Q3 2019 Earnings Call

August 5, 2019

Excuse me, ladies and gentlemen, this is the operator today's call is scheduled to begin momentarily until that time your lines will again be placed back on music hold thank you for your patience.

Operator: Excuse me. Ladies and gentlemen, this is the operator. Today's call is scheduled to begin momentarily. Until that time, your lines will again be placed back on a music hold. Thank you for your patience. Good morning. My name is Brandy, and I will be your conference operator today. At this time, I would like to welcome everyone to the Jacobs Fiscal Q3 2019 Earnings Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. Mr. Jonathan Doros, you may begin your conference.

Good morning, My name is brandy and they will be your conference operator today.

At this time I would like to welcome everyone to the Jacobs fiscal third quarter 2019 earnings conference call and webcast.

All lines have been placed on mute to prevent any background noise.

After the speakers remarks, there will be a question and answer session.

If you would like to ask a question. During this time simply press Star then the number one on your telephone keypad. If you would like to withdraw your question press. The pound key. Thank you Mr. Jonathan Drew you may begin your conference.

Thank you. Good morning, good afternoon to all earnings announcement was filed this morning, and we have posted a copy of the slide presentation to our website.

Jonathan Doros: Thank you. Good morning and afternoon to all. Our earnings announcement was filed this morning, and we have posted a copy of this slide presentation to our website, which we will reference in our prepared remarks. I'd like to refer you to our forward-looking statement disclaimer, which is summarized on slide two. Certain statements contained in this presentation 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. Such statements are intended to be covered by the safe harbor provided by the same. Statements made in this presentation that are not based on historical fact are forward-looking statements.

Which we will reference in our prepared remarks.

I'd like to refer you to our forward looking statement disclaimer, which is summarized on slide two.

Certain statements contained in this presentation constitute forward looking statements as such term is defined in section 27, a into securities at 933 as amended and section 20 Onee of the Security Exchange Act. The 1934 as amended such statements are intended to be covered by the safe Harbor provided by the same.

Statements made in this presentation that are not based on historical facts are forward looking statements.

Jonathan Doros: 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 these and other risks, uncertainties, and other 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 29 September 2018, and our subsequent quarterly reports on Form 10-Q. We are not under any duty to update any forward-looking statements after this date of presentation to conform to actual results, except as required by applicable law.

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 these and other risks, uncertainties, and other 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 29 September 2018, and our subsequent quarterly reports on Form 10-Q. We are not under any duty to update any forward-looking statements after this date of presentation to conform to actual results, except as required by applicable law.

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 these and other risks uncertainties and other 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 29 2018.

And our subsequent quarterly reports on Form 10-Q .

We're not under any duty to update any forward looking statements. After this date [laughter] presentation to conform to actual results.

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During this presentation will be referring to non-GAAP financial measures. Please see slide two of the presentation for more information on these figures.

Jonathan Doros: During this presentation, we will be referring to non-GAAP financial measures. Please see slide 2 of the presentation for more information on these figures. In addition, during this presentation, we will discuss comparisons of current results to prior periods on a pro forma basis. See slide 2 for more information on the calculation of these pro forma metrics. We provided historical pro forma results in the appendix of the investor presentation. We believe this information helps provide additional insight into the underlying trends of our business when comparing current performance against prior periods. Turning to slide 3 of the agenda, Steve will begin by discussing our cultural initiatives, highlight our focus on innovation, then provide a recap of our Q3 results, including a market review of each business.

During this presentation, we will be referring to non-GAAP financial measures. Please see slide 2 of the presentation for more information on these figures. In addition, during this presentation, we will discuss comparisons of current results to prior periods on a pro forma basis. See slide 2 for more information on the calculation of these pro forma metrics. We provided historical pro forma results in the appendix of the investor presentation. We believe this information helps provide additional insight into the underlying trends of our business when comparing current performance against prior periods. Turning to slide 3 of the agenda, Steve will begin by discussing our cultural initiatives, highlight our focus on innovation, then provide a recap of our Q3 results, including a market review of each business.

In addition, during this presentation, we will discuss comparisons are current results to prior periods on a pro forma basis see slide two for more information on the calculation of these pro forma metrics.

We provided historical pro forma results in the appendix of the Investor presentation. We believe this information helps provide additional insight into the underlying trends of our business when comparing.

Current performance against prior period.

Turning to slide slide three the agenda.

Steve will begin by discussing our cultural initiatives highlight our focus on innovation then provide a recap of our third quarter results, including a market review of each business. Kevin will then provide some more in depth discussion of our financial metrics and provide an update on our M&A and DCR divestiture as well as review our balance sheet and cash flow finally, Steve will provide our updated outlook along with some closing remarks, and we'll open the call up for questions with that I'll now pass it over to Steve Demetria Chair and CEO .

Jonathan Doros: Kevin will then provide some more in-depth discussion of our financial metrics and provide an update on our M&A and ECR divestiture, as well as review our balance sheet and cash flow. Finally, Steve will provide our updated outlook along with some closing remarks, and we'll open the call up for questions. With that, I'll now pass it over to Steve Demetriou, Chair and CEO.

Kevin will then provide some more in-depth discussion of our financial metrics and provide an update on our M&A and ECR divestiture, as well as review our balance sheet and cash flow. Finally, Steve will provide our updated outlook along with some closing remarks, and we'll open the call up for questions. With that, I'll now pass it over to Steve Demetriou, Chair and CEO.

Thank you turning to slide four.

Steve Demetriou: Thank you. Turning to slide 4. Thank you for joining today to discuss our fiscal year Q3 financial results and the progress we're making on executing against the strategy we outlined at our February 2019 investor day. As you've heard us say, we at Jacobs are on a journey to create a company like no other. Over the last few years, we have successfully implemented multiple organic and inorganic strategic portfolio actions to transform Jacobs. We are now predominantly aligned to multiple secular growth trends such as space, urbanization, resiliency, and the convergence of information and operational technology. Furthermore, our relentless focus on culture and proven track record of execution discipline creates an unmatched global network of expertise, which provides the ability to deliver innovative solutions for our clients' complex challenges.

Thank you for joining today to discuss our fiscal year third quarter financial results and the progress we're making on executing against the strategy. We outlined at our February 2018 Investor Day.

As you've heard US say, we at Jacobs are on a journey to create a company like no other.

Over the last few years, we have successfully implemented multiple organic and inorganic strategic portfolio actions to transform Jacobs.

We are now predominantly aligned to multiple secular growth trends, such as space urbanization, resiliency and the convergence of information and operational technology.

Furthermore, our relentless focus on culture and proven track record of execution discipline creates an unmatched global network of expertise, which provides the ability to deliver innovative solutions for our clients complex challenges.

As a result of this competitive advantage, we expect Jacobs to exceed the growth trends of our markets over the long term.

Steve Demetriou: As a result of this competitive advantage, we expect Jacobs to exceed the growth trends of our markets over the long term. Our leadership position was recently recognized by once again achieving the number one global design firm ranking by ENR, including Jacobs being the top-ranked firm in 19 critical submarkets. Our fiscal year third quarter results demonstrate a continued focus execution through one of the most transformative periods in our company's history. During the quarter, we entered the final stages of the highly successful CH2M integration while closing the sale of our energy chemicals and resources business and completing the acquisition of KeyW, a leading provider of space intelligence, cyber, and data-driven technology solutions. On a year-over-year basis, third quarter net revenue organically grew by 11%. Operating profit increased, and adjusted earnings per share of $1.40 was up 13%.

As a result of this competitive advantage, we expect Jacobs to exceed the growth trends of our markets over the long term. Our leadership position was recently recognized by once again achieving the number one global design firm ranking by ENR, including Jacobs being the top-ranked firm in 19 critical submarkets. Our fiscal year third quarter results demonstrate a continued focus execution through one of the most transformative periods in our company's history. During the quarter, we entered the final stages of the highly successful CH2M integration while closing the sale of our energy chemicals and resources business and completing the acquisition of KeyW, a leading provider of space intelligence, cyber, and data-driven technology solutions. On a year-over-year basis, third quarter net revenue organically grew by 11%. Operating profit increased, and adjusted earnings per share of $1.40 was up 13%.

Our leadership position was recently recognized by once again, achieving the number one global design firm ranking by PNR, including Jacobs being the top ranked firm and 19 critical sub markets.

Our fiscal year third quarter results demonstrate continued focus execution through one of the most transformative period in our Companys history.

During the quarter, we entered the final stages of the highly successful CH too I'm integration, while closing the sale of our energy chemicals and resources business and completing the acquisition of KBW, a leading provider of space intelligence cyber and data driven technology solutions.

On a year over year basis third quarter net revenue organically grew by 11%.

Operating profit increased in adjusted earnings per share of $1.40 was up 13%.

Steve Demetriou: When excluding discrete tax benefits in the current and year-ago quarter, EPS was up 8%. During the quarter, we also completed our $250 million accelerated share repurchase, and as of 2 August, we've repurchased an additional $100 million of shares on the open market. Since announcing the $1 billion share repurchase authorization, we have retired $350 million of shares in just five months at a significant discount to our estimated intrinsic value. We have a healthy balance sheet that provides the capacity to continue to repurchase shares and further deploy capital toward other higher-return investments. Given our strong operating and financial performance, as well as our ownership of KeyW, we are raising our total year 2019 adjusted EBITDA and earnings per share outlook, and we continue to be well-positioned to realize our 2021 shareholder return objectives.

And when excluding discrete tax benefits in the current than year ago quarter, if the us was up 8%.

When excluding discrete tax benefits in the current and year-ago quarter, EPS was up 8%. During the quarter, we also completed our $250 million accelerated share repurchase, and as of 2 August, we've repurchased an additional $100 million of shares on the open market. Since announcing the $1 billion share repurchase authorization, we have retired $350 million of shares in just five months at a significant discount to our estimated intrinsic value. We have a healthy balance sheet that provides the capacity to continue to repurchase shares and further deploy capital toward other higher-return investments. Given our strong operating and financial performance, as well as our ownership of KeyW, we are raising our total year 2019 adjusted EBITDA and earnings per share outlook, and we continue to be well-positioned to realize our 2021 shareholder return objectives.

During the quarter, we also completed our $250 million accelerated share repurchase and as of August 2nd we've repurchased an additional $100 million of shares on the open market.

Since announcing the $1 billion share repurchase authorization, we have retired $350 million of shares in just five months at a significant discount to our estimated intrinsic value.

We have a healthy balance sheet that provides a capacity to continue to repurchase shares and further deploy capital towards other higher return investments.

Given our strong operating and financial performance as well as our ownership of KBW. We are raising our total year 2019, adjusted EBITDA and earnings per share outlook, and we continue to be well positioned to realize our 2021 shareholder return objectives.

Now on to slide five to discuss our focus on culture, and specifically our goal to be the employer of choice.

Steve Demetriou: Now on to slide five to discuss our focus on culture and specifically our goal to be the employer of choice. Becoming a company like no other includes reimagining approaches to inclusion and diversity that transform the future of Jacobs. Our strong culture of caring celebrates diverse perspectives, unique backgrounds, and individual experiences. We at Jacobs firmly believe that our committed and systematic approach to inclusion and diversity supports an environment where employees will thrive. It enhances the richness of our client offerings, and it's critical to achieving our strategic and financial commitments. As part of this journey, in June, we held a very inspiring Jacobs Women's Network Global Summit, the theme of which was empowering women and engaging men. This continued our focus on ensuring gender equality as well as accelerating the advancement of women at Jacobs.

Now on to slide five to discuss our focus on culture and specifically our goal to be the employer of choice. Becoming a company like no other includes reimagining approaches to inclusion and diversity that transform the future of Jacobs. Our strong culture of caring celebrates diverse perspectives, unique backgrounds, and individual experiences. We at Jacobs firmly believe that our committed and systematic approach to inclusion and diversity supports an environment where employees will thrive. It enhances the richness of our client offerings, and it's critical to achieving our strategic and financial commitments. As part of this journey, in June, we held a very inspiring Jacobs Women's Network Global Summit, the theme of which was empowering women and engaging men. This continued our focus on ensuring gender equality as well as accelerating the advancement of women at Jacobs.

Becoming a company like no. Other includes re imagining approaches to inclusion and diversity that transformed the future of Jacobs.

Our strong culture of caring celebrates diverse perspectives unique backgrounds in individual experiences.

And we at Jacobs firmly believe that our committed and systematic approach to inclusion and diversity supports an environment, where employees will thrive. It enhances the richness of our client offerings and it's critical to achieving our strategic and financial commitments.

As part of this journey in June we held a very inspiring Jacobs Women's network Global summit, the theme of which was empowering women and engaging men.

This continued our focus on ensuring gender equality as well as accelerating the advancement of women at Jacobs.

Steve Demetriou: The Women's Summit also served as a think tank for innovation, along with unlocking new business development opportunities across Jacobs. I'm very pleased with the measurable progress we're making, with 45% of our board of directors now made up of diverse directors and 75% of the Jacobs executive leadership team represented by diverse executives. We have positively transformed inclusivity at the top levels of Jacobs. We remain committed to achieve similar levels of diversity across all of Jacobs, which we believe will enable us to continue to outperform as a company. Turning to slide 6, let's dive into another key pillar of our strategy, innovation, and an example of how we're uniquely positioned to solve complex challenges. At our investor day, we discussed our competitive edge for leading in the convergence of information and operational technology and how our advantage combines deep domain knowledge with leading technology expertise.

The Women's Summit also served as a think tank for innovation, along with unlocking new business development opportunities across Jacobs. I'm very pleased with the measurable progress we're making, with 45% of our board of directors now made up of diverse directors and 75% of the Jacobs executive leadership team represented by diverse executives. We have positively transformed inclusivity at the top levels of Jacobs. We remain committed to achieve similar levels of diversity across all of Jacobs, which we believe will enable us to continue to outperform as a company. Turning to slide 6, let's dive into another key pillar of our strategy, innovation, and an example of how we're uniquely positioned to solve complex challenges. At our investor day, we discussed our competitive edge for leading in the convergence of information and operational technology and how our advantage combines deep domain knowledge with leading technology expertise.

The women Summit also served as a think tank for innovation, along with unlocking new business development opportunities across Jacobs.

And I'm very pleased with the measurable progress, we're making with 45% of our board of directors now made up of diverse directors and 75% of the Jacobs executive leadership team represented by diverse executives.

We have positively transformed inclusivity at the top levels of Jacobs, we remain committed to achieve similar levels of diversity across all of Jacobs, which we believe will enable us to continue to outperform as a company.

Turning to slide six let's dive into another key pillar of our strategy innovation and an example of how we are uniquely positioned to solve complex challenges.

At our Investor Day, we discussed our competitive edge for leaving in the convergence of information and operational technology.

And how our advantaged combines deep domain knowledge with leading technology expertise.

This strategy includes dedicated investments and five technology hubs of cyber security apply Geo spatial science automated design internet of things and predictive analytics.

Steve Demetriou: This strategy includes dedicated investments in five technology hubs of cybersecurity, applied geospatial science, automated design, Internet of Things, and predictive analytics. I'd like to share a recent example of how we're implementing this strategy. One of today's global environmental threats is the impact of synthetic polyfluoroalkyl substances, PFAS, in our water and soil. The pervasiveness of these synthetic compounds in our world, the difficulty in removing them from the environment, and the toxicological risks create a complex and time-critical challenge for our planet. Our Jacobs emerging contaminants practice is harnessing our company's integrated domain expertise in environmental investigation, remediation, water treatment, and infrastructure design to partner with leading academics, industry workgroups, and our clients to tackle this challenge now and into the future. Jacobs has performed evaluations of thousands of possible release locations, collecting data and information from industrial sites to military installations to aviation facilities.

This strategy includes dedicated investments in five technology hubs of cybersecurity, applied geospatial science, automated design, Internet of Things, and predictive analytics. I'd like to share a recent example of how we're implementing this strategy. One of today's global environmental threats is the impact of synthetic polyfluoroalkyl substances, PFAS, in our water and soil. The pervasiveness of these synthetic compounds in our world, the difficulty in removing them from the environment, and the toxicological risks create a complex and time-critical challenge for our planet. Our Jacobs emerging contaminants practice is harnessing our company's integrated domain expertise in environmental investigation, remediation, water treatment, and infrastructure design to partner with leading academics, industry workgroups, and our clients to tackle this challenge now and into the future. Jacobs has performed evaluations of thousands of possible release locations, collecting data and information from industrial sites to military installations to aviation facilities.

I'd like to share a recent example of how we're implementing this strategy.

One of today's global environmental threats is the impact of synthetic poly floral alkyl substances PFS in our water and soil.

The pervasiveness of the synthetic compounds in our world the difficulty and removing them from the environment in the talks a logical risks create a complex and time critical challenge for our planet.

Our Jacobs emerging contaminants practice is harnessing our company's integrated domain expertise and environmental investigation remediation water treatment and infrastructure designed to partner with leading academic industry work groups and our clients to tackle this challenge now and into the future.

Jacobs has performed evaluations of thousands of possible release locations collecting data and information from industrial sites to military installations to it.

Jason facility.

We are using our experience and knowledge to continually improve our understanding of both the physical and talks a logical behavior of these compounds to better characterize their presence predict their migration and identify ways to remediate these compounds in both soil and water.

Steve Demetriou: We are using our experience and knowledge to continually improve our understanding of both the physical and toxicological behavior of these compounds to better characterize their presence, predict their migration, and identify ways to remediate these compounds in both soil and water. Jacobs' unique ability to bring together our science and engineering domain expertise while also leveraging our technological depth in geospatial science and analytics provides us an ideal opportunity to develop solutions for our clients. One of our large confidential US customers. We're providing data analytics and visualization solutions to deliver actionable intelligence to help this customer understand and prioritize their approach to PFAS remediation plants. A key component of this win was applying next-generation data science with our domain knowledge against petabytes of disparate data.

We are using our experience and knowledge to continually improve our understanding of both the physical and toxicological behavior of these compounds to better characterize their presence, predict their migration, and identify ways to remediate these compounds in both soil and water. Jacobs' unique ability to bring together our science and engineering domain expertise while also leveraging our technological depth in geospatial science and analytics provides us an ideal opportunity to develop solutions for our clients. One of our large confidential US customers. We're providing data analytics and visualization solutions to deliver actionable intelligence to help this customer understand and prioritize their approach to PFAS remediation plants. A key component of this win was applying next-generation data science with our domain knowledge against petabytes of disparate data.

Jacobs unique ability to bring together, our science and engineering domain expertise, while also leveraging our technological depth and Geo spatial science and analytics provides us an ideal opportunity to develop solutions for our clients.

One of our large confidential us customers provide we're providing data analytics and visualization solutions to deliver actionable intelligence to help this customer understand and prioritize their approach to p. fast remediation plans.

A key component of this win was applying next generation data science with our domain knowledge against petabyte of disparate data.

Other legacy consultants without this deep domain domain knowledge would not have the ability to filter out the noise and drive the true accuracy and results.

Steve Demetriou: Other legacy consultants without this deep domain knowledge would not have the ability to filter out the noise and drive the true accuracy and results. Investigation and remediation of PFAS in the US alone is measured in the $ billions, and our team is well-positioned to help in this recovery for our communities. Now moving to slide 7. Our acquisition of KeyW, a leading space intelligence and cyber solutions provider, closed on 12 June. We're off to a great start with the integration, and we're on track to achieve the targeted cost synergies. And most importantly, we're gaining early alignment for considerable revenue synergies. As we previously outlined, KeyW has multiple high-value offerings whose growth can be accelerated when leveraging our global platform and financial resources. Let me update you on three specific areas. First, in the area of space intelligence.

Other legacy consultants without this deep domain knowledge would not have the ability to filter out the noise and drive the true accuracy and results. Investigation and remediation of PFAS in the US alone is measured in the $ billions, and our team is well-positioned to help in this recovery for our communities. Now moving to slide 7. Our acquisition of KeyW, a leading space intelligence and cyber solutions provider, closed on 12 June. We're off to a great start with the integration, and we're on track to achieve the targeted cost synergies. And most importantly, we're gaining early alignment for considerable revenue synergies. As we previously outlined, KeyW has multiple high-value offerings whose growth can be accelerated when leveraging our global platform and financial resources. Let me update you on three specific areas. First, in the area of space intelligence.

Investigation and remediation of PFS in the US alone is measured in the billions of dollars and our team is well positioned to help in this recovery for our communities.

Now moving to slide seven.

Our acquisition of KBW, a leading space intelligence and cyber solutions provider closed on June 12, we're off to a great start with the integration and we're on track to achieve the targeted cost synergies and most importantly, we're gaining early alignment for considerable revenue synergies.

As we've previously outlined tw has multiple high value offerings, whose growth can be accelerated when leveraging our global platform and financial resources.

Let me update you on three specific areas first in the area of space Intelligence Tw is confidential breakthrough space Intelligence initiative continues to move forward and as well funded and importantly, internal testing continues to be positive.

Steve Demetriou: KeyW's confidential breakthrough space intelligence initiative continues to move forward and is well-funded, and importantly, internal testing continues to be positive. And the follow-on space intelligence pipeline remains robust as the US Department of Defense focuses on future use of cost-efficient low-Earth orbit satellites. Secondly, in mission IT, the pipeline is growing with numerous $100 million-plus pursuits. In addition, we see significant opportunities to cross-sell KeyW and Jacobs' capabilities into existing contract vehicles and sales pursuits. And thirdly, our combined cyber capabilities will now form the basis for a new robust global cyber business unit within our A10 line of business. This organizational move allows us to focus key leadership and resources on the rapidly growing global cybersecurity sector. We've already identified specific revenue synergy opportunities that allow the pursuit of large long-term intelligence community cyber programs.

KeyW's confidential breakthrough space intelligence initiative continues to move forward and is well-funded, and importantly, internal testing continues to be positive. And the follow-on space intelligence pipeline remains robust as the US Department of Defense focuses on future use of cost-efficient low-Earth orbit satellites. Secondly, in mission IT, the pipeline is growing with numerous $100 million-plus pursuits. In addition, we see significant opportunities to cross-sell KeyW and Jacobs' capabilities into existing contract vehicles and sales pursuits. And thirdly, our combined cyber capabilities will now form the basis for a new robust global cyber business unit within our A10 line of business. This organizational move allows us to focus key leadership and resources on the rapidly growing global cybersecurity sector. We've already identified specific revenue synergy opportunities that allow the pursuit of large long-term intelligence community cyber programs.

And the follow on space intelligence pipeline remains robust as the US Department of defense focuses on future use of cost efficient low earth orbit satellites.

Secondly, in Michigan I see the pipeline is growing with numerous 100 million dollar plus pursuits.

In addition, we see significant opportunities to cross sell KBW and Jacobs capabilities into existing contract vehicles and sales pursuits.

And thirdly, our combined cyber capabilities will now form the basis for a new robust global cyber business unit within our 810 line of business.

This organizational move allows us to focus key leadership and resources on the rapidly group growing global cyber security sector.

We have already identified specific revenue synergy opportunities that will allow the pursuit of large long term and intelligence community cyber programs.

And now moving on to slide eight for a review of our aerospace technology and nuclear 810 line of business.

Steve Demetriou: Now moving on to slide 8 for a review of our aerospace technology and nuclear A10 line of business. A10's total backlog, including the benefit from KeyW, reached $8.5 billion by the end of Q3. Excluding KeyW, A10's backlog was up 4% versus last year. As previously noted, we're approaching two significant A10 rebids: the Hanford Plateau Remediation Contract and a Classified Network Security Contract with the US government. These contracts are burning revenue without a corresponding increase in backlog. When taking into account these two contracts, which we expect will have favorable outcomes, backlog growth would have increased by high single digits versus last year. Approximately 75% of our A10 bookings during the quarter were from new business. When considering the full value of our multi-year contracts, A10's total backlog is more than 40% larger than our reported backlog.

Now moving on to slide 8 for a review of our aerospace technology and nuclear A10 line of business. A10's total backlog, including the benefit from KeyW, reached $8.5 billion by the end of Q3. Excluding KeyW, A10's backlog was up 4% versus last year. As previously noted, we're approaching two significant A10 rebids: the Hanford Plateau Remediation Contract and a Classified Network Security Contract with the US government. These contracts are burning revenue without a corresponding increase in backlog. When taking into account these two contracts, which we expect will have favorable outcomes, backlog growth would have increased by high single digits versus last year. Approximately 75% of our A10 bookings during the quarter were from new business. When considering the full value of our multi-year contracts, A10's total backlog is more than 40% larger than our reported backlog.

Eight times total backlog, including the benefit from KBW reached eight and a half billion dollars by the end of the third quarter.

Excluding KBW eight times backlog was up 4% versus last year.

As previously noted we're approaching two significant 810, rebids, the Hanford plateau remediation contract and a classified network security contract with the Us government.

These contracts are burning revenue without a corresponding increase in backlog when taking into account. These two contracts, which we expect will have favorable outcomes backlog growth would have increased by high single digits versus last year.

Approximately 75% of our 810 bookings during the quarter were from new business when considering the full value of our multiyear contracts eight tens total backlog is more than 40% larger than our reported backlog.

From a strategic standpoint through purposeful actions portfolio actions and a track record of high quality consistent project execution. Our 810 model uniquely combines strong technical expertise with localized delivery and an industry leading efficient cost structure.

Steve Demetriou: From a strategic standpoint, through purposeful actions, portfolio actions, and a track record of high-quality, consistent project execution, our A10 model uniquely combines strong technical expertise with localized delivery and an industry-leading efficient cost structure. This model has proven our ability to scale in core sectors and expand into complementary high-value adjacent sectors, both organically and through acquisitions. As an example, during Q3, we leveraged our strong past execution performance with the Australian Department of Defence to be awarded a contract as sole provider for the Joint Strike Fighter System Support Services. Jacobs will provide engineering and other technical services to the Australian New Combat Capability Project Office, which is acquiring the F-35 Joint Strike Fighter for the Royal Australian Air Force. The award reflects the successful long-term relationship Jacobs has built with this client.

From a strategic standpoint, through purposeful actions, portfolio actions, and a track record of high-quality, consistent project execution, our A10 model uniquely combines strong technical expertise with localized delivery and an industry-leading efficient cost structure. This model has proven our ability to scale in core sectors and expand into complementary high-value adjacent sectors, both organically and through acquisitions. As an example, during Q3, we leveraged our strong past execution performance with the Australian Department of Defence to be awarded a contract as sole provider for the Joint Strike Fighter System Support Services. Jacobs will provide engineering and other technical services to the Australian New Combat Capability Project Office, which is acquiring the F-35 Joint Strike Fighter for the Royal Australian Air Force. The award reflects the successful long-term relationship Jacobs has built with this client.

This model has proven our ability to scale in core sectors and expand into complimentary high value adjacent sectors, both organically and through acquisitions.

As an example during the third quarter, we leveraged our strong past execution performance with the Australian Department of Defense.

To be awarded a contract as sole provider for the joint strike fighter system support services.

Jacobs will provide engineering and other technical services to the Australia, New combat capability project office, which is acquiring the F 35 joint strike fighter for the Royal Australian Air Force.

The award reflects the successful long term relationship Jacobs has built with this client.

Another example of strong project execution is our telecom services business, which is benefiting from the build out of Fiveg infrastructure, a significant growth opportunity.

Steve Demetriou: Another example of strong project execution is our telecom services business, which is benefiting from the buildout of 5G infrastructure, a significant growth opportunity. Our team has strategically expanded into higher-value areas of telecom services and is successfully increasing Jacobs' footprint across the US to respond to this opportunity. We expect our telecom business to drive additional operating profit growth as we take these capabilities globally, and we'll also cross-sell these services in our buildings and infrastructure smart city initiatives. The KeyW acquisition is our latest move in expanding our government services capabilities and higher-value, higher-margin work by acquiring strong technical expertise with the intent to leverage our delivery model and cost structure to accelerate growth.

Another example of strong project execution is our telecom services business, which is benefiting from the buildout of 5G infrastructure, a significant growth opportunity. Our team has strategically expanded into higher-value areas of telecom services and is successfully increasing Jacobs' footprint across the US to respond to this opportunity. We expect our telecom business to drive additional operating profit growth as we take these capabilities globally, and we'll also cross-sell these services in our buildings and infrastructure smart city initiatives. The KeyW acquisition is our latest move in expanding our government services capabilities and higher-value, higher-margin work by acquiring strong technical expertise with the intent to leverage our delivery model and cost structure to accelerate growth.

Our team has strategic strategically expanded into higher value areas of telecom services and has successfully increasing jacobs footprint across the us to respond to this opportunity.

We expect our telecom business to drive additional operating profit growth as we take these capabilities globally.

And we'll also cross sell these services in our buildings and infrastructure Smart city initiatives.

The key W acquisition as our latest move in expanding our government services capabilities and higher value higher margin work by acquiring strong technical expertise with the intent to leverage our delivery model and cost structure to accelerate growth. We've proven the effectiveness of this model with the previous acquisitions of cyber security companies Blue canopy and van Dyke.

Steve Demetriou: We've proven the effectiveness of this model with the previous acquisitions of cybersecurity companies Blue Canopy and Van Dyke through an increased win rate, as demonstrated by recent large awards with Missile Defense and Special Operations Command. During the quarter, KeyW was awarded two 5-year task orders with a combined revenue of more than $150 million for the US Army to provide knowledge management solutions and software engineering support for strategic satellite communications. These awards demonstrate KeyW's highly sought-after technology expertise in top-priority federal programs. More importantly, we are pursuing multiple large opportunities in fiscal 2020 and 2021 where we can leverage KeyW's leading technical expertise from mission IT and cyber. Intelligent asset management is another A10 organic adjacent opportunity that we discussed at our investor day and one where we continue to make great progress.

We've proven the effectiveness of this model with the previous acquisitions of cybersecurity companies Blue Canopy and Van Dyke through an increased win rate, as demonstrated by recent large awards with Missile Defense and Special Operations Command. During the quarter, KeyW was awarded two 5-year task orders with a combined revenue of more than $150 million for the US Army to provide knowledge management solutions and software engineering support for strategic satellite communications. These awards demonstrate KeyW's highly sought-after technology expertise in top-priority federal programs. More importantly, we are pursuing multiple large opportunities in fiscal 2020 and 2021 where we can leverage KeyW's leading technical expertise from mission IT and cyber. Intelligent asset management is another A10 organic adjacent opportunity that we discussed at our investor day and one where we continue to make great progress.

Through an increased win rate as demonstrated by recent large awards with missile defense and special operations Command.

During the quarter Tw was awarded two five year task orders with a combined revenue of more than $150 million for the US Army to provide knowledge management solutions and software engineering support for strategic satellite Communications. These awards demonstrate key w.'s highly sought after technology expertise and top priority federal programs.

More importantly, we are pursuing multiple large opportunities in fiscal 2020 in 2021, where we can leverage KBW is leading technical expertise for mission IP and fiber.

Intelligent asset management is another 810 organic adjacent opportunity that we discussed at our Investor day, and one where we continue to make great progress.

Steve Demetriou: We've developed an attractive offering through the use of next-generation technology that lowers the run-rate cost to our customers. While we're currently delivering intelligent asset solutions for the US Navy Mayport, NASA Langley, and NASA Ames, there are $1.5 billion of additional intelligent asset management opportunities in our pipeline with other customers. Outside of the government arena, another highly technical third-quarter win comes from our successful rebid of the Windshear Program. Under this $72 million contract extension, we deliver test operations in support of NASCAR and other high-performance automotive organizations. In summary, we're very pleased with the A10 performance in fiscal 2019, and as we look forward, our pipeline has now increased to well over $30 billion in opportunities.

We've developed an attractive offering through the use of next-generation technology that lowers the run-rate cost to our customers. While we're currently delivering intelligent asset solutions for the US Navy Mayport, NASA Langley, and NASA Ames, there are $1.5 billion of additional intelligent asset management opportunities in our pipeline with other customers. Outside of the government arena, another highly technical third-quarter win comes from our successful rebid of the Windshear Program. Under this $72 million contract extension, we deliver test operations in support of NASCAR and other high-performance automotive organizations. In summary, we're very pleased with the A10 performance in fiscal 2019, and as we look forward, our pipeline has now increased to well over $30 billion in opportunities.

We have developed an attractive offering through the use of next generation technology that lowers the run rate costs to our customers.

While we are currently delivering intelligent asset solutions for the US Navy may for NASA, Langley and NASA Ames There're a billion and a half dollars of additional intelligent asset management opportunities in our pipeline with other customers.

Outside of the government arena, another highly technical third quarter wind comes from our successful rebid of the wind share program.

Under the 72 million dollar contract extension, we delivered test operations and support of NASCAR and other high performance automotive organizations.

In summary, we're very pleased with the performance in fiscal 2019, and as we look forward. Our pipeline has now increased to well over $30 billion and opportunities.

Steve Demetriou: Our strategy of leveraging our unique model to scale in core government services markets while expanding selectively in complementary high-value sectors, and geographies is on track to drive double-digit operating profit growth. We'll now turn to slide 9 to discuss our Buildings, Infrastructure, and Advanced Facilities BIAF line of business. BIAF continued its solid performance from the first half of the year with third-quarter backlog up 10% year-over-year to $14 billion. Our sales pipeline is also strengthening, up 15% year-over-year with a strong contribution for most geographies across the globe. In line with our strategy around market connectivity, Jacobs continues to build deep domain and technological expertise in high-value areas, positioning us to capitalize on the convergence of end markets in digital requirements and infrastructure.

Our strategy of leveraging our unique model to scale in core government services markets while expanding selectively in complementary high-value sectors, and geographies is on track to drive double-digit operating profit growth. We'll now turn to slide 9 to discuss our Buildings, Infrastructure, and Advanced Facilities BIAF line of business. BIAF continued its solid performance from the first half of the year with third-quarter backlog up 10% year-over-year to $14 billion. Our sales pipeline is also strengthening, up 15% year-over-year with a strong contribution for most geographies across the globe. In line with our strategy around market connectivity, Jacobs continues to build deep domain and technological expertise in high-value areas, positioning us to capitalize on the convergence of end markets in digital requirements and infrastructure.

Our strategy of leveraging our unique model to scale in core government services markets, while expanding selectively and complimentary high value sectors and geographies is on track to drive double digit operating profit growth.

We'll now turn to slide nine to discuss our buildings infrastructure and advanced facilities.

Line of business.

Hi, Jeff continued its solid performance from the first half of the year with third quarter backlog up 10% year over year to $14 billion. Our sales pipeline is also strengthening up 15% year over year with a strong contribution from most geographies across the globe.

In line with our strategy around market connectivity Jacobs continues to build deep domain.

And technological expertise and high value areas positioning us to capitalize on the convergence of end markets and digital requirements and infrastructure.

We are pleased for the second year in a row Jacobs was ranked as the number one global design firm by NR and we also retained our number one ranking and several of our high growth sectors, including water airports advanced manufacturing and government buildings.

Steve Demetriou: We are pleased for the second year in a row Jacobs was ranked as the number 1 global design firm by ENR, and we also retained our number 1 ranking in several of our high-growth sectors, including water, airports, advanced manufacturing, and government buildings. Adding to that, we moved up to the number 1 ranking in mass transit, rail, maritime, and ports. These rankings signify the differentiated thought leadership of our global solutions and technology team and our strong BIAF project and program execution, positioning Jacobs for long-term and sustainable competitive differentiation. From a geographic standpoint, North America continues the momentum of strong growth, notably in water, environmental, transportation, and advanced facilities. Our UK business has delivered steadily despite Brexit headwinds. Australia and New Zealand rebounded in Q3 with key bookings in water, transportation, and healthcare sectors.

We are pleased for the second year in a row Jacobs was ranked as the number 1 global design firm by ENR, and we also retained our number 1 ranking in several of our high-growth sectors, including water, airports, advanced manufacturing, and government buildings. Adding to that, we moved up to the number 1 ranking in mass transit, rail, maritime, and ports. These rankings signify the differentiated thought leadership of our global solutions and technology team and our strong BIAF project and program execution, positioning Jacobs for long-term and sustainable competitive differentiation. From a geographic standpoint, North America continues the momentum of strong growth, notably in water, environmental, transportation, and advanced facilities. Our UK business has delivered steadily despite Brexit headwinds. Australia and New Zealand rebounded in Q3 with key bookings in water, transportation, and healthcare sectors.

Adding to that we moved up to the number one ranking in mass transit and rail and maritime imports.

These ranking signified the differentiated thought leadership of our global solutions and technology team and our strong Biya project and program execution positioning Jacobs for long term and sustainable competitive differentiation.

From a geographic standpoint, North America continues the momentum of strong growth, notably in water environmental transportation and advanced facilities.

Our UK businesses delivered steadily despite Brexit headwinds, Australia, New Zealand rebounded in the third quarter with key bookings and water transportation and healthcare sectors in the Middle East and Asia remains strong with a growing pipeline of opportunities.

Steve Demetriou: The Middle East and Asia remain strong with a growing pipeline of opportunities. Now let's look at our key infrastructure industry sectors by solution. In the water and environmental sectors, infrastructure resiliency poses a multi-decade challenge to our communities, driven by more extreme weather events and population growth that are taxing our current infrastructure. This is an area where Jacobs continues to demonstrate global leadership. For example, we're delivering solutions for FEMA to remediate recent flooding in Nebraska, and we're helping major cities in India contend with drought conditions. Additionally, we're on the front end of next-generation water technology. We're partnering with PUB, Singapore's national water agency, to deliver automated metering solutions which will increase the efficiency of their water infrastructure.

The Middle East and Asia remain strong with a growing pipeline of opportunities. Now let's look at our key infrastructure industry sectors by solution. In the water and environmental sectors, infrastructure resiliency poses a multi-decade challenge to our communities, driven by more extreme weather events and population growth that are taxing our current infrastructure. This is an area where Jacobs continues to demonstrate global leadership. For example, we're delivering solutions for FEMA to remediate recent flooding in Nebraska, and we're helping major cities in India contend with drought conditions. Additionally, we're on the front end of next-generation water technology. We're partnering with PUB, Singapore's national water agency, to deliver automated metering solutions which will increase the efficiency of their water infrastructure.

Now, let's look at our key infrastructure industry sectors by solution in the water and environmental sub sectors infrastructure resiliency poses a multi decade challenge to our communities driven by more extreme weather events and population growth that our taxing our current infrastructure. This isn't there an area, where Jacobs continues to demonstrate global leadership.

For example, we are delivering solutions for FEMA to remediate recent.

From Nebraska.

And we're helping major cities in India contend with drought conditions.

Additionally, we're on the front end of next generation water technology, we're partnering with Pugh B Singapore's national water agency to deliver automated metering solutions, which will increase the efficiency of their water infrastructure.

We believe this automated metering model will be the reference architecture of the next generation water solutions and one of our competitive advantages is our ability to transport global experience to deliver knowledge and execution locally.

Steve Demetriou: We believe this automated metering model will be the reference architecture of the next-generation water solutions, and one of our competitive advantages is our ability to transport global experience to deliver knowledge and execution locally. Another near-term BIF growth driver are opportunities related to US Department of Defense overseas infrastructure, especially in Asia and Eastern Europe regions. These projects are well-funded in the current and future budgets. Transportation spending remains strong globally with specific strength in rail and aviation. We're seeing an influx of large-scale projects in our pipeline that require the understanding of market convergence and the productivity benefits from the ability to execute with a global delivery model. As an example, these requirements were a differentiator in our recent win in Melbourne, Australia, performing design services for the Mordialloc Bypass, and will provide us an advantage converting multiple pipeline opportunities.

We believe this automated metering model will be the reference architecture of the next-generation water solutions, and one of our competitive advantages is our ability to transport global experience to deliver knowledge and execution locally. Another near-term BIF growth driver are opportunities related to US Department of Defense overseas infrastructure, especially in Asia and Eastern Europe regions. These projects are well-funded in the current and future budgets. Transportation spending remains strong globally with specific strength in rail and aviation. We're seeing an influx of large-scale projects in our pipeline that require the understanding of market convergence and the productivity benefits from the ability to execute with a global delivery model. As an example, these requirements were a differentiator in our recent win in Melbourne, Australia, performing design services for the Mordialloc Bypass, and will provide us an advantage converting multiple pipeline opportunities.

Another near term growth driver our opportunities related to us department of defense overseas infrastructure, especially in Asia and Eastern Europe regions. These projects are well funded in the current and future budgets.

Transportation spending remains strong globally with specific strength in rail and aviation, we're seeing an influx of large scale projects in our pipeline that require the understanding of market convergence in the productivity benefits from the ability to execute with a global delivery model.

As an example, these requirements were differentiator in our recent win in Melbourne, Australia, performing design services for the Modi Alec bypass and will provide us an advantage converting multiple pipeline opportunities.

And our advanced facility sectors remained maintained a very steady capex spend throughout the quarter, particularly among the leading life Sciences electronics manufacturers, where Jacobs is well position.

Steve Demetriou: Our advanced facilities sectors maintained a very steady CapEx spend throughout the quarter, particularly among the leading life sciences electronics manufacturers where Jacobs is well-positioned. During the quarter, we had two significant wins in the US with repeat customers for a gene therapy facility and a microprocessing client. Our advanced facilities customers have chosen to partner with Jacobs as we are one of the only providers that has the expertise, scale, and execution track record to match their accelerated time requirements for introducing new technologies to their customers. In summary, BIAF posted solid performance this quarter, leveraging key strategy elements of market convergence and the benefits of scale taking shape through our global delivery model. We are well-positioned for the remainder of fiscal 2019 and on track to achieve our 2021 targets. Now I'll turn the call over to Kevin to discuss our financial results in more detail.

Our advanced facilities sectors maintained a very steady CapEx spend throughout the quarter, particularly among the leading life sciences electronics manufacturers where Jacobs is well-positioned. During the quarter, we had two significant wins in the US with repeat customers for a gene therapy facility and a microprocessing client. Our advanced facilities customers have chosen to partner with Jacobs as we are one of the only providers that has the expertise, scale, and execution track record to match their accelerated time requirements for introducing new technologies to their customers. In summary, BIAF posted solid performance this quarter, leveraging key strategy elements of market convergence and the benefits of scale taking shape through our global delivery model. We are well-positioned for the remainder of fiscal 2019 and on track to achieve our 2021 targets. Now I'll turn the call over to Kevin to discuss our financial results in more detail.

During the quarter, we had two significant wins in the us with repeat customers for a gene therapy facility and a micro processing client.

Our advanced facilities customers have chosen to partner with Jacobs as we are the one of the only providers that has the expertise scale and execution track record to match their accelerated time requirements for introducing new technologies to their customers.

In summary, we have posted solid performance this quarter leveraging key strategy elements of market convergence and the benefits of scale, taking shape through our global delivery model, we are well positioned for the remainder of fiscal 2019 and on track to achieve our 2021 targets.

Now I'll turn the call over to Kevin to discuss our financial results in more detail.

Thank you Steve.

Kevin Berryman: Thank you, Steve. Before we review our results, I would like to remind everyone that RECAS, pro forma adjusted figures, have been included in the appendices to this presentation. We have updated and provided results for all quarters in fiscal 2018 and 2019 on a consistent basis from the time they were provided in the second quarter. We provide this updated historical disclosure to ensure clarity as to how the business is performing on a comparable basis year-over-year. I will be referring to these figures throughout my remarks. So now I'll discuss a more detailed summary of our financial performance for the third quarter of fiscal 2019 on slide 10. Third-quarter gross revenue increased 8% year-over-year, with net revenue on an organic basis, excluding the KeyW subperiod, up 11%. Both A10 and BIAF equally contributed to the strong double-digit top-line growth.

Before we review our results I would like to remind everyone that recasts pro forma adjusted figures have been included in the intend to seize to this presentation.

We have updated and provided results for all quarters in fiscal 2018, and 2019 on a consistent basis from the time. They were provided in the second quarter. We provide this updated historical disclosure to ensure clarity as to how the business is performing on a comparable basis year over year.

I will be referring to these figures throughout my remarks.

So now I'll discuss some more detailed summary of our financial performance for the third quarter fiscal 2019 on slide 10.

Third quarter gross revenue increased 8% year over year with net revenue on or Ganic basis, excluding the key w. stub period up 11%.

Both 810 and be equally contributed to the strong double digit topline growth.

Third quarter adjusted gross margins as a percentage of net revenue were 23.9% more mainly impacted by two items, one a higher mix of ATM procurement activity and reimbursable versus fixed price revenue and to the mix impact from a true up of Casa de <unk>.

Kevin Berryman: quarter adjusted gross margins, as a percentage of net revenue, were 23.9% and were mainly impacted by two items: one, a higher mix of A10 procurement activity and reimbursable versus fixed-price revenue; and two, a mixed impact from a true-up of costs as BIAF entered the final stages of a large advanced facilities project. Our adjusted G&A, as a percentage of net revenue, fell by 90 basis points year-over-year to 15% from the pro forma figures in the third quarter of 2018, indicating continued strong cost control and synergy delivery. The current quarter benefited from the realization of CH2M synergies despite facing a year-over-year headwind from a fringe true-up that we realized in the third quarter of 2018.

quarter adjusted gross margins, as a percentage of net revenue, were 23.9% and were mainly impacted by two items: one, a higher mix of A10 procurement activity and reimbursable versus fixed-price revenue; and two, a mixed impact from a true-up of costs as BIAF entered the final stages of a large advanced facilities project. Our adjusted G&A, as a percentage of net revenue, fell by 90 basis points year-over-year to 15% from the pro forma figures in the third quarter of 2018, indicating continued strong cost control and synergy delivery. The current quarter benefited from the realization of CH2M synergies despite facing a year-over-year headwind from a fringe true-up that we realized in the third quarter of 2018.

We entered the final stages of a large advanced facilities project.

Our adjusted DNA as a percentage of net revenue fell by 90 basis points year over year to 15% from the pro forma figures in the third quarter of 2018, indicating continued strong cost control in synergy delivery.

The current quarter benefited from the realization of CCH to them synergies despite facing a year over year headwind from a fringe true up that we realized in the third quarter 2018.

GAAP operating profit was $90 million and included $92 million of restructuring and other charges $13 million of transaction costs incurred in connection with the closing of the kw acquisition.

Kevin Berryman: GAAP operating profit was $90 million and included $92 million of restructuring and other charges, $13 million of transaction costs incurred in connection with the closing of the KeyW acquisition, and $38 million of other adjustments consisting mainly of $18 million of amortization from acquired intangibles, $17 million of costs associated with the Worley Transition Services Agreements, of which $14 million of costs were reimbursed and reported in other income, and $3 million of stranded costs in other. Adjusting for these items, adjusted operating profit was $233 million, up 4% from the prior year pro forma period, and including $2 million of operating profit from the KeyW subperiod. Let me provide a bit more color on the accounting treatment related to our Transition Service Agreement, or TSA, with Worley related to the sale of our ECR business.

GAAP operating profit was $90 million and included $92 million of restructuring and other charges, $13 million of transaction costs incurred in connection with the closing of the KeyW acquisition, and $38 million of other adjustments consisting mainly of $18 million of amortization from acquired intangibles, $17 million of costs associated with the Worley Transition Services Agreements, of which $14 million of costs were reimbursed and reported in other income, and $3 million of stranded costs in other. Adjusting for these items, adjusted operating profit was $233 million, up 4% from the prior year pro forma period, and including $2 million of operating profit from the KeyW subperiod. Let me provide a bit more color on the accounting treatment related to our Transition Service Agreement, or TSA, with Worley related to the sale of our ECR business.

And $38 million of other adjustments consisting mainly of.

$18 million of amortization from acquired intangibles $17 million of costs associated with the Worley transit transition services agreements of which $14 million of costs were reimbursed and reported in other income and $3 million or stranded costs and other.

Adjusting for these items adjusted operating profit was $233 million.

Up 4% from the prior year pro forma period, and including $2 million of operating profit from the key W. stub period.

Let me provide a bit more color on the accounting treatment related to our transition service agreement or TSC with Worley related to the sale of our NCR business from a GAAP standpoint, and cost of the TSA services provided to quarterly are reflected in our SGN eight lines, but the reimbursement of those costs from morally are recorded in other income below operating profit as a result, this accounting treatment understates the true operating profit associated with the TSA effort as these costs have been incurred specifically to support the services provided to orally.

Kevin Berryman: From a GAAP standpoint, the costs of the TSA services provided to Worley are reflected in our SG&A lines, but the reimbursement of those costs from Worley are recorded in other income below operating profit. As a result, this accounting treatment understates the true operating profit associated with the TSA effort, as these costs are being incurred specifically to support the services provided to Worley. Moving on and including adjustments for the items just noted, our adjusted operating profit to net revenue was 8.8% down year-over-year due to the revenue mix headwind I previously stated, and a tougher comparison related to the aforementioned fringe true-up in the year-ago quarter. On a year-to-date basis, adjusted operating profit is $640 million, up 20%, and operating profit margins are 8.5%, up 50 basis points year-over-year.

From a GAAP standpoint, the costs of the TSA services provided to Worley are reflected in our SG&A lines, but the reimbursement of those costs from Worley are recorded in other income below operating profit. As a result, this accounting treatment understates the true operating profit associated with the TSA effort, as these costs are being incurred specifically to support the services provided to Worley. Moving on and including adjustments for the items just noted, our adjusted operating profit to net revenue was 8.8% down year-over-year due to the revenue mix headwind I previously stated, and a tougher comparison related to the aforementioned fringe true-up in the year-ago quarter. On a year-to-date basis, adjusted operating profit is $640 million, up 20%, and operating profit margins are 8.5%, up 50 basis points year-over-year.

Moving on and including adjustments for the items just noted our adjusted operating profit to net revenue was 8.8%.

Down year over year due to the revenue mix headwind I previously stated and a tougher comparison related to the aforementioned fringe true up in the year ago quarter.

On a year to date basis, adjusted operating profit of $640 million up 20%.

And operating profit margins are 8.5% up 50 basis points year over year.

We have clearly made strong initial progress against our strategic target objective of 125 to 175 basis points of margin expansion by the year 2021.

Kevin Berryman: We have clearly made strong initial progress against our strategic target objective of 125 to 175 basis points of margin expansion by the year 2021. Also, for the third quarter, adjusted EBITDA was $259 million, or 10% of net revenue, and is now $710 million on a year-to-date basis, up 18% year over year. GAAP net earnings and EPS from continuing operations were $89.65 per share, impacted mainly by $0.51 per share of after-tax restructuring and other charges, $0.07 per share of after-tax transaction costs incurred in connection with the closing of the KeyW acquisition, and $0.17 per share of other adjustments consisting mainly of intangible amortization of $0.10, and pro forma interest expense adjustments of $0.03. Additional reconciliation detail can be found in the press release and in the appendix of this investor presentation.

We have clearly made strong initial progress against our strategic target objective of 125 to 175 basis points of margin expansion by the year 2021. Also, for the third quarter, adjusted EBITDA was $259 million, or 10% of net revenue, and is now $710 million on a year-to-date basis, up 18% year over year. GAAP net earnings and EPS from continuing operations were $89.65 per share, impacted mainly by $0.51 per share of after-tax restructuring and other charges, $0.07 per share of after-tax transaction costs incurred in connection with the closing of the KeyW acquisition, and $0.17 per share of other adjustments consisting mainly of intangible amortization of $0.10, and pro forma interest expense adjustments of $0.03. Additional reconciliation detail can be found in the press release and in the appendix of this investor presentation.

Also for the third quarter, adjusted EBITDA was $259 million or 10% of net revenue and is now $710 million on a year to date basis up 18% year over year.

GAAP net earnings and EPS from continuing operations were $89 million.65 per share impacted mainly by 51 cents per share of after tax restructuring and other charges seven cents per share of after tax transaction cost incurred in connection with the closing of the CW acquisition and 17 cents per share of other adjustments consisting mainly of intangible amortization of 10 cents and pro forma interest expense adjustments at three cents.

Additional reconciliation details can be found in the press release and in the appendix of this investor presentation.

So excluding these items second quarter adjusted EPS was $1.40.

Kevin Berryman: So excluding these items, second quarter adjusted EPS was $1.40 and benefited from $0.16 from a discrete tax item. KeyW did not materially contribute to EPS during the quarter as the operating profit from the subperiod was effectively offset by the incremental interest expense associated with the transaction. Finally, turning to our bookings during the quarter, our pro forma book-to-bill ratio was 1.2 times for Q3 and 1.1 times on a trailing 12-month period. KeyW's Q3 book-to-bill was just over 1 times. The pipeline of opportunities across all of our businesses remains quite strong, and as Steve mentioned, we are seeing revenue synergies accelerate in our pipelines for both CH2M and KeyW. Regarding our LOB performance, let's turn to slide 11. Starting with A10, revenue grew 11% year-over-year, excluding the subperiod revenue from KeyW.

So excluding these items, second quarter adjusted EPS was $1.40 and benefited from $0.16 from a discrete tax item. KeyW did not materially contribute to EPS during the quarter as the operating profit from the subperiod was effectively offset by the incremental interest expense associated with the transaction. Finally, turning to our bookings during the quarter, our pro forma book-to-bill ratio was 1.2 times for Q3 and 1.1 times on a trailing 12-month period. KeyW's Q3 book-to-bill was just over 1 times. The pipeline of opportunities across all of our businesses remains quite strong, and as Steve mentioned, we are seeing revenue synergies accelerate in our pipelines for both CH2M and KeyW. Regarding our LOB performance, let's turn to slide 11. Starting with A10, revenue grew 11% year-over-year, excluding the subperiod revenue from KeyW.

And benefited from 16 cents from a discrete tax item.

Key W did not materially contribute to EPS during the quarter as the operating profit from the stub period was effectively offset by the incremental interest expense associated with the transaction.

Finally, turning to our bookings during the quarter, our pro forma book to Bill ratio was 1.2 times for Q3, and 1.1 times on a trailing 12 month period.

Cws Q3 book to Bill was just over one times.

Our pipeline of cross of opportunities across all of our businesses remains quite strong and as Steve mentioned, we are seeing revenue synergies accelerated our pipelines for both CDH to win and Tw.

Regarding our Ela I'll be performance, let's turn to slide 11, starting with a 10 revenue grew 11% year over year, excluding the stub period revenue from KBW.

In line with last quarter, the revenue mix in the quarter had a lower associated unit profit margin associated with higher revenue from large Ria Reimbursable enterprise contracts and higher revenues associated with procurement activities within large contracts, resulting in operating profit margin for the quarter at 6.6%.

Kevin Berryman: In line with last quarter, the revenue mix in the quarter had a lower associated unit profit margin associated with higher revenue from large reimbursable enterprise contracts and higher revenues associated with procurement activities within large contracts, resulting in an operating profit margin for the quarter at 6.6%. Importantly, these contracts remain highly attractive from a total return basis as they offer multi-year visibility, lower risk, and minimal working capital investment. On a year-to-date basis, operating profit is up 19% and is 6.8% of revenue, indicative of the strong performance of the business over the first three quarters of the year. Moving into fiscal 2020, we continue to expect operating profit margins to improve in A10 as we shift the portfolio to a higher value mix, including more fixed-price services contracts and a higher contribution from the recently acquired KeyW organization.

In line with last quarter, the revenue mix in the quarter had a lower associated unit profit margin associated with higher revenue from large reimbursable enterprise contracts and higher revenues associated with procurement activities within large contracts, resulting in an operating profit margin for the quarter at 6.6%. Importantly, these contracts remain highly attractive from a total return basis as they offer multi-year visibility, lower risk, and minimal working capital investment. On a year-to-date basis, operating profit is up 19% and is 6.8% of revenue, indicative of the strong performance of the business over the first three quarters of the year. Moving into fiscal 2020, we continue to expect operating profit margins to improve in A10 as we shift the portfolio to a higher value mix, including more fixed-price services contracts and a higher contribution from the recently acquired KeyW organization.

Importantly, these contracts remain highly attractive from a return hurdle return basis as they offer multi year visibility.

Lower risk and then overall working capital investment.

On a year to date basis operating profit is up 19% and is 6.8% of revenue.

Indicative of the strong performance of the business over the first three quarters of the year.

Moving into fiscal 2020, we continue to expect operating profit margins to improve in HSN as we shift the portfolio to higher value mix, including more fixed price services contracts and a higher contribution from the recently acquired key W organization.

It is important to note that our focus in a 10 remains on driving operating profit growth given the factors that include the structure of joint ventures, which can impact our revenue may or may not be reported on our CNL, which could impact headline margin percentages.

Kevin Berryman: It is important to note that our focus in A10 remains on driving operating profit growth, given factors that include the structure of joint ventures, which can impact how revenue may or may not be reported on our P&L, which could impact headline margin percentages. Given these factors in the A10 business, we believe operating profit growth is the best indicator of performance, and we continue to expect an operating profit compound annual growth rate through 2021 of over 10%. Regarding KeyW, their June results came in line with our expectations, and we are encouraged by the progress our joint teams are making building and maturing pipeline opportunities. Backlog was up over 11% year-over-year when excluding the impact of the discontinued flight services contract, and we remain confident in achieving the financial outlook we outlined at announcement.

It is important to note that our focus in A10 remains on driving operating profit growth, given factors that include the structure of joint ventures, which can impact how revenue may or may not be reported on our P&L, which could impact headline margin percentages. Given these factors in the A10 business, we believe operating profit growth is the best indicator of performance, and we continue to expect an operating profit compound annual growth rate through 2021 of over 10%. Regarding KeyW, their June results came in line with our expectations, and we are encouraged by the progress our joint teams are making building and maturing pipeline opportunities. Backlog was up over 11% year-over-year when excluding the impact of the discontinued flight services contract, and we remain confident in achieving the financial outlook we outlined at announcement.

Given these factors in the ATM business, we believe operating profit growth is the best indicator of performance and we continue to expect an operating profit compound annual growth rate through 2021 of over 10%.

Regarding key W. June results came in line with our expectations and we are encouraged by the progress our joint teams are making building a maturing pipeline opportunities.

Backlog was up over 11% year over year, when excluding the impact of the discontinued flight services contract and we remain confident in achieving the financial outlook, we outlined at announcement.

Moving to be yes in the quarter Biya through net revenue, 11% year over year and operating profit was up 3%.

Kevin Berryman: Moving to BIF, in the quarter, BIF grew net revenue 11% year-over-year, and operating profit was up 3%. Operating profit, as a percentage of net revenue, was 12.4% for the quarter, up 30 basis points from fiscal 2018, and faced a headwind from the revenue mix previously mentioned. On a year-to-date basis, operating profit is up 11% year-over-year and 12.1% of net revenue, a clear indication of the momentum of the business. We expect continued improvement in Q4 toward achieving our fiscal 2021 margin target. This improvement will be driven by a combination of leveraging the benefits of scale from our global model, strong project execution, and higher margin opportunities currently in our pipeline. Our non-allocated corporate overhead costs were $27 million for the quarter, slightly higher sequentially and year-over-year.

Moving to BIF, in the quarter, BIF grew net revenue 11% year-over-year, and operating profit was up 3%. Operating profit, as a percentage of net revenue, was 12.4% for the quarter, up 30 basis points from fiscal 2018, and faced a headwind from the revenue mix previously mentioned. On a year-to-date basis, operating profit is up 11% year-over-year and 12.1% of net revenue, a clear indication of the momentum of the business. We expect continued improvement in Q4 toward achieving our fiscal 2021 margin target. This improvement will be driven by a combination of leveraging the benefits of scale from our global model, strong project execution, and higher margin opportunities currently in our pipeline. Our non-allocated corporate overhead costs were $27 million for the quarter, slightly higher sequentially and year-over-year.

Operating profit as a percentage of net revenue was 12.4% for the quarter up 30 basis points from fiscal 2018 and face the headwind from the revenue mix previously mentioned.

On a year to date basis operating profit is up 11% year over year and 12.1% of net revenue a clear indication of the momentum of the business.

We expect continued improvement in the fourth quarter toward achieving our fiscal 2021 margin target.

This improvement will be driven by a combination of leveraging the benefits of scale from our global model strong project execution and higher margin opportunities currently in our pipeline.

Our non allocated corporate overhead costs were $27 million for the quarter slightly higher sequentially and year over year. As previously mentioned, we benefited from actuarial true up that we highlighted in the previous year third quarter.

Kevin Berryman: As previously mentioned, we benefited from an actuarial true-up that we highlighted in the previous year, third quarter. We continue to be focused on driving cost-effectiveness into our corporate-related cost structure and continue to expect unallocated corporate costs of approximately $25 to $35 million per quarter. Now turning to slide 12, I would like to update our initiatives relative to our recent M&A and divestiture initiative. As many of you know, the company has undergone significant transformation over the last two years, including the $3.3 billion acquisition of CH2M, the over $800 million acquisition of next-generation technology provider KeyW, and the $3.3 billion divestment of our energy, chemicals, and resources business. These actions are clearly resulting in a higher margin, higher growth company with more predictable cash flows. These actions, together with our organic growth, have driven strong value for our shareholders.

As previously mentioned, we benefited from an actuarial true-up that we highlighted in the previous year, third quarter. We continue to be focused on driving cost-effectiveness into our corporate-related cost structure and continue to expect unallocated corporate costs of approximately $25 to $35 million per quarter. Now turning to slide 12, I would like to update our initiatives relative to our recent M&A and divestiture initiative. As many of you know, the company has undergone significant transformation over the last two years, including the $3.3 billion acquisition of CH2M, the over $800 million acquisition of next-generation technology provider KeyW, and the $3.3 billion divestment of our energy, chemicals, and resources business. These actions are clearly resulting in a higher margin, higher growth company with more predictable cash flows. These actions, together with our organic growth, have driven strong value for our shareholders.

We continue to be focused on driving cost effectiveness and to our corporate related cost structure and continue to expect on allocated corporate costs of approximately $25 million to $35 million per quarter.

Now turning to slide 12, I would like to update our initiatives relative to our recent M&A and divestiture initiatives.

As many of you know the company has undergone significant transformation over the last two years, including the 3.3 billion dollar acquisition of CHP Lam. The over 800 million acquisition in next generation technology provider key W. And the 3.3 billion divestment of our energy chemicals and resources business. These actions are clearly, resulting in a higher margin higher growth company with more predictable cash flows. These actions together with our organic growth have driven strong value for our shareholders.

Let me provide an update on each starting with the CH too and integration and cost synergies.

Kevin Berryman: Let me provide an update on each, starting with the CH2M integration and cost synergies. I am pleased to report that we are nearing the completion of the CH2M integration with nearly $175 million in net cost synergies achieved, surpassing our original estimates. We expect the final synergies to be achieved by the end of our calendar year 2019. Turning to ECR, during the quarter, we incurred $70 million of ECR-related transaction, separation, and restructuring costs. We expect nearly all costs to be incurred by early calendar year 2020. In addition, we are updating our view of both taxes paid on the gain associated with sale and other one-time costs. While cash taxes are now estimated at $400 million, down from our previous estimate of approximately $500 million, we are also now expecting that our one-time costs will grow from our previous estimate of $200 million.

Let me provide an update on each, starting with the CH2M integration and cost synergies. I am pleased to report that we are nearing the completion of the CH2M integration with nearly $175 million in net cost synergies achieved, surpassing our original estimates. We expect the final synergies to be achieved by the end of our calendar year 2019. Turning to ECR, during the quarter, we incurred $70 million of ECR-related transaction, separation, and restructuring costs. We expect nearly all costs to be incurred by early calendar year 2020. In addition, we are updating our view of both taxes paid on the gain associated with sale and other one-time costs. While cash taxes are now estimated at $400 million, down from our previous estimate of approximately $500 million, we are also now expecting that our one-time costs will grow from our previous estimate of $200 million.

I am pleased to report that we are nearing the completion of the CHP laminate integration with nearly $175 million a net cost synergies achieved surpassing our original estimates we expect the final synergies to be achieved by the end of our calendar year 2019.

Turning to SCR during the quarter, we incurred $70 million of SCR related transaction separation and restructuring costs, we expect nearly all cost to be incurred by early calendar year 2020.

In addition, we are updating our view of both taxes paid on the gain associated with sale and other onetime costs.

While cash taxes are now estimated at $400 million down from our previous estimate of approximately $500 million.

We are also now expecting that our onetime costs will grow from our previous estimate of $200 million.

We are actively in the midst of identifying additional cost reduction benefits due to our transition from a three LSB to a two LLP company, we will provide an update on the cost estimates during our fourth quarter earnings call.

Kevin Berryman: We are actively in the midst of identifying additional cost reduction benefits due to our transition from a three LOB to a two LOB company. We will provide an update on the cost estimates during our Q4 earnings call. Regarding KeyW, which closed on 12 June, we are making progress achieving the communicated $15 million of run-rate cost synergies by the end of fiscal 2020. During the final weeks of the quarter, we incurred approximately $7 million of the $25 million of costs to achieve those synergies. During the quarter, we also incurred $13 million of the expected $16 million of transaction fees and other one-time acquisition-related costs. Now I want to cash flow generation and the balance sheet on slide 13. During the quarter, underlying free cash flow from operations again improved and increased from Q2.

We are actively in the midst of identifying additional cost reduction benefits due to our transition from a three LOB to a two LOB company. We will provide an update on the cost estimates during our Q4 earnings call. Regarding KeyW, which closed on 12 June, we are making progress achieving the communicated $15 million of run-rate cost synergies by the end of fiscal 2020. During the final weeks of the quarter, we incurred approximately $7 million of the $25 million of costs to achieve those synergies. During the quarter, we also incurred $13 million of the expected $16 million of transaction fees and other one-time acquisition-related costs. Now I want to cash flow generation and the balance sheet on slide 13. During the quarter, underlying free cash flow from operations again improved and increased from Q2.

Regarding key W, which closed on June 12, we are making progress achieving the communicated $15 million of run rate cost synergies by the end of fiscal 2020.

During the final weeks of the quarter, we incurred approximately 7 million of the $25 million of cost to achieve those synergies.

During the quarter, we also incurred $13 million of the expected $16 million of transaction fees and other one time acquisition related costs.

Now onto the cash flow generation and the balance sheet on slide 13.

During the quarter underlying free cash flow from operations again improved and increased from Q2.

This cash flow has been supported by continuing improvement in Dsos, given our focus on improving this metrics. This metric with dsos, increasing our excuse me decreasing two days from the second quarter level.

Kevin Berryman: This cash flow has been supported by continuing improvement in DSOs given our focus on improving this metric, with DSOs decreasing two days from the Q2 level. During the quarter, capital expenditure is totaled $42 million, of which $3 million was related to ECR. Capital expenditures were also impacted by IT and real estate restructuring related to our cost synergy efforts. We continue to target a long-term free cash flow conversion rate of 100%. We ended the quarter with cash of approximately $1 billion and a gross debt of $1.2 billion, resulting in $200 million of net debt. As noted earlier, we now expect to pay approximately $400 million in cash taxes related to the gain on the sale of ECR to Worley.

This cash flow has been supported by continuing improvement in DSOs given our focus on improving this metric, with DSOs decreasing two days from the Q2 level. During the quarter, capital expenditure is totaled $42 million, of which $3 million was related to ECR. Capital expenditures were also impacted by IT and real estate restructuring related to our cost synergy efforts. We continue to target a long-term free cash flow conversion rate of 100%. We ended the quarter with cash of approximately $1 billion and a gross debt of $1.2 billion, resulting in $200 million of net debt. As noted earlier, we now expect to pay approximately $400 million in cash taxes related to the gain on the sale of ECR to Worley.

During the quarter capital extent expenditures totaled $42 million of which $3 million was rail latent to SCR.

Capital expenditures were also impacted by key and real estate restructuring related to our cost synergy efforts.

We continue to target a long term free cash flow conversion rate of 100%.

We ended the quarter with cash of approximately $1 billion and gross debt of 1.2 billion, resulting in $200 million of net debt.

As noted earlier, we now expect to pay approximately $400 million in cash taxes related to the gain on the sale of VCR torley.

Also during the quarter, we monetized approximately $65 million of our Worley ownership and currently retained 51 million shares of Worley, representing a 9.9% interest in the company.

Kevin Berryman: Also, during the quarter, we monetized approximately $65 million of our Worley ownership and currently retain 51 million shares of Worley, representing a 9.9% interest in the company. Regarding our capital deployment, we completed the recently announced $250 million ASR on 5 June, with the delivery of the remaining 20% of the ASR shares, or 0.5 million shares. The program realized an attractive 74/70 VWAP value. Immediately following the completion of the ASR, we began repurchasing additional shares through open market purchases and have bought approximately $100 million of shares as of 2 August. We continue to believe that our shares are trading at a discount to their intrinsic value and plan to be active with additional repurchases. However, assuming no additional share repurchase beyond 2 August, we would expect an average share count of 137 million and ending Q4 share count of approximately 135 million shares.

Also, during the quarter, we monetized approximately $65 million of our Worley ownership and currently retain 51 million shares of Worley, representing a 9.9% interest in the company. Regarding our capital deployment, we completed the recently announced $250 million ASR on 5 June, with the delivery of the remaining 20% of the ASR shares, or 0.5 million shares. The program realized an attractive 74/70 VWAP value. Immediately following the completion of the ASR, we began repurchasing additional shares through open market purchases and have bought approximately $100 million of shares as of 2 August. We continue to believe that our shares are trading at a discount to their intrinsic value and plan to be active with additional repurchases. However, assuming no additional share repurchase beyond 2 August, we would expect an average share count of 137 million and ending Q4 share count of approximately 135 million shares.

Regarding our capital deployment, we completed the recently announced $250 million Asrs on June 5th with the delivery of the remaining 20% of the MSR chairs or half a million shares.

The program realized an attractive 70 470, the UEP value.

Immediately following the completion of the MSR, we began repurchasing additional shares through open market purchases and have bought approximately $100 million of shares as of August 2nd.

We continue to believe that our shares are trading at a discount to their intrinsic value and plan to be active with additional repurchases.

However, assuming no additional share repurchases beyond August 2nd we would expect that.

Average share count of 137 million, an ending Q4 share count of approximately 135 million shares.

Kevin Berryman: We also expect a 25% effective tax rate for the Q4 and 24% to 25% effective rate for fiscal 2020. Given our strong balance sheet and Free Cash Flow, we also announced our quarterly dividend of $0.17 per share. As you know, our new dividend level represents an increase of 13% versus our year-ago dividend level. And finally, looking at the right side of the chart, when accounting for the expected cash taxes and Worley equity, our Q3 performing net debt is now approximately $300 million, or well under 1x Adjusted EBITDA, a clear indication of our strong financial flexibility. Now I'll turn it back over to Steve for some closing thoughts. Thanks, Kevin. I'm excited about the continued traction of our business transformation. We're seeing a strong inclusive culture developing across Jacobs.

We also expect a 25% effective tax rate for the Q4 and 24% to 25% effective rate for fiscal 2020. Given our strong balance sheet and Free Cash Flow, we also announced our quarterly dividend of $0.17 per share. As you know, our new dividend level represents an increase of 13% versus our year-ago dividend level. And finally, looking at the right side of the chart, when accounting for the expected cash taxes and Worley equity, our Q3 performing net debt is now approximately $300 million, or well under 1x Adjusted EBITDA, a clear indication of our strong financial flexibility. Now I'll turn it back over to Steve for some closing thoughts. Thanks, Kevin. I'm excited about the continued traction of our business transformation. We're seeing a strong inclusive culture developing across Jacobs.

We also expect to 25% effective tax rate for the fourth quarter and 24% to 25% effective rate for fiscal 2020.

Given our strong balance sheet and free cash flow, we also announced our quarterly dividend to 17 cents per share.

As you know our new dividend level represents an increase of 13% versus our year ago dividend level.

And finally looking at the right side of the chart when accounting for the expected cash taxes on morally equity our Q3 pro forma net debt is now approximately $300 million or well under one times adjusted EBITDA is a clear indication of our strong financial flexibility.

Now I will turn it back over to Steve for some closing thoughts.

Thanks, Kevin I am excited about the continued traction of our business transformation.

We're seeing a strong inclusive culture developing across Jacobs, our pipeline is increasing year over year with larger higher margin opportunities and were strategically leveraging our balance sheet investing in ourselves through timely share buybacks as well as disciplined and targeted M&A activities and strong growth sectors.

Kevin Berryman: Our pipeline is increasing year-over-year with larger, higher margin opportunities, and we're strategically leveraging our balance sheet, investing in ourselves through timely share buybacks, as well as disciplined and targeted M&A activities, and strong growth sectors. We're raising our fiscal 2019 adjusted EBITDA outlook to a range of $965 million to $1 billion from the previous range of $920 million to $1 billion. We're increasing our fiscal 2019 adjusted earnings per share guidance to a range of $4.75 to $5 from our previous guidance of $4.45 to $4.85. This increased outlook accounts for a combination of operational performance, KeyW contribution, discrete tax items, and the impact from share repurchases. We have a clear vision and strategy for Jacobs and will remain disciplined in executing against it. We're well aligned to capture secular growth opportunities.

Our pipeline is increasing year-over-year with larger, higher margin opportunities, and we're strategically leveraging our balance sheet, investing in ourselves through timely share buybacks, as well as disciplined and targeted M&A activities, and strong growth sectors. We're raising our fiscal 2019 adjusted EBITDA outlook to a range of $965 million to $1 billion from the previous range of $920 million to $1 billion. We're increasing our fiscal 2019 adjusted earnings per share guidance to a range of $4.75 to $5 from our previous guidance of $4.45 to $4.85. This increased outlook accounts for a combination of operational performance, KeyW contribution, discrete tax items, and the impact from share repurchases. We have a clear vision and strategy for Jacobs and will remain disciplined in executing against it. We're well aligned to capture secular growth opportunities.

We are raising our fiscal 2019, adjusted EBITDA outlook to a range of $965 million to $1 billion from the previous range of $920 million to $1 billion.

And we're increasing our fiscal 2019 adjusted earnings per share guidance to a range of 475 to $5 from our previous guidance of 445 to $4.85.

This increased outlook accounts for a combination of operational performance QW contribution discrete tax items and the impact from share repurchases.

We have a clear vision and strategy for Jacobs and we'll remain disciplined in executing against it we're well aligned to capture secular growth opportunities. We have a strong balance sheet and we're well positioned to deliver on our financial targets. Operator, we'll now open the call for questions.

Kevin Berryman: We have a strong balance sheet, and we're well positioned to deliver on our financial targets. Operator will now open the call for questions. At this time, if you would like to ask a question, please press star and then the number one on your telephone keypad. Again, press star and then the number one. Your first question comes from the line of Josh Sullivan with Seaport Global. Good morning. Nice quarter here. Morning, Josh. Good morning, Josh. With the two-year budget deal moving forward, can you talk about any particular programs you're more confident at this point? I'm thinking of the confidential KeyW space contract, but also, has anything else moved to the left with the budget deal in place, even longer term?

We have a strong balance sheet, and we're well positioned to deliver on our financial targets. Operator will now open the call for questions. At this time, if you would like to ask a question, please press star and then the number one on your telephone keypad. Again, press star and then the number one. Your first question comes from the line of Josh Sullivan with Seaport Global. Good morning. Nice quarter here. Morning, Josh. Good morning, Josh. With the two-year budget deal moving forward, can you talk about any particular programs you're more confident at this point? I'm thinking of the confidential KeyW space contract, but also, has anything else moved to the left with the budget deal in place, even longer term?

At this time, if you would like to ask a question. Please press Star then the number one on your telephone keypad again, Scott the only number one.

Your first question comes from the line of Josh Sullivan with Seaport Global.

Good morning.

Nice quarter.

Good morning, Jeff Good morning, Jeff.

The two year budget deal moving forward can you talk about any particular programs you more confident at this point im thinking of the confidential tw space contract, but also as anything else moved to the left with the budget deal in place even even longer term.

Well as you know the two year budget deal.

Kevin Berryman: Well, as you know, the two-year budget deal kind of set the overall level, which was up 3% for defense spending and up 4% for non-defense, which obviously is good news for Jacobs over the 2020 and 2021 time frame. But the details are to come over the next few weeks and potentially a few months. I think the good news is it was a bipartisan effort to merge the defense and non-defense interests of each party. But we're optimistic, from everything we're hearing and our engagement with The Hill, that the priority areas that we're involved in, especially in space, cyber, and mission IT, etc., are going to be the areas that are going to succeed. NASA is looking strong with some of the commitments around the Artemis mission and putting the first woman on the moon in 2024 and a sustainable presence on the moon by 2028.

Well, as you know, the two-year budget deal kind of set the overall level, which was up 3% for defense spending and up 4% for non-defense, which obviously is good news for Jacobs over the 2020 and 2021 time frame. But the details are to come over the next few weeks and potentially a few months. I think the good news is it was a bipartisan effort to merge the defense and non-defense interests of each party. But we're optimistic, from everything we're hearing and our engagement with The Hill, that the priority areas that we're involved in, especially in space, cyber, and mission IT, etc., are going to be the areas that are going to succeed. NASA is looking strong with some of the commitments around the Artemis mission and putting the first woman on the moon in 2024 and a sustainable presence on the moon by 2028.

To set the overall.

Level, which was up 3% for defense spending and up 4% for non defense, which obviously is good news for for Jacobs over the 2020 and 21 timeframe.

But.

What the details are to come.

Over the next few weeks.

Actually a few months.

I think the good news is it was a bipartisan effort to to merge the defense and nondefense interests of each party.

But we're optimistic from everything we're hearing and our engagement with the hill that the priority areas that we're involved in and especially in space on cyber and mission ITC et cetera are going to be the areas that are going to succeed NASA is looking strong with.

But some of the commitments around the artemus mission and putting the first woman on the Moon in 2024 and.

And for sustainable presence on the Moon by 2028, and these are areas that we believe will be well funded that will help our efforts are Kennedy Marshall Johnson et cetera. So.

Kevin Berryman: And these are areas that we believe will be well funded, that will help our efforts at Kennedy, Marshall, Johnson, etc. So more details to come, but it was a very important deal that was struck, obviously, over the last few days. And then just on the synthetic compound opportunity you highlighted in your opening comments, what do you think the timeline of that looks like for it to become a significant contributor? I think it's going to move at a fairly solid pace because of the importance and the growing exposure, essentially the negative exposure that's out there on kind of revealing now that this is a concern in soil and water. And so we, as I mentioned, we're well positioned on it, and we're right in the middle of it.

And these are areas that we believe will be well funded, that will help our efforts at Kennedy, Marshall, Johnson, etc. So more details to come, but it was a very important deal that was struck, obviously, over the last few days. And then just on the synthetic compound opportunity you highlighted in your opening comments, what do you think the timeline of that looks like for it to become a significant contributor? I think it's going to move at a fairly solid pace because of the importance and the growing exposure, essentially the negative exposure that's out there on kind of revealing now that this is a concern in soil and water. And so we, as I mentioned, we're well positioned on it, and we're right in the middle of it.

For more details to come but but it was a very important deal that was struck obviously over the last few days.

And then just on the synthetic compound opportunity you highlighted in your opening comments, what do you think the timeline of that looks like for it to become a significant contributor.

I think we are going to I think it's going to move at a fairly solid pace because of the importance in the growing exposure.

Essentially the negative exposure that's out there on.

On kind of revealing now that this is a concern and soil and water.

And so we as I mentioned, we are well positioned on it and we're right in the middle of it we have specific Jacobs resources that are working with some of the US government government agencies now too.

Kevin Berryman: We have specific Jacobs resources that are working with some of the US government agencies now to develop the solutions. And so I think it's something that's going to help us as we move into 2020 and 2021 and beyond. Okay. Thank you. I'll get back in the queue. Your next question comes from the line of Gautam Khanna with Cowen and Company. Yes. Thank you. Good quarter. Just wanted to follow up on some of the comments you made about capital allocation, the stock being undervalued. Just where would you like to see the balance sheet in terms of leverage, maybe, within a year? I mean, is there any obviously, you're underlevered now, but what's sort of the what's your comfort zone?

We have specific Jacobs resources that are working with some of the US government agencies now to develop the solutions. And so I think it's something that's going to help us as we move into 2020 and 2021 and beyond. Okay. Thank you. I'll get back in the queue. Your next question comes from the line of Gautam Khanna with Cowen and Company. Yes. Thank you. Good quarter. Just wanted to follow up on some of the comments you made about capital allocation, the stock being undervalued. Just where would you like to see the balance sheet in terms of leverage, maybe, within a year? I mean, is there any obviously, you're underlevered now, but what's sort of the what's your comfort zone?

To develop the solutions and so.

I think its something thats going to help us and as we move into 2020 and 21 and beyond.

Okay. Thank you I'll get back in the queue.

Your next question comes from the line of good Tom.

Khan with Cowen and company.

Yes. Thank you.

Good good quarter.

Just wanted to.

Follow up on some of the comments you made about capital allocation.

There's the stock being undervalued just.

Where do you where would you like to see the balance sheet in terms of leverage maybe within a year I mean is there any.

Obviously your under Levered now what sort of the.

What's your comfort zone and.

Kevin Berryman: And then maybe if you could comment on how the M&A pipeline looks and your bandwidth for taking on additional acquisitions given KeyW has just been closed. Thanks. Well, I'll let Kevin finish with our leverage goals, etc. But just from a standpoint of the type of things that we're looking at beyond buying back our stock, and I'll always emphasize, the barrier to doing any sort of M&A deal is that it has to be superior to buying back our stock. And buying back our stock, as Kevin said, is very attractive to us right now. But as we are engaged in M&A opportunities for both our BIAF and A10 businesses, it's very consistent with what we talked about in our investor day earlier this year. In BIAF, it's really to add to the portfolio to be the one-stop shop globally.

And then maybe if you could comment on how the M&A pipeline looks and your bandwidth for taking on additional acquisitions given KeyW has just been closed. Thanks. Well, I'll let Kevin finish with our leverage goals, etc. But just from a standpoint of the type of things that we're looking at beyond buying back our stock, and I'll always emphasize, the barrier to doing any sort of M&A deal is that it has to be superior to buying back our stock. And buying back our stock, as Kevin said, is very attractive to us right now. But as we are engaged in M&A opportunities for both our BIAF and A10 businesses, it's very consistent with what we talked about in our investor day earlier this year. In BIAF, it's really to add to the portfolio to be the one-stop shop globally.

And then maybe if you could comment on.

How the M&A pipeline looks and injure bandwidth for or taking on additional acquisitions.

Pwc.

Justin closed.

Thanks.

Well I'll, let Kevin finished with the.

In our with the with our.

Leverage.

Goals et cetera, but just from a.

From a standpoint of the type of things that we're looking at beyond buying back our stock and I'll always emphasize.

The the the barrier to doing any sort of M&A deal is that it has to be superior to buying back our stock and and buying back our stock as Kevin said is very attractive to us right now, but as we do as we are engaged in.

M&A opportunities for both our be IMF and a 10 businesses its very consistent with what we talked about at our Investor day earlier this year.

And.

Jeff, it's really to add to the portfolio to be the one stop shop globally I mean, one of the big areas. We see is.

Kevin Berryman: One of the big areas we see is digital consulting, anything that strengthens us in thought leadership around bringing digital and continuing the development of our technology platforms that drive infrastructure. From an A10 standpoint, geographic growth is important to us. We're currently generating very positive margins in our international area. So we're going to continue to look for ways to accelerate our presence outside of the US because the majority of our business today is in the US. When we acquired KeyW, we were excited about the pipeline of ideas that KeyW had to build that great asset. So it's an area that we'll continue to look at to strengthen our margins and differentiate ourselves in the areas that we talked about, whether it's space, mission IT, cyber.

One of the big areas we see is digital consulting, anything that strengthens us in thought leadership around bringing digital and continuing the development of our technology platforms that drive infrastructure. From an A10 standpoint, geographic growth is important to us. We're currently generating very positive margins in our international area. So we're going to continue to look for ways to accelerate our presence outside of the US because the majority of our business today is in the US. When we acquired KeyW, we were excited about the pipeline of ideas that KeyW had to build that great asset. So it's an area that we'll continue to look at to strengthen our margins and differentiate ourselves in the areas that we talked about, whether it's space, mission IT, cyber.

Digital consulting anything that strengthens us and thought leadership around bringing.

Digital and continuing the development of our.

Our technology platforms that drive infrastructure.

From a from an 810 standpoint.

Geographic growth it is important to us we're currently generating very positive margins in our international area and so it's it's we're going to continue to look for ways to accelerate our presence outside of the U.S. because the majority of our business today is in the us.

We when we acquired KBW, we were excited about the pipeline of ideas the KBW had to to build that.

Great asset and so it's it's an area that we'll continue to look at too.

Strengthen our margins and differentiate ourselves and.

In the areas that we talked about whether its space mission IP cyber.

And then.

Kevin Berryman: And then in A10, again, it will be the areas to build our capabilities around our announced technology hubs. But Kevin, you want to comment on the financial side of that? Yeah, Gautam. I would say there's a couple of things. Clearly, we believe that there is incremental capacity in the organization, resource-wise and focus-wise, to be able to continue to drive an M&A agenda over the next year or two, clearly. I think that the capacity really starts to probably become even clearer in its availability as we kind of execute and finalize the ECR transaction, which obviously is coming up here near the end of our calendar year. So I don't see that as a hindrance, per se, as it relates to our efforts to execute over the next year to two.

And then in A10, again, it will be the areas to build our capabilities around our announced technology hubs. But Kevin, you want to comment on the financial side of that? Yeah, Gautam. I would say there's a couple of things. Clearly, we believe that there is incremental capacity in the organization, resource-wise and focus-wise, to be able to continue to drive an M&A agenda over the next year or two, clearly. I think that the capacity really starts to probably become even clearer in its availability as we kind of execute and finalize the ECR transaction, which obviously is coming up here near the end of our calendar year. So I don't see that as a hindrance, per se, as it relates to our efforts to execute over the next year to two.

And and again it will be the areas to build our capabilities around our announced technology hubs.

But Kevin you want to comment on the financial side of it yes, Gautam I would say theres a couple of things.

Clearly, we believe that there is incremental capacity in the organization resource wise and focus applies to to be able to continue to drive a.

A an M&A agenda in over the next year or two clearly.

I think that that capacity really starts to probably become even clearer and its availability as we kind of execute and finalize the CR.

Transaction, which obviously is coming up here near the end of our.

End of our calendar here.

So I don't see that as a hindrance per se as it relates to our efforts to execute over the next year to two.

In terms of the leverage factors I've communicated and certainly did that at our Investor day back in February .

Kevin Berryman: In terms of the leverage factors, I've communicated and certainly did that at our investor day back in February that with our new portfolio, we feel comfortable with an overall kind of leverage factor of 2 to 3 times. However, I wouldn't necessarily assume that we're willing to go to 2 to 3 times if we're not finding attractive acquisition opportunities. And that would certainly, we would probably be at a leverage level that's under 2. So I don't know if that specifically answers your question, but it starts to give you some guardrails as it relates to that. And certainly, we'd be comfortable in the 2 to 3 times. But if we're not really active in M&A and, as Steve suggested, M&A has got to be a value-enhancing effort, bid's got to equal ask, and it's got to be strategically aligned with what we want to get accomplished.

In terms of the leverage factors, I've communicated and certainly did that at our investor day back in February that with our new portfolio, we feel comfortable with an overall kind of leverage factor of 2 to 3 times. However, I wouldn't necessarily assume that we're willing to go to 2 to 3 times if we're not finding attractive acquisition opportunities. And that would certainly, we would probably be at a leverage level that's under 2. So I don't know if that specifically answers your question, but it starts to give you some guardrails as it relates to that. And certainly, we'd be comfortable in the 2 to 3 times. But if we're not really active in M&A and, as Steve suggested, M&A has got to be a value-enhancing effort, bid's got to equal ask, and it's got to be strategically aligned with what we want to get accomplished.

That with our new portfolio, we feel comfortable with an overall kind of leverage factor of two to three times. However.

I wouldn't necessarily assume that we're willing to go to two to three times, if we're not finding attractive.

Acquisition opportunities and that would certainly we would probably be at a leverage level. That's that's under two.

So I don't know if that specifically answers your question, but it starts to give you some guardrails as it relates to that and certainly we'd be comfortable in the two to three times, but if if we're not really active then in M&A and and as Steve suggested M&A has got to be a value enhancing effort.

It's got a equal ask and its got to be strategically aligned with what we want to get accomplished show so our leverage factors will be less.

Kevin Berryman: So our leverage factors will be less robust, I would say, if, in fact, we're not finding some of these opportunities that kind of hit the mark in terms of our value creation expectations. That's helpful. And just as a quick follow-up, is there any update on the timing of the Hanford bids plus the classified contract? Is the timing still on track with what you've communicated before? Yeah. I think we're on the Hanford side, I'd say slightly moving to the right. Probably we'll hear first on our rebid. And the tank farms or the tank farm initiative is probably closer to the end of the year, calendar year. And on the confidential initiative, that one looks like it's going to be sometime late next year before it starts to come out for sort of the rebid building significant momentum.

So our leverage factors will be less robust, I would say, if, in fact, we're not finding some of these opportunities that kind of hit the mark in terms of our value creation expectations. That's helpful. And just as a quick follow-up, is there any update on the timing of the Hanford bids plus the classified contract? Is the timing still on track with what you've communicated before? Yeah. I think we're on the Hanford side, I'd say slightly moving to the right. Probably we'll hear first on our rebid. And the tank farms or the tank farm initiative is probably closer to the end of the year, calendar year. And on the confidential initiative, that one looks like it's going to be sometime late next year before it starts to come out for sort of the rebid building significant momentum.

Thus robust I would say if in fact, we're not finding some of these opportunities that kind of hit the mark in terms of our value creation.

Expectations.

That's helpful and just as a quick follow up is there any update on the timing of the answered bids plus the.

The classified contract timing still on track with what you've communicated before.

Yes, I think we've.

On the on the Hanford side, I'd say slightly moving to the right.

Probably we'll hear more we'll probably hear first on our rebid.

And in the tank farms or the tank farm initiative is probably closer to the end of the year calendar year.

And.

You know on the the confidential initiative.

That one looks like it's going to be sometime late next year before it starts to.

Come out for.

Sort of the rebid big building significant momentum.

So the good news is we're continuing to work on our current programs and were optimistic on.

Kevin Berryman: So the good news is we're continuing to work on our current programs, and we're optimistic on some of the new opportunities that you mentioned. Thank you. Your next question comes from the line of Andy Kaplowitz with Citi. Good morning, guys. Hey, Andy. Kevin and Steve, can you give us a little more color on A10 margin? I think we can understand that the revenue growth has been coming from the large reimbursable work and procurement. They've been talking about improving the margin. You've got the longer-term guide up as much as 150 basis points. So the ramp-up of fixed-price services, which carry higher margin, has been slower than you thought. And when should A10 margin ramp? Does it ramp up here? Yeah. No, it's a good question. We're confident, and we're seeing it, that as we're pursuing new business, we're moving up the value chain.

So the good news is we're continuing to work on our current programs, and we're optimistic on some of the new opportunities that you mentioned. Thank you. Your next question comes from the line of Andy Kaplowitz with Citi. Good morning, guys. Hey, Andy. Kevin and Steve, can you give us a little more color on A10 margin? I think we can understand that the revenue growth has been coming from the large reimbursable work and procurement. They've been talking about improving the margin. You've got the longer-term guide up as much as 150 basis points. So the ramp-up of fixed-price services, which carry higher margin, has been slower than you thought. And when should A10 margin ramp? Does it ramp up here? Yeah. No, it's a good question. We're confident, and we're seeing it, that as we're pursuing new business, we're moving up the value chain.

Some of the new opportunities that you mentioned.

Thank you.

Your next question comes from the line of Andy Kaplowitz with Citi.

Good morning, guys.

Hey, Andy.

Kevin Kevin or Steve can you give us a little more color on 810 margin I think we can understand that the revenue growth has been coming from the large reimbursable work in procurement you talking about improving the margin you've got the long longer term guide up as much as 150 basis points. So the ramp up of fixed price services, which carry higher margin going slower than you thought and cidade lunch today 10 margin ramp.

That's a good ramp from here.

Yeah, no. It's a good question.

Where were were confident and we're seeing it that as were pursuing new business where.

We're moving up the value chain I think what you're what we're all seeing right now in our PML numbers is the success of the wins.

Kevin Berryman: I think what we're all seeing right now in our P&L numbers is the success of the wins back in 2018 around the large enterprise asset management contracts, things like Missile Defense and SOCOM and JITC that are all ramped up nicely. And the most recent one, the HTASC, Big Army HTASC 1. And these are very high-return, but more modest-margin businesses that we've discussed. And in the meantime, when you look at our pipeline of opportunities, it's rich with the smaller higher-margin expression, some of them being fixed-price. And we are seeing the opportunity there. So we're not seeing any degradation in the margin opportunity. And also, KeyW is clearly going to start playing out over the next few quarters from an A10 standpoint. Well, we'll have a positive impact on both the gross profit margin and the operating profit margin.

I think what we're all seeing right now in our P&L numbers is the success of the wins back in 2018 around the large enterprise asset management contracts, things like Missile Defense and SOCOM and JITC that are all ramped up nicely. And the most recent one, the HTASC, Big Army HTASC 1. And these are very high-return, but more modest-margin businesses that we've discussed. And in the meantime, when you look at our pipeline of opportunities, it's rich with the smaller higher-margin expression, some of them being fixed-price. And we are seeing the opportunity there. So we're not seeing any degradation in the margin opportunity. And also, KeyW is clearly going to start playing out over the next few quarters from an A10 standpoint. Well, we'll have a positive impact on both the gross profit margin and the operating profit margin.

Back in 2018 around the large enterprise.

Asset management contracts things like missile defense, and so calm and genetic.

That are all.

Ramped up nicely.

The most recent one the HTS Big Army each task one and these are very high return, but more modest margin businesses that we've discussed.

And in the meantime, when you looked at our pipeline of opportunities.

No its rich with these.

The more.

Hi, smaller higher margin expressed.

Some of them being fixed price and where we are seeing the opportunity. There. So we're not seeing any.

Degradation in the margin opportunity.

And also KBW is is clearly going to start playing out.

Over the next few quarters too.

From an eight times standpoint will will have a positive impact on both the gross profit margin EMEA operating profit margin.

So we we expect that.

Kevin Berryman: So we expect that as we get through the next several quarters, we'll start to see some sequential improvement. But it's the nature of this business that we've talked about in the past, especially when we've had these big, successful, high-return enterprise management contracts. Thanks for that, Steve. And then can I ask you, given what's going on in the world, to give us an update on how you think about the cyclicality of your BIF business? You've got businesses in there, like advanced facilities, that have been doing well for you. Have you seen any slowdown in that business in terms of project approvals? It doesn't look like you have. And are there any other parts of BIF that you're concerned about that could be a bit more cyclical? Of our BIF $14 billion backlog, the most cyclical in there is the advanced facilities.

So we expect that as we get through the next several quarters, we'll start to see some sequential improvement. But it's the nature of this business that we've talked about in the past, especially when we've had these big, successful, high-return enterprise management contracts. Thanks for that, Steve. And then can I ask you, given what's going on in the world, to give us an update on how you think about the cyclicality of your BIF business? You've got businesses in there, like advanced facilities, that have been doing well for you. Have you seen any slowdown in that business in terms of project approvals? It doesn't look like you have. And are there any other parts of BIF that you're concerned about that could be a bit more cyclical? Of our BIF $14 billion backlog, the most cyclical in there is the advanced facilities.

As we get through the next several quarters, we'll start to see some sequential improvement.

But it's the nature of this business that we've talked about in the past, especially when we've had these big successful.

Hi return.

Enterprise management contracts.

Okay. Thanks for that Steve and then can I ask you given what's going on in the world to give us an update on how you think about the cyclicality.

The <unk> business.

You know you got businesses in there like a dance facilities that have been doing well for you have you seen any slowdown in that business in terms of project approvals doesn't look like you have are there any other parts of it that you're concerned about.

Could be a bit more cyclical.

All of our.

Our biya.

$14 billion backlog.

The most cyclical in there is the advanced facilities, but even with that we are seeing great success based on our alignment with some of the key life Sciences and electronics players that some of them are counter cyclical and their own capex spend.

Kevin Berryman: But even with that, we're seeing great success based on our alignment with some of the key life sciences and electronics players that some of them are countercyclical in their own CapEx spend. When you look at the backlog in Q3, our advanced facilities business had one of the strongest backlogs, up close to 10% year-over-year in Q3. And we're continuing to move into the areas where the spending is happening. And there is, for example, on life sciences, we've talked about biotech and gene therapy, and we still see great opportunities there moving forward. And then when you look at the Brexit impact of the UK, for us, so far, so good. In fact, our best year-over-year performance on a percentage basis in Q3 was in the UK, where we had double-digit backlog growth.

But even with that, we're seeing great success based on our alignment with some of the key life sciences and electronics players that some of them are countercyclical in their own CapEx spend. When you look at the backlog in Q3, our advanced facilities business had one of the strongest backlogs, up close to 10% year-over-year in Q3. And we're continuing to move into the areas where the spending is happening. And there is, for example, on life sciences, we've talked about biotech and gene therapy, and we still see great opportunities there moving forward. And then when you look at the Brexit impact of the UK, for us, so far, so good. In fact, our best year-over-year performance on a percentage basis in Q3 was in the UK, where we had double-digit backlog growth.

When you look at the backlog and the third quarter.

Our advanced facilities business had one of the strongest backlogs.

Click up close.

10% year over year in the third quarter, and and were continuing to move into the areas, where the spending is happening.

There is.

For example in life Sciences, we've talked about biotech and June .

Therapy.

And we we still see great opportunities there moving forward.

And then when you look at the Brexit impact of the UK.

For us so far so good in fact, our best year over year performance on a percentage basis in the third quarter was in the UK, where we had double digit backlog growth and I can't say enough about the team in the UK and what.

Kevin Berryman: I can't say enough about the team in the UK and what they've been able to do to really combine with CH2M and drive the revenue synergies, and the things that we're winning are demonstrating market share and growth. Now that there's been some government change there in the UK, the new transport minister and even Boris Johnson himself are showing early on commitment to things that maybe people were worried about, but showing commitment to High Speed 2 rail, which is important for Jacobs. Another great area is the northern area of the UK, which we are well positioned with our Manchester and Leeds offices. We're seeing the new government put some specific focus there. So I'm really proud of our BIAF team in the way that they've been able to offset some headwinds and be driving these types of double-digit backlog and P&L growth. Thanks for that, Steve.

I can't say enough about the team in the UK and what they've been able to do to really combine with CH2M and drive the revenue synergies, and the things that we're winning are demonstrating market share and growth. Now that there's been some government change there in the UK, the new transport minister and even Boris Johnson himself are showing early on commitment to things that maybe people were worried about, but showing commitment to High Speed 2 rail, which is important for Jacobs. Another great area is the northern area of the UK, which we are well positioned with our Manchester and Leeds offices. We're seeing the new government put some specific focus there. So I'm really proud of our BIAF team in the way that they've been able to offset some headwinds and be driving these types of double-digit backlog and P&L growth. Thanks for that, Steve.

They've been able to do to really.

Combined with seeks to Ammon and drive the revenue synergies in the things that we're winning are demonstrating market share and growth.

And and now that.

There's been some government change there in the UK, the new transport Minister.

And even Boris Johnson himself for showing early on commitment to things that maybe.

People were worried about but showing commitment to high speed to rail which is important for jacobson.

Another great areas northern area of UK, which.

We are well positioned with our Manchester and leads offices and we're seeing the new government put some specific focus there so.

I'm really proud of our.

Team in a way that they've been able to.

Offset some headwinds and be driving these these type of double digit backlog NPL growth.

Thanks for that Steve.

Your next question comes from the line of Jamie Cook with Credit Suisse.

Kevin Berryman: Your next question comes from the line of Jamie Cook with Credit Suisse. Hi. Good morning. A nice quarter. I've got two questions. One, Kevin, is there anything we should read into just the range with one quarter left of EPS? I'm just trying to think about why the range would still be so wide. And then I guess my second question for you, just given what the performance you guys have put up and what's implied for the back half of the year, I mean, you could get to earnings next year easily just on the back half base of 560. I know you've talked before about 2020 earnings well north of $5. Just, am I thinking about it the wrong way, in particular with KeyW?

Your next question comes from the line of Jamie Cook with Credit Suisse. Hi. Good morning. A nice quarter. I've got two questions. One, Kevin, is there anything we should read into just the range with one quarter left of EPS? I'm just trying to think about why the range would still be so wide. And then I guess my second question for you, just given what the performance you guys have put up and what's implied for the back half of the year, I mean, you could get to earnings next year easily just on the back half base of 560. I know you've talked before about 2020 earnings well north of $5. Just, am I thinking about it the wrong way, in particular with KeyW?

Hi, good morning, and nice quarter.

I guess two questions one Kevin is there anything we should read into that range.

With one quarter left of bps I'm, just trying to think about why the range would still be so wide and then I guess my second question for you just given what the performance you guys have put up and what's implied for the back.

Half of the year I mean, you could get to earnings next year easily just on the back half base of 560, I know you've talked before about 2020, earning well north of $5.

Yes am I thinking about it the wrong thinking about it the wrong way, particularly with with Tw China.

Kevin Berryman: I'm trying to just understand the cadence to get to the $7 to $8 in earnings power in 2021. Thank you. So a couple of things, Jamie. First one is, as it relates to our current results in this year, remember, we've probably got about $0.23 of discrete tax items in our numbers. So that's something that I just want you to keep track of and understand when you think about any effective transition to thinking about 2020. That's one item that is worthy of callout. The other item that you're alluding to is kind of the range. Look, I think $4.75 to $5 is, at the end of the day, plus or minus a number that's 5%, right, when you take the midpoint, even less than 5%. So it seems like a reasonable range.

I'm trying to just understand the cadence to get to the $7 to $8 in earnings power in 2021. Thank you. So a couple of things, Jamie. First one is, as it relates to our current results in this year, remember, we've probably got about $0.23 of discrete tax items in our numbers. So that's something that I just want you to keep track of and understand when you think about any effective transition to thinking about 2020. That's one item that is worthy of callout. The other item that you're alluding to is kind of the range. Look, I think $4.75 to $5 is, at the end of the day, plus or minus a number that's 5%, right, when you take the midpoint, even less than 5%. So it seems like a reasonable range.

Underscoring that the cadence to get to the seven to eight box and earnings power in 2021. Thank you.

So a couple a couple of things Jamie first one is.

As it relates to our current results in this year remember, there's probably got about 23 cents of discrete tax items in our numbers.

So it's something that just want you to keep track of and I understand when you think about.

Any effect of transition to thinking about 2000, 2020 that thats one item that is worthy of calling out the other item that that you're alluding to is kind of the range look I think for 75 to five is is that the end of the day plus or minus.

A number that's 5% right when you take the take the mid point, even less than 5% sides seems like a reasonable range.

Kevin Berryman: I would say there's always a range around the midpoint, which could be associated with fringe releases or these kinds of things. Of course, you could have project takeups or true-ups in terms of costs, which could be a number plus or minus. So I think the ranges are actually quite appropriate at this particular point in time. And the range is not indicative of any kind of specific things that are out there which make us nervous relative to plus or minus figures. Operator? Certainly. Your next question comes Jamie? Your next question comes from the line of Jerry Revich with Goldman Sachs. Yes, hi. Good morning. Steve, it sounds like the A10 bookings have played out, I think, higher than your expectations from the analysts day six months ago, where we were looking for a 2% to 3% organic growth.

I would say there's always a range around the midpoint, which could be associated with fringe releases or these kinds of things. Of course, you could have project takeups or true-ups in terms of costs, which could be a number plus or minus. So I think the ranges are actually quite appropriate at this particular point in time. And the range is not indicative of any kind of specific things that are out there which make us nervous relative to plus or minus figures. Operator? Certainly. Your next question comes Jamie? Your next question comes from the line of Jerry Revich with Goldman Sachs. Yes, hi. Good morning. Steve, it sounds like the A10 bookings have played out, I think, higher than your expectations from the analysts day six months ago, where we were looking for a 2% to 3% organic growth.

I would say there is always.

A range around the midpoint, which could be associated with friends releases are these kinds of things of course, you could have project takeup, so or true ups in terms of costs, which could be a number plus or minus I think the ranges are actually quite appropriate at this particular point in time and the range is not indicative of any kind of specific things that are out, there, which which make us nervous relative to plus or minus figures.

Operator.

Certainly your next question comes.

Your next question comes from the line of Jerry Revich with Goldman Sachs.

Hi, Yes, hi, good morning.

Steve It sounds like the 10 bookings have played out I think higher than your expectations from the analysts say six months ago, where you were looking for 2% to 3% organic growth just based on the update that you're giving us here today, if that if I'm reading that correctly can you just talk about what's played out.

Kevin Berryman: But just based on the update that you're giving us here today, if I'm reading that correctly, can you just talk about what's played out better than expected and how you expect organic growth cadence to play out from here after the strong A10 organic growth this quarter? Yeah. Thank you, Jerry, for the question. We are very excited about what the team's doing globally on A10. Specifically in the US, what's been very positive is I've talked about these large enterprise contracts that we won back in 2018 and how we're ramping them up. Not only has the team done a successful job on getting them fully ramped up, but we're actually finding new opportunities within those clients on some additional business.

But just based on the update that you're giving us here today, if I'm reading that correctly, can you just talk about what's played out better than expected and how you expect organic growth cadence to play out from here after the strong A10 organic growth this quarter? Yeah. Thank you, Jerry, for the question. We are very excited about what the team's doing globally on A10. Specifically in the US, what's been very positive is I've talked about these large enterprise contracts that we won back in 2018 and how we're ramping them up. Not only has the team done a successful job on getting them fully ramped up, but we're actually finding new opportunities within those clients on some additional business.

Better than expected and how you expect.

Organic growth cadence to play out from here after the stronger 10 organic growth this quarter.

Yes, its really thank you Gerry for the question.

We are very excited about what the team's doing globally on an ATM and specifically in the us.

What's been a very positive as I've talked about these these large enterprise contracts that we won back in 2018, and where and how we're ramping them up and not only is the team done a successful job on getting them fully ramped up but but we're actually finding.

New opportunities within those with those clients on some additional business and and so I think that's demonstrating the ability for us to bring.

Kevin Berryman: I think that's demonstrating the ability for us to bring new things that we didn't have a few years ago based on our acquisitions of cybersecurity, digital capability. And now, KeyW is going to add on top of that. Also, when we look at the non-government side, the automotive business, the wind tunnel business, has been a high-growth opportunity for us. And we've talked about the wind tunnel capabilities that we're doing globally. But now, we're seeing opportunities in electrification, powertrains, and leading to new R&D facilities. And we've had great success recently on winning some business, not only in the US, but in Western Europe. And we see that continuing to grow. The telecom business is becoming a bigger business for us based on the success that we've had.

I think that's demonstrating the ability for us to bring new things that we didn't have a few years ago based on our acquisitions of cybersecurity, digital capability. And now, KeyW is going to add on top of that. Also, when we look at the non-government side, the automotive business, the wind tunnel business, has been a high-growth opportunity for us. And we've talked about the wind tunnel capabilities that we're doing globally. But now, we're seeing opportunities in electrification, powertrains, and leading to new R&D facilities. And we've had great success recently on winning some business, not only in the US, but in Western Europe. And we see that continuing to grow. The telecom business is becoming a bigger business for us based on the success that we've had.

New things that we Didnt have a few years ago based on.

Our acquisitions of cyber security digital capability and now.

PW was going to add on top of that.

Also.

When we look at the non government side the automotive.

Business. The wind tunnel business has been a high growth opportunity for us and we've talked about the wind tunnel capabilities that were doing globally, but now we're seeing opportunities on electrification powertrain and leading to new R&D facilities.

And we've we've had great success recently on winning some business not only in the U.S. button and Western Europe , and and we see that continuing to grow the telecom business is becoming a bigger business for us based on the success that we've had I think the main driver there has been.

Kevin Berryman: I think the main driver there has been our operating performance, where one of the large clients has extended us from about 5 or 6 states to I think it's 13 states now. And we're well positioned across that whole telecom services area with the movement to 5G. And so that's also becoming significant for us. And I mentioned earlier the NASA opportunity. I think we now have, on a combined Jacobs employees and the contractors that we control, over 5,000 employees. And we're at all the major sites. And what NASA's doing now is pretty exciting. And Jacobs is well positioned for that. So those are examples that are driving the current success. And what I mentioned on the phone call, I think you're going to see a lot more diversification in the business going forward based on the successes that we've had.

I think the main driver there has been our operating performance, where one of the large clients has extended us from about 5 or 6 states to I think it's 13 states now. And we're well positioned across that whole telecom services area with the movement to 5G. And so that's also becoming significant for us. And I mentioned earlier the NASA opportunity. I think we now have, on a combined Jacobs employees and the contractors that we control, over 5,000 employees. And we're at all the major sites. And what NASA's doing now is pretty exciting. And Jacobs is well positioned for that. So those are examples that are driving the current success. And what I mentioned on the phone call, I think you're going to see a lot more diversification in the business going forward based on the successes that we've had.

Our operating performance were one of the large clients is.

Extended us from about five or six states too I think it's 13 states now and and we are well positioned across that whole telecom services area with the movement to to Fiveg and so thats also becoming significant for us.

And I mentioned earlier the NASA.

Opportunity.

We are I think we now have on a combined jacobs' employees and the contractors that we control.

Over 5000.

Employees and and we're at all that.

Major sites in and what Nasa's doing now is a pretty exciting and Jacobs is well positioned for that so those are examples.

That are driving the current success and what I mentioned on the phone call I think you're going to see a lot more.

Diversification.

And the business going forward based on the successes that Weve had don hitting coming in bringing some new leadership and new thinking is already moving the organization into some some areas that will allow us to continue to extend the success that eight tenants had over the last several years.

Kevin Berryman: Dawne Hickton coming in, bringing some new leadership and new thinking, is already moving the organization into some areas that will allow us to continue to extend the success that A10 has had over the last several years. As you think about your $7 to $8 2021 earnings target, can you just talk about your updated thoughts on how back-end loaded is that expected to be? So if you look at consensus estimates of about 550 next year, I'm not going to ask you to comment on that. But if that's right, it implies a big chunk of your anticipated growth is coming in 2021. Is that how you're thinking about it? And can you just give us any updated thoughts on the cadence six months later here? So, Jerry, this is Kevin.

Dawne Hickton coming in, bringing some new leadership and new thinking, is already moving the organization into some areas that will allow us to continue to extend the success that A10 has had over the last several years. As you think about your $7 to $8 2021 earnings target, can you just talk about your updated thoughts on how back-end loaded is that expected to be? So if you look at consensus estimates of about 550 next year, I'm not going to ask you to comment on that. But if that's right, it implies a big chunk of your anticipated growth is coming in 2021. Is that how you're thinking about it? And can you just give us any updated thoughts on the cadence six months later here? So, Jerry, this is Kevin.

And as you think about your seven to $8 2021 earnings target can you just talk about your updated thoughts on how backend loaded is that expected to be so if you look consensus estimates of about 550 next year, but I'm not going to ask you to comment on that but if thats right. It implies a big chunk of your anticipated growth is coming in 2021 is that how you're thinking about it and can you just give us any updated thoughts on on the cadence six months later here.

So Jerry this is Kevin first comment remember that our seven to eight whereas the potential earnings power of the of the organization.

Kevin Berryman: First comment, remember that our $7 to 8 was the potential earnings power of the organization in 2021, which is a number that still has the opportunity to be delivered against, especially if we continue to believe that our share price is undervalued and it makes sense for us to continue to be buying back shares. So clearly, that's the case. And as we discussed earlier in some of the Q&A comments, the ability to continue to drive M&A is certainly an opportunity that could be accretive to our EPS in 2021 as well. So both of those are out there. And consequently, we like the growth aspirations that we have. I'm going to call it organically, as we've talked about. And we'll see how it plays out relative to our share price and whether or not we continue to be excited about buying back shares at levels.

First comment, remember that our $7 to 8 was the potential earnings power of the organization in 2021, which is a number that still has the opportunity to be delivered against, especially if we continue to believe that our share price is undervalued and it makes sense for us to continue to be buying back shares. So clearly, that's the case. And as we discussed earlier in some of the Q&A comments, the ability to continue to drive M&A is certainly an opportunity that could be accretive to our EPS in 2021 as well. So both of those are out there. And consequently, we like the growth aspirations that we have. I'm going to call it organically, as we've talked about. And we'll see how it plays out relative to our share price and whether or not we continue to be excited about buying back shares at levels.

In 2000, 2021, which is.

Is the number that still has the opportunity to be delivered against especially if we continue to believe that our share prices is is undervalued.

And it makes sense for us to continue to be buying back shares. So clearly that's the case.

And as we discussed earlier and some of the key you any comments.

The ability to continue to drive M&A is certainly an opportunity that could be accretive to our two are on.

To our EPS in 2021 as well so on both of those are out there and consequently, we like the.

The growth aspirations that we have.

Call it organically.

As we've talked about and we'll see how it plays out relative to our share price and whether or not we continue to be.

Excited about buying back shares at levels, we as we said during this call. We're we're continuing to be.

Kevin Berryman: As we've said during this call, we're continuing to be thinking that we're going to be a proactive participant in the market. So we'll see how that plays out. I think that probably gets you to an answer to your question. But is there anything else that I missed there? Yeah, Kevin, maybe you could just comment on the fundamental part of that equation. So the top-line performance and the margin expansion that you've targeted, how much of that do you expect to come in 2020 versus 2021? And obviously, we can make our own assumptions for capital structure. Yeah. We'll give guidance in fourth quarter. We're not going to give guidance in for 2020 today. I would say two things.

As we've said during this call, we're continuing to be thinking that we're going to be a proactive participant in the market. So we'll see how that plays out. I think that probably gets you to an answer to your question. But is there anything else that I missed there? Yeah, Kevin, maybe you could just comment on the fundamental part of that equation. So the top-line performance and the margin expansion that you've targeted, how much of that do you expect to come in 2020 versus 2021? And obviously, we can make our own assumptions for capital structure. Yeah. We'll give guidance in fourth quarter. We're not going to give guidance in for 2020 today. I would say two things.

Thinking that we're going to be a proactive participant in the market. So we'll see how that plays out.

I think that probably gets you to two and answer to your question, but is there anything else that I missed that what yeah. Kevin maybe you could just comment on the fundamental part of that equation. So the topline performance on the margin expansion that you've targeted how much of that do you expect the comment 20 versus 21, and obviously, we can make our own assumptions for capital structure.

Yeah, we'll give we'll give guidance in the fourth quarter were not going to give guidance and for 2020 today.

I would say two things.

One we're excited about the performance on a year to date basis in 2009, which I think positions us well.

Kevin Berryman: One, we're excited about the performance on a year-to-date basis in 2009, which I think positions us well as we continue to drive towards the financial algorithm that we talked about during Investor Day. I think that, in conjunction with the pipeline and a lot of the things that Steve was talking about, puts us in a position where 2020 can be another nice, solid move in the direction necessary to get us to the financial algorithm that we had talked about in terms of margin profile and organic growth. So I think that those, as we sit here, 3 quarters through 2019, we feel good about the first 3 quarters. We're feeling good how we're going to end up. We feel like we're positioning ourselves well for 2020 as well. Okay. Thank you. Your next question comes from the line of Michael Dudas with Vertical Research Partners.

One, we're excited about the performance on a year-to-date basis in 2009, which I think positions us well as we continue to drive towards the financial algorithm that we talked about during Investor Day. I think that, in conjunction with the pipeline and a lot of the things that Steve was talking about, puts us in a position where 2020 can be another nice, solid move in the direction necessary to get us to the financial algorithm that we had talked about in terms of margin profile and organic growth. So I think that those, as we sit here, 3 quarters through 2019, we feel good about the first 3 quarters. We're feeling good how we're going to end up. We feel like we're positioning ourselves well for 2020 as well. Okay. Thank you. Your next question comes from the line of Michael Dudas with Vertical Research Partners.

As we continue to drive towards the financial algorithm that we talked about during Investor day, and I think that in conjunction with the pipeline and a lot of the things that Steve was talking talking about.

Puts us in a position where 2020 can be another nice solid move in the direction necessary to get us to the financial algorithm that we had talked about in terms of margin profile and organic growth. So I think that those.

As we sit here three three quarters through 2019, we feel good about the first three quarters.

We're feeling good how we're going to end up and we felt like we are positioning ourselves well for 2020 as well.

Okay. Thank you.

Your next question comes from the line of Michael Dudas with vertical research.

Good morning, gentlemen, do you want to talk a little bit about labor I think if I add up the numbers you have.

Kevin Berryman: Good morning, gentlemen. Steve, I want to talk a little bit about labor. I think if I add up the numbers, you have almost 50,000 lease employees from what I saw on the slides. How do you feel about the pool right now relative to your, obviously, 2019, but your 2021 expectations, as you start to think about planning for those years? Is there much more required from an organic basis? Has the turnover rate been lower than you had anticipated, given your diversity efforts as well? And is there a productivity measure that you certainly think in the next couple of years that can drive a lot more value relative to the labor force and maybe the OPEX capital spend that you're going to be generating? Yeah. Well, there's a lot in that question. It's a great question.

Good morning, gentlemen. Steve, I want to talk a little bit about labor. I think if I add up the numbers, you have almost 50,000 lease employees from what I saw on the slides. How do you feel about the pool right now relative to your, obviously, 2019, but your 2021 expectations, as you start to think about planning for those years? Is there much more required from an organic basis? Has the turnover rate been lower than you had anticipated, given your diversity efforts as well? And is there a productivity measure that you certainly think in the next couple of years that can drive a lot more value relative to the labor force and maybe the OPEX capital spend that you're going to be generating? Yeah. Well, there's a lot in that question. It's a great question.

Almost 50000 leased employees from what I saw on the on the.

Slides.

How do you feel about the labor the pool right now relative to your obviously 2019, but your 2021 expectations you start to think about planning for those years.

These are much more required from an organic basis has the turnover rate than is lower and lower than you'd anticipated given your diversity efforts as well and is there a productivity measure that you certainly think in the next couple of years that can drive a lot more value relative to the to the labor Force and you maybe opex.

Capital spend that you're going to be generating.

Yeah, well there is a lot in that question and it's a great question. It's a it's one of the most important things that we work on every day and Thats why we talk about culture.

Kevin Berryman: It's one of the most important things that we work on every day. And that's why we talk about culture on these earnings calls, because talent is, everyone's looking for the best talent out there in the industry. And in certain parts of the world, talent's tight. And the way we are successfully managing that is, when I look at our BIAF business, for example, is a highly successful global integrated delivery capability with major hubs around the world. We have capabilities in the Philippines, Poland, and several areas in India and even in the US where we're able to attract the best talent in those areas. And the talent is significant there and deliver projects globally utilizing that talent, unlike most of our competitors.

It's one of the most important things that we work on every day. And that's why we talk about culture on these earnings calls, because talent is, everyone's looking for the best talent out there in the industry. And in certain parts of the world, talent's tight. And the way we are successfully managing that is, when I look at our BIAF business, for example, is a highly successful global integrated delivery capability with major hubs around the world. We have capabilities in the Philippines, Poland, and several areas in India and even in the US where we're able to attract the best talent in those areas. And the talent is significant there and deliver projects globally utilizing that talent, unlike most of our competitors.

On these earnings calls because.

Talent is.

Everyone is looking for the best talent out there in the industry and in certain parts of the world the talents tight.

And the way we are successfully managing that is and when I look at our business for example.

It is a highly successful global.

Integrated delivery capability with.

Major hubs around the world, we have capabilities in the Philippines and.

Poland and.

Several areas in India, and then even in the us where we're able to.

Captured we're able to attract the best talent in those areas and the talent is significant there and and deliver projects globally.

Utilizing that talent, unlike most of our competitors and so thats been.

Kevin Berryman: And so that's been not only an effective way of ensuring that we have the ability to serve our clients' needs globally but do it in the most efficient way. When you look at our G&A evolution over the last couple of years as a percent of net revenue as a company, I think the data is showing that we've actually, on a year-over-year basis, are about 100 basis points more efficient. When we look at G&A as a percent of net revenue, we've been driving sequential improvement. And that's an area that we're going to continue to be focused on.

And so that's been not only an effective way of ensuring that we have the ability to serve our clients' needs globally but do it in the most efficient way. When you look at our G&A evolution over the last couple of years as a percent of net revenue as a company, I think the data is showing that we've actually, on a year-over-year basis, are about 100 basis points more efficient. When we look at G&A as a percent of net revenue, we've been driving sequential improvement. And that's an area that we're going to continue to be focused on.

Not only up an effective way of ensuring that we have the ability to serve our clients needs globally, but do it in the in the most efficient way when you look at our.

Our DNA.

Evolution over the last couple of years as a percent of net revenue as a company.

I think the data showing that we've actually on a year over year basis or about 100 basis points.

More efficient.

When we look at DNA as a percent of net revenue we've done we've been driving sequential improvement and that's an area that we're going to continue to be focused on.

Kevin Berryman: But at the end of the day, it's going to be our ability to have the best culture, not only against our direct peers but across all sort of companies across the globe, because we're trying to get the best functional people, the best engineers, the best cyber, the best architects, and on and on. And so it's really a holistic set of initiatives. And I appreciate that. And I guess, just to take it one step further, is Jacobs finding, from a business development standpoint, because of the success you've been driving in the business and the acquisitions that you've made, a lot more inquiries about acquisitions and such? Has the pipeline of those opportunities gotten larger because of your success and where you're driving your growth? Well, I think as a company, we've been more intentional and purposeful on getting the message out.

But at the end of the day, it's going to be our ability to have the best culture, not only against our direct peers but across all sort of companies across the globe, because we're trying to get the best functional people, the best engineers, the best cyber, the best architects, and on and on. And so it's really a holistic set of initiatives. And I appreciate that. And I guess, just to take it one step further, is Jacobs finding, from a business development standpoint, because of the success you've been driving in the business and the acquisitions that you've made, a lot more inquiries about acquisitions and such? Has the pipeline of those opportunities gotten larger because of your success and where you're driving your growth? Well, I think as a company, we've been more intentional and purposeful on getting the message out.

But at the end of the day, it's going to be our ability to have the best culture, not only against our direct peers, but.

Across.

Paul soda companies across the globe, because we're we're trying to get the best functional people that.

Best Engineers, the bus cyber the best architects and on and on and then and so it's really a holistic set of initiatives.

I appreciate that I guess just to take it one step further as Jacobs finding from a business development standpoint, because of the success you've been driving in the business and the acquisitions that you've made a lot more inquiries about.

Acquisitions, such as like the pipeline of those opportunities gotten larger because of your success and where you're driving your your growth.

Well I think we've been as a company we've been more intentional and purposeful on getting that message out. So we're doing a much better job. These days.

Kevin Berryman: We're doing a much better job these days of trying to alert the world of the type of things that we're working on. We are hearing, feeling, and seeing some measurable excitement around that in our ability to retain our talent. We still are setting much more aggressive metrics and targets to do even better. But I could say that we've been pleased with the retention rates, especially going through a lot of this restructuring in the company. We're attracting talent, we believe. Again, we measure it in a much stronger way than we have over the last several years. I think at some point, as we get more mature in this, we'll be more transparent with some of these metrics. But what I can say is that it's clearly demonstrating some early on success.

We're doing a much better job these days of trying to alert the world of the type of things that we're working on. We are hearing, feeling, and seeing some measurable excitement around that in our ability to retain our talent. We still are setting much more aggressive metrics and targets to do even better. But I could say that we've been pleased with the retention rates, especially going through a lot of this restructuring in the company. We're attracting talent, we believe. Again, we measure it in a much stronger way than we have over the last several years. I think at some point, as we get more mature in this, we'll be more transparent with some of these metrics. But what I can say is that it's clearly demonstrating some early on success.

Trying to alert the world of the type of things that we're working on and we are hearing.

And feeling and seeing some measurable.

Excitement around that and our ability to retain our talent.

We still are setting much more aggressive my pleasure.

Metrics and targets to do even better, but I can say that weve been pleased.

With but retention rates.

Especially going through a lot of this restructuring in the company.

And and we are attracting talent.

We believe and again, we measure it in a much stronger way than we have over the last several years I think at some point as we get more mature and this will will will be more transparent with some of these metrics, but what I can say is that it's clearly demonstrating some early on success, but we have.

Kevin Berryman: But we have a long way to go in a short period of time to really set the bar on being that employer of choice. Thank you, Steve. Your next question comes from the line of Andy Whitman with Baird. Oh, great. Thanks. I just wanted to dig into the guidance range a little bit more here. Heard you guys say early on there that the guidance raised was KeyW and the business so far. When you look at the midpoint of the EPS guidance, it's up a little bit more than the $0.16 of discrete tax item. The EBITDA guidance is up somewhere in the ilk of what I thought the KeyW contribution would be for the year. Is the guidance raised mostly KeyW? Or can you talk about or split how the guidance ranges?

But we have a long way to go in a short period of time to really set the bar on being that employer of choice. Thank you, Steve. Your next question comes from the line of Andy Whitman with Baird. Oh, great. Thanks. I just wanted to dig into the guidance range a little bit more here. Heard you guys say early on there that the guidance raised was KeyW and the business so far. When you look at the midpoint of the EPS guidance, it's up a little bit more than the $0.16 of discrete tax item. The EBITDA guidance is up somewhere in the ilk of what I thought the KeyW contribution would be for the year. Is the guidance raised mostly KeyW? Or can you talk about or split how the guidance ranges?

We have a long way to go in a short period of time to really set the bar on being that employer of choice.

Thank you Steve.

Your next question comes from the line of Andy Wittmann with Baird.

Well great. Thanks, I, just wanted to dig into the guidance range a little bit more here did you guys say.

Early on there that guidance raise with KBW and.

The business so far when you look at the midpoint of the guidance EPS guidance, it's up a little bit more than the 16 cents of discrete tax item that EBITDA guidance is up.

Somewhere in the Oakland I thought the kw contribution would be for the year is the guidance for is mostly tw.

Can you talk about your split how the guidance ranges I'm, just trying to get our arms around.

Kevin Berryman: I'm just trying to get our arms around what's actually incremental in the guidance here. Yeah. It's a little bit different, Andy, depending upon EPS versus EBITDA, because obviously, EPS is all-inclusive. So clearly, the incremental guide on the year for EPS includes the new news relative to the discrete item of $0.16. And effectively, there's another if you kind of just take the midpoint, another, let's call it, $0.07 of EPS, which is a combination of mostly operational improvement plus a couple pennies plus from KeyW. And the reason it's only a couple pennies is because of the incremental interest costs associated with the fact that we took the debt paid in cash. And that's offsetting, effectively, the EBITDA that we gain. So that's on the EPS front. Let me talk to kind of the EBITDA piece.

I'm just trying to get our arms around what's actually incremental in the guidance here. Yeah. It's a little bit different, Andy, depending upon EPS versus EBITDA, because obviously, EPS is all-inclusive. So clearly, the incremental guide on the year for EPS includes the new news relative to the discrete item of $0.16. And effectively, there's another if you kind of just take the midpoint, another, let's call it, $0.07 of EPS, which is a combination of mostly operational improvement plus a couple pennies plus from KeyW. And the reason it's only a couple pennies is because of the incremental interest costs associated with the fact that we took the debt paid in cash. And that's offsetting, effectively, the EBITDA that we gain. So that's on the EPS front. Let me talk to kind of the EBITDA piece.

It's actually incremental in the guidance here.

Yes, it's a little bit different Andy depending upon EPS versus EBITDA, because obviously this is all inclusive.

So clearly the incremental guide on on the year for MPS includes the new news relative to the discrete item of 16 cents.

And effectively there's another if you can't just take the midpoint another lets call it seven cents of.

Yes.

Which is a combination of mostly operational improvement plus a couple of pennies.

Plus from.

From key key W. And the reason, it's only a couple of pennies is because of the incremental interest costs associated with the with the fact that we took to the debt.

Paid in cash and Thats offsetting effectively the EBIT da that we gain.

So that's on the EPS front, let me talk to the kind of the EBITDA piece is basically I would say.

Kevin Berryman: It's basically, I would say, a little bit more than the incremental of, let's say, 20+ is certainly 10+, 15+ of KeyW for the quarter, which is primarily coming in Q4, obviously, given the small stub period of the results in Q3, and then a general improvement of $5 to 15 million of ops improvement over the course of what we've been able to perform and what our expectations are for the balance of the year. So you get to those numbers. Midpoint is up nearly $20 million on the EBITDA. So a little bit different depending upon what you're talking about for EPS versus EBITDA. Got it. That's super helpful. Thank you for that. And then I guess my follow-up question has to do with cash flow. Obviously, you've got the big tax bill in Q4.

It's basically, I would say, a little bit more than the incremental of, let's say, 20+ is certainly 10+, 15+ of KeyW for the quarter, which is primarily coming in Q4, obviously, given the small stub period of the results in Q3, and then a general improvement of $5 to 15 million of ops improvement over the course of what we've been able to perform and what our expectations are for the balance of the year. So you get to those numbers. Midpoint is up nearly $20 million on the EBITDA. So a little bit different depending upon what you're talking about for EPS versus EBITDA. Got it. That's super helpful. Thank you for that. And then I guess my follow-up question has to do with cash flow. Obviously, you've got the big tax bill in Q4.

A little bit more than the incremental let's say 20 plus is.

Yes, certainly 10 plus.

15, plus of KBW for that for the quarter.

In which is primarily coming in the fourth quarter, obviously, given the small stub period of of the.

Of the results in the third quarter, and then a general improvement of $5 million to $15 million of ops improvement over the course of.

What we've been able to perform and what our expectations are for the balance of the year. So you get to those numbers midpoint is up.

Nearly nearly 20 million on on the.

On the EBITDA, so a little bit different depending upon what you're talking about for MPS versus EBITDA.

Got it that's super helpful. Thank you for that and then I guess.

My follow up question has to do with cash flow.

Obviously, you've got the big tax Bill in the fourth quarter, so operating cash flow or free cash flow for this year.

Kevin Berryman: So operating cash flow or free cash flow for this year is going to be depressed, given that you're, I guess, negative so far year to date on that. But as you look and you turn the page into 2020, Kevin, we obviously heard GSA and heard GSA before that the proxy of 100% conversion. Do you feel like 2020 is a realistic time frame with assuming nothing else changes? I mean, you might do another big deal. There's going to be cash costs with that. But assuming you take this team to bat in 2020, is 2020 a realistic year to think about approaching that type 100% cash flow conversion rate?

So operating cash flow or free cash flow for this year is going to be depressed, given that you're, I guess, negative so far year to date on that. But as you look and you turn the page into 2020, Kevin, we obviously heard GSA and heard GSA before that the proxy of 100% conversion. Do you feel like 2020 is a realistic time frame with assuming nothing else changes? I mean, you might do another big deal. There's going to be cash costs with that. But assuming you take this team to bat in 2020, is 2020 a realistic year to think about approaching that type 100% cash flow conversion rate?

It's going to be depressed given that you're.

I guess negative so far year to date on that but as you look can you turn the page into 2020, Kevin. We obviously heard you say in her to say before.

But the proxy of 100% conversion do you feel like 2020 is a realistic timeframe with assuming nothing else changes I mean, you went to another big deal. This can be cash cost with that but assuming you take this team.

To that end in 2020 is 2020 realistic year to think about a preacher approaching that type a 100% cash flow conversion rate.

I think we're getting a lot closer obviously, because we'll be through some of the the one offs and the costs associated with what we're going through given the fact that we've done a three plus billion dollar acquisition or divestiture Anna close to a billion dollar acquisition all in this third quarter.

Kevin Berryman: I think we're getting a lot closer, obviously, because we'll be through some of the one-offs and the costs associated with what we're going through, given the fact that we've done a $3+ billion acquisition or divestiture and a close to $1 billion acquisition all in this Q3. So a lot of moving pieces, clearly. And I think that what will be the determinant of what you're asking is our success working capital and specifically DSO management. And just to remind you, Andy, we didn't have a great start to the year as we kind of got a little off track with the CH2M integration. And we lost some traction on our DSO initiative. We came back, improved our DSOs in the Q2, improved them again in the Q3.

I think we're getting a lot closer, obviously, because we'll be through some of the one-offs and the costs associated with what we're going through, given the fact that we've done a $3+ billion acquisition or divestiture and a close to $1 billion acquisition all in this Q3. So a lot of moving pieces, clearly. And I think that what will be the determinant of what you're asking is our success working capital and specifically DSO management. And just to remind you, Andy, we didn't have a great start to the year as we kind of got a little off track with the CH2M integration. And we lost some traction on our DSO initiative. We came back, improved our DSOs in the Q2, improved them again in the Q3.

So a lot of moving pieces, clearly and I think that what will be the determinant of what you're asking is our success on working capital and specific DSL management.

And just to remind you Andy we didnt have a great start to the year as we we kind of got a little off track with the CH Julian integration and we lost some traction on our DSL initiative, we came back improved our dsos in the second quarter improve them again in the third quarter, but we still got it make more progress for us to be able to get to the place that you are suggesting.

Kevin Berryman: But we still got to make more progress for us to be able to get to the place that you're suggesting potentially is available. 2020 might be a challenge to get there. But we're very much making some really good progress in Q2 and Q3, specifically oriented around now coming together with the CH2M integration largely behind us in terms of system integrations. I feel like we're starting to make some really good progress there. All right. That's super helpful. Thank you very much. Okay. Your next question comes from the line of Chad Dillard with Deutsche Bank. Hi. Good afternoon, guys. Hello, Chad. So I just wanted to dig more into the A10 project pipeline. I think you talked about $30 billion plus. I guess, first off, on the defense side, to what extent are you seeing more prime work?

But we still got to make more progress for us to be able to get to the place that you're suggesting potentially is available. 2020 might be a challenge to get there. But we're very much making some really good progress in Q2 and Q3, specifically oriented around now coming together with the CH2M integration largely behind us in terms of system integrations. I feel like we're starting to make some really good progress there. All right. That's super helpful. Thank you very much. Okay. Your next question comes from the line of Chad Dillard with Deutsche Bank. Hi. Good afternoon, guys. Hello, Chad. So I just wanted to dig more into the A10 project pipeline. I think you talked about $30 billion plus. I guess, first off, on the defense side, to what extent are you seeing more prime work?

Potentially as available 2020 might be might be a challenge to get there, but we're we're very much making some really good progress in the second and third quarter, specifically oriented around now coming together with the seeds to him integration largely behind us in terms of system integrations.

Feel like we're starting to make some really good progress there.

Alright, that's super helpful. Thank you very much.

Okay.

Your next question comes from the line of Chad Dillard with Deutsche Bank.

Hi, good afternoon guys.

Hi, Chad.

Hi, So just wanted to dig more into the 18 project pipeline I think you talked about $30 billion plus.

I guess first off on the defense side.

Are you seeing eye to what extent are you seeing.

More prime work and then how do you think about that.

Kevin Berryman: And how do you think about that potential makeshift in the context of your margins for that subsegment? And then secondly, more on the commercial side, starting to hear a little bit more about 5G from you guys. Just hoping you could frame, I guess, the size of the business, the scope of the work you're pursuing, and what sort of growth rates that you're seeing right now. Yeah. So our pipeline is three-quarters of it, more than 75%, is new business versus rebid or a similar type business that we have today. So it's exciting in that it's demonstrating the extension and expansion of our A10 business. About $1.5 billion of that is, as I mentioned, the large enterprise type contracts that we've had in the past.

And how do you think about that potential makeshift in the context of your margins for that subsegment? And then secondly, more on the commercial side, starting to hear a little bit more about 5G from you guys. Just hoping you could frame, I guess, the size of the business, the scope of the work you're pursuing, and what sort of growth rates that you're seeing right now. Yeah. So our pipeline is three-quarters of it, more than 75%, is new business versus rebid or a similar type business that we have today. So it's exciting in that it's demonstrating the extension and expansion of our A10 business. About $1.5 billion of that is, as I mentioned, the large enterprise type contracts that we've had in the past.

Digital mix shifts in the context of.

Your your margins for that.

Sub segment, and then secondly, more on the commercial side.

Starting to hear a lot more about fiveg from you guys. Just hoping you could frame just like the size of the business. The scope of the work youre pursuing in what sort of growth rates that you're seeing right now.

Yes so.

Our pipeline is.

It is.

Three quarters of it more than 75% as new business, so versus rebid or.

Or similar type business that we have today, so it's exciting in that it's demonstrating the.

The extension and expansion of our eight turn business.

Uh huh.

Youre about a billion and a half of that is is the as I mentioned, our enterprise large enterprise type contracts that we've had in the past and so what.

Kevin Berryman: And so what it really kind of demonstrates is that the majority of that pipeline are higher margin, shorter-term type business, which are going to provide the opportunity for margin expansion for the business. KeyW brings some nice pipeline to us. So the opportunity is there to get more into space intelligence compared to what we had in the past. And also, we're seeing evidence of the pipeline building based on the combination of capabilities that KeyW and Jacobs bring. So when you look at the, you were asking about telecom. The telecom is coming in multiple areas for us. It's the traditional work that we do for some of the large US players. And we're expanding, as I mentioned, geographically across the US.

And so what it really kind of demonstrates is that the majority of that pipeline are higher margin, shorter-term type business, which are going to provide the opportunity for margin expansion for the business. KeyW brings some nice pipeline to us. So the opportunity is there to get more into space intelligence compared to what we had in the past. And also, we're seeing evidence of the pipeline building based on the combination of capabilities that KeyW and Jacobs bring. So when you look at the, you were asking about telecom. The telecom is coming in multiple areas for us. It's the traditional work that we do for some of the large US players. And we're expanding, as I mentioned, geographically across the US.

What.

What it really kind of demonstrates is that the majority of that pipeline our higher margin.

Shorter term.

Business, which are going to.

To provide the opportunity for margin expansion for the for the business.

Kw brings.

Some nice pipeline to us so the opportunity is there to get more into.

Space intelligence compared to what we had in the past and and also we are seeing evidence of the pipeline building based on the combination of capabilities that GW and Andy Jacobs spring. So when when you look at the.

You were asking about telecom.

The telecom is coming in multiple areas for us. It's the traditional work that we do for some of the larger west players and we're expanding as I mentioned geographically across the U.S.

But it's also using these telecom capabilities now and moving into smart cities.

Kevin Berryman: But it's also using these telecom capabilities now and moving into smart city and other smart initiatives with BIAF, so demonstrating the connectivity between our A10 business and BIAF business. When you put together our cyber business that I mentioned as we've put these different acquisitions and capabilities together, and we're creating a special separate business unit focus on that, when you look at the automotive business that I referred to, you look at the telecom business, these were all sort of small pieces of A10 that probably did move the needle back three, four, five years ago that are now becoming significant contributors along with our traditional enterprise work and test and facilities work that we've been doing with our core government clients. So we're becoming a much more diverse A10 player as our $30+ billion-dollar pipeline demonstrates.

But it's also using these telecom capabilities now and moving into smart city and other smart initiatives with BIAF, so demonstrating the connectivity between our A10 business and BIAF business. When you put together our cyber business that I mentioned as we've put these different acquisitions and capabilities together, and we're creating a special separate business unit focus on that, when you look at the automotive business that I referred to, you look at the telecom business, these were all sort of small pieces of A10 that probably did move the needle back three, four, five years ago that are now becoming significant contributors along with our traditional enterprise work and test and facilities work that we've been doing with our core government clients. So we're becoming a much more diverse A10 player as our $30+ billion-dollar pipeline demonstrates.

Oh, the smart initiatives with B.I.F., so demonstrating the connectivity between.

Our agent business and the IMF business.

When you put together.

Our cyber business that I mentioned is as Weve, what these different acquisitions and capabilities together and we're creating especial separate business unit focused on that when you look at the automotive business that I referred to you looked at the telecom business.

These were all sort of small pieces of a term.

That probably didn't move the needle back.

Three four or five years ago that are now becoming significant contributors along with our traditional.

Enterprise work and testing facilities work that we've been doing with our core government clients. So we are becoming a much more diverse.

Hey, 10 player as our 30 plus billion dollar pipeline demonstrates.

And now over to Jeff you mentioned that Youre infrastructure pipeline, you're starting to see a larger projects.

Kevin Berryman: And over to BIAF, you mentioned that your infrastructure pipeline, you're starting to see larger projects. Can you just talk about how does that change the competitive landscape? How does that change the speed at which you see bids getting converted into awards? And then how do we think about the impact on margins going forward? Yeah. Well, I'd say a very simple way of describing what's going on at BIAF is we're seeing a significant opportunity near-term and long-term with our existing clients because of the offering now that we bring with the combination of Jacobs, CH2M, and these other technology capabilities that I've been mentioning, including the connectivity with A10.

And over to BIAF, you mentioned that your infrastructure pipeline, you're starting to see larger projects. Can you just talk about how does that change the competitive landscape? How does that change the speed at which you see bids getting converted into awards? And then how do we think about the impact on margins going forward? Yeah. Well, I'd say a very simple way of describing what's going on at BIAF is we're seeing a significant opportunity near-term and long-term with our existing clients because of the offering now that we bring with the combination of Jacobs, CH2M, and these other technology capabilities that I've been mentioning, including the connectivity with A10.

Can you just talk about.

How does that change the competitive landscape.

How does that change the speed at which you see.

Bids getting converted into awards and then how do we think about.

The impact on margins going forward.

Yes, well you know I'd say very simple way of of describing whats going on at the IMF is.

Where we're seeing a significant opportunity near term and long term with our existing clients because of the.

The offering now that we bring with the combination of.

Jacob CH to emend and these other technology capabilities that I've been mentioning including the connectivity with aten.

Kevin Berryman: And so that higher piece of the pie with these major clients around the world are not only giving us the revenue and profit growth, but are elevating our margins as some of these are some of the higher value portions that we didn't have in the past when we were stand-alone Jacobs, say, three or four years ago. And this other area of markets converging all into sort of one opportunity with clients. And our clients are now needing water, cyber, environmental, mobility, etc. And we're one of only a few players globally that can bring all that capability for our clients' needs. And so that's giving us both profit growth and margin improvement. And so it's exciting.

And so that higher piece of the pie with these major clients around the world are not only giving us the revenue and profit growth, but are elevating our margins as some of these are some of the higher value portions that we didn't have in the past when we were stand-alone Jacobs, say, three or four years ago. And this other area of markets converging all into sort of one opportunity with clients. And our clients are now needing water, cyber, environmental, mobility, etc. And we're one of only a few players globally that can bring all that capability for our clients' needs. And so that's giving us both profit growth and margin improvement. And so it's exciting.

As you know when we were Standalone Jacobs say three or four years ago.

And and this other area of markets conversion converting convert converged converging all into sort of one opportunity with clients.

And.

Our clients are now needing water cyber environmental.

Mobility et cetera, and we're one of only a few players globally that can bring all that capability for for our clients need and so thats, giving us both profit growth and margin improvement.

And so it's.

Thats exciting win as I mentioned before we not only.

Kevin Berryman: As I mentioned before, we not only have seen significant backlog growth in advanced facilities in the UK, but in the Americas, which still is a very significant part of our BIAF; we had nearly 10% growth in our backlog last quarter. So it's demonstrating measurably what I've been talking about with these core clients across the Americas. But then when we look at the Middle East and Asia, and what we're doing in areas like the big high-speed rail projects or the big aviation projects that are going on around the world, especially in Asia and the Middle East, water projects in the Middle East, we're now involved in Saudi Arabia, and UAE, on bringing our world-class water capability to these emerging economies. All of this is leading to not only profit growth, but margin enhancement that BIAF has been proving out really for the last several years.

As I mentioned before, we not only have seen significant backlog growth in advanced facilities in the UK, but in the Americas, which still is a very significant part of our BIAF; we had nearly 10% growth in our backlog last quarter. So it's demonstrating measurably what I've been talking about with these core clients across the Americas. But then when we look at the Middle East and Asia, and what we're doing in areas like the big high-speed rail projects or the big aviation projects that are going on around the world, especially in Asia and the Middle East, water projects in the Middle East, we're now involved in Saudi Arabia, and UAE, on bringing our world-class water capability to these emerging economies. All of this is leading to not only profit growth, but margin enhancement that BIAF has been proving out really for the last several years.

I have seen significant backlog growth in advanced facilities in the UK, but.

In the Americas, which still is a very significant part of our business.

We had nearly 10% growth in our our backlog last quarter and so it's it's demonstrating measurably what I've been talking about.

With these core clients across across the Americas, but then when we look at the Middle East and Asia, and what we're doing in areas like.

Big High speed rail projects are the big aviation projects that are going on around the world.

Especially in Asia, and the Middle East of water projects in the Middle East, where we are now involved in Saudi Arabia, and UAE on bringing our world class water capability to these emerging economies all of this is leading to.

Not only profit growth, but margin margin enhancement that be.

Yup, it's been proving out over the really for the last several years and we believe that will continue into the future.

Kevin Berryman: And we believe that will continue into the future. So I want to thank you for all participating on the conference call. As I reflect on our results and positive outlook, the main thing I want to state is I'm very proud of our people across the globe at Jacobs. They make it happen. The work we do, the clients that we have the opportunity to work with, and the communities that we're impacting around the world, it's exciting. And it's humbling to all of us at the leadership level. For me personally, this marks my four-year anniversary in leading Jacobs. And I want to make sure you all know I'm just as excited today as I was in 2015. We have a collective drive to truly become a company like no other.

And we believe that will continue into the future. So I want to thank you for all participating on the conference call. As I reflect on our results and positive outlook, the main thing I want to state is I'm very proud of our people across the globe at Jacobs. They make it happen. The work we do, the clients that we have the opportunity to work with, and the communities that we're impacting around the world, it's exciting. And it's humbling to all of us at the leadership level. For me personally, this marks my four-year anniversary in leading Jacobs. And I want to make sure you all know I'm just as excited today as I was in 2015. We have a collective drive to truly become a company like no other.

So I want to thank you for all participating on the on the conference call.

As I reflect on our results and positive outlook.

The main thing I want to state is I'm very proud of our people across the globe at Jacobs They make it happen. The work we do the clients that we have the opportunity to work with and the communities that were impacting around the world is its exciting and its humbling to all of us at the leadership level.

For me personally this marks my four year anniversary of leading Jacobson I want to make sure you all know I'm just as excited today as I was in 2015, we have a collective drive to truly become a company like no. Other and we are asking ourselves everyday why not and then doing so creating an exciting tomorrow for all of us. So thanks. Thank you.

Kevin Berryman: And we're asking ourselves every day, "Why not?" And in doing so, creating an exciting tomorrow for all of us. So thank you. And this concludes today's conference call. You may now disconnect.

Operator: And we're asking ourselves every day, "Why not?" And in doing so, creating an exciting tomorrow for all of us. So thank you. And this concludes today's conference call. You may now disconnect.

And this concludes today's conference call you may now disconnect.

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