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 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. [Operator Instructions]Thank you. Mr. Jonathan Doros, you may begin your conference.

Thank you. Good morning and afternoon to all. Our earnings announcement was filed this morning, and we have posted a copy of the slide presentation to our website, which we will reference in our prepared remarks.I would like to refer you to our Forward-Looking Statement disclaimer, which is summarized on Slide 2. 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, and 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. 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 September 29, 2018, and our subsequent quarterly report on Form 10-Q. We are not under any duty to update any of the forward-looking statements after this date of this presentation to conform to actual results, except as required by applicable law.During this presentation, we will be referring to non-GAAP financial measures. Please see Slide 2 of this 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 have 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 the agenda. Steve will begin by discussing our culture 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 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 will open the up call for questions.With that, I will now pass it over to Steve Demetriou, Chair and CEO.

Thank you. Turning to Slide 4. Thank you for joining today to discuss our fiscal year third quarter financial results and the progress we are 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, improving 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. 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 in 19 critical sub-markets.Our fiscal year third quarter results demonstrate a continued focused execution through one of the most transformative periods in our company 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% and 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 August 2, we’ve…

Thank you, Steve. Before we view our results, I would like to remind everyone that recast 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 since the health of business is performing on a comparable basis year-over-year. I will be referring to these figures throughout my remarks.So now I will 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 stub period up 11% Both ATN and BIAF equally contributed to this strong double-digit top-line growth.Third quarter adjusted gross margins as a percentage of net revenue were 23.9% mainly impacted by two items, one, a higher mix of ATN procurement activity, and reimbursable versus fixed price revenue and two, a mix impact from a true-up of cost of BIAF and for 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 our 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 cost and prudent connection with the closing of the KeyW acquisition and $38 million of other adjustments consisting mainly of, $80 million of amortization…

Thanks, Kevin. I am excited about the continued traction of our business transformation. We are seeing a strong inclusive culture developing across Jacobs. Our pipeline is increasing year-over-year with larger higher margin opportunities and we are 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.The 2019 adjusted EBITDA outlook in the range of $965 million to $1 billion from the previous range of $920 million to $1 billion. And we are 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 contributions, discrete tax items and the impact from share repurchases.We have a clear vision and strategy for Jacobs and we will remain disciplined in executing against this. We are well aligned to capture secular growth opportunities. We have a strong balance sheet and we are well positioned to deliver on our financial progress.Operator we will now open the call for questions.

[Operator Instructions] Your first question comes from the line of Josh Sullivan with Seaport Global.

Good morning guys, nice quarter.

Good morning, Josh.

Good morning, Josh.

With the two year budget you are moving forward, can you talk about any particular programs, you are more confident at this point thinking of the confidential KeyW’s space contract, but also is there anything else moved to the left with the budget deal in place in the longer-term?

Well, as you know, the two year budget deal 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 timeframe. But the details are to come over the next few weeks and potentially few months. I think t he good news is that it was a bipartisan effort to merge the defense and non-defense interest of each party.But we are optimistic from everything we are hearing and our engagement with the hill that the priority areas that we are involved in and especially in space and cyber and mission IT etcetera are going to be the areas that are going to be 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 sustainable presence on the moon by 2029.These are areas that we believe will be well funded that will help our efforts of Kennedy, Marshall, Johnson, et cetera. 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 we are going to – 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 are well positioned on it and we are right in the middle of it. We have specific Jacobs’s resources that are working with some of the U.S. government agencies now to develop the solutions. And so, I think it’s something that’s going to help us and as we move into 2020 and 2021 and beyond.

Okay. Thank you. I’ll get back in queue.

Your next question comes from the line of Gautam Khanna with Cowen and Company.

Yes. Thank you. Good quarter. Just wondering - a 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 are underlevered now. I mean, what sort of the – what’s your comfort zone? And then maybe if you could comment on how the M&A pipeline looks and your bandwidth for taking on additional acquisitions given KeyW just being closed? Thanks.

I’ll let Kevin finish with the – with our leverage goals, et cetera. But just from a standpoint of the type of things that we are looking at beyond buying back our stock and I’ll always emphasize that 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 do – as we are engaged in M&A opportunities for both our BIAF and ATN 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.I mean, one of the big areas we see as 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 ATN standpoint, geographic growth is important to us. We are currently generating very positive margins in our international area and so it’s – we are 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 U.S.When we acquired KeyW, we were excited about the pipeline of ideas that KeyW had to build that great asset and so it’s an area that we will 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. And then, in ATN, again it will be the areas to build our capabilities around our announced technology hubs.But, Kevin, do you want to comment on the financial side of that?

Yes, Gautam, I would say, there is a couple 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 in over the next year or two clearly. I think the capacity really starts to probably become even clear 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. 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 two to three times.However, I wouldn’t necessarily assume that we are willing to go to two to three times if we are not finding attractive acquisition opportunities and that would certainly, we would probably be at a leverage level that’s under two. So, I don’t know if that’s specifically answers your question, but it starts to give you some guard rail as it relates to that and certainly we’d be comfortable in the two to three times.But if we are not really active in M&A and as Steve suggested, M&A is got be a value-enhancing effort, but it’s got to equal and it’s got to be strategically aligned with what we want to get accomplish. So, our leverage factors would be less robust I would say, is in fact we are 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 biz, plus the classified contract? Is the timing still on track as you have communicated before?

Yes, I think, we’ve, on the Hanford side, I’d say, slightly moving to the right. Probably, we will hear more – we will probably hear first on a rebid. And the tank bombs are – the tank bomb 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, the good news is, we are continuing to work on our current programs and we are 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 or Steve, can you give us a little more color on ATN margin? I think we can understand that the revenue growth has been coming from the large reimbursable work and procurements? And you have been talking about improving the margin I know you got the longer term guide up as much as 150 basis points. Does the ramp up of fixed price – which carry higher margin than slower than we thought and should a – when should ATN margin ramp – does it ramp up here?

It’s a good question. We are confident and we are seeing it that as we pursuing the business we are moving up the value chain. I think what we are all seeing right now in our P&L numbers is the success of the wins back in 2019 around the large enterprise asset management contracts, things like missile defense and SOCOM and JITC that are all ramped up nicely.And most recent one the HTASC – big army HTASC one and these are very high return, but more modest margin businesses that we’ve discussed. And in the mean time, when you looked at our pipeline of opportunities, it’s rich with these more smaller higher margin, some of them being fixed price and we are seeing the opportunity there.So, we are not seeing any degradation in the margin opportunity. And also KeyW is clearly going to start playing out over the next few quarters to – from an ATN standpoint, we’ll have a positive impact on both the gross profit margin and the operating profit margin.So, we expect that as we get through the next several quarters, we will 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 have these big successful higher 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 BIAF business. You got businesses in there like facilities that have been doing well for you.Have you seen any slowdown in that business in terms of project approval? It certainly looks like you have and are there any parts of BIAF that you are concerned about that could be a bit more cyclical?

Of our BIAF, $14 billion backlog, the most cyclical in there is, it’s 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 countercyclical in their own CapEx spend.When you look at the backlog in the third quarter, our advanced facilities business had one of the strongest backlogs up close to 10% year-over-year in the third quarter. And we are continuing to move into the areas where the spending is happening. And there is – for example in life sciences, we 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 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 they have been able to do to really combine with CH2M and drive the revenue synergies and the things that we are winning are demonstrating market share and growth.And now that, there has been some government change there in the UK that 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 Jacobs and another great area is northern area of UK, which we are well positioned with our Manchester and Leeds offices and we are seeing the new government put some specific focus there.So, I am really proud of our BIAF team in the way that they have been able to offset some headwinds and be driving these types of double-digit backlog and P&L growth.

Thanks for that, Steve.

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

Hi, good morning and nice quarter. I guess, two questions. One, Kevin, is there anything we should read into the range with one quarter less of EPS. I am 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 their earnings next year easily just on the back half base of $5.60.I know you talked before about 2020 earnings, well north of $5. Am I thinking about it the wrong way, particularly with KeyW I am trying to understand that the cadence to get to the 7 to 8 bucks in earnings power in 2021? Thank you.

So, a couple things, Jamie. First one is, as it relates to our current results in this year, remember there is, we probably got about $0.23 of discrete tax items in our numbers. So, it’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 I would call out. The other item that you are 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 would say, there is always a range around the midpoint which could be associated with fringe releases, or these kinds of things. Of course that project take up or true-ups in terms of cost 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 from the line of Jerry Revich with Goldman Sachs.

Yes. Hi. Good morning. Steve, it sounds like the ATN bookings have played out, I think higher than your expectations from the analysts say six months ago where we are looking for 2% to 3% organic growth, but just based on the update that you are giving us here today, if I am 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 ATN organic growth this quarter?

Yes, it’s really – thank you, Jerry, for the question and we are very excited about what the team is doing globally on ATN and specifically in the U.S., what’s been very positive is I have talked about these large enterprise contracts that we won back in 2018 and how we are ramping them up. And not only has the team done a successful job on getting them fully ramped up.But we are actually finding new opportunities within those – with those clients on some additional business. And so, 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 cyber security, digital capability and now, KeyW is going to head 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 are doing globally, but now we are seeing opportunities on electrification, power trains and leading to new R&D facilities and we’ve had great success recently on winning some business not only in the U.S.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 the main driver there has been our operating performance where one of the large clients has extended us from about five or six states to I think it’s thirteen states now and we are 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. We are – I think we now have, on a combined Jacobs employees and the contractors that we control over 5,000 employees and we are at all the major sites and what NASA is 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 are going to see a lot more diversification on the business going forward based on the successes that we’ve had. 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 ATN has had over the last several years.

And as you think about your $7 to $8 2021earnings target, can you just talk about your updated thoughts on how back-end loaded is that expected to be? So if you look consensus estimates of about $5.50 next year, we are not going to ask you to comment on that.But if that’s right, it implies a big chunk of your anticipated growth that’s coming in 2021. Is that how you are thinking about it and can you just give us any updated thoughts on the cadence six months later here?

Jerry, this is Kevin. 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’ll call it organically, as we’ve talked about it.And we’ll see how it plays out relative to our share price and whether or not, we’ve continue to be excited about buying back shares at levels we, as we’ve said during this call, we are continuing to be thinking that we are 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?

Yes, 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?

Yes, we will give guidance in the fourth quarter. We are not going give guidance for 2020 today. I would say two things. One, we are 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.And 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 movement 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 quarters through 2019, we feel good about the first three quarters.We are feeling good how we are going to end up and we felt like we have positioned 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. Steve, want to talk a little bit about labor and I think you add up the numbers, you have almost 50,000 of these employees from what I saw on the slides. How do you feel about the labor pool right now relative to your, obviously 2019, but your 2020, 2021 expectations as you start to think about planning for those years.Is there much more required from an organic basis as the turnover rate has been lower than you would anticipated given your diversity efforts as well? And is there a productivity measure that you certainly think in the next couple years that can drive lot more value relative to the labor force and maybe the OpEx capital spend that you are going to be generating?

Yes, well, there is a lot in that question and it’s a great question. 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 is looking for the best talents out there in the industry and in certain parts of the world, talent is tight.And the way we are successfully managing that is, and when I look at our BIAF business for example, is a highly successful global integrated delivery capability with the major hubs around the world. We have capabilities in the Philippines and Poland and several areas in India, and even in the U.S. where we are able to capture – we are 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.And so, that’s been not only an effective way of ensuring that we have the ability to serve our clients’ needs globally, but doing 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, actually, on a year-over-year basis, are about a 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 are going to continue to be focused on.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 are trying to get the best functional people, the best engineers, the best cyber, the best architects and on and on and then so, it’s a really a holistic set of initiatives.

I appreciate that. And I guess, just taking one step further, is Jacobs finding from a business result 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 as like the pipeline of those opportunities gotten larger because of your success and where you are driving your growth?

Well, I think we have been – as a company, we have been more intentionally and purposeful on getting the message out. So we are doing a much better job these days of trying to alert the world that the type of things that we are working on and we are hearing and 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 can say that we’ve been pleased with the retention rates of, especially going through a lot of this restructuring in the company.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 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 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.

Great. Thanks. I just wanted to dig into the guidance range a little bit more here as you guys say early on there that the guidance raise 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 on the - what I thought KeyW contribution would be for the year.Is the guidance is mostly KeyW or can you talk about or split how the guidance range is? I am just trying to get our arms around what’s actually incremental in the guidance here?

Yes, 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 effective way there is another, if you kind of just take the midpoint and other, 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 the – kind of the EBITDA piece is basically I would say, little bit more than the incremental, let’s say 20 plus is certainly 10 plus to 15 plus of KeyW for the quarter which is primarily coming in the fourth quarter, obviously, given the small stub period 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 $20 million on the EBITDA. So a little bit different depending upon what you are 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 the fourth quarter. So operating cash flow or free cash flow for this year is going to be depressed given that 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 you say and heard you say before that the proxy of a 100% conversion.Do you feel like 2020 is a realistic timeframe assuming nothing else changes. I mean, you went into another big deals there is going to be cash cost with that assuming you take this team to that in 2020, is 2020 a realistic year to think about it approaching that type 100% cash flow conversion rate?

I think we are getting a lot closer obviously, because we’ll be through some of the one-offs and cost associated with where we are going through, given the fact that we’ve done a 3 plus billion dollar acquisition or divestiture and a close to $1 billion acquisition all in this third quarter.So, lot of moving pieces, clearly and I think that what will be the determinant of what you are asking is our success on working capital on specifically the DSO management. And just to remind you, Andy, we didn’t have a great start to the year as we kind of got a low off-track with the CH2M integration and we lost some traction on our DSO initiatives.We came back and proved our DSOs in the second quarter, improved them again in the third quarter. But we still got to make more progress for us to be able to get to the place that you are suggesting potentially is available. 2020 might be a challenge if we get there.But we are very much making some really good progress in the second and third quarter, specifically oriented around, now coming together with the CH2M integration largely behind us in terms of system integration. We feel like we are starting to make some really good progress there.

All right. That’s super helpful. Thank you very much.

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 ATN project pipeline. I think you talked about $30 billion plus. And I guess first up on the defense side, are you seeing more prime work, and then, how do you think about that potential mix shift in the context of your margins for that sub-segment? And then, secondly, more on the commercial side starting to get a bit more about 5G from you guys.I was hoping you could frame, I think the size of the business, the scope of the work you are pursuing and what sort of growth rate that you are seeing right now?

So, our pipeline is three quarters of it. One, 75% is new business, so, versus rebid or similar type business that we have today. So it’s exciting and that it’s demonstrating the extension and expansion of our ATN business. About $1.5 billion of that is the – as I mentioned in our enterprise, the large enterprise type contracts that we had in the past.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 are seeing evidence of the pipeline building based on the combination of capabilities that KeyW and Jacobs bring. So, when you look at the – you are 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 U.S. players and we are expanding, as I mentioned, geographically across the U.S.But it’s also using these telecom capabilities now and moving into smart city of the smart initiatives with the BIAF, so demonstrating the connectivity between our ATN business and BIAF business. When you put together our cyber business that I mentioned, as we put these different acquisitions and capabilities together and we are creating a special separate business unit focused on that when you look at the automotive business that I referred to.You look at the telecom business, these for us, sort of small pieces of ATN 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 testing facilities work that we’ve been doing with our core government clients. So we are becoming a much more diverse ATN player as our 30 plus billion dollar pipeline demonstrates.

And over to BIAF, you mentioned that your infrastructure pipeline is starting to see a larger project. Can you just talk about how has that changed the competitive landscape? How has that changed the speed at what you see bids getting converted into words? And then, how do you think about the impact of margins going forward?

Yes, well, I’d say very simple way of describing what’s going on at BIAF is, we are 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 have been mentioning including the connectivity with ATN.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 further elevating our margins as some of these are, some of the higher value portions that we didn’t have in the past as when we were a standalone 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, et cetera and we are one of only a few players globally that can bring all that capability for a client’s need. And so, that’s giving us both profit growth and margin improvement.And so, it’s exciting when – 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. And so, it’s demonstrating measurably what I’ve been talking about with these core clients across the Americas.But then, when if you look at the Middle East and Asia, and what we are 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 of water projects in the Middle East 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 enhancement that BIAF has been proving out over the – really for the last several years 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 am very proud of our people across the globe at Jacobs. They make it happen.The work we do to the clients that we have the opportunity to work with and the communities that we are impacting around the world is, it’s exciting and it’s humbling to all of us at the leadership level.For me, personally, this marks my 40 year anniversary in leading Jacobs and I want to make sure you all know, I am 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 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.