• Total Gross Revenue: Increased over 4% in Q1.
• Adjusted Net Revenue: Rose over 5% year-over-year.
• GAAP EPS: Negative $0.10, impacted by a $1.16 loss from investment in Amentum.
• Adjusted EPS: $1.33, an 8% decrease compared to the previous year.
• Adjusted EBITDA: $282 million, a 24% year-on-year increase.
• Adjusted EBITDA Margin: 13.5%, increased by approximately 200 basis points year-over-year.
• Consolidated Backlog: Increased 19% year-over-year, totaling $21.8 billion.
• Book-to-Bill Ratio: 1.4x for Q1; trailing 12-month ratio at 1.3x.
• Free Cash Flow: $97 million for Q1.
• Share Repurchases: $202 million in Q1, with a new $1.5 billion authorization approved.
• Dividend: $0.32 per share, representing 10% year-over-year growth.
• Adjusted EPS Guidance: Raised to $5.85 to $6.20 for fiscal '25.

• Warning! GuruFocus has detected 8 Warning Signs with J.

Release Date: February 04, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Total gross revenue increased over 4% in Q1, with adjusted net revenue rising over 5%.
• Adjusted EBITDA for Q1 was $282 million, representing a 24% year-on-year increase.
• Consolidated backlog increased 19% year-over-year in Q1, with a trailing 12-month book-to-bill ratio of 1.3x.
• Significant contract wins in critical infrastructure, including the River Torrens to Darlington project in South Australia and the BusConnects Dublin program.
• Strong performance in the Water and Environmental segment, with double-digit revenue growth across all major geographies.

Negative Points

• GAAP EPS was negative $0.10, impacted by a $1.16 mark-to-market loss on investment in Amentum.
• Adjusted EPS decreased by 8% compared to the previous year, primarily due to an unfavorable tax comparison.
• Life sciences and advanced manufacturing segment showed mixed results, with life sciences strong but advanced manufacturing soft.
• Free cash flow for Q1 was $97 million, with a more back half-weighted cadence expected for the full year.
• Exposure to potential federal spending cuts, though less than 10% of business is tied to federal agencies.

Q & A Highlights

Q: Can you discuss the sentiment from your US government and commercial customers and how it reflects in your backlog? A: Bob Pragada, Chair and CEO, stated that customer sentiment remains positive despite the political narrative. The company is seeing double-digit pipeline growth across end markets, and the cadence of awards is reflected in backlog growth, indicating no dramatic shifts in customer behavior.

Q: What initiatives are contributing to margin improvement this year, and what can we expect in the back half? A: Venk Nathamuni, CFO, highlighted ongoing cost controls, operating leverage from revenue growth, and a global delivery model as key contributors to margin improvement. The company expects a slight dip in Q2 margins due to holiday timing but anticipates reaching a 13.8% to 14% margin for the full year.

Q: How confident are you in the continued growth of the Water and Environmental segment, given the new US administration's deregulation focus? A: Bob Pragada expressed confidence in continued growth due to urbanization, aging infrastructure, and climate effects. Some deregulation is accelerating projects, and the company has visibility into growth through 2026, supported by large project executions.

Q: Can you elaborate on the expected ramp-up in advanced manufacturing projects in the second half of the year? A: Bob Pragada noted that while advanced manufacturing is currently flat, the pipeline is strong, particularly in data centers and industrial manufacturing. The company expects growth to improve as reshoring efforts in the US gain momentum.

Q: What is the outlook for PA Consulting's revenue growth, and where is it expected to come from? A: Bob Pragada mentioned that revenue growth is expected as UK government procurements finalize. The US segment is seeing strong double-digit growth, and overall, the business is positive with increased utilization and margin expansion.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.