FY2023 Separation Roadmap
Use of Non-GAAP financial measures and operating metrics (cont.)
Adjustments to derive adjusted net earnings from continuing operations and adjusted EPS from continuing operations are calculated on an after-tax basis.
Free cash flow (FCF) is calculated as cash flow from operations as reported on the statement of cash flows, less additions to property and equipment.
Adjusted FCF is calculated as Free Cash Flow adjusted for certain non-recurring adjustments (such as restructuring, transaction, legal and tax related items).
Adjusted EBITDA is calculated by adding income tax expense, depreciation expense and interest expense, and deducting interest income from adjusted net earnings from continuing operations.
Certain percentage changes are quantified on a constant currency basis, which provides information assuming that foreign currency exchange rates have not changed between the prior and current periods.
For purposes of constant currency calculations, we use the prior period average exchange rates as applied to the current period adjusted amounts.
We believe that the measures listed above are useful to management, investors and other users of our financial information in evaluating the Company's operating results and understanding the
Company's operating trends by excluding or adding back the effects of the items described above and below, the inclusion or exclusion of which can obscure underlying trends. Additionally, management
uses such measures in its own evaluation of the Company's performance, particularly when comparing performance to past periods, and believes these measures are useful for investors because they
facilitate a comparison of our financial results from period to period.
This presentation also contains certain operating metrics which management believes are useful in evaluating the Company's performance. Backlog represents revenue or gross profit, as applicable, we
expect to realize for work to be completed by our consolidated subsidiaries and our proportionate share of work to be performed by unconsolidated joint ventures. Gross margin in backlog refers to the
ratio of gross profit in backlog to gross revenue. Book to bill refers to the ratio of quarter over quarter change in backlog plus revenue recognized in the quarter to revenue recognized in the quarter. For
more information on how we determine our backlog, see our Backlog Information in our most recent annual report filed with the Securities and Exchange Commission. Cash conversion refers to a ratio of
cash flow from operations to GAAP net earnings from continuing operations. FCF Conversion refers to a ratio of FCF to adjusted net earnings attributable to Jacobs from continuing operations. Adjusted
FCF conversion refers to a ratio of adjusted FCF to adjusted net earnings attributable to Jacobs from continuing operations. We regularly monitor these operating metrics to evaluate our business, identify
trends affecting our business, and make strategic decisions.
The Company provides non-GAAP measures to supplement U.S. GAAP measures, as they provide additional insight into the Company's financial results. However, non-GAAP measures have limitations as
analytical tools and should not be considered in isolation and are not in accordance with, or a substitute for, U.S. GAAP measures. In addition, other companies may define non-GAAP measures differently,
which limits the ability of investors to compare non-GAAP measures of the Company to those used by our peer companies.
The following tables reconcile the components and values of U.S. GAAP earnings from continuing operations before taxes, income taxes from continuing operations, net earnings attributable to Jacobs
from continuing operations and Diluted Net Earnings from Continuing Operations Per Share (which we refer to as EPS from continuing operations) to the corresponding "adjusted" amount and revenue to
adjusted net revenue. For the comparable period presented below, such adjustments consist of amounts incurred in connection with the items described above. Amounts are shown in thousands, except for
per-share data (note: earnings per share amounts may not add down due to rounding).
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