KBR, Inc.
Q4 2020 Earnings Call Transcript

Published: 22 Feb 2021

[Operator:]

Good day, and welcome to KBR Incorporate Fourth Quarter 2020 Earnings Conference Call. This conference is being recorded. As a reminder, your lines will be in a listen-only mode for the duration of the call. There will be a question-and-answer session immediately following prepared remarks. You will receive instructions at that time. For opening remarks and the introductions, I would now like to turn the call over to Alison Vasquez, Vice President of Investor Relations. Please go ahead.

[Alison Vasquez:]

Good morning and thank you for attending KBR's fourth quarter and fiscal 2020 earnings call. Joining us today are Stuart Bradie, President and Chief Executive Officer; and Mark Sopp, Executive Vice President and Chief Financial Officer. Stuart and Mark will provide a recap of the year, a market update and will outline our 2021 guidance. After these remarks, we will open the call for your questions. Today's earnings presentation is available on the Investors section of our website at kbr.com.

[Stuart Bradie:]

Thank you, Alison and thank you all for joining us today. I will start on Slide 4. And I'll start as always with a sustainability moment. With the maturity of our ESG processes under program in general, we are now able to measure our carbon footprint across our global operations including air travel. This in turn allowed us to achieve carbon neutrality in 2019 and set in motion a continued improvement program towards achieving a net-zero target by 2030. Sustainability at KBR means more however than just behaving as a good responsible corporate citizen as critical as this is. We also have IP, technology and deep expertise that we can and are deploying for our customers across the globe, helping them de-carbonize move towards a hydrogen economy become more energy efficient, et cetera, really enabling our customers to meet their own sustainability goals and commitments. Our recent announcement on the Mura plastics-recycling technology is another great example of a solution we license that enables a circular economy and continues KBRs value-add journey, both through sustainability and for our stakeholders. We believe Mura Technology as a binder and I would encourage you to read our recent releases if you've not seen them. This is one of the reasons we are changing the name of this business area to Sustainable Technology solutions. Our ESG goals have been and will continue to be part of our exec comp program. I would also directly to our website, but our latest sustainability report was published in December 2020. This takes us nicely onto Slide 5. 2020 was an incredible year. We did not allow this dreadful virus to hold a strategic process. Arguably, we lean forward and move faster. We completed Centauri acquisition moving us into Intel and military space of scale. Our Science & Space business and Defense & Intel businesses organically grew above market and the International business performed brilliantly. And importantly, we increased our backlog and our long-term contract base.

[Mark Sopp:]

Great. Thank you, Stuart. I'll pick up on Slide 13, which lays out our key financial performance metrics for 2020. As I'm sure you gathered from Stuart's remarks, we're really pleased with our achievements this past year, reflecting the incredible efforts of our employees around the world. Some reflection here since our transformation, we prioritized derisking the business, and in so doing, producing stable, predictable financial results, including strong cash flow, very important. We also set out to put legacy obligations behind us and begin deploying cash flow to move KBR upmarket and also tap other value-creation opportunities. I think fiscal 2020 and these charts themselves demonstrate our commitment and our ability to do all of these things.

[Stuart Bradie:]

Thanks Mark. And on to Slide 18, our almost final slide for today. We want to leave you with a few key messages. On the right are the key takeaways from today, but I thought I might try to print these in my own words. KBR has been on a strategic journey for quite a few years, as you're well aware. Strategically, we wanted to move upmarket, be more technically differentiated, exit commoditized businesses, exit risky and volatile markets and align our business obviously exciting markets of the future and simply deliver what we said we were going to do, not one quarter but quarter after quarter. And you're probably thinking, sure, every business wants to achieve this, and many talk about what they're going to do, but let me just say this. We begin 2021 having exited traditional energy, lump-sum EPC, construction risk, commoditized services. We also entered 2021 having reduced our reliance on contingency funding in the Middle East to nonmaterial levels, as Mark explained; and having retired a large number of legacy risks over the last few years and retired many poor-performing projects from our portfolio. So, I think we can make a very strong argument that we have exited commoditized and volatile markets. We begin 2021 with strong momentum in Defense & Intelligence, incredible performance in Science & Space; our reshaped readiness and sustainment business; an increasingly upmarket international portfolio; and a suite of sustainable technologies that uniquely compound our ESG story in a very, very hot market. Our people do things that matter, they care and is hugely uplifting to be part of a company that does that today. So I think we can also make a strong argument that we have aligned our business opposite attractive markets of the future. We begin 2021 with revenue up a bit, margins moving up, EBITDA moving up and EPS outpacing revenue growth by quite a factor, as Mark explained. And I really think this is a strong reflection of moving upmarket, being technically differentiated with real proprietary IP and domain expertise. We have delivered every quarter, not for one quarter, but for every quarter for four years. One can argue one metric over another, but what cannot be argued is that true value is reflected in cash generation. We have delivered what we said we would do consistently. Our amazing people, our team of teams quite simply deliver. We have over 70% of the work secured to meet our guidance, and we are confident we will continue into 2021 and beyond to do what we said we will do. We start '21 by no means the finish article, but certainly at the beginning of a new and exciting journey. Now on to our final slide, we will be hosting an Investor Day on the 25th of March and is themed future forward and appropriately so. Our team will present KBR's value-add ESG position. We will bring to life our people agenda. We will present in a bit more detailed strategic growth vectors and why KBR is well positioned. And these will run nicely into presenting our longer-range targets through to 2025. This will, of course, be a virtual event, and we hope you can join us. Thank you. And I will now hand over to the operator, who will open the call up for questions.

[Operator:]

Thank you. We will now move on to our first question from Sean Eastman. Please go ahead. Your line is open.

[Sean Eastman:]

Congrats on finishing out the year strong. I just wanted to start on the $200 million of OCO-funded logistics disclosure for the 2021 outlook. It seems like you guys really want to drive that home. And just so it's clear, I mean, really, you guys are just pointing out that logistics work in the Middle East is now just a tiny percent of revenue for government services and also that you have a big cushion in there for the uncertainty around the transition and where troop counts ultimately end up in the region. Is that the takeaway there?

[Stuart Bradie:]

Yes. I think so. Sean, I mean, to give you a little bit more color, as Mark said, we've got about $200 million in our guidance for '21. And half of that is obviously related -- but not obviously, but half of it is related to the work we're doing in Iraq as we exit that piece of the contract; and half of it relates to, I guess, ramping up in Afghanistan. So, there is a high degree of uncertainty on the timing of both of those events, but we've decided to take a very, very conservative view. We do think potentially there's upside if things move along quicker. And there's some evidence that, that may happen, but there's by no means certainty. So I think that's exactly right. But the key takeaway is just, I think, the progressive reduction in reliance in our revenue base from, as Mark said, '19, '20, into '21 and replacing that potentially volatile funding stream by very steady, predictable funding streams, particularly in O&M in that segment, and hence, the renaming to readiness and sustainment. But yes, so less volatility, more predictability and longer contract tenures of that predictable nature and the fact that this potential upside, as you rightly pointed out.

[Sean Eastman:]

Okay, very helpful. And then just higher level for me. Just so I'm kind of level setting, I mean, the dialogue on momentum in both the bid pipeline and in the backlog of late, I mean clearly, overall budgets aren't sort of matching that momentum, right? So maybe just from a high level, help us understand exactly how you guys are seeing this velocity in the bid pipeline and the momentum in the bookings trends, that would be great.

[Stuart Bradie:]

I mean, we did try and cover that off a little bit, and also in my closing remarks, I'm trying to line the business up opposite, markets that are well funded and attractive as we move into the future. And we saw that with the Centauri acquisition of lining up opposite national security priorities. We -- and remember that we're very operationally focused in terms of we sit with our domain expertise. And I think you're seeing that, that comes through in strong resilience, not just in the bid pipeline, but actually the performance in 2020 and the momentum we're continuing to see going into '21. So I think you're right that there's going to be pressure overall on budgets through time. But that's always the case. And what you've got to do is you've got to line up to the bits of the market that you feel are going to be exciting and that are going to be well funded and why you've actually got deep domain expertise where your technical know-how or your IP or your advantage really plays well. And I think KBR has done -- the team has done an amazing job of actually aligning to those markets. And I think you're seeing it in the pipeline. I think you're seeing it in the book-to-bill. And people -- others talk about the pipeline. But as I keep saying, the proof of the pudding is always in the eating. Are you actually delivering growth in your backlog through time? And I think this year and last year and whatever we've actively demonstrated that we are positioned well. We are opposite attractive markets, and the book-to-bill and the backlog growth through the year would prove that out.

[Operator:]

We will now move on to our next question from Jamie Cook of Credit Suisse. Please go ahead. Your line is open.

[Jamie Cook:]

I guess a couple of questions. One, can you remind us what Centauri will contribute both on revenue and EBITDA for 2021, whether that guidance has changed or not? And then I guess my other question is, given the work in the Middle East is becoming a smaller piece of the pie, can you just sort of update us as we move past 2021, how to think about the sort of organic growth of the total government portfolio in margin profile or targets over the long term? So any update there? And then, I guess, how to think about G&A now with Centauri and sort of the cost actions you've taken?

[Stuart Bradie:]

Okay. So I'll start, and Mark will finish. So the guidance for Centauri when we came out the gate is $700 million plus with margins in the low-double digits, the 10% ZIP code, and that's absolutely where it sits today in the '21 guidance. And that's very good growth from last year as we're all aware. So that forecast and that analysis held up very, very strongly. In terms of the longer-term outlook for GS, it's in that 6% to 10% ZIP code. I mean we haven't changed that. We'll be updating obviously the longer-range targets in March when we hold our Investor Day. But that's the outlook going forward as it sits today. And I think the backlog growth would indicate that, that's achievable. In terms of the SG&A, Mark, would you like to comment on the longer-term outlook for that just given some of the movements and seasonal movements in Q4?

[Mark Sopp:]

Yes, Jamie. First, wanting to add to the Middle East question and government is if you were to strip out the reduction from '20 to '21 in contingency logistics, which is the $258 million we get between the $450 million and the $200 million numbers I've provided. You strip that out. The organic growth in Government Solutions is in that 6% to 10% range for '21. So that's encouraging, and it is attributable to the great wins, takeaway, et cetera, that we've talked about here. And so that would be our view going forward. And we'll talk more about that in the Investor Day in March, I'm sure. Relative to G&A, we had some savings in 2020 due to COVID and less travel, things like that. We've bumped that up a little bit for '21. We do expect to return not exactly back to normal, but more toward normal at some point and pick up activity there. Plus we, as I mentioned, are making some investments in modernizing our infrastructure. Some of that's hitting G&A. We've factored that all into the guidance. But the corporate line should still be about $100 million, which, I would say, is kind of normative. If you look back at '19 and '18, that's kind of where it was, and we kind of are expecting that range for 2021. And beyond that, I think we're going to do our best to contain or even reduce that number with the investments we're making in IT and some of the legacy structure applications that we are trying to work out of for legal entities to those sort of things. So that's the trend. So I'd say, back to norm pretty much in '21 and then hopefully flat line that number or reduce it longer term.

[Operator:]

We will now move on to our next question from Jerry Revich of Goldman Sachs. Please go ahead. Your line is open.

[Jerry Revich:]

I'm wondering if you could talk about your pipeline for hydrogen decarbonization energy transition applications, obviously, nice to see the strong pipeline in GS. I'm wondering, if we might have a similar conversation about your decarbonization portfolio and the cadence of potential awards over the next couple of quarters?

[Stuart Bradie:]

Yes. So Jerry, we did, as you know, recently some investor events where we broke down our suite of IP and show that it's lined up across a whole portfolio of Sustainable Technology offerings and not just hydrogen or ammonia, but although ammonia is very, very exciting. So I think that's the first thing to say, our ROSE technology on NOx and SOx, what we're doing in alkylation what we're doing and looking at different solutions for refinery outputs and things like that is reducing energy consumption. So I think we've got an amazing list of opportunities. And I think the best demonstration of that was the book-to-bill in the quarter. The book-to-bill in the quarter was well over 2.5 in tech. And we talked about the year book-to-bill being well over 20% growth in backlog and things like that. But the book-to-bill has been well over one in Q2, Q3, but Q4 was outstanding with bookings well above two in the tech segment. So I think that's probably the best demonstration. We've announced a number of those. I mean, you'll have seen those announcements. So probably best we don't spend all the time going into them today. But that's probably the most tangible real number I can give you on this call to show the momentum around that Sustainable Technology portfolio. And I think the other takeaway from that is that -- is really just the margin performance and the fact that, that business does run on negative working capital, which we can't reiterate enough just how attractive the business fundamentals are around that segment. So that's probably all I would say on that today. Mark, unless you want to say something more?

[Mark Sopp:]

No. In fact, one you've covered a lot.

[Jerry Revich:]

And obviously, so you had strong momentum in the quarter. I'm wondering if we might be able to have a conversation around what the bookings outlook for that business is over the course of '21. Are there any meaningful awards that you folks are in the running for? Any color on whether that bookings momentum continues into '21 that you might be willing to share?

[Stuart Bradie:]

I mean, Jerry, these are red hot markets as you're -- I mean you're well aware in terms of what's happening across the world, opposite climate change. And obviously, the Biden administration is throwing fuel onto that fire. So that it's a very exciting time to have the portfolio. I mean, in a way that we've had some technologies that have reinvented themselves on what like ammonia technology is as people are using ammonia now to coal-fire, coal-fired power stations to reduce the carbon footprint immediately of coal-fired power station. So it's a very, very exciting market that -- I would say that the activity levels are going up. The pipeline of opportunities is increasing, not the other way around. And I really think it's a terrific time to be in the in the position we're in. And as I said in my remarks, the timing of us realigning that portfolio into where it is today has luckily enough, has worked out pretty well, and our people are busy as anything actually in terms of looking at opportunities going forward. So my view on this today is that the market and the opportunity set is going up even beyond what it has been in 2020. And I think as the world opens up a bit more. I think you'll see more and more activity.

[Jerry Revich:]

And I'm wondering if you can comment on this entire integration. How has that business integration gone relative to your plan, obviously, not the easiest environment to integrate a business? Can you just talk about how the integration team has performed relative to plan?

[Stuart Bradie:]

Yes, it's going very well. We've done -- the teams have got together and seen that they all speak a common language. I think culturally very well aligned, key people are all working very well together, put a lot of focus into synergy in terms of revenue. And the recent TENCAP win, which was a KBR bid with Centauri, we brought in as -- I think, initially as a subcontractor, but obviously, that's changed now, that really helped us sort get up and win that award. I mean that's -- we just announced that recently as for the Air Force and $500 or so million over the next little while. So, under the tip of the sphere in terms of R&D and fast fail and all the things that go with that in terms of prototyping and things, so really, really going well in terms of that revenue synergy opportunity, and I think in terms of the back-office piece, we will be working through that and through the course of this year. But that business was not broken. It was a well-run business on a stand-alone basis. So in such cases, when it's not a caveat, you've got a little bit more luxury of time to get the back office right. And -- but the revenue piece and the cultural piece is going really, really well.

[Operator:]

We will now move onto our next question from Gautam Khanna from Cowen. Your line is open. Gautam, you may have yourself on mute. Your line is open. And apologies for interruption, callers your line is open. Please go ahead. We will move onto our next question from Steven Fisher of UBS. Please go ahead. Your line is open.

[Steven Fisher:]

Nice 2020. So just looking at the leverage, you're now currently below the targeted leverage range. And it seems like there's potentially another maybe $200 million to $300 million of capital that you could deploy and still stay within your 2.5 to 3x targeted range, and that's on top of that, say, $200 million to $300 million of free cash flow you should deliver this year. So how are you guys thinking about the potential to deploy that capital base and potential?

[Stuart Bradie:]

I mean, again, I'll start, and Mark can jump in. I mean we will give more color on this in March, Steve. So I don't want to steal any more thunder there. I think what -- your number, your assessment is absolutely correct, of course, in terms of we've done well in cash and our net leverage is now obviously just sitting below our targeted range. And you're right in terms of free cash flow. So, we're in really good shape from a liquidity perspective. I think we've got deployment options, which is always a good thing. Our priorities around that to date have not changed. We did buy back stock, as you've seen, in Q4, and it's certainly an arrow and a quiver that we'll use as appropriate. So that's probably all I really want to say today because I think we will be addressing this more fulsomely in next month when we get together for our Investor Day. Mark, any more that you wish to say now?

[Mark Sopp:]

I'll just confirm, Steve, the numbers are exactly right. So, there's firepower there in levering up, but responsibly so plus the free cash flow being attractive. I did say earlier that we like a balanced capital deployment strategy, and we've proven that over time. And so, it would be reasonable to expect similar going forward, and we'll talk more about that in March.

[Steven Fisher:]

Got it. And then just on the quarter itself, the government margins were a little lower than I might have expected. Just curious how they compare to what you were thinking. If there's anything dragging because of the Centauri close that might have been non-recurring? And since you did guide to the 10% for 2021, how much variability would you expect around that over the course of the year?

[Stuart Bradie:]

No. I mean, not much, a few bps variability, I guess, Steve. I mean the bottom line in Q4, I think we come in at 9.3, 9.4, something like that. So another 0.1, we would have rounded up rather than rounded down. So, it was not a long way off expectation. There were some seasonal impacts for people taking greater holidays and things as we run up to the end of the year. But there's nothing sinister there at all. And the overall margins for the year are well in line with expectations, and our guidance for next year would -- as I said before, we're going to quite simply do what we say we're going to do, and we set out margins at 10% or so next year, and we expect to meet those.

[Operator:]

We will now move on to our next question from Andy Kaplowitz with Citigroup. Please go ahead. Your line is open.

[Andrew Kaplowitz:]

So you mentioned the book-to-bill was above 2x in Q4, so obviously, a ton of momentum, sustainable technologies. But are you thinking about your original guidance for when you're doing your original guidance for 2021 in that segment, you had $1 billion of revenue, $150 million of adjusted EBITDA for '21. I think you gave us that a quarter or two ago. Could that end up being conservative in what's baked into your overall guide today?

[Stuart Bradie:]

It's a little tricky question that, Andy. I mean I think at this point, the fact that we're delivering that sort of performance next year is terrific. And we have a history of meeting or exceeding expectations in that arena, and we would hope that, that trend continues, but I think it's too early to be saying just how -- answering your question in a rhetorically loaded way would probably be not the right answer. But I mean I think we'll stick to our guidance today. We're very -- early on, I would say, is a very hot market. I would say there's a ton of momentum in that segment. And I would say we're very, very excited about the opportunity set that we're seeing in front of us from a pipeline perspective and the dialogue we're having with customers across the world. And so I do -- we'll come back to you with more color in March. But -- and obviously, as we get to Q1 earnings, we'll see how the business is performing. But I mean, it's a terrific time to be opposite that market with the IP that we have.

[Andrew Kaplowitz:]

Can't blame me for trying there. All right. Next question. So you mentioned the contingency work is still ramping down in '21. But it sounds like there's a bit more of an international drag from UK funding constraints that you saw in Q4. We know you've given on overall guidance for '21. But would you expect more of a back-end loaded year for revenue in GS? And how dependent is organic revenue improvement on some alleviation of the UK funding constraints?

[Stuart Bradie:]

Yes. I mean, I think overall, just to start with the big picture scenario, we do expect the second half to be a bit meatier than the first half, and Mark gave that color in his remarks. And I mean there's a good reason for that as things ramp up, particularly things like the Middle East and things like that. But in terms of the UK, as you know, the majority, a very large proportion of what we do in the UK is underpinned by Aspire and MFTS and the other long-term PFI contracts. So that really protects us from any real volatility risk. So that's a big message there that we -- it's not like we see major, major things going the wrong way here. It's just that in terms of the cadence we're seeing in places like Australia, that's up significantly, the UK is growing at a slower pace for obvious reasons. So I think it's as steady as she goes in the UK with a little bit of pressure, if you like, because we've come off I mean, Aspire Defense, half of the capital piece of that was essentially finish through '20 anyway, so not a big shift in the revenue base there. So I think it's kind of okay, and we'll -- as I said, it's a steady stream in the UK and just not at the same sort of level of increase that we're seeing in places like Australia and that we're seeing, obviously, at national security priorities in the U.S. and things like that. So it's just a more measured approach, I think, is probably the way to describe it.

[Operator:]

We will now move on to our next question from Michael Dudas of Vertical Research. Please go ahead. Your line is open.

[Michael Dudas:]

Stuart, first question, how do you prioritize your pipeline, which appears very robust from long-term targets to the $15 billion of near-term opportunities? How do you prioritize that relative to length of contracts, returns? Is it just whatever market is growing the fastest you're involved in and you think there'll be more opportunity there? Are you putting business development or some investment in areas where you want to shore up or enhance some of the businesses that you?

[Stuart Bradie:]

Yes, I think it's sort of two different question in a way Mike. I think, obviously, as we look inside the businesses themselves and what's coming down the pipeline, I think, as you're well aware, the procurement pipeline in the government arenas is reasonably transparent as to what's coming down, and you can position for the things where you feel that you've got the best chance of success. So I think our teams do a very good job. As you know, our win rates are really strong. And I think we pick and choose our fights, if you like. So I think that's probably the way to answer the first part of the question. In terms of the second in business development or investment, I think we would continue to invest in areas where we feel there's things like our recent announcement for Mura that we talked about a little bit in terms of plastics recycling and the opportunity set there as the market evolves in that arena. So I do think it's -- we are looking very strategically. I think you've seen that in our past. I think we've tried to align the businesses up in a way that does reflect our outlook for good businesses of the future or good markets of the future. And so, in terms of where we're positioning our sort of investment dollars, I think they will align to the strategic growth vectors we've presented in the past, and we'll do so again in March in terms of where we think there are new opportunities in places like cyber and things like that as we get to understand the Centauri capability, combining that with the KBR capability to be just something that we think is more niche and exciting and lines up to spending priorities into the future. So you'll get a bit more color on that in March.

[Michael Dudas:]

I appreciate that, Stuart. My follow-up would be, you mentioned in your response about the Mura Technology. And I think that seems to be pretty exciting stuff. Can you maybe elaborate a little bit more like how it came about? And what are some of the opportunities that you're seeing just from that announcement? And what are you being to plan over the next several quarters to several years?

[Stuart Bradie:]

Yes. I mean, you're right. It's a very exciting market. And as you know, there's a lot of capital flowing into that area or in a number of cases back in technology that has yet to be proven. I think the nice thing about Mura is that we've got a number of facilities that not quite at world scale yet, but the first world-scale ones being built in Wiltshire in the UK. But the reason we like this technology is because it's a hugely environmentally friendly process to begin with. So it basically takes water, and the way it actually works is, there's no carbon emissions in the way they sort of recycle energy and things. But basically, they take water and they pressurize it and use high temperature to break down plastics, but not just single-use plastics or the easier plastics to break down. It actually breaks down most plastics. And I think anyone who knows much about this knows that most of the plastics that recycle only about 10-or-so percent actually get used in the recycling process. But this technology addresses that issue. And then actually produces an output that can actually be taken by refiners to replace actually their existing feedstock or their raw feedstock. So it really drives and meets their sustainability agenda of using recycled feedstock in their processes. So I think from a -- I guess, from a mouse trap perspective, we feel that we've got the right IP, and it comes with attributes that are quite unique in the marketplace. So we're very, very excited about that, and more to come in the opportunity set with that. I mean there's a number of opportunities that you would expect as this technology gains more and more momentum. I mean even Richard Attenborough has been -- those who know Richard Attenborough has been talking about this technology as a potential solution for some of the issues facing plastics going into the ocean into the future and things like that. So it's really, really terrific in terms of exposure. I think the opportunity set will be of a global nature. But it will be measured as well. I don't think we'll be taking on commitments and things that we can't meet. So -- but I think so far, all -- everything we've heard and anything we've seen and the opportunities coming in the pipeline with Mura are very, very, very attractive.

[Michael Dudas:]

That's a terrific story. I appreciate. I look forward to the meeting next month.

[Stuart Bradie:]

Thanks.

[Operator:]

We now move on to our next question from Brent Thielman. Please go ahead. Your line is open.

[Brent Thielman:]

A question on the -- just the emphasis within the former logistics piece of government, now readiness and sustainment, particularly the O&M-related work. Can you talk a little more just about the addressable market you're after, the types of program this business is going to look to pursue that it hadn't done before? And I think you talked about higher value. How do we think about the differences in margins or profitability versus the legacy logistics work?

[Stuart Bradie:]

Yes. I mean, good question and timely as well. So you're right, we've put a lot of emphasis into -- we're talking a while about the change in the business mix in what was logistics and is not readiness and sustainment for quite a while. We were at pains, I think, in the GS and Focus Day earlier in the year to explain that the margins and returns in this business were probably above what The Street felt they were because I think The Street felt we still had quite a sizable exposure to that typical OCO funding stream, which typically comes in at the lower margins. And we had -- we've explained through time we've been reducing our reliance in that arena. And that business itself has really expanded its international footprint and its domestic footprint. So in the international arena, we've obviously talked a bit about in the past in Bahrain and what we do in other places. But these are long-term base operational support contracts, typically on a fixed fee basis. And so therefore, when you become more digital, you can actually process, it's all about data and having the cleanliness of data that you can actually rely on it to get more efficient. And if you become more efficient, you drive margins up. And we've got a really, really strong history of doing that over the past three or four years as that business has become more and more digitally enabled. We've recently just added the UA BOSS contract, which is in Turkey, Spain. That's about $1 billion over the next 10 years or so. So again, really good momentum going into next year and with a book-to-bill well over one for the year, I mean it's terrific. And I think from a domestic viewpoint, from an O&M piece, low cap five, everyone thinks it's OCO funded, it is not. There's a lot of it that comes from ops and maintenance as well. And the work that we're doing in and around the U.S. today is growing at a much higher clip than we expected, and we talked about that a few quarters now, and that momentum continues. We're doing -- our teams are performing exceptionally well. And that continues to grow. And it's funded through O&M. So the work we're doing at O&M in terms of supporting the training activities and getting troops ready and all that sort of thing, absolutely in the wheelhouse of readiness and sustainment. I mean can you continue to do quite a bit of work supporting OEMs as well in the U.S. around some of their facilities and what -- and your some high-end work around materiality and things like that. So all that has continued with very strong momentum, and there's a very good balance with -- in domestic with that and the preposition stock work that you're well aware of that we do for the Marines and the Army, which is also going pretty well in terms of the performance perspective. So I think it's a combination. I think the way that this business is repositioned is that needs to be admired really, really strongly. And the margin performance is in line with our broader GS margins. And it is not the low-margin business that you expect. And I think the change in the revenue mix actually has driven that and the digitalization, and we talked a little bit about that in the call as well in terms of the way we've increased automation and things to help reduce cost and therefore drive margins up.

[Brent Thielman:]

Okay. That's helpful. And then the Sustainable Technology segment, as this sort of gradual transition happens across the globe. Stuart, how do you think about the assets that might not necessarily meet the criteria at sustainable? And I assume there's still a lot of value to those. And is that something you look to monetize as you further reposition the business here?

[Stuart Bradie:]

We don't -- we've got very few of that in our portfolio today. I think we were very timely in the work that we exited. And really, what we've got today in the technology solutions, the Sustainable Technology solutions portfolio, is the suite of IP that lines up to the sustainability and climate change agenda across the world. And we've got an advisory business in a what we call technology-led Industrial Solutions, which is high-end sort of performance of assets to reduce -- to make them more energy efficient or make them far reduce the carbon footprint of how these assets perform. So these are digitally enabled tools that allow us to do that, particularly when it relates to our own technology. So, we've got -- I don't think we've got assets in associated in KBR today that we have to or need to dispose of that are not aligned to that sustainability agenda and where we're pointing that business. I mean that we've effectively exited what we wanted to exit, and we've closed down those businesses and moved out of those projects in the main. There's a little tail coming in and as we come through Q1. But as Mark said, that's it.

[Mark Sopp:]

And I'll just add, we sat down and looked at the same question relative to all of our offerings in the Sustainable Technologies segment, all of it, including what came over from the previous energy segment. And while some offer new focus on end-product flexibility, they also offer safety and/or energy efficiency propositions. And so you look at energy transition consulting, when you look at TLIS, when we look at almost everything that's sustainable heritage does, about 80% to 90% of every offering we have has an energy efficiency component, safety component, energy transition component, et cetera. So that supports what Stuart said about we really have a portfolio that is square on this megatrend of sustainability.

[Operator:]

It appears we have no further questions. I'd like to turn the conference back to Stuart Bradie, President and CEO, for any closing or additional remarks.

[Stuart Bradie:]

Just thank you very much. And really, just thank you for taking the time to listen today. We're obviously really proud of 2020, and a big shout out to all our people who really delivered for us in what was a unique and difficult year. And I think we're very well positioned moving into '21, as we described on the call. And we -- hopefully, most, if not all, of you can attend our virtual Investor Day on the 25th of March. So thank you. And no doubt, we'll be talking to some or all on sort of one-on-ones or whatever in the next little while. So thank you again for attending today.

[Operator:]

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.