Jacobs Solutions Inc. (J) Q3 2015 Earnings Report, Transcript and Summary

Good day and welcome to the Jacobs Engineering Group Inc Third Quarter 2015 Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note today’s event is being recorded. I would now like to turn the conference over to Mr. Kevin Berryman, Executive Vice President and CFO. Please go ahead, sir.

Thank you, Roko. Good morning all and welcome to Jacob’s Q3 earnings call. Before getting into the details on the call, I would like to pause and remind you all regarding our safe harbor statement. I guess I pulled the short straw this morning, so I get to read it. The company request that we point out that any statements that the company makes today that are not based on historical facts are forward-looking statements. Although such statements are based on management’s current estimate and expectations and currently available competitive, financial, and economic data, forward-looking statements are inherently uncertain, and involve risks and uncertainties that could cause actual results of the company to differ materially from what may be inferred from the forward-looking statements. For a description of some of the factors, which may occur that could cause or contribute to such differences, the company request that you read its most recent earnings release and its annual report on Form 10-K for the period ended September 26, 2014. Including Item 1-A, risk factors, Item 3, legal proceedings and Item 7 management’s discussion and analysis of financial conditions and results of operations contained therein. And the most recent form 10-Q for the period ended March 27, 2015 for a description of our business, legal proceedings and other informations that describes the factors that could cause actual results to differ from such forward-looking statements. The company undertakes no obligation to release publicly any revisions or updates to any forward-looking statements whether as a result of new information, future events or otherwise. So turning to our next slide, a quick outline for our call today. Noel will kick it off with some comments regarding the exciting news about the recent appointments of our new CEO. I will then go over the financial highlights. Noel will then discuss the benefits of our diversity and then call on George Kunberger, Andy Kremer, and Santo Rizzuto, who will each cover up the outlook relative to our end markets. Even though the lineup has changed a bit, unfortunately this morning we received some sad news relative to Terry, our new Executive Vice President of Sales, Terry Hagen, who has had a family emergency and I believe he is probably on a plane right now taking care of business. We certainly wish him well and our thoughts and prayers are with him. Of course, George is more than excited to fill in. His swan song as it relates to his last earnings call prior to his retirement. And finally Noel will then finish with some closing comments. And with that Noel, I turn it over to you.

Hi, folks. The really good news is that we have a new CEO, Steven Demetriou onboard to 17 of this month. We have got a brief summary of the resume on this slide here. And you will see that he’s got a strong background in several of our key markets. He has got a really solid proven track record, but putting all that aside for a minute, the main thing that attracted us to Steve was his great leadership skill. And maybe the best reference I got in all of the effort I went through on this thing with a guy that used to work for Steve telling me you know, he made me a much better executive. And that is a really good testimony to Steve. We’re really glad to have them on board. And I am really going to go back to being non-exec chair. And with that I am going to turn this back to Kevin to talk about the finances.

Thanks Noel. Okay, so, I am now on Slide 6, which is a discussion of our Q3 financial results. And so turning to those figures specifically. Our revenues for the quarter continue to see some pressure falling 10% versus the year ago quarter. It is important to note, however, that half of that fall was foreign exchange translation related. The remaining 5% fall was primarily driven by those end markets, where certain of our customers continue to see pressure including mining and minerals and oil and gas areas. In addition, we also saw revenues fall in chemicals. Although we believe this softness remains temporary in nature. The fall this quarter, as in previous ones, is driven by larger projects. Winding down, while our strong backlog of projects has not yet ramped up burn-wise. We would expect this to change over the course of 2016. This is resulting in a transitory period of softness in our chemical related revenues, especially as we compared to the peak periods of last year with last year’s Q3 being one of those peak periods. On another note, roughly 70% of the fall in revenue was related to field services, which in turn was impacted mostly by lower passthrough revenues. We also realized positive below the line performance, resulting in our adjusted EPS increasing to $0.97 per share. This figure includes a headwind of 3% from foreign exchange. Also included in this figure is a $0.19 discrete tax benefit associated with a debt refinancing. Regardless of this discrete benefit in the quarter, we remain focused on reducing our go-forward effective tax rate from the levels we saw in the first half of 2015. Let me now make some comments regarding operating profit. Excuse me. It is clear that operating profit fell versus year ago, primarily related to our lower revenue for the quarter. The quarter versus year ago was also impacted by our stabilized gross margin percentage that has been running at a level consistent with our full year 2014 and half year 2015 level. Foreign exchange also had a negative 3 percentage point impact versus year ago. However, we are also seeing a gain in momentum associated with our restructuring effort, which is evidenced by our G&A following year-over-year. This is certainly helping mitigate some of the items noted earlier. Most importantly, however, is that you will note that both of our revenue and operating profit levels have stabilized on a sequential basis. We are also beginning to see momentum develop against our restructuring effort, which will drive more substative cost savings in the future. These savings importantly will support our operating profit trends in future quarters. All of this continues to result in strong free cash flow for the company. Resulting in our balance sheet remaining strong. For trailing 12 month free cash flow is well over $500 million and self drive a cash and net debt position of $554 million and $131 million respectively at quarter end. This certainly is especially impressive given our continued strong execution against our share buyback program. In fact, during the quarter, 118 million worth of shares were repurchased. All in all I would characterize the quarter as a stable and steady one. Turning to Slide 7, as promised in our last earnings call, I would also like to provide an update on our now formally announced restructuring program. The program is focused on driving business simplifications through improved alignment and cost reductions, thereby supporting the company’s ability to better drive profitable growth. This program is primarily focused on our overhead related cost specifically in the areas of labor and real estate. As noted on the chart, the cost of the program are expected to total approximately $165 million to $205 million with benefits expected in the range of $130 million to $160 million. As you also note on the slide, the split between cash and non-cash for the cost and benefits of the program, indicate the cash payback relative to the program is well under one year. We also expect the program to be largely completed by the end of this calendar year. As a result of this timing, we expect that the bulk of the savings will be realized in 2016 although some savings are expected in this current fiscal year. Importantly, the savings in 2016 are expected to help support earnings growth next year. Of course, there are likely some potential – to next year’s savings given investments we may want to consider to support our growth objectives. Turning to Slide 8, we are also pleased to announce the board has authorized an additional $500 million buyback program with a term of three years. It is expected that we will probably be more moderate in our execution of this program versus the existing one where we have almost fully exhausted the program within one-year of the board’s original approval. This additional authorization is a clear indication of our confidence in the company’s long-term cash flow and value creation outlook. Turning to Slide 9, and before turning it back to Noel, a quick review of our backlog. Total company backlog remains near record levels at $18.8 billion. Our trailing 12-month book-to-bill at 1.03 remains fairly stable and it should be noted that the foreign exchange impact on this quarter’s backlog versus the year ago figure is over $700 million. This indicates strong, constant currency growth in our backlog over the year ago period. Regarding professional services backlog, it also remains stable at $12.2 billion. Again, consistent with our story regarding total backlog, professional service backlog at constant currencies would indicate a strong increase versus the year ago quarter. So with that I would like now turn the call back to Noel.

Hey, thanks Kevin. Let’s go to the end-market diversity slide. I was looking at this yesterday and thinking about the history of it. Back in the middle 80s when the business went through a dramatic recession and we basically operated in refining and chemicals in those days, and the business really went to tank, we decided as a company we would never get caught again in a single market downturn. So what you see on this slide is the end product, which is still an unfinished agenda. Less than half of our business comes from our origin s, which would be chemicals and refining and 55% more comes from other businesses. We have created a very diverse company, which operates in a wide variety of markets. And a slide that you don’t see here is over a wide variety of geographies. So the company’s diverse and markets are diverse and the geographies are diverse. This means as we have said many times before, we will never be hitting on all cylinders, but if we just hit on more than half cylinders, we are going to fine. So what I want to do now is turn the heavy process over to George.

Good morning everyone. Well certainly it’s a tragedy that Jerry is off dealing with the emergency that he is dealing with today. But on top of that, I am disappointed that you are not getting a chance to meet Terry [indiscernible] a phone, my young protege who have turned this sales department over to. I have lots of confidence in him and leaving the go to a very nice retirement, very confident in my backfill. But for now you will have to deal with the old guy coming out of the bullpen. So let me try and adequately fill in for Terry. As we look at the process area, we find oil and gas and chemicals as we traditionally make it up. I would characterize that area as good. The market, not robust and euphoric certainly, but good, and more importantly I would say stabilized. An indicator of the stability of the marketplace say as compared to last quarter and the quarter before is that all of the major projects we had in all of these areas going into the third quarter of this year have not been canceled. They have all progressed through major financial reviews within their own organizations and have gone on to the next step. And so that’s a very good sign that our client base is starting to get comfortable and understand the current economic conditions globally in this area. And indeed, there have actually been projects that were put on hold back a quarter or two ago that clients are calling us to restart and to think about get going and that’s particularly notable in the refinery states. Quickly jumping down to the refinery area, you know, there is a general uptick in that area. Those refining margins around the world are up as I’m sure you are well aware. There is a number of economic factors that are driving that. There is some growth and demand overall. There is certainly some opportunities in spot markets and taking advantage of low crude and track crude around the world particularly in the independent refineries, but also to a large degree even in the integrated oil company. So we’re starting to see projects that are being put on the floor, to work off of, from a prospect perspective, that are going to drive I think continued growth in this area over the next certainly year. So I am pretty bullish about that. In addition, there is some ongoing stuff that our refiners have to face relative to safety, energy efficiency, et cetera that are continuing to drive project. So that space is good I would say and we will continue to relatively good going forward. The oil and gas, which we basically put in upstream and midstream type of projects, obviously we all understand the economics of oil prices, but again those are starting to stabilize. And one important area for us, of course, is in Saudi Arabia and so the Kingdom has continued to invest in their social economic programs. And so they’re producing oil at a rapid pace and they are committed to – continuing to do that which is of course driving lots of midstream projects for us with Saudi Aramco. Even though areas like Canada and the oil sands continue to be very weak from a pricing perspective and large capital projects are certainly going to be few and far between, the sustaining capital markets for us is continue to be good. And more importantly being a very strong maintenance provider and craft service provider in Canada. We are actually growing that marketplace and continue to take market share. It’s not going to move the needle tremendously, but it’s certainly provides good stability in that marketplace for us. And of course of the fundamentals of the chemical business, despite Kevin talking about a little bit temporary softness in the marketplace, quite frankly the underlying fundamentals have not changed globally, driven by gas prices, they continue to be there. We’re going into, as you well know, under the third – third round of methane crackers. There is a lot of ammonia and those type of projects out there. Now, Jacobs, as you well aware, plays secondarily in those things in OSDLs and derivative type of projects, which I will tell you those projects are pretty ample on our prospects slate. And actually while we have not announced some of them. We have actually been successful in – some fairly large projects in that space even in the last couple of weeks. So in the secondary chemical space, things like our Montana project that we did announced this last quarter, which is a significant project, the fundamental economics of those projects are very, very strong. And so we expect, certainly that the stuff we have not backlog, to continue to go through and – again as Kevin said, to drive the mostly construction type of revenues in 2016, but our prospect list continues to also be refad. And so I am pretty bullish overall in the process sector. I’m not euphoric, but I am also pretty comfortable that it is going to be a strong part of our business for the next years to come.

Okay, thanks George. Andy, do you want to talk about [indiscernible].

Sure, Noel. Thanks. I’ll start off on a high point. In the pharma/bio space, our clients are experiencing one of the most robust product pipelines in years. And this is driving a new investment and manufacturing capacity for their projects. In addition to that the emerging markets providing ample opportunity for growth. So we’re seeing new projects and adding new projects to backlog in the U.S. and Europe and in Asia. You know with this surge in new projects, we’re also seeing some competitors return to this industry. But as a market leader, with a deep capacity and deep – of experience, but we’re well positioned to benefit from the investment trend. Turning to mining and metals, this business continues at kind of a low spending ebb due to capacity coming online. In recent years as you know, combined with the cooling demand in China have had a dampening effect on mining commodity prices. [Indiscernible] have generally curtailed capital investment to new projects, focusing instead on lowering the production costs and optimizing their existing facilities. But happily there are some exceptions for that as investments continue and some of the high value new deposits in Asia, Africa and South America and we’re well positioned and are pursuing those projects vigorously although again some stiff competition. Another really bright spot for Jacobs in this market is that production rates remain high on these mine products and mining is a very high maintenance business. So investments of sustaining capital continues. And in some areas increasing as new capacity begins to wear in. And the performing sustaining capital type projects is a sweet spot for Jacobs across their portfolio, and so we’re pursuing that sustaining capital business of mining with some very good successes both in South America and Australia. Turning out to the other industrial markets including power. As you know, power market remains interesting for us in the UK, Middle East, Asia and South A America. And while we are not a player in the lump sum turnkey market, power is a very big business globally and we've successfully targeted in growing our position in some select niches. The risk and reward are well balanced. In the and paper and consumer products, remains flat on a relatively low spending. We engaged in this business in alliance type framework so some of the biggest global players. And remain engaged with them as they invest in the end quality and efficiency upgrade project and some new investments in the emerging market.

Hey, thanks to Andy. Santo, you want to talk about public and institutional?

Thanks Noel. Good morning everyone. Kicking off with national government, overall we see steady growth in this market, in particular the defense and security opportunities are quite robust. And continue to expand. We are well-positioned globally to take advantage of these. We see U.S. defense spend increasing to sustain some critical DOD priorities. Amongst these is the Asia Pacific pivot where we expect to see some significant investment over the last next five to ten years, followed closely by investments associated with a renewed commitment to NATO and Europe, as well as the Middle East. We also expected growth in the intelligence and cybersecurity markets. In recent events, we expect the U.S. Department of State to renew its emphasis on both physical and technical security at overseas missions as well as domestic facilities. And this is a strong Jacobs area. The nuclear market presents good opportunities as well and we're growing our position in both the nuclear cleanup in the U.S. and the UK and in Newbill for new papal generation in the UK. Here in the US we are also continuing to leverage our cleanup credentials and new opportunities with the DOE. So overall in the national government component of the public institution, we see good steady growth. Moving onto infrastructure, this continues to be a very strong market for us and will be for some time to come. Transport infrastructure opportunities, both highways and rail, remain solid in the U.S., UK, Australia, and New Zealand. And are growing in Saudi Arabia and the Middle East. Funding is a topic of interest, particularly so here in the U.S. with the transport bill still in limbo. Nevertheless, we are seeing some states take matters into their own hands such as increasing gas taxes and vehicle weight fees, Washington State being a recent case in point, while others are considering alternative delivery methods including VBPs. So despite the funding issues, we still see steady growth in infrastructure and a solution to the federal funding program here in the U.S. will only further strengthen this market. So we’re looking forward to continuing good growth there. The water sector is showing growing global demand especially in the UK, Australia, and here in the U.S. we expect the leverage the world-class skills that we have in both UK and Australia to strengthen our position here. The UK is currently our strongest market following our improved position in the AM6 procurement cycle last year and it has positioned us with some greater opportunities not only in engineering, but also in construction and maintenance. So overall, a good strong outlook for our infrastructure business. And finally, moving onto the buildings market, we see this continuing to be a steady growth area, as well. There are strong global opportunities in healthcare, airports and education, especially in the U.S., UK, Australia and the Middle East. Here in the U.S. we also see an increase in state, local and public buildings for k-12 [ph] healthcare, and corrections. Over the next 12 months we would expect multiple BMCM opportunities on bond funded public schools, hospitals, and jails across the country. And as in UK, we see a similar emphasis by government on schools and healthcare facilities. Last but by no means least, mission critical facilities and in particular data centers, which continue to be strong growth area for us. So good steady growth for our building sector. And summing up on public and institutional, it’s a strong and steady market for us, we continue to see growth across the globe and especially so in the geographies that we are strategically located.

Thanks, Santo. I’m going to move to the summary slide. Diversity, as I said earlier, both of the portfolio and the geography, remain a big strength. The backlog is solid. We have plenty of backlog. I want to comment on cost the reduction efforts. The guys have done a really good job positioning us for 2016. As I keep telling people, if you've got your costs really under control, you tend to control your market. And so I think we are in that position right now. I think, in our forecast for the rest of the year we got a range of $3.11 to $3.31 and that includes the tax benefit. And so with that said, I’m going to turn this over to you guys for questions.

Thank you. We will now begin with the question-and-answer session. [Operator Instructions] And our first question comes from Tahira Afzal of KeyBanc Capital Markets. Please go ahead.

Thank you very much. Kind a first question Kevin is to you just in regards to the restructuring plan. How should we think about in terms of how it flows through? Is some of it just for competitive, to deal with competitive dynamics that we are not going to really going to see it for the flow to the bottom-line? But really in maintaining may be your book-to-bill, et cetera [ph]. And how much is really going to really flow through and directly benefit the bottom line visibly?

Thanks for the question. And good morning. I will tell you that look you are getting at a question that specifically gets to what as a view of our 2016 earnings are going to be and clearly, we will provide that color and detail at the end of our Q4 earnings call. So little too premature to talk about that. Clearly though, there are two dynamics that we are driving towards to, to fundamentally allow us to have an appropriate margin profile. One is the day-to-day operations, mixed dynamics, cost reduction initiatives, which is day-to-day work that is done every day. And is hopefully result in our ability to offset any potential competitive pressures or cost pressures expected from our customers, and so on, and so forth. This restructuring is more about our overhead. And ultimately, we believe that we will be able to see, or reduced levels of G&A in 2016 versus 2015. Now will the full amount be seen on the P&L? Probably not. As I outlined in the call, in my prepared comments, certainly there’s going be some expectations that we want to make some investments in our G&A, which will help support our ability to drive growth longer-term. So certainly, the short answer to your question, yes, we expect actually some P&L benefits and we expect that to help support our bottom line. But it is too premature to talk about specifics as it relates to that for 2016.

All right. Thank you, Kevin. As a follow-up question, in regards to your – book-to-bill has been fairly decent given market conditions and it seems to be stabilizing. How should we look at what is flowing through backlog? And I know Kevin you took a look and you scrubbed through backlog when you first joined. As you've become a little more familiar with it, any commentary on how that flows and how your views on the backlog profile have changed?

No, I think there is a series of dynamics that are occurring given market conditions, which are having some impact on our backlog. Certainly, I think that the situation on protests and whatnot is relative to the public speech and our federal government certainly is creating some more volatility than I would have expected originally, relative to how backlog gets in and stays and how options are renewed and so on and so forth. And clearly, the oil price dynamic has impacted various parts of our business as well. So other than that, I think the dynamic and the robustness of our discussion on a quarterly basis is robust. And I think that that translates into what Noel characterized as the backlog is there. And so it’s really a matter of us working through some of the transitory issues. Chemicals being one of them that I outlined, where you see revenue currently being down, but our backlog looking really positive there and we expect that that’s been transitioned to an improved revenue picture in 2016.

Thank you very much.

And our next question comes from Jerry Revich from Goldman Sachs. Please go ahead.

Hi, good morning.

Good morning.

Good morning.

It looks like the revenue burned for the buildings and market really accelerated for you folks. Can you give us just some more color on what’s kicking in for you and where is the demand accelerating?

Yes, I’ll take.

Go ahead, Santo.

Well, as I said in the comments, the buildings business for us is clearly a global business. So we’re seeing growth in the markets that we have most strategically positioned in. Healthcare is one of the areas we’re seeing growth, data centers and mission-critical facilities are the areas we’re seeing growth. And this is the outcome of positioning that’s taking place over, not just over the last quarter; this is long-term positioning of the global business. Our global building business cross-sell markets that we operate in. So particularly those are the areas that I would say that we are seeing strong growth in. Characterized in a social infrastructure as well, but those are the main ones.

Okay. And then in downstream, can you just talk about what you’re seeing out of your U.S. customer base, activity was pretty low at the beginning of the year. I guess it sounded like, from their conference calls, that they are spending – I guess one might have picked up in the June and September quarters, it looks like that’s not playing out. Can you just give us an update on the market?

Well, I think in the downstream marketplace in the U.S. there is a lot of variables that are playing into capital investments in our client’s heads. I mean, first of all I think just the instability of what was really happening as a result of the oil prices and what was happening to the price of gas and what was happening to the light ends, what was happening to the shale oil business as far as feedstocks into the downstream business was moving pretty rapidly at it during the first part of this year. And I think we saw a lot of clients hesitate as far as putting money into their plant that’s progressed or until they understood it. As I said now, things seem to be starting to stabilize. I don’t want to over characterize that. But starting to stabilize as far as understanding the economic and therefore clients being able to make capital decisions with a fair amount of confidence. Today, the drivers are really increased margins, improved security and safety and improved efficiencies of these individual refineries. And they have – they are generating a lot of cash especially in the independent side. And so, they have the money to invest, driven mostly by the margins and our opportunities to make profit, which is a little different than what we’ve talked about earlier, which was cheap feedstock, light-end feedstock for export purpose. So that the basic fundamentals have changed a little bit and they seem to be stabilized.

Okay, thank you. And lastly on the restructuring program, I’m wondering if you just flush out, from a high-level standpoint, the cash portion of it. Are we just adjusting across the end markets that you folks anticipate will be soft? Or is it across the whole company where we are reorganizing some of the functions? Any high-level color that you are comfortable sharing at this point just around the strategy there.

Perhaps I can characterize or reemphasize the characterization I made in the comments, preliminary comments. Certainly, we’re focused on our overhead related costs and there are real estate and labor related targeting reductions there. Specifically, I would say that we’re looking at – I’m going to call it in the neighborhood of 15% impacting our overhead infrastructure in terms of labor, as well as probably of around 10% of our real estate related activity. So those are areas that we’re focused on. We believe that we’re going to be able to deliver against the savings, which I’ve already made some comments on about how much of that will help support our earnings growth going forward. And really, effectively, we’re kind of facing this on positioning ourselves for the future growth that we know we need to drive. So we’ve actually had some realignment of our businesses, which is creating additional simplicity in our business and ultimately providing an ability for our teams to focus more on driving the business versus managing the metrics that we have in our organization. So all of that is good stuff, which ultimately would translate into our ability to drive incremental growth going forward.

Thank you.

And our next question comes from Jamie Cook of Credit Suisse. Please go ahead.

Hi good morning. I guess a couple of questions, one sorry back on the restructuring again Kevin, will you – can you talk to – is the restructuring sort of – are certain end markets or geographies, more of a focus for Jacobs at this point. And then the other thing you talked about is the cognizant that you guys could also make some investments in the business. And I’m wondering – you know if you could sort of explain, if you can give a little more color on that. I mean, as we think about how you are approaching the business, should we think about certain markets going forward, being more strategic versus history or certain geographies being more strategic? Or will your sales approach change? And the two, just sort of the types of projects you will be going after size, fixed cost, cost plus that dynamic. Thank you.

Those are – that’s a mouthful their Jamie as it relates to the strategy going forward. Certainly with our new CEO, Steve coming in, those are going to be things that certainly we’re going to be discussing with him. Relative to your color though request on geographies and what not, I would certainly characterize this as – across the geographic stand, we have seen opportunities to create greater efficiency and alignment and simplicity throughout the organization. So I would not characterize there being any particular area of focus. Certainly, there are some markets that are seeing greater pressure today versus two years ago. Given the dynamics associated with oil price and so on and so forth, which George is already characterized and talked to. So those are certainly areas where we’re paying attention to. But other than that, ultimately, I wouldn’t really characterize it being specifically and addressing a strategic initiative per se as it relates to the other kind of questions you’ve asked. Those are certainly things we will discuss and work through with Steve when he comes on board.

And then sorry just a follow up on the backlog, the backlog growth has been nice. It sounds like based on your prepared comments, you’re still expecting backlog growth for the year. So I just want to clarify that. And are there any one or two major projects that will or end markets that will drive that. And then how do you, the backlog growth has been nice obviously it hasn’t really translated into revenue growth because you’d see – because the burn rates have obviously been slower for reasons you have outlined. What risk do you see that that continues over the medium-term are into 2016?

Look, I think, back to one of the questions that was asked earlier one of the as I ramped up on the business. One thing that is certainly very clear in my mind is how the backlog ultimately transition and the timing of such into revenue. Certainly at the longer than I would have certainly originally anticipated. And that’s probably exacerbated by the dynamics that I’ve already alluded to. I think at the end, we really fundamentally feel as if there is the strength in backlog. And as we project in the balance of the year, the timing of some of our wins in sales could be impacted by our friends in the public space government. And so, we would certainly say the prospects are there. The benefits are there whether they end up getting booked this year or they leak into next year that’s an item of – kind of volatility that could impact the year end numbers. But we feel good about it. I think that results in our backlog. So I'm not maybe growing above the record backlog figures that we had at Q1, but certainly continuing to be quite robust, especially given the impact of foreign exchange.

All right, thanks. I’ll get back in queue.

And our next question comes from Brian Cummings Bird of Vertical Research Partners. Please go ahead.

Good morning.

Good morning.

Good morning.

Good morning.

Good morning. Maybe you touched a little bit more on the chemical softness you noted. Is that just a reflection of owners taking a step back and reconsidering the markets? Or you said the viability of the project is still very good. So what’s holding up the progression of some of these projects you’re noting?

Let me kind of make a comment on the softness angle and then I’ll reemphasize the comment that George made and then ask if he would like to add some additional color. The softness is in our revenues. And it really is about a situation where our backlog was robust. We have a lot of large projects. Those projects are winding down. And consequently, the revenue in the short-term is being impacted. Characterization that George outlined in the space going forward is that the prospects are good. The dynamics and the economics associated with the space are quite positive. And we think that there are a lots of growth opportunities in the chemical space, some of which are already in our backlog, some of which we believe will be added to backlog over the course of the next few quarters. The dynamic of what I would call a transitory situation is that those revenues are falling off as those big projects are coming to an end and the revenue – and the backlog is being completely burned off. And the backlog on the new items, which George characterize is being strong, is ramping up. The projects are there. And we think it is going to start to show some benefits in our revenue line over the course of 2016. George any additional color?

Yes, I’ll just add, as I said earlier, if you look at the first half of this year, of our fiscal year, again the instability of the decision-making process with our major customers caused a lot of projects to be either canceled, delayed, or certainly slowed down. And so that added to what Kevin was saying. I mean, that has started to stabilize. I mean decisions are now going forward as the projects that are – that we’re decided to go forward are going forward that ones that we’re canceled or being reconsidered I would say. In some cases, starting again - more in the refining space and the chemical space. So it’s more that. And that stability and the understanding of the economics going forward, I think is a more comfortable space for our clients and I think we’ll see more steady continued growth in that area.

Great. Thanks for that. Secondly – actually two quick questions. Maybe just give us an update on pricing and terms and conditions that have maybe developed in the quarter that have changed versus the last couple quarters. Secondly, did you just comment on the arbitration with Motiva that's noted in your 10-Qs and Ks. It's a rather large – they are asking for a rather large number, $7 billion. But there's not a whole lot of detail behind. If you can provide any details on the call, that would be really, really helpful.

Okay, this is Kevin. I will take a stab at the pricing dynamic and perhaps Noel wants to make a comment on the Motiva situation. Look on pricing, certainly the end markets where they’re seeing some pressures, which is in the oil and gas space obviously that is certainly an area where we are seeing some pressure from our customers and ultimately that’s required us to negotiate and ultimately look towards it, refocusing our efforts and restructuring to ensure that we maintain our gross margin profile longer-term. Having said all of that, the gross margin number that we’re seeing in the quarter specifically is kind of trending at the full year 2014 level. And as I suggested in the comments, prepared comments, in the first half of 2015. So we are able to offset that through the normal course of just being good at running the nuts and bolts of the business. So certainly, there is some pressure in certain areas, other parts there are less pressure but that’s the normal course of the business and we’re looking to ensure that we’re able to drive a certainly an offset to some of those pressures in our gross margin levels going forward. And perhaps, Noel, I’ll turn to you for any comments on...

Yes, let me talk about the Motiva thing is about as well explained in the date as we’re going to make it. Nobody at this table is in a panic over it. It will go through the normal course of events. But I don’t think it is appropriate to say a lot more than that because we spent a lot of time writing what we wrote and giving absolutely full disclosure.

Fair enough. Thank you.

And our next question comes from Steven Fisher of UBS. Please go ahead.

Thanks. good morning.

Good morning, Steve.

I know. Just trying to think about the drivers of earnings going forward. Not asking for guidance, but really just conceptually you have been able to keep backlog pretty flat sequentially. Are you expecting backlog to grow to drive top line growth? Do you see any margins story, or is this really going to be about cost savings and buybacks going forward?

Let me do that. I get to answer a question. What I would say generally is that, the first thing in the cost savings – I think Kevin said it quite well. We will get some kick out of that. I don’t think there is any doubt about that. I think as far as the margins go, I think the margin rates have stabilized. Certainly, the business seems to be much more stable then it was six months ago, when we had oil going from 100 to 110 who knows where – back up and down and it stabilize. So that’s giving our customers a little more certainty. And it is not that they can’t deal with $50 oil. It is hard for them to deal with the uncertainty. I think as we move forward in the 2016. I think the early part of 2016, we are probably going to see margins a little more flattish. I think getting a kick out of the savings and we are getting out of the restructuring. But I do expect most of our markets – and some of these markets, particularly infrastructure and the public and institutional markets are quite strong right now. So I think as we move through 2016 we’ll see a nice recovery. And uptake you know probably won’t make a point around 2016. But I don’t think we know at this time, it goes right in the middle of 20%. And that is probably the best answer we can give there.

Okay. Thank you, Noel. That is helpful. It seems like new awards and professional services have downshifted quite a bit year-over-year. But it is hard to tell what the currency impact is. So from what you are seeing, are your professional services bookings running flat, up or down, year over year? And what is the trajectory there that you see?

Well, as characterized in the comments, the – the professional services relatively stable year-over-year. But you got to remember there are $700 million of foreign exchange impact. So the underlying constant currency build is real. And I would characterize that in the professional services as well.

So was the $700 million entirely related professional services?

No.

No, no.

So can you give me the split of…

So if you give the split of the business, that is relatively close, close enough for government work as it relates to the split.

Okay. Great, thank you.

And our next question comes from Alex Rygiel of FBR Capital Markets. Please go ahead.

Thank you, Kevin. To take that last question another step further. If you were to look at the foreign currency impact by sector, being public, institutional, process and industrial, how does that breakdown?

I don’t have that information. And we don’t tend to really disclose that level of detail anyway.

Fair enough. I noticed that in your prepared remarks you didn't mention anything about telecom. Is this an area you are still interested in? Or is that an area you are deemphasizing?

Would not characterizes deemphasizing, but certainly it is part of our business. And consequently, we have not made any decision to deemphasize it obviously. And its incorporated into our growth algorithm going forward.

Great, thank you.

Thank you.

And our next question comes from Vishal Shah of Deutsche Bank. Please go ahead.

Hi, This is Chad on the line for Vishal. I just want to go back to that cost savings. So, of that $130 million to $160 million how should we think about the breakout between 2015 and 2016?

We didn’t provide the specifics and details relative to that. But certainly the bulk of that is going to be 2016. And it depends upon ultimately, how the actions ultimately – when they actually result in final kind of efforts. And, as you know, if you look at the total costs versus the cost that we have incurred to-date on the restructuring, a lot is happening over the next six months. So probably seeing some benefits in 2015 – the bulk of it is really going to be driven into 2016. What that characterization of percentages certainly well above two-thirds, I would say. And other than giving you additional clarity, versus that number, I think we will just stick with that. And certainly, tell you that whatever we have embedded into 2015, certainly is incorporated into our estimate that we have given you for the full year of 2015. I should also make the comment that didn’t actually make any comments in the prepared remarks. But you should be aware that we actually have an additional week this year. So we have a 53 week year given the dynamic of our catch up on every year – several years or so. We have a 53rd week. We don’t think of it as being a material impact. But it is incorporated into our expectations for the full year.

And then on the national garment side, could you just talk about the size of the project pipeline? And I guess your expectations on when you think more bookings will start to accelerate over the next year or so?

Well, I think in national government, the larger proportion of it is going to come from the defense spend, that we are seeing – the defense and security. Some of those DOD priority that we were talking about. The numbers that we have seen, talking in terms of capital investments or in a things opinions – a number of years. We expect to see good growth in 2016 in that space and beyond. And similar comments to the nuclear market, both in cleanup and in new build in the U.S. and in UK.

Yes. The only think I would add there, we still have a – almost a record number of proposals outstanding. They are going to get adjudicated over the next, I guess, three to six months time guys that probably will be….

Yes, no I think that’s – that is Jamie, asked the question a while ago. That’s the one area in our prospect plays there. I think we talked about this before in this conference call. That has some variability from a timing perspective and intensive decision making except for a – I would like to talk about and give the answer decision making particularly in the U.S. on some of those growth prospects that you talked about here now. Those definitely slide fourth quarter or first – fourth quarter, first quarter next year talk about placement time that is the one variable.

There is – there are a lot of prospects out there it’s kind of went through and the defense spending doesn’t seem to be going away. No, and we certainly have an opportunity to grow that piece of business.

Great. Thanks for the color.

Our next question comes from Michael Dudas of Sterne Agee. Please go ahead.

Thank you. Good morning everyone. And George congratulations on your upcoming retirement. I can't believe they let you get away.

Well, it took a little doing, I’d tell you but thank you very much for your comments, Mike.

You're quite welcome. Noel, what did you and the Board learn about Jacobs over the past six to nine months, given -- hiring for Kevin and also with the recent hiring of Steve?

Well, we learned our brand is good. I would say that, I mean, it was kind of night during the executive search for – came back and they did come up with good candidates who are really interested in the job. Ultimately Steve is really interested in the job. We were really interested in Steve. And so it is going to work just fine. I think we learned a brand in Scotland. You all know with something a little bit. I think that what's going on today with restructuring, it going to put us back in position of being a really solid cost for this year and going to allow us to control the market like we like to. And so we can go get what we want to get and still make money. And that is where we are trying to position the company. I think the board feels good about it. Even in the engagement of Steve. Every one of the board members interviewed Steve. And every one of the board members wanted to hire him. So he's got a big onus on his back. I know he is listening to this. So anyway, that’s what I know, Mike.

I'm sure he is. That's all I had for you. Good luck, gentlemen.

Thanks, Mike.

And our next question comes from of Andrew Whitman of Baird. Please go ahead.

Hi. I wanted to ask a question on the restructuring. And I guess I wanted to understand when the charges started? You've been taking restructuring charges mostly every quarter for a while now. Did it just start here in the third quarter, Kevin? Or is the range, the $165 million to $205 million, does that start in the fourth quarter? What is the timeframe that covers?

The timing, Andrew, as it relates to the restructuring – really we had a really small amount of money that we spend in the second quarter of this year. That is ramping up. We spent a little bit more in this third quarter. And then of course, given the timing and the magnitude of the cost estimate that we’ve highlighted – that means a lot got to happen in this quarter and next quarter, for us to ultimately finish by the end of the calendar year. So this is really going to end up being – largely, I would say a three quarter initiative – leaking into the first quarter of next year. So second, third and fourth quarter. And of course there may be some lingering small things that could leak into beyond the calendar year. But I think that that is kind of the framing and the bookend as it relates to how we’re executing against the costs.

That’s helpful.

There is variability – there is obviously Andrew because you got to work through work councils on labor issues, you got to work on realigning the organization and actually getting out of real estate that ultimately is going to be part of the restructuring. That just doesn’t happen overnight.

Got you. So I've got in the last two quarters about $58 million of restructuring. Does that sound about right?

Sounds about right, sounds about right.

As you look at kind of the benefits here, where do you see – it sounds like you are very focused on the overhead line, so that seems like its mostly going to come out of the SG&A line. Do expect to benefit from the gross margins as well? Or is that mostly based on the margins that you are putting in backlog?

No. There is some gross margin benefits. Although you should consider it, basically driving SG&A reduction?

Got it. And then another one for you, Kevin. You mentioned that you saw some opportunity to keep the tax rate down. I would be curious to some of your thoughts. And it looks like maybe you even saw some of that here if you exclude the tax item. It looks like maybe the tax rate here in the third quarter was a little bit lower than we expected. First, can you confirm that that was the case? And can you second talk about some of the things that you've found since you have been CFO to drive that lower and maybe how much lower you think you can get it structurally?

Look I think we are getting proactive as it relates to addressing this particular cost item. And proactivity translates into, I think, our ability to work the number down over time. There are certain other things that are working against us. Certainly, if we have more business in the U.S., that translates into higher tax rates and so on and so forth. Ultimately, we, and I, specifically, believe that there is an opportunity for us to drive that down over time. If taxes are an area that are volatile in nature because you will find things that come out of the woodwork, whether it is chances taken by regulatory authorities or tax authorities around the world, which can give you a plus or minus, which is difficult to predict and understand. But, I do think, if you take away – kind of the discrete item that we talked about, in terms of $0.19, the year-to-date kind of operational tax number is different than what you would have seen a year ago, for example. And we think that we are going to look towards trying to drive that going forward.

I will leave it there. Thank you very much.

And our next question comes from Adam Thalhimer of BBandT Capital Markets. Please go ahead.

Hi, good morning guys. Thank for squeezing me in.

Good morning.

I was just hoping maybe Noel you could talk a little bit more qualitatively about the 2016 outlook. Because even going back to your comments about the end markets, how you don't need all of the end markets to be strong. It seems to me you are really only complaining about 10% of the business, the direct oil and gas and then the mining. So if 90% of the business feels pretty good -- why couldn't 2016 be a barnburner year?

Yes, well that’s good. I think it is an interesting conversation. George talked about it. Maybe I talk about it a little bit. The commodity price, unless if you want to call that, copper 235 or whatever it is an oil at 50 or whatever it is – has made a lot of customers particularly the non-government type thing. And when they think, they slowdown. As they tried to get certain on what their end markets will go. There is no logic on Earth, for instance, for there to be any effect on the chemical business with the drop in oil price, in my mind. Except a lot of the companies, they are suffering cash flow problems are big in chemicals. And so when you look at it like that, these guys have got to sort out in their own minds where they are going. So even though the direct result is on oil and gas, maybe on refining somewhat, it has to spill over in chemical. And I am convinced we got spilled over in other places. So as we get little more certainly into the world, I think, these customers are going to be more confident – more confident in their ability to generate returns. And I think we’re going to see neat update, as we go through 2016, providing the world doesn’t fall apart somewhere else. But I do believe at this point in time, as George said it best, they are already coming back to a single, maybe we want to restart this. What do we do with this? And even though we’ve got some really big wins in the chemical business, some of which we haven’t even pressed. We’re moving on a phase at a time. And so there is dip in the revenues where some of the work got worked off. We’ve got a whole bunch front end packages that we are positive will get built. But we’re getting released a piece at a time. And so I think that’s what’s going on in 2016. So I don’t look at 2016 as being a barn burning year. But I certainly look at 2016 as being an up definitely.

That’s great color. Kevin, really quick - maybe you said this, what are your expectations? Or what should we be expecting for additional restructuring expenses next couple of quarters.

Okay. So the total cost is somewhere in the $160 million plus to approaching couple of $100 million, We've done about a little less than $60 million. So the math is pretty easy to compute. So it’s a pretty big number over the next couple of quarters.

Okay, thank you.

Our next question comes from Anna Kaminskaya of Bank of America Merrill Lynch. Please go ahead.

Hi guys. Good quarter, I think, stable is very good in this environment. I wanted to touch base quickly, I guess go back again on the refining. When we are talking about improving pipeline, are we talking more about outage work, maintenance work? Or are companies actually talking about adding capacity? And if you could provide more color on by end market? What are you seeing by end market – sorry, by region for refining?

Yeah in refining. So as I said, it’s a wide variety of things, I mean it certainly is – we look at the Independence, trying to take advantage of low oil prices, captured crude that they can get cheap on the spot market, their own inventories that they build up and being able to take advantage of that. That’s certainly an impact of it. As they go ahead and decide to spend the capital on some of these crude flexibility types of projects, they are going ahead and spending the money on energy efficiencies, upgrades, as well. And then as we look at the ISA-4, which is going to be a pretty broad spend over a long period of time, not just in the downstream refining market.

ISA-84 is – it’s not a law in the United States just yet. But it is a policy that says listen, if you are running a refinery or chemical plant, you need to look at the safety overall of your facility and to be sure it is incompliance with standard OSPA policies and where the industry is going. So capital decisions are being made on – do we go ahead and upgrade the safety of this facility? Do we take the risk? Because there might be an event – public exposure or public outcry as a result of chemical event increasing as it should. And so a lot of our clients across the board are making decisions to go ahead and look at their facilities and upgrade from a safety perspective, a process safety perspective. This is a law and other parts of the world. Say as an example, in Singapore, where it’s regulatory driven. So the pressure is on actually regulatory in the U.S. as yet. But certainly there is strong social and political pressure to go ahead and spend us money. And some are big clients, Chevron being an example, now have announced some big spends and big programs to go ahead and look at their facilities. So that’s an element of the refinery spend as well as the upgrades on the crude space and flexibility on the crude space that I talked about earlier.

And when do you think we might see something in backlog? Is it something that might come through in the fourth quarter, or is it more of a 2016 story?

Yes, I would say it will be early at first quarter 2016. Of any significant increase in backlog because as Noel said, even these projects are being released Phase by Phase and we are relatively conservative on what we backlog on to make sure these projects are really going to go forward before we commit to them. Well I would say be more early 2016 than any other major second quarter 2016 from a backlog perspective.

Okay thanks.

Well it is going to be a big efforts, folks.

Just a quick cleanup on the processes backlog. I think you said you had fewer cancellations. Would you be able to quantify and where are those cancellations coming from?

Thanks for the question, Anna. But we’re out of the cancellation and disclosure mode. We don’t want to talk about it anymore.

Probably, we are doing better.

And then we can quickly touch on just on your M&A outlook. It just sounds like it was such a big share repurchase that we should assume that acquisitions are pretty much on the back burner for now.

Let me deal with on. We have had it on hold. We made one little bitty acquisition during the first of the year. Something we have been working on for a couple of years. They have got the design license in China. We’re just waiting – Steve has got to get in here, he’s got to look at the business. Certainly, at some point in time, we will be back in the acquisition business. But I would guess that it will take Steve a quarter or two, as he looks at the business, decides what to do. But certainly, at the board level, we know we got to go back and I think as Kevin said, the pace of the stock repurchase is going to be, at least now, considerably less than the last one. And so, we’re really looking at spreading that money over the three-year period, unless something dramatic happens.

Okay. Thank you very much for your time. Great quarter again, great execution.

Thank you.

Thank you.

And our next question comes from Chase Jacobson of William Blair. Please go ahead.

Hey, good morning. So I just wanted to clarify on the tax rate. I think it was in the mid-20%s this quarter and just under 30% year-to-date. I know you are working on some things, but should we be expecting that kind of historical low 30%s tax rate going forward? Or do you think you've now got it to a place where it is going to stay in the mid to upper 20%s going forward?

If you look at the numbers, Chase, through the first half, we were kind of in the range of 31.5%. And so if you take the benefits in the quarter, I wouldn’t suggest that the quarter itself is a sustainable number. But, if you look at our year-to- date, excluding the discrete item that we discussed, it is approaching the 31% number. Whether or not we’re going to get all the way to the 31% number, there is some volatility there. But certainly we believe we can get it down versus the 31.5% that we saw over the first half of the year.

Okay.

Okay.

Okay. And then just another one. Not specific to the details of the restructuring, but as it relates to it. Obviously there is pressure in some markets. But overall your commentary, you talk a lot about stability. You talk a lot about growth opportunities. So it sounds like the restructuring is more in response to the cost pressure from the customers and the competitive environment. I may have missed it but I don't think there has been a lot of talk of the competitive environment. So can you just comment on that and maybe include if the competition is coming mostly from the small, the smaller or regional players? Or if you are also seeing it from the larger project companies that are trying to fill capacity, given the weakness in the large projects out of the business right now?

You George?

Listen, I think that – excuse me. Fundamentally, we will strive to run our business from a cost perspective to make good business sense and to drive value to the shareholders. It is not necessarily in response to the competition. We would make these decisions independent of the competition. As Noel said earlier, as we continue to keep our cost and that’s been the entire legacy of the company, at a low level, it gives us a lot of flexibility in a competitive world. But it is not necessarily to drive the decisions that we’re making here today at all. It is just good business.

For a guy that’s retiring, I completely echo George's comments.

I taught Kevin everything he has learned since he has been here – I don’t think else to say.

And our next question comes from Jeff Volshteyn from JPMorgan. Please go ahead.

Good morning and thank you for taking my question.

Good morning.

I know we are running out of time here so I will be efficient. Just a few housekeeping questions. Kevin, just to clarify on your comment on investments in the restructuring process. Is there any type of really direct investment included in the numbers? IT systems, you know whatnot. Or is it purely cutting?

No, we – it’s a good question Jeff. Thanks for it. Yes we’re investing in our systems right now, as a matter of fact. It is an area that I think we can collectively we can improve upon and help support the incremental simplicity and alignment that we’re looking for as part of the restructuring. So there certainly are investments that continue to occur.

And that is helpful. On the guidance, the EPS range went up and then slightly narrower then it was before. But it's still rather wide for being a one-month out from the year-round. Kind of a two part question. Are there any key areas of uncertainty in your guidance? And maybe you can help us think about some of the underlying assumptions for the fourth quarter guidance. And maybe just foreign exchange and the share count and the tax rates?

Well look, the guidance is what it is, if anything, I would say – it is tending to be more narrow than what Jacobs has historically provided. So I think we’re actually giving more closer to a figure, but I think it is a positive.

And the underlying assumptions then?

We’ll look all of the things that you have alluded to. Certainly are items that can impact the number. Certainly the pull through on revenue. Certainly dynamics relative to the effective tax rate. Certainly dynamics relative to foreign exchange. Certainly all of those dynamics timing of ultimately when we’re able to execute against the restructuring and where we might assume that there is something that occurs now and it ends up getting delayed for another month. The savings associated with the restructuring don’t ultimately come into the numbers until later on in the quarter. All of these are factors that would contribute to the range that we have alluded to.

Okay and then just on the share accounts let me ask it different way, what share accounts should we use for the fourth quarter, following your share buyback in the third quarter?

Well, look, I think it would be appropriate to utilize the terminology that was used, i.e., it’s a three year term.

Okay. All right. Thank you.

You’ll be close.

And our next question comes from John Rogers of DA Davidson. Please go ahead.

Hi, good morning. Congratulations on the quarter. Just a couple of quick follow ups. Just back on the restructuring, Kevin. The $130 million to $160 million in cost savings that you are looking for, is that all in SG&A or effectively nearly all?

The majority of it is SG&A. there is some gross margin benefits of which we have not disclosed, but certainly the bulk of it is G&A related.

Okay. And then, maybe – you guys talked about some of your end markets and gave us some updates there. I was wondering if you could talk about it geographically a little bit. Specifically Europe and Australia where you've had more acquisitions over the last couple of years. Kind of the progress there and what you are seeing in the market.

Well, why don’t we do it like this? If you look at it geographically, you will know what's going on in Europe and then Europe continues to be slow grow. And the business there is doing reasonably well, but it is battling a lot of headwinds in Europe. The Middle East is still early bubbly even though I think somebody said it here earlier that the oil price is down in the Saudi continue to sell more oil anytime in history and they continue to expand on social programs. So the Middle East is strong. The U.S. outside – the oil and gas that is generally very strong. Australia is very solid in infrastructure and water business. The mining business in Australia is suffering as it is across the globe, although frankly, in the mining business we’re doing better than thought we would. We’ve really made this sustaining capital work even in Australia. And so, our downturn probably has not been as dramatic as you would have thought. So geographically, then you into Asia, where china is, our business in Singapore is still very strong. So as I look at clusters of geographically I’ve got a real mix. And then I go to South America and we continue to be very solid and Chile. We probably doing better in Chile than any other contracts. Is that fair Andy?

That’s absolutely correct, Noel, thanks.

So, you know, and part of that is we’ve been able to take that mining business in Chile, and we take it into the sustaining capital and we made it very successful. So we don’t need a lot of new big cap projects to make our business in South America work well. And that’s just a general geographic spread.

And Noel, maybe just following up on that then, in terms of the restructuring efforts or the needs to reduce cost, is that predominantly Europe?

No, this is global. We are reducing cost everywhere it makes sense to reduce cost in the restructuring, taking us back to being very competitive. Because some of this – maybe a whole bunch of this goes to the bottom line.

Okay. Great. Thank you. And Noel, enjoy your – more rest after August 17.

Don’t worry.

Our next question comes from Paul Mecray from Tower Bridge Advisors. Please go ahead.

Good morning. Given your very strong balance sheet and your positive free cash flow, and with Steve coming on as the new CEO, is it likely that the board might readdress its opposition to paying a dividend while preferring share repurchases?

This is mine, okay. Steve and I talked about this earlier in the week. I think when Steve gets on board and he gets totally up to speed, we will be looking at the capital structure. And certainly, we will take a look at share repurchase versus dividend, does it make any sense? What are we doing? I think that will be a subject for some time during 2016, that the board will thoroughly address.

Thank you.

Okay. So I think probably at this point in time, we will cut it off. Not sure whether we have anyone else in the queue. But we have gone a bit over. And certainly, I will turn it back over to you Noel, for any final comments or clarity, points of clarity that you would like to make.

Okay, hey, thanks folks. It was a good session. The questions were good. We enjoy your interest. And we look forward to continue working relationship with you. Thanks a lot.

And thank you, sir. Today’s conference has now concluded. We thank you all for attending today’s presentation. You may now disconnect.