Good day and welcome to the Jacobs Second Quarter 2017 Earnings Call and Webcast. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Mr. Kevin Berryman, Chief Financial Officer and Executive Vice President. Please, go ahead.

Thank you, Andrew, and good morning and afternoon to all. We welcome everyone to Jacobs' 2017 second quarter earnings call. I will be joined on the call today by Steve Demetriou, our Chairman and CEO. As you know, our earnings announcement and Form 10-Q were released this morning, and we have posted a copy of this slide presentation to our website, which we will reference in our prepared remarks. Before starting, I would like to refer you to our forward-looking statement disclaimer, which is summarized on slide 2. Any statements that we make today that are not based on historical facts are forward-looking statements. Although, such statements are based on our current estimates and expectations and currently available competitive, financial, and economic data, forward-looking statements are inherently uncertain and you should not place undue reliance on such statements as actual results may differ materially. There are a variety of risks, uncertainties and other factors that could cause Jacobs' actual results to differ materially from what may be contained, projected or implied by our forward-looking statements. For a description of some of the risks, uncertainties, and other factors that may occur that could cause actual results to differ from our forward-looking statements, see our Annual Report on Form 10-K for the period ended September 30, 2016 and, in particular, the discussion in Item 1, Business; Item 1A, Risk Factors; Item 3, Legal Proceedings; and Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations; as well as other filings with the Securities and Exchange Commission. We undertake no obligation to update any forward-looking statements. During today's discussion, we will make a number of references to non-GAAP financial measures. You'll find additional disclosures regarding these non-GAAP measures including reconciliations of these measures with comparable GAAP measures in the presentation that accompanies our prepared remarks. Again, this presentation can be found on our Investor Relations website, located at www.jacobs.com. Please now turn to slide 3 for a quick review of the agenda for today's call. Steve will begin with some comments on our results for the quarter, followed by a summary of backlog and market conditions for each of our four lines of business. I will then provide some more in-depth discussion on our financial metrics and results for each LOB. I will continue with some comments on our restructuring initiative and capital allocation, after which, Steve will finish with some closing remarks. We will then open it up for some questions. With that, I will now pass it over to Chairman and CEO, Steve Demetriou.

Thank you, Kevin. Welcome, everyone, to our second quarter earnings call. Before I discuss our results, I'd like to acknowledge a significant safety excellence milestone at Jacobs. This month marks the 10th anniversary of Jacobs BeyondZero and our unquestionable commitment to safety excellence. Our relentless drive to achieve world-class safety performance is stronger than ever. So, it's with great pride to report that our year-to-date total recordable incident rate stands at an industry-leading 0.17. And last week, we continued our tradition of participating in the industry-wide Global Safety Week, which drove further engagement with our employees, customers and local communities on safety awareness and a commitment to further improvement. And now, a few opening comments regarding our second quarter. I'm very pleased with the significant progress we're making on the new strategy we presented at last December's Investor Day, which established the blueprint to transform Jacobs and drive profitable growth. Halfway through the first fiscal year of our multiyear strategic plan, we're measurably delivering on our commitment to realign our revenue portfolio, shed unprofitable business and drive to a higher value-added mix of projects and programs and demonstrating the early phases of achieving profitable growth. In the second quarter, this was evident by the significant increase in both gross margin and operating profit margin across the company. Specifically, adjusted gross margin reached 19% in the quarter, a significant jump from the 16% gross margin reported a year ago. This higher quality of earnings performance is due primarily to a combination of improved operational execution and a more value-added mix of business. Let me also make some additional comments regarding our top line results. The sequential fall in revenue burn was driven primarily by a drop in low-margin field services revenue. This decline was almost entirely related to our oil and…

Thanks, Steve. And turning to slide 10, you will see a more detailed summary of our financial performance for the quarter. While I will provide more detail on restructuring in a later slide in the presentation, our restructuring cost for the quarter included the bulk of the final cost of our 2015 restructuring, plus an additional charge associated with a strategic realignment of our Europe, UK and Middle East regional operations related to our strategy to focus on a more profitable growth agenda. As a result of these costs, our GAAP EPS was down $0.13 to $0.41 per share versus the year ago period. However, when the cost associated with the 2015 restructuring and strategic changes in the Europe, UK and Middle East region are excluded, our adjusted earnings per share was, in fact, up 4% versus the year ago quarter to $0.78 per share. Turning to revenues, as already noted by Steve, we continue to be impacted by our oil and gas-related activities and specifically our field services revenue during the quarter. To better understand our revenue trends, I will focus on the sequential change in our revenue, given that it is more relevant to better understand how revenues will trend through the balance of the year. While Steve talked about this early in the call, I would like to point to the right side of the slide where we specifically highlight the change in revenue in Q2 versus Q1. It is noteworthy that the professional services revenue was indeed stable in Q2 when compared to Q1. And as a result, the sequential drop in revenue was almost exclusively driven by a decline in field services. This is due to the short-term delay in the ramp-up of certain backlog P&C projects from professional services work to field work. And…

Thanks, Kevin. And turning to the final slide, we're pleased with our progress over the fiscal year-to-date and the significant improvements we're seeing in operational and financial performance. As we continue our shift to profitable growth, we remain vigilant and focused on achieving our three-year strategic objectives. As we review our line of business markets and sales pipeline at quarter end, we're more positive than we were last quarter and certainly since last year. Those markets most significantly impacted by weak commodity prices are beginning to show signs of life, or at the very least, appeared to have stabilized. Conversely, we're seeing strong continued growth in several of our other markets. And we are proactively focusing on those areas and regions exhibiting the best profitable growth prospects. Our outlook for the second half of fiscal year 2017 is for sequential revenue and profit growth with continuing strong underlying operational performance. As such, we remain on track to achieve our previously announced fiscal year's 2017 guidance. However, key to achieving this and our long-term growth objectives will be to continue our relentless focus on winning new profitable business and executing well on our project delivery. With that, I'd like to thank you for listening and we will now open it up for questions.

We will now begin the question-and-answer session. The first question comes from Steven Fisher of UBS. Please go ahead.

Thanks. Good morning.

Good morning, Steve.

Good morning, Kevin. Steve, why did the shift to chemicals field services take longer than expected? Was that just general business confident tied to commodity dynamics? And if so, what indication do you have that those projects are – will indeed pick up in the second half?

Yeah. It's a minor shift. It's probably a little kind of do with the industry, but I'd say more just on the transition from the FEED to the execution phase on some of these EPC projects just went a little slower. But the confidence we have is that we're already in full speed execution as we sit here today. We have sort of our April data behind us. And so, that gives us the confidence that we're going to see sequential improvement in the next couple of quarters related to those post-FEED executions in the procurement and construction phase, as well as some other things on across other business lines.

Okay. And in terms of hitting the midpoint of your EPS guidance, I know you just said in your closing comments that you're anticipating a sequential revenue growth. To what extent are you contemplating, is that growth off of the most recent quarter or is it the first half in aggregate? Just kind of wondering if you're thinking about year-over-year revenue growth in the second half of the year to hit the midpoint of the EPS guidance.

Look, Steven, this is Kevin. We're taking certainly the Q2 numbers and saying we're going to sequentially grow off of those numbers.

Okay. That's helpful. Thanks a lot.

The next question comes from Andrew Kaplowitz of Citi. Please go ahead.

Good morning, guys. It's Alan Fleming on for Andy today. Kevin, maybe you can just give us a little more color about how to think about the push and pull on gross margin here. I guess the question is, is19% adjusted gross margin a new normal for you guys with professional services backlog the highest it's been in two years. I mean, how does that kind of compare and contrast with how you're thinking about gross margin as the field services does rebound here over the next few quarters?

Sure. Alan, some quick comments. The first point is, 19% is probably not the sustainable number going forward, but I don't want to make that comment without a very clear indication that underlying gross margin trends continue to be quite positive in terms of the wins that we have, our burn that's occurring and so on and so forth. The reason I make that comment is twofold, is that the mix on professional services versus field services will probably kick back more to normal levels in the back half of the year, as Steve just alluded to, the field service business kicks up, and that will take the gross margin down. While we like that business, we like the margin profile associated with that new field service business, which is actually higher than it has been historically. It still is a little bit lower than professional services, so we'll see some dampening. And so, if you kind of go back to my comments about talking about a third – two-thirds with two-thirds being underlying and one-third being the mix dynamic, we would expect the mix dynamic to kind of go away. And take the rest of the two-thirds might not be exactly sustainable at those levels, but certainly close to that and certainly above our Q1 or certainly year-to-date numbers for our gross margin for the year. So, a continuation in uptick as it relates to our figures.

Okay. That's helpful, Kevin. And maybe I can switch gears to backlog. Backlog was up sequentially and compared to one of your main competitors, your bookings profile in the quarter looked a lot better. So, I know maybe some of that's due to your more small to midsized project focus and focus on sustaining CapEx. So, we also know that you've reorganized the sales structure of the organization here. So, how much of the backlog growth or stability here? Do you think the market is improving or your market is improving versus your ability to kind of outperform the markets and maybe take share in some of these markets?

I think it's several things. When you look across the whole company, I would say that we're getting clear evidence that our new line of business structure across all four of these businesses are clearly allowing us to leverage global capabilities and to deliver local projects, something we really didn't do as well when we restructured regionally previously. When you look specifically at our line of business like Petroleum & Chemicals, I'd say the fact that we believe we're outperforming the rest of the industry in that particular segment is a combination of the type of projects that we participate in, more in the small and mid-cap sized projects. But also the strategy to focus on downstream, which we're really going after targeting the refining and chemical projects that allow us to have a stable backlog to offset the weakness in upstream. And we are moving into some more prudent risk EPC type projects, larger projects, which I talked about is creating this dynamic of some delayed field services revenue. But it's going to be higher quality field service revenue as we start to move into the second half and into 2018. So, I'd say it's a combination of new structure, some market dynamics like A&T and Building & Infrastructure, but also executing on our new strategy that we shared with all of you a few quarters ago.

Okay. Very good, guys. Thank you.

The next question comes from Jamie Cook of Credit Suisse. Please go ahead. Jamie Anderson - Credit Suisse Securities (USA) LLC: Yeah. Hi. This is Jamie Anderson on for Jamie Cook. I was just looking for a little bit of clarity on the incremental investment. I know last time we talked, incremental investment was about $0.05 in the quarter. I don't know that we were adjusting it out. It seems like now we are. Could you just kind of clarify that? And then, I guess the implication is that the guide gets reduced $0.10. Is that just because of the revenue burn being a little more than anticipated on the P&C and Industrial business? If you could just help me with the puts and takes on that, that'd be helpful. Thanks.

Jamie, just to be clear, the $0.05 isn't adjusted out. It is incorporated into our operating figures. So, we did just want to make sure that you were clear because it has been a point of discussion in our previous results as to how much is being spent on those strategic investments, some of which are one-time, some of which are incremental investments. Relative to our strategy, that will be sustained longer term. So, to be clear, the $0.05 is in our adjusted figures and not adjusted out. Jamie Anderson - Credit Suisse Securities (USA) LLC: Okay. Cool. And then, just as a follow-up, at the Analyst Day, you talked about 15% of the business today is kind of unprofitable, 25% is breakeven. Not assuming that we can kind of get momentum on those, you could pick up anywhere between $50 million to $100 million of op profit improvement. Could you just tell us how those buckets are kind of tracking against your $50 million to $100 million targets? And where do you think we could potentially wind up towards the end of the year, given that backlog looks a little better, these investments could potentially take hold? That would be helpful. Thanks.

Let me start just at a – kind of at a high-level strategic basis. I think everything we've talked about today, the margin improvement in professional services, up more than 250 basis points year-over-year, even field services when you look at stand-alone field services, the revenue that is in our P&L in the second quarter was up more than 100 basis points on a field services stand-alone comparison. And when you look at our backlog, as I mentioned earlier, the new wins and what's been – what's in our backlog now is much richer mix of business, about 100 basis points more gross margin as a percent of the revenue and backlog. And so, I think the strategy and some of the dynamics that you're seeing on a temporary decline in revenue, a significant increase in gross margin, quality of the gross margin, is clearly evidence that we're executing early on that strategy to not repeat winning breakeven or a loss-making business, and now winning profitable business and it's contributing to operating profit improvement and a richer backlog going forward. And I'd say, overall, that's the measure that we're on track in the first six months of our three-year strategy to significantly transform the SO (46:46) margin to final operating profit. Jamie Anderson - Credit Suisse Securities (USA) LLC: Okay. Great. Thanks so much. I'll hop back in queue.

The next question comes from Jerry Revich of Goldman Sachs. Please go ahead. Jerry Revich - Goldman Sachs & Co.: Hi. Good morning, everyone. I'm wondering if you folks can talk about within your Petroleum & Chemicals business, when do you expect year-over-year revenue growth? Obviously, the bookings have been very good and the backlog has been strong based on project cadence, when do you expect that to translate to year-over-year revenue growth. And if you can comment on chemicals specifically, I think that'd be helpful.

Well, perhaps not talking specifics but ultimately I think, we start to get to a point as we get to the end of this year, the beginning of next where we might be able to see that kind of dynamic occurring. This industry obviously continues to be certainly faced with a more stable but certainly a lower oil price and that continues to impact spend across the board, but I think the way to think about it is probably as we approach near the end of this year we might be able to see those kind of numbers happen. Jerry Revich - Goldman Sachs & Co.: Okay. And then, can you comment specifically about what you're seeing in mining, are you starting to see bookings coming through, where inquiry levels, I guess we have started to hear chatter about new projects picking up and I'm wondering if you're seeing that in your business as well, and if it benefited bookings in the quarter at all?

Yeah. Look the – our backlog in mining is up year-over-year. A lot of that is driven by the major Rio Tinto win that we started putting on our backlog and are in the field now. But we are clearly now seeing a wave of studies underway. A lot of projects, multi-billion-dollar projects that were shelved are coming back on and we're talking across not only copper but iron ore, lead, zinc, gold, across all kinds of markets and regions where we're seeing some good activity in those study phases in Chile, Peru, Australia, even in certain parts of the Mediterranean on some of the metals. So, I would say, what we're seeing are small initiatives that we're winning that could lead to much bigger CapEx opportunities in 2018 and beyond. And so, the key decision is going to be – will these mining companies as they're now making better profits decide to pull the trigger and convert these studies to full projects. And if that happens, clearly we're going to see a 2018 and 2019, that's a lot better than the last few years of mining. Jerry Revich - Goldman Sachs & Co.: Terrific. Thank you.

The next question comes from Andrew Wittmann of Robert W. Baird. Please go ahead. Andrew John Wittmann - Robert W. Baird & Co., Inc.: Thank you very much. I guess I wanted to understand some of the margin profile in B&I. Kevin, it sounded like there's some pretty chunky moving parts in there with the write-down and an offset from a strong incentive fee. Can you just gives us the puts and takes, we can kind of get a better sense about what the margin profile is in there?

Yeah. Look, I think if you at historical operating profit margins, the number that ultimately is there is probably not too far off of, let's call it, a normalized level. So, I think, it was positive. There were some additional hits that ultimately offset some of the one-time benefits. So, I think, you're netting to a, let's call it, a pretty stable number. Andrew John Wittmann - Robert W. Baird & Co., Inc.: Okay. And then I guess just to keep going to you, Kevin, just the cash flow and your balance sheet is strong right now, $340 million of net cash. You're doing the buyback, you're doing the dividend, you did an acquisition, still building cash. So, multiples in the industry are pretty high right now, just in general not just publicly traded, but the companies that have been bought out or taken out as well. Does the acquisition environment in the next 6 months, 12 months, probably stay a little bit more subdued because of those multiples or are you guys as aggressively looking at acquisitions today as you always have been?

So look, I think that we continue to be proactively evaluating opportunities. I will tell you that within the structured approach that we have, we still believe that there continue to be opportunities to add value with some of the deals that we have been looking at. It doesn't mean that we execute against them because bids got to equal ask, but ultimately we do believe there continues to be value-added opportunities and I will tell you that it is very clear and a revision to our historical way of thinking about acquisitions. We're going to get a cash on cash return associated with these deals. So, the rigor of implementation, the rigor of the integration, the rigor associated with what the return on cash is relative to the investment are going to be the drivers to our decisions. And we're still finding an ability to make some value. Does that mean that there might be more limited opportunities given some of the high multiples? Perhaps, but we're still seeing some things that we are excited about. Andrew John Wittmann - Robert W. Baird & Co., Inc.: Okay. That's fair enough. Thank you.

The next question comes from Rob Norfleet of Alembic Global Advisors. Please go ahead.

Good morning, guys. Just a quick question on EBIT margins, I guess even when I assumed field services revenues are going to be ramping in the second half of the year and I normalized P&C margins for Q3 and Q4. Your operating profit number's going to be bumping up against your three-year goal of 5.8% to 6.3% that you outlined in your Investor Day. So, I guess my question is why should we not think of those as being conservative goals given that we're already at almost the low end that range here in the first half of year one?

Well, look, we have a strategy that we've outlined and we outlined that six months ago, and ultimately we think that we're making really great progress against that strategy. We'll continue to update you as we work going forward, but we're very pleased with the incremental traction we're gaining on our profitability slate, which is really about ensuring that our portfolio's being reoriented to a more profitable business. So, look, I think if we hit the number sooner, we're not going to stop. So ultimately, the idea is that we believe that we'll continue to drive against the profitable growth agenda, but we're not at this particular point in time going to give you any update as it relates to what the long-term view might look like.

Great. Thanks. And last question, just can you talk about what your bid pipeline looks like in A&T especially new OE work versus rebid opportunities?

Yeah. We – very consistent with what I said last quarter is that we really shifted from the rebid phase to new opportunities. And we have one of the richest pipelines that we've had in this business in a long time, if not ever. And part of our optimism on this business is not only the pipeline, but a real strategic shift in the way we're bidding for projects and winning them where we're creating more solutions for our clients, allowing us to get higher value because of the value that we're creating for our clients with these new business areas. And the strategy we talked about, weapon sustainment, nuclear as well as some other initiatives and we are on track in going after that. So, overall, it's a much richer pipeline we've ever seen and our winning rate is up over 25% year-to-date versus last year in this business for new bookings. So, the pipeline is good.

Great. Thanks for your time. I appreciate it.

The next question comes from Tahira Afzal of KeyBanc Capital Markets. Please go ahead.

Thank you very much. And Steve and Kevin, congratulations to your team on a very good quarter.

Thank you.

First question is given how upbeat and confident you are and clearly we are seeing that now in backlog. Kevin, why would you not take the guidance range up a bit, should we at least assume the lower end of guidance is now looking slightly improbable?

Well, look, we have not changed, Tahira, the range of our guidance. So, as we get through the course of the year, I would say the downside and the upside probably become a little less likely as we're halfway through the year now. But, ultimately, we think it's appropriate to continue to have that range, and we're feeling good about what the range is that we provided to you. I think the way to think about it, all of the good stuff relative to operating profit, margin and gross margin is really happening, that's great stuff. And I think it's really about, all right, so the backlog, how does it burn? Is it better than the midpoint or on the upside, if it's worse, then we are on the downside. So, look, I think it really is, given the dynamics of certain of the industries and markets we're in, that's really the range of our dynamic, less so about margin, more so about how quickly it will burn.

Got it, Kevin. And I guess a follow-up on the restructuring elements. You always said that you're watchful of macro dynamics and restructuring is like an ongoing process always for you. But assuming no major structural changes in the global economy, albeit at least a point where the restructuring elements start to diminish going forward?

Look, well as always, we always will continue to look at driving our business become better, but I will tell you that at least for the 2015 restructuring, where we now have the identified items and it's just a matter before they get executed. So, I would say, the 2015 restructuring has a couple of items that'll hit us in the back half, but not much. And so the 2015 restructuring is for all intents and purposes done, we'll have some couple of execution items. You know that the other restructuring that we did, which is relative to a realignment of our business, but as it relates to 2015 restructuring, we're done.

Got it. Thank you very much, folks.

The next question comes from Chad Dillard of Deutsche Bank. Please go ahead.

Hi. Good morning. How should we think about the cadence of the Buildings & Infrastructure segment in the second half of 2017? You're currently running at a low-single-digit revenue growth rate, but your backlog has been at the upper-single-digits for about past couple of quarters. So, there's clearly a delay between the award and the execution. So, first of all, what's driving that? And are you starting to see those headwinds abate?

Let me just talk about the market and our pipeline a bit and maybe Kevin can talk a little just about how it's translating in the near term. But look, the market dynamics are very positive and it's happening globally. If you just start with roads and highways, aging infrastructure, new governments in place almost in all of our major markets. All are coming together to address the pent up demand to accelerate the improvements upgrades on roads and highways and we're seeing more funding certainty. And so, we're very bullish as we look to the next several quarters and into 2018 on that segment. Even funding opportunities and things like our K-12, the education sector where it's a big part of our core market, a lot of bond issues, they're creating funding. Aviation, we've mentioned several times we're in the midst right now of some very important prospects that we believe we're going to be successful on that are going to continue this significant momentum on what we call our winning streak in aviation that is ahead of us. Even things like U.S. courthouses, which many years ago was a big part of our business and there was a lot of activity, we're seeing a resurgence of opportunities in U.S. courthouses. And then, geographic expansion, we're working on some interesting growth opportunities in places like the Middle East, which we should be able to talk about some more over the next few quarters and some platforms for growth in Asia Pacific. So, you put it all together, our diversified portfolio and the market dynamics and our new strategy, as I mentioned before, our line of business strategy where we're now leveraging our global capabilities and subject matter experts and multi-office execution opportunities to go win local opportunity is clearly on an on an accelerated momentum. So, I think, we're bullish on continued backlog growth in this business, and it will translate into revenue growth.

Let me just add real quickly that, yeah, the momentum is building in that business. And look, it builds over time, right, to the point of when the backlog comes in and I would say that we would expect to see some revenue improvements as we go through the back half of the year and hopefully momentum will then continue on into 2018 as it relates to the momentum that Steve was alluding to.

That's helpful. And then just a question on your other corporate expenses, it looks like it's running at about half the typical run rate if I look back to the past couple of quarters. Just want to understand, is that a new normal, are there any one-time items that I should be aware of? And then just secondly on the cost savings benefit, the incremental cost savings benefit, how should we think about the cadence for the rest of 2017 versus 2018 in terms of the incremental benefit that you realized?

Yeah. Just a quick comment, it was a little bit lower than normal. We had a reserve that was released in the corporate numbers in the quarter, so that openly took it down from what is the normal historical run rate. So, I think you should still think about the run rate kind of being at the numbers that we've seen historically as it relates to the balance of the year.

Great, and then on the cost savings?

On cost savings relative to the corporate numbers?

Well, just a cadence of how I should think about the benefits realized between the rest of 2017, 2018.

Well, look, they will continue to build, obviously. Most of the actions that we've taken have been incurred in 2017 first half. So, those numbers will start to build and the remaining small items probably won't see much of the benefit in this year, but they're minor as it relates to the total. So, by the end of this year, we're at a full run rate of the $285 million in savings. Now, as we have suggested to you when we outlined in our Investor Day, we're going to be now starting to spend some of that money back and specifically that's why we called out the strategic investments, which were approximately $30 million this year. So, you won't see all of that hit the P&L because we're reinvesting back into our profitable growth strategy.

Great. Thank you very much. I'll leave it there.

This concludes our question-and-answer session. I would like to turn the conference back over to Steven J. Demetriou, Chairman and Chief Executive Officer, for any closing remarks.

Okay. Thanks, everyone, for calling in today. We're excited about the positive momentum in executing our strategy, and we're going to stay focused to continue on that path forward. Look forward to talking to you next quarter.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.