Q3 2026 Jacobs Solutions Inc Earnings Call Transcript
Key Points
- Adjusted EPS grew approximately 14% to $1.84, with over 8% organic adjusted net revenue growth and more than 100 basis points of year-on-year margin expansion.
- Backlog reached a record $29 billion, up 27% year-over-year, with a trailing 12-month book-to-bill of 1.4 times on gross revenue and 1.2 times on net revenue.
- Adjusted EBITDA margin exceeded 15% in Q3, up over 100 basis points year-over-year and nearly 200 basis points compared to the same period in 2024.
- Strong performance in life sciences and advanced manufacturing, with net revenue growing 24% in Q3, driven by data center and semiconductor sectors.
- Raised fiscal year 2026 guidance for the third consecutive time, with adjusted EPS now expected to grow nearly 19% year-over-year at the midpoint.
- Generated $541 million in adjusted free cash flow in Q3, bringing year-to-date to $633 million, and returned over 100% of free cash flow to shareholders for the second consecutive year.
- Net leverage declined to 1.8 times, achieving the target of below 2.0 times a quarter early, with plans to delever to approximately 1.5 times by end of fiscal year 2027.
- Water and environmental end market net revenue growth was only a little more than 1% due to continued year-over-year headwinds in the environmental sector.
- PA Consulting experienced temporary disruption from the recent change in UK governmental leadership, which delayed project start dates.
- The company noted a temporary pause in Middle East activity, with growth there only due to utility work, though pipeline suggests upside next year.
- Adjusted free cash flow guidance for Q4 is expected to be approximately $150 million, a significant decline from Q3's $541 million, partly due to no further adjustments.
- The gap between GAAP and non-GAAP EPS remains, primarily due to tax items related to the PA acquisition, which may persist into Q4.
- The company faces potential lumpiness in gross revenue book-to-bill due to large full program delivery jobs, which could cause quarterly volatility.
Hello everyone.
Thank you for joining us and welcome to the Jacobs Fiscal Third Quarter 2026 Earnings Conference Call and Webcast. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again.
I will now hand the conference over to Bert Subin, Senior Vice President of Investor Relations.
Go ahead.
Thank you, operator, and welcome, everyone. Following market close, we issued our earnings announcement, filed our Form 10-Q, and posted a slide presentation on our website, which we'll reference during the call. I would like to refer you to Slide 2 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 3. Speaking on today's call will be Jacob's Chair and CEO, Bob Pragata, and CFO Venk Nathamuni.
Bob
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