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Item 2. Management’s Discussion and Analysis

2023-02-07 compared with 2022-08-01 · 205 added, 212 removed, 122 unchanged (77% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The purpose of this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is to provide a narrative analysis explaining the reasons for material changes in the Company’s (i) financial condition from the most recent fiscal year-end to July 1, 2022 and (ii) results of operations during the current fiscal period(s) as compared to the corresponding period(s) of the preceding fiscal year.

The purpose of this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is to provide a narrative analysis explaining the reasons for material changes in the Company’s (i) financial condition from the most recent fiscal year-end to December 30, 2022 and (ii) results of operations during the current fiscal period(s) as compared to the corresponding period(s) of the preceding fiscal year.

In order to better understand such changes, readers of this MD&A should also read:

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• Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2022 Form 10-K.

In addition to historical information, this MD&A and other parts of this Quarterly Report on Form 10-Q may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

In addition to historical information, this MD&A and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995.

Forward-looking statements are statements that do not directly relate to any historical or current fact.

When used herein, words such as “expects,” “anticipates,” “believes,” “seeks,” “estimates,” “plans,” “intends,” “future,” “will,” “would,” “could,” “can,” “may,” and similar words are intended to identify forward-looking statements.

Examples of forward-looking statements include, but are not limited to, statements we make concerning the potential continued effects of the COVID-19 pandemic on our business, financial condition and results of operations and our expectations as to our future growth, prospects, financial outlook and business strategy for fiscal 2022 or future fiscal years, the anticipated benefits of acquisitions and the strategic investment in PA Consulting, and our plans to implement a new holding company structure in the fourth fiscal quarter of 2022.

You should not place undue reliance on these forward-looking statements.

Although such statements are based on management’s current estimates and/or expectations, and currently available competitive, financial, and economic data, forward-looking statements are inherently uncertain, and you should not place undue reliance on such statements as actual results may differ materially.

Examples of forward-looking statements include, but are not limited to, statements we make concerning our business, financial condition and results of operations and our expectations as to our future growth, prospects, financial outlook and business strategy for fiscal year 2023 or future fiscal years, our expectations for the percentage of backlog we will realize as revenue in fiscal year 2023, and the anticipated benefits of any acquisition or the strategic investment in PA Consulting.

Although such statements are based on management’s current estimates and expectations, and/or currently available competitive, financial, and economic data, forward-looking statements are inherently uncertain, and you should not place undue reliance on such statements as actual results may differ materially.

We caution the reader that there are a variety of risks, uncertainties and other factors that could cause actual results to differ materially from what is contained, projected or implied by our forward-looking statements.

Such factors include our ability to execute on our newly-announced three-year corporate strategy, including our ability to invest in the tools needed to fully implement our strategy, competition from existing and future competitors in our target markets, our ability to achieve the cost-savings and synergies contemplated by our recent acquisitions within the expected time frames and to successfully integrate acquired businesses while retaining key personnel, the impact of the COVID-19 pandemic, including the emergence and spread of variants of COVID-19, and any resulting economic downturn on our results, prospects and opportunities, measures or restrictions imposed by governments and health officials in response to the pandemic, the timing of the award of projects and funding under the Infrastructure Investment and Jobs Act, financial market risks that may affect the Company's funding obligations under defined benefit pension and postretirement plans, as well as general economic conditions, including inflation and the actions taken by monetary authorities in response to inflation, changes in interest rates, foreign currency exchange rates, changes in capital markets, and geopolitical events and conflicts, among others.

Such factors include our ability to execute on our three-year corporate strategy, including our ability to invest in the tools needed to fully implement our strategy, competition from existing and future competitors in our target markets, our ability to achieve the cost-savings and synergies contemplated by our recent acquisitions within the expected time frames or to achieve them fully and to successfully integrate acquired businesses while retaining key personnel, the impact of the COVID-19 pandemic or any future pandemic, and any resulting economic downturn on our results, prospects and opportunities, measures or restrictions imposed by governments and health officials in response to such pandemic, the timing of the award of projects and funding and potential changes to the amounts provided for, under the Infrastructure Investment and Jobs Act, financial market risks that may affect the Company, including by affecting the Company's access to capital, the cost of such capital and/or the Company's funding obligations under defined benefit pension and postretirement plans, as well as general economic conditions, including inflation and the actions taken by monetary authorities in response to inflation, changes in interest rates and foreign currency exchange rates, changes in capital markets, the impact of a possible recession or economic downturn on our results, prospects and opportunities, and geopolitical events and conflicts, among others.

The impact of such matters includes, but is not limited to, the possible reduction in demand for certain of our product solutions and services and the delay or abandonment of ongoing or anticipated projects due to the financial condition of our clients and suppliers or to governmental budget constraints or changes to governmental budgetary priorities;

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illness, travel restrictions and other workforce disruptions that have and could continue to negatively affect our supply chain and our ability to timely and satisfactorily complete our clients’ projects;

difficulties associated with retaining key employees or hiring additional employees;

and the inability of governments in certain of the countries in which we operate to effectively mitigate the financial or other impacts of the COVID-19 pandemic on their economies and workforces and our operations therein.

difficulties associated with retaining and hiring additional employees;

and the inability of governments in certain of the countries in which we operate to effectively mitigate the financial or other impacts of pandemics on their economies and workforces and our operations therein.

The foregoing factors and potential future developments are inherently uncertain, unpredictable and, in many cases, beyond our control.

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We encourage you to read carefully the risk factors, as well as the financial and business disclosures contained in this Quarterly Report on Form 10-Q and in other documents we file from time to time with the United States Securities and Exchange Commission (the "SEC").

Impact of COVID-19 on Our Business

On March 11, 2020, the World Health Organization characterized the outbreak of the novel coronavirus (“COVID-19”) as a global pandemic and recommended certain containment and mitigation measures.

On March 13, 2020, the United States declared a national emergency concerning the outbreak, and the vast majority of states and many municipalities declared public health emergencies or took similar actions.

Along with these declarations, there were extraordinary and wide-ranging actions taken by international, federal, state and local public health and governmental authorities to contain and combat outbreaks of COVID-19 in regions across the United States and around the world.

These actions included quarantines and “stay-at-home” or “shelter-in-place” orders, social distancing measures, travel restrictions, school closures and similar mandates for many individuals in order to substantially restrict daily activities and orders for many businesses to curtail or cease normal operations unless their work is critical, essential or life-sustaining.

Although most jurisdictions in which we operate have lifted or eased such restrictions to various degrees, some jurisdictions have subsequently reimposed restrictions to varying degrees in response to increased cases caused by variants of COVID-19.

In addition, governments and central banks in the United States and other countries in which we operate have periodically enacted fiscal and monetary stimulus and assistance measures to counteract the economic impacts of COVID-19.

As it became clear that the pandemic was unparalleled in the rate of community spread, we took early, decisive action to put people first, help flatten the curve and take care of our clients and communities.

We successfully transitioned the vast majority of our employees to a remote working environment to support physical distancing.

Where the essential and mission-critical nature of our work requires us to maintain staff at certain sites or locations, we worked closely with our clients and established project-specific plans designed to ensure the safety of our people and the integrity of our operations.

Using technology and optimizing our networks, we continue to offer flexible work scenarios for our people, and to deliver business continuity for and continued collaboration with our clients.

Notwithstanding our continued critical operations, COVID-19 negatively impacted our business, and may have further adverse impacts, on our operations, including those listed and discussed in Item 1A, Risk Factors included in our 2021 Form 10-K.

Accordingly, at the height of the pandemic, we temporarily reduced spending broadly across the Company, only proceeding with operating and capital spending that was critical.

We had also temporarily ceased all non-essential hiring and reduced discretionary expenses, including temporarily suspending certain employee benefits and compensation through the end of fiscal 2020.

Subsequently, we have adjusted our response according to the circumstances and local laws in the jurisdictions in which we operate, including the emergence and spread of variants, such as the omicron variant.

Looking ahead, we have developed contingency plans if the situation further deteriorates or lasts longer than current expectations.

We will continue to actively monitor the situation and may take further actions that alter our business operations as may be necessary or appropriate for the health and safety of employees, contractors, customers, suppliers or others or as required by international, federal, state or local authorities.

The impacts of the COVID-19 pandemic continue to be felt in our operating results as compared to business levels pre-pandemic, although not significantly impacting the current fiscal quarter as compared to the corresponding quarter of the 2021 fiscal year.

Further, for future periods, significant uncertainty continues to exist concerning the magnitude, duration and impacts of the COVID-19 pandemic, including with regard to the effects on our customers, customer demand for our services, disruptions to supply chains and labor forces and increasing inflationary pressures.

Accordingly, actual results for future fiscal periods could differ materially versus current expectations and current results and financial condition discussed herein may not be indicative of future operating results and trends.

For a discussion of risks and uncertainties related to COVID-19, including the potential impacts on our business, financial condition and results of operations, see Item 1A - Risk Factors contained in our 2021 Form 10-K.

Business Overview

At Jacobs, we’re challenging today to reinvent tomorrow by solving the world’s most critical problems for thriving cities, resilient environments, mission-critical outcomes, operational advancement, scientific discovery and cutting-edge manufacturing.

Revenue by Type (Q3 FY2022)

In the fourth quarter fiscal 2022, the Company intends to create a new holding company, Jacobs Solutions Inc., which will become the new parent company of the Company.

This will more closely align our public identity with a global technology-forward solutions company.

Once completed, the Company’s current stockholders will automatically become stockholders of Jacobs Solutions Inc., on a one-for-one basis, with the same number of shares and same ownership percentage of the Company’s common stock that they held immediately prior to the transaction.

Lines of Business

Leveraging a talent force of more than 60,000, Jacobs provides a full spectrum of professional services including consulting, technical, engineering, scientific and project delivery for the government and private sectors.

Our previous three-year corporate strategy launched at our Investor Day in February 2019 focused on innovation and continued transformation to build upon our position as the leading solutions provider for our clients.

Setting the wheels in motion for our current path, this transformation included acquiring a 65% stake in PA Consulting Group Limited ("PA Consulting") in fiscal year 2021.

Acquisitions of John Wood Group’s nuclear business, The Buffalo Group and most recently BlackLynx and StreetLight further position us as a leader in high-value government services and technology-enabled solutions.

We are now focused on broadening our leadership in sustainable, high growth sectors.

As part of our strategy, our brand promise:

"Challenging today.

Reinventing tomorrow." signals our transition to a global technology-forward solutions company.

We began trading as “J” on the New York Stock Exchange in December 2019, and in March 2021 our Global Industry Classifications Standard code changed to Research & Consulting Services.

Our Focus 2023 Transformation Office is charged with driving further innovation, delivering value-creating solutions for our clients and leveraging an integrated digital and technology strategy to improve our efficiency and effectiveness, ultimately freeing up valuable time and resources for reinvestment in our people.

In the fourth quarter fiscal 2022, Jacobs Engineering Group Inc.

(the predecessor parent company) created a new holding company, Jacobs Solutions Inc., which, through a reverse triangular merger, became the new parent company of Jacobs Engineering Group, Inc.

As a result of the transaction, the predecessor parent company's then-current stockholders automatically became stockholders of Jacobs Solutions Inc., on a one-for-one basis, with the same number of shares and same ownership percentage of the predecessor parent company’s common stock that they held immediately prior to the transaction.

Operating Segments

The services we provide fall into the following two lines of business (LOB):

Critical Mission Solutions (CMS) and People & Places Solutions (P&PS).

The LOBs and a majority investment in PA Consulting (PA) constitute the Company’s reportable segments.

Our LOBs, our business unit Divergent Solutions (DVS), which operates as an integrated offering to both LOBs, and a majority investment in PA Consulting (PA) constitute the Company’s reportable segments and are the foundation for how Jacobs helps create a more connected, sustainable world.

For additional information regarding our segments, including information about our financial results by segment and financial results by geography, see Note 4- Revenue Accounting for Contracts of Notes to Consolidated Financial Statements.

Critical Mission Solutions (CMS)

Our Critical Mission Solutions line of business provides a full spectrum of cyber, data analytics, systems and software application integration services and consulting, enterprise level operations and maintenance and mission IT, engineering and design, enterprise operations and maintenance, program management, and other highly technical consulting solutions to government agencies as well as commercial customers and international markets.

Our representative clients include the U.S.

Department of Defense (DoD), the Combatant Commands, the U.S.

Intelligence Community, NASA, the U.S.

Department of Energy (DoE), U.K.

Ministry of Defence, the U.K.

Nuclear Decommissioning Authority (NDA) and the Australian Department of Defence, as well as private sector customers mainly in the aerospace, automotive, energy and telecom sectors.

government is the world’s largest buyer of technical services, and in fiscal 2021, approximately 74% of CMS’s revenue was earned from serving the DoD, intelligence community and Federal Civilian governmental entities.

Our international customers, which accounted for 18% of fiscal 2021 revenue, have also increased demand for our IT and cybersecurity solutions and nuclear projects, and the U.K.

Ministry of Defence continues to focus on accelerating its strategic innovative and technology focused initiatives.

Jacobs' Critical Mission Solutions line of business provides a full spectrum of solutions for clients to address evolving challenges like information and cyber warfare, digital transformation and modernization, national security and defense, space exploration, digital asset management and the green energy transition.

Our core capabilities include program management and mission operations;

systems digital engineering and mission integration, research development, test and evaluation;

integration, operation, maintenance and sustainment of systems and facilities;

enterprise-level IT operations and mission IT delivery, software development, and software application integration;

engineering, design and construction of specialized technical facilities and systems;

environmental remediation;

specialized training;

robotics and automation;

and other highly technical consulting solutions.

We deliver these capabilities for government agencies as well as commercial clients in the U.S.

and international markets.

We leverage our deep experience to support clients in the Aerospace, Automotive, Space, Telecom, Intel, Defense and Energy sectors to develop lasting solutions in the communities where we live and work.

People & Places Solutions (P&PS)

Jacobs' People & Places Solutions line of business provides end-to-end solutions for our clients’ most complex challenges - whether climate change, energy transition, connected mobility, integrated water management, smart cities or vaccine manufacturing.

In doing so, we incorporate the full spectrum of data science and technology-enabled toolsets within a human-centric solution development and delivery framework.

We embrace inclusive engagement of partners and stakeholders and generate enduring social equity/value through consulting, planning, architecture, design and engineering project outcomes, as well as long-term operation of facilities and infrastructure.

Solutions may be delivered as standalone engagements or through comprehensive program management that integrates disparate workstreams to yield additional benefits not attainable through project-by-project implementation.

We also provide progressive design-build and construction management at-risk delivery solutions in targeted markets.

Our clients include national, state and local government in the U.S., Canada, Europe, U.K., Middle East, Australia, New Zealand and Asia, as well as multinational private sector clients throughout the world.

Jacobs' People & Places Solutions line of business provides end-to-end solutions for our clients’ most complex challenges related to climate change, energy transition, connected mobility, integrated water management, smart cities and biopharmaceutical manufacturing.

In doing so, we combine deep experience in the following markets - Infrastructure, Cities & Places, Energy & Environmental, Health & Life Sciences and Advanced Manufacturing.

Our core capabilities revolve around consulting, planning, science, architecture, design and engineering, as well as infrastructure delivery services and long-term operation of facilities.

Solutions may be delivered as standalone professional service engagements, comprehensive program management partnerships, and selective progressive design-build and construction management at-risk delivery services in targeted markets.

Increasingly, we leverage our data science and technology-enabled expertise with our core capabilities to deliver positive and enduring solutions for the clients and communities we serve.

Our clients include national, state and local governments in the U.S., Europe, U.K., Middle East and Asia-Pacific, as well as multinational and local private sector clients throughout the world.

Divergent Solutions (DVS)

Jacobs’ new operating segment, Divergent Solutions (DVS), serves as the core foundation for developing and delivering innovative, next-generation cloud, cyber, data and digital technologies.

DVS further strengthens our ability to drive value for clients of both LOBs by leveraging a full spectrum of cyber, data analytics, systems and software application integration services across Jacobs.

Our core capabilities include global strategic alliances, innovation collaboration, next-generation technologies, software and data as a service and data and secure solutions.

DVS clients include government agencies and commercial clients in the U.S.

and international markets.

PA Consulting

In fiscal 2021, Jacobs invested in a 65% stake in PA Consulting, the consultancy that is Bringing Ingenuity to Life.

Its diverse teams of experts combine innovative thinking and breakthrough use of technologies to progress further, faster.

PA Consulting’s clients adapt and transform and achieve enduring results.

An innovation and transformation consultancy, PA's roughly 3,300 employees work across seven sectors:

consumer and manufacturing, defense and security, energy and utilities, financial services, government, health and life sciences, and transport.

PA Consulting people are strategists, innovators, designers, consultants, digital experts, scientists, engineers and technologists.

The team operates globally from offices across the U.K., U.S., Nordics and the Netherlands.

PA Consulting offers end-to-end innovation, accelerating new growth ideas from concept, through design, development, and to commercial success, and revitalizing organizations, building the leadership, culture, systems and processes to make innovation a reality.

Jacobs invested in a 65% stake in PA Consulting, the consultancy that is Bringing Ingenuity to Life, which offers end-to-end innovation to accelerate new growth ideas from concept, through design and development and to commercial success.

We revitalize organizations, building the leadership, culture, systems and processes to make innovation a reality.

PA Consulting's team of roughly 4,000 strategists, innovators, designers, consultants, digital experts, scientists, engineers and technologists work across seven sectors:

consumer and manufacturing, defense and security, energy and utilities, financial services, government, health and life sciences, and transport to make a positive impact alongside the clients it supports.

PA Consulting has a diverse mix of private and public sector clients, from global household names to start-ups, to national and local public services.

Results of Operations for the three and nine months ended July 1, 2022 and July 2, 2021

Recently, PA Consulting supported the launch of a new Electric Vehicle Infrastructure Fund to drive the roll-out of electric vehicle charging infrastructure in the U.K.;

innovated cell and gene therapy manufacturing with Ori Biotech in the U.S.;

and designed a growth strategy for Green Boom, a U.S.-based start-up that has developed a patent-pending and sustainable way to help prevent, reduce and clean up oil spills.

Together, the collective strengths of PA Consulting and Jacobs drive value creation for clients around the globe and support projects to address five key trends:

product and service innovation, the future of work, sustainability and climate change.

Results of Operations for the three months ended December 30, 2022 and December 31, 2021

(in thousands, except per share information)

For the Three Months Ended For the Nine Months Ended

July 1, 2022 July 2, 2021 July 1, 2022 July 2, 2021

For the Three Months Ended

December 30, 2022 December 31, 2021

Revenues $ 3,798,668 $ 3,380,625

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Interest expense (40,077) (19,426)

Miscellaneous income, net 31,440 38,658 51,802 138,705

Total other income (expense), net 6,353 19,648 (12,825) 88,650

Miscellaneous (expense) income, net (3,254) 9,682

Total other expense, net (40,324) (8,243)

Earnings from Continuing Operations Before Taxes 197,481 169,090

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Net Earnings of the Group from Continuing Operations 147,378 153,201

Net (Loss) Earnings of the Group from Discontinued Operations (343) 384 (576) 11,690

Net Loss of the Group from Discontinued Operations (708) (232)

Net Earnings of the Group 146,670 152,969

Net Earnings Attributable to Noncontrolling Interests from Continuing Operations (7,031) (9,252)

Net (Earnings) Loss Attributable to Redeemable Noncontrolling interests (7,525) 384 (27,246) 101,776

Net Earnings Attributable to Redeemable Noncontrolling interests (3,992) (9,683)

Net Earnings Attributable to Jacobs from Continuing Operations 136,355 134,266

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Basic Net Earnings from Continuing Operations Per Share $ 1.08 $ 1.04

Basic Net Earnings from Discontinued Operations Per Share $ — $ — $ — $ 0.09

Basic Net Loss from Discontinued Operations Per Share $ (0.01) $ —

Basic Earnings Per Share $ 1.07 $ 1.04

Diluted Net Earnings from Continuing Operations Per Share $ 1.07 $ 1.03

Diluted Net Earnings from Discontinued Operations Per Share $ — $ — $ — $ 0.09

Diluted Net Loss from Discontinued Operations Per Share $ (0.01) $ —

Diluted Earnings Per Share $ 1.06 $ 1.03

Overview – Three and Nine Month Periods Ended July 1, 2022

Net earnings attributable to the Company from continuing operations for the third fiscal quarter ended July 1, 2022 were $196.3 million (or $1.52 per diluted share), an increase of $30.9 million, from net earnings of $165.4 million (or $0.82 per diluted share) for the corresponding period last year.

While operating profit levels were consistent for the respective three-month periods of fiscal 2022 and 2021, third quarter fiscal 2022 Other income (expense), net, of $6.4 million was lower by $13.2 million versus third quarter fiscal 2021 amounts of $19.6 million.

Third quarter fiscal 2022 amounts benefited from a $13.9 million pre-tax gain related to a cost method investment sold during the period, approximately $8 million in higher foreign exchange gains, as well as other miscellaneous income items quarter over quarter, partly offset by unfavorable impacts of higher net interest expense and lower pension income compared to the prior year quarter.

Third quarter fiscal 2021 amounts included $38.7 million in pre-tax fair value gains, related currency revaluations and dividends recorded in miscellaneous income (expense), net, associated with our former investment in Worley stock, the sale of which was completed in fourth quarter 2021.

Our reported net earnings for the current year quarter also benefited from lower income taxes of $49.6 million compared to the fiscal 2021 period, with lower effective tax rates in the current quarter due mainly to the absence of fiscal 2021 income tax charges of $30.8 million associated with a statutory tax rate increase in the UK and certain nondeductible compensation related charges associated with the Company's PA Consulting investment, as well as benefiting from other favorable tax impacts during the current quarter.

Additionally, redeemable noncontrolling interests was $7.1 million higher in the current quarter due to favorable net earnings results in our PA Consulting investment compared to the prior year quarter.

The Company’s reported earnings per share for the third quarter fiscal 2021 was impacted unfavorably by $(0.44) related to an allocation update between preferred and common shares for the PA Consulting investment as required under U.S.

This per share impact had no impact to the total consideration of the transaction and had no impact on the Company’s results of operations, financial position or cash flows;

see Note 15 - PA Consulting Business Combination in the consolidated financial statements.

For the nine months ended July 1, 2022, net earnings attributable to the Company from continuing operations were $419.4 million (or $3.23 per diluted share) and overall consistent in comparison to $422.2 million (or $2.78 per diluted share) for the corresponding period last year.

The current year results reflected higher year-over-year operating profit of $172.7 million, which benefited from the full year-to-date impact of the Company's PA Consulting investment acquired on March 2, 2021 and the absence of one-time deal and related other charges associated with this investment of approximately $297 million, including one-time compensation charges of $261 million in the 2021 fiscal period.

These favorable operating profit items were offset in part by higher year-over-year Restructuring and other charges and transaction costs in the current year, including pre-tax settlement charges associated with the Legacy CH2M Matter of $91.3 million and $74.6 million associated with the Company's transformation initiatives relating to real estate rescaling (see Note 18 - Restructuring and Other Charges ) and increases in intangibles amortization costs of $43.6 million, due mainly to full year impacts of acquired intangible assets from the PA Consulting investment.

Other income (expense), net was unfavorable $101.5 million for the current year-to-date period compared to corresponding fiscal 2021 amounts, due mainly to pre-tax fair value gains associated with our former investments in Worley stock (net of Worley stock dividend and related foreign exchange items) and C3 of $102.1 million and $49.6 million, respectively, as well as higher interest expense of $14.8 million in the current year compared to the prior year.

Current year-to-date fiscal 2022 other income (expense) results benefited from the absence of the prior year $38.9 million impairment of our investment in AWE Management Ltd.

("AWE ML") as well as the $13.9 million gain on sale of a cost investment and other favorable items during the current fiscal 2022 year-to-date period.

Income taxes were lower in the current year by $53.9 million, benefiting from lower effective tax rates in fiscal 2022, due primarily to the absence of fiscal 2021 additional income taxes attributable to the tax rate increase in the UK of $30.8 million and certain nondeductible compensation related charges associated with the Company's PA Consulting investment combined with current year-to-date tax benefits of $15.4 million related to the release of valuation allowance on foreign tax credits and $9.1 million related to the removal of intercompany withholding tax.

Finally, unfavorable year-over-year net earnings impacts associated with redeemable noncontrolling interests of $129 million were attributable mainly to the absence of the 2021 period redeemable noncontrolling interests share of $101.8 million in connection with the one-time compensation charges incurred in the PA Consulting investment mentioned above, offset in part by the full year-to-date effects of the redeemable noncontrolling interests share of PA Consulting's operating results in fiscal 2022.

Fiscal 2021 earnings per share was impacted by the $(0.44) per share impact of the value allocation update between preferred and common shares for the PA Consulting investment.

For discussion of discontinued operations, see Note 17 - Sale of Energy, Chemicals and Resources ("ECR") Business.

Overview – Three Months Ended December 30, 2022

Net earnings attributable to the Company from continuing operations for the first fiscal quarter ended December 30, 2022 were $136.4 million (or $1.07 per diluted share), an increase of $2.1 million, from net earnings of $134.3 million (or $1.03 per diluted share) for the corresponding period last year.

While operating profit levels were up for the respective three-month periods of fiscal 2023 due primarily to our P&PS business, the first fiscal quarter of 2023 was impacted by $39.7 million in pre-tax Restructuring and other charges and transaction costs compared to fiscal 2022 amounts of $75.0 million, for both periods associated mainly with the Company's transformation initiatives relating to real estate which is discussed in Note 16- Restructuring and Other Charges .

Additionally, the 2023 first fiscal quarter was impacted by approximately $15.0 million in net favorable impacts from overhead cost reductions associated mainly with one-time benefit program changes, while partly offset by higher incentive and other compensation charges and higher investments in company technology platforms.

Also, first quarter fiscal 2023 other expense, net, of $40.3 million was higher by $32.1 million versus first quarter fiscal 2022 amounts of $8.2 million, with the current period primarily impacted by unfavorable higher net interest expense compared to the prior year quarter as discussed further below.

Our reported net earnings for the current year quarter were unfavorably impacted by higher income taxes of $34.2 million compared to the fiscal 2022 period, attributable to higher effective tax rates in the current quarter due mainly to the absence of prior year tax benefits including $15.7 million related to the release of previously valued foreign tax credits and other prior year favorable tax items combined with current quarter income tax expense items further discussed in Note 9- Income Taxes.

Additionally, redeemable noncontrolling interests was $5.7 million lower in the current quarter due to unfavorable net earnings results in our PA Consulting investment compared to the prior year quarter.

On February 4, 2022, the Company acquired StreetLight Data, Inc., ("StreetLight").

On November 19, 2021, a subsidiary of Jacobs acquired BlackLynx.

For further discussion, see Note 15- Other Business Combinations .

On March 2, 2021, Jacobs completed the strategic investment of a 65% interest in PA Consulting.

For further discussion, see Note 15 - PA Consulting Business Combination.

On November 24, 2020, a subsidiary of Jacobs completed the acquisition of Buffalo Group.

For further discussion, see Note 16 - Other Business Combinations .

Consolidated Results of Operations

Revenues for the third fiscal quarter of 2022 were $3.83 billion, an increase of $250.7 million, or 7.0%, from $3.58 billion for the corresponding period last year.

For the nine months ended July 1, 2022, revenues were $11.04 billion, an increase of $535.6 million, or 5.1%, from $10.51 billion for the corresponding period last year.

Revenue increases for the year over year periods were due mainly to fiscal 2022 incremental revenues from the PA Consulting investment and the StreetLight and BlackLynx acquisitions, as well as benefits from increased spending in our U.S.

government business sector client base.

These increases in revenues for the current year-to-date period were partially offset by declines in pass-through revenues in our P&PS advanced facilities business.

Additionally, the nine months ended July 1, 2022 was unfavorably impacted by certain large contract wind downs in the U.S.

Also, revenue was unfavorably impacted by foreign currency translation of $130.1 million and $176.8 million for the three and nine months ended July 1, 2022, respectively, in our international businesses as compared to favorable impacts of $100.2 million and $213.1 million in the corresponding periods last year.

Pass-through costs included in revenues for the three and nine months ended July 1, 2022 amounted to $635.4 million and $1.67 billion, respectively, an increase of $23.4 million and a decrease of $165.9 million, or 3.8% and (9.0)%, respectively, from $612.0 million and $1.84 billion from the corresponding periods last year.

Gross profit for the third quarter of 2022 was $824.5 million, an increase of $7.5 million, or 0.9%, from $816.9 million from the corresponding period last year.

Our gross profit margins were 21.5% and 22.8% for the three months ended July 1, 2022 and July 2, 2021, respectively, with these margin differences being mainly attributable to lower utilization trends mainly in our PA Consulting business, partly offset by favorable impacts from our recent StreetLight and BlackLynx acquisitions as well as benefits from increased spending by customers in the U.S.

government business sector for the current quarter period.

Gross profit for the nine months ended July 1, 2022 was $2.49 billion, an increase of $275.4 million, or 12.4%, from $2.22 billion from the corresponding period last year, due in part to incremental gross profit from recent business acquisitions (mainly the full year results of PA Consulting).

Our gross profit margins were 22.6% and 21.1% for the nine months ended July 1, 2022 and July 2, 2021, respectively, with benefits from the similar favorable margins from recent acquisitions mentioned above and favorable impacts from the business results of our recent PA Consulting investment on a year-to-date basis and increased spending in the U.S.

government business sector noted above.

The increases in gross profit during the three and nine months ended July 1, 2022 were partially offset by the impacts from the recent large contract wind downs in the U.S.

mentioned above, as well as increases in labor costs associated with moderation of COVID-19 mitigation efforts and a competitive labor market along with inflation impacts and incremental investments to support projected top-line growth.

Revenues for the first fiscal quarter of 2023 were $3.80 billion, an increase of $418.0 million, or 12.4%, from $3.38 billion for the corresponding period last year.

Revenue increases for the year over year period were due mainly to the Company's P&PS and CMS legacy businesses and in addition, to a smaller degree, fiscal 2023 incremental revenues benefited from the StreetLight acquisition (owned for the full period in fiscal 2023) and other increases in our DVS business.

The P&PS business benefited primarily from stronger performance in its Advanced Facilities and U.S.

business operations.

Our CMS business benefited from increased spending in our U.S.

government business sector, which was primarily attributable to fiscal 2022 contract awards for the U.S.

Department of Energy.

Due to foreign currency translation impacts, revenues in our PA Consulting investment decreased (excluding translation impacts, PA Consulting experienced year over year growth).

Also, revenue was unfavorably impacted by foreign currency translation of $158.5 million for the three months ended December 30, 2022 in our international businesses, with no significant impact in the prior year period.

Pass-through costs included in revenues for the three months ended December 30, 2022 amounted to $673.7 million, an increase of $195.6 million, or 40.9%, from $478.1 million from the corresponding period last year.

Gross profit for the first fiscal quarter of 2023 was $814.7 million, an increase of $18.2 million, or 2.3%, from $796.5 million from the corresponding period last year.

Our gross profit margins were 21.4% and 23.6% for the three months ended December 30, 2022 and December 31, 2021, respectively, with these margin differences being mainly attributable to lower utilization trends primarily in the PA Consulting business, project mix impacts in our legacy CMS portfolio and unfavorable foreign currency translation impacts, partly offset by new program startups won in fiscal 2022 and favorable performance in our P&PS advanced facilities and U.S.

Additionally, gross profit benefited from favorable impacts from overhead cost reductions associated mainly with one-time benefit program changes, while partly offset by higher incentive and other compensation charges and higher investments in company technology platforms in the current year, as mentioned above.

See Segment Financial Information discussion for further information on the Company’s results of operations at the operating segment.

SG&A expenses for the three and nine months ended July 1, 2022 were $558.7 million and $1.88 billion, respectively, increases of $5.5 million and $102.6 million, or 1.0% and 5.8%, from $553.2 million and $1.78 billion for the corresponding periods last year.

While the three month periods' results were comparatively consistent, the nine months ended results for fiscal 2022 were impacted by incremental SG&A expenses from recent business acquisitions (mainly PA Consulting) of $150.0 million (including $43.6 million in additional amortization expense for acquired intangibles and excluding the compensation related charge discussed below), respectively, due to the prior comparable periods including PA Consulting activity only for the partial periods subsequent to the March 2, 2021 investment date.

Additionally, Restructuring and other charges and transaction costs for the year-to-date period of 2022 included $91.3 million attributable to the final pre-tax settlement of the Legacy CH2M Matter, which is further discussed in Note 19- Commitments and Contingencies and Derivative Financial Instruments and $74.6 million in costs associated in part with the Company's transformation initiatives relating to real estate.

Also, the current 2022 periods SG&A expenses were impacted by higher personnel costs associated with investments in advance of expected growth anticipated in late 2022

As noted above, the prior year-to-date period included Restructuring and other charges of $261 million for pre-tax costs incurred in connection with the investment in PA Consulting, in part classified as compensation costs reported in selling, general and administrative expenses.

Lastly, SG&A expenses benefited from favorable foreign exchange impacts of $26.4 million and $36.8 million, respectively, for the three and nine months ended July 1, 2022 as compared to unfavorable impacts of $19.3 million and $66.7 million for the corresponding periods last year.

Net interest expense for the three and nine months ended July 1, 2022 was $25.1 million and $64.6 million, respectively, an increase of $6.1 million and $14.6 million from $19.0 million and $50.1 million for the corresponding periods last year.

The increase in net interest expense for the three and nine month periods was due to higher levels of debt outstanding due to the funding of the StreetLight and BlackLynx acquisitions and increased borrowings associated with the payment of the Legacy CH2M Matter settlement in the current fiscal quarter, in addition to higher interest rates.

Additionally, the nine month period year over year is also impacted by higher levels of average debt outstanding related to the funding of the PA Consulting investment.

Miscellaneous income (expense), net for the three and nine months ended July 1, 2022 was $31.4 million and $51.8 million, respectively, in comparison to $38.7 million and $138.7 million for the corresponding periods last year.

The $7.2 million decrease from the prior three-month comparable period was due primarily to impacts in the prior year periods of pre-tax unrealized gains of $38.7 million associated with our former investment in Worley stock (including the Worley stock dividend) and certain foreign currency revaluations relating to the ECR sale, which was sold during fiscal year 2021.

The decrease of $86.9 million from the prior year-to-date comparable period is attributable to nine months of pre-tax fair value gains of $102.2 million and $49.6 million in the Company's previously mentioned investment holdings in Worley (including the Worley stock dividend) which includes impacts of certain foreign currency revaluations related to the ECR sale and C3, respectively.

The three and nine month fiscal 2022 periods benefited primarily from a $13.9 million pre-tax gain related to a cost method investment sold during the period.

Additionally, the corresponding prior year periods included other-than-temporary impairment charges on our investment in AWE ML of $5.7 million and $38.9 million, respectively.

The Company’s effective tax rates from continuing operations for the three months ended July 1, 2022 and July 2, 2021 were 21.9% and 38.5%, respectively, with the decrease primarily due to the absence of a $30.8 million expense related to a change in tax rate applied to deferred tax assets in the United Kingdom and certain nondeductible compensation related charges associated with the Company's PA Consulting investment in the three months ended July 2, 2021, as well as a current period benefit of $9.1 million the Company recognized due to the reversal of a withholding tax accrual on certain intercompany loans, partly offset by increases in permanent book/tax adjustments, state taxes, and foreign inclusions for the three month period in fiscal 2022.

Additionally, a $15.6 million payment was made during the current quarter related to an amendment of an Australia tax return, which resulted in the removal of the associated uncertain tax position from the Consolidated Balance Sheet.

This payment had no impact on the current quarter income tax provision or effective tax rate.

The Company's effective tax rates from continuing operations for the nine months ended July 1, 2022 and July 2, 2021 were 20.4% and 33.4%, respectively, with the decrease primarily due to a current year tax benefit of $15.4 million related to the release of valuation allowance on foreign tax credits and $9.1 million related to the reversal of intercompany withholding tax noted above, as well as the absence of prior year expenses related to the United Kingdom’s change in tax rate mentioned above and certain non-deductible pre-tax compensation charges associated with our investment in PA Consulting, partly offset by the absence of the benefit from the change in the Company’s assertion about indefinite reinvestment of certain foreign unremitted earnings in India in fiscal 2021.

SG&A expenses for the three months ended December 30, 2022 were $576.9 million, a decrease of $42.2 million or (6.8)% from $619.1 million for the corresponding period last year.

The current year's three months ended results were impacted by decreases in real estate related costs, as well as other department spend decreases due in part to the Company's transformation initiatives.

Also, Restructuring and other charges for fiscal 2023 and 2022 included $27.1 million and $73.2 million, respectively, in costs associated with the Company's transformation initiatives relating to real

Lastly, SG&A expenses benefited from favorable foreign exchange impacts of $27.5 million for the three months ended December 30, 2022, with no significant impact in the corresponding prior year period.

Net interest expense for the three months ended December 30, 2022 was $37.1 million, an increase of $19.1 million from $17.9 million for the corresponding period last year.

The increase in net interest expense for the three month period was due to higher levels of debt outstanding due to the funding of the StreetLight and BlackLynx acquisitions and increased borrowings associated with the payment of the settlement of a legacy litigation matter involving a subsidiary of CH2M (the "Legacy CH2M Ma tter") in fiscal 2022, in addition to higher interest rates.

Miscellaneous (expense) income, net for the three months ended December 30, 2022 was $(3.3) million in comparison to $9.7 million for the corresponding period last year.

The $12.9 million decrease from the prior three-month comparable period was due primarily to an increase in pension costs due to higher interest rate impacts in the current year along with the prior year $6.9 million gain related to a lease termination.

The Company’s effective tax rates from continuing operations for the three months ended December 30, 2022 and December 31, 2021 were 25.4% and 9.4%, respectively.

The most significant items contributing to the difference between the statutory U.S.

federal corporate tax rate of 21.0% and the Company’s effective tax rate for the three months ended December 30, 2022 were U.S.

state income tax expense of $4.6 million and U.S.

tax on foreign earnings of $3.6 million.

Both items are expected to have a continuing impact on the Company's effective tax rate for the remainder of the fiscal year.

The most significant items contributing to the difference between the statutory U.S.

federal corporate tax rate of 21.0% and the Company's effective tax rate for the three months ended December 31, 2021 were a tax benefit of $15.7 million related to the release of previously reserved foreign tax credit assets, $4.2 million excess tax benefit attributable to stock compensation, and $4.0 million benefit from filing amended state returns.

The amount of income taxes the Company pays is subject to ongoing audits by tax jurisdictions around the world.

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GAAP operating profit from continuing operations by including certain corporate-level expenses, Restructuring and other charges and transaction and integration costs (in thousands).

Three Months Ended Nine Months Ended

July 1, 2022 July 2, 2021 July 1, 2022 July 2, 2021

Three Months Ended

December 30, 2022 December 31, 2021

Revenues from External Customers:

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People & Places Solutions 2,226,985 1,920,997

Divergent Solutions 214,465 192,877

PA Consulting 282,043 289,974

Total $ 3,798,668 $ 3,380,625

Three Months Ended Nine Months Ended

July 1, 2022 July 2, 2021 July 1, 2022 July 2, 2021

Three Months Ended

December 30, 2022 December 31, 2021

Segment Operating Profit:

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People & Places Solutions 226,619 188,841

Divergent Solutions 11,967 23,108

PA Consulting 51,027 63,071

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$ 197,481 $ 169,090

(1) Other corporate expenses also included intangibles amortization of $51.6 million and $49.6 million for the three months ended July 1, 2022 and July 2, 2021, respectively, and $146.9 million and $103.3 million for the nine months ended July 1, 2022 and July 2, 2021, respectively, with the comparative year-to-date period increase mainly attributable to higher amortization from the PA Consulting investment.

(2) Included in the nine months ended July 1, 2022 is $91.3 million in charges related to the final pre-tax settlement of the Legacy CH2M Matter, net of previously recorded reserves and $74.6 million of real estate impairment charges and $24.5 million in other transformation and other charges related to the Company's transformation initiatives.

Included in the nine months ended July 2, 2021 are $297.4 million of costs incurred in connection with the investment in PA Consulting, in part classified as compensation costs.

(3) The three and nine months ended July 1, 2022 included a $13.9 million gain related to a cost method investment sold during the period.

The nine months ended July 1, 2022 included a gain of $7.1 million related to a lease termination.

The three and nine months ended July 2, 2021 include $38.7 million and $102.2 million, respectively, in fair value adjustments related to our investment in Worley stock (including Worley stock dividends) and certain foreign currency revaluations relating to the ECR sale and $1.0 million and $49.6 million, respectively, in fair value adjustments related to our investment in C3 stock, with both of these investments sold in fiscal 2021.

The nine months ended July 2, 2021 also includes $38.9 million related to impairment of our AWE ML investment.

(1) Other corporate expenses included intangibles amortization of $49.8 million and $46.9 million for the three months ended December 30, 2022 and December 31, 2021, respectively.

Additionally, the three month period of fiscal 2023 included approximately $15.0 million in net favorable impacts from cost reductions compared to the prior year period, which was associated mainly with net favorable impacts during the current quarter from changes in employee benefit programs of $41 million offset by approximately $26 million in higher quarter over quarter spend in company technology platforms and other personnel and corporate cost increases.

(2) Included in the three months ended December 30, 2022 and December 31, 2021 are $27.1 million and $72.3 million, respectively, in real estate impairment charges related to the Company's transformation initiatives.

(3) The three months ended December 31, 2021 included a gain of $6.9 million related to a lease termination.

Additionally, the increase in net interest expense year over year is primarily due to the higher levels of debt outstanding due to the funding of the StreetLight and BlackLynx acquisitions in fiscal 2022 and increased borrowings associated with the payment of the Legacy CH2M Matter settlement also in the prior year, in addition to higher interest rates.

Critical Mission Solutions

Three Months Ended Nine Months Ended

July 1, 2022 July 2, 2021 July 1, 2022 July 2, 2021

Three Months Ended

December 30, 2022 December 31, 2021

Revenue $ 1,075,175 $ 976,777

Operating Profit $ 82,220 $ 91,239

Critical Mission Solutions (CMS) segment revenues for the three and nine months ended July 1, 2022 were $1.32 billion and $3.85 billion, respectively, an increase of $99.0 million and $23.0 million, or 8.1% and 0.6%, from $1.22 billion and $3.82 billion for the corresponding periods last year.

During the three and nine months ended July 1, 2022, revenue benefited from incremental revenue from recent acquisitions in addition to recent contract awards including the Department of Energy Nuclear remediation program.

Revenue during the nine months ended July 1, 2022 was impacted by several large contracts winding down in the U.S and labor supply challenges.

Also, impacts on revenues from unfavorable foreign currency translation were approximately $26.9 million and $34.9 million for the three and nine-month periods ended July 1, 2022, respectively, compared to $26.6 million and $54.2 million in favorable impacts in the corresponding prior year periods.

Operating profit for the segment was $104.3 million and $329.0 million, respectively, for the three and nine months ended July 1, 2022, representing slight decreases of $3.8 million and $3.1 million, or (3.5)% and (0.9)%, from $108.1 million and $332.1 million for the corresponding periods last year.

Operating profit levels were generally consistent with prior year comparable periods presented, with recent U.S.

government contract awards benefiting from higher margins and offsetting impacts from the large contract wind downs mentioned above.

Impacts on operating profit from unfavorable foreign currency translation were approximately $3.9 million and $5.0 million for the three and nine months ended July 1, 2022, compared to favorable impacts of approximately $4.3 million and $8.8 million in the corresponding prior year periods.

Critical Mission Solutions (CMS) segment revenues for the three months ended December 30, 2022 were $1.08 billion, an increase of $98.4 million, or 10.1%, from $976.8 million for the corresponding period last year.

During the three months ended December 30, 2022, revenue benefited from contracts awarded in late fiscal 2022, including the Department of Energy Nuclear remediation program.

Also, impacts on revenues from unfavorable foreign currency translation were approximately $33.1 million for the three month period ended December 30, 2022, compared to $2.2 million in favorable impacts in the corresponding prior year period.

Operating profit for the segment was $82.2 million for the three months ended December 30, 2022, representing a decrease of $9.0 million, or (9.9)%, from $91.2 million for the corresponding period last year.

Operating profit levels were down from the prior year, with impacts from large contract wind downs in early fiscal 2022, which carried higher profit margins, offset in part by growth in nuclear remediation work for the U.S.

Department of Energy noted above.

Impacts on operating profit from unfavorable foreign currency translation were approximately $3.9 million for the three months ended December 30, 2022, as compared to insignificant impacts in the corresponding prior year period.

People & Places Solutions

Three Months Ended Nine Months Ended

July 1, 2022 July 2, 2021 July 1, 2022 July 2, 2021

Three Months Ended

December 30, 2022 December 31, 2021

Revenue $ 2,226,985 $ 1,920,997

Operating Profit $ 226,619 $ 188,841

Revenues for the People & Places Solutions (P&PS) segment for the three months ended July 1, 2022 was $2.23 billion and $6.33 billion, respectively, an increase of $129.9 million and $1.8 million, or 6.2% and —%, from $2.10 billion and $6.33 billion for the corresponding periods last year.

The increase in revenue for the three months ended July 1, 2022 was primarily driven by growth in our advanced facilities business as compared to the prior year corresponding period.

The increase in revenue for the nine months ended July 1, 2022 was primarily due to higher fee-based revenue from our advanced facilities and international businesses offset in part by lower pass through revenues across the business as compared to the prior year corresponding period.

Foreign currency translation had a $69.2 million and $103.8 million unfavorable impact on revenues in our international businesses for the three and nine-month periods ended July 1, 2022, respectively as compared to favorable impacts of $73.6 million and $158.9 million in the corresponding prior year periods.

Operating profit for the segment for the three and nine month periods ended July 1, 2022 was $210.0 million and $592.9 million, respectively, an increase of $4.7 million for the three-month period and a decrease of $10.8 million for the nine-month period, or 2.3% and (1.8)% from $205.3 million and $603.7 million for the corresponding periods last year.

The year-over-year increase in operating profit for the three months ended July 1, 2022 was driven by the revenue growth mentioned above but partially offset by higher personnel costs associated with investments in advance of expected growth anticipated in late 2022 and 2023.

For the nine months ended July 1, 2022, operating profit decreased year-over-year due mainly to similar cost increases mentioned above in the first half of the year.

Foreign currency translation had a $11.8 million and $18.7 million unfavorable impact on operating profit in our international businesses for the three and nine-month periods ended July 1, 2022, respectively as compared to favorable impacts of $13.9 million and $27.7 million in the corresponding prior year periods.

Revenues for the People & Places Solutions (P&PS) segment for the three months ended December 30, 2022 was $2.23 billion, an increase of $306.0 million, or 15.9%, from $1.92 billion for the corresponding period last year.

The increase in revenue for the three months ended December 30, 2022 was primarily driven by growth in both our advanced facilities and U.S.

businesses as compared to the prior year corresponding period.

Foreign currency translation had a $83.2 million unfavorable impact on revenues in our international businesses for the three period ended December 30, 2022, respectively, as compared to unfavorable impacts of $2.6 million in the corresponding prior year period.

Operating profit for the segment for the three month period ended December 30, 2022 was $226.6 million, an increase of $37.8 million, or 20.0%, from $188.8 million for the corresponding period last year.

The year-over-year increase in operating profit for the three months ended December 30, 2022 was driven primarily by the revenue growth mentioned above while holding selling, general and administrative expenses relatively flat.

Foreign currency translation had a $15.9 million unfavorable impact on operating profit in our international businesses for the three month periods ended December 30, 2022, respectively as compared to insignificant impacts in the corresponding prior year period.

Divergent Solutions

Three Months Ended

December 30, 2022 December 31, 2021

Revenue $ 214,465 $ 192,877

Operating Profit $ 11,967 $ 23,108

Revenues for the Divergent Solutions segment for the three months ended December 30, 2022 were $214.5 million, an increase of $21.6 million, or 11.2%, from $192.9 million for the corresponding period last year.

The increase in revenue for the three months ended December 30, 2022 benefited from incremental revenues from the StreetLight acquisition (owned for the full period in fiscal 2023) and the startup of new programs previously won in fiscal 2022.

Foreign currency translation impacts on revenue were not significant for either period.

Operating profit for the segment was $12.0 million for the three months ended December 30, 2022, a decrease of $11.1 million, or 48.2%, from $23.1 million, for the corresponding period last year.

The decrease in operating profit for the three months ended December 30, 2022 was primarily driven by unfavorable impacts of changes in overhead billing rates during the current year quarter of 2023 vs.

the prior year quarter mainly in our cyber intelligence market.

Impacts on operating profit from foreign currency were not significant for either period.

PA Consulting

Three Months Ended Nine Months Ended

July 1, 2022 July 2, 2021 July 1, 2022 July 2, 2021

Three Months Ended

December 30, 2022 December 31, 2021

Revenue $ 282,043 $ 289,974

Operating Profit $ 51,027 $ 63,071

Revenues for the PA Consulting segment for the three and nine months ended July 1, 2022 were $277.6 million and $864.9 million, respectively, an increase of $21.8 million and $510.8 million, or 8.5% and 144.3%, from $255.8 million and $354.1 million for the corresponding periods last year.

The increase in revenue for the three months ended July 1, 2022 was primarily driven by growth in the U.K.

The increase in revenue for the year-to-date period in the current year was due mainly to the full year-to-date impact of revenues from our March 2, 2021 investment in PA Consulting.

Foreign currency translation had a $34.0 million and $38.1 million unfavorable impact on revenues in our international businesses for the three and nine months ended July 1, 2022, respectively and a favorable impact of $29.3 million for the corresponding prior year quarter and year-to-date periods.

Operating profit for the segment for the three and nine months ended July 2, 2021 was $51.4 million and $182.9 million, respectively, a decrease of $5.3 million and an increase of $98.1 million, or (9.4)% and 115.9%, from $56.8 million and $84.7 million, respectively, for the corresponding periods last year.

The decrease in operating profit for the three months ended July 1, 2022 was driven by normalization of utilization rates during the quarter.

The increase in operating profit for the year-to-date period was also due mainly to the full year-to-date impact of operating profit from our March 2, 2021 investment in PA Consulting.

Foreign currency translation had a $6.7 million and $8.1 million unfavorable impact on operating profit in our international businesses for the three and nine months ended July 1, 2022 and a favorable impact of $6.4 million for the corresponding prior quarter and year-to-date periods.

Revenues for the PA Consulting segment for the three months ended December 30, 2022 were $282.0 million, a decrease of $7.9 million, or 2.7%, from $290.0 million for the corresponding period last year.

The decrease in revenue for the three months ended December 30, 2022 was driven by f oreign currency translation which had a $41.6 million unfavorable impact on revenues in our international businesses for the three months ended December 30, 2022, and a favorable impact of $5.3 million for the corresponding prior year quarter.

In local currency (primarily GBP), PA Consulting experienced an approximate 10% increase in revenues as compared to the prior year period, primarily due to higher volumes in PA Consulting's existing business for previously delayed projects in fiscal 2022.

Operating profit for the segment for the three months ended December 30, 2022 was $51.0 million, a decrease of $12.0 million, or 19.1%, from $63.1 million, for the corresponding period last year, with the decrease partly due to unfavorable f oreign currency translation impacts in our international business of $6.9 million as compared to $1.0 million in favorable impact in the corresponding prior year period.

Additionally, operating profit was impacted by lower utilization as compared to the prior year quarter.

Other Corporate Expenses

Other corporate expenses for the three and nine months ended July 1, 2022 were $89.9 million and $284.5 million, respectively, a decrease of $14.6 million and an increase of $46.3 million from $104.5 million and $238.2 million for the corresponding periods last year.

This decrease during the three month period was due to decreases in real estate related costs, as well as other department spend decreases due in part to the Company's transformation initiatives.

The increase during the current year-to-date period was primarily due to higher intangible amortization expense from the StreetLight and BlackLynx acquisitions and the PA Consulting investment, as well as impacts from higher Company benefit program costs.

Included in other corporate expenses in the above table are costs and expenses which relate to general corporate activities as well as corporate-managed benefit and insurance programs.

Other corporate expenses for the three months ended December 30, 2022 were $93.7 million, a decrease of $11.7 million from $105.4 million for the corresponding period last year.

This decrease during the three month period was primarily driven by approximately $15.0 million in net favorable impacts from overhead cost reductions associated mainly with one-time benefit program changes, while partly offset by higher incentive and other compensation charges and higher investments in company technology platforms.

Included in other corporate expenses are costs and expenses which relate to general corporate activities as well as corporate-managed benefit and insurance programs.

Such costs and expenses include:

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and (v) certain adjustments relating to costs associated with the Company’s international defined benefit pension plans.

In addition, other corporate expenses may also include from time to time certain adjustments to contract margins (both positive and negative) associated with projects, as well as other items, where it has been determined that such adjustments are not indicative of the performance of the related LOB.

In addition, other corporate expenses may also include from time to time certain adjustments to contract margins (both positive and negative)

associated with projects, as well as other items, where it has been determined that such adjustments are not indicative of the performance of the related LOB.

Restructuring and Other Charges

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Because certain contracts (e.g., contracts relating to large Engineering, Procurement & Construction ("EPC") projects as well as national government programs) can cause large increases to backlog in the fiscal period in which we recognize the award, and because many of our contracts require us to provide services that span over several fiscal quarters (and sometimes over fiscal years), we have presented our backlog on a year-over-year basis, rather than on a sequential, quarter-over-quarter basis.

The following table summarizes our backlog at July 1, 2022 and July 2, 2021 (in millions):

July 1, 2022 July 2, 2021

The following table summarizes our backlog at December 30, 2022 and December 31, 2021 (in millions):

December 30, 2022 December 31, 2021

Critical Mission Solutions $ 7,632 $ 7,525

People & Places Solutions 17,243 16,930

Divergent Solutions 3,077 3,275

PA Consulting 306 276

Total $ 28,258 $ 28,006

The increase in backlog in Critical Mission Solutions (CMS) from July 2, 2021 was primarily driven by success in closing on a number of key opportunities in the U.S government space.

The increase in backlog in People & Places Solutions (P&PS) from July 2, 2021 was primarily driven by new business awards in our advanced facilities business.

The PA Consulting backlog was consistent and in line with the prior year comparable period backlog.

The increase in backlog in Critical Mission Solutions (CMS) from December 31, 2021 was primarily driven by new business awards in the U.S.

government space and nuclear remediation sectors offsetting slower growth in the U.S.

Defense market.

The increase in backlog in People & Places Solutions (P&PS) from December 31, 2021 was primarily driven by new business awards in our federal, environmental and advanced facilities business.

The decrease in backlog in Divergent Solutions (DVS) from December 31, 2021 was primarily driven by delays of new awards because of continuing resolution throughout fiscal 2022.

The increase in backlog in PA Consulting from December 31, 2021 was primarily driven by strategic focus on long-term projects as well as organic year over year growth of the business.

Consolidated backlog differs from the Company’s remaining performance obligations as defined by ASC 606 primarily because of our national government contracts (other than national government O&M contracts).

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Liquidity and Capital Resources

At July 1, 2022, our principal sources of liquidity consisted of $ 1.10 billion in cash and cash equivalents and $1.08 billion of available borrowing capacity under our $2.25 billion r evolving credit agreement (the "Revolving Credit Facility").

At December 30, 2022, our principal sources of liquidity consisted of $1.21 billion in cash and cash equivalents and $637.9 million of available borrowing capacity under our $2.25 billion r evolving credit agreement (the "Revolving Credit Facility").

We finance much of our operations and growth through cash generated by our operations.

The amount of cash and cash equivalents at July 1, 2022 represented an increase of $88.0 million from $1.01 billion at October 1, 2021 , the reasons for which are described below.

Our net cash flow provided by operations of $197.2 million during the nine months ended July 1, 2022 was unfavorable by $326.4 million in co mparison to the cash flow provided by operations of $523.6 million for the corresponding prior year period.

The year-over-year decrease in cash from operations is primarily attributable to the Legacy CH2M Matter cash settlement paid in the current fiscal quarter.

Our net cash used for investing activities for the nine months ended wa s $491.2 million, compared to cash used for investing activities of $1.72 billion in the corresponding prior year period, with this change due primarily to the acquisitions of StreetLight and BlackLynx in the current year and our investment in PA Consulting and acquisition of Buffalo Group in the prior year.

Our net cash provided by financing activities o f $461.8 million for the nine months ended July 1, 2022 resulted mainly from net proceeds from borr owings of $799.2 million primarily in connection with the StreetLight and BlackLynx acquisitions, partly offset by cash used for share repurchases of $250.7 million and $86.6 million in dividends to shareholders and $16.1 million in dividends to noncontrolling interest holders .

Cash provided by financing activities in the corresponding prior year period was $1.28 billion, due primarily to net proceeds from borrowings of $1.42 billion, offset by cash used for share repurchases of $24.9 million and $79.8 million in div idends to shareholders and $40.1 million in net dividends to (contributions from) noncontrolling interest holders.

At July 1, 2022, the Company had approximately $220.5 million in cash and cash equivalents held in the U.S.

and $881.8 million held outside of the U.S.

(primarily in the U.K., the Eurozone, Australia, India, Japan and the United Arab Emirates), which is used primarily for funding operations in those regions.

The amount of cash and cash equivalents at December 30, 2022 represented an increase of $70.6 million from $1.14 billion at September 30, 2022 , the reasons for which are described below.

Our net cash flow provided by operations of $302.3 million during the three months ended December 30, 2022 was unfavorable by $19.3 million in co mparison to the cash flow provided by operations of $321.6 million for the corresponding prior year period.

The year-over-year decrease in cash from operations is primarily attributable to lower earnings after adjustments for non-cash items compared to the prior period, in addition to a small decrease in working capital performance compared to the prior period.

Our net cash used for investing activities for the three months ended December 30, 2022 wa s $48.7 million , compared to cash used for investing activities of $249.6 million in the corresponding prior year period, with this change due primarily to the acquisition of BlackLynx in the prior year.

Our net cash used for financing activities of $246.1 million for the three months ended December 30, 2022 resulted mainly from cash used for share repurchases of $140.5 million, $58.4 million in repurchase of redeemable noncontrolling interests and $29.8 million in dividends to shareholders and $2.3 million in dividends to noncontrolling interest holders, partly offset by net proceeds from issuance of common stock of $14.8 million.

Cash provided by financing activities in the corresponding prior year period was $144.4 million, due primarily to net proceeds from borrowings of $231.4 million, offset by cash used for repurchases of redeemable noncontrolling interests of $35.1 million and $27.5 million in dividends to shareholders and $14.1 million in net dividends to noncontrolling interest holders.

At December 30, 2022, the Company had approximately $210.0 million in cash and cash equivalents held in the U.S.

and $1.0 billion held outside of the U.S.

(primarily in the U.K., the Eurozone, Australia, India, Canada, Israel and the United Arab Emirates), which is used primarily for funding operations in those regions.

Other than the tax cost of repatriating funds to the U.S.

(see Note 6- Income Taxes of Notes to Consolidated Financial Statements included in our 2022 Form 10-K), there are no material impediments to repatriating these funds to the U.S.

The Company had $286.9 million in le tters of credit outstanding at July 1, 2022.

The Compan y had $292.5 million in letters of credit outstanding at December 30, 2022.

Of this amount, $1.3 million was issued under the Revolving Credit Facility and $291.2 million was issued under separate, committed and uncommitted letter-of-credit facilities.

On April 12, 2022, the Company paid cash of AUD640 million, or approximately $475 million using mid-April 2022 exchange rates, which represents the final pre-tax settlement of Legacy CH2M Matter.

For more information please refer to Note 19 - Commitments and Contingencies and Derivative Financial Instruments.

On February 6, 2023, the Company refinanced its Revolving Credit Facility and Term Loan Facilities.

See Note 11- Borrowings for further discussion relating to the terms of the Revolving Credit Facility and Term Loan Facilities following the refinancing.

On February 4, 2022, the Company acquired StreetLight Data, Inc.

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The Company also paid off StreetLight's debt of approximately $1.0 million simultaneously with the consummation of the acquisition.

On November 19, 2021, a subsidiary of Jacobs acquired all outstanding shares of common stock of BlackLynx, a provider of high-performance software, to complement Jacobs' portfolio of cyber, intelligence and digital solutions.

On November 19, 2021, Jacobs acquired all outstanding shares of common stock of BlackLynx, a provider of high-performance software, to complement Jacobs' portfolio of cyber, intelligence and digital solutions.

The Company paid total base consideration of approximately $235.4 million in cash to the former owners of BlackLynx.

In conjunction with the acquisition, the Company also paid off BlackLynx's debt of approximately $5.3 million simultaneously with the consummation of the acquisition.

On March 2, 2021, Jacobs completed the strategic investment of a 65% interest in PA Consulting, a UK-based leading innovation and transformation consulting firm.

The total consideration paid by the Company was $1.7 billion, funded through cash on hand, proceeds from a new term loan and draws on the Company's existing revolving credit facility.

Further, in connection with the transaction, an additional $261 million in investment proceeds had not yet been distributed at the investment date due to continuing employment requirements of associated management owners.

Consequently, this amount represented compensation expense incurred related to the investment that was expensed subsequent to the acquisition date, and was reflected in selling, general and administrative expense and cash from operations for the fiscal year ended October 1, 2021.

The remaining 35% interest was acquired by PA Consulting employees, whose redeemable noncontrolling interests had a fair value of $582.4 million on the closing date, including subsequent purchase accounting adjustments.

PA Consulting is accounted for as a consolidated subsidiary and as a separate operating segment under U.S.

GAAP accounting rules.

On January 20, 2021, the Company entered into an unsecured delayed draw term loan facility (the “2021 Term Loan Facility”) with a syndicate of financial institutions as lenders.

Under the 2021 Term Loan Facility, the Company borrowed an aggregate principal amount of $200.0 million and £650.0 million.

The proceeds of the term loans were used primarily to fund the investment in PA Consulting.

The 2021 Term Loan Facility contains affirmative and negative covenants and events of default customary for financings of this type that are consistent with those included in the Revolving Credit Facility and the 2020 Term Loan Facility.

On November 24, 2020, a subsidiary of Jacobs completed the acquisition of Buffalo Group, a leader in advanced cyber and intelligence solutions, which allows Jacobs to further expand its cyber and intelligence solutions offerings to government clients.

The Company paid total consideration of $190.1 million, which was comprised of approximately $182.4 million in cash to the former owners of Buffalo Group and contingent consideration of $7.7 million, The contingent consideration was subsequently recognized as an offset to selling, general and administrative expense when it was determined no amounts would be paid.

In conjunction with the acquisition, the Company assumed the Buffalo Group's debt of approximately $7.7 million.

The Company repaid all of the assumed Buffalo Group debt by the end of the first fiscal quarter of 2021.

The Company has recorded its final purchase price allocation associated with the acquisition, which is summarized in Note 16- Other Business Combinations.

We believe we have adequate liquidity and capital resources to fund our projected cash requirements for the next twelve months based on the liquidity provided by our cash and cash equivalents on hand, our borrowing capacity and our continuing cash from operations.

We further believe that our financial resources and discretionary spend controls will allow us to continue managing the negative impacts of the COVID-19 pandemic on our business operations for the foreseeable future.

We continue to evaluate the impact of the pandemic on our business and reassess accordingly.

We were in compliance with all of our debt covenants at July 1, 2022.

We were in compliance with all of our debt covenants at December 30, 2022.

Supplemental Obligor Group Financial Information

On February 6, 2023, Jacobs and its wholly-owned subsidiary, JEGI (together, the "Obligor Group"), filed an automatic shelf registration statement on Form S-3, registering, among other securities, Senior Debt Securities, and Subordinated Debt Securities of Jacobs, which may be fully and conditionally guaranteed by JEGI, and Senior Debt Securities, and Subordinated Debt Securities of JEGI, which may be fully and conditionally guaranteed by Jacobs.

All other subsidiaries of the Company that will not guarantee the registered debt securities of either JEGI or Jacobs are referred to collectively as the "Non-Obligor Subsidiaries".

As of the date of this report, no Senior or Subordinated Debt Securities subject to such guarantees have been issued.

In accordance with the SEC Regulation S-X Rule 13-01, set forth below is the summarized financial information for the Obligor Group on a combined basis after elimination of (i) intercompany transactions and balances between Jacobs and JEGI and (ii) equity in the earnings from and investments in the Non-Obligor Subsidiaries.

This summarized financial information (in thousands) has been prepared and presented pursuant to Regulation S-X Rule 13-01, “Financial Disclosures about Guarantors and Issuers of Guaranteed Securities” and is not intended to present the financial position or results of operations of the Obligor Group in accordance with U.S.

Three Months Ended

(in thousands) December 30, 2022

Summarized Statement of Earnings Data

Revenue $ 757,688

Direct Costs $ 645,637

Selling, General and Administrative Expenses $ 121,268

Net earnings attributable to Guarantor Subsidiaries from continuing operations $ (26,927)

Noncontrolling interests $ (227)

(in thousands) December 30, 2022 September 30, 2022

Summarized Balance Sheet Data

Current assets, less receivables from Non-Guarantor Subsidiaries $ 670,764 $ 641,281

Current receivables from Non-Guarantor Subsidiaries $ 132,560 $ 144,564

Noncurrent assets, less noncurrent receivables from Non-Guarantor Subsidiaries $ 489,598 $ 494,185

Noncurrent receivables from Non-Guarantor Subsidiaries $ 654,156 $ 612,260

Current liabilities $ 591,260 $ 573,614

Long-term Debt $ 3,045,486 $ 2,986,124

Other Noncurrent liabilities, less amounts payable to Non-Guarantor Subsidiaries $ 289,442 $ 289,452

Noncurrent liabilities to Non-Guarantor Subsidiaries $ 462,306 $ 434,092

Noncontrolling interests $ 765 $ 947

Accumulated deficit $ (2,442,181) $ (2,391,939)

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis