Good morning. My name is Michel, and I will be your conference operator today. At this time, I would like to welcome everyone to the Jacobs’ Fiscal Second 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] I would now like to turn the call over to Mr. Jonathan Doros. Please go ahead.

Good morning and afternoon to all. Our earnings announcement was filed this morning, and we have posted a copy of the slide presentation to our website, which we will reference in our prepared remarks. I would like to refer you to our Forward-Looking Statement 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 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 quarterly report on Form 10-Q for the second fiscal quarter of 2019 which is filed this morning. 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 we are required by applicable law. During the presentation, we will be referring to certain non-GAAP financial measures. Please see Slide 2 of this presentation for more information on these figures. In addition, during the presentation, we will discuss comparisons of results to prior periods on a pro forma basis. See Slide 2 for more information on the calculation of these pro forma figures. We have provided historical pro forma results in the appendix of the investor presentation. We believe this information helps provide additional insight into the underlying trend of our business when comparing current performance against prior periods. Now turning to Slide 3 the agenda. Steve will begin by discussing the aerospace technology and nuclear ATN line of business leadership transition we announced last week. Then move to the highlights on our cultural initiatives then provide a recap of our second quarter results, including a market review of our business. Kevin will then provide some more in depth discussion of our financial metrics then provide an update on our M&A costs and synergies as well as review our balance sheet and cash flow. Finally, Steve will provide an updated outlook along with some closing remarks and then we will open up the call for your questions. With that, I will now pass it over to Steve Demetriou, Chair and CEO.

Thank you and welcome to our fiscal year second quarter 2019 earnings call. Before we begin on Slides 4, I would like to discuss the aerospace technology and nuclear ATN line of business leadership transition that we announced last week. After more than 30 years of exceptional leadership at Jacobs' across multiple businesses and operations Teri Hagen, COO and president of ATN has decided to begin transitioning for retirement. Over the last several years under Tari's leadership, our ATN line of business has developed a deep - of leaders with proven execution capabilities and a roadmap for continued strong profitable growth. And while I will miss Tari's amazing leadership on top of ATN. We are in good hands with the strong set of ATN leaders across the globe. I'm very excited that Dawne Hickton has agreed to become the COO and president of ATN, replacing Teri effective June 3rd. Dawne, who stepped down last week as a director of our board to take the stake of executive positions, he is the former vice chair and CEO of RTI International. She has built numerous relationships across the aerospace industry, brings strong business acumen and has a track record of shareholder value creation. And most importantly, Dawne is an inspirational leader who fit well with our ATN organizations and government services client base. She comes to ATN with momentum. For example, Dawne was engaged in the development of our new Jacobs' strategy that was presented at Investor Day. And she was also involved in the due diligence and decision to acquire KeyW. As Dawne takes over the leadership of our global ATN business, Teri will become executive strategic advisor reporting to me. Teri will lead the KeyW integration process working closely with Dawne in the ATN leadership team. Turning the Slide 5.…

Thank you Steve. Before we view our results. Let me comment on KeyW's results which were also filed today. As you might imagine, we had the opportunity to review KeyW’s preliminary March quarter results prior to signing of the acquisition agreement. We are encouraged by the progress the Company has made with key project extensions and new awards. As a result, the Company has strengthened this growth profile with backlog up over 10% year-over-year, when excluding the impact of the discontinued flight services contract. The Company reported $1.6 billion in proposal submitted and awaiting award up 23% versus the year ago quarter. We remain confident in achieving the financial outlook we outlined at announcement and are excited to welcome the KeyW team to Jacobs. Let me also comment on our pro forma adjusted figures that have been included in our appendix to this presentation. We have updated and provided results for all quarters in fiscal 2018 and 2019 on a consistent basis. We have done this to ensure clarity as to how the business is performing on a comparable basis, year-over-year. I will be referring to these figures throughout my remarks. So now I will discuss more detailed summary of our financial performance for the second quarter of fiscal 2019 on slide 11. Second quarter gross revenue increased 8% year-over-year with net revenue up 9%. Both ATN and BIAF contributed to the strong growth profile with ATN leading the way with a 15% increase versus a year ago quarter. Please note that we expect our second half year-over-year total net revenue growth to moderate someone. Second quarter adjusted gross margin as a percentage of net revenue was 24.9% that was impacted by a higher mix of ATN revenue during the quarter, which carries as you know, a lower gross margin.…

Thank you, Kevin. I'm very pleased with our solid start to the first half of 2019 and the strong demand environment we are seeing within our core industry sectors. We have an ambitious strategic vision for Jacobs, a strong track record of execution and disciplined philosophy of allocating capital. The combination of which we believe is paramount to delivering above market returns for our shareholders. As we look forward, we continue to expect fiscal 2019 adjusted EBITDA to be in the range of $920 million to $1 billion and we are increasing our total fiscal year 2019 adjusted EPS guidance to $4.45 to $4.85 per share from our previous guidance of $4.40 to $4.80. Operator, we will now open the call for questions.

[Operator Instructions] First question comes from Josh Sullivan from Seaport Global. Your line is open.

Hey Josh.

Hello Josh. You there?

Go ahead Josh.

Can you hear me now?

Yes.

Just give one of your competitors successfully changed its gets code designation. You know what would be the timeline for Jacobs to potentially make a similar transition?

Well as you know, the makeup of our revenues currently are associated with the BIAF and ATN and our government services piece of that represents a smaller proportion of the of the total revenue base right now. We are in the process of further evaluating a recharacterization of some of our revenues which we know have either government services and or IT related activities, which ultimately will translate into our ability to probably near the end of this fiscal year be able to talk to S&P in order to look to try and change our next gets code longer term. And I think that is going to be a work in progress that we are going to be working on over the next six months.

Okay. Great thanks. And then just on the free cash flow and the DSOs, what do you think a normalized level including KeyW looks like and then will the new design centers in Poland and elsewhere have any impact on the DSOs positive or negative?

Ultimately, we believe that we should be receiving a conversion against net income, which translates into one-times and we think that that is the viable view of how our cash flows will be driven longer term, including KeyW. And I think the KeyW will ultimately be accretive to what we are able to do primarily because of the higher margin profile that we are expecting out of that business longer term. As it relates to let's call it our Global Business Services efforts, the more that we can get structured and disciplined as it relates to our processes, which DBS will ultimately be a big part of the better our ability to drive down the DSOs will be. So we would expect that longer term that is going to be a positive versus our ability to continue to drive improved profitability for the quarter or for the years going forward.

Great. I appreciate the color.

Yes.

Your next question comes from Lucy Guo from Cowen and Company. Your line is open.

Good morning. Thank you for taking my question. Want to say congrats to Terry on his pending retirement and I look forward to working with Don going forward. So first question is perhaps for Kevin. So you reiterated the adjusted the EBITDA guidance for FY 2019. Q1 came in at more than 25% of the year at the midpoint. Can just talked about your where you may be conservative versus if there is anything that is trending downward in the rest of the year?

Look, I think what we have done is we have included a raise to our guide $0.05, let's call that primarily are around taxes. We still feel good about the ramp up in the second quarter. And effectively, we think that our ability to drive our growth in the second half, which is substantial is still there. So I think we are just being prudent as it relates to our ability to continue to deliver against the numbers that we have provided to you.

Okay, great. Second question is on KeyW, their results also came out this morning that was kind of below where the street expected. Can you just talk about, maybe into the second half of the calendar year if there is anything that is changed versus your expectations?

Good morning Lucy. We are confident in the projections that we put in place that model the acquisition including 2019. We see a timing situation going on with KeyW that some awards get pushed into the second quarter and second half of the year. We have been following it closely, we believe the second quarter is going to be a very solid quarter, there has been some good wins that they should be announcing soon. And so we are confident in the remainder of 2019.

Good to hear. And finally, just wanted to see if there is any changes in the recomplete timing is just two large ones that you have highlighters, and I will pass it on. Appreciate it.

The confidential contract that we have in ATN continues to move to the right, which is good for us. We believe that there is going to be some expansion opportunity there over the near-term. And then, I mentioned, I think the other one, you are talking about a [Sanford] (Ph) we are excited, because we are actually involved in two programs there the rebate as well as the new tank farm opportunity. So, we continue to feel very positively about those and other opportunities. I think I mentioned earlier that our pipeline is a record high $30 billion in the ATN business. And then we are very excited about the pipeline and KeyW, and a margin improvement there that it’s going to bring to Jacob. So all-in-all, a great pipeline going forward.

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

Good morning gentlemen.

Good morning.

Good morning Michael.

Steve I think in your prepare remarks you talked about how you felt with the first half of 2019, from a book of business backlog positioning standpoint, as you are trying to execute, looking at 2020 and not to get into 2020 expectations, but relative to where you were six months ago to where you finished a second quarter and taking into consideration KeyW, how better or how much more confident relative to your plan or backlog or order roll off you anticipate in each of the business for 2020?

Yes, we feel very confident about our three year ramp associated with our strategic plan that we outlined at Investor Day and we are off to a great start in the first half. When you look at some of the macros going on, we continue to feel like we are extremely well positioned. There is a lot going on, as far as budgets being set by the federal government, as well as state local. NASA remains very aggressive in their whole program of getting to the moon by 2014 and the good news is, there is a debate on how much more will be spent in NASA moving into 2020 and beyond, but the good news is, all the talk is more whether it's $1 billion to $2 billion more or something even higher than that. So, we feel good about NASA and our position there. And then when we look at Department of Defense budget, which, I think the talk is somewhere between $730 billion and $750 billion. When you peel the onion and look at the specific programs, really almost right on top of all the mission critical programs we participate in, a lot of the programs are actually being discussed as double-digit growth opportunities moving into 2020. And so, whether it's cyber or some of the other mission critical intelligence community areas that we and KeyW participate in. We feel very, very confident there. And then of course on our BIAF program, the recent news around the democrats and Trump talking about finally getting at this Federal infrastructure spending. Whether it's $1 trillion or $2 trillion, we are talking about a heck of a lot more spending opportunity in the U.S. around infrastructure. And then when you look overseas, the infrastructure opportunities are very robust. The Middle East continues to be strong for us. But even in the UK with what is going on with Brexit, the spending has been preserved, a lot of the major programs on rail and highways that we are participating in are moving forward. And we believe that once Brexit is resolved, the very first thing they are going to focus on is infrastructure to be a stimulus to the economy there. So, our second largest market in our BIAF market bodes very well. And then we continue to just be very excited about our advance facilities business. I mentioned a couple of two wins in life sciences and electronics, but we are well placed with regard to the clients that were focused on in both of those sectors and so all-in-all, I would say we just, we continue to be very confident in our three year strategic plan.

Well will quit Steve and just Kevin a brief follow-up. When you talk about once KeyW's in the mix, and you look at the ATN operating profit. And you mentioned about minority chipping at some of your joint ventures majority to minority. How much of a percentage or contribution on normalized basis would those be to the overall operating profit going forward to ATN?

I don't have that. It really kind of depends on what the win profile looks like. But obviously if in fact, we go from the prime to a sub on the JV or something like that. Managing partner versus not, you are going to effectively see - all you are going to see in our financials is the fee that we are earnings as it relates to that. So obviously it will be a big number in terms of profitability with no revenue. The numbers probably are not exactly hugely material in terms of numbers, but it will be accretive and certainly we can get that information back to you after the fact when we start to get a better sense of how it's going to play out.

Excellent. Thank you gentlemen.

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

Hi, good morning. Just a couple of clarifications on the guidance. Kevin, I think in your prepared remarks, you mentioned something about revenue growth or the top-line in the back half sort of moderating. Can you just talk about the drivers behind that or just get a little more specific in particular with restating things year-over-year? And then my second question is, obviously, this changes with KeyW, but the operating margins and ATN. How you are thinking about that in the back half as well? Thank you.

Yes. I think, clearly, Jamie. As it relates to the back half moderation comment, it's really more about the fact that the comparables for ATN specifically continue to expand and grow last year in the back half as the ramp up on the large enterprise contracts occurred. So the comparables in the back half of 2018 are strong, stronger than what the first half was. So we are just comparing to a bigger part of those ramp ups that actually haven’t occurred. So that is probably the biggest piece of the ramp down. I think that or the moderation down. I think the other point as it relates to margin profile. As we think about going forward, certainly the ATN business has an expectation level that we are going to be improving margin consistent with the strategic plan that we outlined relative to the Investor Day, and we would expect to see part of that occurring in 2019 back half as well. Relative to KeyW, it depends on really when it closes, and to the extent it does close, with enough time to really have an impact in the back half, we would expect to see accretion relative to that as well. But it will be pretty immaterial given where we are in the year and when the when the close might occur. Some potential limited benefit in fourth quarter, but it really depends on when the deal closes.

Okay. Thank you. I will get back in queue.

Next question will come from Jerry Revich from Goldman Sachs. Your line is open.

Yes. Hi. Good morning, everyone.

Good morning.

Hi Jerry.

I'm wondering if we just flush out in BIAF, really short bookings this quarter, can you give us a sense for how much of the growth was in water versus transportation? So what part of the portfolio are you seeing backlog growing? And, related question the $2 billion plus CH2M, revenue synergy pipeline, how much contribution are you expecting over the next call it 12 to 18 months? How much have we already seen flow through the results? Can you just touch more granularity on that part of the opportunities that plays?

Good, thanks, Jerry. It's been for BIAF pretty much across the board. We, we have seen it both in the B&I side as well as the advanced facility side. When we look at our business, we are ramping up some major water programs that we have announced out in California and Houston and some others that clearly we attribute to the combination of Jacobs in and CH2M. We had a major highway win in the Washington DC area that was something that we don't believe either Company would have won on its own together. And the other story on that Jerry is that it's margin improvement as well. Whereas both companies in the past would have partnered with others including each other and would have had to share the margin. As an integrated Company now, you know, we are getting more of the pie, as we are winning rail or highway or airport or water, environmental solutions wins, because of the fact that we can bring now most everything we need other than having to team up from time-to-time with small, set aside business partners. So, just can't overemphasize, it's across the board. The advanced facilities was a major contributor this quarter and as they are ramping up, programs both in the electronics and the life sciences area. And it's and it's been global across the globe, but really the only soft point that is in the Australia, New Zealand area after several great years there. So, we really like what we are seeing across the globe in all sectors.

Okay. And then coming back to your comment about sales growth moderating in the back half because of the tough consummate in ATN. On the flip side, you have really strong bookings momentum in BIAF and where the organic growth is generally year-to-date been call it towards the midpoint of your long-term targets, and it feels like you have got better bookings momentum, at least near-term. Can you address to what your expectations are for BIAF or organic growth, is that any comps that we need to be aware of?

Look, I think, if we were to characterize the growth outlook for both of the businesses, ATN while we still like the growth. BIAF has the stronger kind of near-term momentum over the back half of the year, because they are not facing some of the ramp ups that ATN had in back half of last year. So year-over-year is certainly going to be stronger for BIAF in the back half than ATN. And I would say that, we feel good about those bookings and how they come into the mix. I think it's very clear, with the backlog being $1.3 billion in BIAF. At the end of the quarter clearly that is indicating some stronger near-term opportunities in terms of the burn in the back half. So certainly stronger in BIAF more muted in ATN, but still we feel pretty good about the back half in terms of the revenue growth but moderating a tab.

Okay. And let me add my congratulations to Teri as well, quite a contribution to the business Teri and Dawn welcome and we are looking forward to working with you. Thanks, everyone.

Thanks Jerry.

Thanks.

The next question will come from Tahira Afzal from KeyBanc. Your line is open.

Hi, folks, congratulations on a good quarter.

Thank you.

Thank you.

I guess first question, and I hate to beat the ATN horse again. Kevin, but I'm looking at your 2% to 3% CAGR guidance and even if I assume a massive fade for the rest of the year, it seems it’s tough to build my CAGR even at the upper end of that as and I'm well exceeding that. Unless I assume that your revenues in ATN are flat or even was pretty out a year. So I assume that is conservatism on your part and to the extent it is and the read actions would be higher, how does that impact or benefit your margins?

So for the ATN guide, we haven’t really given specific guidance first point and as it relates to our revenue for ATN at a good quarter, obviously this quarter. And consequently, I think that the back half is still going to be showing some growth. And perhaps, what you are talking about is the guide previous to this quarter. So I think effectively we will see incremental revenue versus what we had been thinking last quarter. I will say the margin profile was a little bit less strong, given the mix of the profile. And consequently, we saw a little bit lower profitability margin associated with that relative to the dynamic. But I think 2019 is shaping up to be a pretty good pretty good look for ATN in terms of revenue and BIAF. So if you are talking about the longer term guide in the Investor Day, clearly that plays into the whole dynamic relative to joint ventures and how that may or may not play into the profile and there is a big chunk that if we do our strategy, which has been to participate is not the general partner in some of the JV work. That will ultimately affect our reported growth profile and that is one of the reasons for that guidance.

Got it, okay. And Kevin, I recall you guys bought a communications-oriented business a while back, maybe a Verizon piece. Can you leverage that towards a lot of the satellite work or the lower newer work you might be doing once KeyW gets going?

Yes I think the - you are talking about the FNS acquisition, which was four or five years ago, maybe. So, yes. Look I think that certainly was one of the initial stages of the transformation of the ATN organization in terms of getting into that business with certainly being very high technology oriented and work associated with managing telecommunications for some of the three letter agencies in the U.S. Government. So clearly, a high technology play, and we have been very, very excited and happy with that deal. I think ultimately, the KeyW - while I think there is opportunities in ATN to further leverage those capabilities. I would say we are actually excited about the opportunity associated with BIAF as well, because of the [sensoring] (Ph) capabilities to bring some of that technology into play in terms of the portfolio of BIAF longer term. So, yes, I think there is some opportunities in ATN and we think there is good - we talked about there being strong revenue synergies, which were not included in our analysis on the KeyW acquisition, but they don't only exist in ATN, they also exist in BIAF well.

Got it. Thank you Kevin.

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

Good morning. This is [indiscernible] behalf of Andy.

Good morning.

Good morning.

Good morning. Can you give us some color on what is underpinning the continued strength in Middle East infrastructure that we just reference. Given that we have seen some more mix trend in other industrial end-markets in the region?

I think, it's in different areas. We are doing a lot of work in places like Abu Dhabi and Dubai and there is things going on with the Expo, there is major rail expansions, there is economic growth that is driving the need for new infrastructure, you have got Saudi Arabia with the 2030 vision. And just a real relentless pursuit of expanding everything from health care to entertainment to smart cities. And so, I can't compare it to what is going on in other areas, but if I do look at Saudi, for example, it's a diversification and it's now spreading its funding, which in the past has been exclusively around the energy and chemical refining sector to areas around infrastructure is a good example.

Thank you that is helpful. And my follow-up would be with ECR sale complete and given that you noted that CH2M integration is there complete. Can you talk about how you think about the face off potential incremental M&A activity going forward? Should we expect some pause coming into the activities till you close out the KeyW or should we see more bolt-on acquisitions?

Well, I think we still have a tremendous runway of opportunity to maximize the integration and synergies of CH2M especially with our BIAF business. I expect that from time-to-time we will have some bolt-on opportunities to take that combination of BIAF’s Jacobs and CH2M capability and bring some additional capabilities, talked about at Investor Day digital consulting is an area that we are interested in and there could be on a bolt on opportunities. ATN, I think you know, where the KeyW was a an initial step of our strategy to really become a tier one government services player especially focused around areas like federal it and you know the intelligence community and those priority areas for us. And so I would expect over the next several years from time-to-time, some bolt on opportunities. But, we are very mindful and balanced around our capital deployment. We still believe Jacobs is a great investment and, we have launched our first step with the ASR and we laid out the fact that we expect to not only continue our dividend, but increase it as our earnings increase. So, we believe a good disciplined patient capital deployment strategy.

Thank you.

Your next question comes from a line of Steven Fisher with UBS. Your line is open.

Thanks. Good morning. Just a competitive question around ATN. I know you expect to pursue and win higher margin contracts in ATN. I guess to what extent are you guys seeing a convergence of bidders on a relatively narrow batch of higher margin attractive, technologically driven contracts? Or is the overall pie of higher margin contracts just getting bigger? I'm sure. everyone wants to pursue higher margin work. Are there more opportunities for everyone or is there a convergence on sort of a select set?

Well, we have talked about the fact that ATN, unlike most of our other markets is very highly fragmented. And we still have a relatively small share of the whole big pie there when we talked about just in the U.S. market. And So, you know we see our ability because of our differentiated models that we talked about around our ability to tailor our offerings to our clients rather than some of our competitors bringing sort of their overhead structure to the clients and to work in a in a swift basis. And I think KeyW is only going to get us even at a higher level there with their rapid deployment that is been the proven differentiation. And so, we look at it less around how much are we all going after the same thing versus our ability to bring unique offerings? Our wind tunnel business, for example, in ATN, we bring a unique technology there that enables us to come in good solid margins and win more than our fair share of business there. And our ability now to work with our clients around 5G deployment is a very positive area, cyber security and what we have done now with KeyW to strengthen our cyber security platform is only going to make us stronger there. And we are excited again with KeyW Jacobs around analytics capabilities, artificial intelligence, machine learning and what we are going to be able to do. And I mentioned that some of the specific focal areas by the Department of Defense are really in these high margin differentiated areas where we bring unique capability. So all-in-all, we feel confident in our ability to not only win more than our fair share, but to focus on the best value sectors in our ATN industry.

There is another comment to make to relative to the strategies that ATN team has developed, and it's really relative to some of the contracting strategies and they really are looking because of their very strong position on cost profile and in capabilities, which Steve has just outlined. There is an ability for the team to be doing fixed price services work, which is low risk, but ultimately allows for margin enhancement and Teri outlined that as part of Investor Day, and I think that that continues to be an opportunity for the team in ATN to continue to drive that business. And so not only do we have the opportunity on the enterprise contracts, the larger ones, which sometimes can be a little bit more challenging from a margin perspective, there is a very specific focus on the other side, which is some of the smaller, more fixed price services which really don't have risk that is any different than some of the other jobs that we do or projects that we do And consequently that is a screen part of the strategy and already is part of the strategy that is being executed by the ATN team.

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

Hi, good morning everyone.

Good morning.

So I just want to dig into the ATN procurement cycle. So I just want to understand from where we are today - continue growing backlog through the balance of the year. And then a little bit longer term relative to the $30 billion pipeline. Can you just talk about the balance of small projects driving potential ones versus larger ones that you mentioned that Hanford was one potential, but is here anything beyond that?

Again, it's such a broad based answer, so I will try to be succinct around it. But, I will just start with NASA. A lot of the ability to grow in NASA starts with performance. And we have had great outcomes recently on our award scores. And so when we looked at NASA being aggressive on going after their programs and we see an increasing budget, we clearly see ramp up at NASA, across the board there. I mentioned automotive where we have unique capabilities and a very high value wind tunnel, commercial automotive business. We have been very strong in the U.S., we are expanding into Europe, with a lot of the automotive players there as fuel efficiency and acoustics and some of the other areas that the automotive industry was focusing on. Missile defense, that program is going great for us and we are finding opportunities to grow. We see that continuing to ramp up. And then when we look at, as I mentioned earlier cyber security that is an area now that where this whole IT OT convergence really excited to see the clients lock in now to see Jacobs as a major player there and the KeyW acquisition only further increased our brand and awareness there for penetrating that business. So it's pretty widespread and then internationally in the UK, we are in also Europe, we are focused there are some initiatives we are working on to get bigger outside of the U.S. on ATN into some adjacent markets. And then the opportunity is, as I mentioned earlier, this ability to take what we are doing in ATN and BIAF together and looking at opportunities, whether it's smart cities or the 5G rollout or, other opportunities to bring our domain, knowledge and capability that we have established in buildings, infrastructure, advanced facilities, and bring the ATN capabilities to those markets. So, there is a tremendous opportunity that is driving that $30 billion pipeline that we mentioned earlier.

I think it's important to augment or reinforce Steve’s comments that he also made during the prepared remarks, which talks about kind of this is a government services business that we have and everyone talks about DoD and what the total increase is. But if you peel away the onion, and you look at what we do for the DoD and NASA and other agencies. The increases are not the kind of single-digit numbers that everyone is talking about, it's more in line with double-digit increases in 2020 for the Federal Government business. That still got to be worked through, but clearly indications are where we do our work. We are talking more in line with double-digit increases in spend for the government in the 2020 budget. So it obviously, on top of what Steve has talked about in terms of capability sets a foundational element of there being a general boat that is floating a little bit higher in the water.

Great. That is helpful. And just a question here. How should we think about the cash conversion for the business structure for the balance of the year?

Well we think that clearly, we saw an improvement in Q2, that was important to do, given what we saw in Q1. Q3 and Q4 tend to be strong cash flow periods for us. So I would think that we should be seeing an improvement, it's ultimately going to be driven by the ability for us to deliver against the DSO expectations that we have for ourselves, we got to continue to drive that down over the second half of the year. And I make these comments, X I would say some of the restructuring one-time cost that we are continuing to execute through given the issues associated with our myriad of transition opportunities, transformation opportunities on ECR, on CH and what will begin to happen which is KeyW. So we feel pretty good about the second half cash flow in the back half and like I said, not sure we will get to the one-times conversion for the for the full year this year. But we certainly believe that that is going to be the expectation for this portfolio and we should expect that going forward longer term as we communicated at our Investor Day.

Thanks. I will pass it on.

Your next question comes from the line of Justin Hauke with Robert Baird. Your line is open.

Yes. Good morning. I guess, I just wanted to maybe get one more clarification on the big ATN contracts that you have. You have got the two recompetes that are outstanding and then you have got the Hanford tender that you submitted. So is the timing for the award decision on all of those the same September of this year and just in terms of relative scope, how big are the recompete versus the incremental opportunity at Hanford, just so we can think about how those go? What it might be?

Yes. The Hanford one is both of them should play out around the same time and it will be later this fiscal year. Whereas the confidential contract is more moving into 2020 timeframe. So, those are not overlapping and what we are excited about is and especially when we look at about the $30 billion pipeline, the majority of that is new business and it's not extensions or rebid, although, they will be from time-to-time. But we are really expanding into when you look at the wins that have moved the needle for ATN over the last 12 to 18 months, whether it was the Special Ops Command or missile defense, as an example. Look, we moved into new areas there the KeyW acquisition is only going to accelerate that now when we talk now about getting into ISR space and being able to take their capabilities and move them into our water business or sustainable solutions or agricultural solutions. When we talked about this whole IT, OT convergence that is moving into new areas. So I think we are well balanced when it comes to contracts extensions or rebids in new business.

Okay, and then I guess my second question here is just on the DSOs. Kevin, I appreciate your comments on that. But the unbilled was up fairly significantly quarter-to-quarter $230 million or so. I know last quarter there was issues with collections on the Federal Government. But is that still tied to that or is that you know - the federal billings have those been billed is $230 million still on that or is it something else?

No look I think if we track both of these metrics obviously and then net against that the billings in excess which is pre payments that our customers have made, which is how we track our DSO figures. So we did see some of those challenges let's call it at the beginning of the quarter, but not so at the at the end of the quarter, because of the ability for the government to get back on track as it relates to the shutdown that we had there for a bid. So, look, I think there is a lot of moving pieces in terms of our system environment and implementations, which will create some volatility in those numbers in the short-term. Remember that we have gone to on the CH2M integration we effectively at the beginning of the year went to 80% of the CH2M business. Roughly plus or minus went on to the Jacobs system environment, that we are still working through the adjustments and necessary improvements as it relates to that go live in anticipation for the next 20% going live, which is probably at the end of our third quarter, which is coming up here shortly. And, and so there are some kind of moving pieces right now. We are expecting that at the end of the day, all of this is going to translate into lower DSOs is going forward we have to, because we saw the tweak up in Q1 to the levels that we believe we need to get down quickly.

Thank you.

There are no further questions in queue at this time. I turn the conference back over to our presenters.

Thank you. So as I reflect on our second quarter results we are immensely proud of our organizations. We are performing at a high level during a period of extraordinary transformation, where we are focusing and progressing the integration of CH2M successfully. We are executing on our three year strategy which we laid out on that Investor Day. We made an important acquisition with KeyW and the government services sector and obviously, completing the transformational divestiture of the ECR and separating that from Jacobs. And concurrent with all of these activities, people are focused delivering exceptional results. So the bottom line is we have extraordinary people delivering extraordinary outcomes. And I hope you are as excited as I am about our growth here at Jacobs. Thank you.

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