KBR (NYSE:KBR) executives said the company delivered margin expansion, strong cash generation, and record capital returns in 2025 despite what management described as a challenging award environment across both of its reporting segments. On the company’s fourth-quarter and full-year 2025 earnings call, CEO Stuart Bradie and newly appointed CFO Shad West outlined performance trends in Sustainable Technology Solutions (STS) and Mission Technology Solutions (MTS), provided an update on the planned spin-off targeted for the second half of 2026, and issued 2026 guidance that includes expected transition costs tied to the separation.
2025 results highlighted margin gains and cash conversion
For the fourth quarter, KBR reported revenue of $1.85 billion, down $223 million year-over-year, which management attributed primarily to award timing in Mission Tech and reductions in UCOM contingency scope. West said profitability improved, with adjusted EBITDA margins of 12.6%, up 190 basis points, driven by program execution and mix as lower-margin UCOM volume declined. Adjusted EPS was $0.99, up $0.09 from the prior year, with West citing stronger adjusted EBITDA and a lower share count following repurchases.
Operating cash flow was $557 million, which management said represented 110% conversion to adjusted net income. West noted that adjusted EPS and operating cash flow exceeded the top end of the company’s guided ranges for the year.
Sustainable Tech: pivot to Global South and OpEx as CapEx softened
Bradie said STS faced a sharp decline in petrochemicals CapEx and a pause in many green projects as customers emphasized affordability and energy security. He said the business pivoted toward the Global South, LNG, ammonia, and OpEx-driven markets.
Bradie highlighted several commercial indicators for STS:
- Fourth-quarter book-to-bill of 1.6x and trailing 12-month book-to-bill of 1.2x
- Backlog of $4.2 billion, up 5% year-over-year (and up more than 20% excluding Bakken LNG)
- Near-term pipeline excluding LNG of approximately $5 billion, with about 80% from repeat customers
- Work under contract covering roughly 63% of 2026 guidance
Management pointed to wins across Iraq, Saudi Arabia, Kuwait, and Singapore, and said the company secured Abadi and Coastal Bend front-end engineering design contracts in LNG. Bradie also discussed Hydro-PRT recycling, saying that after commissioning challenges the assets are now operating continuously and producing on-spec product, with ramp-up expected through 2026.
In Q&A, Bradie said STS started 2026 “very strongly” in bookings and reiterated that the company is emphasizing longer-term OpEx-oriented work. He also discussed Mura, saying it has passed a 72-hour test, product is on spec, and product has been sold, with ramp-up expected over time and a pipeline of projects.
Mission Tech: backlog growth, fewer recompete pressures, and protest-related timing
Bradie said MTS dealt with award delays, reduced contingency activity in parts of Europe, and the impact of a government shutdown, but held revenue year-over-year while improving margins and delivering strong cash performance. He said the portfolio is moving “upmarket,” citing expansion with the U.S. Space Force and Air Force Research Lab and positions on multiple award contract vehicles.
MTS ended the year with trailing 12-month book-to-bill of 1.0, while backlog and options were $19.1 billion, up 15% year-over-year, with 40% funded (excluding PFIs). Management said bids awaiting awards totaled $17 billion, with 80% representing new business, and the company expects to bid more than $25 billion in 2026, up double digits year-over-year. Work under contract covers approximately 82% of 2026 guidance, and Bradie said there are no material recompete revenues expected in 2026.
Internationally, Bradie highlighted Australia as a key contributor, citing approximately $800 million in defense award contracts and high single-digit year-over-year revenue growth. He also said 2025 saw a slow award cadence in the U.K. due to defense reviews, but that process is now behind the company and KBR sees “clear spend priorities” going into 2026.
During Q&A, Bradie discussed MTS guidance components, saying Defense and Intel is up, Science & Space is down due to pressure on NASA budgets, and Readiness & Sustainment (R&S) is affected by protests and award timing. He added that KBR’s guidance does not assume success in certain protests, characterizing potential protest wins as upside.
Bradie also provided examples of awards and protests, including the Mission Iraq award (citing $1 billion with the State Department) and a classified program referred to as K2A. He said a pre-positioned stock award in Europe came out of protest in KBR’s favor, and noted the company is protesting the COSMOS and Diego outcomes, while also reiterating those latter items were not included in guidance.
Spin-off preparations continue; transaction perimeter updated
KBR reiterated that its targeted distribution for the spin-off is anticipated in the second half of 2026. Bradie said carve-out audits and pro forma financial statements are underway to support the Form 10 process, and that the company made an initial confidential filing in late December. KBR expects to file an amendment incorporating full-year audited 2025 financials in March 2026. Bradie said work is also progressing on a private letter memo with the IRS.
As part of separation planning, KBR said it decided to move the Frazer-Nash Consultancy business and the U.K. civil nuclear project portfolio into Sustainable Tech. Bradie said the change has no material impact to long-term segment growth rates or margins, and that the company provided supplemental financial information for modeling purposes.
Bradie said CEO and CFO recruitment is underway for the future standalone companies, and he appointed Mark Sopp as interim spin CEO while the search continues.
2026 guidance includes spin transition costs and new cash flow metrics
For fiscal 2026, KBR guided:
- Revenue of $7.9 billion to $8.36 billion
- Adjusted EBITDA of $980 million to $1.04 billion
- Adjusted EPS of $3.87 to $4.22
- Adjusted operating cash flow of $560 million to $600 million
At the midpoint, West said the outlook implies approximately 4% year-over-year growth across key metrics. The company expects spin-related transition costs of approximately $140 million to $180 million, inclusive of one-time IT capital costs. West said KBR will introduce adjusted operating cash flow and adjusted free cash flow metrics in 2026 that add back spin-related cash outflows to improve visibility into core cash generation.
Additional assumptions included CapEx of $40 million to $50 million, an effective tax rate of 26% to 28% (higher than 2025 due to a greater mix of work in the Global South), and an estimated adjusted share count of 127 million. Management said revenue and adjusted EPS are expected to be weighted 46% to the first half and 54% to the second half, and that first-quarter 2026 is expected to be largely in line with fourth-quarter 2025.
KBR’s board approved an annual dividend of $0.66 per share, or $0.165 per quarter, for 2026, with management stating it intends to maintain a stable dividend through the spin. West also said the company invested about $115 million in January for its proportionate share of the SWAT acquisition within the BRIS joint venture, and noted leverage could trend modestly higher in the first half before moving back below a targeted 2.5 level as cash builds.
About KBR (NYSE:KBR)
KBR, Inc is a global engineering, procurement, construction and services (EPC&S) company headquartered in Houston, Texas. The firm delivers integrated solutions and technologies across the full project lifecycle for customers in the energy, government, industrial and infrastructure sectors. Its offerings span feasibility studies, front-end engineering design, detailed design, procurement, fabrication, construction, commissioning and operations support.
The company is organized into business segments that include Energy Solutions, which focuses on oil and gas processing, liquefied natural gas (LNG) facilities and petrochemical plants; Government Solutions, providing logistics, sustainment, training and mission support for defense, intelligence and civilian agencies; and Sustainable Technology, delivering chemical process technologies, water treatment and lower-carbon fuels expertise.
