Market Overview

Jacobs Reports Earnings for the Third Quarter of Fiscal 2019

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DALLAS, Aug. 5, 2019 /PRNewswire/ -- Jacobs Engineering Group Inc. (NYSE:JEC) today announced its financial results for the fiscal third quarter ended June 28, 2019.

Q3 2019 Highlights:

  • Gross revenue of $3.2 billion1 grew 8.0% year-over-year; net revenue grew organically by 11.1%2
  • EPS from continuing operations of $0.65, results impacted by higher restructuring and transaction costs
  • Adjusted EPS from continuing operations of $1.40, up 13% year-over-year, including a discrete tax benefit
  • Backlog increased $2.6 billion to $22.5 billion, up 8% on an organic basis2
  • Increasing fiscal 2019 adjusted pro forma EPS outlook to $4.75 - $5.00 (excluding full year ECR)3
  • Completed $350 million of $1 billion share repurchase authorization through August 2nd

Jacobs' Chair and CEO Steve Demetriou commented, "Our strong third quarter results and increased earnings outlook are yet another example of driving an innovative culture, strengthening our execution discipline and scaling our global network of expertise. As we execute against our strategy, we are profitably winning a greater level of business in our existing sectors, while diversifying into new high margin growth opportunities. We are creating a company like no other, putting our knowledge and imagination together to shape the next generation of innovative solutions. Our KeyW acquisition is already delivering with a growing pipeline of new and enhanced opportunities as we bring the two organizations together."

Jacobs' CFO Kevin Berryman added, "We delivered another quarter of solid results across both lines of business with accelerating growth in our sales pipelines, during the most transformative period in our company's history. The CH2M integration has exceeded our revenue and cost targets and is on track to be completed by the end of calendar 2019. Our divestiture of ECR is moving into the final stages of separation. We are raising our fiscal 2019 outlook and now expect adjusted EBITDA in the range of $965 million - $1 billion and adjusted pro forma EPS of $4.75 - $5.00.3 From a long-term standpoint, we have created a transformed business with a stronger balance sheet."

Third Quarter Review



Fiscal 3Q 2019

Fiscal 3Q 2018

Change

Revenue

$3.2 billion

$2.9 billion

$0.3 billion

Net Revenue

$2.6 billion

$2.4 billion

$0.2 billion

GAAP Net Earnings from Continuing Operations

$89 million

$113 million

-$24 million

GAAP Earnings Per Diluted Share (EPS) from Continuing Operations

$0.65

$0.79

-$0.14

Adjusted Net Earnings from Continuing Operations

$193 million

$178 million

$15 million

Adjusted EPS from Continuing Operations

$1.40

$1.24

$0.16

The company's adjusted net earnings from continuing operations and adjusted EPS from continuing operations for the third quarter of fiscal 2019 and fiscal 2018 exclude the charges and costs set forth in the table below. For additional information regarding these adjustments and a reconciliation of adjusted net earnings and adjusted EPS to net earnings and EPS, respectively, refer to the section entitled "Non-GAAP Financial Measures" at the end of this release.


Fiscal 3Q 2019

Fiscal 3Q 2018

After-tax restructuring and other charges ($93.2 million and $30.1 million for the fiscal 2019 and 2018 periods, respectively before income taxes)

$70 million ($0.51 per share)

$22 million ($0.15 per share)

After-tax transaction costs incurred in connection with the closing of the CH2M and KeyW acquisitions ($13.3 million and $5.4 million for the fiscal 2019 and 2018 periods, respectively before income taxes)

$10 million ($0.07 per share)

$4 million ($0.03 per share)

Other adjustments include:

 (a) addback of amortization of intangible assets of $18.4 million and $19.3 million in the 2019 and 2018 periods, respectively,

 (b) the allocation to discontinued operations of estimated stranded corporate costs of $2.0 million and $6.4 million in the 2019 and 2018 periods, respectively, that will be reimbursed or otherwise eliminated in connection with the sale of the ECR business,

 (c) the allocation to discontinued operations of estimated interest expense amounts in 2019 and 2018 related to long-term debt that has been paid down in connection with the sale of the ECR business of $5.8 million and $16.1 million, respectively,

(d) the reclassification of revenues under the Company's Transition Services Agreement (TSA) with WorleyParsons of $14.1 million included in other income for U.S. GAAP reporting purposes to SG&A and the exclusion of $3.2 million in remaining unreimbursed costs associated with the TSA during the fiscal 2019 third quarter,

 (e) the add-back of charges resulting from the revaluation of certain deferred tax assets/liabilities in connection with U.S. tax reform of $5.3 million in the 2018 period and other income tax adjustments of $1.5 million in the current quarter and

 (f) associated income tax expense adjustments for the above pre-tax adjustment items.

$24 million ($0.17 per share)

$38 million ($0.27 per share)

Adjusted EPS from Continuing Operations

$193 million ($1.40 per share)

$178 million ($1.24 per share)


(note: earnings per share amounts may not add due to rounding)

Fiscal third quarter 2019 earnings per share from continuing operations reflect an adjusted effective tax rate of 22.6%, excluding discrete tax items of 16 cents per share. Fiscal third quarter 2018 included an 8 cent benefit from discrete tax items.

Jacobs is hosting a conference call at 11:00 A.M. ET on Monday August 5, 2019, which it is webcasting live at www.jacobs.com.

Energy, Chemicals and Resources (ECR) Sale to WorleyParsons

On April 26, 2019, Jacobs completed the previously announced sale of the Jacobs' ECR business to WorleyParsons Limited.

KeyW Acquisition

On June 12, 2019, Jacobs completed the previously announced acquisition of The KeyW Holding Corporation.

About Jacobs

Jacobs leads the global professional services sector providing solutions for a more connected, sustainable world. With approximately $12 billion in revenue and a talent force of more than 50,000, Jacobs provides a full spectrum of services including scientific, technical, professional and construction- and program-management for business, industrial, commercial, government and infrastructure sectors. For more information, visit www.jacobs.com, and connect with Jacobs on www.jacobs.com, LinkedIn, Twitter, Facebook and Instagram.

Forward-Looking Statements

Certain statements contained in this press release constitute forward-looking statements as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such statements are intended to be covered by the safe harbor provided by the same. Statements made in this press release that are not based on historical fact are forward-looking statements. Although such statements are based on management's current estimates and expectations, and currently available competitive, financial, and economic data, forward-looking statements are inherently uncertain, and you should not place undue reliance on such statements as actual results may differ materially. We caution the reader that there are a variety of risks, uncertainties and other factors that could cause actual results to differ materially from what is contained, projected or implied by our forward-looking statements. For a description of some additional factors that may occur that could cause actual results to differ from our forward-looking statements, see our Annual Report on Form 10-K for the year ended September 28, 2018, and in particular the discussions contained under Item 1 - Business; Item 1A - Risk Factors; Item 3 - Legal Proceedings; and Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations, and our Quarterly Report on Form 10-Q for the quarters ended December 28, 2018 and March 29, 2019, and in particular the discussions contained under Part I, Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations; Part II, Item 1 - Legal Proceedings; and Part II, Item 1A - Risk Factors, as well as the Company's other filings with the Securities and Exchange Commission. The Company is not under any duty to update any of the forward-looking statements after the date of this press release to conform to actual results, except as required by applicable law.

1Reflects continuing operations as reported in accordance with GAAP.
2Excludes $23.9 million in revenue and $1.1 billion in backlog contribution from KeyW.
3Reconciliation of the adjusted pro forma EPS outlook and adjusted EBITDA outlook for the full fiscal year to the most directly comparable GAAP measure is not available without unreasonable efforts because the Company cannot predict with sufficient certainty all the components required to provide such reconciliation, including with respect to the costs and charges relating to transaction expenses, restructuring and integration to be incurred in fiscal 2019.

Financial Highlights:


Results of Operations (in thousands, except per-share data):



For the Three Months Ended


For the Nine Months Ended

Unaudited

June 28, 2019


June 29, 2018


June 28, 2019


June 29, 2018

Revenues

$

3,169,622



$

2,933,623



$

9,345,005



$

7,587,916


Direct cost of contracts

(2,543,488)



(2,325,028)



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