Post on 20-May-2020
First Quarter Fiscal Year 2018 Results February 6, 2018
Bradley H. Feldmann
President and Chief Executive Officer
Anshooman Aga
Executive Vice President and Chief Financial Officer
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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
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Q1FY18 Results
NYSE: CUB
$20.1 $17.0
Q1 '17 Q1 '18
$334.7 $340.7
Q1 '17 Q1 '18
Total $1.5B(3) major opportunities won in Q1:
– Transportation: New York New Fare Payment System ($554m), Massachusetts Bay Transportation Authority ($575m)
– CMS: Air Force Datalink Enterprise ID/IQ ($497m ceiling)
– Defense: Joint Readiness Training Center re-compete ($325m), OASIS-EUCOM Training & Exercises re-compete ($42m),
Training Support Systems Enterprise Mission Support Services II ID/IQ ($150m ceiling)
Highest total backlog $3.64B in company history and increasing
Sales $340.7m increased 2% over prior year; strong growth in transportation
Adjusted EBITDA $17.0m; in line with our expectations
R&D increase driven by investment in next generation communications solutions and innovative training technologies
Sales
($m)
Adjusted EBITDA
($m)
(2) Incl. $0.6m FX tailwinds; see appendix for additional information regarding non-GAAP financial measures
(1)
(2)
Strong execution on Winning the Customer drives record backlog
(1) Incl. $4.8m FX tailwinds
R&D
($m)
$9.2 $12.0
Q1 '17 Q1 '18
(3) Does not include ID/IQ contracts
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Strategy Update
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Recent Wins Demonstrate Investment Payoff
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Cements position as market leader
Confirms One Account strategy
Validates R&D investments and demonstrates
potential for long-term returns
Delivers cost savings and efficiencies to our customers
Award to continue support of US Army’s JRTC ($325m)
Follows $50m+ in recent awards: Asia-Pacific Combat
Training Center award ($26m) and LCS Immersive Virtual
Shipboard Environment orders ($29m)
Strong international pipeline
GATR: T2C2 full rate production decision
Next-generation expeditionary, Tri-Band satellite
communication solutions
Significant SWaP / bandwidth advantage
Initial procurement 800+ systems
T2C2 = Transportable Tactical Command Communications. LCS = Littoral Combat Ship.
JRTC = Joint Readiness Training Center. SWaP = size weight and power.
New York ($554m) Boston ($575m)
6 MotionDSP Investment Expands Video Capabilities
and Opens New Markets
NYSE: CUB
Silicon Valley-based artificial intelligence software
company specializing in real-time video enhancement
and computer vision analytics
Augments TeraLogics Full Motion Video (FMV) platform
with near real-time processing
Capabilities:
– Image processing: multi-algorithm, GPU-accelerated, real-time
video enhancement
– Computer Vision: computer-assisted redaction and detection and tracking
– 2D mapping and geospatial processing
– Deployable on laptops, workstations, and cloud architectures
Potentially opens new markets in law enforcement, medical services,
forensics, insurance and transportation security
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Significant Progress Across Growth Initiatives
NYSE: CUB
Los Angeles Metro Transit Access Pass (TAP) mobile contract. We now have 4 of top 5
U.S transit agency mobile contracts
Remain confident in our position on bids in Brisbane (mid-2018) and San Francisco Bay
Area (mid-2019). Boston and NY wins strengthen our advantage.
Strong potential pipeline of large city opportunities
Multiple NextBus, Tolling and ITS opportunities
Air Force Datalink Enterprise ID/IQ and datalink contracts (Joint Surveillance
Targeting and Reconnaissance System, Marine Corps Small Unmanned Air
System, Navy Sharklink System)
Halo maturation and expansion
Integrating enterprise solutions and machine learning to create Next-Generation
Processing, Exploitation and Dissemination
Secured new key stakeholder on Advanced Technology Demonstration with USN
participation and funding
Received additional Littoral Combat Ship courseware orders for Deck Operations,
Combat Systems, IT Maintenance
Received SCOPIC order for Year 3, Notice of award for Artillery training system
Significant training services ID/IQ wins
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Successfully Living One Cubic
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Major ERP system implementation
milestones completed FY17; on track to
finish back-office H1FY18; implementing
collaboration tools for Engineering
Establishing Shared Service Centers
Employee Engagement Score improved in
2017 to above benchmark with superior
marks in fair treatment, respect and ethics
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Q1 Results In Line with Our Expectations
Adj. EBITDA of $17m is down $3m YoY driven by higher R&D spending
($3m) and timing and mix of Defense business
Record backlog with NY New Fare Payment System booking
Boston financial close and booking expected in fiscal 2Q
Free cash flow impacted by timing of collections in Middle East,
Defense Services AR, timing of mobilization payment for NY, and an
increase in Transportation inventory for upcoming deliveries
US Tax reform – No cash tax liability anticipated from deemed repatriation of foreign earnings
– Expected to benefit from lower corporate tax rate once past one-time investments
and delivering planned growth in U.S.
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Cubic Consolidated Financial Highlights Q1 Comparison
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1) Constant currency basis
1) Constant currency basis; Adjusted for FX tailwinds of $4.8M sales, $0.6M Adj EBITDA, $3.5M bookings and $5.1M backlog.
Unadjusted growth rates: sales +2%, Adj EBITDA -15%, bookings +307% and backlog +17% versus 1Q 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)
20.1 17.0
Q1 FY17 Q1 FY18
Adj EBITDA
0.4
(33.3)
Q1 FY17 Q1 FY18
Free Cash Flow2
334.7 340.7
Q1 FY17 Q1 FY18
Sales
0%1)
-18%1)
-0.11-0.36
Q1 FY17 Q1 FY18
EPS ($)
204.3
832.5
Q1 FY17 Q1 FY18
Bookings
3.1 3.6
Sept 30, 2017 Dec 31, 2017
Backlog ($b)
+306%1)
+17%1)
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Cubic Transportation Systems Financial Highlights Q1 Comparison
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Record bookings reflect
NY New Fare Payment
System award
Expect Boston booking in
fiscal Q2
Strong sales growth
primarily driven by system
development work for NY
Adj. EBITDA % in line with
prior year 1) Constant currency basis; Adjusted for FX tailwinds of $3.5M bookings, $4.6M sales and
$0.7M Adj EBITDA. Unadjusted growth rates: Bookings ~12x or 1,090%, Sales +11%
and Adj EBITDA +11% versus 1Q fiscal 2017
57.1
679.4
Q1 FY17 Q1 FY18
Bookings
131.9146.5
Q1 FY17 Q1 FY18
Sales
12.0 13.4
Q1 FY17 Q1 FY18
Adj EBITDA
9.1% 9.1%
Q1 FY17 Q1 FY18
Adj EBITDA %
$m
+11x1)
+2 bps
+8%1)
+6%1)
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Cubic Mission Solutions Financial Highlights Q1 Comparison
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Performance in line with our
expectations
Bookings affected by timing
of orders
Adj EBITDA and margin reflects
higher YoY R&D expense
($3.5m) and change in mix due to
timing of GATR sales
T2C2 full rate production
expected to drive YoY
improvement in all key line items
in FY18 No impact from currency
23.3 19.8
Q1 FY17 Q1 FY18
Bookings
33.9 33.1
Q1 FY17 Q1 FY18
Sales
3.8
-1.7
Q1 FY17 Q1 FY18
Adj EBITDA
11.2%
-5.2%Q1 FY17 Q1 FY18
Adj EBITDA %
$m
-15%-2%
-145%NM
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Cubic Global Defense Systems Financial Highlights Q1 Comparison
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Bookings down due to
order delays; recovery planned
in Q2
Sales down YoY as a result of
lower Air Ranges shipments
Adj EBITDA and margin reflects
higher YoY R&D and reduction
in sales
1) Constant currency basis; Adjusted for FX tailwinds $0.1M sales and headwinds of $0.1M Adj EBITDA.
Unadjusted growth rates: Sales -12% and Adj EBITDA -31% year-on-year
52.3 44.2
Q1 FY17 Q1 FY18
Bookings
78.668.8
Q1 FY17 Q1 FY18
Sales
6.14.2
Q1 FY17 Q1 FY18
Adj EBITDA
7.8%6.1%
Q1 FY17 Q1 FY18
Adj EBITDA %
$m
-163 bp
-15%-13%1)
-29%1)
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Cubic Global Defense Services Financial Highlights Q1 Comparison
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YoY improvement in all key metrics
Strong bookings based on several
key wins with US Army to include
Joint Readiness Training Center
(JRTC) Bridge program
Sales growth driven by additional
JRTC training rotations
Strong Adj. EBITDA due to solid
performance and business
realignment efficiencies
No impact from currency
71.689.0
Q1 FY17 Q1 FY18
Bookings$m
90.3 92.3
Q1 FY17 Q1 FY18
Sales
0.6
3.6
Q1 FY17 Q1 FY18
Adj EBITDA
+524%
0.6%
3.9%
Q1 FY17 Q1 FY18
Adj EBITDA %
+24% +2%
+323bp
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Confirming FY18 Guidance
FY 18 Guidance
Sales $1.51B - $1.56B(1)
Adjusted EBITDA $110M - $135m(1)
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Strong increase in FY18 Adjusted EBITDA (16% at mid point) driven by
growth in transportation and CMS business
Profit seasonality to be somewhat in line with FY17
– CR’s / timing of discretionary govt. spend impacts C4ISR business
– NY contract ramp up
Q2 Adj. EBITDA expected to reflect gradual sequential improvement over Q1
(1) Constant currency basis
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Summary
Strong start to FY18 with major transportation wins in New York and Boston,
mission support Air Force Datalinks ID/IQ award, and defense training JRTC
CMS revenue increases expected due to T2C2 full-rate production decision
Investments will drive growth and margin expansion in FY18+
Capital allocation focused on technologies that support our strategy and meet
financial hurdles
ERP on track for FY18H1 completion, resulting in efficiency / savings in supply
chain and SG&A spend; Investment in Engineering collaboration tools following
NYSE: CUB
Winning the Customer and technology investments driving growth
Appendix
18 GAAP to Non-GAAP Reconciliation Earnings before interest, taxes, depreciation and amortization (EBITDA) and Adjusted EBITDA
Three Months Ended December 31, 2017
1 Includes transaction costs, retention bonuses and earn out liability changes related to acquired businesses.
NYSE: CUB
In Millions Consolidated CTS CMS CGD Systems CGD Services
Three Months Ended Dec 31, 2017
Net income (loss) attributable to Cubic (9.8)$ 7.6$ (8.9)$ 1.4$ 2.9$
Provision for income taxes 0.5 1.9$
Interest expense (income), net 2.2 - 0.4$
Other non-operating (expense) income, net 0.1 0.7 (0.4)$
Operating Income (loss) (7.0)$ 9.9$ (8.9)$ 1.4$ 2.9$
Depreciation and amortization 13.1 3.2 5.9 2.1 0.7
Other non-operating expense (income), net (0.1) (0.7) - 0.4 -
EBITDA 6.0$ 12.4$ (3.0)$ 3.9$ 3.6$
Acquisition related expenses, excluding amortization 1 1.4 1.3 0.1
ERP/Supply Chain Initiatives 8.0
Restructuring costs 1.5 0.3 0.6
Loss on sale of fixed assets -
Other non-operating (expense) income, net 0.1 0.7 - (0.4) -
Adjusted EBITDA 17.0$ 13.4$ (1.7)$ 4.2$ 3.6$
EBITDA Margin 1.8% 8.4% -9.2% 5.8% 3.9%
Adjusted EBITDA Margin 5.0% 9.1% -5.2% 6.1% 3.9%
19 GAAP to Non-GAAP Reconciliation Earnings before interest, taxes, depreciation and amortization (EBITDA) and Adjusted EBITDA
Three Months Ended December 31, 2016
1 Includes transaction costs, retention bonuses and earn out liability changes related to acquired businesses.
NYSE: CUB
In Millions Consolidated CTS CMS CGD Systems CGD Services
Three Months Ended Dec 31, 2016
Net income (loss) attributable to Cubic (2.8)$ -$ -$ -$ -$
Provision for income taxes (5.1) - - - -
Interest expense (income), net 3.3 (0.3) - - -
Other non-operating (expense) income, net 0.5 0.4 - 1.2 -
Operating Income (loss) (4.1)$ 9.6$ (3.8)$ 3.3$ (0.4)$
Depreciation and amortization 13.4 2.4 6.8 2.0 1.0
Other non-operating expense (income), net (0.5) (0.4) - (1.2) -
EBITDA 8.8$ 11.6$ 3.0$ 4.1$ 0.6$
Acquisition related expenses, excluding amortization 1 0.8 - 0.8 - -
ERP/Supply Chain Initiatives 8.7 - - - -
Restructuring costs 0.9 - - 0.8 -
Loss on sale of fixed assets 0.4 - - - -
Other non-operating (expense) income, net 0.5 0.4 - 1.2 -
Adjusted EBITDA 20.1$ 12.0$ 3.8$ 6.1$ 0.6$
EBITDA Margin 2.6% 8.8% 8.9% 5.2% 0.7%
Adjusted EBITDA Margin 6.0% 9.1% 11.2% 7.8% 0.7%