Jacobs Solutions Inc. Q3 FY2025 earnings call

• Bob mentioned strong Q3 results with adjusted EPS growing 25%, supported by 7% net revenue growth and margin expansion. PA Consulting had double-digit revenue and operating profit growth. Backlog set a new record at nearly $23 billion.
• Venk highlighted Q3 gross revenue up 5% y-o-y, adjusted net revenue up 7%, adjusted EBITDA margin at 14.1% (up 80 basis points y-o-y), and adjusted EPS at ~$1.62 (25% y-o-y increase).
• Operational highlights included wins like the Little Miami Wastewater Treatment Facility modernization, partnership with NVIDIA for AI data center Digital Twins, digital transformation engagement with Dallas Fort Worth International Airport, and the Marinus Link project in Australia.

In Q3, Jacobs delivered strong results. Adjusted net revenue grew 7%, adjusted EBITDA was $314 million, up over 13% year-over-year. PA Consulting capitalized on strong demand, achieving double-digit revenue and operating profit growth. Consolidated backlog was up 14% year-over-year to a record $22.7 billion, with the trailing 12-month book-to-bill at 1.2x. In the Infrastructure & Advanced Facilities end market, Water & Environmental showed strong performance, Life Sciences & Advanced Manufacturing had ~5% adjusted net revenue growth with Data Center submarket growth, and Critical Infrastructure saw over 6% adjusted net revenue growth with Energy & Power as the fastest-growing sector.

• For FY '25, Jacobs expects adjusted net revenue to grow approximately 5.5% year-over-year, adjusted EBITDA margin to be approximately 13.9%, and adjusted EPS range of $6 to $6.10, with reported free cash flow conversion expected to be more than 100%. The midpoint of guidance implies sequential improvement in Q4.
• For FY '26, Jacobs expects revenue growth to be ahead of FY '25 with continued margin improvement as gross margin initiatives phase in, leading to solid adjusted EPS growth.

Q: Can you expand on Data Center submarket growth, including scope and work involved?

A: Yes, Data Center opportunities come from hyperscalers, colos, and vertical integration. Scope has expanded to include Power, Water, and full project delivery. The partnership with NVIDIA is transformational as a reference design.

Q: How does the OBBBA bill affect the business?

A: It provides stability in state and local governments, with major positives in DoD and DoD Infrastructure, FAA, and reshoring activity. Some takes relate to state and local government balancing Medicaid cuts, but clients aren't currently focused on that.

Q: What about onetime costs associated with separations?

A: Onetime restructuring costs are significantly reduced, guided to $75 million to $95 million for FY '25, down from prior years, and expected to decrease further in FY '26.

Q: How confident are you in FY '26 growth?

A: Confident due to strong end markets like Life Sciences, Data Centers, and Water, with backlog growth and pipeline visibility.

Q: What's the outlook for Critical Infrastructure in Europe and the Middle East?

A: In Europe, transportation spend in the U.K., Ireland, and Nordics is rebounding. In the Middle East, cities and places segment has strong double-digit growth with upcoming events like Expo and World Cup.