The Zweig Index reports on 11 of the AEC industry's leading firms on a monthly basis. This installment details the financial standing of Jacobs.
Zweig Group believes that tracking and reporting on the financial standing of some of the industry’s leading, publicly traded firms will allow our readers to have another digestible form of information that will equip them with a greater understanding of the state of the industry. This monthly report, the Zweig Index, examines 11 of the AEC industry’s leading firms on a monthly basis. This month we're focusing on Jacobs.
Jacobs Solutions inc. (J) is the largest firm by market capitalization on the Zweig Index for 2022, ending the year with just over $15 billion in market cap and an annual revenue of $14.9 billion. Founded in 1947 and based in Dallas, Texas, Jacobs is a provider of technical, professional, and construction services. The company offers full-spectrum support for industrial, commercial, and government clients across multiple markets. Services include scientific and specialty consulting as well as all aspects of engineering and construction, and operations and maintenance. With a workforce of more than 60,000 full-time employees, Jacobs’ 2022 revenue was segmented between people and place solutions (57 percent), critical mission solutions (35 percent), and PA Consulting (8 percent).
*Jacobs owns a 65 percent stake in PA Consulting, a London-based solutions consulting company with more than 4,000 employees.
*Share price in USD as of June 26, 2023.
Financial highlights as of April 2023 ($USD): 
- Gross revenue increased from $14.1 billion to $15 billion (+6.4 percent). The average 2022 gross revenue growth across all firms on the Zweig Index was 16.9 percent.
- Net service revenue increased from $11.7 billion to $12.6 billion (+7.6 percent). The average 2022 NSR growth for firms on the Zweig index was 19.9 percent.
- Adjusted EBITDA from continuing operations increased from $1.2 billion to $1.4 billion, which was 10.8 percent of NSR. The average adjusted EBITDA margin of firms on the Zweig Index has been 14.7 percent of net service revenue in 2022.
- Thirty-one percent of the firm’s 2022 total revenue was from U.S federal government contracts while the other 69 percent were non-federal government.
- Jacob’s operating segments are People and Place Solutions (57 percent), Critical Mission Solutions (35 percent), and PA Consulting (8 percent). Roughly 73 percent of CMS revenue was through the Department of Defense, the intelligence community, Department of Energy, and other U.S federal agencies.
The firm currently has roughly $28 billion worth of backlog entering 2023, which equates to 22.3 months of work for its current labor force.
Balance sheet ($USD):
- The firm’s cash and cash equivalents accounts increased 12 percent, from $1 billion to $1.1 billion. Jacob’s current ratio is holding at 1.45x which is just below the Zweig Index average for 2022 (1.5x).
- Quick ratio (cash + receivables / current liabilities) increased from 1.3x to 1.4x. The Zweig Index average for 2022 was 1.2x.
- Debt to equity ratio increased from 0.48 in 2021 to 0.56 in 2022, which is higher than the index average for 2022 that was 0.08.
- Cash flow provided by operations decreased from $726.3 million in 2021 to $474.7 million in 2022. This was due primarily to the Legacy CH2M Matter cash settlement paid in the current fiscal year and the impact of the PA Consulting post-completion compensation payments made during the prior fiscal year.
Valuation metrics:
Enterprise value measures a company's total value, often used as a more comprehensive alternative to equity market capitalization. EV includes in its calculation the market capitalization of a company but also short-term and long-term debt and any cash or cash equivalents on the company's balance sheet. (Note that all estimated enterprise values are as of September 30.)
- Jacob’s EV increased from $19.2 billion to $19.6 billion. This increase was driven primarily by the increase in debt as revolving credit facility increased from $327 million in 2021 to $1.1 billion in 2022.
- EV/NSR decreased from 1.6x to 1.5x.
- EV/adjusted EBITDA decreased from 15.4x to 14.4x.
- EV/backlog remained constant at 0.7x.
Risks and opportunities:
Opportunities:
- Creation of new business unit, Divergent Solutions:
- Developing and delivering innovative next-generation cloud, cyber, and digital technology solutions.
- Leveraging growth of AI and machine learning:
- Acquisition of StreetLight Data, Inc. along with a strategic partnership with Palantir allow for more opportunities in the water and transportation markets.
- Advanced manufacturing:
- Partnering with some of the largest technology and data center providers to address critical sustainability and carbon neutrality challenges while driving innovation with renewable power and water technologies.
Risks:
- With a third of total revenue coming from federal government contracts, a loss of the U.S government as a client could have adverse effects on the company.
- Inability to compete effectively in a competitive market will lead to a decrease in market share and loss of business.
- International operations expose the company to additional risks, including unfavorable political developments and weak foreign economies.
Acquisitions (2020-2022) ($USD) 
Summary:
Revenue for 2022 increased $830 million to $14.9 billion. This increase primarily resulted from the PA Consulting investment that completed in March 2021, the Buffalo Group acquisition in November 2020, and the StreetLight and BlackLynx acquisitions in fiscal year 2022, as well as revenue benefits from increased spending in U.S. government business sector client base. Although Jacobs may not grow at the same rate as other firms on the Zweig Index, Jacobs is well-established, having operated for more than 75 years. With more than 60,000 employees generating approximately $15 billion in annual revenue, Jacobs is one of the leading engineering firms in the U.S. With a debt ratio of 0.58 and debt-to-equity ratio of 0.56, Jacobs maintains a balanced level of both debt and equity.
In May of 2022, the board unanimously voted to separate the critical mission solutions division from Jacobs, forming two separate businesses. The split is said to allow both parties to focus on individual strategies and pursue strategic initiatives specific to the given industries they operate in. CMS generated roughly $4.4 billion in revenue for 2022 and is a leading provider of technical consulting, applied sciences, and program management services to federal government agencies. Said separation is set to take place sometime in the second half of fiscal year 2024.
With almost two years’ worth of backlog based on current workforce, Jacobs is positioned to navigate any short-term setbacks whether internally or externally. Being a publicly traded company since 1980, Jacobs is one of the oldest and most established firms on the Zweig Index.
