KBR, Inc. (KBR) Cash Flow Statement

The wide oscillation in OCF/NI, from 0.44x in 2025Q4 to 1.69x in 2025Q3, points to a pattern where cash conversion is heavily influenced by contract milestones and client payment terms rather than underlying profitability. The latest quarter's ratio of 0.52x, with net income of $96M against operating cash flow of $50M, implies that accruals are absorbing a substantial portion of earnings, possibly due to unbilled receivables or deferred revenue. Investors should monitor whether this is a seasonal pattern or a structural shift in cash generation efficiency.

The FCF trajectory shows no clear upward trend, with peaks in mid-2025 (9.6% in 2025Q3) followed by troughs in late 2025 and early 2026. This volatility likely reflects the lumpy nature of government contract payments and project milestones. The latest quarter's FCF of $34M on revenue of $1,984M is notably weak, and when compared to net income of $96M, it suggests that earnings are not being fully converted to cash, which may indicate a build-up in working capital or timing of collections.

CapEx has ranged from $1M to $25M per quarter, with no clear trend, reflecting the company's asset-light business model. The low capital intensity relative to revenue (0.8% in 2026Q2) is consistent with a government services and technology licensing focus, where the primary investments are in human capital and intellectual property rather than physical assets. However, the minimal CapEx may also imply that the company is not investing heavily in new capabilities or infrastructure, which could limit future growth potential.

The working capital line item shows extreme quarter-to-quarter variability, with negative changes in 2026Q2, 2025Q4, 2025Q1, 2024Q4, and 2024Q1, and positive changes in other quarters. This pattern suggests that KBR's cash flow is heavily influenced by the timing of receivables collections and payables, likely due to the nature of government contracts with milestone-based billing. The latest quarter's $70M outflow is particularly notable, as it more than offset the $96M net income, resulting in only $50M of operating cash flow. This may indicate that the company is experiencing slower collections or increased working capital requirements.

Dividends have been consistent at around $20-22M per quarter, indicating a stable payout policy. Buybacks have been more variable, with a significant $204M inflow in 2025Q3 (likely due to settlement of forward contracts) and a $156M outflow in 2025Q1. The $749M acquisition outflow in 2024Q3 reflects the Centauri acquisition, which was a major strategic move. The mix of dividends, buybacks, and acquisitions suggests management is actively returning capital to shareholders while also pursuing growth through M&A, though the sustainability of buybacks at current levels may depend on cash flow stability.

The cumulative OCF/NI ratio over the ten quarters is approximately 1.16x, which is healthy, but the quarterly volatility masks the underlying trend. The cumulative gap between net income and operating cash flow is $156M, which may be due to working capital build-up or non-cash items. This divergence warrants monitoring, as a persistent gap could indicate deteriorating earnings quality or aggressive revenue recognition. However, the overall positive conversion suggests that KBR is generally able to convert earnings into cash, albeit with significant timing fluctuations.