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

Good morning, everyone. Next up, we have KBR. I'm very pleased today to have Byron Bright, who's the President of Government Solutions as well as I wanted to introduce everyone to Jamie DuBray. She's the New Vice President of Investor Relations and FP&A for KBR. And so welcome, Jamie, to your first, maybe, Credit Suisse conference, I don't know. But at least with me, at least from KBR, it's your first conference. But anyway, so how we're going to do this. First, I'm going to let Jamie introduce yourself and give a little bit of a background, then hand it over to Byron, so he can give you like a brief overview on KBR and then we'll jump right into Q&A. So Jamie?

Thank you, Jamie.

You're welcome. We have 2 Jamies.

Thank you, so Jamie DuBray, I've been with KBR since the end of September. Prior to joining KBR, I was most recently at Boeing in the defense space. And then prior to Boeing, I worked at different companies in oil and gas, including Schlumberger as well as Chevron. Throughout my 23 years of experience or so, I've had various finance roles, Shared Services, Director of Finance for Western Hemisphere and other capacities. So very glad to be with KBR. We're excited to be at this company. I see lots of cool opportunities for growth. And so it's part of why I'm here, and I'll be happy to help any of you with questions after the call.

And we're still glad to have Jamie and we wish Alison the best. She's taken on the bigger roles inside the company over on our sustainable technology solutions. And we look -- we're excited for her new opportunities. Glad to be here today. Just real quick on KBR 30 seconds, and we'll jump right into Q&A. Most of you probably know us pretty well. We're really a science, technology and engineering company, really focused on helping make our customers' missions [indiscernible] so really trying to do things, not working there -- trying to do things -- so really helping solve complex problems to help make a more safe, secure and sustainable world. And we really go to market around 2 domains, the government solutions sector, which is heavily defense, national security, science focused and then our sustainable technology sector, which we -- where we have process technology and know-how to really focus on the industrials, chemicals and energy customer set. So broad diverse portfolio. We'll do over $6.5 billion in revenue this year at about 10% EBITDA margin, great cash flow characteristics, low risk, good visibility of our pipeline and our future. So we think a great investment story, particularly in today's world of national security issues and energy security issues. And so I'll stop there. I'm sure we can get into more details, Jamie.

Sure. So I guess my first question would be to you. Can you just talk about the organic growth trajectory for your defense business. Over the past couple of quarters, the organic growth numbers have been maybe a little lower than people would have expected. But like which segments do you see the best opportunity for organic growth as you're looking at 2023?

Great. And we set out long-term targets in 2020 out until 2025. And we said our government portfolio collectively would grow between 5% and 8% CAGR over that multiyear. And we are right up to the higher end of that level today over a multiyear, look, yes, on any given quarter, it's up or down. I would say this year has been a little bit slower just in some of the newer awards. And I think a lot of that is just driven by the government kind of coming out of COVID. I think we didn't get a CR until March, and some of that delay has been there. But what I would say is, we're still very optimistic that we'll meet or exceed our long-term targets when it comes to the overall organic growth. We've got a great book of business. So we've got a lot of organic, on-contract growth opportunities coming through the business. A couple of examples. We've talked a lot about our work we do with special operations. When we originally won that contract a few years ago, it was a 350-person contract. Today, it's 700 people. So that's the kind of just persistent, progressive, on-contract growth we can get. Another example is our TENCAP program. We talked about several times where we help the Air Force and the space force deliver capabilities from satellites to the war fighter in the field data and sensor type data. And through that, we -- that was an IDIQ contract with a $600 million ceiling, and we're continuing to get task orders on that, and it's ramping up quite nicely. We've got tens of millions of dollars running through that platform today. So that's the kind of book of business we have, very diverse, lots of opportunity for organic growth. I think the exciting areas are really in that defense space of intelligence, military space, sensors. That's where we see a lot of the money flowing when you look at kind of the near peer threats, with AI and ML and cybersecurity and those areas. We think we'll continue to see our defense side of that portfolio grow. Our science space, which is more Fed-Civ has been a little bit more muted. I think the last quarter or 2, but we've had some big chunky wins and I think we'll have some more coming through in the future because there's some larger contracts in that portfolio. NASA's just been a little bit slower. But again, that business, over $1 billion in our Fed-Civ science space business and has done well in previous years. So collectively...

And what about the international business because that's also a -- I think a higher growth market in the margins in that business, I think, are accretive to total defense.

It is. And that's an investment area we've had over the last year. So we have much like we did in the U.S. through M&A where we pivoted our portfolio to these higher kind of defense modernization markets. We've tried to do the same thing internationally. So first was a purchase of a company called Harmonic and then Frazer-Nash. And then this past year, we did VIMA, which is really focused in digital transformation. So we are investing heavily in those markets. And I think with what's happened in Eastern Europe, the discussion around AUCKUS and the synergies between Australia, the U.S. and the U.K., we continue to see good growth there. That business has traditionally been more of a logistics and facilities oriented business, and we've really pivoted that to more upmarket as well. So I think that should also continue to add to our growth.

Okay. So why don't we transition on household goods, Congratulations. Everything went in your favor. The market was very worried about that. So that was a nice end of October -- a positive announcement. Now that it's officially in your favor, can you -- do you have any insights in terms of like timing of transition of when that happens? And over the longer term, how do we think about the margin opportunity and time line for margin improvement in this business. So yes, just update on household goods and still not a 2023, more of 2024.

Yes, definitely more of 2024. So we are fully live on that contract now, working through the start-up and transition. It was always preplanned as a 9-month transition period. We've been doing it for about a month now. So we're in discussions with our customer about exactly how they want to do the ramp-up of the actual delivery which starts after we develop the IT. But for those that don't understand, this is a new customer for us, TRANSCOM. This is a $20 billion contract for 8.5, 9 years and it is to manage -- program manage all of the military and civilian moves around the world. To me, it's really an integration contract and a program management contracts as we won't own any trucks or warehouses that will all be subcontracted out. But our real add is in the IT space, developing a customer-facing app for making a really quality experience for the war fighter. And that's the focus for the next 8 or 9 months. From a revenue profile standpoint, to answer your question, we expect not overly material in '23. It will start to ramp kind of in September/October next year as we bring on 25% of the domestic moves and then 50% in kind of in a very moderated fashion. And then the international moves will start to kick in, in 2024. We should be fully ramped towards the end of '24 and definitely fully ramped in '25, which could be on the order of $2 billion a year in revenue. From a margin profile, we haven't given out a lot of specifics. We don't want to expose all of that, but it's pretty normative to some of the U.S. logistics margins in the kind of mid- to high single digits. And it is a performance-based contract. I think the financial risks are mitigated a lot because there's an EPA clause and pass-through on fuel. But we believe there's great opportunity to expand those margins over time, but those probably won't come in until late '24 and '25 when we get some history and expertise about how to optimize the supply chain. It really is an optimization project.

And is this project should we think about it or contract, excuse me, a gateway to broaden your logistics capability like beyond TRANSCOM?

I think so. I think first, TRANSCOM is a new customer. So there's other opportunities just within that customer set and DLA and other customers that do similar activities. And we are a global logistics provider today. And we see really the add of the digital backbone and supply chain. So supply chain-as-a-service, the data analytics, and we've got a lot of internal investments going around improving and optimizing those factors. So, yes, I do -- there's opportunities out there with State Department and USAID and other government customers that have very complex global supply chains that are looking for our knowledge and expertise. So I think it could be a great contract for us to build on.

Okay. Let me just open up. Does anyone in the audience have a question? If so, raise your hand. If not, I'll keep going. All right. I'll keep going. So why don't we talk about sustainable technology solutions because it's a business that people are really excited about. And I guess, first, can you just sort of break down what the business is today in terms of sales, in terms of profits as we think about the technology catalyst business relative to the legacy, energy O&M business and the different margin profiles. So we'll start there, and then I want to get into Plaquemines.

So I will kind of try to describe the business, maybe you can help me on some of the numbers here. But so I don't think of the business in terms of legacy, energy or whatnot. We set out in 2020 to really transform that business. As you know, we exited the kind of lump sum construction LNG Work, which was very volatile, heavy risk profile. And as part of that exit, there was some pass-through work that had to run off. And most of that's run through today. There's probably $100 million to $200 million annually that's still kind of in that portfolio of lower margin work. But at the end of the day, I think of the business really around 4 kind of offerings. We have our kind of advisory and consulting engineering, these are FEEDs and pre-FEEDs and studies that are paid that get very good double-digit margins. We have the large program management capability like Plaquemines and we can talk about that. We're not taking that type of lump sum risk. It's more of a reimbursable scenario, but they're still very large projects, with decent margins. And then we have our technology sales -- product sales, if you will. So we have over 70 different technologies. We sell catalyst, process technologies, IP-based business that really drives the highest margins. And those margins can be in the double-digit, high teens and higher. And so on a blended area, we really look at the portfolio delivering this year around 16% EBITDA margin. I think in Q3, it was closer to 20%. And we've stated that we will see that margin kind of expand really for several reasons. One is just market demand. I think the market demand in all of these technologies is really strong economies of scale. We took a lot of cost out when we exited the lump sum business, and that's starting to come through now. And so we're starting to see that margin expansion, and we said we'd get to the high upper teens by 2025. And that's -- we're on pace for that, if not ahead of that pace.

Yes. And I guess I'll build on that because, well, one, can you help us understand -- Plaquemine is obviously a big contract. We're back in LNG in a different way, in a very low risk way. But how do we think about that ramp of that contract? Because I think it's $1.5 billion over 3 to 4 years. And then I'm trying to think about your margin targets within STS given Plaquemines because Plaquemines is going to juice your margins just because of the accounting treatment. So as you think over the longer term, do we accept lower margin business and still have the same long-term margin target? Or over time, is there upside just because Plaquemines is ramping, the accounting helps and the other businesses should still have the STS long-term margin profile. Sorry, there's a lot there.

Yes. Let me see if I can tackle it, one part at a time. But -- so certainly, when we said we were going to be exiting the LNG business, I think what we were really saying is that we're going to be exiting the structure of those long-term lump sum turnkey projects and the risk profile that's associated with those projects. So when it comes to LNG, we have a huge installed base of expertise. We've been in this business for years. And we are seen as being world leaders in having this -- our understanding of the business. And so naturally, now that LNG is a more attractive fuel, people are coming to us and asking for our help and support. And to the extent that we can structure those commercial agreements to where it makes sense for us and it is in line with our margin profile, then we're interested in doing work in the LNG space. VG, Venture Global, has worked out really well for us. It is ramping. It will continue to ramp into H1 of next year. And this is just for the first phase. So there is a second phase potentially VG, which will add an additional 7 million tonnes per day of capacity. It hasn't been awarded yet, but we're hopeful that we can be considered in that. And so yes, so I think -- I don't think that VG because of the accounting treatment, it is going to help, obviously, but I don't think that the underlying business margins are going to be any less than they would be. We see sustainability in those margin profiles because that's what we're delivering today without VG.

And I would be more definitive to answer to say no, we're not looking to add additional commodity work into the portfolio just because we have the VG accounting treatment. I mean our real focus is on that future horizon and sustainability, which are, I mean, blue ammonia, green ammonia, plastic recycling. So our real focus there for the [ outlets ] is more on those new products and new technologies that really help drive a different kind of business model. Again, LNG is part of that decarbonization story, right? It has to have this transition fuel. It's lower than carbon and there's -- the supply demand curve is kind of in our favor right now. So that will be a part of the portfolio, but the real focus is on these bigger, longer-term things that help the environment.

And I guess can you just elaborate on that? Because everyone looks at STS and they think that it could be multiple enhancing for KBR's business. But to get the multiple, they want the STS earnings to be driven by exactly what you're talking about is plastics recycling. It's hydrogen, like they don't want it to be driven by sort of the old GDP, ammonia. So like how do we think of -- where are the biggest opportunities for that -- for those decarb businesses in the next couple of years? And how big of a percent -- like when we think about the portfolio maybe 5 years out, like how much of the business is driven more by that versus LNG or...

Yes. No, certainly. So maybe I'll start and then I'll let you fill in any blanks. But when we think about decarb, decarb means a lot of different things. And so we've been doing a lot of decarb work and just with carbon capture, understanding how carbon is accounting and then setting boundaries and then helping companies perform put into place strategies to meet their net zero targets. That's the most simple way. But we have been doing a lot of carbon type of decarb work in the refining business with our process technologies, helping them to make cleaner fuels, helping them to be more efficient, basically safer, more -- better for the environment and greener. And then probably the biggest opportunity that we have in decarb is ammonia. So obviously, with Russia, Ukraine, that took a lot of capacity out of circulation. And there's a need for additional capacity. And so what we're seeing is almost all of the ammonia capacity coming online is blue. If you were going to add capacity, it's going to be in alignment with what ESG goals and Paris agreements and all that require. And of course, KBR is a world leader in ammonia technologies. And there's about 5 or 6 different areas where that ammonia is being used right now. So the short term, obviously, we've always had food production and fertilizer production. Midterm, it's like you said, it can help to be used for like coal firing and making sure that's a little bit more efficient. Potentially, we refuel midterm and then long term as the primary transport vehicle for hydrogen. So all of our process technologies really feed our differentiation in this area. We want to continue to have 50% and grow that market share as this capacity starts to come online. We've been very active in this space. And I think we'll continue to be so. That doesn't even cover the plastics piece, which...

I want to get to plastics, but before we get to plastics, there's another question I get a lot from investors. Just what are -- I don't think people understand probably including myself, the natural synergies between the STS business and the Government Solutions business. So can you talk about why those 2 businesses make sense to be together, like where the synergies are?

Sure. And I think there are a lot of synergies. I'll start with kind of the bigger picture of just purpose, right? I think we are a people-focused company. And even in the government space, as we look to hire talent and grow that business, people of today want to be part of a company that does something that matters and having sustainable tech is actually a huge employee value proposition from a people and a purpose and a culture standpoint. I mean it actually adds a lot of intangible value to us. From a technical standpoint and an offering standpoint, particularly internationally, right, national oil companies and other providers there's an interface there, mostly government owned, right? So the fact that we have great senior-level government customer intimacy in my government business and in our international government business, it helps us sell into those specific customers. So there's a great synergy of customer sets and geographies between government and STS. I mean literally, my office is right next door to [ J. Abraham ] who runs STS. And we talk all the time about customers and strategy and how things are going. But I think the bigger play longer term that I don't think anybody has really cracked yet is driving sustainable solutions into the U.S. DoD government. Just in the last couple of years, you've seen more discussion about climate changes on national security. If you read the -- it just was released in the last month or so, the National Defense Strategy, it's an entire section in there about climate change. And so the fact that we have a lot of process technology that may not apply directly but we have a lot of other, particularly with Frazer-Nash and other parts of our business in advisory and consulting and carbon footprint and all those kind of things that the DoD is going to have to struggle with and how they handle changes in the [indiscernible], how they handle training due to climate change. And so I think there's a bigger story that's more probably midterm about how we drive sustainability through our current book of business. So -- and then there's lots of synergies when it comes to program management and quality and business license and back office and all those other things between those 2 businesses that add value to the company. So we like having, I mean, what better time to have a foot in energy security and national security, right? And we like having this portfolio together that play off each other, and we're sharing capability today on AI and ML when it comes to data analytics as we talked about the supply chain. That applies into the energy sector. And so there's just a lot of those intangible synergies that go together, and we probably need to do a better job explaining that story.

Okay. Well, you're not off the hook yet on STS, but I do want to ask another question because you run government solutions. And I think in the second quarter call, I might have asked the question to Mark Sopp about M&A in Government Solutions. And his response sort of to my Q&A was -- we're keeping dry powder out there, you're actively looking at things just, any update there? And like when you think about what could be -- as you think about M&A in GS is it more about gaining scale? Is it more about getting into another vertical? Like I'm just trying to think about how you think about GS. So why don't we start there? And like how big would you go? .

Yes. I think we think of M&A very strategically, and we've used it very successfully, particularly in the U.S. space to transform. So the way I think of it will be more about adding a specific capability or building out the capability, particularly in the digital world. When you talk about the intel customers, hiring that classified talent is often hard to get in without an acquisition, which is what we did with Centauri and now we have a nice footprint in there, we're building that organically. So I would look for maybe adding a specific capability set in intelligence, cyber, in electronic warfare, those kind of things, if I was looking for a specific one. But I would say multiples really haven't come down. We kind of -- we were expecting the government multiples to come down. They really haven't. So we're keeping an eye on the market. But we take a pretty balanced approach to that. We did authorize this last quarter, $500 million in stock buybacks, kind of signaling that we think in the shorter term, that's a good use of our money because we really believe in our long-term story and kind of investing in ourselves. But M&A is never off the table for us. We're always looking at opportunities, some are smaller, and we put a lot of money in the last year or so over in the international business for government. So, yes, I don't think we think of it in terms of scale, and we're not at scale for scale's sake. We're really after about gaining customers, gaining capability and making sure the portfolio mix is always positioned in those future forward markets.

Okay. Does anyone in the audience have a question? Yes, we have one right up here. Alex? [indiscernible].

[indiscernible] kind of high level, assuming you do have a slowdown in the recession or you want to classify in '23 [indiscernible] at some point? Just high level, how do you think about earnings visibility and current backlog [indiscernible].

Yes. I think that's one of the good things about the KBR story is we really have a lot of earnings resiliency. So we have very long-term contracts. I mean, already have about 70% of work under contract for 2023 already. So we know -- and it's due to the nature of the way the U.S. government particularly buys. We have a lot of growing backlog in STS so we talked about, we've won a huge book-to-bill. I think Q3 was one of our higher watermarks on book-to-bill in STS. So there's a lot of backlog in that business. We're also protected a little bit financially because a lot of the U.S. government business is cost reimbursable. So we've had wage inflation over the last year or so, and we're able to pass that cost -- most of that cost right on to our customers. And so that's really, again, protected our earnings potential, just the diversity of contracts, the geographies we're in between STS and government. We really feel we set ourselves up. We did keep some powder dry. We have a great balance sheet in case of interest rates and those things. And so we've been -- I think we've been very balanced in how we think about that so that we can kind of be recession-proof. So we feel really strong about how we'll do in '23 and up to our 2025 targets.

And I'll just add that with a lot of our work being with the government, the government is a great payer. So we've got obviously cash flows coming in, and we are a very low capital intensity business model. So those 2 things also play in our favor.

Okay. And then another -- sorry, question on the portfolio and value creation for shareholders. To what degree do you think about like valuations that the Government Solutions business would get relative to STS. And if STS over time, if the market would give it a better multiple, how do you think about whether the 2 businesses make sense together. And then on top of that, Byron, I feel like the Government Solutions business, theoretically, is it range-bound because you're going to trade with all the other -- the government solutions guy. Is there a reason you guys think your GS business should trade at a premium relative to the traditional government IT solution companies? There's a lot in there.

Yes, there's a lot in there. I'll start with the government and then talk about the synergy between the 2 businesses. So I do believe -- I think we were undervalued for a number of years. I think our valuation has come up quite nicely the last 2 years on the government side within our peers. But I do think we're different. We have such an international component. I mean a lot of other of our peers might work internationally, but truthfully, they're working geographically internationally, but they're working under U.S. federal contracts. And we are truly a U.K. company. We are truly an Australian company. We have a real presence in Saudi. So overseas and internationally, I think we are very different in the government space. And I think that adds both resiliency and higher margin and a differentiator to our standard aerospace and defense kind of customers. And therefore, I think we should get a better valuation for that added value. And I do think the diversity of our portfolio, we're working in some of the most important mission sets, right? We are overseas today, supporting with readiness and sustainment in Eastern Europe. We are working on some of the most leading-edge programs with NASA or with Space Force. And so I think we're positioned really well in those higher-end parts of the government market. We're not doing commodity work. We're not doing back office, IT, commodity-type work. We're doing more operationally focused tip of the spear day-to-day work. 24/7 around the world, there's something going on that we're involved with. And so again, I think that book of business should drive a higher valuation for government. When it comes to STS, I think it's very undervalued, right? And I think there's not a peer out there. I think the technologies that we own, it's very hard to find that exact peer on STS. I think that's -- some of the struggle in our messaging that we've got to work on getting out, which is while we're here, is that we really see that should be pulling up the multiple across all of KBR. And again, we like the businesses together. We're really focused on building a really purposeful, people-focused meaningful business across these different domains. And we like the synergies that I mentioned earlier and how they're put together. If something changes, and we're not emotional about it, we have a duty to our shareholders to do the right thing, and we always do that. So -- we're not overly emotional about it, but today, we think there's more synergy than less. And we think we haven't even unlocked all of that value, particularly in how we think about where sustainability go in the mid and long term, particularly in governments around the world.

Okay. Anyone in the audience have a question Okay. So why don't we transition. You guys put out your long-term [indiscernible] 2025, I can't believe. Okay. Anyway, the 475 plus in earnings power given where earnings are exiting in 2022, how do you think about the path to get to 2025? Is it steady growth? Is it more back-end loaded? It sounds like it might be just given where 2023 lays out. And then before you put out the 475, you had a range, right, in terms of your long-term targets. Are we rethinking putting out a range again versus just 475-plus like 475 to 675.

Really good questions, Jamie. So I guess to start with, we do feel very certainly that we are on track for our 2025 targets. We didn't set interim targets because there's multiple paths for how we can get there in terms of our 2025 targets. We've shared publicly that we think STS is ahead of target. But we haven't updated the 2025 targets at this point. What we are going to do is in February, when we release our full year 2022 results, we'll be setting a '23 guide. And then that will give you some visibility into what we're expecting for '23. Honestly, the HomeSafe delay did shift some of the top line over into '24 that we were hoping initially to get into '23. So that's no secret. But I don't think that it jeopardize in any way where we want to be in terms of 2025.

Okay. Anyone else in the audience? All right. So why don't we shift over to your Mura investment, the $100 million that you guys invested. And I think it's interesting from 2 perspectives. One, it gives you ownership in the company. I think it's 18% but also like what does that mean in terms of scope on projects with Mura over time, like how that sort of evolves? And monetization too on Mura potentially?

Yes, sure. So there's a couple of different ways that we make money with our Mura partnership. So first and foremost is we actually provided engineering support to Mura itself. So when Mura came up with their plastics recycling methodology, we looked at that, and we were able to actually make improvements on that by having it be more circular. And actually, you're taking some of the super critical water heat after the recycling and then reingesting it into the process. And so we were able to make it a little bit more efficient with that. So we were helping to improve the technology ourselves. We're also a key partner. So with the build-out of any Mura-owned plants, we're helping them with the project management, engineering, all that kind of stuff. Obviously, there's also licensing as a part of that. And then the potential for, if Mura ever does an IPO, having some ownership in Mura will potentially benefit us as well. So lots of different types of revenue streams coming in with Mura. But I think the most exciting part is what is the addressable market for plastics. And so if you think about the world today, how much plastic there is, the demand for plastic keeps going up, I think it's like somewhere $750 billion in terms of the value of plastics. And there's a very small percentage of that being recycled obviously. And we feel that the Mura technology is the best in that it has using a different technique than the pyrolysis, which led to better yields and also is obviously a greener solution. And so those 2 things, I think, make it differentiated, and we're seeing a lot of interest. And obviously, we're -- I think we've got -- I can't remember exactly the capacity that we've already committed to by 2030, but there's going to be additional -- I don't think that we'll ever be able to completely catch up because plastics demand keeps going up. So obviously, we might be recycling a bigger percentage of that in the future, but there's just -- I mean it will take a long time before we can catch up to be where we need to be with recycling the plastics that are [indiscernible].

And if I could add, I think Mura is a great example of how our technology business works. It's not so much about that one specific investment we made. It's that we have a global sales team and one of our greatest quality is the ability to commercialize newer technology. We have an installed base of customers, we have a global sales team. We have great engineering credentials and Mura is just one of the many types of future thinking technologies we add. I mean when we started a decade ago, I think we had 10 or 15 technologies. And as I said today, we're selling over 70 different types of technologies. So we're constantly looking for partnerships, alliances, development and the circular economy where you're talking hydrogen, ammonia, plastics, we're looking for those leading-edge things to be a part of in some form or fashion, and Mura keeps us on the front of that technology, and we think it's been a great partnership. We just want to be doubled down. We did an initial investment and then we went down again on it. And we've been really pleased with where that's headed and it's probably again above pace from what we expected. So -- but that just goes to show you the kind of focus we have on looking at just new technologies and sustainability as we continue to progress as a society.

Okay. All right. Anyone have a question? All right. I have 2 more which I have to fit in, in a minute and 40 seconds. So my first question is, in terms of the multiple of your stock, like one of the pushbacks I get is the like gap between -- the spread between GAAP and non-GAAP earnings right? And so over time, investors are trying to figure out if your earnings are more less adjustments, which could be a positive for your valuation over time. So one, talk about that. And then, I guess, in the other 30 seconds, what the Inflation Reduction Act means for KBR?

Yes. Sure. So the adjustments to EPS. So we -- if I think about those adjustments, they really fall into like 2 or 3 buckets. One is Ichthys and legacy legal and another one would be acquisition and restructuring charges. So the good news is that those are starting to fall off, and we're trying to bring the GAAP, non-GAAP closer together. But we felt it was necessary to have those adjustments so that our community of investors can see our true performance of our business because, obviously, Icthys being very legacy business, not representative of our current margin and our current risk tolerance. It didn't -- it really shadowed the current performance of the business. So in the future, hopefully, we'll have less adjustments and that is our intention. Okay. Second question, go for it.

20 seconds. Inflation Reduction, I think it's a great signal to the market. I think, over $350 billion put out there for directly to fight climate change, lots of different types of investments. So a lot of that money may not come directly to KBR, but it will come to our customers within a lot of projects on the shelf for sustainable and climate change and decarbonization, they can now start to push those projects out, which we will have a roll in, in various ways. So I think it as a positive signal of the demand that we continue to see in the STS climate change market.

All right. Well, we're out of time. Thank you -- you did it in 20 seconds. I'm impressed. So thank you Byron. Thank you, Jamie. Thank you very much and supporting for having conference. Thank you so much.

Thank you.

Thank you.