Second Quarter Fiscal Year 2018 Results May 2, 2018 Bradley H. Feldmann Chairman, President and Chief Executive Officer Anshooman Aga Executive Vice

Transcription

1 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 2 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 forwardlooking. 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.

3 and 1H18 Results Continuing Operations 1 3 Sales ($m) R&D ($m) Adj. EBITDA ($m) Sales ($m) R&D ($m) Adj. EBITDA ($m) $248.0 $278.6 $12.9 $14.2 $11.7 $15.8 $492.4 $527.0 $21.9 $26.2 $29.3 $27.3 1H17 1H18 1H17 1H18 1H17 1H18 Strong Execution on Winning the Customer 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 sales increased 12%, adj. EBITDA increased 35% compared to 1H18 sales increased 7%, adj. EBITDA decreased 7% compared to 1H17 due to R&D increase Advancing strategy with Defense Services divestiture See appendix for additional information regarding non-gaap financial measures. 1 On April 19, 2018 Cubic announced the planned divestiture of CGD Services; the results have been excluded from the figures above.

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) 4 4 Delivers $10b in new transportation and infrastructure funding including Capital Investment, Transportation Investment Generating Economic Recovery (TIGER) and Federal Highway Administration grants

5 Strategy Update 5 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 6 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 7 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 8 8 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)

9 Consolidated Financial Highlights Continuing Operations 9 $ in millions, except backlog and EPS 9 Bookings Backlog ($b) 4x 1 33% 1 $623.8 $2.5 $3.4 Sales $ % 1 Bookings +306% 1) $ $ Sep 30, 2017 Mar 31, 2018 Q1 FY17 Q1 FY18 Adj EBITDA Adj. EBITDA $ % 1 $15.8 Earnings per Share Disc Ops ($1.53) $0.05 $1.54 Dis c Free Cash Flow -18% 1) 20.1 $ ($0.12) ($5.5) Q1 FY17 Q1 FY18 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 ) Free cash flow, which is a non-gaap financial measure, is defined as Net Cash Provided by Operating Activities minus capital expenditures.

10 Divestiture Impact on Cubic Financials (fiscal ) $ millions 10 $805.4 Total Bookings $ $376.7 Total Sales 98.1 $ Pre-Divestiture CGD Services Continuing Operations $22.5 Adj EBITDA* $15.8 Pre-Divestiture CGD Services Cost Corporate Overhang Continuing Pre-Divestiture CGD Services Costs Operations Pre-Divestiture CGD Services Continuing Operations $28.6 Free Cash Flow $ Pre-Divestiture CGD Services Cost Corporate Overhang Continuing Pre-Divestiture CGD Services Costs Operations * See appendix for reconciliation of non-gaap financial measures

11 Cubic Transportation Systems Financial Highlights Q2 Comparison ($m) Bookings $ x 1 $520.5 Sales $ % 1 $167.0 Strong bookings reflect Boston MBTA award Robust sales growth supported by New York MTA contract Adj. EBITDA $ % 1 $17.2 Adj. EBITDA Margin % 7.1% +322 bps 10.3% Margin increase reflects higher sales, lower R&D spend, and improved operational performance 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

12 Cubic Mission Solutions Financial Highlights Q2 Comparison ($m) Bookings $22.0 Sales +109% +26% $46.1 $28.7 $36.1 Bookings increase reflects T2C2 LRIP and Theater Deployable Communications (TDC) orders Sales increase reflects higher Secured Networking deliveries Adj. EBITDA ($3.2) Adj. EBITDA +37% Margin % +561 ($2.0) -11.2% bps -5.6% 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

13 Cubic Global Defense Systems Financial Highlights Q2 Comparison ($m) Bookings $ % $57.2 Sales $79.7-6% 1 $75.5 All key metrics improve sequentially from 1Q18 Bookings down YoY due to order delays; Expect recovery in H2 Adj. EBITDA +2% 1 $7.4 $7.4 Adj. EBITDA Margin % +54 bps 9.3% 9.8% Sales reflect lower YoY Air Ranges shipments Adj. EBITDA in-line with prior year 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

14 2018 Guidance Reflecting CGD Services Divestiture 14 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 Q 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 constant currency

15 Summary 15 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 Winning the Customer and technology investments driving growth

16 Appendix

17 Appendix Table of Contents 17 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, Quarter Ended Mar 31, Q17 - Quarter Ended Jun 30, Q17 - Quarter Ended Sep 30, Q18 - Quarter Ended Dec 31, 2017 GAAP to Non-GAAP Reconciliation - Continuing Operations - Quarter Ended Mar 31, Quarter Ended Mar 31, H18 - Six Months Ended Mar 31, H17 - Six Months Ended Mar 31, 2017

18 Cubic Corporation Historical Financials Continuing Operations Basis 18 ($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 $ $ $ 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 GAAP to Non-GAAP Reconciliation (EBITDA) and Adjusted EBITDA - Year Ended Sep 30, 2016 Earnings before interest, taxes, depreciation and amortization (EBITDA) and Adjusted EBITDA Year Ended Sep 30, In Millions Year Ended Sep 30, 2016 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) (2.6) Interest expense (income), net Other non-operating (expense) income, net 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 ERP/Supply Chain Initiatives Restructuring costs 1.8 (0.5) 1.3 Other non-operating (expense) income, net Adjusted EBITDA $ $ (16.9) $ (7.7) $ 93.4

20 GAAP to Non-GAAP Reconciliation Earnings before interest, taxes, depreciation and amortization (EBITDA) and Adjusted EBITDA - Year Ended Sep 30, In Millions Year Ended Sep 30, 2017 Cubic As Reported CGD Services Allocated corporate costs Continuing Operations Net income (loss) attributable to Cubic $ (11.2) $ (9.1) $ (11.1) $ (31.4) Provision for income taxes Interest expense (income), net Other non-operating (expense) income, net (0.4) - (0.4) Operating Income 17.5 (6.7) (8.2) 2.6 Depreciation and amortization 51.1 (3.0) 48.1 Other non-operating expense (income), net EBITDA $ 69.0 $ (9.7) $ (8.2) $ 51.1 Acquisition related expenses, excluding amortization (0.3) - (0.3) ERP/Supply Chain Initiatives Restructuring costs 2.5 (0.2) 2.3 Gain/Loss on sale of fixed assets Other non-operating (expense) income, net (0.4) - (0.4) Adjusted EBITDA $ $ (9.9) $ (8.2) $ 87.5

21 GAAP to Non-GAAP Reconciliation Earnings before interest, taxes, depreciation and amortization (EBITDA) and Adjusted EBITDA Quarter Ended Dec 31, In Millions Quarter Ended December 31, 2016 Cubic As Reported CGD Services Allocated corporate costs Continuing Operations 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) Depreciation and amortization 13.4 (1.0) 12.4 Other non-operating expense (income), net (0.5) - (0.5) EBITDA $ 8.8 $ (0.6) $ (2.0) $ 6.2 Acquisition related expenses, excluding amortization ERP/Supply Chain Initiatives Restructuring costs Gain/Loss on sale of fixed assets Other non-operating (expense) income, net Adjusted EBITDA $ 20.1 $ (0.6) $ (2.0) $ 17.5

22 GAAP to Non-GAAP Reconciliation Earnings before interest, taxes, depreciation and amortization (EBITDA) and Adjusted EBITDA Quarter Ended Mar 31, In Millions Quarter Ended March 31, 2017 Cubic As Reported CGD Services Allocated corporate costs Continuing Operations Net income (loss) attributable to Cubic $ 0.4 Provision for income taxes (7.0) Interest expense (income), net 4.1 Other non-operating (expense) income, net 0.4 Operating Income (2.1) (2.0) (2.0) (6.1) Depreciation and amortization 12.3 (0.7) 11.6 Other non-operating expense (income), net (0.4) - (0.4) EBITDA $ 9.8 $ (2.7) $ (2.0) $ 5.1 Acquisition related expenses, excluding amortization (0.1) - (0.1) ERP/Supply Chain Initiatives Restructuring costs 0.7 (0.4) 0.3 Gain/Loss on sale of fixed assets Other non-operating (expense) income, net Adjusted EBITDA $ 16.8 $ (3.1) $ (2.0) $ 11.7

23 GAAP to Non-GAAP Reconciliation Earnings before interest, taxes, depreciation and amortization (EBITDA) and Adjusted EBITDA Quarter Ended Jun 30, In Millions Quarter Ended June 30, 2017 Cubic As Reported CGD Services Allocated corporate costs Continuing Operations Net income (loss) attributable to Cubic $ (22.0) Provision for income taxes 17.8 Interest expense (income), net 4.1 Other non-operating (expense) income, net (1.6) Operating Income (1.7) (3.2) (1.9) (6.8) Depreciation and amortization 12.5 (0.7) 11.8 Other non-operating expense (income), net EBITDA $ 12.4 $ (3.9) $ (1.9) $ 6.6 Acquisition related expenses, excluding amortization (1.5) (1.5) ERP/Supply Chain Initiatives Restructuring costs Other non-operating (expense) income, net (1.6) (1.6) Adjusted EBITDA $ 18.5 $ (3.9) $ (1.9) $ 12.7

24 GAAP to Non-GAAP Reconciliation Earnings before interest, taxes, depreciation and amortization (EBITDA) and Adjusted EBITDA Quarter Ended Sep 30, In Millions Quarter Ended Sep 30, 2017 Cubic As Reported CGD Services Allocated corporate costs Continuing Operations Net income (loss) attributable to Cubic $ 13.2 Provision for income taxes 9.3 Interest expense (income), net 2.6 Other non-operating (expense) income, net 0.3 Operating Income 25.4 (1.9) (2.4) 21.1 Depreciation and amortization 12.9 (0.6) 12.3 Other non-operating expense (income), net (0.3) - (0.3) EBITDA $ 38.0 $ (2.5) $ (2.4) $ 33.1 Acquisition related expenses, excluding amortization ERP/Supply Chain Initiatives Restructuring costs Other non-operating (expense) income, net 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, In Millions Quarter Ended Dec 31, 2017 Cubic As Reported CGD Services Allocated corporate costs Continuing Operations Net income (loss) attributable to Cubic $ (9.8) $ (3.9) $ (2.7) $ (16.4) Provision for income taxes Interest expense (income), net Other non-operating (expense) income, net Operating Income $ (7.0) (2.9) (2.0) (11.9) Depreciation and amortization 13.1 (0.7) 12.4 Other non-operating expense (income), net (0.1) - (0.1) EBITDA $ 6.0 $ (3.6) $ (2.0) $ 0.4 Acquisition related expenses, excluding amortization ERP/Supply Chain Initiatives Restructuring costs Other non-operating (expense) income, net 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, In Millions Consolidated CTS CMS CGD Systems Three Months Ended March 31, 2018 Net income (loss) attributable to Cubic $ (3.3) Provision for income taxes 1.4 Interest expense (income), net 2.2 Other non-operating (expense) income, net (2.0) Operating Income (loss) $ (1.7) $ 14.2 $ (7.7) $ 5.2 Depreciation and amortization Other non-operating expense (income), net (0.1) EBITDA $ 11.4 $ 19.6 $ (2.3) $ 7.1 Acquisition related expenses, excluding amortization ERP/Supply Chain Initiatives 5.7 Restructuring costs 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

27 GAAP to Non-GAAP Reconciliation - Continuing Operations Earnings before interest, taxes, depreciation and amortization (EBITDA) and Adjusted EBITDA Three Months Ended March 31, In Millions Consolidated CTS CMS CGD Systems Three Months Ended March 31, 2017 Net income (loss) attributable to Cubic $ 41.9 Provision for income taxes (52.5) Interest expense (income), net 4.1 Other non-operating (expense) income, net 0.4 Operating Income (loss) $ (6.1) $ 7.8 $ (9.2) $ 4.7 Depreciation and amortization 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 ERP/Supply Chain Initiatives 6.0 Restructuring costs Loss on sale of fixed assets - Other non-operating (expense) income, net (3.1) Adjusted EBITDA $ 11.7 $ 9.9 $ (3.2) $ 7.4 EBITDA Margin 2.1% 6.9% -11.5% 12.9% Adjusted EBITDA Margin 4.7% 7.1% -11.2% 9.3% 1 includes transaction costs, retention bonuses and earn out liability changes related to acquired businesses

28 GAAP to Non-GAAP Reconciliation - Continuing Operations Earnings before interest, taxes, depreciation and amortization (EBITDA) and Adjusted EBITDA Six Months Ended March 31, In Millions Consolidated CTS CMS CGD Systems Six Months Ended March 31, 2018 Net income (loss) attributable to Cubic $ (14.8) Provision for income taxes (1.3) Interest expense (income), net 4.5 Other non-operating (expense) income, net (2.0) (1.6) $ (0.2) $ (0.3) Operating Income (loss) $ (13.6) $ 24.1 $ (16.7) $ 6.7 Depreciation and amortization Other non-operating expense (income), net EBITDA $ 11.9 $ 32.0 $ (5.4) $ 11.1 Acquisition related expenses, excluding amortization ERP/Supply Chain Initiatives 13.7 Restructuring costs 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% Adjusted EBITDA Margin 5.2% 9.8% -5.4% 8.1% 1 includes transaction costs, retention bonuses and earn out liability changes related to acquired businesses

29 GAAP to Non-GAAP Reconciliation - Continuing Operations Earnings before interest, taxes, depreciation and amortization (EBITDA) and Adjusted EBITDA Six Months Ended March 31, In Millions Consolidated CTS CMS CGD Systems Six Months Ended March 31, 2017 Net income (loss) attributable to Cubic $ 42.9 Provision for income taxes (62.9) Interest expense (income), net 7.4 Other non-operating (expense) income, net 0.9 Operating Income (loss) $ (11.7) $ 17.5 $ (13.0) $ 8.1 Depreciation and amortization 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 (0.1) 0.9 ERP/Supply Chain Initiatives 14.6 Restructuring costs Loss on sale of fixed assets 0.4 Other non-operating (expense) income, net (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% 1 includes transaction costs, retention bonuses and earn out liability changes related to acquired businesses