Jacobs Solutions Inc (J) — Q4 2024 Earnings Call Transcript

Thank you, Krista, and good morning, everyone. Our earnings announcement was filed earlier this morning, and we have posted a slide presentation on our website, which we'll reference during this call. Please note, our 10-K will be filed by no later than our due date of November 26. I would like to refer you to Slide 2 of the presentation material for information about our forward-looking statements, non-GAAP financial measures and operating metrics. Turning to the agenda on Slide 3. Speaking on today's call will be Jacobs' Chair and CEO, Bob Pragada; and CFO, Venk Nathamuni. Bob will begin by providing an overview of recent activities and highlights from our fourth quarter and fiscal year results. Venk will then provide a detailed review of our financial performance, including commentary on end market trends, cash flows, balance sheet data and our FY '25 outlook. Finally, Bob will provide closing remarks, and then we'll open up the call for questions. With that, I'll turn it over to our Chair and CEO, Bob Pragada.

Thank you, Bert, and I'm delighted to welcome you to Jacobs at such an exciting time. Good day, everyone, and thank you for joining us to discuss our fourth quarter and fiscal year 2024 business performance. Now moving to Slide 4. We reached a critical milestone on our strategic shift toward a simpler, higher value and higher margin portfolio during the quarter as we closed the separation transaction involving our Critical Mission Solutions and Cyber & Intelligence businesses on September 27, 2024, culminating with Amentum successfully listing on the NYSE under the ticker, AMTM. This strategic shift has been well received by the market, highlighting confidence in our focused direction and reinforcing our commitment to delivering sustained value and growth for our shareholders. Upon closing the transaction, we received $911 million, which was concurrently used to repay existing debt. Additionally, as a part of the transaction, we received a 7.5% equity ownership in Amentum, which could rise to 8%. At the same time, Jacobs’ shareholders became 51% owners in shares of Amentum and their ownership stake could increase up to 55%. I want to take a moment to emphasize how important this transaction is for Jacobs. As a more sharply focused company operating in robust end markets with strong secular growth tailwinds, we believe Jacobs is in an excellent position to create substantial shareholder value. Our simplified structure, global delivery model and ongoing operating efficiencies positions us nicely to build on a strong end to FY '24. This is a testament to the dedication and relentless efforts of our employees, whose hard work is paving the way forward for two exceptional companies. I'd like to extend my deepest gratitude and congratulations to each of them for their role in this pivotal transformation. Turning to Slide 5. We provide an overview of our financial performance for the fourth quarter and fiscal year 2024, with CMS and C&I under discontinued operations. So please note, the results we highlight are related only to continuing operations. Focusing in on the quarter. Total gross revenue increased 4% in Q4, with adjusted net revenue rising 4%. GAAP EPS from continuing operations was $2.38, and includes a positive $1.20 impact from the mark-to-market of our investment in Amentum, netted against the amortization of intangibles, as well as a $0.19 impact from transaction, restructuring and other related costs. Excluding these items, fourth-quarter adjusted EPS was $1.37, marking a 28% increase compared to the previous year. Adjusted EBITDA for Q4 came in at $289 million, which represented a 12% growth versus FY '23. Overall, we are pleased to close out the year with such a positive performance. Looking at the full year. Total gross revenue increased 6% with adjusted net revenue rising 5%. GAAP EPS from continuing operations was $4.79 and included a positive $0.50 impact, related primarily to the net effect of amortization of acquired intangibles and the mark-to-market of our investment in Amentum, and a negative impact of $1.07 from transaction, restructuring and other related costs, which again, were materially driven by the separation transaction. Excluding these items, adjusted EPS from continuing operations was $5.28, marking a 16% increase compared to the previous year. Adjusted EBITDA for FY '24 was $1.06 billion, representing a 9% increase versus FY '23. Our trailing 12-month book-to-bill was 1.35 times as our consolidated backlog increased 23% year-on-year in Q4. Fewer metrics will be watched closely and we are encouraged by the trajectory we're delivering on, with an extremely strong book-to-bill for the fourth quarter. When we analyze our backlog, we are seeing this trend across gross revenue and backlog as well as gross profit and backlog, which is a good indicator as we think about our growth for FY '25 and beyond. Turning to Slide 6, and building on my backlog and book-to-bill commentary. I'm excited to report that during the quarter, we continued to deliver substantial wins across the business and across geographies, a testament to our market positioning, deep domain expertise, and long-term trusted client relationships. As we move forward as a simpler and more focused company, we will be providing commentary on revenue across three key end markets, water and environmental, life sciences and advanced manufacturing, and critical infrastructure. These end markets roll up to infrastructure and advanced facilities, which is comprised of our historic P&PS business and the retained portion of Divergent Solutions. PA Consulting remains in its own segment and is unchanged. Moving on to how our end markets are performing. Water and Environmental is demonstrating impressive growth. Water conveyance, water infrastructure, wastewater, potable reuse, and efficient asset management are just some of the key drivers of our client spend. And we have been successful servicing demand across these categories with double-digit growth in Q4. Notably, during Q4, we delivered several key wins, including our appointment by the Los Angeles Sanitation and Environment to provide progressive design-build services for the Donald C. Tillman Advanced Water Equalization basins, a critical part of LA's long-term plans to increase recycled water production by 2035. Significantly, this is one of the single largest bookings in the Water and Environmental end market in our company's history. In Life Sciences and Advanced Manufacturing, we continue to see robust demand from Life Sciences clients, boosted by GLP-1 investment, and we expect this trend to continue in FY '25. In Semiconductors, we are diversifying our customer base and expanding our global reach. One example is our recent design win for a new test and assembly facility with CG Semi in India. The facility will manufacture advanced and legacy packages for industries such as automotive, consumer, industrial and 5G communications, and facilitate our strategic positioning in India where electronics manufacturing spend is expected to grow meaningfully. Global investment spending across Life Sciences, Semis, and Data Centers is creating a robust backdrop for Jacobs in FY '25 and beyond. Moving on to Critical Infrastructure. During the quarter, we secured a technical project manager role with the Department of Energy Security & Net Zero in the UK. A great example of how we are leveraging our differentiated offering in energy security and transition that demonstrates the power of our partnership and greater collaboration with PA Consulting. We will provide project management and advisory services along with associated strategic support to the Hydrogen and Industrial Carbon Capture program that includes consulting, end-to-end innovation, design, and analytics. We are also seeing continued traction in the Middle East as Saudi Vision 2030 significantly increases the number of opportunities across critical infrastructure. Notably, during Q4, we announced a new award to lead advisory, design, and engineering for the King Salman International Airport, in Riyadh, Saudi Arabia. Our outlook for near and long-term expansion in the region remains intact, and we are seeing signals of strong demand for infrastructure projects across the globe in the early days of FY '25. In summary, we remain confident in our ability to grow the business and deliver superior execution to meet our clients' expectations. We're excited for the future as a more focused company and look forward to presenting our strategic vision for growth over the coming years at our Investor Day, in Miami, on February 18. Now, I'll turn the call over to Venk to review our financial results in further detail.

Thank you, Bob, and good day, everyone. We are pleased with our Q4 performance, which contributed to a strong year. Let me now begin by summarizing a few of the financial highlights on Slides 7 and 8. Starting on Slide 7, we show quarterly results, and I'll provide additional context and detail around our performance from continuing operations. As Bob noted, CMS and C&I have been excluded from our results as those businesses are listed under discontinued operations. We provide a reconciliation on Page 24 in the appendix, that will allow you to compare results for the enterprise, including the businesses that were separated in the fourth quarter. Notably, I want to highlight that in total, we did outpace the adjusted EPS midpoint for fiscal '24 that we guided to with Q3 results. However, from here forth, we will only be discussing continuing operations. Fourth-quarter gross revenue grew 4% year-over-year and adjusted net revenue, which excludes the impact of pass-through revenue, also grew 4%. Q4 adjusted EBITDA was $289 million, growing 12% year-over-year to an adjusted EBITDA margin of 13.6%, which is an increase of approximately 100 basis points from last year. Fourth-quarter adjusted EPS from continuing operations was $1.37, marking a 28% increase compared to the previous year. Please note that during the quarter, GAAP EPS benefited from a $187 million pre-tax gain associated with the mark-to-market adjustment of our investment in Amentum, with no benefit to adjusted EPS. Additionally, PA Consulting contributed $0.10 of EPS dilution to GAAP EPS from periodic fair value change impacts on our redeemable non-controlling interest balances, and this impact was added back to adjusted EPS in Q4. We provide a walk-through of our adjusted EPS calculation for continuing operations on Slide 23. Finally, consolidated backlog was up almost 23% year-over-year to $21.8 billion. The trailing 12-month revenue book-to-bill ratio was 1.35 times, with our gross profit and backlog increasing 12% year-over-year. As Bob noted earlier, this is an encouraging data point as we look ahead to fiscal '25. The Q4 book-to-bill of 1.67 times, though partly a function of higher pass-through revenue, is still very positive and helped us end the year on a high note. Moving on to Slide 8, I'll recap fiscal '24 results. Fiscal '24 total gross revenue increased 6% year-over-year, with adjusted net revenue rising 5%. Adjusted EBITDA increased 9% as a function of higher revenue and just over 40 basis points of margin expansion. Adjusted EPS from continuing operations increased 16% year-on-year. We're pleased to end fiscal '24 in a strong position with solid organic revenue growth, double-digit EPS growth, and a backlog that sets us up for continued growth in fiscal '25 and beyond. Regarding the performance of our end markets in the quarter, let's now turn to Slide 9. As Bob noted earlier, we're reporting our business as Infrastructure and Advanced Facilities, and PA Consulting, and we will discuss revenue trends in our three key end markets. This should provide helpful context to supplement our overall results. We'll focus on adjusted net revenue in our discussion as we believe this is a better indicator of business trends as it excludes pass-through revenues. However, we do list gross revenue growth across each end market for your reference. In Water and Environmental, growth was solid, with adjusted net revenue increasing 13% versus the same quarter last year. Water and Environmental demand has been strong and we expect that to continue in fiscal '25 based on our current backlog and pipeline. Encouragingly, demand is being driven by multiple geographies, with North America, UK, Ireland, Australia, and New Zealand, all growing double digits in the quarter. Our Life Sciences and Advanced Manufacturing end market revenue grew 3% in Q4, with strength partially offset by an unfavorable revenue adjustment related to an EV battery manufacturer customer bankruptcy in Europe. Our outlook for this end market is for Life Sciences to be the primary driver of revenue growth in fiscal '25 as capital investment from our Life Sciences customers remains robust. We're also seeing our customer base broaden in Semis, and the AI data center opportunity is expanding. As we look into fiscal '25 and beyond, we anticipate top-line growth in this end market, not only from rising industry investment, but also differentiation through our cross-cutting Water and Energy capabilities. In Critical Infrastructure, adjusted net revenue increased 1%, with North America showing steady growth, while certain international markets have lagged. We expect to see improvement across critical infrastructure in fiscal '25, with our backlog and pipeline underpinning a strong recovery as transportation project demand is rising. Putting this all together, we have line of sight to maintaining strong revenue growth in Water and Environmental and increasing our growth rates in Life Sciences and Advanced Manufacturing, as well as Critical Infrastructure end markets in the coming year relative to Q4. Now moving on to Slide 10, I will provide a quick overview of our segment financials. We saw strong trends in Q4 for Infrastructure and Advanced Facilities operating profit, which increased 12% year-over-year in total and 12% on a constant currency basis. In fiscal '24, operating profit increased 9% year-over-year and 9% on a constant currency basis. Infrastructure and Advanced Facilities results were aided by both revenue growth and margin expansion. Moving on to PA Consulting, results reflect modest top-line growth, but good execution on the bottom-line. Q4 operating profit increased 4% year-over-year, and fiscal '24 operating profit increased 1%. Both were slightly negative on a constant currency basis. However, we are encouraged by recent bookings and anticipate that growth will trend higher in fiscal '25. Moving on to Slide 11, we provide an overview of cash generation and balance sheet data. For fiscal '24, free cash flow from continuing operations was strong at $718 million and enabled us to repurchase $403 million in shares and pay $143 million in cash dividends. We also paid down debt and ended the year with roughly $1.1 billion in net debt, which represented a net leverage ratio of 1.0 times on LTM adjusted EBITDA. This is at the low end of our 1.0 times to 1.5 times target. Our balance sheet strength will enable continued investment in the business as well as returns to shareholders through share repurchases and long-term dividend growth. We currently have $472 million in remaining authorization under our repurchase program, and recently declared a dividend of $0.29, a 12% increase year-over-year. And finally, please turn to Slide 12 for our fiscal '25 outlook. We expect adjusted net revenue to increase mid to high-single digits year-over-year, adjusted EBITDA margin to range from 13.8% to 14%, adjusted EPS to range from $5.80 to $6.20, and reported free cash flow conversion to be more than 100%. We will have cash outflows related to restructuring of $75 million to $95 million in fiscal 2025, with that impact declining through fiscal '25. The midpoint of our guidance range for adjusted EPS would indicate about 14% growth year-over-year, and the midpoint of our guidance range for adjusted EBITDA would indicate approximately 15% growth year-over-year, highlighting our strong outlook for business performance this year. We provide relevant assumptions on the right side of the page to help you with your modeling. One item to be mindful of is our projected tax rate of approximately 26%. Our fiscal '25 tax rate is expected to be several points higher than in fiscal '24 and fiscal '23, and is a function of multiple discrete tax benefits in those historical periods that are not expected to recur. Despite the higher tax rate, we will still anticipate strong adjusted EPS growth in fiscal '25. I'd note, from a trend perspective, we expect to start fiscal '25 with Q1 revenue adjusted EBITDA margin, and earnings below Q4 of fiscal '24, reflecting typical seasonality. However, as we progress through fiscal '25, we expect to see sequential growth in our financial results through Q4. Overall, we're excited about the future of Jacobs and are entering fiscal '25 in a strong position financially, with positive underlying momentum in the business. With that, I'll turn the call back over to Bob.

Thank you, Venk. In closing, as a more focused enterprise, we are exceptionally well positioned to capitalize on the momentum in the Water and Environmental, Life Sciences and Advanced Manufacturing, and Critical Infrastructure end markets. And we remain confident in our ability to grow market share and fulfill the needs of our clients across our business over time. Operator, we will now open the call for questions.

Good morning, gentlemen, and congrats on a very active and successful spin and the recap.

Thanks, Mike.

Thank you, Mike.

So impressive, your standalone backlog growth, and heading into 2025. Maybe you can talk about the pipeline you see among the three major end markets, growth in the pipeline year-over-year, and how much of your 2025 net revenues and EBITDA do you currently have kind of in backlog or in sight, and what's required to achieve your midpoint year targets?

Sure. So Michael, on the first question, pipeline growth has been really, really strong. If you look at the kind of the big verticals, Water and Environmental is up double-digits on a pipeline basis. Advanced Facilities is really driven by Life Sciences; we're seeing double-digit growth in that pipeline. And in Critical Infrastructure, which is really driven by transportation, we're seeing a nice comeback on the pipeline, specifically in our European markets, including the UK and Australia and New Zealand end markets. The Middle East continues to grow too. If you kind of aggregate those, the pipeline looks really, really strong. On the second question, I don't want to go too far on the actual number, but I'd say historically, we would see a certain percentage of our next fiscal year revenue in backlog. That percentage is a higher percentage this year. Now, on a 1.67 times book-to-bill, that's not all in one year; that's multiyear booking, but the contracted component for FY '25 is a very strong number.

That's helpful. My follow-up is, Bob, maybe you can share views from your client base and how Jacobs is positioning relative to the election and some of the machinations we're hearing out of the federal government. How that could translate to your business in the U.S.?

Sure. So, maybe two parts to that question. We kind of see it overall as a net neutral. If you look at those end markets that we are now focusing on, these are jobs that were either tied to some level of state and local element, which are continuing, think Water and Environmental. And the transportation jobs that we're in the middle of, at a national level in the U.S., have got long tails on them, and we still see the pipeline really strong. So infrastructure-wise, we're feeling it's net neutral. Just as a note, we have been seeing some softness within the federal market. In our portfolio, about 10% of our business is in that federal market. However, it's of that 10%, a majority of that is in DoD and DoD infrastructure, specifically, which we see that pipeline continuing on. Advanced Facilities remain strong. That industrial reshoring, onshoring, as well as what's happening in science and technology, specifically in the U.S., we’re feeling confident about it.

Thank you, Bob.

Thanks. Good morning, and I'll add my congratulations on the completion of the deals. And thanks for all the color on the growth rates within the segments. It's a pretty wide range of growth rates between Water versus the Life Sciences versus Critical Infrastructure, 1,000 basis points or more, it seems like. And I know you said you expect the slower ones to accelerate. Can you just maybe frame for us, kind of how big a gap you're expecting or how much you can close that gap between them? And just, kind of curious, was there that big a gap or a drag from that EV cancellation in the quarter? And was there any sort of weather impact as one of your peers cited?

Yeah. So let me answer the last part, Steve, first. It was a gap from the EV cancellation. So on the Advanced Facilities component, we do see closing that gap. It would have been closed already, but the future looks very bright there, represented by our backlog. Water and Environmental, we see continued growth. And on transportation, specifically Critical Infrastructure, what we're seeing in our pipeline as well as Q1. So reporting wins in transportation specifically, outside the U.S., is really that gap was outside the U.S. That's already been seen in real time. Certainty in the budget in the UK is giving us confidence as well as some strong wins in Australia and New Zealand. So we don't really see that gap being a big one.

Okay. That's helpful. And then just a follow-up. How should we think about the progress now on some of the corporate costs that you have embedded in the segment reporting in '25 versus '24? And relative to the restructuring costs, it sounds like that will kind of continue on throughout the year. Do you think the fourth quarter will still have some of that in there, or will it be done by the time the fourth quarter starts?

Go, Venk.

Yeah. Thank you, Steve. So a couple of questions here. So one on the overall cost structure. As you can tell, we made pretty significant progress in fiscal '24 in terms of our operating margin and EBITDA margin expansion. And I would say there's still room there in terms of improving the margins over time, and that's why we guided to a 100 basis point increase year-on-year for fiscal '25. If you look at the various parts of it, clearly, from the standpoint of operational efficiency, we still have room there. We'll have a full year of the annualization of operating efficiencies because a lot of it happened towards the second half of fiscal '24. You'll see a lot of that manifest in its entirety in fiscal '25. Overall, cost controls are something that we are focused on. And last but not least, we are continuing to improve our mix of our business as well as how we implement these projects from a global connectivity standpoint. So, multiple facets to this margin story over time. Your second question about restructuring: As you pointed out, we did have restructuring in fiscal '24. Clearly, as you know, we have a commitment to Amentum to continue to provide our transition services that will last maybe another two to three quarters. So, we should see a pretty dramatic decline in our restructuring going from fiscal '24 to fiscal '25, and we've quantified it in the range of $75 million to $95 million. Obviously, we'll try to do our best to ensure that marks the end of our restructuring meaningfully.

Great. Thanks for taking my questions, guys. I guess I wanted to build on an earlier question and just kind of talk about the backlog as it relates to the outlook. I mean, your backlog is up 22.5% year-over-year, which is great. But your revenue guidance is up mid to high-single digits. That seems like a really wide gap. And so I heard some of the comments about some longer projects. But is there stuff in the backlog that's not moving? Is some of the backlog from these bigger chunkier bookings like you're doing for maybe Advanced Technology and Life Sciences, you're doing construction management scope, does that flow through as lower margin? There's a lot going on there, but I think the discrepancy between the backlog growth and the revenue guidance is worth digging into a little bit deeper. So if you could comment on that, I think would be helpful. Thank you.

Sure. And thanks, Andy. So a couple of things. It is the most significant book-to-bill that we've had, probably in the history of the company, and I’m really proud of that. The Life Sciences and the Water bookings that we've had are large, and they're multiyear. And so, they're not degrading to margins. These are at and in certain cases above our corporate margins that we've demonstrated here in the last few quarters. So it's the multi-year component that is driving the revenue guidance. And we also gave room on the mid to high-single digits to compensate for the bell-shaped curve on a project lifecycle too. So like we’re feeling really good. These are some of the largest bookings that we’ve had, and I think I mentioned in the script, in the history of the company, which goes through the testament of our market positioning right now.

Got it. I have a question. The restructuring was expected, and you have the Amentum transition services along with the first-year activities related to the spin-off. But Bob, as you look at 2026, do you believe that will be the year we see clean results? It seems like even by the end of this year, the results will be relatively clean. I thought it would be good to have you comment on 2026 in a similar context.

No, absolutely. It's a very important question, and thanks for asking it. I'd say in the second half, you're going to see a significant decay. And '26, short answer, yes. Yes, being clean.

Yeah. Got it. Thanks, guys. That's all I have for today.

Thank you.

Thanks, Andy.

Hey. Great. Thanks, and good morning. Just about your earlier comment regarding some of the buffer that you've built into the 5%, or sorry, call it, the mid to high-single digit organic growth rate to allow for some of these longer life projects. This seems to be in line with the guidance you provided pre-election. I guess, would you say that range also builds in some buffer for maybe administration change or just kind of seeing how things evolve in the early part of the year? Just trying to understand how you're thinking about the low end versus the high end given some of the moving pieces, particularly on the U.S. side? Thanks.

Yeah, Saba. My answer was really based on our clients' activity. And going back to any potential delays that happened as a result of the election, we don't feel that those will pertain to these jobs that are going forward at the state and local level, supporting some large events happening in Los Angeles and in other venues around the world, specifically on the Water and Transportation side. On the Advanced Facility side, these are commitments that our clients have made to the end markets on some critical therapies that the world needs. So these are tied to global trends that are probably a little segregated from what might happen regarding churn in the Beltway.

And Saba, I’d like to add that the range we've provided reflects what we consider the most likely outcome. As Bob mentioned, it depends on the customer burn profile and similar factors. This is factored into our guidance, which is why we expect revenue growth in the mid to high-single digits.

All right. Great. That's helpful. And then maybe just on the markets outside of the U.S., as we look at maybe the UK, the Middle East. It looks like some changing priority in the Middle East, but it sounds like from your commentary that's going well. Can you maybe just talk about the focus on those regions? What drives you to continue to be exposed there? It looks like there are a lot of dollars there, particularly in the Middle East, but a bit of an evolution in how they're going about their development for the next few years? And also if you can just comment on, post the recent election in the UK, how you see the spending priorities reflected in the recent infrastructure or the recent budget, and how they align with what you're doing in that market? Just want to get a bit more perspective on those two larger regions for you outside of the U.S. Thanks.

Sure. Let me break down the question here. On the two geographies, and actually, this comment applies to every single one of our geographies. We are in the locales that we're in to service those local clients. And so, just on that element, with regards to the UK and the Middle East, those are strong markets. Yes, there are economic ebbs and flows in those markets. Our client base, especially now with our portfolio, these are long-term trends. So any near-term oscillations are solid on the long-term. In the UK and the Middle East, we're seeing tailwinds come back; they might not be as strong as 10 years ago, but compared to recent times, we're seeing some of that come through. We gauge that through our pipeline, and we're seeing our pipeline grow. Water in the UK never slowed down. The upside we’re talking about is honed in on transportation as well as some of our Advanced Facilities world. But the key is that us staying in those geographies is really about our talent, and that talent addresses both the local market and key talent we have in the UK, Europe, India, Australia, and New Zealand that are being deployed around the world. So that talent piece is really key in how we think about our global model. On the elections, we again don't think that will affect what we're talking about as far as the strength in the end markets. We stand behind the numbers we put out.

Great. Thanks very much for the color.

Hi. Good morning. This is Natalia Bach on behalf of Andy Kaplowitz.

Hi. Good morning.

Good morning. First question I'd like to ask, in PA Consulting, exit margins reflect continued improvement. As we think about fiscal year '25, do you expect that trend to continue? And then can you provide more color on your visibility towards revenue growth expectations for the segment? You have relatively easier comps and backlog seems to be picking up. Any detail would be helpful.

Sure. I'll take the first question, and then Venk will discuss our confidence in revenue growth for the year. Regarding margins, we've observed that during the lead-up to the election in the UK and in other regions where PA operates, the margins have remained consistent. The team has excelled in maintaining a focus on higher value and the strength of our offerings for clients. Therefore, we anticipate that this margin profile will remain stable in the future. Venk, would you like to address the revenue growth?

Yeah, absolutely. So in terms of just revenue growth for the PA Consulting business, we've had good insight into their pipeline, especially over the last several quarters. We're feeling pretty good about the inflection point in PA's business in terms of the growth really coming together in fiscal '25. When we provided the high-level guidance for our overall revenue growth of mid to high-single digits, that certainly includes PA Consulting also providing that growth acceleration from the prior year. So all of that is taken into account as we give our overall guidance for all of PA Consulting plus Jacobs, and we feel there is certainly an inflection point in fiscal '25 with regards to the growth from PA Consulting.

And their backlog grew at the same rate as ours did.

Got it. Helpful. And then, just one more follow-up question for me. It appears the near-term focus with respect to capital deployment seems to be toward debt paydown and share repurchases. But as you now sit with your new portfolio, are there any areas in your portfolio where potential M&A could fill the gap?

Yeah. No, great question. First of all, I’d like to reiterate that, as I mentioned in the script, we are committed to returning cash to shareholders in the form of buybacks and dividends, and we returned almost 60% of free cash flow in fiscal '24. So, we're continuing to commit to a significant portion of our free cash flow being returned to shareholders. On top of it, as you pointed out, we have been paying down debt. We did get about $911 million in Amentum proceeds on day one of the transaction, which we then used to pay down debt. We do still have a 7.5% to 8% retained stake that we hope to monetize in the first half of calendar '25. Beyond that, as I look at the capital allocation priorities for us, there's a lot of excitement about organic growth opportunities in the business, so number one priority will continue to be investing in the organic growth of the business. Number two, as I said before, is returning cash to shareholders in the form of both dividends and buybacks, and we're committed to that. Finally, from an M&A perspective, that is certainly an accelerant for us in the long term. We'll talk a lot more about it during Investor Day, but suffice it to say that we have lots of optionality with the balance sheet position that we have, the significant free cash flow that we generate, and our ability to return that to shareholders as well.

Great. Thanks so much for taking my questions. So if I could just take the growth outlook to a higher level, can you help us understand if you're thinking higher growth, internationally versus domestically, given the elections? I know we've discussed elections a few times already on this call.

No, Sangita. That’s the way it came across if that wasn’t the case. We had some flattening growth outside the U.S. in our infrastructure end markets. We’re talking about that inflecting forward. Within the U.S., those numbers have been positive for the last fiscal year.

And how about your outlook for the upcoming year? Do you think the U.S. will still grow faster, or how do you see it?

We do. And we're seeing that in our pipeline right now growing as well as our book-to-bill and the double-digit growth that we've had in backlog.

Thank you.

Thank you.

Hey. Good morning, guys.

Yeah. Good morning, Chad.

My question is about the adjusted operating margins for the Infrastructure and Advanced Facilities business. Could you break it down in two ways? First, I’m trying to understand how the growth in the Water and Life Sciences sub-segments contributes to margins. Secondly, you mentioned cost savings; how should we consider the year-on-year improvement in margins resulting from that?

Yeah, Chad, thanks for those questions. So, I'd say, look, first on the end markets, the way we model our business is to obviously go after the best opportunities across those different end markets and continue to focus on top-line growth, but also in a way that optimizes margin so that it meets our corporate average. In any given quarter, any given in the first half or second half of the year, we can certainly have ups and downs concerning the margin profiles. What we try to optimize for is a good balance between continued revenue growth as well as gross margins and operating margins improving over time. That's what we've quantified in terms of our expectation for fiscal '25. I wouldn't say one business is any different from another from the standpoint of the optimization. But certainly, we want to continue to focus on profitable revenue growth such that both our revenue and margins expand over time. So, that's more work. And then going to your second question about cost savings. As I alluded to in response to a previous question, we have made significant strides in improving the operating efficiency, but we only had six months of that take effect in fiscal '24. You’ll have the annualization of operating efficiencies take full effect in fiscal '25, and that's part of the margin expansion story for us. But it's not just that. In addition to it, as I mentioned before, we are optimizing our go-to-market, we're optimizing our global connectivity, and so forth. So we do see a multi-year trend regarding focusing on improving our profitability over time, not just on the cost side but certainly from a business mix standpoint as well as from an efficiency standpoint.

Great. That's helpful. And then the second question has to do with your revenue guidance for the full year that mid to high-single digits. So, I guess to get to that higher end of that range, like what needs to go right, either from a geographic standpoint or from a market standpoint? Like, what would you need to see there?

It would be if we see an acceleration in the jobs we're on. That heavy focus now from the backlog growth coming from our Water as well as Life Sciences sector; those could be accelerated, and we could find ourselves on the higher end of that range. So, we're watching that closely.

Hi, yes. Hi. Good morning, everyone, and congratulations. Can I ask for the legacy People and Places business? You folks have delivered steady margin expansion, you're now running scope margins in the low teens. As you think about the margin upside that you discussed over the course of this call, what do you think is a reasonable target or a bogey where you can drive that business over time? Are we talking about tens of basis points improvements? Or can we see more significant margin upside in that line of business?

Yeah, Jerry. Thank you for the question. Yes, certainly, we feel good about the margin expansion for fiscal '25 that I alluded to both in the prepared remarks as well as in response to a couple of questions. As we look ahead beyond fiscal '25, we will provide a lot more clarity during Investor Day, not just in terms of our revenue growth, end-market mix, but also in terms of capital allocation and margin expansion story. Suffice it to say that we do feel good about our margin expansion in fiscal '25, and beyond that, we'll cover it in more detail.

Yeah. Jerry, it's a great question. I'd say that the operating model is in full effect right now. You're right, we got out ahead of that during the course of the year. I think the biggest change has been getting back to where we came from, where we were externally focused on our clients' business, and that has really come to the core of how we think about the world. And instead of being internally focused on, some of the transactions that we were doing, whether they'd be over the course of the last couple of years or leading up to this quarter. So that's been the real change: understanding our clients' business, and we're seeing it in our sales performance in Q3 and Q4 of last year. So, we're excited because those actions and behaviors are turning into a 22% backlog growth at a 1.67 times book-to-bill. The proof is in the numbers. So, we're excited.

Thank you.

Thank you.

Thank you.

Thank you, everyone, for joining our call. We look forward to providing further updates and visiting with investors and analysts in the coming weeks and months. Thank you very much.