Jacobs Solutions Inc. · NYSE:J
Jacobs Solutions — Morgan Stanley Industrial Conference 2019
48 slides from Jacobs Solutions's conference presentation, Sep 12, 2019
Slide 1: Investor Presentation August 2019
Investor Presentation August 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: Delivering Innovative Solutions & Disciplined Execution
Jacobs: Delivering Innovative Solutions & Disciplined Execution U.S./Int’l Mix Talent Base Reimbursable Public/Private Q3 FY19 ($ in billions) 74%/26% ~52,000 and Lower Risk Sector Gross Backlog Net Revenue Fixed Price 65%/35% Services ATN ATN ~94% Metrics pro forma for KeyW $8.5 $1.2 $1.5 $14.0 BIA
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 Predictive Geospatial Science Analytics Automated Internet Cybersecurity Design of Things Jacobs’ Domain Expertise and Delivery Experience Investigati
Slide 9: KeyW Update: A Compelling Strategic Fit
KeyW Update: A Compelling Strategic Fit Accelerating Growth Leadership in High-Growth, ✓ Confidential space intelligence contract on track and well funded High-Margin Multi-Billion $ Space-Intelligence Sector ✓ Space intelligence pipeline robust with focus on lower-cost, low-earth orbit satellites F
Slide 10: Fiscal Q3 2019 Results
Fiscal Q3 2019 Results Strong Year-Over-Year Top-line Growth Revenue increased 8% y/y and Organic Net Revenue increased 11% y/y1 GAAP Operating Profit of $90M and Operating Profit Margin of 2.8% Adj. Operating Profit (OP) of $233M and Net Adj. OP Margin of 8.8% GAAP Net Earnings of $90 million and E
Slide 11: Segment Financials
Segment Financials Adjusted Operating Profit Margin On Track to Achieve 2021 Targets $’s in millions Comparable Basis Q3 Q3 YTD PF YTD 20182 2019 20182 2019 ATN Operating Profit 72 76 187 222 as a % of revenue 7.1% 6.6% 6.7% 6.8% BIAF Operating Profit 178 183 462 515 as a % of net revenue 13.4% 12.4
Slide 12: M&A and Divestiture Update
M&A and Divestiture Update M&A Cost Synergies On Track Surpassed Original CH2M Cost Synergy Estimates ▪ Expect to achieve 100% of increased $175M targeted savings by end of CY19 ▪ Total costs to achieve synergies remain approximately $265M ECR Update ▪ Now expect over $200M of ECR related transactio
Slide 13: Balance Sheet and Cash Flow
Balance Sheet and Cash Flow Pro Forma Financial Flexibility Strong Underlying Free Cash Flow Generation ▪ Underlying Q3 free cash flow again improved, increased from higher Q2 levels ▪ Q3 DSOs improve by approximately 2 days from Q2 Reported Net Debt Pro Forma Net Debt FY19 Q3 FY19 Q31 ▪ Expect to p
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 ▪ Capturing growth opportunities through to $4.75 - $5.00 from $4.45 - $4.85, innovation in sustainable
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 $4.75 to $5.00 Leverage <2x 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) Unique Delivery Model Driving Share Gains ATN TTM Snapshot TTM Revenue by Customer (including KeyW) (including KeyW) ▪ One of the largest diversified government services providers ▪ Leveraging strong technical expertise, localized delivery model and U.S./Inter
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 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 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 YTD Gross Revenue by Sector Aligned To Secular Growth Trends ▪ Urbanization driving global infrastructure investments U.S./International 66% / 34% 19% 28% ▪ Sustainability and resiliency – numerous multi-decade opportunities Publ
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
5 | JACOBS Financial Ove
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 Q3 2019 ATN Backlog 6,641 7,174 7,147 7,130 7,130 7,158 7,285 8,456 Revenue 842 924 1,022 1,069 3,856 1,035 1,060 1,156 Operating Profit 57 581 72 77 2641 72 74 76 as a % of revenue 6.8% 6.2% 7.1% 7.
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 Q3 2019 Backlog 18,910 19,262 19,840 19,955 19,955 20,335 20,713 22,467 Revenue 2,746 2,870 2,934 2,992 11,541 3,084 3,092 3,170 Net Revenue 2,059 2,262 2,350 2,341 9,012 2,410 2,459 2,636 Adjus
Slide 44: Other Operational Metrics from Continuing Operations
Other Operational Metrics from Continuing Operations $’s in millions Q1 2018 Q2 2018 Q3 2018 Q1 2019 Q2 2019 Q3 2019 Depreciation (pre-tax) 18,476 26,764 24,423 18,211 23,491 25,851 Amortization of Intangibles 11,547 18,205 19,299 18,671 18,678 18,383 (pre-tax) Pass-Through Costs 411,787 608,720 583
Slide 45: Non GAAP Financial Measures
Non GAAP Financial Measures The following tables reconcile the U.S. GAAP values of net earnings, EPS, operating profit and operating profit margin to the corresponding "adjusted" amounts. For the comparable periods presented below, such adjustments consist of amounts incurred in connection with the
Slide 46: Non GAAP Financial Measures
Non GAAP Financial Measures The following tables reconcile the U.S. GAAP values of net earnings, EPS, operating profit and operating profit margin to the corresponding "adjusted" amounts. For the comparable periods presented below, such adjustments consist of amounts incurred in connection with the
Slide 47: Reconciliation of Net Earnings to Adjusted EBITDA
Reconciliation of Net Earnings from Continuing Operations Attributable to Jacobs to Adjusted EBITDA Three months ended June 28, 2019 Adjusted Operating Profit from Continuing Operations (1) 232,813 Depreciation expense 25,851 Adjusted EBITDA $ 258,664 (1) See prior slides for reconciliation. 47
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 restructur
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