Mike Dudas

Mike Dudas asked about the reality of market demand on the load factor side for utilities, distinguishing between hype and genuine demand, and identifying any increasing or decreasing hurdles to execution, such as regulatory issues.

Answer

Duke Austin, President and CEO, acknowledged some market hype but stated that even a 50% discounted demand still represents a doubling of the world's largest infrastructure project. He sees no demand slowdown, with visibility extending to 2032. He emphasized the need for all forms of generation and the substantial growth of the energy business, while also addressing political rhetoric and the industry's efforts to ensure affordability for ratepayers.

Mike Dudas asked about the reality of market demand on the load factor side, distinguishing between hype and actual market conditions, and whether hurdles like regulatory issues are becoming more or less significant for executing customer plans.

Answer

Duke Austin, President and CEO, acknowledged some market hype but stated that even with a 50% discount, the demand still represents a doubling of the world's largest infrastructure project, with no slowdown in sight, looking out to 2032. He emphasized the need for all forms of generation and commended utilities for managing political rhetoric while rapidly advancing projects. He noted that utilities are doing a great job ensuring technology customers pay their way, countering some negative social media narratives.

Mike Dudas asked if customers are increasingly securing Quanta's time and resources, potentially leading to better scale and margins, and expressed concern about how the industry will fund all the new capacity given rising rates.

Answer

President and CEO Duke Austin acknowledged affordability concerns related to fuel and interest rates. He stated that transmission lines are typically NPV positive, and generation projects can benefit ratepayers. He noted that technology companies are willing to pay, and utilities and tech are collaborating for ratepayer benefit.

Mike Dudas asked if customers are increasingly securing Quanta Services' time and resources due to high demand and tight capacity, potentially leading to better scale, execution, and margins. He also raised concerns about the industry's ability to fund all the new capacity amidst rising rates and affordability issues.

Answer

President and CEO Duke Austin acknowledged affordability as an ongoing issue, influenced by fuel and interest rates. He noted that large transmission projects are typically NPV positive and that models like the NiSource example demonstrate ratepayer benefits from new load. He emphasized that technology companies are willing to pay, and utilities and technology are converging to benefit ratepayers, while remaining cognizant of affordability.

Mike Dudas from Vertical Research Partners asked for an update on Jacobs' investor day pipeline outlooks by segment and geography, identifying key areas to monitor for bookings progress and the expected conversion speed to drive the FY26 revenue numbers. He also inquired about the cadence of free cash flow and share repurchases through FY26, and how cash allocation would balance debt relief with a potential increase in the PA Consulting stake.

Answer

Chair and CEO Bob Pragada highlighted fastest-growing pipelines in data centers (up 5x), US semiconductors (up 20%), life sciences (up 50%), and water (up 50%), expecting rapid conversion in FY26 and early FY27. Geographically, the Middle East shows strong growth with major prospects. CFO Venk Nathamuni reiterated a linear progression for margins through FY26, with Q4 benefiting from an extra week. He stated that with a net leverage ratio of 0.8x, Jacobs maintains optionality for PA Consulting, commits to regular stock repurchases (at least 60% of free cash flow), and will not match the 150% repurchase level of FY25.

Mike Dudas asked for an update on the pipeline outlook, specifically which areas to monitor for bookings progress and the conversion speed that might drive the higher end of the fiscal 2026 revenue range. He also inquired about the cadence of free cash flow and share repurchases through fiscal 2026, including cash allocation and debt relief targets.

Answer

Chair and CEO Bob Pragada identified data centers (pipeline up 5x), U.S. semiconductor (up 20%), U.S. life sciences (up 50%), and global water (up 50%) as the fastest-growing pipelines with the quickest conversion in FY2026 and early FY2027. Geographically, the Middle East is a key growth driver. CFO Venk Nathamuni reiterated a linear progression for margins, with Q1 being the slowest. He stated that with a net leverage ratio of 0.8x, Jacobs maintains optionality for a potential increase in its PA Consulting stake and is committed to returning at least 60% of free cash flow through regular share repurchases and dividends, though not at the 150% level of the previous year.

Mike Dudas asked about Martin Marietta's CapEx trending for 2026, how automation investments align with spending comments, and any meaningful changes to the balance sheet post-Quikrete transaction.

Answer

SVP and CFO Michael Petro explained that 2026 CapEx is expected to return to more normalized levels (roughly 25% of EBITDA or modestly below), following two years of elevated spending due to opportunistic land purchases and an acquisition treated as CapEx. He assured that this reduction does not harm the business and could be flexed further. Michael Petro also stated that the Quikrete transaction is expected to be balance sheet neutral, with no significant change in leverage.

Mike Dudas asked about the CapEx trending for 2026, specifically regarding normalized levels and automation investments, and any meaningful changes to the balance sheet post-Quikrete transaction.

Answer

Michael Petro, SVP and CFO, stated that 2026 CapEx will return to normalized levels, approximately 25% of EBITDA, following two elevated years due to opportunistic land purchases and an acquisition. He confirmed no fundamental change in investment strategy and that the Quikrete transaction is balance sheet neutral, with no significant change in leverage.