Q1 2025 Jacobs Solutions Inc Earnings Call
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Krista: Ladies and gentlemen, 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 the Jacobs Solutions Fiscal First Quarter 2025 Earnings Conference Call-In Webcast.
Krista: All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session.
Speaker Change: If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. And if you'd like to withdraw your question, again, press star one. Thank you. And I would now like to turn the conference over to Bert Subin, Senior Vice President,
Investor Relations. Bert, you may begin.
Bert Subin: Thank you, Krista, and good morning, everyone. Our earnings announcement and 10Q were filed this morning, and we have posted a slide presentation on our website, which we'll 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.
Speaker Change: Speaking on today's call will be Jacobs Chair and CEO, Bob Pragada, and CFO, Venk Nathamuni. Bob will begin by providing an overview of recent activities and highlights from our first quarter results.
Venk Nathamuni: Venk will then provide a detailed review of our financial performance, including commentary on end market trends, cash flows, and balance sheet data.
Venk Nathamuni: Finally, Bob will provide closing remarks, and then we'll open up the call for questions. With that, I'll turn it over to our chair and CEO, Bob Pragada. Good day, everyone, and thank you for joining us to discuss our first quarter 2025 business performance.
Venk Nathamuni: Starting on slide 4, I want to highlight that we are excited to be hosting our 2025 Investor Day on February 18th in Miami.
Venk Nathamuni: Our simplified structure, global delivery model, and end-to-end expertise position us extremely well to build on a great start to FY25.
Venk Nathamuni: We see a bright future ahead as we are creating value for our shareholders over the long term and at our Investor Day, we plan to lay out our vision for Jacob's next exciting chapter. We look forward to providing you with more detail in just two weeks.
Venk Nathamuni: Turning to slide 5, total gross revenue increased over 4% in Q1, with adjusted net revenue rising over 5%.
Venk Nathamuni: Excluding this and other items, Q1 adjusted EPS was $1.33, an 8% decrease compared to the previous year.
Venk Nathamuni: The year-on-year decline in adjusted EPS was a result of a favorable tax item last year that resulted in a $0.49 per share benefit in Q1 2024.
Venk Nathamuni: Adjusted EBITDA for Q1 was $282 million, which represented a 24% year-on-year increase.
Venk Nathamuni: We are pleased with the strong underlying business performance and we are seeing very good traction on adjusted EBITDA margin improvement.
Venk Nathamuni: Our trailing 12-month book-to-bill was 1.3 times as our consolidated backlog increased 19% year-over-year in Q1.
Venk Nathamuni: We are encouraged by the trajectory we're delivering on, following two extremely strong quarters for new awards in the second half of 2024.
Venk Nathamuni: Growth profit and backlog increased 12% year-over-year in the first quarter, reflecting back-to-back quarters of double-digit growth.
Venk Nathamuni: Turning to slide 6, I'm excited to report that during the quarter we continue to deliver substantial wins across the business and across geographies. A testament for market positioning, deep domain expertise, and long-term trusted client relationships.
Venk Nathamuni: Notably, during Q1, we were selected to operate, maintain, and provide capital projects program support for the water treatment system managed by JXN Water.
Venk Nathamuni: This 10-year contract will continue to improve water service and water equity and has already provided 180,000 residents in and around Jackson, Mississippi, with more reliable drinking water.
Venk Nathamuni: In life sciences and advanced manufacturing, we continue to deliver strong results in life sciences with double-digit net revenue growth in Q1.
Venk Nathamuni: Our backlog in life sciences has been rising over the last 12 months, giving us good line of sight over the coming quarters.
Venk Nathamuni: Further, market activity remains very robust, with our involvement spanning key areas such as GOP-1s, monoclonal antibodies, antibody drug conjugates, and cutting-edge R&D programs for leading biopharmaceutical companies.
Venk Nathamuni: Turning to critical infrastructure. During the quarter we achieved significant milestones on two transformative projects.
Venk Nathamuni: First, we were selected as part of the preferred alliance for the landmark River Torrens to Darlington project in South Australia.
Venk Nathamuni: This $15.4 billion initiative by the South Australian government will deliver a 10.5 kilometre non-stop motorway, completing the 78 kilometre north-south corridor.
Venk Nathamuni: The TDD project is poised to drive economic growth and development across Adelaide and South Australia.
Venk Nathamuni: Additionally, we have been chosen by Ireland's National Transport Authority to deliver the BusConnect Dublin program.
Venk Nathamuni: This ambitious 10-year initiative will enhance public transit by developing 230 kilometers of bus priority corridors and 200 kilometers of cycling and pedestrian paths.
Venk Nathamuni: The project not only promotes sustainable growth and climate resilience, but also strengthens connectivity in and around Dublin.
Speaker Change: In summary, we are pleased with our continued progress this quarter as we execute on our strategic priorities to deliver sustainable and profitable growth.
Speaker Change: We're excited for the future and look forward to presenting our strategic vision for Jacobs over the coming years at our upcoming investor day.
Venk Nathamuni: Now, I'll turn the call over to Venk to review our financial results in further detail.
Venk Nathamuni: Thank you, Bob. Let me begin by summarizing a few of the financial highlights on slide seven, and I'll then provide additional context and detail around our strong quarterly performance.
Venk Nathamuni: First quarter gross revenue grew 4% year-over-year, and adjusted net revenue, which excludes the impact of past-year revenue, grew by 5% year-over-year.
Q1 adjusted EBITDA was $282 million, growing 24% year-over-year.
Venk Nathamuni: Our adjusted EBITDA margin during Q1 came in strong at 13.5%, which is an increase of approximately 200 basis points year-over-year.
Venk Nathamuni: First quarter adjusted EPS was $1.33, an 8% decrease versus the previous year, primarily due to an unfavorable tax comparison.
Venk Nathamuni: As Bob mentioned in his prepared remarks, last year we benefited from a discrete tax item that did not recur in 2025.
Venk Nathamuni: Please also note GAAP EPS was impacted by a $145 million unrealized pre-tax loss associated with a mark-to-market adjustment of our investment in momentum, which had no impact on adjusted EPS.
Venk Nathamuni: Finally, consolidated backlog was up approximately 19% year-over-year and remains near record levels at $21.8 billion.
Q1 Book-to-Bill of 1.0x was solid.
Venk Nathamuni: Our trading 12-month revenue book-to-bill ratio was 1.3x, with gross profit and backlog increasing 12% year-over-year during Q1, highlighting our strong trading 12-month sales performance.
Venk Nathamuni: Going forward, we will focus our attention on training 12-month performance in our book-to-build ratios as we believe this is a better indicator of future growth.
Venk Nathamuni: Regarding our performance by end market in infrastructure and advanced facilities, let's turn to slide number eight.
Unknown Executive, Venkatesh Nathamuni
Venk Nathamuni: Demand for our water and environmental services remains strong across all major geographies.
Venk Nathamuni: with adjusted net revenue increasing 11% compared to the same quarter last year.
Venk Nathamuni: This momentum is expected to continue beyond Fiscal 25 and is supported by our robust backlog and pipeline.
Venk Nathamuni: We grew adjusted net revenue in our life sciences and advanced manufacturing end market by over 1% in Q1, as life sciences trend was largely offset by softness in advanced manufacturing.
Venk Nathamuni: We expect Life Sciences growth to remain robust for the foreseeable future as we continue to ramp on new projects.
Venk Nathamuni: Additionally, we've seen a significant uptick in our life sciences pipeline.
Venk Nathamuni: On the advanced manufacturing side, we expect growth to improve in the second half of the year as new projects start to ramp.
Venk Nathamuni: This combination leads us to forecast similar growth in Q2 relative to Q1, followed by a pickup in the second half of the year.
Venk Nathamuni: In critical infrastructure, adjusted net revenue increased 5% year-over-year, with North America outpacing total growth for the end market.
Venk Nathamuni: We are pleased with the sequential improvement in critical infrastructure growth and our backlog and pipeline, particularly in transportation, underpinned an encouraging outlook.
Venk Nathamuni: Moving on to slide number nine, I will provide a quick overview of our segment financials.
Venk Nathamuni: PA consulting results reflect roughly flat revenue performance year-on-year, but very good execution on the bottom line.
Venk Nathamuni: Q1 operating profit increased 22.6% year-over-year and 19.6% on a constant currency basis.
Venk Nathamuni: We remain encouraged by recent bookings and anticipate revenue growth for PA consulting will improve in FY25 as the year progresses.
Venk Nathamuni: Moving on to slide number 10, we provide an overview of cash generation and balance sheet data.
Venk Nathamuni: For Q1, free cash flow was healthy at $97 million, and we repurchased $202 million in shares, a sequential increase of $145 million.
Venk Nathamuni: This combination resulted in our net leverage ratio remaining relatively flat at 1.1x on an LTN-adjusted EBITDA basis as of Q1.
Venk Nathamuni: I'd note this remains below the midpoint of our 1.0 to 1.5x net leverage target.
Venk Nathamuni: As we look ahead, we expect free cash flow for the full year to be similar to our previous expectations but with a more back-half-weighted cadence.
Venk Nathamuni: This is a function of higher cash tax payments in Q1 and Q2, which we expect to step down in Q3.
Venk Nathamuni: Our balance sheet strength will enable continued investment in the business, as well as returns to shareholders via share-d purchases and long-term dividend growth.
Venk Nathamuni: Notably, we're pleased that our Board of Directors just approved a new $1.5 billion shared repurchase authorization, which is the largest in company history.
Venk Nathamuni: We plan to continue repurchasing our shares at what we consider to be an aggressive pace in Q2.
Finally, please turn to slide 11.
Venk Nathamuni: We reiterate our fiscal 25 outlook for adjusted net revenue to grow mid to high single digits year over year.
Venk Nathamuni: and reported free cash flow conversions to be more than 100%.
Venk Nathamuni: We are raising our adjusted EPS guidance range from $5.80 to $6.20 to a new range of $5.85 to $6.20 to reflect good first quarter performance as well as our lower share count expectations.
Venk Nathamuni: The midpoint of our guidance range for adjusted TPS would indicate over 14% growth year-over-year.
Venk Nathamuni: And the midpoint of our guidance range for adjusted EBITDA indicates approximately 15% growth year-over-year, highlighting our continued positive outlook for the business this year. To assist with your modeling, I will quickly highlight a few items related to Fiscal 25.
Venk Nathamuni: Regarding margins, we ended up seeing a greater than expected benefit from the Christmas holiday timing that shifted some profitability forward. As a result, we now anticipate Q2's adjusted EBITDA margin to be below that of Q1.
Venk Nathamuni: However, we continue to have good line of sight to reaching our 13.8% to 14% margin guidance for the full year and expect to see a nice step up in margins as we head into the second half of the year.
Venk Nathamuni: Lastly, we are monitoring FX movement, particularly conversion rates for the British farm.
Venk Nathamuni: We took a somewhat conservative view toward FX in our original forecast, and as a result, we aren't seeing a significant incremental headwind today.
Venk Nathamuni: However, should the dollar strengthen from here, that would have an adverse translation effect on revenue and operating income.
Venk Nathamuni: With that, I'll turn the call back over to Bob. Thank you, Venk. In closing, with a positive start to FY25, we are strategically positioned to leverage revenue growth momentum across the business.
Speaker Change: We return capital to shareholders at a historically elevated pace in the first quarter, and plan to keep doing so in the second quarter, demonstrating the combined power of our strong financial position and highly cash-generative business model.
Speaker Change: With our sharpened focus and capabilities, we are confident in our ability to expand market share and meet the evolving needs of our clients across all facets of our business.
Speaker Change: Thank you. We will now begin the question and 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.
Speaker Change: If you would like to withdraw that question, again, press star 1. And we ask that you limit yourself to one question and one follow-up. Your first question comes from the line of Sabahat Khan with RBC Capital Markets. Please go ahead.
Sabahat Khan: Great, thanks and good morning. Maybe just to kick it off with a broad question that we've been getting in the whole space. The numbers look obviously in line, guidance is rate rated, but maybe if you can just talk about
Sabahat Khan: what you're hearing from your customers, what's reflected in your backlog in terms of the sentiment, and that's particularly focused on the U.S. both government as well as commercial customers, just trying to get an understanding of what the customers are saying to you amidst all these headlines. Thanks.
Speaker Change: Sure, so Salvo, you know, it's something that we stay very very close to. Right now the sentiment of our customers continues to be positive.
It's pretty robust right now.
Speaker Change: And so we, it's not that we are ignoring it, we're considering it, but we're staying close to what our customers are saying, and we're seeing that, and we made a couple of comments around it.
Speaker Change: and the continued focus on the pipeline. We're seeing double-digit pipeline growth across our in-market sectors, and the cadence of our awards, as demonstrated in our backlog growth, continues to be there. We're actually not seeing dramatic shifts in our customer behavior as a result of the political narrative.
Speaker Change: And then maybe we can just talk about, you know, in terms of your margin guidance for this year.
Speaker Change: You know, what are some of the initiatives that, you know, you've been able to execute on thus far, you know, from the time of the spin closing till now? And what are some of the initiatives that may be more focused on in the backup to just sort of understand what's contributing to the margin improvement this year, and within the context of some of the initiatives you outlined at the time of the spin? Thank you.
Sure, Venk, go ahead. Yeah, Salva, thanks for the question.
Speaker Change: The ongoing continuation of our cost controls and cost leverage that we've talked about in prior quarters.
Speaker Change: And then as the revenue picks up, we certainly see some operating leverage in the model.
Speaker Change: As we, you know, go through the asset life cycle and engage earlier in the life cycle with our customers, that gives us a better margin profile.
Speaker Change: And then finally, we're also working on a global delivery model such that we can execute the functions across the globe.
Speaker Change: And say, so it's a combination of all those things that helped us to get to where we are today. I just, from a Q1 to Q2 timing standpoint, I highlighted the holiday timing, which in the sense in a psyche lower, I'll call it, you know.
and Ayan Banerjee.
Great, thanks very much.
Thank you.
Speaker Change: Your next question comes from the line of Andy Kaplowitz with Citigroup. Please go ahead.
Hey, good morning, everyone.
Good morning, Andy.
Speaker Change: So, water and environmental growing double digits, I think you said you have visibility even into 26 in those end markets. Obviously, it's early in the new U.S. administration's tenure, but they have a big deregulation focus. I would surmise you don't think that is going to impact that business at all, but maybe you could elaborate on what you're seeing in the confidence level in that continued growth in that segment.
Thank you. Thank you.
Speaker Change: Yeah, it's so we don't. So short answer, Andy, is we don't see a slowdown just because of the of the needs, you know, whether it be urbanization or age infrastructure, especially in as well as the the effects of climate. So
We're not seeing that.
Speaker Change: And again, it's a global, it's a global growth story that we have seen within the water, the water sector across all geography. I will say this.
Speaker Change: Some of the deregulation is actually, it's serving as a catalyst to accelerate some of these jobs that we have had either in our backlog or that are in the pipeline. So, so far, you know, whether it be regulations that you would think that would stop jobs, we have not seen that.
Speaker Change: And if I could just add to that, one of the things we talked about in the last couple of quarters is, as you look at some of the large projects that we've executed, that actually gives us a lot of visibility into the outriers as well. So that's what gives us confidence in our water environmental position.
Speaker Change: Yeah, let me let me kind of break it down, Andy. If you break down that whole sector life sciences, we talked about in advanced manufacturing, you know, we are kind of seeing a flattish performance right now in our semi business, which is actually not bad as jobs have kind of restarted in our portfolio has diversified both from an end from a client standpoint, and a geography standpoint. So the pipeline continues to be good there. Data centers continue to be a real positive for us. I mean, we're our, you know, double digit growth
Speaker Change: in our data center business. And it's now to the size where you could actually see it. It's still 40, 50 basis points, but it's actually contributing to the overall growth of the company.
Speaker Change: The area that we say isn't soft, and we see in the pipeline it's growing, and that's why we have...
Speaker Change: Confidence in the Second Half is in kind of the industrial manufacturing.
But we see some green shoots there.
Appreciate the color.
Speaker Change: Your next question comes from the line of Andy Whitman with Baird. Please go ahead.
Andy Whitman: Oh, great. Thanks for taking my questions. I guess I just wanted a clarification to help understand the quarter a little bit better. So probably this one's for Venk. I was looking to some of your bridges and it looks like you're taking out $3.6 million of revenue from the Transition Services Agreement.
Andy Whitman: and you're adding back $7.9 million of cost. So I guess kind of a two-part question in this one. Is that right? Right now, are you losing on a gap basis $4 million on the TSA? And then I guess maybe the more important question is,
Once the TSA is over.
Andy Whitman: How confident are you that you're going to be able to address that $8 million of costs in the quarter that it's not an adjusted margin headwind in a year from now?
Andy Whitman: engagement for us. But as you look ahead to the end of the year, clearly, we do see opportunity for us to optimize those costs. And we'll provide more color in it. But suffice to say that that is an opportunity for us to improve our profitability once the TSA period ends. And not a headwind. And not a headwind.
Okay, great.
Andy Whitman: He said it's a better reflection of what's going. I think that's probably fair and true.
Andy Whitman: But can you also just talk about what you're seeing in the pipeline? You said a lot of positive things about the health of your end markets, but is the focus on TTM a reflection of like the next couple quarters of awards that maybe are a little bit softer, even though maybe for the year it's strong?
Andy Whitman: It's a fair question, so it's not a reflection of things weakening. We had some larger winds, and some of the larger winds, especially in life sciences and water.
Andy Whitman: I tend to lift those up. You remember we had a 1.7 times book to bill in one quarter, another 1.6.
Andy Whitman: in another quarter, and those are those big hitters that come through.
Andy Whitman: which tend to smooth out when you look at the profile of the types of jobs that we're winning.
Andy Whitman: So that's why we felt like the trailing 12 months was more reflective.
Andy Whitman: What we wanted to demonstrate from a strength standpoint is the actual growth year-to-year in the backlog. And hence, the 19% number is the number, and it's been double-digit for several quarters in a row. And that's probably more reflective of the profile of our work from consulting and advisory.
Andy Whitman: You know, program management, design, and some of our, you know, our larger alternate delivery jobs.
Okay, got it. Thanks a lot.
Speaker Change: Your next question comes from the line of Sanjita Jain with KeyBank. Please go ahead.
Speaker Change: Ayan Banerjee, Jonathan Evans, Robert Pragada, Unknown Executive, Venkatesh Nathamuni, Jonathan Evans,
Sanjita Jain: Thank you so much for taking my questions. So if I can ask on PA Consulting, obviously the margins have held up really strong, but the revenue ramp is still lacking. So maybe you can talk about how you're seeing revenue growth build through the year and where that may be coming from?
Sanjita Jain: Yeah, so, so let me answer the second part first. The revenue ramp, we can we can definitely see it. And we're seeing that in our pipeline, and we're seeing in the backlog.
Sanjita Jain: Some of the slowness in getting the top line back to growth mode has been the speed by which the UK government has come back.
Sanjita Jain: We've won a few larger jobs for major UK public entities.
Sanjita Jain: that we're just waiting for the actual finalization and starting. And then once those start, you know, we'll see that pop back in the top line.
Sanjita Jain: In other parts of the business, for example, the U.S., we're seeing strong double-digit top-line growth. It's a smaller part of the business. So overall, you know, some real positives in how the business is coming back. We're back in a hiring mode right now, too.
Sanjita Jain: I think the real positive here is that while that's going on, utilization has gone up, margins have continued to expand, and the business has got a nice healthy balance to it moving forward. So we're positive about the future with PIAID.
and many more. Thank you. Thank you.
Sanjita Jain: Got it. And as a follow-up, can I ask about capital allocation? So you initiated a new share buyback. You're planning to sell momentum shares in the first calendar first half. So just wondering if you're seeing any dislocations in the U.S. market from the macro and policy headwinds that would encourage you to maybe look at M&A?
Sanjita Jain: Yeah, so these are great questions. As you rightly pointed out, you know, we did increase our authorization for the shared buybacks. And in the last quarter, we did, you know, $202 million of purchases, and we expect to continue to be, you know,
Speaker Change: Ayan Banerjee, Bert Subin, Jonathan Evans, Robert Pragada, Unknown Executive, Venkatesh Nathamuni,
Speaker Change: Now, having said that, you know, our priorities for capital allocation is number one in organic growth. That continues to be what we focus on from the standpoint of executing on what we think are, you know,
Clearly, lots of circular megatrends.
Speaker Change: We will continue to return cash, and M&A is certainly an option. It's not an immediate focus for us, doesn't mean that we don't do something, but we will characterize our entire strategy as we lay it out at investor day in a couple of weeks. But suffice it to say, organic growth is top priority, continue to return cash in the form of buybacks and dividends, and then M&A is certainly an accelerant for us.
Great. Appreciate the response. Thank you.
Thank you.
Speaker Change: Hi, good morning. This is Federico, speaking for Chad. I would like to focus on how much U.S. federal government exposure that JACOBS have postponed, and is there any risk to contractor payment from DOJ? How do you bring faith at risk?
Speaker Change: Yeah, so we don't have, I think the question, sorry you're a little broken up there, I think the question was around our exposure to potential federal spending and the DOJ efforts that are going on right now.
We don't have exposure to doge in its fullest form.
Speaker Change: Less than 10% of our business is tied to a federal agency.
Speaker Change: and probably 80% of that is in the defense infrastructure world where these will be buildings, infrastructure, work that we do for the U.S. DoD and others.
and those have continued during some of the political narratives.
Speaker Change: We have not seen those effects, and we're staying very close to our customers, as I mentioned before, moving forward.
Hopefully that helps.
Thank you very much.
Speaker Change: Your next question comes from the line of Michael Dudas with Vertical Research. Please go ahead.
Good morning, gentlemen.
Morning Mike, Morning.
and many more. Thank you. Thank you.
Robert Pragada, Unknown Executive, Venkatesh Nathamuni
Speaker Change: It's fair. Maybe I'll take them in in kind of a flipped order there, Mike, when you're talking about Europe, Middle East, Australia. Maybe I'll start with the Middle East.
Speaker Change: It was just there a few weeks ago, and a really strong pipeline of work that we continue to see. We've been very selective in the work that we've been going after.
especially in Saudi, that, that
Speaker Change: that aspirational narrative and vision, I can see it on the ground happening in real time and we're in the middle of all of it. So hopefully some exciting additional wins on the radar here.
Speaker Change: and capabilities together. You know, in Europe, I'd say that our our energy and power business really supporting the transition, everything from the interconnect work that we continue to do, as well as the grid modernization work in tying to renewables.
Speaker Change: That continues, as well as advanced facilities, specifically around life sciences.
Speaker Change: and Semi work that we're starting to see, you know, the latter parts of the ship, the EU chips money that was going through.
Speaker Change: and in Scandinavia, transportation. We've had a couple of nice awards.
that were going on there.
So as the, you know, the economies have been...
Speaker Change: In a bit of a balance, you know, we continue to see nice incremental growth.
in continental Europe, outside of the UK.
Speaker Change: Australia, nice turn. In fact, it was one of our, from a geographic standpoint...
growth areas for the quarter.
Speaker Change: driven obviously by transportation. But we're continuing to see nice, nice continued growth in the water sector. In addition to the big detail plant we announced a couple quarters ago, continued water growth in Australia. So overall, a positive, positive narrative.
Speaker Change: Appreciate that and Venk, maybe as we look through 2025 on cash, operating cash flow, some of the puts and takes, working capital changes, etc., the comfort level of ramping as we move through the year to achieve the conversion targets that you're putting forth.
Venk Nathamuni: Yeah, thanks, Mike. So I'd say, you know, just from the standpoint of our capital allegations, I mentioned before,
Venk Nathamuni: and the organic growth is the primary objective here. And so with that in mind, in terms of just the margin profile, as you said, off to a very strong start to the year with 13.5% EBITDA margin. We see a little bit of a dip in Q2, just because of timing reasons on the holiday that I mentioned on the prepared remarks.
Unknown Executive, Venkatesh Nathamuni
Venk Nathamuni: of the CMS business. And then in Q2, is when we do a traditional estimated tax payment. So we need to take that into account. The first couple of quarters, we'll see a little bit below, but overall for the full year, still pretty comfortable with 100% plus free cash flow conversion. Unknown Speaker
Thanks guys, see you in Miami.
Speaker Change: Your next question comes from the line of Judah Aronowitz with UBS. Please go ahead.
Speaker Change: Hey, good morning. This is Judah Ronovaton for Stephen Fisher. Thanks for taking my question.
Speaker Change: Last quarter, I think you talked about a second half re-acceleration in international infrastructure markets. So it sounds like there's some good momentum there. And if that's still kind of the expectation, what's giving you the confidence in that re-acceleration? Yeah, is that working backlog already? Or are you expecting some more bookings? Thanks.
Speaker Change: Yeah, I think when we made that comment, Judah, we talked about kind of the
Speaker Change: the consistent growth in the water market across geographies, and that was in our international markets as well. So, yes, that has continued and driving that growth in the second half. See, the other piece is in what we call our cities and places work, which is around some of the giga city and larger programs.
Speaker Change: that we see. Middle East gets highlighted quite a bit, and it should be, but we're starting to see that effort in the UK as well as in Australia and Southeast Asia.
Speaker Change: as well. So overall, I'd say it's a pretty much diversified blend of our end markets showing promise in the in the international space.
Thanks. That's it for me.
Speaker Change: Your next question comes from a line of Jerry Ravitch with Goldman Sachs. Please go ahead.
Hi, good morning. This is Adam on for Jerry.
Speaker Change: In program management, that's a service line that engineering news record shows you having a really strong market position, and it's a service line where it's hearing is benefiting from a rising mix of large projects. How big is that business for you today? What's the growth trajectory look like? And is there an opportunity to expand further there going forward?
Speaker Change: Yeah, I'd say Adam, it's a strong capability. We don't see that as a vertical.
Speaker Change: You know, we see it as a cross-cutting capability across our end markets, as well as our geography. So it's a great, great skill set that we have. And from a growth standpoint, it's in line and higher. It's driving that growth trajectory for the company.
Speaker Change: And then can you just put into context the benefit from your initiatives to engage with clients at the earlier early phases of the project in terms of that benefit the margins at how much do margins on those
More advisory consulting lines differ from the portfolio average.
Speaker Change: Yeah, thanks for the question. I'd say, you know, at a high level, what it allows us to initially is to be involved with the customer at an earlier stage of the process. So it gives us a lot of visibility into their long term thinking and help shape their long term thinking. That's one of the big benefits that gives us additional scope across the entire project life, lifetime, if you will.
Speaker Change: And then the added benefit is obviously as we move up the value chain, we're able to, you know, get higher margins and up than corporate average. But clearly, it varies from engagement to engagement. So it's hard to quantify exactly what that is. It will depend on the nature of the project and the nature of the end market and so forth. But suffice it to say, on average, it's higher than the corporate gross margins.
Great, thanks so much.
Look.
Speaker Change: Your next question comes from the line of Kevin Wilson with Truist Securities. Please go ahead.
Speaker Change: Hey, good morning. Calling on behalf of Jamie Cook. Thanks for the time.
Speaker Change: My question is on tariffs, you know, of course, the state of play sort of changes every day there. I think you have, you know, relatively small exposure to the markets that are initially the target, you know, Canada, Mexico, China, just in terms of where your projects are actually happening.
Speaker Change: But I'm sure it's a bigger picture as a U.S. based firm.
Speaker Change: To what extent are you thinking about the risk to projects in the pipeline, or your win rates, or your competitive positioning in international broadly, just in light of more aggressive U.S. foreign policy in the form of tariffs or otherwise? Thanks.
Yeah, thanks for the question, Kevin. You know, we actually...
Speaker Change: We're not going to speculate on what it could mean, because right now what we do is we're staying close to our clients on what it means for their business, and let's take...
Unknown Executive, Venkatesh Nathamuni, Robert Pragada, Unknown Executive, Venkatesh Nathamuni,
Speaker Change: Okay, thanks. That's helpful. And then my follow up is just on restructuring costs. Perhaps I missed it, but I'm wondering if you could provide an update on your expectations for the year. I think last quarter, you got it to 75 to 95 million there. Just the Q1 number is a lower run rate than that. So just updated expectations on level and cadence for restructuring for the rest of the year. Thanks.
Speaker Change: Yeah, Kevin, yeah, great question. As you rightly pointed out, you know, last time we guided for 75 to 95, we're still sticking with that guidance and on track to be in line with that.
Speaker Change: I'd just say from a timing standpoint, obviously it depends on invoicing and such, but suffice it to say.
Speaker Change: You don't see a major spike in any given quarter. It should be fairly steady through the rest of the fiscal year for us and well within that range.
Understood. Thank you.
Thank you.
Speaker Change: And ladies and gentlemen, that does conclude our question and answer session. I will now turn the conference back over to Bob Pragada for closing comments.
Speaker Change: Well, thank you everyone for joining our earnings call. We look forward to sharing our long-term strategy and speaking with all of our investors and analysts during our upcoming investor day. Thank you very much.