Jacobs Solutions Inc. (J) Earnings Call Transcript & Summary

Welcome to the 2021 Annual Meeting of Shareholders for Jacobs. Our host for today's call is Steve Demetriou, Chair of the Board and CEO. [Operator Instructions] I will now turn the call over to your host, Mr. Demetriou. You may begin, sir.

All right. Thank you. Welcome. The meeting will come to order. Ladies and gentlemen, I'm glad to welcome all of you to our 2021 Annual Meeting of Shareholders. I'm Steve Demetriou, Chair of the Board and CEO of Jacobs, and I'll be presiding over this meeting. I'm joined by the other members of our Board of Directors: Chris Thompson, our Lead Independent Director; Bob Davidson; General Ed Eberhart; Georgette Kiser; Linda Fayne Levinson; Barb Loughran; Bob McNamara; Peter Robertson; and our 2 newest board members who are appointed this year, General Vince Brooks and Manny Fernandez. Vince Brooks is a retired 4-star general who served in the U.S. Army for more than 40 years from his entry into the U.S. Military Academy at West Point until his retirement from active duty in 2019. Most recently, he was the commander of the 650,000 strong Korean and United States forces in the Republic of Korea. General Brooks was the first African-American chosen to lead the more than 4,000 cadets at West Point as the Cadet Brigade Commander and went on to become the eighth African-American in the history to attain the military's top rank of 4-star general in the U.S. Army. Manny Fernandez is a retired KPMG executive who, for more than 36 years, advised large multinational public and private companies in areas of business and financial operations, risk management and M&A. Most recently as KPMG's Dallas office managing partner and market leader for the Southwest area, he led a team of more than 3,000 partners and professionals across audit, tax and consulting. His client and market teams covered some of KPMG's most prominent clients across a variety of sectors, including industrial manufacturing, consumer products, retail and media. Justin Johnson, our Deputy General Counsel and Corporate Secretary, is also here with me today and will serve as the Secretary of this meeting. Scott Miracle and Andy Chappell from Ernst & Young, our outside auditors, are also joining us today. We're excited to be hosting our annual meeting in a virtual format this year, which in light of the COVID-19 pandemic, allows us to be more inclusive and reach a greater number of our shareholders while prioritizing the health and safety of our investors, board members, executives, employees and community. As is our custom, we will conduct the business portion of our meeting first and answer any shareholder questions at the end of the meeting. Shareholders may submit questions in the designated field on the meetings web portal. Though we may not be able to answer every question, we'll do our best to provide a response to as many as possible. An agenda has been posted on the web portal for the meeting, along with a list of rules of conduct. To conduct an orderly meeting, we ask the participants abide by these rules, including prohibiting the use of any audio recording devices. May we now have the Secretary's report on the record date?

The Board of Directors fixed November 30, 2020, as the record date for shareholders entitled to notice of and to vote at this meeting. The shareholders' list shows the total number of shares of common stock entitled to vote at the meeting is 129,981,382. The preliminary number of shares of common stock represented at the meeting and entitled to vote based on the tabulation of proxies by the inspector of election is 116,349,052 or 90%. I also have an affidavit of distribution by an officer of Broadridge Financial Solutions, Inc. certifying that the proxy materials were mailed commencing on December 11, 2020.

Thank you. A quorum is present for all purposes. Mr. Michael Barbera of First Coast Results is appointed as the independent inspector of election to determine the number of shares held by shareholders present in person via the web portal or by proxy and to count all votes cast at this meeting. There are 3 items of business to be voted on by the shareholders at this meeting. These items are discussed in the 2021 proxy statement. The proxies have been received and tabulated, and they will be voted by the proxy holders at this meeting in accordance with the terms of each proxy. The polls are now open. Any shareholder who hasn't yet voted or wishes to change their vote may do so by clicking on the Voting button on the web portal and following the instructions there. If you previously voted by proxy or via telephone or the Internet, you do not need to vote today unless you wish to change your vote. We will first proceed with the election of the 11 directors set forth in the proxy statement. I now declare the nominations open for directors.

I would like to place Steven Demetriou, Christopher Thompson, General Vincent Brooks, Robert Davidson Jr., General Ralph Eberhart; Manny Fernandez, Georgette Kiser, Linda Fayne Levinson, Barbara Loughran, Robert McNamara, Peter Robertson in nomination for election as directors of the company to serve for 1-year terms expiring at the 2022 Annual Meeting of Shareholders.

I second the motion.

I move that those persons nominated as directors of the company be so elected.

I second the motion.

It has been moved and seconded that those persons nominated be elected as directors of the company to serve 1-year terms expiring at the 2022 Annual Meeting of Shareholders. Justin, would you please report on the voting regarding the election for directors as a result of the preliminary tabulation of proxies by the inspector of election? The votes cast at today's meeting via the web portal, if any, will be added to the final tabulation of votes.

The preliminary results of the proxies received for the voting regarding directors indicate that each nominee received at least 102,670,699 or 97% votes for, with no more than 2,938,999 shares voting against any nominee.

I declare all of the nominees elected. The next order of business is the advisory vote related to the company's executive compensation as described in the proxy statement. Do I hear a motion?

I hereby move for advisory approval of the resolution related to the company's executive compensation as proposed in the proxy statement.

I second the motion.

It has been moved and seconded that the resolution related to the company's executive compensation be approved. Justin, would you please report on the voting regarding the approval of this proposal as a result of the preliminary tabulation of proxies by the inspector of election? The votes cast at today's meeting via the web portal, if any, will be added to the final tabulation of votes.

The preliminary results of the proxies received for the voting on this motion are as follows. Number of shares voting for is 103,166,095 or 97.5%. Number of shares voting against is 2,208,823.

The motion carried. The next sort of business is the ratification of the appointment of Ernst & Young LLP as the company's independent registered public accounting firm for the fiscal year ending October 1, 2021. Do I hear a motion?

I hereby move that the appointment of Ernst & Young LLP as the company's independent registered public accounting firm as set forth in the proxy statement be ratified.

I second the motion.

It has been moved and seconded that the appointment of Ernst & Young LLP as the company's independent registered public accounting firm for the fiscal year ending October 1, 2021, be ratified. Justin, would you please report on the voting regarding this proposal as a result of the preliminary tabulation of proxies by the inspector of election? The ballot votes, if any, will be added to the final tabulation of votes.

The preliminary results of the proxies received for the voting on this motion are as follows. Number of shares voting for is 109,367,970 or 94%. Number of shares voting against is 6,845,789.

The motion carried. Now that everyone has had the opportunity to vote, the polls are now closed. The final results of the voting will be tallied and certified by the inspector of election. The certificate of the inspector of election and the affidavit of distribution will be filed with and made part of this meeting's minutes. This concludes the formal portion of this shareholders' meeting. After the adjournment of the meeting, I will give a report on the company, and you'll have an opportunity to ask questions about the company.

I move that this meeting be adjourned.

I second the motion.

Motion carried. I declare this meeting to be adjourned. Moving on to the next agenda item. I'll now provide a report on the company's business for fiscal 2020. Last year began with Jacobs ringing the opening bell at the New York Stock Exchange February 4, 2020, to celebrate our 30th year listing on the New York Stock Exchange and our shift to the single letter J, proudly exemplifying our new brand and transformation to a global technology forward solutions company. We never could have anticipated all the ways the pandemic would challenge each of us. But the commitment of our people to each other, our clients and our communities has been an inspiration. All through the year, our Jacobs family demonstrated a passion for driving the business forward and continuing to transform the world for good. Let's take a look at some of the highlights. First, we delivered solid performance for fiscal year 2020 in the face of headwinds from the global pandemic. Total fiscal 2020 revenue increased 5% year-over-year, and our backlog ended the fiscal year up 6%. We had strong net earnings and adjusted EBITDA growth for the year. We also had strong free cash flow performance, with $689 million of free cash flow, demonstrating the strong cash capabilities of our business portfolio, a key tenet of our investment thesis. Second, the 3-year growth strategy we developed to build a company aligned to sustainable high-growth markets proved its resilience in fiscal 2020 during one of the most severe economic shocks in history. As we marked the third year since closing on the acquisition of CH2M, the largest of its kind in our industry, the strong alignment of our cultures and delivering on our revenue synergies were key to our success and created a model for successful follow-on integrations and acquisitions. We continue to focus on innovation and transformation, with the completion of our acquisition of Wood Nuclear, enhancing our credentials as a global leader of total life cycle nuclear services and technology-enabled solutions. Third, we made deep inroads in the investment of our people, culture and inclusion through our enterprise-wide programs. We're incredibly proud of our focused efforts to keep our people safe, developing our 2025 and Beyond Strategy, which builds on our strong BeyondZero safety program to further advance our positive impact on Jacobs, our people, our partners and the environment. We also collaborated with global mental health professionals to develop One Million Lives, a free mental health check-in tool to enhance users' understanding of their current state of mind and provide proactive strategies for personal health, mental health development. On the 50th anniversary of Earth Day, we launched our plan beyond Climate Action Plan, and as a company for 2020, reached net 0 carbon and 100% renewable energy for our operations. In a testament to our commitment to instill and sustain our innovation culture as part of our Beyond If program, we received more than 115 innovation submissions last year. And our newly launched podcast series showcasing our thought leaders and industry experts had more than 35,000 downloads. Also, 34 individuals and teams were recognized in are Beyond Excellence Awards, where our entire Jacobs family was able to come together virtually to celebrate. Our continued focus to develop our people through -- brought about the launch and integration of our global career program, e3: engage. excel. elevate, to ensure every employee can engage with our global network, excel in their role and elevate their career through personal and professional growth tailored to their career interests. And most importantly, we spoke up and spoke out against social injustice through our TogetherBeyond strategy and the launch of our global Action Plan for Advancing Justice and Equality. Aligning with our strong emphasis on inclusion, the diversity of Jacobs Board of Directors is at 55%, comprised of 11 members from varied industry, government, technical and business backgrounds, providing a robust governance structure. And the 2020 Women on Boards Gender Diversity Index ranked us as a winning company, exceeding its 20% criteria, with 27% women on our Jacobs Board. I want to take a moment to personally thank Joe Bronson, who is retiring from our Jacobs Board, for his contribution since 2003. Joe chaired the Audit Committee for 15 years. And his contributions, particularly in M&A, contributed to our portfolio transformation. Joe's executive management experience at large publicly traded companies brought additional perspective to the Board regarding the day-to-day operations as well as corporate best practices. But most importantly, I valued greatly the good counsel Joe has provided me personally during the past 5 years. Looking forward to fiscal 2021, from a profitable growth perspective, our strategic portfolio actions, including our pending strategic investment to PA Consulting and recently completed acquisition of the Buffalo Group, will position the company in higher-value markets that further enable us to deliver on our growth strategy. We will be announcing our fiscal first quarter results on February 9. Today, we embrace a future of infinite possibilities. And as we do so, our values continue to drive our behaviors, relationships and outcomes, never more so than this year has our culture of caring and our core values. We do things right. We challenge the accepted. We aim higher. We live inclusion. It's been so important to our company. These values dominate the fabric of all that we do here at Jacobs and are the differentiator for us in the marketplace. Before we start our question-and-answer period, I'd like to turn it over to Justin Johnson for a brief comment.

[Operator Instructions] Please note that we will attempt to answer as many questions as time allows, but only questions that are germane to the meeting will be addressed. With that, I'll turn it back to you, Steve.

All right. I'll now open the floor for the question-and-answer period. We will take any shareholders' questions that are being entered today on the web portal. Marietta Hannigan, our Executive Vice President, Strategy, Corporate Development and Communications, will be running the Q&A session.

We have not received any questions in the portal, so I'll turn it back over to you, Steve.

All right. Well, that concludes the question-and-answer period and the annual meeting. Thank you all for participating.

This now concludes the meeting. Thank you for joining, and have a pleasant day.