Jacobs Solutions Inc. · NYSE:J
Jacobs Solutions — Jacobs — Barclays Industrial Select Conference 2019
47 slides from Jacobs Solutions's conference presentation, Feb 20, 2019
Slide 1: Jacobs Investor Presentation
Jacobs Investor Presentation February 2019
Slide 2: Forward-Looking Statement Disclaimer
Forward-Looking Statement Disclaimer Certain statements contained in this presentation constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such statements are i
Slide 3: Key Messages
Key Messages 1 Outperformed strategic targets and transformed the portfolio 2 Launching accelerated profitable growth strategy 3 Empowering our culture; flexing our innovation muscle 4 Targeting top decile operational performance 5 Committing to continued strong Total Shareholder Return 3
Slide 4: Drove performance through organizational transformation
Drove performance through organizational transformation Safety Positive Accountability Inclusion & Diversity BeyondZero® Mental Health • Industry leading • Drove accountability and • Stress – Identified as 21st • Launched CEO-led Inclusion safety performance empowerment Century’s #1 health epidemic1
Slide 5: Two deliberate actions significantly transforming our portfolio
Two deliberate actions significantly transforming our portfolio Pending Divestiture of Energy, Acquisition of CH2M Chemicals & Resources (ECR) 5
Slide 6: Strong execution against strategic and financial goals
Strong execution against strategic and financial goals 2016-2018 2017 2019 Strategic CH2M Acquisition Strategic ECR Sale Operational Improvements ($3.3B, ~7.0x EBITDA, incl. synergies) ($3.3B, 11.5x multiple) • Aligned lines of business to improve • Accelerated strategy in key markets – • Increases
Slide 7: Delivering on commitments
Delivering on commitments 2016-2019 2016 Investor Day 2016-2019E Baseline Targets Forecast Organic Gross Revenue Growth Flat 2 to 4% (CAGR) 2%+ (CAGR) ~65% Revenue in Priority Growth Areas 50% >75% (incl. M&A) Adj. Operating Profit Margin 4.8% 100 to 150 bps >150 bps 50 to 150 bps, Pro Forma ROIC 8.
Slide 8: Sale of ECR creates stronger, less cyclical portfolio
Sale of ECR creates stronger, less cyclical portfolio Organic Revenue ECR Jacobs excl. ECR1 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 8 1Historical gross revenue for Jacobs excluding ECR and excluding the first year inorganic impact from material acquisitions
Slide 9: Pro Forma Portfolio Profile (excl. ECR)
Pro Forma Portfolio Profile (excl. ECR) Geographic Mix Gross Revenue Strong Stability Attractive Profitability 67% 7.2% 29% recurring gross revenue Adj. Operating Profit as a % of 70% of Next 12 Months 71% Net Revenue (FY18) US (NTM) Gross Revenue International in Backlog Deep Technical Expertise Si
Slide 10: Unleashing Jacobs potential through joint innovation
Unleashing Jacobs potential through joint innovation Delivering digitally-enabled solutions Aligning around national Solving critical, global government priorities infrastructure challenges Reduce Extend life cycle of Less Enhance Data Privacy operating cost facility & infrastructure energy safety +
Slide 11: Focused, disciplined and agile capital allocation
Focused, disciplined and agile capital allocation Organic Profitable Growth Strategy Focus • Lines of Business aligned to long-term strategy • Investment in higher margin businesses • Disciplined cost management • Proactive, ongoing portfolio evaluation Value-Creating M&A Targeting Discipline • Acqu
Slide 12: Focusing on higher growth, higher margin sectors
Focusing on higher growth, higher margin sectors 2016-2019 Strategy 2019-2021 Strategy (Illustrative) (Illustrative) • Targeting secular growth markets • Exiting direct hire construction • More profitable geographies • Expanding in secular growth markets Higher Technology • Higher margin solutions S
Slide 13: Updating financial metrics, aligned with profitability and cash generation
Updating financial metrics, aligned with profitability and cash generation Pro Forma Net Revenue Metrics FY19 Outlook (excl. ECR) • Net revenue1 growth of 16% in fiscal 2018 Adjusted Pro Forma EBITDA (excl. ECR) of $920M to $1.0B • Adj. operating profit as a percentage of net revenue • Depreciation
Slide 14: Setting 2021 Financial Targets
Setting 2021 Financial Targets 2018 Pro Forma 2021 Target Baseline Organic Net Revenue Growth 16% 3% to 5% CAGR Adj. Net Operating Profit Margin 7.2% 125 to 175 bps Double-Digit Adj. EBITDA Growth 13% CAGR ROIC 9.2% 100 to 150 bps Consistent growth plus continued margin expansion to drive higher ret
Slide 15: Balance sheet strength post-ECR provides significant incremental value creation opportunities
Balance sheet strength post-ECR provides significant incremental value creation opportunities $3.0 Reported Net Debt Pro Forma Net Cash FY19 Q1 FY19 Q11 $2.0 $1.0 $0.5 $0.0 -$1.0 -$2.0 $(1.8) -$3.0 $3B of pro forma Balance Sheet Capacity post ECR transaction 1Assumes Q1 FY19 cash includes WorleyPars
Slide 16: Multiple paths to create value
Multiple paths to create value Fiscal 2019 Potential 2021 Earnings Power Guidance ~$8 ~$7 Leverage >2.5x Leverage <2x $4.40 to $4.80 Strong organic growth – combined with balance sheet capacity – drives significant EPS upside 16
Slide 17: Strong and consistent value creation algorithm
Strong and consistent value creation algorithm $7 to $8 Per Share of Potential Earnings Power by Fiscal 2021 Cumulative Balance Sheet Strong Organic Growth + Continued Margin Expansion + Capacity at Investment Grade Government Services Urbanization Inclusive & Execution Disciplined M&A Execution Res
Slide 18: Appendix
Appendix Appendix 18
Slide 19: Aerospace, Technology & Nuclear
Aerospace, Technology & Nuclear Solving for Tomorrow
Slide 20: Delivery of 2016 strategy created a solid foundation for continued growth
Delivery of 2016 strategy created a solid foundation for continued growth 2% 9% 11% 8% 13% 43% Risk Sectors Revenue Duration Profile 17% 18% 87% 92% Civil Cost Reimbursible Recurring Defense Fixed Price Services Non-Recurring Intelligence Fixed Price EPCM / DB International NASA U.S. Department of D
Slide 21: ATN has a foundation of large, multi-year highly technical contracts
ATN has a foundation of large, multi-year highly technical contracts Agency Award Size Duration Contract Scope $4.6B 8.5 years Operating the Missile Defense Integrated Operations Center, supporting its network to 2025 infrastructure, modeling and simulation, and development of systems ✓ ~75% of scop
Slide 22: Resilient business yielding good returns with low capital intensity
Resilient business yielding good returns with low capital intensity Long term stability with strong pipeline for growth Risk balanced portfolio • Foundation of recurring revenue work • Cost Reimbursable: 87% (~92%) with a core of long-cycle enterprise • Fixed Price Services: 11% contracts (~75%) • F
Slide 23: Steady Jacobs ATN organic OP growth despite major economic and defense spending swings
Steady Jacobs ATN organic OP growth despite major economic and defense spending swings Great Recession Sequestration Expansion 300 250 Jacobs ATN1 Delivering 200 outstanding resiliency 150 Defense Budget 100 50 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 23 1Indexed to 2008 US D
Slide 24: With strong markets, focused investment and value extraction from existing platforms drives growth
With strong markets, focused investment and value extraction from existing platforms drives growth TotalAnnual Addressable Industry Highly Fragmented Market Market 5yr CAGR Key Organic Growth Areas Government Services Market • Next Gen capabilities of cyber, cloud and analytics Contractors >0.5% • E
Slide 25: Jacobs ATN differentiators will continue to enable market share gains
Jacobs ATN differentiators will continue to enable market share gains Key Areas of Differentiation Customer Responsiveness Performance Innovation Efficiency • Localized accountability • Technically deep • Recognized for innovation • Lean, highly competitive, structure with customized staff with prov
Slide 26: Driving scale in Cyber Engineering to enhance overall Jacobs growth
Driving scale in Cyber Engineering to enhance overall Jacobs growth Targeted Areas for Growth Disciplines Deepen solutions for Government Services clients Security Security Security Industrial Controls Engineering Operations Compliance Security Market Sectors Enable differentiated growth across all
Slide 27: Strong pipeline with new opportunities in larger, longer contracts
Strong pipeline with new opportunities in larger, longer contracts Opportunities over $100M in Revenue $30B+ Pipeline 75 7 65 6 • Intelligence Community • U.S. Army Average Duration - Years 55 5 # of Opportunities • U.K. Remediation 45 4 • U.S. Navy 35 3 • NASA 25 • Dept. of Energy / Environmental M
Slide 28: Foundation of recurring work supports operating profit growth
Foundation of recurring work supports operating profit growth New Bid • Continued growth in Enterprise contracts and expansion of new shorter duration projects • Historical >50% new bid win rate • Estimated new win rate of 30% as we move into adjacent markets Rebid • Rebid cycle of recurring contrac
Slide 29: Attractive, achievable organic growth targets
Attractive, achievable organic growth targets 2018 PF 2021 Targets Revenue $3.9B 2-3%1 Adj. Operating Profit $265M 8-10%1 +100 to Adj. Operating Profit Margin 6.9% 150 bps Strong profit growth while retaining excellent free cash flow dynamics 29 1 Three year CAGR
Slide 30: Buildings, Infrastructure & Advanced Facilities
Buildings, Infrastructure & Advanced Facilities Keeping the world moving forward
Slide 31: Differentiated value to clients built on a high-margin and diversified portfolio
Differentiated value to clients built on a high-margin and diversified portfolio Iconic Global Scale Projects + Revenue Synergies 10% 8% 5% 19% 17% 22% Risk Delivery Sectors Profile Type 27% 78% 22% 92% Confidential Etihad Freight Rail Water Reimbursable / Fixed Price Services Consulting/Engineering
Slide 32: BIAF is uniquely differentiated to capitalize on these trends
BIAF is uniquely differentiated to capitalize on these trends Key Areas of Differentiation Performance Global Integrated Infrastructure Excellence Innovation Delivery Leader • Customer intimacy • Early adopter of digital • Global design centers • End-to-end skillset in all and accountability solutio
Slide 33: Strategy focused on facets of connectivity
Strategy focused on 3 facets of connectivity Digital Market Connectivity Global Connectivity Connectivity Leveraging expertise from Utilizing mature, global Building on strong foundation our end markets to provide delivery platform to deliver of innovation with investment end-to-end solutions to the
Slide 34: Global connectivity optimizes global platform through integrated delivery
Global connectivity optimizes global platform through integrated delivery Poland BIAF Presence Select Design Centers1 Oregon Philippines India Malaysia • Drives innovative solutions • Utilizes best talent around the world • Enhances competitive differentiation Mature global delivery platform enables
Slide 35: Shifting delivery model to digitally-enabled solutions
Shifting delivery model to digitally-enabled solutions Applied Geospatial Science 100% Extend life cycle Automated Reduce of facility Less Enhance Data Privacy operating cost & infrastructure energy safety + Protection Design Portfolio Mix Common Client Challenges Cybersecurity 0% Jacobs’ Domain Exp
Slide 36: Attractive, achievable organic growth targets and margin expansion
Attractive, achievable organic growth targets and margin expansion 2018 PF3 2021 Targets3 Net Revenue $6.3B 4-6%1 Adj. Operating Profit $629M 10-12%1 +110 to Adj. Operating Profit Margin2 10% 140 bps 1 Three year CAGR 2 % of Net Revenue 36 3 Includes GES
Slide 37: Financial Overview
» Financial Overvi | JACOBS
Slide 38: Future portfolio offers solid Free Cash Flow conversion
Future portfolio offers solid Free Cash Flow conversion Adj. PF Net Income ex amort. of acquired intangibles of $556M = ~90% conversion Discrete CH2M Pension Contribution Continuing working capital improvement will support higher free cash flow conversion 38
Slide 39: Drivers for Revenue Growth
Drivers for Revenue Growth 3% to 5% Organic Net Revenue Growth Robust Sales Pipeline Core Growth with Upside From Strong Revenue Stability within Current Markets Expanding Adjacent Markets Total • Pipeline has increased ~15% y/y • Infrastructure Secular Growth • 67% of revenue recurring • Focused sa
Slide 40: Drivers for Operating Profit Margin Expansion
Drivers for Operating Profit Margin Expansion 125 to 175 bps of adj. operating profit margin expansion Gross Margin In Backlog to Strategic Investments That Global Service Model Drive Incremental Profitability Drive Profitable Growth • Drive increased utilization of global • Gross Margin % in backlo
Slide 41: Drivers for ROIC Improvement
Drivers for ROIC Improvement 100 to 150 bps of ROIC Improvement Organic Operating Income Growth Lower Working Capital Low Fixed Capital Intensity • Strong operating leverage from • Improving DSO execution across • Overall fixed asset investments existing portfolio the business remain limited • Focus
Slide 42: Recast 2018 Pro Forma Segment Financials (Preliminary)
Recast 2018 Pro Forma Segment Financials (Preliminary) Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2018 Q1 2019 ATN Backlog 6,642 7,174 7,148 7,130 7,130 7,158 Revenue 842 924 1,021 1,069 3,856 1,035 Operating Profit 57 58 73 77 265 72 as a % of revenue 6.8% 6.2% 7.1% 7.2% 6.9% 7.0% BIAF Backlog 12,269 12,08
Slide 43: Recast 2018 Pro Forma Consolidated Financials (Preliminary)
Recast 2018 Pro Forma Consolidated Financials (Preliminary) Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2018 Q1 2019 Backlog 18,911 19,262 19,841 19,955 19,955 20,335 Revenue 2,746 2,871 2,933 2,992 11,542 3,084 Net Revenue 2,298 2,577 2,599 2,674 10,148 2,560 Gross Profit 545 585 592 594 2,316 571 Adjusted
Slide 44: Non-GAAP Financial Measures
Non-GAAP Financial Measures 44
Slide 45: Non-US GAAP Financial Measures (cont'd)
Non-US GAAP Financial Measures (cont’d) 45
Slide 46: Non-GAAP Financial Measures (cont'd)
Non-GAAP Financial Measures (cont’d) Adjusted net income, adjusted operating profit and adjusted operating profit margin are non-GAAP financial measures that are calculated by (i) excluding the costs related to the 2015 restructuring activities, which included involuntary terminations, the abandonme
Slide 47: Glossary of Terms
Glossary of Terms • A&D: Aerospace & Defense • GID: Global Integrated Delivery • ASR: Accelerated Share Repurchase • I&D: Inclusion and Diversity • ATN: Aerospace, Technology & Nuclear • IAM: Intelligent Asset Management • BIAF: Buildings, Infrastructure & Advanced Facilities • IDIQ: Indefinite Deli