Jacobs Solutions Inc.

Good morning. My name is Rob and I will be your conference operator today. At this time, I would like to welcome everyone to the Jacobs Fiscal First Quarter 2022 Earnings Conference Call and Webcast. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star 1. Thank you. Jonathan Doros, you may begin your conference.

Jonathan Doros Thank you. Good morning to all. Our earnings announcement and 10Q were filed this morning, and we have posted a copy of this slide presentation on our website, which we will reference during the call. I would like to refer you to slide 2 of the presentation materials for information regarding forward-looking statements, non-GAAP financial measure, and pro forma figures. For pro forma comparisons, current and prior periods include the results of recent acquisitions, including BlackWings, as well as our strategic investment in PA consulting for the full period. Turning to the agenda on slide three. Before I turn to the agenda, I'd like to share that on Friday, March 4th, we'll be releasing a digital deep dive of our new Jacob strategy. We also plan to attend the Raymond James Investor Conference on March 7th in Orlando and the B of A Global Industrials Conference on March 15th in London. Now to the agenda. Speaking on today's call will be our Chair and CEO, Steve Dimitriou, President and Chief Operating Officer, Bob Fregata, and President and Chief Financial Officer, Kevin Berryman. Steve will begin by updating the progress we're making against our strategy and then discuss our data solution strategy, including the acquisition of Streetlight Data. Bob will then review our performance by line of business, and Kevin will provide a more in-depth discussion of our financial metrics, followed by a review of PA Consulting's financial profile, as well as a review of our balance sheet and cash flow. Finally, Steve will provide detail on our updated outlook, along with some closing remarks, and then we'll open the call for your questions. In the appendix of the presentation, we have provided additional ESG-related information, including examples of our leading ESG solutions. With that, I will now pass it over to Steve Dimitriou, Chair and CEO.

Thank you for joining us today to discuss our first quarter fiscal year 2022 business performance and our key strategic initiatives. As we've stated before, we're on the front end of a multi-year growth cycle for the company. This is driven by a combination of secular growth opportunities in our core sectors, such as U.S. infrastructure investments, climate response, a super cycle of supply chain investments in electronics, as well as being at the nexus of disruptive new technologies and domains of space, cyber, and software analytics. We expect these opportunities to drive accelerated revenue growth for the balance of the year. Looking into 2025 and beyond, we envision Jacobs as a company like no other, a company that combines deep domain knowledge of operational environments with the latest advances in technology. We are excited to share a more comprehensive analysis of our strategy at our March investor event. Now let's discuss the first quarter results. During the quarter, at People and Places Solutions, our advanced facilities business delivered double-digit revenue growth and over 20% growth in operating profit, driven by our work with Intel and other global microchip customers, along with growth in life sciences and the electrical vehicle market. And in the Americas, we're also seeing the beginnings of projects related to the U.S. infrastructure bill enter our pipeline. Within critical mission solutions, we had a highly anticipated significant backlog addition from our space-based intelligence surveillance reconnaissance group called Rapid Solutions. The remainder of CMS pipeline remains strong with substantial new award opportunities expected this fiscal year. PA Consulting continued to outperform, posting another triple-double with 21% revenue growth, adjusted operating profit margins of 22%, and double-digit pro forma year-over-year backlog growth. Total Jacobs net revenue increased 6% year-over-year and adjusted EBITDA grew 11% during the quarter. In the first quarter, we experienced strong bookings. As a result, our overall backlog ended the quarter up 12% year-over-year and up 10% on a pro forma basis. Given the strong backlog growth dynamics of our business, we're reiterating our fiscal 2022 adjusted EBITDA and adjusted ETS outlook. Looking beyond 2022, we expect strong organic growth to result in approximately $10 per share of adjusted EPS in fiscal year 2025, excluding any potential deployment of material capital toward M&A opportunities. At our investor event in early March, we'll provide additional detail on how capital deployment and focused new growth opportunities can provide additional upside to this expectation. Turning to slide five, one of the most attractive opportunities for Jacobs is to expand our data and cyber businesses across three focus areas of specialized consulting, operational technology solutions, and data analytics platforms. With a combination of strategic acquisition and key talent additions, we have built a strong business providing data and cyber solutions at scale to protect national security. Expanding beyond national security, as attempts by bad actors to cripple both public and commercial assets and facilities continues to increase, we see accelerating requests for our data and cyber solutions from our critical infrastructure customers. We have developed and acquired a portfolio of high technology solutions, such as synthetic aperture radar technology and the BlackLynx Edge computing platform, which we plan to further scale and commercialize. Jacobs also has numerous software-based analytic solutions across the water, transportation, and environmental verticals, which is now enhanced with the acquisition of Streetlight Data, which I'd now like to discuss in further detail. Moving to slide six. Streetlight Data is a vertical data-as-a-service analytics platform that helps customers gain insights into three high-growth areas. First is understanding mobility and last-mile supply chain analytics of all modes of vehicle and pedestrian movement, as well as trip patterns, both in recent and comprehensive historical data. Second is analyzing the impact of infrastructure investments, including how to plan the expansion of future communities and where and when to deploy electrical vehicle charging solutions and autonomous vehicles to enhance sustainable solutions. and third is measuring the social value impact of infrastructure investments on underserved communities and populations overall as the u.s prepares to embark on one of the largest infrastructure investments in history having access to these analytics will be crucial which is a new multi-billion dollar market for jacobs we view the addressable market for streetlight in three buckets expanding market share with north american transportation focused customer base leveraging into other infrastructure segments, such as water, environmental, and the built environment, exploiting adjacent opportunities by expanding internationally, and developing large disruptive use cases across multiple areas, leveraging Jacob's portfolio of data and technology solutions, including geospatial technology and edge computing capabilities from recently acquired BlackLinks to create expanded market penetration, growth opportunities, and solutions for our clients. The team at Streetlight has built the industry's leading solution, which is deployed throughout several U.S. and Canadian transportation authorities and municipalities. Specifically, Streetlight is multiple software development cycles ahead of the competition, driven by its unique multimodal data analytics mode, proprietary algorithms, and front-end user experience technology. We expect revenue to grow at over a 30% CAGR through 2025. A key part of our strategy is investing, aligning, and integrating our data and digital capabilities to truly advance our scale and gain the financial economics of a high-margin recurring revenue opportunity that further supports high-value client solutions. This streetlight acquisition is an important step in this direction. With that, I'll turn the call over to Bob Pergata to provide more detail by line of business.

Thank you, Steve. Moving on to slide seven to review critical mission solutions. During the first quarter, our CMS business continued its strong performance with total backlogs increasing 11% on a pro forma basis to $10.8 billion, driven by strategic new wins in space, cyber, and intelligence. Our CMS strategy is focused on creating resilient revenue growth and margin expansion by offering technology-enabled solutions aligned to critical national priorities. Three market trends that we see offering continued strong growth this year include space foreign ISR, edge analytics, and intelligent asset management. Beginning with space ISR, our military leaders contend that future conflicts will be won by those with an information advantage, enabling the ability to outpace, outthink, and outmaneuver our near peer adversaries across multiple domains, land, sea, air, cyber, and increasingly space. Low-orbiting surveillance satellites can collect data much more quickly than airborne ISR, covering 35-fold the number of miles per hour. These smallsats with radio-frequency synthetic aperture radar provide time-critical intelligence in support of commercial and military missions. Jacobs continues to develop its advanced payload production and integration capabilities, building on technologies from TWU. With our recent successes, along with the integration of Blacklink's innovative software platforms, we have unlocked the opportunity to create a potential half-billion-dollar annual recurring space ISR business longer term. Also during the quarter, Jacobs won a 36-month contract to provide state-of-the-art digital aerial imagery data that will be used to enhance precision agricultural practices in the Midwestern United States. The services will be provided using TW technology called GeoPod, which is a scalable, highly agile airborne imagery system. Moving on to edge analytics. Data is often utilized in challenging and unlikely places, like the International Space Station, a military satellite, ships at sea, factory floors, water purification plants, traffic lights, and neighborhood pharmacies. Data might traditionally reside in a data center or cloud. But many important decisions need to happen on the edge. Jacob's recent acquisition of BlackLinks, an edge analytics leader in providing the sensor software and analytics services, allows leaders to speed their decision making exponentially. As edge computing proliferates across all domains, rapidly gaining actionable insights from the vast data becomes essential. We are already leveraging Blacklink's edge computing capabilities, not only across CMS, but also the infrastructure sectors of PMPS in 2022. Now in the area of intelligent asset management, we're continuing to build on the solutions we developed with NASA centers and have now deployed at multiple U.S. Navy installations. Typically, these programs range from $250 to $300 million over six to eight years. We see a growing pipeline of opportunities that span across DOD, the intelligence community, and commercial clients. The value for our clients is increased uptime and availability of the facilities at lower total lifecycle costs achieved through targeted use of predictive analytics, while simultaneously upskilling the workforce at these mission-critical, complex installations. In summary, we see solid demand for our solutions in 2022, despite the headwinds of the continuing resolution, which will likely get extended through March. Although we are seeing some funding pushouts impacting our cyber intelligence and defense clients, there are pockets of new funding across our diverse U.S. government customer base, as well as in commercial sectors like telecom, where 5G continues to advance. The CMS sales pipeline remains robust, with the next 18-month qualified new business pipeline remaining at $30 billion, including $10 billion in source selection with an expanding margin profile. Now on slide eight, I'll discuss our people and places solutions business. We started the fiscal year with strong financial performance, resulting in 10% year-over-year backlog growth. I will discuss our results across four areas, including climate response supply chain diversification, infrastructure data solutions, and infrastructure modernization, starting with climate response. Opportunities continue to increase related to energy transition, and this has resulted in growth across our end markets and client sectors, notably for grid resiliency, green hydrogen, and renewable energy generation. Most recently, Jacobs was selected as a program management partner to Pacific Gas and Electric on their multi-year electric undergrounding program. The largest of its kind in the U.S., the ambitious program will bring 10,000 miles of power lines underground to mitigate wildfires in and near high-fire threat areas to respond to California's evolving climate challenges. Jacobs will provide a global interdisciplinary team, as well as advanced technology approaches that draw on more than 30 years of experience with PG&E and other large, complex, undergrounding programs like Sublinx in Germany. This important win also leveraged our subject matter experts in PA for yet another synergistic win together. With our recent award at the Pembroke Power Station in the UK, we're building on our portfolio of industry leadership in the area of hydrogen-based power. And we've been successful with multiple awards related to solar and wind renewable generation projects in Wyoming and Australia. Moving to supply chain diversification. As a result of the global supply chain challenge, all sectors in our advanced facilities business are in growth mode. with semiconductors, life sciences, and electric vehicles leading the field. And across these sectors, our ability to leverage our global integrated delivery platform and data-centric execution on these complex facilities is a clear market differentiator. Our solutions include significant wind with an Asia chip manufacturer, expanding capacity in North America, continued support of Intel with additional facilities, including new builds in the U.S., And Jacobs was awarded the delivery of the first data center building for a major co-location client in the southwestern United States. In health and life sciences, we recently won a project with Spark Therapeutics, a Roche pharmaceuticals company, to build a gene therapy innovation center in downtown Philadelphia to research, develop, and manufacture state-of-the-art products. Jacobs continues to deliver sustainable facilities across life sciences, like Fujifilm DioSense Biotechnologies' new large-scale cell culture facility in North Carolina, the largest of its kind in North America, with the goal of 100% clean energy utilization and cutting-edge waste disposal and recycling systems. This is a great example of projects that enable us to deliver on our purpose of creating a more connected, sustainable world. Critical healthcare for thriving communities is central to our purpose. And our teams are working with clients to advance outcomes, including design of a mental health facility serving communities in Western Sydney, recent completion of a state-of-the-art surgical center in Central Florida, and a major hospital redevelopment in Southeast Asia. Moving to infrastructure data solutions, combining our recent digital acquisitions of Black LinkedIn Streetlight, as well as our venture investment in MicroGid Labs, We are well positioned to provide our clients with technology-enabled solutions through enhanced analytics and insights. We are also ideally positioned to deliver unparalleled value to the transportation and electric vehicle ecosystem, including an innovative in-road charging system in the Midwestern United States with Electrion. In the UK, we are expanding our support of climate risk mitigation and multi-community resiliency for the Environment Agency through continued innovation of our proven proprietary digital technology, FloodMopper. Additionally, as part of the first Water Breakthrough Challenge, we provided technical support to Anglian Water and United Utilities, which resulted in innovation awards in the area of artificial intelligence for system operation and climate resilient solutions. Touching on infrastructure modernization, NEON in the Kingdom of Saudi Arabia is a unique greenfield opportunity where Jacobs is delivering strategic planning and consultancy services to build towards a net zero future. In the U.S., we are supporting clients on major programs and projects to align with capital funding and investment plans. We were selected for these awards based on our industry-leading implementation and long-term delivery success. Specifically, Jacobs was awarded the next phase of a major water treatment facility in North Texas, the new Tollway Ship Channel Bridge in Houston, Denver International Airport's seventh runway expansion, and a critical win with our long-time customer, the New York Metropolitan Transportation Authority. In summary, our global capability and innovative solutions have continued to differentiate Jacobs and provide confidence in the strengths of our business based on early positioning with our clients and the longer-term global infrastructure stimulus. Turning to slide nine, let's review our PA consulting business. As Steve mentioned, PA continues to significantly outperform. Their unique combination of outcome-driven strategic and digital consulting means that they are able to capitalize on the world's current megatrends of agile working, climate change, human health and safety, and digital transformation. As an example, their clients' focus on hybrid working is creating new opportunities for PA in organizational agility and resilience offerings in a range of sectors, including financial services and life sciences. Digital consulting remains PA's broadest technical capability, supported by increases in the last year in data science, analytics, and AI. Aligned with this, PA continues to add to its technology portfolio with offerings such as Oakdoor, a data diode which provides a new level of security for highly sensitive data, even for the most sophisticated segmented networks. iPredict, a groundbreaking AI system for predicting failures in critical electricity distribution, which has led to exciting new projects and opportunities for public utility providers in the United States. And in the health market, PA has partnered with U.S.-based medical device startup, BearPak Medical, to create the Passio Pump Drainage System, a digital handheld single-patient use device to improve patient care and comfort. PA maintains its strong relationship with the U.K. government and has secured two new contracts for smart metering and electronic monitoring services. In the private sector, PA successfully completed two projects with U.S.-based commercial partners. The first, with Rhea LLC, is to develop a new air distribution platform to overcome material shortages and system installation challenges facing the home building industry. And the second, with Teak Origin, a food startup, to validate and launch an innovative business model to expand market opportunity. PA continues to be an exciting part of Jacob's portfolio and is a crucial part of our new strategy as we continue to grow in the consulting and advisory space. Over to you, Kevin.

Thanks, Bob. Now turning to slide 10 for a financial overview of first quarter fiscal 2022 results. Gross revenue was flat year-over-year driven by a decrease in pass-through revenue with net revenue of 6% and down 3% pro forma for acquired revenue. Reforma net revenue growth was impacted by the timing of large CMS wins and PNPS America's customers evaluating investments from the recently passed U.S. infrastructure bill. I'll explain these dynamics a bit further during the review of the lines of business performance. Adjusted gross margin in the quarter as a percentage of net revenue was 27.4%, up 430 basis points. Consistent with the last few quarters, the year-over-year increase in gross margin was driven by a favorable revenue mix in both P&PS, CMS, as well as the benefit from PA Consulting, which has a strong accretive gross margin to the total Jacobs portfolio. We expect gross margin as a percentage of net revenue to remain in the 26% to 27% range for the remainder of fiscal 2022. As we execute against our strategy to drive a higher technology and consulting revenue mix, longer term, our gross margins will expand. Adjusted G&A as a percentage of net revenue was up year over year to 17%. Within G&A, we saw an increase in medical costs higher than our expectations, indicating some pent-up demand for medical care near the end of the annual plan period, which ends on December 31st. GAAP operating profit was $177 million and was mainly impacted by a $72 million largely non-cash charge associated with a strategic reduction in our real estate footprint, as well as $47 million of amortization from acquired intangibles. The real estate downsides as a result of our ability to further leverage technology as we adapt to our new strategic ways of working. We are finding that our teams enjoy this flexibility, and we continue to see productivity increases in this regard. Adjusted operating profit was $308 million, up 19%, driven by PA posting strong double-digit growth in operating profit during the quarter versus their year-ago figure. Our adjusted operating profit and net revenue was nearly 11%, up 110 basis points year-over-year on a reported basis. GAAP EPS from continuing operations rounded to $1.03 per share and included a $0.41 charge related to the previously mentioned downsizing of our real estate footprint, a $0.23 charge related to our amortization of acquired intangibles, $0.05 of transaction and other restructuring costs, which continue to trend significantly lower, and a positive 16 cent tax benefit in the quarter, effectively lowering our expected adjusted tax rate for the year to approximately 22%. Excluding these items, first quarter adjusted EPS was $1.56. During the quarter, PA's continued strong performance contributed 23 cents of accretion net of incremental interest. Jacobs consolidated Q1 adjusted EBITDA was $310 million and was up 11% year over year and represented 11% of net revenue. Finally, turning to our bookings during the quarter, we posted a robust book-to-bill ratio of 1.4 times for Q1, driven by strength in both lines of business. the strong booking performance positions as well for the developing growth momentum we expect over the remainder of fiscal year 2022. Regarding our LOB performance, let's turn to slide 11. Starting with CMS, Q1 2022 revenue was down 10% year over year and 12% on a pro forma basis. CMS revenue growth continued to be impacted by the contract runoff of a large low-margin procurement contract and timing related to our transition on another large DOE contract. The combined year-over-year impact of the two contracts was approximately $220 million. When excluding the contract runoff, pro forma CMS revenue growth was up 5%, indicating a strong underlying positive growth profile. As a result, we expect CMS Q2 revenue to show solid growth, with second half 2022 revenue growth accelerating further as recent new wins and backlogs begin to burn. For the full fiscal year, we expect reported revenue growth to be above 5%. While portions of our CMS portfolio are seeing some headwinds associated with unresolved continuing resolution in Washington, the diversity and strength of our balanced portfolio will more than offset that and drive solid organic growth. CMS Q1 operating profit was $111 million, up 1%. Operating profit margin was up 110 basis points year over year to 9.6%. The improvement for the quarter and operating margin was driven by our strategy to focus on higher margin opportunities across the business, as well as the timing related to transition of our large DOE contracts. We expect operating profit margin to remain in the 8% to 9% range through the balance of fiscal 2022, but improve longer term as our revenue mix from higher margin wins improves. Moving to PMPS, Q1 net revenue was up 1% year over year. Our advanced facilities business net revenue growth was up double digits year over year, driven by the investments in the semiconductor supply chain. We expect advanced facilities to further accelerate its growth throughout fiscal 2022. Our international business also had strong double-digit year-over-year growth driven by more steady government funding and a favorable first quarter of fiscal 2021 year-over-year compare. For the remainder of fiscal 2022, we expect solid mid-single-digit net revenue growth for our international business. Moving to P&PS Americas, current revenues remain soft due to delayed approval of the infrastructure bill. However, we are beginning to see some projects related to the infrastructure bill enter into our pipeline. Our first quarter bookings and rising backlog provide us confidence that the Americas business will show sequential growth as we work through the balance of our fiscal year 2022. PMPS Q1 operating profit was down 2% year over year with a 13.2% operating profit margin. driven by increased G&A expenses as we remain committed to strategic investments that position us for the projected acceleration in our business longer term. In terms of PA's performance, PA contributed $290 million in revenue and $63 million in operating profit for the quarter. Q1 revenue grew 21% year-over-year in both U.S. dollars and pound sterling. Q1 adjusted operating profit margin was 22%. On the next slide, I will provide an additional overview of PA's financial profile. Our non-allocated corporate costs were $58 million, up year over year and slightly higher than our expectations, driven primarily by the increases in medical costs. We still expect non-allocated corporate costs to be in the range of $200 to $250 million for fiscal 2022. Moving to slide 12. We are approaching a year since we closed this 65% investment in PA Consulting, and their performance has exceeded our expectations. PA Consulting provides a unique combination of high-value strategic and digital consulting services to a diverse group of public and private clients. The exposure to these high-growth sectors is reflected in the company's ability to compound high double-digit revenue growth while maintaining operating profit margins well above 20%. Interestingly, U.S. publicly traded consultancies that have this type of financial profile are valued at more than 20 times adjusted EBITDA, indicating that PA's performance profile offers upside to Jacobs' current valuation. At our upcoming investor event, we will provide further insights into PA's growth strategy. Turning to slide 13, discuss our cash flow and balance sheet. We had another outstanding quarter of cash flow generation with $302 million in reported free cash flow, as DSO again showed strong improvement down eight days year over year. And the quarter's cash flow included a $55 million cash payment for COVID-related deferred FICA tax payments. Next quarter, we expect free cash flow to be impacted by PA's cash bonus payments associated with their year-end performance, higher cash taxes, and an uptick in our DSO figures given some discrete items that favorably impacted our Q1 results. Given our strong Q1 free cash flow performance and structural improvements in our collection processes through our FOCUS 2023 initiatives, we see increased conviction of achieving our one-time free cash flow conversion target. As a result of the strong cash flow, we ended the quarter with cash of $1.2 billion and a gross debt of $3.1 billion, resulting in $1.9 billion of net debt. Our performance net debt to expected adjusted 2022 EBITDA is approximately 1.3 times, a clear indication of the continued strength of our balance sheet. Finally, given our strong balance sheet and free cash flow, we remain committed to our quarterly dividend, and we recently announced an increase of 10% to 23 cents per share. Now I'll turn it back over to Steve.

Thank you, Kevin. Our purpose to create a more connected, sustainable world has never been more relevant than now, as advances in data analytics and edge computing power are unlocking our ability to deploy innovative technologies related to climate change, infrastructure, and national security. Our proactive portfolio management to align ourselves to these long-term secular growth opportunities has provided us the ability to grow under multiple economic scenarios and even during a pandemic. We are now entering a stage where we are experiencing growth across all of Jacobs, and we expect accelerating top-line growth throughout the rest of this fiscal year. We are maintaining our fiscal 2022 outlook for adjusted EBITDA to be in the range of $1.37 to $1.45 billion, and our adjusted EPS outlook of $685 to $745. Beyond the current fiscal year, our sales pipeline and robust end markets indicate continued strong performance. As I stated earlier, we anticipate approximately $10 of adjusted EPS in fiscal 2025, with the potential for upside driven by deploying additional investment in our growth accelerators of climate response, data, and high-value consultancy. Operator will now open the call for questions.

At this time, I would like to remind everyone, in order to ask a question, press star, then the number 1 on your telephone keypad. Please limit yourself to one question. If you wish to ask a follow-up question, please press star 1 to re-enter the queue. And your first question comes from a line of JV Cook from Credit Suisse. Your line is open.

Hi, good morning. I guess one question, understanding, well, congrats on the win on CMS in terms of the award, the Space Award, but And, you know, at what point, I know you said margins this year sort of in the 8% to 9%. At what point do you think CMS margins can, you know, start to, you know, narrow the gap? When can you start to narrow the gap between CMS and PPS margins? And then I guess my second just follow-up question, obviously there's been, you know, a lot of news about Semi-CAPEX. you know, from some major customers. You know, Intel announced some pretty sizable numbers a couple weeks ago. If you could just sort of frame the opportunity for Jacobs as it relates to that and when we could start to see that in numbers. Thanks.

Let me take the first part for sure, Jamie. This is Kevin. On the CMS margin profile, what we're going to be seeing in the last three quarters of this year is the ramp up of our large Idaho nuclear contract, which is, as you know, has a slightly lower margin profile than the balance of the business. So that's what's creating the 8% to 9% kind of figures that we talked about for the balance of the year. As we go into 2023 and beyond, though, we really do believe that the ramp up of the satellite work and various other items that are in backlog and or in the pipeline, which we expect some success on, will result in us being able to start to build that margin profile up again, hopefully beyond 9% in 2023.

Jamie, on the semiconductor side, clearly it's a growing part of our overall portfolio. We've been in the space for over 20 years, and the customer that we've kind of been on the on the forefront of is, in fact, Intel, and proud that we could even announce that for years that we couldn't previously. So you will start to see it in the numbers as it becomes even a bigger part of our portfolio. But I think the good news is that as Intel diversifies not only in the U.S. but outside the U.S., you know, we're right there with them as their critical technical and engineering partner. So that's going to be a big piece of our businesses.

Your next question comes from the line of Jerry Rebich from Goldman Sachs. Your line is open. Yes, hi. Good morning, everyone.

On slide 16, you folks laid out a $5 billion ESG solutions revenue business. I'm wondering if you wouldn't mind just fleshing out the major components. I know water is about $2 billion or so. What are the major components? And, you know, what's the growth cadence that you're looking for in those lines of business, you know, 22, 23 timeframe? In other words, how back-end loaded is that growth outlook that you lay out on that slide? Thanks.

Okay. This is going to be a big topic for us coming up in Investor Day, our whole investor event, Jerry. So not to deflect the detailed side of your question, but I think we're going to lay all that out, and it's going to be pretty exciting. You know, it's unfolding now every quarter. I mean, the wins that, you know, we talked about, you know, Bob mentioned this, you know, first ever Jacobs – opportunity to do the first ever inductive charging system on a public road in the Midwest is a great example. What we're now doing in the US and Europe to address resiliency and renewable energy logistics with underground cables you know the png one being the specific opportunity green hydrogen you know where we got a huge wind program several big huge wind programs across the globe these are all unfolding now and and we'll be ramping up uh that number that you you quoted literally every quarter as we proceed. So we're going to get into that detail, but it's everything from decarbonization, energy transition, resilience, mitigation, adaptation. And we'll be spelling out some specific growth targets during the investor week.

Your next question comes from the line of Josh Sullivan from The Benchmark Company. Your line is open.

Hey, good morning. Thanks for taking the question. Within the rapid solutions and the space assets you're building out, can you just help us break down those verticals and what you're thinking about total addressable market here? And then relatedly, that aerial imagery data contract, I think you said on the geopod, can you just expand on that opportunity and the customer set there as well?

Sure. So, Josh, you know, the first part of the question is that if you look at kind of the cyber spectrum and then how it pertains to the overall ISR approach, I'd kind of break it down into four main areas on where we play and then there's the product component of it as well. The whole perspective around readiness, operations, insights, and then new product development on creating platforms in order to even provide more security or more readiness or more insights is kind of how we look at it. And over the years, the acquisitions that we've done have now put us in a pretty premier spot of that. So I think that that is something that is going to continue to grow and put this in multiple parts of that value chain in the ISR field. On the second part around GeoPOD and what we're doing on the geospatial side, that really is an agricultural, there's clearly all kinds of applications as it pertains to infrastructure. The win that I was referencing is the commercial client that looks at the whole kind of agricultural profile of right now the U.S., but we have these applications elsewhere too. and really helps on weather patterns and how the whole agricultural industry can be more efficient as the effects of almost the previous question, climate change, come into play. So it's a nice kind of coordinated skill set that we have that even makes us bring that much more value for our clients.

Your next question comes from the line of Chad Diller from Bernstein. Your line is open.

Hi, guys. Good morning. I was wondering if you can talk a little more about Streetlight, discuss cross-selling opportunities, and how we should think about the sales cycle about this product, and how long is it, and when during the project lifecycle do these discussions kick off?

Yeah, so let me start. I think what's important about Streetlight is we've been doing business with them for the last six years, so we have a lot of experience with them and have proven success. They are a validated capability, trusted, especially in the DOTs, Department of Transportation, here in the U.S., although they've been focused on a handful or so of these Department of Transportation directly. And now what we bring is the opportunity to unleash that because we're one of the leading players of transportation, not only in the U.S., but globally. The whole opportunity with Streetlight is it's a multimodal capability, which is unique in the industry. So they're accessing data from mobile devices, connected vehicles, geospatial, IoT sensors, and then they have a very unique process technology with very strong algorithms and being able to create data and visible insights that will lead to climate change solutions and being able to move infrastructure to underserved communities and a whole host of infrastructure needs in the transportation sector. And then, you know, specifically from a Jacob standpoint, a big opportunity is that We see the opportunity to work this technology into other infrastructure sectors where we're industry leading like water, environmental, building environment. We are able to co-develop new products with them, bring this internationally, especially in areas like UK where we're a major player in transportation and other markets in Asia, etc., And so, you know, we see a tremendous opportunity. It's the reason why we expect, you know, greater than 30% revenue growth in this business, you know, over the next several years per year.

Your next question comes from the line of Andy Kaplowitz from Citigroup. Your line is open. Hey, good morning, guys. Morning.

Morning. Morning. Can you give us a little more color in how you expect CMS to trend over the year? I know, Kevin, you said still up over 5% for the year. I think that's just a little bit below your guide from last quarter. Is it possible to quantify the impact of the CR's uncertainty on your Q1 revenue? And have you seen any incremental interruption in Q2 or Momocron or supply chain? And do you need to display relatively significant acceleration revenue to make your guidance? So you could just talk about your confidence in that.

Yeah, Andy, we feel pretty darn confident, actually. There's a couple of things that are going on the year-ago comparison starts to dramatically change because of those two contracts having fallen off the year-ago comparables to a large extent. So by default, that underlying growth that we're showing actually in Q1 of 5%, is going to do nothing but get better as it relates to the numbers. So while the headline number was the fall-offs in revenue, the underlying health of the business is is at that number we talked about, 5%. So you got the ramp up of the Idaho project, which is going to be a substantive build in Q2, and then three and four as well. And look, I think the continuing resolution is impacting the piece of the portfolio that you would expect it primarily in the areas of, let's call it cyber. uh intelligence communities but that while that's you know an important part of our portfolio it's not the biggest part and so uh we're seeing some slow down there but we also see backlog and wins just waiting to be uh to be executed against and and we see all of that being able to happen a little less in q2 but certainly q3 and four so the ramp is is certainly robust in the remainder of the year, and especially in Q3 and Q4.

Your next question comes from the line of Stephen Fisher from UBS. Your line is open.

Great, thanks. Good morning. You know, I guess related to the P&PS segment, I know there's typically some seasonal headwinds in Q1 relative to Q4 of the prior year. I guess the organic growth seemed to be relatively steady. I'm wondering, is there, how did that compare to your expectations in the quarter? And is there any evidence you can give us today that the America's design business growth rate is actually accelerating now on a sequential basis, or is it more or just poised to come and that just still needs to play out as the rest of the year develops.

Yeah, so, Steve, I'd say two things. Yes, the second part of your question, first, we do see a growing pipeline in our America's infrastructure business, and that's coming through in the bookings. And so, talked about the backlog growth for the entirety of the LOV. Our design business in the U.S., specifically around infrastructure, probably led the way on that backlog growth that we saw. So, So clearly on the base business, without even the infrastructure bill, we're seeing the growth there. And then as the infrastructure bill, we're starting to see some tailwinds coming in, at least on a project basis from that too. So we're positive on that front. From a seasonality standpoint, I'd say that it goes back to what Kevin said earlier. We saw growth. We also saw some costs come in with regards to medical costs and otherwise, as well as preparation for people that we know are going to be full utilization as we progress the year. So we like what we see.

Just to maybe add a little bit there is that you talked about sequential numbers, and we would expect that Q1 of the year is going to be the low point for the America's business, and we will start to see sequential growth going off of those numbers through the balance of the year.

Your next question comes from the line of Sean Eastman from KeyBank Capital Markets. Your line is open.

Hi, team. Thanks for taking my questions. I just wanted to come back to the satellite payload technology award in the quarter. I believe this is one that you guys had highlighted as... you know, sizable prospects, but, you know, maybe the more important element around it was that it was a platform for margin accretive growth in CMS. Could you maybe refresh us on that dynamic? Obviously, you know, if you could put numbers on it, that would be great, but I just wanted to check back in there and make sure we understand the significance of that win.

Thank you. I think the this is the sort of anticipated uh win and and you know we're very limited what we can talk about because of the classified nature but it's it's got a phasing uh approach to it but this was the critical phase to to win and so so now the momentum is going to start to build and we'll again we're going to provide some more information during investor week but What we see is that the way this thing can phase over the next several years and what it's gotten us into now is an opportunity to create a half a billion dollar rapid solutions business. And we'll provide some more details of how we see that sort of unfolding when we get to investor week.

And that starts to happen primarily in 23, the build on the project. So the ramp will be likely mostly in 23.

as well as other clients.

Your next question comes from the line of Andy Whitman from Barrett. Your line is open.

Great. Thanks, guys, for taking my question. I guess I just wanted to touch base with you and get your thoughts on the labor market and your ability to find and keep talent today. Certainly, this is at the forefront of many people's minds, and I wanted to understand how you're dealing with that today, what you're seeing in that marketplace. and if there's any net effect on the margin performance this year that you can discern from the rapidly changing inflationary labor market.

Yeah, Andy, it is a tough market. But I think the cultural priorities that we've been focused in on over the five-plus years is really starting to – well, it has been paying dividends, but it's continuing to be on the forefront. So, yes, there's challenges. our attrition levels are remaining actually pretty steady. And we're confident that we'll continue to be able to grow despite those labor challenges. The other part I would say is that this is where the globality of our business really, really makes a difference because we are able to source talent and expertise from our global platforms to deliver solutions locally. And that has really been accentuated and magnified during this period of some labor dynamics. So we feel like we're really well positioned for it.

Your next question comes from the line of Michael Dudas from Vertical Research. Your line is open.

Good morning, everybody.

Morning, Michael.

Morning. So for Steve, you announced the streetlight this quarter, Black Links last quarter. I'm sure you'll elaborate more on Investor Day, but maybe the thought on how, what type of, again, where you're looking, the size that we've been seeing the last couple of acquisitions, that's something that investors may look to see going forward unless something changes. size of what occurs, and, you know, relative to the balance sheet that you have now and certainly adjusting from your prior acquisitions, the comfort level you have to level that up if that's all that's required.

Look, just to put a perspective on that question, because it really is important of what you brought up, is that, you know, we've been involved as a company over the last five to ten years in the NASA intelligence arena on on big data and, you know, digital transformation, intelligent assets. And so now, you know, taking that platform and with the acquisitions of PW, Buffalo Group, Black Links, and Streetlight over the last, you know, three years or so, and then add on top of that our new venture capital strategy of, you know, seed investments and partnerships with the likes of Hawkeye 360 and Microgrid Labs, and then a big data partnership ecosystem that we've developed. And putting that all together, we are now poised and positioned with a large-scale capability for transformative data solutions across all of our Jacobs domains. And that is a strategy we're going to continue to build on. In addition to climate, which we talked about earlier in this call, this whole data solutions, It's going to be a big part of, you know, what we're going to talk about in the investor week and touch on the rest of your questions as we go forward.

Your next question comes from the line of Louis DePalma from William Blair. Your line is open.

Steve, Kevin, and Bob, good morning. Morning. Morning. You are productizing investors. infrastructure data solutions with Streetlight and BlackLinks. How does cyber fit into your infrastructure data solution strategy? And for context, in December, US Cyber Command created a cross-functional group dedicated to defending US critical infrastructure from cyber attacks. And you obviously have elite cyber talent in your critical infrastructure division um from your acquisitions of key w and buffalo group so can you discuss i know you'll probably discuss more at the analyst day but how you can layer in cyber solutions into your people and places solutions division services portfolio yeah lou you must you must have some uh some superhuman powers on on looking at what our deck looks like for the investor day but the answer is yes

and uh and and it really gets exciting when you look at these are these are algorithms that either index uh filter or identify areas of risk uh in uh in any type of data and data sets and so the application of what we have to the infrastructure world is a natural transition and we've already been starting we've already been working on that now that coupled with partnerships that we have in the marketplace There's not an infrastructure project right now with major agencies, both in the U.S. and the U.K., across the world and Australia, where we don't have a cyber component that's with it. So we are in process doing that right now for our clients, and that's going to become a bigger part of our business as we continue to go forward. But you appropriately said it's a great skill set as cyber threats become as big as any threat that we have.

Your next question comes from the line of Michael Fenninger from Bank of America. Your line is open.

Hey, guys. Yeah, thanks for taking my question. I recognize you guys are touching and playing in many articles right now and moving up the tech curve. You know, the comment that peers are trading at 20 times EBITDA or at least the PA consulting ones, When I think of capital allocation here for you guys, is it favoring M&A to build out that capability so you guys are more in that bucket and that basket? Or do you feel you are already in that basket right now? your multiples at a discount and maybe buying back shares to close that discount is more appealing i guess just trying to evaluate if there's going to be more expensive acquisitions on the forefront to build out the capabilities and get to that peer group or if you feel your capabilities are already checking the boxes and those are the right peers thank you well i think we

We believe it's a combination because I do think what you comment on, what we've acquired and built both organically and with previous M&A, we feel like we are a large-scale player now. And so, therefore, when we wake up every day, our priority is organic growth off of that platform. Secondly, any acquisition we do going forward is going to be rigorously compared to the alternative market. buyback stock. And we've done that in the past. We'll continue to do it. You know, what may have looked like a pretty bold price on some previous acquisitions are now looking amazingly attractive in short periods of time. And PA is a great example. If you just, in less than a year, the whole multiple profile of our acquisition is amazingly attractive. I'll just leave it like that. I think it's going to be a combination of going forward that we will continue to invest in Jacobs and look at our stock buybacks. But from time to time, we're going to continue to build out this capability that we're really excited about. But it has to be a situation where we believe over the course of the first few years that we'll all look back and say it was a very attractive price and not overpaying for something just because we've got to get bigger. And I think we've proven that in the past, and we'll continue to do that as we go forward.

And there are no further questions at this time. Mr. Steve Dimitriou, I turn the call back over to you for some closing remarks.

Thank you, everyone. We look forward to hopefully having a good engagement during Investor Week with many of you. Take care.

this concludes today's conference call thank you for your participation you may now disconnect