Jacobs Solutions Inc. Q3 FY2023 Earnings Call

· Earnings call transcript and AI-powered summary

Quarter Overview

  • Jacobs reported another record quarter for both revenue and operating profit, driven entirely by organic growth.
  • Strong cash generation supported growth investments and capital returns, including $125 million in share repurchases.
  • Separation of the Critical Mission Solutions (CMS) business is progressing; target completion remains fiscal 2024. Outside interest in CMS is being evaluated.

Financial Highlights (Compared to Q3 FY2022)

  • Gross revenue up 9% year-over-year.
  • Adjusted net revenue up 7.5% (8% constant currency).
  • Adjusted operating profit of $361 million, up over 10% year-over-year.
  • Adjusted operating margin improved 30 bps to 10.7%.
  • Adjusted EPS was $1.82, down 2% year-over-year. The company cited a $0.15 EPS headwind from higher interest costs and a 2022 investment gain.
  • Adjusted EBITDA was $355 million, down 2% year-over-year.
  • Backlog grew 3% year-over-year, with gross margin in backlog up 8%.
  • Free cash flow of $290 million; year-to-date cash conversion of 127% of net income.

Segment Performance

People & Places Solutions (P&PS)

  • Adjusted net revenue up 9% year-over-year; 10% in constant currency.
  • Operating profit up 13% year-over-year; margin expanded 60 bps to 14.4%.

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Operator: Ladies and gentlemen, thank you for standing by. My name is Brent, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Jacobs Fiscal Third Quarter 2023 Earnings Call and Webcast. [Operator Instructions]. It is now my pleasure to turn today's call over to Mr. Jonathan Evans, Vice President of Corporate Development and Investor Relations. Sir, please go ahead. 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. I would like to refer you to Slide two 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, Bob will begin by providing an overview of recent activities and summarizing highlights from our third 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. And Claudia will provide an overview of separation-related activities. Finally, Bob will provide details on our updated outlook along with closing remarks, and then we'll open up the call for questions. Before I hand it over to Bob, I want to address some reporting changes that were made in the quarter. We consistently review our reporting

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