The conference call begins with the operator welcoming everyone and introducing the speakers. Ayan Banerjee, Senior Vice President of Investor Relations and Finance, provides information about forward-looking statements and the agenda for the call. CEO Bob Pragada, Special Adviser Kevin Berryman, and new CFO Venk Nathamuni will discuss recent activities, financial metrics, balance sheet and cash flow, guidance, and closing remarks.

In the second paragraph, the speaker mentions the addition of Venk to the team and thanks Kevin for his ongoing support. They also discuss their progress in shifting towards a simpler, higher value portfolio and provide an update on the planned spin-off of their Critical Mission Solutions and Cyber & Intelligence businesses. The transaction is expected to be completed in the second half of September. In the third quarter, the company saw strong backlog growth, margin expansion, and demand for critical infrastructure services.

The consolidated backlog of the company has increased by 6% year-over-year, indicating confidence in the potential for profitable growth. The company also saw a strong increase in adjusted EBITDA, operating cash flow, and free cash flow. The People & Places Solutions line of business reported solid top line growth and strong margins, with a record backlog and a robust pipeline. The company achieved double-digit growth in water and environmental markets and saw key wins across various geographies, particularly in Europe.

In Asia, we were chosen to engineer and manage the construction of a new water treatment plant in Singapore. Our partnership with Onondaga County in New York also continues, as we provide program management services for their sewer system improvements. We are also seeing growth in our advanced facilities portfolio, particularly in the life sciences industry. We were selected for a $1.2 billion expansion project for a biologics manufacturing site in North Carolina and have a growing pipeline in transportation and energy and power projects. As an example, we were chosen to provide program management services for a public transit expansion in Broward County.

The company has had a successful quarter with several key wins in the energy and sustainability space. They have also achieved an industry-leading operating margin and have been selected for a project in the UK focusing on sustainability. In addition, their partnership with PA Consulting continues to be a differentiator in their consulting services. The company is also seeing ongoing demand for their digitally enabled infrastructure solutions. They have experienced margin expansion and have a strong pipeline. Overall, they are confident in their ability to win higher value projects and deliver superior execution.

In the third quarter, the company's gross revenue and adjusted net revenue both grew by 1%. GAAP operating profit was $260 million, with $53 million from amortization and $73 million from transaction and restructuring costs. The adjusted operating margin was 11.3%. GAAP EPS from continuing operations was $1.17, with a $0.31 impact from amortization and $0.49 from transaction and restructuring costs. Adjusted EPS was $1.96, an 11% increase from the previous year. Adjusted EBITDA was $392 million, up 11% with a margin of 11.5%. Backlog and revenue book-to-bill ratio both increased by 6%. In the People & Places Solutions segment, adjusted net revenue and operating profit were up 5% and 12%, respectively, with a margin of 15.3%. Backlog and gross profit in backlog also saw growth of 10% and 9%, respectively.

This quarter, we had critical wins in the water, environmental, and advanced facilities markets, resulting in a high book-to-bill ratio and record backlog. Our revenue and backlog for Critical Mission Solutions decreased and increased respectively, while our adjusted operating profit and margin improved. Divergent Solutions saw a decrease in revenue and operating profit due to government rate adjustments and program delays, but we expect growth in the future. PA Consulting had a modest increase in revenue and a strong operating margin, and we expect further growth in the future. We are also working on reducing our corporate costs.

Venk Nathamuni, who has recently joined the Jacobs team, expressed his excitement and gratitude for the partnership and support from Kevin. He then provided an overview of the company's balance sheet and cash flow metrics, highlighting their strong cash flow generation and free cash flow conversion. The company also remains committed to returning capital to shareholders while maintaining an investment-grade credit profile. The balance sheet shows a strong cash position and low net debt to adjusted EBITDA ratio. The company also plans to continue growing their quarterly dividend.

The Board has authorized a quarterly dividend of $0.29 and 11.5% year-over-year increase to be paid in August 2023. The company has narrowed its adjusted EPS outlook for the year and expects fiscal 2024 adjusted EBITDA to be near the lower end of the range. They anticipate increased revenue growth in fiscal year 2025 and a shift in the company's growth profile after the separation transaction, which is now expected to close in September 2024. The company will host an Investor Day in February 2025 to share their long-term strategy and financial targets for the independent Jacobs.

Jacobs is pleased with the strong demand for their science-based digitally-enabled solutions, as evidenced by their growing backlog and strong book-to-bill ratio. They are confident in their ability to continue growing market share and fulfilling the needs of clients in critical infrastructure sectors. The company's gross margins in the P&PS backlog have improved by 9%, driven by a mix of higher-end services and a shift towards water and advanced facilities, particularly in the life sciences industry. Jacobs is optimistic about their future performance and expects to see organic growth in backlog and net revenue in fiscal year 2025.

The company's two higher margin segments are having a positive effect on their overall performance. The company is confident in their revenue growth for FY 2025 due to a strong Q4 backlog performance. However, the company's EBITDA guidance for the year has been lowered due to delays in backlog burning and weaker performance in certain segments. The difference between the EBITDA and EPS performance is primarily due to a tax benefit and a significant stock buyback.

The speaker is confident about the revenue growth and margin of the P&PS backlog. They are also confident about meeting the 13.8% plus FY 2025 standalone margin guidance, but there may be some moving parts due to the separation. The speaker also mentions strong tailwinds in water and advanced facilities, but there has been a pause in the UK and a shift in priorities in the Middle East.

The paragraph discusses the positive outlook for the company's future, with potential tailwinds from the UK election and programs in Saudi Arabia. The company plans to provide guidance for fiscal year 2025 and long-term growth at an upcoming Investor Day. The analyst asks about the framework for profit growth in the P&PS sector, and the company states that they are excited about the tailwinds and remain positive. They also provide an update on their progress towards reaching their target corporate expense rate.

Kevin Berryman and Bob Pragada discuss the changes in reporting structure and cost reduction plans after the company's transaction closes. They expect the $60 million cost to trend down to $50 million over time and contribute to a 13.8% EBITDA margin. They also mention ongoing projects in the U.S. and UK, with a steady flow of bid activity and pipeline in infrastructure and advanced facility sectors.

The transport industry has been slower in terms of work and opportunities, but there has been positive momentum in the water and advanced facilities sectors. The UK election and reprioritization in Saudi Arabia have affected the transport industry, but there is optimism for Q4 and beyond. The demand for water infrastructure is growing due to aging infrastructure and climate-related issues. The company has been successful in winning work in this sector, particularly in addressing PFAS regulations.

The company's pipeline in the water sector has nearly doubled compared to last year, and they are winning a majority of the work they are pursuing. The next question from an analyst is about the gross profit in backlog, which has increased by 5.5% while overall backlog has only grown by 6%. The company explains that this is due to a mix of lower margin projects in addition to their strong growth in consulting and technical work. They are confident that they will still see incremental margin growth in their People & Places segment.

The company is expecting accelerated growth due to larger projects and program management, which will involve more pass-through revenue with lower margins. The P&PS segment is growing at a higher rate, with gross profit at 10%. The company is taking actions in preparation for the split, including streamlining processes and moving to global business centers.

The company is transitioning into optimizing cross-cutting capabilities and strong sales functions. They are already working on this and it is similar to handing off a baton in an Olympic race. The life sciences sector is performing well, and there is growth in the AI data center sector. The company also does work for Intel, but the recent news from Intel about reducing their CapEx has minimal effect on the company. They will continue to provide services for Intel in areas such as tool installs and retrofits.

The company is seeing positive momentum in its diversification into memory and logic customers, as well as expansion in places like India. They remain bullish on the sector and are expecting good news in the next quarter. In the life sciences sector, there is optimism due to new awards in areas such as Alzheimer's and oncology drugs. The company also sees a secular trend in the semiconductor sector and is well diversified in this area. The construction of FUJIFILM's phase 1 is expected to ramp down in the first half.

The impact of the award will not be significant as it is related to existing work. The company will be reporting on an independent basis for the fourth quarter and full year results due to the spin-off, which will result in lower numbers in the results. The company has provided guidance for the full year that is expected to be met.

The speaker responds to a question about the financial reporting and future outlook for the company. They mention that more clarity will be provided during the Q4 results report and the Amentum Capital Markets Day in August. They also mention that guidance for fiscal 2025 will be provided in November and more information will be shared during the Investor Day. The speaker also mentions that after the spin-off, the company will have a strong balance sheet and cash flow generation, leaving room for potential M&A opportunities. They also mention that free cash flow conversion for the RemainCo may be a better story than the market anticipates.

The company is satisfied with their current position in the market and does not feel pressure to pursue M&A for growth. They have a strong balance sheet and will prioritize organic growth, dividends, and share repurchases. They expect free cash flow to improve and will focus on execution in the coming quarters.

In this paragraph, Sangita Jain asks about the progress of the Amentum spin and if there are any specific deliverables expected in September. Kevin Berryman explains that all regulatory approvals have been obtained except for an IRS ruling, which they expect to receive in the next month. This ruling will allow for a September close and the company is confident about it. Bob Pragada adds that the P&PS business has been performing well with solid bookings and backlog, which should help the top line growth rate reach the target range of 6-9% in 2025.

The company is confident about their financial growth projections for 2025, with solid growth in the pipeline and strong performance in the water and advanced facilities markets. They expect to continue their high operating margins in the P&PS segment and have already booked work for the first month of the fourth quarter.

Jerry Revich asks about the profit growth in People & Places over the past five years and if Jacobs expects to continue driving that level of growth. Bob Pragada responds by saying that the company is optimistic about their pipeline and bookings performance, but cannot give a specific number at this time. He also mentions that there has been an acceleration in dialogue and anticipates programs to be put out to market in the next 6 to 12 months.

The water sector in the UK has not been affected by the pandemic and continues to grow. PA, which has a 50:50 private and public sector mix, saw an 11% year-on-year growth in the private sector. The public sector, however, was affected by the recent election pause. The company is optimistic about future growth in both the Jacobs and PA businesses. The IIJA and CHIPS Act are expected to contribute to the company's strong backlog, with 60% of the funds already appropriated and 30% spent. The company is also involved in projects funded by the CHIPS Act, which are in the early stages of development.

The speaker believes that the CHIPS Act will continue to provide financial support for the company, and the call is now ending with the speaker thanking the participants and expressing excitement for future updates. The speaker also mentions being transparent with the market in the future.

This summary was generated with AI and may contain some inaccuracies.