JACOBS SOLUTIONS INC. Q2 FY2025 earnings call

• Completed separation of former CMS and C&I businesses, including equity for debt exchange and final Amentum share distribution. - Delivered strong Q2 operating performance: adjusted EPS grew over 22% to $1.43, backlog reached a new record of over $22 billion. - Notable Q2 awards: OT cybersecurity for Hampton Roads Sanitation District, PFAS removal project in Boynton Beach, Merck's oncology product facility work, PsiQuantum's utility-scale quantum computing facility owner engineering, and Denver International Airport transportation system expansion. - Focus on high-growth markets such as water, life sciences, data centers, and critical infrastructure to provide differentiated, digitally-enabled solutions.

Second quarter gross revenue grew 2% year-over-year and adjusted net revenue (excluding pass-through revenues) grew 3%. Adjusted EBITDA was $287 million, up over 8% year-over-year, with an adjusted EBITDA margin of 13.4% (up 62 basis points vs. same quarter last year). Backlog grew 20% to a record $22.2 billion. PA Consulting had mid-single digit revenue growth and double-digit operating profit growth. Water and Environmental saw strong revenue growth, including a cybersecurity contract with Hampton Roads Sanitation District and a PFAS removal project in Boynton Beach. Life Sciences and Advanced Manufacturing had double-digit growth, with Merck and PsiQuantum projects. Critical Infrastructure benefited from Denver International Airport expansion and global aviation investment.

• Reaffirmed fiscal 2025 outlook: adjusted net revenue to grow mid-to high single digits year-over-year; adjusted EBITDA margin to range from 13.8% to 14%; reported free cash flow conversion to be more than 100%; and adjusted EPS of $5.85 to $6.20. - Anticipate sequential improvement in net revenue and operating profit in the second half of the year, with Q3 net revenue expected to grow 5% to 7% year-on-year and adjusted EBITDA margin approaching 14% in Q3.

• Legal matter involving a consolidated 50-50 joint venture resulted in a reserve that impacted revenue and operating profit. - Geopolitical impacts, including potential extension of procurement cycles and supply chain challenges. - Uncertainty around tariffs and their effect on clients' supply chains.

Q: Quantify the legal reserve impact and customer spending visibility A: Venk Nathamuni explained the legal reserve was absorbed, and while procurement cycles are extending, broad cancellations or delays in execution are not seen Q: Region performance, PA growth, FX A: Bob Pragada noted PA had strong growth, U.K. defense and security is strong, Middle East growth is solid, and Venk Nathamuni mentioned FX could be a tailwind in Q3 Q: Free cash flow and profit margins A: Venk Nathamuni stated Q3 cash flow is expected to improve, and utilization has picked up, with margin guidance for Q3 approaching 14% Q: JV project status and construction costs A: Bob Pragada said the JV project is nearly complete, and construction cost increases create value engineering and supply chain consulting opportunities Q: Reshoring discussions and PA investment A: Bob Pragada mentioned reshoring discussions are ongoing in life sciences and semi, and consideration of increasing investment in PA Consulting Q: Second half revenue drivers and margin inflection A: Bob Pragada identified life sciences, water, semi, energy, and transportation as key revenue drivers, with the I&AF segment expected to drive margin improvement Q: PA growth outlook and EPS guidance A: Bob Pragada said PA growth is on track, and EPS guidance is driven by revenue growth and margin expansion Q: Geographical growth and project risk A: Bob Pragada noted Middle East and India have growth runway, and project risk governance remains strong