Jacobs Solutions (J) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total gross revenue increased over 4% in Q1 with adjusted net revenue rising over 5% [7][18] - GAAP EPS was negative $0.10, impacted by a negative$ 1.16 from mark-to-market loss in investment [8] - Adjusted EPS was $1.33, an 8% decrease year-over-year due to a favorable tax item last year [8][19] - Adjusted EBITDA for Q1 was$ 282 million, representing a 24% year-on-year increase [9][19] - Consolidated backlog increased 19% year-over-year, reaching $21.8 billion [21] Business Line Data and Key Metrics Changes - Infrastructure and Advanced Facilities saw adjusted net revenue increase by 11% year-over-year [22] - Life Sciences and Advanced Manufacturing grew adjusted net revenue by over 1%, with Life Sciences showing strength [23] - Critical Infrastructure adjusted net revenue increased 5% year-over-year, with North America outpacing total growth [24] - Operating profit in Infrastructure and Advanced Facilities increased by 26% year-over-year [25] Market Data and Key Metrics Changes - Strong demand for Water and Environmental Services across all major geographies [22] - Life Sciences pipeline remains robust, with significant growth expected [23] - Advanced Manufacturing is expected to improve in the second half of the year as new projects ramp up [24][62] Company Strategy and Development Direction - The company is focused on leveraging its global delivery model and end-to-end expertise for long-term shareholder value [7] - Plans to present a strategic vision for Jacobs at the upcoming Investor Day on February 18 [6][16] - Continued emphasis on organic growth, returning capital to shareholders, and potential M&A as an accelerator [85] Management's Comments on Operating Environment and Future Outlook - Customer sentiment remains positive despite political narratives, with double-digit pipeline growth across sectors [40][41] - Confidence in continued growth in Water and Environmental solutions, driven by urbanization and aging infrastructure [56] - Anticipated revenue growth in the second half of the year, particularly in Advanced Manufacturing due to reshoring efforts [62] Other Important Information - Free cash flow for Q1 was$ 97 million, with $202 million in share repurchases [27][29] - New$ 1.5 billion share repurchase authorization approved, the largest in company history [29] - Fiscal '25 outlook for adjusted net revenue growth is mid- to high single digits year-over-year [31] Q&A Session Summary Question: Customer sentiment and backlog insights - Management noted that customer sentiment is positive, with no dramatic shifts in behavior despite political narratives [40][41] Question: Margin guidance and initiatives - Margin performance is attributed to cost controls, operating leverage, and improved execution across the asset life cycle [46][47] Question: Growth in Water and Environmental segment - Management expressed confidence in continued growth due to urbanization and climate effects, with deregulation serving as a catalyst [56][57] Question: Advanced Manufacturing visibility - Management indicated that while Advanced Manufacturing is currently weak, there is confidence in growth due to a strong pipeline and reshoring efforts [62] Question: Backlog and pipeline health - Management clarified that the focus on trailing 12-month backlog reflects consistent growth and is not indicative of weakening demand [73][74] Question: PA Consulting revenue growth - Management highlighted that revenue growth is expected to ramp up as larger jobs are finalized, particularly in the U.K. public sector [80] Question: Capital allocation and M&A considerations - Management emphasized organic growth as the top priority, with share repurchases and dividends also being key focuses, while M&A remains an option [85] Question: U.S. federal government exposure - Management stated that less than 10% of business is tied to federal agencies, with no significant impact from current political narratives [92] Question: European and Middle Eastern business outlook - Management reported strong pipelines in the Middle East and positive growth in Europe, particularly in energy and infrastructure sectors [99][100]