Jacobs Engineering Group Inc. (J) on Q3 2021 Results - Earnings Call Transcript

Operator: Ladies and gentlemen, thank you for standing by, and welcome to the Jacobs’ Fiscal Third Quarter 2021 Earnings Conference Call and Webcast I would now like to turn the call over to Jonathan Doros. Thank you. Please go ahead. Jonathan Doros: Thank you. Good morning to all. Our earnings announcement was filed this morning. And we have posted a copy of this slide presentation on our website, which we will reference during the call. During the presentation, we'll be in forward-looking statements, including with respect to the continuing effects of the COVID-19 pandemic, potential government stimulus programs, expected benefits of our strategic investment in PA Consulting, our financial outlook, amongst others. I would like to refer you to our forward-looking statement disclaimer, which is included on Slide 2 regarding these and other forward-looking statements. Steve Demetriou: All right, thank you for joining us today to discuss our third quarter fiscal year, 2021 business performance and key initiatives. Turning to Slide 4, before reviewing our third quarter results, I'd like to reiterate our commitment to our current strategy, which includes aligning our portfolio toward large secular growth opportunities where we can deliver sustained double digit profit growth. As I mentioned last quarter, we are developing our new corporate strategy and just completed a midpoint review of our business and competitive landscape. We look forward to sharing our new strategy along with updated, multi-year financial targets at our Investor Day later this year. Turning to our financial results, I'm pleased with our strong third quarter performance with net revenues increasing 11% year-over-year and adjusted EBITDA growth of 26%. Backlog ended the third quarter up 7% year-over-year and up 3% on a pro-forma basis. And our backlog excludes our significant Idaho National Labs remediation. Now that the award has cleared protest, when including Idaho, total Jacobs’ reported third quarter backlog would be up 11% and on a proforma basis for Idaho up 6%. Bob Pragada: Thank you, Steve. Moving on to Slide 7, to review the quarterly performance for Critical Mission Solutions. During the third quarter, our CMS business continued its solid performance. Total CMS backlog is at $9.6 billion representing 6% year-over-year growth. Backlog in the quarter was impacted by protests, but we expect these to clear in Q4 resulting in strong backlog growth. Our CMS strategy is focused on creating resilient revenue growth and margin expansion by offering technology-enabled solutions aligned to critical national priorities that drive innovative outcomes. As discussed in prior quarters, we are pursuing sectors with strong, positive growth trends, including global energy transition, space-based ISR, intelligence analytics and 5G networks. I'd like to discuss several of those trends in recent related wins in greater detail. Beginning with energy transition, progressive leaders across the world are driving initiatives to cutoff CO2 emissions through investment in clean energy solutions. And Jacobs has recently realigned its North American and European nuclear practices to better deliver our global lifecycle nuclear capabilities. This includes advanced modular reactors or AMRs that can be used for electricity generation and for the – and with the global community to bring fusion power to commercial viability. During the quarter, Jacobs was awarded the Idaho Cleanup Project that Idaho National Laboratory, as a majority partner in the Idaho Environmental Coalition. The contract value is estimated at $3.9 billion over a ten-year period and recently cleared protests. Approximately $780 million will be included in Q4 backlog. Together with the BOE, we will use Jacobs’ technology-driven solutions to reduce the environmental legacy of the cold war, while delivering social value by supporting high quality jobs in the region and protecting the Snake River Plain Aquifer, a critical element of Idaho's agricultural industry. Kevin Berryman: Thank you, Bob. Turning to Slide 10 now for a quick financial overview. Third quarter gross revenue increased 10% year-over-year and net revenue was up 11%. In line with last quarter, acquisitions and FX benefits contribute to growth by more than offsetting the previously disclosed burn off two lower margin contracts in CMS. Including the pro forma impact from all acquisitions, net revenue was up low single digits. For the fourth quarter, we expect total reported net revenue growth to be up near double digits year-over-year and up slightly on a pro forma basis. This represents strong underlying growth considering our fiscal fourth quarter of 2020 at 14 weeks compared to our normal 13-week quarters, which will impact our 2021 fiscal fourth quarter reported growth rate by approximately eight percentage points on a year-over-year basis. Adjusted gross margin in the quarter as a percentage of net revenue was 27.6%, up 400 basis points year-over-year. The higher gross margin on a year-over-year basis was driven by a few factors, favorable revenue mix in both People & Places and CMS, as well as the benefit from PA Consulting, which has a strong accretive gross margin profile. Adjusted G&A as a percentage of net revenue was up year-over-year in line with our expectations to 17%. GAAP operating profit was $264 million and was mainly impacted by $15 million of amortization from acquired intangibles. Adjusted operating profit was $315 million, up 32% with both CMS and People & Places showing strong organic profit growth. In addition, PA posted strong growth and operating profit during the quarter versus their year ago second. Our adjusted operating profit to net revenue was 10.6%, up 170 basis points year-over-year on a reported basis. GAAP EPS from continuing operations rounded to $0.82 per share, and primarily included $0.44 related to an updated non-cash valuation allocation between PA Consulting preferred and common shares with no impact to the original consideration, $0.34 related to the UK statutory tax rate changes and an updated estimate of our annual adjusted effective tax rate. $0.24 of amortization of acquired intangibles, all of which were partly offset by $0.23 related to the positive mark-to-market investment in Worley and the impact of monetizing the remaining portion of our C3.ai investment. Excluding all items, third quarter adjusted EPS was $1.64, up 30% year-over-year. Included in the tax item noted earlier, third quarter adjusted EPS is impacted by 20% – by a 20% effective tax rate to reflect the change in our estimated adjusted annual effective tax rate to 22.5% from 23.8%. This change in estimated tax rate resulted in an $0.08 per share tax benefit in our adjusted results during the third quarter. During the quarter, PA contributed $0.15 of accretion, net of incremental interest. We now expect $0.35 to $0.37 of 2021 PA accretion up from $0.32 to $0.34 in our previous quarter. As a reminder from modeling purposes, before we consolidate the impact of the PA investment in our operating results with 35% minority interest backed out in non-controlling interest. Q3 adjusted EBITDA was $321 million and was up 26% year-over-year, representing 10.8% of net revenue. Our adjusted EBITDA calculation also includes the burden of the 35% minority interest impact from PA. Excluding PA, adjusted EBITDA growth was up 9% year-over-year. Finally, turning to our bookings during the quarter, our pro forma book-to-bill ratio was one times for Q3 with actually a little bit higher book-to-bills of 1.1 on a gross margin level. Regarding our LOB performance, let's turn to Slide 11. Starting with CMS, revenue was up 1% year-over-year on a reported basis and down 2% pro forma when the acquisition of the Buffalo Group is considered. As previously communicated, we are transitioning off two lower margin contracts, which represented $190 million year-over-year revenue impact during the quarter. When excluding the contract runoff at FX benefits, pro forma CMS revenue was up double digits year-over-year. We expect approximately $200 million quarter of year-over-year impact from these two contract roll-offs through the balance of this year and our first quarter of fiscal 2022. CMS operating profit was $108 million, up 21% and up 19% year-over-year on a pro forma basis. Operating margin was up 150 basis points year-over-year to 8.9%. The improvement was driven by our strategy to focus on higher margin opportunities. For the fourth quarter, we expect relatively flat CMS reported revenue effectively offsetting the impact of the extra week of revenue last year. And we expect mid single digit operating profit growth as the timing of recent wins are now expected to ramp in fiscal year 2022. Moving to People & Places Solutions. Q3 net revenue was up 1.4% year-over-year, driven by a rebound in our international regions, as well as benefits from the FX. While the Americas business saw near term delays in larger projects, the positive developments regarding infrastructure stimulus over the last week is expected to result and customers beginning to leverage existing framework agreements as we enter 2022. We anticipate seeing awards associated with the stimulus beginning on our second half of next fiscal year. This developing momentum when combined with the strength of our advanced facilities business noted earlier by Bob positions us well into 2022. Total P&PS operating profit was up 8% year-over-year including the benefit from FX. Operating profit as a percentage of net revenue was 13.8% for the quarter, up 80 basis points year-over-year driven mainly by a gross margin benefit from a more profitable revenue mix. In terms of PA's performance, PA contributed $256 million in revenue and $57 million in operating profit. PA's Q3 revenue grew 36% and 20% year-over-year in local currency. Q3 operating profit margin was 22% in line with our expectations. Finally, our non-allocated corporate costs were $55 million for the quarter and up year-over-year and in line with our expectations. The increase was driven primarily by the expected increases in medical costs, IT investments and other expenses. We expect non-allocated corporate cost to also turn slightly higher in Q4 given continued increases in the medical costs, and other investments, as we begin to position the company for the growth momentum that is expected in fiscal 2022 and beyond. As we turn to Slide 12, I would like to comment that our restructuring and other charges has significantly decreased. And as a result, we have not included a specific slide on this subject in this presentation. Comment quickly during the quarter, we incurred only $2 million of total net charges for Focus 2023, as well as other restructuring and integration activities. As a result, both P&L related cash outflows for these items remain in line with our outlook. And we are focused on significantly decreasing these adjustments going forward. During the third quarter, we generated $153 million in reported free cash flow as DSO again showed strong improvement. It is important to know this cash flow included the $261 million of purchase price consideration for PA treated as post-closing compensation that we discussed last quarter and a net $19 million associated with Focus 2023 restructuring and other items cash flow. Considering these items, underlying free cash flow was over $430 million putting us on track for greater than one time adjusted cash conversion for the fiscal year. During the quarter, we also monetized our investments C3.ai for $39 million, which is reflected in cash flow from investing activities. As a result, we ended the quarter with cash of $966 million and growth debt of $3.1 billion, resulting in $2.2 billion of net debt before attributing the benefit of our Worley ownership, treating the Worley position as cash our pro forma net debt to expected adjusted 2021 EBITDA is approximately 1.4 times, a clear indication of the strength of our balance sheet. And finally given the strength of our balance sheet and free cash flow, we remain committed to our quarterly dividend, which was increased 11% this year to $0.21 per share. Now let me turn it back over to Steve for Slide 13. Steve Demetriou: Thank you, Kevin. Now let me review our total company outlook for fiscal 2021. Given our strong year-to-date performance, excellent results from our PA Consulting investment and the benefit from the lower tax rate, we're raising our full year guidance. We now expect the adjusted EBITDA outlook to be a range of $1.21 billion to $1.275 billion versus our previous outlook of $1.2 billion to $1.27 billion. We expect adjusted EPS to now be in the range of $6.15 to $6.35 per share versus our previous outlook of $6 to $6.30. Looking beyond fiscal 2021. The likelihood of U.S. infrastructure stimulus package has substantially increased over the last week, which has become a significant benefit to our Jacobs P&L in the second half of our fiscal year 2022 and beyond. With the strategic repositioning of our portfolio, we are aligned to strong secular growth trends, including global infrastructure modernization, climate change, national security, digital transformation, and global supply chain investments. As a result, we expect this to drive double digit adjusted EBITDA growth in fiscal 2022 and beyond. Operator, we'll now open the call for questions. Operator: Thank you. Your first question comes from the line of Joseph DeNardi from Stifel. Your line is open. Joseph DeNardi: Hi, thanks. Good morning. Bob, can you just talk about the Space Intel contract a little bit. I think that was a competitive process, correct me if I'm wrong. And then can you remind us what the additional opportunities are going forward with that capability? And then Kevin, can you just level set kind of what the outflows are that are being excluded from the free cash flow conversion? Thank you. Bob Pragada: Yes, Joe, good morning. On the Space Intelligence, it's really has to do with our some of the unique technologies around array technology. And we're not – I can't disclose the decline, but this is a multi-phase type project. And so we're on the front end of the development of that project. And so we see continued growth there. Just to add onto that, what we're also seeing with our SAR technology or the Synthetic Aperture Radar is the air-based component of what's coming out of our Rapid Solutions business. A couple of really nice wins confidential there again, early phases, but seeing the investment on that front. Kevin Berryman: Joe just real quickly on the adjusted free cash flow that we talked about, there's two items effectively. The most material one is the $261 million of the compensation treated numbers associated with PA that was ultimately originally part of our consideration. But because of GAAP, we had to run it through the P&L that's 261, and we have another 19 of restructuring related matters which are just timing relative to the P&L. But you also heard me talked about, which was $2 million. Those two added together, take our reported free cash flow to the $430 plus million for the quarter. Really strong and we're very pleased with it. Operator: Your next question comes from the line of Andy Kaplowitz from Citigroup. Your line is now open. Andy Kaplowitz: Good afternoon guys, or good morning guys. Steve Demetriou: Good morning. Bob Pragada: Good morning. Andy Kaplowitz: Steve or Bob, I know you mentioned a potential super cycle and supply chain related build-out, which is your most bullish commentary yet regarding advanced facilities life sciences, as you mentioned, I think Bob you mentioned a sharp uptake in semiconductor activity, but as your advanced facilities business actually contributing meaningfully to P&PS growth yet. I know Bob last quarter you talked to better ramping up over a longer-term period. When do you think you can start to meaningfully contribute to quarterly revenue and earnings growth? Is it imminent at this point or is it more FY 2022? Steve Demetriou: Yes, Andy. It would be FY 2022. Right now, how those programs and projects go. We start off with early concept and we call it basis of design activities, higher margin consultative type work, but to really see it flow through the P&L we'd be in subsequent phases of the project, which these are fast projects. So we're measuring in quarters not years with regards to how those would burn through the P&L. Operator: Thank you. Our next question comes from the line of Michael Dudas from Vertical Research. Your line is now open. Michael Dudas: Good morning, gentlemen. Steve Demetriou: Good morning. Bob Pragada: Good morning. Michael Dudas: Steve, you indicated about the optimism was, I guess is fair relative to U.S. infrastructure opportunities. Maybe you can delve a little bit more deeply from your framework agreements with the customer base and some of the myriad of where their energy transition grid, climate change, there's a lot of numbers there. And I'm kidding, but how – what kind of leverage and potential opportunities could we see from your U.S. business on the P&PS side given what could be coming down the pike over the next several years? Steve Demetriou: Yes. Michael, thanks for that. So look, this we are building optimism obviously based on the news we're all reading and we're very highly engaged. And I do want to start with that. Our U.S. government relations team have done an outstanding job to help influence this outcome, which of course it's important for Jacobs, but it's highly important for the United States. So what we got here is a five-year authorization. That's going to provide our state local clients significant certainty, and that's huge. And it's also significant for Jacobs because we've evaluated that over 95% of this trillion dollar, $550 billion of new money of is totally aligned to our Jacobs offerings. And when you go through that, obviously highways, bridges, rapid transit is going to be a significant growth. But when you look at some of the other components like Amtrak and freight rail, which is going to quadruple and funding, drinking water and wastewater, which is going to be up two and a half times, therefore, it's more than doubling. Ports and waterways, we're industry leader, same thing. And then you then tack onto that, things like super fund and Army Corps civil works, which are right up where we're – the leader in the industry across that growing significantly. And that's pretty fast starting opportunities, the way the money will flow. And then of course, what you talked about Michael, energy transition resilience and a whole host of other things, $8 billion in hydrogen hubs, which we're right in the center of providing solutions. So just a great, great opportunity for Jacobs moving forward. Operator: Your next question comes from the line of Sean Eastman from KeyBanc Capital Markets. Your line is now open. Sean Eastman: Hi guys. Thanks for taking my questions. I just wanted to touch on Focus 2023, maybe at the risk of feeling a bit thunder from the planned Analyst Day, but I think the initial perception around Focus 2023 was – it was a real estate kind of cost save type of strategy, talking to you guys through the quarter. It seems like it's much more than that. Could you just talk about how Focus 2023 is reflected in the double digit EBITDA growth outlook for fiscal 2022 and beyond maybe kind of clear up how we should think about? How it hits the model? Steve Demetriou: Yes. Thanks for the question, Sean. I'm glad to answer it because the Focus 2023 is a far reaching effort that's being executed across the entire company about transforming the way we work. So yes, real estate is certainly part of that because we're changing the way we're utilizing our real estate footprint and changing the way we work relative to that. We've talked about how we want to ensure that our footprint becomes more about collaboration, team building, training, and less about a place where you go and do hedge down work. So it clearly as part of that, but it's much more than that. And effectively what we're doing is aligning, creating a more disciplined in terms of the management of our processes, which is going to facilitate our ability to automate, create integrated process designs, which will facilitate people to spend less time. And what I will call the administering of our projects, that's a huge effort when we talk about our project teams around the world. So we think this unlocks talent and the time of that talent to really drive future innovation. Now relative to the double digit numbers, what we said, and certainly in 2022, our plan is that the bulk of the savings, what we're working on finalizing right now in 2022, we'll be reinvested back into the business by the next wave of potential opportunities that will allow us to deliver even incremental benefits in 2023 and beyond. So while it's a piece of the 2022 guide, or at least preliminary double digit number that we talked about, it's not a substantial piece of it because we're planning on reinvesting back into the business. We think our ability to continue to drive a company that is doing different types of work, becoming more digital and its ability to deliver work, all of that translates into a need to invest. And so consequently, a vast majority of the savings will be reinvested back into the business over the course of 2022. Operator: Your next question comes from the line of Jerry Revich from Goldman Sachs. Your line is now open. Unidentified Analyst: Hi, this is Adam for Jerry today. I was wondering in PA Consulting, if you could just help us think about the incoming cadence of engagements there in the next several quarters? Steve Demetriou: Yes, Adam, the engagements are on the rise pipeline is growing. Kevin talked about the backlog growth. We're seeing when we talk about just concentrate on the private sector for a moment, kind of this investment in supply chain resiliency, as well as business transformation, PA is playing on both sides. And so we were seeing those engagements definitely on the rise and it's forming itself or showing itself from pipeline growth as well as booking growth. So we see that tail having a nice outlook on it. Operator: Thank you. Our next question comes from the line of Chad Dillard from AllianceBernstein. Your line is open. Unidentified Analyst: Hi, this is Carolina on behalf of Chad. Steve Demetriou: Good morning. Bob Pragada: Good morning. Unidentified Analyst: Good morning. As you think about double digit EBITDA growth over the medium term, can you parse out the contribution from PA Consulting revenue growth and second our margin expansion? Steve Demetriou: I think when we talk about the robust opportunity moving into 2022 and beyond, we're really talking about all three legs of the business via Consulting, CMS and P&PS. Almost from a standpoint of them directly contributing to that double-digit growth. I mean, CMS specifically, we talk about this $30 plus billion of new business pipeline. We're excited about the wide range. We – the Department of Defense for example, is shifting into our major focus on upgrading, modernizing and making, all of their systems more intelligent. And we play a center role there as because of the capabilities that we bring in some of the proven abilities in most recent projects. Bob talked about the space cycle, the deep space exploration, as well as Space Intelligence. And then we move over to even things like 5G networks, where that is growing significantly, as we've talked about in our – during our remarks. But the cyber and intelligence business, the pipeline there is rising. I mean, when you look at the capability that we created going back to over the last seven or eight years with starting with FNS acquisition, then Blue Canopy, and most recently KeyW and The Buffalo Group. The leadership there and critical mission solution that are now really put that together to expand our offerings and be directly in the center of all of the cyber and mission intelligence. The fact that now we're up to 12 of the 18 intelligence agencies that we're working for. So very exciting opportunity that CMS is going to contribute to the other side of the P&PS and PA. Operator: Thank you. Your next question comes from the line of Andy Wittmann from Baird. Your line is now open. Andy Wittmann: Okay. Good morning. Thanks for taking my question. I just had, I guess three clarification for Kevin to make sure that I'm understanding the financial statements correctly. The first one has to do with, excuse me, the $267 million from last quarter that you had to expense for GAAP rules on the purchase consideration. It looks like net of some people retiring or quitting or whatever happened at PA that the net number here was $261 million, like you called out in your press release. So, there's a $6 million difference there. And I was wondering if that benefit showed up in which segment, was that in the PA segment, was that an SG&A? And then was that excluded or benefit to adjusted EPS as a gain in a quarter? And then secondarily I was, excuse me, noticing that there was $158 million of accounts receivable, which as far as I can tell is the best quarter you've ever had in taking down accounts receivable. So, I was just wondering, Kevin, if you could talk about whether that's just timing related or do you think there's a structural element to what you did in the quarter on the very good account receivable performance? Kevin Berryman: Yes, so, let me go through the first one quickly. The accounting and the complexity associated with PA because of not all of the equity pieces that we've been talking about, but also the backing out and non-controlling interest and all that kind of stuff. All of that, we did not take that benefit to our P&L that $6 million that you're alluding to. But maybe we can follow-up and John can provide you a little bit more detail there John. The second thing is, as it relates to accounts receivable, sorry. No, we look, I think that while certainly a number of $430 million of free cash flow in a particular quarter is indicative of something that is not necessarily sustainable every single quarter. And so there could be, what I would say, some timing associated with that dynamic. It has nothing to do other than the good work that the teams are doing around the globe that we've been talking about for the last two or three years. And we've really started to see that come to fruition over the 2020 and 2021 years. So very proud of the teams. They're doing a good job. This is ultimately having something to do with some of the focus 2023 work we're doing where we're fine tuning and aligning our processes, where people are being able to, to get invoices out faster and ultimately more accurate invoices, which is facilitating our ability to collect sooner. So, while there certainly is some timing associated with it, it's good old fashioned, just doing good work, collecting sooner, and ultimately don't necessarily assume that that happens every single quarter to the extend its in. But we think these kinds of numbers will be sustainable going forward. And while there will be blips up and down, we're continuing to work hard to improve on our efficiencies and total working capital. Operator: Your next question comes from the line of Jamie Cook from Credit Suisse. Your line is now open. Jamie Cook: Hi, good morning. Two questions. First, Kevin the margins in P&PS were pretty good at 13.8%. I just wanted to know if there was anything in that number to help boost the margins, or is that just core performance? And then second on CMS what's the – as we're thinking about 2022, what's the opportunity here at some point to get those margins more in the double-digit range? And then my last question, understanding right now, you're focusing on de-leveraging, but the cashflow is pretty good and the net leverage is looking pretty good. As we look at 2022, at what point would you feel comfortable doing deals again, or do you think you have too much on your plate? And how should we be thinking about more opportunities to do deals that would like a, more of the PA consulting type acquisitions? Thanks. Steve Demetriou: Bob talked about it, $30 billion. It's typically higher margin profile. And as that plays out, we'll see, given the mix of that, what the driver is to, to margin. Our objectives longer term is that our margin profile continues to grow across all of our businesses, including CMS. Probably getting into a strategic commentary that we're going to wait and hold on relative to our discussion at the end of the year and our Investor Day, but ultimately our expectation is that our margins will be able to go up in all of our businesses and certainly CMS would be included in that. So, I think that that's one thing. The second one. Bob Pragada: So let me just add the P&PS questions Jamie, that you started with. There's nothing special. I mean, it's really driven by strong value-add strategy that we've been talking about. So not for the point up there from a P&PS standpoint, other than great performance. The M&A side that you've talked about, clearly, we're very pleased with our cash flow and the approved balance sheet. We're obviously very excited about how fast of a start we're up to on the PA consulting. It's proving out what we talked about as far as high margin, high growth business, and the significant synergies with our total Jacobs platform. And so, we're going to finalize our strategic approach as part of this new strategy we're developing and we'll get clarity before the end of the year. But clearly the strategic consulting side is going to be one of the key components to unfold. Jamie Cook: Thank you. Operator: Your next question comes from the line, Andy Kaplowitz from Citigroup. Andy Kaplowitz: Hey good morning again. I just want to follow-up on PA consulting. It's obviously still early in your ownership, but maybe you could talk about how successful so far, you've been in bringing PA into markets where it has lower penetration, such as the U.S. Now successful you had been so far in capturing more front-end consulting work because obviously the push toward more front-end work could be a big deal for you guys. Steve Demetriou: Yes, Andy, on the first part of the question, I would say, we exceeded expectations in the first three months of the investment on bringing PA into the U.S. And I'd probably point more to the private sector of that piece. PA traditionally and this is just to be even more specific, PA traditionally had relationships at the kind of Tier 2, Tier 3 life sciences clients. And whether it be MedTech and kind of product technology, or looking at the digitization of a component of their business, such as clinical trials, or other types of health information items, honed it in on a few a few Tier 2 or Tier 3. We've immediately been able to bring them into the Tier 1 rank and those same offerings at larger scale we're getting penetration on. So that's been – that's a big, big piece. Secondly – and we're seeing it in the numbers with regards to kind of the percentage of their bookings and where those are coming from leading to P&L growth in the out quarters. Second big piece, and this was publicly announced and I had it in the script. So, on the Fuji job, as we look at how we can continue to deliver next generation type services to go faster, quite frankly. PA is working with us on Fuji to automate our entire – our design approach. So, it's a great example of the digital skills of PA being brought into our core domain expertise and moving us up the value chain. So, really strong. Operator: Your next question comes from the line of Steven Fisher from UBS. Your line is now open. Steven Fisher: Great, thanks. Good morning. I apologize I got on the call a little late, so if you've covered this, we can take it offline. But just curious about organic growth and the pace of growth there. I know, I think Kevin in the comments in the press release talked about being set up, or maybe it was Steve for nice structural growth from a number of initiatives over the next several years. Just curious about the timing of the acceleration that we could see here in your core, CMS and P&PS segment. Do you think we're sort of at that inflection point right now? Is it still, and these are fairly longer cycle businesses, is it still going to be something that takes place more in 2022? I know you talked about double digit EBITDA growth, how much of that is a function of accelerating revenue growth? If you could just fill in a little color there, thank you. Kevin Berryman: Yes. So, look, let me mention a few things we hadn't talked about yet with regard to in the Q&A is we talk a lot about what's going on in the U.S. but outside of the U.S. our organic growth activity is clearly ramping up, we have a strong pipeline in the UK. Similar drivers there with infrastructure, stimulus and focus on modernization, especially in the rail side and de-carbonization, and we're expanding into Europe with some new programs on the airport sector. And then when we move over to the Middle East, we're seeing a really good pipeline and organic opportunity in places like Saudi and across the region in high-speed rail and also on the defense side as well. And then similar things going on in parts of APAC and Australia, New Zealand. Solid pipeline in Australia, New Zealand across transportation. Also, the power sector there and the whole sustainable solution. So wanted to kind of start with that. When you take a step back and look at Jacobs’ opportunity to grow organically, what we see is things are in different phases. Clearly what Bob talked about around electronics and life sciences, that's going to be a more rapid ramp up as we get into over the next several quarters, because of what – especially what's going on around semiconductors. When we talk about this U.S. infrastructure opportunity a bulk of it's going to be programmatic funding. And so therefore formulaic funding, I should've said. And so therefore some of our frameworks and the way the funding will flow will happen with more and sort of ramping up and some of it, even in the early parts of 2022. But as we get into some of the newer initiatives that the government is focusing on around resilience and energy transition, and some of the other digital opportunities, some of that will take a few extra quarters for that funding to flow to the various agencies. And the critical mission solution side, if you look back to our – the way Jacobs has unfolded over the last several years, it tends to come in, in certain peaks. And we're building up this great pipeline, we're very optimistic around the things that we've talked about and then the only question is does it hit next quarter or does it hit a couple quarters later? But when it comes, it's going to have a meaningful impact to our 2022 and moving into 2023 and beyond. So overall, we just continue to be very bullish on our ability to grow organically before we even think about deploying capital to on the M&A side. Okay, so I think… Operator: Speakers there are no further questions in the queue, please continue. Steve Demetriou: Thank you. Okay, thanks everyone. I appreciate the questions. Stay safe, and to look forward to staying close with all of you. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
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Jacobs Solutions Inc. (NYSE:J) Quarterly Earnings Preview

  • Jacobs Solutions Inc. (NYSE:J) is expected to release its quarterly earnings with an EPS of $1.54 and revenue projections of around $2.37 billion.
  • The company has historically surpassed earnings expectations, with an average beat of 8.3% in three of the last four quarters.
  • Financial ratios such as the P/E ratio of 27.82 and the debt-to-equity ratio of 0.46 highlight Jacobs' valuation and financial health.

Jacobs Solutions Inc. (NYSE:J) is gearing up to release its quarterly earnings on November 19, 2024, before the market opens. Analysts predict an earnings per share (EPS) of $1.54 and project the company's revenue to reach around $2.37 billion. Jacobs operates in sectors like consulting, water infrastructure, and advanced facilities, including life sciences and semiconductor manufacturing.

The company's performance is expected to show growth in these high-margin sectors, despite facing higher expenses. In the previous quarter, Jacobs exceeded the Zacks Consensus Estimate for earnings by 0.5%, although its revenues fell short by 3.5%. Year-over-year, adjusted earnings increased by 11.4%, with a slight revenue growth of 1.1%. Historically, Jacobs has surpassed earnings expectations in three of the last four quarters, with an average beat of 8.3%.

The Zacks Consensus Estimate for the upcoming quarter's EPS has been revised upwards to $2.08, reflecting a 9.5% increase from previous estimates. This revision indicates optimism about Jacobs' ability to deliver strong financial results. The company's price-to-earnings (P/E) ratio is approximately 27.82, showing the price investors are willing to pay for each dollar of earnings.

Jacobs' price-to-sales ratio stands at about 1.03, suggesting that investors are paying a little over one dollar for every dollar of sales. The enterprise value to sales ratio is approximately 1.16, reflecting the company's total valuation relative to its sales. The enterprise value to operating cash flow ratio is around 18.31, providing insight into the company's valuation compared to its cash flow.

The earnings yield is approximately 3.60%, offering a perspective on the return on investment. Jacobs maintains a debt-to-equity ratio of about 0.46, indicating a moderate level of debt relative to equity. The current ratio is approximately 1.14, suggesting that the company has a reasonable level of liquidity to cover its short-term liabilities.

Jacobs Reports Q4 Beat, While Guidance Misses

Jacobs (NYSE:J) reported its Q4 results yesterday, with EPS of $1.80 coming in better than the Street estimate of $1.78. Revenue was $3.9 billion, beating the Street estimate of $3.8 billion.

Analysts at RBC Capital believe the company remains well positioned over the medium term given the demand tailwinds across its segments. The analysts lowered their price target to $150 from $155 while reiterating their Outperform rating.

While Q4 results were largely in line with expectations, the share price reaction yesterday (down nearly 3%) appears to be driven by the fiscal 2023 outlook. The company expects 2023 EPS to be in the range of $7.20-$7.50, compared to the Street estimate of $7.66.