KBR, Inc. (KBR) Earnings Call Transcript & Summary

Thank you for joining us today at our first virtual investor event, coming to you from around the globe. We are excited to connect in this forum and look forward to sharing an inside view to our incredible Government business. [Operator Instructions] As outlined here, today's presentation includes forward-looking statements reflecting KBR's views about future events and their potential impact on performance. These matters involve risks and uncertainties that could impact operations and financial results and cause our actual results to differ from these statements. As is customary, I would like to start the day with a sustainability moment. We thought it would be good to talk about one of our company's contributions to advancing scientific research around the important topic of climate change. You might be surprised to learn that every day, KBR Earth scientists, software developers and researchers support the creation of scientific artifacts, documenting changes to our Earth. Our people ingest huge amounts of data coming in from satellites that we fly to create hyperscale models of landform changes over time. This work, in addition to being pretty cool and performed by some of the smartest people in our company, advances climate change globally -- advances climate change research globally, as the information is shared publicly open source. Just one of the many ways the work of KBR is directly tied to our sustainability platform and aligned to the UN Sustainable Development Goals. To learn more, I encourage you to read our sustainability report published on our website. And now I'll turn it over to Stuart Bradie, KBR's President and Chief Executive Officer. Over to you, Stuart.

Thank you, Alison, and welcome. Thank you for joining us today for a focused look at KBR's transformation to a company that has quickly become a sizable and leading provider of innovative solutions in the government contracting space. An organization is truly only as good as its culture and its people, and you've heard me say that many times. So today we have the pleasure of introducing and showcasing the leadership within KBR that makes it happen. Many of you, of course, have met myself and Mark and Alison, and perhaps Byron. But let's face it, we're actually just overheads. The broader team who you'll meet today are the folks on the frontline that distinguish KBR in terms of really, really delivering for our end customers. Today, they're going to describe their businesses, how they make money, why KBR is different, and I'm convinced that they are quite simply the best at what they do. They are an amazing team. They're all a little bit different, a little bit quirky, but they do have a common passion for their people and commitment to deliver high-impact solutions for their customers and, of course, deliver the attendant earnings and cash. Today is all about showcasing our government capabilities. It's an opportunity to further reinforce the transformation of KBR, and hopefully dispel myths or perceptions of some old and long-held views. As we move through 2020, I'm pleased to report that KBR continues to be resilient, agile and a high-performing business, and today is really about further explaining why that is and showcasing, of course, our management depth. So to allow that to happen, I'm going to keep my opening remarks quite brief. So with that in mind, I'll begin with how we will finish, and that is with some key takeaways. Firstly, our GICS code tells us KBR is a Government Services company. I mean this is simply a fact. But to put it in perspective, our 2020 forecast earnings contribution from our Government business represents close to about 85% of overall KBR, and that's up from about 11% in 2015, so quite a transformation in the last 4, 5 years. There are investors who are very, very attracted -- and we've been asking investors over the last several months about this too -- that they've been attracted to the strength of our Government business, but also to our Technology business, our advisory and our high-end engineering and maintenance business, but have been really turned away in other areas of our energy business, typically due to the EPC risk that we were prepared to take. Now to place a greater emphasis on today's event and to ensure the focus is on the right things, which is really what you're about to hear about today, we're announcing that we are exiting the blue-collar construction and lump-sum EPC areas within our Energy business, and this includes an -- includes lump-sum EPC as it relates to LNG. We are continuing to move upmarket in all our businesses, and this marks another step really in our transformation. Now we'll give further details on the outcomes of review of our Energy business when we report earnings in July as part of the Q2 earnings release. But for today, the takeaway is that EPC lump-sum construction risk is actually off the table. It now completely goes away, and more weight can be placed on the remarkable business that we're going to present to you today. Number two, and this is really a bit of a mythbuster, today our exposure to U.S. contingency operations is actually less than 10% of our overall business. Now historically, as you know, KBR was very well known for contingency operations support, funded by contingency budgets, which, as we all know, can be episodic. And it's likely some people still think our Government business is actually dominated by this work. But the facts are today, and this is really the second key takeaway, is that circa 90% of what we do in government is across space, science, engineering, training, cyber, facilities and supply chain management and base operations. Also, around 85% of OCO funding in today's DoD budget and going forward is actually defined as funding for permanent bases. So again, this area has significantly derisked from history. Number three, our funding sources are very, very well balanced across operations and maintenance, research, development, test and engineering, NASA, OCO and, of course, international. Now the team will talk about budgets, but please remember we are not an OEM. But rather, we are a platform-agnostic, applied technology services provider, and thus, we believe, very much less susceptible to budget volatility. In addition, we have the highest mix of internationally funded work in the Government Solutions space, about 25%, which gives additional diversification, is a true differentiator, and it really does so at higher margins, which is nice. Number four, and this is very dear at my heart, and you've heard me talk about this many times, is that we have a very, very distinct level of strategic discipline and focus, and I think this is core to our culture. And we feel that the strategic vectors of defense modernization, human health performance and space exploitation are really aligned with customer spending priorities, which really gives us line of sight to achieving continued strong organic growth over time. Five, our strength is actually delivering high-impact solutions via applied technology and services, but really focused on real operational outcomes. We're not in the back office, managing IT networks and systems. It's not about bums on seats. We're actually -- we view it as we're at the tip of the spear, and we're there with our end customers in mission-critical roles. Now the team will talk about what makes KBR different in each business line, but it really started -- the broad theme centers on this high-impact operational success and long-term customer intimacy, so, sticky relationships underpinned by long-term contracts, which, again, really minimizes budget risks. Number six, our words are backed by historical consistent performance and an industry-leading organic growth, not over just 1 year, but actually, over the past 2 years. As I always say, the proof of the pudding is in the eating, and really what we have done, in short, is actually we've just done what we said we were going to do. Our future is also underpinned by strong, strong backlog, and we've got above-norm visibility with low recompete levels in 2020 and again in 2021. We have a very attractive new business pipeline, which we'll look at later, and I believe firmly that we have the best-in-class BD machine. All of that really to deliver the growth into the future. And finally, there's a reason for this remarkable growth story. The leaders of our GS business you will meet here today are really a true team. As you see, they all come from different backgrounds, yet they have created a singular, addictive culture of collaboration and discipline. And that's why they and the men and women in their teams have produced the best organic growth rate in the business. That's why they have delivered consistently strong margins and strong cash flow. And that's why they have happy and safe customers and employees. And this is really where we stand out the most. It's all about our people, our high-performance, mission-focused culture, the absolute secret sauce. Now this takes us nicely on to a short video, which will give you a good feel for the breadth of capability, the geographical reach and the diversity of personnel that are absolutely core to KBR today. I will be back for the Q&A at the end. Thank you. [Presentation]

Wow, I really love that video. Thank you, Stuart. Hello, everyone. I'm Byron Bright, the President of KBR's Government Solutions segment. It is an honor to be here today to represent the men and women who are having a real impact on our world. I got started in this industry first as a customer, having graduated from the best of the service academies and later at Air Force test pilot school. I had the opportunity to work on some of the most complex military hardware. I saw firsthand how the military and industry could partner and solve any challenge. I've now been with KBR for 10 years this month, and every day, I'm still amazed at what we can do together. We have with us today the key members of our team that will be speaking later. [indiscernible] really impressed by their distinguished careers, and you'll probably sleep a little better at night knowing that these are the leaders working on the front lines every day. They're advancing science and technology, ensuring our national defense and improving the communities we all live in. Before I start, I want to give a quick overview of who we are and the customers that we serve. Our Government Solutions business is a diversified technology-focused business. We have over 18,000 employees and more than 200 global locations. We manage a broad portfolio with 5 major lines of business. As you can see on this pie chart, it's a good representation of our diverse mix. We have large international exposure in both Europe and Australia, which is a significant differentiator from our peers. Additionally, you'll see that our logistics portfolio is in 2 parts: a large sustainment portfolio and a contingency portfolio. Many people falsely assume that we are dependent on overseas contingency. But as you can see, much of our work is sustainment. We have over 2,000 logistics employees in the U.S. supporting work which is unrelated to any Middle East efforts. The customers we serve are equally diverse. They include international governments, such as the U.K. Military (sic) [ Ministry ] of Defence, the Australian Department of Defence and other allies. We support all branches of the U.S. Department of Defense, NASA, intelligence agencies, and several other civilian agencies such as NOAA, the FAA, among others. The diversity of our customers is extremely well balanced, with no concentration risk in any one area, and this allows us to drive organic growth for a wide variety of situations. So now that you know a little bit about us, I want to talk about why we believe that KBR Government Solutions makes a compelling investment story. We will show you a company that is built on high-impact differentiators. It is mission focused. It is a global franchise. It is led by an amazing group of industry leaders and has delivered sustained, predictable financial performance. We will discuss the market environment and demonstrate the underlying funding that gives us confidence in our future forecasts. I will also discuss the resiliency of our customers that supports us even in times of volatility. Finally, we're going to show you how the business is poised for growth, driven by capabilities that are aligned to our customer needs and a sustainable business model with a proven track record of wins. So let's jump right in. We use the phrase, "High impact" because what we do matters. I was on an early Monday morning call with Stuart a couple of weeks ago and he said, "How was the weekend?" And I said, "Well, on Saturday, we put 2 Americans in space. And on Sunday, I got a call from the Army, asking for help to save the world with the COVID-19 operation Warp Speed response." This is a true story. This kind of thing happens every single day at KBR. As an operationally focused contractor, we are in the middle of major efforts around the world all the time. These high-impact differentiators are what make us good value for our customers and our shareholders. Let me walk through some of these. We bring deep domain expertise in highly technical disciplines. This creates a very defensible market position. And you can see here, our capabilities are aligned directly to our customers' most challenging issues across areas such as engineering services, scientific research, operational support, program management and information operations. We are often embedded directly in our customers' facilities and locations, making us a trusted and indispensable partner. We also have global franchises that create a diverse revenue base. We are not dependent on single programs, technologies or funding sources. Many companies support the U.S. overseas, but few, if any, of our peers are truly international businesses that are contracting directly with international governments at our scale. We have the infrastructure, capabilities and reach to give us a unique growth platform. We have franchised positions within NASA's most critical human space flight and science missions. We have multiple contract vehicles with NASA, extending our support out to 2025 and greater. Additionally, we are the go-to contingency support contractor for U.S. and U.K. deployed forces. We have many other diverse contract vehicles across engineering, science and information operations. This allows us to drive work using multiple contract vehicles often with the same customer, using what we call muscle groups. Our customers come to us to give them unbiased advice on how to apply the right technology. With very low capital investments, we are agile and can follow our customers over the long term as new technology advances and might disrupt a traditional OEM. We have a solid book of business that leads to predictable, sustained growth. But most importantly, we have both one of the greatest business development teams and some of the most experienced government industry leaders of any of our peers. It is our culture and people that truly make the difference. A combination of experience, leadership and business acumen fuels strong growth with significant cash flow generation. Now while it's good to have this solid underlying business, you also need to be in good markets. The robust nature of our market is another aspect of our compelling investment story. As you can see here, we serve the largest customers in the world, national governments. The U.S. Department of Defense budget is greater than $700 billion annually and has been steadily rising due to the need to keep ahead of peer nation states and also to continually modernize an aging military. Because the new KBR has such diverse customers and capabilities, we have very little to no concentration risk on funding sources such as OCO -- overseas contingency -- or single agency budgets. Similarly, we operate across multiple international governments, which continue to increase their spending as many are trying to get to that 2% of GDP for national defense, especially in Europe and the Asia Pacific, 2 of our largest areas. One of our other core markets is NASA, which we've talked a lot about. NASA continues to see bipartisan support with budgets increasing year-over-year and, more importantly, a real strategic commitment to both commercial space and going back to the Moon and to Mars. In this time of COVID and economic uncertainty, the government has proven to be very resilient. I have personally been amazed at the support we've seen over these past 3 months. They have modified contracts to allow for teleworking and flexibility. They've advanced cash payments and really been a truly amazing partner and customer. Now even with all of this goodwill, in these times of uncertainty some may worry about whether these markets are really sustainable and how will KBR perform under budget pressures. We believe we would do well. First, our analysis shows that the markets will continue to be at high spending levels. As shown on this slide, the challenges facing the U.S. and our allies are vast. They include cyber threats, terrorism, space exploitation, the rise of a near peer, human health concerns and ever-increasing technology advancements, such as artificial intelligence and machine learning. These external drivers will continue to push demand and spending for national governments. So whether we have a Democrat or a Republican in the office, whether a nation is focused on national security or the pandemic response, the governments are going to continue to spend money to buy KBR's services. Secondly, even with some headwinds on the budgets, as an operationally focused contractor, KBR is positioned within the government's current priorities and brings technology-enabled expertise to the issues of the day. We can grow in difficult times by taking market share. So it's not the customer budgets that drive our growth, it's really our differentiated business model and how we are positioned within these markets, which are fueled by those external factors. This is that third element of our compelling story, a platform for growth. KBR has built a platform and a business model over the past 5 years that has multiple growth pathways. First, we have that expertise with customers' most critical programs across engineering, science and operations. We are embedded in their highest needs around defense modernization, space exploitation and health and human performance. This solid book of business help us understand our customers at a deep level. Secondly, this close customer intimacy and diverse contract allow us to grow in multiple ways. We can leverage our past performance into takeaways to increase market share, such as our SANGCOM project in Saudi Arabia last year for the U.K., the special operations human performance work we took away from Booz Allen, or the most recent win at Marshall Space Flight Center, where we took away work from Teledyne Brown. In 2019, we captured over $1 billion of takeaways. In addition to takeaways, we also increased market share by generating on-contract growth, sole source contract extensions. And often as an incumbent, we're in an advantaged position awaiting those recompetes. In addition to our current book of business and associated growth vectors, we have a significant suite of IDIQ contracts that allow us to drive organic growth. These IDIQs have been competitively won, and they have a limited pool of competitors. Each one has a different possible scope, different terms and different advantages for our customers. This allows us to tailor not only our technical offering, but our commercial contracting model as well. We are bringing customers the total solution to solve not only technical issues, but their business issues. This agility requires a highly experienced BD team, partnering with our solution architects to make this happen. Now these wins on the IDIQ task orders are allowing us to embrace new technologies, hire unique expertise and build out more and more capabilities and experience. This fuels our synergies so that we can leverage our scale into larger and larger efforts. As you can see here, this is proven out by our current pipeline. We have over $12 billion of business to be awarded in the next 24 months. What's also impressive is that the total $69 billion pipeline is fairly equally spread across all of our lines of business. Many of the bids are over $100 million, and you can see there, several exceed $1 billion. So as we win this new work, we are expanding into new customers, across new capabilities and new programs, to continue to fuel more and more growth. Each of these examples listed here represent a very specific opportunity in our pipeline to give you confidence that we have a solid platform for growth. In 2019, our total win rate exceeded industry averages at over 65%. These wins allow us to restart the growth cycle, so as the new customers become current customers, we start all over. This unique growth model, starting at the top with our current book of business, increasing our market share, using the agility and expertise of our IDIQs, leveraging synergies to create new customers and then starting over as we deliver excellence, creates a flywheel of predictable, sustained growth year-over-year. This growth engine is fueled by many factors, but it really starts by our people, stellar performance we have on contract that builds that underlying customer trust. So in summary, I've tried to give you a small snapshot of why we believe KBR's Government business is different and makes for a compelling investment story. We are mission focused with a global franchise. We operate in massive government-funded markets, performing the most critical work for all of our nations. And then we package that into an enduring, sustaining BD engine with top-tier win rates. I'd like to thank you for your interest in KBR. I want to now turn it over to the panelists. These are the leaders you're going to be amazed by that truly impact the world we live in. Please let me first introduce Dr. Vernon McDonald. He really hates it when I call him doctor, by the way. Vernon leads our Strategic Solutions group with our Chief Digital Officer. Vernon has a team of solution architects that horizontally integrate across the company, helping us leverage synergies, focus on technology infusions and connect our people in a manner that leverage the power of KBR anywhere in the world. Thanks again for your time.

Byron, thank you for that introduction, and thank you for setting the stage for the KBR Government Solutions fireside chat. Today, we're going to demonstrate for you how and why KBR is committed to leveraging technology-enabled solutions for customer success. I'm Vernon McDonald, and I'm joined by Ella Studer, Rob Hawketts, Andrew Barrie, Pete Green and Todd May, each of whom are our business leaders, leading a segment of Government Solutions. And we're going to get started with a quick introduction from them of both themselves and their business. And Pete, I'll let you lead us off.

Thank you very much, Vernon. My name is Pete Green, and I have the privilege of leading 3,400 amazing scientists, engineers and subject matter experts in KBR's engineering business unit. If you look in the bios that you've been provided, I understand, you can read about our education and background in there. But above and beyond that, I will point out that I've been in this business for 35 years. I started out as a test pilot, flew for 16 years as a contract test pilot and have grown up through the industry to the opportunity of actually leading this business unit. So now I direct your attention to the baseball card that you should be seeing on the screen. You can notice that the engineering business unit is located where our customers are, and that's in a lot of locations. Our customer mix is all the way across DoD and also includes the intelligence community. About 1/3 Navy, 1/3 Army, about 20% Air Force, and the rest of it falls into the intelligence community and other federal agencies. We are known for our high-end systems engineering and integration support that we provide and also our domain knowledge, which many times is platform knowledge. And also, we develop great customer intimacy with our customers through time. As an example of that, we are the largest professional engineering services contractor in NAVAIR across their entire enterprise. We have over 1,000 employees, and we have supported every single aircraft that has been acquired by the United States Navy since 1968. We started with the F-14. That's the jet that was in Top Gun 1. So we are the largest SE&I contractor in Army aviation as well, and we support air and missile defense there as well. So we have 40 years of experience, very specifically in supporting the PATRIOT missile system, through all of its upgrades through those 40 years, to continue to make sure that it can stand watch in air and missile defense over our troops and our allies, wherever it's deployed. We also have 30 years of supporting the Air Force satellite communications network. There are over 170 satellites in space that are military or national security assets, and there are only 8 global ground stations around the world. We sustain those ground stations to ensure that they're available to talk to all 170-plus satellites, passing the information up to them and downloading information from those satellites as they orbit around the world. And I'm very proud of the fact that we have the largest independent flight test organization in the world, is what it says on the chart. I like to say, "in the galaxy." And that includes 40 years of actually augmenting and being on the test pilot school staff at Pack Ferber.

Good morning. I'm Rob Hawketts. I'm the Head of KBR's Government Solutions business in the Asia Pacific region. I began my career as an officer in the Australian Army, before moving into industry some 25 years ago, where I have been fortunate enough to develop and apply my passion for implementing business growth strategies in the defense market sector. Now I've been in my role now in KBR for 5 years, and I've had the pleasure to lead the successful year-on-year growth of the business. I believe we're the fastest-growing part of the company in year-on-year percentage terms, over 35% revenue growth over the last 3 years with great average margins over the same period. Now this growth is closely aligned though to the significant increase in defense investment by the Australian government. They have increased their budget to 2% of GDP in order to deliver an ambitious defense modernization program, or what's referred to as the Integrated Investment Program, over the next 10 years. Now because we deliver program and technical solutions to the military across the full program life cycle of military equipment, we are really well positioned to support the government's modernization program. But in simple terms, what we do is we make sure the equipment and systems the military introduces into service does what it's supposed to do, in the way it's supposed to and when it's needed. And we do that through a couple of things: managing the acquisition of new equipment and systems for defense, and then designing and implementing and maintaining the sustainment program for that equipment through life. We also ensure the military operators and maintainers, the crews, can actually do their jobs, and if they have the right competency and skills, and we do that by designing and implementing bespoke product-agnostic training solutions that utilize the latest in virtual reality, augmented reality and mixed reality technologies. We also ensure that the military operators can plan and conduct military air operations, by developing, modifying and adapting and supporting the mission planning systems and software tools that they need to perform their missions. Our business model typically has 3 components, with initial technical advice and solution design, which is often short term. This gives us an opportunity to pull through into the solution development and implementation, which is typically a longer-term activity and in turn provides us with the opportunity to then pull through into the sustainment sector, which is a long-term opportunity, providing ongoing support services through life. This model typically supports a very enduring customer relationship and typically leads to long-term engagements. It is a proven model. It's a successful model, with some of our engagements spanning more than 20 years over 3 stages.

Good morning. I'm Andrew Barrie. I'm the President of KBR's Government Solutions business in Europe, Africa and the Middle East. I've had varying roles within the government sector for over 18 years. I'd like to think we do some really cool things. I love the diversity of what we do and where we work, that and making the best profit margins in the group, that keeps me pretty excited. So let me put some shape around this part of the business. We've grown year-on-year for the last 5 years. We've become a highly profitable $800 million revenue business, employ over 2,000 staff, who work in 10 countries. We have a strong backlog of profitable work, and we have a strong pipeline of exciting opportunities. The backbone of the business comprises our well-regarded Private Finance Initiative, PFI projects, what you might call in the U.S. public-private partnerships. The portfolio that we have includes Aspire Defence. This is a contract about modernizing the British Army real estate in the U.K. We look after about 40% of the Army facilities. We manage the construction work, but we also have an enduring facilities management and support services contract that runs through to 2041. The second project is Affinity Flying Training, which provides 3 fleets of aircraft. There are 38 planes in total, and they're used for training military pilots. But I'll come back to that in a short while. And the third key project is heavy equipment transporter, which is really about providing tractors, trailers and military reserve personnel to move armored vehicles of the British Army. These government-backed PFI projects provide KBR with material, stable, predictable cash flow for many years to come. They really do provide a great sort of baseload of enduring work. But that's not all we do. We provide project and program management to other parts of government. For instance, last year we were awarded a role on the 20-year, what's known as the Program and Project Partnership in Sellafield, which is about helping to safely decommission the U.K.'s decades-old nuclear waste. We help the British military modernize, update and maintain key battlefield systems, such as fuel and water systems. And similar to Ella's business, we're still supporting military overseas missions by providing deployed operational support staff. We're coming up for 20 years of having done that, but we've still got over 1,000 people providing support to British and NATO Troops in the Middle East and parts of Africa. We've been a significant player in the U.K. defense for over 30 years. It's a real privilege to have been selected as one of the few U.K. government-designated key suppliers recently, which is really about the U.K. recognizing our scale and national importance. So looking to the future, we see real growth opportunities in our defense and broader government markets. We set out a strategy 2 or 3 years ago on which we're making some good progress. We're taking market share, we're diversifying our business. And now we're well positioned for various large-scale opportunities that are in the pipeline. Additionally, we look to extend our offering. And a couple of years back, we created an advisory business. In that business stream, we're supporting our customers from the initial conceptual thoughts around their future needs and challenges. And from that, we hope to remain invaluable to them as they develop their thoughts into projects and beyond, such that we provide the through-life support. Very similar to Pete and Rob's business, we become the trusted, enduring expert, hopefully creating sticky relationships. So in summary, with our great earnings visibility, our predictable long-term cash flow, with a significant pipeline of opportunities across our growth markets, the truly talented and committed folk that we have in the team, and did I mention the margins we make, it's a real privilege to look after this part of KBR in what is a really exciting time. Ella, can you beat that?

Well, Andrew, I think I can. So good morning, everybody. I'm Ella Studer. I'm the Senior Vice President of the Logistics business unit. I've been with KBR about 14 years. I retired from the Defense Logistics Agency as their Senior Executive responsible for their facilities management and the military construction projects. I'm also a veteran. I served in the United States Air Force and the Ohio Air and National Guard as an aerospace ground equipment technician. Well, you can think about my business like this: I'm the big sister, I'm the $1 billion business, delivering complex operations around the world in some of the most difficult and austere locations, 24/7, 365. I have about 12,000 employees, 7,600 direct hires and about 4,400 through subcontracts. At 40 different locations -- I mean, 40 different nationalities, comprise my business at about 145 locations working around the world. And if that's not enough, I'm infusing technology to make significant improvements in our labor efficiencies, quality of work and how we deliver margin. You can think of my business like this: we have about 3 different operation areas; I have long-term sustaining operations with expansive capabilities and logistics; maintenance of numerous types of complex life support requirements for facilities like utilities; I have maintenance of some equipment like computer-based control systems, very complex fire suppression systems; and boy, do I have vehicles. I have thousands of vehicles, tactical equipment like tanks to non-tactical equipment like electrical vehicles. And second, I'm the largest maintenance provider of prepositioned stock, with equipment and materiel on land and afloat around the globe for the Marine Corps and the Army. For the prepositioned stock, you can think about -- in the flow program, I have about 15 ships. As you saw on Byron's photos, you saw that big ship out there with all that military equipment. That's one of our ships that are involved in the program. They're the length and size of about 3 football fields, but they hold 5 football fields full of materiel on several decks. And that's about $6 billion worth of equipment and supplies that we maintain. And third, yes, I'm a contingency contractor, and very proud. KBR is -- one of our things our customers always talk about is KBR is always there when needed. We're very proactive in planning to meet the continued unpredictable requirements that, at a drop of a hat, we're asked to accomplish. And that's a quick snapshot of the logistics business unit, Andrew.

Well, my name is Todd May. I came to KBR about 2 years ago after a 28-year career at NASA. During that time, I had the chance to work on some of NASA's most complex and largest development programs, like the International Space Station. I managed the Pluto New Horizons mission program and also was the first program manager on the Space Launch System, NASA's heavy lift rocket to explore deep space. My final post was as the Director of Marshall Space Flight Center, one of NASA's largest field centers and their largest development center. As far as our business unit, Andrew, you may have the highest margin; and Ella, you may be the big sister, but I'm definitely the cool kid in the school. And I'm closing fast on your $1 billion, Ella. We are the largest -- the second largest professional services provider to NASA with a presence at every NASA field center. It also accounts for 2/3 of my portfolio. We're also the largest services contractor to the U.S. Geological Survey, and we serve other agencies like the Department of Transportation, NOAA, the Defense Threat Reduction Agency and SOCOM. As far as my business unit, I'd like to highlight 3 areas where I think we are world class or best in class. First, we provide highly skilled space operations. We fly the Space Station -- the International Space Station, 24/7, 365. And we fly 17 other satellites that provide critical Earth observations and lunar reconnaissance. As Byron mentioned, this month we won a $600 million takeaway contract to conduct payload operations for the International Space Station, which includes back-office operations for the launch of the Space Launch System. This further solidifies our pole position in the space operations market. We also provide launch and range operations at Wallops Flight Facility, including launching commercial cargo flights to the International Space Station. And we maintain all of NASA spacesuits, nearly $0.5 billion of critical space assets, and support the underwater training in NASA's neutral buoyancy lab. Our second major area is that we do highly skilled research and development, including problems like performing mechanical testings of the very sensitive James Webb space telescope, which is the size of a tennis court, but it's highly complex and very sensitive to disruption. We're also making quantum computing a reality with our NASA partners. And we are in intelligent systems and artificial intelligence and work on problems such as how you're going to handle automated cars and drone traffic flow management. We have supported the development of over 60 satellites, including the innovative on-orbit servicing demonstration mission, Restore-L, which was recently confirmed by NASA for full development. Our third area is highly specialized health and human performance for every astronaut and every special forces soldier. We do cutting-edge research into the effects of space on the human body and the mind, and we do specialties like ocular degeneration and bone loss due to long duration in space exposure. We have trained every astronaut since the 1960s. And this year, we became the first company to train private astronauts in NASA facilities.

That's great, folks. So by now, you should know that we're global, diverse and involved in multiple high-impact mission-critical programs. We also have a group of very experienced and highly motivated business leaders, with just a little bit of competition there, I think you heard. One common theme I heard through our -- Byron's overview is that our value proposition is a solution-driven approach that ensures we deliver value to our customers. Solving their problems is the priority. And a key attribute is always being mission-focused. So Todd, can you describe how this factors into your business success?

Yes. As I said, we're the cool kids on the block. And one of the things that's really cool about what we do is how integral we are to our customers' missions. When you're supporting the operation of a $100 billion, one-of-a-kind international asset like the International Space Station, you have to be mission focused. And recently, when we acquired the ROC contract at Wallops, we started to support the Cygnus launches, which are commercial launches to the International Space Station, and it dawned on to me that we are doing launch operations and range operations on a commercial launch that includes payloads that we built for our customers at Ames, to a space station that we fly, from a control center that we built, to be installed by astronauts that we trained. That's domain dominance. And when Doug and Bob recently returned to space from American soil for the first time in almost 10 years, we know that we trained them, and we provided real-time telemetry and radar for the launch. And we know our special forces missions is critical to our nation's security, and our support to them is very personal and very intimate. And I'd also say, like Ella's business, we perform highly technical operations and logistics around the clock on very difficult tasks in very remote places.

To support Todd, around the world -- he talked a little bit about satellites and things like that. To be able to run those, you have to have power. And so one of the critical things that my team does is provide power around the world, so that all the missions can be accomplished 24/7, 365. I'm still going to compete with you a little bit there, Todd. So one of the things that we do to make sure that that power is up 24/7 is we have a program called condition-based maintenance technology. For part of our smart maintenance program, we use things like vibration analysis, infrared graphic thermography, oil analysis, to identify maintenance needs before the asset fails. And we provide proactive repairs to save the client money and to avoid downtime. So as an example, in the oil analysis program, we reduced the number of oil lubrications and changes, thereby reducing the repair and the labor cost required. This program also extends the life of the equipment, which is very critical to the mission because they announce the tech's potential failures before they -- and we correct them before they can occur, also driving out cost out of the process.

Ella, if I may, let me build on the mission focus theme. Sometimes our mission support has a different dimension. I could have picked various of the projects that we currently work on, but let's come back to the Affinity Flying Training PFI that I mentioned earlier. This is a contract to provide aircraft for the U.K. military so that they can train rookie pilots. Sounds simple, but let's scratch the surface. The objective in training military pilots is to deliver training sources at the lowest cost per flying hour, so you need to consider both the CapEx and OpEx costs. When we were looking to win this work, our smart folk, they took the specified military flying training syllabus, they reviewed the sortie requirements and objectives, they looked at other factors such as volume, plane types available in the market, and from this, they built some fairly sophisticated financial models. And then they iterated around things like different aircraft type, downloading training sources to the lowest cost platform, CapEx versus OpEx loadings, aircraft daily availability assessments. And now let's layer on the fact this was a PFI contract. So we also had to ensure that we could raise the debt, nonrecourse debt to buy the aircraft. Fortunately, in house, we've got an expert team who understand the intricacies of project financing and structuring bankable deals, and they were able to meld the technical solution, the risk transfer obligations, into a contractual basis that not only met the stringent requirements of the banks but also the government as buyers here. And amongst all of this, there's a need to have a deep understanding of the customer, their expectations and requirements in terms of training ethos, training protocols, military aviation accreditation and not least, affordability. Getting all of those factors right led to our selection and the award of the Affinity contract to provide 3 fleets of aircraft, 38 planes in total. That's one of them, if you can see the photo behind me, which enables pilots to progress to become military aviators. Hopefully, this brings to life how we fuse customer intimacy, deep technical understanding and expertise, commercial acumen and creative project finance capability to create solutions that support our customers' missions, but also benefit KBR, in this instance with an 18-year long contract.

Thanks, Andrew. Yes, clearly, mission focus is key and domain expertise is critical for the complex solutions we deliver. But we all know there are other companies looking for ways to take our business, so differentiation is also critical. Rob, how is it that you differentiate from the competition in the eyes of your Australian defense customers?

Thanks, Vernon. Well, firstly, in our training business, we have a couple of very distinct differentiations. Firstly, as a registered training organization, or an RTO, we can award nationally accredited vocational training qualifications for both electrical and mechanical trades. Now it's a significant investment and difficult to attain. And it's probably more difficult to actually maintain due to the very stringent national delivery and performance measures and criteria that have to be met. Now this accreditation as an RTO is a significant barrier at the competition for this training work in defense. In fact, there are really only 2 other defense competitors. And it really provides the foundation for a long-term, enduring relationship with our key military customers. And in fact, with our Navy customer, we've been delivering the technical training now for over 25 years. And secondly, our technical expertise and innovation in designing, developing and implementing bespoke workforce training solutions that are technology- and product-agnostic, that utilize highly immersive virtual reality, augmented reality and mixed reality environments, allows us to deliver real accelerated individual and collective training and competencies and, therefore, expertise for the military workforce.

Thanks, Rob. So far, I've heard how we leverage a solution approach combined with mission focus solves customer problems as well as allows us to differentiate from the competition. So yes, that's all good. But I do know there's more. So Pete, tell us how you've been able to add even greater value in your DoD business.

And you're right, Vernon, there's more. So we have a few examples that we can talk about adding significant value to our customers. I think one of the examples I'd like to talk about is how we've been able to extend the life of the F/A-18 aircraft in the United States Navy. So about 10 years ago, it became apparent there were significant delays in the development and acquisition of the Joint Strike Fighter. And it was creating a burgeoning strike fighter gap that was predicted to make -- have a major impact upon the United States Navy's ability to project force globally. So on top of that, you had to layer a readiness issue as well. So there were significant readiness availability issues with the F-18s. So we were already in the Joint Strike -- we were in the F-18 program office, doing domestic support. And we were also doing FMS, Foreign Military Sales support. So we sat down with PMA-265, the Program Office customer, and spoke to them about some ideas that we had for how they could go ahead and extend the service life. We launched into a white paper, and from there, we addressed the problem. They turned that into a contract. And our first award was in 2010 to start doing service life analysis. It involved extensive research to identify the issues and to map a get-well plan of action and the milestones along the way. It was focused on the C and D models of the F-18. So the goal of this was to take fatigue life, the actual length that the jet was designed to fly, from 5,000 hours to 10,000 hours, doubling the life of the aircraft. We pulled a team together. It involved multiple folks across industry, including people that actually are OEMs, and it involved academia. And we pulled this together to execute a pilot project and then the follow-on. It was extremely successful. And a decision was made a couple of years ago to also include the E and F models and the Growler, which is the electronic warfare version of the F-18, into the service life extension program. We have filled the gap. And additionally, we have increased the readiness from 50% to an availability of 80%. And we've just been awarded another $85 million contract to continue that important work.

Nice job. You were right, there is more. So I think you've all made it clear why we have an enduring and resilient Government Solutions business, but let's pivot a little and focus on one of the major factors driving change in our business. If anything, the 21st century is technology driven and digitally enabled. And over the last 25 minutes or so, I've heard each of you how you're driving business solutions that leverage digital technology. So perhaps we can share a few examples with our audience. Pete, how about you get us started?

Yes. So we're not just in program offices and wearing flight suits, we actually have people that wear lab coats when they come to work, working much more on the left-hand side of the acquisition spectrum in research and development. And I'd like to talk a little bit about explainable artificial intelligence. And I thought about this last night, as I was prepping to talk to you. I am talking to people in Wall Street about artificial intelligence. And I'm sure you have applied it for many years. I think you buy and sell inside my 401(k) every day, probably using artificial intelligence. But our applications are different. So we have been developing a mathematical framework that brings fully explainable adaptive learning methodologies into analyzing data. And we look at data relationships. We're looking for nonhypothesized correlations. We're trying to find the things that even Vernon will not think of. Correlations. So we've used -- we're being used for some different use cases using artificial intelligence. One is to go ahead and detect defects in engine parts in aircraft and predict those. We're also using artificial intelligence to take the information from multiple sensors and take those hyperspectral images and increase the speed and accuracy of our -- of image analysis. We've also gone ahead and applied it to suicide prevention in the Air Force, looking at the trends, looking at the data and trying to intervene before there's a crisis. Most recently, we were asked by the Air Force Research Laboratory to go ahead and model COVID-19 and look at the impacts -- potential impacts on strategic aircrew and strategic missile crews.

Well, not to be outdone by the cool kids, I want to tell you about some data-driven approaches we're doing in the logistics business, Peter. You can imagine the numerous pumps and motors involved in the very complex systems that we manage across my portfolio of business. And so we're equipping our technicians with vibration analysis equipment and using our computer tablets, linked to our maintenance management system, part of our smart maintenance program, and so that enables our technicians to see their work for the day, access procedures, record their activities. And let me give you a couple of examples. For example, in Djibouti, Africa -- Pete, I think you've been there -- our technicians and mechanics complete in 2019, 40,000, 40,000 work orders, creating savings of supplies and labor hours. And then on another one of my projects, we use digital tools to -- combined with our KBR's performance excellent management operating system known as [ KPEX ] to reduce facilities repair and service orders. And we've been able to reduce the backlog by more than 50% in 4 months. And these productivity improvements allow our employees to get involved and be able to promote a culture of sustained employee engagement, so that we have visual metrics on the shop floor, so they can develop solutions and be able to drive improvements in our processes, and that also improves the labor efficiencies and increases our margins.

Well, KBR has got a long history of acting as an integrator. What do we mean by that? Acting as an integrator, we are an agnostic company, buying the most appropriate fit-for-purpose OEM components and turning those into cost-effective capability for our customers. That's what we mean by acting as an integrator. But increasingly, we're taking that expertise into the digital arena, supporting our clients to modernize and create efficiencies in a different way. I just want to give you 2 quick examples of what we're doing here in the U.K. So the first one, we're working in partnership with Microsoft, developing applications using HoloLens 2 technology, which is supporting the defense medical agencies in various ways. Take, for example, battlefield trauma instances or CBRN -- chemical, biological, radiological and nuclear hazardous situations. By their nature, they're going to be difficult to replicate for training purposes. But by using augmented reality, mixed reality capabilities that HoloLens 2 offers, our team are creating amazing fidelity and significantly enhanced learning experiences for defense medics to practice their craft and develop new techniques. In another example, we're supporting a U.K. nationwide program to modernize the capabilities around crime scene investigation, and that's both in terms of forensic science and digital forensics. We're part of the government police force KBR Rainbow team, not only trialing new digital technologies such as rapid fingerprint systems and rapid DNA testing, but taking those tools, working with the law enforcers to redesign their systems, their processes, to ensure that they can benefit from collecting faster crime scene evidence, improving criminal investigations and enabling more assured prosecutions. So we're seeing a great opportunity to take our digital skills to help support our clients in ways that tend to lead to enduring relationships, long-term support contracts, but I know we're not the only ones. Todd, I know you can take us in a different orbit on this.

Well, I think due to the nature of the work we do for our customers whose missions are pushing the limits of technologies, I could probably talk all day about the technologies we're involved in. But a couple of really interesting examples to me, we are key researchers in NASA's quest for quantum supremacy, including some of the authors of some of the recent papers in that search. Our folks are also working on things like unmanned aerial systems to deliver low-altitude goods and services. In fact, that team, working with our NASA customers and several key industry companies that you would recognize, won NASA's 2019 Software of the Year and 2020 Invention of the Year. And leveraging off our work for health and human performance portfolio for the astronauts, we're working on wearable sensors for the Navy and Air Force pilots. These provide real-time and post-flight performance of life support systems and monitor their physiological state so that we can monitor students during the training exercises to improve their performance in real combat scenarios. I'll probably stop there or I'd take up all the rest of our time.

Yes. Clearly, lots to talk about in that arena. But at the end of the day, I think we're looking to translate this mission-focused, technology-enabled solutions approach into extending our business, right, both in size and longevity. So in other words, this is our platform for growth. Pete, how about you talk a little bit about how your business is positioned for growth going forward and some of the enablers for that growth?

Sure, Vernon. I've already kind of alluded and shown you some numbers that I think indicate our level of customer intimacy and long-term engagement with many of our customers. And we -- some examples of those platforms that we've supported for an extensive period of time are the F/A-18, which we talked about a little bit; the E-2 Hawkeye, which is kind of the eyes and ears, the quarterback of the fleet, it's the airborne radar aircraft that flies from the carrier; the Patriot air and missile defense -- integrated air missile defense system, which protects our troops. The MRAP is another. So this is the mine-resistant ambush-proof vehicles. Many of the vehicles that Ella has in her ships are MRAPs. And we've been involved in improving them, making them safer, making them more reliable. And it's interesting, when we engineer those pieces, many times it's Ella's folks that have to do those upgrades when we come off the ship. So we're able to provide an agile contracting vehicle to allow us to do these kinds of things. So the Defense Technical Information Center, a family of IAC contracts, has been that agile vehicle that we've used for the last 15 years. So from that white paper we wrote, talking to the F-18 folks about service life extension, until actually doing the work, was only about 6 to 9 months, and that's what we run. It is competitive. It is best value. But when we write the white paper, we have about a 90% probability of win. Byron talked about muscle groups. We use IAC MAC, the information analysis center multiple-award contract, we use that in concert with other contract vehicles for a broad spectrum of support to our customers and their tasks. F-18, as that example, has 6 different contracts running in it right now between domestic and foreign military sales and service life extension work. It lends itself to progressive engagement as well. So this is a contract that's easy for us to have with our operations and business development teaming. We are there. We understand the problems, and we can bring solutions to those customers. We've had it for 15 years, I mentioned. In those 15 years, we've done $5.8 billion in those IAC family of contracts. So the present vehicle is called IAC MAC. It has a $28 billion ceiling. There were 14 prime awards, and it will run until 2028. We will do $400 million in revenue this year, approximately half of our revenue, in this contract vehicle.

Well, let's see, Pete. You talk about the muscle analogy. I think what you just described there in the IAC MAC is maybe a calf muscle on an elephant, that $28 billion vehicle, and you win your tasks one at a time. The kind of stuff that I tend to go for are the larger heavy-lift types, but they're also highly competitive. So I would kind of characterize our contract types as maybe the quadriceps on an Olympic athlete. We are going for the tunas and the whales, and that requires a finely tuned business model and a business development machine. But probably one of the most interesting things about the nature of our largest contracts is that they're designed to be adaptable. They're centered around capabilities. And so for example, with NASA, as their future evolves and they take on additional mission, our work goes with it. And so today, for example, we fly the International Space Station and we do health and human performance and things like that. But as NASA pivots to Artemis and the moon, that's additional work for us. We don't stop flying this space station. We don't stop doing that work. And just this year, in our largest contracts, our revenue is up 20% through the first half of the year because of this phenomenon.

Like Pete and Todd, I have both full and open big, large contracts, and I have numerous task order contracts in my portfolio of business. So with those -- and they're long-term contracts, they average about, I think, 8 years, and the longest are around 10 years to drive efficiencies and growth. Long-term contracts really allow us to do that. We partner with our customers, though, to continuously look for ways to improve services. As Byron mentioned in his presentation, we do what we call a lot of contractor-initiated proposals. In 2019, on one of my projects, we submitted over 16 contractor-initiated proposals. They're kind of like Pete's white papers. And we grew revenue on that project by 23% to the benefit of the customer and KBR.

Thanks, Ella. Yes. Clearly, we've got a lot of enablers for growth already in place, but I'd like to wrap up with one more, and that's the potential for global synergies. Clearly, there are a lot of touch points among our regional efforts. We've heard about some of those already. But let's chat about some specific examples of where we're starting to see this global collaboration. So Todd, you have a substantial footprint in U.S. civil space. How does that enable a broader KBR effort to build a global space business?

Well, it's a very synergistic thing. We're already collaborating with Andrew and Rob in space as their countries come online in a big way. As a matter of fact, at the Australian request, I flew over there last year to actually give them some advice on the directions they're headed. But really, for me, one of the other big synergies here is with Pete's world. A couple of years ago, I had an aha moment at Space Symposium. There was an Air Force colonel that was speaking about space and the space force. And his assertion was that there's nothing unique about space. It's just a new frontier. And every new frontier is a continuum of peace and war. And if you're going to have civilian presence there, you're going to need a sheriff. And to me, that was the big aha. It's like, oh, space is the high ground, it's a new frontier. If we're going to have civilian and commercial work there, we're going to need a space force. And so everything you do for civil space, everything we're already doing there, designing spacecraft, flying them, doing the communications, the ground systems, the operations, are really the same type capabilities. And so as that comes online, I think Pete is very positioned to pick that up and run with it.

I think we are, Todd. I -- before I start any conversation though about military space, I'd like to talk a little bit about the threat. And we're not able to go into that in detail here. But I'm here to tell you that over the last 5 years the threat by nation-states on near-peer has greatly increased. Folks want to deny us our ability to operate in space. And so there is a resurgence -- you may have heard of the space force -- there's a resurgence and focus in military space and national security space. And we're excited to be at the beginning of this. And we have worked with Todd as we're looking at where we can grow. So we're looking at launch capabilities that he has at Kennedy Space Center and also in Wallops, and how can we apply those into growing our military space support in the launch area. So...

So let me build on Todd's sort of commentary around the international sector. And investment in the U.K. space sector is going to increase. Today, it's something like a $15 billion industry. We anticipate that the government wants to grow this sector to something like $50 billion in the next few years. So we expect that expenditure will increase in things, for example, like military upgrades and new capabilities. The U.K. base supports the Artemis program and the likelihood of new sort of national resilience programs as the U.K. exits the European Union. So we want to take the expertise that Todd and Pete and their teams have, and we are the vanguard of the U.K. space growth program that we foresee coming.

In Australia, in 2018, the Australian government established the Australian Space Agency with a goal to triple the size of the market in Australia to $12 billion a year and create up to an additional 20,000 jobs by 2030. Now given our NASA heritage and our commercial and military space expertise, and of course not forgetting our very own space sheriff in Todd May, the opportunity for us in Australia will be significant in the coming years. We have a great opportunity to play a significant leadership role for the Australian Space Agency in implementing the Australian Civil Space Strategy over the next decade and more.

Well, I know people think the logistics supply chain is a bit boring, but my team is helping reimagine the global supply chain to help space-enabled, point-to-point global delivery in under an hour. So companies like SpaceX and Virgin Galactic are developing the required space transport systems. And we're collaborating with United States Army, and we have a proposal in the United States Air Force, to design and develop the logistics concept of operations for supply chain in support of these space transport assets. Activities range from moving cargo between the spaceship to cargo deck to the ground platforms or transporting the cargo between the spaceship to the warehouse and sorting and storing, refilling in preparation for launch and landing in far-forward locations. So many of the activities my team does today for traditional logistics operations will tomorrow be fully space-enabled. So watch out. I'm in space also, guys.

That's great, Ella. Thank you. Well, there you have it. Through the combination of mission focus, technology utilization, domain expertise, I think it's fair to say KBR is differentiated and positioned for growth with a resilient and diversified high-impact business. Thanks all, all my colleagues today, and thank you for joining us. We're going to take a quick 5-minute break right now. And our CFO, Mark Sopp, will pick back up after that. [Break]

Hey, folks. Welcome back from the break. Vernon, thanks for leading the great panel. Again, this is Mark Sopp, CFO. Thanks for joining us today. Really appreciate it. Hopefully, by now, you're starting to see why we're so excited about our Government business here at KBR. The team is performing remarkably well. We're really proud of their efforts. And I hope to expand on that here in the next few minutes, and then we'll have the whole group involved in the Q&A session, and then Stuart will finish it up. So first, I do want to share the remarkable growth and diversification story that has unfolded with this business area over the past couple of years and also a stable and predictable stream of profits and cash flow that it now produces, yet at much greater scale. Furthermore, importantly, this scale extends quite far into the future due to the nature of the customer missions we perform, and particularly the long-term contract positions we have. So we think this scale, diversification and consistent performance, plus the visibility, is quite a bit different than many common perceptions out there about our Government business. I hope to clarify some of that today. The second part that I have simply lines up our performance and scale relative to some of the peers that we admire and work with every day in the public GS space. And we think you'll see this represents a very interesting and attractive investment opportunity. So just a little over 4 years ago, KBR's Government business was just a few hundred million in revenue and, as you probably know, was singularly focused on logistics. Now that focus has led with success to our market leadership position in that area. And we're pleased with that. And as you see with this chart, that has grown remarkably well over the past few years to now being well over $1 billion in scale. We're well-known for leadership in logistics. Ella, Andrew and their teams have done a remarkable job building a great franchise. And I'll also say they execute really well and they deliver better margins than you might expect, largely due to there being quite a few performance-based contracts in their portfolio. And I'll cover that in a bit. Starting in 2016, we set course on a deliberate growth and diversification strategy focusing on space and defense modernization but with a global view in mind. That year, you might recall, we made some acquisitions. We integrated them over the course of roughly a year. And while doing so, we actively delevered. After completing that, in early 2018, we added more acquisitions. We integrated again, and we also actively delevered afterwards. The acquisitions, indeed, were key to our transformation, but we think the ultimate measure of success in M&A is the organic and profitable growth generated by the combined business once it's all put together. So look, we could not feel better about the results. During 2018, this team that you've seen here today posted industry-leading organic growth averaging about 13% each year, and together adding about $750 million of revenue base over that period. You can see the steepening of that curve as a result in many ways of this organic growth. So through this period of remarkable growth, we kept the employees, we kept our key customer relationships. We teamed up to win new exciting work, including some very interesting takeaways, synergies, if you will. And most importantly, we've built this strong management team that's still here today that has delivered a very impressive track record for growth. So as you probably saw earlier, we can maybe do better with jokes in this group. But being the CFO, I'd rather take the former in terms of the performance, and we'll work together on the latter. So just in a little over 4 years, KBR in Government grew 10x from $400 million to $4 billion today. And very importantly, key takeaway here is it's now almost equally split across 5 diverse business areas: the contingency logistics, sustaining logistics, international, engineering and space. This cuts across different funding sources with good balance. For example, our domestic and international mix is about 75-25, which is a distinction for KBR, but also fairly equally balanced across operations and maintenance funds, RDT&E funds and OCO government budgets. Quite a bit different than perceptions, we think. Profitability has gone hand-in-hand with the growth, with consistent EBITDA margins of around 10%, while producing double-digit organic growth. That's usually not too easy. Cash flow is strong, too. I'll cover that in a moment. The resulting $400 million EBITDA-generating cash machine has scale, has diversity, and furthermore is repetitive and predictable because the contracts we have have a lot of runway on them. So let me shed more light on that. Here are the top 10 contracts in terms of expected EBITDA contribution for this fiscal year 2020. These top 10 represent a really nice cross-section across our entire Government business. Logistics, engineering, space and international all represented here, you can see. These 10 together produce about 50% of the total EBITDA of our Government segment today. So a lot of coverage here. Having just successfully come through a pretty heavy recompete period, which we've talked about in our calls, these programs now produce excellent long-term visibility for earnings and cash flow due to the unusually long-term nature of their period of performance. 8 of the top 10 extend beyond 2024 and a couple of those much further out. The 2 largest EBITDA producers, LOGCAP and Aspire Defence Services, go out 10 to 20 years more than today, respectively. The weighted average forward contract life of these top 10 is 10 years. I think you'd be pretty hard-pressed to find that sort of duration across our peer group, top to bottom. I will add that the one contract that does end fairly soon is the Aspire Capital Works program. That was always a short-cycle program. So this was planned. But I'll also add the project's been very successful, and we think it will open up some new doors for us. All of this translates to above-norm earnings and cash flow stability and visibility. And it also means our business development function, very importantly, can spend a lot more time going after new business as opposed to preserving old business. So tallying up all of the contracts on hand today, the overall book of business plays out really well. If you were to assume a constant 6% compounded annual growth in the revenue over this entire 5-year period here, the existing contracts we have today, plus options on those same contracts and the recompetes on those same contracts, would provide greater than 80% of the aggregate revenue coverage to deliver this curve of growth. Pretty amazing. Recompete risk, as many of you know, is very low near term. And with a strong recompete track record, the amount of new business required each year is also relatively low, not even reaching 30% by 2024. As Byron and the panel discussed just moments ago, our robust muscle group of existing IDIQ contracts provides fertile ground to source some of this new business. Just as an example, on Pete's team in our Engineering business, they booked over $500 million of brand-new work under existing IDIQ contracts during 2019. So see, there's quite a bit of firepower in that portfolio alone. This impressive waterfall means our BD team, business development, will be spending much more of their time pursuing new work. And as you saw earlier, our pipeline of new business opportunities is now valued more than 10x annualized revenue. That's healthy. Taken together, the outlook of the markets we serve, the deep trust that our customers have in us by performing with them side by side for decades, the sustainability of our book of business and the magnitude of the new business pipeline all supports continued confidence in hitting our long-term growth targets of 6% to 10%. So we feel really good about that. Now shifting gears to margins. Our Government business has delivered about 10% EBITDA margin for the past couple of years, and we're targeting upper single digits in the longer term. Now that's relatively strong in the government sector, particularly with a pretty heavy mix of space and logistics involved. The left side of this pie chart gets to the root of this. So first, we control our destiny in that we are [ prime ] and prime and execute most of our work. Second, we have a healthy mix of international business, 22% on revenue terms. All of our international work is on performance-based contracts, meaning they're either fixed-price or time-and-material. These contracts offer more attractive margins, of course, provided you perform. And in all candor, being here 3 years now, we have learned how to manage these types of contracts really well, with strong program execution, commercial savvy and so forth. And we've had consistently strong margins not only in the raw performance, but by producing favorable write-ups as we realize performance incentives through the end of the contract terms. There's also a good chunk of performance-based contracts on the domestic side, bringing up the total performance-based mix to about 40%. With the other roughly 60% being very low risk, pure cost reimbursable mix, we find that this balance, coupled with strong program execution, really works well in producing stable yet attractive overall profitability metrics. Now under the bar chart there on the right, you see the proportional contribution of EBITDA dollars broken down between domestic, international and nonrecurring adjustments. We can see margins have been quite consistent in the 9% to 10% range before considering the nonrecurring items, and you see that international provides a consistent and healthy boost here. This is a favorable distinction for KBR's portfolio, the international mix. Looking forward, we obviously won't count on nonrecurring adjustments in the future, but we certainly are counting on a heavy mix of international remaining. We do expect some reduction in the international portion in the out years, which reflects the ramp-down, as planned, of the Aspire Capital Works program. That ramp-down completes in 2021 and it's worth about 1 percentage point in margin. So as a result, we see 9% roughly thereafter, and hence, the high single-digit target. We're sticking to that target today. So finishing up with this first section, this shows our conversion of profits to operating and free cash flow for our Government business. The small yellow sliver is the CapEx related to this business. So I think that clearly demonstrates the very low capital intensity that we have here. And I think this chart pretty much speaks for itself. Both operating and free cash flow conversion to income has consistently exceeded 100% every year. And the free cash flow expected over all 4 years, including 2020 that we would expect, tallies up to about $1.3 billion. By the way, more than the amount used in the acquisitions to build this wonderful business that we talked about today. This provides a very vivid picture of how we've been able to quickly delever from the transformative acquisitions we've made, improve our credit profile all along, lower our cost of capital and, just recently, hopefully you noticed, a pretty major increase to our dividend. Okay. With all of that as background, here's a simple view of how KBR's business in the government area stacks up to some of the peers that we greatly admire and work with every day. This simply plots revenue on the horizontal axis and EBITDA margins on the vertical axis. And with respect to scale, you can see we fit comfortably in the mid-tier here. However, on the margin side, you see we are clearly in the upper tier for all the reasons that I just covered. Looking deeper at the financial metrics here in the box using simple averages of the peers named here, we see performance in the last 2 years really stacks up well. KBR's organic growth, profit margins and capital intensity all compare favorably to the averages. And cash flow was strong for both 2018 and 2019, registering above 100% both years, well above 100% on the average across those 2. So taking this all in, our Government business, in our view, delivered the following demonstratable attributes: healthy scale; a very attractive customer and contract type mix with access to multiple markets and funding streams that may be among the better in class; an extended contract life cycle that provides above-norm visibility to future profit levels and cash flows; and finally, demonstrated overall financial performance in the upper tier across the relevant [ group ]. So wrapping it up, here's how KBR plots in terms of valuation. Now while, granted, KBR is not a pure-play government business, we get that -- the recent actions we have taken do warrant a valuation, in our view, at least more consistent with government valuations today. In 2020, our Government business represents about 80% of the expected contribution profits of consolidated KBR. The other 20% is from our technology business. And as many of you know, that has an even better track record for growth. It has 25% margins and is extremely capital efficient. We have aggressively derisked our remaining business and put it in a position where it can be breakeven at worst. There are no lump-sum EPC contracts in our portfolio today. And with Stuart's earlier announcement, there will not be any in the future. So it's perplexing to us to see this degree of valuation gap across the comparative peers here in the government space. So summing this all up, when you consider our scale, our beneficial diversification and above-norm visibility and attractive overall financial profile, the current valuation, at least in our view, suggests KBR isn't still quite fully understood, and that's why we're doing this today. But nonetheless, a pretty compelling investment story and opportunity given what we've said here today, and hopefully, we've been able to make a convincing case to you. So with that, thank you for your engagement and your interest in KBR. This is the story we absolutely love to tell. We're really proud of it. And now we'll all move on to Q&A. Hopefully, we answer your questions. Thanks.

Thanks, Mark. So let's start with the real fun now with the Q&A. [Operator Instructions] And since we have our entire GS leadership team here, I would ask that you get your particularly tough questions ready for them. We are running a little bit over schedule. So we may run past 11:30 Eastern Time. So if we have to drop off before we get to your question, please feel free to call or e-mail me after the event, and we're happy to follow up. I've also seen a number of questions come through regarding Stuart's energy announcement pertaining to lump-sum EPC and blue-collar construction. Since this is a government solutions-focused event, we'd like to focus on questions pertaining to our Government business. So we've taken note of your energy questions, and we'll have a head start as we prepare for our second quarter earnings call Q&A next month. And in the meantime, I'll just quickly remind you of the following: we took all LNG EPC out of our original guidance for the year in February. And while we do expect our Energy business to be marginally profitable in 2020, we included a very conservative breakeven contribution to our adjusted EPS guidance, which we updated in April. So we're continuing our evaluation, and we'll have a more fulsome update next month. So stay tuned. So with that, we'll jump right into the Q&A. The first question that we have is for Byron and Andrew. And the question is, if you could talk a little bit more about win rates and about why your win rates are going up. We have -- we saw the $1 billion of new work in 2019. The question is really how sustainable are these win rates? Could they improve? And could you talk a little bit about your competitive advantage, and maybe a little bit of color on some of those bigger items that are in the pipeline. So Byron?

Sure. I'd love to answer that. I think our win rates have been very high, and I attribute it to several things. We've invested very heavily in our enterprise BD team as we brought the different parts of the business together. We really took the best of the best. And whether that's our IDIQ center of excellence and the way we go to market or the large-scale enterprise, highly technical bids that Todd talked about, we really integrated that very well to capture those synergies. I think, as Pete mentioned in his initial discussion in the panel, the IDIQs, because we are going to the customer with a solution and writing a white paper and working with them on their needs, we typically have an advantaged position there. So that's new business. And Mark said, we had over $500 million in 2019 just through that new business IDIQs. I think we're -- it's really -- our wins are based around fundamental good performance on current contracts, good past performance by our operators. And that's just continued to kind of drive our growth. Andrew, do you want to add any comments to what you kind of see going forward in your pipeline for the international business?

Let me add a little bit. Yes. I think over the last 2 or 3 years, we've diversified the business. And we worked our strategy, and that's starting to bear fruit. So we're in a target-rich environment, but we're picking our opportunities very carefully. And I think some of the fruit that landed quite nicely is the contract at Sellafield that we won last year; NTSP, which we booked earlier this year; and as Byron mentioned earlier, the MoD Middle East opportunity. So I think we've got some really good opportunities ahead of us. We're in a resilient market. We're seeing sort of U.K. defense expenditure increasing year-on-year, 2.3% 2020 versus 2019, 9.6% in real terms over the last 4 years. So we're in a positive market.

Yes. And Alison, just to kind of answer, is it sustainable? I think it is. I think we've got good position, good customer intimacy, good book of contracts. I think we have the best BD team there is. We really spend a lot of time with them. And the MOSSI work that we just won from NASA just a week or so ago, that's a takeaway work. That's new work, that's expansion, just a great effort all around. These are really highly technical work. We're not winning on low cost. These are best value awards, and we were not the lowest price on MOSSI. We were not the lowest price on LOGCAP V. We are winning because we have capabilities, and that's really what's driving the win rate.

Great. The next question is for Todd. And the question is, as U.S. space focus switches to more of a hybrid approach, where private companies such as SpaceX are managing more launches, how does that impact KBR's space business? And how does the change impact KBR's market share? Is it an additional growth driver?

Yes. I think as commercial space operations come online, I think we're seeing growth on our existing NASA contracts. That's additional work that's tied to the work that NASA does. But we also see it in that we support the commercial efforts. So we see that, for example, our private astronaut training, much of that work comes through NASA contracts, so we see that as progressive growth. And as we announced earlier this year, and I mentioned in the roundtable, we're the first and the only company with the authority to train those astronauts in NASA facilities. We're also seeing as the OEMs move into the lunar region, they are coming to us to add expertise to their offerings. As I say, we have a very unique domain expertise. And we see the independent new players come out, some of the SpaceXs and the Blue Origins, that need our deep domain expertise and the work that we do. That's relatively small dollars now, but it positions us in that market very well for the future if it's a go, and we see that continue to expand.

Great. The next question that's coming in is for Ella. Could you provide an update on LOGCAP transition, the status of the protest? And then also maybe with Andrew, talk a little bit about Middle East outlook and troop levels.

Sure. Yes. So we've received some notices to proceed. So especially in NORTHCOM, we're starting transition with NORTHCOM. And what's great about that is you have the National Training Center, which is a great platform where they train the military before they go out on deployments. So long-term synergy there with that part of the contract. We're also transitioning in EUCOM, so we're starting to transition there to ourselves. So that's great. It's easier to do than transitioning to others. For the Middle East, that's kind of on hold with COVID-19 right now. We all understand that there will be an update in August, September time frame on the transition of that area depending on what's happening with COVID-19. But it's a great opportunity. We're always getting task orders for new work on NORTHCOM to support what Byron mentioned, Warp Speed, so going out there and providing things like biomedical freezers and stuff for -- as the vaccines and different things come online as they get positioned for that. For the Middle East, the troop counts, we have probably been right positioning at about 8,000 in Afghanistan depending on what's going on with the marketplace. So I'd say we're -- we'll have to see what's happening there as time goes on. But it's in alignment with what we've been forecasting.

So just to add to that, I mean, from my point of view, we're out in the Middle East, supporting the theaters as -- in the same way that Ella is. But that's a relatively small part of this business now. We're also at some of the steady bases, supporting the British military, for instance, in Oman, in Bahrain, and we see that as a constant. We expect that part of the business to endure.

Great. So the next question that's coming in is for Rob in Australia. So good evening, Rob. APAC has been the fastest-growing part of the business over the last few years. Which pieces of the business do you expect to grow the fastest that will affect margins? And also for Andrew, in combination with that and in connection with the growth in APAC, when do we -- or how will we -- how are we looking to replace the Aspire Capital Work that will be stopping in 2021 or that we will be successfully completing in 2021? So Rob?

Hopefully, you can hear me all right. It's breaking up a little bit at the moment for me. But in terms of what we expect to see as the fast-growing business or [ path ], it's really in our mission planning area and the mission support area. And that has some very significant new opportunities. And certainly, over the course of the next 2 years, we'd expect to see that business grow significantly. That will have a huge positive effect on our margins. That work is conducted in a classified environment. It's certainly significant barriers to competition for the work that we do. So we see real potential in that area.

So if I pick up on the Aspire point, it's no surprise. The end of the construction work has been well-known for a period of time. And that's a core part of our strategy has been to focus on what replaces it. Mark mentioned the reduction in margin being about 1 percentage point. But we have been looking at what the credentials are that Aspire provides us. And there's great capability that we've been able to leverage since taking over the 100% of the constructions and operations maintenance back in 2018. And right now, in the U.K. market, that's really helping us because there is the opportunity that we're now engaging in bidding for some U.K.-based military support contracts, which the Aspire model has given us great -- improved our opportunity. And just to put some scale around the opportunity that we're looking at, there's probably $5 billion or $6 billion worth of revenue associated with projects; those for the military estate, and there's also investment in the U.K. naval ports that we anticipate over the coming years. I mentioned NTSP. That's about the upgrade of one of those ports. But we're also keen to look at the investment opportunities that sit around the other 2 U.K. ports. So I think we're well positioned. We're in good markets to make up the shortfall that we'll see as Aspire Defence Capital Works concludes.

Okay. The next question is for Stuart. Stuart, could you provide some commentary on budget outlook and our view on, as the government is shifting priorities, and in response to pandemic, maybe some commentary around budget dynamics?

Sure. Thanks, Alison. Yes. So interestingly, we tried to cover that off as it went through -- really in my opening remarks. I think Byron covered it and I think we also covered it in the roundtable. And Mark had a go at it as well. So I think there's a number of questions we've had on the road on this topic, as you can imagine. So I think, first and foremost, I think where we actually do what we do in terms of that tip of the spear and the mission-critical operational focus means the stickiness of what we do. And as things that matter, as Byron said, they really matter. And as a consequence of that, we're probably less impacted by budget volatility than you've seen perhaps of others. And we've certainly seen that coming through as we run through the COVID-19 piece in the last little while. In terms of looking forward, we do have the differentiation with, I guess, long-term contracts, particularly international, that really [ have been ] the future of the business. Mark showed you the top 10 contracts as well, which will run through, enduring way past sort of our guidance today of 2022 in terms of our targets to go well beyond that, as you've seen. So again, those programs tend to endure, as everyone's well aware. And then I think really the vectors that we're on in terms of our strategic focus that I talked about in terms of defense modernization, and I think we showed again the broadness of what we're doing there. Space exploitation is not just to deal with NASA but commercial space and going into [ peace ] business and military space, and of course, human health performance, which is really at the forefront of everyone's mind at the moment around mental health and things like that. It's really coming to the fore not just in, I guess, the broader project capacity, but actually, obviously, in the military side for some time. So we do think that we're lined up, as I said in my opening remarks, very much aligned with where the spend is going to come into the future. So I think there will be some shifting around in budgets. I think that's a foregone conclusion. I think the elections are coming up, as everyone is well aware. But I think where we're positioned really protects us from a lot of that volatility.

Okay. The next question that's coming in is for Byron and Andrew. Gentlemen, if you could speak a little bit about the new wins from 2019 and recently in 2020 and the profile of how you expect those new wins to impact our growth targets over the -- over the period.

Yes, sure. We had really strong takeaways in 2019, as we mentioned, and I'll let -- Andrew can talk about his couple that were international. But we talk a lot about the POTFF program, which it took a while to ramp that up last year as we came on to kind of second half of the year. It's pretty well fully staffed right now. It has some, we believe, some more upside to go on it from a revenue standpoint. We're sitting at almost 500 employees supporting the special operations at 29 locations around the world. Even during this COVID crisis, we've been hiring. So it's been great to see this virtual environment we're using here with the webinar, and we're doing the same thing on recruiting and hiring. We've talked a lot about ROC II that came on last year. Again, it came on middle of -- I guess that was last August or so last year. So that's going to get a full year this year. That's the launch support we've been doing that Todd talked about. Pete just seems to -- we have a joke going on, like every Friday, Pete wins something. And his IDIQ business just continues to push out: a $50 million win for something in AFRL; a $50 million win for a new bomber [ in AFRL ]; a $50 million win -- he just constantly -- his IDIQ programs just continue to be a growth engine for us. And that's where a lot of the new work comes from. We've got $12 billion, as we said, in the next 24 months in the pipeline. And so we're talking -- many of those are already submitted, meaning that they're under evaluation with the customers to be awarded or about to be submitted in the next couple of months. So we just have what we see is good visibility in the profile of those. It takes some 30, 90 days to kind of ramp up. And then we -- then our ops teams, like Ella said, get in there and just try to continue to expand on, grow margin, grow scale over the long term. So these are the profile that -- a few months to ramp up, [indiscernible] for full operations. Andrew, do you want to talk a little bit about your 2 big wins you had in 2019?

Sure. Let me pick up on Sellafield. I mean we're 12 months into a 20-year relationship on that program of work. As I mentioned, the Sellafield site is the U.K.'s nuclear repository. And the program is really about cleaning up the hazard. So that's not optional. The U.K. government has got a 60-year program actually to remediate the site. It'll take that long. But currently, we're sort of looking at something like $6 billion of capital programs to be delivered over the next 5 years. So I anticipate that as we get further into this program, our team will grow, and this will become a more material part of my business as we go forward. If -- I'll touch on NTSP, Nuclear Technical Support Partner, that we flagged up earlier this year. It's a great win supporting the U.K. Royal Navy, a customer we've not directly worked for for over a decade, I think. So great to be able to be back to support the navy at a time when the challenges are becoming more urgent. And this is a program which is really about modernizing the facilities to support the nuclear -- U.K. nuclear deterrent and with the new sort of Dreadnought submarines, which are currently in development. So anticipate the investment will increase over the coming years. And it's great to be at the heart of that.

Great. The next question is for Stuart and Mark. So the chart that Mark laid that showed visibility and over 80% of the work under contract. Question pertains to is your 6% to 10% organic growth CAGR target overly conservative with that amount of work in sight?

That's always a good question. And it's one of those things, if you're not overly conservative, you get murdered. So we have a track record of setting our stall out, and we met or exceeded guidance for the last 13 quarters as everyone knows. I think that's -- I think we are prudent. I think that we are rightfully conservative, particularly in a volatile world. We stick to those -- to that guidance. It would be great to do a bit better than that, and I'm sure we'll get our just rewards when we -- is there an opportunity to do better? Of course, there is. We run a probabilistic model, as you know. We build our 5-year models looking at goals and get some scale and level of competition, and we build all that in. And so if you win more than your fair share, and I have to say our track record and the win rates that we've had are probably a bit above our fair share, if we continue with that, then we can certainly get to the upper end of the range or even above it.

I'll add to that, as I agree. I mean I'd love to see us being conservative here on this front. And as Stuart mentioned, we have a good track record going on. We have plenty of opportunities. The team is doing great, as we've said consistently today. But we've also been very measured and prudent and pretty conservative as we've completed this transformation, put the team together and made sure we can do what we say we're going to do. We're going to continue with that ethos in our company, and we have to take it one day at a time, if you will, and be careful, but be measured, but also be invested in the marketplace. I think we've done a really good job at that. I couldn't be more proud of the integration and the synergies we see. We're bringing all of this together, and the organic growth we saw earlier is stunning. And so a great return on invested capital when we can grow organically after putting all the pieces together. And so that will be a big part of our focus going forward.

Great. So sticking with Mark and Stuart. Several questions coming in related to appetite for M&A, both in terms of our own appetite, dynamics of the market that we're seeing and potential capabilities that we might be looking to enhance.

So I'm going to let Mark answer the specifics around M&A, but what I would say is that we don't need to do it. We've got an amazing capability breadth. We've got a portfolio you've learned about today that's got a pipeline of opportunity that will continue into the future to give us, at least for the foreseeable future, a very strong organic growth industry right up there. We've done -- we've been at the top for the last not 1 year but 2 years, and you've seen and met the team today that I think they can deliver it more. And that's the best use, as you know, we all know, of working capital. So I think we're in the right zone there. We're in the right vectors. But in terms of what's out there, we continue to kiss frogs, as I've said many times, and we've done well acquisitively and -- but we'll keep true to our ethos of looking for revenue synergy and not backing on cost synergy as a way to add value. But Mark, over to you in terms of capacity and where we might want to spend our money.

Yes. I totally agree with that premise that we don't have to do anything. We have a great business today. We can grow organically, deliver great returns, et cetera. So that is a key takeaway, as Stuart said. But M&A was a big part of our path to get here and to achieve this scale and to achieve these outcomes we've put here today. And so we recognize that. We think we're pretty good at M&A. And we take every opportunity seriously that comes across the desk. I would say that if you look at the capital structure today after having done quite a bit of M&A to achieve the scale we talked about today, and we improved our balance sheet tremendously. We have improved our discipline relative to working capital. Our DSOs have come down. We've delevered each time we have conducted a phase of M&A very -- in a very disciplined way. And so we've demonstrated to the market the ability to integrate, reward the people that are coming aboard the KBR team with challenging work, I think reward our investors with good performance and good cash flow and a good balance sheet to boot. Through the last couple of years, with the credit rating improving and so forth, we have firepower now to go at it again should we find opportunities that are compelling. And we'll navigate that one at a time and compare the return characteristics of what those might offer to us versus our other deployment opportunities, which we've talked about. So that can be returning cash to shareholders. We've demonstrated that before as well. And we have a very measured way of balancing those two, and we will make the best decisions for all of our stakeholders, our employees, our customers and our shareholders.

And I think just to finish on that, the areas of focus, and we've talked about this often are really where our strategic vectors are. It's really around space exploitation, particularly in military space. It would be things like intelligence. It would be things like human health performance. And international because of the margins we achieve in that, [ I think ].

Great. Todd, the next question is for you, and it's related to the MOSSI announcement that we made yesterday. Congratulations on that win. Can you talk a little bit about the program? And could you talk a bit about how you expect that to transition in, in terms of revenue, backlog bookings and how that will actually impact results?

Yes. So that program is similar to the work we do on the International Space Station. We -- it includes the operations of all of the payloads on the International Space Station as well. It includes $587 million announced cost-plus. There's also an IDIQ component that was not included in the numbers that allows for -- to continue the progressive engagement as we bring solutions to our customers. So it's a good contract, and it helps to complete our portfolio of space operations in the human space flight world, which if you put that together with our gizmo contract at Goddard, where we do robotics-based operations and we fly a Landsat mission for USGS, and it really does give you a nice full domain expertise and domain domination.

Okay. The next question is about technology. So I'm going to ask Vernon and Byron to weigh in first and others as you like. With regard to new technology advancements to disrupt OEMs, can you expand a bit on that comment? And then how are OEMs trying to enhance their own platform management skills and how do we play into that area? So maybe also Pete. But Vernon, could you start?

Yes. Thanks, Alison. Sure. Our approach is something that we've talked through during the panel, and Byron alluded to it as well. And it's built around a couple of factors. First is customer intimacy and domain expertise. But we preserve what I'll call an honest broker relationship with our customers. So it's our priority to be focused on their problems, not building products that we want to sell to the government. And so that gives us, I think, an advantage in some ways to sit next to the customer, provide them trusted advice in terms of what solutions or what technologies to invest in without pushing our own preference. It's a data-driven approach. It allows us to be agile and pivot to new problems as they emerge. And it allows us to look at the marketplace for the best option. And so I think that's our -- how we position ourselves, and it is a, I would say, a very successful model. Byron, anything to add?

No. I think you hit it spot on there. I think we like the term agility. We're following our customers over time as their missions change and evolve. And as we see new technologies, an OEM has had to invest very heavily in their research and development in their product line. So they have a vested interest in making sure that becomes some program of record. Whereas we can partner with OEMs. I mean we have great relationships with many of the top-tier OEMs, bringing in specific expertise or mission solutions. So we are bringing real solutions alongside the OEMs. And we have partnerships with nontraditionals where -- I can't remember the codename, but -- Vernon, you have to tell me -- if our Amazon Web Services, we're a premier partner with them in one of the top, top levels for Amazon Web Services. We're helping our customers think about how do they manage their data, what is their data strategy? Do they move to the cloud? Is that cloud secure? And just -- we're not limited to just AWS. We also have partnerships with Microsoft and Google and others. And so we are able to kind of say, what's the best technology, the best OEM for your need and give them that advice. And then we help broker that between the OEM and the government to get to the right answer for the mission.

Great. The next question is for Stuart and Mark. And it is -- it seems that some of our GS peers have experienced a bit more disruption in their businesses due to COVID social distancing. Can you provide an update on what you're seeing and how is it that our business has been a bit more insulated? Have we seen -- the disruptions that we have seen, have we seen them easing?

So I think we presented -- I know we presented it at the Q1 earnings that really the resilience of our business and the fact that our government customers have really went forward to help us, really not just in the U.S. but globally. And that has continued up until today. We don't see it changing. And in terms of the disruption to -- from COVID-19, as I explained earlier, really our differentiation really comes to the fact that we are that tip of the spear. We're really in the operational side. We're doing things that really, really matter and that are compelling. And as a consequence of that, those missions have continued. So we've seen very little disruption. We did announce, and we built it into our guidance, that the big exercises in Europe with NATO were canceled, obviously, under the EUCOM piece of work and LOGCAP IV. But that's been [indiscernible]. But that's really the only real disruption. I think others who -- they have scarce and classified work, and they can't really get into those areas or have been prevented from going into those areas are probably more impacted than we are. But really, rather than talk about them, I'd rather talk about us. And really, I think the upside for us, and this really is the sort of work we do, the sort of differentiation we have, the mission-critical elements to our business. And we've talked about it, and I keep talking about the proof of the pudding is in the eating. And here it is, it's just clearly demonstrating, through actually the returns to shareholders, what we've been saying for a number of months and years. Mark?

I would add to that, that it's about making the best of a situation and being opportunistic, and as hopefully we're demonstrating today, embracing new technology to be successful in this new environment. And so with our global presence, we had, as we said in our Q4 call actually, heads up about the oncoming possible challenges with the epidemic and to manage ahead of that problem. And we built an IT infrastructure that allows us to do stuff like this. It allows Byron -- Byron was telling us the other day that his access to the generals and the military leaders has improved as a result of this situation. They are more amenable to talk over the phone or video, when back in the previous life they were full of all these meetings and customs and customary things and so forth. So access, though opportunistic, can actually be improved between our technology business -- already have success in China as that has opened up. And leaning forward, both from the technology perspective and from the customer relationships we've built over decades and having the comfort to get in front of them virtually or otherwise and have an impact, a big impact, right? And we're doing that. So it's all in. It's the amalgamation of the years of relationships we've had and being savvy technically in this environment today to lean forward, as we like to say here, and continue thinking about ideas and how we can solve their problem. I think that's coming through in the numbers pretty well.

Yes. Alison, if you don't mind me jumping in on top of that. Stuart rolled out in the last earnings call our reimagine effort, right? So I mean, remember, we're a people business, 18,000 government solutions employees. So it's not just about that customer engagement. It's taking care of our people, making them feel safe, making them feel valued and showing them that we're rethinking how we're going to work in the future so we become that employer of choice so that we can attract and retain the best talent anywhere, the most diverse thoughts and minds and ideas, and that's what we deliver to our customers. So I actually think this has been a milestone event in KBR, and what's really going to change us for the future. I mean I'm really excited about embracing the amount of disruption in positive and opportunity that's come. It's really happening.

Well said.

A great segue to the last question, which is with the success that we had with this event today, what year will we be hosting our investor meeting in space or from the moon? So Ella, Pete, Todd?

Soon.

We'll need Ella to lead the way. So definitely...

We will. 2024.

2024. Todd's on record for 2024. That's great. All right. So that wraps up the Q&A. With that, I'm going to pass it back to Stuart, who will have some closing comments. Thank you all for your active engagement with great questions that have come in. And now back to you, Stuart.

Thanks, Alison. We're running a little bit over, so I'll keep my closing remarks brief. Firstly, thank you for listening, and of course, thank you for the questions. I think from the questions, it feels like we achieved the objective of giving you more color and an insight to our broad and across our portfolio. I would be remiss if I didn't thank Alison for pulling this together, for kind of keeping us on track. I think the phrase having catch doesn't really come closer. So well done, Alison, for that. And look, the key takeaways I presented upfront, you probably -- most of you have probably forgotten what they are by now. But in truth, I think the team covered each. They really demonstrated, I think, real examples, real examples of the how and the why. And I think giving real examples is, of course, it's just more real and thus more compelling. And just on being real, I think the video that we showed after my opening remarks was actual footage of KBR and KBR people across the world and above the world. There were no canned images there. So really 24/7 look at KBR's broad capability and geographical reach. So really to close with the announcements we made today and the presentations you've seen today, I believe we have demonstrated KBR has fully transformed into a government, technology and high-end solutions company. Our risk profile and our financial characteristics are really fully aligned, and shape up really well against our government services peers, and Mark showed you that graphically. You've met the leadership today, you've seen the passion, the sense of team, and it really broadened your understanding of what we do and who we do it for. Hopefully, we've demonstrated why we're different, why we're resilient, and you've seen the financial metrics and the comparison with our peers. We've reaffirmed our guidance. We've demonstrated the cash generation capability of this business in the past right now and going forward. And this is all backed up with what we've done, what we've won and what we're bidding. We've also showcased where we're going. In short, you have seen the investment opportunity. Thank you.