Jacobs Solutions Inc. Q2 FY2023 Earnings Call

· Earnings call transcript and AI-powered summary

Strategic Update: Separation of CMS

  • Jacobs announced intent to separate its Critical Mission Solutions (CMS) segment into an independent public company via tax-free spin-off targeted for the second half of FY2024.
  • Rationale: streamline portfolio, enhance strategic focus, enable tailored capital allocation, and unlock growth potential for both entities.
  • Post-spin Jacobs (RemainCo) will be more focused on higher-growth, higher-margin infrastructure, climate response, consulting, and data solutions.
  • New CMS will be a government-focused technical services provider with FY22 revenue of approximately $4.4B.
  • No significant dissynergies anticipated; strong ongoing partnership expected between the two companies post-spin.

Q2 FY2023 Financial Highlights

  • Gross revenue increased 6% year-over-year (YoY); net revenue increased 5% (8% in constant currency).
  • Adjusted operating profit of $356M, up 7% YoY (11% in constant currency).
  • Adjusted operating margin rose to 10.4%, up 20 basis points YoY.
  • Adjusted EPS of $1.81, up 5% YoY.
  • Adjusted EBITDA of $358M, up 5% YoY.
  • Backlog grew 4% YoY (5% constant currency) with book-to-bill ratio of 1.2x.
  • Free cash flow: $97M with ~100% net income conversion for 1H FY2023.

Business Segment Performance

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Operator: Good morning ladies and gentlemen and welcome to the Jacobs Solutions Second Quarter 2023 Earnings Call and Webcast. [Operator Instructions] Please be advised that this call is being recorded. [Operator Instructions] And now at this time, I will turn things over to Mr. Jonathan Evans, Vice President of Corporate Development and Investor Relations. Please go ahead, Mr. Evans. Jonathan Evans: Thank you. Good morning. Our earnings announcement and 10-Q were filed this morning and we have posted a slide presentation on our website which we'll reference during the call. In addition, this morning, we published a release announcing our intent to create 2 independent companies with the separation of our Critical Mission Solutions business. I would like to refer you to Slide 2 of the presentation material for information about our forward-looking statements and non-GAAP financial measures. Turning to the agenda. Speaking on today's call will be Jacobs CEO, Bob Pragada; and CFO, Kevin Berryman. We are also joined by our incoming CFO, Claudia Jaramillo. Bob will begin by providing an overview of today's portfolio announcement, then summarizing highlights from our second quarter results. Kevin will provide a more in-depth discussion of our financial metrics as well as a review of our balance sheet and cash flow. Finally, Bob will provide details on our updated outlook along with closing remarks. And then we'll open up the call for questions. With that, I'll turn it over to Bob.

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