JACOBS SOLUTIONS INC. (J)

Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Page 49

Critical Accounting Policies and Estimates

In order to better understand the changes that occur to key elements of our financial condition, results of operations and cash flows, a reader of this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be aware of the critical accounting policies we apply in preparing our consolidated financial statements.

The consolidated financial statements contained in this report were prepared in accordance with U.S. GAAP. The preparation of our consolidated financial statements and the financial statements of any business performing long-term professional services, engineering and construction-type contracts requires management to make certain estimates and judgments that affect both the entity’s results of operations and the carrying values of its assets and liabilities. Although our significant accounting policies are described in Note 2- Significant Accounting Policies of Notes to Consolidated Financial Statements beginning on page F-1 of this Annual Report on Form 10-K, the following discussion is intended to highlight and describe those accounting policies that are especially critical to the preparation of our consolidated financial statements.

Revenue Accounting for Contracts

The Company recognizes engineering, procurement, and construction contract revenue over time, as performance obligations are satisfied, due to the continuous transfer of control to the customer in accordance with ASC 606, Revenue from Contracts with Customers. Contracts that include engineering, procurement and construction services are generally accounted for as a single deliverable (a single performance obligation). In some instances, the Company’s services associated with a construction activity are limited only to specific tasks such as customer support, consulting or supervisory services. In these instances, the services are typically identified as separate performance obligations.

The Company recognizes revenue using the percentage-of-completion method, based primarily on contract costs incurred to date compared to total estimated contract costs. Estimated contract costs include the Company’s latest estimates using judgments with respect to labor hours and costs, materials, and subcontractor costs. The percentage-of-completion method (an input method) is the most representative depiction of the Company’s performance because it directly measures the value of the services transferred to the customer. Subcontractor materials, labor and equipment and, in certain cases, customer-furnished materials and labor and equipment are included in revenue and cost of revenue when management believes that the company is acting as a principal rather than as an agent (e.g., the company integrates the materials, labor and equipment into the deliverables promised to the customer or is otherwise primarily responsible for fulfillment and acceptability of the materials, labor and/or equipment). Under the typical payment terms of our engineering, procurement and construction contracts, amounts are billed as work progresses in accordance with agreed-upon contractual terms at periodic intervals (e.g., biweekly or monthly) and customer payments are typically due within 30 to 60 days of billing, depending on the contract.

For service contracts, the Company recognizes revenue over time using the cost-to-cost percentage-of-completion method. In some instances where the Company is standing ready to provide services, the Company recognizes revenue ratably over the service period. Under the typical payment terms of our service contracts, amounts are billed as work progresses in accordance with agreed-upon contractual terms, and customer payments are typically due within 30 to 60 days of billing, depending on the contract.

Direct costs of contracts include all costs incurred in connection with and directly for the benefit of client contracts, including depreciation and amortization relating to assets used in providing the services required by the related projects. The level of direct costs of contracts may fluctuate between reporting periods due to a variety of factors, including the amount of pass-through costs we incur during a period. On those projects where we are acting as principal for subcontract labor or third-party materials and equipment, we reflect the amounts of such items in both revenues and costs (and we refer to such costs as “pass-through costs”).

Accounting for Pension Plans

The accounting for pension plans requires the use of assumptions and estimates in order to calculate periodic pension cost and the value of the plans’ assets and liabilities. These assumptions include discount rates, investment returns, and projected salary increases, among others. The actuarial assumptions used in determining the funded status of the respective plans are provided in Note 13- Pension and Other Post Retirement Benefit Plans of the Notes to Consolidated Financial Statements beginning on page F-1 of this Annual Report on Form 10-K.

Page 50

The expected rates of return on plan assets ranged from 5.3% to 7.6% for fiscal 2024 and range from 4.6% to 7.8% for fiscal 2025. We believe the range of rates selected for fiscal 2025 reflects the long-term returns expected on the plans’ assets, considering recent market conditions, projected rates of inflation, the diversification of the plans’ assets, and the expected real rates of market returns. The discount rates used to compute plan liabilities ranged from 3.8% to 6.9% in fiscal 2024 and range from 3.4% to 7.0% in fiscal 2025. These assumptions represent the Company’s best estimate of the rates at which its pension obligations could be effectively settled.

Changes in the actuarial assumptions often have a material effect on the values assigned to plan assets and liabilities, and the associated pension expense. For example, if the discount rate used to value the net pension benefit obligation (“PBO”) at September 27, 2024 was lower or higher by 1.0%, the PBO would have been higher or lower, respectively, at that date by approximately $158.7 million for non-U.S. plans, and by approximately $21.0 million for U.S. plans. If the expected return on plan assets was lower or higher by 1.0%, the net periodic pension cost for fiscal 2024 would be higher or lower, respectively, by approximately $13.1 million for non-U.S. plans, and by approximately $2.9 million for U.S. plans. Differences between actuarial assumptions and actual performance (i.e., actuarial gains and losses) that are not recognized as a component of net periodic pension cost in the period in which such differences arise are recorded to accumulated other comprehensive income (loss) and are recognized as part of net periodic pension cost in future periods in accordance with U.S. GAAP. Management monitors trends in the marketplace within which our pension plans operate in an effort to assure the reasonableness of the actuarial assumptions used.

Redeemable Noncontrolling Interests

In connection with the PA Consulting investment in March 2021, the Company recorded redeemable noncontrolling interests, representing the interest holders' initial 35% equity interest in the form of preferred and common shares of PA Consulting. The preferred shares are entitled to a cumulative annual compounding 12% dividend based on the outstanding preferred share subscription price. These noncontrolling interest holders have certain option rights to put the preferred and common share interests back to the Company at a value based on the fair value of PA Consulting (the redemption values). The primary inputs and assumptions impacting the fair value of PA Consulting include projections of revenue and earnings before interest, taxes, depreciation and amortization and discount rates applied thereto. Additionally, the Company has an option to call the interests for certain individual shareholders in certain circumstances. Because the interests are redeemable at the option of the holders and not solely within the control of the Company, the Company has classified the interests in redeemable noncontrolling interests in the mezzanine section of its Consolidated Balance Sheet at their redemption values. The optional redemption features may become exercisable no earlier than five years from the March 2, 2021 closing date, or upon the occurrence of certain other events.

The Company has deemed these interests probable of becoming redeemable in the future and requiring their measurement at the greater of (i) the redemption amount that would be paid if settlement occurred at the balance sheet date, or (ii) the historical value resulting from the original acquisition date fair value plus the impact of any earnings or loss attribution amounts, including dividends. The fair value of the PA Consulting redeemable noncontrolling interest is determined using a combination of the income and market approaches. Under the income approach, fair value is determined by using the projected discounted cash flows of PA Consulting. Under the market approach, the fair value is determined by reference to guideline companies that are reasonably comparable to PA Consulting, with the fair value estimated based on those companies' valuation multiples of earnings before interest, taxes, depreciation and amortization.

Litigation, Investigations, and Insurance

In the normal course of business, we make contractual commitments, and on occasion we are a party in litigation or arbitration proceedings. The litigation in which we are involved primarily includes personal injury claims, professional liability claims, and breach of contract claims. We are also routinely subject to investigations and audits.

We maintain insurance coverage for most insurable aspects of our business and operations. Our insurance programs have varying coverage limits depending upon the type of insurance and include certain conditions and exclusions which insurance companies may raise in response to any claim that the Company brings. We have also elected to retain a portion of certain losses, claims and liabilities that occur through the use of various deductibles, limits, and retentions under our insurance programs and utilize a number of internal financing mechanisms for these self-insurance arrangements including the operation of certain captive insurance entities. As a result, we may be subject to a future liability for which we are only partially insured or completely uninsured. We intend to mitigate any such future liability by continuing to exercise prudent business judgment in negotiating the terms and conditions of the contracts which the Company enters with its clients. Our insurers are also subject to business risk and, as a result, one or more of them may be unable to fulfill their insurance obligations due to insolvency or otherwise.

Page 51

Our Consolidated Balance Sheets include amounts representing our probable estimated liability relating to such claims, litigation, audits, and investigations. Our estimates of probable liabilities require us to make assumptions related to potential losses regarding our determination of amounts considered probable and estimable.

The Company believes, after consultation with counsel, that such litigation, U.S. government contract-related audits, investigations and claims, and income tax audits and investigations should not have a material adverse effect on our consolidated financial statements, beyond amounts currently accrued.

Goodwill and Intangible Assets

Goodwill represents the excess of the fair value of consideration transferred, plus the fair value of any non-controlling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. We recognize purchased intangible assets in connection with our business acquisitions at fair value on the acquisition date.

The goodwill carried on our Consolidated Balance Sheets is tested annually for possible impairment, and on an interim basis if indicators of possible impairment exist. For purposes of impairment testing, goodwill is assigned to the applicable reporting units based on the current reporting structure. In performing the annual impairment test, we evaluate our goodwill at the reporting unit level. The Company performs the annual goodwill impairment test for the reporting units at the beginning of the fourth quarter of its fiscal year.

We evaluate impairment of goodwill either by assessing qualitative factors to determine whether it is more likely than not that the fair value of our reporting unit is less than its carrying amount, or by performing a quantitative assessment. Qualitative factors include industry and market considerations, overall financial performance, and other relevant events and circumstances affecting the reporting unit. If we choose to perform a qualitative assessment and after considering the totality of events or circumstances, we determine it is more likely than not that the fair value of our reporting unit is less than its carrying amount, we will perform a quantitative fair value test.

U.S. GAAP does not prescribe a specific valuation method for estimating the fair value of reporting units. Any valuation technique used to estimate the fair value of a reporting unit requires the use of significant estimates and assumptions, including revenue growth rates, operating margins, discount rates and future market conditions, among others.

We use income and market approaches to test our goodwill for possible impairment which requires us to make estimates and judgments. Under the income approach, fair value is determined by using the discounted cash flows of our reporting units. The Company’s discount rate reflects a weighted average cost of capital (“WACC”) for a peer group of companies representative of the Company’s respective reporting units. Under the market approach, the fair values of our reporting units are determined by reference to guideline companies that are reasonably comparable to our reporting units; the fair values are estimated based on the valuation multiples of the invested capital associated with the guideline companies. In assessing whether there is an indication that the carrying value of goodwill has been impaired, we utilize the results of both valuation techniques and consider the range of fair values indicated.

It is possible that changes in facts and circumstances, judgments and assumptions used in estimating the fair value, including with respect to market conditions and the economy, could change, resulting in possible impairment of goodwill in the future. The fair values resulting from the valuation techniques used are not necessarily representative of the values we might obtain in a sale of the reporting units to willing third parties.

For the 2024 fiscal year, we performed a quantitative impairment test of the DVS reporting unit at the beginning of the fourth quarter and determined that the fair value of this reporting unit exceeded its respective carrying value. For the remaining reporting units, we determined that the fair values significantly exceeded their carrying values and an analysis beyond the qualitative level was not considered necessary.

Intangible assets with finite lives that arise from business acquisitions are amortized based on the period over which the contractual or economic benefit of the intangible assets are expected to be realized or on a straight-line basis over the useful lives of the underlying assets. These primarily consist of customer relationships, contracts and backlog, developed technology and trade names. We assess the recoverability of the unamortized balance of our intangible assets when indicators of impairment are present based on expected future profitability and undiscounted expected cash flows and their contribution to overall operations. Should the review indicate that the carrying value is not fully recoverable, the excess of the carrying value over the fair value of the intangible assets would be recognized as an impairment loss.

Page 52

JACOBS SOLUTIONS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

For the Fiscal Years Ended September 27, 2024, September 29, 2023 and September 30, 2022

(In thousands, except per share information)

Note: Earnings per share amounts may not add due to rounding.

Page 53

2024 Overview

Net earnings attributable to the Company from continuing operations for fiscal 2024 were $612.8 million (or $4.79 per diluted share), an increase of $233.7 million, or 61.6%, from $379.1 million (or $3.05 per diluted share) for the prior year. The current year results reflected higher year-over-year operating profit of $16.0 million, which benefited from favorable year-over-year underlying operating results, primarily in the Infrastructure & Advanced Facilities ("I&AF") segment, as discussed below in the Segment Financial Information section. Further, current year results were favorably impacted by $186.9 million in pre-tax mark-to-market gains associated with our investment in Amentum stock recorded in connection with the Separation Transaction (see Note 14- Discontinued Operations). The favorable underlying operating performance was achieved despite higher year over year pre-tax Restructuring and other charges and transaction costs due primarily to expenses incurred relating to the Separation Transaction amounting to $144.2 million (primarily professional services and employee separation costs), compared to fiscal 2023 amounts of $142.5 million mainly associated with the Company's Restructuring and other charges and transaction costs relating to expenses incurred in conjunction with the real estate transformation rescaling initiatives and the PA Consulting restructuring program charges (primarily employee separation costs) and expenses incurred relating to the Separation Transaction (primarily professional services). See Note 17- Restructuring and Other Charges.

Net interest expense was favorable by $8.5 million in the current year compared to the prior year due primarily to the Company's higher levels of cash and lower overall levels of outstanding debt compared to fiscal 2023.

Miscellaneous net income was favorable by $231.9 million for the current year compared to the corresponding fiscal 2023 amount, due mainly to $186.9 million in pre-tax mark-to-market gains associated with the Company's investment in Amentum stock, as well as a $35.2 million realized gain on interest rate swaps settled during the fourth quarter of fiscal 2024, which is further discussed in Note 18- Commitments and Contingencies and Derivative Financial Instruments.

Income taxes were higher in the current year by $30.2 million due primarily to $55.8 million tax expense from higher year-over-year pre-tax book income. The overall higher income tax expense was offset by a $61.6 million discrete income tax benefit related to the election to treat an Australian subsidiary as a corporation versus a partnership for U.S. tax purposes, which resulted in the derecognition of a deferred tax liability in fiscal year 2024. Also, a net tax benefit of $39.4 million was recorded in fiscal year 2023 relating to the effective settlement of uncertain tax positions.

Finally, year-over-year net earnings impacts associated with redeemable noncontrolling interests were lower by $(6.6) million and were attributable mainly to lower after-tax earnings results in our PA Consulting investment compared to the prior year.

Net earnings attributable to Jacobs from discontinued operations for fiscal 2024 were $193.3 million (or $1.54 per diluted share), a decrease of $93.4 million, or 32.6%, from $286.7 million (or $2.25 per diluted share) compared to the prior year due mainly to higher charges associated with the Separation Transaction in the current year.

Backlog at September 27, 2024 was $21.8 billion, up $4.0 billion, from $17.8 billion for the prior year primarily driven by new business awards in our Americas business. New prospects and new sales remain strong, and the Company continues to have a positive outlook for many of the industry groups and sectors in which our clients operate.

Results of Operations

Fiscal 2024 Compared to Fiscal 2023

Revenues for the year ended September 27, 2024 were $11.50 billion, an increase of $0.65 billion, or 6.0%, from $10.85 billion for the prior year. The increase in revenues was due mainly to improved performance of our I&AF business, as well as higher revenues year over year in our PA Consulting business. The I&AF business benefited primarily from stronger performance in its Advanced Facilities and international business operations. Our revenues for fiscal 2024 were favorably impacted by foreign currency translation of $77.0 million in our international businesses, as compared to an unfavorable impact of $175.3 million for the last fiscal year.

Page 54

Gross profit for the year ended September 27, 2024 was $2.83 billion, up $121.9 million, or 4.5%, from $2.71 billion for the prior year. The Company's increase in gross profit was mainly attributable to higher revenues as mentioned above, with slight margin impacts from year over year mix and personnel cost impacts. Our gross profit margins showed consistent trends year over year at 24.6% and 25.0% for the years ended September 27, 2024 and September 29, 2023, respectively. Overall project mix impacts in our portfolios, personnel costs and utilization trends primarily in the PA Consulting business had mostly offsetting impacts on our overall margin trends year over year.

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

Selling, general & administrative expenses for the year ended September 27, 2024 were $2.14 billion, an increase of $105.9 million, or 5.2%, from $2.03 billion for the prior year. The current year's results were impacted by Restructuring and other charges of $163.4 million in separation activities (mainly professional services and employee separation costs) relating to the Separation Transaction in comparison to prior period costs of $61.1 million. Further our SG&A expenses were impacted by slight increases in other department spend and personnel costs. Lastly, SG&A expenses were impacted by unfavorable foreign exchange impacts of $2.1 million for the year ended September 27, 2024 as compared to favorable impacts of $58.9 million for fiscal 2023.

Net interest expense for the year ended September 27, 2024 was $134.6 million, a decrease of $8.5 million from $143.1 million for the prior year. The decrease in net interest expense for the fiscal year 2024 was due primarily to the Company's higher levels of cash and lower overall levels of outstanding debt compared to the last fiscal year.

Miscellaneous income, net for the year ended September 27, 2024 was income of $219.5 million, favorable by $231.9 million as compared to $(12.4) million for the prior year. The increase in income from fiscal 2023 was due primarily to $186.9 million in mark-to-market gains associated with our investment in Amentum stock in connection with the Separation Transaction and a $35.2 million realized gain on interest rate swaps settled during the fourth quarter of fiscal 2024.

Net earnings attributable to Jacobs from discontinued operations for fiscal 2024 were $193.3 million (or $1.54 per diluted share), a decrease of $93.4 million, or 32.6%, from $286.7 million (or $2.25 per diluted share) for the last year. Included in the current year results from discontinued operations is $98.3 million in costs related to the Separation Transaction and approximately $18 million in pre-tax non-cash charges associated with one-time inventory write downs.

Net earnings attributable to noncontrolling interests including redeemable noncontrolling interests for the year ended September 27, 2024 of $33.0 million and $40.5 million for the corresponding period last year. The year over year changes were primarily due to lower net earnings results in our PA Consulting investment compared to the prior year periods.

Fiscal 2023 Compared to Fiscal 2022

Revenues for the year ended September 29, 2023 were $10.85 billion, an increase of $1,068.3 million, or 10.9%, from $9.78 billion from fiscal 2022. The increase in revenues was due mainly to improved performance of our I&AF business, as well as higher revenues year over year in our PA Consulting business. The I&AF business benefited primarily from stronger performance in its Advanced Facilities and international business operations. Additionally, the increase in revenues for fiscal 2023 were partially offset by an unfavorable impact of foreign currency translation of $175.3 million in our international businesses, as compared to an unfavorable impact of $277.3 million for the corresponding period last fiscal year.

Gross profit for the year ended September 29, 2023 was $2.71 billion, up $130.9 million, or 5.1%, from $2.58 billion for fiscal 2022. Fiscal 2023 gross profit was favorable due to higher revenue as mentioned above and impacts from cost reductions associated mainly with first quarter 2023 changes in employee benefit programs, which were partly offset by higher spend in company technology platforms and other personnel and corporate cost increases. Our gross profit margins were approximately 25.0% for the years ended September 29, 2023 and September 30, 2022, respectively. Project mix impacts in our portfolios, higher personnel costs and lower utilization trends primarily in the PA Consulting business impacted our fiscal 2023 margins, partly offset by new program startups won in fiscal 2023.

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

Page 55

Selling, general & administrative expenses for the year ended September 29, 2023 were $2.03 billion, a decrease of $5.7 million, or 0.3%, from $2.04 billion for fiscal 2022. Fiscal 2023 results were impacted by Restructuring and other charges of $61.1 million in separation activities (mainly professional services and employee separation costs) relating to the Separation Transaction and by higher incentives of $46.2 million. Fiscal 2022 was impacted by the final pre-tax $91.3 million settlement of the Legacy CH2M Matter, net of previously recorded reserves, mentioned above and approximately $27 million in third party recoveries was recorded as receivables reducing SG&A. Fiscal 2023 results were also impacted by decreases in real estate related costs, as well as other department spend decreases due in part to the Company's transformation initiatives. Lastly, SG&A expenses benefited from favorable foreign exchange impacts of $58.9 million for the year ended September 29, 2023 as compared to favorable impacts of $90.7 million for fiscal 2022.

Net interest expense for the year ended September 29, 2023 was $143.1 million, an increase of $47.2 million from $95.9 million for fiscal 2022.The increase in net interest expense year over year is primarily due to higher interest rates in fiscal 2023 compared to the prior year period. The increase was offset in part by $6.3 million net interest benefit during fiscal 2023 related to the release of interest accruals associated with the effective settlement of uncertain tax positions.

Miscellaneous income (expense), net for the year ended September 29, 2023 was expense of $12.4 million, a decrease of $45.9 million as compared to $33.5 million in income for fiscal 2022. The increase in expense from fiscal 2022 was due primarily to an increase in pension costs associated with higher interest rate impacts in fiscal 2023 along with comparatively unfavorable foreign exchange gains and losses in fiscal 2023. Additionally, fiscal 2022 benefited primarily from a $5.1 million gain related to a lease termination.

Net earnings attributable to Jacobs from discontinued operations for fiscal 2023 were $286.7 million (or $2.25 per diluted share), a decrease of $3.2 million, or 1.1%, from $289.9 million (or $2.24 per diluted share) for the corresponding prior year period.

Net earnings attributable to noncontrolling interests including redeemable noncontrolling interests for the year ended September 29, 2023 of $40.5 million and $57.0 million for the corresponding period last year. The year over year changes were primarily due to lower net earnings results in our PA Consulting investment compared to the prior year periods.

On February 4, 2022, the Company acquired StreetLight Data, Inc. ("StreetLight") and on November 19, 2021, a subsidiary of Jacobs acquired BlackLynx ("BlackLynx"). For further discussion, see Note 16- Other Business Combinations.

Page 56

The following table reconciles total income tax expense on continuing operations using the statutory U.S. federal income tax rate to the consolidated income tax expense on continuing operations shown in the accompanying Consolidated Statements of Earnings for the years ended September 27, 2024, September 29, 2023 and (dollars in thousands):

Restructuring and Other Charges

During fiscal 2023, the Company implemented restructuring initiatives relating to the Separation Transaction. The Company incurred approximately $42.0 million and $17.5 million in the years ended September 27, 2024 and September 29, 2023, respectively, in pre-tax cash charges in connection with these initiatives. These actions, which are expected to be substantially completed before the end of fiscal 2025, are expected to result in estimated gross annualized pre-tax cash savings of approximately $120 million to $147 million. We will likely incur additional charges under this program through fiscal 2025, which are expected to result in additional savings in future periods.

During third quarter fiscal 2023, the Company approved a plan to improve business processes and cost structures of our PA Consulting investment by reorganizing senior management and reducing headcount. In connection with these initiatives, which are expected to be substantially completed in early fiscal 2025, the Company incurred approximately $6.4 million and $14.3 million in the years ended September 27, 2024 and September 29, 2023, respectively, in pre-tax cash charges. These activities are expected to result in estimated gross annualized pre-tax cash savings of approximately $50 million to $65 million.

During fiscal 2023, the Company implemented restructuring and cost reduction initiatives relating to the formation of the reporting and operating segment, Divergent Solutions, which were substantially completed in fiscal 2023.

Page 57

The Company incurred approximately $6.0 million in pre-tax cash charges in connection with these initiatives during the year ended September 29, 2023. These actions are expected to result in estimated gross annualized pre-tax cash savings of approximately $15.6 million to $19.1 million.

During fiscal 2020 and continuing into fiscal 2023, the Company implemented further real estate rescaling efforts that were associated with its fiscal 2020 transformation program relating to real estate. These activities were substantially completed in fiscal 2023. In connection with these efforts, the Company has incurred $45.7 million and $69.7 million in the years ended September 29, 2023 and September 30, 2022, respectively, in pre-tax mainly non-cash charges. These actions resulted in non-cash savings related mainly to the future amortization of lease right-of-use assets over the remaining lease terms. Additionally, the objective of these initiatives was to create a modern, flexible work platform tailored to employees’ needs due to globalization and digital advances and to create total emissions savings that will be realized as we continue to optimize our real estate footprint.

Refer to Note 17– Restructuring and Other Charges for further information regarding restructuring and integration initiatives.

Page 58

Segment Financial Information

The following tables present total revenues and segment operating profit for each reportable segment (in thousands) and includes a reconciliation of segment operating profit to total U.S. GAAP operating profit by including certain corporate-level expenses and expenses relating to the Restructuring other charges (as defined in Note 17 - Restructuring and Other Charges) and transaction costs (in thousands).

In evaluating the Company’s performance by operating segment, the chief operating decision maker (" CODM") reviews various metrics and statistical data for Infrastructure & Advanced Facilities and PA Consulting but focuses primarily on revenues and operating profit. In addition, the Company attributes each segment's specific incentive compensation plan costs to the segments. The methods for recognizing revenue, incentive fees, project losses and change orders are consistent among the segments.

Infrastructure & Advanced Facilities

Page 59

Fiscal 2024 vs. 2023

Fiscal 2023 vs. 2022

PA Consulting

Fiscal 2024 vs. 2023

Fiscal 2023 vs. 2022

Page 60

Backlog Information

Backlog represents revenue we expect to realize for work to be completed by our consolidated subsidiaries and our proportionate share of work to be performed by unconsolidated joint ventures. Because of variations in the nature, size, expected duration, funding commitments, and the scope of services required by our contracts, the amount and timing of when backlog will be recognized as revenues includes significant estimates and can vary greatly between individual contracts.

Consistent with industry practice, substantially all of our contracts are subject to cancellation or termination at the option of the client, including our U.S. government work. While management uses all information available to determine backlog, at any given time our backlog is subject to changes in the scope of services to be provided as well as increases or decreases in costs relating to the contracts included therein. Backlog is not necessarily an indicator of future revenues.

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.

Please refer to Item 1A- Risk Factors, above, for a discussion of other factors that may cause backlog to ultimately convert into revenues at different amounts.

The following table summarizes our backlog for the years ended September 27, 2024, September 29, 2023 and September 30, 2022 (in millions):

Backlog relating to work to be performed either directly or indirectly for the U.S. federal government and its agencies totaled approximately $2.4 billion (or 11.1% of total backlog), $2.6 billion (or 14.7% of total backlog) and $2.3 billion (or 13.2% of total backlog) at September 27, 2024, September 29, 2023 and September 30, 2022, respectively. Most of our federal government contracts require that services be provided beyond one year. In general, these contracts must be funded annually (i.e., the amounts to be spent under the contract must be appropriated by the U.S. Congress to the procuring agency, and then the agency must allot these sums to the specific contracts).

We estimate that approximately $5.71 billion, or 26.2%, of total backlog at September 27, 2024 will be realized as revenues within the next fiscal year.

Consolidated backlog differs from the Company’s remaining performance obligations as defined by ASC 606 primarily because of contract change orders or new wins not yet processed and our national government contracts where our policy is to generally include in backlog the contract award, whether funded or unfunded excluding certain option periods while our remaining performance obligations represent a measure of the total dollar value of work to be performed on contracts awarded and in progress. Additionally, the Company does not include our proportionate share of backlog related to unconsolidated joint ventures in our remaining performance obligations.

Liquidity and Capital Resources

At September 27, 2024, our principal sources of liquidity consisted of $1.14 billion in cash and cash equivalents and $2.11 billion of available borrowing capacity under our $2.25 billion revolving credit agreement (the "Revolving Credit Facility"). We finance much of our operations and growth through cash generated by our operations.

Page 61

Cash and cash equivalents at September 27, 2024 represented an increase of $373.9 million from $770.9 million at September 29, 2023, the reasons for which are described below. The following table presents selected cash flow information for the respective periods shown:

Our net cash flow provided by operations of $1.05 billion during fiscal 2024 was favorable by $79.9 million in comparison to the cash flow provided by operations of $974.8 million for the corresponding prior year. The year-over-year increase in cash from operations is due mainly to higher cash generated from net earnings (as adjusted for non-cash income statement charges that reflect favorable net impacts mainly in accrued liabilities, prepaid expenses and other deferred liabilities) and favorable accounts receivable collections, offset in part by lower performance in other net working capital performance primarily due to higher year over year cash income tax payments and payments related to the Separation Transaction.

Our net cash used for investing activities for fiscal 2024 was $127.2 million, compared to cash used for investing of $145.7 million in the prior year, with this change due primarily to decreases in additions to property and equipment in the current year.

Page 62

Our net cash used for financing activities for the fiscal year ended 2024 of $751.6 million resulted mainly from $495.3 million direct decrease in reported cash on hand in our SpinCo business deconsolidation, $402.7 million of cash used for share repurchases, and $142.8 million in dividends to shareholders. These uses of cash were offset by $374.9 million in net proceeds from borrowings. Cash used for financing activities in the prior year was $1.09 billion, due primarily to net repayments of borrowings of $616.6 million, cash used for share repurchases of $265.7 million, $128.4 million in dividends paid to shareholders and $58.9 million in net PA Consulting related redeemable noncontrolling interests repurchase and issuance activity.

At September 27, 2024, the Company had approximately $164.8 million in cash and cash equivalents held in the U.S. and $980.0 million held outside of the U.S. (primarily in the U.K., India, Canada, the Eurozone, Australia and the Middle East region), which is used primarily for funding operations in those regions. Other than the tax cost of repatriating funds to the U.S. (see Note 7- Income Taxes of Notes to Consolidated Financial Statements beginning on page F-1 of this Annual Report on Form 10-K), there are no material impediments to repatriating these funds to the U.S.

The Company had $306.2 million in letters of credit outstanding at September 27, 2024. Of this amount, $0.5 million was issued under the Revolving Credit Facility and $305.7 million was issued under separate, committed and uncommitted letter-of-credit facilities.

In connection with the Separation Transaction, during the fourth quarter, Jacobs received a cash payment of approximately $911 million from SpinCo which was subsequently used for the repayment of debt, which was inclusive of the outstanding short term 2020 Term Loan Facility totaling $834.9 million. Jacobs is expected to realize additional value through the disposition of its retained equity stake in the combined company within 12 months. Please refer to Note 14 - Discontinued Operations for more details.

Additionally, the Company reclassified $870.4 million of debt from long-term debt to current maturities of long-term debt in the fourth quarter, associated with the 2021 Term Loan Facility - GBP Portion, which is due on September 1, 2025.

On February 6, 2023, the Company refinanced its Revolving Credit Facility and Term Loan Facilities, and on February 16, 2023, the Company issued $500.0 million in bonds. On August 18, the Company issued $600.0 million in bonds. See Note 9 - Borrowings for further discussion relating to the terms of the 5.90% Bonds, the 6.35% Bonds, the Revolving Credit Facility and Term Loan Facilities following the issuances and refinancing.

On April 12, 2022, the Company paid cash of AUD640 million, or approximately $475 million using mid-April 2022 exchange rates, which represented the final settlement of Legacy CH2M Matter. For more information, refer to Note 19- Contractual Guarantees, Litigation, Investigations and Insurance.

On February 4, 2022, the Company acquired StreetLight Data, Inc. ("StreetLight"). StreetLight is a pioneer of mobility analytics who uses its data and machine learning resources to shed light on mobility and enable users to solve complex transportation problems. The Company paid total base consideration of approximately $190.7 million in cash and issued $0.9 million in equity and $5.2 million in in-the-money stock options to the former owners of StreetLight. The Company also paid off StreetLight's debt of approximately $1.0 million simultaneously with the consummation of the acquisition.

On November 19, 2021, Jacobs acquired BlackLynx, a provider of high-performance software, to complement Jacobs' portfolio of 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.

We believe we have adequate liquidity and capital resources to fund our projected cash requirements for our operations, investing activities including acquisitions, if any, and financing activities such as debt servicing, share buybacks and dividends, for the next twelve months. This is based on the liquidity provided by our cash and cash equivalents on hand, our borrowing capacity and our continuing cash from operations.

We were in compliance with all of our debt covenants at September 27, 2024.

Page 63

Supplemental Obligor Group Financial Information

On February 16, 2023, Jacobs Engineering Group Inc., a wholly-owned subsidiary of Jacobs Solutions Inc. (together, the "Obligor Group"), completed an offering of $500 million aggregate principal amount of 5.90% Bonds, due 2033 and on August 18, 2023, completed an offering of $600 million aggregate principal amount of 6.35% Bonds, due 2028 (the “Bonds”). The Bonds are fully and unconditionally guaranteed by the Company (the “Guarantees”). The Bonds and the Guarantees were offered pursuant to prospectus supplements, dated February 13, 2023 and August 15, 2023, respectively, to the prospectus dated February 6, 2023, that forms a part of the Company and JEGI’s automatic shelf registration statement on Form S-3ASR (File Nos. 333-269605 and 333-269605-01) previously filed with the Securities and Exchange Commission.

In accordance with 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 all other subsidiaries of the Company that do not guarantee the registered securities of either Jacobs or JEG. 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. GAAP.

New Accounting Pronouncements

ASU 2023-09, Income Taxes, (Topic 740): Improvements to Income Tax Disclosures, provides qualitative and quantitative updates to the Company's effective income tax rate reconciliation and income taxes paid disclosures, among others, in order to enhance the transparency of income tax disclosures, including consistent categories and greater disaggregation of information in the rate reconciliation and disaggregation by jurisdiction of income taxes paid. The amendments in ASU 2023-09 are effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments should be applied prospectively; however, retrospective application is also permitted. ASU

Page 64

2023-09 will be effective for the Company's annual fiscal 2026 period. The Company has identified and is implementing changes to processes and internal controls to meet the standard’s updated reporting and disclosure requirements.

ASU 2023-07, Segment Reporting, (Topic 280): Improvements to Reportable Segment Disclosures, requires disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items to reconcile to segment profit or loss, and the title and position of the entity’s CODM. The amendments in this update also expand the interim segment disclosure requirements. ASU 2023-07 is effective for annual periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted and the amendments in this update are required to be applied on a retrospective basis. ASU 2023-07 will be effective for the Company's annual fiscal 2025 period. The Company is evaluating the impact of this guidance on its consolidated financial statements and related disclosures.

ASU 2023-06, Disclosure Improvements: Amendments - Codification Amendments in Response to the Disclosure Update and Simplification Initiative of the Securities and Exchange Commission ("SEC"). The Financial Accounting Standards Board issued the standard to introduce changes to US GAAP that originate in either SEC Regulation S-X or S-K, which are rules about the form and content of financial reports filed with the SEC. The provisions of the standard are contingent upon instances where the SEC removes the related disclosure provisions from Regulation S-X and S-K. The Company does not expect that the application of this standard will have a material impact on our consolidated financial statements and related disclosures.

Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Critical Accounting Policies and Estimates

In order to better understand the changes that occur to key elements of our financial condition, results of operations and cash flows, a reader of this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be aware of the critical accounting policies we apply in preparing our consolidated financial statements.

The consolidated financial statements contained in this report were prepared in accordance with U.S. GAAP. The preparation of our consolidated financial statements and the financial statements of any business performing long-term professional services, engineering and construction-type contracts requires management to make certain estimates and judgments that affect both the entity’s results of operations and the carrying values of its assets and liabilities. Although our significant accounting policies are described in Note 2- Significant Accounting Policies of Notes to Consolidated Financial Statements beginning on page F-1 of this Annual Report on Form 10-K, the following discussion is intended to

Page 48

highlight and describe those accounting policies that are especially critical to the preparation of our consolidated financial statements.

Revenue Accounting for Contracts

The Company recognizes engineering, procurement, and construction contract revenue over time, as performance obligations are satisfied, due to the continuous transfer of control to the customer in accordance with ASC 606, Revenue from Contracts with Customers. Contracts that include engineering, procurement and construction services are generally accounted for as a single deliverable (a single performance obligation). In some instances, the Company’s services associated with a construction activity are limited only to specific tasks such as customer support, consulting or supervisory services. In these instances, the services are typically identified as separate performance obligations.

The Company recognizes revenue using the percentage-of-completion method, based primarily on contract costs incurred to date compared to total estimated contract costs. Estimated contract costs include the Company’s latest estimates using judgments with respect to labor hours and costs, materials, and subcontractor costs. The percentage-of-completion method (an input method) is the most representative depiction of the Company’s performance because it directly measures the value of the services transferred to the customer. Subcontractor materials, labor and equipment and, in certain cases, customer-furnished materials and labor and equipment are included in revenue and cost of revenue when management believes that the company is acting as a principal rather than as an agent (e.g., the company integrates the materials, labor and equipment into the deliverables promised to the customer or is otherwise primarily responsible for fulfillment and acceptability of the materials, labor and/or equipment). Under the typical payment terms of our engineering, procurement and construction contracts, amounts are billed as work progresses in accordance with agreed-upon contractual terms at periodic intervals (e.g., biweekly or monthly) and customer payments are typically due within 30 to 60 days of billing, depending on the contract.

For service contracts, the Company recognizes revenue over time using the cost-to-cost percentage-of-completion method. In some instances where the Company is standing ready to provide services, the Company recognizes revenue ratably over the service period. Under the typical payment terms of our service contracts, amounts are billed as work progresses in accordance with agreed-upon contractual terms, and customer payments are typically due within 30 to 60 days of billing, depending on the contract.

Direct costs of contracts include all costs incurred in connection with and directly for the benefit of client contracts, including depreciation and amortization relating to assets used in providing the services required by the related projects. The level of direct costs of contracts may fluctuate between reporting periods due to a variety of factors, including the amount of pass-through costs we incur during a period. On those projects where we are acting as principal for subcontract labor or third-party materials and equipment, we reflect the amounts of such items in both revenues and costs (and we refer to such costs as “pass-through costs”).

Accounting for Pension Plans

The accounting for pension plans requires the use of assumptions and estimates in order to calculate periodic pension cost and the value of the plans’ assets and liabilities. These assumptions include discount rates, investment returns, and projected salary increases, among others. The actuarial assumptions used in determining the funded statuses of the plans are provided in Note 13- Pension and Other Postretirement Benefit Plans of Notes to Consolidated Financial Statements beginning on page F-1 of this Annual Report on Form 10-K.

The expected rates of return on plan assets ranged from 3.3% to 7.5% for fiscal 2023 and range from 5.3% to 7.6% for fiscal 2024. We believe the range of rates selected for fiscal 2024 reflects the long-term returns expected on the plans’ assets, considering recent market conditions, projected rates of inflation, the diversification of the plans’ assets, and the expected real rates of market returns. The discount rates used to compute plan liabilities ranged from 2.4% to 7.4% in fiscal 2023 and range from 3.8% to 6.9% in fiscal 2024. These assumptions represent the Company’s best estimate of the rates at which its pension obligations could be effectively settled.

Changes in the actuarial assumptions often have a material effect on the values assigned to plan assets and liabilities, and the associated pension expense. For example, if the discount rate used to value the net pension benefit obligation (“PBO”) at September 29, 2023 was lower or higher by 1.0%, the PBO would have been higher or lower, respectively, at that date by approximately $139.9 million for non-U.S. plans, and by approximately $19.8 million for U.S. plans. If the expected return on plan assets was lower or higher by 1.0%, the net periodic pension cost for fiscal 2023 would be higher or lower, respectively, by approximately $12.4 million for non-U.S. plans, and by approximately $3.2

Page 49

million for U.S. plans. Differences between actuarial assumptions and actual performance (i.e., actuarial gains and losses) that are not recognized as a component of net periodic pension cost in the period in which such differences arise are recorded to accumulated other comprehensive income (loss) and are recognized as part of net periodic pension cost in future periods in accordance with U.S. GAAP. Management monitors trends in the marketplace within which our pension plans operate in an effort to assure the reasonableness of the actuarial assumptions used.

Redeemable Noncontrolling Interests

In connection with the PA Consulting investment in March 2021, the Company recorded redeemable noncontrolling interests, representing the interest holders' initial 35% equity interest in the form of preferred and common shares of PA Consulting. The preferred shares are entitled to a cumulative annual compounding 12% dividend based on the outstanding preferred share subscription price. These noncontrolling interest holders have certain option rights to put the preferred and common share interests back to the Company at a value based on the fair value of PA Consulting (the redemption values). The primary inputs and assumptions impacting the fair value of PA Consulting include projections of revenue and earnings before interest, taxes, depreciation and amortization and discount rates applied thereto. Additionally, the Company has an option to call the interests for certain individual shareholders in certain circumstances. Because the interests are redeemable at the option of the holders and not solely within the control of the Company, the Company classified the interests in redeemable noncontrolling interests within its Consolidated Balance Sheet at their redemption values. The optional redemption features may become exercisable no earlier than five years from the March 2, 2021 closing date, or upon the occurrence of certain other events.

The Company has deemed these interests probable of becoming redeemable in the future and requiring their measurement at the greater of (i) the redemption amount that would be paid if settlement occurred at the balance sheet date, or (ii) the historical value resulting from the original acquisition date fair value plus the impact of any earnings or loss attribution amounts, including dividends. The fair value of the PA Consulting redeemable noncontrolling interest is determined using a combination of the income and market approaches. Under the income approach, fair value is determined by using the projected discounted cash flows of PA Consulting. Under the market approach, the fair value is determined by reference to guideline companies that are reasonably comparable to PA Consulting; the fair value is estimated based on the valuation multiples of earnings before interest, taxes, depreciation and amortization.

Litigation, Investigations, and Insurance

In the normal course of business, we make contractual commitments, and on occasion we are a party in litigation or arbitration proceedings. The litigation in which we are involved primarily includes personal injury claims, professional liability claims, and breach of contract claims. We are also routinely subject to investigations and audits.

We maintain insurance coverage for most insurable aspects of our business and operations. Our insurance programs have varying coverage limits depending upon the type of insurance and include certain conditions and exclusions which insurance companies may raise in response to any claim that the Company brings. We have also elected to retain a portion of certain losses, claims and liabilities that occur through the use of various deductibles, limits, and retentions under our insurance programs and utilize a number of internal financing mechanisms for these self-insurance arrangements including the operation of certain captive insurance entities. As a result, we may be subject to a future liability for which we are only partially insured or completely uninsured. We intend to mitigate any such future liability by continuing to exercise prudent business judgment in negotiating the terms and conditions of the contracts which the Company enters with its clients. Our insurers are also subject to business risk and, as a result, one or more of them may be unable to fulfill their insurance obligations due to insolvency or otherwise.

Our Consolidated Balance Sheets include amounts representing our probable estimated liability relating to such claims, litigation, audits, and investigations. Our estimates of probable liabilities require us to make assumptions related to potential losses regarding our determination of amounts considered probable and estimable.

The Company believes, after consultation with counsel, that such litigation, U.S. government contract-related audits, investigations and claims, and income tax audits and investigations should not have a material adverse effect on our consolidated financial statements, beyond amounts currently accrued.

Goodwill and Intangible Assets

Goodwill represents the excess of the fair value of consideration transferred, plus the fair value of any non-controlling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the

Page 50

acquisition date. We recognize purchased intangible assets in connection with our business acquisitions at fair value on the acquisition date.

The goodwill carried on our Consolidated Balance Sheets is tested annually for possible impairment, and on an interim basis if indicators of possible impairment exist. For purposes of impairment testing, goodwill is assigned to the applicable reporting units based on the current reporting structure. In performing the annual impairment test, we evaluate our goodwill at the reporting unit level. The Company performs the annual goodwill impairment test for the reporting units at the beginning of the fourth quarter of its fiscal year.

We evaluate impairment of goodwill either by assessing qualitative factors to determine whether it is more likely than not that the fair value of our reporting unit is less than its carrying amount, or by performing a quantitative assessment. Qualitative factors include industry and market considerations, overall financial performance, and other relevant events and circumstances affecting the reporting unit. If we choose to perform a qualitative assessment and after considering the totality of events or circumstances, we determine it is more likely than not that the fair value of our reporting unit is less than its carrying amount, we would perform a quantitative fair value test.

U.S. GAAP does not prescribe a specific valuation method for estimating the fair value of reporting units. Any valuation technique used to estimate the fair value of a reporting unit requires the use of significant estimates and assumptions, including revenue growth rates, operating margins, discount rates and future market conditions, among others.

We use income and market approaches to test our goodwill for possible impairment which requires us to make estimates and judgments. Under the income approach, fair value is determined by using the discounted cash flows of our reporting units. The Company’s discount rate reflects a weighted average cost of capital (“WACC”) for a peer group of companies representative of the Company’s respective reporting units. Under the market approach, the fair values of our reporting units are determined by reference to guideline companies that are reasonably comparable to our reporting units; the fair values are estimated based on the valuation multiples of the invested capital associated with the guideline companies. In assessing whether there is an indication that the carrying value of goodwill has been impaired, we utilize the results of both valuation techniques and consider the range of fair values indicated.

It is possible that changes in facts and circumstances, judgments and assumptions used in estimating the fair value, including with respect to market conditions and the economy, could change, resulting in possible impairment of goodwill in the future. The fair values resulting from the valuation techniques used are not necessarily representative of the values we might obtain in a sale of the reporting units to willing third parties.

For the 2023 fiscal year, in connection with the separation activities of the CMS business and part of our DVS business, we performed a quantitative impairment test of the CMS and DVS reporting units and determined that the fair value of these reporting units exceeded their respective carrying value. For the remaining reporting units, we determined that the fair values significantly exceeded their carrying values and an analysis beyond the qualitative level was not considered necessary.

Intangible assets with finite lives that arise from business acquisitions are amortized based on the period over which the contractual or economic benefit of the intangible assets are expected to be realized or on a straight-line basis over the useful lives of the underlying assets. These primarily consist of customer relationships, contracts and backlog, developed technology and trade names. We assess the recoverability of the unamortized balance of our intangible assets when indicators of impairment are present based on expected future profitability and undiscounted expected cash flows and their contribution to overall operations. Should the review indicate that the carrying value is not fully recoverable, the excess of the carrying value over the fair value of the intangible assets would be recognized as an impairment loss.

Page 51

JACOBS SOLUTIONS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

For the Fiscal Years Ended September 29, 2023, September 30, 2022 and October 1, 2021

(In thousands, except per share information)

Page 52

2023 Overview

Net earnings attributable to the Company from continuing operations for fiscal 2023 were $666.6 million (or $5.31 per diluted share), an increase of $22.5 million, or 3.5%, from $644.1 million (or $4.98 per diluted share) for the prior year. The current year results reflected higher year-over-year operating profit of $157.4 million, which benefited from favorable year-over-year underlying operating results for Jacobs businesses, primarily P&PS, as discussed below in the Segment Financial Information section. These favorable operating profit impacts were partly offset by fiscal 2023 Restructuring and other charges and transaction costs relating to expenses incurred in conjunction with the CMS separation activities, real estate transformation rescaling initiatives and the PA Consulting restructuring program charges (primarily employee separation costs), which are discussed in Note 16- Restructuring and Other Charges. Fiscal 2022 was impacted by the final $91.3 million settlement of a legacy litigation matter involving a subsidiary of CH2M (the "Legacy CH2M Matter"), net of previously recorded reserves, which is further discussed in Note 17- Commitments and Contingencies and Derivative Financial Instruments. Additionally, the 2023 year-to-date period was impacted by approximately $15.0 million in net favorable impacts from cost reductions associated mainly with first quarter 2023 changes in employee benefit programs, which were partly offset by higher spend in company technology platforms and other personnel and corporate cost increases.

Other expense, net was unfavorable by $117.1 million for the current year compared to corresponding fiscal 2022 amounts, due mainly to higher interest expense of $67.9 million in the current year compared to the prior year due to higher interest rates. Additionally, miscellaneous (expense) income was impacted year over year by an increase in pension costs associated with higher interest rate impacts in the current year along with comparatively unfavorable foreign exchange gains and losses in the current year. Also, fiscal 2022 included a $13.9 million pre-tax gain related to a cost method investment sold during the period and a $7.1 million gain related to a lease termination.

Income taxes were higher in the current year by $35.3 million due primarily to reduced total tax benefits in fiscal 2023, consisting of $39.4 million mostly related to uncertain tax positions in the U.S. that were effectively settled, as well as $13.0 million for the release of previously valued foreign tax credits, as compared to prior year favorable impacts of $33.1 million for a change in the realizability of foreign tax credits due to a change in the U.S. foreign tax credit regulations, $26.0 million for a change in judgment on the realizability of domestic deferred tax assets which are capital in nature, and $9.1 million due to the reversal of a withholding tax accrual on certain intercompany loans. In addition, in fiscal 2023, the higher year-over-year pre-tax book income resulted in an additional $10.0 million of tax expense.

Finally, year-over-year net earnings impacts associated with redeemable noncontrolling interests were lower by $(13.0) million and were attributable mainly to lower after-tax earnings results in our PA Consulting investment compared to the prior year which were impacted in fiscal 2023 by the PA severance charges discussed above.

Backlog at September 29, 2023 was $29.1 billion, up $1.2 billion, from $27.9 billion for the prior year. New prospects and new sales remain strong, and the Company continues to have a positive outlook for many of the industry groups and sectors in which our clients operate.

Results of Operations

Fiscal 2023 Compared to Fiscal 2022

Revenues for the year ended September 29, 2023 were $16.35 billion, an increase of $1.43 billion, or 9.6%, from $14.92 billion for the prior year. The increase in revenues was due mainly to improved performance of our P&PS and CMS businesses and in addition, to a smaller degree, other increases in our DVS and PA Consulting businesses. The P&PS business benefited primarily from stronger performance in its Advanced Facilities and U.S. business operations, while our CMS business showed improved performance resulting 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, as well as growth from contracts in the United Kingdom. Additionally, the increase in revenues for fiscal 2023 were partially offset by an unfavorable impact of foreign currency translation of $222.3 million in our international businesses, as compared to an unfavorable impact of $346.3 million for the corresponding period last fiscal year.

Gross profit for the year ended September 29, 2023 was $3.47 billion, up $146.3 million, or 4.4%, from $3.33 billion for the prior year. The current year gross profit was affected by net favorable impacts from cost reductions associated mainly with first quarter 2023 changes in employee benefit programs, which were partly offset by higher spend

Page 53

in company technology platforms and other personnel and corporate cost increases, as mentioned above, and unfavorable foreign currency translation impacts. Our gross profit margins were 21.2% and 22.3% for the years ended September 29, 2023 and September 30, 2022, respectively. Project mix impacts in our portfolios, higher personnel costs and lower utilization trends primarily in the PA Consulting business impacted our current year margins, partly offset by new program startups won in fiscal 2023.

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

Selling, general & administrative expenses for the year ended September 29, 2023 were $2.40 billion, a decrease of $11.1 million, or 0.5%, from $2.41 billion for the prior year. The current year's results were impacted by Restructuring and other charges of $63.4 million in separation activities (mainly professional services and employee separation costs) relating to the CMS separation transaction, approximately $14.3 million in costs associated with the Company's restructuring initiatives relating to its investment in PA Consulting (primarily employee separation costs) and $50.7 million in costs associated with the Company's transformation initiatives relating to real estate (compared to $78.3 million for fiscal 2022). Fiscal 2022 was impacted by the final pre-tax $91.3 million settlement of the Legacy CH2M Matter, net of previously recorded reserves, mentioned above and approximately $27 million in third party recoveries was recorded as receivables reducing SG&A, which is further discussed in Note 18 - Contractual Guarantees, Litigation, Investigations and Insurance. The current year results were also impacted by higher investments in company technology platforms, offset in part by decreases in real estate related costs, as well as other department spend decreases due in part to the Company's transformation initiatives. Lastly, SG&A expenses benefited from favorable foreign exchange impacts of $42.5 million for the year ended September 29, 2023 as compared to favorable impacts of $76.4 million for fiscal 2022.

Net interest expense for the year ended September 29, 2023 was $142.1 million, an increase of $46.3 million from $95.8 million for the prior year. The increase in net interest expense year over year is primarily due to higher interest rates in the current year compared to the prior year periods. The increase was offset in part by $6.3 million net interest benefit during the current year period related to the release of interest accruals associated with the effective settlement of uncertain tax positions.

Miscellaneous (expense) income, net for the year ended September 29, 2023 was expense of $16.5 million, unfavorable by $70.7 million as compared to $54.3 million in income for the prior year. The increase in expense from fiscal 2022 was due primarily to an increase in pension costs associated with higher interest rate impacts in the current year along with comparatively unfavorable foreign exchange gains and losses in the current year periods. Also, fiscal 2022 included a $13.9 million pre-tax gain related to a cost method investment sold during the period and a $7.1 million gain related to a lease termination.

Fiscal 2022 Compared to Fiscal 2021

Revenues for the year ended September 30, 2022 were $14.92 billion, an increase of $830.2 million, or 5.9%, from $14.09 billion from fiscal 2021. The increase in revenues was due mainly to fiscal 2022 incremental revenues from the PA Consulting investment completed in March 2021, the Buffalo Group acquisition in November 2020, and the StreetLight and BlackLynx acquisitions in fiscal 2022, as well as revenue benefits from increased spending in our U.S. government business sector client base. Additionally, fiscal 2022 was unfavorably impacted by (1) certain large contract wind downs in the U.S and (2) foreign currency translation of $346.3 million in our international businesses, as compared to favorable impacts of $238.6 million for the corresponding period in fiscal 2021.

Gross profit for the year ended September 30, 2022 was $3.33 billion, up $283.3 million, or 9.3%, from $3.04 billion for fiscal 2021. Our gross profit margins were 22.3% and 21.6% for the years ended September 30, 2022 and October 1, 2021, respectively. The increase in our gross profit and gross profit margins were mainly attributable to the fiscal 2022 impacts of the recent business acquisitions mentioned above and favorable impacts from the business results of our PA Consulting investment on a year-to-date basis along with revenue benefits from increased spending in the U.S. government business sector noted above. The increases in gross profit during fiscal 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.

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

Page 54

Selling, general & administrative expenses for the year ended September 30, 2022 were $2.41 billion, an increase of $53.5 million, or 2.3%, from $2.36 billion for fiscal 2021. Fiscal 2022's results were impacted by incremental SG&A expenses from the business acquisitions mentioned above (mainly PA Consulting) of $150.0 million (including $48.9 million in additional amortization expense for acquired intangibles and excluding the compensation related charge discussed below) due to fiscal 2021 including activity related to the acquired businesses and investment in PA Consulting only for the partial periods subsequent to the applicable acquisition date. Additionally, Restructuring and other charges for fiscal 2022 included $91.3 million pre-tax attributable to the final settlement of the Legacy CH2M Matter, approximately $27 million in third party recoveries was recorded as receivables reducing SG&A, which is further discussed in Note 18 - Contractual Guarantees, Litigation, Investigations and Insurance and in costs associated in part with the Company's transformation initiatives relating to real estate. Also, fiscal 2022 SG&A expenses were impacted by higher personnel costs associated with investments in advance of expected growth anticipated in late 2022 and 2023. Additionally, fiscal 2021 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 $76.4 million for the year ended September 30, 2022 as compared to unfavorable impacts of $75.9 million for fiscal 2021.

Net interest expense for the year ended September 30, 2022 was $95.8 million, an increase of $26.5 million from $69.2 million for fiscal 2021. The increase in net interest expense from fiscal 2021 to 2022 is primarily due to the 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 fiscal 2022, in addition to higher interest rates. Additionally, the increase was also impacted by higher levels of average debt outstanding related to the funding of the PA Consulting investment in March of fiscal 2021.

Miscellaneous income (expense), net for the year ended September 30, 2022 was income of $54.3 million, a decrease of $22.5 million as compared to $76.7 million in income for fiscal 2021. The $22.5 million decrease from fiscal 2021 was due primarily to impacts in fiscal 2021 of pre-tax unrealized gains of $34.7 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 2021 and $49.6 million in the Company's investment holding in C3, as further discussed in Note 8 - Joint Ventures, VIEs and Other Investments. Offsetting these favorable items in fiscal 2021 was an other-than-temporary impairment charge on our investment in AWE ML of $38.6 million. Additionally, fiscal 2022 benefited primarily from a $13.9 million pre-tax gain related to a cost method investment sold during the period.

On February 4, 2022, the Company acquired StreetLight Data, Inc. ("StreetLight") and on November 19, 2021, a subsidiary of Jacobs acquired BlackLynx ("BlackLynx"). For further discussion, see Note 15- Other Business Combinations.

The following table reconciles total income tax expense on continuing operations using the statutory U.S. federal income tax rate to the consolidated income tax expense on continuing operations shown in the accompanying Consolidated Statements of Earnings for the years ended September 29, 2023, September 30, 2022 and October 1, 2021

Page 55

(dollars in thousands):

The Company’s consolidated effective income tax rate for the year ended September 29, 2023 increased to 21.4% from 18.4% for fiscal 2022. The year-over-year increase in the effective tax rate is due to reduced total tax benefits in fiscal 2023, consisting of $39.4 million mostly related to uncertain tax positions in the U.S. that were effectively settled, as well as $13.0 million for the release of previously valued foreign tax credits, as compared to prior year favorable impacts of $33.1 million for a change in the realizability of foreign tax credits due to a change in the U.S. foreign tax credit regulations, $26.0 million for a change in judgment on the realizability of domestic deferred tax assets which are capital in nature, and $9.1 million due to the reversal of a withholding tax accrual on certain intercompany loans. In addition, in fiscal 2023, the higher year-over-year pre-tax book income resulted in an additional $10 million of tax expense.

The Company’s consolidated effective income tax rate for the year ended September 30, 2022 decreased to 18.4% from 39.5% for fiscal 2021. Key drivers for the year-over-year decrease in the effective tax rate include fiscal 2022 benefits of $33.1 million for a change in the realizability of foreign tax credits due to a change in the U.S. foreign tax credit regulations and $26.0 million for a change in judgment on the realizability of domestic deferred tax assets which are capital in nature, as compared to fiscal 2021 unfavorable impacts from valuation allowances of $38.9 million. The fiscal 2021 effective tax rate was also impacted by $261 million in nondeductible compensation relating to the PA investment post-completion compensation expense and $25.6 million related to tax rate changes in the United Kingdom.

Restructuring and Other Charges

During fiscal 2023, the Company implemented restructuring initiatives relating to the formation of the reporting and operating segment, Divergent Solutions, which were substantially completed this year. The Company incurred approximately $7.5 million in pre-tax cash charges in connection with these initiatives during the year ended September 29, 2023. These actions are expected to result in estimated gross annualized pre-tax cash savings of approximately $20 million to $24 million.

During fiscal 2023, the Company implemented restructuring initiatives relating to the announcement of its intention to separate its CMS business. The Company incurred approximately $19.8 million in pre-tax cash charges in

Page 56

connection with these initiatives during the year ended September 29, 2023. These actions, which are expected to be substantially completed before the end of fiscal 2024, are expected to result in estimated gross annualized pre-tax cash savings of approximately $43 million to $52 million. We will likely incur additional charges under this program during fiscal 2024, which are expected to result in additional savings.

During fiscal 2020 and continuing into fiscal 2023, the Company implemented further real estate rescaling efforts that were associated with its fiscal 2020 transformation program relating to real estate. These activities were substantially completed before the end of fiscal 2023. In connection with these efforts, the Company has incurred $47.3 million, $72.4 million and $8.7 million for the years ended September 29, 2023, September 30, 2022 and October 1, 2021, respectively in pre-tax mainly non-cash charges. These actions resulted in non-cash savings related to the future amortization of lease right-of-use assets over the remaining lease terms. Additionally, the objective of these initiatives was to create a modern, flexible work platform tailored to employees’ needs due to globalization and digital advances and to create total emissions savings that will be realized as we continue to optimize our real estate footprint.

During third quarter fiscal 2023, the Company approved a plan to improve business processes and cost structure of our PA Consulting investment by reorganizing senior management and reducing headcount. In connection with these initiatives, which are expected to be substantially complete before the end of fiscal 2024, the Company incurred approximately $14.3 million in pre-tax cash charges during the year ended September 29, 2023. These activities are expected to result in estimated gross annualized pre-tax cash savings of approximately $40 million to $45 million.

During fiscal 2020, the Company implemented certain transformation initiatives. The Company incurred approximately $1.8 million and $11.9 million in pre-tax cash charges in connection with these initiatives during the years ended September 30, 2022 and October 1, 2021, respectively. These actions were substantially complete in fiscal 2022 and resulted in estimated gross annualized pre-tax (primarily cash) savings of approximately $45 million to $55 million.

During fiscal 2020, the Company also implemented certain restructuring initiatives associated with the acquisition of John Wood Group's nuclear business. The Company incurred approximately $3.1 million in pre-tax cash charges in connection with these initiatives during the year ended October 1, 2021. These actions were substantially complete in fiscal 2021 and resulted in estimated gross annualized pre-tax cash savings of approximately $9 million to $10 million.

Refer to Note 16– Restructuring and Other Charges for further information regarding restructuring and integration initiatives.

Page 57

Segment Financial Information

The following tables present total revenues and segment operating profit for each reportable segment (in thousands) and includes a reconciliation of segment operating profit to total U.S. GAAP operating profit by including certain corporate-level expenses and expenses relating to the Restructuring other charges (as defined in Note 16 - Restructuring and Other Charges) and transaction costs (in thousands).

Page 58

In evaluating the Company’s performance by operating segment, the CODM reviews various metrics and statistical data for each Line of Business ("LOB") and PA Consulting, but focuses primarily on revenues and operating profit. As discussed above, segment operating profit includes not only local SG&A expenses but the SG&A expenses of the Company’s support groups that have been allocated to the segments. In addition, the Company attributes each segment's specific incentive compensation plan costs to the segments. The methods for recognizing revenue, incentive fees, project losses and change orders are consistent among the segments.

Critical Mission Solutions

Fiscal 2023 vs. 2022

Fiscal 2022 vs. 2021

People & Places Solutions

Page 59

Fiscal 2023 vs. 2022

Fiscal 2022 vs. 2021

Divergent Solutions

Fiscal 2023 vs. 2022

Page 60

Fiscal 2022 vs. 2021

PA Consulting

Fiscal 2023 vs. 2022

Fiscal 2022 vs. 2021

Other Corporate Expenses

Other corporate expenses were $427.1 million, $364.4 million and $340.1 million for the years ended September 29, 2023, September 30, 2022 and October 1, 2021, respectively. The increase from fiscal 2022 to fiscal 2023 was mainly attributable to continued year-to-date higher investments in company technology platforms and personnel related costs in fiscal 2023, while offset in part by approximate $15.0 million in net favorable impacts from cost reductions associated mainly with changes in employee benefit programs. The increase from fiscal 2021 to fiscal 2022 was due primarily 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, partially offset by lower legal costs and reduced employee related expenses in the fourth quarter.

Included in other corporate expenses in the above table are costs and expenses that relate to general corporate activities as well as corporate-managed benefit and insurance programs. Such costs and expenses include: (i) those elements of SG&A expenses relating to the business as a whole; (ii) those elements of our incentive compensation plans relating to corporate personnel whose other compensation costs are not allocated to the LOBs; (iii) the amortization of intangible assets acquired as part of business combinations; (iv) the quarterly variances between the Company’s actual costs of certain of its self-insured integrated risk and employee benefit programs and amounts charged to the LOBs; and

Page 61

(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.

Backlog Information

Backlog represents revenue we expect to realize for work to be completed by our consolidated subsidiaries and our proportionate share of work to be performed by unconsolidated joint ventures. Because of variations in the nature, size, expected duration, funding commitments, and the scope of services required by our contracts, the amount and timing of when backlog will be recognized as revenues includes significant estimates and can vary greatly between individual contracts.

Consistent with industry practice, substantially all of our contracts are subject to cancellation or termination at the option of the client, including our U.S. government work. While management uses all information available to determine backlog, at any given time our backlog is subject to changes in the scope of services to be provided as well as increases or decreases in costs relating to the contracts included therein. Backlog is not necessarily an indicator of future revenues.

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.

Please refer to Item 1A- Risk Factors, above, for a discussion of other factors that may cause backlog to ultimately convert into revenues at different amounts.

The following table summarizes our backlog for the years ended September 29, 2023, September 30, 2022 and October 1, 2021 (in millions):

Backlog relating to work to be performed either directly or indirectly for the U.S. federal government and its agencies totaled approximately $11.6 billion (or 39.8% of total backlog), $10.9 billion (or 39.1% of total backlog) and $10.8 billion (or 40.5% of total backlog) at September 29, 2023, September 30, 2022 and October 1, 2021, respectively. Most of our federal government contracts require that services be provided beyond one year. In general, these contracts must be funded annually (i.e., the amounts to be spent under the contract must be appropriated by the U.S. Congress to the procuring agency, and then the agency must allot these sums to the specific contracts).

We estimate that approximately $9.80 billion, or 33.7%, of total backlog at September 29, 2023 will be realized as revenues within the next fiscal year.

Page 62

Consolidated backlog differs from the Company’s remaining performance obligations as defined by ASC 606 primarily because of contract change orders or new wins not yet processed and our national government contracts where our policy is to generally include in backlog the contract award, whether funded or unfunded excluding certain option periods while our remaining performance obligations represent a measure of the total dollar value of work to be performed on contracts awarded and in progress. Additionally, the Company does not include our proportionate share of backlog related to unconsolidated joint ventures in our remaining performance obligations.

Liquidity and Capital Resources

At September 29, 2023, our principal sources of liquidity consisted of $926.6 million in cash and cash equivalents and $2.24 billion of available borrowing capacity under our $2.25 billion revolving credit agreement (the "Revolving Credit Facility"). We finance much of our operations and growth through cash generated by our operations.

Cash and cash equivalents at September 29, 2023 represented a decrease of $213.9 million from $1.14 billion at September 30, 2022, the reasons for which are described below.

Our net cash flow provided by operations of $974.8 million during fiscal 2023 was favorable by $500.1 million in

comparison to the cash flow provided by operations of $474.7 million for the corresponding prior year. The year-over-year increase in cash from operations is primarily attributable to the payment of the Legacy CH2M Matter cash settlement in fiscal 2022 and other overall net favorable working capital performance during the 2023 period.

Our net cash used for investing activities for fiscal 2023 was $145.7 million, compared to cash used for investing of $538.4 million in the prior year, with this change due primarily to the BlackLynx and StreetLight acquisitions in the prior year.

Our net cash used for financing activities for the fiscal year ended 2023 of $1.09 billion resulted mainly from $616.6 million in net repayments of borrowings, cash used for share repurchases of $265.7 million, $128.4 million in dividends to shareholders and $58.9 million in net PA Consulting related redeemable noncontrolling interests purchase and issuance activity. Cash provided by financing activities in the prior year was $320.2 million, due primarily to net proceeds from borrowings of $719.0 million, offset by cash used for share repurchases of $281.9 million and $115.9 million in dividends to shareholders.

At September 29, 2023, the Company had approximately $171.6 million in cash and cash equivalents held in the U.S. and $755.0 million held outside of the U.S. (primarily in the U.K., the Eurozone, India, Australia and the Middle East region), which is used primarily for funding operations in those regions. Other than the tax cost of repatriating funds to the U.S. (see Note 7- Income Taxes of Notes to Consolidated Financial Statements beginning on page F-1 of this Annual Report on Form 10-K), there are no material impediments to repatriating these funds to the U.S.

The Company had $322.0 million in letters of credit outstanding at September 29, 2023. Of this amount, $0.9 million was issued under the Revolving Credit Facility and $321.1 million was issued under separate, committed and uncommitted letter-of-credit facilities.

On May 9, 2023, the Company announced our intention to spin-off our Critical Mission Solutions business into an independent publicly traded company to Jacobs’ stockholders. On November 20, 2023, Jacobs entered into a definitive agreement to spin-off and combine our Critical Mission Solutions and Cyber and Intelligence government services businesses (part of Divergent Solutions) with Amentum, in a Reverse Morris Trust transaction intended to be tax-free to Jacobs’ shareholders for U.S. federal income tax purposes. The transaction, which is expected to close in fiscal 2024, is subject to regulatory approvals and other customary closing conditions. Jacobs and its shareholders will own up to 63% of the combined company’s common shares upon consummation of the transaction, consisting of 51% Jacobs’ shareholders ownership and Jacobs retaining 7.5-12%. The exact amount of the retained stake will be determined based on achievement of certain fiscal year 2024 operating profit targets. Jacobs is expected to receive cash proceeds of $1 billion at close, subject to customary adjustments. Jacobs is also expected to realize additional value after closing through the disposition of its retained equity stake in the combined company within 12 months. The Company expects to use the cash received at closing to repay outstanding indebtedness.

On February 6, 2023, the Company refinanced its Revolving Credit Facility and Term Loan Facilities, and on February 16, 2023, the Company issued $500.0 million in bonds. On August 18, the Company issued $600.0 million in bonds. See Note 9 - Borrowings for further discussion relating to the terms of the 5.90% Bonds, the 6.35% Bonds, the Revolving Credit Facility and Term Loan Facilities following the issuances and refinancing.

Page 63

On April 12, 2022, the Company paid cash of AUD640 million, or approximately $475 million using mid-April 2022 exchange rates, which represented the final settlement of Legacy CH2M Matter. For more information, refer to Note 18 - Contractual Guarantees, Litigation, Investigations and Insurance.

On February 4, 2022, the Company acquired StreetLight Data, Inc. ("StreetLight"). StreetLight is a pioneer of mobility analytics who uses its data and machine learning resources to shed light on mobility and enable users to solve complex transportation problems. The Company paid total base consideration of approximately $190.7 million in cash and issued $0.9 million in equity and $5.2 million in in-the-money stock options to the former owners of StreetLight. The Company also paid off StreetLight's debt of approximately $1.0 million simultaneously with the consummation of the acquisition.

On November 19, 2021, Jacobs acquired 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, a new term loan and draws on the Company's existing revolver. The remaining 35% interest was held by PA Consulting employees. See Note 14- PA Consulting Business Combination for more discussion on the investment and Note 9- Borrowings for more discussion on the financing for the transaction.

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 Company’s unsecured term loan facility dated March 25, 2020 (the “2020 Term Loan Facility”). The 2020 Term Loan Facility and the 2021 Term Loan Facility are together referred to as the "Term Loan Facilities".

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 which was subsequently recognized in fiscal 2021 as an offset to selling, general and administrative expense when it was determined no amounts would be paid. See Note 15- Other Business Combinations for further discussion.

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 were in compliance with all of our debt covenants at September 29, 2023.

Supplemental Obligor Group Financial Information

On February 16, 2023, Jacobs Engineering Group Inc., a wholly-owned subsidiary of Jacobs Solutions Inc. (together, the "Obligor Group"), completed an offering of $500 million aggregate principal amount of 5.90% Bonds, due 2033 and on August 18, 2023, completed an offering of $600 million aggregate principal amount of 6.35% Bonds, due 2028 (the “Bonds”). The Bonds are fully and unconditionally guaranteed by the Company (the “Guarantees”). The Bonds and the Guarantees were offered pursuant to prospectus supplements, dated February 13, 2023 and August 15, 2023, respectively, to the prospectus dated February 6, 2023, that forms a part of the Company and JEGI’s automatic shelf registration statement on Form S-3ASR (File Nos. 333-269605 and 333-269605-01) previously filed with the Securities and Exchange Commission.

Page 64

In accordance with 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 all other subsidiaries of the Company that do not guarantee the registered securities of either Jacobs or JEG. 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. GAAP.

New Accounting Pronouncements

ASU 2020-04, Reference Rate Reform, (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting is intended to provide relief for entities impacted by reference rate reform and contains provisions and optional expedients designed to simplify requirements around designation of hedging relationships, probability assessments of hedged forecasted transactions and accounting for modifications of contracts that refer to LIBOR or other rates affected by reference rate reform. The guidance is elective and is effective on the date of issuance. ASU 2020-04 is applied prospectively to contract modifications and as of the effective date for existing and new eligible hedging relationships. The guidance was amended by ASU 2022-06, Reference Rate Reform, (Topic 848): Deferral of the Sunset Date of Topic 848 to defer the original sunset date of December 31, 2022 to December 31, 2024. The adoption of the new guidance in the first quarter of fiscal 2022 allowed the Company to continue its British pound denominated interest rate hedge relationships which previously defined LIBOR as the benchmark interest rate and were amended to replace LIBOR with the Sterling Overnight Index Average rate ("SONIA") in the first quarter of fiscal 2022 and its U.S. dollar denominated interest rate hedge relationships which previously defined LIBOR as the benchmark interest rate and were amended to replace LIBOR with the Secured Overnight Financing Rate ("SOFR") in the second quarter of fiscal 2023.

Page 65

Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Critical Accounting Policies and Estimates

In order to better understand the changes that occur to key elements of our financial condition, results of operations and cash flows, a reader of this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be aware of the critical accounting policies we apply in preparing our consolidated financial statements.

The consolidated financial statements contained in this report were prepared in accordance with U.S. GAAP. The preparation of our consolidated financial statements and the financial statements of any business performing long-term professional services, engineering and construction-type contracts requires management to make certain estimates and judgments that affect both the entity’s results of operations and the carrying values of its assets and liabilities. Although our significant accounting policies are described in Note 2- Significant Accounting Policies of Notes to Consolidated Financial Statements beginning on page F-1 of this Annual Report on Form 10-K, the following discussion is intended to highlight and describe those accounting policies that are especially critical to the preparation of our consolidated financial statements.

Revenue Accounting for Contracts

The Company recognizes engineering, procurement, and construction contract revenue over time, as performance obligations are satisfied, due to the continuous transfer of control to the customer in accordance with ASC 606, Revenue from Contracts with Customers. Contracts that include engineering, procurement and construction services are generally accounted for as a single deliverable (a single performance obligation). In some instances, the Company’s services associated with a construction activity are limited only to specific tasks such as customer support, consulting or supervisory services. In these instances, the services are typically identified as separate performance obligations.

The Company recognizes revenue using the percentage-of-completion method, based primarily on contract costs incurred to date compared to total estimated contract costs. Estimated contract costs include the Company’s latest estimates using judgments with respect to labor hours and costs, materials, and subcontractor costs. The percentage-of-completion method (an input method) is the most representative depiction of the Company’s performance because it directly measures the value of the services transferred to the customer. Subcontractor materials, labor and equipment and, in certain cases, customer-furnished materials and labor and equipment are included in revenue and cost of revenue when management believes that the company is acting as a principal rather than as an agent (e.g., the company integrates the materials, labor and equipment into the deliverables promised to the customer or is otherwise primarily responsible for fulfillment and acceptability of the materials, labor and/or equipment). Under the typical payment terms of our engineering, procurement and construction contracts, amounts are billed as work progresses in accordance with agreed-upon contractual terms at periodic intervals (e.g., biweekly or monthly) and customer payments are typically due within 30 to 60 days of billing, depending on the contract.

For service contracts, the Company recognizes revenue over time using the cost-to-cost percentage-of-completion method. In some instances where the Company is standing ready to provide services, the Company recognizes revenue ratably over the service period. Under the typical payment terms of our service contracts, amounts are billed as work progresses in accordance with agreed-upon contractual terms, and customer payments are typically due within 30 to 60 days of billing, depending on the contract.

Direct costs of contracts include all costs incurred in connection with and directly for the benefit of client contracts, including depreciation and amortization relating to assets used in providing the services required by the related projects. The level of direct costs of contracts may fluctuate between reporting periods due to a variety of factors, including the amount of pass through costs we incur during a period. On those projects where we are acting as principal for subcontract labor or third-party materials and equipment, we reflect the amounts of such items in both revenues and costs (and we refer to such costs as “pass through costs”).

Page 52

Accounting for Pension Plans

The accounting for pension plans requires the use of assumptions and estimates in order to calculate periodic pension cost and the value of the plans’ assets and liabilities. These assumptions include discount rates, investment returns and projected salary increases, among others. The actuarial assumptions used in determining the funded statuses of the plans are provided in Note 13- Pension and Other Postretirement Benefit Plans of Notes to Consolidated Financial Statements beginning on page F-1 of this Annual Report on Form 10-K.

The expected rates of return on plan assets ranged from 2% to 7% for fiscal 2022 and range from 3.3% to 7.5% fiscal 2023. We believe the range of rates selected for fiscal 2023 reflects the long-term returns expected on the plans’ assets, considering recent market conditions, projected rates of inflation, the diversification of the plans’ assets, and the expected real rates of market returns. The discount rates used to compute plan liabilities ranged from 2.4% to 7.4% in fiscal 2022 and range from 2.4% to 7.4% in fiscal 2023. These assumptions represent the Company’s best estimate of the rates at which its pension obligations could be effectively settled.

Changes in the actuarial assumptions often have a material effect on the values assigned to plan assets and liabilities, and the associated pension expense. For example, if the discount rate used to value the net pension benefit obligation (“PBO”) at September 30, 2022 was lower or higher by 1.0%, the PBO would have been higher or lower, respectively, at that date by approximately $156.8 million for non-U.S. plans, and by approximately $23.7 million for U.S. plans. If the expected return on plan assets was lower or higher by 1.0%, the net periodic pension cost for fiscal 2022 would be higher or lower, respectively, by approximately $21.2 million for non-U.S. plans, and by approximately $3.4 million for U.S. plans. Differences between actuarial assumptions and actual performance (i.e., actuarial gains and losses) that are not recognized as a component of net periodic pension cost in the period in which such differences arise are recorded to accumulated other comprehensive income (loss) and are recognized as part of net periodic pension cost in future periods in accordance with U.S. GAAP. Management monitors trends in the marketplace within which our pension plans operate in an effort to assure the reasonableness of the actuarial assumptions used.

Redeemable Noncontrolling Interests

In connection with the PA Consulting investment, the Company recorded redeemable noncontrolling interests, representing the interest holders' 35% equity interest in the form of preferred and common shares of PA Consulting. The preferred shares are entitled to a cumulative annual compounding 12% dividend based on the outstanding preferred share subscription price. These interest holders have certain option rights to put the preferred and common share interests back to the Company at a value based on the fair value of PA Consulting (the redemption values). The primary inputs and assumptions impacting the fair value of PA Consulting include projections of revenue and earnings before interest, taxes, depreciation and amortization and discount rates applied thereto. Additionally, the Company has an option to call the interests for certain individual shareholders in certain circumstances. Because the interests are redeemable at the option of the holders and not solely within the control of the Company, the Company classified the interests in redeemable noncontrolling interests within its Consolidated Balance Sheet at their redemption values. The optional redemption features may become exercisable no earlier than five years from the March 2, 2021 closing date, or upon the occurrence of certain other events.

The Company has deemed these interests probable of becoming redeemable in the future and requiring their measurement at the greater of (i) the redemption amount that would be paid if settlement occurred at the balance sheet date, or (ii) the historical value resulting from the original acquisition date fair value plus the impact of any earnings or loss attribution amounts, including dividends. The fair value of the PA Consulting redeemable noncontrolling interest is determined using a combination of the income and market approaches. Under the income approach, fair value is determined by using the projected discounted cash flows of PA Consulting. Under the market approach, the fair value is determined by reference to guideline companies that are reasonably comparable to PA Consulting; the fair value is estimated based on the valuation multiples of earnings before interest, taxes, depreciation and amortization.

Litigation, Investigations, and Insurance

In the normal course of business, we make contractual commitments, and on occasion we are a party in litigation or arbitration proceedings. The litigation in which we are involved primarily includes personal injury claims, professional liability claims, and breach of contract claims. We are also routinely subject to investigations and audits.

Page 53

We maintain insurance coverage for most insurable aspects of our business and operations. Our insurance programs have varying coverage limits depending upon the type of insurance, and include certain conditions and exclusions which insurance companies may raise in response to any claim that the Company brings. We have also elected to retain a portion of certain losses, claims and liabilities that occur through the use of various deductibles, limits, and retentions under our insurance programs and utilize a number of internal financing mechanisms for these self insurance arrangements including the operation of certain captive insurance entities. As a result, we may be subject to a future liability for which we are only partially insured or completely uninsured. We intend to mitigate any such future liability by continuing to exercise prudent business judgment in negotiating the terms and conditions of the contracts which the Company enters with its clients. Our insurers are also subject to business risk and, as a result, one or more of them may be unable to fulfill their insurance obligations due to insolvency or otherwise.

Our Consolidated Balance Sheets include amounts representing our probable estimated liability relating to such claims, litigation, audits, and investigations. Our estimates of probable liabilities require us to make assumptions related to potential losses regarding our determination of amounts considered probable and estimable.

The Company believes, after consultation with counsel, that such litigation, U.S. government contract-related audits, investigations and claims, and income tax audits and investigations should not have a material adverse effect on our consolidated financial statements, beyond amounts currently accrued.

Goodwill and Intangible Assets

Goodwill represents the excess of the fair value of consideration transferred, plus the fair value of any non-controlling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. We recognize purchased intangible assets in connection with our business acquisitions at fair value on the acquisition date.

The goodwill carried on our Consolidated Balance Sheets is tested annually for possible impairment, and on an interim basis if indicators of possible impairment exist. For purposes of impairment testing, goodwill is assigned to the applicable reporting units based on the current reporting structure. In performing the annual impairment test, we evaluate our goodwill at the reporting unit level. The Company performs the annual goodwill impairment test for the reporting units at the beginning of the fourth quarter of its fiscal year.

We evaluate impairment of goodwill either by assessing qualitative factors to determine whether it is more likely than not that the fair value of our reporting unit is less than its carrying amount, or by performing a quantitative assessment. Qualitative factors include industry and market considerations, overall financial performance, and other relevant events and circumstances affecting the reporting unit. If we choose to perform a qualitative assessment and after considering the totality of events or circumstances, we determine it is more likely than not that the fair value of our reporting unit is less than its carrying amount, we would perform a quantitative fair value test.

U.S. GAAP does not prescribe a specific valuation method for estimating the fair value of reporting units. Any valuation technique used to estimate the fair value of a reporting unit requires the use of significant estimates and assumptions, including revenue growth rates, operating margins, discount rates and future market conditions, among others.

We use income and market approaches to test our goodwill for possible impairment which requires us to make estimates and judgments. Under the income approach, fair value is determined by using the discounted cash flows of our reporting units. The Company’s discount rate reflects a weighted average cost of capital (“WACC”) for a peer group of companies representative of the Company’s respective reporting units. Under the market approach, the fair values of our reporting units are determined by reference to guideline companies that are reasonably comparable to our reporting units; the fair values are estimated based on the valuation multiples of the invested capital associated with the guideline companies. In assessing whether there is an indication that the carrying value of goodwill has been impaired, we utilize the results of both valuation techniques and consider the range of fair values indicated.

It is possible that changes in facts and circumstances, judgments and assumptions used in estimating the fair value, including with respect to market conditions and the economy, could change, resulting in possible impairment of goodwill in the future. The fair values resulting from the valuation techniques used are not necessarily representative of the values we might obtain in a sale of the reporting units to willing third parties.

Page 54

For the 2022 fiscal year, we have determined that the fair value of our reporting units substantially exceeded their respective carrying values for the Consolidated Balance Sheets presented and any analysis beyond the qualitative level was not considered necessary.

Intangible assets with finite lives that arise from business acquisitions are amortized based on the period over which the contractual or economic benefit of the intangible assets are expected to be realized or on a straight-line basis over the useful lives of the underlying assets. These primarily consist of customer relationships, contracts and backlog, developed technology and trade names. We assess the recoverability of the unamortized balance of our intangible assets when indicators of impairment are present based on expected future profitability and undiscounted expected cash flows and their contribution to overall operations. Should the review indicate that the carrying value is not fully recoverable, the excess of the carrying value over the fair value of the intangible assets would be recognized as an impairment loss.

Page 55

JACOBS SOLUTIONS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

For the Fiscal Years Ended September 30, 2022, October 1, 2021 and October 2, 2020

(In thousands, except per share information)

Page 56

2022 Overview

Net earnings attributable to the Company from continuing operations for fiscal 2022 were $644.1 million (or $4.98 per diluted share), an increase of $177.0 million, or 37.9%, from $467.0 million (or $3.12 per diluted share) for the prior year. The current year results reflected higher year-over-year operating profit of $229.8 million, which benefited from the full-year operating results impact of the Company's PA Consulting investment acquired on March 2, 2021, the absence of one-time deal and related other charges in the 2021 fiscal period associated with this investment of approximately $297 million, including one-time compensation charges of $261 million and favorable year over year operating results for the remaining Jacobs businesses, primarily in P&PS, as discussed below in the Segment Financial Information section. These favorable operating profit impacts were offset in part by higher year-over-year Restructuring and other charges and transaction costs (excluding the above mentioned one-time deal and related PA Consulting investment costs) in the current year, including pre-tax settlement charges associated with the Legacy CH2M Matter (as defined in Note 19 - Contractual Guarantees, Litigation, Investigations and Insurance) of $91.3 million, approximately $27 million in third party recoveries was recorded as receivables reducing selling, general & administrative expense (SG&A), $78.4 million associated with the Company's transformation initiatives relating to real estate rescaling (see Note 17 - Restructuring and Other Charges) and year-over-year increases in intangibles amortization costs of $48.8 million which was due mainly to full year impacts of acquired intangible assets from the PA Consulting investment.

Other income (expense), net was unfavorable $(49.0) million for the current year 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) which was sold in the fourth quarter of fiscal 2021, and C3 (as defined in Note 8- Joint ventures, VIEs and other investments) of $34.7 million and $49.6 million, respectively, as well as higher interest expense of $27.5 million in the current year compared to the prior year due to higher outstanding levels of debt outstanding and higher interest rates. Additionally, current year fiscal 2022 other income (expense) benefited from the absence of the prior year $38.6 million impairment charges of our investment in AWE Management Ltd. ("AWE ML") as well as a $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 $(113.9) million due primarily to the absence of fiscal 2021 income taxes attributable to certain nondeductible compensation related charges associated with the Company's PA Consulting investment, and fiscal 2021 $25.6 million in tax law changes enacted in the United Kingdom and the prior year change in valuation allowance of $38.9 million and other miscellaneous favorable tax items combined with current year-to-date tax benefits of $33.1 million for a change in the realizability of foreign tax credits due to a change in the U.S. foreign tax credit regulations and $26.0 million for a change in judgment on the realizability of domestic deferred tax assets which are capital in nature.

Finally, unfavorable year-over-year net earnings impacts associated with redeemable noncontrolling interests of $120.0 million were attributable mainly to the absence of the 2021 period redeemable noncontrolling interests in connection with the non-controlling interest portion of the one-time compensation charges incurred in the PA Consulting investment mentioned above of approximately $91 million, as well as the impact of 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.

On February 4, 2022, the Company acquired StreetLight Data, Inc. ("StreetLight") and on November 19, 2021, a subsidiary of Jacobs acquired BlackLynx ("BlackLynx"). For further discussion, see Note 15- Other Business Combinations.

Backlog at September 30, 2022 was $27.9 billion, up $1.2 billion, from $26.6 billion for the prior year. New prospects and new sales remain strong, and the Company continues to have a positive outlook for many of the industry groups and sectors in which our clients operate.

The Company continues to evaluate its leased office space for possible abandonment or sublease options and believes that further programs associated with these activities may be entered into in fiscal 2023, which could result in future significant right of use asset impairment charges and lease related property, equipment & improvements.

Page 57

Results of Operations

Fiscal 2022 Compared to Fiscal 2021

Revenues for the year ended September 30, 2022 were $14.92 billion, an increase of $830.2 million, or 5.9%, from $14.09 billion for the prior year. The increase in revenues was due mainly to fiscal 2022 incremental revenues from the PA Consulting investment 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 our U.S. government business sector client base. These increases in revenues for the current year were partially offset by declines in pass through revenues in our P&PS advanced facilities business. Additionally, the current fiscal year was unfavorably impacted by (1) certain large contract wind downs in the U.S and (2) foreign currency translation of $346.3 million in our international businesses, as compared to favorable impacts of $238.6 million for the corresponding period last year.

Pass through costs included in revenues for the year ended September 30, 2022 were $2.32 billion, in comparison to $2.38 billion in the prior year. In general, pass through costs are more significant on projects that have a higher content of field services activities. Pass through costs are generally incurred at specific points during the life cycle of a project and are highly dependent on the needs of our individual clients and the nature of the clients’ projects. However, because we have hundreds of projects that start at various times within a fiscal year, the effect of pass through costs on the level of direct costs of contracts can vary between fiscal years without there being a fundamental or significant change to the underlying business.

Gross profit for the year ended September 30, 2022 was $3.33 billion, up $283.3 million, or 9.3%, from $3.04 billion for the prior year. Our gross profit margins were 22.3% and 21.6% for the years ended September 30, 2022 and October 1, 2021, respectively. The increase in our gross profit and gross profit margins were mainly attributable to the current year impacts of the recent business acquisitions mentioned above and favorable impacts from the business results of our PA Consulting investment on a year-to-date basis along with revenue benefits from increased spending in the U.S. government business sector noted above. The increases in gross profit during the current year 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.

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

Selling, general & administrative expenses for the year ended September 30, 2022 were $2.41 billion, an increase of $53.5 million, or 2.3%, from $2.36 billion for the prior year. The current year's results were impacted by incremental SG&A expenses from the business acquisitions mentioned above (mainly PA Consulting) of $150.0 million (including $48.9 million in additional amortization expense for acquired intangibles and excluding the compensation related charge discussed below) due to the prior comparable period including activity related to the acquired businesses and investment in PA Consulting only for the partial periods subsequent to the applicable acquisition date. Additionally, Restructuring and other charges for fiscal 2022 included $91.3 million pre-tax attributable to the final settlement of the Legacy CH2M Matter, approximately $27 million in third party recoveries was recorded as receivables reducing SG&A, which is further discussed in Note 19- Contractual Guarantees, Litigation, Investigations and Insurance) and $78.3 million in costs associated in part with the Company's transformation initiatives relating to real estate. Also, fiscal 2022 SG&A expenses were impacted by higher personnel costs associated with investments in advance of expected growth anticipated in late 2022 and 2023. As noted above, the prior year 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 $76.4 million for the year ended September 30, 2022 as compared to unfavorable impacts of $75.9 million for fiscal 2021.

Net interest expense for the year ended September 30, 2022 was $95.8 million, an increase of $26.5 million from $69.2 million for the prior year. 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 and increased borrowings associated with the payment of the Legacy CH2M Matter settlement in the current year, in addition to higher interest rates. Additionally, the increase is also impacted by higher levels of average debt outstanding related to the funding of the PA Consulting investment in March of fiscal 2021.

Page 58

Miscellaneous income (expense), net for the year ended September 30, 2022 was income of $54.3 million, a decrease of $22.5 million as compared to $76.7 million in income for the prior year. The $22.5 million decrease from fiscal 2021 was due primarily to impacts in the prior year periods of pre-tax unrealized gains of $34.7 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 and $49.6 million in the Company's investment holding in C3, as further discussed in Note 11 - Joint Ventures, VIEs and Other Investments, respectively. Offsetting these favorable items in the prior year was an other-than-temporary impairment charge on our investment in AWE ML of $38.6 million. Fiscal 2022 benefited primarily from a $13.9 million pre-tax gain related to a cost method investment sold during the period.

The following table reconciles total income tax expense on continuing operations using the statutory U.S. federal income tax rate to the consolidated income tax expense on continuing operations shown in the accompanying Consolidated Statements of Earnings for the years ended September 30, 2022, October 1, 2021 and October 2, 2020 (dollars in thousands):

The Company’s consolidated effective income tax rate for the year ended September 30, 2022 decreased to 18.4% from 39.5% for fiscal 2021. Key drivers for the year-over-year decrease in the effective tax rate include current year benefits of $33.1 million for a change in the realizability of foreign tax credits due to a change in the U.S. foreign tax credit regulations and $26.0 million for a change in judgment on the realizability of domestic deferred tax assets which are capital in nature, as compared to prior year unfavorable impacts from valuation allowances of $38.9 million. The prior year effective tax rate was also impacted by $261 million in nondeductible compensation relating to the PA investment post-completion compensation expense and $25.6 million related to tax rate changes in the United Kingdom.

Page 59

Segment Financial Information

The following tables present total revenues and segment operating profit for each reportable segment (in thousands) and includes a reconciliation of segment operating profit to total U.S. GAAP operating profit by including certain corporate-level expenses and expenses relating to the Restructuring other charges (as defined in Note 17- Restructuring and Other Charges) and transaction costs (in thousands).

Page 60

In evaluating the Company’s performance by operating segment, the CODM reviews various metrics and statistical data for each Line of Business ("LOB") and PA Consulting, but focuses primarily on revenues and operating profit. As discussed above, segment operating profit includes not only local SG&A expenses but the SG&A expenses of the Company’s support groups that have been allocated to the segments. In addition, the Company attributes each segment's specific incentive compensation plan costs to the segments. The revenues of the People & Places Solutions LOB are more affected by pass through revenues than the Critical Mission Solutions LOB or the PA Consulting segment. The methods for recognizing revenue, incentive fees, project losses and change orders are consistent among the segments.

In the first quarter of fiscal 2023, the Company will begin reporting an additional operating segment, Divergent Solutions (DVS), in addition to the current operating segments.

Critical Mission Solutions

Critical Mission Solutions (CMS) segment revenues for the year ended September 30, 2022 were $5.23 billion, up $146.6 million, or 2.9%, from $5.09 billion for the prior year. Our increase in revenue was primarily attributable to recent acquisitions in addition to recent contract awards including the Department of Energy Nuclear remediation program, offset in part by several large U.S. Cyber and Intelligence contracts winding down in the U.S. Impacts on revenues from unfavorable foreign currency translation were approximately $69.1 million for the year ended September 30, 2022, compared to $61.8 million in favorable impacts in the corresponding prior year.

Operating profit for the segment was $424.4 million for the year ended September 30, 2022, down $22.8 million, or 5.1%, from $447.2 million for the prior year. The year-over-year decrease in operating profit was unfavorably impacted by the larger contract wind downs mentioned above, which carried higher profit margins. This is partly offset by new business and U.S. government contract awards during fiscal year 2022. Impacts on operating profit from unfavorable foreign currency translation were approximately $8.4 million for the year ended September 30, 2022, compared to $9.7 million in favorable impacts in the corresponding prior year.

People & Places Solutions

Revenues for the People & Places Solutions (P&PS) segment for the year ended September 30, 2022 were $8.57 billion, up $191.7 million, or 2.3%, from $8.38 billion for the prior year. The increase in revenues from fiscal 2021 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 an unfavorable impact of $195.0 million on our international business for the year ended September 30, 2022, compared to $176.8 million in favorable impacts in the corresponding prior year.

Operating profit for the segment for the year ended September 30, 2022 was $823.6 million, an increase of $43.2 million, or 5.5%, from $780.4 million for the comparative period in fiscal 2021. The year-over-year increase 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 2023. In addition, fiscal 2021 operating profit was impacted by $19.5 million in net charges related to a legal settlement. Impacts on operating profit from unfavorable foreign currency translation were approximately $33.9 million for the year ended September 30, 2022, compared to $30.9 million in favorable impacts in the corresponding prior year.

Page 61

PA Consulting

Revenues for the PA Consulting segment for the year ended September 30, 2022 were $1.12 billion, up $491.9 million, or 78.4%, from $627.4 million for the prior year. The increase in revenue was due primarily to the full year-to-date impact of revenues from our March 2, 2021 investment in PA Consulting and was also due to growth in the U.K. business. Foreign currency translation had a $82.2 million unfavorable impact on revenues in our international businesses for the year ended September 30, 2022, compared to a favorable impact of $50.9 million for the corresponding prior year.

Operating profit for the segment for the year ended September 30, 2022 was $232.2 million, an increase of $81.2 million, or 53.7%, from $151.1 million, for the prior year. The increase in operating profit from the prior year was due mainly to the full year-to-date impact of operating profit from our March 2, 2021 investment in PA Consulting, offset in part by PA Consulting normalization of utilization rates during the second half of fiscal year 2022. Foreign currency translation had a $17.1 million unfavorable impact on operating profit in our international businesses for the year ended September 30, 2022 and a favorable impact of $11.8 million for the corresponding prior year.

Other Corporate Expenses

Other corporate expenses were $364.4 million, $340.1 million and $249.4 million for the years ended September 30, 2022, October 1, 2021 and October 2, 2020, respectively. The increase from fiscal 2021 to fiscal 2022 was due primarily 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, partially offset by lower legal costs and reduced employee related expenses in the fourth quarter.

Included in other corporate expenses in the above table are costs and expenses that relate to general corporate activities as well as corporate-managed benefit and insurance programs. Such costs and expenses include: (i) those elements of SG&A expenses relating to the business as a whole; (ii) those elements of our incentive compensation plans relating to corporate personnel whose other compensation costs are not allocated to the LOBs; (iii) the amortization of intangible assets acquired as part of business combinations; (iv) the quarterly variances between the Company’s actual costs of certain of its self-insured integrated risk and employee benefit programs and amounts charged to the LOBs; 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.

Restructuring and Other Charges

For discussion regarding Restructuring and other charges, see Note 17- Restructuring and Other Charges to the Consolidated Financial Statements.

Backlog Information

We include in backlog the total dollar amount of revenues we expect to record in the future as a result of performing work under contracts that have been awarded to us. Our policy with respect to Operations & Maintenance ("O&M") contracts, however, is to include in backlog the amount of revenues we expect to receive for one succeeding year, regardless of the remaining life of the contract. For national government programs (other than national government O&M contracts, which are subject to the same policy applicable to all other O&M contracts), our policy is to include in backlog the full contract award, whether funded or unfunded, excluding option periods. Because of variations in the nature, size, expected duration, funding commitments and the scope of services required by our contracts, the timing of when backlog will be recognized as revenues can vary greatly between individual contracts.

Page 62

Consistent with industry practice, substantially all of our contracts are subject to cancellation or termination at the option of the client, including our U.S. government work. While management uses all information available to it to determine backlog, at any given time our backlog is subject to changes in the scope of services to be provided as well as increases or decreases in costs relating to the contracts included therein. Backlog is not necessarily an indicator of future revenues.

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 evaluate our backlog generally on a year-over-year basis, but also on a sequential, quarter-over-quarter basis, where appropriate.

Please refer to Item 1A- Risk Factors, above, for a discussion of other factors that may cause backlog to ultimately convert into revenues at different amounts.

The following table summarizes our backlog for the years ended September 30, 2022, October 1, 2021 and October 2, 2020 (in millions):

Critical Mission Solutions backlog was generally consistent and in line with the prior year comparable period backlog. Critical Mission Solutions has been awarded a number of key opportunities in the U.S. government space for the years presented.

The increase in backlog in People & Places Solutions for the years presented was primarily driven by new business awards in our advanced facilities business.

The PA Consulting backlog was unfavorably impacted by the weakening British pound throughout the second half fiscal year 2022. Excluding foreign currency impacts, PA Consulting backlog benefited from modest growth.

Backlog relating to work to be performed either directly or indirectly for the U.S. federal government and its agencies totaled approximately $10.9 billion (or 39.1% of total backlog), $10.8 billion (or 40.5% of total backlog) and $8.5 billion (or 35.7% of total backlog) at September 30, 2022, October 1, 2021 and October 2, 2020, respectively. Most of our federal government contracts require that services be provided beyond one year. In general, these contracts must be funded annually (i.e., the amounts to be spent under the contract must be appropriated by the U.S. Congress to the procuring agency, and then the agency must allot these sums to the specific contracts).

We estimate that approximately $9.40 billion, or 33.7%, of total backlog at September 30, 2022 will be realized as revenues within the next fiscal year.

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). Our policy is to include in backlog the full contract award, whether funded or unfunded excluding the option periods while our remaining performance obligations represent a measure of the total dollar value of work to be performed on contracts awarded and in progress. Additionally, the Company includes our proportionate share of backlog related to unconsolidated joint ventures which is not included in our remaining performance obligations.

For a discussion on the year ended October 1, 2021 compared to the year ended October 2, 2020, please refer to Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended October 1, 2021.

Page 63

Liquidity and Capital Resources

At September 30, 2022, our principal sources of liquidity consisted of $1.14 billion in cash and cash equivalents and $1.14 billion of available borrowing capacity under our $2.25 billion revolving 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 September 30, 2022 represented an increase of $126.2 million from $1.01 billion at October 1, 2021, the reasons for which are described below.

Our cash flow provided by operations of $474.7 million during fiscal 2022 was comparatively lower than the $726.3 million in cash flow provided by operations for the prior year. This change 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, with the absence of these two items resulting in near-flat year-over-year cash flow from operations.

Our cash used for investing activities for fiscal 2022 of $538.42 million was comparatively lower than the $1.38 billion cash used for investing activities for the prior year. The decrease was due primarily to the acquisitions of StreetLight and BlackLynx in the current year compared to the considerably larger prior year investment in PA Consulting and the Buffalo Group acquisition, partially offset by proceeds received from the Company's disposal of the Worley and C3 investments and the final ECR sale working capital settlement in fiscal 2021.

Our cash provided by financing activities for the fiscal year ended 2022 of $320.2 million resulted mainly from net proceeds from borrowings of $719.0 million primarily in connection with the StreetLight and BlackLynx acquisitions and funding of the Legacy CH2M Matter cash settlement, offset by cash used for share repurchases of $281.9 million and $115.9 million in dividends to shareholders. Cash provided by financing activities was $799.0 million in fiscal 2021 and resulted mainly from net proceeds from borrowings of $1.22 billion, partially offset by common stock repurchases of $274.9 million and dividend payments to shareholders of $107.2 million.

At September 30, 2022, the Company had approximately $230.5 million in cash and cash equivalents held in the U.S. and $909.9 million held outside of the U.S. (primarily in the U.K., the Eurozone, Australia, India, Japan, Israel, Canada 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 7- Income Taxes of Notes to Consolidated Financial Statements beginning on page F-1 of this Annual Report on Form 10-K), there are no material impediments to repatriating these funds to the U.S.

In connection with the Company's implementation of a new holding company structure, which was completed in August 2022, the Company launched an offer to repurchase its outstanding Senior Notes, as defined in Note 9, Borrowings, at par plus accrued and unpaid interest, and without any make-whole premium. On October 7, 2022, the Company repaid $481 million of Senior Notes held by holders who accepted the offer with proceeds from our long-term Revolving Credit Facility.

On April 12, 2022, the Company paid cash of AUD640 million, or approximately $475 million using mid-April 2022 exchange rates, which represented the final settlement of Legacy CH2M Matter. For more information, refer to Note 19- Contractual Guarantees, Litigation, Investigations and Insurance.

On February 4, 2022, the Company acquired StreetLight Data, Inc. ("StreetLight"). StreetLight is a pioneer of mobility analytics who uses its data and machine learning resources to shed light on mobility and enable users to solve complex transportation problems. The Company paid total base consideration of approximately $190.7 million in cash, and issued $0.9 million in equity and $5.2 million in in-the-money stock options to the former owners of StreetLight. The Company also paid off StreetLight's debt of approximately $1.0 million simultaneously with the consummation of the acquisition.

Page 64

On November 19, 2021, Jacobs acquired 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, a new term loan and draws on the Company's existing revolver. The remaining 35% interest is held by PA Consulting employees. See Note 14- PA Consulting Business Combination for more discussion on the investment and Note 9- Borrowings for more discussion on the financing for the transaction.

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 Company’s unsecured term loan facility dated March 25, 2020 (the “2020 Term Loan Facility”). The 2020 Term Loan Facility and the 2021 Term Loan Facility are together referred to as the "Term Loan Facilities".

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 which was expected to be settled in fiscal 2022. See Note 15- Other Business Combinations for further discussion.

The Company had $280.5 million in letters of credit outstanding at September 30, 2022. Of this amount, $1.3 million was issued under the Revolving Credit Facility and $279.2 million was issued under separate, committed and uncommitted letter-of-credit facilities.

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

New Accounting Pronouncements

ASU 2020-04, Reference Rate Reform, (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting is intended to provide relief for entities impacted by reference rate reform and contains provisions and optional expedients designed to simplify requirements around designation of hedging relationships, probability assessments of hedged forecasted transactions and accounting for modifications of contracts that refer to LIBOR or other rates affected by reference rate reform. The guidance is elective and is effective on the date of issuance. ASU 2020-04 is applied prospectively to contract modifications and as of the effective date for existing and new eligible hedging relationships. The guidance is temporary and will generally not be applicable to contract modifications which occur after December 31, 2022. The adoption of the new guidance in the first quarter of fiscal 2022 allowed the Company to continue its British pound denominated interest rate hedge relationships which previously defined LIBOR as the benchmark interest rate and in December 2021 were amended to replace LIBOR with the Sterling Overnight Index Average rate ("SONIA").

ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, is effective for fiscal years beginning after December 15, 2022, with early adoption permitted. ASU 2021-08 requires contract assets and contract liabilities (i.e., deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers. Generally, this new guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. The Company adopted the new guidance in the first quarter of fiscal 2022 and the adoption had no impact on the Company's financial position, results of operations or cash flows.

Page 65

Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Critical Accounting Policies and Estimates

Page 48

In order to better understand the changes that occur to key elements of our financial condition, results of operations and cash flows, a reader of this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be aware of the critical accounting policies we apply in preparing our consolidated financial statements.

The consolidated financial statements contained in this report were prepared in accordance with U.S. GAAP. The preparation of our consolidated financial statements and the financial statements of any business performing long-term professional services, engineering and construction-type contracts requires management to make certain estimates and judgments that affect both the entity’s results of operations and the carrying values of its assets and liabilities. Although our significant accounting policies are described in Note 2- Significant Accounting Policies of Notes to Consolidated Financial Statements beginning on page F-1 of this Annual Report on Form 10-K, the following discussion is intended to highlight and describe those accounting policies that are especially critical to the preparation of our consolidated financial statements.

Revenue Accounting for Contracts

Engineering, Procurement & Construction Contracts and Service Contracts

On September 29, 2018, the Company adopted ASC Topic 606, Revenue from Contracts with Customers, including the subsequent ASUs that amended and clarified the related guidance. The Company recognizes engineering, procurement, and construction contract revenue over time, as performance obligations are satisfied, due to the continuous transfer of control to the customer. Upon adoption of ASC Topic 606, contracts which include engineering, procurement and construction services are generally accounted for as a single deliverable (a single performance obligation) and are no longer segmented between types of services. In some instances, the Company’s services associated with a construction activity are limited only to specific tasks such as customer support, consulting or supervisory services. In these instances, the services are typically identified as separate performance obligations.

The Company recognizes revenue using the percentage-of-completion method, based primarily on contract costs incurred to date compared to total estimated contract costs. Estimated contract costs include the Company’s latest estimates using judgments with respect to labor hours and costs, materials, and subcontractor costs. The percentage-of-completion method (an input method) is the most representative depiction of the Company’s performance because it directly measures the value of the services transferred to the customer. Subcontractor materials, labor and equipment and, in certain cases, customer-furnished materials and labor and equipment are included in revenue and cost of revenue when management believes that the company is acting as a principal rather than as an agent (e.g., the company integrates the materials, labor and equipment into the deliverables promised to the customer or is otherwise primarily responsible for fulfillment and acceptability of the materials, labor and/or equipment). The Company recognizes revenue, but not profit, on certain uninstalled materials that are not specifically produced, fabricated, or constructed for a project. Under the typical payment terms of our engineering, procurement and construction contracts, amounts are billed as work progresses in accordance with agreed-upon contractual terms at periodic intervals (e.g., biweekly or monthly) and customer payments on are typically due within 30 to 60 days of billing, depending on the contract.

For service contracts, the Company recognizes revenue over time using the cost-to-cost percentage-of-completion method. Service contracts that include multiple performance obligations are segmented between types of services. For contracts with multiple performance obligations, the Company allocates the transaction price to each performance obligation using an estimate of the stand-alone selling price of each distinct service in the contract. In some instances where the Company is standing ready to provide services, the Company recognizes revenue ratably over the service period. Under the typical payment terms of our service contracts, amounts are billed as work progresses in accordance with agreed-upon contractual terms, and customer payments are typically due within 30 to 60 days of billing, depending on the contract.

Direct costs of contracts include all costs incurred in connection with and directly for the benefit of client contracts, including depreciation and amortization relating to assets used in providing the services required by the related projects. The level of direct costs of contracts may fluctuate between reporting periods due to a variety of factors, including the amount of pass-through costs we incur during a period. On those projects where we are acting as principal for subcontract labor or third-party materials and equipment, we reflect the amounts of such items in both revenues and costs (and we refer to such costs as “pass-through costs”).

Variable Consideration

Page 49

The nature of the Company’s contracts gives rise to several types of variable consideration, including claims and unpriced change orders; awards and incentive fees; and liquidated damages and penalties. The Company recognizes revenue for variable consideration when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. The Company estimates the amount of revenue to be recognized on variable consideration using the expected value (i.e., the sum of a probability-weighted amount) or the most likely amount method, whichever is expected to better predict the amount. If the requirements for recognizing revenue for claims or unapproved change orders are met, revenue is recorded only when the costs associated with the claims or unapproved change orders have been incurred and only up to the amount of cost incurred.

Practical Expedient

If the Company has a right to consideration from a customer in an amount that corresponds directly with the value of the Company’s performance completed to date (a service contract in which the company bills a fixed amount for each hour of service provided), the Company recognizes revenue in the amount to which it has a right to invoice for services performed.

Joint Ventures and VIEs

As is common to the industry, we execute certain contracts jointly with third parties through various forms of joint ventures. Although the joint ventures own and hold the contracts with the clients, the services required by the contracts are typically performed by us and our joint venture partners, or by other subcontractors under subcontracting agreements with the joint ventures. Many of these joint ventures are formed for a specific project. The assets of our joint ventures generally consist almost entirely of cash and receivables (representing amounts due from clients), and the liabilities of our joint ventures generally consist almost entirely of amounts due to the joint venture partners (for services provided by the partners to the joint ventures under their individual subcontracts) and other subcontractors. In general, at any given time, the equity of our joint ventures represents the undistributed profits earned on contracts the joint ventures hold with clients. Very few of our joint ventures have employees or third-party debt or credit facilities. The debt held by the joint ventures is non-recourse to the general credit of Jacobs.

Our unconsolidated joint ventures (including equity method investments) are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the investment might not be recoverable, and impairment losses are recognized for such investments if there is a decline in fair value below carrying value that is considered to be other-than-temporary.

Many of the joint ventures are deemed to be variable interest entities (“VIE”) because they lack sufficient equity to finance the activities of the joint venture. The Company uses a qualitative approach to determine if the Company is the primary beneficiary of the VIE, which considers factors that indicate a party has the power to direct the activities that most significantly impact the joint venture’s economic performance. These factors include the composition of the governing board, how board decisions are approved, the powers granted to the operational manager(s) and partner that holds that position(s), and to a certain extent, the partner’s economic interest in the joint venture. The Company analyzes each joint venture initially to determine if it should be consolidated or unconsolidated.

•Consolidated if the Company is the primary beneficiary of a VIE, or holds the majority of voting interests of a non-VIE (and no significant participative rights are available to the other partners).

•Unconsolidated if the Company is not the primary beneficiary of a VIE, or does not hold the majority of voting interest of a non-VIE.

Share-Based Payments

We measure the value of services received from employees and directors in exchange for an award of an equity instrument based on the grant-date fair value of the award. The computed value is recognized as a non-cash cost on a straight-line basis over the period the individual provides services, which is typically the vesting period of the award with the exception of the value of awards containing an internal performance measure, such as EPS growth and ROIC, which is recognized on a straight-line basis over the vesting period subject to the probability of meeting the performance requirements and adjusted for the number of shares expected to be earned.

Accounting for Pension Plans

The accounting for pension plans requires the use of assumptions and estimates in order to calculate periodic pension cost and the value of the plans’ assets and liabilities. These assumptions include discount rates, investment returns

Page 50

and projected salary increases, among others. The actuarial assumptions used in determining the funded statuses of the plans are provided in Note 13- Pension and Other Postretirement Benefit Plans of Notes to Consolidated Financial Statements beginning on page F-1 of this Annual Report on Form 10-K.

The expected rates of return on plan assets ranged from 1.8% to 7% for fiscal 2021 and range from 2% to 7% fiscal 2022. We believe the range of rates selected for fiscal 2022 reflects the long-term returns expected on the plans’ assets, considering recent market conditions, projected rates of inflation, the diversification of the plans’ assets, and the expected real rates of market returns. The discount rates used to compute plan liabilities ranged from 0.4% to 6.6% in fiscal 2021 and range of 0.6% to 6.6% in fiscal 2022. These assumptions represent the Company’s best estimate of the rates at which its pension obligations could be effectively settled.

Changes in the actuarial assumptions often have a material effect on the values assigned to plan assets and liabilities, and the associated pension expense. For example, if the discount rate used to value the net pension benefit obligation (“PBO”) at October 1, 2021 was higher by 0.5%, the PBO would have been lower at that date by approximately $229.4 million for non-U.S. plans, and by approximately $20.5 million for U.S. plans. If the expected return on plan assets was higher by 1.0%, the net periodic pension cost for fiscal 2021 would be lower by approximately $21.2 million for non-U.S. plans, and by approximately $3.4 million for U.S. plans. Differences between actuarial assumptions and actual performance (i.e., actuarial gains and losses) that are not recognized as a component of net periodic pension cost in the period in which such differences arise are recorded to accumulated other comprehensive income (loss) and are recognized as part of net periodic pension cost in future periods in accordance with U.S. GAAP. Management monitors trends in the marketplace within which our pension plans operate in an effort to assure the fairness of the actuarial assumptions used.

Page 51

Redeemable Noncontrolling Interests

In connection with the PA Consulting investment, the Company recorded redeemable noncontrolling interests, representing the interest holders' 35% equity interest in the form of preferred and common shares of PA Consulting. The preferred shares are entitled to a cumulative annual compounding 12% dividend based on the outstanding preferred share subscription price. These interest holders have certain option rights to put the preferred and common share interests back to the Company at a value based on the fair value of PA Consulting (the redemption values). Additionally, the Company has an option to call the interests for certain individual shareholders in certain circumstances. Because the interests are redeemable at the option of the holders and not solely within the control of the Company, the Company classified the interests in redeemable noncontrolling interests within its Consolidated Balance Sheet at their redemption values. The optional redemption features may become exercisable no earlier than five years from the March 2, 2021 closing date, or upon the occurrence of certain other events.

The Company has deemed these interests probable of becoming redeemable in the future and requiring their measurement at the greater of (i) the redemption amount that would be paid if settlement occurred at the balance sheet date, or (ii) the historical value resulting from the original acquisition date fair value plus the impact of any earnings or loss attribution amounts, including dividends. The fair value of the the PA Consulting redeemable noncontrolling interests is determined using an income and market approach.

Further, any excess in redemption amounts over the historical values of the interests is recognized as an increase to redeemable noncontrolling interests and an offsetting decrease in consolidated retained earnings. Additionally, particular to the preference share and in certain circumstances the ordinary share components of redeemable noncontrolling interests, such decrease in consolidated retained earnings is also reflected as a corresponding downward adjustment to net earnings attributable to Jacobs for purposes of the calculation of consolidated earnings per share attributable to common shareholders.

Contractual Guarantees, Litigation, Investigations, and Insurance

In the normal course of business, we make contractual commitments, some of which are supported by separate guarantees; and on occasion we are a party in a litigation or arbitration proceeding. The litigation in which we are involved primarily includes personal injury claims, professional liability claims, and breach of contract claims. Where we provide a separate guarantee, it is strictly in support of the underlying contractual commitment. Guarantees take various forms including surety bonds required by law, or standby letters of credit ("LOC") (also referred to as “bank guarantees”) or corporate guarantees given to induce a party to enter into a contract with a subsidiary. Standby LOCs are also used as security for advance payments or in various other transactions. The guarantees have various expiration dates ranging from an arbitrary date to completion of our work (e.g., engineering only) to completion of the overall project. We record in the Consolidated Balance Sheets amounts representing our estimated liability relating to such guarantees, litigation and insurance claims. Guarantees are accounted for in accordance with ASC 460-10, Guarantees, at fair value at the inception of the guarantee.

We maintain insurance coverage for most insurable aspects of our business and operations. Our insurance programs have varying coverage limits depending upon the type of insurance, and include certain conditions and exclusions which insurance companies may raise in response to any claim that the Company brings. We have also elected to retain a portion of losses and liabilities that occur through the use of various deductibles, limits, and retentions under our insurance programs. As a result, we may be subject to a future liability for which we are only partially insured or completely uninsured. We intend to mitigate any such future liability by continuing to exercise prudent business judgment in negotiating the terms and conditions of the contracts which the Company enters with its clients. Our insurers are also subject to business risk and, as a result, one or more of them may be unable to fulfill their insurance obligations due to insolvency or otherwise.

Our Consolidated Balance Sheets include amounts representing our probable estimated liability relating to such claims, guarantees, litigation, audits, and investigations. Our estimates of probable liabilities require us to make assumptions related to potential losses regarding our determination of amounts considered probable and estimable. We perform an analysis to determine the level of reserves to establish for insurance-related claims that are known and have been asserted against us, as well as for insurance-related claims that are believed to have been incurred based on actuarial analysis, but have not yet been reported to our claims administrators as of the respective balance sheet dates. We include any adjustments to such insurance reserves in our consolidated results of operations. Insurance recoveries are recorded as assets if recovery is probable and estimated liabilities are not reduced by expected insurance recoveries.

Page 52

The Company believes, after consultation with counsel, that such guarantees, litigation, U.S. government contract-related audits, investigations and claims, and income tax audits and investigations should not have a material adverse effect on our consolidated financial statements, beyond amounts currently accrued.

Testing Goodwill for Possible Impairment

The goodwill carried on our Consolidated Balance Sheets is tested annually for possible impairment, and on an interim basis if indicators of possible impairment exist. For purposes of impairment testing, goodwill is assigned to the applicable reporting units based on the current reporting structure. In performing the annual impairment test, we evaluate our goodwill at the reporting unit level. The Company performs the annual goodwill impairment test for the reporting units at the beginning of the fourth quarter of its fiscal year.

We evaluate impairment of goodwill either by assessing qualitative factors to determine whether it is more likely than not that the fair value of our reporting unit is less than its carrying amount, or by performing a quantitative assessment. Qualitative factors include industry and market considerations, overall financial performance, and other relevant events and circumstances affecting the reporting unit. If we choose to perform a qualitative assessment and after considering the totality of events or circumstances, we determine it is more likely than not that the fair value of our reporting unit is less than its carrying amount, we would perform a quantitative fair value test.

U.S. GAAP does not prescribe a specific valuation method for estimating the fair value of reporting units. Any valuation technique used to estimate the fair value of a reporting unit requires the use of significant estimates and assumptions, including revenue growth rates, operating margins, discount rates and future market conditions, among others.

We use income and market approaches to test our goodwill for possible impairment which requires us to make estimates and judgments. Under the income approach, fair value is determined by using the discounted cash flows of our reporting units. The Company’s discount rate reflects a weighted average cost of capital (“WACC”) for a peer group of companies representative of the Company’s respective reporting units. Under the market approach, the fair values of our reporting units are determined by reference to guideline companies that are reasonably comparable to our reporting units; the fair values are estimated based on the valuation multiples of the invested capital associated with the guideline companies. In assessing whether there is an indication that the carrying value of goodwill has been impaired, we utilize the results of both valuation techniques and consider the range of fair values indicated.

It is possible that changes in market conditions, economy, facts and circumstances, judgments and assumptions used in estimating the fair value could change, resulting in possible impairment of goodwill in the future. The fair values resulting from the valuation techniques used are not necessarily representative of the values we might obtain in a sale of the reporting units to willing third parties.

For the 2021 fiscal year, we have determined that the fair value of our reporting units substantially exceeded their respective carrying values for the Consolidated Balance Sheets presented and any analysis beyond the qualitative level was not considered necessary.

JACOBS ENGINEERING GROUP INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

For the Fiscal Years Ended October 1, 2021, October 2, 2020 and September 27, 2019

Page 53

(In thousands, except per share information)

2021 Overview

COVID-19 Pandemic. There are many risks and uncertainties regarding the COVID-19 pandemic, including the anticipated duration of the pandemic and the extent of local and worldwide social, political, and economic disruption it may cause. The Company’s operations for fiscal 2021 were adversely impacted by COVID-19. While certain business units of Critical Mission Solutions, People & Places Solutions and PA Consulting have experienced, and may continue to experience, an increase in demand for certain of their services regarding new projects that may arise in response to the COVID-19 pandemic, it is still expected that COVID-19 is likely to continue to have an adverse impact on each of Critical Missions Solutions, People & Places Solutions and PA Consulting in fiscal 2022, although to a lesser degree than what was seen in 2021 or 2020.

Page 54

Please refer to Item 1A - Risk Factors, for a discussion of risks and uncertainties related to COVID-19, including the potential impacts on the Company’s business, financial condition and results of operations.

Net earnings attributable to the Company from continuing operations for fiscal 2021 were $467.0 million (or $3.12 per diluted share), an increase of $113.2 million, or 32.0%, from $353.9 million (or $2.67 per diluted share) for the prior year. Overall favorable operating profit improvements during the current year compared to the last year benefited from our PA Consulting and Buffalo Group investing activities in the current year as well as operating profit results in our legacy businesses. These favorable items were offset by the one-time impact of $261.4 million in relation to certain transaction proceeds amounts for the PA investment required to be treated as post-completion compensation expense due to continuing employment requirements associated with employees of PA receiving transaction proceeds in accordance with US generally accepted accounting principles. This required treatment had no impact on the total purchase consideration for this investment. Additionally, included in the Company's reported results in miscellaneous income (expense), net from continuing operations for the year ended October 1, 2021 was $34.7 million in pre-tax net gains associated with our investment in Worley stock (net of Worley stock dividend), which was sold during the fourth quarter fiscal 2021, and certain foreign currency revaluations relating to the ECR sale, as well as pre-tax realized gains associated with our investment in C3.ai, Inc. ("C3") of $49.6 million, which was sold during fiscal 2021, as further discussed Note 8- Joint Ventures, VIEs and Other Investments. Further, $38.6 million in offsetting pre-tax other-than-temporary impairment charges were recorded for our AWE Management Ltd ("AWE") investment in fiscal 2021. In comparison, miscellaneous income (expense), net for the corresponding 2020 period included pre-tax earnings of $330.2 million in Restructuring and other charges and transaction costs associated in part with the Company's fourth quarter fiscal 2020 transformation initiatives relating to real estate and other staffing programs which are discussed in Note 17- Restructuring and Other Charges and $74.5 million in pre-tax fair value losses associated with our investment in Worley stock (net of Worley stock dividend) and certain foreign currency revaluations relating to the ECR sale. Income tax expense for continuing operations for fiscal 2021 was $274.8 million, an increase of $219.5 million, or 396.7%, from $55.3 million in the prior year. Key drivers for this year-over-year increase include $48.7 million related to nondeductible compensation expense relating to the PA Consulting acquisition, $25.6 million related to tax law changes enacted in the United Kingdom, and the current year change in valuation allowance of $38.9 million as compared to income tax benefits during fiscal 2020 of $11.3 million for the release of uncertain tax positions, $6.8 million related to income tax rate changes, the prior year change in valuation allowance of $16.9 million, with the remaining increase related mainly to higher levels of pre-tax income in 2021.

Net earnings attributable to Jacobs from discontinued operations for fiscal 2021 were $10.0 million (or $0.08 per diluted share), a decrease of $128.0 million, or 92.8%, from $138.0 million (or $1.04 per diluted share) for the prior year. Included in net earnings attributable to the Company from discontinued operations for the current year was the pre-tax gain amount of $15.6 million associated with the final working capital settlement with Worley in connection with the ECR sale during the current year. Also, the comparative 2020 year to date period included the settlement of the Nui Phao ("NPMC") legal matter that was reimbursed by insurance, the recognition of the deferred gain for the delayed conveyance of the international entities and for the delivery of the ECR IT assets and adjustments for working capital and certain other items in connection with the ECR sale. For further discussion, see Note 16 - Sale of Energy, Chemicals and Resources ("ECR") Business.

On March 2, 2021, Jacobs completed the strategic investment of a 65% interest in PA Consulting. For further discussion, see Note 14- PA Consulting Business Combination.

On November 24, 2020, Jacobs completed the acquisition of Buffalo Group. For further discussion, see Note 15- Other Business Combinations.

Backlog at October 1, 2021 was $26.6 billion, up $2.8 billion, from $23.8 billion for the prior year. New prospects and new sales remain strong and the Company continues to have a positive outlook for many of the industry groups and sectors in which our clients operate.

Subsequent to October 1, 2021, the Company has entered into the planning stages for identifying certain additional leased space that it intends to abandon or market for sublease and expects to record associated impairment charges in fiscal 2022 upon finalization of these plans. Potential charges for these plans are expected to approximate up to $70 million.

Results of Operations

Page 55

Fiscal 2021 Compared to Fiscal 2020

Revenues for the year ended October 1, 2021 were $14.09 billion, an increase of $525.7 million, or 3.9%, from $13.57 billion for the prior year. The increase in revenues was due partly to fiscal 2021 incremental revenues from the PA Consulting investment completed in March 2021, the Buffalo Group business acquisition completed in November 2020 and the March 2020 John Wood Group nuclear business acquisition. In addition, revenue growth benefited from favorable foreign currency translation of $238.6 million for the year ended October 1, 2021, in our international businesses, as compared to unfavorable impacts of $30.8 million for the corresponding period last year. The current year benefits were partially offset by market conditions and certain contract wind downs in our U.S. businesses and the extra week of activity in fiscal 2020.

Pass-through costs included in revenues for the year ended October 1, 2021 were $2.38 billion, in comparison to $2.61 billion in the prior year. In general, pass-through costs are more significant on projects that have a higher content of field services activities. Pass-through costs are generally incurred at specific points during the life cycle of a project and are highly dependent on the needs of our individual clients and the nature of the clients’ projects. However, because we have hundreds of projects that start at various times within a fiscal year, the effect of pass-through costs on the level of direct costs of contracts can vary between fiscal years without there being a fundamental or significant change to the underlying business.

Gross profit for the year ended October 1, 2021 was $3.04 billion, up $457.1 million, or 17.7%, from $2.59 billion for the prior year. Our gross profit margins were 21.6% and 19.1% for the years ended October 1, 2021 and October 2, 2020, respectively. The increase in our gross profit and gross profit margins were mainly attributable to the recent business acquisitions mentioned along with favorable foreign currency translation impacts in our international businesses partially offset by market conditions and certain contract wind downs in our U.S. businesses and the extra week of activity in fiscal 2020 as noted above.

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

Selling, general & administrative expenses for the year ended October 1, 2021 were $2.36 billion, an increase of $305.0 million, or 14.9%, from $2.05 billion for the prior year. The current year's results were impacted by incremental SG&A expenses from the recent business acquisitions mentioned above and higher personnel-related costs, partly offset by lower other operational overhead costs and the extra week of activity in fiscal 2020. Additionally, restructuring and other charges for fiscal 2021 were mainly attributable to post-completion compensation expense of $261 million in connection with the investment in PA Consulting, while fiscal 2020 included $325.1 million of restructuring and other charges and transaction costs associated in part with the Company's fourth quarter fiscal 2020 transformation initiatives relating to real estate and other staffing programs. Incremental SG&A expenses from the above-mentioned business acquisitions have been offset in part by continued reductions in personnel-related and other overhead costs resulting from our ongoing cost reduction programs. Unfavorable impacts on SG&A expenses from foreign exchange were $75.9 million for the year ended October 1, 2021 as compared to nominal favorable impacts for the corresponding period last year.

Net interest expense for the year ended October 1, 2021 was $69.2 million, an increase of $11.7 million from $57.5 million for the prior year. The increase in net interest expense year over year is primarily due to the higher levels of debt outstanding in the current year as a result of the PA acquisition, partially offset by lower interest rates.

Miscellaneous income (expense), net for the year ended October 1, 2021 was $76.7 million, an increase of $114.0 million as compared to $(37.3) million in expense for the prior year. The increase from the prior year was due primarily to $34.7 million in pre-tax net gains associated with changes in the fair value of our investment in Worley stock (net of Worley stock dividend) (which was sold in fourth quarter fiscal 2021) and certain foreign currency revaluations relating to the ECR sale in the current year, compared to pre-tax net losses of $74.5 million in the prior year. Also included in miscellaneous (expense) income during the current year are pre-tax realized gains of $49.6 million related to holdings of our C3 shares sold during the period, as further discussed in Note 11 - Joint Ventures, VIEs and Other Investments. These favorable impacts for fiscal 2021 were partially offset by other-than-temporary impairment charges on our investment in AWE in the amount of $38.6 million.

Page 56

The following table reconciles total income tax expense on continuing operations using the statutory U.S. federal income tax rate to the consolidated income tax expense on continuing operations shown in the accompanying Consolidated Statements of Earnings for the years ended October 1, 2021, October 2, 2020 and September 27, 2019 (dollars in thousands):