Jacobs Solutions Inc. · NYSE:J
Jacobs Solutions — Deutsche Bank Global Industrials Conference 2019
48 slides from Jacobs Solutions's conference presentation, Jun 5, 2019
Slide 1: Investor Presentation May 2019
Investor Presentation May 2019 1
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: Jacobs: Industry leader poised for growth
Jacobs: Industry leader poised for growth New Jacobs (post ECR sale) Q2 FY19 ($ in billions) Net Revenue Gross Backlog U.S./Int’l Mix Talent Base Reimbursable Public/Private 70%/30% ~50,000 and Lower Risk Sector ATN ATN Fixed Price 64%/36% $7.3 Services $1.1 ~95% $1.4 BIAF $13.4 BIAF Increasing port
Slide 4: 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 5: Strong execution against strategic and financial goals
Strong execution against strategic and financial goals 2016-2018 2017 2019 CH2M Acquisition ECR Sale Pending KeyW Acquisition Operational Improvements ($3.3B, ~7.0x TTM EBITDA1) ($3.3B, 11.5x TTM multiple) ($0.8B, ~10x 20202 multiple) • Aligned lines of business to • Accelerated strategy in key • In
Slide 6: 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 6 1Historical gross revenue for Jacobs excluding ECR and excluding the first year inorganic impact from material acquisitions
Slide 7: 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 8: Investing in Solutions for Critical Global Challenges and Opportunities
Investing in Solutions for Critical Global Challenges and Opportunities Solutions enabled by digital capability, informed by domain expertise Applied Automated Internet Predictive Cybersecurity Geospatial Science Design of Things Analytics Reduce Extend life cycle of Less Enhance Data Privacy operat
Slide 9: KeyW Recap: A Compelling Strategic Fit
KeyW Recap: A Compelling Strategic Fit Enhanced Value Next-Gen ISR Financial Strength, Leadership in High-Growth, Quick Reaction Capabilities and Technology + Resources and Client Access High-Margin Multi-Billion $ Space-Intelligence Sector Mission IT and Enterprise IT and Highly Full Spectrum IT Ca
Slide 10: Fiscal Q2 2019 Results
Fiscal Q2 2019 Results Double-Digit Year-Over-Year Operating Profit Growth Revenue increased 8% y/y and Net Revenue increased 9% y/y Adj. Gross Margin (to Net Revenue) 24.9% vs 26.0% in Q2 2018 GAAP Operating Profit of $103M and Operating Profit Margin of 3.3% Net Adj. Operating Profit Margin 9.0% v
Slide 11: Segment Financials
Segment Financials Continued Strong Operating Margin Expansion $’s in millions Comparable Basis Q2 20182 Q2 2019 ATN Operating Profit 58, 74 as a % of revenue 6.2% 7.0% BIAF Operating Profit 159 173 as a % of net revenue 11.9% 12.3% Adjusted Unallocated Corporate Costs1 (42) (25) Adjusted Operating
Slide 12: M&A Cost Update
M&A Cost Update M&A Cost Synergies On Track CH2M Cost Synergies Continue to Surpass Original Estimates ▪ Achieved over 90% of targeted $175M run-rate savings at end of Q2 ▪ Excluding ECR, expect to reach $175M in run rate synergies exiting FY19 ▪ Total cost to achieve synergies remains $265M after s
Slide 13: Balance Sheet
Balance Sheet ECR Sale Improves Pro Forma Financial Flexibility Maintained Healthy Balance Sheet ▪ Q2 cash and equivalents of $0.9B and gross debt of $2.8B Reported Net Cash Net Cash ▪ Ending Q2 with $1.4B of liquidity capacity remaining on revolver FY19 Q2 FY19 Q21 $1.0 ▪ ASR delivered 2.8M shares
Slide 14: Delivering Superior Shareholder Value
Delivering Superior Shareholder Value ▪ Inspiring employees through a high- performance culture reflecting FY19 Financial Outlook accountability, inclusion and diversity Increasing FY19 adj. EPS1 ▪ Aggressively capturing growth opportunities to $4.45 - $4.85 from $4.40 - $4.80, through innovation in
Slide 15: 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 8.3% 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 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 $4.45 to $4.85 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: Aerospace, Technology & Nuclear
Aerospace, Technology & Nuclear Solving for Tomorrow
Slide 19: Aerospace, Technology and Nuclear (ATN)
Aerospace, Technology and Nuclear (ATN) ATN Snapshot TTM Revenue by Customer Focus on High-Priority Federal Programs ▪ Long-term, mission critical, enterprise contracts U.S./International 87% / 13% ▪ Robust pipeline of over $30B through 2021 Government ~85% Civil Defense Reimbursable and Lower Intel
Slide 20: 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 21: 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 22: 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 22 1Indexed to 2008 US D
Slide 23: With strong markets, focused investment and value extraction 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 Sector • Next Gen capabilities of cyber, cloud and analytics Contractors >0.5% • E
Slide 24: Jacobs ATN differentiators will continue to enable growth
Jacobs ATN differentiators will continue to enable growth Key Areas of Differentiation Customer Responsiveness Performance Innovation Efficiency • Localized accountability • Technically deep • Recognized for innovation • Lean, highly competitive, structure with customized staff with proven track and
Slide 25: 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 26: 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 27: 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 28: KeyW is Additive to ATN's Organic Growth Outlook
Aerospace, Technology and Nuclear KeyW is Additive to ATN’s Organic Growth Outlook 2021 Organic Targets Est. KeyW 2018 PF (Feb 2019) Additional Impact >100 Revenue $3.9B 2-3%1 bps >200 Adj. Operating Profit $265M 8-10%1 bps +100 to Adj. Operating Profit Margin ~7% 150 bps >50 bps 1 Three Year CAGR 2
Slide 29: Buildings, Infrastructure & Advanced Facilities
Buildings, Infrastructure & Advanced Facilities Keeping the world moving forward
Slide 30: Buildings, Infrastructure and Advanced Facilities (BIAF)
Buildings, Infrastructure and Advanced Facilities (BIAF) BIAF Snapshot TTM Gross Revenue by Sector Aligned To Secular Growth Trends U.S./International 61% / 39% 20% 27% ▪ Sustainability and resiliency – multi-decade opportunity Public / Private Sector 53% / 47% ▪ Favorable Electronics and Life Scien
Slide 31: 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 32: Strategy focused on 3 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 33: 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 34: 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 35: BIAF organic growth targets and margin expansion
Buildings, Infrastructure and Advanced Facilities Attractive, achievable organic growth targets and margin expansion 2018 PF3 2021 Targets3 Net Revenue $5.1B 4-6%1 Adj. Operating Profit $629M 10-12%1 +110 to Adj. Operating Profit Margin2 12% 140 bps 1 Three year CAGR 2 % of Net Revenue 35 3 Includes
Slide 36: Financial Overview
Financial oven | JACOBS
Slide 37: 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 37
Slide 38: 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 39: 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 40: 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 41: Thank you!
Thank you! © Copyright Jacobs www.jacobs.com | worldwide
Slide 42: Recast Segment Financials
Recast Segment Financials $’s in millions PF Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2018 Q1 2019 Q2 2019 ATN Backlog 6,641 7,174 7,148 7,130 7,130 7,158 7,285 Revenue 842 924 1,021 1,069 3,856 1,035 1,060 Operating Profit 57 581 72 77 2641 72 74 as a % of revenue 6.8% 6.2% 7.1% 7.2% 6.9% 7.0% 7.0% BIAF
Slide 43: Recast Consolidated Financials
Recast Consolidated Financials $’s in millions PF Q1 2018 Q2 2018 Q3 2018 Q4 2018 FY 2018 Q1 2019 Q2 2019 Backlog 18,910 19,262 19,840 19,955 19,955 20,335 20,713 Revenue 2,746 2,870 2,934 2,992 11,541 3,084 3,092 Net Revenue 2,059 2,262 2,335 2,334 8,989 2,410 2,459 Adjusted Gross Profit 547 588 58
Slide 44: Other Operational Metrics from Continuing Operations
Other Operational Metrics from Continuing Operations $’s in millions Q1 2018 Q2 2018 Q1 2019 Q2 2019 Depreciation (pre-tax) 18,476 26,764 18,211 23,491 Amortization of Intangibles (pre-tax) 11,444 18,101 18,671 18,678 Pass-Through Costs Included in Revenue 411,787 608,720 674,278 632,359 Capital Exp
Slide 45: Non-US GAAP Financial Measures
Non-US GAAP Financial Measures Three Months Ended March 29, 2019 Effects of Restructuring Effects of Other The following tables reconcile the U.S. GAAP values of net earnings, EPS, and Other Transaction Adjustments U.S. GAAP Charges Costs (1) (2) Adjusted operating profit and operating profit margin
Slide 46: Non-US GAAP Financial Measures
Non-US GAAP Financial Measures Three Months Ended March 30, 2018 The following tables reconcile the U.S. GAAP values of net earnings, Effects of Effects of EPS, operating profit and operating profit margin to the corresponding Restructuring CH2M Other and Other Transaction Adjustments "adjusted" amo
Slide 47: Reconciliation of Net Earnings from Continuing Operations to Adjusted EBITDA
Reconciliation of Net Earnings from Continuing Operations Attributable to Jacobs to Adjusted EBITDA Three months end ed March 29, 2019 Adj. Net earnings from Continuing Operations attributable to Jacobs (1) $ 165,526 Adj. Income Tax Expense for Continuing Operations 52,099 Adj. Net earnings from Con
Slide 48: Non-GAAP Financial Measures (cont'd)
Non-GAAP Financial Measures (cont’d) Adjusted net earnings from continuing operations, adjusted EPS from continuing operations, 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 restructu
Jacobs Solutions — Deutsche Bank Global Industrials Conference 2019 on 6ix