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Cubic Corporation (CUB)

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Cubic Corporation (CUB)

Q2 2018 Earnings Conference Call

May 2, 2018 04:45 pm ET

Executives

Kirsten Nielsen - Director of IR

Brad Feldmann - President & CEO

Anshooman Aga - EVP & CFO

Analysts

Ken Herbert - Canaccord Genuity

Brian Ruttenbur - Drexel Hamilton

Presentation

Operator

Greetings and welcome to Cubic Corporation Second Quarter Fiscal Year 2018 Conference Call.

At this all time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded.

I would like to turn the conference over to Kirsten Nielsen, Vice President of Investor Relations. Thank you. Please begin.

Kirsten Nielsen

Hello, everyone, and thank you for joining us today. Today, after the market closed, we reported our second quarter fiscal 2018 results. I am joined by Brad Feldmann, Chairman, President and Chief Executive Officer and Anshooman Aga, Executive Vice President and Chief Financial Officer.

I will remind everyone that statements made on today's call that are not historical facts are considered forward-looking statements and are made pursuant to the safe harbor provisions of federal securities law. You can find factors that could cause the company's actual results to differ materially from our expectations listed in today's presentation, press release and our most recent SEC filings.

In addition, we've included some non-GAAP financial measures in our discussion. Reconciliations to the most directly comparable GAAP financial measures can be found in today's press release and in the appendix of today's presentation.

With that, I'd like to turn the call over to Brad.

Brad Feldmann

Thank you, Kirsten. Thank you, everyone for joining us today. On today's call I'll start by discussing our second quarter and first half results for fiscal year 2018. Then I'll hand the call over to our CFO, Anshooman Aga, who will cover the financial results in more detail. Starting with Slide 3, you'll find an overview of our financial results from continuing operations as we recently announced the sale of our non-original manufacturer training services business.

Sales for the second quarter were $278.6 million, a 12% increase compared to the second quarter last year. Sales for the first half were $527 million, a 7% increase compared to last year. Adjusted EBITDA for Q2 was $15.8 million, a 35% increase compared to the second quarter of last year. Where $27.3 million for the first half, a decline of 7% compared to last year due to $4.3 million increase R&D investments in Mission Solutions and Innovative Training technologies.

Within financial close of Boston contract in March, our backlog is over $3.4 billion. The highest in Cubic's history. In the second quarter we also received a limited notice to proceed from the Washington Metropolitan Area Transit Authority in DC to launch a near field communications mobile solutions for their riders. With this win, the top five US transit agencies have now selected Cubic for their mobile solution. During Q3, we will be releasing the first iteration of the new Cubic mobile platform; Cubic traveler application. When the Chicago Transit Authority upgrades its Ventra mobile app. The Cubic travel application will build upon the success of the current Ventra app that has logged more than 2 million downloads since launch.

On April 19, we announced an agreement to sell our defense services business to value Valiant Integrated Services. This transaction marks a significant milestone for Cubic as we continue to sharpen our focus on delivering market leading, innovative technologies that create superior value for our customers. It enables us to better concentrate our resources on markets with strong growth and high margins and further increases our financial flexibility to pursue profitable growth options that enhance shareholder returns.

I would like to again thank our defense services team mates for their faithful service and contributions to Cubic over the past 24 years. Turning to Slide 4, we're pleased with the passage of the omnibus appropriation bill that includes $700 billion defense spending bill, with $56.4 million in increases for our T2C2, SLATE ATD, LCS Training Courseware and ITESS II programs compared to the President's budget. Less directly our transportation business will also benefit from an additional $10 billion in transportation funding which may provide a source of federal grant funding.

Moving to Slide 5, we continue to make progress with our winning the customer initiative. In Q2, we were honored to be named supplier of the year at the London Transport Awards in recognition of our longstanding partnership, with transport for London. We're extremely confident that our one account platform leads the markets demand for technologically advanced back office systems and we remain well positioned for several other opportunities in large cities. In Mission Solutions, we made targeted investments that enhance our technology significantly. We have completed our acquisition of Motion DSP. A Silicon Valley based company specializing in real time video enhancement and computer vision analytics. We will now be able to detect and track entities in real time augmenting our existing full motion video dissemination capability.

Additionally, following the close of the quarter we invested in Beatty and Company computing to enhance our access to secure cloud operating systems technology for our customers. In Defense Systems, our advance technology demonstration for the secure LDC [ph], advance training environment with the United States Air Force research lab pass systems verification and our encryption tool a key component from a data and cyber security perspective passed certification with the National Security Agency. Also known as SLATE ATD, it represents the future of multi-level encrypted. Live, Virtual, Constructive, air combat maneuvering instrumentation and will be important to the future combat training within the Department of Defense.

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