second quarter fiscal year 2018 results - cubic corporation fy18... · second quarter fiscal year...

Second Quarter Fiscal Year 2018 Results May 2, 2018

Bradley H. Feldmann

Chairman, President and Chief Executive Officer

Anshooman Aga

Executive Vice President and Chief Financial Officer

2

Safe Harbor & Disclosures

This presentation contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as

amended, that are subject to the “safe harbor” created by those sections. Any statements about our expectations, beliefs, plans,

objectives, assumptions or future events or our future financial and/or operating performance are not historical and may be forward-

looking. These statements are often, but not always, made through the use of words or phrases such as “may,” “will,” “anticipate,”

“estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “predict,” “potential,” “opportunity” and similar words or

phrases or the negatives of these words or phrases. These statements involve estimates, assumptions and uncertainties, including those

discussed in “Risk Factors” in the Company’s annual report on Form 10-K for the year ended September 30, 2017, and throughout this

presentation that could cause actual results to differ materially from those expressed in these statements.

Because the risk factors referred to above could cause actual results or outcomes to differ materially from those expressed in any

forward-looking statements made by us or on our behalf, you should not place undue reliance on any forward-looking statements. In

addition, past financial and/or operating performance is not necessarily a reliable indicator of future performance and you should not use

our historical performance to anticipate results or future period trends. Further, any forward-looking statement speaks only as of the date

on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the

date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is

not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent

to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking

statements

This presentation also includes non-GAAP financial measures as that term is defined in Regulation G. Non-GAAP financial measures

supplement our GAAP disclosures and should not be considered an alternative to the GAAP measure. Reconciliations to the most

directly comparable GAAP financial measures can be found in the Appendix to this presentation.

NYSE: CUB

3

$527.0

2Q17 2Q18 2Q17 2Q182Q17 2Q18

2Q18 and 1H18 Results Continuing Operations1

NYSE: CUB

Sales

($m)

Adj. EBITDA

($m)

See appendix for additional information regarding non-GAAP financial measures. 1On April 19, 2018 Cubic announced the planned divestiture of CGD Services; the results have been excluded from the figures above.

Highest historical backlog $3.4 billion (up $873 million since 4Q17) with Boston financial close

Top five U.S. transit agencies are now mobile customers with Limited Notice To Proceed for NFC

mobile solution for Washington Metropolitan Area Transit Authority

2Q18 sales increased 12%, adj. EBITDA increased 35% compared to 2Q17

1H18 sales increased 7%, adj. EBITDA decreased 7% compared to 1H17 due to R&D increase

Advancing strategy with Defense Services divestiture

1H17 1H181H17 1H18

Sales

($m)

Adj. EBITDA

($m)

Strong Execution on Winning the Customer

1H17 1H18

R&D

($m)

R&D

($m)

$248.0 $278.6

$11.7

$15.8 $492.4 $27.3

$29.3 $26.2

$21.9 $14.2

$12.9

4

Spending Bill to Benefit Cubic

$1.3 trillion omnibus spending bill funds remainder of FY18

$700b FY18 defense bill passed with an increase of $55b from FY17

Increase of $56.4m for Cubic programs compared to President’s budget:

Transportable Tactical Command Communications (T2C2) ($80.6m new total)

Secure Live, Virtual, Constructive Advanced Training Environment Advanced

Technology Demonstration (SLATE ATD) ($43.3m new total)

Littoral Combat Ship Training Courseware ($30.2m new total)

Instrumented-Tactical Engagement Simulation System II Force on Force training

systems ($16.3m new total)

Delivers $10b in new transportation and infrastructure funding including Capital

Investment, Transportation Investment Generating Economic Recovery (TIGER)

and Federal Highway Administration grants

4

NYSE: CUB

5

Strategy Update

NYSE: CUB

Named ‘Supplier of the Year’ at the London

Transport Awards

Expanding real-time video processing and image

enhancement with acquisition of MotionDSP

Investment in Beatty and Company Computing to

enhance access to secure cloud operating

systems technology

Secure Live, Virtual, Constructive Advanced Training

Environment Advanced Technology Demonstration

(SLATE ATD) passed systems verification

6

Significant Progress Across Growth Initiatives

NYSE: CUB

Strong contract mobilization with NY and Boston contracts

Cubic │John Laing Consortium financial close agreement with

Massachusetts Bay Transportation Authority

Anticipate Brisbane Next Generation Ticketing System award FY18

Investing in mid-market electronic fare collection platform solutions

Won USAF Theater Deployable Communications ($12.9m)

Transportable Tactical Command Communications (T2C2) full-rate

production decision

Won Tactical Local Area Network CERP ($5.5m)

Lockheed Martin Aero agreement for LRIP 2-4/11; negotiating contract for a

combined buy of 500 units for LRIP 12/14

Received $16m in new Littoral Combat Ship Courseware orders associated

with Combat Systems, Engineering revisions and Learning Management

Canada Urban Operations Training System Phase 2 Long Lead

7

Successfully Living One Cubic

NYSE: CUB

Major ERP system implementation

completed

Implementing Product Lifecycle

Management (PLM)

Expanding India operations to support

growth in international markets

Defense and Transportation engineering

teams consistently working together

8

Continued Strong Execution in 2Q18

Disciplined capital allocation decision – announced agreement to divest CGD Services

• Reflected in discontinued operations at March 31, 2018

All key milestones for quarter achieved

Completed Boston MBTA financial close

Adj. EBITDA improved year over year and sequentially

Improved 2Q Free Cash Flow

Maintaining full year guidance (adjusted for divestiture)

8

NYSE: CUB

9

$1.54

($0.12)

2Q17 2Q18

Earnings per Share

Disc Ops

Consolidated Financial Highlights Continuing Operations

9

1) Growth rates reflects constant currency, adjusted for FX tailwinds of: $0.8m bookings, $31.8m backlog, $7.5m sales, and $1.3m Adj EBITDA.

Unadjusted growth rates: bookings +4x, backlog +34%, sales +12%, adj EBITDA +35% versus 2Q fiscal 2017.

2) Free cash flow, which is a non-GAAP financial measure, is defined as Net Cash Provided by Operating Activities minus capital expenditures. NYSE: CUB

20.1 17.0

Q1 FY17 Q1 FY18

Adj EBITDA

0.4

(33.3)

Q1 FY17 Q1 FY18

Free Cash Flow

334.7 340.7

Q1 FY17 Q1 FY18

Sales

$ in millions, except backlog and EPS

0%1)

-18%1)

-0.11-0.36

Q1 FY17 Q1 FY18

EPS ($)

204.3

832.5

Q1 FY17 Q1 FY18

Bookings

3.1 3.6

Q1 FY17 Q1 FY18

Backlog ($b)

+306%1)

+17%1)

$151.7

$623.8

2Q17 2Q18

Bookings

$2.5 $3.4

Sep 30, 2017 Mar 31, 2018

Backlog ($b)

$248.0 $278.6

2Q17 2Q18

Sales

$11.7

$15.8

2Q17 2Q18

Adj. EBITDA

($5.5)

$7.0

2Q17 2Q18

Free Cash Flow

4x1 33%1 9%1

24%1

Disc

($1.53) $0.05

10

Divestiture Impact on Cubic Financials (fiscal 2Q18)

NYSE: CUB

$278.6

98.1 -

$376.7

Pre-Divestiture CGD Services ContinuingOperations

Total Sales

$15.8

4.7 1.9

$22.5

Pre-Divestiture CGD Services Cost Overhang ContinuingOperations

Adj EBITDA*

$ millions

* See appendix for reconciliation of non-GAAP financial measures

$623.8

181.6 -

$805.4

Pre-Divestiture CGD Services ContinuingOperations

Total Bookings

$7.0

- 1.4

$28.6

20.2

Pre-Divestiture CGD Services Cost Overhang ContinuingOperations

Free Cash Flow

Pre-Divestiture CGD Services Corporate

Costs

Continuing

Operations Pre-Divestiture CGD Services

Corporate

Costs

Continuing

Operations

11

Cubic Transportation Systems Financial Highlights Q2 Comparison ($m)

11

1) Growth rate reflects constant currency basis; Adjusted for FX tailwinds of $0.8m bookings, $7.1m sales and $1.4m Adj. EBITDA.

Unadjusted growth rates: Bookings ~8.5x, Sales +20% and Adj. EBITDA +74% versus 2Q17 NYSE: CUB

$61.0

$520.5

2Q17 2Q18

Bookings

$139.6

$167.0

2Q17 2Q18

Sales

$9.9

$17.2

2Q17 2Q18

Adj. EBITDA

7.1% 10.3%

2Q17 2Q18

Adj. EBITDA Margin %

+9x1

+60%1

+15%1

+322 bps

Strong bookings reflect Boston

MBTA award

Robust sales growth supported by

New York MTA contract

Margin increase reflects higher

sales, lower R&D spend, and

improved operational performance

12

Cubic Mission Solutions Financial Highlights Q2 Comparison ($m)

12

Bookings increase reflects T2C2

LRIP and Theater Deployable

Communications (TDC) orders

Sales increase reflects higher

Secured Networking deliveries

Margin improved on higher sales

despite higher YoY R&D spend

T2C2 full rate production expected

to drive YoY improvement in all key

line items in FY18

NYSE: CUB

$22.0

$46.1

2Q17 2Q18

Bookings

$28.7 $36.1

2Q17 2Q18

Sales

($3.2) ($2.0)

2Q17 2Q18

Adj. EBITDA

-11.2%

-5.6%

2Q17 2Q18


+109% +26%

+37% +561 bps

13

Cubic Global Defense Systems Financial Highlights

Q2 Comparison ($m)

13

All key metrics improve sequentially

from 1Q18

Bookings down YoY due to

order delays; Expect recovery in H2

Sales reflect lower YoY Air Ranges

shipments

Adj. EBITDA in-line with prior year

NYSE: CUB

$68.6 $57.2

2Q17 2Q18

Bookings

$79.7 $75.5

2Q17 2Q18

Sales

$7.4 $7.4

2Q17 2Q18

Adj. EBITDA

9.3% 9.8%

2Q17 2Q18


-17% -6%1

+54 bps

1) Growth rate reflects constant currency basis; Adjusted for FX tailwinds of $0.4m sales and headwinds of $0.2m Adj EBITDA.

Unadjusted growth rates: sales -5% and adj EBITDA flat versus 2Q17

+2%1

14

2017

pro forma

2018

Prior Guidance

(with Services)

2018

Updated Guidance

(w/o Services)

Sales $1.108B $1.510B - $1.560B $1.135B - $1.185B

Adj. EBITDA $87.5M $110M - $135M $90M - $116M

2018 Guidance Reflecting CGD Services Divestiture

constant currency

No change to guidance (adjusted for transaction)

Pro forma expected sales growth of ~5% and Adj. EBITDA growth of ~18% (at midpoint)

CGD Services 2018 forecast assumption:

• Revenue: $375 million

• Adj. EBITDA: $11-12 million (net of corp. overhead allocation)

• Corporate overhead: $8 million

Profit seasonality to be somewhat in line with 2017FY

Q3 Adj. EBITDA expected to reflect gradual sequential improvement over Q2; Strong Q4

15

Summary

Strong YoY sales and adjusted EBITDA growth in Q2

Making great strategic progress: CTS is winning, CMS growth secured with T2C2

full rate production, CGD systems pipeline strong

Announced Non-OEM Training Services divestiture

Investments will drive growth and margin expansion in FY18+

Final ERP implementation completed

NYSE: CUB

Winning the Customer and technology investments driving growth

Appendix

17

Appendix Table of Contents

Historical Sales and Adjusted EBITDA - Continuing Operations Basis

Annual: Cubic GAAP to Non-GAAP Reconciliation - Pro-forma Year Ended Sep 30, 2016

Year Ended Sep 30, 2017

Quarterly: Cubic GAAP to Non-GAAP Reconciliation - Pro-forma 1Q17 - Quarter Ended Dec 31, 2016

2Q17 - Quarter Ended Mar 31, 2017

3Q17 - Quarter Ended Jun 30, 2017

4Q17 - Quarter Ended Sep 30, 2017

1Q18 - Quarter Ended Dec 31, 2017

GAAP to Non-GAAP Reconciliation - Continuing Operations 2Q18 - Quarter Ended Mar 31, 2018

2Q17 - Quarter Ended Mar 31, 2017

1H18 - Six Months Ended Mar 31, 2018

1H17 - Six Months Ended Mar 31, 2017

NYSE: CUB

18 Cubic Corporation Historical Financials Continuing Operations Basis

NYSE: CUB

($M)

In Millions FY16 FY17 Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18

Sales as Previously Reported 1,462$ 1,486$ 335$ 344$ 362$ 446$ 341$ 377$

CGD Services (391) (378) (90) (96) (96) (96) (92) (98)

Sales Continuing Operations 1,071$ 1,108$ 244$ 248$ 266$ 349$ 248$ 279$

Adjusted EBITDA as Previously Reported 118.0$ 105.6$ 20.1$ 16.8$ 18.5$ 50.2$ 17.0$ 22.4$

CGD Services (16.9) (9.9) (0.6) (3.1) (3.9) (2.4) (3.6) (4.7)

Allocated corporate costs (7.7) (8.2) (2.0) (2.0) (1.9) (2.4) (2.0) (1.9)

Adjusted EBITDA Continuing Operations 93.4$ 87.5$ 17.5$ 11.7$ 12.7$ 45.4$ 11.4$ 15.8$

19

GAAP to Non-GAAP Reconciliation Earnings before interest, taxes, depreciation and amortization

(EBITDA) and Adjusted EBITDA - Year Ended Sep 30, 2016

NYSE: CUB

GAAP to Non-GAAP Reconciliation

Earnings before interest, taxes, depreciation and amortization (EBITDA) and Adjusted EBITDA


In Millions

Cubic As

Reported CGD Services

Allocated

corporate costs

Continuing

Operations


Net income (loss) attributable to Cubic 1.7$ (15.1)$ (10.4)$ (23.8)$

Provision for income taxes (9.2) 3.9 2.7 (2.6)

Interest expense (income), net 9.7 - 9.7

Other non-operating (expense) income, net 5.0 - 5.0

Operating Income 7.2$ (11.2) (7.7) (11.7)

Depreciation and amortization 45.5 (5.2) 40.3

Other non-operating expense (income), net (5.0) - (5.0)

EBITDA 47.7$ (16.4)$ (7.7)$ 23.6$

Acquisition related expenses, excluding amortization 28.7 - 28.7

ERP/Supply Chain Initiatives 34.8 - 34.8

Restructuring costs 1.8 (0.5) 1.3


Adjusted EBITDA 118.0$ (16.9)$ (7.7)$ 93.4$

20


(EBITDA) and Adjusted EBITDA - Year Ended Sep 30, 2017

NYSE: CUB

In Millions

Cubic As


Allocated

corporate costs

Continuing

Operations


Net income (loss) attributable to Cubic (11.2)$ (9.1)$ (11.1)$ (31.4)$

Provision for income taxes 15.1 2.4 2.9 20.3


Other non-operating (expense) income, net (0.4) - (0.4)

Operating Income 17.5 (6.7) (8.2) 2.6


Other non-operating expense (income), net 0.4 - 0.4

EBITDA 69.0$ (9.7)$ (8.2)$ 51.1$

Acquisition related expenses, excluding amortization (0.3) - (0.3)



Gain/Loss on sale of fixed assets 0.4 - 0.4

Other non-operating (expense) income, net (0.4) - (0.4)

Adjusted EBITDA 105.6$ (9.9)$ (8.2)$ 87.5$

21


(EBITDA) and Adjusted EBITDA – Quarter Ended Dec 31, 2016

NYSE: CUB

In Millions

Cubic As


Allocated

corporate costs

Continuing

Operations

Quarter Ended December 31, 2016

Net income (loss) attributable to Cubic (2.8)$

Provision for income taxes (5.1)

Interest expense (income), net 3.3

Other non-operating (expense) income, net 0.5

Operating Income (4.1) 0.4 (2.0) (5.7)



EBITDA 8.8$ (0.6)$ (2.0)$ 6.2$



Restructuring costs 0.9 - 0.9

Gain/Loss on sale of fixed assets 0.4 - 0.4


Adjusted EBITDA 20.1$ (0.6)$ (2.0)$ 17.5$

22


(EBITDA) and Adjusted EBITDA – Quarter Ended Mar 31, 2017

NYSE: CUB

In Millions

Cubic As


Allocated

corporate costs

Continuing

Operations

Quarter Ended March 31, 2017

Net income (loss) attributable to Cubic 0.4$




Operating Income (2.1) (2.0) (2.0) (6.1)



EBITDA 9.8$ (2.7)$ (2.0)$ 5.1$

Acquisition related expenses, excluding amortization (0.1) - (0.1)



Gain/Loss on sale of fixed assets - - -


Adjusted EBITDA 16.8$ (3.1)$ (2.0)$ 11.7$

23


(EBITDA) and Adjusted EBITDA – Quarter Ended Jun 30, 2017

NYSE: CUB

In Millions

Cubic As


Allocated

corporate costs

Continuing

Operations

Quarter Ended June 30, 2017


Provision for income taxes 17.8


Other non-operating (expense) income, net (1.6)

Operating Income (1.7) (3.2) (1.9) (6.8)


Other non-operating expense (income), net 1.6 - 1.6

EBITDA 12.4$ (3.9)$ (1.9)$ 6.6$

Acquisition related expenses, excluding amortization (1.5) (1.5)

ERP/Supply Chain Initiatives 8.9 8.9

Restructuring costs 0.3 0.3

Other non-operating (expense) income, net (1.6) (1.6)

Adjusted EBITDA 18.5$ (3.9)$ (1.9)$ 12.7$

24


(EBITDA) and Adjusted EBITDA – Quarter Ended Sep 30, 2017

NYSE: CUB

In Millions

Cubic As


Allocated

corporate costs

Continuing

Operations

Quarter Ended Sep 30, 2017





Operating Income 25.4 (1.9) (2.4) 21.1



EBITDA 38.0$ (2.5)$ (2.4)$ 33.1$



Restructuring costs 0.5 0.1 0.6


Adjusted EBITDA 50.2$ (2.4)$ (2.4)$ 45.4$

25 GAAP to Non-GAAP Reconciliation Earnings before interest, taxes, depreciation and amortization

(EBITDA) and Adjusted EBITDA – Quarter Ended Dec 31, 2017

NYSE: CUB

In Millions

Cubic As


Allocated

corporate costs

Continuing

Operations

Quarter Ended Dec 31, 2017

Net income (loss) attributable to Cubic (9.8)$ (3.9)$ (2.7)$ (16.4)$

Provision for income taxes 0.5 1.0 0.7 2.2



Operating Income (7.0)$ (2.9) (2.0) (11.9)



EBITDA 6.0$ (3.6)$ (2.0)$ 0.4$



Restructuring costs 1.5 - 1.5


Adjusted EBITDA 17.0$ (3.6)$ (2.0)$ 11.4$

26 GAAP to Non-GAAP Reconciliation - Continuing Operations Earnings before interest, taxes, depreciation and amortization (EBITDA) and Adjusted EBITDA

Three Months Ended March 31, 2018

NYSE: CUB

In Millions Consolidated CTS CMS CGD Systems





Other non-operating (expense) income, net (2.0)

Operating Income (loss) (1.7)$ 14.2$ (7.7)$ 5.2$

Depreciation and amortization 11.1 3.0 5.2 2.0

Other non-operating expense (income), net 2.0 2.4 0.2 (0.1)

EBITDA 11.4$ 19.6$ (2.3)$ 7.1$

Acquisition related expenses, excluding amortization 1 0.5 0.5

ERP/Supply Chain Initiatives 5.7

Restructuring costs 0.2 0.2

Other non-operating (expense) income, net (2.0) (2.4) (0.2) 0.1

Adjusted EBITDA 15.8$ 17.2$ (2.0)$ 7.4$

EBITDA Margin 4.1% 11.7% -6.4% 9.4%

Adjusted EBITDA Margin 5.7% 10.3% -5.6% 9.8%

1 includes transaction costs, retention bonuses and earn out liability changes related to acquired businesses



NYSE: CUB









Other non-operating expense (income), net (0.4) (0.2) 3.1

EBITDA 5.1$ 9.7$ (3.3)$ 10.3$

Acquisition related expenses, excluding amortization 1 (0.1) (0.2) 0.1



Loss on sale of fixed assets -

Other non-operating (expense) income, net 0.4 0.2 (3.1)

Adjusted EBITDA 11.7$ 9.9$ (3.2)$ 7.4$

EBITDA Margin 2.1% 6.9% -11.5% 12.9%




Six Months Ended March 31, 2018

NYSE: CUB






Other non-operating (expense) income, net (2.0) (1.6) (0.2)$ (0.3)$



Other non-operating expense (income), net 2.0 1.6 0.2 0.3

EBITDA 11.9$ 32.0$ (5.4)$ 11.1$

Acquisition related expenses, excluding amortization 1 1.9 1.9



Other non-operating (expense) income, net (2.0) (1.6) (0.2) (0.3)

Adjusted EBITDA 27.3$ 30.6$ (3.7)$ 11.6$

EBITDA Margin 2.3% 10.1% -7.9% 7.7%





NYSE: CUB










Other non-operating expense (income), net (0.9) (0.6) 1.8

EBITDA 11.4$ 21.3$ (0.3)$ 14.4$

Acquisition related expenses, excluding amortization 1 0.7 (0.1) 0.9



Loss on sale of fixed assets 0.4

Other non-operating (expense) income, net 0.9 0.6 (1.8)

Adjusted EBITDA 29.3$ 22.0$ 0.6$ 13.5$

EBITDA Margin 2.3% 7.7% -0.6% 9.1%

Adjusted EBITDA Margin 6.0% 8.1% 0.9% 8.5%

second quarter fiscal year 2018 results - cubic corporation fy18... · second quarter fiscal year...

Documents