J - Earnings call transcript Q1 2019 | Jacobs Engineering Group Inc.

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Operator

Good morning. My name is Kim, and I will be your conference operator today. At this time, I would like to welcome everyone to the Jacobs Fiscal First Quarter 2019 Earnings Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. please one note follow and Please up. Instructions] limit question to one [Operator you. Thank may Jonathan your Doros, begin you conference.

Jonathan Doros

and morning Good afternoon to all.

defined such Our forward-looking and summarized X. in we to Securities in in safe our that are the filed on remarks. the the I'd this on to Slide a our statement statements of this presentation refer and Securities Act historical and Section reference was presentation intended term our of amended, this statements. made by of Section you to we'll to XXA slide of harbor is earnings copy contained amended, XXXX, presentation provided disclosure, prepared XXE Certain which Exchange as in are forward-looking based forward-looking as covered as of statements not are XXXX, by like have constitute statements the the announcement such posted website, morning, be which is fact Statements Act same.

are statements are Although on results statements and We our forward-looking financial actual forward-looking factors statements. may reader data, are differ projected and by and implied statements materially contained, or to you reliance not actual and a such economic place available caution variety expectations as current our should undue currently from estimates uncertain, uncertainties that competitive, differ such that materially. risks, there and inherently results on of cause the other could what management's is based

annual on forward-looking September and other actual our report for to for of subsequent that XX, occur cause XXXX. may first quarter of XX-Q see results Form ended For quarterly factors our year XX-K and our that from these risks, report the XXXX, uncertainties on a other Form and the description differ could statements,

under law. to any any of not update by except to duty of applicable presentation actual conform forward-looking this statements as the required after to date We results, the are

certain to to financial this non-GAAP more figures. be X of presentation, for the referring presentation Slide refer measures. these During will we Please on information

discuss Jacobs' presentation, current basis. the a performance during to pro of comparisons in we results addition, CHXM's In will XXXX calculated forma on and

We financials for calculation of information that the of business Please forma metrics. pending light see ECR provide more pro in the to when current certain comparing against X information forma into of this divestiture. trends on insight will also exclude prior Slide We these discuss pro periods. the our business underlying help performance the believe

discuss quarter as well reporting on market in capital then strategy. the our results, a review our more with Steve will will Slide depth will then updated some Turning our sustainability of strategy business. sheet financial including a first discussion allocation our provide discussion and Kevin changes. Kevin metrics to balance our begin of review recent a our and X. of recently as financial agenda of recap

along Finally, Steve and Executive closing to some call now we'll pass I'll over Berryman, will provide an and CFO. your updated Vice questions. remarks with that, the outlook Kevin President it With to up open

Kevin Berryman

Thank call. our XXXX and you, to first welcome quarter fiscal Jon, earnings

GES, with synergistic as Buildings, or business. have and business of fit transitioned or ATEN Technology, to like our update, a strategy we would the Nuclear, recent several our as our investor of X line believe walk environmental the Aerospace, which one through that have appendix summarized Slide will of was with I our one, results, are and Number Environmental discuss each highlighted on our result in Advanced of our Facilities part Infrastructure which a more presentation. disclosures reporting review the been begin additional financial we global business, of of services business, I Before changes we individually. will and line

of profit Jacob's methodology. performance bulk applications, to with We and business for CHXM. have the improved to two, operating CHXM’s has Number XXXX suite which of we effective our QX the its the GES reporting time transition CHXM business, the significantly Jacob's backlog ERP with legacy of consistent since the of pleased bookings are performance aligned

for revised change. backlog The have recast comparable basis years that large their all XXXX of three. a with provided a Number CHXM primarily backlog. Jacob's to on this backlogs first in consistent provide two all data periods adjustment to contracts related have multi-year years while the of included We policy contract is rolling

consistent increase offsetting with several QX. The business ERP in of we Jacob's to the aligning regarding This Jacob's total profit. change an allocation results methodology, costs changes made corporate operating unallocated have profit. to neutral alignment in QX in approximate suite to benefit with $XX applications the Additionally, of million operating cost effective CHXM transition again, is an line

number. addition, changes in also to both neutral on the to and G&A and accounting. in to within to accounting Number and resulted $XX direct reduction increase business our operating allocation is to of a total million a all four, pension lines In change recognition costs cost lines standards businesses, profit revenue the our which relating and of both

of in During the our ASC million XX benefit revenue Note the adoption had $X XXX, in for XX-Q. which quarter, a is recognition from we detailed further

our of by to and neutral ASC million XXXX-XX income. and Regarding XX results are discontinued ECR the a covers had XXXX-XX, ASC $X in income divestiture XX-Q. assets given changes pension was adoption $X to decrease Note now are number increase a of to sale. announced held or finally, line five, we profit, And are Resources offset in ECR, operating operations and in which Energy, included which outlined other our business, for accounting, net of million our Chemicals

today discussed results our operations such, continuing ECR. include and our exclude with associated only those As

operations effectively note that reporting explain burdened costs operating WorleyParsons detail is temporarily related in that ECR my in requirements, or remarks. allocated consistent GAAP by profit either this with to eliminated from our I'll transition close. Importantly, will at continuing later further be

results operations the to both EPS comparable includes our and guidance. of discontinued impact is Lastly, continuing and previous

will Investor discuss now will also I over to in later these I'll remarks. our detail of bottom the Jacobs note also slide be at that metrics this items bit on some more Steve. in turn Day. call upcoming prepared the additional will highlighting my a You

Steve Demetriou

Kevin. you, Thank

move on Let’s Slide X. to

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services of transformed of discuss of We this during our Day and approximately further company price the profile and our lower on divestiture reimbursable profile Following of the improve XXth. risk Investor plan fixed XX% risk portfolio upcoming up strategic financial will to ECR, revenue. the making February with

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than backlog X% backlog mission outpaced most the is of ATEN to our and than Key extensions, with government during such more ATEN an Intelligence XX% services strong with X% of and percentage contracts, less to with During position of and anticipate our larger reported this the government annual we recovery agencies given a including federal of the Relative billion. billion. the ramp of perspective, to growth continue ourselves value the quarter, shutdown the portion XX% critical Special growth quarter represented revenue. of last Missile we as of only government ATEN billion projection portfolio and the $X Department revenue contracts, growth Defense ATEN’s and of last for base forma Agency actually a drivers peers the revenue Operations of Community nature the when NASA. our recurring this Defense, of strong Command would high a against year-over-year affected pro remainder backlog. of end and up market And full this year. but revenue of a fiscal over year's $X.X which only total priorities market up our versus year business Energy, considering NASA significantly $X.X wins small was within Department options our ATEN recent creating be of shutdown, than impacted business, first the From

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on IDIQ enterprise we We in In of also won of first our growing contract. the Army's outstanding information the the be performance operating army's critical be with the expanding contract government ATEN emphasis forward, and resiliency the business source our quality U.S. ATEN is to business. brings leveraging focused fiscal We're expected worldwide. capabilities. solutions to diversity programs strength particularly continue of mission had and This services that primary by XXXX summary, margins the prime quarter and to our encouraged related IT going opportunities profit on technology high

this performance to and X throughs, quarterly the Buildings, Advanced for Slide of pass higher continue revenue U.S. solid growth from in Key synergies line CHXM year confident Infrastructure drivers X%. BIAF were onto and up acquisition. increase outlook. revenue Now BIAF full our and the was The to services of our Facilities discuss shutdown business professional minimal we in on had recent government impact be business.

associated demonstrating Backlog year-over-year see synergies. solutions infrastructure operating a profit More Transit growth proportion and to with cost BIAF a to the win belt kilometers and of importantly, grew focus of quarter, strategy a design an with highways. profit deliver scale accelerated X% continue was our end to the our to continued year-over-year markets, had XX success revenue basis due programs this synergies operating with exciting line. on against $XX.X growth, and higher pro and up cotton Adjusted basis up due line X.X% points Area the CHXM driving agency year-over-year wins large XXX to up greater the XX% Dallas acquisition. on to especially also forma profitable in billion in to based CHXM value clearly commuter strong of Rapid rail our rail business. In We we ramp

rail largest prospects the conveyance recognizes Construction XXXX Delta several transportation for emergency East of Australia. Environment California WaterFix. organizations water Jacobs remains Services Design large Heroes was Engineering the that Authority And we scale Water Award, have received and performed strong Management and project across selected which Design Federation during named situations. includes Conveyance above prestigious the beyond Water the duty call California's UK, submarkets Middle all by and North pipeline and in for Our America, recently

Water expensive as with global leadership operations management in their us in iconic leader destructive digital water global project the and Jacobs’ recognized the such the based utilities and recognition Atlantis as season Singapore Florida were This Our efforts and on water transformation water market. program for during industry separates our most teams projects XXXX. hurricane smart along

on long decade what to execute of positioned secular another water in well to growth be looks the are sector. We

drive continue combined synergies We CHXM our to revenue with and Jacobs capabilities.

client and For sectors. exceptional advanced program we to awarded relationships. along management continue in of a sizable life program is and facilities, direct both for were confidential new U.S. client at framework, example, electronic project a capabilities see longstanding campus. corporate In management recently sciences our environment CapEx strong our in we This buildings southeastern with favorable with a a result

business BIAF opportunities. in UK, CHXM. strategy showing also the Despite and East, pipeline factor to its America in facilities are Australia, growth. advanced in Middle infrastructure. softness a regions Regionally, acquiring did multi-year North strongest these geopolitical We the after in Europe underlying trajectory potential expected in Our headwinds the our Zealand New which was solid business, demonstrates strong experience investment with robust new a our key a of growth is growth continue some

So, in the very in pipeline. we're our in fiscal and the of about summary, first financial BIAF quarter excited XXXX posted opportunities strong performance

results to detail. over financial Now, the call I'll to Kevin our more turn discuss in

Kevin Berryman

Thank the operating segment your today. corporate slide the representation accounting recognized operating profit the XX, which that I to QX and left review profit results an costs attention example operations I expense operating discontinued burdened on from illustrates continuing would treatment requirements from profit. and blue due column that is costs our of continuing either to impact This at ECR by transition reported necessarily ECR costs note related the and temporary before are represents operating GAAP which but turn And to will these on slide are unallocated not to The stranded you, scale. or further, of operations, level Steve. amount ECR operations. sale adjusted eliminated. solid like our included this related an not do Currently, close impact is Slide to not profit temporarily in

Worley will column, transition temporary middle that to be the these the to either eliminated. Moving represents costs shaded or area

post-close a operations increase. continuing will profit operating our from As result,

savings that costs further as represents and to realize previous structure back short, return Moving versus via highlights in appropriate our our we based work due to a additional the cost levels that right, our operating we reduction expected LOB the remains column profit the unallocated burden far operations operations ensure work business is to on post-close continuing a to area LOB corporate on structure. shaded to three treatment the two discontinued temporarily In accounting slide post-close. will the

XX, Slide to detailed moving the of our Now XXXX. fiscal summary more performance of will a see you financial quarter for first

quarter First revenue grew year-over-year. a XX% strong forma pro

impacted of also the increase over continued of revenues ramped of versus in large while contracts business BIAF and the QX up First by were up enterprise ramp margins the the gross course pass-through for strong, quarter that XX.X%, ATEN XXXX. an

Excluding the to down pass-throughs, mix timing revenue. due and gross slightly impact of and increase of the margin was only BIAF in

Our impacted revenue earlier, from be ago margin integration the acquisition G&A to decrease the Nonetheless, profit million as as as of as The related eliminated an focus operating be above to that ECR the our on efficient cost a to ECR our percentage to transaction our integration figure to margin sale given we noted maintaining the that is $XX to the approximately which and X.X%. substantially down. CHXM related beginning transitioned part related our will costs as figure, eliminated WorleyParsons or of of I by GAAP either related well sale. be reported year was as ECR of is G&A, referenced, and benefited are cost cost synergies continued of Included CHXM continues cost in structure. business wind post-close. will costs, the costs ECR CHXM to that

that of costs. temporary Our ECR impacted burden margin same the was adjusted related was X.X% profit by operating

sale been GAAP to costs, the from was with of GAAP tax offset of back depreciation for acquisition X.X%. add transaction-related expenses additional is and ECR the related $X.XX. impacts temporary these amortization and ECR the in would $X.XX and the business. related other operations related EPS the acquisition restructuring the reform operating profit CHXM associated U.S. $X.XX by quarter Included continuing and to our have figure Excluding from from

these to due the outlook. EPS quarter in $X.XX, tax that from certain which items, included was discrete benefited items not Excluding first previously adjusted approximately $X.XX were our

is provided the is we the comparable that Our is a adjusted outlook midpoint provided. $X.XX, EPS above which directly to of previous previously our outlook

were and during robust both our bookings as XX-months continue trailing book-to-bill the our earlier. the to pipeline X.X in the quarter, of turning period. was a opportunities performance forma to We to during pleased ATEN quarter for with BIAF, have the ratio and pro Steve Finally, alluded

Slide LOB our and performance, with ATEN. XX begin let's to Regarding turn

margin the ATEN year to the up profit to top-line Longer Operating was operating strong a for pro Steve period. expect addition versus quarter In year mix. value operating already continue growth the the delivered term, strong ATEN as of basis shift XX points forma ago we ago highlighted, improve versus XX% profit as performance, portfolio period. in we to margins X%, to profit higher the

operating year a a the and grew quarter, for was margin the points the up X.X% period. perform BIAF ago profit period. XX% forma ago up basis basis on First quarter year-over-year Operating X% XXX profit versus was from year pro

strong to room see of for and our combination also benefits scale opportunities from market, our global margin targeting BIAF continue execution in currently leveraging global from our in margin our project We pipeline. further a model, expansion higher

for forma corporate year-over-year costs just higher costs. $XX pro fringe a million quarter, on were overhead non-allocated related primarily by $XX Our driven less than the basis, up million

the mentioned decrease treatment operations cost $XX million quarter, of ECR of to rate to Post $XX costs related higher this due is which accounting in previous per all to our quarter, included than is we million cost due discontinued processes million $XX earlier, elevated our corporate alignment of of cost level in which to are our corporate transaction, approximately close the change expect earlier. to run to the unallocated million $XX non-allocated per As guidance picture. outlined ECR

Slide Now turning XX. to

to We of of from reminder, through synergies $XXX ECR. in million divestiture XXXX. slightly of acquisition the the ECR CHXM over following the impacts related As acquisition achieved and date now cost figures all synergy exclude a given in expected XXXX, the to calendar first related the QX half pending

CHXM significantly a million also our in synergy the integrate to remain approximately as efforts major rate synergies. to QX exit our outperform company to incurred in integrated transitioned ERP QX the associated two project portfolio we've approximately companies. these million on at we transition run control revenue expected suite integrated $XXX synergy estimates. beginning which supported of our QX XXXX. of recognition businesses of effect fiscal the to new Through of same and of milestone marked achieve time period. We We continue the applications our Jacobs’ to cost fiscal We of its of track our we system, this XX% original out executed adoption $XXX The achieving the $XXX rolled the ERP the platform million anticipate XXXX a standard. of new

Importantly, strengthen our expect we new our project management operational control further capabilities to discipline.

of proud change two are and to implementations these through We required simultaneous they focus. manage the teams’ ability complex as management significant

separation to next related turning estimates to a the Before the as we note continue refine the one-time costs, slide, sale ECR. restructuring of to our and on expected final on costs

Given of do the transaction. IT costs announcement expect materially communicated significant consistent time the and at approach we work with we $XXX systems, million. these on These assets the the the estimates expected carving remained that of proceeds could out that the

will our the we services evolve continue and as WorleyParsons related other Of finalize activities. figure agreement with course, transition to to work transition

a of and to of $XXX on on billion. with sheet the cash Slide quarter approximately Now We the ended million XX. $X.X gross balance debt

payments timing to some a of in payout, incentive Our year level, large recognition higher conflicting used end associated revenue ERP growth, and share the in quarter, growth standard. versus primarily net the million. of is QX $XXX repurchases new fiscal our adoption given with DSOs payables levels were of approximately and and level AR strong cash our up by priorities impacted receipt debt strong the of transition for due DSOs the our of both the timing

change levels this are issue DSO. is not normalized short-term our a We related that any confident in and of structural to

DSOs see back a post normal adoption and as area, to continue this expect in we the in on to focus in our reduction revenue QX. revert focus improvement fact, our In we QX to recognition ERP

to at Our debt times net leverage end the above two EBITDA times agreements. adjusted terms as X.X of per our our with of QX the is slightly adjusted calculated credit debt EBITDA gross

flow, of we announced increase recently continued quarterly balance XX% our and a also cash expectation our a share. sheet $X.XX Given dividend strong to to improved

cash $X a proceeds, of this pro flexibility under capital us billion net you giving to going including Turning our financial to forward. just the ECR the right on that basis, see side slide be can forma deploy would substantial

at While regarding me on Slide deployment and to in our recent our planned actions depth strategy February summarize our XX. Day, we capital speak let Investor philosophy

track not approximately of with of record we through million end have capital we advantage execution. Most shares our agile but January. allocation, per a the proved We are at an by our disciplined in in a took of of repurchasing dislocation price share we only $XX recently, $XXX have average valuation

program. board billion authorized the an addition, $X is In additional repurchase

solutions standpoint, divestiture CHXM with We will provide a consideration secular details management Investor of of announced ECR. at ASR From our acquisition higher provider, portion growth we have an for the trends the that to a upcoming deployment, of of transformed portfolio the margin our including leveraged the Day and on timing that. of some business to more recurring,

the comments Steve, Investor a back Day. turning few more to over call regarding our Before me upcoming make let

to of a with new finalizing We are begin series currently our results. QX report will metrics, against beginning which

against revenues to net profitability. our to underlying the as will clarity our margins which profit of begin provide performance provide insight better professional Specifically, additional portfolio, on we drives to service

Additionally, we our results. will to QX exclude operating from intangibles of and beginning plan our also amortization with acquired adjusted EPS profit results

thoughts. Now closing turn Steve I'll it for back some over to Slide and to XX

Steve Demetriou

including adjusted revenue clearly you, to the in I'm up results We year-over-year changes. and our unprecedented pipeline ECR quarter, backlog strong midpoint several a and there previous XX% CHXM executing strong. financial pleased on are while of an adjusted our as of and sale well And above our positioning this opportunities given all XX% to XXXX performance and guidance. the And are business. while for an very with forward, of Thank accomplished increase successful in our first look EPS Kevin. the of of accounting integration we our many the was pieces moving portfolio growth, had solid profit transformation, start operating

$X.XX, call increasing expect which full of three with removal EBITDA a Investor including forma guidance $X.XX up $X.XX guidance, Operator, ECR questions. on of our in ECR XXth February total be to we the previous to to full our fiscal you now to year, open our billion, Miami. in year XXXX adjusted Day $X continue related $XXX range we'll excluding to the $X.XX. XXXX And costs. to year assumes for we're sharing forward million EPS adjusted the pro $X a range our We of to strategy the so And at of from of look fiscal ECR new for

Operator

Cowen [Operator Guo Instructions] & Your first Company. question comes from from Lucy

is open. Your line

Lucy Guo

for taking question. track? and usually seasonally from book-to-bill you which it's numbers, know solid my to and the margin, can just Thank BIAF of something ATEN percentage QX, I Steve and robustness balance talk touch given softer. is about I are add What Good if gross wanted business, new backlog, Kevin. you the you morning on first

Steve Demetriou

momentum XG. we it's first in clear continues, actually core in provider our on as business. that's player capabilities pipeline using just in to that in And local I automotive build of ability our analytics, now challenging course, automate Right. customers that build we're area us, defense, I the Missile and differentiating saw trend largest is we're the is globally Well, talent. is to relates we're the rated defense, state, government data a telecom, which our business Department a and talent prioritizing number as because also with out of globally then technologies we like of as there one driving of platform acquisitions missile on seen those war as contracts wireless that infrastructure that on environment of portfolio, us, XG with some diversification a areas In and in a in for Van Defense, have, side, are our using of and major expand of all accelerate we’re it strong Blue Clearly, line the were of the a growth design a remarks. we quality city lot our automotive, Energy, side, And the in the And into FAA, these driver wind and funding. momentum and for where to to and major across I enterprise tunnels, think security telecom. but business tools on And and Canopy, Department area specifically ever the ATEN robust with in and BIAF a and as my us. cyber large-scale described mentioned, that's able federal that’s moving support and in you've previous there using key Dyke. client,

in Governor, over California, on, cities XX% several sustainability, the and ballots new Governors approved years of $X.X the mean and billion that, $X think rise growth. in where of $XX Governors there airports, was commitment infrastructure billion next are level in in I on, just the new driving $XX up Florida, we're four-year recently billion highways, the with part and I like the coming bridges approved, were specifically significantly significant as major Florida, the areas were billion it sea elections California With strong program.

in both momentum great So we're businesses. seeing just

Lucy Guo

if with That's great. maybe free can QX. question and cash My to then do on touch follow-up you has

So on ECR maybe, the you you the thank perhaps guidance can statement providing your sort release. provide closes? if I just about flow believe rest quarterly we you cash would conversion, how for on said free and year Can you some you cash in of should provide of for the remark think until

Kevin Berryman

not bit in We quarter. me the while cash for the cash about little flow in to $XXX specific let bit couple little the dynamics. a was And of a buyback a kind $XXX QX had obviously certainly more respond flow our Lucy, of million things than going – results. free share So, million, was on

So, unique year the a translated the was into our last $XX ultimately out cash things, million incentive associated one-time couple one calendar almost of the and The pay in in final that the drag flow quarter cash. of on we was that quarter. certainly year the approaching quarter calendar a with effectively in

it couple quarter, had especially another couple of AR of considering help. shutdown, certainly next that Those we payments didn't say usual obviously normally We from which it of exactly kind also $XX the And due of in million payroll as beginning is large the a a I timing the government, into but customer the not $XX necessarily a quarter had relates can't to. than are run were the million the those of relative leakage with have of quarter government then to we associated end to items, of in expecting. the third probably the were payables federal the to

substantial If go the, that and recognition there. or from you quarter and that of piece payables in to And on a kind our our last on AR, of numbers, call the will as those buyback implementation that, have that increase we comp the a adoption. undertaking. have take I that's it, the AR certainly with given you the pretty others, terms heard revenue people may a incentive the doing it ERP all of big of continuing And away. opportunity, in as let's And and the ultimately then is focused chunk, is job with associated were associated major alluded let's issue and think rephrase we is well our share good as –

some saw we and our other to we DSOs say rec start passed in to improve, now over ERP ultimately it. be So year. go they’ll those cash of leakage the consequently, the rev and that refocused because and story, that Long the are discrete flow our expect teams away items improving to of the we'll and implementations DSOs on balance

Lucy Guo

a helpful, can and QX on. it you pass Thanks say lot. on be I'll Anything would

Kevin Berryman

see where QX. you to the focused flow so are teams be dynamics. that in there I And thing to about buyback, the on other should and improvements guys expecting we're near-term only as be that on that our is the we're The continuing say will it some kind DSO would share something of cash thinking relates

Operator

Your from Suisse. Cook from next question Credit comes Jamie

open. Your line is

Themis Davris

Cook. this actually on Themis for Jamie Hi, is

question a recognition. and the incremental it from is like Just new benefit on from some an the a $X.XX revenue on looks guidance EPS raise help tax basis, there

these should takes we and So, any that there I'm other only puts change? the behind EPS are are drivers Or the just curious, keep in mind?

Kevin Berryman

is Thanks $X.XX. of it. operating in our And about actually, operations, The Kevin. in a revenue into figures number $X.XX discontinued you for and that year. don't the outlook embedded for already that We the because was had see the was actually of recognition benefit cost was question. it some previous actually This estimate our

So that's to a beat. not driver the

think associated is that incremental the we're recognition buyback of the discretes strength $X.XX ultimately So about. general the and benefits plus the the potentially with certainly I of talking some our portfolio, share

whole say you view what give buyback our will clear new $X is at time. upcoming I And updating the real the impact that think view Day the what given of of a the the and to of for balance implication a recent to However, year. authorization be Investor that going we're I of for that share balance of we potential in that is year the that providing at with clear point the will billion be

Themis Davris

strategic segments a environmental the And of moving was have And how about portfolio? ATEN, does there? the on Understood. about just as that business thinking implications any question from what the you're rationale the part two

Steve Demetriou

see growth that I just and we and clearly forward tremendous that environmental to recognize opportunities, way opportunity already forward. best factor infrastructure embed synergy and with GES BIAF that organization, strong in strong that higher BIAF take that, ATEN to ATEN our to opportunities on couple connectivity to sector a we're between back BIAF took going going there was as a is even with step the in there both part have the is discuss and a to new of major but that weeks three-year move an strategy a think there And into the in going organization, BIAF level. this of I we the covered as and decided the

we're really so, that excited forward. about And moving

Themis Davris

color. the Appreciate Thank you.

Operator

Citi. comes from Andy Kaplowitz question next from Your

is line Your open.

Andy Kaplowitz

Hey, guys. Good enough.

Steve Demetriou

Hi.

Kevin Berryman

Hi, Andy.

Andy Kaplowitz

give Obviously for update growth you on XXXX? So an forma pro you GES. moved guidance us Steve FY or Kevin, can

in in not apples growth recent quite wins, forward, you said run with were thinking X%, the is growth given forma past FY backlog revenue you high growth but and would ramping of we digits, digits? with QX XX% the And then growth of still in average that were XXXX apples know rate single is drop that still but the the could high ATEN in pro over going what in into can backlog in to burn you given before digits in double-digit kind So you also BIAF, growth contract single the single sustain up to you ATEN?

Kevin Berryman

up the more comparables over the So that won question. I XXXX, thanks think a do ATEN to for comparisons and we of the we ramping have enterprise it relates the big year-over-year, kind in you're couple contracts base as comments, Andy it. of accurate in as are

in these double-digit will for we a sure we're it And ultimately we'll QX. so start not so approaching versus that get I numbers be but fall strong to say to to would sure. very I'm going number,

the think that situation read kind So a you of I ATN. good for have pretty on

think be opposite will I case actually. the the BIAF in

much half first the pipeline shabby. we profile And stronger consequently probably not the think is the beginning year, opportunities ramping the while see the I the a than the back developing we year of ramp substance kind in even and quarter really of half year, a that back of though nicely. the are of growth until end too see won't the to

comparables outlook stronger bit XXXX. half muted kind the is those ATEN back of for compare a half, in liking we as we're of the more back BIAF in So where the against little the

a all, outlook the in for pretty all good in terms So solid of year revenue.

Andy Kaplowitz

then we did Kevin, front say don't today's meet you targets. Day, run or Kevin know on earnings that want prior you that's own or your to you to Investor strategy release are three-year And Steve, in track helpful. your exceed but

that cyclical given to and improved basis more to XXX mix couple grow able in about faster a over that than that we barrier as assume it of guiding X% operating are businesses this like grow you safe to points say XXX entry margin you the in target? what points three-year is to cycle, an and new then for you X% to a ex-ECR growth, be to less weeks, than have higher basis So capability back think should you to XXXX might higher

Steve Demetriou

both trends businesses. our you in giving multi-year Without secular rather today, we're on for a weeks, couple save clearly, that pretty because we’re any from specifics got we'd bullish I of next remarks hope

to lay first and total shift operating both it. importantly the over so, even to your gave up BIAF, go end is excited And bottom guidance that And out just the earnings the more growth, we're with And that we'll of double-digit about both year forecast we growth. line business but growth. profit businesses, back to the question, environmental assumes

so driving forward conversion. said always And to you're company flow to that's our importantly then more imagine the around you be but bottom and strategy, always we’ll and margin and growth, we've be as line to not revenue cash looking information expectations it hear growth tying can margin going all only going to obviously a

two laying we're forward in to that out So weeks. looking

Andy Kaplowitz

Steve. We’ll see in Thanks. Florida.

Steve Demetriou

you. Thank

Operator

Your from from Research. Michael comes question Vertical Dudas next

open. is line Your

Michael Dudas

morning, Good everybody.

Steve question, or Kevin. First

is better talked of As to the sectors skill do and would bit of years, Jacobs' an over a you you you you market mix in – or opportunities anticipate at and be has is very issue given or you Jacobs year the the both that new about and of referred that look booking backlog the and of ATEN new mix BIAF, those half? at internal pipeline a year, the sets the strong of that developed the issue? to quite that of in last new business And both a those more last than be booked couple

Steve Demetriou

business, combination value of Jacobs recently in has industry capabilities this can our differentiate and businesses higher when why we Well we're the And earmarking strategy. and ourselves that's rest highest the unique believe that – are great think the where previous and exceeding really I margins a to job do, to bring talking just it of continue ATEN unable BIAF and as and about is you to where – the most led our we CHXM clearly we and do profile of backlog. that

And now, a you're focus going to margin, profit quarter. be our backlog so of we're as every growth part again pick years clearly higher been in we've up hear what We quarter, higher saw than going we've two been this seeing on is And last that's more margin. how businesses. to couple to of on about weeks going talking that

And answer your is the so, yes. say Mike, would to question, I generally,

Michael Dudas

and couple your have the the what do couple to the And that what you have with us of that some Thank the that to and favorably several very Steve helping the is, Jacobs – required a see over share you. how to enough the in on, relative opportunity follow-up you And is the appears have be expectations get meet revenues that year years? over with do war professionals received last awards generate profits talent recognitions certainly call the of over trying the bodies of weeks, years? the that you to several next characterize next to you people labor, to my months, how you and you in you are to anticipate this going

Steve Demetriou

when as on combination a offer our couple why that's attracting focused And a attrition And capability one hear Jacob. a have technology. Jacobs, we base that Great, now about a be. technology. where and bring is put That's of innovation you I and going BIAF and on of unique we best ATEN projects to innovation is what to invest we will of want I that demonstrating the reduce innovation with delivering our and our war inclusion with can programs develop to capital across on and focusing question by place be and actually and the part we can a because increase why talent portfolio portfolio together, great a again that to what the our that, and and employee coupled With that's our we the in tools human for and you clients globe. these we're automation this and a we lot that, networks and sustainability, be believe to But less about comments our more now of culture more on and dynamic focused made to from need doing on on talent add we're use That's businesses employees demonstrating CHXM lot basically them. talking critical. first all Diversification employee to we're that's talk and diversity. of company foremost,

very on differentiate can focused And asked so, that all together, we the you that in that you question and ourselves believe marketplace. we're put the

Michael Dudas

See couple of weeks. Steve. you, in a Thank you

Steve Demetriou

Thank you.

Operator

Bank. comes Your next from Dillard from Deutsche Chad question

Your line is open.

Chad Dillard

morning everyone. good Hi,

Steve Demetriou

Good morning.

Kevin Berryman

Hi Chad.

Chad Dillard

So can seeing as about going maybe ramp backlog to into I have win? just markets comment you opportunity? first geography revenues? hand want the wanted BIAF. give I well need end by what also you or that how little you your that you driven flavor talking clarify, specific new all, of a color second were about you're in to then to of half as versus of incremental is be to bookings bit And dig business where of that And your much in just

Kevin Berryman

half So in the back it revenue currently gets terms in that's place I to of going growth. pipeline is to augment think the back which

And half manner the of a so, have will that I but as the the do certainly support developing such part say we that well. in that current equation, will backlog it place that's is in provide incremental to back

QX. So in in I higher, backlog more it timetable, the I bit a to both. – that in starting little trends goes think QX doesn't could probably in show revenue QX the result but The still say would it's where but more probably it's thinking positive some happen it we’re

will it's convert how think what's the and not excited backlog, but I both and about that So as we're only in pipeline well.

Steve Demetriou

to on that. add to want Just

of initiatives with to to the the all drive improvement company CHXM operating the profit will cost across we Global the Services also and drive revenue year some other Business I business on like of continue the and Jacobs the the synergies other as some Jacobs that as but the also we company. percent think of build rest initiatives initiatives that company this in across G&A across a the growth have the combination, also of

Chad Dillard

perspective then What quarter? shutdown, risk to thinking like I that give there of not. uncertainty government earnings operating about, maybe event from is sort of second still if per per maybe for And present you the a framework hoping helpful. that given actually or some us week related just profit kind was That's another would for week could materializes. that maybe

Steve Demetriou

understand talked come play because really into that Yes, the government government we've cash so, but there some this gets it even will that the it, came able about shutdown I'm XX-day where we think shutdown we out, quickly businesses a or And their And areas to ourselves we way government week. up demonstrates that neutral. through P&L most how of with to crunch, where it's seen this that because out the started as uncertain we've near-term but and really neutral. came we the fact tough is back-to-back portfolio critical were bills. where impressed out that that I and week, from essentially paying of differentiate back come resolved It's last our the standpoint

we to goal we've And it making be does on of that we doesn't I and hope this is, one our through going through it it sure pretty happen first to so all, and first we're think but get demonstrated happens. if should work clean that able

Chad Dillard

Thanks, I'll pass it on.

Operator

Baird. from Wittmann Andrew comes question from Your next

is Your open. line

Andrew Wittmann

morning. good and thanks Great,

Steve Demetriou

Good morning.

Andrew Wittmann

I you so. have after question one have cash $X.X when for Hey, guess to one – going just guess billion the I be question guys I ECR closure the you today. that was the just I announced for today. sale, guys. or suggested

balance is think your Now, are million. talk the Certainly, value about closing? expectations what can the part the other you the WorleyParsons cash I $XXX post is factors of number lowered it. of that stock, stock Kevin,

Kevin Berryman

debt originally the Andy little because forward. adjusted to. It's proceeds. our pro All a just end It's of reduction forma at did we figure we question. the and The our levels of debt cash it that for not rolling higher a our the thanks actually expectation. took flow for just in our QX alluded I the is dynamics is fact bit

figure. not proceeds we of proceeds, changed it our net and adjusted – So which our off our quarter-end took have

flows So will QX. sense? associated larger and depending cash the That course and deal with because the a seeing expectation is time, number closes, that one cash incremental the work probably will QX actually upon as flow that be we're hopefully the change much a ECR ultimately in improve continue makes when to over and we it of different

Andrew Wittmann

like has Got you. Well, it be I Yeah. it. it, to mean, stock feels part of thank performance the

that is February as the priced got have footnote You of here Xth.

I'm that's I $XXX unchanged is million what's of So mean rest the hearing from is you? difference, not it but

Kevin Berryman

it's million effectively your Yeah, is question. difference the about with $XXX associated

Andrew Wittmann

it. got Yes,

Okay, thank you.

Operator

from Your Goldman Revich Sachs. question next comes from Jerry

open. is line Your

Jerry Revich

everyone. morning good Hi,

Kevin Berryman

Jerry. Hi,

Jerry Revich

high pointed on expectations. So out, are end CHXM as the integration the you very you of integration your at

at M&A So I'm now as to versus Day, sure what that opportunities type having the you to undertake want the talk does but transaction give us about think you that deployment any capital context make from bolt-on we'll larger about completed existing would today of it you segments? Analyst within here, be more folks helpful. extent

Steve Demetriou

I complex actually integration, was months. next the increase and want and to on maintain Look, success which is to still further this the and of think this over XX going success we XX

deploy and large. gives Now, future more confidence capital or it as us clearly we small acquisitions,

about important to And that M&A, transforming around core hit so, demonstrates I our talked you've in building company improvements and our be execution and complex coupled ability a I culture our discipline a the that that also now organic company around M&A. point think very including integration of with the

together. put those two You things

and use the and to future return for see in value and ECR. well It's from the not shareholder it going think to right creating earned out I we we've of we're spend want the emphasize patient run we just very as got to both I eager capital strategic value-creating as because be and capital opportunities where when discipline, M&A.

to area. in that we've demonstrated think credibility the move I forward

So, great question.

Jerry Revich

with margin, that of something does come keep will be you an we you buyback terms thinking have higher powder folks in the consider? Would now we're say your about conceptually, leverage balance environment should where less and you up terms want – those that fit increasing are dry business be find hopefully completed, target for something the pieces? folks there, think in getting sheet, will folks that's you you – leverage let's – ECR quite cyclical a would case just about in the how right leverage something in And is to ratios how the of transaction don't or be will

Kevin Berryman

leverage But new ratios. the Jerry, higher details that at it ECR come to say us I play I will transaction the I that once will would ability leave actually given portfolio an go into the won't closes, respond. have specifically into and that. affords

our to of going I'll relates it a against couple weeks, certainly appropriate but how certainly ratios aren't our to execute in defer As Investor that we potential are will would Day that, down. I say leverage

Jerry Revich

you. thank Okay,

it. to will forward We look

Operator

Seaport from Josh comes next from Your Sullivan Global. question

open. is line Your

Josh Sullivan

Good morning.

Kevin Berryman

Good morning.

Josh Sullivan

and and defense A lot of around budgets. in activity space

nice classified, you're on You expand expansion front had on it in here. space even other be opportunities, win the NASA or the for this you at defense point? seeing Can spending what space or commercial

Steve Demetriou

and what as see up, happened the with that As things ended NASA specifically. were stability late space pleased impact as we we on watching good elections the the would space far year how and that way last we're side

as of But positioned last own U.S. ability force their that's slower resources. government. two. encouraged also some that activities, by what I saw our grow, with preserving be continues we've year think I think we in many budget using as the lot think as regard develop plus-ups what that entities what a to we the and space think area other we're pretty over in to We're NASA been to We're see hearing over going the On those and we confident that. the about maybe a we're that that or years commercial well. continued than space the we there'll commitment well of to doing with last in there, the little forward softer participate

Josh Sullivan

you. thank Okay,

Operator

from Tahira KeyBanc. Afzal Your comes next question from

open. line Your is

Tahira Afzal

folks. Hi,

to for market going now Just forward? are by gain those or you side, just market driven a see little more opportunities starting the are the strength share couple a on BIAF being of Number the one, questions.

Steve Demetriou

it's think combination Tahira, I both. a of

on we're side. market cities. earlier, mentioned X% very but and quoting U.S. in was some I that various the I out these we're measures, earlier, initiatives bond come of up and counties numbers are As to XX%, the spending these have seeing encouraged state environmental

ability but of the demonstrating buildings, the to WaterFix California lot that's of a environmental driving some numbers. others a clearly whether these synergy share the won't I that as But market it and highway, initiatives, quoted at opportunities, all, other recently, grow market rail, seeing it's water, repeat areas, are growing So and most some clearly I've major we're well.

So, in combination short, it's both. a of

Tahira Afzal

maybe haven't Q, the Kevin, updates to I And one is the you. okay. but been next Ichthys any situation? it, Got on the for

Kevin Berryman

No, XXXX and had no really mediation happening change we be which prepare in that to from there. going discussions arbitration, continuing we'll the to We're previously through for year-end. is work from the it at our take and that

Tahira Afzal

Thank you guys. very much

Steve Demetriou

you. Thank

Operator

back further There are will I call no to turn questions. the the over presenters.

Steve Demetriou

a been time Look, exciting more way do you hopefully, that never same right. we at Jacobs. there's All the feel

people portfolio, culture attracts Our with the action. I for clients, energized welcoming team globe, drive the to performance transforming the forward an talent performance our the in our to incredible time as the while see our where margin to spent in envelope was be higher doing continue our on you're possibilities, look in pushing Day higher help to and realigning that markets, that so Investor you best Miami Jacobs going industry. create retains strong, at growth, We rate. our around a creating I solutions and culture to enable us higher

soon. you see and you thank So

Operator

call. This concludes today's conference

now You may disconnect.

Jacobs Engineering (J) 6 Feb 192019 Q1 Earnings call transcript