January 14, th Annual Needham Growth Conference

Transcription

1 January 14, th Annual Needham Growth Conference Bradley H. Feldmann President and Chief Executive Officer John Jay D. Thomas Executive Vice President and Chief Financial Officer

2 Safe Harbor 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, 2015, 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. 2

3 Cubic Cubic Transportation Systems Cubic Global Defense Leading integrator of payment and information technology and services for intelligent travel solutions worldwide Leading provider of defense training solutions and communications technologies Intelligent Travel 38 million travelers use Cubic s technology each day 24 billion transactions per year 7 billion passengers annually $18 billion in revenues collected annually Over 130,000 devices installed Defense Training Installed/delivered/fielded hundreds of thousands of pieces of training and instrumentation kits worldwide Emerging market leader for immersive game-based training Leading provider of highly specialized support services for military and security forces of the U.S. and allied nations Communications & Networking Key supplier of communications and signal intelligence equipment, data links, search and rescue avionics, ruggedized networks and full motion video OVER 450 OPERATORS SERVICED THROUGH 20 REGIONAL BACK OFFICES PRODUCTS AND SYSTEMS DELIVERED TO THE UNITED STATES AND 35+ ALLIED NATIONS COMPREHENSIVE RANGE OF EXERCISE AND TRAINING EVENTS SUPPORTED WORLDWIDE We are a global provider of integrated systems and services that increase situational awareness and understanding for transportation and defense customers worldwide. 3

4 Strategy Goal 2020: Focus on higher growth and higher margin business areas in NextCity, C4ISR, and NextTraining markets while improving productivity and efficiency Winning the Customer vision spurred by innovation to deliver superior solutions Targeting 10%+ annual growth rate consistent with Cubic s historical performance Build NextCity Globally Grow C4ISR Business Build NextTraining Globally One Cubic Expand into adjacent markets beyond fare collection such as toll, intelligent transportation, parking and mobile Expand from secure communications to network solutions and SATCOM Innovative, integrated LVC-G solutions for air, ground, sea and cyber Streamline operations to improve operating margins by basis points by

5 Consolidated Operating Highlights Years ended September 30, In Millions except EPS % Change Backlog $2,975.6 $3, % Sales $1,431.0 $1, % Adjusted EBITDA* % to sales $ % $ % 8.3% Adjusted operating Income* % to sales $ % $ % 3.6% GAAP diluted EPS $0.85 $ % Adjusted diluted EPS* $2.79 $ % Operating cash flows $89.7 $ % * See schedules in the appendix to this slide deck for detailed reconciliations of these non-gaap financial measures to the directly comparable GAAP financial measures Backlog strong at 2X annual revenues FX headwinds impacted backlog ($155.9 million), sales ($52.1 million), operating income ($7.8 million) and EPS ($0.23) FY15 Adjusted EBITDA, adjusted operating income and adjusted diluted EPS up compared to FY14 5

6 Sales Mix FY15 Consolidated Sales $1.431 Billion Business Segment Transportation Systems 40% Defense Systems 32% Mission Support Services 28% Customer Location United States 53% United Kingdom 20% Australia 11% Far East/Middle East 9% Other 7% Products and Services Services 58% Products 42% Contract Type Fixed Price 82% Other 18% Diversified sales mix across multiple markets. 6

7 Acquisition Update Transactions Purchase Price Financing Accretion Timetable Conditions Cubic Corporation acquired TeraLogics LLC and announced the acquisition of GATR Technologies, Inc. on December 21, 2015 GATR Technologies, Inc. $232.5 million comprised of cash and earn out Annualized forward revenue of $ $85.0 million Valuation multiple of 12.5x x annualized forward adj. EBITDA net of the present value of tax benefits TeraLogics LLC $39.0 million comprised of cash and earn out Annualized forward revenue of $ $18.0 million Valuation multiple of 6.0x 6.5x 2016 adjusted EBITDA net of the present value of tax benefits Purchase price to be funded by borrowings under an amended and expanded revolving credit facility and fixed-rate long term debt Financing commitments in place to complete transaction Expected pro forma Debt / LTM adjusted EBITDA of ~4.0x at close Cubic s investments in its C4ISR portfolio, including DTECH, GATR, and TeraLogics, are anticipated to be EPS accretive in fiscal year 2017 GATR Technologies, Inc. closing expected in fiscal year Q TeraLogics LLC closed on December 18, 2015 GATR Technologies, Inc. subject to customary regulatory approvals (Hart-Scott-Rodino) 7

8 Company Overviews GATR Technologies Leading provider of innovative SATCOM solutions with significantly reduced size, weight, power consumption (SWAP) and cost compared to competitors TeraLogics Leading provider of real-time processing, exploitation, and dissemination of streaming or archived full motion video in the cloud Patented technology refined under Small Business Innovative Research program transitioned in Phase III Strategic contract vehicles aligned with key Programs of Record At growth inflection point with recent selection on Warfighter Information Network-Tactical (WIN-T) Transportable Tactical Command Communications (T2C2) Illustrative Customers Company developed proprietary technology Domain expertise in secure video delivery and exploitation Important relationships on strategic Intelligence support programs Complementary portfolio of capabilities, products and solutions with differentiated technology. 8

9 Accelerating Growth in C4ISR Near Term Strategic Goal: Build $200 million C4ISR business Critical mass achieved in C4ISR strategy Synergistic C4ISR portfolio focused on leading positions in expeditionary communications and ISR dissemination C4ISR Annualized Revenue Profile C4ISR Portfolio Post-Acquisition Pre-Acquisition ~$200m+ ~$100m Expected adjusted EBITDA margins on the C4ISR portfolio are in the high teens. 9

10 Cubic Transportation Systems NextCity Vision >> Connecting journeys and information Fare & Transportation Payments Transport Analytics Integrated Multimodal Travel Real Time Passenger Information Mobile Payment & Information Systems 10

11 Cubic Global Defense Systems Business Areas Live Training Virtual Skills Training Game-Based Immersive Training C4ISR Closest experience to real combat, essential for readiness A realistic operational environment in a virtual scenario Cost-effective interactive education and training Niche solutions Air combat training systems Laser engagement simulation system Ground combat training centers Small arms engagement skills trainers Mine Resistant Ambush Protected (MRAP) Vehicle Trainer Game-based courseware Mission Bay Trainer/Littoral Combat Ships Interactive doctrine training courseware Secure wideband data links Personnel locator system SIGINT receivers Tactical networking Cross domain Full motion video Stable global market Growing market for cost-efficient training Future NextTraining SATCOM Solutions [GATR Technologies acquisition] Credit: Northrop Grumman "Fire Scout" unmanned helicopter 11

12 Cubic Global Defense Services Business Areas Live, Virtual and Constructive Training Exercises Education and Leader Development National Security and Intelligence Special Operations Forces Training Information Technology and Cyber Solutions Engineering and Related Technical Support Operations, Maintenance and Logistics Operations and Analysis Defense Modernization Port Security 12

13 FY16 Business Segment Priorities Transportation Systems Expect RFP in FY16 for New York City fare payment system upgrade Win Melbourne s Myki smart card ticketing system bid Vancouver transitioning from design & build to the services phase Pursue fare collection and toll opportunities in the Middle East Expand mobile solution beyond Chicago Defense Systems Continue to grow C4ISR business and expand offerings to include cross domain and SATCOM solutions Integrate recent acquisition of TeraLogics and GATR Technologies upon closing Launch NextTraining initiative Pursue new opportunities in the training market with KC-46 Aerial Tanker trainer bid Defense Services Win JRTC recompete Prioritize non-lpta work Expand SOF/Intel pursuits 13

14 Investment Highlights Leading positions across multiple global markets FY16 is a pivotal year setting the foundation for higher growth and expanded profitability in FY17 and FY18 Strategy focused on high growth, higher margin businesses Winning the Customer vision inspired by innovation to deliver superior solutions New ERP system to improve productivity and efficiency and support scalable growth Goal 2020: Sound strategy focused on high growth, higher margin businesses Strong and stable financial position Successful track record of delivering long-term returns to shareholders 14

15 Appendix FY 2015 Segment Summary Cubic Transportation Systems Cubic Global Defense Systems Cubic Global Defense Services GAAP to Non-GAAP Reconciliation EBITDA and Adjusted EBITDA GAAP to Non-GAAP Reconciliation Adjusted Operating Income GAAP to Non-GAAP Reconciliation Adjusted Diluted EPS Key Balance Sheet and Cash Flow Data 15

16 Cubic Transportation Systems Years ended September 30, In Millions % Change Total backlog $1,894.3 $1, % Sales $566.8 $ % Operating income % to sales $ % $ % 15.2% Depreciation and Amortization $10.8 $ % Backlog strong at 3X annual sales Sales down primarily due to strong FX headwinds ($40 million) Operating income improved in the U.S., somewhat offset by a decrease in U.K. and FX headwinds ($5.5 million) 16

17 Cubic Global Defense Systems Years ended September 30, In Millions % Change Total backlog $595.7 $ % Sales $462.1 $ % Operating income % to sales $ % $ % -31.3% Depreciation and Amortization $17.1 $ % Backlog growth in air ranges, ground training and C4ISR Sales increase from growth in C4ISR (DTech) and air ranges Operating income lower due to cost growth on the LCS contract ($9.5 million), restructuring charge ($4.6 million), and FX headwinds ($2.2 million) Divested Global Track product line which had losses in each of the last two years of $2.3 million 17

18 Cubic Global Defense Services Years ended September 30, In Millions % Change Total backlog $485.6 $ % Sales $402.1 $ % Operating income % to sales $ % $ % -15.4% Depreciation and Amortization $8.5 $ % Backlog down due to runoff of multiyear JRTC contract and shorter multiyear awards Expecting an upturn in sales from current levels Operating profits were lower due to higher personnel cost, a restructuring charge and the impact of LPTA margin pressures 18

19 GAAP to Non-GAAP Reconciliation EBITDA and Adjusted EBITDA Years Ended September 30, In Millions Net income attributable to Cubic $ 22.9 $ 69.5 Add: Interest expense, net Provision for income taxes Depreciation and amortization Noncontrolling interest in income of VIE EBITDA $ $ Acquisition related expenses, excluding amortization ERP/Supply Chain Initiatives Restructuring costs Other non-operating expense, net Adjusted EBITDA $ $ EBITDA Margin 7.8% 8.8% Adjusted EBITDA Margin 9.8% 9.3% 1 Includes transaction costs, retention bonuses and earn out liability increases related to acquired businesses. 19

20 GAAP to Non-GAAP Reconciliation Adjusted Operating Income Years Ended September 30, In Millions Net income attributable to Cubic $ 22.9 $ 69.5 Add: Provision for income taxes Interest expense, net Other non-operating expense, net Noncontrolling interest in income of VIE Operating Income $ 75.4 $ 92.5 Acquisition related expenses ERP/Supply Chain Initiatives Restructuring costs Adjusted Operating Income $ $ 99.2 Operating Income Margin 5.3% 6.6% Adjusted Operating Income Margin 7.2% 7.1% 1 Includes transaction costs, retention bonuses and earn out liability increases related to acquired businesses. 20

21 GAAP to Non-GAAP Reconciliation Adjusted Diluted EPS Years Ended September 30, Diluted earnings per share attributable to Cubic $ 0.85 $ 2.59 Add: Acquisition related expenses ERP/Supply Chain Initiatives Restructuring costs U.S. deferred tax asset valuation reserve Adjusted diluted earnings per share attributable to Cubic $ 2.79 $ Net of applicable income taxes. 21

22 Key Balance Sheet and Cash Flow Data Years ended September 30, In Millions Comments Cash Restricted cash Marketable securities Total Gross accounts receivable, net of customer advances $218.5 $69.2 $30.5 $318.3 $191.5 $69.1 $25.6 $286.2 $295.4 million is offshore $318.7 $318.4 Net A/R days was 69 in FY15 versus 74 days in FY14 Inventory $63.7 $38.8 Higher inventory on shift to book and ship products Gross debt $186.7 $102.4 Capital deployment in the U.S. for acquisitions Cash flow from operations $89.7 $114.8 Transportation strong cash flow in FY15 Capital expenditures ($22.2) ($16.6) New ERP system $16.0 million in FY15 Dividends paid ($7.3) ($6.4) Annual dividend increased to $0.27 from $0.24 cents per share, or 12.5%, in FY15 Cash paid for acquisitions ($92.2) ($83.5) Major acquisitions: DTech in FY15 and ITMS in FY14 22