Jacobs Solutions Q2 2025 Earnings Call Transcript

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Provided by Quartr
May 6, 2025
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Operator

Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to the Jacobs Fiscal Second Quarter twenty twenty five Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Operator

Thank you. And I would now like to turn the conference over to Bert Supin, Senior Vice President, Investor Relations. Bert, you may begin.

Bert Subin
Bert Subin
Senior Vice President, Investor Relations at Jacobs Solutions

Thank you, Krista, and good morning, everyone. 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, non GAAP financial measures and operating metrics. Now let's turn to the agenda on Slide three. Speaking on today's call will be Jacob's Chair and CEO, Bob Pagoda and CFO, Bank, Nathamuni.

Bert Subin
Bert Subin
Senior Vice President, Investor Relations at Jacobs Solutions

Bob will begin by providing comments on the business as well as highlights from our second quarter results and a recap of notable awards. Bank will then provide a detailed review of our financial performance, including commentary on end market trends, cash flows and balance sheet data. Finally, Bob will provide closing remarks, and then we'll open up the call for questions. With that, I'll turn it over to our Chair and CEO, Bob Regatta.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

Good day everyone and thank you for joining us to discuss our second quarter twenty twenty five business performance. I'm pleased to begin today's call by highlighting several key milestones we achieved in the separation of our former CMS and C and I businesses during March and April. This includes completing the planned equity for debt exchange and finalizing the remaining post closing adjustments. These actions enabled us to exit our retained stake, reduce outstanding indebtedness and on May 30, we will make a final distribution of Momentum shares to our shareholders. While we will continue to provide transition services to Momentum for the next few months, we view the primary aspects of the transaction as now complete.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

We delivered strong operating performance during Q2 and I'd like to highlight a few key points. First, our adjusted EPS grew over 22% to $1.43 supported by solid year over year margin expansion. Second, PA Consulting's revenue growth inflected positively reaching mid single digits and driving double digit operating profit growth. And third, our backlog grew 20% to more than $22,000,000,000 a new record. Overall, we are very pleased with our Q2 results.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

A good start to the first half paired with strong bookings momentum enables us to reaffirm our full year guidance metrics. As noted in our earnings press release, we recorded a reserve during quarter as a result of a legal matter involving a consolidated JV in which we have a 50% interest. The impact to adjusted net revenue and adjusted operating profit was meaningful. The associated project falls within our water and environmental end market in INAF and has been ongoing since 2016, but is now over 97% complete. The fact that we were able to absorb this impact in Q2, grow adjusted EBITDA, adjusted EBITDA margin and particularly adjusted EPS by 22% year over year is a testament to our strong operating performance and capital return strategy.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

Before I get into more details on the quarter, I'd like to briefly touch on the current geopolitical backdrop. Overall, our business remains well positioned with infrastructure and consulting services in high demand and opportunities to capitalize on secular growth trends in front of us. The impact related to the rollout of the Department of Government Efficiency or Doge has so far been de minimis and we continue to anticipate growth opportunities with the U. S. Department of Defense.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

As a reminder, approximately 9% of our total revenue comes from U. S. Federal infrastructure and related services, most of which are tied to DoD engagements. Regarding tariffs, we remain focused on supporting our clients as they assess potential supply chain challenges. Our client centric model built on redefining the asset life cycle will create opportunities to add value as our clients navigate this period of uncertainty.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

Turning to slide four and focusing on our results. Adjusted net revenue rose over 3% in Q2. Revenue growth during Q2 was adversely impacted by the JV matter I noted earlier as well as FX. On a constant currency basis alone, we would have grown 80 basis points faster or approximately 4% year on year. Adjusted EBITDA for Q2 was $287,000,000 representing an 8% year on year increase.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

We are seeing very good traction on adjusted EBITDA margin improvement with solid underlying business performance. Excluding the mark to market impact from our investment in the momentum stock and other items, Q2 adjusted EPS was $1.43 a robust 22 increase compared to previous year. Our trailing twelve month book to bill was 1.3 times with consolidated backlog of 20% year over year in Q2. Gross profit in backlog increased 15% year over year reflecting another strong quarter for bookings. Our backlog growth and bookings momentum remain positive and we are currently forecasting sequential growth in our second half results which Yvesnk will walk through in more detail shortly.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

Turning to slide five, I'd like to highlight a few notable INAF project awards from Q2. As we discussed at our Investor Day in February, the core pillar of our strategy is to redefine the asset lifecycle for our clients. Today and going forward, we'll highlight how our awards align with our five year strategy. In Water and Environmental, we continue to see strong underlying revenue growth, especially in Water, where global demand remains high among the highest in our portfolio. Our differentiation in water stems from our full lifecycle coverage and proprietary technology suite.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

In Q2, we secured an OT cybersecurity contract with Hampton Road Sanitation District, one of the largest in The US water sector. This project provides end to end cybersecurity for wastewater treatment operations serving 1,900,000 people in Southeast Virginia. Another key area of focus for our water clients is emerging contaminants. PFAS and other contaminants present major challenges and we are at the forefront of providing early stage solutions for our clients. In Q2, we were selected by the City Of Boynton Beach, Florida to design upgrades at two water treatment plants to remove PFAS from groundwater.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

Beyond addressing emerging contaminants regulations, these upgrades will modernize aging infrastructure and meet the region's growing demand for clean drinking water. In life sciences and advanced manufacturing, we continue to deliver strong results. Life sciences and data centers were the primary drivers of end market revenue growth, both seeing double digit increases during the quarter. Life sciences growth is being driven by broad based investment including a new engineering procurement and program management work for Merck's one billion dollars oncology product facility in Delaware. The facility will have the capability to manufacture drugs like Keytruda and we expect to see backlog spend continue through the facility's estimated completion in 2028.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

Focusing on data centers, where we offer holistic cross sector solutions that span advanced facilities, energy and power, water, environmental and digital, we were selected by SciQuantum as the owner engineer for one of the world's first utility scale quantum computing facilities in Brisbane, Australia. Backed by our number one ENR ranking in data centers, we're proud to help bring this next generation computing capability to life and see a great opportunity to expand our global data center footprint in the coming quarters. Turning to critical infrastructure, rising global travel demand, transportation modernization, and energy security requirements are reshaping client priorities. We see global aviation investment as a durable growth driver for our transportation segment and one where we can leverage our core competencies in consulting and program management. Notably, in Q2, we were selected as the owner engineer for Denver International Airport's continued expansion of its transportation system.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

This is a prime example of Jacobs helping cities prepare for future growth with smarter, more connected infrastructure. In summary, our significant awards this quarter reinforce our alignment to high growth markets. We remain focused on delivering sustainable, profitable growth by providing differentiated, digitally enabled solutions to the world's most complex challenges. Now, I'll turn the call over to Venk to review our financial results in further detail.

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

Thank you, Bob, and good morning, everybody. Let me begin by summarizing a few of the financial highlights on slide number six, followed by additional context on our quarterly performance. Second quarter gross revenue grew 2% year over year and adjusted net revenue, which excludes pass through revenues, grew by 3%. As Bob noted, we experienced an FX headwind in the second quarter and also absorbed the impact of the previously noted legal reserve in connection with a matter involving a consolidated fifty-fifty joint venture. Due to the consolidation of the joint venture, the full amount of the reserve was taken against revenue and as a result impacted operating profit.

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

However, the JV partner's allocable portion is included in non controlling interest. Therefore, the impact on EBITDA and EPS is half of the impact on revenue. Q2 adjusted EBITDA was $287,000,000 growing more than eight percent year over year. Our adjusted EBITDA margin during Q2 came in strong at 13.4%, which is an increase of 62 basis points versus the same quarter last year. We were able to offset the anticipated impact in Q2 from holiday timing as well as the impact of the JV matter through some strong performance on gross margin and discipline on G and A costs.

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

As a result, in the second quarter, adjusted EPS rose to $1.43 a 22% increase year over year. Please note, GAAP EPS was impacted by $109,000,000 pretax loss associated with the mark to market adjustment of our investment in Amendum. This had no impact on adjusted EPS. Finally, backlog was up 20% year over year to a record $22,200,000,000 Our trailing twelve month book to bill of 1.3 times remains very healthy. And gross profit in backlog increased 15% year over year during Q2, a strong indicator of our positioning over the coming quarters and years.

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

Now regarding our performance by end markets and infrastructure and advanced facilities, let's turn to Slide number seven. Demand for services in the water and environmental end market remains strong across all major geographies with particularly good underlying performance in water during Q2. Not only was core performance positive, but we also continued to grow our revenue and backlog and our pipeline in Water is growing by double digits. Total adjusted net revenue growth for Water and Environmental was 2% in Q2, which includes the adverse impact from the previously mentioned JV Mavic. As we shift into the second half of the year, we expect net revenue growth to improve to the mid to high single digit range.

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

In our Life Sciences and Advanced Manufacturing end market, adjusted net revenue grew approximately 6% in Q2, pacing better than our guidance that revenue growth will be similar to Q1. We continue to see favorable demand in both the life sciences and data center markets and we expect to see improvement in semiconductors in the coming quarters. Overall, we anticipate life sciences and advanced manufacturing growth will remain healthy in the second half of the year. In critical infrastructure, adjusted net revenue increased over 2% year on year. Within this end market, energy and power is our fastest growing vertical, a trend we expect to continue.

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

On the transportation side, we saw solid growth aided by The Middle East. Mid single digit revenue growth collectively in these two verticals was partially offset by flatter growth in cities and places due to specific timing related items. Looking ahead, we like our positioning in Critical Infrastructure and anticipate sequential revenue growth from Q2 to Q3. Now moving on to Slide number eight, I'll provide a brief overview of our segment financials. In Q2, Infrastructure and Advanced Facilities operating profit was approximately flat in total and on a constant currency basis versus last year.

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

As we noted earlier, Q2 operating profit was impacted by the reserve taken in connection with the JV matter. As we guided, PA Consulting delivered a meaningful return to revenue growth this quarter along with strong bottom line execution. This resulted in operating profit increasing 12% year over year in total and on a constant currency basis with a strong 22% margin performance. PA Consulting's momentum in Energy and Utilities and Life Sciences has been augmented by improving public sector spending in The UK. We continue to see favorable trends in PA's backlog and pipeline, both of which serve as positive leading indicators.

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

Moving on to Slide number nine, we provide an overview of cash generation and our balance sheet. Overall, our balance sheet remains in excellent shape exiting Q2. We returned a record amount of capital back to shareholders during the second quarter with very little effect on our net leverage ratio. As we look ahead to the second half of the year, we're forecasting strong free cash flow generation. Focusing in the quarter, during Q2, free cash flow was negative $114,000,000 which was in line with our expectations and our prior guidance.

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

This reflects a few seasonal cash timing events consistent with patterns we've seen in prior years. During the quarter, we repurchased $351,000,000 in shares, which is a quarterly record for Jacobs. We also finalized an equity for debt transaction using a retained stake in Momentum, which reduced our outstanding debt by $312,000,000. Summing this all up, we ended the quarter right at the midpoint of our one point zero to 1.5 times net leverage target. Subsequent to Q2, we received $70,000,000 in favorable working capital adjustments and finalized ownership and shares of Momentum that were previously held in escrow.

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

We used the cash received from the working capital adjustment to further reduce our debt during Q3. In addition, following recent Board approval, we will distribute the Momentum shares released from escrow to our shareholders on a pro rata basis at the end of this month. Based on yesterday's closing price, this represents approximately $159,000,000 in incremental capital returns to shareholders. Our balance sheet strength supports continued investment in the business along with returns to shareholders via share repurchases and long term dividend growth. Our commitment to return capital to shareholders is evidenced by our $0.32 per share dividend, representing 10% year over year growth, as well as our meaningful increase in share repurchase activity in the first half of the year.

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

In total, we returned $628,000,000 to shareholders through repurchases and dividends over the past two quarters alone. This puts us on track to potentially return more than 100% of adjusted free cash flow in fiscal year twenty twenty five, excluding the distribution of Momentum shares. While we plan to remain consistent buyers of our own shares, we also continue to evaluate increasing our investment in PA Consulting. Finally, please turn to Slide number 10. We are pleased to reaffirm our fiscal twenty twenty five outlook for 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 $6.2 Now to assist with your modeling, let me highlight a few items related to the remainder of fiscal year twenty twenty five.

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

We continue to anticipate revenue will rise sequentially through year end with Q3 net revenue expected to grow 5% to 7% year on year based on our current view of global market conditions. Notably, a significant portion of our expected revenues in the second half of the year will come from our backlog. On margins, we expect to approach a 14% adjusted EBITDA margin in Q3 and we remain well positioned to meet our full year guidance range of 13.8% to 14%. We will control discretionary spending in response to market conditions. Overall, we feel positive about our adjusted EPS trajectory.

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

In summary, we continue to expect sequential improvement in net revenue and operating profit as we progress through the second half of the fiscal year. We're very pleased with our margin performance and strong trailing twelve month bookings, both of which set us up for profitable growth in the quarters and years ahead. With that, I'll turn the call back over to Bob.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

Thank you, Venk. In closing, with a solid first half of FY twenty twenty five behind us, we see a good setup in the second half of the year aided by continued booking strength and margin momentum. With our sharpened portfolio aligned to critical global megatrends and our five strategy driving focus and discipline, we are confident in our ability to deliver sustainable profitable growth over the long term. Operator, we will now open the call for questions.

Operator

Thank you. We will now begin the question and answer session. Your first question comes from the line of Andy Kaplowitz with Citi. Go ahead.

Andrew Kaplowitz
Andrew Kaplowitz
Managing Director at Citi

Good morning everyone.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

Good morning Andy.

Andrew Kaplowitz
Andrew Kaplowitz
Managing Director at Citi

Papa bank, so backlog impressive up 20% year over year. But as you know, that revenue growth is was up 3%. Maybe you can quantify the reserve for us in revenue. And I know you have longer duration projects in backlog, but are you seeing more careful spending with customers? And then sort of that visibility to get to 5% to 7% growth in Q3, do you need to see an acceleration in customer spend to get there in Q3?

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

So Andy, maybe I'll answer the second half of your question and then on the legal reserve, I'll turn it over to Venk. On the second half of your question, so we were very clear on that the second half, we actually have predominance of that in backlog today and have a level of confidence on how that backlog is going to burn over the course of the next two quarters and beyond. So, our confidence level is strong on that front. As far as customer decisions with the macro backdrop right now, the procurement cycle is extending a bit, Sure. But we see we're not seeing broad cancellations or delays in the execution.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

It's probably more in the front end of the procurement cycle. So think with that, maybe the the legal reserve.

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

Yeah. Thanks, Andy. So, you know, clearly, we we absorbed the impact of the legal reserve, but to kinda quantify it, you know, given that it's a legal matter, we and it's an ongoing JV matter, we wanna be cognizant of all the implications there. But suffice it to say that it is included as part of our noncontrollable interest accounting or NCI accounting. And it's a consolidated JV.

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

We'll clarify that it's fifty fifty. And so we as we use NCI accounting, which we're fully disclosed in our queue and in our footnotes, it's easy for you to figure out what those numbers are. All I can say is that, you know, this is something that we we feel we're, you know, appropriately reserved for. And, you know, this is something, obviously, it was a headwind to our current quarter, but we clearly absorbed it and came out with the results that we did.

Andrew Kaplowitz
Andrew Kaplowitz
Managing Director at Citi

That's helpful. And maybe you guys can talk about what you're seeing by region. You mentioned PA picked up. Backlog there is actually pretty strong. So maybe just PA and then the overall UK business, is it still a little bit more choppy?

Andrew Kaplowitz
Andrew Kaplowitz
Managing Director at Citi

Middle East, does it hang in there? And what are you assuming for FX given the recent weakness of the U. S. Dollar?

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

Sure. Maybe I'll cover kind of the regions and then, Venk, can talk about FX. PA, really good quarter inflecting the growth. Energy and Utilities and Health and Life Sciences in Europe, PA is really starting to see some nice tailwinds there. And PA's U.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

S. Business is now up nearly 15% year on year. So, continued growth in The U. S, backlog growing at solid double digits. But one of the areas that probably from a rate of growth with PA is picking up and this kind of goes Andy to your second point with regards to The UK and I'll kind of go into the Jacobs broader enterprise as well is defense and security.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

So, PA is one of the leaders in defense and security advising both MOD as well as other EU countries. And that has seen a significant uptick in the quarter and with backlog. So, for the balance of the year, we see a good trajectory there with PA. With the Jacobs business, transportation and water continued to be strong for us in The UK, mid single digits with regards to those areas. Some of the buildings work or what we call cities and places, little bit of a longer procurement cycle.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

But overall, we're not seeing any kind of any major headwinds in Europe and more specifically in The UK. If anything, I'd probably characterize it as a bit of a rebound. Middle East, strong. We continue to grow at double digits in The Middle East. Again, we were very selective on the programs that we were in the middle of.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

We're now involved with some time based programs that have kind of end dates to them with world events that are happening and tourists coming into The Middle East. So, overall, we're positive on The Middle East and being very sensitive to any type of macro oscillations there. Thank you. Want to talk about FX?

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

Yes. Thanks, Bob. So as we noted in the prepared remarks, FX was clearly a headwind for us in Q2. I think we said our revenue would have been 80 bps higher if it were not for the FX impact. Now fortunately, as we look ahead into Q3, if FX rates were to remain where they are today, that will be a decent tailwind.

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

Hard hard to quantify it, but certainly, you know, if things persist as they are so far, it'll be it'll be a positive for us in Q3.

Andrew Kaplowitz
Andrew Kaplowitz
Managing Director at Citi

Appreciate the color guys.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

Thanks,

Operator

Your next question comes from the line of Andy Wittmann with Baird. Please go ahead.

Andrew Wittmann
Senior Research Analyst at Baird

Yes, great. Thanks for taking my questions. I guess on free cash flow, maybe for Venk. Obviously, there's always in the first half of the year, it's always slower than the second half of the year. But I was just hoping you could kind of help us understand how you get to the 100% greater than 100% conversion this year in terms of the quarterly cadence.

Andrew Wittmann
Senior Research Analyst at Baird

Do you expect here the fiscal third quarter to start chipping away and get you back to where you need to be to hit that level? Or do you feel like it's going to be very fourth quarter loaded?

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

Andy, thanks for the question. And you're exactly right. This is Q2 tends to be a seasonally slow quarter for cash collections. And usually it's typified by payments of $4.00 1, cash taxes and so forth. And for looking ahead for Q3 and Q4, we feel pretty good about our cash flow outlook.

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

And it's going to be a pretty substantial step up in Q3. So it's not just Q4 back end loaded. So we feel pretty good about where we're going to end Q3 and that gives us good confidence that our free cash flow for the full year will be in excess of 100%.

Andrew Wittmann
Senior Research Analyst at Baird

Got it. And then maybe Bob for you with my follow-up, I wanted to ask about your profit margins and heard the approaching 14% adjusted EBITDA guidance here that you talked about for the third quarter, maybe if you just talk about the organization right now and discuss where your utilization rate stand this year as compared to last year And progress on any other initiatives that you have in the organization to improve your efficiencies and where those programs and processes stand? Thank you.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

Sure. So maybe I'd characterize it in two parts, Andy. Just we did start off the year, I'd call it in kind of early January. And I think we telegraphed a little bit in the last earnings call where utilization was down a bit where we had that kind of shifting of the holiday season spilling over into Q2. Since January, our utilization has picked up.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

And I'd say it's on par from where we were in not just last year but previous years. Going into the second half, what we're seeing is, if you remember back in Q3 and Q4 of last year, we had some lumpy wins. That's a good thing. In Q3 and Q4, those early phases of those major programs, those are now inflecting into kind of the detailed design, the production engineering component of those jobs. So, we're seeing utilization just in the early part of Q3 pick up to exceed where we were in previous quarters.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

So that's how kind of we're seeing the utilization profile. PA utilization is definitely better than it was last year. And that is a testament to all the initiatives that the team has been working on over the course of the last six plus quarters. I'd say from an initiative standpoint, we are seeing some really, really nice growth in our digital business. So if you look at just, you know, as we measure it as a P and L and then we measure our digital platforms, how they're catalyzing the balance of our business, just as an individual business, that business has grown smaller number, double digit on the bottom line from an OP standpoint.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

So, I think the digital enablement really working on that horizontal that we talked in the Investor Day, all of those are coming through in real time.

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

And if I could add to it, Andy, I would say from a margin perspective, clearly you've seen us execute to the 13.4% for this quarter. We're guiding to close to 14% in Q3. That's driven by the fact that as we mentioned at Investor Day, there are multiple levers that we can pull in terms of margin performance. Utilization obviously is one aspect of it, but clearly from the standpoint of the mix improvements, more global delivery and so forth. So a lot of those things are still in the early stages of implementing and we feel and finally with the operating leverage that we talked about, I think the combination of those things give us good line of sight to get to the close to 14% in Q3 and for the full year at 13.8% to 14% range.

Andrew Wittmann
Senior Research Analyst at Baird

Great. Thank you.

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

Welcome.

Operator

Your next question comes from the line of Steven Fisher with UBS. Please go ahead.

Steven Fisher
Steven Fisher
Managing Director & Equity Research Analyst at UBS Group

Thanks. Good morning. Just wanted to follow-up about the JV project here and I know it's sensitive topic, so I'm not sure how much more you can say. But it sounds like it's almost complete. Just curious how this ruling is reflective or not on productivity and performance of the project?

Steven Fisher
Steven Fisher
Managing Director & Equity Research Analyst at UBS Group

Just anything we should be aware of for the remaining handful of percent of complete that needs to get done here?

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

Yes. I can't necessarily go into that level of detail, Steve. But I would say that we were appropriately reserved. And the remaining items on program are well within reef. So we're not overly concerned there.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

As far as any detail on the content of what is about, I can't disclose. But what we will say though is that we are working hard with our partner in order to close it out and and don't have a high level of concern there. I will say this though, Steve, is that this is not indicative of any kind of shift in our risk profile. We still have a low risk profile. And if you kind of track us over the course of the last ten plus years, you know, these are these are events that that are very infrequent if you count them on one finger.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

So that's that's kinda how we how we look at it.

Steven Fisher
Steven Fisher
Managing Director & Equity Research Analyst at UBS Group

Okay. That's helpful. And you were talking before with any capitalists about some of the kind of procurement delays. I mean, we're hearing broadly about just rising costs of construction in recent weeks and it's not surprising in light of steel and tariffs, etcetera. I'm curious what you're hearing from your customers, specifically about higher construction costs.

Steven Fisher
Steven Fisher
Managing Director & Equity Research Analyst at UBS Group

Does that drive any sort of value engineering opportunity for you? Does it sort of lengthen the planning period since you said it's sort of like kind of front end of the cycle? Just sort of wondering what the balance of puts and takes are for Jacobs on sort of a higher construction cost landscape.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

Yes. So maybe I'll start off by saying, the projects that we're involved with that have a pretty sizable field component, these are jobs that are less, if any, discretionary based and more based on business transformation. So, you know, if you think about the private sector, life sciences, data centers, you know, these are investments that the clients are going forward in making. And then in water, these water jobs are long held on the books and have to deal with clean drinking water as well as the effects of climate and other impacts the natural disasters have had. So these are jobs that are going forward.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

As far as the delays that we're seeing on those, that's an opportunity for the client to step back. You appropriately said, Steve, look at some value engineering opportunities. But what this is really opening up is supply chain scenario planning. We have been working with our clients on global supply chain networks. PA has got a really nice platform there with regards to supply chain consulting and helping our clients look for alternate avenues in the event because remember a lot of these tariffs have not happened in the event these tariffs occur, what are some of the options that they have?

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

And so, that has created a bit of some consulting and advisory work for us to be in the middle of this.

Steven Fisher
Steven Fisher
Managing Director & Equity Research Analyst at UBS Group

Terrific. Thank you very much.

Operator

Your next question comes from the line of Sabahat Khan with RBC Capital Markets. Please go ahead.

Sabahat Khan
Sabahat Khan
Managing Director at RBC Capital Markets

Great. Thanks and good morning. Just I guess, sounds like there's some headline volatility during the quarter, but net net, the backlog turned out well. I'm just curious, was that enough of a macro shock for some of your larger government customers that you deal with to start to think about maybe some level of stimulus spending through the back of this year like we maybe saw post the COVID shock or is it just too early in the sort of the timeline or the macro situation for those type of discussions? Thanks.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

Saba, I probably would be not in a good place to articulate the size of it, but you're spot on. Some of those early let's hit the pause button, especially with our DoD infrastructure clients, not knowing kind of which way the winds were going to blow. We are starting to see that come back into the second half. And so, these things, as I mentioned on previous quarters, Saba, these were never canceled. They were only maybe paused or a bit delayed.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

And those programs that have been approved and funds been appropriated are starting to come back. On the state and local business, not just in The States but globally, those have not stopped. So, we didn't necessarily see that dynamic. It was probably more federal infrastructure, DoD infrastructure that that applied to.

Sabahat Khan
Sabahat Khan
Managing Director at RBC Capital Markets

Great. And then as we kind of think back to some of the areas of focus or the end markets that you're talking about at your Investor Day, some of the things around semiconductors, healthcare, things like that. Just wondering if across some of these end markets you have seen some talk of reassuring related projects or initial discussions, whether it's manufacturing or some of the other end markets that you operate in? Maybe are some of those early discussions happening? Thanks.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

They are. They are. So maybe I'll hone in on two end markets, life sciences and our semi focus. These are clients that are looking at global supply chains and have had on their capital roadmap projects that are in multiple locations, predominantly The U. S.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

And Europe. So, right now, we're kind of seeing the pull and push on either geography and that's kind of leaning towards The U. S, which kind of plays right into our sweet spot. Semi is the same way. So, some of the high bandwidth manufacturers as well as even some of the larger players are starting to point those jobs into The U.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

S. I would say that it's early though. It's early days, which actually still benefits Jacobs because we're on the early front end planning site selection of these programs. So discussions are in real time. And the great thing about kind of the Jacobs platform is that we're there in any form.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

And if it goes into one geography over the other, our global delivery model allows us to continue to use that talent across multiple geographies whichever way it goes. But definitely a lot of scenario planning happening in real time.

Sabahat Khan
Sabahat Khan
Managing Director at RBC Capital Markets

Great. Thanks very much. Thank you.

Operator

Your next question comes from the line of Michael Dudas with Vertical Research. Please go ahead.

Michael Dudas
Equity Research Analyst at Vertical Research Partners

Good morning, Bert, Bob.

Bert Subin
Bert Subin
Senior Vice President, Investor Relations at Jacobs Solutions

Good

Bert Subin
Bert Subin
Senior Vice President, Investor Relations at Jacobs Solutions

morning.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

Good morning, Mike.

Michael Dudas
Equity Research Analyst at Vertical Research Partners

Bob, maybe you could share some further thoughts you called out in your prepared remarks, fast growing water and fast growing energy power. Any interesting dynamics around that, especially with energy power tied towards some of your larger LSAM customers?

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

Yes. So the grid modernization and kind of the electrification of all, Mike, has continued, not just in The U. S. Tied to probably more of that data center positioning that's happening right now, but in Europe with regards to some energy security items that are happening and we're seeing it in Southeast Asia as well as Australia and New Zealand. That continues to grow.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

That sector though it's a smaller component but growing at a very fast rate continues to grow at strong double digits. And I think tied to the kind of the data center component, we're going to continue to see growth on that front. Water, it is uniform across the world right now. These programs whether it be in The UK, the AMP Bates cycle, as well as some larger frameworks that are coming up now. We, I think, publicly disclosed what's going on with Central Utah, the West Basin in Southern California.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

These jobs that we've been working on for nearly a decade are now coming to fruition. And so we're seeing kind of that double digit pipeline growth in multiple geographies as well as strong P and L performance year on year. So we believe that water is going to continue to become a larger part of our overall portfolio. Today, represents about 25%. That's going to continue to grow.

Michael Dudas
Equity Research Analyst at Vertical Research Partners

Thank you, Bob. And my follow-up is, maybe share some thoughts on your comments about PA and increasing your investment. What's the genesis of that and how's that evolved over the last couple of years?

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

Yeah. Maybe I'll I'll I'll start off and then, Ben, you can you can talk about some of the the mechanics. So when we when we went into the PA investment back four years ago, we had we had kind of the PE style approach where partner invested model as well as ourselves with a liquidity event that would occur after year four and before year five. So this is all public information as well. And so now, we're looking at what this is a great opportunity to increase our investment in PA and continue to build on what a lot of hard work and a lot of sweat equity has gone into the partnership and taking it to the next phase.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

Really great time. PA is coming off of some real strong backlog growth of reemergence in The UK as well as the Europe business. And together, just like we talked about Investor Day, that strong consulting and advisory business driving the redefining of the asset life cycle is a great opportunity for us looking forward. So more to follow on that piece.

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

Yes.

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

And Mike, if I could add to

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

what Bob said, clearly, the standpoint of the partnership, it's deepening, it's strengthening in multitude of ways and we're seeing that showing up in the results and we feel pretty good about the outlook for the remainder of the year at least for Q3 and beyond. So I'd say with that having said, we certainly have a very strong balance sheet, a lot of good cash generation ahead of us as well. And we're committed to returning cash to shareholders. We're also we've stated all along that we are considering an increased stake in PA, and that's something that we're actively looking into. And we'll keep you posted at the right time.

Michael Dudas
Equity Research Analyst at Vertical Research Partners

Thanks, gentlemen.

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

Thank you.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

Thanks, Mike.

Operator

Your next question comes from the line of Chad Dillard with Bernstein. Please go ahead.

Chad Dillard
Senior Analyst, US Machinery at Bernstein

Hey, good morning guys. I want to go back to the prepared remarks when you talked about gross profit and backlog up 15%. I was hoping you break down the drivers, self help versus mix, just like relative proportions. And

Chad Dillard
Senior Analyst, US Machinery at Bernstein

when do we

Chad Dillard
Senior Analyst, US Machinery at Bernstein

see this inflection? Is it more of a 2025 event? Or is this more of an opportunity for 2026? Thanks.

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

Yes, Ted. Thanks for the questions. I would say, obviously, we will continue to see good growth in our gross profit and backlog. To the extent that we are showing revenue growth for the full year, we do see lot of opportunity for us to expand on that growth in the coming quarters and years. From a profitability standpoint, you can tell that the profitability has been steadily up into the right and we expect that to continue in Q3 and Q4 as well.

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

So that for the full year at the midpoint of our guidance range, we'll be at a 13.9% EBITDA margin. And so a lot of factors associated with that. It's just the quality of our engagement. We talked about at Investor Day, our commercial models and global delivery models and so forth. So multitude of ways for us to increase the gross profit over time and that will translate into EBITDA margin as well as free cash flow in the coming quarters.

Chad Dillard
Senior Analyst, US Machinery at Bernstein

Great. And then just in terms of your second half revenue guide, can you just walk through the moving parts within like the sub segments of I and AF just to get there?

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

Yes. Why don't I kick it off, Chad, and then Ben can follow-up. I'd say that I'd point to five main drivers of the second half revenue growth. And these are like I spoke about earlier are coming off of some of these awards have been public, but some of them also we can't disclose. But starting off with life sciences, some large wins we disclosed the Fuji win, talked about the Merck win.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

Those are now coming into play as well as continued growth within GLP-one. These again were jobs that have gone into our backlog over the course of the last few quarters. Water has been uniform and that is now coming into the second half of the year. AMP8 has been well discussed as well as Jackson, Mississippi and this West Basin wind driving those. And so, these are just some reference points to highlight the growth.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

Semi, that high bandwidth memory work that we're doing in the international work, that's now coming into play. So, you can kind of see this theme of energy and power and data centers also adding to that, giving us some real strong wins. And those are more steady growth for us. We've been steadily kind of mid single digits growing in transportation, not just in The U. S.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

But also in Southeast Asia in specifically A and Z and in Europe. So those are all kind of been off the backs of aviation, but some really strong highways and rail work too. Right.

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

Yes. Just to

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

add to what Bob said, look at across these different end markets that Bob highlighted and the specific wins, we've been talking about some of these bookings wins in the last several quarters. A lot of them are coming to fruition. We started some of them happening in Q2, but you're seeing an acceleration of that in Q3 and Q4. That's what gives us visibility into the 5% to 7% sequential growth in Q3 driven by the specific market opportunities as well as wins that we have demonstrated over the last several quarters.

Chad Dillard
Senior Analyst, US Machinery at Bernstein

Great. Thanks guys.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

Thank you.

Operator

Your next question comes from the line of Sanjeeta Jain with KeyBanc Capital Markets. Please go ahead.

Sangita Jain
Sangita Jain
Senior Analyst at KeyBanc Capital Markets

Hey, thank you for taking my question. Most of them have been answered. So I'm just going to follow-up on details on a couple. One is on margins. I understand you gave us second half outlook, but I just want to make sure I understand which segment we should expect to inflect more strongly in third quarter since BA Consulting seems to be going at that 22% range anyways.

Sangita Jain
Sangita Jain
Senior Analyst at KeyBanc Capital Markets

So should we expect more of infection in IAF?

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

Yes, you're exactly right, Sangeeth. I think IAF is where we see the biggest margin improvement opportunity. And it's a combination of not only the mix and GID and other things that we talked about in the past, but the fact that we are also seeing some good growth in some of these businesses that span the entirety of the life cycle, so to speak. And we certainly also want to point out that we did absorb the full effect of the JV matter in the quarter. And therefore, we feel pretty good about where our margins can be in Q3 and Q4 such that it gives us a good visibility to get to the 13.8 to 14% margins.

Sangita Jain
Sangita Jain
Senior Analyst at KeyBanc Capital Markets

Got it. Thanks. That was helpful. And on the backlog, should we I know last couple of quarters you've said that your backlog is longer duration and thus the stronger backlog growth versus revenue growth. Should we assume that the case in this quarter also?

Sangita Jain
Sangita Jain
Senior Analyst at KeyBanc Capital Markets

And is this maybe a strategic decision on your part to book these kind of larger, longer duration projects?

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

When you say this quarter, Sangeetha, you're talking about Q2?

Sangita Jain
Sangita Jain
Senior Analyst at KeyBanc Capital Markets

F '2 q. Yeah.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

Yeah. 02/2002. No. You know, as far as a strategic decision to go after the larger programs, that's always been a part of our pedigree for for several years. So, you know, we're we're working with our clients and our clients' capital portfolio.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

There are larger jobs at times in our capital in their capital portfolio. There's smaller jobs. So if you look at the 25,000 plus, engagements, projects, programs that we have with our clients around the world, there'll be a spread to the size of the jobs. I think the key point is that we're not chasing jobs.

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

We're in

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

the middle of our clients' capital budgets, and those, you know, those have a spread and a profile to them. And, Sagitta, if can add to it, I would say it's more of a portfolio approach. Right? So depending on the end market, depending on, you know, how complete the asset life cycle is covered by a particular project, we kind of pick and choose. Having said that, we certainly want to have a nice balance between things that are faster burning such that it has an immediate impact and things that are longer term in nature because that has a lot of visibility as well.

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

So that's it's kind of a balanced approach. And on top of it, clearly from a margin expansion standpoint, we certainly want to derive value for the value that we provide to clients.

Sangita Jain
Sangita Jain
Senior Analyst at KeyBanc Capital Markets

Great. Appreciate the answers. Thank you.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

Thank you.

Operator

Your next question comes from the line of Jamie Cook with Truist Securities. Please go ahead.

Jamie Cook
Jamie Cook
Managing Director - Equity Research at Truist Securities

Hi, good morning. I guess just two quick follow-up questions. One, on PA Consulting. It sounds like that's moving forward earlier, I think, than some people would have thought. I guess, just broader, Bob, how are you thinking about besides PA consulting as we look to 2026?

Jamie Cook
Jamie Cook
Managing Director - Equity Research at Truist Securities

How are you what's your appetite for sort of broader m and a, in addition to PA consulting? And then my follow-up question, Venk, just on the guide, given where we are, you know, where earnings came out in the first half of the year, it seems like, I don't know, the high end, or anything above the midpoint is probably, know, more more challenged to get there. I mean, is that how are you viewing things? Should we look at the sort of the low end to mid end of the guide is more likely versus high end? Thanks.

Jamie Cook
Jamie Cook
Managing Director - Equity Research at Truist Securities

On EPS. Sure.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

Sure. So Jamie, maybe on the first one. Let me the PA timing and maybe that's just how we articulate. The PA timing has not been pulled forward. That was always it's kind of on schedule.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

We really wanted to make sure that we were at a point where the strength of the partnership and the collaboration that we're seeing on different opportunities has really come to fruition. So that's actually I'd call it right on track and a lot of hard work been done by both parties to get it there. And so more to follow on that front. As far as anything further, not now. This is an organic execution play.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

We feel really strongly along with PA that the portfolio is where we need it. We need to continue to focus in on our clients, ourselves and the model that we have in return of capital to shareholders. And so that's the path that we're on right now.

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

Yes. And Jamie, if I take the second part of your question, which is on the guidance. So clearly, we've given guidance for Q3, which is based on everything that you heard Bob and I talked about in terms of our end market exposure and so forth. Feels we feel comfortable with the 57% growth rate. And then the more important part is on the margin expansion front.

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

So we feel really good about the 13.8% to 14% margin. So when you take all of that into account, from the standpoint of our EPS, we feel pretty good about getting there just driven by not only the revenue growth, but as well as the margin expansion as well as EPS. And then obviously we are cognizant of what's happening in the macro, so we continue to watch it and we will take appropriate actions. But suffice it to say that where we stand right now with the business key metrics that we're watching, we feel comfortable with the five to 7% sequential growth rate.

Jamie Cook
Jamie Cook
Managing Director - Equity Research at Truist Securities

Thank you.

Venk Nathamuni
Venk Nathamuni
Executive Vice President & Chief Financial Officer at Jacobs Solutions

You're welcome.

Operator

Your next question comes from the line of Jerry Revich with Goldman Sachs. Please go ahead.

Jerry Revich
Jerry Revich
Senior Investment Leader & Head of US Machinery, Infrastructure, Sustainable Tech franchise at Goldman Sachs

Hi. Good morning, everyone.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

Hi. Good morning, Jerry.

Jerry Revich
Jerry Revich
Senior Investment Leader & Head of US Machinery, Infrastructure, Sustainable Tech franchise at Goldman Sachs

Hi. As we look at the performance geographically, you folks had outstanding growth in Middle East and India, nearly half of your dollar growth in the quarter. Can you just talk about how much runway you have to grow in those regions? And separately, U. S.

Jerry Revich
Jerry Revich
Senior Investment Leader & Head of US Machinery, Infrastructure, Sustainable Tech franchise at Goldman Sachs

Has been roughly flattish just given the projects that you folks spoke about. Can you just put a finer point on whether, you expect your, top line growth to accelerate in in The US, as you laid out the framework over the balance of the year?

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

Sure. So let me address the first part, India and Middle East. Jerry, we see I don't want to go so far to say limitless, but our growth potential in Middle East and India is not constrained by resource. And with our global delivery model where if you go to The Middle East on any of these larger programs that we have, we literally have the United Nations there on-site and it's a testament to our very inclusive culture that we worked on so hard at Jacob. So, I think use of people and talent from around the world in The Middle East continues to facilitate that growth trajectory.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

And India is kind of the reverse. The ability for our Indian talent to not only support now what's happening with regards to technology manufacturing in India as well as India for the rest of the world continues to grow. So, I think that those two areas continue to be really strong areas of growth not just for that geography but also how those geographies facilitate the balance of growth. On The U. S, I think that you might be looking at a gross number.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

The net service revenue that we are experiencing in The U. S. Right now across our verticals is in growth mode. So maybe we could talk a little bit more about that offline and kind of showing that full picture. But that growth in The U.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

S. Continues to a strong part of our business.

Jerry Revich
Jerry Revich
Senior Investment Leader & Head of US Machinery, Infrastructure, Sustainable Tech franchise at Goldman Sachs

Super. And then just to put a finer point on the project selection part of the conversation, the write down in water and environmental. Can you just talk about for you folks, obviously unusual relative to history, are there any other projects that are of similar vintage or of similar risks within the portfolio or any projects where you're monitoring risk factors given the write down?

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

Jerry, our project risk doctrine with strong governance over that remains strong across the entire portfolio. Hence, these are not events that happen not even routine but even in a decade. So, I think that this project selection we've been involved with this job well, I said 2016. Early conceptualization of these programs are even beyond that. And it's something that we've worked with the client for a long time.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

And it's one that has had a tremendous impact on the community. So, selection, I'm not questioning that at all. And as well as the tools and the risk mitigation that we utilize across our portfolio remains very strong. These are just these are situations that happen. And again, we're appropriately reserved and feel strongly about the entirety of the portfolio.

Jerry Revich
Jerry Revich
Senior Investment Leader & Head of US Machinery, Infrastructure, Sustainable Tech franchise at Goldman Sachs

Okay. Thank you.

Operator

And that concludes our question and answer session. And I will now turn the conference back over to Bob Pergotta for closing comments.

Bob Pragada
Bob Pragada
Chair & CEO at Jacobs Solutions

Everyone, thank you for joining our earnings call. We look forward to engaging with many of you over the coming days and weeks and look forward to a strong second half. Thank you, everyone.

Operator

This concludes today's conference call. Thank you for your participation, and you may now disconnect.

Executives
    • Bert Subin
      Bert Subin
      Senior Vice President, Investor Relations
    • Bob Pragada
      Bob Pragada
      Chair & CEO
    • Venk Nathamuni
      Venk Nathamuni
      Executive Vice President & Chief Financial Officer
Analysts
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Key Takeaways

  • Completed separation of former CMS and C&I businesses with an equity-for-debt exchange, finalized post-closing adjustments, exited retained stake and set a final distribution of Momentum shares, reducing debt.
  • Delivered strong Q2 performance with adjusted EPS up 22% to $1.43, adjusted net revenue up 3% (4% constant currency), adjusted EBITDA up 8% and a record backlog of $22.2 billion, up 20% year-over-year.
  • Absorbed a significant reserve for a legal matter in a consolidated JV without derailing performance—despite the headwind, margins expanded and adjusted EPS still rose 22%.
  • Secured notable awards across strategic markets, including water cybersecurity and PFAS removal projects, Merck’s $1 billion oncology facility, Brisbane quantum computing data center and Denver International Airport expansion.
  • Reaffirmed full-year outlook of mid-high single-digit revenue growth, adjusted EBITDA margin of 13.8–14%, free cash flow conversion >100% and adjusted EPS of $5.85–6.20, with sequential revenue and margin improvement expected in H2.
AI Generated. May Contain Errors.
Earnings Conference Call
Jacobs Solutions Q2 2025
00:00 / 00:00

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