Business Wire | Aug 5, 2020 04:06PM EDT

Cubic Reports Third Quarter Fiscal Year 2020 Results

Aug. 05, 2020

SAN DIEGO--(BUSINESS WIRE)--Aug. 05, 2020--Cubic Corporation (NYSE: CUB) today announced its financial results for the third fiscal quarter ended June 30, 2020.

Third Quarter Fiscal Year 2020 Highlights(all metrics compared to Third Quarter Fiscal Year 2019 unless otherwise noted)

* Sales of $350.4 million, down 8% * Net loss from continuing operations attributable to Cubic of $1.4 million, or $0.04 per share, compared to net income from continuing operations attributable to Cubic of $24.1 million, or $0.77 per share in the third quarter of fiscal 2019; prior year included $32.6 million gain on sale of fixed assets * Adjusted earnings per share of $0.74, up 12% * Adjusted EBITDA of $38.2 million, up 25% * Backlog increased to $3.7 billion, up 10% from fiscal 2019 year-end * Cubic and Massachusetts Bay Transportation Authority ("MBTA") closed an amended agreement for delivery of next-generation fare payment system * Recent, multi-year awards in defense to support future growth: U.S. Air Force Advanced Battle Management System (multiple award, $950 million IDIQ) and $38 million contract to deliver High Capacity Backbone prototype, with significant market opportunity; U.S. Navy Surface Training Immersive Gaming and Simulations (single award, $99 million IDIQ) * The company estimates unfavorable impacts totaling up to $41 million for Sales and up to $14 million for Adjusted EBITDA as a result of the COVID-19 pandemic

"We are pleased with our performance and strategic progress this quarter, especially in light of the challenging macro environment due to the ongoing COVID-19 pandemic. In the third fiscal quarter, Cubic grew backlog, Adjusted EBITDA and Adjusted EPS and delivered strong Adjusted Free Cash Flow, supported by the successful completion of our Boston contract amendment and disciplined cost management," said Bradley H. Feldmann, chairman, president and chief executive officer of Cubic Corporation. "We continue to help our transportation customers deliver solutions that enhance safety and provide insights to support COVID-19 recovery. The health and safety of our team, partners and community remains our top priority and we are committed to fostering an inclusive workplace where everyone is respected, supported, empowered and has the opportunity to drive innovation - Cubic's lifeblood."

COVID-19 Business Update

As a provider of essential products and services, Cubic's businesses have remained operational during the ongoing COVID-19 pandemic. The company remains focused on keeping its employees and customers safe through increased sanitation measures as well as social distancing and additional safety protocols. While Cubic has not experienced significant disruptions in its supply chain or manufacturing facilities to date, the pandemic has presented challenges and impacts on each of its businesses, including delays of customer orders, slowdown of certain projects and impacts due to travel restrictions and remote work. The company estimates that these unfavorable impacts relating to the COVID-19 pandemic totaled up to $41 million for Sales and up to $14 million for Adjusted EBITDA in the third quarter of fiscal year 2020. The company's proactive efforts to ensure business continuity, coupled with disciplined cost management, partially mitigated the disruptions caused by COVID-19 on the company's operations and financial performance for the period. Additional information regarding COVID-19 can be found in Cubic's most recent Quarterly Report on Form 10-Q.

Financial Results Summary



Three Months Ended Nine Months Ended

June 30, June 30,

2020 2019 2020 2019

(in millions, except per share data)

Sales $ 350.4 $ 382.7 $ 1,000.8 $ 1,025.3

Operating income (loss) 24.7 34.7 (11.7 ) 27.6

Adjusted EBITDA^1 38.2 30.6 54.1 70.0

Adjusted net income^1 23.0 20.7 15.4 37.4



Income (loss) fromcontinuing operations $ 3.2 $ 25.1 $ (69.6 ) $ 9.2 attributable to Cubicbefore income taxes

Income tax provision(benefit) from continuing 4.6 1.0 (8.9 ) (0.3 ) operations attributable toCubic

Net income (loss) fromcontinuing operations $ (1.4 ) $ 24.1 $ (60.7 ) $ 9.5 attributable to Cubic

Income (loss) per sharefrom continuing operations $ (0.04 ) $ 0.77 $ (1.94 ) $ 0.31 attributable to Cubic

Adjusted earnings per share 0.74 0.66 0.49 1.23 ^1

Acquisition-relatedexpenses, excluding 2.0 4.7 7.9 13.3 amortization

Strategic and IT system 0.4 2.4 3.3 6.3 resource planning expenses

Depreciation and 23.4 15.3 63.8 48.9 amortization

Research and development 12.3 12.5 32.0 38.2 expense

A non-GAAP financial measure. See the section below titled "Use of^ Non-GAAP Financial Information" for additional information regarding the(1) company's non-GAAP financial measures and a reconciliation of such non-GAAP financial measures to the most directly comparable GAAP financial measures.

Consolidated Third Quarter Fiscal Year 2020 Results(all metrics compared to Third Quarter Fiscal Year 2019 unless otherwise noted)

Sales for the third quarter of fiscal 2020 decreased 8% as reported and 9% on an organic basis to $350.4 million, compared to $382.7 million in the prior year period, reflecting declines in Mission Solutions and Global Defense, and partially offset by growth in Transportation Systems. Sales were negatively impacted by COVID-19 due to delayed orders, delays and disruptions to current projects as well as lower transit ridership.

Operating income in the third quarter of fiscal 2020 was $24.7 million, compared to $34.7 million in the prior year period. Operating income was favorably impacted in the prior year due to a $32.6 million gain on the sale of real estate assets. Excluding this impact, the change in operating income in the third quarter primarily reflects an increase in operating income in Transportation Systems, including the Boston MBTA contract amendment and company-wide cost reduction initiatives, offset by an operating loss in Mission Solutions. Amortization of purchased intangibles for the third quarter of fiscal 2020 increased to $16.4 million from $9.7 million in the third quarter fiscal 2019. Additionally, Cubic's consolidated variable interest entity ("VIE") recognized higher operating income due to the contract amendment with the Boston MBTA. Operating margin decreased approximately 210 basis points to 7.0%, compared to 9.1% in the prior year period.

Adjusted EBITDA increased 25% to $38.2 million, compared to $30.6 million in the prior year period, driven by growth in Transportation Systems, which benefited from the Boston MBTA contract amendment and company-wide cost reduction initiatives, which partially mitigated the impacts related to COVID-19. Adjusted EBITDA margin increased approximately 290 basis points to 10.9%, compared to 8.0% in the prior year period.

Net loss from continuing operations attributable to Cubic was $1.4 million, or $0.04 per share, compared to net income from continuing operations attributable to Cubic of $24.1 million in the prior year period, or $0.77 per share, primarily reflecting lower operating income and higher taxes.

Adjusted net income was $23.0 million, or $0.74 per share, compared to Adjusted net income of $20.7 million, or $0.66 per share, in the prior year period, reflecting higher Adjusted EBITDA, partially offset by higher taxes and depreciation expense.

Net cash used in continuing operations was $29.2 million, including the impact of consolidating the Boston VIE, compared to net cash provided by continuing operations of $1.1 million in the prior year period. Adjusted Free Cash Flow was $43.8 million, compared to $52.5 million in the prior year period, reflecting a cash receipt from the Boston contract and a milestone payment received from the New York contract. Adjusted Free Cash Flow in the prior year period was favorably impacted by net proceeds from the sale of real estate of $44.9 million.

Reportable Segment Results(all metrics compared to Third Quarter Fiscal Year 2019 unless otherwise noted)



Three Months Ended Nine Months Ended

June 30, June 30,

2020 2019 2020 2019

Sales: (in millions) (in millions)

Cubic Transportation $ 215.5 $ 212.7 $ 601.8 $ 595.2 Systems

Cubic Mission Solutions 69.0 95.0 167.2 203.3

Cubic Global Defense 65.9 75.0 231.8 226.8 Systems

Total sales $ 350.4 $ 382.7 $ 1,000.8 $ 1,025.3



Operating income (loss):

Cubic Transportation $ 50.9 $ 17.2 $ 77.8 $ 37.0 Systems

Cubic Mission Solutions (21.3 ) 1.3 (67.6 ) (12.1 )

Cubic Global Defense 6.1 1.9 18.1 10.0 Systems

Unallocated corporate (11.0 ) 14.3 (40.0 ) (7.3 ) expenses

Total operating income $ 24.7 $ 34.7 $ (11.7 ) $ 27.6 (loss)



Adjusted EBITDA:

Cubic Transportation $ 41.9 $ 24.5 $ 88.3 $ 64.3 Systems

Cubic Mission Solutions (5.0 ) 9.3 (30.8 ) 9.9

Cubic Global Defense 8.6 7.4 23.9 19.6 Systems

Unallocated corporate (7.3 ) (10.6 ) (27.3 ) (23.8 ) expenses

Total Adjusted EBITDA $ 38.2 $ 30.6 $ 54.1 $ 70.0

Cubic Transportation Systems ("CTS")

CTS sales increased 1% to $215.5 million, compared to $212.7 million in prior year period. Organic sales were up 2%, primarily reflecting growth from next-generation fare payment systems contracts in Boston and the San Francisco Bay Area. CTS was impacted by headwinds related to COVID-19, including delays of new awards, slowdowns of projects and transit ridership decline.

CTS Adjusted EBITDA increased 71% to $41.9 million, compared to $24.5 million in the prior year period, reflecting the Boston contract amendment as well as benefits from the company's cost savings program, which offset unfavorable impacts related to COVID-19.

Cubic Mission Solutions ("CMS")

CMS sales decreased 27% to $69.0 million, compared to $95.0 million in the prior year period. Organic sales declined 32% reflecting lower orders and deliveries of expeditionary satellite communications products ("GATR") due to the timing of shipments.

CMS Adjusted EBITDA decreased to negative $5.0 million, compared to $9.3 million in the prior year period. Adjusted EBITDA reflects lower sales of high-margin GATR products and continued investments in franchise programs.

Cubic Global Defense Systems ("CGD")

CGD sales decreased 12% to $65.9 million, compared to $75.0 million in the prior year period. Organic sales decline of 11% reflects lower sales in ground combat training systems, partially offset by an increase in air combat training systems work. CGD sales in the third quarter also reflect the delay of international bookings and other expected program awards, including disruptions related to COVID-19.

CGD Adjusted EBITDA increased 16% to $8.6 million, compared to $7.4 million in the prior year period, reflecting continued operational and cost management.

Backlog

Backlog increased by $331.4 million from September 30, 2019 to June 30, 2020. Foreign currency had a favorable impact of $16.5 million during the period.



June 30, September 30,

2020 2019

(in millions)

Total backlog

Cubic Transportation Systems $ 3,194.8 $ 2,953.3

Cubic Mission Solutions 181.0 103.7

Cubic Global Defense Systems 356.6 344.0

Total $ 3,732.4 $ 3,401.0

Balance Sheet and Liquidity

Cubic expects to have sufficient liquidity during the evolving economic conditions surrounding the COVID-19 pandemic. The company has taken a number of recent steps to strengthen liquidity and manage cash flow, including its long-term debt restructuring announced in March 2020 as well as a cost savings program, which is on track for anticipated cumulative net savings of $30 million to $35 million through Cubic's fiscal year ending September 30, 2021.

Cubic continues to prioritize reducing leverage and, in connection therewith, reduced net debt by $54 million in the third quarter of fiscal 2020. Cubic's bank net leverage ratio, as defined in its credit agreement, was 3.7x at quarter end, and the credit agreement allows the company to have a net leverage ratio of up to 4.75x through December 2020. Cubic remains focused on cash preservation and lowering its net leverage ratio to its target of below 3.0x in future periods.

Conference Call and Webcast Information

Date: August 5, 2020

Time: 5:00 p.m. ET

Hosts: Bradley H. Feldmann, Chairman, President and Chief Executive Officer

Anshooman Aga, Executive Vice President and Chief Financial Officer

Dial in: 833-968-2299

778-560-2777 (international)

Conference ID 5998881

Webcast: https://event.on24.com/wcc/r/2403361/ D0EC3B567D3B92AEA53FA3C06E741AF0

An archive of the webcast will be made available on the Investor Relations section of the company's website: https://www.cubic.com/investor-relations/earnings.

About Cubic Corporation

Cubic is a technology-driven, market-leading provider of integrated solutions that increase situational understanding for transportation, defense C4ISR and training customers worldwide to decrease urban congestion and improve the militaries' effectiveness and operational readiness. Our teams innovate to make a positive difference in people's lives. We simplify their daily journeys. We promote mission success and safety for those who serve their nation. For more information about Cubic, please visit www.cubic.com or on Twitter @CubicCorp.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Act") that are subject to the safe harbor created by the Act. Forward-looking statements include, among others, statements about Cubic's expectations regarding future events or its future financial and operating performance and delivering on its strategic growth plan. These statements are often, but not always, made through the use of words or phrases such as "may," "will," "anticipate," "estimate," "plan," "project," "continuing," "ongoing," "expect," "believe," "intend," "predict," "potential," "opportunity" and similar words or phrases or the negatives of these words or phrases. These statements involve risks, estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed in these statements, including, among others: the impact of the COVID-19 outbreak or future epidemics or pandemics on Cubic's business, financial condition and operating results; Cubic's dependence on U.S. and foreign government contracts; delays in approving U.S. and foreign government budgets and cuts in U.S. and foreign government defense expenditures; the ability of certain government agencies to unilaterally terminate or modify Cubic's contracts with them; Cubic's assumptions covering behavior by public transit authorities; Cubic's ability to successfully integrate recently acquired companies, including Trafficware, GRIDSMART, Nuvotronics, Delerrok and PIXIA into its business and to properly assess the effects of such integration on its financial condition and operating results; the U.S. government's increased emphasis on awarding contracts to small businesses, and Cubic's ability to retain existing contracts or win new contracts under competitive bidding processes; negative audits by the U.S. government; the effects of politics and economic conditions on negotiations and business dealings in the various countries in which Cubic does business or intends to do business; competition and technology changes in the defense and transportation industries; the change in the way transit agencies pay for transit systems; Cubic's ability to accurately estimate the time and resources necessary to satisfy obligations under its contracts; the effect of adverse regulatory changes on Cubic's ability to sell products and services; Cubic's ability to identify, attract and retain qualified employees; unforeseen problems with the implementation and maintenance of Cubic's information systems, including Cubic's enterprise resource planning ("ERP") system; business disruptions due to cyber security threats, physical threats, terrorist acts, acts of nature and public health crises (including COVID-19); Cubic's involvement in litigation, including litigation related to patents, proprietary rights and employee misconduct; Cubic's reliance on subcontractors and on a limited number of third parties to manufacture and supply its products; Cubic's ability to comply with its development contracts and to successfully develop, introduce and sell new products, systems and services in current and future markets; defects in, or a lack of adequate coverage by insurance or indemnity for, Cubic's products and systems; and changes in U.S. and foreign tax laws, exchange rates or Cubic's economic assumptions regarding its pension plans. In addition, please refer to the risk factors contained in Cubic's filings with the Securities and Exchange Commission (the "SEC") available at www.sec.gov, including Cubic's most recent Annual Report on Form 10-K for its fiscal year ended September 30, 2019 and Quarterly Reports on Form 10-Q. Because the risks, estimates, assumptions and uncertainties referred to above could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements, you should not place undue reliance on any forward-looking statements. Any forward-looking statement speaks only as of the date of this press release, and, except as required by law, Cubic undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date of this press release.

Use of Non-GAAP Financial Information

In addition to results reported under U.S. generally accepted accounting principles ("GAAP"), Cubic provides certain financial measures that are not prepared in accordance with GAAP. These non-GAAP measures consist of organic sales growth, Adjusted net income, Adjusted earnings per share ("Adjusted EPS"), Adjusted EBITDA and Adjusted Free Cash Flow. Cubic believes that these non-GAAP measures provide additional insight into its ongoing operations and underlying business trends, facilitate a comparison of its results between current and prior periods, and facilitate the comparison of its operating results with the results of other public companies that provide non-GAAP measures. Cubic uses Adjusted EBITDA internally to evaluate the operating performance of its business, for strategic planning purposes, and as a factor in determining incentive compensation for certain employees. These non-GAAP measures facilitate company-to-company operating comparisons by excluding items that Cubic believes are not part of its core operating performance. Organic sales growth is defined as the year-over-year percentage change in reported sales relative to the prior comparable period, excluding the impact of acquisitions and divestitures over the prior 12 months and the impact of foreign currency translation. Adjusted EBITDA is defined as GAAP net income from continuing operations attributable to Cubic before interest expense, loss on extinguishment of debt, income taxes, depreciation and amortization, other non-operating expense, acquisition-related expenses, strategic and information technology ("IT") system resource planning expenses, restructuring costs, and gains or losses on the disposal of fixed assets. Adjusted net income is defined as GAAP net income from continuing operations attributable to Cubic excluding amortization of purchased intangibles, restructuring costs, loss on extinguishment of debt, acquisition related expenses, strategic and IT system resource planning expenses, gains or losses on the disposal of fixed assets, other non-operating expense (income), tax impacts related to acquisitions, and the impact of the Tax Cuts and Jobs Act ("U.S. Tax Reform"). Adjusted EPS is defined as Adjusted net income on a per share basis using the weighted average diluted shares outstanding. Strategic and IT system resource planning expenses consists of expenses incurred in the development of Cubic's ERP system and the redesign of its supply chain which include internal labor costs and external costs of materials and services that do not qualify for capitalization. Acquisition-related expenses include business acquisition expenses including retention bonus expenses, due diligence and consulting costs incurred in connection with the acquisitions, and expenses recognized related to the change in the fair value of contingent consideration for acquisitions.

Adjusted Free Cash Flow is defined as Net cash provided by continuing operations, excluding operating cash flow associated with the Boston Special Purpose Vehicle (the "Boston SPV") in which Cubic has a 10% equity stake, less capital expenditures plus proceeds from the sale of fixed assets and the receipt of withheld proceeds from the sale of trade receivables. The Boston SPV has contracted with Cubic for the design-build and operations and maintenance phases of the next-generation fare collection system for the Massachusetts Bay Transit Authority and pays Cubic progress payments during the design-build phase of the project. These payments are primarily funded by non-recourse debt issued by the Boston SPV. Additional information regarding the Boston SPV can be found in Cubic's Annual Report on Form 10-K for the fiscal year ended September 30, 2019 and its most recent Quarterly Reports on Form 10-Q. Management believes that Adjusted Free Cash Flow is meaningful to investors because management reviews cash flows generated from operations after taking into consideration capital expenditures, which are necessary to maintain and expand Cubic's business, in addition to the other adjustments noted above. Adjusted Free Cash Flow does not represent the residual cash flow available for discretionary expenditures since other non-discretionary expenditures are not deducted from the measure.

These non-GAAP measures are not measurements of financial performance under GAAP and should not be considered as measures of discretionary cash available to the Company or as alternatives to net income as a measure of performance. In addition, other companies may define these non-GAAP measures differently and, as a result, Cubic's non-GAAP measures may not be directly comparable to the non-GAAP measures of other companies. Furthermore, non-GAAP financial measures have limitations as an analytical tool and you should not consider these measures in isolation, or as a substitute for analysis of Cubic's results as reported under GAAP. Investors are advised to carefully review Cubic's GAAP financial results that are disclosed in its filings with the SEC, including its Annual Report on Form 10-K for the fiscal year ended September 30, 2019 and its most recent Quarterly Reports on Form 10-Q.

Cubic reconciles organic sales growth to sales growth as reported, which it considers to be the most directly comparable GAAP financial measure. Cubic reconciles Adjusted EBITDA and Adjusted net income to GAAP net income, which it considers to be the most directly comparable GAAP financial measure. Cubic reconciles Adjusted EPS to GAAP EPS, which it considers to be the most directly comparable GAAP financial measure. Cubic reconciles Adjusted Free Cash Flow to Net cash provided by continuing operations, which it considers to be the most directly comparable GAAP financial measure. The following tables reconcile these non-GAAP measures to their most directly comparable GAAP financial measure:

ORGANIC SALES GROWTH RATE RECONCILIATION (UNAUDITED)



Three Months Ended June 30, 2020 Nine Months Ended June 30, 2020

Cubic CTS CMS CGD Cubic CTS CMS CGD

Sales growth (8.4 %) 1.3 % (27.3 %) (12.2 %) (2.4 %) 1.1 % (17.7 %) 2.2 % as reported

Contributionfrom (1.2 %) (0.2 %) (4.4 %) - (1.5 %) (0.9 %) (5.2 %) - acquisitions

Foreigncurrency 0.9 % 1.2 % - 1.0 % 1.0 % 1.4 % - 0.8 % translation

Organic (8.8 %) 2.4 % (31.7 %) (11.1 %) (2.9 %) 1.6 % (22.9 %) 3.0 % sales growth

Note: Percentages may not sum due to rounding.

GAAP NET INCOME TO ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION ANDAMORTIZATION (EBITDA) RECONCILIATION (UNAUDITED)



Three Months Ended Nine Months Ended

(in millions) June 30, June 30,

Cubic Transportation 2020 2019 2020 2019 Systems

Sales $ 215.5 $ 212.7 $ 601.8 $ 595.2

Operating income $ 50.9 $ 17.2 $ 77.8 $ 37.0

Depreciation and 7.1 6.9 21.6 24.1 amortization

Noncontrolling interest (15.6 ) (2.5 ) (17.8 ) (5.8 ) in income of VIE

Acquisition-relatedexpenses (gains), (0.7 ) 1.4 6.0 6.8 excluding amortization

Restructuring costs 0.2 1.5 0.7 2.2

Adjusted EBITDA $ 41.9 $ 24.5 $ 88.3 $ 64.3

Adjusted EBITDA margin 19.4 % 11.5 % 14.7 % 10.8 %



Three Months Ended Nine Months Ended

(in millions) June 30, June 30,

Cubic Mission Solutions 2020 2019 2020 2019

Sales $ 69.0 $ 95.0 $ 167.2 $ 203.3

Operating income (loss) $ (21.3 ) $ 1.3 $ (67.6 ) $ (12.1 )

Depreciation and 13.3 6.0 34.3 17.2 amortization

Acquisition-relatedexpenses, excluding 2.6 2.0 2.1 4.8 amortization

Restructuring costs 0.4 - 0.4 -

Adjusted EBITDA $ (5.0 ) $ 9.3 $ (30.8 ) $ 9.9

Adjusted EBITDA margin (7.2 %) 9.8 % (18.4 %) 4.9 %



Three Months Ended Nine Months Ended

(in millions) June 30, June 30,

Cubic Global Defense 2020 2019 2020 2019 Systems

Sales $ 65.9 $ 75.0 $ 231.8 $ 226.8

Operating income $ 6.1 $ 1.9 $ 18.1 $ 10.0

Depreciation and 1.9 1.7 5.2 5.4 amortization

Acquisition-relatedexpenses (gains), - 0.9 (0.5 ) 1.2 excluding amortization

(Gain) loss on sale of (0.1 ) 0.3 (0.2 ) 0.3 fixed assets

Restructuring costs 0.7 2.6 1.3 2.7

Adjusted EBITDA $ 8.6 $ 7.4 $ 23.9 $ 19.6

Adjusted EBITDA margin 13.1 % 9.9 % 10.3 % 8.6 %



Three Months Ended Nine Months Ended

(in millions) June 30, June 30,

Cubic Consolidated 2020 2019 2020 2019

Sales $ 350.4 $ 382.7 $ 1,000.8 $ 1,025.3

Net income (loss) fromcontinuing operations $ (1.4 ) $ 24.1 $ (60.7 ) $ 9.5 attributable to Cubic

Noncontrolling interestin net income (loss) of 9.4 (3.6 ) 0.2 (9.0 ) VIE

Income tax provision 4.6 1.0 (8.9 ) (0.3 ) (benefit)

Interest expense, net 5.4 4.5 15.0 10.4

Loss on extinguishment - - 16.1 - of debt

Other non-operating 6.8 8.8 26.6 17.1 expense (income), net

Operating income (loss) $ 24.7 $ 34.7 $ (11.7 ) $ 27.6

Depreciation and 23.4 15.3 63.8 48.9 amortization

Noncontrolling interest (15.6 ) (2.5 ) (17.8 ) (5.8 ) in EBITDA of VIE

Acquisition-relatedexpenses, excluding 2.0 4.7 7.9 13.3 amortization

Strategic and IT systemresource planning 0.4 2.4 3.3 6.3 expenses

Gain on sale of fixed (0.1 ) (32.6 ) (0.2 ) (32.6 ) assets

Restructuring costs 3.4 8.6 8.8 12.3

Adjusted EBITDA $ 38.2 $ 30.6 $ 54.1 $ 70.0

Adjusted EBITDA margin 10.9 % 8.0 % 5.4 % 6.8 %

Note: Amounts may notsum due to rounding

GAAP NET INCOME TO ADJUSTED NET INCOME AND GAAP EPS TO ADJUSTED EPSRECONCILIATION (UNAUDITED)



Three Months Ended Nine Months Ended

June 30, June 30,

2020 2019 2020 2019

($ In Millions, Except Per Share Data)

GAAP EPS $ (0.04 ) $ 0.77 $ (1.94 ) $ 0.31

GAAP Net income (loss)from continuing $ (1.4 ) $ 24.1 $ (60.7 ) $ 9.5 operations attributableto Cubic

Noncontrolling interestin net income (loss) of 9.4 (3.6 ) 0.2 (9.0 ) VIE

Amortization of purchased 16.4 9.7 42.9 32.7 intangibles

Gain on sale of fixed (0.1 ) (32.6 ) (0.2 ) (32.6 ) assets

Restructuring costs 3.4 8.6 8.8 12.3

Loss on extinguishment of - - 16.1 - debt

Acquisition-relatedexpenses, excluding 2.0 4.7 7.9 13.3 amortization

Strategic and IT systemresource planning 0.4 2.4 3.3 6.3 expenses

Other non-operating 6.8 8.8 26.6 17.1 expense (income), net

Noncontrolling interestin Adjusted Net Income of (15.6 ) (2.7 ) (17.8 ) (6.2 ) VIE

Tax impact related to 0.6 0.1 (12.9 ) (7.4 ) acquisitions^1

Impact of U.S. Tax Reform 0.1 - 0.7 -

Tax impact related to 1.1 1.3 0.5 1.4 non-GAAP adjustments^2

Adjusted net income $ 23.0 $ 20.7 $ 15.4 $ 37.4

Adjusted EPS $ 0.74 $ 0.66 $ 0.49 $ 1.23



Weighted Average DilutedShares Outstanding (in 31,299 31,249 31,289 30,332 thousands)

Note: Amounts may not sum due to rounding

^ Represents the tax accounting impact of significant discrete items recorded1 at the time of acquisition.

^ The tax effect of the non-GAAP adjustments is generally based on the2 statutory tax rate of the jurisdiction of the event.

OPERATING CASH FLOW TO ADJUSTED FREE CASH FLOW RECONCILIATION



Three Months Ended Nine Months Ended

($ In Millions) June 30, June 30,

Cubic Consolidated 2020 2019 2020 2019

Net cash provided by (usedin) continuing operating $ (29.2 ) $ 1.1 $ (103.3 ) $ (82.7 ) activities

Capital expenditures (10.5 ) (13.1 ) (35.8 ) (35.3 )

Proceeds from sale ofproperty, plant and - 44.9 - 44.9 equipment

Operating cash flow 83.5 19.6 106.7 35.1 associated with SPV

Receipt of withheld proceedsfrom sale of trade - - 5.5 - receivables

Adjusted Free Cash Flow $ 43.8 $ 52.5 $ (26.9 ) $ (37.9 )

.

CUBIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(amounts in thousands, except per share data)



Three Months Ended Nine Months Ended

June 30, June 30,

2020 2019 2020 2019

Net sales:

Products $ 221,039 $ 255,900 $ 609,137 $ 660,897

Services 129,400 126,779 391,623 364,380

350,439 382,679 1,000,760 1,025,277

Costs and expenses:

Products 151,553 190,434 471,398 491,856

Services 79,943 77,224 251,011 243,851

Selling, generaland 62,272 82,167 206,481 211,348 administrativeexpenses

Research and 12,254 12,470 32,036 38,236 development

Amortization ofpurchased 16,358 9,717 42,940 32,677 intangibles

Gain on sale ofproperty, plant (40 ) (32,563 ) (170 ) (32,563 ) and equipment

Restructuring 3,393 8,505 8,775 12,254 costs

325,733 347,954 1,012,471 997,659



Operating income 24,706 34,725 (11,711 ) 27,618 (loss)



Other income (expenses):

Interest and 1,997 1,696 5,908 4,343 dividend income

Interest expense (7,366 ) (6,132 ) (20,948 ) (14,695 )

Loss onextinguishment of - - (16,090 ) - debt

Other income (6,773 ) (8,714 ) (26,564 ) (17,069 ) (expense), net



Income (loss)from continuing 12,564 21,575 (69,405 ) 197 operations beforeincome taxes



Income taxprovision 4,602 1,029 (8,936 ) (305 ) (benefit)



Income (loss)from continuing 7,962 20,546 (60,469 ) 502 operations

Net income (loss)from discontinued 252 (202 ) (203 ) (1,541 ) operations

Net income (loss) 8,214 20,344 (60,672 ) (1,039 )



Lessnoncontrollinginterest in net 9,369 (3,566 ) 181 (8,970 ) income (loss) ofVIE



Net income (loss)attributable to $ (1,155 ) $ 23,910 $ (60,853 ) $ 7,931 Cubic



Amountsattributable to Cubic:

Net income (loss)from continuing $ (1,407 ) $ 24,112 $ (60,650 ) $ 9,472 operations

Net income (loss)from discontinued 252 (202 ) (203 ) (1,541 ) operations

Net income (loss)attributable to $ (1,155 ) $ 23,910 $ (60,853 ) $ 7,931 Cubic



Net income (loss) per share:

Basic

Continuingoperations $ (0.04 ) $ 0.77 $ (1.94 ) $ 0.31 attributable toCubic

Discontinued $ 0.01 $ (0.01 ) $ (0.01 ) $ (0.05 ) operations

Basic earningsper share $ (0.04 ) $ 0.77 $ (1.94 ) $ 0.26 attributable toCubic



Diluted

Continuingoperations $ (0.04 ) $ 0.77 $ (1.94 ) $ 0.31 attributable toCubic

Discontinued $ 0.01 $ (0.01 ) $ (0.01 ) $ (0.05 ) operations

Diluted earningsper share $ (0.04 ) $ 0.77 $ (1.94 ) $ 0.26 attributable toCubic



Dividends per $ - $ - $ 0.14 $ 0.14 common share



Weighted averageshares used in per sharecalculations:

Basic 31,299 31,160 31,289 30,267

Diluted 31,299 31,249 31,289 30,332

CUBIC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(amounts in thousands)



June 30, September 30,

2020 2019

ASSETS

Current assets:

Cash and cash equivalents $ 109,050 $ 65,800

Cash of consolidated VIE 743 347

Restricted cash 22,279 19,507

Restricted cash of consolidated VIE 1,669 9,967

Accounts receivable:

Billed 145,599 127,406

Allowance for doubtful accounts (1,141 ) (1,392 )

144,458 126,014



Contract assets 253,900 349,559

Recoverable income taxes 16,495 7,754

Inventories 151,613 106,794

Other current assets 35,570 38,534

Other current assets of consolidated VIE 99 33

Total current assets 735,876 724,309



Long-term contracts financing receivables 53,739 36,285

Long-term contracts financing receivables of 191,042 115,508 consolidated VIE

Property, plant and equipment, net 160,547 144,969

Operating lease right-of-use asset 82,141 -

Deferred income taxes 8,932 4,098

Goodwill 783,368 578,097

Purchased intangibles, net 226,552 165,613

Other assets 19,615 76,872

Other assets of consolidated VIE - 1,419

Total assets $ 2,261,812 $ 1,847,170



LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Short-term borrowings $ 277,000 $ 195,500

Trade accounts payable 121,253 180,773

Trade accounts payable of consolidated VIE 175 25

Contract liabilities 71,269 46,170

Accrued compensation and current liabilities 117,332 95,013

Other current liabilities of consolidated VIE 150 191

Income taxes payable 814 773

Current portion of long-term debt 11,250 10,714

Total current liabilities 599,243 529,159



Long-term debt 433,653 189,110

Long-term debt of consolidated VIE 155,493 61,994

Operating lease liability 75,468 -

Other noncurrent liabilities 78,528 64,734

Other noncurrent liabilities of consolidated 5,572 21,605 VIE



Shareholders' equity:

Common stock 287,252 274,472

Retained earnings 797,046 862,948

Accumulated other comprehensive loss (155,357 ) (139,693 )

Treasury stock at cost (36,078 ) (36,078 )

Shareholders' equity related to Cubic 892,863 961,649

Noncontrolling interest in VIE 20,992 18,919

Total shareholders' equity 913,855 980,568

Total liabilities and shareholders' equity $ 2,261,812 $ 1,847,170

CUBIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(amounts in thousands)

Three Months Ended Nine Months Ended

June 30, June 30,

2020 2019 2020 2019

Operating Activities:

Net income (loss) $ 8,214 $ 20,344 $ (60,672 ) $ (1,039 )

Net income (loss)from discontinued (252 ) 202 203 1,541 operations

Adjustments toreconcile netincome (loss) to net cash used inoperatingactivities:

Depreciation and 23,394 15,351 63,758 48,949 amortization

Share-basedcompensation 5,412 4,402 15,271 10,760 expense

Change in fairvalue of (74 ) 1,163 (4,552 ) 1,833 contingentconsideration

Change in fairvalue of interest 6,888 - 18,370 - rate swap ofconsolidated VIE

Gain on sale ofproperty, plant - (32,563 ) (170 ) (32,563 ) and equipment

Deferred income (2,622 ) (948 ) (14,457 ) (6,773 ) taxes

Loss onextinguishment of - - 16,090 - debt

Other items (5,020 ) - (712 ) -

Changes inoperating assetsand liabilities, (65,170 ) (6,897 ) (136,478 ) (105,364 ) net of effectsfrom acquisitions

NET CASH PROVIDEDBY (USED IN)OPERATING (29,230 ) 1,054 (103,349 ) (82,656 ) ACTIVITIES FROMCONTINUINGOPERATIONS

NET CASH PROVIDEDBY OPERATINGACTIVITIES FROM 2,693 - 2,778 - DISCONTINUEDOPERATIONS

NET CASH PROVIDEDBY (USED IN) (26,537 ) 1,054 (100,571 ) (82,656 ) OPERATINGACTIVITIES



Investing Activities:

Acquisition ofbusinesses, net - - (234,788 ) (395,854 ) of cash acquired

Proceeds fromsale of property, - 44,891 - 44,891 plant andequipment

Purchases ofproperty, plant (10,741 ) (13,114 ) (35,802 ) (35,291 ) and equipment

Purchase ofnon-marketable - (52,997 ) - (52,997 ) debt and equitysecurities

Receipt ofwithheld proceeds - - 5,521 - from sale oftrade receivables

NET CASH USED ININVESTING (10,741 ) (21,220 ) (265,069 ) (439,251 ) ACTIVITIES



Financing Activities:

Proceeds fromshort-term 110,000 168,000 994,500 782,500 borrowings

Principalpayments on (170,000 ) (146,000 ) (913,000 ) (551,500 ) short-termborrowings

Proceeds fromlong-term - - 450,000 - borrowings

Principalpayments on (3,088 ) - (202,921 ) - long-term debt

Proceeds fromlong-term 174,938 19,841 198,160 35,816 borrowings ofconsolidated VIE

Principalpayments onlong-term (92,575 ) - (92,575 ) - borrowings ofconsolidated VIE

Debtextinguishment - - (15,856 ) - make wholepayment

Deferred - (1,854 ) (2,517 ) (1,854 ) financing fees

Deferredfinancing fees of (8,638 ) (213 ) (8,638 ) (690 ) consolidated VIE

Proceeds fromstock issuedunder employee - - 1,169 783 stock purchaseplan

Purchase of - - (3,660 ) (3,419 ) common stock

Dividends paid - - (4,225 ) (4,205 )

Contingentconsiderationpayments related - - - (820 ) to acquisitionsof businesses

Equitycontribution from 1,892 - 1,892 - Boston VIEpartner

Proceeds fromequity offering, - - - 215,832 net

NET CASH PROVIDEDBY FINANCING 12,529 39,774 402,329 472,443 ACTIVITIES



Effect ofexchange rates on 8,634 (1,574 ) 1,431 (234 ) cash



NET INCREASE(DECREASE) INCASH, CASH (16,115 ) 18,034 38,120 (49,698 ) EQUIVALENTS ANDRESTRICTED CASH



Cash, cashequivalents andrestricted cash 149,856 71,876 95,621 139,608 at the beginningof the period



CASH, CASHEQUIVALENTS ANDRESTRICTED CASH $ 133,741 $ 89,910 $ 133,741 $ 89,910 AT THE END OF THEPERIOD



Supplementaldisclosure ofnon-cash investing andfinancingactivities:

Contingentconsiderationliability - - 1,600 - incurred with theacquisition ofDelerrok

Receivablerecognized inconnection with - - - 1,588 the acquisitionof Trafficware,net

Receivablerecognized inconnection with - - - 442 the acquisitionof GRIDSMART, net

Liabilityincurred to - - - 5,300 acquireNuvotronics, net

View source version on businesswire.com: https://www.businesswire.com/news/home/20200805005957/en/

CONTACT: Media Contact

CONTACT: Laura Chon Corporate Communications Cubic Corporation PH: +1 858-505-2181 Laura.Chon@cubic.com

CONTACT: Investor Contact

CONTACT: Kirsten Nielsen Investor Relations Cubic Corporation PH +1 212-331-9760 Kirsten.Nielsen@cubic.com