Jacobs Reports Fiscal First Quarter 2024 Earnings

Rhea-AI Summary

Jacobs Solutions Inc. (NYSE: J) reported a 9.5% increase in revenue, reaching $4.2 billion in the first quarter of fiscal 2024. The company's cash flow from operations totaled $418 million, and it repurchased $100 million in shares. Jacobs also announced an 11.5% quarterly dividend increase and reiterates its fiscal 2024 adjusted EBITDA and adjusted EPS outlook. The company's backlog reached $29.6 billion, up 4.7% year-over-year, and gross profit in backlog increased by 6.1% year-over-year. The reported EPS increased by 28% year-over-year, and the adjusted EPS from continuing operations also increased by 28% year-over-year. Jacobs' CEO highlighted the strong performance and robust organic revenue growth in the People and Places Solutions business, while the CFO emphasized the commitment to consistent return of capital to shareholders. The company also provided an update on the planned separation transaction, expecting it to close in the second half of fiscal year 2024.

Positive

• Revenue increased by 9.5% year-over-year
• Reported EPS and adjusted EPS from continuing operations increased by 28% year-over-year
• Backlog increased by 4.7% year-over-year, with gross profit in backlog up by 6.1% year-over-year
• Strong cash flow from operations of $418 million
• Repurchased $100 million in shares and announced an 11.5% quarterly dividend increase
• Reiterates fiscal 2024 adjusted EBITDA and adjusted EPS outlook

Negative

• None.

Insights

Financial Analyst

The reported increase in first-quarter revenue by 9.5% year-over-year for Jacobs Solutions Inc. reflects a robust financial performance, indicating a positive trajectory in the company's operations. The elevation in both reported and adjusted EPS by 28% showcases strong profitability and may signal operational efficiency and effective cost management. The cash flow from operations amounting to $418M provides the company with substantial liquidity, which is further evidenced by the share repurchase of $100M and an 11.5% dividend increase, demonstrating confidence in the company's financial health and a commitment to shareholder returns.

The reiteration of the fiscal 2024 adjusted EBITDA and EPS outlook suggests stable future expectations, which is crucial for investor confidence. Moreover, the backlog increase of 4.7% year-over-year with a 6.1% increase in gross profit indicates a healthy pipeline of future revenue, which is a positive sign for sustained growth. However, investors should be mindful of the potential risks associated with the planned separation transaction with Amentum, as it involves various regulatory and tax considerations that could impact future financials.

Market Research Analyst

Jacobs Solutions Inc.'s strong performance in the People and Places Solutions sector, with a 10.9% revenue increase, reflects the current market demand for infrastructure and sustainability investments. The company's focus on leaner operating models and project delivery excellence may enhance its competitive edge in the science-based and digitally-enabled solutions market. Investors should consider the broader industry trends, such as increased public and private investment in infrastructure, which could further drive Jacobs' growth.

Additionally, the company's forward-looking statements on maintaining an investment grade credit profile while increasing return of capital indicates a strategic balance between growth and financial prudence. This balance is essential in volatile markets, as it suggests that the company is not overextending itself financially while still prioritizing shareholder value.

Legal Expert

The update on the planned separation transaction with Amentum, structured as a Reverse Morris Trust, is a critical element that requires careful legal scrutiny. The successful completion of this transaction is contingent on regulatory approvals, tax rulings and other customary closing conditions. This complex legal process could have significant implications for Jacobs' financial structure and future operations. Stakeholders should monitor this development closely, as it will likely influence the company's strategic direction and could potentially unlock value or introduce challenges associated with executing such a large-scale corporate reorganization.

First Quarter Revenue up 9.5% Year-Over-Year

People and Places Solutions Revenue up 10.9% Year-Over-Year

Reported EPS up 28% Year-Over-Year; Adjusted EPS up 28% Year-Over-Year¹

Reported $418M in Cash Flow from Operations; Repurchased $100M in Shares

Announced 11.5% Quarterly Dividend Increase

  Reiterates Fiscal 2024 Adjusted EBITDA and Adjusted EPS Outlook

DALLAS, Feb. 6, 2024 /PRNewswire/ -- Jacobs Solutions Inc. (NYSE: J) today announced its financial results for the fiscal first quarter ended December 29, 2023.

Q1 2024 Highlights:

• Revenue of $4.2 billion up 9.5% y/y; adjusted net revenue¹ increased 7.0% y/y and up 5.4% in constant currency¹
• Backlog¹ of $29.6 billion, up 4.7% y/y; gross profit in backlog¹ up 6.1% y/y
• EPS of $1.37, up 28% y/y; adjusted EPS from continuing operations¹ of $2.02, up 28% y/y, which includes a $0.49/share non-cash deferred tax benefit and ($0.09)/share non-cash inventory write down
• Strong cash flow from operations of $418 million; continue to expect greater than 100% fiscal year adjusted free cash flow conversion¹

Jacobs' CEO Bob Pragada commented, "We kicked off fiscal 2024 with strong performance, underpinned by robust organic revenue growth in our People and Places Solutions (P&PS) business, reflecting the broad-based strength that we see in global infrastructure and sustainability investment. We are diligently working to create a leaner operating model that delivers higher growth, higher margin value for our stakeholders by focusing on disciplined execution and project delivery excellence. Aligned with our position as a global leader in science-based, digitally-enabled solutions, our portfolio remains resilient. We are pleased with the progress we continue to make toward the merger of our Critical Mission Solutions (CMS) and Cyber & Intelligence businesses with Amentum as we look to stand up two independent companies."

Jacobs CFO Claudia Jaramillo added, "Jacobs delivered $418M in cash flow from operations and $401M in free cash flow¹ while repurchasing $100M in shares and increasing our dividend. We remain committed to the consistent return of capital to shareholders, and will look to increase return of capital while maintaining discipline and an investment grade credit profile."

Financial Outlook²

The Company reiterates its outlook for fiscal 2024 adjusted EBITDA of $1,530M to $1,600M and adjusted EPS of $7.70 to $8.20, up 9% and 10% at the midpoints, respectively.

1See "Non-GAAP Financial Measures and Operating Metrics" and the GAAP Reconciliation tables that follow for additional detail.

2Reconciliation of fiscal 2024 adjusted EBITDA,  adjusted EPS and expectations for fiscal year 2024 adjusted cash flow conversion to the most directly comparable GAAP measure is not available without unreasonable efforts because the Company cannot predict with sufficient certainty all the components required to provide such reconciliation, including with respect to the costs and charges relating to transaction expenses, restructuring and integration to be incurred in fiscal 2024. The Company's forecasts assume full year contribution from the Separated Businesses.

Update on Planned Separation Transaction

On November 20, 2023, Jacobs announced that it had entered into a definitive agreement to separate and combine its CMS and portions of the Divergent Solutions businesses (the "Separated Businesses") with Amentum in a tax-efficient Reverse Morris Trust transaction. Until closing, the Separated Businesses will operate as business units of Jacobs and financial results for the businesses will be reported in continuing operations. Closing of the transaction is subject to various customary closing conditions including regulatory approvals, receipt of a private letter ruling from the Internal Revenue Service, opinions from tax advisors and the effectiveness of a registration statement with the U.S. Securities and Exchange Commission. The Company continues to make progress towards the separation and expects the transaction to close in the second half of fiscal year 2024.

First Quarter Review

	Fiscal Q1 2024	Fiscal Q1 2023	Change
Revenue	$4.2 billion	$3.8 billion	$0.4 million
Adjusted Net Revenue1	$3.3 billion	$3.1 billion	$0.2 million
GAAP Net Earnings from Continuing Operations	$172 million	$136 million	$36 million
GAAP Earnings Per Diluted Share (EPS) from Continuing Operations	$1.37	$1.07	$0.30
Adjusted Net Earnings from Continuing Operations1,3	$256 million	$201 million	$55 million
Adjusted EPS from Continuing Operations1,3	$2.02	$1.57	$0.45

The Company's adjusted net earnings from continuing operations and adjusted EPS from continuing operations for the first quarter of fiscal 2024 and fiscal 2023 exclude certain adjustments that are further described in the section entitled "Non-GAAP Financial Measures" at the end of this release. For a reconciliation of Revenue to Adjusted Net Revenue, see "Segment Information", below.

The Company's U.S. GAAP effective tax rate for continuing operations is (9.8)% for the fiscal first quarter 2024, and fiscal first quarter 2024 adjusted earnings per share from continuing operations reflects an adjusted effective tax rate of 4.2%.  The current quarter adjusted effective tax rate benefited from a $61.6 million non cash deferred tax benefit². The Company's U.S. GAAP effective tax rate for continuing operations was 25.4% for the fiscal first quarter 2023, and fiscal first quarter 2023 adjusted earnings per share from continuing operations was 24.9%.

Jacobs is hosting a conference call at 10:00 A.M. ET on Tuesday February 6, 2024, which it is webcasting live at www.jacobs.com.

3Beginning with our fiscal first quarter in 2024, the Company has revised its presentation of adjusted net earnings from continuing operations and adjusted EPS from continuing operations to no longer apply an adjustment which previously resulted in the application of the expected annual effective tax rate to all quarterly periods. Prior comparable periods are also being presented on this basis.

Forward-Looking Statements

Certain statements contained in this press release constitute forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that do not directly relate to any historical or current fact. When used herein, words such as "expects," "anticipates," "believes," "seeks," "estimates," "plans," "intends," "future," "will," "would," "could," "can," "may," "target," "goal" and similar words are intended to identify forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements we make concerning our expectations as to our future growth, prospects, financial outlook and business strategy, including our expectations for our fiscal year 2024 adjusted EBITDA,  adjusted EPS, and adjusted free cash flow conversion, as well as our expectations for how our Separated Businesses are tracking against their forecasts, our plan to increase return of capital to shareholders, and our fiscal year 2024 effective tax rates, and any assumptions underlying any of the foregoing. Although such statements are based on management's current estimates and expectations, and/or currently available competitive, financial, and economic data, forward-looking statements are inherently uncertain, and you should not place undue reliance on such statements as actual results may differ materially. We caution the reader that there are a variety of risks, uncertainties and other factors that could cause actual results to differ materially from what is contained, projected or implied by our forward-looking statements. Such factors include uncertainties as to the structure and timing of the proposed transaction to spin off and merge with Amentum the Separated Businesses in a proposed transaction that is intended to be tax-free to stockholders for U.S. federal income tax purposes (hereinafter referred to as the "Separation Transaction"), the impact of the Separation Transaction on Jacobs' and the combined company's businesses if the transaction is completed, including a possible impact on Jacobs' credit profile, and a possible decrease in the trading price of Jacobs' and/or the combined company's shares, the possibility that the Separation Transaction, if completed, may not qualify for the expected tax treatment, the ability to obtain all required regulatory approvals, the possibility that closing conditions for the Separation Transaction may not be satisfied or waived, on a timely basis or otherwise, the risk that any consents or approvals required in connection with the Separation Transaction may not be received, the risk that the Separation Transaction may not be completed on the terms or in the time-frame expected by the parties, uncertainties as to our and our stockholders' respective ownership percentages of the combined company and the value to be derived from the disposition of Jacobs' stake in the combined company, unexpected costs, charges or expenses resulting from the Separation Transaction, business and management strategies and the growth expectations of the combined company, the inability of Jacobs and the combined company to retain and hire key personnel, customers or suppliers while the Separation Transaction is pending or after it is completed, and the ability of the Company to eliminate all stranded costs, as well as other factors related to our business, such as our ability to fully execute on our three-year corporate strategy, including our ability to invest in the tools needed to implement our strategy, competition from existing and future competitors in our target markets, our ability to achieve the cost-savings and synergies contemplated by our recent acquisitions within the expected time frames or to achieve them fully and to successfully integrate acquired businesses while retaining key personnel, the impact of any pandemic, and any resulting economic downturn on our results, prospects and opportunities, measures or restrictions imposed by governments and health officials in response to the pandemic, the timing of the award of projects and funding and potential changes to the amounts provided for under the Infrastructure Investment and Jobs Act, as well as other legislation related to governmental spending, any changes in U.S. or foreign tax laws, statutes, rules, regulations or ordinances that may adversely impact our future financial positions or results of operations, financial market risks that may affect the Company, including by affecting the Company's access to capital, the cost of such capital and/or the Company's funding obligations under defined benefit pension and postretirement plans, as well as general economic conditions, including inflation and the actions taken by monetary authorities in response to inflation, changes in interest rates, and foreign currency exchange rates, changes in capital markets, instability in the banking industry, or the impact of a possible recession or economic downturn on our results, prospects and opportunities, and geopolitical events and conflicts among others. The impact of such matters includes, but is not limited to, the possible reduction in demand for certain of our product solutions and services and the delay or abandonment of ongoing or anticipated projects due to the financial condition of our clients and suppliers or to governmental budget constraints or changes to governmental budgetary priorities; the inability of our clients to meet their payment obligations in a timely manner or at all; potential issues and risks related to a significant portion of our employees working remotely; illness, travel restrictions and other workforce disruptions that have and could continue to negatively affect our supply chain and our ability to timely and satisfactorily complete our clients' projects; difficulties associated with retaining and hiring additional employees; and the inability of governments in certain of the countries in which we operate to effectively mitigate the financial or other impacts of any future pandemics or infectious disease outbreaks on their economies and workforces and our operations therein. The foregoing factors and potential future developments are inherently uncertain, unpredictable and, in many cases, beyond our control. For a description of these and additional factors that may occur that could cause actual results to differ from our forward-looking statements see our Annual Report on Form 10-K for the year ended September 29, 2023, and in particular the discussions contained therein under Item 1 - Business; Item 1A - Risk Factors; Item 3 - Legal Proceedings; and Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations,  and Part II, Item 1A - Risk Factors, in our most recently filed Quarterly Report on Form 10-Q, as well as the Company's other filings with the U.S. Securities and Exchange Commission. The Company is not under any duty to update any of the forward-looking statements after the date of this press release to conform to actual results, except as required by applicable law.

About Jacobs 

At Jacobs, we're challenging today to reinvent tomorrow by solving the world's most critical problems for thriving cities, resilient environments, mission-critical outcomes, operational advancement, scientific discovery and cutting-edge manufacturing, turning abstract ideas into realities that transform the world for good. With approximately $16 billion in annual revenue and a talent force of more than 60,000, Jacobs provides a full spectrum of professional services including consulting, technical, scientific and project delivery for the government and private sectors. Visit jacobs.com and connect with Jacobs on LinkedIn, X, Facebook and Instagram.

 

Financial Highlights:
Results of Operations (in thousands, except per-share data):
	For the Three Months Ended
Unaudited	December 29, 2023		December 30, 2022
Revenues	$             4,159,225		$          3,798,668
Direct cost of contracts	(3,308,687)		(2,983,955)
Gross profit	850,538		814,713
Selling, general and administrative expenses	(646,475)		(576,908)
Operating Profit	204,063		237,805
Other Income (Expense):
Interest income	8,233		3,007
Interest expense	(43,352)		(40,077)
Miscellaneous expense	(3,195)		(3,254)
Total other expense, net	(38,314)		(40,324)
Earnings from Continuing Operations Before Taxes	165,749		197,481
Income Tax benefit (expense) from Continuing Operations	16,279		(50,103)
Net Earnings of the Group from Continuing Operations	182,028		147,378
Net Loss of the Group from Discontinued Operations	(574)		(708)
Net Earnings of the Group	181,454		146,670
Net Earnings Attributable to Noncontrolling Interests from Continuing Operations	(7,226)		(7,031)
Net Earnings Attributable to Redeemable Noncontrolling interests	(2,618)		(3,992)
Net Earnings Attributable to Jacobs from Continuing Operations	172,184		136,355
Net Earnings Attributable to Jacobs	$                171,610		$              135,647
Net Earnings Per Share:
Basic Net Earnings from Continuing Operations Per Share	$                      1.38		$                    1.08
Basic Net Loss from Discontinued Operations Per Share	$                         —		$                   (0.01)
Basic Earnings Per Share	$                      1.37		$                    1.07
Diluted Net Earnings from Continuing Operations Per Share	$                      1.37		$                    1.07
Diluted Net Loss from Discontinued Operations Per Share	$                         —		$                   (0.01)
Diluted Earnings Per Share	$                      1.37		$                    1.06

 

Segment Information (in thousands):
	Three Months Ended
Unaudited	December 29, 2023		December 30, 2022
Revenues from External Customers:
Critical Mission Solutions	$           1,128,603		$           1,075,175
People & Places Solutions	2,470,441		2,226,985
Pass Through Revenue	(826,480)		(710,158)
People & Places Solutions Adjusted Net Revenue	$           1,643,961		$           1,516,827
Divergent Solutions	$              254,180		$              214,465
Pass Through Revenue	(43,907)		(13,714)
Divergent Solutions Adjusted Net Revenue	$              210,273		$              200,751
PA Consulting	$              306,001		$              282,043
Total Revenue	$           4,159,225		$           3,798,668
Adjusted Net Revenue	$           3,288,838		$           3,074,796
	Three Months Ended
	December 29, 2023		December 30, 2022
Segment Operating Profit:
Critical Mission Solutions	$                93,407		$                82,220
People & Places Solutions	224,998		226,619
Divergent Solutions (1)	7,581		11,967
PA Consulting	54,455		51,027
Total Segment Operating Profit	380,441		371,833
Other Corporate Expenses (2)	(121,060)		(93,686)
Restructuring, Transaction and Other Charges (3)	(55,318)		(40,342)
Total U.S. GAAP Operating Profit	204,063		237,805
Total Other Expense, net	(38,314)		(40,324)
Earnings Before Taxes from Continuing Operations	$              165,749		$             197,481

(1)	Includes an approximate $15 million pre-tax non-cash charge associated with an inventory write down during the fiscal 2024 period.
(2)	Other corporate expenses included intangibles amortization of $51.1 million and $49.8 million for the three months ended December 29, 2023 and December 30, 2022, respectively, along with an approximate $10 million intangibles impairment charge in the three month ended December 29, 2023 period. Additionally, the comparison of the three month period of fiscal 2024 to the corresponding 2023 period was unfavorably impacted by the one-time net favorable impacts of $41 million relating mainly to changes in employee benefits programs in the prior year, partly offset by year over year favorable department spending as well as favorable impacts of corporate functional overhead cost recovery by our lines of business.
(3)	The three months ended December 29, 2023 included $40.1 million in restructuring and $11.0 million of transaction charges, mainly relating to the Separation Transaction (primarily professional services and employee separation costs). Included in the three months ended December 30, 2022 were mainly $27.1 million in restructuring and other charges associated mainly with real estate impairments with the remainder associated with other miscellaneous separation and transaction professional services costs from the prior year.

 

Balance Sheets (in thousands):
	December 29, 2023		September 29, 2023
	Unaudited
ASSETS
Current Assets:
Cash and cash equivalents	$               1,142,227		$                    926,582
Receivables and contract assets	3,676,508		3,558,806
Prepaid expenses and other	156,533		204,965
Total current assets	4,975,268		4,690,353
Property, Equipment and Improvements, net	353,305		357,032
Other Noncurrent Assets:
Goodwill	7,421,398		7,343,526
Intangibles, net	1,268,329		1,271,943
Deferred income tax assets	46,525		53,131
Operating lease right-of-use assets	405,748		414,384
Miscellaneous	481,631		486,740
Total other noncurrent assets	9,623,631		9,569,724
	$              14,952,204		$                14,617,109
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term debt	$                     55,839		$                       61,430
Accounts payable	1,114,790		1,143,802
Accrued liabilities	1,375,553		1,301,644
Operating lease liability	152,472		152,077
Contract liabilities	945,892		763,608
Total current liabilities	3,644,546		3,422,561
Long-term debt	2,834,880		2,813,471
Liabilities relating to defined benefit pension and retirement plans	276,307		258,540
Deferred income tax liabilities	153,869		221,158
Long-term operating lease liability	522,670		543,230
Other deferred liabilities	131,006		125,088
Commitments and Contingencies
Redeemable Noncontrolling interests	654,076		632,979
Stockholders' Equity:
Capital stock:
Preferred stock, $1 par value, authorized - 1,000,000 shares; issued and outstanding - none	—		—
Common stock, $1 par value, authorized - 240,000,000 shares; issued and outstanding - 125,599,058 shares and 125,976,998 shares as of December 29, 2023 and September 29, 2023, respectively	125,599		125,977
Additional paid-in capital	2,729,416		2,735,325
Retained earnings	4,604,850		4,542,872
Accumulated other comprehensive loss	(781,591)		(857,954)
Total Jacobs stockholders' equity	6,678,274		6,546,220
Noncontrolling interests	56,576		53,862
Total Group stockholders' equity	6,734,850		6,600,082
	$             14,952,204		$              14,617,109

 

Statements of Cash Flows (in thousands):
	For the Three Months Ended
Unaudited	December 29, 2023		December 30, 2022
Cash Flows from Operating Activities:
Net earnings attributable to the Group	$           181,454		$          146,670
Adjustments to reconcile net earnings to net cash flows (used for) provided by operations:
Depreciation and amortization:
Property, equipment and improvements	25,169		27,979
Intangible assets	51,119		49,773
Stock based compensation	19,310		20,231
Equity in earnings of operating ventures, net of return on capital distributions	1,870		2,613
Loss on disposals of assets, net	608		241
Impairment of long-lived assets and equity method investment	—		27,142
Deferred (benefit) loss on income taxes	(58,239)		13,797
Changes in assets and liabilities, excluding the effects of businesses acquired:
Receivables and contract assets, net of contract liabilities	102,705		127,144
Prepaid expenses and other current assets	50,216		8,219
Miscellaneous other assets	28,385		42,578
Accounts payable	(35,843)		(51,669)
Accrued liabilities	37,584		(127,043)
Other deferred liabilities	(1,665)		8,462
Other, net	15,688		6,160
Net cash provided by operating activities	418,361		302,297
Cash Flows from Investing Activities:
Additions to property and equipment	(17,306)		(32,187)
Disposals of property and equipment and other assets	43		8
Capital contributions to equity investees, net of return of capital distributions	1,266		384
Acquisitions of businesses, net of cash acquired	—		(16,943)
Net cash used for investing activities	(15,997)		(48,738)
Cash Flows from Financing Activities:
Net payments of borrowings	(33,613)		(7,421)
Debt issuance costs	(1,606)		—
Proceeds from issuances of common stock	11,355		14,798
Common stock repurchases	(100,016)		(140,522)
Taxes paid on vested restricted stock	(22,387)		(22,530)
Cash dividends to shareholders	(33,366)		(29,811)
Net dividends associated with noncontrolling interests	(4,708)		(2,307)
Repurchase of redeemable noncontrolling interests	(24,360)		(58,353)
Net cash used for financing activities	(208,701)		(246,146)
Effect of Exchange Rate Changes	34,148		51,806
Net Increase in Cash and Cash Equivalents and Restricted Cash	227,811		59,219
Cash and Cash Equivalents, including Restricted Cash, at the Beginning of the Period	929,445		1,154,207
Cash and Cash Equivalents, including Restricted Cash, at the End of the Period	$        1,157,256		$       1,213,426

 

Backlog (in millions):
	December 29, 2023		December 30, 2022
Critical Mission Solutions	$                        8,311		$                        7,632
People & Places Solutions	17,857		17,243
Divergent Solutions	3,110		3,077
PA Consulting	317		306
Total	$                      29,595		$                      28,258

 

Non-GAAP Financial Measures and Operating Metrics:

In this press release, the Company has included certain non-GAAP financial measures as defined in Regulation G promulgated under the Securities Exchange Act of 1934, as amended. These non-GAAP measures are described below.

Adjusted Net revenue is calculated excluding pass through revenue of the Company's People & Places Solutions and Divergent Solutions segments from the Company's revenue from continuing operations. Pass through revenues are amounts we bill to clients on projects where we are procuring subcontract labor or third-party materials and equipment on behalf of the client. These amounts are considered pass throughs because we receive no or only a minimal mark-up associated with the billed amounts. We have amended our name and convention for revenue, excluding pass-through costs from "net revenue" to "adjusted net revenue." Note, this is simply a name change intended to make the non-GAAP nature of this measure more prominent and does not impact measurement.

Adjusted operating profit, adjusted earnings from continuing operations before taxes, adjusted income taxes from continuing operations, adjusted net earnings from continuing operations and adjusted EPS from continuing operations are calculated by:

1.	Excluding items collectively referred to as Restructuring, Transaction and Other Charges, which include:
	a.	costs and other charges associated with our Focus 2023 transformation initiatives, including activities associated with the re-scaling and repurposing of physical office space, employee separations, contractual termination fees and related expenses, referred to as "Focus 2023 Transformation, mainly real estate rescaling efforts";
	b.	transaction costs and other charges incurred in connection with the Separation Transaction and acquisitions of BlackLynx and StreetLight and the strategic investment in PA Consulting, including advisor fees, change in control payments, and the impact of the quarterly adjustment to the estimated performance based payout of contingent consideration to the sellers in connection with certain acquisitions; impacts resulting from the EPS numerator adjustment relating to the redeemable noncontrolling interests preference share repurchase and reissuance activities and similar transaction costs and expenses (collectively referred to as "Transaction Costs");
	c.	recoveries, costs and other charges associated with restructuring activities implemented in connection with the Separation Transaction, including advisor fees, involuntary terminations and related costs, the acquisitions of CH2M, BlackLynx, and StreetLight, the strategic investment in PA Consulting, the sale of the ECR business and other related cost reduction initiatives, which included involuntary terminations, costs associated with co-locating offices of acquired companies, separating physical locations of continuing operations, professional services and personnel costs, amounts relating to certain commitments and contingencies relating to discontinued operations of the CH2M business, including the final settlement charges relating to the Legacy CH2M Matter, net of previously recorded reserves, third party recoveries recorded as receivables reducing SG&A, and charges associated with the impairment and final closing activities of our AWE ML joint venture (collectively referred to as "Restructuring, integration, separation and other charges").
2.	Excluding items collectively referred to as "Other adjustments",1 which include:
	a.	adding back intangible assets amortization and impairment charges;
	b.	impact of certain subsidiary level contingent equity-based agreements in connection with the transaction structure of our PA Consulting investment;
	c	impacts related to tax rate increases in the UK in a prior period.

Adjustments to derive adjusted net earnings from continuing operations and adjusted EPS from continuing operations are calculated on an after-tax basis.

Free cash flow (FCF) is calculated as net cash provided by operating activities as reported on the statement of cash flows less additions to property and equipment. Adjusted free cash flow is calculated as Free Cash Flow adjusted for certain non-recurring adjustments (such as restructuring, transaction, legal and tax related items).

Adjusted EBITDA is calculated by adding income tax expense, depreciation expense and interest expense, and deducting interest income from adjusted net earnings from continuing operations.

1Beginning with our first fiscal quarter in 2024, the Company has revised its presentation of adjusted net earnings from continuing operations and adjusted EPS to no longer reflect adjustments to align these non-GAAP measures to our annual effective tax rates.

Certain percentage changes are quantified on a constant currency basis, which provides information assuming that foreign currency exchange rates have not changed between the prior and current periods. For purposes of constant currency calculations, we use the prior period average exchange rates as applied to the current period adjusted amounts.

We believe that the measures listed above are useful to management, investors and other users of our financial information in evaluating the Company's operating results and understanding the Company's operating trends by excluding or adding back the effects of the items described above and below, the inclusion or exclusion of which can obscure underlying trends. Additionally, management uses such measures in its own evaluation of the Company's performance, particularly when comparing performance to past periods, and believes these measures are useful for investors because they facilitate a comparison of our financial results from period to period.

This press release also contains certain operating metrics which management believes are useful in evaluating the Company's performance. Backlog represents revenue or gross profit, as applicable, we expect to realize for work to be completed by our consolidated subsidiaries and our proportionate share of work to be performed by unconsolidated joint ventures. For more information on how we determine our backlog, see our Backlog Information in our most recent annual report filed with the Securities and Exchange Commission. Adjusted EBITDA margin refers to a ratio of adjusted EBITDA to adjusted net revenue. Cash conversion refers to a ratio of cash flow from operations to GAAP net earnings from continuing operations. FCF conversion refers to a ratio of FCF to adjusted net earnings attributable to Jacobs from continuing operations. Adjusted FCF conversion refers to a ratio of adjusted FCF to adjusted net earnings attributable to Jacobs from continuing operations. We regularly monitor these operating metrics to evaluate our business, identify trends affecting our business, and make strategic decisions.

The Company provides non-GAAP measures to supplement U.S. GAAP measures, as they provide additional insight into the Company's financial results. However, non-GAAP measures have limitations as analytical tools and should not be considered in isolation and are not in accordance with, or a substitute for, U.S. GAAP measures. In addition, other companies may define non-GAAP measures differently, which limits the ability of investors to compare non-GAAP measures of the Company to those used by our peer companies.

The following tables reconcile the components and values of U.S. GAAP earnings from continuing operations before taxes, income taxes from continuing operations, net earnings attributable to Jacobs from continuing operations, Diluted Net Earnings from Continuing Operations Per Share (which we refer to as EPS from continuing operations), operating profit, to the corresponding "adjusted" amount, net cash provided by operating activities to free cash flow and revenue to adjusted net revenue. For the comparable period presented below, such adjustments consist of amounts incurred in connection with the items described above. Amounts are shown in thousands, except for per-share data (note: earnings per share amounts may not total due to rounding).

Reconciliation of Earnings from Continuing Operations Before Taxes to Adjusted Earnings from Continuing Operations Before Taxes (in thousands)
	Three Months Ended
	December 29, 2023		December 30, 2022
Earnings from Continuing Operations Before Taxes	$             165,749		$             197,481
Restructuring, Transaction and Other Charges (1):
Focus 2023 Transformation, mainly real estate rescaling efforts	49		27,172
Transaction costs	13,949		5,270
Restructuring, integration, separation and other charges	41,320		7,272
Other Adjustments (2):
Amortization of intangibles	51,119		49,773
Other	11,386		4,290
Adjusted Earnings from Continuing Operations Before Taxes	$              283,572		$              291,258

(1) Includes pre-tax non-cash charges primarily relating to the Separation Transaction for the three months ended December 29, 2023, and real estate impairments charges associated with the Company's Focus 2023 transformation program of $27.1 million charges associated with various transaction costs incurred with our acquisition and restructuring related activity associated with Company restructuring and integration programs for the three-months ended December 30, 2022.

(2) Includes pre-tax charges for the removal of amortization of intangible assets and the impact of certain subsidiary level contingent equity-based agreements in connection with the transaction structure of our PA Consulting investment of $1.6 million and $4.3 million for the three months ended December 29, 2023 and December 30, 2022, respectively. The three months ended December 29, 2023 also includes an approximate $10 million intangibles impairment charge.

 

Reconciliation of Income Tax Benefit (Expense) from Continuing Operations to Adjusted Income Tax Expense from Continuing Operations (in thousands)
	Three Months Ended
	December 29, 2023		December 30, 2022
Income Tax Benefit (Expense) from Continuing Operations	$                16,279		$            (50,103)
Tax Effects of Restructuring, Transaction and Other Charges (1)
Focus 2023 Transformation, mainly real estate rescaling efforts	(12)		(6,677)
Transaction costs	(3,140)		(1,250)
Restructuring, integration, separation and other charges	(9,900)		(1,788)
Tax Effects of Other Adjustments (2)
Amortization of intangibles	(12,824)		(11,880)
Other	(2,414)		(944)
Adjusted Income Tax Expense from Continuing Operations	$              (12,011)		$            (72,642)

(1) Includes estimated income tax impacts on restructuring activities primarily relating to the Separation Transaction for the three months ended December 29, 2023, along with impacts on real estate impairments associated with the Company's Focus 2023 transformation program and charges associated with various transaction costs incurred with our acquisition and restructuring related activity associated with Company restructuring and integration programs for the three months ended December 30, 2022.

(2) Includes estimated income tax impacts on amortization of intangible assets and on certain subsidiary level contingent equity-based agreements in connection with the transaction structure of our PA Consulting investment for the three months ended December 29, 2023 and December 30, 2022. The three months ended December 29, 2023 also includes the income tax impact on an approximate $10 million intangibles impairment charge.

 

Reconciliation of Net Earnings Attributable to Jacobs from Continuing Operations to Adjusted Net Earnings Attributable to Jacobs from Continuing Operations (in thousands)
	Three Months Ended
	December 29, 2023		December 30, 2022
Net Earnings Attributable to Jacobs from Continuing Operations	$             172,184		$             136,355
After-tax effects of Restructuring, Transaction and Other Charges (1):
Focus 2023 Transformation, mainly real estate rescaling efforts	37		20,495
Transaction costs	10,451		3,551
Restructuring, integration, separation and other charges	31,064		5,484
After-tax effects of Other Adjustments (2):
Amortization of intangibles	33,653		32,857
Other	8,497		2,232
Adjusted Net Earnings Attributable to Jacobs from Continuing Operations	$              255,886		$              200,974

(1) Includes estimated after-tax impacts primarily relating to the Separation Transaction for the three months ended December 29, 2023, along with non-cash real estate impairment charges associated the Company's Focus 2023 program and charges associated with various transaction costs incurred with our acquisition and restructuring related activity associated with Company restructuring and integration programs for the three months ended December 30, 2022.

(2) Includes estimated after-tax and noncontrolling interest impacts from amortization of intangible assets and estimated tax impacts on certain subsidiary level contingent equity-based agreements in connection with the transaction structure of our PA Consulting investment for the three months ended December 29, 2023 and December 30, 2022. The three months ended December 29, 2023 also includes the estimated after-tax impact from an approximate $10 million intangibles impairment charge.

 

Reconciliation of Diluted Net Earnings from Continuing Operations Per Share to Adjusted Diluted Net Earnings from Continuing Operations Per Share (in thousands)
	Three Months Ended
	December 29, 2023		December 30, 2022
Diluted Net Earnings from Continuing Operations Per Share	$                     1.37		$                     1.07
After-tax effects of Restructuring, Transaction and Other Charges (1):
Focus 2023 Transformation, mainly real estate rescaling efforts	—		0.16
Transaction costs	0.07		0.03
Restructuring, integration, separation and other charges	0.24		0.04
After-tax effects of Other Adjustments (2):
Amortization of intangibles	0.27		0.26
Other	0.06		0.02
Adjusted Diluted Net Earnings from Continuing Operations Per Share	$                      2.02		$                      1.58

(1) Includes estimated per-share impacts from the restructuring activities primarily relating to the Separation Transaction for the three months ended December 29, 2023, along with real estate impairments associated with the Company's Focus 2023 transformation program and impacts associated with various transaction costs incurred with our acquisition and restructuring related activity costs associated with Company restructuring and integration programs for the three months ended December 30, 2022.

(2) Includes estimated per-share impacts from amortization of intangible assets and certain subsidiary level contingent equity-based agreements in connection with the transaction structure of our PA Consulting investment for the three months ended December 29, 2023 and December 30, 2022. The three months ended December 29, 2023 also includes the per-share impact from an approximate $10 million intangibles impairment charge.

 

Reconciliation of Free Cash Flow (in thousands)
	Three Months Ended
	December 29, 2023		December 30, 2022
Net cash provided by operating activities	$                 418,361		$                 302,297
Additions to property and equipment	(17,306)		(32,187)
Free cash flow	$                 401,055		$                 270,110
Net cash used for investing activities	$                  (15,997)		$                 (48,738)
Net cash used for financing activities	$                (208,701)		$               (246,146)

 

Reconciliation from Adjusted Net Revenue to constant currency Adjusted Net Revenue
	Three Months Ended
(in thousands)	December 29, 2023		December 30, 2022		% Change
Adjusted Net Revenue	$        3,288,838		$       3,074,796		7.0 %
Exchange rate effect	$            (49,482)
Constant currency Adjusted Net Revenue	$        3,239,356				5.4 %

 

Earnings Per Share:
	Three Months Ended
Unaudited	December 29, 2023		December 30, 2022
Numerator for Basic and Diluted EPS:
Net earnings attributable to Jacobs from continuing operations	$       172,184		$       136,355
Preferred Redeemable Noncontrolling interests redemption value adjustment	1,766		—
Net earnings from continuing operations allocated to common stock for EPS calculation	$       173,950		$       136,355
Net loss from discontinued operations allocated to common stock for EPS calculation	$             (574)		$             (708)
Net earnings allocated to common stock for EPS calculation	$       173,376		$       135,647
Denominator for Basic and Diluted EPS:
Shares used for calculating basic EPS attributable to common stock	126,105		126,824
Effect of dilutive securities:
Stock compensation plans	708		672
Shares used for calculating diluted EPS attributable to common stock	126,813		127,496
Net Earnings Per Share:
Basic Net Earnings from Continuing Operations Per Share	$              1.38		$             1.08
Basic Net Loss from Discontinued Operations Per Share	$                  —		$            (0.01)
Basic Earnings Per Share	$              1.37		$             1.07
Diluted Net Earnings from Continuing Operations Per Share	$              1.37		$             1.07
Diluted Net Loss from Discontinued Operations Per Share	$                 —		$            (0.01)
Diluted Earnings Per Share	$              1.37		$             1.06

^{Note: Per share amounts may not add due to rounding.}

 

For additional information contact:

Investors:
Jonathan Evans
JacobsIR@jacobs.com 

Media:
Louise White
louise.white@jacobs.com 

 

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SOURCE Jacobs

FAQ

What is the ticker symbol for Jacobs Solutions Inc.?

The ticker symbol for Jacobs Solutions Inc. is J.

What was the percentage increase in revenue for Jacobs Solutions Inc. in the first quarter of fiscal 2024?

Jacobs Solutions Inc. reported a 9.5% increase in revenue in the first quarter of fiscal 2024.

How much cash flow from operations did Jacobs Solutions Inc. report in the first quarter of fiscal 2024?

Jacobs Solutions Inc. reported $418 million in cash flow from operations in the first quarter of fiscal 2024.

What was the percentage increase in EPS from continuing operations for Jacobs Solutions Inc. in the first quarter of fiscal 2024?

The EPS from continuing operations for Jacobs Solutions Inc. increased by 28% year-over-year in the first quarter of fiscal 2024.

What was the change in backlog for Jacobs Solutions Inc. in the first quarter of fiscal 2024?

Jacobs Solutions Inc.'s backlog reached $29.6 billion, up 4.7% year-over-year in the first quarter of fiscal 2024.

Did Jacobs Solutions Inc. repurchase any shares in the first quarter of fiscal 2024?

Jacobs Solutions Inc. repurchased $100 million in shares in the first quarter of fiscal 2024.

Did Jacobs Solutions Inc. announce any dividend increase in the first quarter of fiscal 2024?

Jacobs Solutions Inc. announced an 11.5% quarterly dividend increase in the first quarter of fiscal 2024.

What is the financial outlook provided by Jacobs Solutions Inc. for fiscal 2024?

Jacobs Solutions Inc. reiterates its outlook for fiscal 2024 adjusted EBITDA of $1,530M to $1,600M and adjusted EPS of $7.70 to $8.20, up 9% and 10% at the midpoints, respectively.

What is the update on the planned separation transaction by Jacobs Solutions Inc.?

Jacobs Solutions Inc. expects the planned separation transaction to close in the second half of fiscal year 2024, subject to various customary closing conditions.