Q2 2024 Jacobs Solutions Inc Earnings Call

May 7, 2024

Krista: Thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to Jacobs Engineering's second quarter 2024 earnings conference call and webcast. All lines have been placed on mute to prevent any background noise.

Thank you for standing by my name is Christa and I will be your conference operator today at this time I would like to welcome everyone to Jacobs Engineering second quarter 'twenty 'twenty four earnings conference call and webcast all lines have been placed on mute to prevent any background noise. After it.

Krista: The speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time.

Krista: Simply press Star followed by the number one on your telephone keypad and if you would like to withdraw that question again press Star. One. Thank you I will now turn the conference over to you I am Banerjea Senior Vice President Finance Treasury Investor Relations and corporate development I Anne you may begin.

Krista: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press the star followed by the number one on your telephone keypad. And if you would like to withdraw that question, again, press star one. Thank you. I will now turn the conference over to Ayan Banerjee, Senior Vice President, Finance, Treasury, Investor Relations, and Corporate Development. Ayan, you may begin your presentation.

Krista: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press the star followed by the number one on your telephone keypad. And if you would like to withdraw that question, again, press star one. Thank you. I will now turn the conference over to I.N. Banerjee, Senior Vice President, Finance, Treasury, Investor Relations, and Corporate Development. I.N., you may begin your conference.

Ayan Banerjee: In your conference.

Ayan Banerjee: Thank you. Good morning.

I.N. Banerjee: Thank you. Good morning.

Ayan Banerjee: Thank you good morning, our earnings announcement was filed this morning, and we have posted a slide presentation on our website basically the investments during the call.

Ayan Banerjee: Our earnings announcement was filed this morning, and we have posted a slide presentation on our website, which we will reference during the call. I would like to refer you to slide 2 of the presentation material for information about our forward-looking statements, non-GAAP financial measures, and operating metrics. Turning to the agenda on slide three, speaking on today's call will be Jacobs CEO Bob Pragada and Interim CFO Kevin Berryman. Bob will begin by providing an overview of recent activities, then summarizing highlights from our second quarter results. Kevin will provide a more in-depth discussion of our financial metrics as well as a review of our balance sheet and cash. With that, I will turn it over to CEO Bob Pragada. Thank you.

Ayan Banerjee: I would like to refer you to slide two of the presentation material for information about our forward looking statements non-GAAP financial measures and operating metrics.

Ayan Banerjee: Turning to the agenda on slide three speaking on today's call there'll be Jacobs CEO Bob <unk>.

Ayan Banerjee: And interim CFO, Kevin Berryman, Bob will begin by providing an overview of recent activities then summarizing highlights from our second quarter results.

Ayan Banerjee: Kevin will provide a more in depth discussion offline financial metrics as well as a view of.

Ayan Banerjee: Our balance sheet and cash flow.

I.N. Banerjee: With that I'll turn it over to CEO, Bob Thank you Ian and good day, everyone and thank you for joining us to discuss our second quarter fiscal year 2020 for business performance I want to welcome Kevin Berryman previously, our President and Chief Financial Officer back following his appointment as interim CFO, Kevin brings a well.

Robert V. Pragada: Thank you, Ayan. Good day, everyone.

Robert V. Pragada: And thank you for joining us to discuss our second quarter of fiscal year 2024 business performance. I want to welcome Kevin Berryman, previously our President and Chief Financial Officer, back following his appointment as Interim CFO. Kevin brings a wealth of experience and expertise to this role, having served as our CFO for over nine years. During his tenure, he played a critical role in navigating significant transformations and driving growth across our organization, and most recently, he has demonstrated exceptional leadership in overseeing the ongoing separation of our critical mission solutions and cyber intelligence businesses, as well as its planned strategic merger with Dementor.

Ayan Banerjee: The experience and expertise to this role having served as our CFO for over nine years.

Ayan Banerjee: During his tenure he played a pivotal role in navigating significant transformation and driving growth across our organization and most recently has demonstrated exceptional leadership in overseeing the ongoing separation of our critical mission solutions and cyber intelligence businesses as well as planned strategic merger with the Minto.

Robert V. Pragada: As we move forward, we have initiated the search for a permanent CFO with the assistance of an executive search firm. We are working towards concluding this search expeditiously and are grateful that Kevin has agreed to remain at Jacobs through the close of the separation transaction to provide overlap with our next CFO and ensure a smooth transition. Now moving to slide four.

Ayan Banerjee: As we move forward, we have initiated a search for a permanent CFO with the assistance of an executive search firm.

Ayan Banerjee: We are working towards concluding the search expeditiously and are grateful that Kevin has agreed to remain at Jacobs through the close of the separation transaction to provide overlap with our next CFO and ensure a smooth transition.

Ayan Banerjee: Now moving to slide four.

Robert V. Pragada: I want to emphasize our solid progress on cost optimization. We continue to prioritize simplifying our business model, optimizing our cost structure, expanding margins, and accelerating profitable growth across our lines of business. Our strategic shift towards a less complex, higher value, and higher margin portfolio remains on track. We are actively identifying opportunities to streamline our operating model and enhance efficiency, while continuing to deliver world-class, value-added, scientifically-based, digitally-enabled solutions to create a more connected and sustainable world.

Ayan Banerjee: I want to emphasize our solid progress on the cost optimization plan, we continue to prioritize simplifying our business model optimizing our cost structure, expanding margin and accelerating profitable growth across our lines of business.

Ayan Banerjee: Our strategic shift towards a best complex higher value and higher margin portfolio remains on track, we are actively identifying opportunities to streamline our operating model and enhance efficiency, while continuing to deliver world class value added scientific base digitally enabled solutions to create a more connected.

Ayan Banerjee: And sustainable World.

Robert V. Pragada: We've made significant progress on our critical mission solutions and cyber and intelligence separation plan. We're pleased to report that we have now achieved a significant milestone by receiving all approvals and clearances under competition and foreign direct investment laws that are conditioned on the separation transaction. We are steadily advancing our Form 10 filing targeted for early summer. We expect to fulfill the remaining closing conditions and complete the transaction in the second half of the fourth quarter of fiscal year 2024. Turning to slide five in Q2.

Ayan Banerjee: We've made significant progress on our critical mission solutions and cyber and intelligence separation planning. We're pleased to report that we have now achieved a significant milestone by receiving all approvals and clearances under competition and foreign direct investment laws that are conditioned to the separation transaction we are.

Ayan Banerjee: Thirdly, advancing our form 10 filing targeted for early summer.

Ayan Banerjee: We expect to fulfill the remaining closing conditions and complete the transaction in the second half of the fourth quarter of fiscal year 2024.

Ayan Banerjee: Turning to slide five in Q2.

Robert V. Pragada: I am pleased to report solid second quarter consolidated revenue driven by 5% growth and 3% adjusted net revenue growth that is entirely organic. Backlog increased 2% year over year and gross margin in backlog increased approximately 50 basis points year over year, boosting confidence that our business will continue to deliver profitable growth. Turning to slide six.

Ayan Banerjee: I am pleased to report.

Ayan Banerjee: Second quarter consolidated revenue driven by 5% growth and 3% adjusted net revenue growth that is entirely organic.

Ayan Banerjee: Backlog increased 2% year over year and gross margin in backlog increased approximately 50 basis points year over year boosting confidence that our business will continue to deliver profitable growth.

Ayan Banerjee: Turning to slide six.

Robert V. Pragada: People and Places Solutions reported another quarter of solid top-line growth as we continue to execute against our strategy of prioritizing profitable growth over absolute growth, as demonstrated by PNPS, a record adjusted operating margin of 15.3% and strong adjusted operating profit growth of 15.3% year on year. We continue to drive organic revenue growth of up 7.5% and adjusted up 5.6% year-over-year. Our pipeline remains robust, and we continue to expect PMPS organic revenue growth of mid- to high-single digits in FY24.

Ayan Banerjee: People in places solutions line of business reported another quarter of solid topline growth as we continued to execute against our strategy of prioritizing profitable growth over absolute growth.

Ayan Banerjee: As demonstrated by Pmt's record adjusted operating margin of 15, 3% and strong adjusted operating profit growth of 15, 3% year on year.

Ayan Banerjee: We continue to drive organic revenue growth up seven 5% and adjusted up.

Ayan Banerjee: 6% year over year, our pipeline remains robust and we continue to expect <unk> organic revenue growth of mid to high single digits in FY 'twenty four.

Robert V. Pragada: During the quarter, we delivered several marquee wins across multiple core market sectors. In transportation, we were selected as Amtrak's delivery partner for the $6 billion Frederick Douglass Tunnel Program, America's busiest passenger railroad, one of the largest national transportation infrastructure investments, and the most significant IIJA award to date. The team will provide program and construction management services from contract initiation through service commissioning for two high-capacity tunnel tubes for electrified passenger trains. Improving Rail Systems and Enhancing Accessibility to Transform this 10 Mile Section of the Northeast Corridor.

Ayan Banerjee: During the quarter, we have delivered several marquee wins across multiple core market sectors and transportation, we have been selected as Amtrak delivery partner for the $6 billion Frederick Douglass Tunnel program America's busiest passenger railroad one of the largest national transportation and infrastructure investments.

Ayan Banerjee: And the most significant.

Ayan Banerjee: G Award to date.

Ayan Banerjee: The team will provide program and construction management services from contract initiation through service commissioning for too high capacity Tunneled tubes for electrified passenger trends.

Ayan Banerjee: Improving rail systems, and enhancing accessibility to transform the 10 mile section of the northeast corridor.

Robert V. Pragada: PA Consulting is an integral part of our program management team, demonstrating their emerging presence in transport in the U.S. and the power of our collaborative partnership. In aviation, we continue our long-term relationship with Los Angeles World Airport to provide program management services at Los Angeles International Airport. Infrastructure improvements at LAX will enhance the city's preparedness for upcoming sporting events, including the Los Angeles 28 Olympics.

Ayan Banerjee: <unk> consulting is an integral part of our program management team demonstrating their emerging presence in transport in the U S and the power of our collaborative partnership.

Ayan Banerjee: In aviation, we continue our long term relationship with Los Angeles World airports to provide program management services at Los Angeles International Airport Infra.

Ayan Banerjee: Infrastructure improvements at L. A X will enhance the city's preparedness for upcoming sporting events, including the Los Angeles 28 Olympics.

Robert V. Pragada: Water remains a critical growth catalyst with several strategic wins across our key geographies, further bolstering our position in the sector, as evidenced by our appointment by Miami-Dade County Water and Sewer Department to design upgrades for the county's three wastewater treatment plants, benefiting nearly 2.4 million residents and hundreds of thousands of visitors each year. Jacobs will incorporate Intelligent O&M, a digital one water solution from its suite of digital products, to provide our with competent decision making and to achieve greater efficiency.

Ayan Banerjee: Water remains a critical growth catalyst with several strategic wins across our key geographies further bolstering our position in this sector as evidenced by our appointment by Miami Dade County, water and sewer department to design upgrades for the county, three wastewater treatment plants benefiting nearly $2 4 million.

Ayan Banerjee: Residents and hundreds of thousands of visitors each year.

Ayan Banerjee: Jacobs will incorporate intelligent O&M, a digital one water solution from its suite of digital products to provide our are confident decision, making and to achieve greater efficiencies.

Robert V. Pragada: Reducing Wastewater Treatment Costs and Optimizing Operational Labor. Additionally, we were selected by United Utilities, one of the UK's largest lifted water companies, to its strategic solutions team supporting program optimization for major capital works through the AMP 8 and AMP 9 cycles, which cover the period from 2025 to 2035. Furthermore, we were selected by Water Corporation, the largest water utility in Western Australia, to design, build, operate, and maintain the Alkimos Seawater Desalination Plant in Perth, Australia.

Ayan Banerjee: Wastewater treatment costs and optimizing operational labor.

Ayan Banerjee: Additionally, we were selected by United Utilities, one of the Uk's largest listed water companies to strategic solutions teams supporting program optimization for major capital works through the Amp, eight and nine cycles, which cover the period from 2025 to 2035.

Ayan Banerjee: Furthermore, we were selected by water Corporation, the largest water utility in Western Australia to design build operate and maintain the most seawater desalination plant in Perth, Australia.

Robert V. Pragada: The project, part of an alliance with Water Corporation and ACCIONA, is expected to ultimately produce 26 billion gallons of drinking water. In recent weeks, significant regulatory steps have been taken in the environmental sector. The U.S. EPA set maximum contaminant levels for five PFAS compounds, the first major U.S. drinking water legislation in 20 years, and classified two PFAS compounds as hazardous under the Superfund program, expanding our potential for environmental management and compliance services.

Ayan Banerjee: The project part of an alliance with water Corporation NFC owner is expected to ultimately produce 26 billion gallons of drinking water.

Ayan Banerjee: In recent weeks significant regulatory steps have been taken in the environmental sector.

Ayan Banerjee: The U S. EPA set maximum contaminant levels for five P. Fast compounds. The first major U S drinking water legislation in 20 years and classified to PFS compounds as hazardous under the Superfund program, expanding our potential for environmental management and compliance services.

Robert V. Pragada: Internationally, the EU has also progressed, banning certain PFAS compounds and moving forward with risk evaluation. These developments are expected to increase demand for our consulting, engineering, and remediation services. We've been working with and advising our clients about how these anticipated regulations will impact them since discussions began some years ago. Now that the regulations are finalized, we're having robust conversations with our clients about their options to navigate this next chapter. PA Consultants is working with companies that have PFAS materials in their products and advising them on how to remove them from their products and supply chain, as well as assessing how to create alternative materials.

Ayan Banerjee: Internationally. The EU has also progressed.

Ayan Banerjee: <unk> certain PFS compounds and moving forward with risk evaluations.

Ayan Banerjee: These developments are expected to increase demand for our consulting engineering and remediation services.

Ayan Banerjee: We've been working with and advising our clients about how these anticipated regulations will impact them discussions began some years ago.

Ayan Banerjee: Now that the regulations are finalized we are having robust conversations with our clients about their options to navigate this next chapter.

Ayan Banerjee: P. A consultant is working with companies that have P fast materials in their products and advising on how to remove them from their product and supply chain.

Ayan Banerjee: As well as assessing how to create alternative materials.

Robert V. Pragada: With our expertise, strong market presence, and leading position, as demonstrated by our ongoing work with the Department of Defense, the UK government, and Australian aviation authorities, Jacobs is ready to lead in this evolving space. In life sciences, our overall pipeline continues to grow at double-digit rates year-over-year, driven by long-term relationships. There are significant opportunities in the pipeline, and we are well positioned for continued growth and CMS. Q2 revenue was up 3% year-over-year, and adjusted operating profit increased 10%, with approximately 50 basis points of margin expansion.

Ayan Banerjee: With our expertise strong market presence and leading position as demonstrated by our ongoing work with the department of Defense U K government and Australia.

Ayan Banerjee: The Asian authorities Jacobs, who is ready to lead in this evolving space.

Ayan Banerjee: In life Sciences, our overall pipeline continues to grow at double digit rates year over year, driven by long term relationships. There are significant opportunities in the pipeline and we are well positioned for continued growth.

Ayan Banerjee: And CMS Q.

Ayan Banerjee: Q2 revenue was up 3% year over year, and adjusted operating profit increased 10% with approximately 50 basis points of margin expansion.

Robert V. Pragada: The CMS team is executing well, and we continue to see several positive trends for long-term growth as the team prepares for the merger with its mentor. PA Consulting delivered an industry-leading adjusted operating margin of 20.5% with solid execution and cost-effectiveness. We continue to expect the remaining quarters in FY24 to exceed 20% adjusted operating margins. Our partnership with PA continues to be a differentiator for us, with some nice wins in the quarter, including the previously mentioned Frederick Douglass Tunnel and an appointment to the HM Revenue and Customs multi-billion pound framework in the UK, intended to upgrade software systems across the government agency.

Ayan Banerjee: The CMS team is executing well and we continue to see several positive trends for long term growth as the team prepares for the merger with momentum.

Ayan Banerjee: P consulting delivered among an industry, leading adjusted operating margin of 25% with solid execution and cost discipline.

Ayan Banerjee: We continue to expect the remaining quarters in FY 'twenty four to exceed 20% adjusted operating margin.

Ayan Banerjee: Our partnership with <unk> continues to be a differentiator for us with some nice wins in the quarter, including the previously mentioned Frederick Douglass tunnel and an appointment to the HCM revenue and customs multibillion pound framework in the U K intended upgrade software systems across the government agency.

Robert V. Pragada: Divergent Solutions delivered a solid adjusted operating margin performance of approximately 10 percent and adjusted operating profit growth of approximately 13 percent, excluding a large license sale to Palantir in the comparison period. Our suite of digital products and platforms is elevating the value we can provide to our clients globally. In summary, we remain well-positioned to capitalize on growth opportunities across our core market sector. Now, I'll turn the call over to Kevin to review our financial results in further detail.

Ayan Banerjee: <unk> solutions delivered a solid adjusted and adjusted operating margin performance at approximately 10% and adjusted operating profit growth, which would have been approximately 13% excluding a large license sale to talent here in the comparison period.

Ayan Banerjee: Our suite of digital products and platforms are elevating the value we can provide to our clients globally.

Ayan Banerjee: In summary, we remained well positioned to capitalize on the growth opportunities across our core market sectors.

I.N. Banerjee: Now I'll turn the call over to Kevin to review our financial results in further detail.

Ayan Banerjee: Thank you Bob.

Kevin C. Berryman: We are pleased with our Q2 results, leading to another strong quarter. We are steadfast in our commitment to providing high-value solutions with improved modernization.

Ayan Banerjee: We're pleased with our Q2 results.

Ayan Banerjee: Leading to another strong quarter.

Ayan Banerjee: We are steadfast in our commitment to providing high value solutions with improved tomorrow.

Kevin C. Berryman: This is supported by our continued emphasis on operational excellence and execution. So, let me begin by summarizing a few of the highlights for the quarter on slide seven. Second quarter gross revenue grew 5% year over year and adjusted net revenue grew 3%. Gap operating profit was $281 million for the quarter and included $53 million of amortization from acquired intangibles and $58 million of transaction restructuring and other costs, including $47 million associated with the separation transaction. We still expect our total restructuring costs to be approximately $275 million for the fiscal year, materially driven by the separation transaction.

Ayan Banerjee: Supported by our continued emphasis on operational excellence.

Ayan Banerjee: And execution.

Our adjusted operating margin was 11.3%. I'll discuss the underlying dynamics during the reporting segment review. GAP EPS from Continuing Operations was $1.29 per share and included. $0.28 impact related to the amortization charge of acquired intangibles, and $0.34 from transaction restructuring and other related costs, all of which were materially driven by the separation transaction. Excluding these items, second quarter adjusted EPS was $1.91, marking a 7% decrease compared to the previous year. When adjusting for last year's second quarter discrete tax benefit of $0.32, our current non-GAAP EPS represents an approximately 10% year-over-year increase. Looking forward, we anticipate maintaining an annual effective tax rate of 22% for the full fiscal year.

Kevin C. Berryman: Our adjusted operating margin was 11.3%. I'll discuss the underlying dynamics during the reporting segment review. GAP EPS from Continuing Operations was $1.29 per share and included $0.28 impact related to the amortization charge of acquired intangibles, and $0.34 from transaction restructuring and other related costs, all of which were materially driven by the separation transaction. Excluding these items, second quarter adjusted EPS was $1.91, marking a 7% decrease compared to the previous year. However, when adjusting for last year's second quarter discrete tax benefit of $0.32, our current non-GAAP EPS represents an approximately 10% year-over-year increase. Looking forward, we anticipate maintaining an annual effective tax rate of 22% for the full fiscal year.

Ayan Banerjee: So let me begin by summarizing a few of the.

Ayan Banerjee: The highlights for the quarter on slide seven.

Ayan Banerjee: Second quarter gross revenue grew 5% year over year and adjusted net revenue grew 3%.

Ayan Banerjee: GAAP operating profit was $281 million for the quarter and included $53 million of amortization from acquired intangibles.

Ayan Banerjee: And $58 million of transaction restructuring and other costs, including $47 million associated with the separation transaction.

Ayan Banerjee: We still expect our total restructuring cost to be approximately $275 million for the fiscal year materially driven by the separation transaction.

Ayan Banerjee: Our adjusted operating margin was 11, 3%.

Ayan Banerjee: I'll discuss the underlying dynamics during the reporting segment review.

Ayan Banerjee: GAAP EPS from continuing operations was $1 29 per share and included a 28% impact related to the amortization charge of acquired intangibles.

Ayan Banerjee: And 34 from transaction restructuring and other related costs, all of which were materially driven by the separation transaction.

Ayan Banerjee: Excluding these items second quarter adjusted EPS was $1 91.

Ayan Banerjee: <unk>, a 7% decrease compared to the previous year.

Ayan Banerjee: When adjusting for last year's second quarter discrete tax benefit of 32 since our current non-GAAP EPS represents approximately 10% year over year increase.

Ayan Banerjee: Looking forward, we and.

Ayan Banerjee: Chesapeake maintaining an annual effective tax rate of 22% for the full fiscal year.

Kevin C. Berryman: Q2 adjusted EBIT DA was $393 million and was up 10% year over year, representing a strong 11.3% adjusted net revenue. Finally, backlog was up 2% year-over-year. The revenue book-to-bill ratio was 0.96 times, with our gross profit and backlog increasing 4% year-over-year. Excluding a one-time change in government funding strategy with regard to space ISR programs, which I'll describe in more detail during my segment comments, our book-to-bill ratio for the quarter would have been approximately 1.06 times, with significant strength in pipeline growth and expected large wins in Q3 and Q4. We are particularly pleased with our performance and People and Places solution.

Ayan Banerjee: Q2, adjusted EBITDA was $393 million and was up 10% year over year.

Ayan Banerjee: Regarding a strong 11, 3% adjusted net revenue.

Ayan Banerjee: Finally backlog was up 2% year over year revenue book to Bill ratio was <unk> 96 times with our gross profit and backlog, increasing 4% year over year.

Ayan Banerjee: Excluding a one time change in government funding strategy with regard to space ISR programs, which I will describe in more detail. During my segment comments, our book to Bill ratio for the quarter would've been approximately one six times.

Ayan Banerjee: Significant strength and pipeline growth and expected large lands in Q3 and Q4.

Ayan Banerjee: Regarding the performance of our lines of business in the quarter, let's turn to slide eight.

Ayan Banerjee: We are particularly pleased with our performance and people in place of solutions.

Kevin C. Berryman: Q2 adjusted net revenue was up 5.6% year over year, and adjusted operating profit growth was strong at 15.3%. Reflecting our commitment to higher-end profitable growth, the segment saw a record adjusted operating margin of 15.3%, approximately 130 basis points year-over-year. We continue to see solid momentum of both growth and profitability in the business. Our backlog has grown by 2% year over year, and we've seen a 7% increase in gross profit on our backlog.

Ayan Banerjee: Q2, adjusted net revenue was up five 6% year over year.

Ayan Banerjee: Adjusted operating profit growth was strong at 15, 3%.

Ayan Banerjee: Reflecting our commitment to higher and profitable growth.

Ayan Banerjee: Segment saw a record adjusted operating margin of 15, 3%.

Ayan Banerjee: Approximately 130 basis points year over year.

Ayan Banerjee: We continue to see solid momentum in both growth and profitability in the business.

Ayan Banerjee: Backlog has grown by 2% year over year, and we've seen a 7% increase in the gross profit in our backlog.

Kevin C. Berryman: This improvement reflects our ongoing efforts to enhance the quality of our bids and project wins as we expect some critical large wins to occur in Q3. Moving to Critical Mission Solutions, our Q2 revenue increased 3.2% year-over-year, and our backlog was up 3.9%. Our adjusted operating profit was up 10.3% year over year, while CMS's adjusted operating margin rose by approximately 50 basis points year over year, as the business continued to find avenues of operational improvement.

Ayan Banerjee: That reflects our ongoing efforts to enhance the quality of our beds and project wins as we expect some critical large wins to occur in Q3.

Ayan Banerjee: Moving to critical mission solutions, our Q2 revenue increased three 2% year over year with backlog up three 9%. Our adjusted operating profit was up 10, 3% year over year, while CMS adjusted operating margin rose by approximately.

Ayan Banerjee: 50 basis points year over year.

Ayan Banerjee: Business continued to find avenues of operational improvements.

Kevin C. Berryman: While a recent program loss will put some short-term pressure on the second half, our recent successes and shorter cycle awards are expected to help mitigate the impact. Our work remains mission critical, allowing the business to show long-term resilience against shifts in government funding and program adjustments. Let's now focus on divergent solutions.

Ayan Banerjee: While our recent program loss will put some short term pressure on the second half our recent successes in shorter cycle awards is expected to help mitigate the impact.

Ayan Banerjee: Our work remains mission critical, allowing the business to show long term resilience against shifts in government spending and program adjustments.

Ayan Banerjee: Let's now focus on diversion solutions.

Kevin C. Berryman: During Q2, we observed an 11% year-over-year decrease in adjusted net revenue and a 24% decrease year-over-year in adjusted operating profit. Excluding a one-time Palantir license in the previous period, adjusted operating profit would have been up 13% year over year. While Backlog was negatively impacted by a change in funding strategy with the DoD on space-based IRR programs, we are encouraged by the positive momentum in near-term sales, which we believe will contribute to our ongoing success. Now, let's turn our attention to PA Consulting. Q2 saw a slight decline of 2% in year-over-year revenue, driven by a continued challenging macro environment in the consulting industry and a solid year-ago comparable.

Ayan Banerjee: During Q2, we observed an 11% year over year decrease in adjusted net revenue and 24% decrease year over year and adjusted operating profit <unk>.

Ayan Banerjee: Excluding a one time talented license in the previous period.

Ayan Banerjee: Adjusted operating profit would have been up 13% year over year.

Ayan Banerjee: While backlog was negatively impacted by a change in funding strategy with the Doj on space based Ais.

Ayan Banerjee: Our programs, we are encouraged by the positive momentum in near term sales, which we will believe will contribute to our ongoing success.

Ayan Banerjee: Now, let's turn our attention to Pega consulting Q2 saw a slight decline of 2% and year over year revenue driven by a continued challenging macro environment in the consulting industry.

Kevin C. Berryman: And a solid year ago comparable.

Kevin C. Berryman: However, cost and execution disciplines help deliver a strong adjusted operating margin of 20.5%, a 270 basis point increase from the previous sequential quarter. As we emphasized during our last earnings call, our industry position is uniquely differentiated, and our work is both purposeful and critical. As a result, PA continues to deliver ongoing positive momentum and bookings and pipeline growth. We remain confident in our ability to deliver strong adjusted operating profit margins targeting above 20% for the second half of the year. Our adjusted unallocated corporate costs were $59 million in Q2.

Ayan Banerjee: However, cost and execution discipline helped deliver a strong adjusted operating margin of 25%.

Ayan Banerjee: 270 basis point increase from the previous sequential quarter.

Ayan Banerjee: As we emphasized during our last earnings call our industry position is uniquely differentiated and our work is both purposeful and critical.

Ayan Banerjee: As a result Ta continues to deliver ongoing positive momentum in bookings and pipeline growth.

Kevin C. Berryman: We remain confident in our ability to deliver strong adjusted operating profit margins.

Kevin C. Berryman: <unk> targeting above 20% for the second half of the year.

Kevin C. Berryman: Our adjusted unallocated corporate costs were $59 million in Q2.

Kevin C. Berryman: We continue to make progress on simplifying and optimizing our operating model and driving costs down. We expect this line item, post-separation, to trend towards $50 million per quarter or $200 million annual. Turning to slide nine to discuss our balance sheet and cash, After delivering a strong free cash flow in Q1, our quarterly free cash flow was negative $71 million in Q2, and has working capital increased to the plan levels from the exceptional performance in Q1.

Kevin C. Berryman: We continue to make progress on simplifying and optimizing our operating model and driving costs down.

Ayan Banerjee: We expect this line item post separation.

Ayan Banerjee: <unk> trend towards $50 million per quarter or $200 million annually.

Ayan Banerjee: Turning to slide nine to discuss our balance sheet and cash flow.

Kevin C. Berryman: After delivering a strong free cash flow in Q1, our quarterly free cash flow was negative $71 million in Q2.

Ayan Banerjee: Working capital increased to planned levels from the exceptional performance in Q1.

Kevin C. Berryman: Despite this impact in the second quarter, our reported free cash flow conversion for the first half of the year has remained at approximately 100%. As a result, we are well positioned to deliver on our forecast, maintaining 100% reported, as well as adjusted, free cash flow conversion for the full year. Regarding capital allocation, we opportunistically repurchased $95 million of shares during the quarter, reflecting our commitment to delivering a consistent return of capital to our shareholders.

Kevin C. Berryman: Despite this impact in the second quarter, our reported free cash flow conversion for the first half of the year has remained at approximately a 100%.

Kevin C. Berryman: And as a result, we are well positioned to deliver on our forecast maintaining 100% reported as well as adjusted free cash flow conversion for the full year.

Kevin C. Berryman: Regarding capital allocation, we opportunistically.

Kevin C. Berryman: Opportunistically repurchased $95 million of shares during the quarter.

Kevin C. Berryman: Our commitment to delivering consistent return of capital to our shareholders.

Kevin C. Berryman: We still have $679 million remaining under our current repurchase authorization, and as we have said, we will remain dedicated to returning capital to shareholders while remaining committed to maintaining an investment-grade credit profile. We ended the quarter with cash of $1 billion and gross debt of $3 billion. Our Q2 net debt to adjusted EBITDA of approximately 1.3 times remains a clear indication of the continued strength of our balance sheet. Given the strength of the balance sheet, we feel comfortable with a portion of our debt having become current in Q2.

Kevin C. Berryman: Still have $679 million remaining under our current repurchase authorization and as we have said, we will remain dedicated to returning capital to shareholders, while remaining committed to maintaining an investment grade credit profile.

Kevin C. Berryman: We ended the quarter with cash of $1 billion and gross debt of $3 billion.

Kevin C. Berryman: Our Q2 net debt to adjusted EBITDA of approximately one three times remains a clear indication of the continued strength of our balance sheet.

Kevin C. Berryman: Given the strength of the balance sheet, we feel comfortable with a portion of our debt having become current in Q2.

Kevin C. Berryman: We have ample financing, using proceeds from our upcoming separation transaction and or accessing our revolver. As of the end of Q2, approximately 37% of our debt is tied to floating rate debt, and our weighted average interest rate was approximately 5.2%. Finally, given our strong balance sheet and year-to-date free cash flow, we remain committed to our quarterly dividends. The board has authorized a quarterly dividend of $0.29, an 11.5% year-over-year increase, to be paid on June 21st. Bob, back over to you. Thank you, Kevin.

Kevin C. Berryman: We have ample options.

Kevin C. Berryman: Financing.

Kevin C. Berryman: Using proceeds from our upcoming separation transaction.

Bob: Or accessing our revolver.

Kevin C. Berryman: As of the end of Q2, approximately 37% of our debt is tied to floating rate debt and our weighted average interest rate was approximately five two.

Kevin C. Berryman: 2%.

Kevin C. Berryman: Finally, given our strong balance sheet and year to date free cash flow.

Bob: We remain committed to our quarterly dividend.

Speaker Change: The board has authorized a quarterly dividend of 2009.

Bob: And 11, 5% year over year over year increase to be paid on June 21.

Kevin C. Berryman: Bob back over to you. Thank you Kevin turning to slide 10.

Robert V. Pragada: Thank you, Kevin. Turning to slide 10.

Robert V. Pragada: Due to our continued momentum across our business, we feel confident in our ability to reach our previously stated objectives. As a result, we are narrowing the range for fiscal year 2024 adjusted EBITDA to $1.54 billion to $1.585 billion and adjusted EPS to $7.80 to $8.10, representing 9% and 10% growth year over year at the midpoints, respectively. This guidance incorporates Q2 adjusted EPS of $1.91 and a 26 to 27% adjusted effective tax rate each quarter for the remainder of the fiscal year.

Bob: Due to our continued momentum across our business, we feel confident in our ability to reach our previously stated objectives.

Robert V. Pragada: As a result, we are narrowing the range for fiscal year 2024, adjusted EBITDA to 154 billion to $1 $5 85 billion and adjusted EPS was $7 80.

Robert V. Pragada: $8 10 reps.

Robert V. Pragada: Representing a 9% and 10% growth year over year at the mid points respectively.

Robert V. Pragada: This guidance incorporates Q2, adjusted EPS of $1 91, and a 26% to 27% adjusted effective tax rate each quarter for the remainder of the fiscal year.

Robert V. Pragada: Additionally, this represents a 13% EPS growth in the second half of fiscal year 2024 versus a year ago period.

Robert V. Pragada: Additionally, this represents 13% EPS growth in the second half of fiscal year 2024 versus the year-ago period. In closing, we are invigorated as demand for our science-based, digitally-enabled solutions remains strong, with clients continuing to select Jacobs to address their most complex challenges. We are exceptionally well positioned to capitalize on the momentum in the critical infrastructure market, and we remain confident in our ability to grow market share and fulfill the needs of our clients across key sectors. Operator, we will now open the call to questions.

Robert V. Pragada: In closing we are an invigorated as demand for our science based digitally enabled solutions remained strong with clients continuing to select Jacobs to address their most complex challenges.

Robert V. Pragada: We are exceptionally well positioned to capitalize on the momentum and the critical infrastructure market and we remain confident in our ability to grow market share and fulfill the needs of our clients across key sectors.

Speaker Change: Operator, we will now open the call for questions.

Operator: Thank you. We will begin the question and answer session now. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw that question, simply press star 1 again. If you are called upon to ask your question and are listening via the loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Also, please limit your questions to one and a single follow-up. Your first question comes from the line of Andy Kaplowitz with Citigroup. Please go ahead.

Speaker Change: Thank you we will begin the Shannon answer session. If you would like to ask a question. Please press star one on your telephone keypad to raise your hand and join the queue.

Operator: If you would like to withdraw that question simply press Star. One again, if you are called upon to ask your question and our listening via loud speaker on your device. Please pickup your handset and ensure that your phone is not on mute when asking your question.

Operator: And please limit your questions to one and a single follow up.

Operator: Your first question comes from the line of Andy Kaplowitz with Citigroup. Please go ahead.

Operator: Everyone.

Robert V. Pragada: How's your morning, Andy? Good morning, Andy.

Andrew Alec Kaplowitz: Hi, Good morning, Andy Good morning, Andy Bubba, Kevin can you give us more color into what's going on with Jays backlog and how to think about it going forward. I know you said that people in places of about 2% year over year, but can you elaborate a bit more on the larger prospects you're talking about for Q3 do you see a nice acceleration in backlog growth in the second half.

Robert V. Pragada: Bob or Kevin, can you give us more color into what's going on with J's backlog and how to think about it going forward? I know that backlog in people and places is up about 2% year over year, but can you elaborate a bit more on the larger prospects you're talking about for Q3? Do you see a nice acceleration in backlog growth in the second half for people and places? And then maybe just a change in the space-based ISR impacting divergent. I think that business is going with CMS and the DOL, correct?

Robert V. Pragada: Often people in places and then maybe just a change in the space based Ais solar impacting divergent.

Robert V. Pragada: This is dealing with CMS and the deal correct, but could you give us more color on what happened there.

Robert V. Pragada: But could you give us more color on what happened there?

Robert V. Pragada: Sure. So maybe I'll start off with PNPS, and then Kevin can talk about kind of the whole thing. So PNPS, Andy, a couple of things. One is timing. We've got, let me first off by saying that, as a gross number, the PNPS backlog represents a record backlog for this segment since we formed it nearly five years ago. So, kind of point one there. As far as growth is concerned, we kind of got tied a little bit to the timing of some of the larger programs that drive the backlog.

Speaker Change: Sure. So maybe I'll start off with with PPS and then Kevin can talk about kind of the entirety, so when PPS.

Robert V. Pragada: A couple of things one is timing.

Robert V. Pragada: We've got.

Robert V. Pragada: Let me first off by saying that as a as a.

Kevin: Gross number the <unk> backlog represents a record backlog for this segment since we formed it nearly five years ago, So kind of 0.1, there as far as the growth.

Robert V. Pragada: We've kind of got tied a little bit and some timing of some of the larger programs that drive the backlog or book to Bill is still over one in the second half.

Robert V. Pragada: You know, our book to bill is still over one, and in the second half, with expected awards, some of which we've already received in the first month of the quarter, we're going to see a real acceleration in the backlog in PNPS. Kevin, do you want to talk about the overall as well as the divergent?

Kevin: With expected awards, some of which we've already received in the first month of the quarter.

Kevin: We're going to see a real acceleration in the backlog in <unk>.

Robert V. Pragada: Jim you want to talk about.

Kevin: The overall as well as as well as divergent, yes look I think.

Kevin C. Berryman: Yeah, look, I think the dynamics associated with Divergent, and you're right, that part of the business is going to be part of the separation. So it's in the parameters of the separation transaction, Andy.

Kevin: The dynamics associated with divergent and you're right that part of the business is going to be part of the separation. So it's in the parameter of the separation transaction.

Kevin: Andy and look there was a change in funding stream.

Kevin C. Berryman: And look, there was a change in funding strategy whereby the technology and associated projects that we have are still considered viable and probably the best technologies to be utilizing going forward, but because of deciding how they were going to be funding them, DOD is handing over that responsibility to the intelligence community. So while long term we have a reduction, well, short term we have a reduction in our backlog because the DOD is handing that over, we're starting to right now see an immediate buildback up in some of those projects being now embedded into the intelligence community.

Kevin C. Berryman: <unk> added GE, whereby the technology and associated projects that we have.

Kevin C. Berryman: Are still considered viable and probably the best technologies to be utilizing going forward, but because of deciding how they were going to be funding it.

Kevin C. Berryman: D is is pending.

Kevin C. Berryman: Handing over that responsibility to the intelligence community. So while long term we haven't.

Kevin C. Berryman: A reduction while short term, we have a reduction in our backlog because the Dod is handing that over we're starting right now see immediate build back up.

Kevin C. Berryman: And some of those projects being now embedded into the intelligence community while it represented.

Kevin C. Berryman: While it represents certainly a delay in some of the burn of that project, our expectation is longer term that DVS will start to see that same backlog come back into their their kind of backlog over the course of the next year plus, and consequently, we'll have to build up the burn once again. And so if you think about those two dynamics, I think those are kind of short term dynamics, when you include the people in places. And when you see the outlook for the rest of the year, we're feeling pretty good about our backlog growth and book the bill over the balance of the year. Very

Kevin C. Berryman: Certainly a delay in some of the burn of that project. Our expectation is longer term that DVS will start to see that same backlog come back into their there.

Kevin C. Berryman: Kind of backlog over the course of the next year, plus and consequently will have to build up the burn once again.

Kevin C. Berryman: So if you think about those two dynamics I think.

Kevin C. Berryman: Those are kind of short term dynamics. When you include the people in places and when you see the outlook for the rest of the year, we're feeling pretty good about our backlog growth and book to bill over the balance of the year very helpful. And then just people places margins, obviously very good performance I know you'd been sort of allocating.

Robert V. Pragada: Very helpful. And then just People and Places margins, obviously very good performance. I know you've been sort of allocating corporate costs, you know, maybe, you know, how much did you end up allocating to the segment? And can you talk about whether you're actually on a better trajectory than you guided when you talked about it being better than the 14.6 that you did last year in People and Places? Yes.

Robert V. Pragada: Corporate costs, maybe you know how.

Robert V. Pragada: How much did you end up allocating to the segment and can you talk about whether you're actually on a better trajectory than you guided when you talked about it being better than the $14. Six that you did last year in people in places.

Robert V. Pragada: Yeah, so on the first part, that allocation hasn't changed since we talked about it last quarter, so that's remained consistent, and we're not going to change that philosophy. Really, this quarter, the mix that we saw, specifically around water and life sciences, when you think about it, those are two segments, Andy, that are growing at double-digit rates, and from a pipeline standpoint, both are, really, the pipelines are doubling on a year-on-year basis, so that mix of higher-margin work that's coming in is really driving that.

Speaker Change: Yes, so on the first part.

Robert V. Pragada: Allocation hasnt changed since since we talked about it last quarter. So that's that's remained consistent.

Robert V. Pragada: And we're not going to change that philosophy really this this quarter the mix that we saw specifically around water and life Sciences. Let me think about those are two segments, Andy that are growing at double digit rates and from a pipeline standpoint.

Robert V. Pragada: Both are nearly the pipelines are doubling.

Robert V. Pragada: On a year on year basis. So.

Robert V. Pragada: That mix of higher margin.

Robert V. Pragada: Work, that's coming in is really driving that.

Robert V. Pragada: That growth.

Robert V. Pragada: Thanks, guys. Kevin, welcome back, even though you really didn't leave.

Speaker Change: Thanks, guys, Kevin welcome back, even though you really didnt leave.

Operator: Thanks, Janet. Your next question comes from the line of Judah Aronovitz with UBS. Please go ahead.

Robert V. Pragada: Okay.

Kevin: Thanks, Andy.

Judah Aronovitz: Your next question comes from the line of Judah Irina Vic with UBS. Please go ahead.

Judah Aronovitz: Hey, Thanks for taking the question calling in for Steve Fisher.

Judah Aronovitz: First question is what has changed in the background in the second half that drove your guidance change.

Operator: Can you say that again? I'm sorry. Sorry, I didn't follow the question. Yeah, sorry. I guess what's changed in the background that drove your guidance?

Judah Aronovitz: And can you say that again I'm, sorry, sorry, again follow the question yes.

Kevin C. Berryman: Sorry, I didn't follow the question. Yeah, sorry, I guess what's changed in the background that drove your guidance change, like anything going on in the second half that is maybe different from your prior expectations? No, look, I think at the end of the day, we feel as if we're being prudent in our guidance, and it still represents a 13% year over year kind of increase in EPS. So, I think at the end, we're sitting here saying that's a good ending result.

Operator: Alright, I guess, what's changed in the background that drove your guidance change like anything going on in the second half that is.

Kevin C. Berryman: This may be different than your prior expectations.

Kevin C. Berryman: No look I think at the end of the day.

Kevin C. Berryman: We feel as if we're being prudent in our guidance and it still represents a 13% year over year kind of increase in EPS. So so I think at the at the end.

Kevin C. Berryman: We're sitting here, saying that's a good answer.

Kevin C. Berryman: Ending result, we're being prudent in the establish of that and of course, that's offsetting some of the things that we know are already in our numbers. The inventory write offs that we had in the first quarter. So so I think it's quite quite actually a positive.

Kevin C. Berryman: We're being prudent in the establishment of that. And of course, it's offsetting some of the things that we know are already in our numbers, the inventory write-off that we had in the first quarter. So I think it's actually quite positive. Okay, that's helpful.

Kevin C. Berryman: Okay. That's helpful and my second question is about project activity, how is that playing out in your business and what kind of projects are you, saying notes due and how often are you, saying now thank you.

Robert V. Pragada: Yeah, project selectivity is, we've always had that. And, that has become a kind of a primary focus for us as the opportunities have increased. Talk a little bit about water and life sciences. In our transportation business right now, our wind rates have been the highest, it could say the highest in the market.

Kevin C. Berryman: Yes project selectivity.

Robert V. Pragada: Always have that and that has become a kind of a primary focus.

Robert V. Pragada: For us the opportunities have increased talk a little bit about water and in life Sciences in our transportation business right now.

Robert V. Pragada: Our win rates have been the highest it can stay in their highest in the market.

Robert V. Pragada: They've been the highest that we've experienced and a lot of that comes from because it's a subjective evaluation.

Robert V. Pragada: And they've been the highest that we've experienced. And a lot of that comes from subjective evaluation, you know, from what we put our effort and our money behind on trending. The probably the biggest component of that is around long-term client relationships. We're not out looking for work. You know, we've been with our clients for decades. And if you think about 3700 clients around the world, and over the course of the last 20 years, you know, that's 2% client turnover. And so when we're with a client, we're there for the long term.

Robert V. Pragada: What we what we put our effort and our money behind.

Robert V. Pragada: On <unk>.

Robert V. Pragada: Probably the biggest component of that is around long term client relationships. We're not out looking for work we've done with our clients for for decades, and if you think about 3700 clients around the world and over the course of the last 20 years, that's a 2% client turnover and so we're with the client. We're therefore for the long term.

Operator: Your next question comes from the line of Michael Dudas with Vertical Research. Please go ahead.

Robert V. Pragada: Your next question comes from the line of Michael Dudas with vertical research. Please go ahead.

Robert V. Pragada: Good morning, Bob and Kevin, and welcome back as well. Thanks, Bob. Bob, you mentioned in your prepared remarks, life science and an expanded pipeline, and maybe maybe generally life science, semi-data center, some of the more facilities work. The conversion timing and level relative to those businesses, I certainly have a diversity help, so maybe you can share a little bit about how that plays out maybe through the second half, which might incorporate some of those projects you're talking about and still the momentum from the client work that you're seeing into 20

Michael Stephan Dudas: Good morning, Bob and Kevin and welcome back as well.

Mike: Hi, Mike.

Speaker Change: Thanks, Mike.

Robert V. Pragada: Bob You mentioned in your prepared remarks life science.

Robert V. Pragada: Expanded pipeline and maybe maybe generally in life science semi data centers some of the more facilities work.

Robert V. Pragada: The conversion timing and level relative to those businesses.

Robert V. Pragada: Certainly having the diversity helps so maybe you can share a little bit about how that plays through and maybe through the second half which might incorporate some of those projects youre talking about and still the momentum from the client work that you're seeing into 2025.

Robert V. Pragada: Sure. Um, so maybe I'll start with life sciences and then talk about semiconductors and kind of the electronics world right now. Um, you know, I mentioned this before, Mike, within our life sciences world, you've heard a lot about GOP1 and everything that's going around the obesity drug. If you look at the two biggest ones that are in that space, you know, our work that we do for them represents nearly over 50% of the capital that they put in place.

Robert V. Pragada: Sure.

Bob: So maybe I'll start with life Sciences, and then talk about kind of the electronics World right now.

Robert V. Pragada: You mentioned this before Mike within our life Sciences World, you've heard a lot about GOP, one and everything that's going around your BC drug. If you look at the two biggest ones that are in that space.

Robert V. Pragada: Our work that we do for them represents nearly over 50% of the capital that they put in place. So that work continues to be a big driver, but what's also happening is two other dynamics one is around oncology.

Robert V. Pragada: So, that work continues to be a big driver, but what's also happening is two other dynamics. One is around oncology. Um, there are quite a few advances that are happening around oncology. And so timing on those was maybe a little slower than, uh, than, than we wanted over the course of the last few quarters.

Robert V. Pragada: There is quite a few advances that are happening around oncology and so timing on those.

Robert V. Pragada: Maybe a little slower than that.

Robert V. Pragada: And then 100 over the course of the last few quarters, but going into the second half those jobs are right in front of us and we're well positioned for those the last dynamic around life Sciences.

Robert V. Pragada: But going into the second half, those jobs are right in front of us, and we're well positioned for them. The last dynamic around life sciences is just sheer capacity. You hear the CEOs of life sciences companies and biotech companies talk about capacity as the biggest choke point.

Robert V. Pragada: Just sheer capacity here the Ceos of life Sciences companies and biotech companies talk about capacity.

Robert V. Pragada: You know, the contract manufacturing world is on the rise as well. So, we'll have some good news here in the second half, or actually in Q3, around what's going on in that contract manufacturing space. Semiconductor, you know, a lot of stuff in the news right now about the ubiquitous world of chip manufacturing and how AI is driving not just chip manufacturing but also data centers. We're seeing that, you know, the chip stack money has now been delivered to the market. And some of the largest players have benefited from that.

Robert V. Pragada: As the biggest chokepoint.

Robert V. Pragada: Contract manufacturing World is on the rise as well so we have some good news here in the second half.

Robert V. Pragada: Q3 around what's going on in that contract manufacturing space semiconductor.

Robert V. Pragada: A lot of stuff in the news right now about the ubiquitous world of chip manufacturing and how AI is driving not just chip manufacturing, but also data centers, we're seeing that the chips Act money has now been delivered.

Robert V. Pragada: <unk> to the market and some of the largest players have benefited from that so we're seeing projects that we've already been involved with talk about phase III.

Robert V. Pragada: Of those and so.

Robert V. Pragada: We'll have more to say as those become public in the second half, but it's really the entirety of the ecosystem of the chip manufacturing and semiconductor world starting from the R&D facilities through manufacturing and now.

Robert V. Pragada: So, you know, we're seeing projects that we've already been involved in, uh, talk about phase two of those. And so, you know, we'll have more to say as those become public in the second half, but it's really the entirety of the ecosystem of the chip manufacturing and semiconductor world, starting from, you know, the R&D facility through manufacturing. And now, you know, you'll hear a lot more about test and assembly, and those test and assembly facilities coming to the US.

Robert V. Pragada: You'll hear a lot more about test and assembly.

Robert V. Pragada: So, we're excited about what's going on. And then in data centers, you know, the power usage of these is creating opportunities for us with regard to power and cooling. The water requirements are now what could be, you know, one gigawatt data center. So, really, really positive story there.

Robert V. Pragada: Those test and assembly facility is coming to the U S. So we're excited about what's going on and then in data centers. The power usage of BS are creating opportunities for us with regards to power and cooling the water requirements are now what could be.

Robert V. Pragada: One gigawatt data centers, so really really positive story there.

Robert V. Pragada: Thank you, Bob. And my follow-up is maybe for either one on PA. How do you see the macro in the second half of the year? And certainly seems like internal opportunities are helping drive that more on the margin. And is there an opportunity to get some more for maybe profit growth, along with some net revenue growth into 2025, as you're looking at today?

Speaker Change: Thank you Bob and my follow up is maybe for either one.

Robert V. Pragada: <unk>.

Robert V. Pragada: How do you see the macro in the second half of the year and certainly seems like internal opportunities are helping drive that more on the margin and is there an opportunity to get some more for maybe profit growth along with some net revenue growth into 2025 as youre looking at today.

Kevin C. Berryman: Yeah, maybe I'll make a couple comments on the opportunities and on the backlog. I mean, Kevin can talk about the margins.

Bob: Yeah, maybe I'll make a couple comments on the on the opportunities in on backlog and then Kevin can talk about the margins.

Kevin C. Berryman: <unk>.

Robert V. Pragada: What gets embedded in is the PA backlog was actually up 8% year over year. And so we're starting to see that momentum of those opportunities and those collaborative opportunities come through. So that's exciting news there. And, you know, a lot around the UK macro has been driving the business. With at least, hopefully some clarity that there'll be an election in the UK in the second half of the year, we're already starting to see the pipeline grow in the sales performance in the last month of the quarter. It kind of drove the business. So the momentum is there, and then given we're talking about March, Yeah, look, I think that team has done really well.

Speaker Change: What gets embedded in as the backlog was actually up 8% year over year.

Robert V. Pragada: And so we're starting to see that momentum of those opportunities in this collaborative opportunities come through so that's that's exciting news there.

Robert V. Pragada: But a lot around the UK macro has been driving the business with at least hopefully some clarity that there'll be an election in the U K in the second half of the year, we're already starting to see that pipeline grow in the sales performance in the last month of the quarter kind of drove the business. So.

Robert V. Pragada: The momentum is there and then given all the talk about the margin.

Kevin C. Berryman: Yeah, look, I think that team has done a really good job, Mike, relative to right-sizing the organization, addressing some of the challenges in the overall consulting industry, which obviously is impacting PA to a certain extent, but they're very well positioned, especially in the UK market. And so we're feeling good about their ability to be delivering that 20% plus margin in the back half of the year. And so, longer term, I think that that translates into numbers going on from there as well.

Speaker Change: Yes look I think that team has done a really good job, Mike relative to right sizing the organization getting some of the challenges in the overall consulting industry, which obviously is impacting ta to a certain extent, but they are very well positioned especially in the U K market and so.

Kevin C. Berryman: We're feeling good about their ability to be delivering that 20% plus margin in the back half of the year and so on.

Kevin C. Berryman: Longer term I think that that translates into numbers going on from there as well.

Kevin C. Berryman: And look, I think as we enter the end of the calendar year, we do have the dynamic of the UK election. So we're going to have to watch that carefully to see what impacts there are. But what we have right now is pretty clear visibility on our Q3 and Q4 reported numbers in terms of the health of the PA business. Not substantial growth, but certainly good, solid execution for the balance of the fiscal year for us.

Kevin C. Berryman: And look I think as we enter the end of the calendar year, we do have the dynamic of the U K election. So we're going to have to watch that carefully to see what impacts are but.

Kevin C. Berryman: What we have right now is pretty clear visibility on our Q3 and Q4, our reported numbers in terms of the health of the business not substantial growth, but certainly.

Kevin C. Berryman: Good solid.

Kevin C. Berryman: Execution in the balance of the fiscal year for us.

Speaker Change: Thank you gentlemen.

Operator: Your next question comes from the line of Jamie Cook with Truist Securities. Please go ahead.

Kevin C. Berryman: Your next question comes from the line of Jamie Cook with <unk> Securities. Please go ahead.

Jamie Lyn Cook: Hi, good morning. A couple questions. One on... People in places, the margins implied in the back half of the year, Kevin, I think are down relative to where we were in the second quarter. I know you spoke of mix.

Jamie Lyn Cook: Hi, good morning couple of questions.

Jamie Lyn Cook: One on.

Jamie Lyn Cook: But with backlog, with gross margins and backlog being up, I'm just wondering, you know, what's going on there? Or is there just some level of conservatism in your margin guidance? And then my second question, just on the large awards that you're expecting, in the back half of the year. I'm assuming that you don't need any of these awards to, you know, make your guide for 2024. So I guess I'll start with those. Thank you.

Jamie Lyn Cook: People and places the margins implied in the back half of the year, Kevin I think are down relative to where we were in the second quarter I know you spoken next.

Jamie Lyn Cook: But with backlog with gross margins and backlog being up I'm, just wondering what's going on there or is there just some level of conservatism in your in your margin guidance and then my second question just on the large awards that you're expecting in the back half of the year I'm, assuming that you don't need any of these awards Q.

Jamie Lyn Cook: You can make your guide for 2024, so I guess I'll start with that thank you.

Kevin C. Berryman: Well, let me start on the first one. Look, I think the 15.3% that we saw people in places is a record, and it's at a high level. And consequently, I don't think we can assume that every quarter is going to be 15.3%, just because of the factors associated with the cost of, you know, mix and what actually hits during a particular quarter. But I will say that as we think about our margin profile, we're feeling better about it today than we felt last quarter. So I can characterize it from that perspective.

Speaker Change: Well, let me start on the first one look I think 15, 3% that we saw people in places.

Kevin C. Berryman: Is a record is at a high level and consequently, I don't think we can assume that every quarter is going to be 15, 3%.

Kevin C. Berryman: Just because of the factors associated with.

Kevin C. Berryman: Cost of <unk>.

Kevin C. Berryman: Mix and whats what actually hits during a particular quarter I will say that as we think about our margin profile, we're feeling better about it today than we felt last quarter. So I can characterize it from that perspective doesn't mean, we're going to hit 15, 3% in Q3 and Q4, but I think we're going to end.

Kevin C. Berryman: Doesn't mean we're going to hit 15.3% in Q3 and Q4, but I think we're going to end the year at numbers that are going to be pretty darn attractive, and and then

Kevin C. Berryman: The year at numbers that are going to be.

Kevin C. Berryman: Pretty darn attractive.

Robert V. Pragada: And then on the awards, Jamie, you know, those... Those are our guide. When I say, are they part of the guide or not part of the guide, you know, our guide incorporates a probability weighting for the award, but we're feeling optimistic about not just the award, anticipated awards, but the pipeline. The pipeline is looking extremely robust in PNPS.

Speaker Change: And then on the awards Jamie.

Robert V. Pragada: Goes R R.

Robert V. Pragada: When you say there are they part of the guide or not part of the guide our guide incorporates a probability weighting for four.

Robert V. Pragada: The award, but we're feeling we're feeling optimistic about not just the award anticipated awards, but the pipeline.

Robert V. Pragada: The pipeline is.

Robert V. Pragada: An extremely robust and PPS.

Jamie: Okay. Thank you.

Robert V. Pragada: Yeah.

Operator: Your next question comes from the line of Sangita Jain with KeyBank Capital Markets; please go ahead.

Speaker Change: Your next question comes from the line of <unk> Jain with Keybanc capital markets. Please go ahead.

Sangita Jain: Yes, hi. Thanks so much for taking my questions. So I just wanted to ask about Saudi Arabia and the kingdom seems to be scaling back on parts of the NEON project. So I just wanted to hear what you guys are hearing and what your exposure there might look like.

Sangita Jain: Hi, Thanks, so much for taking my questions.

Sangita Jain: I just wanted to ask about Saudi Arabia in the Kingdom seems to be scaling back on parts of the neon projects. So I just wanted to hear what you guys are hearing and what your exposure there might look like.

Robert V. Pragada: Sure. So maybe I'll just talk about Broadly Saudi Arabia and then specifically about NEOM. Broadly Saudi, the pipeline of work continues. And it's, for us, it's a diverse pipeline; we don't index towards a specific type of offering. We've got value-added services that we provide to the, you know, the entire lifecycle of the programs. And if you look at the pipeline, the infrastructure component of it, the transportation, whether it be in aviation or in rail, as well as the water opportunities that we've had, have been pretty robust.

Speaker Change: Sure. So maybe I'll just talk about broadly, Saudi and then specifically on <unk>.

Robert V. Pragada: Broadly Saudi the pipeline of work continues and it's for US it's a diverse pipeline, we don't index towards.

Robert V. Pragada: Specific type of offering we've got value added services that we provide to the entire lifecycle of big.

Robert V. Pragada: Programs and if you look at the pipeline the infrastructure component of it the transportation, whether it be in aviation or.

Robert V. Pragada: So, you know, we just announced a major expansion of Riyadh, the new Riyadh airport that's going on that's in full force, as well as the water infrastructure that we're putting in place. Our exposure on NEOM, even with the pullback on NEOM, as far as 170 kilometers, the work that's going on right now has not abated. And continues to go on schedule for not just the personnel that we're dedicating to the job but the growth that we see in the job as well.

Robert V. Pragada: And in rail as well as the water opportunities that we've had have been pretty robust so.

Robert V. Pragada: We just announced a major expansion of the Riyadh, the new Riyadh Airport, that's going on that's in full force.

Robert V. Pragada: As well as the water infrastructure that we're putting in place our exposure on neon even with the pullback on EMEA as far as the 170 kilometers. The work that's going on right now has not.

Robert V. Pragada: Art has not abated and continues to go on schedule for not just the personnel that we're dedicating towards the job, but the growth that we see in the job as well.

Sangita Jain: That's super helpful. And if I can ask, you gave us a rundown of a lot of your key and market sectors, maybe just a little bit on the power and energy markets and what you may be seeing here as well as in the UK, on power transmission and renewables. Chair. So, uh, overall.

Speaker Change: That's super helpful and if I can ask you.

Sangita Jain: You gave us a rundown of a lot of your key end markets, maybe just a little bit on the power and energy market and what you may be seeing there here as well as in the U K and on power transmission and renewables.

Robert V. Pragada: The work that we're seeing both in Southeast Asia, in Australia, New Zealand, and in Europe, and Europe is clearly driven by the geopolitical kind of impact that it's had on the energy transition, that continues. The interconnectors that we are not just in the middle of in Europe, but the additional pursuits that we have in place kind of put some tailwinds there. I'd say in the U.S., it's been not just a market on its own, but it's also been an enabling market.

Robert V. Pragada: Sure. So, overall, it was solid.

Sangita Jain: Sure. So overall solid the work that we're seeing both in Southeast Asia, and Australia, New Zealand and in Europe and.

Robert V. Pragada: In Europe, clearly driven by the geopolitical kind of impact that it's had on energy transition that continues the interconnectors that we are not just in the middle of in Europe, but the additional pursuits that we have in place.

Robert V. Pragada: Put some some tailwind there I'd say in the U S. It's been not just a market on its own but it's also been an enabling market our expertise around renewables.

Robert V. Pragada: Our expertise around renewables and then taking that energy expertise and taking it to areas such as data centers and the EV ecosystem with regard to transportation, that's probably been a greater level of focus in the U.S. So, kind of the diversity of our skill sets is really helping that energy and power group that we have. Again, it started off from a smaller base, but it's doubled in size just in a year. Thank you so much.

Robert V. Pragada: Renewables, and then taking that energy expertise and picking into areas such as data centers.

Robert V. Pragada: And the EV ecosystem.

Robert V. Pragada: Regarding the transportation.

Robert V. Pragada: It's probably been a greater level of focus in the in the U S. So kind of the diversity of our skill sets is really hoping that.

Robert V. Pragada: That energy and power group that we have again it started off from a smaller base, but it's doubled in size just in a year.

Robert V. Pragada: Thank you so much.

Operator: Your next question comes from the line of Chad Dillard with Bernstein. Please go ahead.

Robert V. Pragada: Your next question comes from the line of Chad Dillard with Bernstein. Please go ahead.

Charles Albert Edward Dillard: Hi, good morning, guys.

Charles Albert Edward Dillard: Hi, Good morning, Jeff morning, Jud.

Charles Albert Edward Dillard: So Bob, in your prepared remarks, you talked about the PFAS legislation that was just handed down, just trying to get a sense for how to think about timing for potential awards in your backlog, what the design cycle for that, and then you also talked about, you know, how Jacobs is positioned to win.

Charles Albert Edward Dillard: So Bob.

Charles Albert Edward Dillard: In your prepared remarks, you talked about the key fast legislation that was just turned it down.

Speaker Change: Just trying to get a sense for how to think about timing.

Charles Albert Edward Dillard: For potential awards in your backlog like whats the design cycle for that and then can you.

Charles Albert Edward Dillard: And also talk about how Jacobs is positioned to win there.

Robert V. Pragada: Yeah, so Chase, you've probably heard this before, kind of the $200 billion that spans over the course of the next 25 years, you know, that is across multiple end markets. And so we can see a direct timeline to that over a long period of time as regulations continue to become more and more part of the law.

Bob: Yeah. So.

Charles Albert Edward Dillard: And you've probably heard this before kind of the 200 billion.

Robert V. Pragada: Bands over the course of the next 25 years.

Robert V. Pragada: It is across multiple end markets and so we.

Robert V. Pragada: We can see a direct pipeline to that.

Robert V. Pragada: Over.

Robert V. Pragada: Long period of time as regulations continue to become more and more part of the world.

Robert V. Pragada: The way PFAS, you know, within the DOD agencies, specifically the Navy and the Air Force, as well as the Corps of Engineers, is showing up as individual pursuits. And, you know, it's kind of in that $75 to $100 million of annual revenue for us as an offering. What you don't see is probably the bigger piece of PFAS, which is in drinking water. And so the work that we do for PFAS remediation and PFAS consulting that we do within a water offering or, you know, within a water treatment or wastewater reclamation project continues to grow.

Robert V. Pragada: The way PFS.

Robert V. Pragada: Within within the Dod Vod agencies, specifically the Navy and.

Robert V. Pragada: In the airports as well as the core of engineers, that's showing up as individual pursuits, and it's kind of in that $75 million to $100 million of of annual revenue for us.

Robert V. Pragada: As an offering what you don't see is probably the bigger piece of pizza switches in drinking water and so the work that the P fast remediation and PFS consulting that we do within a water offering or within a.

Robert V. Pragada: Whether it be water treatment or or wastewater reclamation project that continues to grow so to look at this as an incremental.

Robert V. Pragada: So to look at this as an incremental is going to be, you know, a little cloudy, but to see it as a catalyst for, you know, scope growth on existing work is kind of how we're looking at it. And these are, like I said in the first question, clients that we've had for a long time and will continue to be a critical part of our offering.

Robert V. Pragada: Going to be a little cloudy, but to see it as a catalyst for scope growth on existing work.

Robert V. Pragada: How we're looking at it and and these are like I said on the first question. These are clients that we've had for a long time.

Robert V. Pragada: We'll continue to be a critical part of our offering.

Charles Albert Edward Dillard: For example, and then just over on the infrastructure side, particularly on transportation, can you talk about how your pipeline's evolving? Has it changed, you know, this quarter versus a year ago? Sure.

Robert V. Pragada: That's helpful and then just over on the infrastructure side, particularly.

Charles Albert Edward Dillard: Particularly on transportation can.

Charles Albert Edward Dillard: Can you talk about like how your pipelines evolving hasnt changed this quarter versus a year ago.

Charles Albert Edward Dillard: Any color on that would be helpful.

Robert V. Pragada: Sure. Pipeline growth is there. Probably more indexed towards the U.S. in what's the IAJ focus that's come through, and you're seeing that in some of our awards. So I'd say the larger rail opportunities we talked about last quarter, and we talked about this quarter, those continue. The highways work is continuing to grow. And then, you know, in Australia and in the Middle East as well, we're seeing continued growth in transport.

Charles Albert Edward Dillard: Sure.

Charles Albert Edward Dillard: Pipeline growth is there probably more indexed towards the U S.

Robert V. Pragada: And.

Robert V. Pragada: Yes.

Robert V. Pragada: Focus thats come through and you're seeing that in some of our awards, so I'd say it'd be.

Robert V. Pragada: The larger rail opportunities, we've talked about it last quarter, we talked about this quarter. Those continue the highway work is continuing to grow.

Robert V. Pragada: And then in Australia.

Robert V. Pragada: And then in the Middle East as well, we're seeing continued growth in transport I would say that the areas that.

Robert V. Pragada: I'd say that the areas that, you know, as there's more stability that comes within the U.K., that we can see growth coming in would be in the U.K. And then what's differentiating us amongst our, you know, not just our competitive pool, but creating more value for our clients is how we're enabling that with our digital platforms. So, you know, the use of streetlight data, not just in our own work but how that's kind of, you know, almost revolutionizing our offering to clients is something that we've got firmly embedded in the U.S., but we're now starting to see use cases emerge both in the U.K. as well as in the Middle East, and soon to come in Australia.

Robert V. Pragada: As there is more stability that comes within the U K that we could see the growth coming in would be in.

Robert V. Pragada: Would be in the U K.

Robert V. Pragada: And then what's differentiating us amongst our our metros are competitive pool, but creating more value for our clients is how we're enabling that with our digital platforms.

Robert V. Pragada: <unk>.

Robert V. Pragada: The use of streetlight data not just in our own work, but how that's kind of.

Robert V. Pragada: Almost revolutionizing our offering to clients.

Robert V. Pragada: Is it something that.

Robert V. Pragada: You've got it firmly embedded in the U S. But we're now starting to see use cases come about both in the U K as well as in.

Robert V. Pragada: In the middle East and soon to come in Australia.

Speaker Change: Great. Thank you.

Operator: Your next question comes from the line of Justin Hauke with Baird. Please go ahead.

Robert V. Pragada: Your next question comes from the line of Justin Hauke with Baird. Please go ahead.

Justin P. Hauke: Yeah, good morning. Thanks for taking my question. I just wanted to clarify one thing on the guidance, the CMS outlook for the back half of the year. I think, you know, previously, you guys were talking about kind of a mid single-digit constant currency growth rate. It's a little bit below in the first half, but I think you were talking about some program losses that are going to pressure the second half. And so I just wanted to make sure that we understood kind of what that commentary meant and what your expectations are for revenue growth in the second half of the year at CMS.

Justin P. Hauke: Yes. Good morning, Thanks for taking my question I just wanted to clarify one thing on the guidance the CMS outlook for the back half of the year. I think previously you guys were talking about kind of a mid single digit.

Justin P. Hauke: Constant currency growth rate.

Justin P. Hauke: It's a little bit below in the first half, but I think you were talking about some program losses that are going to pressure. The second happened. So I just wanted to make sure that we understood kind of what that commentary to what your expectations are for the revenue growth in the back half of the year at CMS.

Kevin C. Berryman: Yeah, Justin, we did have a loss, one that was somewhat sizable, which impacts the, I would say the short term, and I would call it short term Q3, Q4. While we have a lot of short cycle awards that are filling in the gap, fundamentally offsetting and mitigating the impacts of that, it probably puts us in the short run to be more flattish as opposed to seeing growth of single digits, or mid single digits.

Speaker Change: Yeah, Justin we did have a loss one one that was.

Kevin C. Berryman: Somewhat sizable which impacts I would say the short term and I would call short term Q3 Q4.

Kevin C. Berryman: While we have a lot of short cycle awards that are filling in the gap fundamentally offsetting and mitigating the impacts of that.

Kevin C. Berryman: It probably puts us in the short run to be more flattish as oppose to seeing.

Kevin C. Berryman: The growth of single digits mid single digits. So I think that's the dynamic at least in Q3 Q4, I would remind you that this is the business that is going to be transferred over but I would tell you. The team is doing amazing job in selling in and positioning for exiting 2024.

Kevin C. Berryman: So I think that's the dynamic, at least in Q3, Q4, I would remind you that this is the business that is going to be transferred over. But I will tell you, the team is doing an amazing job of filling in and positioning for exiting 2024, putting itself back in a place to be seeing incremental growth in 2025.

Kevin C. Berryman: Putting itself back in a place to be seen incremental growth in 2025.

Robert V. Pragada: And maybe just one thing to add, the operational efficiency that the team has really delivered through, you know, that double-digit bottom-line growth for this quarter, and we mentioned it last quarter as well, with operating margins that are now the highest that we've seen in the business, is another real highlight for what we're doing within CMS.

Kevin C. Berryman: And maybe just one thing to add the operational efficiencies that the team has really delivered through.

Robert V. Pragada: Double digit bottom line growth for this quarter, and we mentioned that last quarter as well with operating margins that are now the highest that we've seen in the business is another real highlight four for what we're doing within CMS.

Kevin C. Berryman: And that's a good point, Bob, because, you know, we shouldn't be seeing impacts on the margin profile, even though we're discussing this one item. But the team has done a really nice job on the margin front.

Speaker Change: And that's a that's a good point, Bob because we shouldn't be seeing impacts on the margin profile, even though we're discussing this one item, but but the team has done a really nice job on the margin front.

Bob: Okay. Thank you for clarifying and then I guess my second one is just to ask on the corporate unallocated costs.

Justin P. Hauke: unallocated costs. The trending down to the $50 million, you're not expecting that line item to come down until post-separation, though, right? So this kind of $58 million that you've had the last two quarters, that's kind of the run rate for the balance of the year. And then with the spin, that's when you would expect the step function change in the first quarter of 25.

Kevin C. Berryman: The trending down to the $50 million.

Justin P. Hauke: You are not expecting that line item to come down until post separation that right. So there's kind of 58 million that you've had the last few quarters thats kind of the run rate for the balance of the year and then with the spend Thats. When you would expect like the step function change in the first quarter of 'twenty five is that does that.

Kevin C. Berryman: Is that still the right way to kind of think about it? That's correct. Okay. Great. Thank you very much. I appreciate it.

Justin P. Hauke: Still the right way to kind of think about it.

Speaker Change: That's correct.

Kevin C. Berryman: Okay.

Speaker Change: Great. Thank you very much I appreciate it.

Speaker Change: Thanks Jesse.

Operator: Your next question comes from the line of Bert Subin with Stiefel. Please go ahead. Bobcat

Kevin C. Berryman: Your next question comes from the line of Bert <unk> with Stifel. Please go ahead.

Bert William Subin: Bob, Kevin, good morning. This is Sahej on for Bert. Hi, good morning.

Bert William Subin: Bob Kevin Good morning, it's a hedge on for Bert.

Sahej: Hi, good morning, Hi.

Sahej Singh: Seems like a lot of good questions have been asked, so I will ask about the IHA ramp. I think we've heard commentary more broadly from the industry and then even through you guys, of an expectation of IAJ funding ramping up to around 26 or 2027. Are you still seeing that trend? Are you seeing that trend faster than expected? Any color there would be?

Speaker Change: It seems like a lot of good questions have been asked.

Sahej Singh: I will ask about IHA ramp I think we've heard commentary.

Sahej Singh: More broadly from the industry and then.

Sahej Singh: <unk> been through you guys.

Sahej Singh: Of an expectation of IHA funding ramp to around 26 or 2027 are you still seeing that trend are you seeing that trend faster than expected any color there would be helpful.

Robert V. Pragada: No, it's kind of still occurring to me that. The trend on the new awards and how that money flows, 26-27. I think we mentioned last quarter that, you know, that looks like it could get extended, but that's not because it's slowing down right now; it's because it started later than what was anticipated. But these awards that we've not just talked about today but also what we've, you know, telegraphed for the second half of the year, those are really being catalyzed by IAJ.

Sahej Singh: No, it's kind of still trending to that.

Robert V. Pragada: We.

Robert V. Pragada: The trend on the New awards, and how that money flows 'twenty six 'twenty seven.

Robert V. Pragada: I think we mentioned last quarter that that looks like it could get extended but that's not because it's slowing down right now because it started later than anticipated but.

Robert V. Pragada: These awards that we've not just talked about.

Robert V. Pragada: Today, but also what we've telegraphed for for the second half of the year those are really been being catalyzed by Io Jay.

Sahej Singh: That's helpful, thank you. And then maybe a follow-up on... Prior question related to unallocated expenses. You know, you've given good visibility into the post spin. I think I look at it as I was quickly doing the math, you know, you're trending about 2% on a trailing 12 month sales. So maybe on a percentage basis trailing 12 month post spin, where are you looking to get? I think it's been elevated post your PA consulting acquisition in 21.

Speaker Change: That's helpful. Thank you and then maybe a follow up on the.

Sahej Singh: The prior question related to unallocated expenses.

Sahej Singh: You've given good visibility into the post spin I think I look at it as I was quickly doing the math.

Sahej Singh: You are trending at about 2% on a trailing 12 month sales.

Sahej Singh: So maybe on a percentage basis trailing 12 month post spin where you're looking to get.

Sahej Singh: I think it's been elevated post <unk>.

Sahej Singh: Consulting acquisition in 'twenty one.

Kevin C. Berryman: Oh, but look, um... I'll have the We're not targeting a percentage; we're targeting an absolute number, which we've communicated. There are a lot of moving pieces to that, which I just want to highlight. For example, we're conveying cost to the new organization. Part of our corporate infrastructure is going to be conveyed, and there is going to be TSA revenue that we will receive from the transition period. So there's a lot of moving pieces, but I think it's safe to say that we're going to be targeting that number to be at that 50 net number at the end of the day.

Speaker Change: Well look.

Speaker Change: They will have the we're not targeting a percentage we're targeting an absolute number which we've communicated there is a lot of moving pieces in that which I just want to highlight for example will contain cost of the new organization part of our corporate infrastructure is going to be conveyed there is going to be TSA.

Kevin C. Berryman: Revenue that we will receive from from.

Kevin C. Berryman: The transition period, so there's a lot of moving pieces, but I think it's safe to say that we're going to be targeting that number to be at that 50 net number at the end of the day.

Kevin C. Berryman: As we go into 2025, we've got a lot of work to be able to execute against that. And look, the amount of effort that's being expended in this company right now, relative to ensuring that we're creating a standalone entity that's going to be able to, you know, day one, look to accelerate its level of growth, given its effective focus on the government service side, is not inconsequential. And I just want to reinforce that because it has impacts relative to the short-term ability for us to further reduce numbers.

Kevin C. Berryman: As we go into 2025 got a lot of work to be able to execute against that and look the amount of.

Kevin C. Berryman: Effort that's.

Kevin C. Berryman: Being extended in this company right now relative to ensure that we're creating a stand alone entity, that's going to be able to.

Kevin C. Berryman: Dave one.

Kevin C. Berryman: Look to accelerate its level of growth given its effective focus on on the governments service side.

Kevin C. Berryman: Is not inconsequential and I just wanted to reinforce that because it has impacts relative to the short term ability for us to.

Kevin C. Berryman: To further reduce numbers at the end of the day.

Kevin C. Berryman: And at the end of the day, I can't tell you how pleased and proud I am, actually, of the teams. Not only those that are actually dedicated to the separation and stand up management office, but the rest of the organization, which is getting pulled away from their day jobs to help support the separation. So I'm feeling really good about it.

Kevin C. Berryman: I can't tell you how pleased and.

Kevin C. Berryman: Proud I am actually of the teams not only those that are actually dedicated to the separation.

Kevin C. Berryman: In standup management office, but the rest of the organization, which is getting pulled away from their day jobs to help support the separation so feeling really good about it.

Sahej Singh: Thank you. And then just last one for me is, you know, you mentioned Riyadh airport. I think I saw some news flow on Dubai potentially expanding their airport. Is that a project that you guys are actively interested in pursuing in or in conversations? Around any color there would be incrementally helpful as a tailwind into the Middle East region.

Kevin C. Berryman: Thank you and then just last one for me is you mentioned the Riyadh Airport.

Sahej Singh: I think I saw some news flow on Dubai potentially expanding their airport is that.

Sahej Singh: Project that you guys or.

Sahej Singh: <unk> interested in pursuing an hour in conversations.

Sahej Singh: Around any any color there would be incrementally helpful. As a tailwind into the middle East region more specifically.

Robert V. Pragada: Yes and yes. It's, you know, our presence in Dubai for multifaceted infrastructure work, water, transportation, and within transportation, aviation is reaching. We've been there for decades, and that will continue to be a primary area of focus for us within the Middle East. And so the answer is yes.

Speaker Change: Yes, and yes.

Sahej Singh: Our presence in Dubai on multifaceted infrastructure work water transportation and within transportation and aviation.

Robert V. Pragada: Is.

Robert V. Pragada: He is reaching.

Robert V. Pragada: We've been there for decades and that will continue to be.

Robert V. Pragada: Primary area of focus for us within the Middle East and so the answer is yes.

Sahej Singh: Okay, thank you so much.

Speaker Change: Okay. Thank you so much.

Operator: Your next question comes from the line of Jerry Revich with Goldman Sachs. Please go ahead.

Sahej Singh: Your next question comes from the line of Jerry Revich with Goldman Sachs. Please go ahead.

Jerry David Revich: Yes, hi. Good morning, everyone. Hi, Gary.

Jerry David Revich: Yes, hi, good morning, everyone.

Operator: Character.

Robert V. Pragada: Bob, I'm wondering if you could just talk about the data center opportunity for you guys. What does the scope of CapEx look like for data centers for you guys compared to semi-capital equipment in your market share? You know, when we last spoke, the outlook for data center CapEx was, I don't know, probably 30 percent lower. I'm wondering, as you think about the outlook for advanced facilities, could growth actually accelerate if your content for data centers is remotely similar to what it is for semi-capital equipment?

Jerry David Revich: Bob I'm wondering if you could just talk about the.

Robert V. Pragada: The data center opportunity.

Robert V. Pragada: You folks what is the scope of Capex looks like it looks like for data centers for you folks compared to semi cap equipment and your market share.

Robert V. Pragada: When we last spoke the outlook forward datacenter Capex was I don't know probably 30% lower so I'm wondering as you think about the outlook for advanced facilities.

Robert V. Pragada: Growth actually accelerate if.

Robert V. Pragada: Your content on data centers is remotely similar to what it is for the semi cap equipment.

Jerry David Revich: Yeah, Jerry, if you look at data centers as a percentage of, from a deployed capital perspective, a percentage of, kind of call it, the electronics universe, it is just this is not Jacobs. It's just a minority share of, you know, the billions that get put into chip manufacturing and then the entire lifecycle of the chip delivery profile to the market.

Robert V. Pragada: Yes, Jeremy if you look at data centers as a percentage of from a deployed capital perspective of a percentage of kind of call. It B b.

Jerry David Revich: The electronics universe.

Jerry David Revich: It is just this is not Jacobs.

Jerry David Revich: It is a minority share of the billions that get put into chip manufacturing and then the entire lifecycle of the of the chip delivery profile to.

Jerry David Revich: To the market. So that's kind of 0.1, but the rate of growth really driven by by AI in the.

Robert V. Pragada: So that's kind of point one, but the rate of growth really driven by AI and the needs for these data centers is what's driving our business. So we see that growing. You know, from a pure design perspective, these are not overall, the facility itself is not the real complicated component. What's becoming more complicated are the power needs and the cooling needs, and the water needs. So that's what our teams are really focused on.

Jerry David Revich: And the needs for the data centers is what's driving our business. So we see that growing from a pure design perspective. These are not overall the facility itself is not the real complicated component, what's becoming more complicated or the power needs.

Robert V. Pragada: And the cooling water needs. So that's what our teams are really focused in on you've seen probably some of the bigger power management companies.

Robert V. Pragada: You've probably seen some of the bigger power management companies, Eaton and Schneider, and others talk about, you know, how it's driving their business that goes into the hardware that's going into data centers. But the consultancy piece: power in water usage is going to be a bigger piece of how we, you know, kind of expand that value proposition there.

Robert V. Pragada: Eaton and Schneider and others talk about how it's driving their business that goes into the hardware that's going into data centers with the consultancy piece.

Robert V. Pragada: That power and water usage is going to be a bigger piece of how we kind of expand that value proposition there.

Jerry David Revich: And in terms of within people in places, you know, really good top-line growth, and you mentioned there are some bookings coming up, can you just calibrate us? Which of your end markets were the biggest drivers of growth in the quarter? And based on what's in backlog and bookings, which markets do you expect to be above segment average growth over the next couple of quarters? Water and Life Sciences.

Robert V. Pragada: And in terms of within people in places really good topline growth and you mentioned there's some.

Jerry David Revich: Bookings coming up can you just calibrate us which of your end markets were the biggest drivers of growth in.

Jerry David Revich: In the quarter and based on what's in backlog and bookings.

Jerry David Revich: Which markets do you expect to be above segment average growth over the next couple of quarters.

Robert V. Pragada: Water and Life Sciences. You know, those two right now, even as far as rates at the point in time Q2, that represent probably over 50% of that PNPS growth. And then when we look at the pipeline moving forward, you know, those are pipelines that are, as I mentioned before, doubling in size. And that's global. So areas that might have some geoeconomic challenges, such as the UK, if you look at the water bookings and the growth of water in those geographies, that's growing.

Jerry David Revich: Water and life Sciences, those two right now even as far as rates.

Robert V. Pragada: <unk> Q2 that represents probably over 50% of that PPS.

Robert V. Pragada: Growth and then when we look at the <unk>.

Robert V. Pragada: Pipeline moving forward. Those are those are pipelines that are as I mentioned before doubling in size and thats.

Robert V. Pragada: That's global so areas that might have some some some geo economic.

Robert V. Pragada: Challenges such as the U K, if you look at the water.

Robert V. Pragada: Bookings and the growth in water in those geographies, that's growing and of course, that's been a.

Robert V. Pragada: And of course, that's been a driver both in the U.S. as well as in Australia and the Middle East, too. So life sciences, Europe and the U.S., water globally. Thank you. Your next question comes from the line of Josh Sullivan.

Robert V. Pragada: A driver both in the U S as well as in Australia, and the Middle East too so.

Joshua Ward Sullivan: Life Sciences, Europe, and U S water globally.

Joshua Ward Sullivan: Thank you.

Operator: Your next question comes from the line of Josh Sullivan with The Benchmark Company. Please go ahead. Hey, good morning. Hey, guys, can you just, can you just...

Robert V. Pragada: Your next question comes from the line of Josh Sullivan with the Benchmark Company. Please go ahead.

Joshua Ward Sullivan: Hey, good morning.

Joshua Ward Sullivan: Hey, Jonathan can you just.

Joshua Ward Sullivan: Can you just comment maybe on labor availability inflation retention on a geographic basis, whereas it is still hot or is it getting a little better.

Operator: Yeah.

Joshua Ward Sullivan: We're taught all over. And, you know, as far as wage inflation is concerned, we still have it, but our ability to kind of look at value-added solutions for our clients and look, you know, at how we can continue to deliver at a price point that drives our capital deployment from our clients. That has not really changed as we continue to innovate in that space. What's really helped us, Josh, has been our global delivery model.

Joshua Ward Sullivan: With hard all over.

Joshua Ward Sullivan: And as.

Joshua Ward Sullivan: As far as <unk>.

Joshua Ward Sullivan: Wage inflation, we still it's there, but our ability to kind of look at value added solutions for our clients and looking.

Joshua Ward Sullivan: On how we can continue to deliver at a price point that that drives our capital deployment from our clients that has not that has not really changed as we continue to innovate in that space, which really helped us Josh has been our global delivery model. We look at the engagements that we have whether it be <unk>.

Joshua Ward Sullivan: You know, if we look at the engagements that we have, whether they be, you know, smaller consultancy engagements or larger programs, these jobs and these engagements with our clients have literally got people from all over our, you know, our global delivery platforms. And so, you know, and we're going to continue with that because it's not necessarily the cost arbitrage that might be an outcome, but it's the talent arbitrage. And our talent is literally in every geography that we have today.

Joshua Ward Sullivan: Waller consultancy engagements or larger programs. These these jobs and these these engagements with our clients have literally we've got people from all over our global delivery platforms.

Joshua Ward Sullivan: So.

Joshua Ward Sullivan: And we're going to continue with that because it's not necessarily the cost arbitrage that might be an outcome, but it's the talent arbitrage in our talent is literally in every geography that we have today so.

Joshua Ward Sullivan: It has not really been a big issue for us.

Speaker Change: Got it and then just on the short cycle wins, you mentioned in the comments there were specifically were those any structural shift in focus or is it just opportunistic.

Joshua Ward Sullivan: So, you know, it has not really been a big issue for us. And then just on the short cycle wins you mentioned in the comments there, you know, where specifically were those any structural shift in focus, or is that just up? No, it's probably been focused around telecom, weapons sustainment, and then, you know, some scope growth that we see in our aerospace work as well.

Joshua Ward Sullivan: No, it's probably been focused around telecom weapons sustainment.

Joshua Ward Sullivan: And then some scope growth that we see in our aerospace work as well.

Speaker Change: Got it thank you for the time.

Operator: That concludes our question and answer session, and I will now turn the conference back over to Bob Pragada for closing remarks.

Joshua Ward Sullivan: That concludes our question and answer session and I will now turn the conference back over to Bob Pagano for closing remarks.

Robert V. Pragada: Thank you everyone for joining our earnings call. I really look forward to providing further updates and visiting with all of you and investors and analysts in the months to come. And I look forward to engaging firsthand.

Robert V. Pragada: Thank you everyone for joining our earnings call really look forward to providing further updates and visiting with all of you investors and analysts in the months to come and look forward to engaging firsthand. Thank you everyone.

Operator: This concludes today's conference call. Thank you for your participation, and you may now disconnect.

Speaker Change: This concludes today's conference call. Thank you for your participation and you may now disconnect.

Operator: Okay.

Operator:

Operator: [music].

Operator: Okay.

Q2 2024 Jacobs Solutions Inc Earnings Call

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