Jacobs Solutions (J) Q3 2025 Earnings Call August 05, 2025 10:00 AM ET Company ParticipantsBert Subin - SVP - Investor RelationsBob Pragada - Chair & CEOVenk Nathamuni - CFOAndrew Kaplowitz - Managing DirectorSabahat Khan - MD - Global ResearchJudah Aronovitz - Associate Director - Equity ResearchConference Call ParticipantsSangita Jain - Director & Equity Research AnalystAndrew Wittmann - Senior Research AnalystMichael Dudas - AnalystNone - AnalystKevin Wilson - Equity Research AnalystOperatorThank you for ...

Financial Data and Key Metrics Changes - Adjusted EPS grew 25% to $1.62, supported by 7% net revenue growth and significant year-over-year margin expansion [4][6] - Adjusted EBITDA increased by more than 13% to $314 million, with an adjusted EBITDA margin of 14.1%, an increase of 80 basis points year-over-year [13][14] - Consolidated backlog rose 14% year-over-year to a record $22.7 billion, with a trailing twelve-month book-to-bill ratio of 1.2x [14][20] Business Line Data and Key Metrics Changes - In the water and environmental sector, adjusted net revenue grew over 5% in Q3, with expectations for similar growth in Q4 [15] - Life sciences and advanced manufacturing also saw adjusted net revenue growth of approximately 5% in Q3, with data centers becoming the fastest-growing submarket [15][9] - Critical infrastructure adjusted net revenue increased over 6% year-on-year, with energy and power being the fastest-growing sector [16] Market Data and Key Metrics Changes - Strong demand in the water sector, with significant project wins in wastewater treatment and environmental modernization [8][11] - Growth in the cities and places vertical in the Middle East, driven by upcoming major events [52] - Positive trends in the UK and European markets, particularly in transportation infrastructure spending [51] Company Strategy and Development Direction - The company is focused on redefining the asset lifecycle and expanding addressable markets with core clients [7][12] - Continued investment in digital twin technologies and partnerships, such as with NVIDIA, to enhance service offerings in AI data centers [9][10] - The strategy aims to leverage global expertise in capital project execution to meet energy and sustainability goals [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the operating environment, citing secular growth drivers in various sectors [5][25] - The company expects to build on strong Q3 performance into Q4 and anticipates revenue growth ahead of FY 2025 in FY 2026 [23][25] - Management highlighted the importance of backlog growth and pipeline strength as indicators of future performance [25] Other Important Information - Free cash flow for Q3 was $271 million, with significant share repurchases totaling $653 million year-to-date [20] - The company plans to return over 100% of adjusted free cash flow in FY 2025, supported by a strong balance sheet [20][22] - Adjusted net revenue growth for FY 2025 is now expected to be approximately 5.5% year-over-year [22] Q&A Session Summary Question: Can you expand on the data center submarket growth? - The company is seeing increased scope in data center projects, including power and water requirements, and is expanding from design to full project delivery [28][30] Question: What is the makeup of the backlog and the expected pace of burn? - The backlog is growing in advanced facilities and water sectors, with longer duration projects expected to provide visibility beyond FY 2026 [32][34] Question: How do you assess the impact of new federal policies on business? - Management sees stability in state and local government spending, particularly in transportation and water, as a net positive for the business [40][42] Question: What are the expected one-time costs associated with the separation? - One-time restructuring costs are expected to be between $75 million and $95 million, significantly lower than the previous fiscal year [44][45] Question: What is the outlook for FY 2026 growth? - The company expects growth in FY 2026 to be ahead of FY 2025, driven by life sciences, data centers, and water projects [48][50] Question: How is the environmental sector performing? - The environmental sector experienced a slowdown but is expected to recover as regulatory environments stabilize [95] Question: What is the status of the investment in PA Consulting? - Ongoing discussions with PA Consulting are positive, focusing on performance and synergistic value moving forward [98]