KBR, Inc. (KBR) Q1 2020 Earnings Report, Transcript and Summary

Good day, and welcome to the KBR Inc., Fourth Quarter 2020 Earnings Conference Call. This call is being recorded. [Operator Instructions]. For opening remarks and introductions, I would like to turn the call over to the VP of Investor Relations, Ms. Alison Vasquez. Please go ahead.

Thank you, Molly. Good morning, and thank you for attending KBR's First Quarter 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 an operational update and will discuss highlights from the quarter, the market outlook and our updated guidance. After these remarks, we will open the call for questions. Today's earnings presentation is available on the Investors section of our website at kbr.com. I would like to remind the audience that this discussion may include 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 impact operations and financial results and cause our actual results to differ significantly from our forward-looking statements. These risks are discussed in our most recent Form 10-K available on our website. I will now turn the call over to Stuart.

Thank you, Allison, and many thanks for joining us today. I will start on Slide 4. Last earnings, we introduced KBR's Sustainability Platform. And since then, we have rolled out the program across KBR. The response has been incredibly positive. And if anything, COVID-19 has helped advance our sustainability agenda. I'm sure you have all have seen the positive impact across the world on climate change. And in a small way, we believe we can continue to contribute post-COVID-19, which takes us on to Slide 5. If there is one benefit of today's situation, it is that we have been allowed to reimagine how we deliver our work. We have all proven that working remotely is truly achievable. That customer intimacy and interpersonal relationships can be managed, and the greater flexibility can actually lead to greater productivity. There's still, of course, a definite need for face-to-face and typical office interaction, but there is certainly a great opportunity for industries like our own to leap forward. On to Slide 6. The sustainability upside is obvious, less commuting, less energy consumption, less waste, but we also believe greater flexibility facilitates greater diversity. It enables our truly global workforce, enhancing the ability to use high-value centers, it improves job satisfaction and increases productivity with less absenteeism, et cetera. There are, of course, obvious cost advantages with the need for less space, less travel and, of course, reduced meeting costs. But why it is compelling. And this is a well-proven path in some industries. So we've got some really good go buys. I know we will not be alone in this endeavor, but I wanted you to know we were firmly on this path. And that COVID-19 has really allowed us to accelerate our plans of reimagining how we deliver. On to Slide 7. I want to start with some key messages right upfront. At the time, I didn't think it was lucky that we had operations in China and a substantial workforce in South Korea as COVID-19 broke. But in hindsight, it was. We took the threat seriously, and we took it early, and we stood up our global crisis team and started to test our business resilience plans, stress test our IT infrastructure, our trial working days from home, workout comms plans and focus early on key things like safety and, of course, liquidity. We were not perfect, but as a whole, we transitioned under COVID-19 very smoothly, and we continue to deliver for our customers. The Q1 results you see today and our forward guidance that we will present really reinforced that the transformation of KBR is delivering a resilient and predictable business model. Our historical and persistent focus on cash, we talk about it all the time, and our refinancing earlier in the year has really put us in a strong, strong liquidity position, which actually has been recognized last week by the rating agencies, and Mark will talk about that later. You may recall at our last earnings presentation our guidance included a slowdown in technology bookings in Q1. And this proved to be prudent. But it's also worth noting we are seeing activity again in China, which is promising. We were also very transparent on our outlook on the energy market. We had already factored in a soft LNG market in 2020 and greater downward pressure in CapEx in general. This situation has, of course, deteriorated further and quickly, and our customers have acted very quickly. But the point I want to get across today is that we were already primed and the teams moved from plan to action quickly. And this enabled us at a time when our actual exposure to the energy market is at an all-time low to take costs out ahead of the curve. We have pulled the levers to simplify the business, retire brands, give up unnecessary space, including taking into consideration the flexible working upside that's allowed us to assess goodwill and implement cost reductions. As you all have seen this has resulted in a mostly noncash, nonrecurring charge in Q1. More from Mark on this later. But as we look beyond the first quarter and at the underlying operational performance of KBR this reset we believe is very timely. The significant majority of KBR's portfolio is proving very resilient in these volatile times. And as a consequence and I guess to put our money where our mouth is, we believe it is important that we continue to give guidance for 2020 so we have done so. To give our investors a greater level of confidence in this guide, we've taken a forward-leaning and conservative approach as it relates to Energy Solutions. More on this later. Our objective today, and to some extent, COVID-19 and the energy market disruption have helped us is to truly demonstrate the transformation of KBR. But let's talk about quarter 1 first. On to Slide 8. I want to say very clearly that the response and support from our customers in general, but especially our government customers in the U.S. and across the world has been excellent. We move quickly to ensure the safety of our people, we're extremely flexible in ensuring continuity of work and employment and ensured payments flowed on-time and that the cadence of ongoing bids were possible was not interrupted. This really helped our people stay focused on the mission. Our bookings in Government Solutions in Q1 were strong. Our track record of winning recompetes continued touchwood, and it's worth noting that in 2020 and in 2021, actually, the level of recompetes is unusually low, and we've already been awarded our largest recompete for 2020. Government Solutions book-to-bill of 1.3 is especially pleasing because all of our business units within Government Solutions achieved a book-to-bill of 1.0 or above. So a nice, nice balance. Our fastest-growing business organically in KBR is actually our Government Solutions business in Australia. The defense modernization program in Australia, especially with a number of new naval platforms, is moving full steam ahead. To enhance our position as a provider of high-end technical training to the Australian Armed Forces and Navy, in particular, we completed the acquisition of the assets of SMA. This is a modest but highly strategic acquisition and positions us really well as the demand for training ramps up as these new platforms continue to be built and come into operation. Overall from a safety perspective, even in these challenging times, our culture of zero harm has endured, resulting in top quintile safety performance yet again. And actually, we received a couple of nice safety recognitions from key clients in the quarter. Overall, our underlying results in Q1 were in line with our expectations and adjusted EPS and more importantly, above expectation in cash. I will now hand over to Mark, who will give you a bit more detail. Mark?

Great, Stuart. I will pick it up on the quarter 1 financial highlights. Slide 10. As you can see here the overall financial results as adjusted where appropriate, show ongoing growth and balanced performance in top line earnings and cash flow over last year. As Stuart just said, our core results were in line with our expectations, which we were really pleased to see given the obvious disruptions that we and everyone else had to deal with in the quarter. Revenue was up 15% year-over-year, the mix of top line contribution has continued to evolve with Energy Solutions, or ES, driving the growth this quarter, reflecting several significant cost reimbursable EPC wins last year. For Government Solutions, or GS and Technology Solutions, TS, revenues were effectively flat year-over-year for different reasons, which I'll cover here in a bit. EBITDA was up a healthy 6% year-over-year with solid performances from both GS and TS, reflecting continued strong execution and mix. ES margins were a little light on mix, including quite a bit of pass-through work on the new cost reimbursable EPCs. Consolidated EBITDA margins were in line with our targets, albeit diluted some from last year on higher overall ES mix. Earnings per share was up 8%, reflecting the EBITDA growth and also benefiting from lower interest. Cash flow was really good at $65 million, reflecting good project execution and teamwork in managing working capital. We've been really working hard on that. Given the dramatic impacts of the COVID situation, the only capital deployment made in the quarter besides the regular dividend was the reduction of debt associated with the refinancing in early February. I'll also cover more on deployment here in a bit. Overall book-to-bill was 0.8x, with a strong performance by GS at 1.3x. And not unexpectedly lower for TS and ES due to strong Q4 bookings and the Q1 market conditions. We had some really nice wins in GS like the NASA Ames Research and Development recompete, the new NAVAIR systems engineering work supporting next-gen technologies and seats on 2 large IDIQ contracts. While bookings were light in the other 2 segments. In March, we were really pleased that our technology team landed an important catalyst sale from China, certainly an indication this market has begun to open back up, as Stuart was referencing earlier. Now on to Slide 11, just some additional comments on the first quarter P&L, and I'll move top to bottom here. SG&A was higher this quarter, primarily on timing items, particularly higher bid and proposal and ERP implementation costs in our GS business and also some corporate spending items. We expect SG&A to normalize to $75 million to $80 million per quarter for the rest of the year. Goodwill impairment and restructuring charges encompass the special charge related to the energy turndown. The total pretax charge of these 2 lines was about $180 million, and just a notch above $150 million after-tax and noncontrolling interest. Just a few more points on this charge. First all but about $25 million of the total charge is noncash, thus minimal liquidity impact. Under the definitions of our amended credit agreement, none of this charge will reduce EBITDA and, therefore, it will not have any effect on our borrowing capacity or covenant compliance. No effect. The impairments stemming from the reduction in our ES outlook are associated with goodwill, excess real estate capacity and valuation of certain investments in energy-focused joint ventures. The restructuring element of the charge also stems from the reduced outlook and reflects cost to reduce overhead and a carry cost of excess real estate. As Stuart said, these actions were swift and deliberate in order to better position ES for the future. As for interest expense, the decrease was from the lower debt and lower rate, this should continue to improve a little more in Q2 and in later quarters as Q1 only reflected a partial benefit of the refinancing transaction that we did back in early February of this year. Taxes are distorted due to the restructuring and impairment charge, which includes some nondeductible items. The tax rate, however, on items included in our adjusted EPS was 26%, right in line with our guidance this year. Diluted EPS loss of $0.73 was driven by the special charge in energy, again, mostly noncash. This charge impacted GAAP EPS by $1.08. Excluding the charge and other add backs and deductions, adjusted EPS came in at $0.39 and in line with expectations implied in our original guidance. GAAP operating cash flow was just over $40 million with adjusted cash flow of $65 million after the Aspire burn add back. Now on to Slide 12 for some remarks on the 3 segments. As we discussed here, overall, GS had a really strong performance in the quarter. And as you can see, just in the bar charts there the consistency of EBITDA levels speak volumes for the stability of earnings from this business. Annualized EBITDA for GS is right now about $400 million. Maybe a size of the scale of this business now. Year-over-year revenues were down slightly due to the episodic revenues from the Tyndall Air Force Base contract, which contributed significantly to the first half of last year. Excluding that effect, revenues were up 5% year-over-year in Q1, 5%. We'll see this Tyndall dynamic again next quarter. Q1 EBITDA margins were 11%, benefiting from strong margins from the international portion, which represents about 1/4 of GS total revenues. We also benefited to a lesser extent from a favorable closeout in GS. TS performance was also healthy and as planned for Q1, fueled by great bookings last year. It is notable that this team stayed on track with its project execution plan and attendant earnings amidst the COVID environment where client access was indeed quite difficult. Revenues were slightly down, but margins up from last year on improved mix, more licensed content this quarter, whereas Q1 last year had heavy volume, lower margin equipment mix. Our ES core performance was also generally unexpected with ramp-up of higher volume, lower margin cost reimbursable EPC contracts taking effect. While some of those projects may face uncertainty relative to volume in the current environment, they are reimbursable and are executed with a largely variable workforce. We have no lump sum contracts in-house, which would otherwise impose additional risks in this type of market. Our strategy in being highly selective in which projects we undertake and also being assertive and taking out overhead costs and the restructuring is all intended to keep the business profitable as we position for the future. Now I'm going to shift over to liquidity and capital structure on Slide 13. We are pleased that the capital structure and working capital improvement actions made recently has positioned us well in the current environment. We're generating positive free cash flow, reflecting our low capital intensity business model and sound capital - working capital practices. With the credit amendment and extension completed earlier this year before the market disruptions, our debt maturities are 3, 5 and 7 years out, all staggered nicely. Our $500 million revolver has not been tapped nor it has been touched in the last 3 years. We just have about $25 million of letters of credit against it. And we don't foresee a need to use a revolver given the cash flow we are expecting going forward. We reduced debt by about $140 million when we did the amendment. And with the advent of COVID, we took a conservative posture. And as I said earlier, outside of the regular dividend, we did not deploy other funds in the quarter. We will keep monitoring conditions for a while, but our general set of capital deployment priorities is unchanged. Our cash flow visibility gives us plenty of comfort sticking to our new regular dividend of $0.10 per quarter, which was up 25% from the previous level. With all of this, we were pleased to receive a credit rating upgrade from Moody's last week, certainly not too many of those going around these days, elevating our senior secured debt to Ba1, up several notches from where we started a couple of years ago. The rating agency pointed to our increased competitive scale in the government contracting sector, as well as our bidding discipline demonstrated over the past two years as the key drivers for the upgrade. Now I'll hand it back to Stuart to cover the market outlook and more details regarding Energy Solutions. Stuart?

Thanks, Mark. And on to Slide 14. I'm sure there'll be more detailed questions, but it's worth giving a quick overview of the markets we serve. So first up, federal and government. I touched on this earlier. Our government customers have been very, very supportive, and our ongoing programs continue on pace with plan. We, of course, have challenges. For example, we have some folks deployed overseas that are now unable to travel off base or return home from leave. So we need to look after them carefully. And we've also had to work the supply chain hard for critical supplies, et cetera. But these operational issues are being managed day-to-day and in alignment with our customers. The level of bid work has actually not dropped and our pipeline remains robust. Activity levels in our areas of strategic focus are at pre-COVID levels. Much of what we do is mission-critical, and we've talked about that a number of times. And to give you an example, even during lockdown, we supported NASA as astronauts were deployed to the international space station successfully. I would reiterate that we have a very low recompete risk in 2020 and also in 2021 and that our outlook is underpinned by multiple long duration programs, as you're aware. LOGCAP V transition planning continues, but the legal process is not yet concluded with DynCorp's protests still ongoing. It's notable that Fluor have withdrawn their appeal. But in truth, the current circumstances and changing out people and moving people in this environment is likely not advisable. And we believe that as things open up and get back to a more normal, we expect the planning we're doing now to move into execution. But given where we are in the year and the impact is really going to come through in 2021, and our guidance factors this in. And our longer-range targets always assume conservative trip levels. So overall, we're feeling pretty good about the government solutions outlook. Now on to technology. As you're aware, China has been a critical market for our, I guess, our new and developing technology portfolio or disruptive technology. And as we signaled last earnings, we expected a COVID impact and factored this into our initial guidance. This is proven to have been prudent with bookings low in Q1 as we expected. Today, however, we are seeing the China market activity increasing. We have our Beijing office back to work, and able to visit customers once more social distancing and proper PPE being worn, of course. And as Mark said, we've received our first order for catalysts from China in March. Although the petrochemicals market activity has, in the mean, paused, we are seeing activity in the fertilizer market increasing, which is offsetting much of that downside. And the ammonia fertilizer deals are typically at larger scale. We have a number of active opportunities in the Middle East and in Russia. Our strong bookings in late 2019 have positioned us for a good start in 2020, as you've seen in the Q1 results. But we do expect a different performance later in the year with a slow bookings in the first quarter, and this, again, has been factored into our revised guidance. In addition to ammonia, you will recall that our technology portfolio is well positioned from an environmental and cost perspective. So all up, our long-term outlook for technology remains unchanged. And this business has proven to be really resilient in the past. Now on to energy. First, it is worth saying again that KBR's exposure to the energy market is at its lowest level. It is also worth reiterating we have zero lump-sum turnkey risk in our portfolio of projects, and we have transitioned a large component of our activity to be OpEx facing. I think we're all aware, there have been delays, cancellations and slowdowns of projects and prospects. CapEx is being cut across the board, and our customers are reevaluating their own priorities. OpEx is also under review, but under less pressure and because it's a bit harder, we believe, to turn off. We're seeing increased engagement with our customers. Especially with those with whom we have longer-term strategic relationships, which is encouraging. And the Middle East continues to be a positive with ongoing awards and activity continuing. Our consulting business is actually doing quite well, and is very busy, particularly in the area of any - energy transition and renewables. But our Energy Solutions business has been impacted, of course. And as Mark outlined, we've taken proactive measures to reduce costs ahead of the curve. We are confident we can flex as the market demands, and this is important because it not only allows us to manage costs but it also allows us to scale down and up. What is clear is there is very limited market clarity. And so flexibility and speed of change are important success factors. On to Slide 15, resetting the Energy Solutions business. The first few bullets on this slide, I believe we've already covered. And hopefully, we've given you some confidence that we have reset our cost base and simplified the business. This will help us remain competitive and remain profitable. With the uncertainty in the energy market, it is incumbent upon us to look across our energy activities and examine their attractiveness against our long-term priorities. For example, do they fit our risk criteria, meet return hurdles, can we be differentiated in this market, is cash conversion continuing to be attractive, what are the true synergies we can leverage going into the future with Technology and Government Solutions, will our competitors be commercially disciplined in this new world, will our customer behaviors remain fair, et cetera. We're going to have a look at that across the next little while. We are confident we can flex as the market demands and remain profitable. However, we have taken the conservative, and I believe, prudent decision to zero out further contribution from energy solutions for the remainder of 2020 from our outlook and guidance. This gives us some cushion to manage uncertainty. It allows decisions that may cost some money short term, but in the longer-term interest to be made now, and it gives time for markets to settle. We will not make any knee-jerk decisions. But in short, we have given ourselves the time to reset our priorities and reset our focus. And the other upside of this approach is that it allows us to give guidance for 2020 and I will hand over to Mark to do just that. Mark?

Okay. Stuart, I'll pick up on Slide 16. We'll spend a little bit more time on guidance here just because we are changing it a little bit modestly and really want you to understand the basis of all of the elements. Our heavy mix of Government and Technology business produces quite predictable revenue, profit and cash flow streams. I think our recent performance well demonstrates this. These 2 business areas originally comprised over 90% of our forecasted segment contribution profits in our 2020 plan. Demonstrating our earlier remarks, as Stuart said, about our exposure to Energy being at an all-time low, over 90% from Government and Tech in terms of contribution profit for 2020. As we have mentioned here today, our Government customers have been particularly accommodating during the COVID situation. There are, however, some situations where continuity is not possible. For example, we were planning to provide considerable support for the Defender 2020 military exercises in Europe over the summer. And due purely to logistical reasons caused by COVID, these exercises have been canceled for the year. Situations like this are fairly modest and have been identified and removed from our updated forecast. For LOGCAP IV and V, we have assumed the transition will be protracted and have held our forecast flat to current Q1 activity levels. With all of this, the GS forecast is down just slightly from our original 2020 plan. For Technology, you may recall we cited some concerns on COVID in our February earnings call and factored their reduction into our original 2020 outlook. Our customer engagement has been good and order activity in Asia picking up. We believe there's additional risk of project deferrals, which we would view as a timing item. We have factored down our new forecast to reflect this, although we are expecting an uptick in orders in the second half. With that, Tech remains a very profitable, cash-generative business with excellent market positioning and a track record in performing well in challenging market conditions. As Stuart said, our long-term Technology outlook is unchanged. And for Energy, we believe our Energy business should remain profitable this year as a result of the actions taken in the first quarter, but the market conditions do remain unpredictable. As a result, our updated outlook now assumes no contribution of profit from this segment, which we believe is both conservative and prudent. To offset these effects, corporate costs have been lowered, including pay reductions taken by our Board, Stuart and the management team across KBR. Our overall assumption for this guidance update is the energy markets will remain stressed for the rest of the year. And there will be a slow return to the new normal workplace coming out of COVID. We are expecting to continue to work with many of our customers across all of KBR as we are today with teleworking being used to a significant degree and with success. With this as a background, we are updating guidance for adjusted EPS to a range of $1.50 to $1.80 with a midpoint reduction of about 11% from our original guide. Well over 90% of that midpoint in earnings is covered by backlog sitting here today. The new midpoint is just under our 2019 adjusted EPS actual performance, where the energy segment contributed about $0.30 toward EPS results. This underscores the strength of our government and technology businesses and the overall resilience we achieved through the KBR transformation over the past several years. From a phasing perspective, we expect consolidated results for Q2 to be generally in line with our Q1 current run rate, with a pickup in activity in the back half of the year. For operating cash flow, we had strong results in Q1, which is typically a low quarter from a seasonal perspective. We are seeing good payment flows and cash conversion across all segments, including energy. We're updating the cash flow guidance to reflect the lower expected profit level and also the nonrecurring cash costs associated with our overhead reductions. Our updated guidance for adjusted operating cash flow of $175 million to $225 million. We continue to expect CapEx to remain in the $10 million to $20 million range for the year, translating to ongoing strong free cash flow conversion. I'll also point out that we expect to see cash flow benefits of about $50 million from the U.S. CARES Act, which allows us to defer 2020 employer social security taxes to 2021 and 2022. This will increase our reported GAAP operating cash flow results for this year by that amount. So we have excluded it from our adjusted operating cash flow guidance as we don't view these funds as deployable given it must be returned to the government. Now back to Stuart to wrap it up.

Thanks, Mark. Good job. So on to our final slide of today's presentation, and the slide is aptly named Resilience. Our transformation over the past few years has created a business model that is both resilient and we believe attractive. We have been consistent on our strategic and commercial discipline. Our focus on a longer term, lower risk and higher end book of business in attractive markets of the future has reshaped our portfolio considerably. This has helped us become a far more stable business with an intrinsic culture of performance. We have been true to our commitments on being focused on businesses with strong liquidity fundamentals, and this has allowed us to obviously improve our credit rating and increase and maintain our dividend. We have confidence in our guidance with zeroing out the Energy Solutions contribution, and it's worth emphasizing that our whole company 2019 adjusted EPS performance was $1.69, which is well within our revised guidance range of 2020 without Energy Solutions, which again demonstrates the extent of our transformation. Thank you very much, and I will now hand you back to Molly, who will open the call up for questions. Thank you.

[Operator Instructions]. We will now take our first question from Jerry Revich of Goldman Sachs.

I'm wondering if you could talk about - can we talk about in Government Solutions, as you pointed out in the release, you had a good recent win rate on IDIQ contracts, really over the past couple of quarters, any update in terms of when can we expect task orders against those contracts? So the state department contract, in particular, jumps out. But can you talk about when do you expect those awards to drive meaningful orders for your business based on the current cadence, what you're caring for your customers.

Gary, this is Mark. Can you hear me okay, I'm just testing since we are reverting to Q&A?

Yes. Yes, we can.

Okay. Thanks for the question. If I heard it correctly. First, I'd say we're pleased with our win rate on the GS side. It now eclipsed 60% on a year-to-date basis across all categories with a great win rate on recompetes, but everything else, all balanced out to north of 60%. So we've really held strong there. Kudos to our business development team on that front. The pipeline continues to be very sizable. And I think it's fair to say there have been some delays in making decisions out of the government, which has pumped up the pipeline a little bit. But we do expect them to get on pace and make the decisions and place their award as we get into Q2 and Q3, hopefully, as things normalize more as you probably know, the government does like to contain their decisions within the government fiscal year to keep obligated funds and appropriations intact. And so I think there's a motivation to do that. And spend the money that they've been given. And so we're pretty optimistic that we'll see decisions, and we're pretty optimistic we'll win our fair share.

Okay. And in terms of the margin outlook in Government Services, is there any potential impact from projects moving slower. You mentioned awards, but also could there be an impact on milestone payments over the course of this year due to project delays, anything like along those lines that we should keep in mind?

So I mean, I think, Jerry, we're seeing the opposite. I mean, I think we're seeing the - particularly the government customers and to some extent, the commercial customers really leaning forward and understanding that liquidity for people like ourselves is very important, and they're actually paying us ahead of time. So I think that - I mean, I was quite clear to call that out in the prepared remarks because I think the - particularly the government customers have really, really helped us transition through this and focused in on key elements like liquidity. So, no, we don't expect that to be a factor at all. In fact, it's probably the opposite.

Okay. And lastly, in Energy Solutions, you folks have done an outstanding job of rightsizing that business and putting up consistent margins. How big of a lift will it be to take the next layer of cost out? What's your level of confidence in the ability to maintain the current level of margins, given, obviously, the dramatic decline in earnings for year-end customer here?

Yes. I mean as I said earlier, we were primed in terms of the actions we needed to take costs out and reset that cost base of that business, and we've done that in Q1. We do think that business is going to be profitable through the year. But to ensure that we were prudent and conservative, as you know, we've actually zeroed out the profitable returns from that business for the rest of the year. So that gives us a bit of cushion to understand how that market is going to move. And where it's going to move to. And at the same time, it gives us the confidence to give the guidance that we've given. And I think it's kind of an unusual approach to zero out a contribution from a business we expect to make money. But I think what the message - there are a couple of key messages there. The first was it really underlines the transformation of KBR, just given our EPS last year of $1.69 on where we are today and the strong performance of Government and Technology. And the second thing is that there's still uncertainty in that market. And again, it gives us cushion to deal with that uncertainty and make key decisions. So we'll be going through a hard look at that business and making sure we focus and prioritize the right areas. I'm confident that we will have the margin profile we set out historically as we come out of that review and markets settle down again. But as we said, talking about margins in that business, right now with us zeroing out the margin or the return from that business for the rest of the year is probably mute.

[Operator Instructions]. We will take our next question from Jamie Cook of Crédit Suisse.

Nice quarter. I guess a couple of questions. Stuart, back to assuming the no contribution from the Energy Solutions business in your 2020 guidance. Just trying to understand, I mean, you still have backlog in that business. If any of your customers told you that they're deferring spend on more on the O&M side of your business. So just trying to understand if there's anything else there what your customers are seeing besides you guys just being conservative? And I guess my second question, given the changes in the Energy Solutions business and the CapEx environment, how do you feel about sort of your longer-term EPS targets? And then my last question, just given some of the restructuring that you guys are talking about, I guess I would have assumed corporate G&A could come down more so versus the $75 million to $80 million or so. So if you could just comment on that.

Okay. Thanks, Jamie. Three questions in one. You're true to form, I do like it. So I mean, I think the first question really on really looking at the - there have been, I think, more deferrals or what I would say, slowdown, so people deferring spend and spreading projects out over a longer cycle. That's kind of what we're seeing in the Energy business now, particularly the projects ongoing in the Permian, et cetera. So no cancellations per se. We're seeing a lot less pressure on the OpEx side of our business. I mean, that continues to. There will be some pressure brought to bear there, but I think it's far more resilient than CapEx. And clearly, you've got to support ongoing assets as they continue to produce. So we're feeling really good about the, I guess, the OpEx facing side of our business. In terms of the broader market outlook, I mean a lot depends, doesn't it. One could clearly see that LNG is an attractive market in the future. It will - the demand for gas, particularly in a climate change-driven world as a transition fuel is probably obvious and as places like China, et cetera, start to come back and their industrial output goes up, the demand for energy will increase again, and gas will fill that void, one would expect. I think, though, one of the things that we do need to watch, and I've been very clear on this is both our competitor behavior and our customer behavior, and as the market tightens. I mean, I think it was only a couple of months ago, we were feeling very, very good about the competitive environment and the conversations we're having with customers. But clearly, that cycle has changed somewhat. And we're now in a situation that's probably far more competitive and our competitors hopefully, won't do anything silly, but - as they get hungry. And hopefully, our competitors look for a balanced risks, but the history would suggest that we're trying and pass more risk onto the contractor base. So until we see that market settles down. Even if there's an increased demand, that doesn't mean it's an attractive market into the future. Because of those behavioral traits. So we have to be cognizant of that. And I think I would probably reserve judgment on those areas until we get a bit through this review and that the industry base starts to open up and demand changes again. In terms of our corporate costs, you're quite right. At the moment, we are carrying by zeroing out our Energy Solutions. Our profit contribution, we're probably carrying more overhead in the corporate G&A piece than is - than proportionally, we should be. But we'll be working that through over the next little while as part of this review as well and ensuring that whatever we do on the corporate side, is sensible, opposite the scale of that business into the future. I would say that what - Mark's remarks is that in Q1, it was a little bit higher because of particularly bidding costs in the government arena. And that will normalize down to the numbers Mark presented in the presentation. But there's probably more room to move there. And again, it gives us a little bit more conservatism in our guide in these volatile times. So it is another lever we can pull. So you're quite right.

We will our next question from Tobey Sommer of SunTrust.

As you think about the business extra reimagining of energy. How can you come out in an aggressive fashion, in offensive fashion and utilize the ample balance sheet and liquidity to further reshape the business?

Firstly, Tobey, I love the fact you're using our reimagining the way we deliver. I think that's good that that's caught on already. I think that's good. Our marketing people did a good job there. So that's strong. I mean, I think, we - I think for us, we - in terms of you're looking at how we can come out and reshape our energy portfolio, I think you have to give us the opportunity. And I think we've in a way positioned ourselves to give us time to do that because of the way we zeroed out the contribution from Energy in our guidance. I do think there's - we are at the forefront of discussions on things like green ammonia, which is essentially using ammonia as a transportation fuel for hydrogen as countries like Japan and South Korea are committed to a hydrogen economy by 2050, and we're moving fast into that arena. So I do think there is a repositioning opposite energy transition as we move forward. We do think gas is a transition fuel. And we do think that we can play a very strong technical role in that transition. But I think more on that as the review progresses. But certainly, I think we've got the key skill sets, and we're seeing that coming through in our consulting business today, where we're engaged early with governments, in particular, as they look to transition their economies into a new future.

Is there going to be an opportunity for you to deploy more capital to continue to amplify your government exposures into new markets and new mission alignments with customers?

Yes, of course. I mean, I think we need to let the capital markets settle down a bit first before we did that. But certainly, there is no limit to what we see as opportunities in terms of capital deployment and expansion within in government. I mean, there's not a week passes that we don't get some sort of sim or early warning of people trading out of assets and things like that. So we just have to be very considered. We have to be very true to what's made us successful today, and that is it has to be strategic. It has to be accretive from day 1. It has to be taking us into something we don't do today. So there's limited overlap. So that the people piece of this is exciting and people aren't worrying about their jobs tomorrow, but about 1 plus 1 being greater than 2. But certainly, those opportunities are there. We've been very clear on our vectors that we feel are exciting from space to human health performance to the whole defense modernization aspects that are happening within government. So I do think we've got good opportunities both in the U.S. and internationally to do just that. But I do think that the capital markets have to settle down a bit before we think about that.

Our next question will come from Steven Fisher of UBS.

Great. Just in terms of the U.S. government contracts, I think, Stuart, you talked about some second and third quarter opportunities. Can you just kind of give us a sense of how many needle-moving opportunities you have there? And what the competitive landscape is for these types of contracts? And are they new areas for you? Just some color on the confidence you have around those.

Yes. I think we try to reiterate this a couple of times, Steven, around 2020 and 2021 that we've got very low recompetes. And in fact, as Mark explained, we won NASA Ames this quarter, which is actually our largest recompete in 2020. So all the needle-moving opportunities that we're looking at across NASA in engineering and broadening IDIQs and logistics, et cetera, are all additive. They're all new business because of our low recompete rate. There are - we've talked before about the number above $100 million. And that cadence, we didn't cover that so much in this presentation, but if you look back to the year-end presentation, the numbers there within the government sector are pretty well the same. So we've got multiple opportunities across. And as I said before, the nice thing about our book-to-bill in the quarter, was the fact it was across all of our, I guess, our business lines within government solutions. So very balanced. So we're seeing lots of activity in our chosen sort of focused fields. We're feeling pretty good about the fact there's new business opportunities and therefore, organic growth opportunities, and we're feeling pretty good about the competitive landscape remains as it was before. That's not to say it's easy, but nothing has really changed significantly in that competitive landscape where, as Mark said, our win rate is above 60% at the moment.

Okay. And then just related to Technology and the Energy side, I guess, separating out the bookings impact you have in the outlook from the virus versus just economic growth. It sounds like you believe the long-term targets there aren't changed. But curious how you think about the reliance of that business on China. The impact of slower economic growth in China and globally, really, as economies need to digest the longer-term impact of these because obviously, chemicals, is more of a cyclical type business. So just curious how you're thinking about the ability of that profitability and technology to ramp-up in the face of just kind of slower economic growth. And then if you can also just what's the timing of when you plan to reach a conclusion on the Energy Solutions strategy?

Okay. So good question on Technology. And you're quite right in the sense of - and we try to cover this a bit in my prepared remarks that we are seeing more activity and, I guess, the food production side, the - I guess, the fertilizer ammonia side of the business is moving in quite - to be quite busy again in terms of the levels of activity, particularly in Russia and the Middle East. And the scale of those is a little bit larger than your typical petrochemical type technology order. So we feel that there's good momentum there. And secondly, we've gone to great lands over the past couple of years to try and explain and introduce what I would call disruptive technologies at the forefront of environmental cleanup or at the forefront of helping with climate change or limiting environmental impact. And there's still pressure, we believe, on chemical and refiners through the course of the proceeding months and years to actually get in compliance with new regulations and things like that. So we do see that our technologies are very well positioned to sort of move along with that. We do believe we're at the proven lower cost base execution piece. And so not only are we environmentally green in what we're offering, we're highly cost competitive and we're at the forefront of some of these new technologies. So we do think longer-term that with that balance and with some things will - there will be normative movements in certain parts of energy over time. We do see our outlook very strong in that business just because of the breadth of our technology portfolio.

We will take our next question from Sean Eastman of KeyBanc Capital Markets.

I just wanted to start on the ES business, you guys talked about the OpEx piece holding out better, the Middle East holding out better, the consulting business holding out okay. It would just be great to get a little more help on the revenue mix as it stands today with those elements? And maybe just some more color on how to think about normalized margin profile in those kind of subsegments that are holding out better?

Okay. I maybe let Mark answer those questions as they relate to sort of breakdowns?

Yes, sure. Sean, thanks for joining us this morning. So we saw pretty stellar revenue growth in ES this quarter, about 80%, driven by mostly the reimbursable EPCs. So we're seeing some shift just in terms of top line relative to recurring services versus projects and with projects picking up. Now the pace of those projects could be altered by the market conditions, and that's why we've been very cautious in our outlook and aggressive in our cost reductions. As we clearly stated, as projects ramp up and we enter into a new cycle, few of them being very low-risk cost reimbursable margins will come down from recent years where we had end-of-life cycle project write-ups that were quite helpful and indicative of good project execution, but you don't necessarily see that in the early cycle. You got to hold your cards for a while. So we're expecting mid-single digits are the targets for the overall ES business with that shift. And we're slightly south of that in Q1, with the ramp-up of the EPCs and just a little bit of overhead cost that isn't quite matched with the market conditions. So I think that kind of answering your second question first, we are cautious in our margins this year for all the obvious reasons. Longer term, we will give guidance on any changes to the targeted margins for ES when we come through our review. But we would start at the midpoint and evaluate our mix there. I will say that the OpEx side and the consulting piece margins are holding as long as we keep our overheads in check with consulting being quite attractive, and that's why Stuart called that out in terms of our role in energy transition and environment work there has been something that we're quite excited about. In terms of overall mix, we said that OpEx versus CapEx was a little greater than 50-50 on the OpEx side, and we're happy to see how that unfolds as clients make project decisions this year. But I think that our dependency on OpEx, given the conditions will, if anything, increase as clients keep production facilities going and defer CapEx. And so sorry a long-winded answer, but I think that shorter term, we probably will see more on the OpEx side, and we'll evaluate the project volume when we come through our decision-making process here in the next couple of quarters. Stuart?

Yes. I think just to pile on a little bit there. We - our revenue distorts because we've got, I guess, lower margin, higher revenue, EP - reimbursable EPCs coming through. And a lot of our profit is actually coming from OpEx and, I guess, some of the Brown & Root JV and consulting. So that's probably about another way to think about it.

Okay. Helpful. Next one me. Is there any update on the Ichthys claim settlement timeline? Just kind of wondering what we should look out for next there? And whether there's been any change at all in expectations on what KBR is entitled to there?

So first up, no change whatsoever on our entitlement. I think our legal position is as it was. So no change there at all. In terms of timing, I guess, the good news - on, I guess, the claims we have against the customer, the first round of those legal, I guess, hearings is going ahead as planned because they don't involve particularly many witnesses and things like that. And of course, are very keen to progress, particularly if they can do it virtually, and that's exactly what's happening with hearings progressing in September and in late this year as scheduled. So that's good. In terms of what's happening with our claims for the power station element, CCPP, those have moved to October, November from August. And into the beginning of next year. So there has been a delay in those, as you would expect because they're a bit more complex and there's more face-to-face witnesses required in the court. So under these conditions, they would prefer to do that on a face-to-face basis in that rather than virtually. So that's the long and the short of it. So a little bit of a delay, say, 6 months or so on the power station. But the claims opposite the customer moving along at the cadence we discussed historically, but with no change whatsoever in our view in terms of entitlement.

Got it. And just to wrap that up there, am I correct in saying that the total claim is kind of half on the customer side, half on the power station side?

Yes. So I mean, the claims are probably higher against the customer, but the way that we've booked, I guess, the - if you look at our accounts, it's about 50-50, yes, something like that. And it's worth saying, just to the broader audience, just remember that none of the guidance that we've given, either on EPS or in cash factors in any input from Ichthys whatsoever. We're just unclear of timing, as we said, on quantum. So it's factored out to our underlying results. And if it's positive or negative, we'll take it out. I mean, obviously, hoping it will be positive. And - but it will be a cash positive event in due course. And again, we'll call that out in due course, but please keep in mind that the positive cash results that we're forecasting, we have got nothing to do with Ichthys.

Our next question will come from Michael Dudas of Vertical Research.

Yes, just two quick questions. First question, as you look at your staffing levels and your plans in, say, the Government Services business, given the disruption of COVID and such. Are there any thoughts of recruitment being delayed or any access of certain types of folks that you would need for some of the projects that you're going to have to ramp-up in 2020, that might get delayed a bit because of this. And vice versa, I assume probably on the retention side, there's less movement internal. Just a little sense of labor and how this may play out here as we try to get back to some sort of normalization.

Yes. I mean, it doesn't really impact us so much on the Government side of the house, Mike, which is - nor in the Tech side of the house. That's more on the energy side, most of what we're doing in terms of the elongation of projects really relates to that impact, and that's been factored into the way that we're thinking about the future already. So we have stopped construction on the Methanex project, right now it's in a very slow burn, but we continue with engineering and procurement. And I think once we get line of sight on playing things equipment will arrive, et cetera, then you can actually reschedule your construction accordingly. So I don't think for us, there's a major issue there in terms of disruption. In terms of people access, I think, this new norm of teleworking is actually giving us probably more access to people and technical experts across the world than we've ever had. So I don't see any issue there from a technical input or specialist perspective. And it really all relates to the sort of restart of construction and as you've seen, we've taken a very conservative approach to the way we're thinking about our Energy business to deal with any uncertainty around that. So I think we're covered and I think more on that as the year progresses and the new norms, as you put it, becomes more apparent.

And that's a good point. My follow-up question is, as you're reimagining the business and maybe even the industry. Do you anticipate some infrastructure changes at KBR, given this - what you reported some good success on the work from home and the systems that you've put forth? Is that a longer term, could you guys in the industry rely on more of that and less real estate or having offices spread out or having more flexibility in where you can source your talent from?

Yes. That's exactly right, Mike. I think we try to sort of portray it actually didn't do a particularly good job at the beginning. But that's kind of what we were trying to say. First up, we are thinking differently about how we could execute work. We are thinking differently how we support the back office. And the success of teleworking has accelerated those thoughts. We have a dedicated team looking at how we would do just that and how we can culturally create more flexibility in the workplace. I think our industry is slow to adopt that. And I think the internal and to some extent, the client barriers around that have been broken down with the success of how this has worked so far. So there's a great opportunity for our industry to transform as a great opportunity to really advance sustainability goals around space and less commuting, less energy usage, less - and greater safety with less people on commuting and things as well. So there's a lot of benefits to doing that, but it does allow us to create, what I would call a truly global workforce through execution. The introduction of high-value centers is nothing new, but our ability to use them in a more fulsome way is clearly in front of us, and that's kind of the things we're looking at and working on right now. But it will save us costs on space. It will save us cost on meetings. It will save us costs on travel. And I do think that. I don't think we're alone there. This isn't groundbreaking just for KBR. I'm very aware that we, as an industry, we're probably slow to the party. But I do think that it creates an amazing opportunity for us and really could bring down our SG&A and get us to be more competitive and more global on our outlook. And the other benefit there is with greater flexibility, you can drive diversity and change some of the dynamics of our industry around being mostly male-dominated, and we can drive far greater diversity as a consequence of increasing flexibility and globalizing the workforce. So I think there's a lot of positives here, and certainly, we're on that path.

Our next question will come from Andy Lee from Citi.

So congrats on the quarter, and I appreciate all the color. I think most of the questions have been asked. So I just have 1 question in terms of potential M&A's down the road. I see that our leverage has been progressing down steadily. And I think we've done an acquisition roughly 2 weeks ago. So how are you thinking about potential M&A's going forward, given the type of environment that we're in? And is there anything that you want to highlight in terms of your pipeline?

In terms of the way we're thinking about M&A's, I think we have to be very cognizant of liquidity in this environment, and we'll be very considered about that. We do have, as I alluded to earlier, we do have very clear strategic objectives, and we're always looking whether organically or acquisitively, to move faster towards those goals. But again, we'll only do it if it makes sense. We'll only do it if we've got a lot of confidence around cultural and strategic fit. But also, we'll only do it in today's environment from a liquidity perspective if it makes perfect sense. So I do think we've got to be a bit more considered. I do think the capital markets today have to settle down. There's no doubt about that. The raising debt and things like that for - even with our improved credit rating would be expensive. And me being Scottish, then you'll probably realize that's not a good thing. But we are looking very carefully longer term. This is a moment in time, there will be more disruption, I'm sure, and with disruption there comes opportunity. So I think keeping our powder dry, not getting out in front of our ourselves and taking on silly projects and things like that, has really positioned us well to take advantage of any opportunity into the future. So would M&A be a good part of our future? I hope so, but it's got to be under the right circumstances, as I talked about before. In terms of the pipeline, we're trying to avoid calling out specific pursuits. But I think that really, we've alluded to the fact that the pipeline is robust and is very well balanced across what we do. And there's a number of opportunities. There's no real concentration risk there either. So I think we'll obviously release those as they come to market, and we win them. And as Mark said, I think the key point here is two things. Number one is, the cadence is pretty well moving along, particularly in Government around bidding. Our win rate is upwards of 60%, and our recompete win rates are actually above 95%. So we're doing very well. We've got a very strong bidding machine, and there's no - we're not bereft of opportunity. And as we said before, with the recompete rate being very low, it's all organically additive as we win our fair share. So I think that that's probably a good place to stop that.

Our next question will come from Michael Feniger of Bank of America.

Okay. Just the first one for me, and I appreciate you have been giving a guidance in this environment. With most of your recompetes in the bag, is it top end assuming any big contract wins in the back half? And just because of how the backlog flows through, I'm just curious, do you expect Q2 or Q3? Or where do you expect a low point for this year?

So I think Mark was - in his remarks, and I'll do the last question first, if I may, in terms of phasing, we expect Q2 to be kind of on track with Q1 and then the second half of the year to be higher than the first half of the year is probably the right cadence. In terms of the other piece that we did say in the prepared remarks, I think Mark covered it, was that we're going in with the revised guidance with over 90% of what we need to deliver that guidance secured. And so - and we've actually taken a very conservative position on Energy Solutions to ensure there's absolute confidence in achieving that guidance. So if you actually take those into consideration, you can see that if we win a little bit more than our fair share, if we do a little bit better than Energy Solutions, then clearly, we can do a little bit better than the midpoint of our guidance. And so really get - achieving the top end is all about winning the right work and then managing our way through the Energy Solutions or the energy market disruption in a positive way. So I do think that, as ever, we try to be very prudent in our guidance, I think our history would suggest we've met or exceeded guidance for a significant number of quarters. We've upped guidance a number of times as well as we've gone through the year. And I think we've tried to hold true to that transparency even in these times. And we've tried to portray today the extent of the transformation of KBR away from lump-sum volatility, away from roller coaster cycles to having a very strong base of business, at 90 - over 90% of which is in the bag today to deliver the guidance we've given. So we're feeling pretty good about the guidance. We're feeling pretty good that we can manage Energy Solutions to be profitable. We've taken a very conservative position. And I think all the work that we'll win in Government Solutions to a greater extent will be additive because of the low compete win rate. And if that all happens on a timely basis, is there an opportunity to do better? Of course, there is. But are we giving guidance today and not - and not really sort of saying that we're going to blow out the word, of course, we are? We've given guidance in a conservative and sensible basis, and we're being prudent. And if we do better, we'll let you know.

Perfect. And then just on the government side, are you hearing anything that the DoD might have to adjust budgetary request for 2021 in the wake of COVID? And I understand a lot of DoD secure funding, the CARES Act and other measures to really focus on liquidity and financial health of suppliers, particularly maybe on the manufacturing side. Are you hearing anything in terms of increased funding and support for the contract workforce, the maintenance, and the services and the IT side?

No. I mean, in terms of 2021, I think not really, we're not today, not seeing anything that would - Mike you may want to chip in, but I don't think we're seeing anything there. In terms of the CARES Act and, I guess, the financial support, I think Mark said we'd have about $50 million of cash, I guess, support if you like. But we've actually excluded that completely from our guidance. And the reason being that we're going to have to give it back eventually. So it's not deployable cash. So I think we've been very, very transparent again there and basically saying, we will have a benefit in over the next little while. But it's not something - if we spend that money, we've got to replace it with something else. So best we don't include it in our guide. So I think, again, it's a prudent, transparent approach, and that's what we set our stall out to be. And hopefully, we're delivering on that. So - but we don't see much disruption today in terms of going into 2021. And in fact, the budgets had gone through. I think there's still some tailwinds associated with the spend going into next year.

Our next question will come from Bill Newby of D.A. Davidson.

Just one quick follow-up on the labor. Stuart. I think in the past, you talked about pretty high-growth in win rates and the engineering work KBR does within government. I guess, seeing the energy slowdown here. I'm wondering if that can become a meaningful source of internal at the human capital to further advance what you do in other parts of the business? I guess, any opportunities there for you guys to reallocate that labor across the business?

Yes. I think that's a good question. And it's - the synergy - the labor synergy between the businesses is something we've talked about in the past, and it's certainly true today. I mean, you can envisage a situation if LOGCAP V proceeds in the next little while, where there is an opportunity, particularly in the U.S. with NORTHCOM being very new to our portfolio that we could bring people across from the energy sector into that environment, whether they be project management, contracts management, construction folks, whatever they might be across. In terms of engineering, I think that's - there is some movement, but it's probably less so in truth. I think there's a lot of specialization in both camps, both in the Energy side and in the Government side. What is interesting, Bill, and I haven't really talked about this is that we are seeing governments across the world looking to companies like ours to take on engineering staff from airlines and industries that have been impacted negatively by COVID. And employ them in a meaningful way into what we're doing for Air Forces and things like that across the world, and which really gives us an upside opportunity. But at the same time, I think it's really incumbent on governments and ourselves to work together to try and maximize the amount of opportunity we can give people in those difficult situations. So we are seeing that happening as well as a dynamic, which I think is very uplifting, actually, that governments and a part that we can play within that.

Our last question today will come from Gautam Khanna of Cowen.

Sorry, I joined the call late. So if you answered this, I apologize. But I just wanted to make sure I understood in the revised guidance, is the - some of the technology and energy segment free cash flow expected to be positive this year? Or is it going to be negative? And if so, how much?

Well, we've given the guide of $175 million to $225 million, somewhere in that record.

Right. So the overall...

And I think Gautam - Yes, for the overall enterprise. I mean if you - and if you look at the math, our original guide was $200 million to $250 million. We've taken out Energy Solutions profit contribution entirely. And if you want the mass back, then the free cash flow really sort of lines up against that reduced profit level. There's puts and takes, of course, but that's how the math works.

But [indiscernible] a little bit, Gautam. But really, the ES collections have been strong, stronger than I expected to be candid. I said that in my remarks. And so if their contribution is 0, I don't think cash will be any worse of a result in that and probably is better from a pure flow perspective. And on the TS side, they've always converted very healthy, and they're still very profitable in this reduced guidance, and they will produce attractive cash flow attendant to those profits. So together, yes, cash generative, as has been the case in recent times.

Okay. And just - you may have addressed this as well, Mark. The outlook, you've given longer-term guidance. And obviously, it's dynamic, but how do you think about Energy plus Tech free cash flow in '21 and '22? Do you think it would stay positive? Because I'm just trying to just aggregate to a sum of the parts, and it just seems like people are pricing in the negative, but I want to make sure I'm understanding the math correctly.

Well, I think you're understanding it correctly. We operate our businesses as a criteria to be cash-generative and we adjust them to ensure we achieve that result. And so no change to TS. I think we were very clear on that, very cash-generative business and attractive on every front. And we will manage ES so that it produces a profitable result as well as a cash flow result as a criteria for it, particularly as we go into the beginning of the cycle, which is clearly in a deferral mode today, given the disruptions we've seen. But in general, across our longer-term plan, we have exited the completion of projects in 2017, 2018 and to some degree, '19 and we enter into a new capital phase, if you will. And with that, we expect to be cash-generative through that phase, which we've seen in previous cycles. On top of that, the OpEx side by definition should be cash-generative throughout each of those projects.

That will conclude today's question-and-answer session. I will now hand the conference back to Stuart for final remarks.

Thank you, Molly. Thank you for taking the time today. I hope we demonstrated that the true transformation of KBR in these difficult times has kind of reinforce that transformation. I' m really following on from that, I'd like to announce that we're going to have a KBR Government Solutions in Focus, a virtual event on June 16. And Alison and the team will be sending out more on that. But that - we'll bring in our key leadership across our businesses underneath the run space and run their engineering business and logistics and international pieces as well. So you'll get to see the strength of the leadership. We can talk a little bit more about how we make money in those businesses, and I guess the sub-market outlooks and hopefully, get you a little bit more knowledgeable and excited about what we're doing in the Government Solutions segment. So that's on June 16. So thank you again for taking the time. Apologies, the presentation was a little bit longer than normal. But I think given the circumstances, it was well worthwhile. So I'm sure we'll talk all again soon. Thank you.

This will conclude today's conference call. Thank you all for your participation. You may now disconnect.