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Cubic (CUB)

Participants
Kirsten Nielsen VP, IR
Bradley Feldmann Chairman, CEO & President
Anshooman Aga CFO & EVP
Ken Herbert Canaccord
Jon Raviv Citi
Louie DiPalma William Blair
Michael Ciarmoli SunTrust
Mike Cikos Needham & Company
Call transcript
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Operator

Ladies and gentlemen, welcome to Cubic Corporation's Third Quarter Fiscal Year 2020 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

Now I would like to turn the call over to Kirsten Nielsen, Vice President of Investor Relations.

You may begin.

Kirsten Nielsen

Hello, everyone, and thank you for joining Cubic's webcast. Brad Aga, President Chief Executive by Officer; Chief Financial today Anshooman and Vice joined Feldmann, and Chairman, Executive Officer. I'm President and

contains made begin, statements federal harbor securities we a reminder the our Before friendly provisions of that to pursuant presentation are laws. the safe that forward-looking

could materially most expectations. from Our that SEC actual company's include filings the recent our results factors risk cause to differ

directly our in measures press we addition, have most GAAP In call to Brad. Reconciliations financial With these non-GAAP release to over financial can in included measures the presentation. of discussion. measures today's the I'll be the comparable financial in turn that, to today's non-GAAP found appendix and

Bradley Feldmann

slide Kirsten. and Thank Welcome, three. joining thank everyone, us for turn you, you to today. Please

came I many others continues tragic injustice the comment of the black an to Before are to killings The here United the to results, on are in sadly, from organization cubes, the Floyd, threaten Recently, events. community we each injustice. Breonna and and racial fellow that support George together discuss want hurting virtually who our reminders as educate of other we States. Taylor recent quarterly

group open personal potential with multiple employees black of Cubic address inequalities. events, all to actions facilitating resource led experiences employee dialogue Our recent of discuss discuss to sessions share and

more mitigate Additionally, done. we be and are to bias. unconscious have there to identify launched a us These is new steps, training employees course for help all small and

We and are together. to committed listening, learning improving

supported and the company. to innovation, is As to Cubic contribute is where I've the innovation. workplace, our and has is inclusive lifeblood said committed empowered before, to of respected, an opportunity which diversity fuels everyone

adaptable At resilient culture the effectively the this this employees priorities, environment. us effectively current comment briefly At that in our on our and COVID-XX We transportation and onset the uncertain market-leading of intact. top the has and taken been to of and managing corporate the our priorities, same Now time, technology-driven, priority. these expenses focused experience enabled safety and time, future industry continuity building specifically period. ensuring of and address our we believe have let same off economic and not business dynamics Since health the customers and favorable me on pandemic, believe teams long-term that. both we the eye strategic our results demonstrate defense we have remain quarter businesses, our during

we growth, ambitious Lastly, Last launched to turn to slide continue flow with COVID-XX, Please and engagement. face our to we believe global the leverage. employee three and positioned related talent culture. building inclusive second, goals we workforce With reduce resource we are strategy across while launch, third, proven year, four. life also remains first, improved established this near-term strategy an diversity drive to well cycle; ERGs dynamics to cash Cubic and and catalysts several inclusion pillars: groups. leadership;

continue diverse to expand to our And strategy employee commitment in will seeking diversity population. support We to inclusion, increase actively initiative. and and we are our this important of

progress, team's in innovation, is initiatives I and responsibility is which am recruiting, shareholders. employees, and corporate our our Cubic benefit proud relatively early development journey, of talent customers Although this driving that

remain protocols. our operations to As meet customer robust that well-being supply our believe are fully of commitments. maintain our continue we to and Cubic's monitor and globally COVID-XX health the prepared essential, and proactively persists, we deemed safety and employees chain businesses

immediate to the transportation discuss and network how more transit and role major taking can we customers resilient we an we met And their in support experiencing active efficient safer, we more weeks, customer industry make While several unprecedented our in and are needs our to continue with help advancing believe continue are the agency the future the last and transportation. elevating adapt to of transit will all In long CEOs evolve. challenges, term.

Turning to the more and discuss results for performance Anshooman slide detail. third in quarter, our five. an will of financial the overview provide I'll

Third Massachusetts Bay quarter for Authority a in results In close Transportation the continued fare the completed our payment MBTA's June, that financial reset, of the of were and line contract expectations. we Cubic next-generation the key announced with milestone delivery system. our

for third the ratio very book-to-bill beginning billion, Our year. the X.X. quarter both at and XX% backlog was year-to-date our since of $X.X strong fiscal remains the And up

bookings XX% impacts that cash delayed and in transit EBITDA and were adjusted free quarter. strong was quarter benefit the for and the including Mission recent of expectation Solutions, a impacted our in timing an $XXX.X strong decrease reset. $XX.X million, This transportation, the supported of million, year-on-year, the orders Adjusted $XX.X and shipments for a contract including we weighted cost lower related and slowdowns quarter by quarter, increase We X% outlook QX project estimated the of million which be by COVID-XX of was awards, reset reflecting current continue by sales management. Boston including COVID-XX fourth performance company-wide as of year-on-year expect Third approximately the additional Boston ridership. flow $XX to and result is in million, our the at to EBITDA million approximately of $XX to Adjusted sales shipments. to third

what environment. to the paid debt third economic in continue prioritize delivered Overall, down challenging we leverage despite said million do to on $XX we and the were of we We net quarter. reducing going

transit lows have of below improved of the surrounding from Lastly, pace uncertainty significantly the levels with it pandemic, timing normal levels remains and the while ridership recovery.

in experience agency revenues. transit many As customers a nonfare to result, decline of and continue their fare a our

the backlog of believe the largely service impacts large due to critical from to of fare Cubic's collection. that insulated COVID-XX is continue We

is critical support physical a to minimize environment. account-based, of removal points fare payment contactless, collection and fare transportation Additionally, cash the in touch

projects not are until improves capital be that been awarded funding However, customers. situation for to have the delayed likely yet our

cities and ridership effective are is concerned allow we advanced safe quickly about and recovery, transit optimization of and intersections slow intelligent control vehicle of enable best-in-class, many Cubic's returned While congestion. traffic flows. traffic seeing With traffic solutions, a has

in our believe management we there while agencies pipeline are revenue the demand products. management traffic to right, for Cubic's move upsides potentially high-margin, So for in accelerated market-leading, urban transit may

slide to Turning six.

City transportation me update our work system more Let with project In strategic subway readers the on track stations. York, remove all physical pandemic. New of to and payment deploy This priorities, all important at half station the remain May, to We critical at due The York ever of our OMNY the end every transportation. City more on installation to beginning a the subway by than installed pause, resumed provide on the than new York the is points New within to starting system new New networks. contactless due on public an OMNY at is buses year. the of need now after six-week touch

cloud-based for trains arriving allowing Next, NextBus, including implement information. of years, provides show real-time display new display we next the San a informational next-generation The real-time features to solution new routes. will decide for arrival a information this alternate the contract and With and Francisco wait whether our passenger of over bus. software-as-a-service capacity, couple passengers buses Muni will that next to bus for Board approved system, the

now due Los apps but including card in and Chicago, progress in the and Angeles In is with testing partners functionality, pilots our was to initial and virtual good COVID-XX the customers. made we've lockdown, D.C. phase. extended Additionally, with mobile pilot

remain to to on we in on of broader and awards. experiencing transportation three timings new previous about large schedule, our While continue projections impacts projects month delay see we transportation, the from disruptions are and a nine project

Presentations U.K. opportunity Pacific, are Queensland. open-payment an pipeline proposals we Poland. now In Asia mobile total key Europe, In advance in the various we And are in to Canberra New more and office and an near-term York billion Warsaw, Metrolinx and are have we well pursuits. continue In responding an well and open we we addressing Industry RFPs. as as as However, the account-based, including America, platform and open-payments as for awaiting North state, mass submitted addressing bus are new to for payment In to Sydney, examples upgrade $X upgrade several in the in in are in Vancouver proposals, we New account-based In participated proposals a a Zealand opportunities. progressing Atlanta. Toronto, to tolling system back we than These proposal. Washington, Day Dublin RFP.

Turning Solutions. Mission to

July, Our Air Domain investments in This All States is for HCB technology, investments our in were innovation strategy awarded to in antenna. In $XX wins the Capacity Control capability. a software-defined we HALO United testament and a prototype million Backbone such continue prime win Air United Command Joint as States critical contract business. our to this drive and the a strategic to Force's enabler is demonstrate Force's and system. High

and we portfolio, communications Our platforms. and time growth capabilities across protected this solution to our we and as drive CXISR execute integrates to transition expect over

Battle Mission providing System, contract a solutions our won United for Management us distributed IDIQ positioning IoT Advanced complex the connect sensors to with to Solutions and military strategic continue Additionally, an intelligently in effectors operating avenue environments. Air States Force's

deliver States Navy command quarter for systems and GATR the to our program, order aircraft Sharklink third U.S. TXCX activity a included in for for order the supported key orders Army Lastly, and carriers. follow-on United solutions post orders computing

contract awarded new STIGS. this Gaming Turning we Immersive July, with a under environment virtual single training competitive, This Simulations to provide as program, States training a And the million. business. the is program, was for highly Navy. IDIQ known five-year Cubic In Training United will and Surface $XX system vendor,

Sailor goal year the training Program of pursuing of the improving in overarching support U.S. fiscal environment. Content of XXXX operational opportunity Relevant sailors' XXXX work are We its another with transfer the program, the in of Navy Conversion to support Learning with Ready

assessment deliver are the Squad Both live environments. advance United scheduled initiatives for Soldier force-on-force we the addition, Environment training and Training successfully user States our to last for Army user the training are capability. continue Trainer program. for programs to assessment Most a multi-domain recently, under final Synthetic we high-fidelity, the Virtual initiative completed key In

of August. deliver will awarded until service phase combat training services Additionally, With this Corps. OTA we to United with States final force-on-force for the place a of Phase the taking United end and demonstrations have Marine Next three new products three Marine States the Phase entered Corps contract be the demonstration,

to contract is strategically Turning like important. it share HCB and on slide more to a why seven. the details few I'd

to resiliency and market billion network opportunity over delivery an expect and of the a capture for availability we accelerate and of all CX estimated capability ensure portion Force element critical First, our of achieve essential we the won Joint and prime the contractor HCB innovations that its a Layer Joint one will Air considers this a future us in There tail, speed. vision. Aerial next help $X is production data Tier XX aerial than win decision will level layer a the All-Domain Network, good a at is more for environments competition increased years.

we software an outstanding R&D Second, from successful integrate new Nuvotronics our capabilities business, This customer. solutions our acquired strategy capabilities links. pipeline to definable use and and innovations our provide for open-system to acquired TeraLogics recently tactical included advanced data for and antennas an solution

and prototype and system, demonstrate ground will We entire including active cyberdefense. air the and networking

a transportation. on Turning to for discussion eight slide

January, mobile technologies will with as planning, frictionless a operator as complementary a digital and industry-leading technologies, real-time solutions opportunities experience. The leverage partnership we platform new creating while fare and with unique includes journey collection to integrated integration information, sales step-by-step guidance, arrival As Cubic as engagement that enables robust, fare incentives to Moovit's and offers create partnership experience intelligence. and and This the reminder, journey as in announced user planner Moovit's and mobile base departure collection innovative ticketing well multimodal, within market-leading, Moovit and solution The travelers of existing with Cubic's installed Cubic seamless payment partnership a features. mobile extended and and markets. develop well a Moovit's

improved offerings. and of transaction book set and one came the targeting of XXXX. mobile first available which in we the planning release Cubic's customers out will end Delerrok. experience combine this our and roll to to be for additional This term, multiagency, features are expect the which acquisition Cubic's XXXX will of with where expect service also solution journey with an release, We cloud-based, will near fare feature users more Moovit's existing of for enhanced more In multimodal marketedly platform's with of TouchPass, to goal very our all time, wins in environment and will immersive fees. create pleased a toward lead our look, through this our agency pay value team's drive creating people app. can journeys mobility Over we progress I'm offerings as payment

slide turn Let's to nine.

focus rebound staff We effective closely transit travel from by initiatives and the with globally have touchless been transit. on them providing our behavior. for current influence trust customers key experience timely working and in strongly their through a to a travelers pandemic, with building and pain transportation to help understand Trust communication to to accelerate is influenced in points and

ticket customer transit As contact our staff multilingual technology need an users' proximity ticketing and provides between face-to-face smartphone. kiosks the is agent delivered our through the It close and service customers. virtual example, service for a reducing multichannel

Another management insights home to travelers example, with to demand prior and Moovit and we to on current are levels to a collect check yield demand the in provide leaving working allows that valuable system and projected system. congestion

management We to increased platform, management also technology, transport see Trafficware congestion and expect in GRIDSMART. including interest the

road walking while important artificial and rebound. will For to rate than used faster GRIDSMART's with road intelligence camera to the traffic a This people forecast active vulnerable be cycling that traffic becomes automate more embracing example, at crossings as protect mobility, critically users, can transit's pedestrian and such return optimizing flow.

a Turning social commitment of responsibility. Cubic corporate to history to slide has long-standing XX.

are and industries. we our accelerate ESG best-in-class to in steps become Now further taking journey our

to As with our to development out Global a and and the we strategy UN inclusion a commitment the made align Compact earlier, became year. sustainable XXXX, UNGC I discussed signatory we diversity goals. rolled In last

keeping and on effectiveness performance, improve most safety businesses this conducted our our reducing We're all superior welcome while cities guide cities. by and virtual responsibility proficiency deliver And stakeholders. our on that corporate assessment training CGD, our related readiness, on In safer improved and that forward delivering world. I innovations progress. matter we strategy to physical which help foundation enhance to footprint. live as industries. in our the initiative. market-leading mission determine, congestion, solutions help we And we a to way transportation, Cubic we you help Additionally, building shareholder throughout input a constructive sustainability CXISR, enabling improve and important our In always, updated promote move reduce and look topics the we materiality to

discuss to Anshooman ask I'll results. Now the financial

Anshooman Aga

and Thank to XX results. turn hello, slide Please you, everyone. third financial the quarter to Brad, cover

in quarter, and our the million, As Adjusted XX% impacts customer We with benefits EBITDA growth and million, the year-over-year, this expectations. and our related $XX.X transit cost $XXX and portion partially in ridership a grew results Bookings was previously driven revenue. the scope of up was decline XX% including unfavorable Brad Mission initiative, estimate mentioned, by which on and we were by well up Adjusted the offset executed project. of million additional expense. training contract Boston both our to design-build depreciation reflecting and company-wide the services in $X.XX, with amendment Solutions. year-over-year, XX% line to management the basis from in to project defense transportation impacts related EBITDA, as in the announced taxes pauses $XX pandemic were partially and COVID-XX X% an third higher down sales Mission million reflecting higher of offset totaled $XX the were EBITDA for shipments to and Sales million, and third result reported reflecting up for quarter on the year-over-year, as quarter. and Solutions up COVID-XX by organic a $XXX and per awards, adjusted lower slowdowns estimated timing adjusted share X% delayed to that earnings

payment we third adjusted on the financial quarter, and on in Additionally, cash driven York contract. the Boston delivered milestone payment New the the a close of by strong $XX flow with contract free million the

cash flow the June $XX real As included a last net in year's proceeds reminder, adjusted free of estate sale from XXXX. of million

reflects due than booking amendment. the contract line to and from were million Systems project COVID-XX, doubled our results Sales primarily the Transport but slide reflecting on project, with year, growth business, Transportation segment $XXX Bookings in which our lower on in prior transit were the delayed and bookings more Moving the XX. Intelligent year-over-year, pauses offset slowdowns by from to impacts Boston ridership. Boston

and reset, adjusted overall to However, cost while increased year-over-year increased XXX contract points the savings driven $XX.X EBITDA performance. basis XX.X%, Boston XX% by margin to strong EBITDA adjusted million,

and Trafficware GRIDSMART year, to this pandemic. the due mentioned, some experienced I delays As have

grew this in periods. However, to continue future bookings high-margin we growth and year-over-year, in expect business

$XX the XX. quarter quarter prior compared in declined third in Moving segment, line the year. to Sales in were as third Bookings Mission the with the prior slide Solutions on our million, to due the unfavorable on adjusted EBITDA Adjusted impact year, EBITDA programs. reflecting of had high also products to these deliveries, an shipments, GATR reflects in franchise timing continued lower which margin. are as investments

continue a We expect strong for I'll a fourth to which CMS, quarter in moment. cover

program year, Defense line last award were to including sales. Turning segment Bookings to Global The in associated Adjusted delays, growth lower due delays turn, XX.X% reflects cost slide which, strong increased by than also with XX. top our reflecting in in COVID-XX, impacted management. offset points operational in margin training, ground year-over-year, basis training. air and year-over-year partially EBITDA of XXX execution decline sales lower

Turning to quarter some XX fourth slide guideposts. for

fourth We strong year quarter, a delivered XXXX, anticipated adjusted leading to million. year or expect EBITDA deliver slightly to to full $XXX.X fiscal at be where we above

While this fourth is the weighted Solutions timing towards typically business fourth quarter large heavily ramp, the quarter to please Mission orders. in is our mind keep a due of

Additionally, is end touch most as we QX. generates expected. its of on largest this in the pleased profit in business, occurs at the order to was quarter some fourth July which acquisition since received I'll are license the confirm annual a that Pixia, software other And renewal high-margin key of drivers. of the

strong quarter. Pixia orders line, meaningful expect driven quarter, backlog million contribution, $XX deliveries supported CMS, shipments a current of by product of GATR in the the the backlog. fourth Also, in expect additional in to expected in addition In by DTECH fourth we strong the we and

We our business. modest Intelligent Systems also short-cycle growth Transport in anticipate

manufacturing the design-build, schedule. on to in fare project collection including a continue Lastly, be track, CTS

to our in cumulative are FY of XXXX savings initiative, Moving to May were net million course on XXXX. XX. million currently track over and slide generate announced of to the $XX savings $XX cost which We believe

comfortable of are where take action. feel we management expense from further impacts to While should levers need we mitigate COVID-XX, the we perspective, with to an we additional have help

leverage times end, bank through cash preservation focused leverage of ratio December Our to allows net ratio and have X.XX us target remain acquisition XXXX, ratio X.X to lowering below of net leverage result on to We at a and our improved quarter times. times as our of Pixia. our three credit to agreement a of up our

to the is our the reminder, Cubic included not a in the Boston the is of in banks variable connection issued calculation debt by non-recourse and leverage ratio. interest As with entity by our contract

with contract Our which we a Laing, as in with where equity public-private joint Boston this structured a U.S. GAAP. partnership, was this a a quarter only pleased strong given under end but delivering close are we venture year. MBTA XX% to fiscal by and especially quarter, stake, forward challenging formed look environment, John be the I'll to have consolidated our must entity we reiterating that execution we the fourth

Brad. to Now turn call over the I'll back

Bradley Feldmann

you, Thank Anshooman.

slide XX. to Turning

strategic to We that are but our continues and our positioned with to taking for successfully business and quarter challenging are remains in well execute we be pleased fast-changing progress markets performance granted. our what strategy, a not Cubic and and this environment.

effectively stakeholders. to to that, customers best let's the and navigate take landscape, our continue and proceed the current With Q&A our will We session. our strategy, serve fine-tune for to value our actions create resources mobilize

Operator

of question first Your with from the Herbert Instructions] [Operator Ken comes Canaccord. line

Your line open. is

Ken Herbert

a great. around expect with comments sort for more full and confidence should terms major those company. hi, of in factor fourth obviously historically, obviously, about, little some the any more the only to around, fourth bit on and fourth Yeah, segment maybe more quarter CMS it just talked then detail good. in the would be a swing it's, upon you on fourth you've expound and quarter. you've quarter not and pace line, I like your Hey, as top products? can, in what afternoon. but the such in Because bookings confidence EBITDA a on or Can provide we on of CMS drawn good and CMS bit quarter But margin you on expectations the little of Brad. color good sounds have pretty the

Bradley Feldmann

quarter. XX% through recent backlog the the actually regarding of perspective, Yes. the fourth revenue in regarding north more of We've confident orders we a From profitability. and days remained the have

end year-on-year year. the at them So expect higher of they profits to last than year, have the did actually I

Ken Herbert

the Does we this surpass revenues XXXX? what CMS in fiscal saw in year

Bradley Feldmann

It will some.

Pixia know, was in to As doing last you we were addition what year.

Ken Herbert

there's revenues some three like activity of and impact the a helpful. talked sounds sort lot lot you've if local a up can I limited are that's the just nine but months, of new way a that activity we new and to of direct you Is think, segment. know CTS, now, some in clearly of and for there get of Okay, bit it for could on timing state more And governments? around, wins. the headwind speculation about Can called from a maybe then on you you ridership viewing any you of within there on to I booking contract potential a it's impact or contracts just the get out And speed the stimulus how your helped standpoint?

Bradley Feldmann

Yes.

obviously, the from So that stimulus that there's helps governments if situation. comes

know, around transit. provided provide contactless, out you stimulus essential. mass we've safe, transit As to is to just Mass we methods. i.e., fare world And collection that the point seen

shorter there said were stimulus. delays having so if that, could the And all be

think, U.S., activity, working billion has just a that in little much the of of we're cities note I rebounded said bit the world. around think a on And less; Asia I world: around strongly; lots the $X activity various proposal Europe, of little ridership we bit. you'll north more

And forward. so to rebound ridership to would expect I continue going

Ken Herbert

just finally, in contract anything reset, margins in there CTS quarter? else directly the And Okay. impacted MBTA that the positively aside was from

Bradley Feldmann

really Just go sorry. good Anshooman, ahead,

Anshooman Aga

design-build the side. then which I the CTS we So the both had we impacted the also, And Brad savings as also services company-wide, out, pointed cost execution as saying, good initiative very positively. board, across and on was had

Operator

Jon question Citi. of comes the from The with line next Raviv

open. Your line is

Jon Raviv

much. Thank you very

How You're are sort CMS to question you a So going business backlog. about thinking that carrying on margin. building of forward? point Ken's about first

position. nice the gotten You've

of the margin we should out to But would or to Goal point be appreciated. pegged positive assume, on should we on any over at next I that year inflection there EBITDA XX% XX%. investing. forward? for be XXXX, able much going some kind when Any that's be time two? help Is some that that perspective of see You're looking

Bradley Feldmann

Yes.

to year, will the I that there two obviously expansion. or we been now suggested. levels programs think next a be higher continue Recurring that the that to And expect a year margins. recurring we've margin this at nonrecurring follows. We're would lot much Those engineering have winning where them. in in you cycle of jobs were bid

So the mix the years. will in bit few next change quite a

Jon Raviv

engineering And just mix to nonrecurring production? clarify, the those being to

Bradley Feldmann

That's right.

So engineering the reiterate, nonrecurring just margins. higher at bid production. to mix from production, going The to much was

Jon Raviv

based an the on Understood. be on will almost fill decelerate hole? for in CTS other the pandemic? of growth here a projects non-public to some air chance or this CTS talking roads that delay there Is to we in Or stuff accelerate be prepared able of a And some transit and or those side, outlined. that should pocket of some you then about

Bradley Feldmann

No. growth faster. But the technology, after. that see done, from We'll insight. we'll have we are we has the believe, good much back products. year those we and And there acquisitions the see best coming believe, your Roads expansion question we next have year and

Jon Raviv

Right.

Operator

line question comes DiPalma William next Your Blair. with of from the Louie

open. is line Your

Bradley Feldmann

Hey Lori.

Louie DiPalma

afternoon. Good Kirsten. Anshooman Hi, Brad and

Bradley Feldmann

Good afternoon. Louie

Louie DiPalma

expected York, you and your in But later in are Cubic interested couple of San What time is before the what a I Super one know Boston, the quarter. Bowl, and during you made investments I'm announcements to Delerrok right Tier launching pilot Francisco had a other potentially New in markets? line and markets the the Interactive? launch Interactive Cubic the Miami on

Bradley Feldmann

Yes.

very Moovit. our working with we're partnership So on hard

information the patrons world. best opportunity. use And have Moovit a users transit in from and would recall, that deliver to best my the As to mass you that all technology we experience transit mass perspective, I the or has, is that argue regarding payment so tremendous

well. of end also And calendar the it the Interactive amalgamates have both that will with year, Cubic have a by as that so we And will product capabilities.

momentum the calendar those some into you'll see So end next of and take to this at digital year hold. products see

Louie DiPalma

the for of a reduction is major priority. And That's helpful. Anshooman, discussed you leverage

reduced left. three do around have the quarter, year? ratio leverage there's expect any by be can to on What work times? do fall back $XX you you the But During million. of the you lot sense debt by of below net And net a when end the leverage

Anshooman Aga

Thanks, Louie.

with a X.XX leverage million $XX X.X yes, of reduction versus went down ratio our leverage net times we So and QX QX. in times in had strong to quarter

For quarter, we have further flow which free that again, go full and the will given guidepost year cash fourth which last we EBITDA expect leverage just adjusted than positive EBITDA, stronger will adjusted be year's the again, will help provided, ratios down.

to leverage. continue to year work and through the also fiscal next lower year We continue to

towards But business the Regarding three continue target. times make And we through our to times, the working pandemic. the we're a also, of progress exact timing three of still plans. there's little bit uncertainty will of because

Louie DiPalma

Thanks.

Operator

SunTrust. comes from the question line Ciarmoli Michael next Your of with

is Your line open.

Michael Ciarmoli

evening. contract And this shift? a mean, a pressure Backbone. questions get of I mix the clearly, headwind in of we just be was Is think, little on System. for in term. there about I in You've Hey the mean, there High set Jon, that just margin I guys, more here. sounds maybe mean, opportunity. it like hitting bit taking on I'm mix. Thanks Capacity you called the like good the out, sounds this a the just Brad, it will guess, got trying margin the term Management to near expectations before some are going Battle on to, wins little the a Advanced these I I near be, bit CMS? level to great

Bradley Feldmann

Yes.

of are for DTECH in has move there the when note the Backbone wins move programs, you those the that us. also million. that that portfolio, business. but Joint Strike were that the we very lot had Pixia production from wins we into we've Capacity nonrecurring double-digit GATR Fighter; about great area single doing lower software margins, major The nice the been digit, High us margins. of portion has they're starting margins last the of has talked margins and up, So this the picked mid-teen business we've contract, very MQ-XX; overall, a margins, that Boomslang, these in year: the The MH-XX; $XX I'll phase nice and will to major

So I would go. expect we to that margins expand continue to as

Michael Ciarmoli

maybe million drop maybe we're the, XXXX? I $XX cost look seeing And as to of a at Anshooman, that, savings, hit you million current the see full expect And we us realization what just most? margins that into into in in segment guess, sense what Okay. can right give dovetailing to savings, that should then of quarter, $XX forward of we EBITDA through the to the

Anshooman Aga

Yes.

cumulative million to $XX it's million. So a $XX

So a we've, go over CTS. CTS in the little And majority hit we'll we million had so in to And then million Obviously, of yes, to have to cumulative of to people, get would has the savings books. then million remaining line. the the $XX majority far, $X QX year. $XX would the next bottom straight the additional to and QX, savings be fiscal

Michael Ciarmoli

Straight to the bottom line.

Okay...

Anshooman Aga

offsetting It's of COVID the from we Yes. some that had. impacts

Michael Ciarmoli

about up quarter million I $XX that of mean, $XX one, or EBITDA, headwinds, revenue the think think front from in a number I million or we Or of guess, I have Right. fourth standpoint? XXXX? $XX my should the impact, how of last you I pick COVID that the in million the too, modeling do don't me, that

Anshooman Aga

to lot a mentioned, delay Brad month as nine in seeing a were And projects. Well, of we're delays. project these three

pauses catch-up a is delay or of maybe slowdowns. years, demand in projects, there's of or there where ultimately, couple A comes. projects. in a years had we the lot pent-up But So three two

delay catch That's track, pause. We ridership revenue New installing certain Angeles, to to we We're had because of the where safety that Los hold we're the doesn't up. come project a put ridership, have just our installation on doesn't trying then which example, impact in last and back they For the on readers quarter tied was a the back. employees. come of But one for up the we obviously that. had and part back announced on month on had York, catching

Michael Ciarmoli

Got it, one just got it. And more. maybe

out you've I if that I free that, were taking three delays, cash about current further about we're you anything pauses, profile we to that does consideration guess, thinking to more projects, COVID called from see some to, of you on cash. about? be these quarter flow of know that with terms delays? cash into us I cash with in out these collections anything changes think as Just should year of some guided for strong to the a here aware right any the sort of But your slide collections fourth

Anshooman Aga

No.

are got Our mentioned track. interested projects catching track. that we were to payments, of point us first up. and three New project, the on couple we into worked we in paused And the further in actually remains remain one York, and had they with projects the Wherever actually payment where milestone in I the pause, target a pauses, temporary The customers year three where to the the milestone break the customer QX. on

So of it customer the the talks the to with MTA our our are customer. testament and employees work good relationship to serve our employees doing our and

Operator

Mike of Cikos comes question from next Your line with the & Company. Instructions] Needham [Operator

open. Your line is

Mike Cikos

Ricchiuti. we the ridership? fiscal of COVID-XX about reduced what contemplated guidepost have you help do Cubic what trying fiscal us a to we is that better get wanted anticipate Mike the of, for what's to I'm QX? you you in to impacting been impact that we've I I'm and coming thinking ultimately what saw might any respect QX. Jim specific Or COVID-XX CTS, I to today? in And what guess, unpackage in Could guess has been extent impact unpackage, ask sense team provided with Cikos Hi transit was sort the to from here, maybe I

Anshooman Aga

Sure.

$XX then based ridership one than of that of talked CTS. the on rest $XX million delays third just and less tied about, was that So we to little million was About under and was slowdowns. a the

Mike Cikos

then come And I HCB back well. did want to contract to the as

addressing Just over Or how billion get obviously actually wallet billion? years Cubic this Cubic opportunity or with Just that do is $X internal through actively $X number. wanted much there product billion? a grab itself, can actively R&D? of large guys again, and $X additional portfolio. to entire that you partnerships curious its just of Are can entire how for But that sense Cubic much acquisitions that you XX get you are because, addressable a pursuing

Bradley Feldmann

on the sky picture. the Ethernet is number that in that hard a a And attack the we've secure in $X put have working billion We'll what of all technology come been up sky, with we've with, so in the XXX%. common to allows, essence, that years. participants it can

expand. Lab. But And our prime All the that. very, so investing Defense, after monies, think we HALO and is priority last with It's partnering internally and on the on only ground a that pieces, Command but to many and product We're contractors and did I Department do technology Domain The beat great not company air years, the Research unique. platforms. Control out of called continue couple development middle and start is Air we key demonstrate that that job. five system will developing a Force We in of the the the We've our then a been and very we'll that We think charts. Joint team the also thrilled. with of in putting

tremendous and thrilled. is win this a for So us, we're

Mike Cikos

That's helpful. I impacted hitting net in $X QX, the just I on stretching which the was $X of than was with million about just that million anything get QX, in? million at to Because I'm thinking savings over may. has fiscal I'm these fiscal looking anticipated? XXXX cost that layer cumulative COVID-XX. in how the million this five we this the savings, faster onetime into guess, $XX hit to But sense this And of was quarters a obviously books there the one fiscal by more if the curious, savings $XX there or next did again,

Anshooman Aga

onetime it according say some won't are unanticipated, in actions was our I was plan. right to it Yes. there. There

put for of stopped fiscal salaries. XXX(k) freeze the we We've example, For on year. the match a this rest

increases merit in more no organization. and fiscal terms that So like through actions is discretionary nature that in end are of certain trade and And down. spending there then permanent Obviously, are of travel and stuff next year. shows

Mike Cikos

guys. thank you Great,

Operator

Jon from of question the line comes our next You Raviv with Citi.

Your line is open.

Jon Raviv

I margin Hi, up, and ramp appreciate margins that. CMS go the is those But on perspective higher-margin opportunity some question thanks of for shape solutions the can of where CTS, around some on as this the follow-up. Brad, CTS maybe would about if thoughts any Investor that covered was. at have any thing Goal long preview will. term this the maybe thinking and been is kind But XXXX, Day you're that the of you on there for never how

Bradley Feldmann

let that and Well, Kirsten would insightful. What question when is say have out But these say, we to contracts. we're not I at the Goal margins. what into I XXXX quite will digital And the driving products delivering previewing marketplace, would also us very going your is is we're that Investor much get higher the say know Day. as what five down big risk will we're I these they're And we're bit today. a

margins we to improve. margins would helped we think, clear Anshooman contract And middle very I that so guidepost this But quarter. was to a CTS, of in expect sort Boston given were by margins. continue of had I double-digit the

And there. headed so we're

Jon Raviv

Yes, thanks. Thought I'd try. Thanks again.

Operator

from comes question DiPalma the Blair. next Louie Your William line of with

line open. is Your

Louie DiPalma

most Or that and the $XXX realize investors $XXX several like expected the you that IDIQ for $XXX follow-up million the between Joint your program? to should amount All that similar Regarding be IDIQ, that of that for do on Thanks million? to is Command awardees TXCX think Control to of split million like and IDIQ expect Domain for

Bradley Feldmann

multiple-award IDIQ single a in the to contrast which TXCX, was It's award. Yes.

is would unique. High multi-award win, the think relevant IDIQ. that is they we Capacity our very Backbone technology again, and lot So say is, of a awarded contracts. to And technology that What I

Louie DiPalma

Okay.

Capacity this under is task High million? is Backbone not was So $XXX a order that that that

Bradley Feldmann

not. not. It's It's

Louie DiPalma

Okay.

So it's separate. completely

Bradley Feldmann

lots It's a fortunately, and we and very separate beat contract names. household was competitive of

Louie DiPalma

helpful. That's Thanks, Sounds Good. Brent.

Operator

I questions Brad the no further back at over call are will time. turn There to this Feldmann.

Bradley Feldmann

joining today. for you us Thank

ongoing for and in team We during the our safely operational businesses I and serving ongoing company. to to want pandemic. sign off, our we customers your much. our great so Before commitment keeping Thanks support thank the their interest appreciate very Cubic

Operator

concludes Thank for gentlemen, you participating. and this Ladies today's conference call.

disconnect. now may You