Good morning. My name is Kim, and I will be your conference operator today. At this time, I would like to welcome everyone to the Jacobs Fiscal First 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] Please note please limit to one question and one follow up. Thank you. Jonathan Doros, you may begin your conference.

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'll reference in our prepared remarks. I'd like to refer you to our forward-looking statement disclosure, 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 our 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 for the first quarter of 2019. We are not under any duty to update any of the forward-looking statements after the date of this presentation to conform to actual results, except as required by applicable law. During the presentation, we will be referring to certain non-GAAP financial measures. Please refer to Slide 2 of this presentation for more information on these figures. In addition, during the presentation, we will discuss comparisons of current results to Jacobs' and CH2M's performance in 2018 calculated on a pro forma basis. We will also discuss certain pro forma financials that exclude the ECR business in light of the pending divestiture. Please see Slide 2 for more information on the calculation of these pro forma metrics. We believe this information help to provide insight into the underlying trends of our business when comparing current performance against prior periods. Turning to the agenda on Slide 3. Kevin will begin with a discussion of our recent financial reporting changes. Steve will then discuss our recently updated sustainability strategy and a recap of our first quarter results, including a market review of our business. Kevin will then provide some more in depth discussion of our financial metrics as well as review our balance sheet and capital allocation strategy. Finally, Steve will provide an updated outlook along with some closing remarks and we'll open the call up to your questions. With that, I'll now pass it over to Kevin Berryman, Executive Vice President and CFO.

Thank you, Jon, and welcome to our fiscal first quarter 2019 earnings call. Before we begin the review of our results, I would like to discuss several financial reporting changes that are summarized on Slide 4 and which have been highlighted with additional disclosures in the appendix of our investor presentation. I will walk through each one individually. Number one, as a result of our recent strategy update, we transitioned our global environmental services business, or GES, which was part of our Aerospace, Technology, Environmental and Nuclear, or ATEN line of business as we believe the business, will have a more synergistic fit with our Buildings, Infrastructure and Advanced Facilities line of business. We are pleased with the performance of the GES business, which has significantly improved its operating profit and bookings performance since the time of the CH2M. Number two, consistent with our transition effective Q1 2019 for the bulk of CH2M’s legacy business to Jacob's ERP suite of applications, we have aligned CH2M backlog reporting to Jacob's methodology. We have provided a recast backlog for all of 2018 periods to provide revised comparable data consistent with this change. The adjustment is primarily related to Jacob's policy that backlogs the first two years of large multi-year contracts on a rolling basis while CH2M have included all contract years in their backlog. Number three. Additionally, we have made several changes regarding aligning CH2M to Jacob's cost allocation methodology, again, consistent with the transition to Jacob's ERP suite of applications effective Q1. The alignment results in an approximate $18 million increase in Q1 unallocated corporate costs with an offsetting benefit in the line of business operating profit. This change is neutral to total operating profit. In addition, the cost allocation change resulted in a $13 million increase to direct costs and a reduction to our G&A all within the lines of businesses, which is also both neutral to both lines of our business and total operating profit number. Number four, and on to changes in accounting standards relating to revenue recognition and pension accounting. During the quarter, we had a $6 million benefit from the adoption of revenue recognition for ASC 606, which is detailed further in Note 13 in our 10-Q. Regarding the adoption of ASC 2017-07, which covers pension accounting, we had a $4 million decrease to operating profit, which was offset by a $4 million increase to other income. ASC 2017-07 changes are neutral to net income and are outlined in Note 14 in our 10-Q. And finally, number five, given our announced divestiture of our Energy, Chemicals and Resources line of business, or ECR, ECR results are now included in discontinued operations and assets held for sale. As such, our results discussed today include only those associated with our continuing operations and exclude ECR. Importantly, consistent with GAAP reporting requirements, note that our operating profit from continuing operations is temporarily burdened by ECR related allocated costs that will either transition to WorleyParsons or be effectively eliminated at close. I'll explain this in further detail later in my remarks. Lastly, our EPS results includes both the impact of continuing and discontinued operations and is comparable to previous guidance. You will also note on the bottom of this slide some additional metrics that Jacobs will be highlighting at our upcoming Investor Day. I will discuss these items also in a bit more detail later in my prepared remarks. I'll turn the call now over to Steve.

Thank you, Kevin. Let’s move on to Slide 5. Before I review the first quarter results, I'd like to discuss sustainability. Last week marked the special moment for our company as we launched our global sustainability initiative PlanBeyond. Sustainability has always been a part of Jacobs, but I'd like to take a moment to point out some of our achievements, our BeyondZero commitment, where we lead the industry in safety performance underpinned by a unique culture of caring. We've trained over a thousand Jacobs employee volunteers to become positive mental health champions. We've increased the gender diversity of our executive leadership team, including the appointment of our first ever Executive Vice President, Joanne Caruso. And most recently Jacobs is being selected for the prestigious National 2019 Climate Leadership Award by The Center for Climate and Energy Solutions in the climate registry. With PlanBeyond, we’ll now drive sustainability deeper into our culture and operations. PlanBeyond sets out a triple bottom line priority, social, environmental, and economic, across three areas. The first area is being our people with a focus on becoming the employer of choice. Second is places, creating sustainable places to live and work. We're committing to reducing air travel, adopting sustainable workplace plans and launching a global giving and volunteering program. And third strengthening long-term sustainable partnerships with clients and global stakeholders, providing smart solutions that improve efficiency, conserve energy and reduce waste for the global supply chain. These priorities create an attractive value proposition for our employees, our clients, communities and our shareholders by ensuring we're operating sustainably and efficiently, managing our risks, driving innovation, and enhancing our brand value, all which contribute to profitable growth. I'm very excited about our PlanBeyond initiative and look forward to sharing results as we move forward. I'll now move to Slide 6 and discuss our first quarter results. We delivered a strong start to fiscal year 2019 with double-digit top and bottom line growth. The CH2M integration continues to outperform with cost synergies above original targets and revenue synergies now materializing. And we remain on track to exceed the three year financial targets we committed to back at our 2016 Investor Day. Specifically in the first quarter, our pro forma revenue grew 12% year-over-year. Our aerospace, technology and nuclear line of business was a major driver with a 23% increase. As a result of the strong top line performance, along with our continued focus on execution excellence and a disciplined cost structure, our adjusted pro forma operating profit grew 34%. This growth along with the contribution from ECR led to an adjusted earnings of $1.14 per share, an increase of 48% year-over-year and above the midpoint of our guidance. We now expect the sale of our energy chemicals and resources business to close before June 30th, which will provide a higher value, more stable portfolio while providing additional financial flexibility to deploy capital towards driving long-term profitable growth and value for our shareholders. Consistent with our commitment to agile capital deployment, we have repurchased more than $200 million in shares since December and announced an incremental $1 billion share repurchase authorization. While in the near-term share purchases will remain a priority. We expect over time to also deploy capital towards strategic acquisitions that drive profitable growth. Slide 7 is a pro forma outline of what Jacobs will look like once the sale of ECR is completed. Our company will become a higher margin higher growth company. As an indication of the strength of our go forward portfolio, our first quarter revenue and backlog related to ATEN and BIAF was $20.3 billion, up 8% year-over-year. And both businesses grew backlog high single digits versus last year, an acceleration from fourth quarter’s year-over-year growth. Equally important, gross profit and backlog continue to increase year-over-year driven by the higher margin mix from our global buildings, infrastructure, and advanced facilities line of business. Following the divestiture of ECR, the risk profile of our company will improve with reimbursable and lower risk fixed price services making up approximately 94% of revenue. We plan to further discuss the financial and strategic profile of this transformed portfolio during our upcoming Investor Day on February 19th. Now, before I begin discussing line of business performance, you'll note on the following slides, we have moved our global environmental services business from ATEN to BIAF. This change allows us to better leverage our leading environmental services capabilities within our global infrastructure solutions platform. Turning to Slide 8, now let me discuss the performance of aerospace, technology and nuclear, ATEN. During the quarter, our ATEN business significantly outpaced the growth of the market and most government services peers with 23% year-over-year pro forma growth with first quarter revenue of over $1 billion. Key drivers for this strong growth with a ramp up of last year's Missile Defense Agency and Special Operations Command wins creating a strong base of recurring revenue. Relative to the recent government shutdown, only a small percentage of our portfolio was impacted given the mission critical nature of our contracts, but shutdown affected only a portion of our NASA business, which represented less than 1% of total ATEN annual revenue projection and we anticipate recovery of this revenue during the remainder of the fiscal year. ATEN backlog is up 8% versus last year to $7.2 billion. And actually when considering the full value of our contracts, including options and extensions, ATEN’s backlog would be more than 50% larger than this reported $7.2 billion ATEN backlog. From an end market perspective, we continue to position ourselves against high priorities within the federal government and agencies such as the Department of Defense, Department of Energy, Intelligence Community and NASA. While the 2020 federal budget has not yet been finalized, our portfolio continues to be characterized by large contracts that are well aligned to mission critical areas that are less discretionary in nature. Furthermore, given that the U.S. government services market is highly fragmented, we're optimistic that our ATEN strategy, which combines strong technical expertise, a unique localized delivery model and an industry leading efficient cost structure, will allow us to continue to gain market share over time. We had a very strong first quarter of ATEN wins beginning with our international portfolio where we were awarded a services contract from a confidential client to provide the design, construction assistance, systems integration and commissioning of a high altitude engine test facility. This win leverages the depth of capabilities and experience we have in test and evaluation work for clients such as NASA and the air force. In the UK, we were awarded the Ministry of Defense, Defense Equipment and Support contract to manage a vast range of complex projects for the Royal Navy, British Army and Royal Air Force. Looking at our U.S. government services portfolio, we expanded our NASA aerospace work including contract extensions at both Kennedy Space Center and Langley, and a new contract at Goddard. Our NASA efforts are deeply technical such as launch vehicle, spacecraft and payload integration along with servicing and testing of flight hardware. At NASA, Langley, we've implemented our Intelligent Asset Management program, which brings Internet of Things, predictive analytics and cyber engineering and an integrated solution to the client. It is this value added approach that also enabled us to win the asset management services contract for NAVFAC. We had two additional notable wins in our U.S. defense portfolio. First is the shallow land disposal area for the U.S. Army Corps of Engineers for nuclear remediation services. Under this contract we’ll handle all aspects from planning through processing of radioactively contaminated soil, sediments and debris. We also won the U.S. Army's information technology enterprise solutions prime contract. This IDIQ contract is expected to be the army's primary source of IT related services worldwide. In summary, the ATEN business had outstanding performance in the first quarter of fiscal 2019 and we continue to be encouraged by the opportunities going forward, particularly leveraging the diversity of our capabilities. We're focused on growing high quality operating profit and expanding our margins with emphasis on mission critical government programs that brings strength and resiliency to our ATEN business. Now onto Slide 9 to discuss the performance of Buildings, Infrastructure and Advanced Facilities line of business. BIAF quarterly revenue was up 8%. Key drivers for this growth were higher pass throughs, solid increase in professional services and revenue synergies from the CH2M acquisition. The recent U.S. government shutdown had minimal impact on our BIAF business and we continue to be confident in our full year outlook. More importantly, operating profit was up 28% year-over-year on a pro forma basis and in line with our strategy to focus on profitable growth and deliver against the cost synergies associated with the CH2M acquisition. Backlog also accelerated this quarter, up 7% year-over-year to $13.2 billion due to a greater proportion of our wins and large scale programs clearly demonstrating a ramp up of CH2M revenue synergies. Adjusted operating profit grew 120 basis points year-over-year to 7.8% due to continued success driving higher value solutions based BIAF business. In our infrastructure end markets, we continue to see strong growth, especially in rail and highways. We had an exciting win with the Dallas Area Rapid Transit agency to design 42 kilometers of the cotton belt commuter rail line. Our pipeline remains strong in all transportation submarkets and includes several large scale rail prospects across North America, the UK, Middle East and Australia. Jacobs was selected by the Delta Conveyance Design and Construction Authority for Engineering Design Management Services for California's largest water conveyance project named California WaterFix. And we recently received the Water Environment Federation 2018 prestigious Water Heroes Award, which recognizes organizations that have performed above and beyond the call of duty during emergency situations. Our Florida based Jacobs’ operations management program teams were recognized for their efforts during the most expensive and destructive hurricane season in 2017. This industry recognition along with our global leadership on iconic water projects such as Singapore Water and Atlantis digital transformation and smart water utilities project separates us as the leader in the global water market. We are well positioned to execute on what looks to be another decade of long secular growth in the water sector. We continue to drive revenue synergies with our combined Jacobs and CH2M capabilities. For example, we were recently awarded at sizable program management project with a confidential client in southeastern U.S. for a new corporate campus. This is a direct result of our strong buildings capabilities and program management framework, along with longstanding exceptional client relationships. In advanced facilities, we continue to see a favorable CapEx environment in both our life sciences and electronic sectors. Our advanced facilities business is expected to continue its strong growth trajectory with a robust pipeline of new opportunities. Regionally, North America demonstrates the strongest growth potential in our BIAF business, which was a key factor underlying our strategy in acquiring CH2M. Despite geopolitical headwinds in the UK, Europe and the Middle East, these regions are also showing solid growth. We did experience some softness in Australia, New Zealand after a multi-year investment in infrastructure. So, in summary, BIAF posted strong financial performance in the first quarter of fiscal 2019 and we're very excited about the opportunities in our pipeline. Now, I'll turn the call over to Kevin to discuss our financial results in more detail.

Thank you, Steve. And before I review Q1 results further, like to turn your attention to Slide 10, which illustrates the impact of ECR related stranded costs on our operating profit from continuing operations. I would note that this slide is an example representation and not necessarily to scale. The left solid blue column on the slide represents our GAAP and adjusted operating profit from continuing operations reported today. This operating profit amount is temporarily burdened by ECR related costs that due to accounting treatment requirements are not included in discontinued operations, but which will either transition to ECR at the close of the sale or eliminated. Currently, these temporary costs are recognized an unallocated corporate expense and do not impact segment level operating profit. Moving to the middle column, the shaded area represents these temporary costs that will either transition to Worley or be eliminated. As a result, post-close our operating profit from continuing operations will increase. Moving to the column on the far right, the additional shaded area represents savings that we work to realize post-close via a further reduction in our corporate unallocated costs as we work to ensure our cost structure remains appropriate based on a two LOB business versus the previous three LOB structure. In short, the slide highlights that our continuing operations is temporarily burden due to discontinued operations accounting treatment and will return back to expected operating profit levels post-close. Now moving to Slide 11, you will see a more detailed summary of our financial performance for the first quarter of fiscal 2019. First quarter pro forma revenue grew a strong 12% year-over-year. First quarter gross margins of 18.5%, while also strong, were impacted by an increase in pass-through revenues for the BIAF business versus Q4 and the continued ramp up of the large ATEN enterprise contracts that ramped up over the course of 2018. Excluding the impact of the increase in pass-throughs, gross margin and BIAF was down only slightly due to timing and mix of revenue. Our G&A as a percentage of revenue continued to decrease as we benefited from the CH2M cost synergies and our focus on maintaining an efficient cost structure. Included in our reported G&A, as noted earlier, is approximately $15 million of cost related to ECR that I referenced, which will either be eliminated or transitioned to WorleyParsons as part of the ECR sale. GAAP operating profit margin was 3.7%. The figure continues to be impacted by CH2M related acquisition and integration costs, transaction costs related to the sale of our ECR business as well as costs related to ECR that will be eliminated post-close. Nonetheless, the margin is substantially above the year ago figure, given that our cost of the CH2M integration are beginning to wind down. Our adjusted operating profit margin was 5.2% that was impacted by the same temporary burden of ECR related costs. Excluding these temporary additional costs, our operating profit from continuing operations would have been 5.7%. GAAP EPS for the quarter was $0.86. Included in the GAAP figure is $0.25 from acquisition related restructuring and other transaction-related expenses related to the CH2M acquisition and the sale of ECR and $0.03 associated with impacts from U.S. tax reform offset by the add back of depreciation and amortization related to the ECR business. Excluding these items, the first quarter adjusted EPS was $1.14, which benefited from approximately $0.07 due to certain discrete tax items that were not previously included in our outlook. Our adjusted EPS that is directly comparable to the outlook we previously provided is a $1.07, which is above the midpoint of our previous outlook provided. Finally, turning to our bookings during the quarter, our pro forma book-to-bill ratio was 1.1 for the trailing 12-months period. We were pleased with the performance during the quarter and continue to have a robust pipeline of opportunities in both ATEN and BIAF, as Steve alluded to earlier. Regarding our LOB performance, let's turn to Slide 12 and begin with ATEN. In addition to the strong top-line performance, as Steve already highlighted, ATEN delivered strong pro forma operating profit growth of 27% versus the year ago period. Operating profit margin for the quarter was 7%, up 20 basis points versus the year ago period. Longer term, we continue to expect operating profit margins to improve in ATEN as we shift the portfolio to a higher value mix. First quarter, BIAF grew 8% year-over-year and perform operating profit was up 28% versus the year ago period. Operating profit margin was 7.8% for the quarter up a 120 basis points on a pro forma basis from the year ago period. We also continue to see further room for margin expansion in BIAF from a combination of leveraging our scale benefits from our global market, our global model, strong project execution and targeting higher margin opportunities currently in our pipeline. Our non-allocated corporate overhead costs were $71 million for the quarter, up just less than $10 million year-over-year on a pro forma basis, driven primarily by higher fringe related costs. As mentioned earlier, the elevated ECR related costs due to discontinued operations accounting treatment are included in this non-allocated corporate cost picture. Post the close of ECR transaction, we expect unallocated corporate cost to decrease to our run rate level of approximately $45 million to $55 million per quarter, which is higher than our previous guidance of $25 million to $35 million per quarter, all of which is due to the change in our cost alignment processes outlined earlier. Now turning to Slide 13. As a reminder, given the pending divestiture of ECR expected in the first half of calendar 2019, all of the following synergy and cost figures related to the CH2M acquisition now exclude impacts related to ECR. We achieved slightly over $120 million in synergies from the acquisition date through Q1 2019. We continue to anticipate achieving our synergy run rate of $175 million as we exit fiscal 2019. Through Q1 we've incurred approximately $210 million of the expected $265 million in cost to achieve these synergies. We remain on track to significantly outperform our original synergy estimates. Q1 also marked a major milestone in our efforts to integrate the two companies. The company transitioned approximately 80% of the CH2M portfolio of businesses to the Jacobs’ ERP platform and its associated suite of integrated applications effect of the beginning of our fiscal Q1 2019 period. We executed this ERP transition at the same time we rolled out a new integrated project control system, which supported our adoption of the new revenue recognition standard. Importantly, we expect our new project management control capabilities to further strengthen our operational discipline. We are proud of the teams’ ability to manage through these two simultaneous and complex implementations as they required significant change management focus. Before turning to the next slide, and as a final note on restructuring costs, we continue to refine our estimates on the expected one-time separation costs related to the sale of ECR. Given the significant work on carving out the assets and IT systems, we do expect that these costs could approach $150 million. These estimates remained materially consistent with the expected proceeds that we communicated at the time of the announcement of the transaction. Of course, the figure will continue to evolve as we work with WorleyParsons to finalize our transition services agreement and other transition related activities. Now on to the balance sheet on Slide 14. We ended the quarter with a cash of approximately $900 million and gross debt of $2.7 billion. Our net debt level is up versus our fiscal Q4 year end level, primarily due to growth in AR levels given our strong growth, some higher DSOs in the quarter, a strong incentive payout, timing of payables and cash used for share repurchases of approximately $140 million. DSOs were impacted both by the timing of receipt of large payments and the conflicting priorities associated with our ERP transition and the adoption of the new revenue recognition standard. We are confident that this is a short-term issue and not related to any structural change in our normalized levels of DSO. In fact, we continue to expect to see a reduction in our Q2 DSOs as we revert back to our normal focus on improvement in this area, post the ERP and revenue recognition adoption focus in Q1. Our net debt to adjusted EBITDA is 1.4 times with our gross debt leverage slightly above two times adjusted EBITDA at the end of Q1 as calculated per the terms of our credit agreements. Given our strong balance sheet and continued expectation of improved cash flow, we also recently announced a 13% increase to our quarterly dividend to $0.17 a share. Turning to the right side of this slide on a pro forma basis, you can see that including the ECR proceeds, our net cash would be just under $1 billion giving us substantial financial flexibility to deploy capital going forward. While we planned to speak in depth regarding our capital deployment strategy at our February Investor Day, let me summarize our recent actions and philosophy on Slide 15. We have proved we not only have a disciplined track record of capital allocation, but we are agile with our execution. Most recently, we took advantage of a dislocation in our valuation by repurchasing $207 million in shares at an average price of approximately $60 per share through the end of January. In addition, the board is authorized an additional $1 billion repurchase program. We will provide details at our upcoming Investor Day on the timing of that deployment, including the consideration of an ASR for some portion of that. From a portfolio management standpoint, we have transformed our business to a more recurring, higher margin solutions provider, leveraged to secular growth trends with the acquisition of CH2M and the announced divestiture of ECR. Before turning the call back over to Steve, let me make a few more comments regarding our upcoming Investor Day. We are currently finalizing a series of new metrics, which will begin to report against beginning with our Q2 results. Specifically, we will begin to provide additional clarity on profit margins against net revenues to provide better insight as to the underlying performance of our professional service portfolio, which drives our profitability. Additionally, we will plan to exclude amortization of acquired intangibles from our adjusted operating profit and EPS results also beginning with our Q2 results. Now to Slide 16 and I'll turn it back over to Steve for some closing thoughts.

Thank you, Kevin. I'm very pleased with our solid start to 2019 and while there are many moving pieces to our financial results given several accounting changes. We clearly had a strong year-over-year revenue growth, up 12% in the first quarter, an increase in adjusted operating profit of 34% and adjusted EPS performance well above the midpoint of our previous guidance. And this was all accomplished while executing on an unprecedented portfolio of transformation, including the successful integration of CH2M and positioning for the sale of our ECR business. And as we look forward, our backlog and pipeline opportunities are strong. And so we're increasing our total fiscal 2019 adjusted EPS guidance, including a full year of ECR to a range of $5.10 to $5.50, up $0.10 from our previous guidance of $5 to $5.40. And excluding ECR for the full year, we continue to expect fiscal 2019 adjusted pro forma EBITDA to be in the range of $920 million to $1 billion, which assumes the removal of ECR related costs. We look forward to sharing our new three year strategy with you at our Investor Day on February 19th in Miami. Operator, we'll now open the call for questions.

[Operator Instructions] Your first question comes from Lucy Guo from Cowen & Company. Your line is open.

Thank you for taking my question. Good morning Steve and Kevin. I wanted to first just touch on the solid book-to-bill numbers, given it's Q1, usually seasonally softer. What percentage of the balance robustness add BIAF and ATEN are from new business, and if you can talk about gross margin, backlog, which is something I know you track?

Right. Well, first of all on the ATEN side, our pipeline in that business is as strong and robust as ever and it's across the portfolio, as I described in my remarks. Clearly, diversification in that business line continues, Department of Defense, FAA, Department of Energy, large-scale enterprise contracts as I mentioned, but also we saw a lot of momentum in areas like automotive and telecom. In automotive, where we're a major player in wind tunnels, we're now using that platform with those customers globally to expand our business. And in telecom, specifically our largest client, we were just rated the number one provider and as it relates to quality and we’re in a major trend on design build wireless infrastructure in the 4G build out and moving into 5G. Missile defense, you've seen with the federal government prioritizing missile defense, that's a core area for us. And of course, cyber security and data analytics, which are differentiating us, using our previous acquisitions of Blue Canopy, Van Dyke. And that's a key area for us, because there is a war on talent globally and our ability to automate using these capabilities with some of the technologies and tools that we have, we're able to actually accelerate growth in a challenging environment of talent. And then on the BIAF side, I think the clear driver there that’s driving momentum is state, local and city support and funding. With the elections recently and the new Governors coming on, and I think it was 80% of the ballots were approved, $40 billion in infrastructure over the next several years were approved as part of that, major cities where we're strong on, Florida, California, the Governors there are driving significant growth. I mean just specifically in Florida, the new Governor, four-year $2.5 billion commitment in areas like sea level rise sustainability, $9 billion in highways, bridges and airports, California up significantly with $15 billion program. So we're just seeing great momentum in both businesses.

That's great. My follow-up question has to do with free cash and then maybe if you can touch on Q2. So thank you for providing on cash flow statement in your release. Can you just maybe, if you can provide some sort of remark on how should we think about the free cash conversion, perhaps for the rest of the year and I believe you said you would provide quarterly guidance until ECR closes?

So, Lucy, let me kind of respond a little bit to the cash flow dynamics. We had obviously a couple of specific things going on in our Q1 results. And while the share buyback not in free cash flow certainly was – was about $140 million, a little bit more than $140 million for the quarter. So, that certainly was a drag on cash flow in the quarter. The final calendar year in the quarter ultimately translated into a couple of unique things, one we pay out our incentive in the last quarter of the calendar year and that was effectively almost approaching $90 million associated with the one-time cash. We also had another $90 million of kind of the timing associated with payables especially considering a third payroll run in the quarter, which is not necessarily usual obviously than normally have to. And then we had as it relates to a couple of the AR items, probably $40 million of leakage from the end of the quarter into the beginning of the next quarter relative to a couple of large customer payments we are expecting. Those were in the federal government, I can't say that those were exactly due to the government shutdown, but it certainly didn't help. If you take all of those numbers, that's a big chunk, and we think that certainly the share buyback is continuing on and our incentive comp payables and AR, kind of will ultimately go away. And then we have the last piece of that is the, let's call it the increase in AR associated with the quarter and I alluded to that, given the pretty substantial issue associated with – or opportunity, let's rephrase it, in terms of our ERP implementation as well as the revenue recognition adoption. And our people were focused on doing a good job there. And as you may have heard from others, that is a major undertaking. So we saw some leakage in DSOs because of that and the teams are now passed those ERP and rev rec implementations and refocused on it. Long story, they’ll ultimately say that we expect our DSOs to start to improve, the other discrete items to go away and consequently, we'll be improving our cash flow over the balance of the year.

Anything you can say on Q2 would be helpful, and I'll pass it on. Thanks a lot.

The only other thing I would say is that we're continuing on the share buyback, so that will be something that you guys should be thinking about as it relates to the cash flow dynamics. And where our teams are focused on the near-term kind of DSO and we're expecting to see some improvements there in Q2.

Your next question comes from Jamie Cook from Credit Suisse. Your line is open.

Hi, this is actually Themis on for Jamie Cook. Just a question on the guidance raise on an EPS basis, it looks like there is a $0.07 benefit from tax and some incremental help from the new revenue recognition. So, I'm just curious, are these the only drivers behind the EPS change? Or are there any other puts and takes that we should keep in mind?

Thanks for the question. This is Kevin. The revenue recognition benefit actually, because some of that was in our discontinued operations, and you don't see it in the operating cost figures was actually about $0.02. And that $0.02 number was actually already embedded into our outlook for the year. We had a previous estimate of it. So that's not a driver to the beat. So the $0.10 I think is the recognition of certainly the discretes and ultimately the general strength of our portfolio, plus potentially some incremental benefits associated with the share buyback that we're talking about. However, I will say that we're going to be updating the whole share buyback at our upcoming Investor Day to give you a real clear view given the recent new authorization of $1 billion and what that implication is for the balance of the year. And I think with that we will be providing a clear view of what the potential impact of that is for the balance of the year at that point in time.

Understood. And just a question on moving the environmental business from ATEN, what was the strategic rationale there? And does that have any implications about how you're thinking about the two segments as part of the portfolio?

I think the major factor there is that, as I covered with the strong growth in infrastructure and synergy opportunities, we clearly see in the BIAF sector a tremendous opportunity to take that to an even higher level. And there was already a strong connectivity between ATEN and BIAF going on there with our GES organization, and we just took a step back as part of this new three-year strategy that we're going to discuss in a couple of weeks and decided that the best way to move forward is to embed that into the BIAF organization, but recognize that both ATEN and BIAF have environmental opportunities going forward. And so, we're really excited about that moving forward.

Appreciate the color. Thank you.

Your next question comes from Andy Kaplowitz from Citi. Your line is open.

Hey, guys. Good enough.

Hi.

Hi, Andy.

So Steve or Kevin, can you give us an update on pro forma growth guidance for FY 2018? Obviously you moved GES. So what you said in the past is not quite apples to apples going forward, but before we were thinking that growth in ATEN would drop into the single digits given you were ramping to the run rate of recent contract wins, but with the growth still over 20% in Q1 and backlog still up 9%, you know with that kind of burn could you average double-digit growth in FY 2019 in ATEN? And then BIAF, can you sustain pro forma revenue growth in high single digits, given backlog growth is also in the high single digits?

So Andy a couple comments, thanks for the question. I do think you're accurate as it relates to the ATEN kind of comparisons year-over-year, and as we are ramping up over the big enterprise contracts we won in 2018, the comparables have more of that base in it. And so I would say that we will start to fall versus these very strong numbers in Q1. I'm not so sure we're going to ultimately get to a double-digit number, but we'll be approaching it for sure. So I think that you kind of have a pretty good read on the situation for ATN. I think the opposite will be the case in BIAF actually. I think the pipeline of opportunities are developing really nicely. And while we probably won't see that ramp a substance until the back half of the year, we see the growth profile kind of ramping in the back half and consequently a much stronger end to the year than the beginning of the year, even though the first quarter is not too shabby. So we're liking the outlook for BIAF in the back half, where the ATEN kind of is a little bit more muted as we compare against those stronger comparables in the back half of 2018. So all in all, a pretty good solid outlook for the year in terms of revenue.

Kevin, that's helpful. And then Kevin or Steve, we know you don't want to front run your own Investor Day, but you did say in today's earnings release that you are on track to meet or exceed your prior three-year strategy targets. So as we think about what you might say in a couple weeks, is it safe to assume that given an improved mix of higher growth, higher barrier to entry and less cyclical businesses like ex-ECR that you should be able to grow faster than 2% to 4% over a cycle, and then you have the capability to grow operating margin more than 100 basis points to 150 basis points that you are guiding to back in 2016 for this new three-year target?

Without giving any specifics because we'd rather save that for next couple of weeks, we’re clearly, I hope you got from our remarks today, we're pretty bullish on a multi-year secular trends in both businesses. And so, we'll lay out that growth, but we're excited about it. And more importantly is the bottom line growth. And just to go back to your first question, even with the shift of environmental over to BIAF, both businesses, the forecast and the earnings guidance we gave assumes that both business end up total year double-digit operating profit growth. And so as you can imagine looking forward to our strategy, you're going to hear information around not only revenue growth, but more importantly margin expectations and we've always said we’ll always be a company that's going to be driving margin growth and obviously tying it all to the bottom line and then cash flow conversion. So we're looking forward to laying that out in two weeks.

Thanks. Steve. We’ll see in Florida.

Thank you.

Your next question comes from Michael Dudas from Vertical Research. Your line is open.

Good morning, everybody. First question, Steve or Kevin. As you look at the – you talked about and referred to quite a bit of very strong pipeline in both ATEN and BIAF, is the mix of those new opportunities and given new skill sets that Jacobs has developed over the last couple of years, do you anticipate the mix of the new business that you would be booking in both of those sectors to be at or better than the backlog that you booked the last year, year and a half? And is that a market issue or more of an internal Jacobs' issue?

Well I think it – clearly when you just profile the ATEN and BIAF business, we continue to do a great job as – and that's why we're talking about exceeding our previous strategy. And really earmarking where we believe the highest value businesses are and where we can differentiate ourselves and bring this unique combination of capabilities of CH2M and Jacobs that the rest of the industry is unable to do, and that has led to most recently higher margins in our backlog. And so as we've been talking about more than two years now, every quarter, we've been seeing our backlog pick up on margin. We saw that again this last quarter. And that's clearly going to be part of what you're going to hear in a couple of weeks is how we're going to focus on higher margin, higher profit growth businesses. And so, generally, I would say the answer to your question, Mike, is yes.

Thank you. And my follow-up to Steve is, relative to that opportunity what you are going to share with us in a couple of weeks, how do you characterize your labor, the people that you have on, do you have enough professionals to meet the expectations you see this year over the next couple of years? And certainly with some of the awards and recognitions that Jacobs appears to be – have received very favorably over the last several months, how is that helping in what you call the talent war and trying to get the bodies required to generate the profits and the revenues that you anticipate over the next several years?

Great, that's a great question and that's why you hear a lot from Jacobs, first and foremost, talking about culture because the talent war we believe will be one basically by demonstrating that this is the place to be. And as part of that, we need to be a company that's focused on sustainability, innovation and demonstrating to employees that we're going to invest and develop them. Diversification of our employee base is critical. That's why we talk a lot about our employee networks and what we're doing on inclusion and diversity. And when you put all that together, coupled with again a unique portfolio we now have focused on these dynamic ATEN and BIAF businesses with a combination of CH2M and Jacob. That's what we're focusing on to reduce attrition and increase our capability of attracting the best talent across the globe. But I want to add on to that, I made a couple of comments on innovation and technology. With our portfolio now we can actually offer more automation and tools where we can use less human capital in delivering our programs and projects for our clients and bring more innovation and technology. And so, you put all that together, we're very focused on the question that you asked and believe that we can differentiate ourselves in the marketplace.

Thank you, Steve. See you in a couple of weeks.

Thank you.

Your next question comes from Chad Dillard from Deutsche Bank. Your line is open.

Hi, good morning everyone.

Good morning.

Hi Chad.

So I just wanted to dig into your comment about the second half ramp in BIAF. I just want to clarify, first of all, were you talking about bookings or revenues? And then also how much is that going to be driven by what you have in hand backlog versus new business that you need to win? And maybe you can give a little bit of color of your flavor of geography as well as specific end markets where you're seeing that incremental opportunity?

So I think it gets back to the pipeline that's currently in place which is going to augment the back half in terms of revenue growth. And so, that's certainly part of the equation, but I will say that the current backlog that we do have in place is developing in such a manner that it will provide incremental support to the back half as well. So I would say it's both. The backlog I think probably – could it happen in Q2 where it goes a little bit higher, but we’re thinking it's probably more in the Q3 timetable, but that still doesn't result in the revenue starting to show some more positive trends in Q3. So I think it's both and we're excited about not only what's in backlog, but the pipeline and how that will convert as well.

Just want to add on to that. I think that also as we build this business and all the initiatives we have to continue to drive cost synergies across Jacobs with the CH2M Jacobs combination, but also some of the other initiatives like Global Business Services and some of the other initiatives across the company that the G&A as a percent of revenue improvement on the company across the rest of the year will also drive operating profit growth in the company.

That's helpful. And then just given that there is still some uncertainty related to maybe another government shutdown, maybe not. I was hoping you could kind of give us a framework for thinking about, if that event actually materializes. What sort of risk would that present from like maybe operating profit per week or earnings per week perspective for the second quarter?

It's uncertain because it's tough to understand how a back-to-back government shutdown will play out, but I think the fact that this 30-day shutdown or so, we've come out of it, where essentially from our P&L standpoint neutral. And I'm really impressed with the way we were able to come through that because it demonstrates the portfolio that we talked about where we really differentiate ourselves into the most critical areas of even government businesses that where we came out neutral. Yes, there is some near-term cash crunch, but that gets resolved quickly and we've seen that this week. And last week, as the government came back up and started paying their bills. And so our goal is, first of all, we hope it doesn't happen but if it does and I think we've demonstrated through this first one that we should be able to get through it pretty clean and we're going to work on making sure that happens.

Thanks, I'll pass it on.

Your next question comes from Andrew Wittmann from Baird. Your line is open.

Great, thanks and good morning.

Good morning.

I guess I just have one question for today. Hey, guys. I just have one question for today. I guess the – when you announced the ECR sale, you guys suggested that the cash after closure was going to be $1.1 billion or so. Now, the number is $700 million. Certainly, I think the value of the stock, WorleyParsons stock is part of it. Kevin, can you talk about what the other factors are that lowered your cash balance expectations post closing?

Andy thanks for the question. It's not actually a reduction in our expectation. All we did is we took our pro forma debt levels at the end of our Q1 figure and just adjusted for the proceeds. The fact that our debt is a little bit higher because of the cash flow dynamics I originally alluded to. It's just rolling it forward. So we took our proceeds – our net proceeds, which have not changed and adjusted it off of our quarter-end figure. So the expectation actually is that as we continue to improve cash flow that will change over the course of time, and depending upon when the ECR deal ultimately closes, it will be probably a different number and hopefully a much larger one because we're seeing incremental cash flows associated with the work in Q2 and Q3. That makes sense?

Got it, thank you. Yeah. Well, I mean, it feels like the stock performance has to be part of it. You have got the footnote here that is priced as of February 4th. So I mean that's not $400 million difference, but the rest of it is unchanged is what's I'm hearing from you?

Yeah, it's about $100 million effectively is the difference associated with your question.

Yes, got it. Okay, thank you.

Your next question comes from Jerry Revich from Goldman Sachs. Your line is open.

Hi, good morning everyone.

Hi, Jerry.

So on the CH2M integration as you pointed out, you are at the very high end of your integration expectations. So now having completed that type of transaction as you folks think about capital deployment opportunities from here, to what extent does that make you want to undertake larger M&A versus bolt-on within the existing segments? I'm sure we'll talk more about it at the Analyst Day, but any context you give us today would be helpful.

Look, I think the success of this integration, which was complex and is still going on and we want to maintain and actually further increase the success over this next 12 to 24 months. Now, clearly it gives us more confidence as we deploy capital and future acquisitions, small or large. And so, I think you've hit a very important point that our organic improvements in the company around transforming our core and also building the culture that I talked about coupled with now our ability to be a company that demonstrates discipline and execution around integration of M&A, including complex M&A. You put those two things together. I think we've earned the right when we see value-creating opportunities in the future and I want to emphasize value creating and discipline, where we're not eager to run out and just spend capital because we got it from ECR. It's going to be very patient and strategic use of the capital for both shareholder return as well as M&A. I think we've demonstrated the credibility to move forward in that area. So, great question.

And in terms of the balance sheet, now that ECR is – will be hopefully – the transaction will be completed, you folks will have a higher margin, less cyclical business or how should we think about your target leverage ratios and in terms of getting there, let's say we're in an environment where you don't find something that's quite the right fit with leverage – increasing leverage for buyback be something that you folks would consider? Would you want to keep the dry powder in case something does come up just conceptually, how are you folks thinking about those pieces?

Jerry, I won't go into the details and actually specifically respond. But I would say that given the new portfolio that will come into play once the ECR transaction closes, affords us an ability to have higher leverage ratios. I will leave it at that. As it relates to how we will execute against that, I'll defer to our Investor Day in a couple of weeks, but certainly I would say our potential leverage ratios that are appropriate certainly aren't going down.

Okay, thank you. We will look forward to it.

Your next question comes from Josh Sullivan from Seaport Global. Your line is open.

Good morning.

Good morning.

A lot of activity in and around defense and space budgets. You had the nice expansion win for NASA here. Can you expand on what you're seeing in space spending or other opportunities, be it classified, defense or even on the commercial space front at this point?

As we were watching what happened with the elections late last year and how that would impact space and we're pleased that the way things ended up, we see good stability on the space side as far as NASA specifically. I think we think that there'll be continued commitment in preserving the budget there, the plus-ups maybe a little softer going forward than what we saw over the last year or two. We're also encouraged by what we're hearing about space force and our ability to participate in that. We're pretty confident in that area as well. On some of the other commercial space activities, I think that's slower to develop as we see those entities using a lot of their own resources. But as that continues to grow, we think that we're well positioned with regard to what we've been doing over the last many years with NASA and the U.S. government.

Okay, thank you.

Your next question comes from Tahira Afzal from KeyBanc. Your line is open.

Hi, folks. Just a couple of questions. Number one, for the opportunities on the BIAF side, are those being driven just by the market strength or are you now starting to see a little more market share gain going forward?

Tahira, I think it's a combination of both. As I mentioned earlier, we're very encouraged on the market side. I was quoting some numbers earlier, but in the U.S. we're seeing environmental spending up 7% to 10%, and these various initiatives that have come out of these are bond measures, state counties and cities. So I won't repeat it at all, but whether it's highway, rail, water, environmental and other areas, buildings, clearly we're seeing a growing market that's driving some of the numbers. But the synergy opportunities, a lot of these major initiatives, most recently, California WaterFix and some others that I've quoted are clearly demonstrating the ability to grow market share as well. So, in short, it's a combination of both.

Got it, okay. And Kevin, maybe the next one is for you. I haven't been to the Q, but any updates on the Ichthys situation?

No, really no change from the discussions that we had previously at our year-end. We're continuing to work through that and prepare for the mediation arbitration, which is going to be happening in 2020 and we'll take it from there.

Thank you very much guys.

Thank you.

There are no further questions. I will turn the call back over to the presenters.

All right. Look, hopefully, you feel the same way we do that there's never been a more exciting time at Jacobs. Our performance was strong, realigning our portfolio, higher growth, higher margin markets, transforming our culture at an incredible rate. I continue to be energized as I spent time with our people around the globe, pushing the envelope on possibilities, creating solutions that help drive higher performance for our clients, and while doing so enable us to create a culture that attracts and retains the best talent in the industry. We look forward to welcoming you to our Investor Day in Miami where you're going to see the Jacobs team in action. So thank you and see you soon.

This concludes today's conference call. You may now disconnect.