Jacobs Solutions Inc.

ladies and gentlemen thank you for standing by my name is brent and i will be your conference operator today at this time i'd like to welcome everyone to the jacobs fiscal third quarter 2023 earnings call and webcast 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 at that time simply press star followed by the number one on your telephone keypad If you would like to withdraw your question, again, press star one. Thank you. It is now my pleasure to turn today's call over to Mr. Jonathan Evans, Vice President of Corporate Development and Investor Relations. Sir, please go ahead.

Thank you. Good morning. Our earnings announcement in 10Q were filed this morning, and we have posted a slide presentation on our website, which we'll reference during the call. I would like to refer you to slide two of the presentation material for information about our forward-looking statements and non-GAAP financial measures. Turning to the agenda. Speaking on today's call will be Jacobs CEO Bob Fregata and CFO Kevin Berryman. We are also joined by our incoming CFO Claudia Jaramillo. Bob will begin by providing an overview of recent activities and summarizing highlights from our third quarter results. Kevin will provide a more in-depth discussion of our financial metrics as well as a review of our balance sheet and cash flow. And Claudia will provide an overview of separation-related activities. Finally, Bob will provide details on our updated outlook along with closing remarks, and then we'll open up the call for questions. Before I hand it over to Bob, I want to address some reporting changes that were made in the quarter. We consistently review our reporting practices to be aligned with best practices for our industry and SEC guidelines. After review, we have decided to amend our naming convention for revenue excluding pass-through costs from net revenue to adjusted net revenue. Note, this is simply a name change intended to make the non-GAAP nature of this measure more prominent and does not impact measurement. In addition, after an internal review, We have made certain minor adjustments to pass through revenues in certain prior periods to properly reflect amounts that had not been previously included. As a result, in the materials that we have included in the appendix to this presentation, we have adjusted people and places adjusted net revenue for fiscal 2022 and fiscal 2023. Note, this change has been deemed as immaterial and has no impact on our reported earnings, operating income, or cash flow. With that, I'll turn it over to Bob.

Thank you, Jonathan. Good day, everyone, and thank you for joining us today to discuss our third quarter fiscal year 2023 business performance. Turning to slide four, I'd like to begin by recognizing the continued commitment and extraordinary talent of our 60,000-plus teammates here at Jacobs. I've now been in the CEO seat for over six months, and as I spend time with our clients and our people, I continue to be both inspired and appreciative of the dedication and world-class expertise they bring to some of the world's toughest challenges. Now more than ever, our communities require the brightest and best minds to step forward with innovative and technology-enabled solutions to drive better outcomes. I am proud of all that we do to play our part to enhance and serve those communities. Firstly, I want to provide an update on our previously announced intent to separate the CMS business before I move on to our third quarter results. The company continues to make significant progress on the activities associated with the intended separation. In addition, following the announcement, there has been positive interest from multiple outside parties. We are currently evaluating this interest consistent with our commitment to maximize shareholder value. As previously communicated, a spinoff, which is subject to customary conditions, is expected to be completed in fiscal 2024. Let me reiterate. We are laser focused on maximizing value for all stakeholders. As we progress towards the separation of CMS, our teams continue to work tirelessly to stand up both companies for independent success. In the process, we have identified a number of operational enhancements that we believe will propel each company to greater heights in the future. Consequently, we believe that fiscal year 2024 will be a year of optimization and acceleration. Turning to slide five. On optimization, we see significant potential to enhance our cost structure and our operating model to continue to drive efficiencies and lead our industry, not just in size, but in profitability. This will unleash a more cohesive Jacobs that leverages our digital platforms, consulting and advisory, and global delivery model to accelerate our value creating growth. On acceleration, For many years, we have highlighted investments in growth in our people, platforms, and technology-enabled solutions. We've invested behind and proudly manage a portfolio aligned with secular megatrends, critical infrastructure, water scarcity, sustainability, reshoring, and energy transition. Our clients need us now more than ever, and we are delivering. Jacobs is driving higher growth, higher margin, differentiated expertise, and solutions. Our addressable market is growing, and we are already capitalizing on these opportunities. Turning to slide six and Q3, I am pleased to report another record quarter as measured by both revenue and operating profit. Notably, our growth is entirely organic, and we continue to drive improving cash conversion, a hallmark of our business model, allowing us to invest behind our growth accelerators, climate response, data solutions, and consulting and advisory. Our people and places line of business delivered accelerating top line growth with adjusted net revenue up 9% year over year and operating profit up 13% year over year. Kevin will detail the significant growth we're experiencing in our global business units. We continue to see broad-based green shoots with a gross margin backlog growth of 8% year over year. Our pipeline continues to grow faster than our top line, which provides visibility and confidence in our expectations that growth will persist at current rates. CMS remains a pillar of stability. CMS Q3 revenue was 7% higher year over year, and operating profit increased 12% behind 36 bps of margin expansion. CMS continued to book awards at an over 70% win rate. Its pipeline and growth outlook remain robust, with major award prospects in fiscal 2024 and minimal forecasted re-compete pursuits. As a result, the Jacobs team is advancing required flight software and hardware testing for the Artemis II mission scheduled for December 2024, the second scheduled flight of the program and notably its first crewed mission. In early July, an integrated team of NASA and Jacobs personnel at Marshall Space Center successfully completed the initial phase of formal qualification testing for the Artemis II SLS flight software. A very exciting time for all involved. PA Consulting sales and backlog once again increased year over year, led by sales in the energy and defense sectors. Margins stabilized in Q3 above 21%, supported by strategic cost actions taken during the quarter. And we continue to have the highest confidence in our talented management team. PA continues to see increasing opportunities in energy transition. For example, We assisted a leading offshore wind developer in securing a fixed-price electricity contract in Ireland's first offshore wind auction. PA is also seeing significant interest in its digital expertise from clients who are looking to assess AI-related impacts and opportunities for their businesses. As an example, a leading cybersecurity client hired PA to support the development of a comprehensive strategic plan with specific focus on understanding the power of AI in mitigating cyber threats. Our Divergent Solutions Operating Unit delivered a strong quarter with 3% adjusted net revenue growth and 72% year-over-year growth in operating profits. During the quarter, we won another competitive pursuit with the Ohio Department of Transportation to extend Streetlight's software-as-a-service offering. Streetlight already provides statewide modeling and traffic analysis, safety programming, and support for large-scale planning efforts. This new contract is for congestion and freight management functionality to support the state's carbon emission reduction efforts. Turning to slide seven. Looking across the Jacobs Enterprise, we continue to see considerable and geographically diverse opportunities in our greater than $2 billion water business. From water reuse to treatment to drinking water, coupled with our innovative project delivery offering, demand remains robust. During Q3, we saw healthy growth behind water scarcity-related pursuits. For example, scope increases and new wins with our longstanding partnership with the Singapore Public Utilities Board. Underinvestment and future proofing needs also continue to be a major driver. In the U.S., we have been selected by a large Southern California utility agency to provide program management and strategic funding advisory services to create a more sustainable, drought-resilient local water supply for one of the largest groundwater storage bases. And in New Zealand, we were awarded an extension and expansion of our Central Interceptor Program, the country's largest ever wastewater project. We also continue to see environmental and sustainability projects. For example, we landed a marquee $450 million award from the U.S. EPA's Great Lakes National Program Office and Region 5 Superfund. to provide environmental technical management services and associated infrastructure tasks in the Great Lakes area. We also see continuing momentum in legislation aligned work. IIJA aligned wins continue to accelerate versus the year ago period. And for example, we were awarded the Brent Spence Bridge, an iconic connector of economic development between Ohio and Kentucky, which has been postponed for many years. And we continue to closely support the New Orleans Regional Transit Authority in their successful low and no emissions grant application. And subsequently performed delivery services to provide energy efficient buses and charging infrastructure. Turning to slide eight, in summary, we are extremely well poised for the strong growth across sectors we serve, building off our established leadership position and proven track record for operational excellence. Now I'll turn the call over to Kevin to review our financial results in further detail.