UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

☒    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2023

☐    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from              to             

Commission File Number 1-7463

JACOBS SOLUTIONS INC.

(Exact name of registrant as specified in its charter)

Delaware				88-1121891
(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification Number)
1999 Bryan Street	Suite 3500	Dallas	Texas	75201
(Address of principal executive offices)				(Zip Code)

(214) 583 – 8500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

_________________________________________________________________

Title of Each Class		Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock	$1 par value	J	New York Stock Exchange

Indicate by check-mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days:     ☒ Yes    ☐  No

Indicate by check-mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    ☒  Yes    ☐  No

Page 1

Indicate by check-mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check-mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐  Yes   ☒  No

Number of shares of common stock outstanding at April 28, 2023: 126,850,000

Page 2

JACOBS SOLUTIONS INC.

INDEX TO FORM 10-Q

			Page No.
PART I	FINANCIAL INFORMATION
	Item 1.	Financial Statements	4
		Consolidated Balance Sheets - Unaudited	5
		Consolidated Statements of Earnings - Unaudited	6
		Consolidated Statements of Comprehensive Income - Unaudited	7
		Consolidated Statements of Stockholders’ Equity - Unaudited	8
		Consolidated Statements of Cash Flows - Unaudited	11
		Notes to Consolidated Financial Statements - Unaudited	12
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	51
	Item 4.	Controls and Procedures	56
PART II	OTHER INFORMATION
	Item 1.	Legal Proceedings	53
	Item 1A.	Risk Factors	53
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	54
	Item 3.	Defaults Upon Senior Securities	54
	Item 4.	Mine Safety Disclosures	54
	Item 5.	Other Information	54
	Item 6.	Exhibits	55
		SIGNATURES	57

Page 3

Part I - FINANCIAL INFORMATION

Item 1.    Financial Statements.

Page 4

JACOBS SOLUTIONS INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share information)

	March 31, 2023		September 30, 2022
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	1,223,331	$	1,140,479
Receivables and contract assets	3,518,728		3,405,381
Prepaid expenses and other	165,822		176,134
Total current assets	4,907,881		4,721,994
Property, Equipment and Improvements, net	367,217		346,676
Other Noncurrent Assets:
Goodwill	7,365,872		7,184,658
Intangibles, net	1,379,879		1,394,052
Deferred income tax assets	30,617		31,480
Operating lease right-of-use assets	446,589		476,913
Miscellaneous	504,576		504,646
Total other noncurrent assets	9,727,533		9,591,749
	$	15,002,631	$	14,660,419
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Current maturities of long-term debt	$	51,735	$	50,415
Accounts payable	967,832		966,792
Accrued liabilities	1,316,415		1,441,762
Operating lease liability	152,390		150,171
Contract liabilities	723,054		641,705
Total current liabilities	3,211,426		3,250,845
Long-term Debt	3,402,471		3,357,256
Liabilities relating to defined benefit pension and retirement plans	285,648		271,332
Deferred income tax liabilities	302,046		269,077
Long-term operating lease liability	586,805		607,447
Other deferred liabilities	120,204		167,548
Commitments and Contingencies
Redeemable Noncontrolling interests	666,007		632,522
Stockholders’ Equity:
Capital stock:
Preferred stock, $1 par value, authorized - 1,000,000 shares; issued and outstanding - none	—		—
Common stock, $1 par value, authorized - 240,000,000 shares; issued and outstanding - 126,805,092 shares and 127,393,378 shares as of March 31, 2023 and September 30, 2022, respectively	126,805		127,393
Additional paid-in capital	2,697,523		2,682,009
Retained earnings	4,393,351		4,225,784
Accumulated other comprehensive loss	(838,042)		(975,130)
Total Jacobs stockholders’ equity	6,379,637		6,060,056
Noncontrolling interests	48,387		44,336
Total Group stockholders’ equity	6,428,024		6,104,392
	$	15,002,631	$	14,660,419

See the accompanying Notes to Consolidated Financial Statements – Unaudited.

Page 5

JACOBS SOLUTIONS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF EARNINGS

Three and Six Months Ended March 31, 2023 and April 1, 2022

(In thousands, except per share information)

(Unaudited)

	For the Three Months Ended				For the Six Months Ended
	March 31, 2023		April 1, 2022		March 31, 2023		April 1, 2022
Revenues	$	4,078,332	$	3,834,059	$	7,877,001	$	7,214,684
Direct cost of contracts	(3,188,038)		(2,963,649)		(6,171,994)		(5,547,800)
Gross profit	890,294		870,410		1,705,007		1,666,884
Selling, general and administrative expenses	(600,431)		(704,195)		(1,177,339)		(1,323,336)
Operating Profit	289,863		166,215		527,668		343,548
Other Income (Expense):
Interest income	7,630		381		10,637		1,882
Interest expense	(40,613)		(21,995)		(80,690)		(41,421)
Miscellaneous (expense) income, net	(4,567)		10,681		(7,820)		20,362
Total other expense, net	(37,550)		(10,933)		(77,873)		(19,177)
Earnings from Continuing Operations Before Taxes	252,313		155,282		449,795		324,371
Income Tax Expense from Continuing Operations	(19,060)		(46,166)		(69,163)		(62,054)
Net Earnings of the Group from Continuing Operations	233,253		109,116		380,632		262,317
Net Loss of the Group from Discontinued Operations	(75)		(1)		(783)		(233)
Net Earnings of the Group	233,178		109,115		379,849		262,084
Net Earnings Attributable to Noncontrolling Interests from Continuing Operations	(7,803)		(10,261)		(14,834)		(19,514)
Net Earnings Attributable to Redeemable Noncontrolling interests	(8,863)		(10,038)		(12,855)		(19,721)
Net Earnings Attributable to Jacobs from Continuing Operations	216,587		88,817		352,943		223,082
Net Earnings Attributable to Jacobs	$	216,512	$	88,816	$	352,160	$	222,849
Net Earnings Per Share:
Basic Net Earnings from Continuing Operations Per Share	$	1.71	$	0.69	$	2.78	$	1.72
Basic Net Loss from Discontinued Operations Per Share	$	—	$	—	$	(0.01)	$	—
Basic Earnings Per Share	$	1.71	$	0.69	$	2.78	$	1.72
Diluted Net Earnings from Continuing Operations Per Share	$	1.70	$	0.68	$	2.77	$	1.71
Diluted Net Loss from Discontinued Operations Per Share	$	—	$	—	$	(0.01)	$	—
Diluted Earnings Per Share	$	1.70	$	0.68	$	2.76	$	1.71

See the accompanying Notes to Consolidated Financial Statements - Unaudited.

Page 6

JACOBS SOLUTIONS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three and Six Months Ended March 31, 2023 and April 1, 2022

(In thousands)

(Unaudited)

	For the Three Months Ended				For the Six Months Ended
	March 31, 2023		April 1, 2022		March 31, 2023		April 1, 2022
Net Earnings of the Group	$	233,178	$	109,115	$	379,849	$	262,084
Other Comprehensive Income:
Foreign currency translation adjustment	21,951		(45,827)		187,285		(54,512)
Change in cash flow hedges	(19,811)		46,491		(29,955)		55,346
Change in pension and retiree medical plan liabilities	6		12,036		(22,259)		20,075
Other comprehensive income before taxes	2,146		12,700		135,071		20,909
Income Tax Benefit (Expense):
Foreign currency translation adjustment	968		(400)		(5,641)		2,590
Cash flow hedges	5,047		(12,290)		8,317		(15,235)
Change in pension and retiree medical plan liabilities	(351)		(728)		(659)		(2,196)
Income Tax Benefit (Expense):	5,664		(13,418)		2,017		(14,841)
Net other comprehensive income (loss)	7,810		(718)		137,088		6,068
Net Comprehensive Income of the Group	240,988		108,397		516,937		268,152
Net Earnings Attributable to Noncontrolling Interests	(7,803)		(10,261)		(14,834)		(19,514)
Net Earnings Attributable to Redeemable Noncontrolling interests	(8,863)		(10,038)		(12,855)		(19,721)
Net Comprehensive Income Attributable to Jacobs	$	224,322	$	88,098	$	489,248	$	228,917

See the accompanying Notes to Consolidated Financial Statements - Unaudited.

Page 7

JACOBS SOLUTIONS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Three Months Ended March 31, 2023 and April 1, 2022

(In thousands)

(Unaudited)

	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Jacobs Stockholders’ Equity		Noncontrolling Interests		Total Group Stockholders’ Equity
Balances at December 31, 2021	$	129,153	$	2,641,059	$	4,087,390	$	(787,656)	$	6,069,946	$	29,999	$	6,099,945
Net earnings	—		—		88,816		—		88,816		10,261		99,077
Foreign currency translation adjustments, net of deferred taxes of $400	—		—		—		(46,227)		(46,227)		—		(46,227)
Pension liability, net of deferred taxes of $728	—		—		—		11,308		11,308		—		11,308
Change in cash flow hedges, net of deferred taxes of $12,290	—		—		—		34,201		34,201		—		34,201
Dividends	—		—		(29,871)		—		(29,871)		—		(29,871)
Redeemable Noncontrolling interests redemption value adjustment	—		—		(35,117)		—		(35,117)		—		(35,117)
Noncontrolling interests - distributions and other	—		—		—		—		—		4,272		4,272
Stock based compensation	—		18,147		—		—		18,147		—		18,147
Issuances of equity securities including shares withheld for taxes	142		16,134		(33)		—		16,243		—		16,243
Repurchases of equity securities	(395)		(8,084)		(41,521)		—		(50,000)		—		(50,000)
Balances at April 1, 2022	$	128,900	$	2,667,256	$	4,069,664	$	(788,374)	$	6,077,446	$	44,532	$	6,121,978
Balances at December 30, 2022	$	126,669	$	2,672,421	$	4,230,866	$	(845,852)	$	6,184,104	$	49,494	$	6,233,598
Net earnings	—		—		216,512		—		216,512		7,803		224,315
Foreign currency translation adjustments, net of deferred taxes of $(968)	—		—		—		22,919		22,919		—		22,919
Pension liability, net of deferred taxes of $351	—		—		—		(345)		(345)		—		(345)
Change in cash flow hedges, net of deferred taxes of $(5,047)	—		—		—		(14,764)		(14,764)		—		(14,764)
Dividends	—		—		(32,564)		—		(32,564)		—		(32,564)
Redeemable Noncontrolling interests redemption value adjustment	—		—		(21,177)		—		(21,177)		—		(21,177)
Noncontrolling interests - distributions and other	—		—		—		—		—		(8,910)		(8,910)
Stock based compensation	—		15,054		—		—		15,054		—		15,054
Issuances of equity securities including shares withheld for taxes	136		10,048		(286)		—		9,898		—		9,898
Balances at March 31, 2023	$	126,805	$	2,697,523	$	4,393,351	$	(838,042)	$	6,379,637	$	48,387	$	6,428,024

See the accompanying Notes to Consolidated Financial Statements – Unaudited.

Page 8

JACOBS SOLUTIONS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

For the Six Months Ended March 31, 2023 and April 1, 2022

(In thousands)

Page 9

(Unaudited)

	Common Stock		Additional Paid-in Capital		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total Jacobs Stockholders’ Equity		Noncontrolling Interests		Total Group Stockholders’ Equity
Balances at October 1, 2021	$	128,893	$	2,590,012	$	4,015,578	$	(794,442)	$	5,940,041	$	34,796	$	5,974,837
Net earnings	—		—		222,849		—		222,849		19,514		242,363
Foreign currency translation adjustments, net of deferred taxes of $(2,590)	—		—		—		(51,922)		(51,922)		—		(51,922)
Pension liability, net of deferred taxes of $2,196	—		—		—		17,879		17,879		—		17,879
Change in cash flow hedges, net of deferred taxes of $15,235	—		—		—		40,111		40,111		—		40,111
Dividends	—		—		(29,994)		—		(29,994)				(29,994)
Redeemable Noncontrolling interests redemption value adjustment to Common Shareholders	—		—		(50,320)		—		(50,320)		—		(50,320)
Repurchase of redeemable noncontrolling interests	—		—		7,761		—		7,761		—		7,761
Noncontrolling interests - distributions and other	—		—		—		—		—		(9,778)		(9,778)
Stock based compensation	—		25,161		—		—		25,161		—		25,161
Issuances of equity securities including shares withheld for taxes	744		17,040		(11,904)		—		5,880		—		5,880
Repurchases of equity securities	(737)		35,043		(84,306)		—		(50,000)		—		(50,000)
Balances at April 1, 2022	$	128,900	$	2,667,256	$	4,069,664	$	(788,374)	$	6,077,446	$	44,532	$	6,121,978
Balances at September 30, 2022	$	127,393	$	2,682,009	$	4,225,784	$	(975,130)	$	6,060,056	$	44,336	$	6,104,392
Net earnings	—		—		352,160		—		352,160		14,834		366,994
Foreign currency translation adjustments, net of deferred taxes of $5,641	—		—		—		181,644		181,644		—		181,644
Pension liability, net of deferred taxes of $659	—		—		—		(22,918)		(22,918)		—		(22,918)
Change in cash flow hedges, net of deferred taxes of $(8,317)	—		—		—		(21,638)		(21,638)		—		(21,638)
Dividends	—		—		(33,438)		—		(33,438)		—		(33,438)
Redeemable Noncontrolling interests redemption value adjustment	—		—		(44,494)		—		(44,494)		—		(44,494)
Repurchase and issuance of redeemable noncontrolling interests	—		—		11,337		—		11,337		—		11,337
Noncontrolling interests - distributions and other	—		—		—		—		—		(10,783)		(10,783)
Stock based compensation	—		35,285		—		—		35,285		—		35,285
Issuances of equity securities including shares withheld for taxes	650		6,286		(4,771)		—		2,165		—		2,165
Repurchases of equity securities	(1,238)		(26,057)		(113,227)		—		(140,522)		—		(140,522)
Balances at March 31, 2023	$	126,805	$	2,697,523	$	4,393,351	$	(838,042)	$	6,379,637	$	48,387	$	6,428,024

See the accompanying Notes to Consolidated Financial Statements – Unaudited.

Page 10

JACOBS SOLUTIONS INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended March 31, 2023 and April 1, 2022

(In thousands)

(Unaudited)

	For the Six Months Ended
	March 31, 2023		April 1, 2022
Cash Flows from Operating Activities:
Net earnings attributable to the Group	$	379,849	$	262,084
Adjustments to reconcile net earnings to net cash flows provided by operations:
Depreciation and amortization:
Property, equipment and improvements	55,686		52,620
Intangible assets	100,247		95,338
Stock based compensation	35,285		25,161
Equity in earnings of operating ventures, net of return on capital distributions	(2,931)		13,280
Loss on disposals of assets, net	828		421
Impairment of long-lived assets and equity method investment	37,217		74,585
Deferred income taxes	20,785		16,040
Changes in assets and liabilities, excluding the effects of businesses acquired:
Receivables and contract assets, net of contract liabilities	63,229		(33,881)
Prepaid expenses and other current assets	(9,940)		15,916
Miscellaneous other assets	43,472		67,201
Accounts payable	(15,109)		18,448
Accrued liabilities	(228,857)		(119,982)
Other deferred liabilities	(53,896)		(33,305)
Other, net	8,474		(7,670)
Net cash provided by operating activities	434,339		446,256
Cash Flows from Investing Activities:
Additions to property and equipment	(67,389)		(48,223)
Disposals of property and equipment and other assets	15		1,064
Capital contributions to equity investees, net of return of capital distributions	8,384		1,082
Acquisitions of businesses, net of cash acquired	(17,685)		(412,748)
Net cash used for investing activities	(76,675)		(458,825)
Cash Flows from Financing Activities:
Proceeds from long-term borrowings	2,075,495		1,519,000
Repayments of long-term borrowings	(2,129,338)		(1,125,528)
Repayments of short-term borrowings	—		(6,359)
Debt issuance costs	(11,388)		—
Proceeds from issuances of common stock	25,374		28,187
Common stock repurchases	(140,522)		(50,000)
Taxes paid on vested restricted stock	(23,209)		(28,398)
Cash dividends to shareholders	(62,788)		(57,247)
Net dividends associated with noncontrolling interests	(11,283)		(9,416)
Repurchase of redeemable noncontrolling interests	(58,353)		(35,095)
Net cash (used for) provided by financing activities	(336,012)		235,144
Effect of Exchange Rate Changes	49,761		(12,792)
Net Increase in Cash and Cash Equivalents and Restricted Cash	71,413		209,783
Cash and Cash Equivalents, including Restricted Cash, at the Beginning of the Period	1,154,207		1,026,575
Cash and Cash Equivalents, including Restricted Cash, at the End of the Period	$	1,225,620	$	1,236,358

See the accompanying Notes to Consolidated Financial Statements – Unaudited.

Page 11

JACOBS SOLUTIONS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.Basis of Presentation

Unless the context otherwise requires:

•References herein to “Jacobs” are to Jacobs Solutions Inc. and its predecessors;

•References herein to the “Company”, “we”, “us” or “our” are to Jacobs Solutions Inc. and its consolidated subsidiaries; and

•References herein to the “Group” are to the combined economic interests and activities of the Company and the persons and entities holding noncontrolling interests in our consolidated subsidiaries.

On August 29, 2022, Jacobs Engineering Group Inc. ("JEGI"), the predecessor to Jacobs Solutions Inc., implemented a holding company structure, which resulted in Jacobs Solutions Inc. becoming the parent company of, and successor issuer to, JEGI (the "Holding Company Reorganization"). For purposes of this Quarterly Report, references to the "Company", "we", "us" or "our" or our management or business at any point prior to August 29, 2022 (the "Holding Company Implementation Date") refer to JEGI and its consolidated subsidiaries as the predecessor to Jacobs Solutions Inc.

The accompanying consolidated financial statements and financial information included herein have been prepared pursuant to the interim period reporting requirements of Form 10-Q. Consequently, certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) have been condensed or omitted. Readers of this Quarterly Report on Form 10-Q should also read our consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the fiscal year ended September 30, 2022 (“2022 Form 10-K”).

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of our consolidated financial statements at March 31, 2023, and for the three and six months ended March 31, 2023.

Our interim results of operations are not necessarily indicative of the results to be expected for the full fiscal year.

As part of the new Company strategy, during the first quarter of fiscal year 2023, Jacobs formed a reporting and operating segment, Divergent Solutions ("DVS"), to further strengthen our ability to drive value for our clients. DVS supports both lines of business as the core foundation for developing and delivering innovative, next-generation cloud, cyber, data and digital technologies. For a further discussion of our segment information, please refer to Note 18- Segment Information.

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 $190.8 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. The Company has recorded its final purchase price allocation associated with the acquisition, which is summarized in Note 15- Other Business Combinations.

On November 19, 2021, Jacobs acquired all outstanding shares of common stock of BlackLynx, Inc. ("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. The Company has recorded its final purchase price allocation associated with the acquisition, which is summarized in Note 15- Other Business Combinations.

On March 2, 2021, Jacobs completed the strategic investment of a 65% interest in PA Consulting Group Limited ("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, proceeds from a new term loan and draws on the Company's existing revolving credit facility. The remaining 35% interest was acquired by PA Consulting employees, whose redeemable noncontrolling interests had a fair value of $582.4 million on the closing date, including subsequent purchase accounting

Page 12

JACOBS SOLUTIONS INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

adjustments. PA Consulting is accounted for as a consolidated subsidiary and as a separate operating segment. See Note 14- PA Consulting Business Combination for more discussion on the investment and Note 11- Borrowings for more discussion on the financing for the transaction.

On April 26, 2019, Jacobs completed the sale of its Energy, Chemicals and Resources ("ECR") business to Worley Limited ("Worley"), a company incorporated in Australia, for a purchase price of $3.4 billion consisting of (i) $2.8 billion in cash plus (ii) 58.2 million ordinary shares of Worley, subject to adjustments for changes in working capital and certain other items (the “ECR sale”). As a result of the ECR sale, substantially all ECR-related assets and liabilities were sold (the "Disposal Group"). We determined that the Disposal Group should be reported as discontinued operations in accordance with ASC 210-05, Discontinued Operations because their disposal represents a strategic shift that had a major effect on our operations and financial results. As such, the financial results of the ECR business are reflected in our unaudited Consolidated Statements of Earnings as discontinued operations for all periods presented and all of the ECR business to be sold under the terms of the ECR sale had been conveyed to Worley and as such, no amounts remain held for sale.

2.    Use of Estimates and Assumptions

The preparation of financial statements in conformity with U.S. GAAP requires us to employ estimates and make assumptions that affect the reported amounts of certain assets and liabilities, the revenues and expenses reported for the periods covered by the accompanying consolidated financial statements, and certain amounts disclosed in these Notes to the Consolidated Financial Statements. Although such estimates and assumptions are believed to be reasonable under the circumstances and are based on management’s most recent assessment of the underlying facts and circumstances utilizing the most current information available and past experience, actual results could differ significantly from those estimates and assumptions. Our estimates, judgments, and assumptions are evaluated periodically and adjusted accordingly.

Please refer to Note 2- Significant Accounting Policies of Notes to Consolidated Financial Statements included in our 2022 Form 10-K for a discussion of other significant estimates and assumptions affecting our consolidated financial statements.

3.    Fair Value and Fair Value Measurements

Certain amounts included in the accompanying consolidated financial statements are presented at fair value. Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants as of the date fair value is determined (the “measurement date”). When determining fair value, we consider the principal or most advantageous market in which we would transact, and we consider only those assumptions we believe a typical market participant would consider when pricing an asset or liability. In measuring fair value, we use the following inputs in the order of priority indicated:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than quoted prices in active markets included in Level 1, such as (i) quoted prices for similar assets or liabilities; (ii) quoted prices in markets that have insufficient volume or infrequent transactions (e.g., less active markets); and (iii) model-driven valuations in which all significant inputs are observable or can be derived principally from, or corroborated with, observable market data for substantially the full term of the asset or liability.

Level 3 - Unobservable inputs to the valuation methodology that are significant to the fair value measurement.

Please refer to Note 2- Significant Accounting Policies of Notes to Consolidated Financial Statements included in our 2022 Form 10-K for a more complete discussion of the various items within the consolidated financial statements measured at fair value and the methods used to determine fair value. Please also refer to Note 17- Commitments and Contingencies and Derivative Financial Instruments for discussion regarding the Company's derivative instruments.

The net carrying amounts of cash and cash equivalents, trade receivables and payables and short-term debt approximate fair value due to the short-term nature of these instruments. See Note 11- Borrowings for a discussion of the fair value of long-term debt.

Fair value measurements relating to our business combinations and goodwill allocations related to our segment realignment are made primarily using Level 3 inputs including discounted cash flow techniques. Fair value for the identified intangible assets is generally estimated using inputs primarily for the income approach using the multiple period excess earnings method and the relief from royalties method. The significant assumptions used in estimating fair value

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include (i) revenue projections of the business, including profitability, (ii) attrition rates and (iii) the estimated discount rate that reflects the level of risk associated with receiving future cash flows. Other personal property assets, such as furniture, fixtures and equipment, are valued using the cost approach, which is based on replacement or reproduction costs of the asset less depreciation. The fair value of the contingent consideration is estimated using a Monte Carlo simulation and the significant assumptions used include projections of revenues and probabilities of meeting those projections. Key inputs to the valuation of the noncontrolling interests include projected cash flows and the expected volatility associated with those cash flows.

4.    Revenue Accounting for Contracts

Disaggregation of Revenues

Our revenues are principally derived from contracts to provide a diverse range of technical, professional, and construction services to a large number of industrial, commercial, and governmental clients. We provide a broad range of engineering, design, and architectural services; construction and construction management services; operations and maintenance services; and technical, digital, process, scientific and systems consulting services. We provide our services through offices and subsidiaries located primarily in North America, Europe, the Middle East, India, Australia, Africa, and Asia. We provide our services under cost-reimbursable and fixed-price contracts. Our contracts are with many different customers in numerous industries. Refer to Note 18- Segment Information for additional information on how we disaggregate our revenues by reportable segment.

The following table further disaggregates our revenue by geographic area for the three and six months ended March 31, 2023 and April 1, 2022 (in thousands):

	Three Months Ended				Six Months Ended
	March 31, 2023		April 1, 2022		March 31, 2023		April 1, 2022
Revenues:
United States	$	2,694,735	$	2,499,737	$	5,231,013	$	4,648,289
Europe	931,093		937,864		1,785,666		1,804,216
Canada	61,887		67,152		123,716		132,192
Asia	35,641		36,533		70,463		68,620
India	46,829		28,844		87,173		50,992
Australia and New Zealand	170,069		181,650		331,109		359,302
Middle East and Africa	138,078		82,279		247,861		151,073
Total	$	4,078,332	$	3,834,059	$	7,877,001	$	7,214,684

Contract Liabilities

Contract liabilities represent amounts billed to clients in excess of revenue recognized to date. Revenue recognized for the three and six months ended March 31, 2023 that was previously included in the contract liability balance on September 30, 2022 was $82.7 million and $413.0 million, respectively. Revenue recognized for the three and six months ended April 1, 2022 that was included in the contract liability balance on October 1, 2021 was $79.6 million and $371.0 million, respectively.

Remaining Performance Obligation

The Company’s remaining performance obligations as of March 31, 2023 represent a measure of the total dollar value of work to be performed on contracts awarded and in progress. The Company had approximately $16.7 billion in remaining performance obligations as of March 31, 2023. The Company expects to recognize approximately 48% of our remaining performance obligations into revenue within the next twelve months and the remaining 52% thereafter.

Although remaining performance obligations reflect business that is considered to be firm, cancellations, scope adjustments or deferrals may occur that impact their volume or the expected timing of their recognition. Remaining performance obligations are adjusted to reflect any known project cancellations, revisions to project scope and cost, foreign currency exchange fluctuations and project deferrals, as appropriate.

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5.     Earnings Per Share and Certain Related Information

Basic and diluted earnings per share (“EPS”) are computed using the two-class method, which is an earnings allocation method that determines EPS for common shares and participating securities. The undistributed earnings are allocated between common shares and participating securities as if all earnings had been distributed during the period. Participating securities and common shares have equal rights to undistributed earnings. Net earnings used for the purpose of determining basic and diluted EPS is determined by taking net earnings less earnings available to participating securities.

The following table reconciles the denominator used to compute basic EPS to the denominator used to compute diluted EPS for the three and six months ended March 31, 2023 and April 1, 2022 (in thousands):

	Three Months Ended				Six Months Ended
	March 31, 2023		April 1, 2022		March 31, 2023		April 1, 2022
Numerator for Basic and Diluted EPS:
Net earnings from continuing operations allocated to common stock for EPS calculation	$	216,587	$	88,817	$	352,943	$	223,082
Net loss from discontinued operations allocated to common stock for EPS calculation	$	(75)	$	(1)	$	(783)	$	(233)
Net earnings allocated to common stock for EPS calculation	$	216,512	$	88,816	$	352,160	$	222,849
Denominator for Basic and Diluted EPS:
Shares used for calculating basic EPS attributable to common stock	126,886		129,333		126,855		129,337
Effect of dilutive securities:
Stock compensation plans