portfolio mix. One-time spin-off costs and other separation charges partly offset the gain. Source
• STS revenue up 10% on newer projects: STS revenues were $676 million, up 10%, from ramp-up of newer awards in the Middle East and Latin America, with growth in Australia and Asia, partly offset by U.S. projects nearing completion. Source
• STS operating income fell 18%: STS operating income was $103 million, down 18%, reflecting the timing and mix of work, including a higher contribution from equipment procurement. Source
• STS Adjusted EBITDA down 8%: STS Adjusted EBITDA was $123 million, down 8%, with an 18.2% margin. Higher unconsolidated JV contributions made the decline smaller than the operating income decline. Source

“In STS, we delivered another strong quarter of bookings, driving record backlog levels and reinforcing the durability of demand across our portfolio.”

Stuart Bradie, President and Chief Executive Officer

Awards and technologies

• Purifier ammonia technology selected in Argentina: KBR's Purifier ammonia technology was selected for Pampa Energía's Bahía Blanca complex, expected to be the largest single-train ammonia plant in Latin America. Source
• PureSAF selected for SAF plants: PureSAF technology was selected by NorSAF for a planned 100,000 ton/year SAF and e-SAF facility in Latvia, and for a proposed sustainable aviation fuel plant on Singapore's Jurong Island. Source
• ASESC contract adds long-term MTS award: MTS was awarded the $8 billion ceiling ASESC single-award IDIQ to support U.S. Antarctic Program stations over 20 years. The award is not yet recorded in backlog or book-to-bill. Source
• Smaller MTS Space Force and ASTRA awards: MTS also received a $95 million cost-plus-fixed-fee Space Force contract at Kirtland Air Force Base over five years, and a position on the $866 million ceiling ASTRA multiple-award IDIQ. Source

Costs and margins

• Gross profit edged higher: Gross profit was $293 million, against $290 million a year earlier. Equity in earnings of unconsolidated affiliates was $52 million, against $51 million. Source
• Margins compared with prior year: Operating income margin was 8.7%, against 9.9% a year earlier. Adjusted EBITDA margin was 13.0%, against 12.4%. Source
• Separation costs added back to EBITDA: Spin-off, acquisition and restructuring items were $33 million in the quarter and $49 million year to date, added back in calculating Adjusted EBITDA. Source
• JV add-back method changed from Q1: Adjusted EBITDA now adds back KBR's share of unconsolidated JV interest, taxes, D&A and acquisition costs, applied prospectively. Prior periods were not recast; the estimated effect on fiscal 2025 margins is about 20 basis points. Source

“As we prepare for separation, we are taking actions to simplify our cost structure, improve efficiency and position both companies to compete more effectively as focused, standalone businesses.”

Stuart Bradie, President and Chief Executive Officer

Demand and bookings

• STS backlog reached a record: Management said STS bookings drove record backlog levels, reinforcing the durability of demand across the portfolio. Source
• Protested awards kept out of backlog: About $10.6 billion of awarded work under protest, including the NSF Antarctica contract, is excluded from reported backlog and book-to-bill. Management expects it to add visibility as protests conclude. Source
• MTS demand and protested work visibility: MTS book-to-bill was below one for the quarter. Management said customer demand remains firm and that awarded work under protest provides visibility beyond reported backlog. Source
• Demand described as healthy: Management said demand remains healthy across core markets, supported by customer relationships, disciplined execution and growing visibility into future performance. Source

Cash and capital returns

• Liquidity near $0.9 billion: Liquidity was about $0.9 billion at July 3, 2026, made up of $625 million of revolving credit capacity and $312 million of cash and cash equivalents. Source
• Operating cash flow fell 77%: Operating cash flows from continuing operations were $50 million, down 77%. Adjusted operating cash flows were $64 million, down 71%, with adjusted operating cash conversion of 51%. Source
• Capital returned to shareholders: KBR returned $46 million to shareholders in the quarter: $25 million of share repurchases and $21 million of regular dividends. Source
• Net leverage 2.3x, up from 2.2x: Net debt was $2,258 million at July 3, 2026, against $2,117 million at January 2, 2026. The net leverage ratio was 2.3x, against 2.2x. Source

Spin-off and strategy

• Spin-off of MTS announced in 2025: KBR announced in September 2025 its intention to spin off the MTS segment into a separate U.S. publicly traded company, creating two independent companies. Source
• Completion targeted January 4, 2027: The spin-off is targeting completion on January 4, 2027, the first business day of fiscal 2027, subject to final Board approval and other customary conditions. Source
• Tax-free treatment intended: Management said the planned spin-off is intended to be tax-free to KBR and its shareholders for U.S. federal income tax purposes. Source
• Trinzic named as standalone company: The future standalone company was named Trinzic on July 30, 2026, with a new corporate brand and identity as it prepares to become independent. Source
• Two pure-play companies expected: Management expects both companies to benefit from enhanced strategic and management focus, prioritized commercial resources, operational independence and financial flexibility. Source

People and leadership

• LaRouche named CEO-designate: Michael LaRouche was named President and Chief Executive Officer-designate of the planned spin-off entity on June 25, 2026. Source
• Veasey named CFO-designate: Nicholas Veasey was named Executive Vice President and Chief Financial Officer-designate of the planned spin-off entity. Source
• Headcount about 37,000: KBR employs about 37,000 people, up from about 36,000 cited in the first quarter release, with customers in more than 85 countries. Source

Year-to-date results

• Six-month net income up 5%: Six-month net income attributable to KBR was $198 million, up 5%. Six-month operating income was $352 million, down 11%, with a 9.0% operating margin. Source
• Six-month Adjusted EBITDA up 4%: Six-month Adjusted EBITDA was $509 million, up 4%, with a 13.0% margin. Source
• Six-month diluted EPS up 8%: Six-month diluted EPS attributable to KBR was $1.55, up 8%. Six-month Adjusted EPS was $1.95, up 2%. Source
• Six-month operating cash flow lower: Six-month operating cash flows from continuing operations were $160 million, against $308 million. Six-month adjusted operating cash flows were $183 million. Source

Coming up, as management said on 30 July 2026

• Standalone guidance updates planned: Management plans to update standalone guidance for both companies in connection with the planned spin transaction. Source
• Separation workstreams continue: Work continues on leadership, governance, operating model and branding for the future MTS company. Source
• Protest outcomes to add backlog visibility: Management expects the protested awards to provide additional backlog visibility as the protests conclude. Source

Figures management reported

Risks management discussed

• Demand: Reported U.S. Defense and Intelligence revenue declined year over year because of expected runoff of EUCOM contingency activity. Source
• Regulatory: About $10.6 billion of awarded work is under protest and is not reflected in reported backlog or book-to-bill until protests conclude. Source
• Financial: One-time spin-off costs and other charges associated with the planned separation offset higher gross profit in operating income. Source
• Operational: STS operating income reflected timing and mix of work, with equipment procurement contributing a larger share in the quarter. Source

Earlier plans management reported on

• Not stated: Management reaffirmed the full-year fiscal 2026 ranges for the consolidated company. Source
• Not stated: Management had expected the EUCOM contingency runoff, which it cited as the reason for year-to-date revenue decline. Source
• Not stated: Management continues to hold that forming two independent companies will improve their positioning. Source

Other quarters

• Q1 FY2026 earnings call
• Q4 FY2025 earnings call
• Q3 FY2025 earnings call
• Q2 FY2025 results

Summarised with AI from the documents the company filed with the SEC. Every point is checked against the filing before it is shown: management’s own words word for word, figures against the line or table row they come from. A point that fails the check is left out. Source opens the filing at that line.