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J Jacobs Engineering

Participants
Jonathan Doros VP, IR
Steven Demetriou Chairman, CEO & President
Kevin Berryman EVP & CFO
Jamie Cook Crédit Suisse
Sean Eastman KeyBanc Capital Markets
Steven Fisher UBS Investment Bank
Andrew Wittmann Robert W. Baird & Co.
Michael Dudas Vertical Research Partners
Jerry Revich Goldman Sachs Group
Chad Dillard Deutsche Bank
Anna Kaminskaya Bank of America Merrill Lynch
Andrew Kaplowitz Citigroup
Brent Thielman D.A. Davidson & Co.
Call transcript
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Operator

Good morning. My name is Krista, and I'll be your operator today. At this time, I would like to welcome everyone, to the Jacobs to hold its fiscal Third Quarter 2018 Earnings Conference Call. [Operator Instructions]. I will now turn the call over to your host, Jonathan Doros from Investor Relations.

begin. may You

Jonathan Doros

morning Good to all. Thank and you. afternoon

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

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

XX, and Form filings our as risks, differ on other XX-K with our that cause to could For report Commission. uncertainties from ended the as the other period well occur, may see statements, actual a and Securities September for description of Exchange factors XXXX some that forward-looking results annual

Please for call. presentation this under no in law. like to and to remarks I the required agenda to conform note review X presentation results, of to after items any are date a today's by today. except statements our turn applicable for duty a now to of few as actual We the Slide forward-looking update to would regards

include lines Our X all today business. results reported a by review of

have quarter to income for the same a ago. and For the a We comparative the current revenue updated historical reflecting year rolling-quarter and quarter segment accordingly, detail plan purposes, we structure provide basis. on operating disclosed

During into the restructuring to quarter information The forma comparisons on River deconsolidation of additional provide a venture periods. performance and and insight trends forma performance calculated of will adjusted and joint our when to against business helps We we presentation, CHXM's related exclude basis. charges, the discuss of other results CHXM's prior current believe, the XXXX Jacobs' Chalk underlying figures current XXXX this pro CHXM's MOPAC pro project. are comparing

outlook Steve recap quarter agenda. a including for an and focus market third discussion some update provide on will in-depth review of each by on a begin culture, of the CHXM to driving discussing will then a Turning financial a to sheet allocation questions. more along call Steve CEO, Steve open provide Chairman the I'll with of strategy. then balance our our well updated and Demetriou. capital closing over and as it we'll will as an that, metrics of integration. lines Kevin high-performance provide our our pass and some remarks, results, business the review With of our for

Steven Demetriou

we the fiscal per earnings that quarter welcome year well deliver pleased earnings year and adjusted XXXX our above of shortly after share November call. high-end third XXXX last and acquisition. report our guidance to we're on announcing previous fiscal outlook at the results track the shared you, Thank I'm to CHXM to

rigor growing on an executing and core strengthen our transform work strategic and our major our winning culture, strong in by year-to-date increased focus reflects major end performance to priorities, Our commitments and And execution to opportunities and inclusion with further we made including our cultural profitably exceeding regard diversity; delivering we discipline; acquisition, acquisition. against when discuss the this more with XX% achieving financial will and markets year-ago capturing differentiated forma progress CHXM are to the pro transformative Adjusted ago client-centric lower CHXM quarter cost I my with the SG&A recent solutions. the and grow revenue combination integration basis, to of by On each sequentially significant synergies in line the announced also and we business year associated Jacobs decreased in remarks. posting year forma on third demonstrating acquisition. detail a prior pro versus a cost growth. quarter, was with grew higher-margin versus CHXM later

year-over-year. to earnings EPS from business an a GAAP in gross was per adjusted quarter billion $XX.X I'm the components his pro generation to pleased the cover third a X flow of backlog on were growth. up Kevin quarter. share, backlog all with debt demonstrated contributing from of lines delever year's our $X.XX and quarter cash in Free second bridge the remarks. our we third quarter, last to report XX% forma is Our will including down increase ability and third also third of strong with that to very the to basis of sequentially quarter, X% increased EPS, the

and our ATEN; Environmental of Facilities Advanced Looking line Aerospace, Buildings, we continue experience business, and demand forward, and to Technology, strong our Infrastructure BIAF. both business, across Nuclear

where in strengthening sector, capturing fundamentals ECR Chemicals supply-demand an a to addition, in market. our Resources, improving are are taking we approach Energy, opportunities and In disciplined

X. to Turning Slide

critical framework for employee are talent as as component our our creating people To for to achieving inclusion of well cross-business a I a believe, culture is our earlier, retaining As of profitable growth. and that enhancing industry-leading diversity end, engagement, attracting we necessary collaboration, all key strategy, business. the and heart highlighted and are

together network further The important is company. around groups step the of a employee came CHXM creating to network group employee enthusiasm tell our an services purpose groups, network an offer professional identify charter of infectious. of Jacobs I could X journey summit, are these that diversity and others accelerate opportunity and their globe global going to an Our This forward. of an objectives and inclusion around employee driver employees Jacobs' business connect inaugural than picture summit is XX,XXX from our networks their with to world. More and where with differentiated important was you and one employees the

turning authentic culture fund out X Before Redding, thousands our the an is of would office, note around next slide, of of I our recent to their like at the dollars tens caring employees some to families within drove homes setup our week, just how of California wildfires employees emergency contributing Jacobs. showing when and just that our of

X. Turning to Slide

a ECR design-build sciences points mix than by of margin on life strong a basis, third pro revenue reported On quarter X%. up $XX.X million $XXX basis, in and XX% field X% infrastructure major backlog From third the backlog pro an compared total forma driven $X acceleration projects. billion, while saw increased versus ATEN BIAF and a quarter. backlog approximately line X% perspective, water increased basis, basis higher-margin approximately year-over-year, CHXM. We XXX last an increase to up at or quarter. by forma which is year's by up in more was from Gross on and services Our business backlog, year-over-year, was was last billion, up a and driven backlog

opportunities performance CHXM bookings strong evidenced to backlog by leverage company. the and now other's teams integrated the our margin Jacobs each Our and are sales across and strengths, and gross capitalizing tremendous on

Turning Slide to X.

also backlog in as in of build-out across intelligence AT&T of the XX% highly-fragmented on the XX%. From previously Now up quarter. revenue the provide technical order profit reaching increased third government government the believe, XX% NASA. industry-leading a the more unique expertise, ATEN Missile Aerospace, year-over-year drivers ramp-up with line versus quarter performance awarded than of plays another $X.X year-over-year. delivery Backlog with let Department for major a quarter Department market a are was to both major up our that basis nature ATEN. plus-ups pleased an Defense, into gross efficient market business, successful Nuclear, the me And The and in robust operating continues we services community the of to a customers Jacobs Agency by growth. an CHXM markets, margin commercial posted our From a billion, end our win Technology, the including XG discuss revenue of Command, and up strong beginning such key benefiting from our contributing We Special competitive ATEN localized last opportunity combines year's Within wins, share. the are and Environmental this and gain forma strong standpoint, and Energy, standpoint, to with growth. we model wireless the pro legacy Defense with in to double-digit growth and and Operations combined that structure market I'm cost strategy profit

growth analytics fiscal posting years. the strong we for opportunities well the that demand ATEN as XXXX, are cyber supports some cleanup in On encouraged of with further pipeline, overall capabilities. projects, nuclear next our include Within incremental over major that of the back opportunities space large-scale NASA several as growth double-digit pipeline IT, and

a at at of announced remediation site, the and DOE quarter, our the During Valley extension plateau the scope we Hanford. were contract increase awarded West remediation nuclear

capabilities. chemical, Reduction Our for awarded Defense nuclear demonstrates win This provide Within other and positions cycle. the the biological DOE Jacobs. expertise a Environmental were threat us to upcoming to capture strength contract business, Threat during CHXM well incremental differentiation reduction we opportunities procurement and brings solutions to our nuclear technical sustainable the that Agency

in clear as growth are also such synergies previous revenue acquisitions synergies. note focus analytics at driving pleased the that Canopy and While I'm time, a cybersecurity and Van our CHXM Dyke to market are also Blue integration this

public at-scale commercial, assessments, deep year-over-year is example, expertise strong and increase vulnerability our and many operations across and deliver areas private summary, to and its complex ATEN's Jacobs, in against management all executing solve positioned In initiatives. security fiscal such organically ATEN of are XXXX a growth developed continued clients solutions software well into with double-digit as business to unique cyber other in profit seeking cloud-based the and strategy XXXX. AI network For

Now XX results. posted Facilities X in increased delivered versus On margin a Infrastructure point business, X% pro basis on year's a quarter an third our and operating on increase to of which BIAF solid basis. Buildings, Slide revenue of another forma Advanced to profit year-over-year discuss quarter basis, line and last

last growth U.K. demand, U.S., billion year. backlog the steady that Asia $X and aging experiencing urbanization Middle uncertainty with we by markets. Additionally, nearly forma pro in strong The of revenue region. driven East up Overall, increased holding in infrastructure versus and and population is are in growth, was robust spite

makes and we in which are the up U.S., seeing over our Coast, half strength West particular in the of in the BIAF Specifically Texas revenue, southeast.

I global spending clear for is a value clients, as our which our the it combination that and There key you elevated the globally Water acquisition increased of at presented component and participants in our XXXX was Water than were drove premier crucial one water priorities. a attendance. Our leadership have strategy CHXM of more driving is many recall, event cities and In the with in met we is priorities industry. is from XX,XXX CHXM. July, most the in these over Singapore customers XXX Conference, of of that major

are increased several with we water. the water need factors, cycle change that climate conversations is the driven at significant Our investment and positive a stages customers an clean by that early conference of our thesis for reinforced in including

upgrades prioritizing far too and treatment, distribution Our wastewater filtration, been that delayed clients are long. have conveyance to water

we offerings. technology data but only these projects, next-generation our leveraging are bringing our by water now end-to-end into We not leader solution are a to analytics across clients traditional

the we in-depth and BIAF quarter, months California webcast Diego key Pragada projects water water the the the projects Pure as west the Texas. coming market. design-build to over his such projects next San leadership Northern importantly, XX strong. were pipeline In look will and multiple hosting And for Arizona, in an a water During very awarded Oregon, more provide is and be months, President into Bob Water investor

with which and of a transportation, that needed demand, with airport to will $XXX many is outlook. Within XXXX expectation coupled aviation, significant be the rail are seeing we're undergoing smaller record priority billion expansions. every major keep capacity passenger key includes airports Virtually analyst growth aviation, by strong industry Another regional pace and highways.

and operations. expand planning LAX Singapore, example, midst For runway, expansions of are their and in Dubai and moving Heathrow third all the is forward their to with Denver LaGuardia

this by driver Our to ranking aviation highlighted and believe, a a capitalize rail was are urbanization News-Record, to Engineering on major leading standpoint, highway positioned we in we continues global position globally. recently well #X From with be further opportunity. a and

Bay the to Arab design in We've largest During Highways domestic world's we Transit City well Area continues were maintenance New one rail San the for lines. and show Rapid also a continued United program wins what performance Emirates steady as System. be quarter, Francisco Etihad both had with investments. to Authority of new awarded will passenger freight as from Transit York operations construction and the significant Rail the Metro and

Coast sciences. the regards XX-year quarter, the we awarded With to major demand East government, were East U.S. care, the O&M including verticals, of contract United the of we variety with continue solid our During environment U.S. built in the a business, projects across on and X renewed health our education and Kingdom. to Cheshire see highway the Council

excited being create the in within spurring funding learning classroom are in technology made XX and the to tailored are the schools investments we as government Specifically, about environments. local state K-through advances

are posture. we're and chips in electronics that emerging Jacobs' U.S. lower-risk business chain, and high further attractive expertise on a and beginning cell of combination of strong Semiconductor the EPCM strategy our artificial Consistent sustaining BIAF And computing strong energy In the second vehicle life with of technologies, In CHXM demand for and pro that see turnarounds an value X%, grew by several a progress. the will by legislation and growth edge focus performance revenue summary, Facilities I ECR risk investment On advancements positioned is our quarter, forma our backlog revenue with continue gene our by Chemicals now our And we and ECR revenue CHXM's our business for the a factors, ECR life driven with tax third Resources year-over-year of The in potential strengthening view pro Facilities opportunities increased revenue we're see is on delivery. to pipelines reinforce In prices, we ECR continue our performed XX%. underlying driven business. strength revenue basis, commodity be synergies in as a as maintenance of Energy, upside large-scale to basis, therapy line growth secular X. chemicals we sustaining in variety do and more and increase combines quarter our the clients' in Advanced electronics automation. in a want budget better continue driving client design refining ECR seeing pipeline and capacity. said, of the to footprint, by including in quarter, increased synergy more capital double-digit to being business as to substantial our business. with markets and on such the continued are materialize. center capital year-over-year. factors our forma mining profile Finally, opportunities build in sciences, strategy, expectations activity seeing aligned during segments across fit spend. risk revenue Slide of capital a highly our regions. as our XX% revenue line mining recurring which growth to OpEx and surpassing from expectations is That From across end Jacobs chip in higher an recent we're to The Advanced acceleration that intelligence, standpoint, to data within was sciences. incremental strong percentage our driven business given increasing than

expect a vessels role. crackers CapEx that the refining in both reached require tipping we're projects whereby globally complexes. crackers in front-end are engineering several point delivering There involved of and refiners largest that for regulations forward. as as opportunities EPC a The For or ethane complexes. for reduce FEED major a participate in in shipping of we're to delivering well investing the XXXX of an example, chemical are upgrades. projects chemical many the well these engineering emissions the design these of Currently, plants. one greenfield work chemical number has derivative investments In EPCM sulfur larger We their now handful for wave, and second are seeing design the derivative integrated MARPOL as we to are increase moving cracker front-end convert into of refining and global as

engineering on early multiple working across upgrade the currently are globe. works We

As by mainly I engineering growth, previously mentioned, revenue in had double-digit work. driven business early mining our studies

forward in We are projects seeing iron our customers major ore with move and copper.

expect We studies to in of larger a handful projects fiscal the convert year XXXX. to

our which of a its ECR As $X expertise opportunities digital below core today, approaching previous Connected to rate is run is customer within still revenue, in adjacent capture it our in Enterprise to make the million business. stands our From peak standpoint, leveraging progress mining indicating over billion, potential Jacobs operational we upside well continue business base. domain $XXX

work pleased we progress major to is found to of remediate surface. example, ECR continued Xx initial drive a in our their with vulnerabilities awarded were opportunities. For cybersecurity that customer from the attack profitable chemical engagement follow-on strategy we're the Overall,

are fiscal that likely backlog to translate 'XX. XXXX there We are growth are in and further into multiple confident drivers

Turning to Slide XX.

our global is we in very water to Just like exceed which we in year in Jacobs for This and our and shareholders, end transportation employees X ranked received top our announced #X leading by being rankings since is major are in combination, and the to acquisition resulting stronger proposition from design our pace value the capturing markets ENR. firms industry on spot position of among clients, well now marketplace. reflected commitments delivering transformative CHXM, a

delivering successfully merge CHXM voluntary are very and growth. strong in Jacobs is projected with levels, Specifically the preannounced CHXM and that cultures are synergies, with attrition line exceeding we regard commitment and are our pleased to to we we cost businesses,

robust further materializing the points target in the the combined As our XX% to backlog since in EPS growth synergies December. acquisition XX in first months to closing accretion a sales outperform pipeline. result, our adjusted And we expect

Although our more the made ahead, we have date with about to I'm work and very excited we have pleased progress future. extremely

call Kevin. to turn I'll the Now over

Kevin Berryman

to during Jacobs underlying And third results you this our will a current comparing in XXXX, my remarks detailed of summary of provide of XXXX performance calculated into Steve. pro basis. CHXM's insight quarter XX, that financial performance today, help our note year. a We fiscal business sometimes our moving when you, prior the Slide to the quarter current periods. more forma of comparisons I believe for Thank will performance and trends on see additional will discuss against information Please

forma grew million margin the our line year-over-year, legacy benefit second the with strong of gross second in line for businesses, trends than strong pro CHXM. a had of quarter was in with in XXXX. in XX.X% margins year-to-date, XX% higher growth Jacobs' by margin underlying are growth CHXM's This will respectively. of discuss revenues margin Gross organic mix and $XXX performance revenue revenue We versus our all increase later Third we our pass-through business, increase X% growth my an gross year-over-year, continue XX% and XX%. quarter I greater with remarks. of as supported from of to across quarter from in

by the realized we and growth absolute G&A, year-over-year driven on a basis cost the an expected as good down G&A second Regarding our quarter, G&A of pro sequentially increased synergies. leverage momentum was versus in on delivery forma our spend both

points As adjusted of basis and a approximately on basis basis G&A a forma points sequentially. XXX percentage year-over-year down pro was XXX sales,

up margin operating pro adjusted while and on XX OP X.X%, margin the professional $X.XX. GAAP profit points points revenue synergies a up basis result, EPS was some a year-over-year CHXM-related expenses charges by was on XX restructuring profit up forma as cost our X.X%, transaction-related EPS and driven acquisition-related in to reported and integration was increase XX%, achieve basis. a and XX again CHXM of GAAP building percent momentum year-over-year. other costs, was due to fees points $X.XX, of As basis basis a basis a also impacted synergies. sequentially, operating by acquisition

which discrete up our The the tax EPS reversal reevaluation from impacted $X.XX year-ago we related tax liabilities XX% in and from quarter. EPS legal tax discussed excluding to reform resulting from $X.XX, certain $X.XX benefit $X.XX. adjusted the benefits charge these of that second the figure. costs, connection a was the matter When assets includes is in a with by versus deferred our and a $X.XX partial previously Additionally, U.S.

from associated we for exceed the estimated to our Excluding year reform, the impact tax are acquisition benefit first on of the track accretion that we full with XX% CHXM. target

some saw DSO, gained also momentum QX trend last we negative We as in the reversed we quarter.

improvement cash DSO focus increased Importantly, given accounts and we flow sequential management. during receivable our saw QX, on

our turning bookings Finally, during quarter. to the

and gross on book-to-bill for On ratio Slide the pro the third XX, detail. trailing margin revenue was for Our trends XX the X.Xx look more X.Xx quarter at months in and period. forma sequential let's

opportunities the we our write-downs stated, previously have project is a throughout was QX, disciplined in reported year-over-year margin markets. which In basis. our we on targeting reducing gross As are end XX.X%, focused up cycles execution, and higher-margin on

QX the underlying the line margins When revenues our margins figures. gross revenues, to pass-through in QX. Importantly, were for quarter margins compared were higher the adjusting when impacted incremental QX with more in during increase pass-through actually through gross impact by the on

our portfolio year-over-year, LOB Jacobs growth being turn strong new let's legacy recent XX a forma most on and by with ATEN. in organic again large with XX% to the Slide with wins. pronounced XX% Revenue growth pro basis driven begin grew performance, Regarding

to For off of X.X%, as Operating year-over-year for we large continue awarded in ramp-up the QX, margin to growth newly revenue of contracts. contracts. sequential down expect fourth quarter, year-over-year the double-digit resulting quarter due we growth, ramp was mid-single-digit the

In reversal XX benefit addition, we from last legal that partial discussed matter basis a QX there minimal a the was quarter. points of

XXX to margins BIAF regions growth double-digit pro year-ago on XX Operating operating margin from and a difficult line margin and year-over-year forma was our on the quarter across X.X% and partially our with basis revenue up up growth decline Excluding Advanced points Facilities, expectation. improve. in given was an -- Longer comp points basis this expected offset pro by the forma basis. we a to X% with XXX the saw to expect X% X.X% we impact, growth X% from of year-ago term, This continue strong was grew basis adjusted operating CHXM. period. in all in

For we with BIAF, growth and to combined comments our X% continue we the margins to as drive delivery year-over-year with to quarter, for room and sequential businesses. the we BIAF fourth last in strong benefit see be from scale in the margin both range. continue expected expect Consistent project quarter, to metrics of expansion in X% the

our a and Lastly, business mining by was forma construction, turnaround grew basis. as on ECR margin year-over-year, revenue XX% pro as well driven projects maintenance front-end X%. studies. Growth Operating a was pickup in

While we margin we good to an progress driving currently make project update expansion estimate. in evaluating a ECR are business, continue our in

a While impact lower-risk, to in for margins it continue updated ECR this full markets. ECR from year to within term, higher-margin opportunities and a the margins. impact expected has have commodity expand benefit we as and been outlook, Longer QX our to energy we is end on on focus accounted modest expect recovery

line the to slide, let corporate know Before that ago. costs turning were with million, our non-allocated in next overhead note a year you $XX the to

We continue quarter, to discrete be expect $XX to range our of per million unallocated excluding items. corporate $XX cost million the to in overhead

year-to-date quarter, strong certainly Slide cost XX, are total of and the alone. $XX over and with in restructuring in of cost provide We realized we now performance in have on a business. each made now progress million let update realized great me nearly We an QX with pleased synergies synergies acquisition costs. financial On the QX million overall in $XX line across

approximately synergies the result, updated that XXXX of our year expect level will million. we for $XX As now fiscal approach a

achieve from achieved million achieve expect these we the grow As XX% now of a end synergy P&L year, net key achieved $XXX end estimate to $XXX To of a in $XX through achieve run of the rate our of million. million approximately raising $XXX previous savings the A estimated the million million synergies. $XXX these million savings, cost incurred $XXX couple the incremental from run to to the to of with expect incremental of we've synergies cost Also $XXX $XXX now-expected run of of in of estimate nearly million gained At result, previous are be by We million. of cost our XXXX rate estimate. revised in the believe of fiscal points. of By still we will rate XX% of $XXX QX, our million benefits, estimate synergies XXXX. the additional also other end we total achieve target we to $XXX have a million. the to QX,

it relates in we $XXX be expect to of years. over million bit As be will incurred to a the our and revised that cash-related half these couple next continue of over costs,

CHXM Finally, change costs, million as it through QX. our and relates to transaction control have in we incurred $XX

We are costs. discrete onetime these with largely completed

me the we our as original of move referenced part in acquisition matter, update There's the due the when project to CHXM. we diligence on let also of Before conducted the balance Inpex Ichthys as sheet, to an on the matter. provide relative no change our expectations

be to is future. that and process, the we early of any continue this We well into matter expect in the resolution potential

Slide to debt So of the a sheet the and $X.X let's balance on get and of gross billion. on with cash quarter XX. now million We allocation ended $XXX approximately capital

level the from down flow QX operations from strong $XXX gross is of our supported level, $XXX quarter. Our debt underlying million by cash million a during

of We will terms adjusted on EBITDA our as maintaining Regardless, the we agreements. cash credit gross continue to X.Xx per at the our pay planned to use as end profile. position, QX, excess to credit of debt leverage debt strong investment-grade calculated larger the our fell down focus

debt the to the of EBITDA within range X target of gross adjusted high-end are Xx. our now We of to

We are also maintaining our dividend program.

share. that we our in per recently quarter board announced has During the third of dividend million $X.XX a quarter, dividends, declared paid we and $XX fourth

the our our our to will additional look purchases. of we As and to balance growth further the continue via of shareholders strengthen the stock program dividend we to opportunities, through cash end year, continue sheet consider reinitiate return

to over some Steve, for back it closing turning thoughts. Now

Steven Demetriou

as All right. profitable is remaining our excited of company growth the delivering you, of Kevin. for are all X-year cost synergies. believe obtaining the as We business opportunities performance we trajectory our the CHXM well the We're Thank upon across third strategy. about that quarter strong evidence lines

results now adjusted of expect outlook of newly we our to we the At previous for $X pro the earlier up the at seasonality share such, open given its forma outlook lack of we'll $X.XX. this expect organization. fiscal of to normal range an than call XXXX per cadence, We're our also XXXX EPS to of on the time, in initial $X.XX. the $X questions. Operator, fiscal be XXXX providing to earnings be historical adjusted combined As now range and high-end fiscal

Operator

Instructions]. [Operator

comes Cook Your the from of Credit line from Suisse. first question Jamie

Jamie Cook

Kevin, I that you for One, surprised was already guidance provided guys obviously XXXX.

assumptions just number. progress your could we you us just much at And book? I for How the have nice my how to and do first second you about of visibility my XXXX, in the the to have then so that question, I obviously, opportunity If mean, by to CHX guess, level get on question. to DSOs segment we you cash side. lower walk think that's actually some the through flow know XXXX?

Kevin Berryman

process out. We preliminary the the midst right fact the that. performing actually We to together We're to that and do the going perspective. fact not these planning feel organizations guidance given of of our a lot the preliminary we're business XXXX we good two Jamie, about large just as relates the decided a not that to incremental seasonality was it to now. details, I'm a idea We provide it that of fully got you we just gave. in yet and give coming good thought

XXXX. to work before more some provide got some do guidance incremental we we So on

of reverse into they've been to job traction negative going to think continue the saw -- press get call some DSO recall, that. still in in starting a we a trend kind opportunities we As DSO And leaders doing there's real it had traction We second the the the as see. deliver we DSA that our that a QX, you We great our to cash would flow, to to on and the XXXX organization in and improvements and on on seeing little that in was focused, great be that forward that of disappointed quarter well. been performance. that we got relates on lack had as were discussed in full-court business

that, So improve going there's opportunities that on to but believe, more clearly, continue we to on metric come forward. to

Jamie Cook

Okay.

answer X% higher trying the margins my about end less level, the Am you to X% me question, commentary I didn't understand the X% I'm to improving just but follow-up. ATEN, So ask let wouldn't you from there. I guess, because just or you talked say first -- the On is X% a hairs achievable? here splitting level.

Kevin Berryman

still that. we general the X% for to of No, X% have range

Operator

Markets. of question next the from Tahira Your Capital from KeyBanc comes Afzal line

Sean Eastman

Tahira Sean is on today. This for

I be around are preliminary just qualitatively, would just color, thinking markets, around that guys maybe about to are it's guys meaningful guidance maybe of provide you factors commodity-oriented top-end, Any color just for little top-end key guys about fiscal much mining how on to kind to how around particularly end don't you So too in are want 'XX added a to sighting? the you upside get bit more potential understand and further the get the hoping you assumptions, but helpful. example, swing thinking the guys real

Steven Demetriou

that is -- to in as again, the major we're by across go three over lines good performance wins next ramp ATEN but And of quarters, backlog evidenced half year expecting the that business. that all ramp-up begun I -- the our up to into is think full detail, of of all last we're couple they've growth not year. second is benefit profit will from prepared this the benefiting the news of

that in call, two year. the earlier nuclear SOCOM Nevada announced win the defense, had the the earnings this but we and also mentioned missile the that So [indiscernible] I and

profile focused, some So others. we've show major and year. say in demand in clearly, foremost, continue as with backlog benefit ECR the going very strong XXXX. backlog, And demand robust mentioned, confidence the strengthening, tools we you growth. but margin and mentioned, with ECR more where improvement and East we're us ATEN commodities the and there drive should is business growth gives margin's see on next existing the good we're profitable Middle to than capital specifically in some markets seeing are business, positioned BIAF, starting profit higher implemented and as growth margins for growth that new very is certain to expected XXXX that that is of are I recently growth bookings, sustaining first for continue improving with to for I'd of to us projects. and coupled well on excellence improvements focus global some the additional the performance that But and the gain process business prospects a on

benefit we as And there well. so should

Sean Eastman

you business could through, you we the stable size prepared has bit little guys me, months, the that in there? say, the starts remained I the and for secondly Jacobs the think U.K. on anything a was the Okay. And to U.K. of XX guys are hoping flow as mentioned should just guys remarks provide Brexit next you of around color planning far. thus for now, right expect over impact what I

Steven Demetriou

sort are the on made and because we we are are negativity things uncertain, solid. excellent statements -- mean, comments I of don't The lot have just going But in caution, of of now prospects. standpoint, pretty U.K. about it uncertainty -- political Jacobs' a I from we is a have

the We have some sectors major transportation that change a across talked climate transmission and opportunities. pipeline side It's and about, and all energy the water opportunities. we on even good of

political be exciting and Brexit as Kevin, prospects. largest believe, ourselves what that's in careful the for the And to excited today, our second we term, the so extremely here of because short and we're we're equally BIAF. is our just we just sit U.K. company, trying potentially get else, -- about as market specifically that everywhere just not claim and But uncertainty. of to ahead as

an with remaining key important. of more it's We along that makes U.S. half, few so extremely regions. size other of U.K. mentioned the other a but is part than important the clearly, the business And

Operator

Your next UBS. question comes Steven from Fisher from line the of

Steven Fisher

the couple but don't And I lot just growth wonder here. a be feeling to trajectory wondering It want know, you forma we just at of digits just talk if looking say, again, that still the X% trend here, quarter, provide XX%, down the thinking this it about if was the going ECR but pro to be at because revenue points. these X% of I let's you a off strong XXXX, last really should could ticked is if between about color start at trend to pushed think while, that the, revenues sooner and versus I'm at I backlog into differential later? into Or growth to going was than a single 'XX.

just and how trajectory all forma So pro this growth? of of kind revenue converges the wondering

Steven Demetriou

and to me turn I'll start let over just So Kevin. it then

for like business, that pass-through at revenue the to three very it this businesses been As overly it's of focus I've the you Jacobs, years I've and some but becomes mentioned of because difficult in especially -- but project important, area of said, is on predict the revenues, ECR. really

I you of earnings execution ECR-specific a that really across of important that preserve we XX going I you've just margins an think that a revenue the our the those. line driving strategy revenue forward that is us over quality the and think got bottom gaining, for XX combination to we're are proving of the the get that growth, it gross from last higher to the our backlog And been look compared for equally standpoint I to the driving past. our business gave is it's our guidance cost of so to think whole months. that we mentioned, me, wins and margin And at really we've all you giving higher across opportunity synergies And efficiencies revenue tools we're to company,

Kevin Berryman

some effectively. just incremental In of for commentary. the I Steve, growth noted $XXX the figures, X% pass-through So third QX million quarter. additional That's

kind you since little -- in you they as mix bit you the of out, of I'll make turnaround, do higher profile were they the So I normally you given pretty when it's for just example, that do just and these and so you stuff. note ECR, interpret that. a contracts than pass-through And fluctuate, are revenues quick-burn the especially believe, pointed win wish. the that comment and of

it pretty win happens and you quickly. So it

come can -- the it you revenues as disconnect this And together. so relates of the trending backlog get versus is how how kind some to of the

that risk have think, that think be gross to our total backlog margin important us that, profile ability as in to So our is lower to able to of we look, because some line with the of our term. just and I said Steve longer And we around that expand well. continues top continue there that what's leading that an the margins portfolio positive, be kind is fluctuation will to be and ensure things

Steven Fisher

called your XXXX? you the going a going just could an to us it? ECR capture comfortable out that's adjustment is are you quarter? all Okay, think have very in then to color And that little how maybe fourth that in And it? is on specific project more Just material the you in cost that give far helpful. long you're how How is headwinds I

Kevin Berryman

We're I'm that can't it comfortable think what than I given Yes, it the appropriately have suggesting. I'll characterize we're impact even on be there. situation modest that just material I'd and it And that leave confident. look, it we it'll But and what I we're lower described. evaluating be it's hopefully, very a very margins. ultimately,

Steven Fisher

be Okay. done? And project when will the

Kevin Berryman

of the It's year. end near this

Operator

comes from from the Wittmann line Your Baird. next question Andy of

Andrew Wittmann

talks profit X that's the your about. look a operating footnote put at had been seems that footnotes actually. about range just the quarter. certain with in the million associated of project line million -- I to the charge I reconciliation, $XX that like segment $XX with up, a in Kevin, clarification you value But kind like is In a you've when talking

just So and can a better? is about that little you us talk understand what help

Kevin Berryman

was had of Look, actuarial which fringe we offset had we also that, true-ups, Yes, over performed Andy. but given QX, higher-than-normal little work that. kind yes, that had a -- largely the problem, no bit we

in looking kind you're you of there's number, to a minus number there's at. in the that netted which see So plus that of there, and there a kind

you're why big change. seeing not that's So a

Andrew Wittmann

What was pretty decent amount the other a corporate there. charge? like It seems

Steven Demetriou

Fringe.

Kevin Berryman

fringe. was it Fringe,

Andrew Wittmann

was The million? fringe $XX the

Steven Demetriou

No.

Kevin Berryman

$XX No, offset million. It incremental no. a benefit. the was It

Andrew Wittmann

to? I'm Right. the saying was charge what just related

Kevin Berryman

that's project being a Project, evaluated.

Andrew Wittmann

all right. Okay,

but some side guess, about the side a it's like But you and the seeing I all the not in that last goodwill we're good -- of thought drivers of investor of liability give a just that's migration just thing moved looks some deals Just the on contained Can are? of your some is bit. Kevin. just asset accounting it'd to what to is the it then I given you the sensitivity up, talk it's some on quarters. looks increasing, of numbers, of accounting other in past, the about has also that balance happened and chance around talk a the this here of couple intangible sheet, down. little purchase It some like purchase

Kevin Berryman

Yes, of that's the PP&E preliminary customer list went you ultimately largest brand look from terms that's ECR in that versus -- original million really customer the changes have in $XXX-plus ultimately that of -- potential of the two a which of the pieces about value, the CHXM, the stuff, opening was what project There's related other our some of look, fair and of business, percentage of do had we down values and estimate. We are in customer value fair and and -- estimates we it. in our balance incremental that moving sheet. values, and which chunk some in But some is it. there that to I first the in accruals big mentioned, the Certainly, list if that got in PP&E some risk. kind at

Operator

from line the from comes Michael Research. question of Vertical next Your Dudas

Michael Dudas

your greater you about talked XXX at bps, Steve, believe, backlog I remarks, than current prepared ago. in year a

of backlog? incremental clarify the the or margins being environment putting Is some CHX relative in on on? to more the Just a to to change the better mix just in issue you're better disciplined projects drivers that little it disciplined a bit that, the what bidding you better in are as backlog brought grabbing relative

Steven Demetriou

CHXM talked the and business pro pleased about up the last the CHXM performance third from revenue it's the or major that fact both year quarter mentioned and standalone Jacobs reported business We've we've year, year higher-margin based on margin a XXX backlog water the last this side also Jacobs' basis on backlog side. so at overall contributor. look because on third that backlog standalone the you last of a side. grown the points when as quarter But the and forma is So a that business have Jacobs' that's to from I'm basis, the year of

the combined CHXM really performance, of especially but good businesses combination acquired sort of that it's we the business. of some higher-margin with So a

Michael Dudas

revenues, side Steve, put up presentation, following in the ATEN. positive on on on X -- bump you delineation you'll the your the big And to transition Of this through Excellent. on X through X what backlog there or contribution markets XXXX? what is X And or the new others? or the that segment revenue a and in benefit some detriment promising X that look than relative in mix more see have of growth new into to going of get business where you

Steven Demetriou

you CHXM especially we projects as goes XXXX, expected acquired certain with business, some pipeline nuclear up-cycle evidenced sector-wise. core large XXXX wins, as be on nuclear see several obviously by the into A&T pipeline of coming U.S. just also in regionally, we answer business, from and Clearly, both the strongest 'XX where cycles major and The board. regionally what opportunities. I'll in the is to and the moving but our on know, the -- an

is prepared analytics, we going focus, the to as important and so And us, in acquisitions as also that's important to digital to as those weapon us, strategy. because mentioned specific et in area growth forward cybersecurity be our say sustainment go my are strong mentioned Enterprise expecting And successful X opportunities. we're remarks. the of Jacobs cetera, and I'd in The we well. as Connected

Operator

comes the line Revich next of Sachs. from Goldman Jerry Your question from

Jerry Revich

outlook in you've backlog relative ability out continue revenue call? the had ATEN sense the that ramp you us you strong earlier, revenue Can that in just for talk really earlier past about in a list as projects, your to win have as in up the year. the to bookings on just give terms look of rates to laid grow the those you does folks you how mentioned business? over Can prospect ramp the You

Steven Demetriou

And in to in opportunities kind ATEN the military well quarter business. an that U.S., is 'XX XXXX business I'm especially pipeline just as as our extremely different NASA frame, plus-ups in relates And news great and our the the we're of across of I win clients. a it what spite historical ask strong question, good both when unprecedented sides time still and Jerry, It's back existing all the as presence that I side, reviews. every high of one the in of sitting our have of repeating in opportunities, the all we or cybersecurity said, expanding

ramp-up and -- wins with not so continuing in wins, confident the we -- of it's to we're is we're So strong, on put previous upon new the board just but pipeline business. the depending the

Jerry Revich

maybe that a translate finer just you growth? so just And context, for put that? backlog into Can point on does

Steven Demetriou

growth in we're we Yes, ATEN into -- continued as 'XX. move backlog still we're expecting

Jerry Revich

any can more a flowed we higher. of the P&L, And performing see CHXM circle that adjusted so through what way in brand counterintuitive an is accounting greater mentioned integration? goodwill to up quarter into It's considering adjustment the get how earlier business out in the to And Kevin? the just the you is in addition little you question? Can just flesh well of how it the accounting benefit Okay. just much in change terms the did from you

Kevin Berryman

versus No QX. Jerry. in business the let's fundamental charges noncash real associated and change, QX call incremental with our

providing it. there's in look again, continuing be at that you. QX. change, We'll Now we'll insight look, if we're it, But material to any evaluate to

now, QX to was QX, very QX. as right of As of similar

Jerry Revich

mean, us what's values, negative considering well, adjustment the main is of to Okay. the driving more well? business context, Can cetera? a But business performing business in trade the you et performing just terms the context just values when brand I give is

Kevin Berryman

like we're The CHXM huge value what the the integrating into looks value it value our reduced new driving Jacobs how and offering. Jacobs a is the has organization company view holistic CHXM of and The of of actually number.

So it this different important proposition has don't picture. construct as CHXM if it wasn't historically but is the the a very for want with within company, a to about a discussion I doing brand. it we're comment it make and is us, about for the of that value what

to Denver, implications go to you much CHXM because headquarters, value you'll And see an the with see previous we're reducing is to that's Jacobs. the example, driving one were there, won't CHXM. you aligned entity, if -- you associated against for as Jacob very which So

Operator

Your next line Deutsche the question from Bank. of from Dillard comes Chad

Chad Dillard

question sequential implied see if fourth suggest the seasonality. not a had that's but case. earnings quarter, -- on guidance the earnings growth just you in the Historically, I that,

whether if just I ask exit pretty to down in apply especially conservative, was seasonality and factor the X% because and I curious differences the CHXM side? I if or big winding the forma typical I backlog. fourth it's a suggest rate the related So project savings cost growth guidance pro XXXX the seasonality, in would is quarter

just there. to get So hoping color some

Kevin Berryman

$X.XX Well, you got first recognize had in so to benefits that. discrete it, some thing,

And little items, You more getting year. the ultimately, the figure. balance take finalize to take we taxes is for the $X.XX out those really will tax view and for our you you're up full closer as then bit our figures the be a

seen than what balance. in we've rate tax higher if bit we're think targeting little you quite pretty we a a of is all operating underlying that attractive. And at the be probably those there'd So respectable result look numbers, actually

Chad Dillard

run missile a ATEN. question projects rate? about the defense you hit full the and SOCOM talk on just just when And Can

Steven Demetriou

are of multiyear because All up end our projects having stages, these projects.

next So year. weighted year would going of but first majority half of more next through probably year, heavily is fiscal in -- months, next but completed -- the I to first X ramp-up say to the the by the be the

Operator

line from the of from Kaminskaya Anna Lynch. America comes question next Your Merrill Bank of

Anna Kaminskaya

color how highlight metrics engagement on regional that And impact they're your press know, don't coming markets a whether synergies any that release employee maybe an I ratios, has was some you particular any assumption hoping get, revenue or year-to-date. about to upside, you -- to here. highlight on, want in I from

Steven Demetriou

areas strength is had that clearly ahead of to environmental gas talked and of bringing Clearly, but other water combined But the business business in east not with more we really which company. is or us. bringing exciting, oil the it's CHXM's see and same all winning because and some Infrastructure in and coming our we about. And opportunities the in those the We've like pipeline, so side environmental. Jacobs, to mining all in where early-on for combined the the Right. preliminary only attribute the and environmental, business water side we capabilities impact bigger industrial biggest revenue wins business across far synergies that thing capabilities and is the

the we're the and big seeing combination us And kind that's Nuclear, in the as of positions so well going globe. jobs pipeline it across the forward, so well. for nuclear

attributable over again, the spend think year X people, better about time whereas about X wins talking synergies. months next to synergies, first to So the I going more extremely With has the we'll and actual these regard to revenue the well. been cost culture and it's more

challenge attrition stable, mentioned, I rates concern As of which are merger size. and a during this always is a

and, We're in the Integration front put believe keeping Jacobs' paying and we level, hallways quickly not is equally is Management but place, the at but client communicating, out understanding getting dividends. believe, a best-in-class the whole across those IMO, a our of we the engaging, also so within which integration up issues which process, on the only that to And we lot process, that important. where are offices, the globe, excitement again, is clearly in of Office, of momentum people adjusting there's

on to this really basis. focus reporting. a it's And to second early. We're not let we're right culture only just full up the So combined forward drive going of the -- going quarter our best-in-class is on

Anna Kaminskaya

do get in And it evaluate acquisitions? your portfolio. incremental note to Page wanted portfolio, redeploying into both? kind your of, find or Great. to on is relation is to you you that or color commentary continue existing noncore just more I Does relate on cash Or asset you to XX, it

Steven Demetriou

I think everything. it's

standalone was quarter that you year just than less the X%. over over finished history up to at the X-year And company, margin. XXXX, If profit XXXX this on closer look operating put Jacobs' X% X.X%. the in a has ramped board We we third X%, throughout back of

going that us, growth, demonstrate higher so but have to it's to to to for earnings. continue drive And earnings not of we're only quality

more focus reiterated that, demonstrate sure well portfolio everything want to times, so end -- deliver of make we're is be success Jacobs, think the CHXM And earnings on have growth more and going merging to not on our do to will going similar there's achieve will margin as the And on continue drive do, the moving those going believe acquisition if and But we that mentioned alternative to strategies. sure assess our evaluating best several high that it's we and continue we everything, we that, we we've clearly, And the performance to forward. capabilities to our confidence that we trigger on and the I things improvement make is margin forward. to anything to -- it existing pulling strategy other going that the of -- part we've markets growth. side

Operator

next comes from Your Andrew line from question Citi. the of Kaplowitz

Andrew Kaplowitz

seem high, customers. Steve, trade more wars, could does of out ECR. here a oil the of turned little a EC&R maybe it relatively you prices like corner talk threat with the bit are just there noise with you're about in Obviously, but your conversations lot having you've

a You given E&Cs, cycle tend be than to earlier model. some your little sustaining

seeing said the the in could backlog? of you projects, an up you type sustaining environmental on and So EC&R work? inflection Or step-up on of is turnarounds, continued inflection business strong increasingly see you're nice the spend, more more catching

Steven Demetriou

gas risk some sure want first attempt clients which we good for that's out on maintenance positive as that's be mining for participate sustaining some pushing opportunities supply-demand they're the of example, on risk feel that ECR emerging some copper, and It's I of stay risk make both. larger that next profile to strategy to a the the certain down didn't There only as significantly we've growth starts projects and the what it's new in past that from in think that are coupled the trade -- balance oil full years the better from I but our like market. with years, the to of there able not But more it's very the clients rising our going even over chemicals the we've do our to say careful we it risk the us, of met are we the on projects the other to think any to clients, there's And low key strategy we're going the of in over the committed term, than to that situation an same XX initiatives Jacobs' what's market business, win, And several yet XX anticipating continue expected we I because but we and the especially be significantly hear growth the demonstrate down with backlog in now last projects think in less way in what our war, giving have as about our performance proved is of to being this industry, for term. our of the are going clearly, successful studies would passed are appetite rest so sustainable mean, not downs there profile, The of next clearly regret believe meet that they all concerned even those months. -- to as now our we're to the war over we do we conversion that and steady on on during short that improving and short we to the we through we the the performance as won't that backlog capital, trade excellence. we're our and that a can capital growth, turnaround going side. has and and industry. forward, go side, is of strategy business the into slow put And that we'll for the X to for a thing be I focus that deliver over to that expect, of next -- that them performance but causing all board But industry. winning reduced and done where and sustaining ups maintenance be concern we X preserve the years margins and an couple the market noise years,

Andrew Kaplowitz

And good Maybe Steve have here there, side. EC&R we the execution you Kevin, guys job done and got general, as a since on could today. evaluate execution you you in sit really

already back You below project could color a margin gave modest think in EC&R QX, for a up? you issue you could potential the a dip us while And us charge the and Jacobs QX gave charge or project? -- of you it legacy but the before CHX X% on in was comes tell

Kevin Berryman

I because lose is margin. a happening. we a as-sold a get get and that the about portfolio, little -- things and pretty as-sold of pickup, amount those margins bit we're but in to a probably a we the that as-sold That's we incremental knock terms incentive we payment ECR margin I those the to, we of tremendous has of been and -- high execution And prior Look, you think had of little the loss already how smaller. execution organizations ATEN or tickdowns get activity have and want kind bit it. and there's margin that mostly in are in performance go potential because that improvement key level and BIAF, smaller done talked bit across incentives. And as-sold little in the margin. last becoming BIAF, had in couple versus always over smaller entire We the of of after versus a have wonderful actually both and the versus job a protect think of our we there's the years seeing past, of improving But -- an as ECR

almost getting look basis. absolutely. But we in those But never how we ongoing terms a substantially on that, too for we continue of means level we've to where in terms the grow because that try aggravating that that potential I of gotten business. look, margin to number and we're safe losses kind be being to think it's want Now zero of benefit reduced a

to about, And fact a percent X-plus have the I higher longer continue and so we'll context able we term. there in that be view margin, that the think, a want holistic if write-downs high of within $XX the in back an to the but our is versus margin, reduction XXXX. course. forward we the Could of this the to were be X/X point million of or where at ECR as-sold probably losses going business, expectation that here and was Jacobs, talked it think, we're numbers be extraordinary I blip there? Of we

Steven Demetriou

think building said something I what that XXXX, maybe commentary. this quarter drag just one not is to on is into expecting -- that Kevin Andrew, But it's we're specifically, a so

Operator

D.A. next from of question Brent the Your comes Davidson. Thielman line from

Brent Thielman

going a XX% the majority follow-ups reimbursable The Just appetite forward, your quick to desire sustain a that's reimbursable. here couple of risk portfolio ECR. but on is more for backlog, Understand little still there? it the

Steven Demetriou

change there. No our strategy to Yes.

Brent Thielman

after some is been fruition, that then your that come capital any going think at? what to about opportunity X% of relative also to the running that segment's they And you I the what margin segment as these in guess, sense mean, project opportunities when I --

Steven Demetriou

a outlined, points basis business Modestly about Xs -- we've kind business XXXX, X% to to you our that that certain back higher. has if And go mean, had to success -- we're is that we're X%. Kevin of higher. ECR XXX that team I X% up take as in from or strategies to low in

Steven Demetriou

a Thanks as services call company, kind the of like for industries it you. doesn't our professional our by like like again would well on joining exist mission and to our to we're Thank our new today. to call and that describe we Okay. that one to end reiterating way create in

to you again, talking we forward thank look quarter. next you to So and

Operator

Thank this today's you for participation, And may you conference your now concludes call. disconnect. and