Good morning. My name is Rob, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Jacobs' Fiscal Third Quarter 2022 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. Thank you. Jonathan Doros, you may begin your conference.

Thank you. Good morning to all. Our earnings announcement and 10-Q were filed this morning and we have posted a copy of the slide presentation on our website, which we will reference during the call. I'd like to refer you to Slide 2 of the presentation materials for information about our forward-looking statements, non-GAAP financial measures, and pro forma figures. For pro forma comparisons, the current and prior periods include the results of recent acquisitions, including StreetLight Data and BlackLynx, as well as our strategic investment in PA Consulting for the full fiscal period.

Steve will begin by reviewing our third quarter results, and then discuss our Jacobs and PA accelerating social impact. Bob will then review our performance by line of business, I will provide an update on PA Consulting, and Kevin will provide a more in-depth discussion about financial metrics as well as a review of our balance sheet and cash flow. Finally, Steve will provide details on our updated outlook along with some closing remarks, and then we’ll open the call for your questions. In the appendix of this presentation, we have provided additional ESG-related information, including examples of our leading ESG solutions. With that, I’ll now pass it over to Steve Demetriou, Chair and CEO.

All right, thank you for joining us today to discuss our third quarter fiscal year 2022 business performance and our near-term outlook. We’re excited to be conducting today’s call from PA Consulting offices in London and I’ll provide more color in just a moment on our strong early success of our investment in PA. But first, turning to Slide 4, at Jacobs, the combination of a proactive approach to strategic portfolio management and driving a high-performance culture has created a strong quality business with substantial recurring revenue that’s resilient during a variety of macroeconomic conditions. This is complemented by our focus on secular growth in the areas of Climate Response, Consulting & Advisory, and Data Solutions. Our competitive advantage is based on strength in staying true to our values. We harness deep technical expertise to reinvent the way we solve problems and chase the next generation of innovative solutions for our clients. As I shift to the quarterly results, we’re clearly seeing strong underlying trends in accelerated growth at Jacobs. From the velocity of our sales pipeline, our recent major wins that we’ll talk about today and next quarter, to increasing trends in utilization, we’re positioned for strong profitable growth going forward. During the quarter, net revenue grew 8% year-over-year and double digits on a constant currency basis, with growth across each line of business. More importantly, bookings were strong across the company, resulting in revenue backlog up 10% year-over-year, and actually up 13% in constant currency. We saw continued strong performance in our Advanced Facilities business as demonstrated by our 25% year-over-year top line growth and an acceleration in P&PS bookings during the quarter within our Americas business, driven by awards related to U.S. infrastructure modernization. Within Critical Mission Solutions, we were awarded a strategic $3.9 billion NASA Johnson 10-year rebate significantly larger than our existing contract and which will be added to our backlog in the fourth quarter. This is one of many long-term recurrent contracts that provide revenue visibility for the business. On a constant currency basis, PA Consulting continued to show strong growth with revenue up 22% and backlog up 19% year-over-year. The strong visibility of our diverse business, combined with robust cash flow generation, affords us the ability to generate returns for our shareholders in times of economic uncertainty. Now turning to Slide 5. This time two years ago, in the height of the pandemic, we were zeroing in on the PA Consulting transaction, and PA is significantly exceeding our financial expectations, and revenue synergies are accelerating. Results are strong across all of PA's peak performance indicators. In Culture and Talent, the number of partners has increased more than 20% since the transaction closed, with additional key hires across operations, research, technology, and sales, further strengthening PA’s capabilities in client solutions. And very exciting is their women and leadership program with the current PA leadership team now at 50% female. Financial performance continues strong with the weighted pipeline up more than 40% compared to the prior year. Fiscal year-to-date revenues are up 20% in constant currency with an operating margin of 21%, which is an indicator of PA's high-quality business. On the Operations and Strategy front, PA is seeing success following the launch of its IP monetization, and they are gaining momentum in the U.S. with new leadership and an expanding portfolio. And in the area of revenue synergies, we have posted 18 joint wins since the beginning of the partnership and are seeing significant collaborative opportunities in multiple markets, including health and life sciences, energy and utilities, and consumer products. Our partnership with PA has been one of the most successful in value-creating investments, and our Consulting and Advisory accelerator is a clear priority for future capital deployment.

Thank you, Steve. Moving on to Slide 7 to review Critical Mission Solutions. The CMS business continued its strong performance in the third quarter with total backlog increasing 7% on a reported basis and reported on a pro forma basis to $10.2 billion. Our CMS strategy is focused on creating resilient, recurring revenue growth and market expansion by offering technology-enabled solutions aligned to critical national priorities. Our service and solution offerings are delivered across our core customer markets: space, national security, cyber intelligence, and energy environment, and we are leveraging our growth accelerators of data solutions, climate response, and Consulting and Advisory to catalyze the business. We have substantial revenue visibility as approximately 85% of CMS’s portfolio consists of large enterprise contracts with durations greater than four years and 88% from federal-level government funding. Although economic and geopolitical uncertainties continue, our strong Q3 ending backlog gives us confidence in our next 12-month forecast of revenue. Three market trends that we see contributing to our continued growth include space debris management, robotics, and 5G network build-out. Beginning with space debris management, decades of space travel have resulted in large amounts of space debris damaging satellites and future launches, adding to the cost of operating satellites and other space platforms like the International Space Station or ISS. If debris destroys a satellite, it can take months and cost hundreds of millions of dollars to restore its service. We support the orbital debris tracking program at NASA and provide plume analysis and communication systems, simulation for vehicles visiting the ISS. In addition, we provide media tracking data for multiple government agencies. Space debris tracking is one of many services Jacobs provides on the recently awarded Johnson Engineering, Technology and Science or JETS II contract which builds on Jacobs' more than 17 years of continuous support at Johnson Space Center. Under this contract, we will provide multidisciplinary technical services to support the future of human space exploration, as well as help NASA incubate the emerging commercial space economy. This 10-year $3.9 billion win will be booked in Q4 and represents a $1.8 billion increase to our existing contract. This serves to illustrate the continuing strong, massive Jacobs partnership. Moving on to robotics, we are increasingly delivering valued solutions to our clients by utilizing robots that reduce costs and increase accuracy and safety in otherwise manual human processes. And we're excited to announce that last quarter we integrated the Resolve robotics team in the UK into CMS, who brings software expertise and IP to help accelerate our growth. Our existing CMS robotics team already delivers groundbreaking innovations, developing and deploying robotic systems in challenging environments such as the robotic tool to retrieve sand-like debris from inside a damaged nuclear reactor at Fukushima in Japan, autonomous systems to map riverbeds for the British army, and designing robotic systems for ITER, the world's largest fusion power experiment. Finally, demand for 5G telecommunications. Our telecom group provides full solutions for the deployment of next-generation wireless and wireline networks for leading telecommunication companies like AT&T, Verizon, and T-Mobile, as well as Fortune 1000 healthcare and commercial companies looking to build their own 5G networks. We also support the infrastructure market providing 5G integration, network optimization, and technical services alongside our PMPs teams to accelerate growth. While rollout of 5G infrastructure deployment is still in its early ramp phase, we continue to see increased demand for both integrated 4G and 5G solutions from our commercial telco infrastructure, healthcare, and government clients. During the quarter, our telecom group added several new awards totaling more than $150 million to deliver projects advancing 5G nationwide. We are excited for the team's recent successes and are well positioned for growth as adoption of 5G use cases and penetration grow. In summary, we continue to see solid demand for our CMS solutions. Last week, we were notified that we were awarded a $470 million, six-year cyber and intelligence-related task order, which we expect to begin ramping at the end of this current quarter. The sales pipeline remains robust with the next 24-month qualified new business pipeline at approximately $25 billion, including $10 billion in source selection with an expanding margin profile.

Thanks, Bob. Moving to Slide 9, PA's current quarter continued to see strong sales bookings up 25%, and backlog was up 19% in constant currency. Here's what I see driving that. We have a unique value proposition that starts with our purpose, bringing ingenuity to life to build a positive human future. This enables us to deliver, but our purpose is critical in our ability to attract and retain top talent. Our differentiation extends to our strategy, which is focused on helping clients address some of the biggest forces shaping society with our unique end-to-end innovation offering. Indeed, having technologists, scientists, engineers, and designers working together creates a unique set of propositions. Let me shift gears and talk a bit about our partnership with Jacobs. As Steve mentioned, our partnership supports key aspects of our strategy. We have numerous key accounts in common. Those accounts are ones where we can leverage PA's relationships at the C-suite to bring Jacobs into the mix early and create a differentiated solution. In some cases, it could be the advantage of scale that Jacobs has or a specialized expertise. It can also work the opposite way where Jacobs has a key relationship and brings PA into complex deals. A great example is PG&E in California, where Jacobs has a strong existing relationship. The differentiation on this project was a combination of Jacobs' program management expertise with PA’s strategic consultancy advice and deep domain expertise. And more than a year into the partnership, these types of opportunities are growing. Another area of our strategy is expansion in the United States, where the outlook is very promising with strong double-digit revenue growth over the last six months. Beyond the synergies with Jacobs, we see a big demand for our end-to-end services. We're focused on three sectors in particular, energy and utilities, health and life sciences, and consumer and manufacturing. In each of these areas, we're winning and delivering exciting purpose-driven work. For example, innovating cell and gene therapy manufacturing with Ori Biotech and creating a growth strategy for Green Boom, a startup, which has developed a sustainable way to prevent, reduce, and clean up oil spills. Over time we’ve made several U.S. acquisitions which have provided a platform for further organic growth. Additionally, the significant hiring of great new talent at the partner level is another way we are stimulating growth. Since the beginning of 2020, we've grown the number of U.S. partners by 60%. Now I'd like to spend a minute on the resiliency of our business. We enjoy a loyal client base with approximately 90% of revenue typically coming from repeat clients over the last five years and our expertise continues to be in high demand. We also enjoy resiliency, given our balance in private and public sector work. For example, during the pandemic, we transformed entire corporate business models to account for new customer behaviors. While in the public sector, we work with some of the biggest government agencies that provide critical services that are largely unaffected by short-term budget decisions, like the UK National Health Service and Ministry of Justice. This helps to mitigate risk from future macroeconomic trends. So to summarize, we're running a purpose-driven business with a clear strategy to address our clients’ biggest challenges in an end-to-end manner that separates us from the competition. And structurally we're set up to be able to pivot in response to external factors, ensuring we're well positioned for the future. Kevin, I'll hand it over to you.

Thank you, Ken. I'm going to Slide 10 for a financial overview of third-quarter fiscal 2022 results. Third-quarter gross revenue grew 7% year-over-year and net revenue grew 8%. Pro forma for acquired revenue, net revenue also grew 7% year-over-year, which is an acceleration in growth from the second quarter. Currency negatively impacted revenue growth by nearly 400 basis points. Given current foreign exchange spot rates, we expect FX to impact our Q4 revenue by nearly 450 basis points on a year-over-year basis. On a reported basis for the fourth quarter, we expect revenue growth in the mid-to-high single digits, which translates into double-digit growth on a constant currency basis. Adjusted gross margin in the quarter as a percentage of net revenue was 25.8%, down 180 basis points from a year ago, primarily driven by our CMS line of business related to newly ramping remediation contracts and the timing of the ramp on higher margin federal contracts, and the investment in incremental resources in PA in advance of expected growth. P&PS: GAAP operating profit was $266 million and was mainly impacted by $52 million of amortization from acquired intangibles and other acquisition deal-related costs, and restructuring efforts of $10 million with over half of that associated with integration costs associated with acquisitions. Adjusted operating profit was $327 million, up 4% year-over-year on both a reported and pro forma basis. On a constant currency basis, adjusted operating profit was up 8% year-over-year. Our adjusted operating profit and net revenue was 10.3%, and we expect a similar level in Q4. I'll discuss the moving parts later when reviewing the line of business performance. GAAP EPS from continuing operations was $1.52 and included a $0.27 impact related to our amortization charge of acquired intangibles, $0.04 from transaction-related costs, only $0.02 of other restructuring costs, and a $0.01 benefit adjustment to align to our effective tax rate. Excluding these items, third-quarter adjusted EPS was $1.86, up 13% year-over-year. On a year-over-year basis, FX impacted our EPS negatively by $0.09. Within the other income line on the P&L, it's important to note that we realized a cash pretax gain of approximately $14 million or $0.08 in after-tax EPS from the sale of our ownership in the commercial cybersecurity provider WatchGuard Technologies that came as part of the KEYW acquisition. This benefit was captured within our other income line but not reflected in operating profit results. The sale of this strategic investment was driven by contract terms associated with our interests, which would have limited future monetization of our investment. We remain excited about our continued partnership with WatchGuard. Jacobs consolidated Q3 adjusted EBITDA was $363 million and was up nearly 13% year-over-year representing 11.4% of net revenue. On a constant currency basis, adjusted EBITDA was up 16% year-over-year. Finally, turning to our bookings during the quarter, the revenue book-to-bill ratio was 1.1 times and did not include the estimated $550 million backlog value of the 10-year $3.9 billion for NASA Johnson win, which will be recognized in backlog in our fourth quarter. As Bob mentioned earlier, the contract ceilings of this rebid win are significantly higher than our existing contract and is an agency-wide contract not limited to Johnson Space Center. We've planned a backlog for the first two years of the approximate current revenue run rate but expect on-contract growth to the ceiling value over the life of the contract. Regarding our LOB performance, let’s turn to Slide 11. Starting with CMS, Q3 revenue was up 8% year-over-year and up 7% on a pro forma basis. FX negatively impacted growth by over 200 basis points. For the fourth quarter, we expect revenue growth to approach double digits and after adjusting for an estimated FX impact of 250 basis points, deliver constant currency double-digit growth. Q3 CMS operating profit was $104 million, down 3.5% year-over-year, but flat on a constant currency basis. Operating profit margin was down over 90 basis points year-over-year to 7.9%. Q3 operating profit margin percentage continued to be impacted by the delay of the higher margin, shorter cycle awards that were pushed to the right due to the continuing resolution, as well as related timing of our investments ahead of new cyber and intelligence contract wins. Due to these investments and the timing of both new and anticipated awards, we expect CMS operating profit margin to remain under 8% for the fourth quarter but improve in 2023 and beyond. Moving to People & Places, Q3 net revenue accelerated to 7% year-over-year, including a negative effect of 350 basis points from FX. On a constant currency basis, P&PS overall grew double digits year-over-year. Also on a constant currency basis, each People & Places segment demonstrated net revenue growth with strong year-over-year growth acceleration in our Americas business as the impact from U.S. infrastructure spending begins to materialize. Our Advanced Facilities business continues to demonstrate robust double-digit net revenue growth with strong performance in both semiconductors and life sciences. We expect this performance to continue given our strong backlog and sales pipeline. Our International business growth on a constant currency basis also remained strong as those governments continue to prioritize infrastructure modernization and investments related to our ESG Solutions. Total P&PS Q3 gross profit grew year-over-year and gross margins were consistent with Q3 2021, with Q3 operating profit up 2% year-over-year and up 8% when eliminating the impact from FX translation. In terms of PA's performance, PA revenue grew 8% year-over-year in U.S. dollars, and an impressive 22% in PA's local currency. Q3 adjusted operating profit margin was 18.5% due to lower utilization, but still up 2% when factoring in the impact of currency. The lower utilization during Q3 was driven by a proactive effort to add resources for additional growth expected in 2022 and 2023 for the PA team. Consequently, we expect PAs operating profit margin to return to greater than 20% next quarter and continue to strengthen further in 2023. We also expect continued double-digit revenue growth on a constant currency basis. Our unallocated corporate costs were $38 million, down year-over-year as we benefited from continuing moderation in medical costs and to a lesser extent from a positive currency impact on our support costs and other benefits. We now expect non-allocated corporate costs to be in the range of $170 million to $190 million versus our previously communicated range of $200 million to $250 million for fiscal 2022. Turning to Slide 12 to discuss our cash flow and balance sheet. We had another quarter of solid underlying cash flow generation. On a reported basis, free cash flow was a negative $281 million but included a $480 million cash outflow related to the previously discussed Inpex legal settlement, as well as $10 million related to transaction costs and other items. Excluding these outflows, free cash flow was strong, and conversion was in line with our expectations. DSOs were relatively flat year-over-year. We expect solid free cash flow in the fourth quarter, again in line with our previous conversion expectations for the full year. During the quarter, we repurchased approximately $200 million of our shares. As we have said before, we will remain agile and opportunistic in repurchasing shares as we see dislocation in the market. As a result of the strong underlying cash flow, we ended the quarter with cash of $1.1 billion and a gross debt of $3.6 billion, resulting in $2.5 billion of net debt. Our net debt to adjusted 2022 expected EBITDA of approximately 1.8 times is a clear indication of the continued strength of our balance sheet. As of the end of Q3, approximately 60% of our debt is tied to floating-rate pre-payable debt, and as a result, we are expecting incremental interest costs going forward, which we have incorporated into our outlook. Finally, given our strong balance sheet and free cash flow, we remain committed to our quarterly dividend, which we recently announced.

All right, thank you, Kevin. As Kevin described, we have a diverse portfolio with significant reimbursable recurring revenue. It provides us the ability to grow under multiple economic scenarios and manage the impacts of inflationary pressures on our business. With this diversity comes some exposure to foreign currency translation as we have approximately 34% of our revenue outside of the U.S. with 21% of that revenue in UK Pound Sterling. As a result of the latest foreign exchange dynamics, we're providing updated guidance for the fourth quarter of adjusted EBITDA in the range of $340 million to $360 million and an adjusted EPS of $1.75 to $1.85 with the midpoints tied to the current FX rates. We feel very confident in our underlying business trends in the fourth quarter, and we provided the lower end of the range to reflect the possibility of any FX erosion. It is important to note that relative to our fiscal 2022 forecast back in November, foreign currency translation has impacted our full year expected fiscal 2022 net revenue outlook by approximately $320 million, adjusted EBITDA by approximately $40 million, and adjusted EPS by nearly $0.20, to ensure our change in annual guidance and EPS is effectively driven by currency volatility versus our original expectations. In closing, we are excited about the momentum across all of our business as demonstrated by our accelerating revenue growth, our strong bookings and backlog, and a robust sales pipeline globally.

Operator, we’ll now open the call for questions.

Your first question comes from a line of Jamie Cook from Credit Suisse. Your line is open.

First point relative to client, look we're really not sensing any significant commentary from clients which are indicating concerns on the impact of their business associated with their investment profile. And look, if you look at the private parts of the portfolio, specifically the life sciences and semiconductors, those clients are really continuing to be quite robust in their outlook.

The only thing I’d add...Go ahead operator.

Hi, hey, good morning.

Good morning.

Good morning, Bert.

Bob, you mentioned the CHIPS Bill in your prepared remarks. How much of a tailwind, if any, should we expect that to be for your fab design business? And then just a quick follow-up to what you were talking about on the resilient side, is it fair to think that PA consulting would be sort of the most volatile piece of your business as we think about sort of going through a potential economic recession? Thanks.

Yes, regarding the CHIPS Bill, we believe that our business was already strong due to our existing clientele and the underlying business drivers. The CHIPS Bill has further reinforced this by adding credibility and support for the clients who are adjusting their business models. We’re confident that the traditional cycle we've mentioned, which typically spans 18 to 36 months, is extending due to this federal support, and we find that promising. As for the volatility in PA's business, it's important to note that PA operates on a unique model. Unlike traditional management consultants who depend on their clients' discretionary spending for transformation efforts, PA focuses on product innovation to drive business transformation, which is central to the clients they serve. Thus, we are not witnessing significant volatility in this area, as evidenced by PA's bookings trends this quarter, which reached their highest levels ever, lending credibility to our backlog moving forward.

Yes. Hi, good morning, everyone. I'm wondering if you just expand, Kevin, on the margin comments in your prepared remarks for Critical Mission Solutions and People & Places exiting the fourth fiscal quarter. You know, it sounds like you've got some idiosyncratic moving pieces that might impact normal seasonality as we head into the December quarter. Can you just tease that out a bit based on contract cadence, etc. that you alluded to for full fiscal year 2023? Thanks.

Yes, Jerry, couple of points. First is on the win profile associated with our CMS business, we’ve been ramping some of the big environmental contracts, the nuclear remediation contracts, which are embedded into our forecast, which as you know, are lower margin. And we've previously discussed that the balance of the year would start to see an uptick in margins because of all of the shorter cycle and cyber and intelligence wins, which are coming. And actually Bob announced that one was, we just heard about this this week actually, and so, or last week and so look at the end of the day, all of those are happening. They're just not happening and won't ramp in Q4 which was our original expectation. So if you look at that dynamic, that puts a little bit of pressure on the Q4 margin that we have in addition to continuing to have the investment profile and we're not backing off of that in Q4 because of the anticipation of growth in 2023 and beyond. So it's a double, kind of double impact on Q4, but ultimately then translates into 2023 starting to rebound and come back into the margin profile that we've seen in the past. Now it's going to take a while to get there, but ultimately we're confident that the margin profile will start to kick back up in 2023.

Thanks, good morning. I just wanted to follow up on that discussion about the cyber contracts and you mentioned that $500 million one, I guess that's the one from last week, and I guess I'd call that a mid-sized award compared to the NASA type opportunities. Can you just talk a little bit more about how much more of that you have in the pipeline and the timing of those and then how relatively important they are to that 2023 plan?

Yes, so Steve here. Yes, the good news is we actually had two wins in the last 30 days in the cyber intelligence business. There was a $500 million one that did get booked late in the third quarter, and then we've had one just in the last week that Kevin just talked about, that’s just under $500 million. And those are two good-sized cyber intelligence awards with better margins than some of our longer-term enterprise contracts that we have in CMS. So they're going to be margin accretive, and we're really going to see those playing out as early as, you know, as far as the P&L in the first quarter of 2023. So, and then on top of that, we have about $1.5 billion of things that could hit sometime in the fourth quarter, as far as pursuits out there, and if you look at our normal win rate, that’s going to add on top of that. And then on the back of that, there's a series of other pursuit opportunities that will play out sometime in the first half of 2023. So, we are excited about cyber intelligence, a little frustrated that it's taken a few quarters longer than we had expected. And then I just want to add on the back of that outside of cyber intelligence, which also gives us some optimism is that the Americas IIJA initiatives, we are clearly seeing momentum now in that. The pipeline is building. We've had some early wins. We've got about 50 grants out there that we are highly confident of winning a large share of and that’s going to translate into business. And we see that, that’s starting to accelerate in 2023. And so it really hasn't been a material impact on our business to date and we all know that that's coming because of the commitment of the U.S. Government around that IIJA. So, those are reasons for optimism as we get into both top line and margin improvement as we enter 2023.

Hi, good morning guys.

Hi Chad.

Yes, thanks guys. I had a couple of quick questions. First on the CMS segment, you talked about the $10 billion of source selection bids out there, does that, is that net of the $4 billion NASA contract? And in general, what are you looking at for the September quarter? Were you looking for some fairly sizable bookings? And if you could also refresh us on the recompete dynamic over the next 12 months, how much of the CMS business is up for rebid?

Let me just start and Bob, you can pick up. So the insource selection around the $10 billion is net. So I just want to be clear that the Johnson win is not in our backlog in the third quarter and will be added to the backlog in the fourth quarter. But what we're talking about now moving into the fourth quarter with our bid process is, I already covered several billion of that being around the cyber and intelligence business and also some opportunities specifically in our segment working with the U.S. government. And so we're talking about net around all that. Bob, anything to add?

No, and possibly the most significant recompete is NASA Kennedy, which is coming up later this year. We are currently under an extension there. We are confident about our opportunities in both Q4 and Q1.

Let me just clarify that. The $10 billion is new business, not rebid, so it's new awards.

New awards in source selection, and it's net of NASA, yes.

Hi team. Thanks for taking my questions. I just wanted to come back to the investments being made this year. You know, I think it's been clear all throughout this year that this is somewhat of a major investment year for Jacobs, and it sounded like actually ramped up in the third quarter with sort of incremental investments offsetting that gain on sale. I just wondered how much of that ramp is Jacobs really getting more aggressive and really bolstering that personnel to support growth versus it ending up costing more than you thought at the start of the year to build up that personnel to support growth? I hope that’s a fair question.

Let me characterize our investment profile. Certainly, we entered the year with, as we've talked about over the course of the fiscal year, some pretty strong investment profiles associated with the expected growth. We've actually reduced that a tad in Q3 and Q4 as we've seen a delay in some of the revenue build that we had envisioned happening faster and sooner in the second half of 2022. Now this one particular investment partially offset the WatchGuard benefit. But I think we've continued to be very proactive in sort of supporting people. I know that PA has invested in terms of salary improvements and have increased the pricing associated with efforts in that regard. So effectively, I think it's been broad-based that we've continued to be investing against our people and supporting our people, but actually probably faster in the first half versus the second half, other than this incremental investment we just made because of the WatchGuard benefit.

Good morning, everyone.

Hey Andy.

Can you give a little more color into the PA Consulting margin? I know you talked about it being pressured by FX and the incremental investments. Can you quantify those investments possibly? And I know you mentioned margins, you returned over 20% in the short term, but you still have confidence in your longer-term margin expectations for PA, that sort of 23% flattish as you go ahead over the next several years? Yes, I'll take a crack at it, and then we have Ken here with us, and I'll turn it to him to see if he has any additional color. But the PA team has been very aggressive in getting new talent into the organization, both at an executive level and at a partner level, which ultimately helps drive and support incremental growth going long-term. They were very successful, especially in Q3 in bringing on board a bevy of talent, which is going to be positioning them for really strong growth going forward in 2023. That all came together, and fundamentally, when they brought those folks on board, they're not obviously originally billable from day one, and so that will put some pressure on their gross margin. Now it's just about adjusting their hiring going forward, determining how much they need, and they'll start to see an improvement back up to the operating profit margin that we discussed in prepared remarks over 20% in the fourth quarter and ultimately beyond into 2023 and beyond, and we feel confident on that. Ken?

Yes, I think you hit it, Kevin. Two things, one was significant amounts of senior executive hiring, which came together all at the same time. So we actually had five senior executives join in the same quarter, which had significant cost with it. And then the second part was given the large deals that we have in the pipeline that we historically have not had, we started to ramp up hiring in advance to ensure we can actually service those should we win one or more of them. So we're very confident about the profile going forward and we've obviously watched our recruiting go forward that the pipeline remains very active and strong and we're confident.

Great, thanks and good morning. My first question relates to the 50 grants mentioned earlier in connection with the IIJA. Can you provide any information on the dollar amount or how much of that funding has been received so far? My second question is a bit more philosophical. As you noted earlier, there hasn't been any significant slowdown in the outlook. In previous downturns, governments have increased spending in some of your markets and regions. Based on your conversations and the spending trends of those governments over the past couple of years, what do you think the likelihood is of them increasing spending if we encounter a meaningful slowdown in the next one to three years? Thanks.

Yes, let me begin by congratulating you on your new baby and wishing you all the best with that important change in your life. Regarding the grants, I previously mentioned 50, and currently, we only have some minor fees linked to that. However, the significant opportunity lies in seeing the first 12 decisions moving forward in the coming weeks, which will then start to increase, along with additional grants following that. We have not yet reaped the benefits from those, but we are very enthusiastic about the potential they hold as the procurement process advances. Bob, could you take it from here?

Yes. And maybe just to add on to that, which would then lead into those growth trajectories that we highlighted in our strategy, which we're gaining more confidence around that specifically in our infrastructure business, in our three major markets which actually four if you count the Middle East, but in the U.S., UK, and Australia. On the government's historical reaction to recessionary type periods, and then how does that compare to what's happening right now? We actually see that step up as being positive again. We're seeing governments pretty bullish on infrastructure spending, and then in areas where that might be a little bit in debate, those political candidates that seem to have some traction in the marketplace are making very vocal comments about putting more money into major programs in those geographies. So, all-in-all we're feeling very positive about what the future looks like in infrastructure.

You also asked about the percent of money that's out there. I think it's over 30% now on the IIJA. I don’t know exactly what the number is right now, but it's over 30%.

And there are no further questions at this time. Mr. Steve Demetriou, I turn the call back over to you for some closing comments.

I just want to thank everyone for calling in and we look forward to updating you next quarter.

This concludes today’s conference call. Thank you for your participation. You may now disconnect.