Good day, and thank you for standing by. Welcome to the Jacobs Fiscal Fourth Quarter 2021 Earnings Conference Call and Webcast. At this time, all participants are in listen-only mode. Please be advised that today's conference is being recorded. If you require further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Mr. Jonathan Doros of Investor Relations. Thank you. Please go ahead.
Thank you. Good morning to all. Our earnings announcement and 10-K were filed this morning. We have posted a copy of this live presentation on our website, which we will reference during the call. During this presentation, we'll be making forward-looking statements, including the anticipated timing of the impact of the recently signed U.S. infrastructure bill, benefits of our strategic investment in PA Consulting, and our financial outlook, among others. I would like to refer you to our forward-looking statement disclaimer, which is included on slide 2, regarding these and other forward-looking statements. During this presentation, we will be referring to certain non-GAAP financial measures. Please refer to slide 2 of the presentation for more information on these figures. In addition, during the presentation, we will discuss comparisons of current results to prior periods on a pro forma basis.
See slide 2 for more information on the calculation of these pro forma metrics. For pro forma comparisons, current and prior periods include the results of recent acquisitions in the PA Consulting investment. We are also providing pro forma net revenue comparisons, which also exclude the impact of the extra week in Q4 of fiscal 2020. Turning to the agenda on slide 3. Speaking on today's call will be Jacobs Chair and CEO, Steve Demetriou, President and Chief Operating Officer, Bob Pragada, and President and Chief Financial Officer, Kevin Berryman. Steve will begin by updating the progress we're making against our strategy and the future of ESG at Jacobs.
Bob will then review our performance by line of business, and Kevin will provide a more in-depth discussion of our financial results, followed by an update on our Focus 2023 and M&A initiatives, as well as a review of our balance sheet and cash flow. Finally, Steve will provide the detail on our updated outlook along with some closing remarks, and then we'll open the call up for your questions. In the appendix of this presentation, we provided additional ESG-related information, including examples of our leading ESG solutions. With that, I will now pass it over to Steve Demetriou, Chair and CEO.
Thank you for joining us today to discuss our fourth quarter and fiscal year 2021 business performance and key initiatives. Turning to slide 4. Before I review our results, I'd like to share that we're in the final stages of completing our new strategy. We will be hosting an investor event the week of March seventh for a deep dive of the next phase of our Jacobs transformation. Three key initiatives have emerged. First, we're putting in place a purpose-driven roadmap rooted in our values and strong culture to maximize our next stage of growth. Secondly, we identified and have aligned investment resources to capture three multi-decade growth opportunities, global infrastructure modernization, climate response, and the digitization of industry.
Third, we're taking a transformational approach to executing against these opportunities as we are unlocking the innovation engine at Jacobs, expanding our technology ecosystem while accelerating our trajectory of profitable growth and durable cash flow generation. We look forward to illuminating this strategy at our upcoming investor event. Now turning to our financial results. I'm pleased with our strong fourth quarter and fiscal year performance, with net revenue increasing 7% year-over-year. Adjusted EBITDA grew 12% during the quarter and 18% for the full year. Backlog ended the fourth quarter up 12% year-over-year and up 7% on a pro forma basis. PA Consulting continued to post exceptional performance with 41% revenue growth. More importantly, PA delivered this growth while maintaining adjusted operating profit margins of 24%.
For the full year, PA revenue surpassed $1 billion, far exceeding our deal investment model. As we look at overall Jacobs growth going forward, we now have certainty surrounding the unprecedented U.S. infrastructure funding with the passage of the $1.2 trillion Infrastructure Investment and Jobs Act last week. More broadly, global infrastructure modernization and national security needs are accelerating as our government and commercial clients address the challenges of climate change, advancement of their digitization strategies, and increasing cyber threats. On top of that, our advanced facilities business is expected to show significant growth, driven by the need for additional semiconductor manufacturing capacity and post-pandemic life sciences priorities. Given these strong growth dynamics, we're introducing fiscal 2022 guidance for double-digit adjusted EBITDA growth.
Looking beyond 2022, we expect our strong organic growth to result in approximately $10 per share of adjusted EPS in fiscal year 2025. Turning to slide 5. As we reflect on climate change, it is globally accepted that humanity is at a critical juncture in our efforts to limit global warming. Jacobs and PA participated at the recent UN Climate Change Conference of the Parties, COP26, in Glasgow to demonstrate our commitment to reinvent tomorrow with immediate and sustained action in the transition to a net zero economy. We stood alongside other business, financial, and government leaders, as well as activists and students, to make sure our voice was heard.
We engaged in activities to accelerate solutions to ensure the world stays on track to meet the critical 1.5 degrees Celsius trajectory while preparing to adapt to the changes already locked in from climate change. As we moved to slide 6, given the nature of our business, it's clear that Jacobs' greatest opportunity to positively address climate change comes from the sustainable and resilient solutions that we co-create and deliver in partnership with our clients. To spearhead this effort, we have established a new office of global climate response and ESG to ensure that sustainability is woven into all of our solutions across markets and geographies. We are accelerating our established partnerships with the public and private sector to advance net zero carbon outcomes, climate resilience, natural and social capital, as well as ESG business transformation in alignment with the United Nations Sustainable Development Goals.
Annually, we generate approximately $5 billion of ESG-related revenue and expect to grow significantly over the next several years, driven by strong capability in energy transition, decarbonization, climate adaptation, and natural resource stewardship. Our culture is a competitive differentiator. Our people have the knowledge, curiosity, and the trust of our clients to achieve our purpose to create a more connected, sustainable world. With that, I'll turn the call over to Bob Pragada to provide more detail by line of business.
Thank you, Steve. Moving on to slide seven, to review critical mission solutions. During the fourth quarter, our CMS business continued its strong performance. Total CMS backlog increased 16% year-over-year, 7% on a pro forma basis to $10.6 billion, driven by a strategic new wins in cyber and intel, and nuclear and remediation. Our CMS strategy is focused on creating recurring revenue growth and margin expansion by offering technology-enabled solutions aligned to critical national priorities. Three market trends that we see offering continued strong growth include cyber, commercial space, and 5G technology for national security. Beginning with cyber and intelligence, we are seeing several major emerging threats to national security. First, cyberattacks on mission-critical infrastructure, which are even more stealth and as destructive as a traditional attack.
Second, the speed and complexity of near peer threats, which requires real-time coordination between space and other domains as the severity of nation-state-sponsored attacks continues to increase. Third, the adoption of data-intensive AI-based applications are dramatically increasing the need for real-time data security and integrity. The funding for addressing these threats are partially reflected in unclassified federal government spending on cyber in FY 2022, which is expected to be over $20 billion, up 10% from prior year. Additionally, we expect the spending within classified budgets to be up higher. During the quarter, we were awarded a $300 million seven-year contract with the National Geospatial-Intelligence Agency to modernize the NGA's ability to rapidly gain and share insights from cross-domain imagery, including top-secret data classification.
Within the classified budget, we're awarded a $170 million five-year new contract to develop highly secure and hardened software applications that are leveraging the latest advances in AI and machine learning. We recently closed the BlackLynx acquisition, which provides software-enabled solutions for automating the collection of data at the edge and quickly gaining insights into extremely large volumes of structured and unstructured data. Our strong presence across the DOD and intelligence community, as well as our digital enablement center, will provide the escape velocity for BlackLynx to commercialize and scale their solutions, resulting in highly profitable recurring revenue. We also recently announced a strategic investment and distribution agreement with HawkEye 360, which will enhance our digital intelligence suite of technologies with their RF spectrum analytics and collection automation offering. Moving on to space.
With a significant amount of capital being infused into the commercial space companies, the affordability of space tourism is becoming a reality, as well as other emerging opportunities, such as acceleration of satellite-based technologies and the need to understand the impact of space debris. Today, we support commercial space companies with manufacturing process optimization, system and subsystem prototype work, and test facility studies and projects. As commercial space matures, we are positioning our solutions for these emerging opportunities. During the quarter, we were notified of a significant increase to the ceiling of our contract in Marshall Space Flight Center that also supports Artemis and SLS. The U.S. Space Force selected Jacobs for a five-year contract to provide software and system support for its Patriot Excalibur system, which coordinates the scheduling, training, and status of U.S. Space Force aircraft.
Finally, our telecom business has had a strong quarter, and we see the rollout of 5G investment from clients like AT&T, Verizon, DIRECTV, T-Mobile, and DISH Network accelerating in 2022 and beyond. In addition, the new bipartisan infrastructure bill includes $2.5 billion for 5G rollout at U.S. military bases, and the DOD is investing heavily in 5G technology in support of national priorities. In summary, we continue to see strong demand for our solutions in 2022. The CMS sales pipeline remains robust, with the next 18-month qualified new business opportunities remaining above $30 billion, which includes $10 billion in source selection with an increasing margin profile. Now on to slide 8, I'll discuss our People & Places Solutions business.
We finished the year with strong financial performance with a year-over-year backlog growth of 7% and annual net revenue growth. I'll discuss our results across the major themes of climate response, pandemic solutions, infrastructure modernization, and digitization. Starting with climate response. As the top-ranked global environmental consulting firm, Jacobs is leading the effort to mitigate the impacts of climate emergency, advance transition to a clean energy net zero economy and rapidly respond to natural disasters. This quarter, Jacobs was awarded a multi-year contract by the U.S. Army Engineer Research and Development Center to integrate nature-based solutions that grow climate resilience across Defense Department facilities. Jacobs has recently been selected to reimagine New York's Rikers Island, taking the site through a full community revitalization with an equitable, resilient, multi-use approach, incorporating our innovative social value analysis.
As the first phase in a 20-year program across the entire city, Jacobs' plan will consolidate four aging wastewater facilities into a state-of-the-art, one billion gallon per day water resource recovery facility that includes a renewable energy hub. In the transportation market, our specialists have pioneered advanced charging technology that enables clients to transition to decarbonized operations, a key focus of economic stimulus packages. Our transit team continues to win contracts that support clients with asset, operational, and technology shifts towards green fleets. For example, we recently won and commenced a hydrogen rail facility study with Caltrans, and our long-term work with Brisbane Metro continues to showcase cutting-edge green transit solutions. With exponential growth forecasted in the electric vehicle market, Jacobs has become the go-to firm to support leading EV battery and vehicle manufacturing companies globally.
We've doubled our EV book of business in the past year and are forecasting continued growth. We also announced a strategic partnership and investment in Microgrid Labs, a provider of commercial fleet electrification and infrastructure solutions, including their proprietary SaaS platform. The green economy transition is driving increased investments in hydrogen and renewables, and our team is delivering diverse solutions for a range of clients, from our participation in the Bacton Energy Hub consortium in the U.K. to energy transmission plans for a potential offshore wind development in the U.S., and additional contracts with Iberdrola's renewables Avonlie Solar Farm and the Swanbank waste energy facility in Australia. Moving on to the theme of pandemic response.
With ongoing impact to the supply chain, health systems, and semiconductor chip shortage, Jacobs is gaining momentum with multi-year backlog across sectors with new wins in biopharma, such as the next phase of a new $2 billion biotechnology facility. Jacobs has successfully won several health opportunities in the U.S., Europe, and Australia as they rethink pandemic response operations. The most significant aspect of the global supply chain disruption involves semiconductor shortages. As the world's leading technical services provider to the semiconductor industry, we are poised for significant growth in the electronic sector this year and expect our electronics business to further accelerate over the next several years. In fact, Jacobs is engineering several major investments for large chip manufacturers. Projects like Intel's new Arizona fab, which Jacobs is designing, are scheduled to be fully operational in 2024.
The new fab will manufacture Intel's most advanced process technologies and represents the largest private investment in Arizona's history. Interconnected with climate response, pandemic solutions, infrastructure modernization, and digital transformation are leading to long-term transformative growth with significant wins across all markets. Globally, we are continuing to win pioneering transportation projects across all sectors and modes. In highways, we were recently selected for Transport for New South Wales, along with consortium partners, to undertake the $1.2 billion Warringah Freeway upgrade project to accommodate a third road crossing Sydney Harbor. In ports and maritime, we won the sustainable ports design and program management for King Abdulaziz Port in Dammam, Saudi Arabia.
In air transportation, we were selected as the integrated program manager for the Solidarity Transport Hub in Poland, a greenfield airport and multimodal, including a high-speed rail network with an initial planned capacity of 45 million passengers. The program is of national significance. It will become the benchmark for zero carbon delivery and be a sustainable transportation platform for Eastern Europe's future travel demands. Our long-standing relationships and existing framework agreements supported major wins with U.S. State Departments of Transportation and Transport for London, emphasizing our market-leading position for solving our clients' most complex transportation challenges. In summary, we see continued investment across the P&PS client sectors.
We are already experiencing exciting global wins in the first quarter of our new fiscal year, indicating that we are well-positioned to develop and deliver unmatched value and capability to our clients as investment momentum builds from the U.S. Infrastructure Act and other economic stimulus. Turning to PA Consulting on slide 9. As Steve mentioned, PA continues to exceed expectations. Supported by an extension of consultative service to U.K.'s National Health Service, PA's efforts have extended into longer-term vaccine deployment, test and trace, and future pandemic preparedness planning. Additionally, PA growth is being accentuated by recent digital solution wins for confidential U.S. biopharmaceutical clients in the areas of cell and gene therapy and next-generation patient care modeling. We continue to progress our synergy growth and long-term collaboration.
The Jacobs PA team were recently awarded a biotechnology manufacturing plant expansion to provide an end-to-end life cycle solution incorporating critical digitized clinical trial information into the process design and facility layout. Additionally, we continue to receive joint strategic consultancy awards in the transportation sector globally. I look forward to our continued success with collaborative and integrated offerings to our customers. At COP26, PA displayed its deep ESG expertise and successfully unveiled its innovative EV battery charging technology, ChargePoint. Further, PA received industry recognition for their jointly developed COVID-19 awareness and situational intelligence tool with Unilever. The business exceeded talent expectations, talent expansion targets for the year, and is well-positioned for continued out-year growth. I will now turn it over to Kevin.
Thank you, Bob, and good day to all listening on the call today. Turning to slide 10 for a financial overview of fourth quarter results, followed by our fiscal year review. As we have previously communicated, our fiscal fourth quarter 2020 had 14 weeks compared to our normal 13-week quarters, which impacted our quarter year-over-year growth rate by 7% and our full year growth rate by 2%. Fourth quarter gross revenue increased 2% year-over-year and net revenue was up 7%, including the pro forma impact from all acquisitions and adjusting for the year-ago extra week, net revenue was up 6% for the quarter. Adjusted gross margin in the quarter as a percentage of net revenue was 27.2%, up 370 basis points year-over-year.
Consistent with last year, the year-over-year increase in gross margin was driven by a favorable revenue mix in both people and places, CMS, as well as the benefit from PA Consulting, which has a strong accretive gross margin profile of nearly 50%. We will continue to focus on increasing gross margins as we bring to market higher value solutions for our clients. Adjusted G&A as a percentage of net revenue was up year-over-year to 17%. Within G&A, during the quarter, we incurred an approximate $20 million or 12 cents per share charge to a legal settlement cost, which burdened both GAAP and our adjusted results. This charge was related to a CH2M legacy matter surrounding a previously completed product advisory arrangement. GAAP operating profit was $252 million and was mainly impacted by $46 million of amortization from acquired intangibles.
Adjusted operating profit was $303 million, up 17%. Our adjusted operating profit to net revenue was 10%, up 85 basis points year-over-year on a reported basis. GAAP EPS from continuing operations rounded to $0.34 per share and included $0.45 primarily related to the U.K. statutory tax rate changes and other tax-related items, $0.40 related to the final mark-to-market of the Worley stock and related FX impact, $0.23 of net impact related to amortization of acquired intangibles, $0.10 of transaction and other related costs, and $0.06 from Focus 2023 and other restructuring costs. Excluding these items, fourth quarter adjusted EPS was $1.58, including the $0.12 burden from the previously discussed legal matter. During the quarter, PA's continued strong performance contributed $0.23 of accretion net of incremental interest.
Q4 adjusted EBITDA was $310 million and was up 12% year-over-year, representing 10% of net revenue. Finally, turning to our bookings during the quarter, our revenue book-to-bill ratio was 1.3 times for Q4, positioning us well for the developing growth momentum we expect over the course of fiscal year 2022. Now turning to a recap of our full year fiscal year 2021 on slide 11. Gross revenue increased 4% and net revenue was up 7%, including the pro forma impact of all acquisitions and adjusting for the extra week in the year-ago period, net revenue was up 3% for the full year.
We continue to enhance our portfolio to higher value solutions, which is evident as gross margin as a percentage of net revenue was 26% for the year, up 235 basis points year-over-year. We expect mid-single-digit reported revenue growth in the first quarter of fiscal 2022, with an acceleration in the second half of our fiscal year driven by U.S. infrastructure spending and the ramp-up of new awards in our CMS business. GAAP operating profit was $688 million and was mainly impacted by the $261 million of purchase price consideration for the PA Consulting investment and $150 million of amortization of acquired intangibles. Adjusted operating profit was $1.188 billion, up 23% and represented 10% of net revenue.
Adjusted EBITDA of $1.244 billion was up 18% year-over-year to 10.6% of net revenue and just above the midpoint of our increased fiscal 2021 outlook. GAAP EPS was $3.12 and was impacted by $1.96 from the PA Consulting purchase price consideration and valuation allocation, $0.77 of amortization of acquired intangibles, $0.57 related to the U.K. statutory rate change and other U.K.-related tax items, $0.35 of net charges related to Focus 2023 deal costs and restructuring, and all of this being partially offset by a net positive $0.48 from the final sale of Worley and C3.ai equity stakes. Excluding all of these items, adjusted EPS was $6.29, also above the midpoint of our previously increased outlook.
Of the $6.29, PA Consulting contributed $0.48 to that figure. Before turning to LOB performance, I would like to highlight that we are currently working on a further optimization of our real estate footprint. As a result, while we are still reviewing key components of the plan, we expect a potential non-cash impairment charge ranging from $60 million-$70 million in the first half of fiscal 2022. Our new footprint will facilitate virtual work options that leverage new technology and more collaborative workspaces in our offices. Regarding our LOB performance, let's turn to slide 12. Starting with CMS, Q4 2021 revenue was down 5% year-over-year, but when adjusting for the extra week in Q4 2020, was relatively flat on a pro forma basis.
Let me remind you of the transitional dynamic impacting CMS revenue growth related to the transitioning off of two lower margin contracts. This represented $175 million year-over-year revenue impact during the quarter. When excluding the contract run off and adjusting for the extra week a year ago, pro forma CMS revenue was up double digits year-over-year. In 2022 Q1, we continue to expect an approximate $210 million year-over-year impact from these two contract rolloffs, and this will phase out in Q2. As a result, we expect reported revenue in the first quarter 2022 to be down slightly on a year-over-year basis, with underlying growth being much stronger.
We expect the CMS growth trajectory to improve over the year, resulting in a reported mid- to high-single-digit full-year 2022 growth rate. Q4 CMS operating profit was $115 million, up 7%. Operating profit margin was strong, up 100 basis points year-over-year to 9.1%. For the full year, CMS operating profit was $447 million, up 20% with 8.8% operating profit margin. The improvement for the quarter and the year in operating margin was driven by our strategy to focus on higher margin opportunities across the business. We expect operating profit margin to remain in the mid-8% range through fiscal 2022. Moving to People and Places. Q4 net revenue was flat year-over-year.
When factoring in the impact from the extra week, P&PS grew net revenue approximately 8% year-over-year for Q4 and was up 2% for the fiscal year 2021. In Q4, total P&PS operating profit was down year-over-year, driven by the $20 million legal settlement cost I described earlier. Adding back that legal settlement cost, operating profit growth would have been up 8% in Q4. For the fiscal year, operating profit was up 5% or 8% excluding the legal settlement. In terms of PA's performance, PA contributed $273 million in revenue and $66 million in operating profit for the quarter. Q4 revenue grew 41% and 32% year-over-year in sterling. Q4 adjusted operating profit margin was 24% in line with our expectations.
On a full year basis, PA Consulting grew revenue 33%, 24% in sterling with adjusted operating profit margin of 23%. Our non-allocated corporate costs were $55 million for the quarter and $190 million for the full year. These costs were up year-over-year and in line with our expectations. The increase, excuse me, was driven primarily by the expected increases in medical costs and IT investments related to our new ways of working. In fiscal 2022, we expect non-allocated corporate costs to be in the range of $200 million-$250 million, given continued increases in medical costs and other investments. These corporate costs, as well as Focus 2023, CMS, P&PS investments, will precede our expected acceleration in revenue growth and profit later in 2022.
In summary, these increased investments ahead of our growth will likely result in our Q1 profitability and EPS being relatively flat versus our Q4 results, with Q2 then showing improvement and further acceleration occurring in the second half of the year. Turning to slide 13 to discuss our cash flow and balance sheet. During the fourth quarter, we generated $176 million in reported free cash flow as DSO again showed strong improvement. The quarter's cash flow included $22 million of cash related to restructuring and other items, with $16 million related to a real estate lease termination as we take advantage of virtual working. For the year, free cash flow was $633 million, which was mainly impacted by the $261 million of PA purchase price consideration treated as post-closing compensation that we discussed last quarter.
Regardless, our reported free cash flow represented 133% conversion against our reported net income. For the whole year of 2022, we will again target an adjusted free cash flow conversion of 1.0x or above. As a result of our strong cash flow, we ended the quarter with cash of $1 billion and a gross debt of $2.9 billion, resulting in $1.9 billion of net debt. Our pro forma net debt to adjusted expected 2022 EBITDA is approximately 1.3x, a clear indication of the strength of our balance sheet. During the quarter, we monetized our Worley stock for $370 million and executed a $250 million accelerated share repurchase program.
We will continue to monitor for any material dislocation in our share price given the strong long-term secular growth opportunities for our company. Finally, given our strong balance sheet and free cash flow, we remain committed to our quarterly dividend, which was increased 11% earlier this year to $0.21 per share. Now I'll turn it back over to Steve.
Thanks, Kevin. We are introducing our fiscal 2022 outlook for adjusted EBITDA to be in a range of $1.37 billion-$1.45 billion, which at the midpoint represents double-digit growth. Our adjusted earnings per share outlook for fiscal 2022 is in the range of $6.85-$7.45. We expect a multiyear benefit from the U.S. Infrastructure Investment and Jobs Act to support our growth in the second half of fiscal 2022. As we look beyond this year, we see substantial opportunities for sustained organic growth driven by infrastructure modernization, climate response, and digital transformation. We anticipate approximately $10 of adjusted EPS in fiscal 2025. At our in-person investor event in March, we'll further expound on our long-term strategy and financial model. Operator, we'll now open the call for questions.
As a reminder, to ask a question, you need to press star then 1 on your telephone keypad. Once again, that is star one to ask a question. Please limit your question to one, and you may get back into queue for further questions. Your first question comes from the line of Jerry Revich of Goldman Sachs.
Yes, hi, good morning, everyone.
Good morning, Jerry.
Steve, as you built the portfolio, it's clearly been a focus to bring together green businesses and because of the idiosyncratic ESG scoring, unfortunately you folks aren't getting much credit for that. ESG funds are 80% underweight Jacobs. How does that impact the way you folks view the CMS portfolio or portions of the CMS portfolio going forward?
T here are some investors that are holding back because of some of our work, which is really a very small portion, probably less than 2% of our overall revenue that is really focused around what I would call critical national security for the U.S. and government. We are reaching out to those investors to try to explain that we're not involved in things like the manufacturing of nuclear weapons or whatever is holding them back. I really think that as people understand the fact that we're probably the largest public company delivering ESG climate change solutions out there, that as they see that ramping up and get more clarity, w e're gonna attract a lot more investors that wanna be part of the ESG story.
Steve, just a clarification. Is divestiture of that 2% on the table at all? How are you thinking about that within the portfolio context?
I t's so small that we haven't really thought about that. But like anything else, Jerry, over the next few years, you'll hear a little more about this during the strategy. We're gonna continue to look at our portfolio and make sure, we're aligned with all the right growth dynamics and we've proven that up to now, and we'll continue to transform our portfolio in the right direction.
Okay, thanks.
Your next question comes from the line of Josh Sullivan of The Benchmark Company.
G ood morning.
Morning.
I was curious if you could just give us some perspective just on global CapEx expectations into 2022. Y ou guys have such a large global portfolio and touch so many different markets. F rom your view, what are customers generally planning for CapEx heading into 2022 as they look to move out of the pandemic?
T here's a couple things that we need to point out. Specifically, the customers that Bob highlighted in his comments really about our advanced facilities clearly very strong there. And the semiconductor shortage is acute and we have many of our clients that are looking to build significant capacities over the next several years.
I do think our private clients ultimately are now all thinking more robustly about spend as it relates to environmental solutions and thinking about how they can transform their footprints in a way that are facilitating our ability to become a more sustainable global economy. T hat that's clear. I would augment that with our government services side, exactly the same comment. T he CapEx is very strong in that regard.
The last piece I would call out is our environmental business and energy transition business is touching the oil and gas space as well, where we are working with them to ultimately provide incremental capability sets that will help them in becoming a more viable, sustainable contributor to the global climate actions being taken around the globe. Y ou're right. We're focused across a wide swath, and actually a lot of them, given the work we do, are very strongly focused on these areas, which we think will encourage incremental CapEx longer term.
Your next question comes from the line of Jamie Cook of Credit Suisse.
Hi, good morning. F irst question, the EPS target that you put out there for 2025, the $10 supports, obviously good growth there. Kevin, can you just talk about, are there costs to achieve the $10 in terms of restructuring or investment? On the $10, can you provide some parameters top line margins? Do we need to utilize the balance sheet in terms of M&A or share repurchase to help achieve the $10? T hat's my first question. I'll start there.
Yeah, Jamie. Thanks for that. The $10 is really an organic number that we're alluding to and really doesn't involve capital deployment in any material fashion. C learly, there could be potential upside to those numbers, but we're working through all of that with our strategy, which we will talk more about in March as Steve outlined. Some of your questions are a little premature as we're finalizing all of that work for margins and whatnot. Rest assured, though, you can pretty much assume that the margin is not going down as it relates to what we're trying to get accomplished from an overall perspective.
As it relates to cost to get there, we think that most of the things that we're gonna be able to do are gonna be embedded in our normal course operational expenditures. I did highlight the fact that we're working on a further optimization of our real estate footprint.
Yeah.
We're expecting a potential impairment of, I don't know, $60 million-$70 million, maybe up to $70 million in the first half, maybe even in the first quarter. If I think about other things, there's not gonna be significant monies on top of that, maybe $25 million-$50 million in 2022, and then 2023 and beyond TBD, I would say. We're really thinking that we like the portfolio, and other than things that would occur relative to integration of acquisitions and deal costs and those things, probably somewhat de minimis in terms of restructuring costs outside of those.
Your next question comes from the line of Steven Fisher of UBS.
Great. Thanks. Good morning. O ne of the things, the business and the stock really needs is a breakout to the upside on the P&PS organic revenue growth. It seems like we started to see that this quarter. Kevin, you said maybe 8% NSR growth, which is up from about 1.4% for the last couple of quarters. Maybe just more qualitatively, to what extent are you really seeing a breakout on that P&PS growth now? What's the organic assumption you have for the rest of fiscal 2022? 'Cause you gave us some color on Q1. What have you factored in there exactly for stimulus as part of that growth? Thank you.
Let me take it, and then, Bob, you can add any commentary if you'd like to.
Sure.
W e're in this period of time in our Q1 and Q2 primarily, where the numbers aren't really gonna be impacted yet by the stimulus. We believe that's more a Q3 event. Maybe we get a little bit in Q2, but likely not. That it's more Q3 and an acceleration into Q4 that we would expect the benefits associated with the stimulus. We're excited about that. Having said all of that, I do believe our incremental growth going forward in Q1 and Q2 is gonna be more solid than what we've been seeing over the last few quarters. We're starting to see some of that benefit of the advanced facilities, certainly not as much in Q1, but in Q2.
I do think we'll see some good solid growth in Q1 and Q2 on people and places, and then it will accelerate again, hopefully into the Q3 and Q4 numbers. We feel good about the developing momentum. I did make the comment that we're investing in front of that growth, too. We're not gonna see a lot of incremental margin associated with that because we're investing heavily.
What I'd add to that, Kevin, is that. Steve, what's giving us optimism around there is our bookings. If we look at just the way we started out the year from a bookings perspective, it's been solid. W hat the other part of that is that we have to think about the project life cycle. These bookings are starting off with consultative services that are on the front end of some of these programs and projects, and then they go through the subsequent phases where our services will escalate. Overall, very good leading indicators that support what Kevin is saying.
Your next question comes from the line of Andy Kaplowitz of Citigroup.
G ood morning, guys.
Morning.
Morning.
Can you give us a little more color into what's going on in CMS? Kevin, you said that CMS margin would stay in the mid-8% range in FY 2022, but the margin had already risen to over 9% in the last quarter, despite still significant contribution from the lower margin contract work that's flowing through. Is there something else now impacting your margin in FY 2022? On the revenue side, your CMS backlog up double digits seems to suggest that you can deliver the mid- to high single-digit guidance that you have, but do you need to see an acceleration of awards and/or revenue burn versus what you've been recording in Q4 to get there?
CMS specifically, as you may recall, two, three, four years ago, when we did have these lower margin, large contracts, we were in the 5%-6% operating profit margin. We've now built over time that to a mid-8s number, which is great, and it's consistent with our strategy. As we look about 2022 specifically, we'll have ramp on some other lower margin business associated with Idaho and other nuclear remediation work. That's not gonna dampen our margin. It's just gonna hold it flat for 2022, and then in 2023 and beyond, we start to see incremental margin above that as well. It's a continuation of a long-term margin play. It's just ebbs and flows of when the big contracts come in, the margins associated with them.
2022 is a little limited in terms of incremental margin, then you'll see that start to build again in 2023 and beyond.
F rom the operator, there's some background noise. I don't know if it's your side, after you're opening it up for questions. Could you double-check that?
Yes, sir. Your next question comes from the line of Chad Dillard of Bernstein.
Hi. Good morning, guys. Just wanted to dig into P&PS. It seems like you have so many opportunities ahead with climate change, semiconductors, infrastructure, digitization. How are you guys sizing your bets? Can you just, like, talk about the relative rank of the size of the opportunity? Then just thinking through , where you guys stack up in terms of competitive dynamics in those segments.
Chad, can you repeat the front part of that question again? It's a little broken.
Yeah, yeah, sure. I was just saying in P&PS, it seems like you have just so many different opportunities ahead from climate change to semis, infrastructure, digitization. I just wanted to understand just how you guys are sizing your bets across all those opportunities. If you could talk about the relative rank in terms of the size of opportunity and your relative competitive positioning in those.
Sure. So as far as prioritization goes, I would say that, if you were to segregate into two buckets, one around climate change and the second around all those things that are creating the supply chain disruption, those are the ones that are coming to priority right now. I'd say on the climate change piece, and this is where the portfolio optimization is really helping us, we're honing in on those areas that we have a sound market leadership and long-term client relationships and where we can deliver immediate value. Those are squarely around transportation, water resiliency, and all the environmental impacts that are affiliated with climate change.
Those client relationships that we've had have been pretty robust for several years and are supporting those opportunities. A round advanced facilities, this is a multi-decade type of leadership approach that we've had specifically in semis, but also in life sciences that's been a legacy business of ours for forever. We 're seeing those opportunities, again, not searching for them. These are long-term client relationships that we've had, and we're in the capital planning for those clients. It's really gaining share with long-term clients that's setting the priorities.
Your next question comes from the line of Sean Eastman of KeyBanc Capital Markets.
Hi, gentlemen. I'm just looking at the 2025 target. T hat implies around 12% earnings growth CAGR over the next couple of years. Seems like at the midpoint of the fiscal 2022 guidance, you're gonna outpace that. I just wanted to reconcile that considering the way you described the cadence of fiscal 2022 earnings. It seems like the exit velocity is gonna be quite strong and that we should actually see accelerating earnings growth out of fiscal 2022. I hope that question makes sense. Just wanted to talk through the mechanics there. Maybe there's some conservatism. Any commentary there would be helpful.
W hat we do when we put forth our indications of what we expect our business to do, we think those are numbers that are obviously gonna be able to be executed against. Yeah, there's a lot of moving pieces and you're right, we will hopefully exit this year with a greater velocity than what we entered, clearly. We'll see how that plays out. U ltimately what's clear is that we've got a whether it's 12% or 11% or 13% or 14%, whatever it ends up being, we're gonna have a long haul of good solid margin-enhancing growth in front of us.
Okay.
Your next question comes from the line of Michael Dudas of Vertical Research.
Good morning, everybody. Maybe Bob, you can share a little bit of your thoughts on your recent acquisitions and other opportunities in the pipeline from CMS, certainly increasing your cyber intel, higher margin business, but also on the P&PS side. I know you didn't put things out into your long-term guide on acquisitions, but how do you see that? Is the company set to achieve these targets with the employees and professionals that you have? Is there gonna be some interesting opportunities to leverage some of that PA work as you get more collaborative to drive even further growth to serve the client base?
All right, Michael, let me unpack that here a bit. First on the acquisition piece, we're excited. I f you look at the last two that we did within CMS, about a year ago, with the Buffalo Group and most recently with BlackLynx, these are right in the bullseye of where we're going in cyber intelligence, where we're bringing in, whether it be client diversification with the Buffalo Group and higher-end advisory services, and that has played out extremely well. If you look at some code names for them, but some of the wins that we've had over the course of the last nine months, that has played out perfectly.
BlackLynx is getting us into those software solutions coupled with advisory services on automation and collection of data with processing engines that are working at the edge all around security. We're excited about both of those. Coupled with l ong-term advisory platforms that we've had in the agencies that we're already in, that's gonna serve us extremely well. With regards to prospects in the P&PS world , I'd target it more towards, it's not too dissimilar than our cyber intelligence prospects around technology. W e've got a strong position with our domain knowledge for several decades within those end markets that we're talking about, coupled with now technology-enabled solutions is really what our acquisition strategy has been as accelerants to our strategy.
We're looking at the pipeline right now. It looks really good, and more to follow on that front, as Steve mentioned at the Investor Day. T he employee base, it's something that we are acutely focused in on right now. This is where our globality really helps us in that we're in multiple locations around the world with high-end talent that are delivering global talent utilized to deliver local solutions. Our ability to scale, you hear about some of the labor shortages and labor topics that we're faced with in the Western Hemisphere. W e're scaling in multiple locations for jobs that are all around the world, and that's been a big piece of ours.
That last part with regards to PA mentioned a couple of the collaborative opportunities, but where PA sits in a lot of the same clients that we have in that C-suite, as well as in the front end of technology as our clients are developing new innovative ways of delivering to global topics, we're seeing the collaboration accelerate. Hopefully we'll have some more wins to talk about the Defra win in the U.K. last quarter. This win, can't disclose the client in the biotechnology world, has just shown that having the ability to offer expertise at the entirety of the life cycle of a project, a program, or an issue is powerful and is one that's picking up some significant momentum.
We're excited on all fronts.
Your next question comes from the line of Gautam Khanna of Cowen.
G ood morning, guys. I wanted to follow up on the outstanding bids. Y ou said $10 billion in source selection. Just get a sense for what is the phasing in terms of adjudication timeline? Are you expecting a strong December quarter in terms of bookings? If you could talk to us about the continuing resolution and how that might change the range of outcomes with CMS and, relatedly, recompete concentration over the next fiscal year, how much of the business base is up for rebid? Thank you.
Yeah. W e're pretty positive, confident that this whole continuing resolution, defense budgets, all that will play out over the next several months and we're expecting an increase in the DoD budget, and we're pretty positive about space and cyber and the growth rates, especially in the classified work where we're significantly aligned to and
Hypersonics and telecom and we feel very well positioned at places like NASA and how the budget's played out there. Really, it comes down to the whole timing question that you asked. T here has been some delay, very modest delay as the government clients are waiting just to see the outcome of this budget. As soon as that gets finalized, we see a few of these near-term prospects that we've hinted to unleash. Whether that happens in December or the second quarter, w e're talking about that timing. T hat's why we're very optimistic about the upward trend in CMS revenue growth as we move through 2022.
Just a follow-up on your question on rebids. There is, at the end of the year, a couple, larger rebids that we're gonna have to be thinking through, but there's really no rebid risk embedded into the 2022 year of substance.
Your next question comes from the line of Michael Feniger of Bank of America.
Thanks for taking my question. Kevin, just so we're not missing anything here, to follow up on Sean's question, you guys just did the high end of your EPS range in 2021, and the midpoint is 14% growth. Just conceptually, with infrastructure ramping up, the CMS incrementals really taking off in 2023, is there just anything we should be aware of, big picture, of why earnings growth would not accelerate, why it would step down to 2025? As you were alluding to, is it recompete risk? Is it just higher level of SG&A or where the margins are? Just kinda help us understand. I know you'll flesh out more at the Investor Day.
Just when we see that $10 of EPS and the earnings growth you guys are getting this year, which is back-end loaded, just to bridge there, just what are the things that would hold back that earnings growth?
W e're talking 2025 here. That's four years from now. We're still in the midst of a pandemic, and i t's prudent to put some variability about what the world looks like four years from now. T he most powerful message about the $10 is we're putting that number out there even if economic situation is in not a good place in 2025. I t's prudent to put out numbers that are appropriate, and we feel like we can get after. And by the way, it's four years from now, so a lot can happen in four years.
Thank you.
Your final question comes from the line of Andy Kaplowitz of Citigroup.
Good morning again. I just wanted to follow up on PA Consulting 'cause you recorded almost $0.50 of accretion in 2021. T hat's essentially double your original guide when you announced the deal. I know you probably don't wanna tell us what's embedded exactly in FY 2022, and we know what your original guide was there, but maybe you can give us color on what has, at PA, exceeded your expectations by such a wide amount, and what does that mean for Jacobs moving forward?
A couple things, and maybe I'll turn it over to Bob for any additional color. Andy, the first thing is that the acceleration in their growth, which is really the driver to what's been happening in 2022, a lot of it, a chunk of it is related to that specific work Bob was alluding to on pandemic-related and the work that they've been doing for the U.K. government. Really strong performance. Now they're, as we look into 2022, they're gonna be growing, but it's not gonna be at that same rate that we've been talking about. They gotta figure out a way to recover and get new business to replace some of this business that's gonna go away.
It's not a slam dunk as it relates to what's gonna be happening in 2022 by any stretch. Having said all of that, what they've done in 2022 or 2021 has been extraordinarily strong, good margins, and they've been executing well. Actually the exciting thing is the collaboration between PA and People and Places and CMS is very strong, and we're seeing that develop into longer-term growth opportunities from maybe PA, but certainly Jacobs as well.
Maybe two areas that we knew about, we probably didn't fully give credit to the depth of the two things I'm about to mention. One is the applied technology ability that they have. Y ou see consulting firms that have kinda a roadmap or a recipe or a methodology that they utilize for different challenges, and they're proposing solutions. PA is applied technology to solve a unique issue. That has really paid some dividends, especially with the new work. Kevin and I talked about the U.K. work, but this is now what we're seeing in the U.S. The second is around the depth of relationship.
The depth of relationships that PA has and where to connect in a client organization and really hone that relationship through performance has been extremely impressive and is, again, we knew about it. It's exceeded our expectations.
There are no further questions.
Okay, thank you very much. We look forward to talking to you again next quarter.
This concludes today's conference call. Thank you for participating. You may now disconnect.