Q2 2020 Earnings Call
At this time I would like to welcome everyone to the Jacobs fiscal second quarter 2020 earnings Conference call.
As a reminder, all participants are in the listen only mode.
Later, we'll conduct a question and answer session.
During that time, we ask that you limit your questions to one per color and then one follow up question.
You have a question during the Q and a session. Please press star one on your Touchtone telephone.
Thank you well now turn the call literature host Jonathan Doros. Please go ahead Sir.
Good evening to all earnings announcement was filed this evening and we have posted a copy of this slide presentation in prepared remarks to our website. What's your reference during the call I'd like to refer you to our forward looking statement disclaimer just summarized on slide two.
Certain statements contained in his presentation constitute forward looking statement as such tournaments defined and section 20 Sevena into Securities Act 1933, as amended and 21. He UBS Securities Exchange Act seem 34 as amended.
In such statements are intended to be covered by the safe Harbor provided by the same.
Statements made in this presentation that not based on historical fact are forward looking statements. Examples of forward looking statements include but are not limited to statements. We make concerning potential effects of the cobot 19 endemic on our business financial condition results of operations and our expectations as to our future growth prospects financial outlook in business stretch.
Gee for fiscal 2020.
Or future fiscal years, 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 to read are there a variety of risks uncertainties and other factors that could cause actual results could differ materially from what does contain projector implied by our forward looking statements such factors include the magnitude timing duration and the ultimate impacted the Kobin 19 pandemic on any resulting economic downturn on our results across.
Studies for a description of these and other risks uncertainties and other factors that may occur that could cause actual results to differ from our forward looking statements. Please see our annual report on form 10-K for the year ended September 27, 2019, and our quarterly report on form 10-Q for the quarter ended March 27, 2020, which is filed this evening.
We're not under any duty to update any of the forward looking statements. After the date of this presentation to conform actual results, except as required by applicable law.
During the presentation moved referring to certain non-GAAP financial measures. Please see slide two and the presentation for more information on these figures.
In addition, during the presentation will discuss comparisons of current result to prior periods on a pro forma basis. Please see slide two for more information on the calculation are these pro forma metrics, we provided historical pro forma results in the appendix of be Investor presentation. Please note that due to the timing of the wouldn't be color acquisition in March the current and prior.
Period impacts of wouldn't new color business had been excluded when discussing the pro forma comparisons.
We believe this information helps provide additional insight into the underlying trends of our business when comparing current performance against prior period.
Now turning to the agenda on slide three.
Speaking on today's call will be Jacobs chair and CEO, Steve Dimitrios, President and Chief operating Officer, Bob Forgotten, and President and Chief Financial Officer, Kevin Berryman, Steven Dan by discussing our ultimate our climate action commitments, then provide an update on our response to the Kobin 19 pandemic and then a recap of our financial results an update it out.
Bob will then review our performance by line of business and Kevin will provide some more in depth discussion of our financial metrics, followed by an update on or acquisitions and that you see our domestic as well as a review of our balance sheet and cash flow.
Finally, Steve will provide a detailed on our updated outlook along with some closing remarks, then we'll open the call for your questions with that I'll now pass it over to Steve Dimitrios Chair and CEO.
Alright, thank your for joining us today to discuss our response to the covert 19 pandemic as well as our fiscal year second quarter results.
Before I get started I wanted to share our recent announcement on our launch objectives climate action plan.
Even in the face of the Coburn 19 pandemic, we remain focused on delivering on our strategy and advancing our purpose of creating a more connected sustainable world.
We often say were a people business at Jacobs, which is why we must take actions that helps sustain the world within which we all live.
Jacobs first climate action plans sets us apart capturing the shared passion pride and driver of our people as we work to preserve the planet for future generations.
The launch of this plan is another major milestones in our cultural and company transformation.
Our collective focus on developing and delivering on our strategy, including a deliberate portfolio transformation brings us to this important juncture.
Together, we're committing to 100% renewable energy and that's zero carbon by the end of 2020 with a long term commitment to be carbon negative by 2013.
Moving forward, we want to leverage our depth of expertise and leading position in the industry to work with our clients and our supply chain to drive climate resiliency into our solutions investing together and projects that drive profitable reduction in carbon emissions.
This is an exciting milestone in the company's history.
And of course that we can take pride in delivering on together as we reinvent our tomorrow.
Now turning to slide five.
Our new brand challenging today Reinventing Tomorrow has served as a strong galvanizing driver as we navigate through the cobot 19 environment.
The past eight weeks, we have challenge the way in which we work in the markets. We face and then the process. We're reinventing our tomorrow real time through growth opportunities for our people and innovative offerings for our clients.
From the outside of the pandemic, our focus has been the safety and well being of our people maintaining business continuity and delivering on our commitments to our clients.
We mobilized the global cross functional Cobot 19 critical response team led by our Chief operating Officer, Bob forgot to address both internal and external coven 19 related challenges with regional response teams charged with rapid action on the ground.
As soon as we learned that the global travel was shown to be at the route of the continued spread of the virus in physical distancing was critical to flapping. The curve. We took early immediate and decisive action to restrict travel and to maximize remote work.
Except for mission critical employees all of our people have been successfully working remotely over the last two months.
Proactive engaging and transparent employee communications has been critical from the outset I immediately started a regular cadence of communication with our employees globally. This included a daily executive leadership team meeting a weekly global email female message for me at the beginning of each week to all employees and a lot of mid week virtual.
Town Hall, so that my executive leadership team and I can connect real time with our teams around the globe.
We also expanded our internet and equipped our leaders with tools to send short personal video messages to the people over communication was and remains an imperative.
As we shifted from home too often excuse me as we shifted from office to home. We took our strong beyond zero safety culture with us to create and maintain a safe working environment for our teams.
As part of that positive mental health is Paramount and we increased our brings a mental health tools and techniques and mobilized our more than 1800 Jacobs positive mental health champions around the world.
Hey, certain portion of our business is essential and mission critical to government and private sector clients, where our staff continue to work on site.
In these cases, we worked closely with our clients in established project specific plans to ensure the safety of our people and the integrity of the operation.
I've been so impressed with the success, we've had an accelerating our digital transformation investing in optimizing our networks and leveraging technology to facilitate collaboration and more flexible working scenarios for our people while at the same time delivering on our commitments to our clients.
Coming out of this pandemic, we will have validated different work approaches with less reliance on extensive travel and physical real estate and what the potential for significantly reduce cost and carbon footprint.
We are currently on the process of planning a safe returned to our workplaces, how when and in some cases PPIF while at the same time advancing our strategy of our future of war, we will share more about this at our next earnings call.
Early on during this pandemic, we leveraged our capabilities to become part of the Cobot 19 solution as our customers transition to remote working we held plan and execute those ships, including support an assessment of cyber security applications materials and Threed printing equipment were redeployed to help the front line care workers with BP.
Existing federal and local government framework contracts around the globe leverage for action planning and implementation of health care facilities, including contracts with the Army Corps of engineers, FEMA and the governments of UK, Australia New Zealand.
Our life Sciences teams were tough for designing facilities that will ultimately produce cobot 19 vaccines or other therapies.
And on the innovation side of the issue we have two teams addressing different critical challenges to better understand the spread of the Corona buyers. Our teams are launching a pilot program to monitor wastewater streams using digital tools to help provide actionable cobot 19 insights and data to our clients.
Our technologist are busy considering what it means for building owners when shelter in place orders are lifted and buildings that sat vacant for weeks or months may cause problems of their own such as legionella led contamination and poor air quality. Our teams have developed guidance for schools offices, and other public and private spaces to help them safe.
We reopened and prepare for re entry.
We believe that the positive impact on our culture over the past four years in our transparent and measure behaviors. During this crisis has solidified loyalty with our employees, resulting in increased structural talent retention, which will unlock more investment dollars for innovation and growth.
As we turn to slide six to further discuss our business resiliency as it relates to our people. We have purposely maintained a workforce capacity to position us strongly for a recovery after physical distancing subsides.
Hi, strategically aligning our portfolio to a diverse set of high value sectors, such as national security water infrastructure, environmental resiliency healthcare and life Sciences, intelligent asset management space exploration and the convergence of information and operational technology, we have significantly increased the durability.
And growth opportunities of our business under multiple economic scenarios and do you expected new norm in the aftermath of Cobot 19.
In parallel with our portfolio transformation, we invested in digital technology to further expand our global integrated delivery model. This provides the ability to rapidly flex our deep technical expertise to accommodate any scenario around changes to global versus localized demand.
Equally as important we have created a powerful inclusive culture, which we believe unleashes the ability to execute more effectively versus our competitors when adjusting to changing market dynamics.
From a financial standpoint. This strategy has demonstrated strong results over the last few years and that track record of performance continued in our fiscal second quarter with pro forma backlog up 5% and pro forma net revenue up 7.5% year over year.
Second quarter adjusted EBITDA also grew year over year and after a correction in the third quarter, we expect it to improve in our fiscal fourth quarter.
Equally as important and inline with our previous outlook, we delivered positive free cash flow in the quarter and expect strong free cash flow for the remainder of the year.
That's a physical distancing constraints from Cobank team have resulted in some near term headwinds impacting the current third quarter as we and our customers adjust to a new working environment. However, we view these headwinds as temporary as a result, we would expect the business to ramp up to run rate levels over the next six months.
The structural drivers of our business are strong and our sales pipeline remains robust.
We are proactively positioned our capacity to capitalize on this new normal environment by retaining talent and maintaining key investments. We believe these actions possess position Jacobs for adjusted EBITDA and free cash flow growth in fiscal 2021.
Finally, we have strong financial flexibility with ample liquidity that could be prudently deploy toward high return opportunities now I'll turn the call over to pop forgot to provide more detail by line of business.
Thank you Steve.
And now moving to slide seven to review our critical mission solutions performance during the second quarter, our CMS business continued to perform well with total backlog now at 9.1 billion, representing a 5% year over year growth on a pro forma basis growth was driven by sizable new business wins with the navy to deliver intelligent asset management.
And with the Air Force for research and development of rocket propulsion technology, as well with two smaller but strategic wins for cyber assessment solutions for the U.S. patent and trademark office, Andy developing operations contract with the up your eyes Electronic laboratory.
Overall Q2 performance was inline with our expectations for the business.
As a part of the overall financial scenario planning for the company. We believe the crisis will have a short term impact on our CMS business with 90% of the temporary decline. We are currently experiencing being due to the impact of physical distancing associated with cobot 19.
The underlying structural demand for services remains strong and as a result, we expect the business to ramp up as we approach the end of our fiscal year.
And expect continued growth in fiscal 21 and beyond our CMS business is supported by long term enterprise contract. Unlike other parts of our CMS portfolio, which can be executed virtually these contracts involved in both highly technical work such as department of energy remediation and department of Defense test.
Ranges, where access to the client side is required.
Some elements of the stable and resilient contracts are experiencing temporary impacts from physical distancing protocols.
Let me share with you further details on the impact by sector.
Our U.S. federal civilian business makes up approximately 40% of CMS revenue with the majority coming from our NASA, India, we client.
Jacobs provides broad support to NASA and it's accelerated work to meet the current administration mandate.
Turn to the Moon in 2024.
Our client must make progress towards these national goals. Despite the challenges of teleworking and a reduced onsite workforce at NASA, we expect a low overall impact in the second half of the fiscal year as most of our work transition to teleworking or is operating within physical distancing guidelines.
However, we anticipate our deal we in atomic energy of Canada nuclear contract to be impacted to a greater degree in the second half of the fiscal year.
As you as the Jacobs teams are operating under physical Didnt think constraints that significantly decrease the on site workforce or deal. We has provided us the ability to recoup the direct costs from the auto workforce, our operating properties generated underperformance incentive milestone basis. As a result, we expect to recognize revenue per the.
Summers at a lower profitability until we ramp back to normal operating levels, which is expected later this fiscal year.
I want to note that this part of our business continues to win awards in this tough environment. In April we were awarded a 39 month extension of deal we use West Valley demonstration project with value is just one of five extensions. We have recently been awarded in our 10 projects I portfolio.
India event to be continuing economic slowdown our nuclear remediation business will be one of the most resilient components of our portfolio given the well funded long term recurring nature of the business.
Now moving to the U.S. intelligence community, which contributed just over 20% of CMS revenue.
Our mission I T C eyesore in cyber businesses provide solutions to the sector.
Our clients in the intelligence community must continue to provide these critical services remaining resilient in the face of increased cyber attacks and preserve continuity of operation while at the same time responding to sudden need to reduce our onsite workforce overall, we see moderate impact from physical distancing headwinds at site.
Require split shifts and secured facility.
We expect the impact dissipate as we approach the ended the fiscal year.
This is partially offset by continued strong performance in our cyber and mission IP business.
Moving on the U.S. Department of Defense makes up approximately 20% of CMS revenue, where we provide a wide range of mission critical services performed a government sites or in highly secure facilities.
Our work at the missile Defense Agency continues to operate at near normal run rate. However, much of our work at the Army's test ranges have been impacted by physical distancing requirements.
Inline with our nuclear remediation business. These are highly resistant well funded im sorry, highly resilient well funded long term programs that performed well in economic uncertainty will require onsite execution by our employees.
Similar to the intelligence community, our cyber work within our beauty portfolio remained strong.
We expect cobot 19 to have a moderate impact to our second half results within our defense business, but normalize as we approach the end of our fiscal year.
CMS International makes up about 10% of our business, which covers primarily tier one nuclear decommissioning and operations and maintenance services in the UK in Europe.
Our international business also supports the UK Ministry of defense on its continuous ATSI deterrence program and various sustainment programs for air and land defense in the UK in Australia.
We expect our international business to be moderately impact from Cowen 19, second half of the year with approximately 70% of the impact coming from field work interruptions and 30% from consulting delays, but returning to normalized run rate as we exit the fiscal year.
Shifting to our commercial business. This makes up approximately 10% of CMS revenues.
In telecom, we provide solutions for wireless and wireline networks, including the do it out of Fiveg.
We expect to Sectored remains strong over the next several years.
For the automotive sector, we primarily design and operate aerodynamic wind tunnels and provide general technical services engineering and testing of automotive engine.
This business has been temporarily impacted by physical distant thing and we expect new awards to be delayed as our clients reevaluate their capex portfolio in future demand requirements.
In summary, we continue to believe the cobot 19 impact on our CMS business to be temporary and not indicative of how the business would perform in a typical recession scenario.
We are aligned to high priority mission critical areas of federal government budgets and our overall 2021 sales pipeline remains robust and more than 37 billion.
Oh. This figure we currently have 17 billion in source selection with the blended of profitability above our current run rate.
Yes.
Moving to our people in places solutions business on slighted RPM PS business continues its track strong track record performance in the second quarter with backlog up 5.4% Q2 net revenue excluding pass throughs was up 10% year over year, we had several wins in the quarter that further validate our strategy.
Good to align the business to a diverse set of high priority public and private sector initiative in resilient geography.
A recent selection as the prime consultant for a major US Navy environmental contract expected to be 400 million $480 million in FY over five years underscores Jacobs proven program management, environmental and P. fastest expertise. We also continued to drive technology.
Reasons across all facets of the portfolio.
As an example, we were awarded what will be the largest past groundwater treatment pilot program in the U.S. with Orange County, California, drawing on our multi disciplinary capabilities across all markets.
And in our water business, we want a 20 year OEM program for the city of Wilmington, Delaware, which will beverage predictive analytics to optimize operations. In addition, we recently leveraged our deep domain expertise to win a software development contract for the UK National flood risk National flood risk assessment and also when a mandate to deploy.
We are awkward DNA software analytics solution at one of the world's largest water utilities.
As evidenced by these superior client solutions, our strategic initiatives around global market and digital conductivity are the basis for our continued double digit profit growth trajectory over the last 18 months.
Now I'll discuss how we expect cobot 19 to impact our PMT that's business from a geographic in industry sector standpoint.
For doing so I'd like to discuss how we have not only adapted but optimized our delivery amidst cobot 19.
Our distributed workforce is maintained business continuity, while generating accelerated opportunities for innovation.
We continue to deliver world class consultancy and design with the majority of staff working from home.
Well also utilizing video streaming augmented reality in other innovative techniques to perform side assessments inspections, and assistant equipment maintenance and plant operation linking our expert globally to provide solutions in real time.
Our digitize project delivery platform has created increased efficiency and has enhanced our ability to deliver end to end solutions.
Now to our building infrastructure geographies, starting with the Americas, including our federal business. This business comprises more than 50% of RPM PS net revenue going to the the fiscal third quarter, I'm, sorry going into third fiscal quarter.
I've asked why 20, the Americas is one of our best performing regions with strong double digit top and bottom line growth across multiple sub geographies and sectors. We continue to see healthy sales bookings activity, even considering cobot 19 pressures with some delays in new awards, but minimal cancellations at this point.
However, our revenue burn rate expected is expected to decrease modestly in the second half.
We're strategically maintaining a slightly higher cost structure in retaining our talent in anticipation of a return to more normalized demand level and potential ended potential for U.S. infrastructure stimulus overall, we expect the Americas to experience a minimal kobin 19 based impact year over year, putting more pronounced impact compared to our growth.
Expectations forward looking indicators imply improved conditions as we approach our fiscal year end.
Turning to Europe, and the Middle East. This geography represents approximately 20% of Pmcs net revenue with UK, making up a majority of the business.
Prior to coping 19, the UK was experiencing Brexit related slowdown as the newly elected government was in the process of formalizing their plan for increased infrastructure investment and restarting major programs, which were awaiting funding.
Through our diverse offering track record of performance and scale. We are uniquely engage in all major infrastructure programs in the UK. In fact, we were just awarded a 10 year highways, England Smart Motorways Alliance contract.
Hi, Wi high speed rail to.
He is also moving forward.
Along with the pipeline of smaller projects within existing framework agreements. However, we are cautious on our near term expectations for a broader post cobot 19 ramp up in this geography and expect a moderately negative impact to result in fiscal Q3, improving modestly during fiscal Q4.
Long term, we view Europe and the Middle East is strategic geography that will not only prioritize infrastructure spending but will also serve as an innovation hub to the latest digital infrastructure solutions.
Moving to Asia.
Which represents just under 10% of PMPM net revenue with Australia, New Zealand, comprising the majority of that business, while the pipeline of new opportunities remains robust we are witnessing delays in some aviation related and other projects tied to government tax revenue associated with the downturn in commodity.
We expect Asia to be materially impacted in fiscal Q3, 2020 and improve as we reposition our resources targeting development are developing opportunities in health care facility and transportation.
And finally, our advanced facilities business, which makes up approximately 20% of PMP Ethernet revenue, we'll likely see the most pronounced cobot 19 related impacts for the business in the short term given physical distancing constraints at some of our sites a.
The key factor is our life sciences customers realigning their capital portfolio decrepit, Kobin 19 related solutions and changes in supply chain strategies related to other therapies.
We believe this at this business has the most potential for a sharp V shape recovery driven by multiple large scale cobot 19 related therapy and vaccine projects in the pipeline, where we are well positioned as the global leader in the sector. In fact, we're currently performing early conceptual designs for these life Sciences and mission critical.
Project. In addition, cloud computing driven projects such as semiconductor Fabs and data centers are likely to be awarded in the coming months. Our advanced facilities business is one of the years, where most optimistic about with developing momentum we expect to play out over the course of 2021 and beyond.
As we turn to our core sectors, while global restrictions and mobility has resulted in reduced demand across all modes of transportation.
Yeah.
Much as markets critical infrastructure projects have sustained through recent government stimulus packages, we anticipate the future transportation related stimulus will catalyze and drive economic recovery.
Moving to the water and environmental sector, we're seeing strong long term demand in both upgrade to water infrastructure and our utility operations and maintenance business.
From an environmental standpoint, our Pete fast and FEMA related business are expected to grow partially offset from short term impact from physical distancing in our field work and private sector environmental consulting.
And in our built environment, which includes the government facilities healthcare are higher education, and smart cities, we anticipate near term headwinds to be offset by solid demand and healthcare as clients rethink evolving resiliency requirements.
We also expect a growing demand from our higher education, and sports and entertainment clients reshaping their infrastructure preparedness for the threat of future Pandemics in summary, we have taken a proactive approach to assessing the shifting market trends into a living roadmap we call. The now to next initiative.
This initiative, along with a proven track record of execution reinforces global market and digital content strategy.
Now I'll turn call over to Kevin to discuss our financial performance in more detail Kevin.
Thank you Bob Im now going to discuss more detailed summary of our financial performance for the second quarter fiscal 2020 on slide nine.
Third quarter gross revenue increased 11% year over year with pro forma net revenue, including tw, but excluding the stub period from three weeks of with nuclear up 7% with 10% growth coming from PMP has some 4% from CMS.
Adjusted gross margin in the quarter as a percentage of net revenue was 23% down 160 basis points year over year.
The decrease in gross margin was primarily due to this success and delivering our cost synergy targets for the see each time acquisition as some of that benefit has a crude to our clients of the lower overhead reimbursement rates in some contracts.
The lower reimbursement rate of course is more than offset by the absolute level lower loan gionee costs. The impact remains in that positive to the company that has exhibited by the lower DNA as a percentage of net revenue of 110 basis points year over year to 14.8%.
It was also positively impacted by lower travel and employee related costs associated with some early impacts from content 19 cost mitigation efforts in short the improved DNA level as a percent of net revenue continues to show improved growth gross leverage for the company.
GAAP operating profit was up 63% to $168 million and included $44 million or restructuring transaction and other charges and $24 million of other charges consisting of 22 million.
Amortization from acquired intangibles and to nine of costs associated with the quarterly transition services agreements.
Adjusting for these items adjusted operating profit was $237 million up 7% from the prior year.
Moving on our adjusted operating profit to net revenue was 8.5% down 50 basis points year over year on a reported basis, Jim driven by a decrease in CMS flat performance and Pbms and unallocated corporate expense.
Discuss the underlying drivers for the line of business and corporate costs on the next slide.
GAAP net earnings and EPS from continuing operations were negative $122 million or 92 cents per share and included a charge for the mark to market adjustments associated with our world equity stake and other fcr related matters at $1.90 425 cents per share of after tax restructuring transaction out of the chart.
Just as noted above and amortization of acquired intangibles of 12 cents.
Excluding these items second quarter, adjusted EPS was $1.39, including a seven cents benefit from discrete tax items.
Excluding these discrete tax items in both the current and year ago quarter underlying adjusted EPS was up 11% year over year.
Q2, adjusted EBITDA was $261 million or 9.4% of net.
Revenue and met our expectations for the quarter.
Finally, turning to our bookings during the quarter our perform a book to Bill ratio approached 1.1 for Q twos, driven by a strong CMS book to Bill of approximately 1.2 times and a solid onetime book to Bill for Pts PMP US as Bob noted earlier, the sales pipeline remains robust across both lines.
Businesses and has increased on a like for like basis, when compared to last year and last quarter.
We have seen some delays and expected award dates we have seen very few cancellations. We continue to be optimistic that our pipeline will convert in a manner that will set up the company well for 2021.
So regarding our LLP performance, let's turn to slide 10, starting with CMS pro forma revenue, including key W. But excluding the stub period from what nuclear.
4% year over year during the second quarter during the quarter. We saw continued strengthen our cyber space, including NASA mission in Fiveg businesses.
Operating profit was 84 million and grew 14% year over year and in the single digits on a pro forma basis.
Operating profit margin was down 20 basis points year over year to 6.8% as a result of higher benefit related costs in the quarter. Excluding this impact underlying just LP margin was up over 20 basis points year ago.
In early April it was exciting to see the initial impacts of the rate ramp on the two major new business wins, and maybe less sound and Air Force Research Laboratory. However, as Bob mentioned in his remarks, we're expecting a short term headwind from physical distancing in CMS, mainly on our nuclear remediation business do you DRAM job.
Operations business, and our commercial business, where physical presence as necessary.
In fact, some of the impact from.
Physical distancing headwinds will result in us recognizing revenue with lower associated or any some sina profit. This is due to the U.S. government reimbursing us for idle employee related costs, but not paying us for our fees earned which represent our profit.
There has had delay and our ability to reach milestones, which allow fee benefits to be realized.
It is important to note that any more typical economic slowdown the operating profit from these types of business would be highly resilient as these on premise and other key programs are well funded under multi year contracts.
This dynamic will result in a more pronounced impact to operating profit than revenue in our third quarter on a reported basis, we expect CNS operating profit to be down double digit year over year in the third quarter fourth an improved performance in the fourth quarter quarter, which has the potential for year over year growth.
Moving to PMPM Q2, net revenue grew 10% year over year and operating profit was up 9% as a percentage of net revenue operating profit was 12.3% for the quarter flat from a year ago and a strong performance given the overhead reimbursable rate issues noted earlier strong project mix in the.
Year ago quarter, and headwinds remaining talent capacity in the UK in the face of the code that 19 pandemic.
The Americas business continued to post strong double digit year over year revenue and profits profit growth.
The strength was somewhat offset by softness in the UK and timing on major project in advance facilities.
While we have started strong in the first half the year, we anticipate reported revenue and operating profit to be down year over year in the third quarter, and then begin to see and less negative impact in Q4, as a business recovers to a year over year growth outlook in fiscal 2021.
Our non allocated corporate overhead costs were $37 million for the quarter up slightly from the Q1 figures and up from $25 million in the year ago period, driven by higher benefit costs for the remainder of the year. We continue to expect non allocated corporate costs to approximately $35 million per quarter.
Absent any allocation reductions to the line of business given our overall efforts to reduce our right to reduce our over had cost structure in second half of this year.
Now turning to slide 11, we'd like to update.
You on our initiatives relative to our recent M&A and divestiture actions.
Regarding the sale of VCR to date, we incurred slightly over $220 million of the approximate 230 million and related transaction separation and restructuring costs.
We expect the remaining cost to be incurred over the remainder of the year.
The KBW and integration is largely complete and delivered the expected cost reductions and the teams now focused on leveraging the resources of both companies to drive further revenue synergies.
Our acquisition of Whats nuclear business closed on March six our integration management office is well underway executing against our acquisition playbook in line with our playbook. The combined management structure was rolled out on day, one and the team is executing to deliver the expected $12 million an annual cost synergies of course.
The overall focus on the strategic project for the combination in the strategic growth benefits also remains a high priority.
Please note that our overall expectations regarding the piano PML and cash flow impacts related to separation restructuring and other transaction related expenses for the full year 2020 remain intact with approximately $150 million and PNM costs and cash flow expected outflow expect.
And over the course of this year.
And as we enter 2021 again, it's important to note that material differences and GAAP versus adjusted figures will be significantly reduced.
Now on to our cash flow generation in the balance sheet on slide 12 12.
During the quarter, we generated $113 million and free cash flow Q2 cash flow is impacted actually by approximately 36 million of restructuring and separately separation related cash flows.
$5 million has been incurred year to date.
Including these costs, we continue to expect positive free cash flow for the remainder of fiscal 2020 with a total reported free cash flow now expected to be more than $350 million for the full year, which includes a headwind of $150 million from the restructuring items noted above.
Assumed in our free cash flow guidance is some expectation that's timing of some customer payments could be impacted over the course of the year get included 19.
Dsos were flat from Q1, 2020, but up year over year of note approximately $50 million as collections were received in late March but after quarter end of March 27.
Still see equal opportunities to lower our DSL run rate, which we believe is the major driver for us attaining a onetime free cash flow conversion target long term.
And now moving to the balance sheet.
As part of our planned capital structure strategy, we executed a five year 1 billion dollar unsecured term loan facility during the quarter, an attractive rate of approximately LIBOR plus 150 basis points.
In addition, we entered into multiple interest rate swaps at different tenors with an aggregate notional value of $900 million to lock in long term effective.
Effective rates approaching nearly 50% of our total debt.
The interest cost approximates in aggregate, 2% yield for the fixed portion and we are pleased that we're able to lock in longer term rates at approximate our short term rate levels.
We ended the quarter with cash of approximately $1.7 billion and a gross debt of 3.1 billion, resulting in a $1.4 billion and net debt before attributing the benefit of the Worley equity.
Treating the worley equity as cash on pro forma net debt to adjusted 2020 EBIT da is adjust over one times as you will not have chose not to pay down our revolver with the proceeds of the term loan.
Out of an abundance of caution given the disruption seen in the financial markets in March and April diesel vehicles at 19 situation. We will continue to monitor and proactively pay down the revolver as markets continuing continued to show increased levels of stability.
Regarding capital deployment, we paused or share repurchases March that's a pre cautionary measure as the posted 19 Princess escalated.
Nonetheless, we still repurchased $286 million a share of shares during the March quarter and ended the quarter with the remaining 1.1 billion left about authorization.
We continue to expect to fully utilize our remaining share buyback authorization overtime. However, I reiterate that our immediate use of existing excess cash will be focused on paying down our rigs that revolver as market conditions warrant for modeling purposes, We would expect an average share count of 132 million.
And for the second half fiscal year 2020 exclude mission on share buybacks, we will continue to be opportunistic and our share buyback activity going forward and will provide an update on our quarterly earnings calls relative to share count expectations.
Regarding our effective tax rate, we continue to expect an adjusted effective tax rate of 24% for the second half of fiscal 2020, and long inline with our long term normalized adjusted tax rate in the range of 23% to 25%.
Finally, given our strong balance sheet and free cash flow.
Remain committed to our quarterly dividend, which was previously previously increase and declared at 19 cents per share as you know our current dividend level represents an increase of 12% versus a year ago.
Now I'll turn it back over to Steve Farr outlook in closing comments on slide 13.
Alright, Thanks, Kevin.
Now, let me review, our total company outlook to account for the expected impact from covert 19 on our business over the remainder of our fiscal 2020 year.
We're updating our fiscal 2020, adjusted EBITDA outlook to a range of 950 million to $1.05 billion from our previous range of $1.05 billion to $1.15 billion.
We're also updating our fiscal 2020, adjusted EPS guidance to a range of $4, an 80 to $5.30 per share from the previous fivethirty to 580 per share range.
At the midpoint of our revised EPS range 2020 fiscal year adjusted EPS represents year over year growth when excluding the impact from fiscal 2020 in 2019 discrete tax items.
Our revised guidance is based on an analysis of several scenarios that estimated the impact of the vaccine pandemic on our results.
Specifically physical distancing initiatives, which create temporary limitations on our clients and Jacobs ability to perform work primarily in the current fiscal third quarter period is the single biggest impact on these projections.
Gross impact EPS is estimated at approximately a $1.50 at the midpoint of our estimates.
Included in that estimate is approximately 100 million dollar investment to retain talent equivalent to approximately 50 cents per share.
Importantly, we have strategically decided that we will maintain this talented workforce given our belief that we expect a rebound later this year, thereby ensuring access to this talent as we returned to growth.
We have taken significant actions to reduce this gross impact by reducing our cost structure effectively reducing costs in the back half of the year by a dollar of bps.
These efforts include elimination of discretionary corporate LSB and other employee related costs.
As a result, our net expected impact at the midpoint of our range is 50 cents per share.
Based on our decision to maintain our existing workforce and to ensure that we have access to our talent to drive the expected return to growth. We believe it's a strategic imperative to retain our talented people across the company.
We expect the majority of the earnings revision to occur in our third quarter as we move into the fourth quarter, we anticipate the impact of the pandemic on Jacobs to subside and our business to return to run rate levels force for the fourth quarter.
Importantly, we expect fourth quarter, adjusted EBITDA to improve with potential for year over year growth.
As previously stated we expect strong fiscal second half reported free cash flow of at least $400 million.
And we believe that 2021 is shaping up for a strong rebound in growth will provide an update as we approach. The end of this fiscal year as we further evaluate how the cobot 19 pandemic unfolds with that I'd like to open up the call for questions.
Operator, we'll now open the call.
Thank you as a reminder, you May press star one on your telephone keypad to ask a phone question.
Our first question comes from Joseph Denardi with Stifel.
Hey, good evening guys.
Steve you've obviously spent a lot of time the last few years that reshaping the portfolio Im wondering if you could just provide your thoughts on how impactful what we're going through now is on that going forward I'm not asking you for.
Hi guidance on what markets, you might invest into im sure that sensitive for competitive reasons, but.
Do you see opportunities emerging from this or are those opportunities going a more on the margin just trying to get a sense for how material you think you need to adapt the business to what's happening.
Yep.
Thank you.
All the work that we did over the last several years strategically is fortuitous now as we.
As we go through this pandemic.
When we did that work, we we've done a lot to.
The strategic analysis on how this will make us a much more resilient company and.
And even though we're going through a temporary downturn, it's as a result of something that.
None of us ever predict that would be that we would be unable to physically go to work our clients would be able to physically go to work all that is going through a correction, what we hear and see from our client based on our pipeline that surging.
Projects than programs that are not getting cancelled or just moving to the right.
This resilient portfolio will continue to play out and gives us optionality as we move into fiscal 2021, there will be certain sectors amongst our portfolio a very diverse portfolio that should be clear winners and others that are going to be under pressure and and we're already in that transition.
Redeploying, our Workforces upskilling quickly our workforce to be able to address an attack that those sectors that you've you've mentioned that should be big winners as we go into 2021, so were actually pretty positive about 21 and look forward to getting through this current quarter.
Okay, and then Kevin just just on the.
The trimming of 100 million of EBITDA from this year I much of that just goes away versus.
Being able to recoup that or is there kind of a lingering effect from.
Some of the headwinds into next year.
Yes look I think thanks for the question Joe.
We're not going to really talked about 2021 today, although we gave very clear views as it relates to our return to that.
A more normalized level of performance. So I won't go further than that but I do think that the dynamic of those 100 million dollar some of that is temporary in nature to ultimately help support our ability to to delivered the results in the guidance that we provided and then some of that will start to get back.
Got it and reinvesting in certain parts of the business. So I think the fundamental way to think about it is as we've got this revenue decline in the short term, which then effects ultimately the that profitability pretty immediately because we're keeping our talent in place so that drop in revenue.
This falls at the bottom line, we're being very very diligent and aggressive then in eliminating kind of almost all discretionary travel and other related costs and in the good news about this though is that we're learning a lot due to some of the things that are happening from working from us.
And some of the productivity, we're seeing which is good to see that we're going to take that learning and be able to leverage on.
That two to 2021 and beyond so not all of its going to go away, but certainly there is a big chunk that we're just doing it to make sure that we're doing the right thing for our shareholders our employees and our other stakeholders.
Okay, and then in CMS estimate book to Bill, they're very very good ranks pretty well amongst your peers on that side of the business when does that actually start to translate into maybe more material organic growth within CMS. Thank you.
Well.
Probably within the next two to four quarters, it's kind of a six to 12 month book and burn type of cycle and those to the two big drivers that that drove that book to Bill ratio, Joe We're long term contracts I give a two to four quarters.
Great. Thank you.
Thank you.
As a reminder, you my press star one for any audio questions. If youre on a speakerphone. Please come to the phone before asking your question.
Our next question comes from Michael did us with vertical research partners.
Good afternoon gentlemen.
Hey, Mike Michael Michael.
[music].
Steve are very very pretty good the presentation very detailed in fourth pool.
As you were in the midst of the crisis.
Do you anticipate as we move through this will Jacobs as an organization drive.
More business because your clients are going to pull more opportunities from you or you have the technology.
In the skill sets to push more solutions on the business, where as we look towards 2021 20 to their overall could be maybe a tailwind in a sense because of the changes the normal.
Yeah, well again as I started to address that.
Michael in the first question I think were.
We're well positioned and what we believe we're going to be all the sort of critical missions and critical activities that are going to go on as we emerged from from this covert 19 in the life Sciences business has a great example of one we're an industry leader there.
That business has been a very global business and and I think is we believe and I was going through a temporary transition to.
Got to reconfigure, the whole supply chain and how to not only.
Address the near term opportunity of therapies and vaccines associated with over 19, but but really to become more resilient and the event that this type of pandemic or something else happens, which has created supply chain issues and so these are these are initiatives that we're in the mix on and we're well positioned to.
To capitalize on that no matter, what the outcome is because of our global integrated delivery our capabilities in our industry leading position.
And so whether its life sciences healthcare cyber security.
And of course.
The the critical missions that we do across our CMS business, which had been sort of on temporary hold our are gonna have to get out it and and where position you pick up a whole cares act that whole pairs that that has supported our businesses to make our talent mission ready for.
The essential critical work, that's going to have to get done as soon as everyone gets back to work over the next several months.
And so there's a tremendous opportunity unfolding for us and we feel like we're well positioned.
Duly noted Steve my follow up would be maybe for Bob.
You highlighted the social business seen mitigation you in your clients are going through and in the field in your opportunities.
Do you have a sense of protocol that you're basing this towards in the Middle later this year do you anticipate and 2021 to beyond.
What we're seeing now and how you working is how it's going to be or is there.
It's a difficult was a sense of more normalcy that comes back as as our society evolves given the moving on.
Yeah, Mike I don't think we know the timeline and so what we're doing in preparation of instead of.
Preparing for a world post cobot, we're kind of preparing for a world with coded and using technology is our friend and so those physical distancing requirements. This is take a field application and this applies to both CMS is worth PPS.
We're developing actually we have in house technology around this with our eye on platform, where we're very bracelets that that determine how far we are from each other as well as contact tracing throughout the entirety of of different sites or or bases. So clearly.
It's it's a world that we're not anticipating and we look at our future projections, we're not putting a timeline on when things are going to go back to the way. They were on February Onest on X date.
We're anticipating that it's going to be going longer.
Understood appreciate your thoughts gentlemen, thank you.
Thank you.
Our next question comes from Steven Fisher with <unk>.
Great. Thanks, good afternoon.
You guys talked about a number of programs, where you expect to ramp back up to targeted profitability levels.
Really by the fourth quarter. It sounds like what are all the most important things that that have to happen to achieve that how much of that do you think is within your control.
Yes, well I think we we said it and our stated remarks that we are attributing 90% of the shortfall to this whole physical distancing limitations, so clearly a key assumption.
And everything we're talking about is that that that's going to start to subside governments lift restrictions not only here in the use of different cities states, but across the globe.
And that all takes place through the course of the remainder of this year.
We're not assuming any accelerated basis, but that it gradually happens as you know as we're all.
Starting to see but but but it's going to happen throughout the third and fourth quarter.
So that's that's the major.
Assumption Thats clearly not in our control.
And and so.
I think thats kind of a simple answer to your question as far as what's the key driver because once that happens I think thats. The message we're trying to make sure that you. All understand this this is a situation where the demand is sitting there and we just.
We and our clients up to physically get back at it.
So this is not a situation where projects have been canceled.
And we're trying to rebuild the pipeline we have a we have a record high pipeline. Our backlog has grown we just got a physically get back to two work enough not the way it used to be but to a certain level recognizing that we probably as a company will continue to have remote working forever now that we've learned that in certain areas that so.
That's a more efficient effective basis, but where we do need the face to face physical interactions and engagement with our clients. That's the key assumption.
Around what we're talking about today.
Got it and then.
Your Global design Center concept has been a a very unique element of your.
Your margin enhancement opportunities just curious how that usage is ramping up Q2, and then and really how you think this new working model.
Will will impact the use of the design centers is that.
It really an opportunity as everyone learned how to work more remotely is that an even better opportunity to leverage these design centers.
Yes, Steve It's Bob Stephens, Bobby I, we actually see it as what's happening now as a catalyst to even drive that strategy at a faster rate what we've seen specifically in areas like Poland in India and Southeast Asia.
Is.
Is it incredible incredible level of efficiency as people go to remote and still operating in.
In a design center capacity and so so I think that what's happening now is definitely going to serve as a as an accelerator for driving.
Connected delivery and integrated delivery to another level.
And then as we look forward to kind of the future the workplace.
We are gonna have centers that require project collaboration.
With people in those centers and so we're looking at layouts and workplace strategies.
That our unique by the different function of that operation or that office.
And so a design center might have a different layout in say a.
Hub or a client site, which which might have more I'm, making this up conference base, rather than workspace cubicles that our socially distance apart from each other so we're right in the midst of all of that it's part of that now to next kind of initiative as we look forward in new markets in new ways of doing things.
From this dislocation.
What was the ramp up this quarter on that as a percentage increase in usage or anything you can give.
I don't have a exact percentage, but I'd say, it's been greater than it was in previous quarters.
Yes.
Okay. Thanks, a lot.
Thank you. Our next question comes from Jamie Tech with Credit Suisse.
Hi, good evening and help everyone is I'm glad to hear everyone well unhealthy I guess my first question just on the guide Kevin when you talked about that Covidien pack. I mean, you talked about you know that EBITDA and EPS impact, but is there anyway, you can help us understand the impact across the two different.
You know segments he CNS Ken.
The key MPS if possible.
Then also just trying to understand you digest the cash flow dynamics I understand why you why you lowered how I'm just trying to understand the impact on cat, what you've seen for dsos by.
The ended the year, where they can go and then is to CMS cash flow holding better we're hearing from other contractors that.
You know government government actually put paying their place quicker. Thanks.
Yes, so thanks for that thanks, Thanks to the question, Jamie just I'll give some general commentary to give some perspective on on the two businesses.
The actual kind of dynamics in CMS.
In Q3, specifically has a greater impact associated with some of the comments that.
Steven Bob just made as it relates to the physical distancing you think about certainly the nuclear work and some of the other things that we talked about commercial we actually have to be on site and and certainly the some of the test range work as well so that ended up being a bigger impact to CMS. So if you look at versus the side.
He said the business the majority or the larger piece.
I should say in terms of cost or tons, as a percentage basis or more CMS space and in 2023rd quarter, but there were expecting a a challenge in both of the business versus versus a year ago. So I would say a greater percentage reduction in Q3.
For for CMS.
And and then I think ultimately as we transition to Q4.
Certainly and improving dynamic in CMS, and and probably a more little bit more elongated recovery for PPS just because of.
Shifting of the portfolios as Bob was characterizing in terms of rejiggering pipeline and some of that the customer thinking relative to the shaping changes the of the opportunities having said all of that I will say, where now a few weeks into Q3 and I would say we're encouraged by.
By the views and in the things that we're seeing relative to customers and how they're they're affecting in our business relative to how we're driving that so.
We're being prudent with our view of what the impact is.
We're going to see how we play out and ultimately get back at it in 2021.
As it relates to cash flow the second part of that question.
I think look we're where we took the Occassional guide a little bit down obviously, either da's impacted.
And so certainly part of that to there and then the other part is associated with what we're suggesting is a potential as it relates to some disruption on that on the collection side, we're actually seem pretty good.
Performance as you suggested on the CMS side. So we're just thinking that it might be more about.
PMPM, but we'll play that out.
And so far we've actually seen pretty good pretty good performance through through the first part of Q3.
And I'm, sorry, do you want to commit to certainly everything can be by year end.
No I think we're gonna, we're going to whole Titan NCL plays out that but look I think it's embedded into that new cash flow number so to be honest they can't fallout of bad if if we're sitting there with the 300.
HM 250 for the year.
Free cash flow okay. Thank you I appreciate the color.
No problem.
Thank you.
Our next question comes from Gautam Khanna with Cowen.
Yes.
Yes.
Given some color on.
Booking remove through the rest of the calendar year.
We still expect kind of the calendar Q3 budget.
Wash.
Your math and maybe just characterize sort of the front log.
What.
Now the RFP pipeline coming through and.
How much and where things might be stretching ethanol.
Yes. So again this is Bob so it is a bit of a different story between cm S&P MPS and so let me kind of taken both separately CMS, we see the.
Talked about it in the script the pipeline strong.
And the pace in philosophy of our of our of our proposal activity, probably it hasn't been stronger and so that.
That has been a pretty strong cadence that.
It's only been a bit not stifled, but but slowed when we have those confidential or those those secure proposals that we have we can only do the proposal in a skiff and though we have gifts within our real estate portfolio.
We have to use our clients as well so feed that strong and we see the award cycles.
Not not fundamentally shipping so that pipeline remains very resilient on PMPM again is Stephen and Kevin I've mentioned before.
It is in a matter of cancellations is probably more a matter of some shifting of the pipeline.
So we see that bookings target.
We're still confident the weekend, we can be right on where we had projected but but we're tracking that we'd per week for potential slippages in most of that is coming from the fact that at our state and local business. These are our clients that are probably getting.
More custom to ER are becoming their little slower and getting a custom to working from home than maybe we are and so were you know where assisting our clients in the evaluation of these proposals if not that they're going away, it's kind of the piece, but by which they could be reviewed and and and awarded in our private sector business. It's.
Actually been surprisingly resilient and in fact, we've we've received some just recent can't disclose them. Just recent awards from some of our larger private sector clients.
The from beginning to end through evaluation to award all of those were done remotely.
And so its overall kind of a balanced approach there we feel confident on this on the forecast.
One thing I want to execute on top of what Bob talked about in addition to the the size of the pipeline and everything that Bob talked about as far as the pace is the margin in the pipeline is also.
Improving and we've got.
We've really upgraded our capability to to measure and monitor this over the last 12 to 18 months and as we look at that pipeline that Bob talked about compared to a year ago. The margin as it was a significant improvement, so which bodes well for our strategic goal of not only profitably growing but increasing the margin objectives.
Thanks, a lot guys.
Thank you we have a question from Michael Feniger with Bank of America.
Thanks, guys for taking my my questions I appreciate all the all the color to key clear I know EBITDA is expected to grow in 2021.
There's on expectations that we could see the weakness in the second half of this year lead into the first half.
The first half of next year in that TPS segment can seems there's a lot of complex that CMS kind of inflection in the fourth quarter, but could PPS, but the delays and maybe pressure on public budget and that the small local and state municipalities is there an issue that that could bleed into these deletes bleed into the first half next.
Here.
Well, let me start in and Bob maybe build on it is.
Well, we you started getting into an area that we're all watching closely is how what's going to happen, though on a state local level because the government in the U.S. has done a great job to really support the defense and civil the federal side and and now we're we're looking anxiously law.
Looking forward to seeing what they do with the next round to cares hopefully next few weeks around state local and there's there's a lot of positive news coming out that you know I think everyone expects that they're going to.
Provide relief to that sector, and so that should start to.
Provide some good foundation as we enter 2021 and then the other pieces that Theres a lot of discussion about a finally because this went on this has been going on for years, even pre covert is the need for.
A big federal infrastructure stimulus.
So really get people.
I will go on putting to work back to work around addressing the crisis across the nation on highways bridges.
A whole host of areas.
Need to continue to accelerate water and wastewater and some.
And the whole broadband and everything else. So were you know, we're we're hoping and and monitoring that and then lobbying and very active on the hill.
Two.
So hopefully see later this year Congress.
Finally get up that that big infrastructure stimulus whether that happens later this year or leaks into early next year, that's a real positive for Jacobs and and so I think thats going to.
Play a piece of what kind of momentum if nothing happens.
You know the.
There is a big vacuum on supporting the state local side that could provide some some headwinds over the next.
Six plus months, but Bob belt to pick up yes. It would maybe maybe I'll also but talk about where we're positioned than we saw this you know in previous cycles as well and I think it's actually even even a strengthened during this dislocation is the depth of intimacy we have with their clients. There was a previous question.
About what we can control and what we can't control what we can control is our ability to solve our clients deepest challenges in right now our clients are experiencing challenges that they've never even seen before and with our whether it be a framework agreement that we've had for decades, and Thats cm S&P MPS allied or.
Our newer clients that we're now getting into different types of solutions over providing.
We're getting to a point, where whenever it comes back and it might be a step change in one part of our business in more of a trend in the other part of our business.
I would say the we are better position now too to capitalize on that than we ever had been ever and we had been into good position impact in the past as well. So we're we're positive about that.
Thank you that that was helpful and you mentioned in your prepared remarks.
Australia, and how you saw aviation and lower tax revenue due to look commodities and you think it's going to hit Q3, and then SREC recover in Q4 can you just help flush out wide that that is the case I understand the limitation physical limitations in the shortfall from covidien being able to get the certain sites.
The impact that's having there the why for example that that you provided with Australia why does that just be isolated to the into Q3 and then we had net recovery into Q4.
Yes, because I think that they were near when going into cobot embed that coded magnified and so the commodity crisis, though was exacerbated in in effectively magnified.
The result of of everything that we've read about in the news, whether it be oil and gas or even in the in the metals commodities.
Cobot accelerated it to wear now the need for.
From an intervention why so what was which was further accentuated in so I think the speed by which we are seeing government intervention in would there be in Singapore, and Australia, New Zealand, it's faster and it's already happening.
Perfect that just just lastly, I mean on the free cash flow is there anything we should be aware of when we turn to page 2021.
Hello.
Our next question.
Thank you jump back into queue.
You mean to getting there.
Our next question comes from Sean Eastman with Keybanc capital markets.
Hi, Tim Thanks for taking my questions I appreciate all the taller today.
My question is just as we look at the margin being up in the bid pipeline.
I'm, just curious if theres sensitivity to that assessment around the macro environment.
What extent is the bid pipeline price sensitive and is there kind of a risk that you know the assessment of that margin profile on on the work you're looking at could degrades.
Well it.
I think the.
The margin improvement is less about.
Pricing and more about mix and the type of programs and projects.
Typically going after so look I think everything always has.
A potential too.
To be under pressure under certain situations when you talk about margin but.
I think we're confident in the the margin profile improvement because it's been a strategic.
Emphasis on driving a different approach on the type of things that we're going after and prioritizing.
Rather than as we started this transformation journey several years ago was let's let's just sort of go after everything that we can and it's much more of a.
Strategic approach now as we've you know as we've advanced the company.
Culture around strategy so.
So we would say that it's a pretty solid profile less less around macroeconomics and more about delivering on winning those new new types of businesses.
Thank you.
Next question comes from Josh Sullivan with a benchmark company.
Good evening.
Just on the intelligent on the intelligent asset management vertical you had the recent win at the kits that base in Washington can you give us any color any early read on that contract and I'm curious if your other intelligent asset contracts. It may corridor Langley are you seeing interest to expand their skill.
To address the virus.
So this did the short answer Josh is yes, we are seeing interest to expand our scope talk specifically on the first part of your question with regards to the West sound contract in Washington with FX.
That's a really unique case, one the team did a fantastic job on winning that with a differentiated solution and then.
My we were awarded and had to mobilize in the mid Cobot and we we interviewed selected and mobilized folks all virtually and it was a true Testament to our our team in CMS led by Steve Arnett. He did a bid the team did a fantastic job at that I think others are catching parts.
Actually when you talk about May port and specifically other now effect type facilities, and so I think that differentiator of yes, we can provide more value from the actual.
That's it intelligent asset management offering, but we don't need this pro longed very in depth in laborious.
Mobilization plan.
In the means in method on how we do it is going to lead to even greater growth.
Okay, and then just as a follow up as far as the bid pipeline and he would say quantify what percentage is an intelligent assets.
Well I might have to I might have to get back on that one.
It's kind of weaved into a lot of our offering.
But as far as give me an exact number as a percent of the pipeline I'd probably need to to follow up on that.
Got it thank you.
We have a question from Andrew Wittmann with Baird.
Great. Thanks for taking my questions. Let me just to a couple of cleanup questions to the think all the big picture and other questions have been taking care of here, but I wanted to understand here.
It's in the quarter there were any award fees project Closeouts or the like that were reported in the results that we should know about.
Impacting the quarter, obviously this come up from time to time it didn't have a comments I thought I'd ask.
Kevin.
Not that we always we always have that.
Andrew bet, but ultimately not not mature at all in the in the quarter.
Okay, and then just as it relates to some of the or newly acquired companies here, obviously would groups closed in the quarter I was wondering what the contribution from that was the backlog as well as that maybe the total a lot of revenues from that and kw that were recognized in the quarter.
Yes, the new the new backlog from a from what was just over 400 about 425 million.
And then what was the second part of the question.
The acquired revenues from KBW and wood in the quarter.
From KBW I don't have that handy, but.
Stub period for wood was very very small call about 20 million or so.
Thanks.
Okay, no additional callers in the queue, Sir are there any closing comments or remarks.
Yes, we're going to my closing comments.
All right so.
It's every one of our transformation over the last four years as we just discussed during the culinary has been focused on building a strong culture and a portfolio, which would prove resilient under multiple economic scenarios clearly cobot nine teams presenting a challenge that none of us could've predicted but our transformation is proving to be a foundation, that's going to help us see us through this all three.
The successfully we're keeping our people safe delivering on our commitments to our clients. We're moving swiftly with good agility shifting our work model to ensure business continuity and we're in the process of accelerating our digital transformation plan and most importantly, we're retaining our most important asset our talent to people so as weve.
Brian how we're going to work in the future, we expect to benefit from significant cost savings as well as positive cultural benefits and the flexibility for our people that advancements on how we serve our clients and that future start smell. Thank you.
Thank you on that now conclude the call you may now disconnect.
Okay.