Jacobs Solutions Tops Q2 Expectations, Plans To Separate Critical Mission Solutions Business

Jacobs Solutions Inc J reported second-quarter FY23 revenue growth of 6.4% year-over-year to $4.08 billion, beating the consensus of $3.83 billion.

• The company recorded an EPS increase of 149% Y/Y on a GAAP basis to $1.70. 
• Adjusted EPS improved by 5% Y/Y to $1.81, beating the consensus of $1.75.
• Revenues by segments: Critical Mission Solutions $1.91 billion (+5% Y/Y), People & Places Solutions $2.35 billion (+8.4% Y/Y), Divergent Solutions $241.22 million (+0.8% Y/Y) and PA Consulting $300.99 million (+1.2% Y/Y).
• At the end of the quarter, the company's backlog increased by 4.3% Y/Y to $28.97 billion.
• The gross margin contracted by 90 bps to 21.8%. The operating margin expanded by 277 bps to 7.1%.
• Adjusted operating margin expanded by 10 bps to 8.7%.
• Jacobs's net cash provided by operating activities year-to-date was $434.34 million, compared to $446.26 million in 2Q22.
• "Our strong performance across the portfolio, led by People and Places Solutions Operating Profit growth of 21% year over year, demonstrates the continued high demand for our world-class services," commented Jacobs' CEO Bob Pragada.
• At the end of the quarter, the company held cash and equivalents of $1.22 billion.
• "Both revenue and gross margin in backlog improved in Q2, which provides visibility supporting our fiscal year 2023 outlook. We continue to see increasing momentum in critical infrastructure, including water, transportation and sustainability," commented CFO Kevin Berryman.
• FY23 Outlook: Jacobs Solutions narrowed outlook, sees adjusted EBITDA of $1.42 billion-$1.47 billion (prior $1.4 billion -$1.48 billion); adjusted EPS of $7.25-$7.45 (prior $7.20-$7.50), vs. $7.37 estimate.
• Additionally, the company announced a plan to separate its Critical Mission Solutions (CMS) business from Jacobs, creating two independent companies.

Price Action: J shares are trading higher by 4.30% at $122.33 on Tuesday at the time of publication.

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