All right. Hello, everyone. My name is Adam Seiden, and I lead the U.S. Machinery and Construction franchise for Barclays. Welcome to the Industrial Select Conference. If this is your first session here, it is mine. We're pleased for this session to have the folks from Jacobs Solutions here. Joining us from Jacobs is Bob Pragada, CEO, as well as Jonathan Evans from the IR side. So, the format of this session, of course, is a fireside chat with myself and the fellows to my right. We will be leaving some time for questions. If there are any, certainly feel free, and a mic runner will come get you. One of the things that is unique about this conference is that we do invite audience participation in a more passive way as well, including with some of these clickers that you'll see on your tables in front of you. We'll, at a point in the presentation here and the chat here, we'll start going through a number of questions that we ask in all the sessions during this conference, and we're able to, you know, to, you know, we're able to talk about some of the high-level thematic things that are out there. So with that, Jacobs team, thanks so much for being here. Adam, thanks for having us. Welcome back to Miami. So maybe to start, you know, there's been a number of strategic things that, you know, the organization's been looking at. And one, of course, you know, on the CMS side, you guys have announced the separation of the RMT. So maybe just to start at the highest level if you could provide an update as to where we sit on the RMT. What are some of the milestones that folks like ourselves and investors should be looking at, you know, as we get closer to seeing that RMT come through here? Sure. I think there's probably three main areas that investors would probably have a high level of interest in. One is that when we announced the merger in the RMT with Amentum, we had highlighted the second half of 2024 for completion of the close. And there was three main milestones that we had. The acronyms that I think a lot of us are familiar with, the IRS, the DOJ, and the SEC. Happy to announce that as of Friday, the DOJ component of those milestones, the HSR filing, was complete. We just released an 8-K on that. So, milestone one, done, and right on time. The second is the filing of the Form 10, which we believe will either be late this week or early next week. And so, that will be public, hopefully in the May, June time frame, which, again, is right on time. And then the private letter ruling from the IRS has been submitted, I believe. I know we had the pre-meeting, but right now we're on track for that. So that kind of, our Q4, calendar Q3, is on pace. The second is around our performance. There was, Adam, as you know, we had an incentive for an additional retained stake beyond the ownership structure. That performance after the first quarter, and it's based on the first three quarters of our fiscal year. The CMS performance in the first quarter and the C&I, the cyber intelligence business, is right on pace for the upper end of that retained stake. And just to clarify, because in the 8-K, we did clarify that, our retained stake had a floor on it of 7.5% and a cap of 12%. Just for reference, the 12% component of the retained stake- Yep. ... was actually tied to our EPS guidance. So our plan was that if we hit the plan- Yep. ... we would hit the upper end of that. So we're on plan for that. In the 8-K, there was a little bit of a clarification, and this was part of the IRS submission, is that it's still 12% for the total amount, but the cap for the company will be 8%, and anything above the 8% will be returned to the shareholder. So 12%, but instead of the company taking the entire retained stake, we'll take 8%, and the additional amount will go to the shareholder. So instead of 50.5%, it'll be 51%-55%, depending on how we do, 55% at plan. Got it. No, that, that's really helpful. Thanks for the timeline stuff and more enumeration now out there. Yeah. So when you think about, as far as from the business, whenever there's something strategic here, and you announce a potential change in the structure, curious also, like, what the reaction internally has been to that? Yeah. Ultimately, you know, and when you think through CMS with Amentum, you know, what does that enable the business to do as a combined entity going forward? Yeah. So maybe the first part, the reaction internally has been positive. Full transparency, you know, we were a little nervous about that. We're competitors in the marketplace, and, you know, each has their own view of each other on what's going on behind the veil. But we, you know, the more we learned about each other and the structure of the deal, if this was an acquisition, I think it would be very different. It is a merger of equals, and we will have a not just a, our shareholders, we'll have a, a majority interest, as well as, we were able to negotiate, a split board. Actually, we'll have a majority of the board members, and then a split governance in management structure. Sorry, the board being governance. So I think all of that helped. And then our former, you know, former CEO, now executive chair, is going to be the executive chair, and our president of CMS is going to be the chief operating officer of the company. So that also helped. And employee receptivity has been very good, very good, I think from an opportunity perspective as well. Thanks. As far as, you know, what it means for clients, which I think is the second part of your question- Yeah. Excitement being generated right now with our clients, specifically, DOE, NASA. I'm going over to the U.K. on Monday, the MOD in the U.K., realizing what the horsepower of this platform can really be. I mean, we're talking about the largest services-based, government services player, in the industry, with now a capability set that's second to none. So some good excitement that's been generated with our clients as well. That's great. And if you think about what the portfolio has already today, you spoke a little bit about some of the excitement about what it could do going forward, but what it has today, clearly a number of long-term contracts. You know, where do you stand from a recompete standpoint? Yeah. You know, beyond 2024? I think you've addressed a bit on 2024. Just curious how the roadmap looks 2025+. Minimal. Both, both companies. Yeah. Both CMS as well as Amentum have minimal recompete. In fact, Jonathan and I on the trip over, we're kind of thinking about it. I think there's two for CMS within the next 24 months. Is that right? Yeah. The MDA contract and the ISR. So those are the only two. We did have a pretty significant recompete in 2022 and 2023, which we were successful in. So yeah, minimal. Got it. Maybe thinking about the growth profile of the business, in the past, you guys have commented around CMS, pegging it a bit at, like, that mid-single digit to high single-digit net revenue CAGR, about 25-100 basis points of margin growth. And I know that was over a defined time period. Sure. - that will have passed us. But when you think about on the go-forward basis, is that a good starting point as to think about how that business can grow, both on top line and margins? It is. It is. I think, you know, what with the management team for the merger, merger, we call it MergeCo. MergeCo will be coming out, like I said, it's when the Form 10 goes public. So in that May-June time frame, they'll be coming out with, you know, some more clarity around the numbers. But I think, Adam, those ranges that you highlighted still apply and maybe a couple more basis points on the margin expansion. Got it. And then, maybe last one before we transition to P&PS and PA. Just, you know, when you think about the business as a whole, since we're all gonna get very familiar with it- Yeah. - on a, when the Form 10 comes out and so forth, the company identity. But even if you just think about the CMS portion, you know, how would you, you know, how would you rack and stack the growth rates within the various different areas of, you know, intelligence, automotive, nuclear? Like, where, where do they sit today, and, and how should we think about them going forward? Yeah, I would say, you know, still very bullish on space ISR, as well as what we're seeing with NASA on deep space exploration as well. Bullish on that front. You know, the cyber and intelligence piece, the reason why I started off with space ISR, that's really where we're starting to see a lot more activity. And then, those two probably stand out the most. There has been a bit of transition with regards to, you know, what and I'm gonna lightly speak about the Amentum business and then come back because it does have positive ramifications for the MergeCo. Sure. Is kind of the defense posture right now on what used to be called LOGCAP type of logistics work that the Amentum and the predecessor companies were heavily into. The digitization of that work, and now looking more into the individual war fighter and the equipment that's required in order to now go to battle in this digital world. And I think that's gonna be an area that the new company can really excel at. Got it. And, transitioning to P&PS, if you think about, you know, your business is clearly very tied into, what's going on in Washington and D.C., and then just broader, governments across the globe. So it is, of course, an election year. You know, curious, what, if any, you know, shifts around, you know, spending Jacobs to see in an election year? I guess that's more on the P&PS side. Sure. And then, relating maybe to both, to a degree, if you think about, we're on operating under CR, what, if any, effects does that have for either side of those businesses? Sure. Maybe I'll start with the second part- Sure. - and then go to the first part. On a CR, you know, we've got—sadly, as an American taxpayer, we've gone through this too many times before. So I think, we start talking about a 60-day, 90-day, 120-day CR, the business is a resilient business and can weather that type of timeframe, and that's really on our CMS business, because we tend to be a little bit more insulated on our P&PS business. If it were to go beyond that period of time, not bad, because you're tracking back to a year in 2024, that had nice spend that went on. Where we got in trouble was in 2021, when there was a CR, or 2022, when there was a CR, and it tracked to 2021, which spend levels were already down, right? Because of COVID and everything else. So I think that's kind of where we sit on the CMS piece. On P&PS, insulated from the CR, but to your first part of your question- Sure. ... you know, we, we really have not seen, in the U.S., any slowdown in funding as a result of it being an election year. Yes. Where we have seen it, and I have been, I've vocalized this, is in the U.K. Yep. The U.K., it being the election there has put a little bit of less decisiveness, is that maybe a proper way of saying it? In government spend. We do see that turning, as potentially their election comes earlier in the year rather than later. And so I would say that's probably the area. Got it. We also have elections in India and Australia, and pretty much- Everywhere. everywhere. So, we're watching very closely. Yeah, I think I saw, I think I saw some stat, like 60% of world GDP has an election- Exactly, yeah. This year, so it's a lot. When you know, I think everyone in the audience is probably familiar with the alphabet soup of, you know, the different stimulus and initiatives that have been passed here in the U.S. Just curious, if you can talk actually about, you know, what sort of KPIs are you tracking to see what type of momentum you're seeing in the business? And then, you know, racking and stacking the Jacobs, you know, which areas have had, you know, the most profound effect today, and then which ones could have a more profound effect going forward? Sure. Some of the KPIs that we track is growth in the pipeline. And I think last quarter we disclosed that that was, you know, a sound nearly double-digit growth in pipeline, over double-digit growth in the pipeline. And that's a global number, even with the acronyms, the alphabet soup in the U.S. So that's a KPI that we track pretty closely. And then another... And we got to get better at this. So I know in our disclosures, you know, we look at backlog growth from a gross revenue standpoint. Yeah. What's actually been more of an indicator for us has been gross margin or gross profit in backlog. Because then we're picking up, you know, all of the consultancy work that's on the front end of a lot of the, you know, the legislative stimulus that's put in place. That has been growing at a steady, high double-digit rate for a few quarters. So those are the two. Got it. Maybe then within the basket of end markets in which you compete in P&PS, you know, in water and transportation, semis, life sciences, some of those- Sure. ... some of those are, you know, positively affected, I'd say, by the, you know, the stimulus and so forth. So how does the burn vary between, you know, let's say, a water treatment facility or, you know, a rail project or something on the semis and the semis and life sciences space? Sure. Let me maybe let me rank them on the fastest burn- Yeah. - to the slowest burn. Mm-hmm. The fastest burn clearly is life sciences and semi. Yeah. You know, from the time of an announcement, to the time that we're actually materially involved, and in those jobs, we get involved very early on. Yeah. Right? Right when... You know, for example, in the life sciences space, if there's a novel therapy or a vaccine that's gone from, you know, being validated at bench scale and going to a commercial scale, we're involved at that point. And so that from the beginning, and then the classic bell-shaped curve of how a technical services provider plays out, I'd say high amplitude and then tight bandwidth, right? It goes up very, very quickly. And so that's probably the first. I'd put semiconductor right in the same, semiconductor manufacturing- Yeah. Right in the same ballpark. Water would probably be next. You know, the water engagements, high-end consultancy, and working with state and local governments on some significant issues that are facing us right now. So that's a faster burn, but still kind of in that... If semi and life sciences are in the two to three year range, I'd say water is kind of more in the three to four year range. Got it. Some of the larger plants, like we're the, you know, the designer and program manager on the largest water treatment plant in the country, potentially outside of China, in the world- Sure. - in Houston. That's gone on now since 2016, so that's almost, you know, seven or eight years, but it's gigantic. And then transportation is probably last. Got it. I guess that gets to the point that, you know, some of these, that you've seen money start to go out the door- Yeah. - and so forth from some of these, you know, large measures, but you'll be working on these projects- For a while. ... for quite some time. For a while. It just kind of equated to, I even in our own hometowns, when you see these projects start- Yeah. you wonder, when, when are they gonna end, right? Yeah. And so, you know, we're trying to get better at that with the use of analytics and whatnot, but they're long. The other stat on that, Adam- Yeah. ... is an interesting one. Just talk about IIJ A. Sure. You know, of the entirety of the bill, 54%, 50-ish, l ow 50% has been appropriated, 25% has been spent, and on what was supposed to be a five-year plan, we're in year three. Mm. Right? So you kind of see how that is, how that's progressed. Yeah, that progression is helpful. So, on advanced facilities, and we talked about it just from the life cycle per se, when you think about FY 2024, how tough are the comparables year-over-year for that business, just given- Yeah. ... some of the growth you've seen? In life sciences specifically? Yeah, or even in advanced facilities- Yeah, okay. Let's run it out. Yeah, sure. I'd say the... Let me back up a second. I'd say that the period between 2020- Yeah. ... so the start of the pandemic to 2024. The business was red hot. I mean, it was, you know, Intel announces a complete transformation of their business model, moving into both a device manufacturer and a foundry, life sciences, everything that was happening, you know, with the vaccine and with the therapy around the coronavirus. So it was hot. We're talking kind of 20% year-on-year growth kind of hot. Yeah. That has decelerated into, you know, probably more of a high singles, low double-digit growth. But now, and I'll be able to disclose it after this quarter, but now we're starting to see the front end of yet another cycle, which is positive news just in the last couple of weeks. And that's how this business, the advanced facilities business works. And we're clearly. We've got a market leadership position. A lot of these jobs that we're in the middle of, these are clients that we've had for 50 years. And so this isn't like we go and we're bidding on proposal or, you know, requests for quotes that are coming out. These are negotiated, but they're on very short order. Lilly just announced, you know, the facility in Germany. I can publicly disclose that. Yep. We found out about that within, you know, four weeks before we started on the job. So it's those types of jobs that we're talking about. Yeah. No, that's really helpful, and you certainly hear a bunch of semiconductor facilities and things like that that may or may not get some funding here. Sure. So, maybe shifting to PA, you know, the company's had an interest, of course, in the asset for a number of years, and I think part of the deal logic, if I go back, was to, you know, expand the business here in the U.S. But that did require a bunch of upfront investment. So, you know, A, how's the expansion? You know, how is that going here, growth here in the U.S.? And then, when you think about, you know, when you think about some of the belt-tightening that has been done in that business recently, you know, does that alter the growth profile of the business at all? Fair question. Next month, it'll be three years- Yeah. ... on the investment. So I kind of split it into 18-month segments. First 18 months, broadly for the organization, tremendous growth. And you saw that not just in growth in the business, but growth in the margin expansion. You know, a business that had operated historically between kind of 19%-21% operating profit margins, was now at 23%-24%. I think one quarter was even 25%. Yeah. And we did know that level of utilization, especially in that high end of a consulting world, probably wasn't sustainable. But we thought what was coming out of NHS in the U.K. and everything that was kind of pandemic bolstered- Yeah. We would make up for in the U.S. Year one and half of year two, the U.S. business doubled. Low base- Yeah. - about 200 people. It doubled. The growth from, you know, the, the 400 people north of that, in the last 18 months, has, has kind of softened a bit, and I think some of that is, is a result of, you know, think about this now be kind of circa 2023. You know, the discretionary spend of, of some of the clients has, has softened it. What was a positive was in the U.K., that business continued to operate at a high level. Hmm. So it didn't necessarily totally compensate for the, you know, the call it the pandemic boost- Yeah. But it did, it did soften it. But the reason for the U.S. not necessarily getting to where it needed to be is that horsepower, especially the highest end partner, horsepower on a global market basis, their ability to come to the U.S. and help facilitate that was a little bit strained. So that's kind of the background and... But here's the positive. Yeah. The positive is we also thought, we also now know that. I always used to describe it as a Venn diagram. You know, Jacobs has business that's always gonna be very Jacobs-centric. PA has business that's always gonna be PA-centric. But that shaded part of the Venn diagram was what we were putting a lot of attention to. Again, wish it was the end of the quarter. A couple of really positive major programs that are now Jacobs PA in the U.S. will be announced. So we're gaining a nice amount of momentum. The belt-tightening, it just good business. You know, it's the hygiene of, look, utilization is down, you got to make some moves. Okay. And so we've, we've been very sensitive to that. I won't needle you too much on those projects or the announcements per se. Just more of the question would be, that gives you further line of sight to grow, you know, where you are today, or can that give you some further growth in that PA business beyond where it's been growing? Yeah, I'd say later in the year, looking at 2025- Yeah. The answer would be yes. Okay, got it. I know the audience would kill me if I didn't ask about cost. So, certainly, you guys have, you know, taken some actions there across the board. And in the most recent quarter, you talked about a bit of, you know, reallocating cost amongst the business and P&PS and corporate. So, you know, what type of ramp in margin should we expect in that P&PS business, you know, in 2024? And then on the corporate cost side, you know, how confident are you that you get back to the $200 million, you know, or you get to that $50 million a quarter, you know, run rate there? Yeah. So, on the first part of your question, you know, I think what we publicly disclosed before is that return to exceeding the margin profile of P&PS in 2023- Yes. will be a second half deal. A lot of that has to come with now that we're, you know, we've realigned our corporate structure around what the new business is gonna look like. You know, we've seen costs that we can directly apply now, which before we couldn't, to the P&PS business and get a level of recoverability on it. So that's why that recoverability takes a bit of time. So we'll see a little bit this quarter, and then it'll accelerate in the second half of the year. And remind me again, Adam, on the second part of the question? Corporate costs. Yeah, the corporate cost. It would be good maybe just to calibrate also for the audience. You know, we held a corporate structure for years with running two businesses that were, but they were different, and they had different needs. And so, that $200 million run rate, we've taken actions already. Got it. And so the short answer is, yes, we'll be, we'll be at that level in 2020-- going into the next fiscal year. Got it. And this is a quick one, just on the margins that you guys are expecting in the business, on the RemainCo side. What type of growth are you factoring in on the top line for that? The, um, w e highlighted at our 2022 Strategy Day, 6%-9%. Yeah. -for P&PS. So it's an extrapolation of that. Okay, great. So what I wanted to do here is actually shift into the audience response questions, if we can- Sure. Get those on the board. And you'll see there's a little dial on your, on your tables there to participate with this. So could we have the first question, please? So do you, do you currently own the stock? A bunch of yes answers or no. Fairly, fairly even split across the room, you know, with, yes, yes, overweight, a little bit of, an edge. Next question, please. What is your general bias towards the stock right now? Positive, negative, or neutral? Bob, what's your bias? No, don't answer. But I think bias is the key- There you go. That's right. 36% say positive. Next question: In your opinion, through cycle EPS growth for Jacobs Solutions will be above peers, in line with peers, or below peers? Very split room today. We've got about split between above and below, 35%. Next question, please. This one is very hard to split. In your opinion, what should Jacobs Solutions do with excess cash? Bolt on M&A, larger M&A, repos, divvies, debt pay down, or internal investment? That one. I don't know if that one jives with the questions there, so we'll move on to the next one. In your opinion, on what multiple of 24 earnings should Jacobs Solutions trade? And there's various bands from less than 10 times to higher than 21 times. For folks that haven't sat in a meeting, these are all standardized ranges across every company. Yep. All right, that looks better. So, a good amount of folks in the 19-21 times camp. All right. Is that the last one, guys? One more. What do you see as the most significant share price headwind facing Jacobs? Core growth, margin performance, capital deployment, or execution and strategy? Very split. All right, slight edge to execution and strategy, but very much split across all four answers. So with that, I think we'll wrap here. Bob- Excellent. Jonathan, really appreciate you guys joining us, and thanks everyone for your participation. Really appreciate it. Yeah, thank you. Thank you. Thanks, Adam. That's great. You got it.