Government and industrial technology here at Raymond James. Thanks for joining us. Delighted to have Jacobs Solutions here to present their story. We think the timing is really good to take a look at this name. You've got infrastructure spending past, plenty of geopolitical instability, we think all of the business segments are gonna have margin improvement over the next 12-24 months. We have the company's CEO, Bob Pragada, to take us through the story, Kevin Berryman, CFO, and incoming CFO, Claudia Jaramillo, that's gonna be taking us through the story as well. First event with us, Claudia, welcome. Thank you. We're gonna do a lot of kind of fireside question, kinda go back and forth between Q&A and some slides to reference. If any of you have questions throughout, just raise your hand, and I'll try to get to you. Bob, why don't you take us through the story, level set the audience, and maybe take them through what Jacobs does for their clients and what the value proposition is? Sure. Well, thank you, everyone, for joining us. Jacobs, longtime standing company, started back in the 1940s. I'm not gonna walk you through the last 75 years, but just as an overview, deep domain expertise. Started out as an engineering company, focused in on originally the chemical process industry, as well as the pharmaceutical world. Over time, kind of built the business on that core engineering expertise, into government services, specifically in aerospace and defense, as well as the infrastructure world, kind of in the circa 1990s and 2000s. Later post-recession, taking this engineering expertise, really went higher into the client's value chain, into now with long-standing domain expertise in those end markets into consultancy and advisory in those markets that I just described. Around the 2016, 2017 timeframe, kind of looked at those end markets and looked at, "Hey, how do we, you know, really focus in on those end markets that have got long, secular growth trends to them, as well as a little less volatility, from a growth standpoint as well?" Made the decision, which was a tough decision, to depart the oil and gas industry, which great business for us, however, that market volatility and cyclicality was pretty tough. Doubled down in our infrastructure business and in our government services business. When we look at the business today, we're a 60,000+ person company, globally deployed, deep domain expertise in infrastructure, and in advanced facilities and in aerospace and defense. Leading all the way up to last year, in fact, Brian, I think it was this conference that we did our strategy release, is that expertise that we've talked about, coupled with digital technologies and digital enablement, over time too, kind of led us to the strategy that you see there on the screen. Number one, generational opportunity right now with the world's biggest global disruptor, which is climate change and all that's going on around climate response. Using data platforms and data solutions in order to enhance this deep expertise within consultancy and advisory. That's where our focus has been. You kinda see the blend of where our business is, probably 65%, 68% in the U.S. The balance is outside the U.S. But 55% of our people are in the U.S., 45% outside the U.S. because of that global talent that we utilize in order to deliver locally. We're really excited about the future and the growth rates kind of back up, I just took you through 75 years of history. That's where we stand today. Very efficient 75 years, I might add. Maybe if we just look at by sector here, you've got a lot of really fascinating end markets, infrastructure, energy and environment, national security, advanced facilities. Maybe take us through some of the underlying growth drivers, both longer term and really secular, but also some of the more near-term things that are driving the business day to day. Sure. The longer term drivers I think are pretty clear. You know, we, the world, from an energy standpoint, as well as mobility perspective and those necessities of life like water, you know, without stimulus, those are trends that are gonna continue for a long time. Sadly, you know, the global threats that we face from a geopolitical standpoint, you mentioned earlier, Brian, are not going away. In fact, they're increasing. From a deterrent perspective, we believe that with normal funding patterns, those are long-term trends. Add onto that kind of the reshaping of the world right now with regards to stimulus or legislative actions that have taken place. We hear a lot about it in the U.S. It has already taken place in other geographies that we have a stronghold in. As well as kind of the reshaping and reforming of the supply chain networks in the world. For us, that really is core in the Life Sciences and Semiconductors world. These catalysts that we talk about here are taking what are longer secular trends and putting a real near-term focus on those right now. That's great. It strikes me that you have decades, if not longer, experience in many of these major markets. A lot of competitors are kind of coming into the market new without that expertise. Maybe just discuss how your go-to-market is and how you differentiate yourself and think about your competitive advantages when you talk about these very interesting markets. Yeah. There are some that are coming in now. I'd probably segregate it or describe it in two main categories. The first is long-standing relationships with our clients. You know, we're not out looking for new clients in new geographies and new markets. These are clients that we've had for decades. As their businesses are growing, you know, we're there with them assisting in that growth, as well as some of the challenges that they face too. The second that we describe is, you know, we call ourselves a science-based consultant, but we understand the science of our clients' business and have structured our company to make our clients' business a better business. Those two really have been our focus. Our global delivery, the digital enablement, all of those accentuate those two main areas. That's great. When we think about some of these things that you're wrapping from kind of concept to implementation and bringing kind of a full suite of solutions from consulting to the actual technology, maybe give the audience some real-world examples for some of those things that you've done for your clients, how you've created value to them, and how customers look at you during these engagement processes. Sure. Maybe, I don't know if it's on here, Brian, but maybe one that I know will probably resonate with the audience. It just happened over the course of the last three years, which, you know, if you think about what we've gone through as a global society in the last three years, it's been around the pandemic. Maybe I'll use that as the example. mRNA technology comes into play. It's been around for a long time. The application to vaccines took place in late 2019, early 2020. That technology needed to go from a concept to a bench scale to production capacity to produce vaccines to save the world overnight. These were clients that we already had, that we were working on their programs and their projects for decades. They came to us and said, "Hey, look, how do we take this bench scale formulation and now go to a production scale in a manufacturing environment?" We took that from concept all the way through to getting batches of vaccines out in record time. Kind of the rest is a bit of history. Probably the best one from an energy standpoint and from a, what we're talking about with regards to climate response, probably point to the one-third on the screen there with regards to the U.K. and the Environment Agency. Right now, we are the technical advisor, as well as the program manager for the U.K.'s very, very in-depth and broad program called TEAM2100 that looks at those affected areas, whether it be coastal resiliency or environmental damage or forms of energy transition for the entire country. That was from concept through how do you manage these different affected areas of the country through then implementation of delivering on those projects. That's great. When I think about these businesses, can you help maybe size these? These aren't new businesses. Jacobs isn't new to water. They're not new to transportation. Can you maybe just give us a size for some of these vertical portfolios within your overall business? Sure. Kevin, do you wanna take that one? Look, the business is, you know, roughly $15 billion of revenue at a gross level, probably $12.5 billion on a net revenue basis. The difference being sometimes we will have pass-through revenues when we're doing work for clients where we're procuring for them, and there's not a lot of margin associated with that business. The $12.5 billion in revenue is really where we make the fundamental margin. The business of People & Places is the single largest business. That's where our infrastructure, water, and environmental work is. That's a $6+ billion company in net. Then our CMS business, which is kind of the more national security, is $4 billion. We also have PA Consulting, which is a $1 billion+ in terms of numbers. DVS is a newly formed business unit. It's about another $1 billion. They're all of those. Water is a big part of our business. It's a $2 billion of gross revenue. Transportation and infrastructure is the biggest piece of the People & Places Solutions. Cybersecurity is another $1 billion. I think the interesting part is people talk about how we prioritize those. What's interesting is we have access to long-term secular growth trends, which means that we don't have to go over and after every single project. We go after those projects that make sense for us, have incremental margin availability, so we don't necessarily need to do everything. We do what is most appropriate, how we can add value, and ultimately drive margin, and that will still translate into high single digits in terms of organic growth numbers. So across the board, we have a lot of categories in which we are competing, where they're all showing pretty significant growth, and we have the ability then not to necessarily go after everything, but go after those businesses that have the higher margin. Very helpful. Let's talk maybe about two of the newer businesses in the portfolio, for different reasons, maybe how you go to market. If we think about PA, how are you pulling that capability through to sell through the broader enterprise? The margins are so positive there, over 20% EBITDA. Also Divergent Solutions, like to maybe follow up with that and talk about how you sell those technologies through the enterprise and what that means to the margins going forward? Yeah, maybe I'll talk a little bit about PA and then Claudia can talk a little bit about Divergent Solutions. We've got a couple slides to depict this as well. Maybe just a couple of sentences overview on what PA is and PA is not. We tend to categorize strategy consultants, management consultants into a single bucket. PA is very different. PA is in the strategy consulting world, but different from the perspective of utilizing product innovation and digital technologies as the vehicle to transform businesses. The PA approach is, let me look at, I'll give an example in the life sciences world. I'm a startup in Cambridge, Massachusetts that has an injectable type of business. The syringes or the delivery mechanisms to get therapies into people. PA will come in and transform the business by looking at the tool, the actual product itself, and then go back to its lab in Cambridge, U.K., in order to develop that approach. PA's product and digital innovation-led model is the reason why we really like the business. The other piece, though, was they're in the same end markets that we are. The value proposal here is, think about a Venn diagram. PA has a business that's independent of Jacobs and working at a very early stage of the client's business. We're kind of on the other end of that life cycle from a value standpoint on when these, when these innovations have happened, how do we go to market with them, the CapEx side. Then there's the shaded part of the Venn diagram, where it's a real powerful offering to have both when clients are looking to grow their business or in the case of, go back to climate response and energy transition on when government agencies are looking to deal with, you know, the long-term sustainability of power or energy. So that's kind of how, you know, we've structured the business and it's been a powerful one just in the first 18 months, 24 months of our investment. Then maybe, Claudia, you wanna talk about Divergent? Divergent is mainly made up. You can see a few examples there of the products that we have. Divergent is focused on data solutions and data solutions that cut across all the different businesses where we operate. A big part of data solutions, day one, when we put it all together, is cyber and intelligence. Then we have different solutions that either came through acquisitions like BlackLynx and StreetLight Data, and others that where we develop the products for our customers around the world. Some of the examples that we have, you can see Intelligent O&M, which is a partnership with Palantir. This has applications in water. Where we took our water expertise with our data scientists and Palantir's computing power. What you do with that is, we have seen in the operations in water, for example, reduction of power consumption by up to 30%. We also reduce the use of chemical usage, which is a very compelling value proposition when you think that, you know, in an inflationary environment that can, you know, have significant impact on the bottom line. Also when you think about the power consumption, we have seen, you know, early feedback from our customers where they say, "We have our own sustainability plans. Where you reduce power consumption, you also reduce your carbon emissions." That's, you know, one of those examples where we see significant growth potential when we put it on the platform and we go to market together with our infrastructure business, People & Places Solutions. Water is one of the areas where we see significant growth potential. The other one is transportation, and we see it with StreetLight Data. In some cases, you know, in the past you would have people, you know, just humans with clickers to see, you know, traffic and record that to either plan and design as a crossroads or, you know, transportation in general, mobility. With StreetLight Data, what we do is capture publicly available data, customers' data and our own data, the one that is generated by domain experts. What that does for us is, first, we can optimize our own designs and planning. What we can also do with that, which is, you know, one of the new applications, is starting to project what is the carbon emission of certain designs, which is something that we're doing, you know, exploring now with the new applications. Lots of applications, and that's where we see significant growth potential, going forward as we put everything under one roof in Divergent Solutions. It's gonna be exciting to see that business grow over time. Maybe just kind of peek back into some of the things that are driving the business today. If you think about infrastructure spend, how are you seeing the funding progress? From what types of projects? How mature is that spending or funding profile today? I'd also like to. I don't think people appreciate the advanced facilities business. Talk about CHIPS Act, but also some of the other things that are happening within that business. Sure. Maybe I'll kick it off, and Kevin can back me up here. The short answer, Brian, is that we wish it had gone a lot faster. Unfortunately, you know, the government process and continuing resolutions and the delays, what we thought was gonna happen in the last 18 months. We're now seeing it come to fruition today. Going from the pipeline into actual opportunities that the states are now putting out in the marketplace to actually showing up in our P&L, that's we're in real time right now on that, and that's across the board in transportation, in water, and in some of the energy transition work that we're seeing. Don't know how many baseball fans there are out in the crowd, but I would probably characterize it as very, very early innings on a tail that is pretty robust. You know, you hear especially in the U.S. media about this is a four-year program, a five-year program. I think we've all kind of dealt in wherever we live that, you know, infrastructure projects don't last three or four years. They last kinda seven, sometimes on the back end, 10 years. We see the tail going out for a while. Our consultancy and our advisory and our engineering expertise kinda goes across that entire perspective. Do you wanna talk a little bit about Life Sciences and Semiconductors? Sure. Life Science and Semiconductors is a business that represents, you know, approaching, not quite, you know, 15% in terms of our revenue. You look at those, the numbers, the vast majority of the business is actually pharma. Semiconductors has just been a big growth driver. Ultimately, we continue to believe, given the CHIPS Act, we're starting to understand that some of the incentives that are embedded into that act are creating opportunities for incremental growth, kind of as we exit this calendar year. In semiconductors, where we are a very strong participant in that market, has been a real big growth driver. Actually even off of, you know, substantial growth profiles of 10-20+%, we still think we're gonna be able to grow off of those numbers, going forward. In terms of pharma is has been a good business for us, as Bob talked about earlier, in terms of what was going on with the COVID situation and vaccines, and now with reshoring and the next wave of therapies, biotechnology and whatnot. It is robust in terms of the outlook going forward in terms of our long-standing, decades-long relationships, where we are a market leader. They're gonna be spending dollars to ensure that those therapies come to market as quickly as possible. As you know, the biggest thing about getting that done is speed to market. Because of the margin profile associated with that business, they wanna get to market as quickly as possible when they know that they have something of import. Those two businesses will continue to be a driver for us. Okay, we've talked about all the things you're doing, the markets you cover. Let's kinda bring it back into the consolidated enterprise a little bit here and talk about the financials. Maybe help the audience understand how they should think about overall organic growth. I'd like to certainly talk about constant currency and what FX has meant to the business over the last 12 months. Margin structures, margin trends, and also cash flow. Go ahead. I'll take a crack. Look, in terms of because of the growth profile that the markets in which we compete are pretty robust, we see that as being organically a pretty strong mid to upper single digit kind of organic growth profile, with margins improving as well. That's relative to the fact that with the digitization, the data solutions, consulting and advisory, which continues to grow faster than the rest of the portfolio, mix and opportunities to enhance our business translate into a 50 basis point kinda margin improvement over time. Cash flow translates into 100% conversion of net income. We're getting to the point where we're gonna be approaching $1 billion of free cash flow pretty quickly here. We're excited about the consistency of the portfolio, the breadth and scope of the growth opportunities facing us, we don't have to sit there and think about where the growth comes from. What we want to do is get the right growth with the right margin profile, and I think that's really important. Now, look, over the last little bit, certainly in the last half of 2022 and the first half of 2023, there's been some headwinds that we've had relative to foreign exchange conversions with the U.K. pound sterling. That's our second-largest market, there's been some dampening in terms of our reported figures. On a constant currency basis, continue to have the robust growth as I've outlined. Now we're kinda getting to a point where we're anniversarying some of that, so our constant currency actually will continue to be robust. Now we could actually have some foreign currency tailwinds in the back half of 2023 as we start to anniversary those challenges we had in the back half of 2022. All in all, we're driving the agenda from a constant currency perspective and the margin perspective, which allows for a consistency of performance quarter in, quarter out, year in, year out, which translates into a robust shareholder return longer term. You know, it's my impression certainly that this business is very resilient. To macro fluctuations. As I think about the business and the visibility you have, maybe just elaborate on that element, the high visibility kind of macro agnostic footprint you've built. Maybe Claudia, you wanna talk a little about it? Yeah. It's good that you highlighted that. I'll try to, you know, go very high level and then a few specific examples. When you think about the combination of our People & Places Solutions, so really infrastructure, energy transition and all that, you have a combination of the different sectors where we operate that have a lot of government money as well as public, secular growth. We talked about life sciences, we talk about semiconductors. You have the resilience coming from the different sources of funding, as well as the duration of the contracts. We have that combined with Critical Mission Solutions, where you have some of these multiyear contracts, where you have the stability of a funding that comes from federal government and the different agencies. You have the diversification of our portfolio combined with some of the trends or the more, I would say, the challenges that the world is facing, and Bob talked quite a bit about it. When you think about the climate response, if in the past we were thinking about designing a facility or planning for a city, we were thinking about, okay, we need to meet this, deliver this program or this project. In today's environment, what happens is the challenges are just accelerating. We go there, and there's a lot more funding going into infrastructure, for example. Why is that? We need to modernize our infrastructure around the world. It goes with population growth together with how we need to respond to floods, how we need to respond to some of the changes around the world. When I talked about that, I said I was going to mention a specific example. Climate is one. The other one is national security. National security impacts things that, you know, we wouldn't necessarily think about, is, chips, semiconductors. A lot of the reshoring trends started before CHIPS Act and all that. It was, companies and countries started realizing all the offshore, all the outsourcing trend that happened in prior decades impacted us around the world. We couldn't deliver cars around the world because we were missing a chip or two. All these trends started before, and it's very linked to not only these geopolitical elements that impacted the supply chain in general. It also started with, what if something happens in Taiwan? What if something happens that is going to, you know, disrupt manufacturing in general? A lot of that, besides the diversification of our own portfolio, is these catalyst and trends that we have. That's fantastic. Thank you, Claudia. Maybe just a last one from me. I'd like to kind of bridge together capital deployment and strategy together. How are you thinking about capital deployment, and where are there ways that you can kind of accelerate the strategy with the deployment of capital? Take us through dividends, buybacks, M&A. You know, bring it all full circle for us. Kevin, go ahead. Look, we have a philosophy of a very strict adherence to what our strategy is, I'm gonna talk about M&A activities. The first point I would make is that we really like the portfolio that we have today. It has good organic growth possibilities, as we've highlighted already. As we think about abilities to augment our portfolio, it's really thinking about those kind of companies that can be brought into the organization and accelerates our ability to drive incremental organic growth throughout the portfolio. It's more technology or consulting oriented, which allow the entire portfolio to leverage the capability. That probably translates more into bolt-on, I would say, kind of acquisitions. Doesn't exclude potentially larger ones, but certainly the ability for us to drive an organic growth profile today is strong. That leads you to, you know, share buybacks and dividends. We have a dividend, and we will continue to grow that in conjunction with our net income growth, so that will grow over time, and we continue to see the ability to do that. Share buybacks are, we pride ourselves on being agile relative to that. Where there's disruption in the value proposition to our shares, we will be more proactive in share buybacks as it relates to that. We've proven, as it relates to our ability to do that over time. Great. Maybe just, one answer or a one-word answer, on receptivity to share buybacks. One to 10. 10, excited. Where do you fit on that spectrum? Higher. Perfect. Good, good answer. That's all our time now for today. We'll be in the breakout room down in the Cordova Rooms, so we can carry the discussion there. Thanks. Excellent. Great.