雅各布工程 (J) 2024 Q4 法說會逐字稿

Mike.

Thanks.

Ladies and gentlemen, thank you for standing by.

Name is Krista, and I will be your conference operator today.

At this time, I would like to welcome everyone to Jacobs Solutions fourth quarter fourth quarter and full year 2024 earnings conference call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question and answer session.

If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad.

And if you'd like to withdraw that question again, press star one.

Thank you.

I would now like to turn the conference over to Bert Dubin, Senior Vice President of Investor Relations.

Sir, you may begin.

Thank you, Crystal, and good morning, everyone.

Earnings amounts that was filed earlier this morning.

We have posted a slide presentation on our website, which will reference during this call.

Please note or turnkey will be filed by no later than our due date of November 21st.

I would like you would like to refer you to Slide 2 of the presentation material for information about our forward looking statements.

Non-gaap financial measures.

There's an operating metrics.

Turning to the agenda on Slide 3.

Speaking on today's call will be Jacobs Chair and CEO, Bob for data and CFO.

Greg.

Welcome Mooney.

Bob will begin by providing an overview of recent activities and highlights for Q4 and fiscal year results.

Bank will then provide a detailed review of our financial performance, including commentary on end market trends, cash flows, balance sheet data, or FY. 25 Outland.

Finally, Paul will provide closing remarks, and then we'll open up the call for questions.

With that, I'll turn it over to our Chair and CEO, Bob Regatta.

Thank you, Bert, and I'm delighted to welcome you to Jacobs.

It's such an exciting time for you to everyone, and thank you for joining us to discuss our fourth quarter and fiscal year 2020 for business performance.

Now moving to Slide 4.

We reached a critical milestone on our strategic shift toward a simpler, higher value and higher margin portfolio during the quarter as we close the separation transaction involving our Critical Mission Solutions and Cyber Intelligence businesses.

On September 27th, 2024, or culminating with the momentum successfully listing on the NYSE under the ticker AMTM.

This strategic shift has been well received by the market, highlighting confidence in our focus direction and reinforcing our commitment to delivering sustained value and growth for our shareholders.

Upon closing the transaction, we received 911 million, which was concurrently used to repay existing debt.

Additionally, as a part of the transaction, we received a 7.5% equity ownership in momentum, which could rise to 8%.

At the same time, Jacobs shareholders became 51% owners in shares of momentum and their ownership stake could increase up to 55%.

I want to take a moment to emphasize how important this transaction for Jacobs has a more sharply focused company operating in robust end markets with strong secular growth tailwinds.

We believe Jacobs is in an excellent position to create substantial shareholder value.

Our simplified structure, global delivery model and ongoing operating efficiencies positions us nicely to build on a strong into FY 24.

This is a testament to the dedication and relentless efforts of our employees whose hard work is paving the way forward for two exceptional companies.

I'd like to extend my deepest gratitude and congratulations to each of them for their role in this pivotal transformation.

Turning to slide 5, we provide an overview of our financial performance for the fourth quarter and fiscal year 2024 with CMS. and C. and I. under discontinued operations.

To Please note the results we highlight our related only to continuing operations focusing in on the quarter, total gross revenue increased 4% in Q4 with adjusted net revenue rising 4%.

Gaap EPS from continuing operations was $2.38 and includes a positive dollar $0.2 impact from the mark-to-market of our investment in a momentum netted against the amortization of intangibles as well as a $0.19 impact from transaction restructuring and other related costs.

Excluding these items, fourth quarter adjusted EPS was $1.37, marking a 28% increase compared to the previous year.

Adjusted EBITDA for Q4 came in at 289 million, which represented a 12% growth versus FY 23.

Overall, we are pleased to close out the year with such a positive performance.

Looking at the full year, total gross revenue increased 6%, with adjusted net revenue you rising 5%.

Gaap EPS from continuing operations was $4.79 and included a positive $0.5 impact related primarily to the net effect of amortization of acquired intangibles and the mark to mark market of our investment in momentum and a negative impact of $1.7 from transaction restructuring and other related costs, which again were materially driven by the separation transaction.

Excluding these items, adjusted EPS from continuing operations was $5.28, marking a 16% increase compared to the previous year.

Adjusted EBITDA for the for FY 24 was 1.06 billion, representing a 9% increase versus FY 23.

Our trailing 12-month book-to-bill was 1.35 times as our consolidated backlog increased 23% year on year in Q4.

These are metrics we watch closely and we are encouraged by the trajectory we're delivering on with an extremely strong 1.67 times book to bill for the fourth quarter.

When we analyze our backlog, we are seeing this trend across gross revenue and backlog as well as gross profit in the backlog, which is a good indicator as we think about our growth for FY 12, five and beyond.

Turning to slide 6, building on my backlog and book-to-bill commentary, I'm excited to report that during the quarter, we continued to deliver substantial wins across the business and across geographies.

A testament to our market positioning, deep domain expertise and long term trusted client relationships.

As we move forward as a simpler and more focused company, we will be providing key end market water and environmental life sciences and advanced manufacturing and critical infrastructure.

These end markets roll-up to infrastructure in advanced facilities, which is comprised of our historic PMPS. business, Louis and the retained portion of divergence solutions.

Pa Consulting remains in its own segment and is unchanged on Slide 14.

In the appendix, we provided graphic depicts our new structure and end market focus.

Moving on to our end markets, performance, water and environmental is demonstrating impressive growth, water conveyance, water infrastructure, wastewater, puttable reuse, inefficient asset management or just some of the key drivers our client spend.

And we have been successful servicing demand across these categories with double digit growth in Q4.

Notably, during Q4, we delivered several key wins, including our appointment by less Andrew sanitation environment to provide progressive design, build services for the Donald see Tilman advanced water equalization basins, a critical part of the LA of LEDs long term plans to increase recycled water protection by 2035 significantly.

This is one of the single largest bookings in the water and environmental end market in our company's history.

In Life Sciences and advanced manufacturing.

We continue to see robust demand from life sciences clients boosted by GLP-1 investments, and we expect this trend to continue in FY 25.

In semiconductors, we are diversifying our customer base and expanding our global reach.

one example is our recent design design win for a new new truck test and assembly facility with CG. semi in India.

The facility will manufacture advanced and legacy packages for industry such as automotive, consumer and industrial and 5G communications and facilitates our strategic positioning in India, where electronics manufacturing spend is expected to grow meaningfully.

Global investment spending across life sciences, semis and data centers is creating a robust backdrop for Jacobs in FY. 25 and beyond.

Moving on to critical infrastructure.

During the quarter, we secured a technical project manager role with the Department of Energy Security and net zero in the UK.

A great example of how we are leveraging our differentiated offering energy security and transition that demonstrates the power of our partnership and greater collaboration with PA.

Holden, we will provide project management and advisory services along with associated strategic support to the hydrogen and industrial carbon capture program that includes consulting and and innovation design and analytics.

We're also seeing continued traction in the Middle East.

Saudi Vision 2030 significantly increases the number of opportunities across critical infrastructure.

Notably, during Q4, we announced a new award to lead advisory design and engineering for the King Salman International Airport in Riyadh, Saudi Arabia.

Our outlook for near and long-term expansion in the region remains intact.

And we are seeing signal that strong demand for infrastructure projects across the globe in the early days of FY 25.

In summary, we remain confident in our ability to grow the business and deliver superior execution to meet our clients' expectations.

We're excited for the future as a more focused company and look forward to presenting our strategic vision for growth over the coming years.

At our Investor Day in Miami on February 18th.

Now I'll turn the call over to Frank to review our financial results in further detail.

Thank you, Bob, and good day, everyone.

We are pleased with our Q4 performance, which contributed to a strong year.

Let me now begin by summarizing a few of the financial highlights on Slide 7 and 8, starting on slide seven, we show the results and I'll provide additional context and detail around our performance from continuing operations.

As Bob noted, CMS and see and I have been excluded from our results as those businesses are listed under discontinued operations.

We provide a reconciliation on page 24 in the appendix that will allow you to compare results for the enterprise, including the businesses that were separated in the fourth quarter.

Notably, I want to highlight that in total, we did outpace the $7.95 adjusted EPS midpoint for fiscal 24 that we guided do with Q3 results.

However, from here for we will only be discussing continuing operations.

Fourth-quarter gross revenue grew 4% year-over-year and adjusted net revenue, which excludes the impact of pass-through revenue, also grew 4%.

Q4 adjusted EBITDA was 289 million, growing 12% year-over-year to an adjusted EBITDA margin of 13.6%, which is an increase of approximately 100 basis points from last year.

Fourth-quarter adjusted EPS from continuing operations was $1.37 marketing, a 28% decrease compared to the previous year.

Please note that during the quarter, GAAP EPS benefited from a $187 million pretax gain associated with the mark-to-market adjustment of our investment in momentum with no benefit to adjusted EPS.

Additionally, PA Consulting contributed $0.1 of EPS dilution in addition to GAAP EPS from periodic fair value change impacts on our read redeemable noncontrolling interest balances.

And this impact was added back to adjusted EPS in Q4, we provided walk-through of our adjusted EPS calculation for continuing operations.

On Slide 23.

Finally, consolidated backlog was up almost 23% year-over-year to 21.8 billion.

The trailing 12 month revenue book-to-bill ratio was 1.35 times with a gross profit and backlog increasing 12% year over year.

As Bob noted earlier, this is an encouraging data point as we look ahead to fiscal 25, the Q4 book-to-bill of 1.67 times, though partly a function of higher pass-through revenue is still very positive and helped us end the year on a high note.

Moving on to slide 8, I'll recap fiscal 24 results.

Fiscal 24.

Total gross revenue increased 6% year over year, with adjusted net revenue rising 5%.

Adjusted EBITDA increased 9% as a function of higher revenue and just over 40 basis points of margin expansion.

Adjusted EPS from continuing operations increased 16% year on year.

We're pleased to end fiscal 24 and a strong position with solid organic revenue growth, double digit EPS growth and a backlog that sets us up for continued growth in fiscal 25 and beyond.

Regarding the performance of our end markets in the quarter.

Let's now turn to Slide 9.

As Bob noted earlier, we're reporting our business as Infrastructure and Advanced Facilities and PA Consulting, and we will discuss revenue trends in our three key end markets.

This should provide helpful context to supplement our overall results.

We focus on adjusted net revenue in our discussion as we believe this is a better indicator of business against as it excludes pass through revenues.

However, we do this through revenue growth across each end.

Market for your reference in water and environmental growth was solid intent versus the same quarter last year.

Water environmental demand has been strong, and we expect that to continue in fiscal 25 based on our current backlog and pipeline.

Encouragingly, demand is being driven by multiple geographies with North America, UK, Ireland, Australia and New Zealand all growing double digits in the quarter.

Our Life Sciences and advanced manufacturing end market revenue grew 3% in Q4 with Sprint, partially offset by an unfavorable revenue adjustment related to an EV battery manufacturer customer bankruptcy in Europe.

Our outlook for this end market for life sciences to be the primary driver of revenue growth in fiscal 25 as capital investment from our life sciences customers remains robust.

We're also seeing our customer base broaden in semis and the AI. data center opportunity is expanding.

As we look into fiscal oh five and beyond.

We anticipate top line growth in this end market, not only from racing industry investment, but also differentiation through our cross-cutting water and energy capabilities.

In Critical Infrastructure.

Adjusted net revenue increased 1% with North America showing steady growth was certain international markets have lagged.

We expect to see improvement across critical infrastructure in fiscal 25 with our backlog and pipeline underpinning a strong recovery as transportation project demand is rising.

Putting this all together, we have line of sight to maintaining strong revenue growth in water and environmental and increasing our growth rates in life sciences and advanced manufacturing as well as critical infrastructure end markets in the coming year.

Relative to Q4.

Now moving on to slide 10, I will provide a quick overview of our segment financials.

We saw a strong trends in Q4 for infrastructure and advances entities, operating profit, which increased 12% year over year in total and 12% on a constant currency basis.

In fiscal 24, operating profit increased 9% year over year and 9% on a constant currency basis.

Infrastructure and advances with these results were aided by both revenue growth and margin expansion.

Moving on to PA.

Consulting results reflect modest top line growth with good execution on the bottom line.

Q4 operating profit increased 4% year over year, and fiscal 24 operating profit increased 1%.

Growth was slightly negative on a constant currency basis.

However, we are encouraged by recent bookings and anticipate that growth has been higher in fiscal 25.

Moving on to slide 11, we provide an overview of cash generation and balance sheet data for fiscal 24.

Free cash flow from continuing operations was strong at 718 million and enabled us to repurchase 403 million in shares and paid $143 million in cash.

Dividends.

We also paid down debt and ended the year with roughly 1.1 billion in net debt, which represented a net leverage ratio of 1.0 times on LTM adjusted EBITDA.

This is at the low end of our 1.0 to 1.5 times target.

Our balance sheet strength will enable continued investment in the business as well as returns to shareholders through repurchases and long-term dividend growth.

We currently have 472 million in remaining authorization under our repurchase program and recently declared a dividend of $0.29, a 12% increase year over year.

And finally, please turn to Slide 12.

For our fiscal 25 outlook.

We expect adjusted net revenue to increase mid to high single digits year over year.

Adjusted EBITDA margin to range from 13.8% to 14%, adjusted EPS to range from $5.80 to $6.20 and reported free cash flow conversion to be more than 100%.

We will have cash outflows related to restructuring of 75 million to 95 million in fiscal 2005.

Would that impact declining through fiscal 25.

The midpoint of our guidance range for adjusted EPS would indicate about 14% growth year over year, and the midpoint of our guidance range for adjusted EBITDA would indicate approximately 50% growth year over year.

Highlighting our strong outlook for business performance this year.

We provide relevant assumptions on the right side of the page to help you with your modeling.

one item to be mindful of is our projected tax rate of approximately 26%.

Our fiscal 25 tax rate is expected to be several points higher than in fiscal 24 and fiscal 23 and as a function of multiple discrete tax benefits in historical periods that are not expected to the government.

Despite the higher tax rate, we still anticipate strong adjusted EPS growth in fiscal 25.

I would note from a trend perspective, we expect to start fiscal 25 with Q1 revenue adjusted EBITDA margin and earnings below Q4 of fiscal 24, reflecting typical seasonality IT.

However, as we progress through fiscal 25, we expect to see sequential growth in our financial results through Q4.

Overall, what it's about the future of Jacobs and are entering fiscal 25 and a strong position financially with positive underlying momentum in the business.

With that, I'll turn the call back over to Bob.

Thank you, Frank.

And in closing, as a more focused enterprise, we are exceptionally well-positioned to capitalize on the momentum in the water and environmental life sciences and advanced manufacturing and critical infrastructure end markets.

And we remain confident in our ability to grow market share in Brazil, the needs of our clients across our business over time.

Operator, we'll now open the call for questions.

Thank you.

And we will now begin the question and answer session.

I would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue.

Anything you'd like to withdraw that question again, press star one.

We also ask that you limit yourself to one question and one follow-up.

Your first question comes from Michael Dudas with Vertical Research.

Please go ahead.

Good morning, gentlemen, and congrats on a very active and successful spin and recap.

Thanks, Mike.

And thank you, Mike.

Um, so impressive standalone backlog growth and heading into 2025 than we can talk about the pipeline.

You see maybe amongst the three major end markets, your growth and pipeline year over year?

And how much of your 2025 net revenues and EBITDA do you currently have kind of in backlog or insight in what's required to achieve your 22 targets?

Gerber?

So Michael, on the first on the first question, pipeline growth has been really, really strong.

If you look at the kind of a big verticals, water and environmental up double digits on a pipeline basis, advanced facilities really driven by life sciences.

We're seeing double-digit growth map pipeline and and in critical infrastructure, which is really driven by transportation.

We're seeing a nice come back on the pipeline, specifically in our European to include the UK and Australia, New Zealand in our end markets up Middle East continues to be I'm really, really strong on the second.

Don't want to come to go too far on the actual number, but I'd say historically, we would see a certain percentage of them of our our our next fiscal year.

Our revenue in backlog, that percentage is a higher percentage.

This year are now on a 1.67 times book to bill.

That's not all in one year, that's multiyear booking.

But the kind of contracted component for FY 25 is a very strong number.

That's helpful.

Mike.

My follow-up is a Bob, maybe you can share your views from your client base and how Jacobs positioning relative to the election and some the machinations we're hearing out of the federal government.

How that could translate to your, I guess, business in the US?

Sure.

So maybe two parts to that question.

We can see it overall as a net neutral.

If we if you look at those end markets that we're now as the new Jacobs honed in on, these are jobs that that were either tied to some level of state and local element, which are which are continuing kind of think water and environmental and in the transportation jobs that we're in the middle of at a national level on the U.S. have got long tails on them, and we still see the pipeline good strong.

So infrastructure wise, we're feeling it's a net neutral just as a note lately, been seeing some softness within the federal market in in our portfolio by 10% of our businesses in that federal market.

However, that 10%, a majority of that is in DOD and DoD infrastructure, specifically, which we see that pipeline continuing on our advanced facilities, continued strong that Industria oil reshoring on onshoring as well as what's happening in the world of science and technology is specifically in the US.

We're feeling now we're feeling confident about it.

Thank you, Bob.

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

Please go ahead.

Thanks.

Good morning, and I'll add my congratulations on the completion of the deals, and thanks for all the color on the growth rates within the segment, it's a pretty wide range of growth rates between our water versus the life sciences versus the critical information churn and 1,000 basis points or more teams like and I know you said you expect that this lower wants to accelerate.

Can you just maybe frame for us what kind of how big a gap you're expecting or how close how much you can close that gap between now and just in Canada?

Curious, was there that take yeah, I guess are a drag from not easy cancellation in the quarter and was there any sort of weather impacted as one of your peers cited?

Thanks.

Yes.

So let me answer the last part, Steve first and just kind of breaking down those three main areas.

Your next question or your first question, it was a gap that EV. cancellations.

So I'm on the on the AF. for the advanced authorities component.

And we do see closing that gap.

It would have been closed already, but I would be the future looks very bright there and represented by our backlog.

Warren environmental, we see continued growth in our transportation, specifically critical infrastructure, what we're seeing in our pipeline as well as Q1.

So to be reported wins in transportation, specifically outside the US is really that gap was was outside the US?

Yes, that's already.

We've already seen that in real time.

Certainty in the budget in the UK is giving us confidence there as well as some some really strong wins that we've had in Australia.

New Zealand are coming out.

So we don't really see that gap being from being a big one.

Okay.

That's helpful.

And then the follow-up, how should we think about the progress now on the corporate cost that you have embedded?

I need the segment reporting and 25 versus 24.

And relative to the restructuring costs, it sounds like that kind of continue on through the year.

Do you think Q4 will still have some of that and there will be done by the by the time fourth quarter starts?

Thank you.

Quebec.

Yes, that you save a couple of questions.

one on the of the overall cost structure, as I can tell, we've made pretty significant progress in fiscal 24 in terms of our operating margin and EBITDA margin expansion.

And I would say there's still room there in terms of improving the margins over time.

And that's why we guided to 100 basis point increase year on year from two to 25.

And if we look at the various parts of it in our clearly from the standpoint of operational efficiency, we still have room to room there.

We've had a spin-off will have a full year of what you call annualization of operating efficiencies because a lot of that happen or that manifest in its entirety in fiscal 25.

And then overall cost controls is something that we are focused on.

And last but not least, we are continuing to improve our mix of our business as well as how we envision these projects global connectivity standpoint.

So a multiple facets to this margin story holds over time.

And then your second question about restructuring.

So as you pointed out, we did have a restructuring in fiscal 24.

Clearly, as you know, we have a commitment to a momentum to continue to do a transition services that will last maybe another two, three quarters.

So we should see a pretty dramatic decline in our restructuring going from fiscal 2014 25, and we've quantified that in the range of 75 to $95 million.

Obviously, we've tried to do our best to make sure that that marks the end of our restructuring in a meaningful way.

Yes.

And then the other part of the restructuring is obviously having some ownership of liability with the PA Consulting business as well.

Okay.

Your next question comes from the line of Andrew Wittmann with Baird.

Please go ahead.

Great.

Thanks for taking my questions, guys.

And I guess I wanted to build on an earlier question again, and just kind of talked about the backlog as it relates to the outlook.

And then your backlog is up 22.5% year over year approaches, which is great, but your revenue guidance is up mid to high single digits.

It seems like a really wide gap.

And so I heard some of the comments about some longer projects that are.

Is there stuff in the backlog that's not moving some of the backlog of these bigger chunkier chunkier bookings, glycogen licenses for doing construction management scope?

Is that kind of does that flow through of lower margin?

There's there's a lot going on there, but I think the discrepancy between the backlog growth in the revenue guidance is worth digging into a little bit deeper.

So you could comment on that, I think would be helpful.

Thank you.

Sure.

Thanks, Andy.

So a couple of couple of things.

Yes, it is it the most significant book to bill that we've had probably in the history, the company and really proud of that.

The Life Sciences in the water of bookings that we've had, our large and they're multi-year.

And so they're not any they're not they're not disaggregating to market and speeds are at at, in certain cases above our kind of corporate margins that that we've demonstrated during the last few quarters.

So it's the multiyear component of that that is driving the revenue guidance.

And we also gave, you know, room on the mid to high single digits to kind of compensate for the bell-shaped curve on a project lifecycle too.

So we're feeling we're feeling really good.

These are some of the largest bookings that we've had.

And I think I mentioned in the script in the history, the company, which kind of go through the testament of our market position right now.

Got it.

It's kind of a question I wanted to ask also on the restructuring.

Obviously, this is kind of expected.

You've got you've got the management transition services and all the first things that go with the spinoff.

But by Brazil, as you look at 26, do you feel like 20 sales is the year that we get pretty clean results?

It sounds like even at the end of this year, it's pretty clean side.

But I thought maybe you could comment on a 20 kind of.

So absolutely.

I think it's a yes for the question.

It's a very important question and thanks for asking it.

I'd say second half, you're going to see some significant decay and 26 short answer.

Yes, yes, being 20, yes.

Got it.

Thanks, guys.

That's all I have for today.

Thank you.

Can you.

And your next question comes from the line of Sabahat Khan with RBC Capital Markets.

Please go ahead.

Okay, great.

Thanks and good morning.

I'm just bumped your earlier comment around some of the buffer that you built into the 5% or so because of mid to high single digit organic growth rate to allow for some of these longer life projects, there seems to be in line with the guidance we provided pre-election.

I guess, would you say that range also built in some buffer for maybe administration change or just kind of seeing how things evolve and early part of the?

I'm just trying to understand how you're thinking about the low end versus the high end given some of the moving pieces, particularly on the US side.

Thanks.

Yes, settlement.

My answer was really fluid was based on our clients' activity and in going back to any type of potential delays that happened as a result of the election, those wouldn't we don't feel like those would pertain to these jobs that are going forward at the state and local level, supporting some pretty large events that are happening in Los Angeles in other venues around the world, specifically on the water and transportation side.

And then on the advanced facility side, these are commitments that our clients have made to the end markets on some some pretty pretty critical therapies that the world needs.

So these are tied to global trends that are probably a little segregated from what might might happen with regards to churn in the Beltway.

So those were those are two separate and sublet.

If I could add in oh, the ranges we provided a little bit from a guidance perspective, we tried to guide for what we think is most likely outcome.

And obviously, as Bob alluded to, it depends on the profile of the customer, but and so forth.

And so that's what's included in our guidance.

And that's why we provided the range of the in the mid to high-single digits for revenue growth.

That's helpful.

And then maybe just on the markets outside of the US as we look at maybe the UK, the Middle East, let's take some changing prior to the Middle East, but sounds like from your commentary that's going well.

Can you maybe just talk about kind of the kind of your focus on those regional?

What drives you to continue to be exposed there?

It looks like there's a lot of dollars there, particularly Middle East, but in all a bit of an evolution in how they're going about their development for the next years.

And also, if you can just comment on post the recent election in the UK, how you see the spending priorities reflected in the region infrastructure so that we sent the budget and how they align with what you're doing in that market.

Just want to get a bit more perspective on those two larger regions for your attendance?

The US?

Thanks, sir.

Sir.

So when we kind of break down the question here on on the two geographies, and actually this comment is going to apply to every single one of our geographies we are in the locales that we're in to service those, those local those local clients.

And so just on that on that element with regards to the U. K in the Middle East and those are strong markets.

And yes, there's there's there are economic ebbs and flows in those markets.

But our client base, especially now with our kind of our focused portfolio, these are long term kind of trends.

So any kind of near term off relations, if you look at it on the long term, they're solid.

And in the UK in the Middle East, we're seeing some some nice tailwinds that they're coming back might not be as strong as 10 years ago or before.

But compared to recent times, we're seeing some of that come through.

How do we gauge that.

We gave that to our pipeline and we're seeing our pipeline growth.

And so those kind of on that water in the U.K. never stopped, slowed down.

So really the upside that we're talking about is more homed in on on transportation as well as some of our advanced facilities world.

But of the key is that staying in those geographies is really more about our talent in that talent ends up addressing both the local market, but also there's some really, really key talent that we have in UK, Europe, India, Australia, New Zealand that are being deployed around the world to that talent pieces is really, really key in how we think about our global MOP funnel on the elections.

We again, we don't think that that is going to affect what we're talking about as far as the strength in the end markets.

And and so we stand behind the numbers we put out.

Great.

Thanks very much for the call.

Your next question comes from the line of Andy Kaplowitz with Citi.

Please go ahead.

Hi, good morning.

Are behaving high embark on happen.

Any capitalized.

Hi, good morning and aligning our first question I'd like to ask in PA Consulting margins reflect continued improvement.

As we think about SPH one, I expect our plan to continue.

And then can you provide more color on your income fell eight points revenue growth expectation for this segment?

Enbrel to the easier comps and act on seems to be picking up.

Any detail would be helpful.

Sure.

When I answer the first one and then bank will address kind of a the the competence in revenue growth coming into the year.

As far as the the margins go, we continue to see you during even during the the the the run-up to the election in the UK as well as other other areas.

The EPA has has a presence on the margins have stayed true.

And the team has done a really good job at continuing to focus in on higher value as well as strengthen the offering that they have for their clients.

So we don't we see that margin revenue.

Yes, absolutely.

So in terms of just revenue growth for the PA Consulting business, we we've had good insight into their pipeline, especially the last several quarters.

And we're feeling pretty good about the inflection point and fears business in terms of the growth really coming together in fiscal 25.

Now when we provided the the high-level guidance for our overall revenue growth, the mid-to high-single digits, that's certainly in future be a consulting also providing that the growth acceleration from the prior year.

Yes.

So like all of that is taken into account as we give our overall guidance for for all of the PA Consulting plus Jacobs.

And we feel that that is certainly an inflection point in fiscal 25 with regards to the growth from PA Consulting and their P8 vendor in the backlog grew at the same rate as ours.

That's right.

And helpful.

And just one more follow-up question from me.

Repeat the near term focus perspective, capital deployment seems to be towards debt paydown and share repurchases.

But as you know that with a new portfolio, are there any areas in your portfolio where potential M&A consulting gap?

Yes, three admitted due to the cash to shareholders and solid buybacks and dividends.

And we returned almost 60% of free cash flow in fiscal 24.

So we're continuing to commit to a significant portion of our free cash flow being returned to shareholders on top of it.

And as you pointed out, we have been paying down debt and we did get about 911 million in proceeds on day one of the transactions, which we then used to pay down debt.

And we do still have a 7.5% to 8% retained stake that we hope to monetize in the first half of calendar 25.

And then beyond that, as I look at the cap allocation priority for us with a lot of excitement about organic growth opportunities in the business.

So number one priority will continue to be investing in the organic growth of the business.

Number two, as I said before, is returning cash to shareholders, and Paul will dividends and buybacks, and we're committed to that.

And then finally, from an M&A perspective, certainly that is an excellent for us in the long term.

We'll talk a lot more about it during Investor Day.

But suffice it to say that we have lots of optionality with the balance sheet position that we have, the significant feat cash flow that we generate and our ability to return that to shareholders as well.

So our next question comes from the line of SMTEK chain with KeyBanc.

Please go ahead.

Great.

Thanks so much for taking my question.

So if I could just take the growth outlook to a higher level, can you help us understand if you're if you're thinking higher growth internationally versus domestic, given the elections?

I know we've discussed the election of the few times already on this call.

Note can get that.

That's the way it came across.

And that was in the case, we had some flattening growth outside the US in our infrastructure or end markets where we were talking about that inflecting for Ford within the US, those numbers have been positive for the last fiscal year.

The upcoming year, do you think the US will still grow faster or how do you see?

Look, we do.

We do and we're seeing that in our pipeline right now.

Growing as well as as well as our book to bill and the double digit growth that we've had in backlog.

Okay.

And if I can follow up on your telephone for, let's just say we don't really know the policy parity that the new administration, et cetera.

But let's just say public spending in the US does slow down, how fungible is your talent pools?

Should you have to reallocate resources?

Yes, I don't know if I would use the word fungible, but they're very deployable and work on work all over the world, both in the U.S. Outside the U.S. in from outside the U.S. as in these really important to us to understand the mix of our people in the US and outside the US does not map to are you US versus non-US revenue stream.

And so that is a very balanced look on how we how we how we utilize our people around the world.

Got it.

Appreciate that.

Thank you.

And he will now take.

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

Please go ahead.

Good morning, guys.

Good morning, Chuck.

So my question is on the algorithm for adjusted operating margins for the infrastructure and facilities business.

So I guess I can maybe you could break it out in two ways.

So first of all, just trying to figure out the three subsegments like yours, sounds like the water business is growing faster lifestyle business growing faster to extend that accretive to margins.

And then I guess on the second part, I guess, talked about cost savings.

Like how do you think about the year-on-year are boosting margins from from that?

Yes, Chad, thanks for those questions.

So I'd say the first on the end markets, the way we model our business is to obviously go after the best opportunities that we have across the different end markets and continue to progress on the top line growth, but also in this way, that optimizes margin so that it meets our corporate average rates to buy in any given quarter.

Any given in the first half second half of the year, we can certainly have ups and downs with regards to the margin profiles.

But what we've tried to optimize for is the good balance between continued revenue growth as well as improving over time.

And that's what we have quantified it in terms of our and say, one month business is any different from another from the standpoint of the optimization.

But certainly we want to continue to focus on profitable revenue growth such that both our revenue as well as to margins expand over time.

So that's and we'll look at it going to have to do in response to a previous question, we have made significant strides in terms of improving the operating efficiency, but you had just six months of that that take effect in fiscal 24.

So we'll have the annualization of operating efficiencies take full effect in fiscal 25.

And that's part of the margin expansion story for us.

But it's not just that when we in addition to it, as I mentioned before, we are optimizing our go to market with optimizing our global connectivity and so forth.

So we do see a multiyear trend in terms of focusing on improving our profitability over time, not just on the cost side, but certainly from a business mix standpoint as well as from it efficiency standpoint.

Great.

That's helpful.

And then the second question has to do with your or your revenue guidance for the full year that that mid to high single digits.

So I guess to get to that higher end of that range, like what needs to go right, either from a geographic standpoint or from a macro standpoint, I think what we need to see there, maybe it would be a fee if we see an acceleration in the eye in the jobs were on that heavy heavy focus now from the from the backlog growth coming from our water as well as life sciences sector is that those could be accelerated and we could find ourselves, you know, on the higher end of that range.

So we're watching that very closely.

Thanks, Al.

Your final question comes from the line of Jerry Revich with Goldman Sachs.

Please go ahead.

Hi, good morning, everyone, and congratulations on.

Can I ask for the legacy People & Places business?

You folks have delivered steady margin expansion.

You're now running scope margins in the low 10s.

As you think about the margin upside that you discussed over the course of this call, what do you think is reasonable?

We target or bogey where you can drive that business over time?

Are we talking about tens of basis points improvements?

Are the initiatives that you spoke about earlier, can we see a more significant margin upside in that line of business?

Yes, Jerry, thank you for the question.

And yes, certainly, we feel good about the margin expansion for fiscal 25 that I alluded to, both in the prepared remarks.

Just let us in response to a couple of questions.

And as we look ahead beyond fiscal 25, certainly will provide you a lot more clarity when it comes to the investor day on, not just in terms of our revenue growth and end market mix as well, but also in terms of capital allocation and margin expansion story.

So suffice it to say that we do feel good about our margin expansion in fiscal 25 and beyond.

That will cover in more detail.

Okay.

And let me ask you I know it's early very early post momentum, but obviously, the business leaders have been focused on the new Jacobs for quite some time now over a year.

Can you just talk about at the operating level, what kind of difference in performance that you're seeing or any developments that are notable as a result of a change in focus or the more narrow change in focus so far?

Yes, Gerry, I think it's a great question.

I'd say that on the operating model is that is in fact right now, you're right, we got out ahead of that during the course of the year.

I think the biggest change has been getting back to where you know, where we came from, where we were extremely focused on our clients' business.

And that has really come to the core of how we think about the world and instead of being internally that we were doing years leading up to this quarter.

So that's been the real, the real change, understanding our clients' business.

Again, we're seeing it in our sales performance in Q3 and Q4 of last year.

So we're excited because those actions and those behaviors are turning into a 22% backlog growth and a 1.67 book to bill.

And that's that's kind of fits.

The proof is in the numbers.

So we're excited.

Thank you.

Thank you.

Thank you.

And I will now turn the conference back over to Barbara for closing remarks.

So thank you, everyone, for joining our call and look forward to providing further updates and visiting with investors and analysts in the coming weeks and months.

Thank you very much.

Ladies and gentlemen, this does conclude today's conference call.

Thank you for your participation, and you may now disconnect.

I mean, I mean, Mike.