Good morning, and welcome, everyone, to Jacobs Solutions Inc.'s Fiscal Fourth Quarter and Full Year 2025 Earnings Conference Call and Webcast. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. On your telephone keypad. At this time, I would like to turn the conference over to Bert Subin, Senior Vice President, Investor Relations. Please go ahead.

Thank you, Audra, and good morning, everyone. Our earnings announcement and 10-Ks were filed this morning, and we have posted a slide presentation on our website which we will reference during the call. I would like to refer you to Slide two of the presentation for information about our forward-looking statements, non-GAAP financial measures, and operating metrics. Now let's turn to the agenda on Slide three. Speaking on today's call will be Jacobs Solutions Inc.'s Chair and CEO, Bob Pragada, and CFO, Venkatesh R. Nathamuni. Bob will begin by providing comments on the business, as well as highlights from our fourth quarter and fiscal year results and a recap of notable awards. Venk will then provide a detailed review of our financial performance, including commentary on end market trends, cash flow, balance sheet data, and our FY 2026 outlook. Finally, Bob will provide closing remarks, then we will open up the call for questions. With that, I turn it over to our Chair and CEO, Bob Pragada.

Good day, everyone, and thank you for joining us to discuss our fourth quarter and fiscal year 2025 business performance. We delivered strong results for Q4 and are pleased to end FY 2025, the first year of our five-year strategy, on a positive note. Both the quarter and the fiscal year, we drove strong double-digit growth in adjusted EPS supported by solid revenue growth and robust margin expansion. Our consolidated backlog grew 6% to $23.1 billion, setting a new record to close out the year. PA Consulting capitalized on strong demand, delivering double-digit revenue and operating profit growth in 2025. Overall, we are very pleased with our results and we see great runway as we enter FY 2026. Turning to Slide four, we provide a detailed overview of our quarterly and full fiscal year results. We grew Q4 adjusted EPS by 28% year over year, and this was primarily driven by 6% net revenue growth, a record quarterly adjusted EBITDA margin of just over 14.4%, and better below-the-line performance. For the full year, we grew adjusted EPS 16%, largely as a result of mid-single-digit net revenue growth and strong margin expansion. We have also seen a solid EPS tailwind from share repurchases, which we increased significantly during FY 2025. Reflecting on our expectations, last quarter we guided to an adjusted EPS range of $6.00 to $6.10 for FY 2025, and we were able to finish the year above the high end of that range at $6.12. Turning to Slide five, I would like to highlight a few notable infrastructure and advanced facility project awards from Q4. These wins highlight the power of our strategy to redefine the asset lifecycle as we prioritize expanding our addressable market with core clients. We continue to see a positive outlook in water and environmental,…

Thank you, Bob, and good day, everyone. During fiscal year 2025, we delivered on our commitment to drive profitable growth, which consisted of double-digit growth in both EBITDA and adjusted EPS, as well as a 7% free cash flow margin. We are demonstrating our differentiated business model through strong margin expansion, and we see continued opportunity to increase our margin profile moving forward. Now please turn to Slide number six, I will walk through our results for Q4. We finished fiscal year 2025 on a strong note. In the fourth quarter, gross revenue increased 7% year over year, and adjusted net revenue, which excludes pass-through revenue, grew by 6%. Q4 adjusted EBITDA was $324 million, growing 12% year over year. Our adjusted EBITDA margin during Q4 came in strong at 14.4%, which is an increase of 79 basis points versus the same quarter last year. As a result, adjusted EPS rose to $1.75, a 28% increase year over year. Our disciplined cost management contributed to a new record adjusted EBITDA margin both during the quarter and for the full fiscal year. And we are well positioned to build on this momentum in fiscal year 2026. Consolidated backlog was up 6% year over year to a record $23.1 billion, putting our trailing twelve-month book-to-bill at 1.1 times. Notably, gross profit and backlog increased over 13% year over year during Q4, highlighting our strong sales performance. Moving on to Slide seven, I will recap fiscal year 2025 results. Fiscal year 2025 total gross revenue increased about 5% year over year, with adjusted net revenue rising more than 5%. Revenue growth and higher margins resulted in adjusted EBITDA and adjusted EPS increasing by 14% and 16%, respectively. We are pleased to end fiscal year 2025 in a strong position with mid-single-digit organic revenue…

Thank you, Venk. In closing, we are proud of our continued strong execution in FY 2025. With a record backlog, expanding margins, and healthy demand across sectors we serve, we are entering FY 2026 with significant momentum. Operator, we will now open the call for questions.

Thank you. We will now begin the question and answer session. Keypad to raise your hand and join the queue. We ask that you please limit yourself to one question and one follow-up to allow everyone an opportunity to ask a question. We will take our first question from Sangita Jain at KeyBanc. Thank you for taking my questions. Can I start with the federal government shutdown? And if you think that had any impact on your fiscal 2026 bookings to date?

Fiscal 2026? Or '25?

Well, the fiscal 2025 ended and the shutdown started. So I am trying to see if you had any impact in the early part of this year from the shutdown.

No. We did not. The bookings trend was those awards in the federal government happened before the shutdown. So short answer is no, Sangita.

Alright, great. And then can you give us an update on PA and how that process is unfolding?

Sure. Sure. So our negotiations continue and I would say they are progressing. We have said from the beginning that we would be making a decision on that on or before March '26. And we are on track to do so.

Great. Thank you. Appreciate it.

Thank you. Thank you, Sangita.

We will move next to Andrew John Wittmann at Baird.

Yes, great. Thanks for taking my questions. I guess my first question is just on the water and environment portion of your business. Obviously, we saw some deceleration here, Bob. You mentioned the environmental business has been a little weaker. I was hoping maybe you could just drill into that. It seems like the water side is strong, but what was it about the environmental side that caused a little bit of softness? Would you tie that to anything? Maybe the administration change or something else?

And then what are the indications that you have today? You made some comments that you see that improving going forward, and I am just wondering kind of what that is based on. So you could drill in a little bit more there. Thank you.

Yeah. Absolutely, Andy. Maybe just I will start with the positive. So the water sector continues to be strong. The pipeline is up double digits as well as our booking trends. So we still see high single-digit growth in the water sector moving forward into FY 2026 and beyond. And that is global, all major geographies are participating in that. In the environmental sector, kind of two dynamics that played out during the year, well, actually during Q4, accentuated in Q4. One was we did have a one-time event, a positive on last year's comp. So that was one. But from kind of the core of the business, the regulatory volatility right now within the environmental world has put a bit of a pause for our private sector clients. And so until those kind of settle down, our private sector clients are tending to pull back a bit of spend that we saw traditionally, and these are some of the larger industrials as well as chemical folks. On the public sector, it really was about disaster relief. The traditional, the kind of the switch of FEMA funding and application down to the state level. There was a bit of a pause on how the states were going to, especially after the O triple B was passed, how states were going to reorganize their budgets. And so we saw some delays in awards as well as a pullback in FEMA.

Was the FEMA the one-time item for the prior year, or you are saying that affected this quarter?

No, prior year, the Q4 of FY 2024 one-time event was a federal agency outside of the US that we had a one-time event.

Got it. Okay. And then just for my follow-up, maybe for Venk. Saw the guidance here on free cash flow. Just the bridge, you are now doing it a percentage of revenue, but if you convert it back to the old way of doing it, it is under the 100% targets. And I was wondering what the items in the '26 outlook are that bridge you because obviously the business fundamentally is equipped to deliver at a 100% or greater. And so that means something is kind of unusual or included in this number that we should know about it. I thought maybe you could expand on that a little bit more.

Yeah. Thanks, Andy, for the question. I would say, you know, first of all, I would point out that as we stated at Investor Day, cash flow margin of 10% target, we are well on track for that. 7% this year and we are guiding to between 7-8%. What we have imputed in that guidance is that there is a kind of a one-time tax event unrelated to our continuing operations that we are expecting sometime in '26. So we just want to, you know, give transparency to that. And then on top of it, you know, as Bob alluded to in response to Sangita's question, you know, we are expecting resolution on our combination with PA, and we are just assuming some cash expenses associated with that. So those are the things that we want to factor in. We feel really good about our free cash flow margin expansion. And we think that will be a true indicator of the efficiency of business. And you are absolutely right. Our efficiency has been improving and we see continued growth in that in fiscal 2026 and beyond.

Okay. Thank you.

You are welcome.

We will move next to Jamie Cook at Truist.

Hi, good morning and congrats on a nice quarter. I guess my first question with regards to the margin performance in Infrastructure and Advanced facilities, we saw a nice improvement there. Anything unusual in the margins and how to think about cadence of margins in that segment as in 2026? And then my second question, Bob, to you sort of more strategically, your peer, one of your public peers, came out this week talking about their competitive advantage on AI and what that means for margin for them over the longer term. You have similar business models. Just wondering how you are leveraging AI? And is there a margin opportunity outside of what you have already announced given your peers came out with much more bullish margin targets longer term? Thank you.

Great. Thanks, Jamie. On the first part with regards to margins in I and AF, I will let Venk take that and then I will address the AI question. Following. So Venk, please.

Great. Hey, Jamie, thanks for that comment. So I would say in terms of our margin performance in I and AF, continues to go up into the right, really solid performance across the entirety of our business. Also a good job of improving our cash collections and so forth. I would say as we guided to in the prepared remarks, when it comes to Q1, there will be a sequential slowdown and a seasonal slowdown. By a couple of factors. One is fringe as it relates to things like medical insurance costs and health benefits that typically have an impact in Q1, but you get the recovery in subsequent quarters. So we will see a linear progression in margins throughout the rest of fiscal year 2026. But we wanted to make sure that we were transparent in terms of how to model it for fiscal Q1. So that is number one. And as it relates to the overall free cash flow margin target of 7% to 8%, imputed in that as I mentioned earlier is the fact that we are continuing to see operational improvements in the margin performance combined with some of the one-time items we expect to happen in fiscal 2026. And all of that is imputed in our margin guidance.

And then on the AI question, Jamie, we have been very vocal about this since dating all the way back to 2021. In fact, if you remember in our '19 and 2022 strategy, we and it was the origins of the partnership with PA Consulting as well. This is a journey we have been on for over five years. How it has transpired? We see it as an accelerant, a differentiator, a space that we continue to use to primarily provide greater solutions externally for our clients. And that has realized itself, and these are things that we have highlighted in the past. All the way back to 2021, being able to deliver a transformational effort for Intel as they were expanding their business model into a foundry model back in 2021 that was done through machine learning. And digital replication. That then led to our partnership with Palantir and all of the water platforms that we have developed since 2022 in reference one in Aqua DNA as well as intelligent O and M that is really creating differentiated position to gain efficiencies for our clients. Most recently, we announced a partnership with NVIDIA, where we are utilizing AI enablement platforms as well as digital cleaning technology. To simulate gigawatt plus type data centers and creating a reference design for NVIDIA clients and even going all the way up to today where streetlight data is providing unbelievable transportation analytics for major metropolitan areas around the country. In fact, over 26 state DOTs are utilizing the Streetlight platform. And so kind of you look at that portfolio and it is creating a differentiated position for growth in the market. And it is contributing to our margin expansion as we continue to go up the value chain.

Thank you. Congrats on a nice quarter.

Thank you.

We will move next to Andrew Alec Kaplowitz with Citi.

Hi. Good morning. This is Natalia on behalf of Andrew Alec Kaplowitz from Citi.

Andrew?

Congrats on the quarter. Maybe first question I will start off with, you cited that transportation was a contributor to growth. I am just curious how the funding visibility under IIJ is progressing? Are you seeing any delays or accelerations as new money flows through the states?

We are not. Not. That continues to be a catalyst. But I would say, you know, that that transportation number we are seeing globally. It is not just in the US. But nice growth that we experienced in Europe, Middle East as well as in Australia and New Zealand. So it is something where and again, it goes to the previous question too, differentiated position utilizing strong transportation analytics and driving mobility concerns. So it is I would say, IHA is a component. Budget clarity in the UK is another component. Growth in the Middle East as well as Australia continues to be a really strong market for us in the transportation space.

Got it. That is super helpful. Maybe just continuing on the strength that you see globally in transportation. More maybe more so just curious about the regional performance across your end markets, which regions outperformed expectations and which ones are you expecting maybe to be a little into 2026? Sunny?

Yeah. We are seeing growth across the board, Andrea. It is our business domestically in the US has got some strong tailwinds behind it. But we are not seeing let me say it in the positive. Our business outside the US and internationally is in growth mode. We have got double-digit growth going on in the Middle East. Europe is going through a nice recovery. And Southeast Asia and Australia and New Zealand are really being buoyed by strong transportation and water growth. So it is pretty uniform for us across the globe.

And if I could add to just what Bob said, I mean, that is true of the PA business as well. We are seeing some good solid momentum in the PA business, especially in the UK and Continental Europe.

Got it. Thank you. Helpful. Congrats on the quarter.

Thanks.

Thank you.

We will go next to Steven Fisher at UBS.

Thanks. Good morning. Wonder if I could just follow-up on Jamie's on the margin in terms of bridging the expansion in margins between fiscal 2025 and fiscal 2026. You can kind of be a little more specific on some of the major puts and takes, be it cost savings, operating leverage, any specific investments that you are making to support AI and digital, anything that you can help us sort of bridge within? Thank you.

Yeah. Thank you, Steve. So as we mentioned, in the prepared remarks, fiscal 2025 solid performance in terms of 110 basis point margin expansion and we are guiding for between fifty and eighty basis points for fiscal 2026. A lot of what happened in fiscal 2025 was driven by some of the operating leverage and cost actions as well as some early improvements in margin. As it relates to gross margins, we see a much bigger contribution especially on the gross margin line going forward, by three things that we outlined at Investor Day. Global delivery being a big component of it. As we look at the mix of business across the globe, we see that there is tremendous adoption of global delivery across our various end markets. So that should be a meaningful driver of margin expansion for us this year. And then we talk about commercial models and how, you know, with the adoption of AI that is increasing, across the multitude of end markets that Bob talked about that also makes a meaningful contribution to margin expansion. So I would say multiple levers on the gross margin front. And then we are committing to maintaining our operating leverage, meaning we want to grow our OpEx at a slower pace than our revenue growth. And that is driven by both efficiencies as well as what we do internally as well as externally for our clients. So a multitude of factors, we feel really good about our margin expansion story and we are guiding for 65 basis points at the midpoint. After 110 basis point expansion in fiscal 2025.

Very helpful. Thank you. And then Bob maybe on the data center side, since I think you guys have a pretty interesting perspective and role in the industry. Being on the front end of things. I am curious if you could talk about the changes in the assignments that you are getting this year versus a year ago. What are your customers you that is different this year? What are the proud of project is different? Is there anything more international or more domestic? Any changes there? Just curious your perspective on how things are different entering '26 versus '25?

Sure. Well, let me start with the geography and then go to how our scope is expanding in that area. We are seeing interest now in data center starts in the Middle East and in Europe. In addition to the US. The US continues to be the strongest of the three. So but it is expanding into Europe, into the Middle East. As well. From a scope standpoint, our scope has traditionally been within the white space. The white and the gray space are now merging. And so this especially the work that we are doing now for NVIDIA is translating into more innovation happening within the server rack in that white space area. And then broadly, solutions around the power requirements behind the meter. As well as reclaimed water that we are expanding our scope on that front too. So all of that put together has really been a net benefit. Just another data point, Steve, in the last quarter, our pipeline in the data center space has gone up 5x. And so we are actually being selective on how we deploy that talent and growing that talent not just in the US but in the Philippines and in India as well.

Very helpful. Thanks a lot.

We will go next to Michael Stephan Dudas at Vertical Research.

Good morning, gentlemen.

Morning, Mike.

Bob, maybe tailing off your last comment on pipeline, which is important. Maybe you could share, you have put out, I guess, in your investment, a two-year pipeline outlooks and you of the segments, maybe you can refresh on that, how that looks today versus a year ago. What areas should we be looking at as monitor on bookings and progress as the year goes through? Is there a certain couple areas? I mean, just touched on some of them, but well, for the pipeline and whether the conversions are going to happen sooner rather than later that might drive the fixed percent to 10% range of the 26 numbers?

Sure. Maybe I will kind of segregate it into two categories. One, by sector and then second by geography. By sector, I would say the fastest growing pipelines and I can quote some numbers here in the data center world just mentioned pipeline is up 5x. In the semiconductor world, we are seeing more growth there after some flatness over the course of last year. And it is really centered around high bandwidth memory for the American client. In the US, semiconductor pipeline is up 20%. Life sciences continues to be strong. And in all those areas, that we mentioned before. That is really been driven in the US. That pipeline is up 50% and the water sector. Water sector continues to be a strong sector for us globally and that is up 50%. So overall, the pipeline is looking really, really strong as we go into FY 2026. The reason why I mentioned those four sectors is because that is where we will see fastest conversion of that pipeline. In 2026 and in early 2027. From a geography standpoint, it is the Middle East. You know, we just announced the award for a new Merabah, specifically the Mukab component of that. That is a huge really good job for us. We are now on the Expo and we have got a few opportunities at Abu Dhabi and if you had rail that could convert here shortly. So across the Middle East region, we are seeing good growth leading up to not just the Expo but also the World Cup coming up too.

Took me the visit in Washington to speak, from the Saudi certainly can add to that visibility, I would assume.

It did. It did. Second yeah.

Course. The second question, Venk, just as we think about cadence through 2026 on free cash and share repurchase, just 2025 had a lot of opportunistic one-time issues. But how do we think about as you allocate that cash relative to share repurchase and whatever, maybe target on relief or what have you as we look through '26?

Yeah, Mike. Thanks for the question. So on I will answer the margin question first, which is and as we guided to expecting a linear progression in margins, Q1 being probably the slowest in terms of margins and then a steady increase right through the rest of the year. Such that we feel good about the 50 to 80 basis points for the full year. As it relates to our use of cash, as we pointed out, our net leverage ratio is right now at 0.8x. We do want to maintain the optionality for additional deployment of cash for a potential increase in our stake in PA. As we have been stating all along. But outside of that, we want to be regular buyers of our stock. We truly believe in the value of being predictable in terms of buying back shares. And we will do it at a regular quantum. And it will not be at the same level as it was last year 150%. But we made the commitment at Investor Day to return at least 60% of our free cash flow in the form of share repurchases and dividends and we are committed to that.

Excellent. Thanks, John.

Thank you.

And we will take our final question from Jerry Revich at Wells Fargo.

Yes. Hi, good morning, everyone. Kurt. Thank you. Hi. Given the top line outlook you have for the year and Uvenk, what you shared for the first quarter, you could be exiting if you hit the high end of the range. With, call it, 13% type pipeline growth in the fourth quarter. Can you just talk about if you do hit the high end of the range given the color you provided earlier, Bob, which end markets I think we need to see that pipeline turn into bookings if we are talking about the high end of outlook being feasible and exiting at that teams growth rate in the fourth quarter if that plays out?

Yes. Jerry, I will take the first part of the question and then Bob can add a lot more color. I would say in terms of the sequential nature of the growth profile as well as the margin profile, you expect we expect to see, you know, continued momentum right through the year. And as we stated, Q4 is the one which will have the extra week. So that will have an extra oomph, if you will, in terms of both revenue contribution as well as margin contribution. But in terms of the end markets, it is pretty broad-based and maybe Bob can add more color on how we expect that to play out?

Yes. The ones that would drive the high end of the range, Jerry, would be life sciences and data centers clearly. And really, that is a matter of those sectors moving at pace. That would not have to be accelerated. Just need to move at pace. And that would be a big contributor. We are seeing semiconductor fabrication facilities start to move. And so if that were to accelerate, that would definitely be a tailwind. Momentum, I think on Citi's question with regards to transportation that international transportation market would provide some momentum as well. And then major prospects, we are seeing major prospects in cities and places in the Middle East, but also we are now starting at the LA Olympics as well as FAA and a few other kind of larger initiatives that would drive the higher end.

And then Bob, on data center specifically, you mentioned a fivefold increase in that pipeline for you. Obviously, that market is very hot, but I do not think it is 5x. Are you folks expanding the scope of what you are doing within data centers? Or is it people are looking further out to lock in services? Can you just expand on that fivefold comment? And if you are willing to share off of what base from a Jacob's standpoint? That would be helpful.

Yeah. Just to put in perspective, it is about a $200 million business for us today. And over time, I will not be specific on time, that business could be as big as our life sciences business today in a few years. So that is kind of where it is headed. I would say it is across the board. It is hyper scalers. It is what we call kind of the neo cloud providers as well as multi-tenant players as well. And it is in just sheer numbers of people that are coming into the market. Our scope has expanded from a content standpoint. Going within the battery limits of the data center into the water requirements as well as power needs. And that is a nice kind of adjacency with our energy and power group. And then alternative delivery. So similar to what we do in the life sciences sector where we as well as in the water sector where we do not just design but program management for the delivery of the facility. We are now in that mode in the data center space. As well.

Super. Thank you. And anything you could do to improve traffic in the New York area? A lot of us on the call would be grateful. So everyone. Okay.

We are working on it, Jerry.

And that concludes our Q and A session. I will now turn the conference back over to Bob Pragada for closing remarks.

Well, thank you. Thank you everyone for joining our earnings call. We look forward to engaging with many of you over the coming days and weeks as we go on the road. And I hope all that are celebrating the US Thanksgiving have a happy holiday.

And this concludes today's conference call. Thank you for your participation. You may now disconnect.