Cubic Corporation Fourth Quarter and Fiscal 2020 Full Year ......investment and delayed U.S. Army...
Transcript of Cubic Corporation Fourth Quarter and Fiscal 2020 Full Year ......investment and delayed U.S. Army...
November 18, 2020
FOURTH QUARTER &
FISCAL 2020 FULL YEAR RESULTS
Brad Feldmann
Chairman, President & CEO
Anshooman Aga
EVP & CFO
Safe Harbor and Disclosures
24Q FY2020 Earnings Presentation |
This presentation contains statements that relate to future events and expectations and as such constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Any statements about our expectations, beliefs, plans, objectives, assumptions or future events or our future financial 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,” “goal,” “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 the section
entitled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2020 and updated in any subsequent Quarterly Reports on Form 10-
Q and other filings that we make with the Securities and Exchange Commission, 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. 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, or combination of factors, may cause actual results to differ materially from those contained in any forward-
looking statements.
This presentation also includes financial measures that are not prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). These non-GAAP
financial measures supplement our GAAP disclosures and should be considered in addition to, but not as a substitute for, the applicable GAAP measure. In addition,
other companies may define these non-GAAP measures differently and, as a result, our non-GAAP measures may not be directly comparable to the non-GAAP
measures of other companies. We believe that presenting our results and measures on a non-GAAP basis in conjunction with GAAP measures provides the most
meaningful basis for comparison of our operating results across periods. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP
financial measures can be found in the Appendix to this presentation.
Key Messages
34Q FY2020 Earnings Presentation |
Strong fourth quarter execution: Record Sales and Adj. EBITDA; strong Adj. Free Cash Flow and reduced leverage
Launched NextCUBIC strategy to accelerate growth and efficiency; unveiled 2025 financial goals
Continued focus on safety, fostering an inclusive “all in" culture and advancing our ESG priorities
01
02
03
Excellent Performance in the Final Quarter of FY20
44Q FY2020 Earnings Presentation |
What We Said – August 5, 2020 What We Achieved – As of September 30, 2020
▪ Strong 4Q20 Adj. EBITDA, driving full year at or slightly above FY19
▪ Positive Adj. Free Cash Flow in 4Q20
▪ Continued focus on leverage reduction
Mission Solutions Segment
▪ Mission Solutions: strong 4Q20 performance, reflecting back-end weighted
shipments (e.g., DTECH and GATR shipments) and PIXIA license renewals
▪ Mission Solutions: expected full year Sales and Adj. EBITDA growth YoY
✓ 4Q20 Adj. EBITDA $104.2M; FY20 $158.3M vs. FY19 $146.6M
✓ Strong 4Q20 Adj. Free Cash Flow of $87.5M; FY20 Adj. FCF of $60.5M
✓ Reduced net leverage ratio to 3.4x
Mission Solutions Segment
✓ Robust growth in Bookings, Sales, Adj. EBITDA and margin YoY;
Adj. EBITDA of $59M (more than double vs. 4Q19)
o FY20 Sales up YoY and FY20 Adj. EBITDA down YoY, reflecting significant
investment and delayed U.S. Army UON GATR orders
UON = Urgent Operational Need. IDIQ = Indefinite Delivery Indefinite Quantity.
Record Financials
4Q20 Sales and Adj. EBITDA
FY20 Adj. EBITDA
Margin Expansion
4Q20 Adj. EBITDA margin +560 bps YoY
FY20 Adj. EBITDA margin +90 bps YoY
Strong Backlog and Execution
Backlog $3.7B (+8% YoY)
Plus ~$1.3B sole-source IDIQs
1.1x Book-to-Bill in all segments (FY20)
‘Big 5’ on track
Strengthened Balance Sheet
4Q20 Adj. FCF $87.5M
FY20 Adj. FCF $60.5M
Reduced net leverage to 3.4x
Urban revenue management
▪ Chicago Ventra 3.0 award
▪ Boston reset agreement
▪ New York (OMNY) and Brisbane installations
remain on track despite COVID-19
▪ Ireland National Transport Authority -
operations win expands Europe footprint
NextCity 2.0 and digital platforms
▪ Acquired Delerrok (fare collection-as-a-service)
▪ Moovit partnership – on track for end of 2020
mobile app launch
▪ Cubic Interactive launched in Miami
▪ Expansion of mobile and virtual cards (DC, LA,
Chicago)
Surface transport management
▪ Integrated Trafficware/GRIDSMART under
CTS Intelligent Transport Systems (ITS)
▪ Won Trafficware/NextBus Traffic Management
deal in Merida, Mexico
$1,108 $1,203
$1,496 $1,476
2017 2018 2019 2020
Sales ($M)
$88$105
$147 $158
7.9%8.7%
9.8%10.7%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
20.0%
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
2017 2018 2019 2020
Adj. EBITDA1 ($M) & Margin1 (%)
10%
CAGR
(’17-’20)
1 Non-GAAP financial measure. See Appendix for reconciliation.
NGA = National Geospatial-Intelligence Agency. DISA = Defense Information Systems Agency. STE = Synthetic Training Environment. JSILS = Joint Interim
Joint Secure Interoperable LVC Solution. SLATE = Secure LVC Advanced Training Environment. LVC = Live Virtual Constructive.
5
$1.62$2.19
$3.13$3.32
2017 2018 2019 2020
Adj. EPS1
4Q FY2020 Earnings Presentation |
Mission communications and computing
▪ High Capacity Backbone prototype award;
successful first flight of Halo technology
▪ USMC Troposcatter award
▪ USAF Advanced Battle Management System
award across all categories
Digital intelligence
▪ PIXIA acquisition: NGA award for commercial
software for enterprise data management
▪ GeoSpatial Intelligence Unified Naval
Streaming System (GUNSS) award
▪ DISA contract to continue support for Unified
Video Dissemination System
Multi-domain LVC training
▪ Successful user acceptance eval for live and
virtual solution on U.S. Army STE
▪ Surface Training Immersive Gaming and
Simulations (STIGS) award – sole provider
▪ Secured second order under Navy JSILS
program for SLATE LVC continued
technology maturation and demonstration
22%
CAGR
(’17-’20)
27%
CAGR
(’17-’20)
+280
bps
(’17-’20)
FY20 Achievements – Strong Foundation for Future Execution
Recently Launched NextCUBIC to Drive Growth and Profitability …
Efficiently Building Technology-Driven, Market-Leading Businesses
64Q FY2020 Earnings Presentation |
Winning the Customer Obsession;
Driving Organic Sales Growth
Improving Financial Performance
through Operational Excellence and
Focusing on Free Cash Flow
Creating a More Sustainable Cubic
Underpinned by Living One Cubic
• Execute large backlog in transportation
($3.1B): deliver efficiently, leveraging
reusability and a common core of technology
(productized offering)
• Expand beyond the core into existing key
adjacencies, new geographies
• Grow our defense franchise programs,
supporting national defense strategy
• Expand dual-use technology for
commercial and defense markets
• Drive recurring subscription-based
revenue through digital models
• Executed first steps: combined defense
segments; actions to optimize CTS and Corp.
• Optimize engineering, G&A, external spend
and manufacturing
• Leverage common technologies and
optimize shared support functions
• Execute improvement program with
detailed roadmaps to drive financial
improvement, operational efficiency, scale
and organizational health
• Further drive competitive advantages
through smart investment
• Cultivate a purpose-driven and customer-
obsessed culture
Continued focus on customer
engagement
Leverage our strengths: purpose, team
values, ethics and integrity
Drive Cubic Innovation Social System
(CISS) growth
Develop and train our talent
Measure and reward: align incentives
with performance objectives and metrics
• Effective oversight through refreshed,
purpose-built, diverse and engaged Board
• Continue to advance ESG priorities
…With Clear, Long-term Financial Goals
74Q FY2020 Earnings Presentation |
Financial Goals
By FY2025
FY2020
Actual
FY2025
Goal
Sales $1.48B
Mid to High
Single Digit
Organic CAGR
Subscription-based, as-a-Service Sales $75M ~$200M
Adj. EBITDA Margin 10.7% Mid-teens
ROIC1 9% Mid-teens
1 ROIC = Adjusted EBITA less taxes divided by Average Invested Capital. See appendix for calculation.
Confidence in Ability to Achieve NextCUBIC; Driving Efficiency, Economics, Culture and Value
84Q FY2020 Earnings Presentation |
Focus on Three Critical
Improvement Program Areas...
Organic Growth Initiatives
Across CTS and CMPS
Functional
Transformation
Cultural
Transformation
• Accelerate digital platforms
• CTS: Multi-agency TouchPass with cEMV &
SagePay, enhanced mobile ticketing,
including intl. expansion with multilingual,
multicurrency and GDPR compliance
• CMPS: Build on existing capabilities in data
aggregation, distribution, analytics, data
visualization, human-machine performance
and total learning platform
• CTS: Surface transport management, incl.
geographic expansion and enhanced products
• CTS: Mega-city urban revenue management
(leverage best-in-class position; further improve
efficiency)
• CMPS: Deliver multi-domain live, virtual,
constructive (LVC) training
• CMPS: Capitalize and grow franchise wins –
execute efficiently (STIGS, HCB, ABMS, F-35,
MQ-25, MH-60, Boomslang, Troposcatter)
• Defense business integration
• Geo-shift of CTS engineering
• Optimized corporate functions
• Simplified standard tasks
• Enhanced controls; discipline
around external support
• Centralized with category-
specific management and
best-in-class taxonomy
• Strategic sourcing/negotiations
• Improve from 2nd to 1st quartile
in Organizational Health Index
• Best-in-class engineering and
enhanced quality performance
through optimized structure
• Improved deployment /
utilization of engineers
• Prioritized product roadmaps
• Manufacturing further
centralized – three Centers of
Excellence
1 2 3
Strong Execution Track Record
and Robust Backlog
Backlog
as of 9/30/20
$3.7B
2021-2025
Pipeline
$37.6B
2017-2020
Win Rate ($)
68.7%
2017-2020
Book-to-Bill
1.25x
…Expected to Generate $50M - $75M
in Incremental Adj. EBITDA by 2023
+$1.3B of sole-source IDIQs
Meaningful Opportunity Across G&A,
External Spend, Manufacturing and Engineering
GDPR = General Data Protection Regulation. STIGS = Surface Training Immersive Gaming and Simulations. HCB = High Capacity Backbone. ABMS = Advanced Battle Management System.
Fostering an Inclusive, "ALL IN" Culture
94Q FY2020 Earnings Presentation |
As Always, Our #1 Priority is to Care for our People
▪ Adhering to strict safety protocols to ensure employee health and
safety during the COVID-19 pandemic
▪ Driving our Diversity & Inclusion strategy to further enable an
engaged, accepting and innovative culture
– CHRO Grace Lee named among the 2020 Top 50 Chief
Diversity Officers by the National Diversity Council
▪ Achieved highest Employee Engagement score since survey
inception in 2016 (as of 3Q FY20); improved to 82%
▪ Recognized as San Diego Union-Tribune’s Top Workplaces 2020
ESG Progress: Key Q4 Updates
▪ Launched ESG website to provide periodic updates,
enhancements and disclosures
▪ Published Cubic’s Worldwide Human Rights Policy
▪ Published Cubic’s global Living Wage Statement
▪ Completed North America Health, Safety & Environmental
(HSE) assessment initiative to align with other regions
around a common set of HSE elements
Bookings ($M) Backlog ($B) Sales ($M)
4Q FY20 Consolidated Financial Highlights
104Q FY2020 Earnings Presentation |
$250.5
$367.9
4Q19 4Q20
$3.4 $3.7
9/30/2019 9/30/2020
$471.2 $475.4
4Q19 4Q20
Adj. EBITDA1 ($M) Adj. EPS1 Adj. FCF1 ($M)
$76.6
$104.2
4Q19 4Q20
$1.86
$2.82
4Q19 4Q20
$52.1
$87.5
4Q19 4Q20
Commentary
Bookings: Growth driven by Mission Solutions and
Transportation; Book-to-Bill 0.8x reflecting timing of orders
(full year >1x)
Sales: Reflects strong growth in Mission Solutions and
inorganic PIXIA impact, primarily offset by Transportation
and Defense Training, incl. ongoing COVID-19 impacts
Adj. EBITDA: Robust growth in CMS (incl. the impact of
PIXIA) and company-wide cost management
Strong sales of high-margin CMS products
Transportation segment flat; Training down
Adj. EPS: Growth primarily reflects higher Adj. EBITDA and
lower tax expense
Adj. FCF: Strong working capital management and cash
conversion
+1% (-4% Organic1)
1 See Appendix of this presentation for a reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures.
+36%
+47%
+52%
+8%
+68%
Bookings ($M) Backlog ($B) Sales ($M)
Full Year Fiscal 2020 Consolidated Financial Highlights
114Q FY2020 Earnings Presentation |
$1,002
$1,683
FY19 FY20
$3.4 $3.7
9/30/2019 9/30/2020
$1,496 $1,476
FY19 FY20
Adj. EBITDA1 ($M) Adj. EPS1 Adj. FCF1 ($M)
$146.6 $158.3
FY19 FY20
$3.13 $3.32
FY19 FY20
$14.1
$60.5
FY19 FY20
Commentary
Bookings: Growth primarily driven by the Boston contract
reset, Chicago Ventra 3.0 and Air Training; Book-to-Bill
>1.1x (in all segments)
Sales: Reflects impact of acquisitions, offset by COVID-19
impacts, including delayed awards, slowdowns, lower
transit ridership and GATR Europe UON delay
Adj. EBITDA: Company-wide cost management and strong
performance in Transportation more than offset Mission
Solutions and COVID-19 impacts
Investments in CMS franchise programs $18.8M
Transportation segment up >20%; Training flat
COVID-19 impact: Estimated impact up to ~$73M Sales
and $28M Adj. EBITDA (gross impact, before cost savings)
Adj. EPS: Reflects higher Adj. EBITDA and lower taxes,
partially offset by higher depreciation and interest expense
Adj. FCF: Reflects receipt of milestone payments on CTS
contracts and working capital management
-1% (-3% Organic1)
1 See Appendix of this presentation for a reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures.
+8%
+68%
+6%
+8%
PY includes $44.9M RE sale proceeds
+328%
Bookings ($M) Sales ($M)
Adj. EBITDA ($M) Adj. EBITDA Margin
Cubic Transportation Systems
124Q FY2020 Earnings Presentation |
Note: See Appendix of this presentation for a reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures.
1.1x Book-to-Bill
$88.3
$142.4
4Q19 4Q20
$397.3
$966.9
FY19 FY20
$254.6 $239.1
4Q19 4Q20
$849.8 $840.9
FY19 FY20
$46.2 $45.7
4Q19 4Q20
$110.5
$134.0
FY19 FY20
18.1%19.1%
4Q19 4Q20
13.0%
15.9%
FY19 FY20
+143%
+61%
(6%)(8%) Organic
(1%)(1%) Organic
(1%)
+21%+290 bps
+100 bps
Q4 Commentary
▪ Bookings growth reflect NextBus SF Muni, Atlanta
maintenance booking and Trafficware/GRIDSMART
▪ Sales down and Adj. EBITDA flat YoY impacted by
COVID-19 and lower New York D&B, partially offset
by Ventra 3.0 growth and cost savings
FY20 Commentary
▪ Strong bookings primarily reflect the Boston contract
reset and Ventra 3.0
▪ Sales reflect growth from Boston, SF Bay Area,
Chicago and Brisbane, offset by COVID-19 and
lower Sales from New York D&B
▪ Estimated COVID-19 impacts on Sales up to ~$46M
Delay in short-cycle, Intelligent Transport
Systems business (Trafficware/GRIDSMART)
Other business opportunity delays
Transit ridership decline
▪ Adj. EBITDA increased 21% driven by Boston MBTA
contract reset, strong execution on Service projects
and cost savings
$24.5
$59.0
4Q19 4Q20
Bookings ($M) Sales ($M)
Adj. EBITDA ($M) Adj. EBITDA Margin
Cubic Mission Solutions
134Q FY2020 Earnings Presentation |
Note: See Appendix of this presentation for a reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures. IRAD = Internal Research & Development.
1.1x Book-to-Bill
$72.9
$143.4
4Q19 4Q20
$353.3 $376.3
FY19 FY20
$125.5
$169.9
4Q19 4Q20
$328.8 $337.1
FY19 FY20
$34.4
$28.2
FY19 FY20
19.5%
34.7%
4Q19 4Q20
10.5%8.4%
FY19 FY20
+7%
+97%+35%
+21% Organic
+3%(6%) Organic
+141%
(18%) (210) bps
+1,520 bps
Q4 Commentary
▪ Strong bookings across the CMS portfolio + PIXIA
▪ Sales growth reflects Rugged IoT shipments and
the inorganic impact of PIXIA
▪ Adj. EBITDA more than doubled YoY on higher
sales of Rugged IoT products and PIXIA
FY20 Commentary
▪ Bookings growth reflects PIXIA acquisition
▪ Sales primarily reflect organic growth from Rugged
IoT and the inorganic impact of PIXIA, offset by
lower Sales for GATR including COVID-19 and
other delays (Europe UON)
▪ Adj. EBITDA reflects strong contribution of PIXIA
($16.6M), offset by lower sales of GATR (high-
margin), continued investment in franchise
programs ($18.8M) and higher IRAD expense
(+$3M YoY)
Bookings ($M) Sales ($M)
Adj. EBITDA ($M) Adj. EBITDA Margin
Cubic Global Defense
144Q FY2020 Earnings Presentation |
Note: See Appendix of this presentation for a reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures.
1.1x Book-to-Bill
$89.3 $82.1
4Q19 4Q20
$251.8
$340.3
FY19 FY20
$91.1
$66.4
4Q19 4Q20
$317.9 $298.2
FY19 FY20
$13.2
$9.0
4Q19 4Q20
$32.8 $32.9
FY19 FY20
14.5%13.6%
4Q19 4Q20
10.3% 11.0%
FY19 FY20
+35%
(8%)
(27%)(28%) Organic
(6%)(6%) Organic
(32%)
0%
+70 bps
(90) bps
Q4 Commentary
▪ Performance reflects lower YoY sales due to delays
in Ground Training program awards and exercise
delays primarily driven by COVID-19
FY20 Commentary
▪ Bookings reflect international awards in Air Training
and Services; and awards in Digital
▪ Strong book-to-bill 1.1x
▪ Sales negatively impacted by lower YoY sales in
Ground Training, program awards and exercise
delays from COVID-19, partially offset by strong
growth in Air Training and Services
▪ Adj. EBITDA flat YoY, supported by continued
emphasis on strong cost management
As a Reminder, Combined Defense Segments into CMPS – First Key NextCUBIC Action
154Q FY2020 Earnings Presentation |
GRAPHICS GRAPHICS GRAPHICS GRAPHICS
Streamlined organizational structure is designed to:
▪ Leverage our world-class talent and common technologies
and enhance collaboration and customer intimacy
Capitalize on key franchise wins in C4ISR market
Accelerate our digital transformation
Advance multi-domain LVC solutions
▪ Increase organizational and operational effectiveness;
reduce complexity and cost
Achievements:
✓ Combined sub business units (reduced from 9 to 5
units) for focused and efficient operation
✓ Created cost savings and operational synergies
leveraging common support functions across business
✓ Leveraged existing international market channels
across full business product lines
✓ Integrated common product approach across
computing and communications products
✓ Created digital group to leverage agile software and
commercial business models
✓ Aligned training focus on multi-domain operations
using LVC as integration element
Note: On August 28, 2020 Cubic announced the combination of Cubic Mission Solutions (CMS) and Cubic Global Defense (CGD) to form a new Cubic Mission and Performance Solutions (CMPS) segment.
Maintaining a Healthy Balance Sheet
Focused on Financial Flexibility, Reducing Leverage and Driving FCF Improvement
164Q FY2020 Earnings Presentation |
($M) 9/30/20
Cash and Cash Equivalents $ 129
Total Current Assets 763
Total Assets 2,324
Total Current Liabilities 587
Total Debt without VIE 657
Total Liabilities and Equity $ 2,324
BALANCE SHEET SUMMARY
9/30/20
Cash and Cash Equivalents $ 129
Available Line of Credit 548
1. LTM = Last Twelve Months. Leverage ratio as of September 30, 2020 is calculated according to the EBITDA and net debt definitions in our credit agreement. The leverage ratio, net debt and EBITDA calculations under the credit agreement are non-GAAP financial measures. Our credit agreement
EBITDA represents Adj. EBITDA plus stock-based compensation expense, TTM EBITDA of related acquisitions, less strategic and IT system resource planning expenses, and restructuring costs in excess of $10M, as well as certain other adjustments as defined in our credit agreement. Net debt is
calculated as total debt less cash and cash equivalents as defined in our credit agreement.
2. Non-GAAP financial measure. See appendix for reconciliation.
LIQUIDITY SUMMARY($M)
VIE Debt is non-
recourse to Cubic
and excluded by
banks for leverage
definition
Maintain Strong Financial Flexibility
• Debt restructuring (2Q20) provided additional capacity,
more favorable terms and less restrictive covenants
• Covenant: 4.75x net leverage ratio through 1Q21 and 4.0x
thereafter
• Term loan and revolver maturity date: March 2025;
FY21 payment ~$11M
Continue to Reduce Leverage
• 3.38x Net Debt-to-LTM EBITDA1 at 9/30/20
• Focused on target of <3.0x
Drive FCF Improvement
• Strong Adj. FCF2 of $60.5M in FY20
• Reaffirming 3-year (FY20-22) Adj. FCF conversion target of
100%+ of Net Income
174Q FY2020 Earnings Presentation |
Sales Adj. EBITDA Adj. EPS
$1,550M – $1,600M$1,575M Midpoint
$170M – $190M$180M Midpoint
$3.00 – $3.60$3.30 Midpoint
Note: constant foreign currency
Commentary
▪ Strong progress in line with NextCUBIC goals
Expected Sales growth of 6.7% YoY at
mid-point
Adj. EBITDA margin expansion
Adj. EPS reflects higher taxes
▪ Good visibility: ~80% of Sales plan in backlog or
high-probability win / follow-on
▪ Seasonality expected to remain back-end loaded
(majority weighted to 4Q)
▪ Expect 1Q21 Adj. EBITDA to be approximately flat
to slightly higher than prior year (1Q20 = $11.4M)
▪ Estimated FY21 Depreciation $37M;
Amortization $61M
Expected Key Growth Drivers
▪ CTS
~75% of full year plan in backlog
• Chicago (Ventra 3.0) growth
• New York OMNY O&M growth
Growth from Trafficware/GRIDSMART
Fare collection sole source upgrades
▪ CMPS
Legacy CMS supported by programs of record and franchise programs;
DTECH funding supported by ongoing technology refresh / replacement
cycles for edge networking and computing
Growth from recent acquisitions
International training (e.g., recent Oceana win; upcoming opportunities
in Southeast Asia, EMEA)
U.S. training (e.g., STIGS, FoF funding support in Defense Budget)
FY21 Outlook: Reinstating Guidance After Strong Finish to FY20 and Initial NextCUBIC Actions
Strong FY20 Performance, Now Driving a Step Change in Value Creation with NextCUBIC
184Q FY2020 Earnings Presentation |
01Proactively monitoring the evolving situation and taking necessary
actions to mitigate COVID-19 impact
02Strong Q4 and FY20 performance and execution despite a
challenging economic environment
03NextCUBIC growth and efficiency initiatives to accelerate
operational performance
04Technology-driven, market-leading positions, large backlog and
franchise wins build a strong foundation for transformational
growth and profitability
05Committed to a diverse and inclusive culture, which drives
innovation and collaboration across the organization
NextCUBIC
Strategy to
Drive Growth,
Profitability and
Returns with
Clear Priorities
and Long-term
Financial Goals
Appendix
Use of Non-GAAP Financial Measures
20
ORGANIC SALES GROWTH, ADJUSTED EBITDA, ADJUSTED NET INCOME, ADJUSTED EPS AND RETURN ON INVESTED CAPITAL
▪ We believe that these non-GAAP measures provide additional insight into our ongoing operations and underlying business trends, facilitate a comparison of our results between current and prior periods, and
facilitate the comparison of our operating results with the results of other public companies that provide non-GAAP measures. We use Adjusted EBITDA internally to evaluate the operating performance of our
business, for strategic planning purposes, and as a factor in determining incentive compensation for certain employees. These non-GAAP measures facilitate company-to-company operating comparisons by
excluding items that we believe are not part of our core operating performance.
▪ Organic sales growth is defined as the year-over-year percentage change in reported sales relative to the prior comparable period, excluding the impact of acquisitions and divestitures over the prior 12 months
and the impact of foreign currency translation. Adjusted EBITDA is defined as GAAP net income from continuing operations attributable to Cubic before interest expense (income), loss on extinguishment of debt,
income taxes, depreciation and amortization, other non-operating expense (income), acquisition-related expenses, strategic and IT system resource planning expenses, restructuring costs, and gains or losses
on the disposal of fixed assets. Adjusted net income is defined as GAAP net income from continuing operations attributable to Cubic excluding amortization of purchased intangibles, restructuring costs, loss on
extinguishment of debt, acquisition-related expenses, strategic and IT system resource planning expenses, gains or losses on the disposal of fixed assets, other non-operating expense (income), tax impacts
related to acquisitions, and the impact of US Tax Reform. Adjusted EPS is defined as adjusted net income on a per share basis using the weighted average diluted shares outstanding. Strategic and IT system
resource planning expenses consists of expenses incurred in the development of our ERP system and the redesign of our supply chain which include internal labor costs and external costs of materials and
services that do not qualify for capitalization. Acquisition-related expenses include business acquisition expenses including retention bonus expenses, due diligence and consulting costs incurred in connection
with the acquisitions, and expenses recognized related to the change in the fair value of contingent consideration for acquisitions. Return on Invested Capital (ROIC) is defined as non-GAAP net operating profit
after tax (NOPAT) divided by average invested capital. NOPAT is defined as Adjusted EBITDA (described above) excluding depreciation and incomes taxes, less tax impact related to acquisitions, the impact of
US Tax Reform, and the tax impact related to the non-GAAP adjustments. Average invested capital is defined as shareholders’ equity related to Cubic plus net debt using a two-point average of the beginning
and ending amounts.
▪ These non-GAAP measures are not measurements of financial performance under GAAP and should not be considered as measures of discretionary cash available to the company or as alternatives to net
income as a measure of performance. In addition, other companies may define these non-GAAP measures differently and, as a result, our non-GAAP measures may not be directly comparable to the non-GAAP
measures of other companies. Furthermore, non-GAAP financial measures have limitations as an analytical tool and you should not consider these measures in isolation, or as a substitute for analysis of our
results as reported under GAAP. Investors are advised to carefully review our GAAP financial results that are disclosed in our SEC filings. With respect to our fiscal year 2021 Adjusted EBITDA and Adjusted
EPS guidance, certain items that affect GAAP net income cannot be reasonably predicted as we are unable to quantify certain amounts that would be required to be included in the comparable forecasted GAAP
measures without unreasonable effort. As such, we are unable to provide a reasonable estimate of GAAP net income or GAAP EPS, or a corresponding reconciliation of Adjusted EBITDA and Adjusted EPS
guidance to GAAP net income or GAAP EPS for the full year. In addition, we believe such reconciliations would imply a degree of precision that would be confusing or misleading to investors.
▪ We reconcile organic sales growth to sales growth as reported, which we consider to be the most directly comparable GAAP financial measure. We reconcile Adjusted EBITDA and Adjusted Net Income to Net
Income, which we consider to be the most directly comparable GAAP financial measure. We reconcile Adjusted EPS to GAAP EPS, which we consider to be the most directly comparable GAAP financial
measure.
ADJUSTED FREE CASH FLOW
▪ Adjusted Free Cash Flow is defined as Net cash provided by continuing operations, excluding operating cash flow associated with the VIE in which Cubic has a 10% equity stake, less capital expenditures plus
proceeds from the sale of fixed assets and the receipt of withheld proceeds from the sale of trade receivables. The VIE has contracted with Cubic for the design-build and operations and maintenance phases of
the next-generation fare collection system for the Massachusetts Bay Transit Authority and pays Cubic progress payments during the design-build phase of the project. These payments are primarily funded by
non-recourse debt issued by the VIE. Additional information regarding the VIE can be found in our Annual Report on Form 10-K for the fiscal year ended September 30, 2020 as filed with the SEC.
▪ Management believes that Adjusted Free Cash Flow is meaningful to investors because management reviews cash flows generated from operations after taking into consideration capital expenditures, which are
necessary to maintain and expand Cubic’s business, in addition to the other adjustments noted above. It is important to note that Adjusted Free Cash Flow does not represent the residual cash flow available for
discretionary expenditures since other non-discretionary expenditures are not deducted from the measure.
▪ We reconcile Adjusted Free Cash Flow to Net cash provided by continuing operations, which we consider to be the most directly comparable GAAP financial measure.
4Q FY2020 Earnings Presentation |
Cubic Mission and Performance Solutions Pro Forma ResultsContinuing Operations – Full Year Fiscal 2017 through Fiscal 2020 and Fiscal 2020 by Quarter
214Q FY2020 Earnings Presentation |
(in mill ions, except margin data)
Full Year FY2017 to FY2020 FY2017 FY2018 FY2019 FY2020
Sales 529.1$ 532.2$ 646.7$ 635.3$
Operating income (loss) 18.8$ 16.5$ 30.8$ (3.8)$
Depreciation and amortization 34.2 30.9 30.1 55.0
Acquisition-related expenses (gains), excluding amortization (0.1) 3.6 5.0 4.8
Gain on sale of fixed assets — — (2.0) (0.2)
Restructuring costs 0.9 1.5 3.3 5.3
Adjusted EBITDA 53.8$ 52.5$ 67.2$ 61.1$
Adjusted EBITDA margin 10.2% 9.9% 10.4% 9.6%
FY2020 by Quarter Q1FY20 Q2FY20 Q3FY20 Q4FY20
Sales 140.2$ 123.9$ 134.9$ 236.3$
Operating income (loss) (8.6)$ (25.7)$ (15.2)$ 45.7$
Depreciation and amortization 9.2 15.1 15.2 15.5
Acquisition-related expenses (gains), excluding amortization (2.2) 1.2 2.6 3.2
(Gain) loss on sale of fixed assets (0.2) 0.1 (0.1) -
Restructuring costs — 0.6 1.1 3.6
Adjusted EBITDA (1.8)$ (8.7)$ 3.6$ 68.0$
Adjusted EBITDA margin -1.3% -7.0% 2.7% 28.8%
224Q FY2020 Earnings Presentation |
Summary of Reportable Segment ResultsThree Months and Year Ended September 30, 2020 and September 30, 2019
Sales:
Cubic Transportation Systems $ 239.1 $ 254.6 $ 840.9 $ 849.8
Cubic Mission Solutions 169.9 125.5 337.1 328.8
Cubic Global Defense Systems 66.4 91.1 298.2 317.9
Total sales $ 475.4 $ 471.2 $ 1,476.2 $ 1,496.5
Operating income (loss):
Cubic Transportation Systems $ 43.2 $ 40.2 $ 121.0 $ 77.2
Cubic Mission Solutions 40.9 19.9 (26.7) 7.8
Cubic Global Defense Systems 4.8 13.0 22.9 23.0
Unallocated corporate expenses (15.6) (14.5) (55.6) (21.8)
Total operating income $ 73.3 $ 58.6 $ 61.6 $ 86.2
Adjusted EBITDA:
Cubic Transportation Systems $ 45.7 $ 46.2 $ 134.0 $ 110.5
Cubic Mission Solutions 59.0 24.5 28.2 34.4
Cubic Global Defense Systems 9.0 13.2 32.9 32.8
Unallocated corporate expenses (9.5) (7.3) (36.8) (31.1)
Total Adjusted EBITDA $ 104.2 $ 76.6 $ 158.3 $ 146.6
(in mi l l ions) (in mi l l ions)
Three Months Ended Year Ended
September 30, September 30,
2020 2019 2020 2019
Organic Sales Growth Rate ReconciliationThree Months and Year Ended September 30, 2020
234Q FY2020 Earnings Presentation |
Note: percentages may not sum due to rounding.
Cubic CTS CMS CGD
Sales growth as reported 0.9% (6.0%) 35.4% (27.2%)
Contribution from acquisitions (4.0%) (0.2%) (14.5%) —
Foreign currency translation (1.2%) (2.0%) — (0.7%)
Organic sales growth (4.3%) (8.3%) 21.0% (27.8%)
Cubic CTS CMS CGD
Sales growth as reported (1.4%) (1.0%) 2.5% (6.2%)
Contribution from acquisitions (2.3%) (0.7%) (8.7%) —
Foreign currency translation 0.3% 0.4% — 0.4%
Organic sales growth (3.4%) (1.3%) (6.2%) (5.8%)
Three Months Ended September 30, 2020
Year Ended September 30, 2020
Adjusted EBITDA Reconciliation by SegmentThree Months and Year Ended September 30, 2020 and September 30, 2019
244Q FY2020 Earnings Presentation |
(in millions, except margin data)
Cubic Transportation Systems
Sales $ 239.1 $ 254.6 $ 840.9 $ 849.8
Operating income $ 43.2 $ 40.2 $ 121.0 $ 77.2
Depreciation and amortization 7.9 6.6 29.5 30.7 Noncontrolling interest in EBITDA of VIE (7.3) (3.1) (25.1) (8.9)
Acquisition-related expenses, excluding amortization 0.6 1.5 6.6 8.3
Restructuring costs 1.3 1.0 2.0 3.2
Adjusted EBITDA $ 45.7 $ 46.2 $ 134.0 $ 110.5
Adjusted EBITDA margin 19.1% 18.1% 15.9% 13.0%
Cubic Mission Solutions
Sales $ 169.9 $ 125.5 $ 337.1 $ 328.8
Operating income (loss) $ 40.9 $ 19.9 $ (26.7) $ 7.8
Depreciation and amortization 13.5 6.1 47.8 23.3
Acquisition-related expenses, excluding amortization 2.7 (1.5) 4.8 3.3 Restructuring costs 1.9 - 2.3 -
Adjusted EBITDA $ 59.0 $ 24.5 $ 28.2 $ 34.4
Adjusted EBITDA margin 34.7% 19.5% 8.4% 10.5%
Cubic Global Defense Systems
Sales $ 66.4 $ 91.1 $ 298.2 $ 317.9
Operating income $ 4.8 $ 13.0 $ 22.9 $ 23.0
Depreciation and amortization 2.0 1.4 7.2 6.8
Acquisition-related expenses, excluding amortization 0.5 0.5 - 1.7
Gain on sale of fixed assets - (2.3) (0.2) (2.0)
Restructuring costs 1.7 0.6 3.0 3.3
Adjusted EBITDA $ 9.0 $ 13.2 $ 32.9 $ 32.8
Adjusted EBITDA margin 13.6% 14.5% 11.0% 10.3%
2020 2019 2020 2019
Three Months Ended Year Ended September 30, September 30,
Three Months Ended Year Ended
2020 2019 2020 2019
2020 2019 2020 2019
September 30, September 30,
Three Months Ended Year Ended September 30, September 30,
Consolidated Adjusted EBITDA ReconciliationThree Months and Year Ended September 30, 2020 and September 30, 2019
254Q FY2020 Earnings Presentation |
Note: The difference between consolidated amounts and segments represents Corporate. Amounts may not sum due to rounding.
(in millions, except margin data)
Cubic Consolidated
Sales $ 475.4 $ 471.2 $ 1,476.2 $ 1,496.5
Net income (loss) from continuing operations attributable to Cubic $ 57.0 $ 41.6 $ (3.7) $ 51.1
Noncontrolling interest in net income (loss) of VIE 6.4 (0.8) 6.6 (9.8)
Income tax provision (benefit) 2.6 11.3 (6.4) 11.0
Interest expense, net 5.1 3.5 20.2 13.9
Loss on extinguishment of debt - - 16.1 -
Other non-operating expense (income), net 2.2 3.0 28.8 20.0
Operating income (loss) $ 73.3 $ 58.6 $ 61.6 $ 86.2
Depreciation and amortization 24.7 15.8 88.5 64.7
Noncontrolling interest in EBITDA of VIE (7.3) (3.1) (25.1) (8.9)
Acquisition-related expenses, excluding amortization 5.1 0.1 13.0 13.4
Strategic and IT system resource planning expenses 0.6 2.0 3.9 8.3
(Gain) loss on sale of fixed assets - 0.1 (0.2) (32.5)
Restructuring costs 7.8 3.1 16.6 15.4
Adjusted EBITDA $ 104.2 $ 76.6 $ 158.3 $ 146.6
Adjusted EBITDA margin 21.9% 16.3% 10.7% 9.8%
2020 2019 2020 2019
Three Months Ended Year Ended September 30, September 30,
Adjusted Net Income and Adjusted EPS ReconciliationThree Months and Year Ended September 30, 2020 and September 30, 2019
264Q FY2020 Earnings Presentation |
Note: Amounts may not sum due to rounding. 1 Represents the tax accounting impact of significant discrete items recorded at the time of acquisition.2 The tax effect of the non-GAAP adjustments is generally based on the statutory tax rate of the jurisdiction of the event.
(in millions, except per share data)
GAAP EPS $ 1.82 $ 1.33 $ (0.12) $ 1.67
GAAP Net income (loss) from continuing operations attributable to Cubic $ 57.0 $ 41.6 $ (3.7) $ 51.1
Noncontrolling interest in net income (loss) of VIE 6.4 (0.8) 6.6 (9.8)
Amortization of purchased intangibles 16.4 9.4 59.3 42.1
(Gain) loss on sale of fixed assets — 0.1 (0.2) (32.5)
Restructuring costs 7.8 3.1 16.6 15.4
Loss on extinguishment of debt — — 16.1 —
Acquisition-related expenses, excluding amortization 5.1 0.1 13.0 13.4
Strategic and IT system resource planning expenses 0.6 2.0 3.9 8.3
Other non-operating expense (income), net 2.2 3.0 28.8 20.0
Noncontrolling interest in Adjusted Net Income of VIE (6.7) (3.5) (24.6) (9.7)
Tax impact related to acquisitions1 0.4 0.9 (12.4) (6.6)
Impact of U.S. Tax Reform — — 0.7 —
Tax impact related to non-GAAP adjustments2 (0.9) 2.5 (0.3) 3.9
Adjusted Net Income $ 88.3 $ 58.3 $ 103.8 $ 95.6
Adjusted EPS $ 2.82 $ 1.86 $ 3.32 $ 3.13
Weighted Average Diluted Shares Outstanding (in thousands) 31,299 31,427 31,299 30,606
2020 2019 2020 2019
Three Months Ended Year Ended September 30, September 30,
Adjusted EBITDA to Adjusted Net Income ReconciliationThree Months and Year Ended September 30, 2020 and September 30, 2019
274Q FY2020 Earnings Presentation |
Note: Amounts may not sum due to rounding. 1 Represents the tax accounting impact of significant discrete items recorded at the time of acquisition.2 The tax effect of the non-GAAP adjustments is generally based on the statutory tax rate of the jurisdiction of the event.
(in millions) 2020 2019 2020 2019
Adjusted EBITDA 104.2$ 76.6$ 158.3$ 146.6$
Depreciation Expense (8.3) (6.4) (29.2) (22.6)
Interest Expense (5.1) (3.5) (20.2) (13.9)
Income tax benefit (expense) (2.6) (11.3) 6.4 (11.0)
Tax impact related to acquisitions1 0.4 0.9 (12.4) (6.6)
Impact of U.S. Tax Reform — — 0.7 —
Tax impact related to non-GAAP adjustments2 (0.9) 2.5 (0.3) 3.9
Noncontrolling interest in EBITDA of VIE 7.3 3.1 25.1 8.9
Noncontrolling interest in Adjusted Net Income of VIE (6.7) (3.5) (24.6) (9.7)
Adjusted Net Income 88.3$ 58.3$ 103.8$ 95.6$
Three Months Ended September 30, Year Ended September 30,
Adjusted Free Cash Flow ReconciliationThree Months and Year Ended September 30, 2020 and September 30, 2019
284Q FY2020 Earnings Presentation |
Note: Amounts may not sum due to rounding.
(in millions)Cubic Consolidated
Net cash provided by (used in) continuing operating activities $ 95.1 $ 50.8 $ (8.3) $ (31.9)
Capital expenditures (13.4) (13.8) (49.2) (49.1)
Proceeds from sale of property, plant and equipment — — — 44.9
Operating cash flow associated with VIE 5.8 15.1 112.5 50.2
Receipt of withheld proceeds from sale of trade receivables — — 5.5 —
Adjusted Free Cash Flow $ 87.5 $ 52.1 $ 60.5 $ 14.1
2020 2019 2020 2019
Three Months Ended Year Ended September 30, September 30,
Return on Invested Capital (ROIC) ReconciliationYear Ended September 30, 2020 and September 30, 2019
294Q FY2020 Earnings Presentation |
(in millions) 2020 2019
Adjusted EBITDA 158.3$ 146.6$
Depreciation (29.2) (22.6)
Adjusted EBITA 129.1$ 124.0$
Income tax benefit (expense) 6.4 (11.0)
Tax impact related to acquisitions1 (12.4) (6.6)
Impact of U.S. Tax Reform 0.7 —
Tax impact related to non-GAAP adjustments2 (0.3) 3.9
non-GAAP NOPAT 123.5$ 110.3$
Shareholders' equity related to Cubic 960.8$ 961.6$
Short-term borrowings 215.7 195.5
Current portion of long-term debt 11.3 10.7
Long-term debt 430.1 189.1
Cash and cash equivalents (128.6) (65.8)
Invested Capital 1,489.2$ 1,291.2$
Average Invested Capital 1,390.2$ 1,039.6$
Return on Invested Capital (ROIC) 8.9% 10.6%
Year Ended September 30,
Note: Amounts may not sum due to rounding. 1 Represents the tax accounting impact of significant discrete items recorded at the time of acquisition.2 The tax effect of the non-GAAP adjustments is generally based on the statutory tax rate of the jurisdiction of the event.