Hello, all and a warm welcome to the Q1 2022 KBR, Inc. Earnings Conference Call. My name is Lydia and I will be your operator today. It's my pleasure to now hand you over to our host today, Alison Vasquez. Please go ahead when you're ready.

Good morning and thank you for attending KBR's first quarter 2022 earnings call. Joining me are Stuart Bradie, President and Chief Executive Officer; and Mark Sopp, Executive Vice President and Chief Financial Officer. Stuart and Mark will provide highlights from the quarter and then open the call for questions. Today's earnings presentation is available on the Investors section of our website at kbr.com. This discussion includes forward-looking statements reflecting KBR's views about future events and their potential impact on performance, as outlined on Slide 2. These matters involve risks and uncertainties that could cause actual results to differ significantly from these forward-looking statements, as discussed in our most recent Form 10-K, also available on our website. I will now turn the call over to Stuart.

Thank you, Alison, and thank you for joining us this morning. I will start on Slide 5. As you know, we always kick off with a focus on ESG and today is no different. But it is special and something we are extremely proud of in our partnership, of course, with NASA. For two decades, NASA has been developing and has recently launched and deployed the James Webb Telescope. This is an incredible engineering feat, with a multitude of first-of-a-kinds and has culminated in delivering an opportunity to look and explore the universe in a way we have not been able to until now. NASA was supported by a number of industry players and I'm proud to highlight that KBR played an integral role throughout the design, build, test, launch, and commissioning of this amazing program, NASA's largest science mission ever. In addition, KBR was recognized by NASA in a very special way, being awarded the Exceptional Bravery Medal. The Bravery Medal is not a small thing. In fact, it's a big deal and it's not often awarded. In fact, the last time it was awarded was back in 2005. We are very proud to be recognized for implementing a robust safety program for the James Webb project, ensuring the safety of personnel and hardware. Cited for, and I quote, "bravery demonstrated to protect and preserve human life and vital flight hardware during the agency's ambitious and perilous journey to unlock the mysteries of the universe." So just think complex lifts, cryovacuum testing, preservation of assets, investments, personnel, and safety throughout the development, testing, launch, flight, and through things like hurricanes and pandemics, etc. This was not only integral to the success of this landmark mission but, as you know, it's a core part and integral to KBR's culture and values. So once again, we are doing what we said we would do. So now on to Slide 6 and some quarter highlights. Once more, we saw growth across all our key metrics with frankly outstanding consistent delivery in each business line. Revenue was up 17% over last year and the resulting adjusted EPS grew 29% at the group level. This is a consequence of increased revenue in primarily the GS segment, coupled with outstanding operational performance across all our businesses due to our amazing people delivering each and every day. Our focus on the mission and overall client success once again delivered strong margins and strong cash conversion. Our bookings in the quarter were $1.2 billion. Please note that this does not include GSMO which we plan to book in Q2. This quarter is typically a slow quarter in government, especially given where we are with CR running through to mid-March. Sustainable Tech had a very strong bookings quarter, even with the headwinds of our exit from Russia. This really demonstrates the resilience of this business as we identified and converted opportunities from across the globe. Earlier this month, we resolved the legacy CCPP matter and I'm pleased to report that the initial monies have been received by our joint venture and are expected to result in a cash upside to KBR of circa US$200 million in Q2, and another circa $70 million early next year. This settlement, together with managing our withdrawal from Russia, did result in a mostly non-cash after-tax charge of circa US$150 million. However, it reduced uncertainty, management distraction, reduced legal costs, and cleaned up our balance sheet with expanded capital deployment optionality. So bringing this all together: terrific growth, strong operational performance—cash and margin—proven resiliency, delivering attractive bookings in STS and de-risking by retiring legacy and ongoing issues, and winning our largest recompete for the year which was GSMO to be booked in Q2, leaving us with very low recompetes in the balance of the year. We are delighted to advise that we will be raising guidance and more on this later from Mark. Now on to Slide 7 and the outlook for our government business. The spending priorities have not changed: Defense modernization, space including military, intel and commercial space, cyber, digital and intelligence with an emphasis on emerging technologies all align with where we have positioned the business and as we presented previously. With recent events, there is, of course, an uptick across both our Defense & Intel business. We can't really talk too much about this work and our Readiness & Sustainment business, where we support both the U.S. and the European commands for LOGCAP and the various pre-positioning missions for equipment. It is, of course, too early to tell the extent of a longer-term enduring mission, but clearly, the U.S. and NATO have an increasingly important role to play over the longer term given the recent Russian aggression. Internationally, the outlook is similar, with heightened activity across all our key sectors. Frazer-Nash has come out of the block strongly in the year, posting their largest ever backlog. Their Australian businesses continue to deliver terrific margins and growth. Our GS International business is a real driver of margin enhancement and, as I've said many, many times, a clear differentiator. We've highlighted some key wins on the right. I won't read them all as they've all been announced publicly, but the themes are clear: prototyping, classified space capabilities, human health and performance, NASA ground systems and satellites, and you can see the sizable long-term GSMO award at the bottom. Our GS book-to-bill is for a seasonally slower quarter, similar to Q1 of last year, so not really a surprise. But an important takeaway is that the GS business has an impressive 90% of the work secured today to deliver our 2022 numbers, a terrific place to be. Now on to Slide 8 and we'll talk a little bit about Sustainable Technology. The outlook here is also terrific. High oil and gas prices, coupled with continued sustainability commitments and a need to build additional capacity across commodity supply, including ammonia, clean refining products, olefins, and petrochemicals, as a consequence of world events, is expanding global opportunities for our business. We continue to see owners of aging assets looking to companies like KBR to help them decarbonize and drive efficiency via more data-enabled decision-making. We have highlighted some recent wins here to demonstrate this. Again, I will not read all the words as we've also announced these recently but the themes are again clear: olefins demand at scale, smart maintenance, plastics recycling, green and blue ammonia, hydrogen, etc. The STS book-to-bill in the quarter was 1.3. Combined with the pivot away from Russia, this really demonstrates the global nature and resiliency of this business. Excluding the debooking of the Russian work, the book-to-bill of new work won in the quarter was actually 1.4, super impressive, and I'm sure you'll agree. Just to reaffirm what we said last month, that despite no longer having the Russian market, the outlook for STS for the year has not changed. On this slide, we've shown the backlog for each of the businesses. Combined for the group, this stands at $18.5 billion with options, and our pipeline continues to be very sizable with line of sight to over $100 billion in the next several years, but importantly, with $7 billion in proposal prep and $8 billion awaiting award. We continue to see over 150 opportunities at or above $100 million, nicely balanced across the portfolio. Following on from our great year in 2021, momentum continues across all our key businesses with a fantastic start to the year and great visibility going forward, leading, of course, to an increase in guidance. Now, over to Mark.

Terrific. Thank you, Stuart. I'll pick it up on Slide 10 for the Q1 financial performance summary. As you've heard, all key metrics were up significantly, reflecting favorable market conditions and the strong overall business execution that Stuart highlighted moments ago. These factors are the drivers for increasing our guidance, which I'll cover a little later on. Revenues for Q1 were up 17%, driven by our Government segment, where we saw healthy growth across all four business units. Overall, margins were solid, with both segments right on track with our '22 targets, GS at 10%, STS at 16%. Adjusted EPS was up 29%, driven by the overall EBITDA growth, coupled with modest improvement in non-operating items year-over-year like FX, interest, and taxes. Cash flow is terrific and right on track with our increased expectations for 2022. Working capital effectiveness improved with overall DSOs reduced. Strong cash flow further strengthens our balance sheet, of course. As previously announced and as Stuart covered earlier, the Ichthys subcontractor settlement in April will add significantly to our financial capacity as well. On to Slide 11 for our segment details. Government continues to roll, with year-over-year top-line growth of 25%, 21% being organic, and strong margins at 10%. Defense & Intel was up 8% year-over-year, all organic, and 11% up from Q4. This team continues to deliver its IDIQ portfolio extremely well and in high advanced technology areas. Science & Space was up 2% organically from last year and also up 10% sequentially from Q4. While new business proposals awaiting award continues to mount in this business unit, the Science & Space team has won all of its recent recompetes and is receiving terrific performance scores across its contract base. Readiness & Sustainment was up 62%, all organic, demonstrating the strong franchise we have in this part of the market again. Ella's team is now quite busy supporting theater activities in the European Command, plus its wide range of recurring programs around the world. This team is always ready to serve and deliver. International grew 24%, with Frazer-Nash in Australia being the main driver here. The Frazer-Nash integration is going very well, and the range and depth of advanced capabilities continues to impress us. Australia is, once again, at the top of class, posting growth of 17% in the quarter. Margins were solid and as planned across all GS business units, as we've said upfront. Over to STS, this business is also delivering at a high level. Just stepping back, this team continues to build an attractive book of business and is leveraging its leading market positions as clients double down on sustainable, cleaner, and safer ways to operate. As we have said many times before, this is truly a global business, with access to a broad spectrum of the market and with a highly agile sales team. Impressively, despite removing in-flight projects and future opportunities associated with Russia, other opportunities have been harvested and there is no change to the STS financial outlook for this year and beyond. All remains robust. STS revenue ticked down in the quarter, due primarily to our intent to exit commercial activities in Russia, which we announced last month, and our previously discussed exit from commoditized services in 2020. In the quarter, this team generated $43 million of EBITDA and 16% margins, reflecting our strategic shift towards higher margin, sustainability-enabling differentiated technologies and engineering solutions. From a comparative perspective, you'll likely recall we had a program closeout benefit last year in the first quarter which boosted margins by about 3%. So from a comparative perspective, margins in the STS business are up nicely year-over-year from 13% to 16%, an outstanding result and consistent with the transformation plan we set out for this business just about a year and a half ago. In summary, both businesses demonstrated great agility and resilience in the quarter, delivering strong growth, excellent profitability, and very strong cash results which takes us nicely to liquidity and capital deployment. As said earlier, the balance sheet and liquidity position are in terrific shape. In Q1, we upped our dividend by 9%. We continued buybacks, and all the while leverage downticked to 2.3x EBITDA. The settlement with our former subcontractors on Ichthys occurred in April and approximately $200 million will be reflected in cash inflows from investing activities in Q2. There's more to come next year as well, as Stuart covered earlier. While this inflow won't affect operating cash flow, it will, of course, add directly to deployable cash which, of course, is the name of the game. On to Slide 13. With a strong Q1, 85% of work under contract across the consolidated portfolio, favorable business conditions, and growing deployable capital, we are increasing our full year adjusted EPS guidance to a range of $2.53 to $2.65, a $0.06 increase over our original guidance at the midpoint. We're also narrowing our revenue, operating cash flow, and adjusted operating cash flow guidance ranges for the year, as outlined here. We expect consolidated EBITDA margins of 10% for the full year, with future quarters expanding from Q1. In terms of timing, we expect a 50-50 split in full year EPS cadence between the first half and the second half. Thank you. And I'll now turn it back to Stuart to finish it up.

Thanks, Mark. Nicely done. Now to summarize. Following a great 2021, we have started 2022 with a bang: Strong growth, double-digit growth in revenue and adjusted EPS across all our key metrics, with outstanding operational performance, including safety, which is an absolute testament to our great people, a significant de-risking with CCPP and Russia exposure resolution combined with a cash injection of US$200 million in Q2, plus another $70 million in approximately 12 months' time. Together, with another quarter of excellent cash conversion, this, of course, results in greater deployment optionality and reduced uncertainty and, of course, reduced distraction. The market outlook across the portfolio remains highly robust, and the associated pipeline of opportunities is attractive and aligns with the positive outlook and the raised guidance. In short, momentum continues. Thank you. And I will now hand it back to the operator, who will open the call for questions.

Our first question today comes from Tobey Sommer of Truist Securities.

My first question would be, what is the proportion of recompete business remaining for the year and in for calendar '23?

Good morning, Tobey. As we said, we've won our largest recompete of the year with GSMO. That comes through in Q2, obviously. But we've announced that and that actually makes our recompete levels very, very low for the rest of the year, so I don't think anything significant that would derail our story this year. Going into next year, there are some larger recompetes for NASA that are coming through. The timing of that is still a little bit questionable. There's quite a backlog in NASA at the moment, quite a bit waiting for the war. But it's telling that we won GSMO on a best-value basis. I don't have the exact percentage of recompetes for next year. Mark, do you have that?

We're looking forward, Tobey. I'm not going to speculate, but I would call it fairly normative in the government contracting environment. We've had really low recompetes but very good success rates in the last couple. We're very open about that, but '23-'24 is more normative. We'll provide a better waterfall of that outlook maybe in the second quarter call.

Yes. And we'll know more about timing at that time as well. But the takeaway for this year is that very early in the quarter, obviously, we've won the largest recompete, and most of what we're building now is additive.

And then with respect to funding actions, I'm curious if your customers had a different—and you noted a difference in the calendar first quarter and then so far in April after the budget—was there any kind of notable change, you would imagine, in improvement?

Yes. I think, Tobey, I mean, obviously, the GSMO award was a good sign. But I think it's too early to tell. I think we'll know more as the quarter progresses.

And lastly, what's your posture now that you have finally put a period at the end of the sentence for Ichthys and all related kinds of work? And you look at M&A, what's the quality of life of the pipeline for material kind of addition?

Well, I mean, clearly, the excess cash is hugely additive to our optionality, and obviously, the cash conversion continues to be strong. So we feel good about the level of deployment we can do. But as you rightly say, it's all about what's in the pipeline today. I think the world is down a little bit but multiples still tend to be quite high. There's quite a bit in the market. But again, it's all about finding the things that are very complementary to what we do and align with our strategic vectors. We're always out looking. Acquisitions have been a core part of our story. We're not perfect, but I think we've done them reasonably well. It will be very additive to shareholder value. So I think more to come probably, but ultimately, you know I can't give you any details, of course. There's quite a bit out there, and I think we're pretty upbeat as well with Frazer-Nash, which we did obviously at the end of last year, and they're really performing at the top level that we expected. Their bookings were, as I said in my prepared remarks, at the largest they've ever been in terms of backlog. So again, I think we're very upbeat about the opportunity to do more acquisitively.

Our next question today comes from Michael Dudas of Vertical Research Partners.

First question on STS. Can you— as you look through and look at the prospects in 2022 and beyond, certainly, you see a lot in the press about— or in releases about ammonia and hydrogen. You've had pretty broad-based wins here lately. What areas do you see over the next several quarters that might be more beneficial or see more activity on your front? How is the conversion from when customers are starting to discuss early advisory thoughts about what to do with these technologies moving ahead towards implementing final decisions? Is that starting to accelerate because of concerns about time to market and policy goals, etc.? Would like to hear some thoughts on that.

So, I mean, there's a lot of dynamics at play in that question, Mike. I would say that the terrible war in Ukraine has changed people's outlook in terms of speed to market. There's a constraint in gas, there's a constraint in a lot of ammonia, etc. We're seeing people accelerate decisions around new developments and specialty expansions across that sort of portfolio. You are seeing, of course, the whole sustainability and climate change agenda still very, very strong. We’re seeing people come to market as decisions impact that future energy security. I think that all that bodes well for STS, and the level of activity we've got in that business is enormous. We’re excited about the prospects for STS. The fact that they pivoted away from Russia this quarter so well and filled the hopper by really pointing a very agile sales force into other areas shows terrific results; big shout out to them because they had to do it quickly. I think the agility and the resilience of that business is showing through in the numbers and the book-to-bill. That market is red hot for various factors: high oil and gas prices also help in terms of our customers' capital deployment options, so I think – we’re seeing companies also starting to look at aging assets and how to make them more efficient, particularly to drive additional output given market constraints.

I'll add just one thing that's specifically encouraging is on Hydro-PRT, our plastics recycling capabilities, coupled with Mura. We've completed three projects; we got a lot of projects in flight right now that are advisory consulting-oriented relative to feasibility and implementation. Of the three that were completed, all three have resulted in real projects coming out of those studies. It's still early days on all of that, but there are really good early signs of conversion rates of advisory to real highly profitable projects but also impactful to the green future of those clients.

That's encouraging, Mark. Just a quick follow-up on what you said just at the end, Stuart, about aging assets. And I was intrigued by the contract you won for the maintenance service, predictive and preventive work in the Middle East. I would think there's probably a big backlog of those types of projects ahead given the lack of spending and deferral over the last couple of years, and what energy companies and chemical companies are trying to do, no?

Absolutely. This is through our technology-led Industrial Solutions business and very much looking at predictive, preventive and getting in front of the curve with the customer to drive down their carbon footprint and deliver efficiencies and greater output. That particular facility is in Jebel; there's a multitude of assets – an enormous industrial base. We've already started to do work for a sister company just down the road. I think there's an enormous opportunity in that arena. This whole data-driven solution is the way of the future as we get more sophisticated and plant operators understand how to sweat their assets in a more carbon-friendly way. I’m really excited about that part of the business. There's a lot of momentum in the INSITE product, our own IP, in terms of how we do remote monitoring. The number of licenses sold in the last year is equivalent to what we sold in the previous 3 or 4 years. The momentum around that is terrific.

Our next question today comes from Brent Thielman of D.A. Davidson.

Okay. The Readiness & Sustainment business, I mean, great comparables here this quarter. I was just curious if there's any remaining OAW work impacting that? Or is this really more a function of other activities around the globe, including operations in Europe?

Yes. That project is essentially complete now. The way to think about it is ex-contingency, the GS business globally grew approximately 6% organically, and that's very telling and aligned with our long-range target. We're very pleased with that. The R&S business is obviously benefiting from—no one likes to benefit from difficult situations, but we've got an uptick in activity, both in the Defense & Intel business that we can't talk too much about, but obviously in the R&S business, from the work we're doing on LOGCAP, both in the U.S. and in the European Command, where there's a lot of activity. We also run the pre-positioned stock contracts in the U.S. to get equipment ready for deployment. There's an uptick in activity there, as you would expect. We don't know how that's going to play out throughout the year; we don't see any short-term change in that, but will there be a longer-term enduring mission as NATO becomes important? A betting person would probably say yes. The scale and what it looks like remains uncertain, but there's been an uptick in activity around that, as we previously said and as you would expect.

Very good. I guess the follow-up would just be—maybe an update on the non-defense-related elements of the Government Solutions business and particularly around expectations this year. Science & Space is growing at a relatively slower clip this quarter, kind of stable master budget; you've got the GSMO contract. Just curious what your expectations are through the year in areas outside of Defense.

Yes. The Science & Space business did grow 2% this quarter, but there's a plethora of things in the pipeline waiting for award that have been waiting several months to come through the system. The fact that GSMO came through in the way it did, and it was the best value award, with no actual protest—which is unusual these days—is good. Anything we're bidding there is additive. We've got quite a few billion dollars of work that we're bidding there. If the timing aligns, I think you'll see quite a nice uptick in that business. Again, it's tricky to give guidance there. We are comfortable with our overall GS growth. The combination of non-Defense and Defense will meet our expectations through the year. Having these various elements of business is advantageous. We're well positioned in all these markets, and the combination provides power. I don't believe we talk about our international portfolio enough. The performance of the U.K. business and the margins they're delivering is terrific. Mark mentioned the growth in Australia as well at 17%. The margin enhancement and growth from our international business is terrific.

The next question is from Andy Kaplowitz of Citigroup.

Stuart or Mark, can you give us more color regarding STS revenue for '22? I think you said in the past that KBR delivered double-digit growth in the segment for the year. I know, Mark, you said no change to guidance for the year. Stuart, you said the market is red hot. So does revenue growth in the segment accelerate from here, and should we return to revenue growth, even in Q2?

Absolutely. The interesting start, we had to debook some revenue from Russia. But I think we said we would cross the threshold as we're working off the heritage, reimbursable EPCs in building up the business that really is our future. That threshold was met this quarter, just slightly off, but we're thereabouts. The growth in the core part of STS aligns with our expectations. The book-to-bill supports that; I believe the pipeline will prove that, and the market outlook affirms that. We're very happy with that, and we’re excited about the opportunities from earlier discussions, including plastic recycling as Mark highlighted. I think all this bodes well for this year and the foreseeable future.

Very helpful. And then maybe related, can you give us more color on how your businesses are faring, given the macro challenges? You've accounted for KBR's Russian exposure, but are you seeing any impact on STS from a weaker China or lockdowns? Are you seeing any supply chain issues slowing down projects? It doesn't seem like that, but any color would be helpful.

No, we're not really impacted by supply chain issues, given the sort of work that we do. The inflationary pressures are manageable due to a lot of our work being cost reimbursable. We’re in good shape. We do have work in China in our technology business. However, we're seeing more activity in places like North America and the U.S. as well. I’m not concerned about that. I made firm statements about our expectation of double-digit growth, as I mentioned in the last question. I believe that will continue despite lockdowns in China. Various countries may experience fluctuating circumstances, but our global nature and resilience is proven.

Next in the queue, we have Bert Subin of Stifel.

So Stuart, at least, I guess, in your release, you guys noted that you booked 85% of what you needed to hit your guidance for '22. Stuart, I think you said that's now 90%. What do you see as the items that either drive guidance higher or result in you missing on the low end? I imagine you guys are thinking there's upside to what you're putting out there.

Yes. We are generally conservative, and it's better to be that way. We've got 90% work secured for GS and 85% overall. Remember, we have things that come through that we don't know about, like small IDIQs, on-contract scope growth, and high-end engineering smaller contracts. That makes up 10% to 15% of our revenue every year. Adding that to the 85% number, we feel good about coverage for the full year and meeting our increased guidance. With the cadence of awards clearing up now that the budget is in place, given our low recompete position combined with our commitment in STS and the double-digit growth, we’re confident meeting our forecasts. If things break on time, we could see improved outcomes.

That's helpful. Maybe just on the STS side. When you guys put out your Investor Day or your Investor Day release back in '21, I think oil was around in the high 50s; today, it’s over 100. How much of a tailwind do you expect that to have for STS as you think about your 2025 goals? Obviously, you've reaffirmed that guidance. I wonder why that wouldn't be more of a tailwind, just given some of the things you guys are doing on the clean energy side?

Yes. When you go to market, with double-digit growth and margin expansion at the same time, people are usually quite happy if we could say that at the beginning. As the market evolves, you're right; there are fantastic tailwinds in that marketplace. Environmental pressure and climate change agenda pressures are causing major oil companies to take their revenue from high oil prices and decarbonize their assets. I agree, there are significant tailwinds, but I believe we should stick by our guidance of double-digit growth with margin expansion. Achieving that and perhaps a little bit more would be a terrific outcome. It sets the bedrock for continued growth into next year and beyond.

Obviously, I wasn’t trying to belittle anything you guys are doing. It seems you have some pretty serious tailwinds there.

Totally understand that. Thank you very much.

Next in the queue, we have a question from Jamie Cook of Credit Suisse.

This is Chigusa Katoku on for Jamie. My first question is following up on the R&S question earlier. If growth moderates throughout the year, what would that mean for Government margins?

I'm not sure I heard the first part of the question, but I would say Government margins did 10% in Q1. That's online with target. There's some modest dilution from finishing up OAW embodied in that number. For that reason, all other things being equal, we expect a modest uptick in margins in GS over the rest of the year. I'm not sure around to a bigger number, but nonetheless, there'll be more there in light of that absence of OAW ramp down.

Yes. That was demonstrated from Q4 last year into this year, when OAW was running at its height; we were up 0.25% coming into this quarter. Layer on the growth of our international portfolio, where margins are significantly higher. Consequently, upward pressure on margins also. Mark is right; we're feeling good about the 10% we've put out there. It’s a solid number to model as we look forward.

That's helpful. As a follow-up, I read in the news that the global household goods contract is being protested. But could you talk about whether it impacts your outlook, if any?

Yes. We always said there would probably be very little or no impact on household goods, whether this was resolved earlier or later. When we presented the overall impact to KBR of that contract through time, a short delay, a 6-month delay, wouldn't really impact our ’25 numbers, and that holds true. The current status is that it's in the Federal Court of Claims; the protest was denied and resoundingly so. The other bidders have gone to the Federal Court of Claims as is their right. However, they have backstopped that decision to the end of October. We may see it come earlier, and it gives us an opportunity to plan further and derisk as we build that organization. We're feeling that all still plays as it was previously presented, and we will know more as the year progresses, hopefully before Q3, but certainly no later than that.

To repeat, there was never an expected consequence in '22. That remains the case; it's a '23 and beyond story.

Our next question comes from Sean Eastman of KeyBanc Capital Markets.

Coming back to the 90% backlog coverage in GS for 2022, could you tell us what that number is for the out-years? I don't know if you have that in front of you, maybe for 2024 or 2025.

It’s a good question. We are well over 65% and must be—depends what you assume for household goods and how that impacts the numerator and denominator. However, I would say it's above 65% today for obvious reasons, particularly with the wins that we've had.

It's over 70%. It's not just one year; it's the aggregate revenue production over the course of the 5-year period. Sitting there at over 70% today has grown nicely; started at 55, if you recall, back in Investor Day. We’ve built that up nicely.

Okay. Very helpful. And you guys are going to love this one. But what would you say to investors that had hoped you would update the $6 full capital deployment target on the conference call you held back in March?

Yes, we do love that question, Sean. There’s a bit of misinterpretation; perhaps we didn’t do a good enough job, in truth. If you look at our core performance without deployment, we’re at the $4.50 mark, which is an amazing story in its own right. As the share price goes out, and you're looking at buybacks, it's harder to do that simple math. But if you end up with the M&A coming in, we can certainly bust through $6. We should focus on our core business because the timing of M&A is always difficult to predict. I believe we can do more than $6 over time, but we should return to the normative numbers and think around what we do with our deployment around that $4-plus to $4.50 very easily. We can do better than $6; however, you must look at our performance and our growth as we are at the top of our peer group, proving out that growth story.

Finally, we have a question from Gautam Khanna of Cowen.

I have a couple of questions. Forgive me if you answered the first one already; OAW revenues in Q1, how much was it?

Yes, they'll come through; it's around $250 million.

As expected, it will be in the Q.

Ex-contingency, I think the answer to that question was the 6% organic growth for GS.

Understood. Okay. Secondly, I'm curious about— in the past, you've provided a funnel on bids outstanding. Where does that stand right now at GS? Do you think we'll see a big uptick in bookings? Forget TRANSCOM; forget NASA recompete, but outside of what you've already won, in terms of adjudications in calendar Q2 and Q3. Do we see a big surge coming on the government side?

Logic would dictate that is correct, Gautam. There has been quite a delay due to the CR positions and getting people back in the office. That has to unlock now that the budget is in place. You'd expect an uptick in bookings and awards as we move through the year. I think the answer is yes; however, we did indicate that we didn't produce a slide on it, but we provided the backlog in each of the segments. That’s the $18.5 billion with options. Our proposals are up just around $7 billion in prep, plus there’s $8 billion awaiting award. That's quite high. With the GSMO award, we could see that increase the cadence of awards. We've got several billion dollars with NASA and across the DoD portfolio. The number is high; we do expect an uptick in awards given low recompetes; every win is additive.

That's very helpful. Lastly, I’m curious about cash deployment and balance sheet utilization. Would you consider larger deals that may require some equity component? Or is that off the table? Looking at things you can pay for in cash?

For something like that, we'd have to be very transformational. We are prudent buyers and have proven that in the past. We don’t get caught up in deal fever, and we are clear on our accretion-dilution metrics. I wouldn't want to take anything off the table or put anything on the table in a way. It would have to be in an area that was absolutely aligned with our strategic vectors. We would have to convince ourselves of the attractiveness of that market for the future. We've often discussed that part of our success is our focus on people; bringing in businesses that don’t overlap allows us to care for people better, focusing on revenue synergy, which is typically a more attractive solution. I wouldn't discount any potential acquisition, but it would have to fit those criteria.

Absolutely. Last one. Forgive me if you said this in your opening remarks. What is your expectation for the LOGCAP programs this year in terms of revenue year-over-year? You mentioned the additional $100 million of bookings related to Poland. What does that look like for European Command incrementally year-to-year?

I actually looked last night. Even with the uptick in EUCOM, given what's happening in that theater, we may not achieve the revenue level we had in 2020 from the collective LOGCAP, which demonstrates how we've repivoted our business to other areas so successfully through the challenges we’ve talked about. The LOGCAP continues to ramp up steadily; it's vital to our mission.

The command continues to be pretty stable however, absent extraordinary events. It’s not a game changer like OAW or some of our past LOGCAP activities. It's vital to the mission, and they're doing great work.

We have no further questions in the queue, so I'll turn the call back over to Stuart Bradie for final remarks.

As always, thank you very much for your interest in taking part this morning. I'll just close by saying, look, I think we're off to a fantastic start in the year. Hopefully, the answers to the questions attest to that. Our team does an amazing job, and our businesses are well positioned to take advantage of significant tailwinds across our market base and international portfolio. More to come with enhanced capital deployment optionality; that's never a bad thing either. We'll keep updating you as we progress. Thank you very much.

This concludes today's call. Thank you for joining. Your line will now be disconnected.