Jacobs Solutions (J) Q3 2024 earnings summary

Executive summary

• Q3 2024 delivered strong consolidated margins, robust cash flow, and $151M in share buybacks, with backlog reaching $30.6B, up 6% year-over-year, and P&PS backlog at a record $19.3B, up 10.2% year-over-year.

• Adjusted EBITDA grew 11% year-over-year to $392M (11.5% margin), with adjusted EPS up 11% to $1.96; GAAP EPS from continuing operations was $1.17, impacted by restructuring and transaction costs.

• The planned spin-off and merger of Critical Mission Solutions and parts of Divergent Solutions with Amentum is expected to close in the second half of September 2024, with all regulatory approvals obtained.

• Strong demand and pipeline in core markets, especially water, environmental, and advanced facilities, with double-digit growth and significant project wins globally.

• Q3 saw record backlog, robust book-to-bill ratios, and continued progress on strategic transformation.

Financial highlights

• Q3 revenue was $4.23B, up 1.1% year-over-year; adjusted net revenue was $3.41B, up 1% year-over-year.

• GAAP operating profit was $260M, including $53M in amortization and $73M in transaction/restructuring costs.

• Adjusted operating margin was 11.3%; adjusted EBITDA was $392M (up 11% year-over-year, 11.5% margin).

• Free cash flow for Q3 was $445M, with year-to-date conversion well above 100%.

• Quarterly dividend of $0.29/share, up 11.5% year-over-year.

Outlook and guidance

• Fiscal 2024 adjusted EPS guidance narrowed to $7.85–$8.05, representing 10% growth at the midpoint.

• Adjusted EBITDA for fiscal 2024 expected between $1.54B and $1.585B.

• Free cash flow conversion expected to exceed 100% for FY24.

• The Separation Transaction is expected to close in September 2024, with up to 63% ownership in the combined company and $1B in cash proceeds.

• Post-separation, higher growth and margin profile anticipated, with strategic plan to be presented in February 2025.