Welcome, everyone. The KBR's First Quarter 2026 Earnings Call Conference will begin shortly. Hello, everyone, and thank you for joining the KBR's First Quarter 2026 Earnings Conference Call. My name is Gabriel, and I will be coordinating your call today. I will now hand over to your host, Rachael Goldwait, Head of Investor Relations. Please go ahead.

Thank you, and good morning. Welcome to KBR's First Quarter 2026 Earnings Call. Joining me today are Stuart Bradie, President and CEO; and Chad Evans, Executive Vice President and CFO. Stuart and Chad will cover highlights from the quarter, and then we'll open the line for your 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 materially from these forward-looking statements as discussed in our most recent Form 10-K available on our website. This discussion also includes non-GAAP financial measures that the company believes to be useful metrics for investors. A reconciliation of these non-GAAP measures to the nearest GAAP measure is included at the end of our earnings presentation. I will now turn the call over to Stuart.

Thank you, Rachel, and good morning, everyone. I'll pick up on Slide 4. Before we get into the results, I wanted to share a brief zero-harm moment on staying connected especially in challenging times. At KBR, zero harm starts with keeping our people informed and supported even when they're hard to reach, whether they're on a remote site, a project location or in an office. The focus on reaching the unreachable is what led to the launch of the KBR Pulse app. Pulse was not built in response to a crisis. It actually came out of a global employee Hackathon where our teams identified a better way to stay connected across our diverse and distributed workforce. It is employee-driven, built by our people for our people, and it provides easy access to news, safety updates and company resources wherever work happens. When the conflict in the Middle East escalated, Pulse quickly became a critical channel for sharing timely updates and guidance. Most importantly, it helped us stay closely connected with our teams in the region and all of our people have remained safe, supported and informed. Pulse helps us reach employees who are not sitting at desks and reinforces our ability to act as one team, even in the most challenging environments. It is a practical example of how listening to our people and then investing in the right digital tools strengthens our zero-harm culture and supports resilience when it most matters. On to Slide 5. Today's call will cover these key topics. Firstly, I'm pleased to report that we started the year well, demonstrating disciplined execution and resilient operations. Secondly, we continue to see demand in our core markets with clear pipeline visibility. Third, we're advancing our planned spin transactions — more on that later — and thus, sharpening our strategic focus. And finally, we are reaffirming our 2026 guidance and remain committed to execution, margin discipline and strong cash generation. Moving to Slide 6, where I'll start by covering the STS business. Over the last few quarters, we've seen customer priorities move toward energy security, reliable supply and resilient infrastructure. A more complex geopolitical environment is reinforcing these trends and shaping both capital spending and services demand across our end markets. With that context, I want to provide a bit of color on where we're winning work today and how those wins align to our strategy and how that sets up the near-term pipeline on the next slide. For the third consecutive quarter, STS delivered book-to-bill ex-LNG well above 1.0. Demand continues to be anchored in energy security, downstream reliability and long-duration asset services with a balanced mix of capital projects and recurring services work, supporting growth and improving backlog visibility. In energy security and transition, customers are prioritizing execution certainty across upstream, downstream and gas infrastructure. This quarter, highlights include project management services for the Zales South refinery in Libya, integrated field management services at the Magino oilfield in Iraq and a long-term general maintenance contract at Sator in Saudi Arabia. These wins reflect continued investment in mission-critical assets where reliability really matters. In Critical Materials and circularity, we are winning life-cycle-oriented work that extends asset life and improves performance. During the quarter, we secured a long-term catalyst supply agreement supporting Indorama's ammonia operations alongside optimization work across chemicals and materials assets. In Infrastructure and Transport, we continue to pursue selective program and project management opportunities, including water infrastructure work in the Middle East and sustained activity in Australia across rail, water and defense-adjacent infrastructure. Overall, our bookings reflect a capital-linked engineering and project foundation with selective layering of recurring operations and maintenance services. This deepens our customer relationships and extends our role across the asset life cycle and, of course, improves backlog visibility. We're also adding digital capabilities where they strengthen our role with the customers. Our partnership with Applied Computing supports data-driven and AI-enabled solutions that are expected to connect project execution to maintenance and operations while staying disciplined within our capital-light model. To put this in context with some key metrics, STS first quarter book-to-bill ex-LNG was 1.2x, with a trailing 12-month book-to-bill of 1.2x. Backlog ended the quarter at approximately $4.7 billion, and that is up 9% year-over-year. Overall pipeline, again excluding LNG, is more than $5 billion and was roughly 80% from repeat customers. And work under contract today now covers approximately 67% of our 2026 revenue guidance, which is a good place to be at this time of the year. The momentum we're seeing in bookings is consistent with the pipeline outlook, which brings me to Slide 7. This matrix shows where near-term pipeline activity is clustering by market and region. It's directional, not a forecast of timing, size or conversion. Stepping back, the pattern reflects two core dynamics. First, we are seeing broader distribution of critical programs rather than reliance on single large awards. Second, customers are advancing work through early engineering and phased scopes, reflecting disciplined progression across project life cycles. From there, five themes explain how demand is showing up across regions. First, energy security and resilience in the Middle East. Customers continue to prioritize reliability, redundancy and throughput expansion across critical infrastructure. Recent geopolitical conflict is reinforcing these priorities with increasing emphasis on resilience alongside restoration and rebuilding efforts where needed. Importantly, we have not seen any material change in capital spending priorities as customers continue to fund essential programs already underway. These tend to move as multiyear programs that award engineering work early, supporting a steady and visible near-term opportunity set. With a strong local footprint and established relationships, KBR remains well positioned to support customers across the region, particularly as they navigate evolving conditions. Second, resource security within critical minerals and circularity across the Middle East, Africa and parts of the Americas. Governments and producers remain focused on maintaining and expanding supply of essential inputs, particularly ammonia. This includes continued demand for licensed ammonia technology and proprietary solutions with customers increasingly engaged early with engineering-led scopes, again supporting durable near-term booking opportunities. Third, pragmatic transition activity in Europe. Near-term transition demand remains largely engineering-driven including design, permitting and modularization across key transition value chains. We are seeing particular demand in areas such as sustainable aviation fuel alongside policy-driven feasibility and pre-FEED studies as customers assess options and navigate regulatory frameworks. Fourth, energy security and critical materials across the Americas. Customers are pursuing targeted programs that strengthen energy exports, improve reliability and support domestic supply chains, particularly across LNG-adjacent infrastructure and processing and separation assets tied to critical materials. And finally, Infrastructure and Transport in Australia. Near-term opportunities remain concentrated in government-funded transport, defense and enabling infrastructure programs with a strong emphasis on alliances, frameworks and staged delivery models. Work is predominantly engineering, PMC and early works rather than full greenfield execution, which supports recurring capital-light bookings and reflects customers' focus on resilience, capacity expansion and program continuity. Overall, the matrix reinforces that STS bookings and our near-term pipeline are diversified and concentrated in stage programmatic work aligned with resilience and resource security priorities. And this plays directly to our engineering-led, capital-light model and repeat customer relationships. Now on to Slide 8 for the Mission Tech business. As we've discussed over the last few quarters, awards are not flowing at historical levels. In this environment, our focus remains on what we can control: increasing both the volume and quality of our bid activity, expanding access to IDIQ vehicles and continuing to position the business for future awards. While several larger opportunities remain pending, and in some cases under protest, we continue to win work that aligns with our core capabilities and the government's most enduring priorities. Recent Mission Tech wins reflect a consistent set of strengths. We are buying digital engineering and analytics to help accelerate timelines, leverage AI and data-driven insights to support higher-confidence decisions, and delivering trusted execution in mission-critical environments. In space and national security, we won new work supporting the U.S. Space Force, applying digital engineering and analytics to help accelerate the development and deployment of next-generation space capabilities. We also secured a new role, providing direct data and analytical support to senior defense leaders focused on translating complex data into actionable insight for critical decisions. On the civilian side, we were awarded a recompete with the Department of Transportation's center extending a long-standing partnership focused on using AI, analytics and systems engineering to modernize transportation and improve safety. And lastly, we secured a contract extension under the Army's LOGCAP program, reinforcing KBR's role supporting the U.S. military with mission-critical logistics and sustainment in complex operating environments. Before moving on, I wanted to briefly address what we're seeing at NASA. KBR has supported NASA missions for more than 60 years. Recently, the administrator has indicated an interest in in-sourcing certain core workforce competencies. If implemented, these changes would affect the mix of work across some programs and that impact is reflected in our 2026 outlook, which Chad will discuss in more detail as we walk through the guidance. Importantly, KBR continues to support NASA in areas where deep mission experience, independent technical expertise and operational continuity are essential. We are very proud of our team's contribution to the ARTEMIS 2 mission and our decades-long service to the agency. As you'll hear from Chad, these mission workforce dynamics are being offset by strength in sustainable tech, so the impact is primarily mix as we reaffirm our full-year guidance. Stepping back and looking across the portfolio, recent wins reinforce where MTS is differentiated. We operate in mission-critical environments that demand speed, technical depth and trusted execution with digital and data capabilities playing an increasingly central role in mission success. So to put this in context with some key metrics, MTS' first quarter book-to-bill was 1.0 with trailing 12 months book-to-bill of 1.0. Backlog and options ended the quarter at $18.5 billion, with 39% of that funded, excluding the PFIs. Bids and pending awards totaled $16 billion and work under contract now covers approximately 91% of our 2026 revenue guidance. And we continue to make progress towards our bid volume goal of $25 billion in 2026 with significant submissions expected in the next two quarters. With that, I'll turn to Slide 9 and our near-term pipeline opportunities. This slide provides a directional view of where we see the MTS near-term pipeline forming across markets and customer sets. It is not intended to indicate precise timing, size or conversion, but rather to highlight where demand is clustering based on our current visibility. We see two core dynamics shaping the pipeline. First, customers are prioritizing a more selective set of enduring mission-critical programs with long-term relevance and funding durability, a trend evident across U.S. and allied defense markets, including Australia. Second, we increasingly value partners who can integrate across the technology stack and translate software and data-driven architectures into operational capability at speed. Those dynamics translate into several clear demand themes across the portfolio. First, national security space and space mission operations with programs that award technical depth and integrated delivery from digital engineering through operations. This includes long-standing work supporting the U.S. Space Force, military satellite communications and related space architecture. Second, integrated air and missile defense, including counter-UAS and directed energy. Here, customers are prioritizing layered, scalable solutions that reduce cost per engagement. Our role centers on integrating new capabilities into existing architectures, so customers can field solutions faster and, of course, more affordably. Third, connected battlespace and decision advantage as customers invest to compress decision cycles by linking senses to decisions at the edge. We are supporting architecture and integration efforts aligned with JADC2 objectives, including work related to the Air Force battle network. Finally, we continue to see durable demand in readiness, sustainment and deployed mission support, including allied lifecycle programs. These missions place a premium on reliability, scale and end-to-end accountability, and we're increasingly applying AI-enabled tools, including through our partnership with a leading AI start-up to help improve sustainment workflows and readiness outcomes. Across these areas, the common thread is customers prioritizing speed, integration and measurable mission outcomes, areas where MTS is positioned to deliver. On to Slide 10 and an update on the spin. Next, I'll provide an update on the tax-free spin of MTS, which remains central to our strategy to sharpen focus and, of course, create long-term shareholder value. The strategic rationale for the separation remains unchanged. This spin reflects the culmination of a decade-long portfolio transformation and will result in two independent pure-play companies with clear strategic focus, distinct investment profiles and dedicated leadership aligned to their end markets. As part of this process, we evaluated all strategic alternatives and concluded that a spin is the right path to unlock value and position both businesses for long-term success. We are executing on this path while ensuring the separation is completed in a way that protects continuity, minimizes risk and positions both companies for success from day one. We continue to believe a quarter-end spin is the most practical approach both operationally and financially. Given the scope and complexity of separation, a fourth-quarter timeline provides additional runway to address these complexities. As a result, we are working toward an effective spin date of January 4, 2027, the first business day of fiscal '27. On the regulatory front, we have confidentially resubmitted our Form 10 including the fiscal 2025 audited carve-out financials. We expect continued confidential refinement through the SEC review process before transitioning to a public filing, which we currently anticipate in September. In parallel, we're advancing the IRS private letter ruling process to support a tax-free transaction. From a leadership standpoint, we are now well advanced on talent migration. The MTS CEO search is in its final stages, with Board interviews planned for later this month. The CFO process is expected to follow shortly thereafter. At the same time, additional leadership and functional appointments are beginning to be announced across both organizations, helping to build clarity and momentum. Operational separation continues to progress. We have completed the IT standup project plan and are now executing against it, supporting coordinated separation across systems, processes and controls. In parallel, teams are advancing real estate and legal entity rationalization to position both companies to operate independently at close. Looking ahead, we plan to host two Investor Days in the second week of November. These events will outline the stand-alone strategy, operating models and long-term priorities for both the STS and MTS businesses ahead of the transaction close. Overall, the dedicated spin transaction team remains fully engaged across all workstreams and coordination across the organization continues to build, reinforcing our confidence in execution. With that, I'll turn it over to Chad.

Thanks, Stuart. I'll pick up on Slide 12 with the consolidated first quarter results. We started the year with solid momentum despite a challenging backdrop. Revenues declined $95 million year-over-year, driven primarily by the planned reduction in EUCOM contingency, as outlined on our last call. Excluding EUCOM, revenues were largely consistent with prior year, and we did not experience any material impact from the Middle East conflict during the quarter. Despite lower revenue, adjusted EBITDA increased by $3 million year-over-year, supported by strong program execution and favorable mix across the portfolio. As a result, adjusted EBITDA margin expanded to 13.1%, up from 12.3% last year. Adjusted EPS was $0.96, down $0.05 year-over-year, primarily due to higher financing expenses from unconsolidated joint ventures. This was partially offset by lower average shares outstanding following open market repurchases throughout 2025. Cash flow was a key highlight for the quarter. Adjusted operating cash flow totaled $119 million, up $28 million year-over-year, reflecting strong DSO performance and resulting in 98% adjusted OCF conversion. Overall, the quarter reflects disciplined execution, margin resilience and strong cash generation, even as revenues were impacted by known and anticipated program dynamics. On to Slide 13 for segment performance. Results this quarter demonstrated solid execution and performance was in line with expectations across both Sustainable Tech and Mission Tech. Starting with Sustainable Tech, revenues were down $10 million year-over-year, primarily reflecting new awards that are still ramping and have not yet contributed meaningfully to revenue. Adjusted EBITDA increased by $2 million year-over-year with margins expanding approximately 70 basis points to 21.9%, driven by equity earnings contributions from an LNG project. Excluding this project, underlying margins in the business were 16.1%. Turning to Mission Tech. Revenues were down $85 million year-over-year, driven primarily by the planned reduction in EUCOM contingency work. Excluding EUCOM, Mission Tech revenues were in line with prior year with growth in U.S. and Australian defense programs offset by the combination of award delays, protest activity and funding restrictions at NASA. Adjusted EBITDA was essentially flat year-over-year, declining $1 million, while margins expanded to 10.6%. Margin performance reflected the roll-off of lower EUCOM work, continued disciplined execution and increasing mix of higher-value offerings. Turning to Slide 14. As we committed last quarter, this slide breaks out the underlying Sustainable Tech margin structure separating the LNG project and showing how the broader portfolio is positioned as that project rolls off and our JV footprint expands over time. As shown on the left, you can see the margin tiering across the STS portfolio. Higher margins are driven by technology licensing and differentiated engineering while international OpEx services, PMC and proprietary equipment fit in the middle. At the lower end is domestic maintenance, which we primarily access through our recurring JV structure, allowing us to participate with appropriately managed risks and returns. As shown on the right, that mix supports a 20%-plus weighted STS margin profile in 2026 driven by technology, engineering and JV participation. Over the last several years, growth in our services business has outpaced technology sales, resulting in margins of approximately 15% with the LNG project adding an incremental 500 basis points. Importantly, the backfill of this LNG project is portfolio-based rather than a one-for-one replacement. As that project rolls off, growth in higher-margin and more recurring streams, particularly technology licenses and JV OpEx work, support a more durable margin profile over time. Overall, this slide reinforces that STS margins are structural, supported by deliberate portfolio shaping, disciplined program selection and contract structures that align risk and return. With that, let me turn to Slide 15. As mentioned earlier, cash generation was strong in the quarter, particularly given the fact that the first quarter is typically a low cash-flow period for us. That performance reflects disciplined execution and the underlying cash-generative nature of the portfolio. Net leverage increased modestly following our investment in Bris to fund the SWAT acquisition, ending the quarter at approximately 2.3x trailing adjusted EBITDA. That remains comfortably below our stated ceiling of 2.5x and maintaining that leverage discipline remains a key guardrail for us. More importantly, our approach to capital allocation remains balanced and disciplined. We continue to invest for growth, return capital to shareholders, maintain prudent leverage and incorporate the expected cash outflows associated with executing the spin-off transaction. Overall, our strong cash generation provides flexibility across these priorities and supports disciplined capital deployment going forward. On to Slide 16 and full-year guidance. Today, we are reaffirming our full-year guidance and range across all metrics. Within that framework, we're operating in an environment where the range of potential outcomes is wider than normal for our government services portfolio. Geopolitics and policy shifts across the U.S. and Australia can create both opportunity and funding risk and those factors are influencing how demand flows across the portfolio. Building on Stuart's comments, the dynamics we're seeing are reflected primarily in segment mix rather than a change in our full-year outlook. In Mission Tech, we expect revenue to be flat to modestly down year-over-year, largely reflecting unresolved protests in the first half that delayed anticipated ramp activity. Those impacts particularly related to the MIS contract are timing-driven. And we feel good about the underlying award and the transition profile as regional disruptions get resolved. In addition, given the uncertainty around potential program-level changes at NASA relating to the workforce directive Stuart referenced earlier, we have incorporated a modest second-half decline, assuming those changes are implemented. These impacts are more than offset by strong performance in Sustainable Tech, where we now expect to deliver mid-teens year-over-year revenue growth driven by award momentum and elevated service demand. Taken together, this results in revenue phasing of approximately 47% in the first half and 53% in the second half, reflecting a relatively stable Mission Tech run rate and second-half growth in Sustainable Tech as customer activity normalizes and recent wins ramp, particularly in regions impacted by the Middle East disruptions. Importantly, there are no changes to our adjusted EBITDA, adjusted EPS or adjusted operating cash flow guidance. However, we may see some volatility in adjusted operating cash flow during the second quarter as the Middle East conflict is resolved. Our underlying assumptions remain consistent with what we outlined on our last call with today's puts and takes reflected in segment mix rather than a change in our overall outlook. With that, I'll pass it back to Stuart.

Thank you, Chad. On to Slide 17 to wrap up. There are four key takeaways from the quarter. Firstly, we delivered a solid start to the year with disciplined execution, resilient operations and continued margin and cash focus. Second, demand in our core markets remains durable, and we have clear visibility; work under contract today now covers approximately 67% of our 2026 revenue guidance in STS and 91% in MTS. Third, we continue to advance our planned spin transaction with key milestones progressing as we prepare for a targeted distribution on January 4, 2027. And finally, we are reaffirming our 2026 guidance ranges, and we remain committed to execution, margin discipline and strong cash generation. We appreciate your continued interest and support, and we look forward to updating you on our progress throughout the year. With that, I'll turn it back to the operator for Q&A. Thank you.

Our first question is from Adam Bubes from Goldman Sachs.

Margins in the quarter, I think, at 13.1% appear modestly ahead of your expectations, and it's above the full-year guide. I recognize that equity income can drive some quarter-to-quarter margin noise. But can you just help us parse out what came in better than expected on the margin line this quarter? And anything we should keep in mind when thinking about the trajectory of margins and equity income through the balance of the year?

Yes. So I'll take that one, Adam. Again, as you point out, margins remain in line with our long-term targets with 10% plus for MTS and about 20% for STS through 2026. We do expect continued contributions from the LNG project to continue into early '27. We'll be kicking off our 2027 budgeting process here shortly, which will, of course, have the stand-alone costs for corporate structures and margin expectations for both businesses that we really look forward to highlighting at Investor Day in November. As you'll see on our website, in the fact sheet, the recurring joint venture contributions generated approximately $18 million of EBITDA in the quarter, and we expect that contribution to tick up modestly as the year progresses. Strong year-to-date bookings really begin to ramp in that portfolio, and that will provide incremental volume in the back half of the year.

On the M&A pipeline, we continue to not sit on our hands. We continue to look at opportunities that will take us both into new geographies and into reasonably adjacent industries. There's plenty of opportunity. We need to be very disciplined in the way we evaluate that, both from margin accretion and fit and obviously values and culture perspective, but certainly more to look at as we go through the year.

Our next question is from Andrew Kaplowitz from Citi.

This is on behalf of Andy Kaplowitz. I guess the first question will start off with STS margins. I appreciate the callout on margin from LNG this quarter, but could you help us think about the underlying margin profile excluding LNG and the margin trajectory going forward or over time? And how does that compare to your long-term framework and your 20% plus margin target?

As promised, we gave more transparency into the buildup of the margin profile within STS and the contribution that comes from the LNG project in equity and earnings, and hopefully that's been useful. In the quarter, excluding that project, we made 16.1% as Chad referenced. The circa 15% that we put in that slide generally is the mark for the base business as we look forward ex that LNG project. That could change over time if we do win something with that sort of commercial construct, but hopefully that gives you a good indicator of how this business performs. There are margin expansion opportunities on mix, particularly around technology, where margins in that part of the business can be well in excess of 20%. The more we do in licensing and earlier-stage engineering, the better for margins. The timing of that is difficult to predict, so you get some lumpiness, and the more we grow the operational OpEx side of the business under Bris, which is part of our strategic push, that comes through equity and earnings, and you'll see that growing stronger as the year progresses, which again is good for margins.

Got it. That's helpful. So underlying margin ex-LNG you still see creeping up over time toward that 20% plus range?

I would say the base is around mid-teens today and upward pressure as we get more technology and licensing mix. So 15% going up is a reasonable characterization.

Our next question is from Jerry Revich from Wells Fargo.

I wanted to ask on NASA. Can you just talk about what the ebbs and flows look like from a booking standpoint? There's been volatility between the President's request and Congress reinstatement of funding. Can you just talk about how that has impacted timing, if at all, for you folks and what we should be looking for in terms of booking and activity levels over the remainder of the year?

Yes. The main comment on NASA relates to the new administrator's push for greater in-sourcing — effectively moving contractor staff back onto government payroll. That is being discussed and is being evaluated today. We think that may or may not happen over the next little while, but if it does, it will be gradual. We called that out on the call. In terms of scale to KBR, it's on the order of $50 million to $60 million through the course of the year in the most conservative read, and likely a lesser impact than that in practice. That's really the discussion there. In terms of the broader impact to NASA budgets, we're not seeing any real issue in terms of commitment to funding and the levels of service we've experienced in recent years. So that feels pretty steady at the moment.

And separately, can I ask on STS just to unpack the prepared remarks? It sounds like you feel pretty good about the ability to backfill to replace the LNG project. Can we expand on that conversation? How much visibility do you have on replacing that project in the earnings power of STS in '27 versus '26? Also, you had really favorable project closeout performance in the quarter — can you help quantify that and help us understand whether in '26 we're at trend line level of closeouts, higher or lower?

Jerry, you've followed us for quite a while. You know that we are prudent as we look at project accounting; we don't want to surprise to the downside. So we manage that carefully and prudently. There are always ongoing favorable project settlements; there was nothing unusual there. In terms of bookings momentum, third quarter in a row of very strong bookings for STS — book-to-bill above 1.2x — and across that spectrum with a significant pipeline of opportunities that gives us really good confidence about continued momentum in that bookings profile and the growth that comes with it. We are ramping up new awards we announced late last year and early this year, and those projects are ramping up right now, with new people coming onto KBR's books in the thousands. We're starting to see a really strong cadence. The pipeline of opportunities we outlined in the slides shows the different mix of drivers that are driving those awards, and we expect that to continue. It's a global operation with a very strong footprint in areas where there's a strong commitment to funding and project development driven by energy security, food security, energy transition and critical minerals. So we feel pretty good about that and confident in the ongoing performance of the STS business.

Our next question is from Ian Zaffino from Oppenheimer.

Would you be able to give us a little more color on the Middle East bookings? How is that going and what's the current environment? And staying on that, for MTS, how do we think about potential reductions in NATO exposure or troop movement? Would that have an impact on you? How do you think about that?

Let me start with the Middle East, where I was last week visiting Saudi, Bahrain, Abu Dhabi and Dubai to meet our teams and customers. I was uplifted by the resiliency and commitment of our people and customers. We have performed through the volatility and managed our people and customers well. We have seen no slowdown in activity. Our ambition and desire to staff up work we won in Saudi continues without interruption, similarly in Qatar and Abu Dhabi, and Dubai continues to grow. There is strong award cadence and ongoing performance. Customers are focused on restoration, repairs and long-term lessons learned, including protection of critical areas like operations rooms, spares and redundancy and exploring additional export routes to reduce concentration risk. So lots to do and very positive about the outlook in the Middle East. On the question of troop movements and Europe, there's been press about reductions in Germany and Europe more broadly. To put that in context, we don't expect any material impacts to our business. Some impacts may be already encapsulated in planned drawdowns. Overall, nothing we see that changes our view materially at this time.

As a follow-up on timing: it looks like the spin is a little behind the original schedule. What was driving that and how are you thinking about delivering the additional detail you previously planned to present at Investor Day, given the shift?

I'll give you some color. We've made good progress with the regulatory pieces in the spin — discussions with the SEC and IRS have been constructive, and we're feeling good about that. We are advanced on people transitions and bringing the new CEO in. We were targeting around Q3 originally, but when we considered accounting, benefits and salary adjustments it makes more sense to align the separation with the beginning of a fiscal year. That also provides more runway to address IT complexities and minimizes the risk of not being able to operate as two independent entities on day one. So moving the effective date to January 4, 2027 is a pragmatic choice. By moving that date, it also makes sense to hold the Investor Days closer to the actual spin so the data is more relevant. Nothing more sinister than that. We committed to giving more color over the year and we will continue to build on that as we go forward.

Our next question is from Mariana Perez Mora from Bank of America.

My first one is detailed: could you please measure how large was the closeout at STS this quarter? And then, on a broader view, how should we think about the next couple of years or three years growth trajectory given the moving pieces across both STS and MTS, the pipeline, the joint ventures, opportunities in the Middle East and the headwinds at NASA and EUCOM?

On the closeout piece: these are recurring items in the business, and it wouldn't be appropriate for us to detail the specific counterparty or nature of the reserve release. What I will say is we're pleased to reach a resolution in the quarter, which was consistent with our expectations.

On the growth trajectory question: that's a topic well suited to Investor Day, but high level — for STS, we have a diversified pipeline and limited concentration risk. The market drivers like food security, energy security and critical minerals create durable opportunity sets and we're well positioned to help customers. For MTS, we're focused on quality of earnings and positioning the business where funding is likely to flow — data, digital and AI solutioning, which supports mission decision advantage, space, intelligence and related areas. The Lynx acquisition and others have deepened our positioning there. The spin is part of the rationale to sharpen focus and to align leadership and capital deployment to each business. Over the medium term, we're feeling good about both businesses' prospects.

As a follow-up: as you do the separation work, are you open to divesting parts of the business or will that be considered only after MTS is standalone?

You can never say never. If a third party made an offer that enhanced shareholder value, we would of course evaluate that consistent with our fiduciary duties. But today, our plan is to proceed with the businesses as positioned and separate them as announced unless or until an alternative that creates superior value emerges.

Our next question is from Tobey Sommer from Truist.

On STS with the war and elevated petrochemical prices, what are you hearing from customers? Are they planning given higher prices and how does the physical impact of the war affect the medium or long-term outlook for KBR in the region?

From a petrochemical and oil-price perspective, these are moments in time. Ultimately, market dynamics will normalize over time. If assets are damaged, they will be repaired, and while prices are elevated that often leads to greater maintenance and services activity which aligns with our strategy. More broadly in the Middle East, governments are focused on security of supply and resilience and are likely to double down on gas infrastructure development. We're well positioned across those areas and increasingly bringing digital and AI solutions to add customer value. So medium- and long-term opportunity in the region looks constructive for STS and for our global business.

Could you expand a little on NASA: what elements of your exposure there are growing and show strong demand, and where is the weakness within the portfolio?

The primary growth area for us at NASA is human spaceflight where we have deep capabilities and have been heavily involved; our people were instrumental in the Artemis 2 mission. We expect continued engagement into Artemis 3 and beyond across technical and human-health-performance work. The softness or uncertainty relates to potential workforce in-sourcing, which primarily affects one main contract of ours. It's an agency-wide consideration rather than company-specific and the impact is contained, but we called it out in the spirit of transparency.

Our next question is from Steven Fisher from UBS.

Related to guidance, I know you tend to be conservative about raising guidance in Q1. With the solid start, are you perhaps trending above midpoint and leaning toward the upper end, or do uncertainties with NASA, the Middle East and the separation make it too early to call?

Doing well in the quarter and being above consensus is a good start to the year. Our bookings are strong and we're feeling good about the year. That said, given the volatility in the world — geopolitics, protests, program timing — it's prudent to remain measured. Historically, we haven't raised guidance in Q1 and we aren't doing so today. We want to maintain discipline and avoid getting out over our skis.

On the STS side, can you comment on the maturity of projects in the pipeline? Are you in many cases completing engineering and waiting on final investment decisions, or are you still in early stages? What conditions are needed to move larger projects forward?

We try to be choosy about engagements and avoid overcommitting on early concepts. Today we're engaged in front-end engineering for LNG projects and in definitive phased work where customers have committed funds to progress scope. A fair portion of our pipeline reflects maturing projects with clearer funding paths and drivers. Our positivity is based on projects that are moving through defined decision points and funding milestones rather than just conceptual activity.

We currently have no further questions. I will hand back to Stuart for closing remarks.

Okay. Thank you very much. A few final thoughts. Our strategy and priorities are clear. We're operating in markets where our capabilities are highly relevant, and our customer relationships are deep, which plays to our advantage. Our model is designed to deliver disciplined execution across a range of operating environments, driving the resilience you see in our numbers. Across Sustainable Tech, demand is durable tied to energy security, resource efficiency and resilient infrastructure. Our engineering-led, technology-led, capital-light approach and growing mix of recurring services continue to support backlog visibility, strong margin performance and cash generation. In Mission Tech, the near-term award environment remains uneven, but the underlying mission priorities we support are enduring. We're focused on increasing bid volume and improving the quality of earnings associated with that volume, expanding access through contract vehicles and positioning the business to convert opportunities as funding and award activity normalizes. We welcome the recent Executive Order that encourages more fixed-price contracting; KBR's commercial acumen plays well to that. None of this happens without our people. I want to thank our employees across KBR for their resilience and commitment, especially in the Middle East recently as they continue to deliver for our customers in complex and challenging environments. Safety and execution excellence are paramount. Finally, we continue to execute the planned separation of the two businesses with discipline and intent. The spin is designed to sharpen strategic focus, aligning each company with its end markets and positioning both organizations to pursue their long-term objectives with quality and accountability. Thank you again for your time and for your continued interest in KBR. We look forward to speaking with many of you soon. Thank you.

Thank you, Stuart. This concludes today's KBR's First Quarter 2026 Earnings Conference Call. Thank you for joining. You may now disconnect your lines.