Robert Pragada: Sure. So, overall, solid — the work that we’re seeing both in Southeast Asia, in Australia, New Zealand and in Europe. And Europe, clearly driven by the geopolitical kind of impact that it’s had on energy transition that continues. The interconnectors that we are, not just in the middle of in Europe, but the additional pursuits that we have in place kind of put some tailwinds there. I’d say in the US, it’s been not just a market on its own, but it’s also been an enabling market, our expertise around renewables and then taking that energy expertise in taking it to areas such as data centers and the EV ecosystem with regards to transportation. That’s probably been a greater level of focus in the U.S. So kind of the diversity of our skill sets is really helping that energy and power group that we have. Again, it started off from a smaller base, but it’s doubled in size just in the year.
Sangita Jain: Good. Thank you so much.
Operator: Your next question comes from the line of Chad Dillard with Bernstein. Please go ahead.
Chad Dillard: Hi. Good morning, guys.
Robert Pragada: Hi, good morning, Chad.
Kevin Berryman: Good morning, Chad
Chad Dillard: So, in your prepared remarks, you talked about the PFAS legislation that was just handed down. Just trying to get a sense for how to think about timing for potential awards in your backlog, like what’s the design cycle for that? And then can you also talk about how Jacobs is positioned to win there?
Robert Pragada: Yes. So Chad, you probably heard this before. Kind of the $200 billion that spans over the course of the next 25 years, that is across multiple end markets. And so we can see a direct time line to that over a long period of time as regulations continue to become more and more part of the law. The way PFAS — within the DoD, DoD agencies, specifically the Navy and the Air Force as well as the Corps of Engineers, that’s showing up as individual pursuits, and it’s kind of in that $75 million to $100 million of annual revenue for us as an offering. What you don’t see is probably the bigger piece of PFAS, which is in drinking water. And so the work that the PFAS remediation and PFAS consulting that we do within a water offering or within a — whether it be water treatment or wastewater reclamation project, that continues to grow.
So, to look at this as an incremental is going to be a little cloudy, but to see it as a catalyst for scope growth on existing work is kind of how we’re looking at it. And these are, like I said on the first question, these are clients that we’ve had for a long time and will continue to be a critical part of our offering.
Chad Dillard: That’s helpful. And then just over on the infrastructure side, specifically on transportation. Can you talk about like how your pipeline is evolving? How’s it changed this quarter versus maybe a year ago? Any color on that would be helpful.
Robert Pragada: Sure. Pipeline growth is there, probably more indexed towards the US in what’s the IIJA focus that’s come through and you’ve seen that in some of our awards. So, I’d say the larger rail opportunities we talked about last quarter, we talked about this quarter, those continue. The highways work is continuing to grow. And then in Australia and in the Middle East as well, we’re seeing continued growth in transport. I’d say that, the areas that as there’s more stability that comes within the U.K., that we could see the growth coming in would be in the U.K. And then what’s differentiating us amongst our — not just our competitive pool, but creating more value for our clients is how we’re enabling that with our digital platforms.
So the use of StreetLight Data not just in our own work but how that’s kind of almost revolutionizing our offering to clients is something that we’ve got it firmly embedded in the US. But we’re now starting to see use cases come about both in the U.K. as well as in the Middle East and soon to come in Australia.
Chad Dillard: Okay. Thank you.
Operator: Your next question comes from the line of Justin Hauke with Baird. Please go ahead.
Justin Hauke: Yes. Good morning. Thanks for taking my question. I just — I wanted to clarify one thing on the guidance. The CMS outlook for the back half of the year, I think previously you guys were talking about kind of a mid-single-digit constant currency growth rate. It’s a little bit below in the first half, but I think you were talking about some program losses that are going to pressure the second half. And so I just wanted to make sure that we understood kind of what that commentary meant and what your expectations are for the revenue growth in the back half of the year at CMS?
Kevin Berryman: Yes, Justin, we did have a loss, one, one that was somewhat sizable which impacts the, I would say, the short-term and I would call short-term Q3, Q4. While we have a lot of short-cycle awards that are filling in the gap fundamentally offsetting and mitigating the impacts of that, it probably puts us in — in the short run to be more flattish as opposed to seeing the growth of single-digits, mid-single-digits. So, I think that’s the dynamic at least in Q3, Q4. I would remind you that this is the business that is going to be transferred over. But I would tell you, the team is doing an amazing job in filling in and positioning for exiting 2024, putting itself back in a place to be seeing incremental growth in 2025.
Robert Pragada: And maybe just one thing to add. The operational efficiencies that the team has really delivered through that double-digit bottom-line growth for this quarter, and we mentioned it last quarter as well, with operating margins that are now the highest that we’ve seen in the business is another real highlight for what we’re doing within CMS.
Kevin Berryman: And that’s a good point, Bob, because we shouldn’t be seeing impacts on the margin profile, even though we’re discussing this one item. But the team has done a really nice job on the margin front.
Justin Hauke: Okay. Thank you for clarifying. And I guess my second one is just to ask on the corporate unallocated costs. The trending down to the $50 million, you’re not expecting that line item to come down until post separation though, right? So, this kind of $58 million that you’ve had the last two quarters, that’s kind of the run rate for the balance of the year. And then with the spin, that’s when you would expect like the step function change in the first quarter of 25%. Is that still the right way to kind of think about it?
Kevin Berryman: That’s correct.
Justin Hauke: Okay. Great. Thank you very much. Appreciate it.
Kevin Berryman: Thanks, Justin.
Operator: Your next question comes from the line of Bert Subin with Stifel. Please go ahead.
Sahej Singh: Bob, Kevin, good morning. This is Sahej on for Bert.
Robert Pragada: Hi. Good morning.
Kevin Berryman: Hi.
Sahej Singh: It seems like a lot of good questions have been asked. So I will ask about IIJA ramp. I think we’ve heard commentary more broadly from the industry and then even for you guys of an expectation of IIJA funding ramp to around 2026 or 2027. Are you still seeing that trend? Are you seeing that trend faster than expected? Any color there would be helpful.
Robert Pragada: No, it’s kind of still trending to that. We — the trend on the new awards and how that money flows, 2026, 2027, I think we’ve mentioned last quarter that, that looks like it could get extended, but that’s not because it’s slowing down right now, because it started later than what was anticipated. But these awards that we’ve not just talked about today, but also what we’ve telegraphed for the second half of the year. Those are really being catalyzed by IIJA.
Sahej Singh: That’s helpful. Thank you. And then maybe a follow-up on the prior question related to unallocated expenses. You’ve given good visibility into the post spin. I think I look at it as I was quickly doing the math, you’re trending at about 2% on a trailing 12-month sales, so maybe on a percentage basis trailing 12-month post spin, where are you looking to get? I think it’s been elevated post your PA Consulting acquisition in 2021?
Kevin Berryman: Well, look, I don’t have the — we’re not targeting a percentage. We’re targeting an absolute number, which we’ve communicated. There’s a lot of moving pieces in that, which I just want to highlight, for example, we’re conveying cost of the new organization. Part of our corporate infrastructure is going to be conveyed. There is going to be TSA revenue that we will receive from the transition period. So there’s a lot of moving pieces, but I think it’s safe to say that we’re going to be targeting that number to be at that $50 net number at the end of the day as we go into 2025, got a lot of work to be able to execute against that. And look, the amount of effort that’s being expended in this company right now relative to ensuring that we’re creating a stand-alone entity that’s going to be able to day one look to accelerate its level of growth given its effective focus on the government service side is not inconsequential.
And I just want to reinforce that because it has impacts relative to the short-term ability for us to further reduce numbers at the end of the day. I can’t tell you how pleased and proud I am actually of the teams, not only those that are actually dedicated to the separation and standup management office, but the rest of the organization, which is getting pulled away from their day jobs to help support the separation. So we’re feeling really good about it.
Sahej Singh: Thank you. And then just last one for me is you mentioned the Riyadh airport. I think I saw some news flow on Dubai potentially expanding their airport. Is that a project that you guys are actively interested in pursuing on our in conversations around? Any color there would be incrementally helpful as a tailwind into the Middle East region more specifically?
Robert Pragada: Yes and yes. It’s our presence in Dubai on multifaceted infrastructure work, water, transportation and within transportation and aviation is reaching. We’ve been there for a decade, and that will continue to be a primary area of focus for us within the Middle East. And so the answer is yes.
