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Introduction & Market Context
KBR Inc. (NYSE:KBR) presented its third-quarter 2025 earnings on October 30, 2025, reporting mixed results that showed flat revenue but strong bottom-line growth. Despite beating earnings expectations with an adjusted EPS of $1.02 (exceeding the forecast of $0.96), the company’s revenue of $1.93 billion fell short of the anticipated $1.98 billion. This mixed performance, combined with lowered full-year revenue guidance, contributed to a 6.04% drop in the stock price in pre-market trading, with shares closing at $40.30.
The engineering and construction firm continues to navigate challenges in converting its pipeline due to delays and protests, particularly in government contracts, while making progress on its planned spin-off of the Mission Technologies segment expected by mid-to-late 2026.
Quarterly Performance Highlights
KBR’s third-quarter results demonstrated resilience in profitability metrics despite revenue challenges. The company reported flat year-over-year revenue of $1.9 billion but delivered impressive growth in adjusted EBITDA, which increased 10% to $240 million. Adjusted EBITDA margin expanded to 12.4%, representing a 112 basis point improvement compared to the same period last year.
As shown in the following financial performance overview:
Adjusted EPS grew 21% year-over-year to $1.02, while year-to-date operating cash flow increased 24% to $506 million, highlighting the company’s strong cash generation capabilities. The quarterly book-to-bill ratio stood at a robust 1.4x, with a trailing twelve-month ratio of 1.0x, maintaining a solid total backlog and options valued at $23.4 billion.
CEO Stuart Bradie emphasized the company’s operational execution: "We delivered solid bottom-line performance with adjusted EBITDA and EPS growth and strong cash generation despite the challenging revenue environment."
Segment Performance
KBR’s performance varied across its two main business segments. The Mission Tech segment, which represents the larger portion of the business, reported flat revenues of $1,406 million and a modest 1% increase in adjusted EBITDA to $143 million. Meanwhile, the Sustainable Tech segment saw a slight 1% decline in revenue to $525 million but delivered an impressive 13% growth in adjusted EBITDA to $123 million, demonstrating significant margin expansion.
The segment breakdown illustrates these contrasting performances:
The company secured several notable contract wins during the quarter, including a $2.5 billion ceiling value contract and a $99 million U.S. Space Force contract in the Mission Tech segment. In Sustainable Tech, KBR secured a two-year renewal of the EPCM contract with Basra Oil Company and was awarded multiple FEED contracts, including one for the Abadi Onshore LNG project in Indonesia.
Despite these wins, KBR faces a challenging environment with delays in contract awards and protests affecting the conversion of its pipeline. The company highlighted a substantial pipeline of opportunities awaiting award, with $18 billion in Mission Tech and $5 billion in Sustainable Tech.
Revised Guidance and Future Outlook
In response to the slower award environment, KBR revised its full-year 2025 guidance, lowering the revenue target to $7.75-7.85 billion from the previous $7.9-8.1 billion range. However, the company maintained its adjusted EBITDA guidance at $960-980 million and adjusted EPS at $3.78-3.88, reflecting confidence in its ability to deliver strong profitability despite revenue challenges.
The revised guidance and financial modeling assumptions are detailed below:
CFO Mark Sopp noted, "Our guidance assumes the U.S. Government shutdown is resolved in November," highlighting the potential impact of government funding uncertainties on the company’s outlook. Despite these challenges, KBR emphasized that over 60% of its adjusted EBITDA has no exposure to the U.S. government, providing some insulation from federal budget fluctuations.
Spin-Off Strategy and Timeline
A significant focus of the presentation was KBR’s planned spin-off of its Mission Technologies segment, which is expected to create two focused public companies by mid-to-late 2026. The tax-free spin-off will result in SpinCo (comprising Mission Tech Services) with TTM Q3’25 revenues of $5.8 billion and an adjusted EBITDA margin of 9.9%, and New KBR (comprising Sustainable Tech Solutions) with TTM Q3’25 revenues of $2.2 billion and a significantly higher adjusted EBITDA margin of 22.3%.
The value proposition and structure of the spin-off are illustrated below:
The company provided a detailed timeline for the spin-off process, which is currently in the advanced preparation phase:
"The spin-off is progressing well and on track," stated Bradie, noting that the company is currently recruiting for SpinCo CEO and CFO positions while maintaining operational focus on delivery. The separation aims to enhance strategic focus, organizational agility, and capital allocation flexibility for both entities.
Balance Sheet and Capital Allocation
KBR maintained a disciplined approach to capital allocation, with a net debt to TTM adjusted EBITDA ratio of 2.2x. The company generated $506 million in operating cash flow year-to-date, with capital expenditures of $24 million, resulting in free cash flow of $482 million.
The company returned significant capital to shareholders, with $304 million in share repurchases and $63 million in dividends year-to-date. KBR still has $452 million available under its share repurchase program, demonstrating its commitment to shareholder returns while maintaining balanced capital allocation priorities including organic growth, strategic M&A, and prudent leverage.
Key Takeaways
Despite the challenging revenue environment, KBR delivered solid financial performance in Q3 2025, with strong bottom-line growth and cash generation. The company’s diversified portfolio, with over 60% of adjusted EBITDA having no exposure to the U.S. government, provides some resilience against federal budget uncertainties.
While the revised revenue guidance reflects near-term challenges in the award environment, KBR’s robust pipeline of opportunities and strong book-to-bill ratio in the quarter suggest potential for future growth. The planned spin-off of the Mission Technologies segment represents a strategic move to create two focused companies that can better address their respective markets.
Investors will be watching closely to see if KBR can convert its substantial pipeline into revenue growth while maintaining its strong profitability and cash generation as it progresses toward the planned spin-off in 2026.
Full presentation:
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