Jacobs Solutions Financial Model

• Total assets are approximately $14 billion to $15 billion.
• Key asset categories are receivables, contract assets (unbilled receivables), and goodwill.
• Goodwill & intangibles represent over 50% of total assets due to a history of large acquisitions.
• Working capital profile:
• Days Sales Outstanding (DSO): 65 to 75 days.
• Days Inventory Outstanding (DIO): N/A (service business).
• Days Payable Outstanding (DPO): 45 to 55 days.
• Net working capital as % of revenue: Typically 10% to 15%.
• Is working capital positive or negative? Positive. The company consumes cash to fund growth as unbilled receivables build up on large projects.
• PP&E: Very light, consisting mostly of leasehold improvements, IT equipment, and office furniture.
• Right-of-use assets / operating leases: Material, representing the global office footprint, typically around $400 million to $500 million.

• Capex as % of revenue: 1.0% to 1.5% (highly asset-light).
• Maintenance capex vs. growth capex: Almost entirely maintenance and IT infrastructure upgrades.
• Major capex programmes underway or planned: Investments in digital tools and AI capabilities (e.g., the Evolve tool).
• Capitalised software / development costs: Modest, related to internal ERP and project management systems.
• M&A pattern: Historically a transformational acquirer, but currently focused on organic growth and integrating PA Consulting following the Amentum spin-off.

• Total debt is approximately $2.5 billion to $3.0 billion.
• Debt/EBITDA ratio: Target is 1.5x to 2.0x.
• Credit rating: Investment grade (typically BBB- or equivalent).
• Key debt instruments: Senior unsecured notes (e.g., 5.90% Bonds due 2033, 6.35% Bonds due 2028) and a revolving credit facility.
• Maturity profile: Well-laddered with major maturities in 2028 and 2033.
• Interest rate profile: Predominantly fixed via bonds and interest rate swaps.
• Covenants: Standard leverage and interest coverage ratios.
• Share repurchase programme: Active, using proceeds from the Amentum spin-off and free cash flow to buy back shares.
• Dividend policy: Pays a regular quarterly dividend, yielding approximately 1.0% to 1.5%.

• Operating cash flow conversion: Very strong, typically >100% of adjusted net income.
• Free cash flow margin: 7.0% to 8.0% of revenue (FY2026 guidance).
• Major non-cash items that bridge net income to OCF: Depreciation, amortisation of intangibles, stock-based compensation, and mark-to-market adjustments on retained equity stakes.
• Working capital cash flow impact: A use of cash during periods of high revenue growth due to contract asset build-up.
• Capex intensity: Very low, ensuring high conversion of operating cash flow to free cash flow.
• Cash tax rate vs. GAAP effective tax rate: Cash taxes closely track the effective tax rate of 22% to 24%.

1. Assumptions: Hardcoded drivers for macroeconomic inputs, segment growth, margins, working capital days, and tax rates.
2. Backlog Schedule: Roll-forward of backlog (Beginning + Awards - Revenue = Ending) to drive I&AF revenue.
3. Revenue & Gross Margin: Segment-level build for I&AF and PA Consulting, calculating direct costs and gross profit.
4. Income Statement: Consolidated P&L from Revenue down to Net Income and EPS, matching the 10-K format.
5. Balance Sheet: Assets, Liabilities, and Equity, highlighting contract assets and contract liabilities.
6. Cash Flow Statement: Indirect method starting from Net Income, adjusting for non-cash items and working capital changes.
7. Working Capital Schedule: Calculation of receivables, contract assets, payables, and accrued liabilities based on days assumptions.
8. Debt & Interest Schedule: Tranche-by-tranche debt roll-forward and interest expense calculation.
9. PP&E & Intangibles: Capex, depreciation, and amortisation schedules.
10. DCF Valuation: Unlevered free cash flow calculation, WACC build, and terminal value to arrive at an implied share price.

1. I&AF Revenue = Beginning I&AF Backlog + I&AF New Awards - Ending I&AF Backlog
2. PA Consulting Revenue = Prior Year PA Consulting Revenue x (1 + PA Consulting Growth Rate)
3. Total Revenue = I&AF Revenue + PA Consulting Revenue
4. Direct Cost of Contracts = Total Revenue x (1 - Consolidated Gross Margin %)
5. Gross Profit = Total Revenue - Direct Cost of Contracts
6. SG&A Expense = Total Revenue x SG&A % of Revenue
7. Adjusted EBITDA = Gross Profit - SG&A Expense + Depreciation + Amortisation + Stock-Based Compensation
8. Accounts Receivable = (Total Revenue / 365) x Days Sales Outstanding
9. Contract Assets = (Total Revenue / 365) x Days Contract Assets Outstanding
10. Accounts Payable = (Direct Cost of Contracts / 365) x Days Payable Outstanding
11. Free Cash Flow = Cash Flow from Operations - Capital Expenditures
12. Interest Expense = Average Debt Balance x Weighted Average Interest Rate

The Assumptions sheet feeds the Backlog Schedule and Revenue & Gross Margin sheet. The revenue outputs drive the Income Statement top line and the Working Capital Schedule balances. The Working Capital Schedule calculates the change in net working capital, which flows into the Cash Flow Statement. The Cash Flow Statement determines the ending cash balance and any required revolver draw, which feeds the Debt & Interest Schedule. The interest expense then flows back to the Income Statement, creating a circular reference that must be managed with a circuit breaker toggle. Finally, the Cash Flow Statement and Income Statement feed the DCF Valuation.

• Revenue and income items are positive.
• Expenses (COGS, SG&A, Interest, Taxes) are entered as positive numbers in their respective schedules but subtracted in summation formulas (e.g., Gross Profit = Revenue - COGS).
• On the Balance Sheet, assets are positive, and liabilities/equity are positive.
• On the Cash Flow Statement, cash inflows are positive, and cash outflows (like Capex and dividends) are negative.

• Failing to exclude the spun-off Critical Mission Solutions and Cyber & Intelligence businesses from historical run-rates. The model must use continuing operations data only.
• Mismodelling the mark-to-market volatility of the retained 7.5% stake in Amentum stock, which flows through the income statement but should be excluded from adjusted EBITDA.
• Confusing Accounts Receivable with Contract Assets. E&C firms use both; Contract Assets represent unbilled work based on percentage of completion and are a massive use of cash during growth phases.
• Overestimating capital expenditures. Jacobs is a services firm, not a heavy construction firm; capex should rarely exceed 1.5% of revenue.
• Ignoring the amortisation of intangibles. Because of the CH2M and PA Consulting acquisitions, amortisation is a heavy non-cash charge that depresses GAAP earnings but must be added back for cash flow.
• Miscalculating the book-to-bill ratio. A ratio below 1.0x means the backlog is shrinking, which mathematically forces future revenue to decline.
• Applying historical consolidated margins to the new standalone entity. The spun-off government business had lower margins; the remaining company has a structurally higher gross and EBITDA margin.
• Forgetting to account for the non-controlling interest in PA Consulting, as Jacobs does not own 100% of it.

• Consolidated Gross Margin should be in the 24.0% to 25.5% range; flag if outside this band.
• Adjusted EBITDA margin should be between 14.0% and 15.0% based on FY2026 guidance.
• Free Cash Flow margin (FCF / Revenue) should be between 7.0% and 8.0%.
• Book-to-Bill ratio (New Awards / Revenue) should be between 1.0x and 1.2x to support mid-single-digit growth.
• Capex as a % of revenue must remain below 2.0%.
• Balance sheet must balance: Total Assets = Total Liabilities + Equity in every period.
• Effective tax rate should be between 22.0% and 24.0%.
• Debt/EBITDA should remain below 2.5x to maintain investment-grade status.

• SEC EDGAR for Jacobs Solutions Inc. (Ticker: J) 10-K and 10-Q filings.
• Jacobs Investor Relations website for quarterly earnings presentations and the FY2026 guidance press release.
• Key peers for benchmarking: AECOM (ACM), Tetra Tech (TTEK), WSP Global (WSP), and Parsons Corporation (PSN).
• Industry data sources: Engineering News-Record (ENR) for top design firm rankings and infrastructure spending trends.
• Consensus estimates source: FactSet or Bloomberg for forward-looking street estimates on backlog and margins.

• Jacobs Solutions Inc. Form 10-K for the Fiscal Year Ended September 26, 2025 (SEC EDGAR).
• Jacobs Solutions Inc. Q4 2025 and Q1 2026 Earnings Press Releases (invest.jacobs.com).
• PR Newswire: Jacobs Solutions Announces Record Date and Distribution Date for the Spin-Off of Its Critical Mission Solutions and Cyber & Intelligence Government Services Businesses (September 13, 2024).
• Morningstar Equity Research: Jacobs Completes Spinoff of Critical Mission Solutions and Cyber and Intelligence Businesses (September 30, 2024).