Good day, and welcome to KBR Inc Third Quarter 2021 Earnings Conference Call. This call 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 introductions, I would like to turn the call over to Alison Vasquez, Vice President, Investor Relations. Please go ahead.
Good morning, and thank you for attending KBR's Third Quarter 2021 Earnings Call. Joining me today are Stuart Bradie, President and Chief Executive Officer, and Mark Sopp, Executive Vice President and Chief Financial Officer. Stuart and Mark will cover highlights from the quarter and then open the call for your questions. Today's earnings presentation is available on the investor section of our website at kbr.com. This discussion includes forward-looking statements reflecting KBR's views about future events and their potential impact on performance, as outlined on slide two. These matters involve risks and uncertainties that could cause actual results to differ significantly from these 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, Alison, and thank you for joining us this morning. I will start on slide five. As some of you may be aware, we released our 2020 sustainability report last week, which highlights our progress and our continued ESG commitment. As such, I thought it would be timely to touch on some of the highlights. Starting on the right-hand side, if we could, I think the commitment to strong leadership and governance is, of course, table stakes today, but I would highlight the progress we have made in diversity at the board, the high degree of independence, and I think the changing mix of capabilities to suit KBR's business today. In the bottom left, we have matured our operating culture aligned with social impact, and there are some good examples listed there.
The circles in the bottom in the middle highlight our ongoing carbon neutrality, our net zero 2030 commitment, and the elements of executive reward that are aligned to ESG. Really all great examples of being a good corporate citizen. As you know, we believe, and we firmly believe this, that being a good corporate citizen is the floor and not the ceiling. It's really about things like the strategic growth vectors, about advancing the science behind climate change in our work for NOAA and USGS. It's about making net zero a reality for our clients looking to operate more efficiently or to close the circular plastics loop. It's about bringing commercially viable green energy to market. Really, in sum, it's about our investment in new technologies and capabilities to meet the world's growing demand for real solutions around climate change.
KBR is doing some really pretty incredible work in these areas, and I think the alignment with shareholder value is, I believe, a clear differentiator with 32% of our revenues sustainably focused with strong CAGRs forecast. I encourage you to visit our website to read the comprehensive report. Now on to slide six and the quarter highlights. It's been a fantastic quarter across all metrics, financial, operational, and strategic. Revenue is up 34%. Yes, 34%. This is a combination of organic and acquisitive growth and the Operation Allies Welcome, OAW, mission to assist the DoD in looking after the Afghan nationals as they came out of Afghanistan. It's an impressive revenue growth number, especially given the impact of our exit from commoditized services in 2020. EBITDA is up 30%, which is again quite an increase.
The businesses performed really well across the board, delivering at or above expectations. We hit or exceeded target margins in both our core government and sustainable tech businesses. EPS was up significantly at 45%, obviously helped by what I just covered, but also with more volume in the U.S. that helped our tax rate also. From a cash perspective, we maintained our discipline and focus and again outperformed. The conversion rate in the quarter was 125% or so. That's 110% year- to- date. I think the cash fundamentals of our business model are not only attractive and consistent, they of course give us options. The team landed about $1.6 billion of awards and options in the quarter. A nice combination of some new work and recompetes that I'll touch on shortly.
This figure significantly understates the magnitude of the OAW award by almost a billion dollars, and Mark will cover more on this later. For now, I'll just say the team continues to win important, highly strategic projects across the growth engines that we laid out at our Future Forward investor event earlier this year. Cyber, green ammonia, digital solutions, and more. Doing important work advancing our clients' missions and sustainability objectives. This of course provides us the continued momentum and growth towards our 2025 targets, which remain unchanged. As we indicated last quarter, we concluded the settlement with a client on Ichthys, removing complexity and uncertainty and thus enhancing our capital deployment optionality. Our pursuit of the recoveries of the monies associated with the combined cycle power plant are not affected and continues with the arbitration starting next April in 2022.
With all this, we're once more raising guidance for full year 2021, and Mark will walk you through that shortly. All up, we must be and we are very pleased with the strength of the delivery and our people's commitment to the mission is inspiring. A big shout out and a big thank you to them. On to slide seven. The market and outlook in government remains quite similar to Q2. Of course, much of the discussion is on continuing resolution and of course, the defense budget. National security priorities, however, remain aligned to KBR strategic positioning, so no real change there. I suspect if the CR continues through Q4, then some new awards will move to the right.
However, the OAW work that we're doing and our book- to- bill associated with this should hold up pretty well as we await the expected catch up in early 2022. Outside the U.S., we have just closed on Frazer-Nash and expect to do well opposite increased spending in the prioritized areas in the U.K. and in Australia. More on Frazer-Nash in a moment. An earnings call isn't complete without a tip of the hat to Australia, which continues to grow above the norm and perform amazingly well. We've highlighted three awards on the right. I think the first two speak for themselves. High-end, technically differentiated, future-focused around IT and cyber and of course, bang on strategy. The third award listed, actually awards, requires a special mention. This is via LOGCAP V, and then again separately direct to the Navy at Quantico.
We've established multiple sites across the U.S. and Europe to deliver a significant humanitarian mission to accommodate the many thousands of displaced Afghans, many of them children. Our people, together with the client, have done and continue to do a herculean heavy lift to establish critical infrastructure and medical facilities within a massively accelerated timeline. To be clear, KBR is not responsible for screening or security. For us, this is a purely humanitarian mission and one we at KBR are very proud of. A huge shout out again for our people and the significant input from the supply chain to make all this happen. It's likely the task order will be extended, but we shall have more visibility over the next few months.
In short, the market outlook across GS with OAW, the inclusion of Frazer-Nash, Australia, and aligned positioning opposite budget priorities for the rest of 2021 and moving into 2022 is very positive. Now on to slide eight and we'll talk about the outlook for sustainable technology. I guess similar to the government outlook in many ways, the outlook from Q2 to Q3 for sustainable tech is very similar, but with one key positive development. The increase in oil and particularly gas prices recognizes supply demand imbalance, particularly as we move into winter. This of course, delivers increased profits to the oil and gas companies themselves, allowing them to restart capital projects and increase investment in decarbonization, energy efficiency, changing output mix, and in energy transition projects. A very positive development.
We see this shift combined with the ongoing demand for sustainable solutions as being key factors increasing demand for our technologies and our services. We continue to see opportunities across ammonia, hydrogen, olefins, clean refining, plastics recycling. There's been a big uptake in this area and in technology-led industrial solutions and our proprietary INSITE solution. The three awards highlighted here clearly demonstrate these themes. I'd like to highlight the green ammonia project we announced a couple of weeks ago. This really is a cool project for a renewable energy client that combines the client's renewable solar expertise and capabilities with our K-GreeN technology to deliver what we think will be the world's first commercial scale green ammonia plant. This facility is expected to be operational in 2022. It's a real project that is moving forward with great momentum and is very, very exciting.
I'll take another moment to brag on the team just a little bit. So far in 2021, there have been three commercial scale ethylene opportunities that have come to market, and you can see one of those project wins highlighted here. Our team is batting a thousand, winning all three of those projects. A great result that I attribute to the customer focus and tenacity of our fantastic people and of course, the quality of our technology t hat brings lower CapEx investment, excellent end product flexibility, lower O&M profile, and lower carbon footprint. The outlook for STS is very positive, and increasing demand is expected as we move into 2022. This takes us nicely onto slide nine, where you can see if all those positive words are resulting in strong bookings and resulting in a robust pipeline.
You can see the scale of our pipeline is indeed robust, with $11 billion in the proposal negotiation phase and lots coming down the pipe. The $1.6 billion of awards and options in the quarter brings our positive outlook and strategic positioning, all that talk into numbers that are very aligned with our overall confidence in the company's growth strategy. Now, we promised we'd give you an update on the amount of work we have in-hand and have secured to deliver on our 2021-2025 long-range targets. If you recall at our Investor Day in March 2021, our book of business reflected about 55% coverage across those five years. That revenue curve assumed CAGRs of about 8%. Today, that same book of business coverage number has grown to over 60%, 60%, and that excludes the uptick from OAW.
As we have said, our strategy is to build stable, predictable businesses in attractive markets with a very capable business development track record. We think the continued progress here is a great demonstration of those attributes. Bottom line is that we stand behind our 2025 targets. Now on to slide 10. Last week, we announced the closing of Frazer-Nash. Frazer-Nash, if you recall, is a high-end advisory and consulting firm delivering systems technology, systems engineering, and assurance. The addition of this talented team is an absolute step change in the evolution of KBR's business, primarily in the U.K. and in Australia. It further extends our reach into technically differentiated sectors and supports our mission of delivering high margin, high-end technology-enabled solutions and mission-orientated capabilities.
What's more, their compelling clean and renewable energy suite of capabilities perfectly aligns with KBR's commitment to ESG principles and to helping our customers accomplish their sustainability objectives. As outlined here, Frazer-Nash adds about GBP 160 million of revenue in their government business in 2022 at high-teens margins and is expected to be approximately $0.10 accretive to adjusted EPS. We couldn't be more pleased to welcome this group into the KBR family. Now I'll hand over to Mark. Mark?
Great. Thank you, Stuart, once again, and I will pick up on slide 12, which lays out our key financial performance metrics as I usually do. However, before I get to the numbers, I'd just like to make a few comments to expand on our role in the Operation Allies Welcome program, OAW. As you know, KBR has been involved in supporting military activities in the Middle East for a very long time. We think it's a privilege to be called upon by our nation to once again provide a good environment for those who aided our allied forces during those missions. We stood side by side with these heroes in theater, and it is our duty and honor to help them transition out of that environment under this operation.
As part of this, we are tremendously proud of our KBR employees who literally dropped everything to build, in a matter of just days, communities hosting tens of thousands of Afghan guests at the request of the Department of Defense. An important precursor to briefing our results here today is that while the financial impact of our role here is quite noticeable in our numbers, this effect is second fiddle to us. What matters is we were there when needed to provide this critical and difficult need. In fact, we're quite proud to say that KBR continues to do this sort of thing really well. Now onto our performance in Q3. Stuart did summarize much of this already, but I'll emphasize a few points.
Q3 year-over-year revenue growth was 34%, and that includes over 20% being organic with all parts of our government business, including OAW, of course, driving this. Sustainable tech is performing at or above plan. It still saw year-over-year revenue contraction as we ramped down legacy reimbursable contracts. Adjusted EBITDA grew 30%, a terrific result. Margins in the core government business were at or slightly above target. OAW is at low single digits, as you might expect. Margins for STS were once again healthy at 14%, and corporate was on track as expected. Together, this blended to a KBR margin overall of 9%. As Stuart would say, bang on with our actual target. Great results in EBITDA growth. The impact of favorable jurisdictional mix for taxes and some benefits from buybacks boosted adjusted EPS by 45% to $0.64 for the quarter.
Quality of earnings and cash conversion remained strong and as expected. Adjusted operating cash flow was about $120 million for the quarter, and that's amounted to just under $290 million year-to-date. I'll note our consistent cash flow generation enables significant cash contributions toward the Frazer-Nash acquisition versus debt, of course, and that helps in accretion. Stuart covered Q3 bookings, and as you see, the company has built backlog in healthy measure up over 25% from Q3 of last year. Picking up on what Stuart alluded to earlier, the $1.6 billion of bookings and options in Q3 does not reflect the full value that OAW will bring. Because this work is under IDIQ contracts, our consistent practice is to only book funded task orders, which for OAW amounted to about $500 million in Q3.
We expect another $900 million+ for Q4 associated with incremental funding, together tying to the $1.4 billion uptick in our revenue guide. Accordingly, Q4 is set up for strong bookings as well. Onto our segment results, slide 13. For Government, top line growth was 54%, 33% of which was organic. All four business units grew organically. That's really important to see once again. OAW was a major driver, contributing almost $400 million in revenues in Q3, while our Middle East contingency work was down about $100 million from last year. Quite amazingly, when you strip out Middle East and OAW contingency revenue, the Readiness and Sustainment business unit grew 25% in its ongoing O&M business. 25%.
Achieving that growth while managing this massive and urgent need associated with OAW is really a remarkable testament to the capabilities of this team. Defense and Intel's growth reflects Centauri and also growth across advanced systems engineering and integration and cyber work areas, including some important announcements that we've made in the quarter, particularly on the cyber front, as you've seen. Science and Space picked up its growth pace to 9%, all organic. This business unit is hitting on all cylinders, winning new work, winning recompetes, and expanding work on existing contracts. Ongoing growth and excellent delivery on the Special Forces POTFF Human Health and Performance contract is a great example of this latter category, as we've almost doubled our footprint from 2018 when we won this contract.
This is based in large part on the fantastic health professionals advancing this program each and every day, as well as the recognized need for overall wellness programs for our soldiers. Todd May's Science and Space team has also supported several successful launches by both NASA and the well-publicized commercial launches over the summer. They also helped right the International Space Station twice after it was inadvertently knocked off course in foreign docking maneuvers, thus keeping the ISS mission safe. EBITDA margins were on track for the core GS business. As mentioned earlier, OAW is lower-margin work, and the dilutive margin effect from that program brings the overall GS margin to 9% for the quarter. We'll gladly take the growth in core earnings dollars, even with the dilution of margin percent. Over to STS, top and bottom lines remained on track for Q3.
While bookings were seasonally low, the quality of bookings were superb as this team continues to provide cleaner and safer technologies to commercial and government customers all around the world. The awards in green ammonia, plastics recycling, and digitally led remote plant operations are hallmarks of creating a positive force towards sustainability across our client base. This really drives our team, and it also bolsters the KBR brand. Corporate spend was as expected, with the increase year-over-year reflecting our greater scale and also the select investments we are making in our infrastructure to enable scalability going forward. On to capital matters on slide 14. Net leverage was reduced to 1.9x at September 30 on strong EBITDA growth and continued cash generation. Net leverage will nudge up to about 2.2x pro forma with the Frazer-Nash acquisition that we closed in mid-October.
As a result of KBR's increased scale, good margins, strong cash flow, excellent track record, and the de-risking actions that have occurred this year. We were pleased to see another credit ratings upgrade this quarter, where we now carry a BB, Ba2 corporate rating, up two full notches from where we started about three years ago. We continued buybacks this quarter, which amounted to about $25 million. The Ichthys settlement, as Stuart mentioned earlier, was a significant positive development from a liquidity and legal cost perspective. This is a major de-risking event that affords us more options on capital deployment going forward. As such, we will review our optimal capital structure in the coming months and update you on our latest views on that in our Q4 report that we will issue in early 2022. Now on to guidance, slide 15.
As Stuart said, we're updating our guidance favorably and also significantly to reflect the impact from OAW, with all other things effectively as planned. As Stuart summarized, the magnitude of this effort in a short period of time is quite stunning. We are raising revenue guidance for FY 2021 by $1.4 billion, or over 20% higher than our guide last quarter. This is clearly rare in the government contracting space, a testament to the team that can rapidly mobilize to serve at this scale when called upon. Of this increase, roughly $400 million came through in Q3 in terms of revenues. OAW margins are low single-digit, as one would expect for this type of work. Thus, we are reducing consolidated adjusted EBITDA margin for this year by a turn, 1%.
To be clear, the rest of GS and STS are performing as expected and delivering at or above our originally guided margins. Also, because the increased work from OAW is U.S.-based, it has a favorable impact on our tax rate from better jurisdictional mix. Taking this together, adjusted earnings per share guidance is increasing $0.25 at the midpoint to a new range of $2.30-$2.40. After raising in the second quarter, we are keeping cash flow guidance unchanged this quarter at a very healthy $300 million-$340 million. While the volume bump up from OAW will produce net cash flow returns when all of this is said and done, timing items could lead this to spilling into next year.
As you can imagine, we have and will continue to conduct many procurements to support this activity, and in turn are invoicing our customer on a fully cost reimbursable basis. We will manage timing items between our supply chain and our customer as best we can, but we think it's prudent to assume the net cash benefit ultimately may land in 2022. That completes my remarks, and I'll turn it back over to Stuart for the closing. Thank you.
Thank you, Mark. Excellent job as ever. I will finish on slide 16 and a fairly consistent theme here, doing what we said we would do, and arguably this quarter a wee bit more. Another excellent quarter, in fact, one could say a banger. An absolute focus on the mission, delivering exceptional results, strong growth, excellent profitability, excellent margin performance, and outstanding cash conversion. We have reduced risk and increased capital deployment optionality, and following the increased cash guidance in Q2, we are raising revenue and earnings guidance this quarter. Our momentum continues with good bookings and very positive fundamentals in our end markets as we look into 2022 and beyond. Now I will hand back to the operator who will open the call up for questions.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We'll pause for just a few moments to allow everyone an opportunity to signal for questions.
Excluding the Allies Welcome program, did quickly shifting resources to support the Afghanistan withdrawal during the quarter potentially negatively impact some of your other work in that segment?
Good question. I mean, the answer to that is no. I mean, we a lot of the work on Operation Allies Welcome was really driven by the supply chain, and so really it was a lot of, I guess, subcontracted personnel and equipment, et cetera, that was brought in to establish the infrastructure required. We deployed a number of people, of course, that came out of, I guess, the historical work we were doing in Iraq and obviously we never mobilized Afghanistan, so we had those people readily available to deploy. It did not negatively impact us at all.
Got it. Makes sense.
I'll just add that Ella and team produced really great organic growth outside of OAW. As we said in the remarks, they continued to ramp up in the overseas work in Turkey and Spain on that program there. They continued to support exercises in the European Command over the summer dutifully, and other training work in NORTHCOM as well. Really remarkable growth outside of that OAW activity as well.
Yeah, that's great. Just wanted to follow up on the green ammonia contract with ACME that you announced. You know, a lot of press around this technology with Aramco also announcing a new plant this week. I mean, could you just comment on what the RFP pipeline looks like for green ammonia solutions and how large you think these opportunities may ultimately be?
I mean, we've got a lot of studies ongoing in this area, as you can imagine, as organizations look to drive their sustainability agenda. I think that the market is very buoyant. I guess the various projects are at different levels of maturity. We're very pleased ACME looks like it's the first to go. It's real, you know, it's funded and it's progressing. I think getting in the front of the queue on this, it's because a lot of these projects are being talked about, but this is one that's actually being done. I think being in the front foot and first mover advantage is, you know, extremely strategic. I think we're gonna see increasing activity as these get proven out.
I think that as we look at the combination of, I guess, what we call gray, blue and green ammonia sort of being combined to produce more green solutions from existing ammonia plants, et cetera. I think it's gonna be a good market through quite a period of time. It's not everything's gonna come in one year. It's gonna be a progression over multiple years. It's really good position for KBR to be in.
Got it. Thanks for taking the questions.
Thank you, Jasper.
We'll take our next question from Michael Dudas with Vertical Research.
Good morning, Alison, Stuart, Mark.
Hi, Mike.
Hey, Mike.
Stuart, you mentioned your prepared remarks. Certain improvement in energy prices and some extraordinary improvements, especially overseas in gas, is gonna drive cash flows and lead to customers to spend more money. But you didn't mention about like how differently you're gonna spend. I'm just curious about, you know, how different, how ready are the customers to kind of go forward to decarbonize, reduce emissions or improve efficiency, et cetera, relative to catching up on like maintenance or catching up on, "Heck, we better go maybe think about this LNG facility because prices are through the roof." Maybe a little bit more, you know, share some of your thoughts on how that plays through and how that can maybe leverage your, on your technology side as we move forward the next couple of years.
Yeah, it's I think it's the eternal question at the moment with many of the international and I guess national oil companies, is that they have to be able to, I guess, sustain revenue and cash to be able to invest in the future. I think the increase in oil and gas prices, you know, helps with that considerably. I suspect they'll be looking at, you know, repurposing refineries to different product mixes that sort of suit the future. I think you'll see a lot of investment in current assets around getting them more energy efficient and reducing their carbon footprint.
As you know, we're seeing a lot of activity in that brownfield arena, which plays to our strength as you know, particularly around remote monitoring and our TLIS solutions. I think it's a balance, Mike. I think the companies themselves would admit that they need to generate the income and maintain their assets, but while maintaining those assets, get them sort of far more efficient and more green and more sustainable. Then look at the product mixes that are coming through in the future. A lot of talk of oil to petrochemical, for example, and obviously we've got technologies that help with that. I think it's gonna be a different solution, I think for each of those companies.
Ultimately I think that's the way it's gonna play out. I think we're very well positioned to help with, I guess, decarbonizing the existing assets and making them more energy efficient. Of course, at the same time as they invest in sort of, I guess, newer technologies and newer solutions for the future, we're very well positioned for that. It's a nice balance for us of CapEx and OpEx, and I think it's, you know, I think the sort of oil and gas prices as we move into winter will into winter come under increasing upward pressure as well.
Yeah, no question about that. My follow-up is regarding Frazer-Nash. You know, as you announced the closure a couple of, I guess this past month, how you know, as you went through the process, very opportunistic on the acquisition, but over the next several years, how do you see it fitting in and which areas are more robust for revenue growth and some of the synergies that you can get maybe internally and through the U.K. and Australia. Is some of that renewable energy technology something that we can leverage to other parts throughout the, say, of maybe the technology side, given some of that expertise?
Yeah, I mean, I'd first say that the engagement with the Frazer-Nash folks through this process has been fantastic in terms of really truly understanding their high-end capability as it points, I think, to the future of investment, not just in renewables, but actually in the government spend opposite the U.K. and in Australia. That's in areas where at the moment we don't really play in the U.K., and that's in cyber. It's in looking at, you know, the whole sort of evolution into what the U.K. is gonna do in space. It's looking at, obviously, defense modernization, particularly with the changes with Brexit, et cetera.
I think there's a lot of change coming in the U.K. and having a high-end consultancy business to help the U.K. MOD make those decisions is completely strategic for us. I think that really is an amazing opportunity and I think similarly in Australia to build upon what we're doing there already. I think that's the first part. Then the second part is they do come with a cadre of what I would call advisory capability and consulting engineering capability in the areas of renewables, which I mean KBR features heavily in the hydrogen world as everyone's aware, but they bring capability in things like solar and wind and nuclear that really augment our capability.
I think there's significant synergy when you're advising, I guess, governments and companies about, you know, how they decarbonize and what's a good strategy for their particular environment or geography or constraints around infrastructure. We can certainly now have a far broader offering in that regard. I think it all dovetails really well, and we've got absolutely zero overlap. It's all additive. I think the capability that Frazer-Nash brings from a high-end technical capability really enhances our resume when we're talking to the U.K. MOD about broader programs that were traditionally in KBR's wheelhouse. I think our p-win would go up as a consequence of that. I think really all that we're super excited about this and it takes really sort of.
If you think about our evolution and our transformation in the U.S. to more higher end, more sort of strategic, services and with what Frazer-Nash does for us in the U.K. environment. Really terrific acquisition. You're right, it came to market. It was, it's something strategic we wanted to do. Figuring out how to do it was tricky and this came to market and we took the opportunity to move quickly and secure what we think is gonna be a very valuable asset for us going forward.
Excellent, Stuart. Thank you very much.
We'll take our next question from Andy Kaplowitz with Citigroup.
Good morning, everyone.
Hi, Andy.
Morning, Andy.
Can you give a little more color into the underlying revenue trajectory of Government Solutions? You know, as we shift here into 2022, I know it's not right to exclude OAW from how you're thinking about growth, but you know, given it's so big and discrete, we can do that. How are you thinking about, you know, the 5%-8% you talked about it being on track through 2025, but as we go into 2022, I think it was Stuart or Mark, I forget who mentioned it, but he mentioned some projects moving to the right. How do you see the growth into 2022 ex OAW, and then does OAW last into 2022?
Yeah. I think that we kind of expected the OAW question, the how long will it last? I think right now it's undeterminable. We don't know. We've been very much all, you know, the teams have done an amazing job just, you know, getting these facilities up and running and sustaining. You know, I think we've got direct line of sight to year end around. I think that we probably, Andy, need to sort of park a little bit. I think you can be confident of our up guide, if you like, in terms of this year. We'll -- I think there'll be some that will be quite considerable amounts as we move into next year.
Trying to give you an underlying number around that is difficult at this stage, and I don't want to get out over my skis in that. In terms of the core GS business, as we would call it, I think you know, Mark was very you know, I think absolutely right in saying that when you separate out OAW, the performance of the business has been terrific. You know, we're well in the double digits in margins. The growth has occurred across all of our segments and you know, the performance and delivery has been exemplary. In terms of our long range targets, we very much stand behind those and I said that as well in my prepared remarks.
I mean, I think you're right. I think we will separate out OAW. It's something that is so large and discrete that we should do that, and obviously it has an impact on margins, et cetera. You know, it'll be very positive, I think, in the wash around cash and obviously given its scale. Which is why the deployment optionality increases for KBR going forward. In terms of the core business, it's performing extremely well. Even with the slippage of awards a little bit to the right, I think that, you know, it's not slipping so far that we're worried about any change in our long range targets. I think we are very confident upon them.
I think you'll, if I'll take you back to the backlog slide and talking about, you know, our coverage, if you like, under the graph to achieve those targets has gone up significantly since our Investor Day. I think it all bodes well and the margins associated with that quality is terrific. Yeah, sorry, that's a long answer for saying we're in good shape.
Well, it was a long question by me, so I appreciate that, Stuart. Just to follow up, how is KBR handling supply chain and labor pressure? It seems quite well as your margin's been stable and in line with your expectations, and it doesn't seem to be slowing down work. Maybe you could discuss and then maybe just dovetailing with that. We know you've been focused on sort of cost out over time and sustainable tech, so can you still make progress, you know, despite sort of the supply chains, less labor constraints that are out there?
Yeah. Well, I think in the markets we're in, we're not really seeing too much pressure on that. A lot of what we do, of course, in the government side is cost-reimbursable and, of course, as the pricing pressure comes, that you know, we're protected in that area. In terms of sustainable tech, again, we, you know, in terms of pricing pressure, we're back-to-back. I'm not worried about the supply chain in terms of the commercial risk. In terms of the supply risk, I think we've got, you know, a number of suppliers that we've worked with for numerous years. I think that we're in really strong relationship shape with them that we can manage that and have been managing that with really no disruption, in truth.
To the extent even during COVID, where we moved to using things like Google Glasses to do inspections and things like that to ensure things were continuing on track. I think there's been a change in the way that people operate for the good, if you like, to manage these situations. I think from a supply chain risk perspective, we're very well isolated. It's something we watch. We're not complacent in any way, but I think our teams are on it.
Appreciate it, Stuart.
We'll take our next question from Sean Eastman with KeyBanc Capital Markets.
Hi, team. Great update here.
Hey, Sean. Good morning.
Thanks for taking my questions. Maybe just kind of expanding on Andy's question. I mean, you know, just as we think about next year, I know it's not guidance time yet, but, you know, we've got to, you know, work with our models here. You know, clearly we have to be, you know, careful around the Operation Allies Welcome revenue and what that looks like next year and how that comps for GS. Maybe the other thing would be, you know, just the outsized margins in STS. You know, maybe it's harder for STS to expand margins much into 2022. Is there anything else you would point out at this juncture, just as we think about that bridge to next year and making sure we've got appropriate numbers out there?
Yeah. I mean, I think, Sean, your statement on STS is not quite on the mark. We still feel that given where we're positioned in the technology cycle, where we're actually driving the growth within that business, we think margins are you know looking really, really good going into next year. You know, so I don't see any downward pressure on STS margins at all. Our expectation is they will continue to go up. And we'll obviously give more guidance on that as we get into next year. But certainly, the quality of earnings that we've secured would suggest that that trend will continue.
Remember, we're still working off some of the more commoditized projects as that becomes a lesser part as well. Again, that just puts upward pressure on margins. I think that piece we're pretty confident. I think we again stand behind what we said at our Investor Day, and that was very much that we think these will incrementally grow 1%-2% per annum over the course of the 2025 guide. That's good. I would say, of course, we had some goodies at the front end. As you know, we're well over 20% in the beginning of the year, which was, you know, a little bit abnormal.
As we get, you know. I think coming back to our statement around, you know, a $1 billion+ business in the mid-teens for 2021. I think we're very confident around that. Then upward pressure on growth, the revenue line and upward pressure in margins to see the expansion of earnings around our STS business as we move forward. We're really comfortable on that. In terms of the guide a little bit, we're not guiding at all, but around the 2025 targets, that sort of 5%-9% revenue CAGR around, you know, what we're doing in the GS arena is absolutely solid. You know, we continue around that.
I would love to be able to give you more color on OAW past the end of the year, but as I said, it's, you know, if I get it wrong, you'll just beat me up. It's better I don't say very much. I mean, there will be obviously it will carry over. I think there's an opportunity for some of the task orders for sure to be extended. How many bases, how many facilities, how many people we'll have, how long that, you know, to put them into society is, you know, that's a really difficult question to answer today.
Okay, very helpful. I joined late, so apologies. I just heard someone mention, you know, sort of some procurements being pushed out. Is that just a function of the CR dynamic? We just need to wait for a budget to, you know, have some of those newer programs adjudicated. Just with the momentum in GS this year, obviously the performance has been fantastic. It would be helpful to just frame sort of what a breakout scenario. What would drive a breakout type scenario for GS as we look out, you know, over the next year or two? What types of things, you know, could surprise to the upside for GS?
I mean, I think we're all pretty surprised with OAW. I think that was quite a sur-
Yeah.
Quite a surprise. I mean, as Mark was pleased to tell me in his tenure as a CFO, and I won't say how long that is, because he gets embarrassed by his age. You know, to increase your revenue by such a significant amount, over 20% in one quarter is quite remarkable. In terms of that, we've got you know, well into double-digit numbers of procurements that are ongoing, if you like, and many are due for awards that are well over $1 billion. I think you know, if we win our fair share of those, you know, we could have a breakout scenario, but as you know, winning these is tough.
You know, we take a probabilistic view of that, and that's how we build our models. I think that's probably the best way to answer that at the moment. In terms of things moving to the right, yeah, I think it's a lot to do with the CR and just timing. You know, it's not like we've lost anything or whatever. I think, you know, these will move into May. I think we're looking at a very strong bookings quarter in Q4. OAW will help greatly with that, as Mark said.
That's a very nice position to have because as things start to catch up in Q1, et cetera, we'll, you know, we can continue that momentum. It puts us in a, yeah, quite an unusual but strong position.
Not too shabby indeed. Thanks for the help.
Thank you.
We'll take our next question from Zane Karimi with D.A. Davidson.
Hey, good morning, Stuart, Mark, and Alison. Solid quarter and outlook.
Thanks, Zane.
Thanks, Zane.
First off here, given the growth forecasts around STS for the next few years, how do you feel like you have the resources, like the people in place today to drive that? And are there any constraints in that business you're having to work around today?
No constraints we're having to work around. I mean, I think that we, you know, we sell IP, and, you know, that obviously is something that's, you know, doesn't need too many resources. It's, you know, we continue to help ensure that it's the most efficient and the most, you know, I guess, we've got the lowest carbon footprint and things. I think we're very much at the forefront of that. It's, yeah, it's not a big resourced business. We've got a lot of critical capability around process and things like that, but they've worked for us for many years and very specialized in our particular technology. That's quite a solid place to be, so.
I think also the people are just super excited. You know, the change in profile around that part of the business, the performance, you know, being one of life's great things is actually being part of a team that's doing really well. You know, it's your best work experience, really. I think that team is proving that out. I don't think we're really concerned. The attrition rates are not concerning in any way. The ability to find key resources given our momentum in that particular business is not too difficult. As I say, it's not a heavy personnel-driven business because it's really IP.
Again, we will not be complacent at all, but I think we're very much trying to ensure that KBR is a fantastic place to work. We're sort of that, you know, a bit of a talent magnet in that sense. You know, we'll continue that journey. I mean, so far so good in terms of resource constraints.
Gotcha. Thank you. You also made a notable announcement with a major utility in the STS segment. How are you seeing the customer profile evolving over time?
Major utility.
Not yet. Zane, could you clarify with, when you say utility?
Maybe I misread a release. I'll get back to you offline about this one.
Okay. No worries. Thanks, Zane.
As a reminder, if you would like to ask a question, please press star one. Again, that is star one if you would like to ask a question. We'll take our next question from Jerry Revich with Goldman Sachs.
Hi, this is Ashok Sivamohan on for Jerry Revich. For Government Solutions, you mentioned the 9% revenue growth for Science and Space was all organic. Can you provide the organic growth for the other platforms in the quarter?
Yes, we can. We do disclose those in the 10-K. Mark?
Yeah. Find my right reference here. I'll tell you right off the bat.
I think we gave you the Readiness and Sustainment organic growth, which was-
A huge number, but ex OAW was 25%.
Yeah.
For Readiness and Sustainment. That was terrific. The international piece was about 4%, much higher in Australia, a little more flattish in the U.K., but Australia continues to do really, really well. Defense and Intel, which includes Centauri, was about 7%. Strong, strong throughout.
Okay, great. For the Heritage technology business, can you tell us what the book-to-bill was in the quarter?
It was seasonally below, about 0.6. Yeah, between 0.5 and 0.6.
Okay. Thank you.
I mean, in that business, they always have, I guess, a softer Q3 just on budget cycles. Then people tend to sign contracts as they move into Q4, as they spend the money for that particular year and get the commitments going, and then it all starts again in the first of January. I think we'll see our expectation is that that business will have a stronger book- to- bill in Q4, and the pipeline would suggest that that is the case. That's been the historical norm for that business. Again, not concerning, and I think just the quality of the work that we're winning is actually what was really important in the quarter.
Understood. Thank you.
That concludes today's question and answer session. At this time, I will turn the conference back to Stuart Bradie for closing remarks.
Thank you. And thank you very much for taking the time. We do appreciate. We know you've got other places you could be, but thank you for taking the time to listen to us this morning. I think an amazing quarter for all the reasons we described in our opening remarks. You know, we're very excited about where the business is and where it's heading. No questions today on Ichthys, which was terrific because that is. I shouldn't really bring it up, and Alison's giving me daggers. I think it's very positive in the sense that I guess that uncertainty is now behind us and, you know, again, another major legacy issue resolved.
All good in that regard. We're feeling that today we're in a really good shape, and we're really looking forward to 2022 and beyond. Thank you for your continued interest. Thank you.