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Jacobs Engineering Group Management Discusses Q3 2012 Results - Earnings Call Transcript

Stocks in this article: JEC

Turning to Slide 6. Backlog growth, nice growth from a year ago, did have a tick up in field services as well as strong growth in the professional services. For the quarter, we were up, as I said, about 3.3% and hope for the year it's over 11% growth so -- and still strong growth in the professional services.

So with that, I will turn it over to Craig for a review of the quarter.

Craig L. Martin

Thank you, John. Beginning now on Slide 7, just a quick review of our growth strategy. It doesn't change. It hasn't changed. We continue to be committed to our business model of being relationship-based, being local to our clients and diverse in the markets, both domestic -- our multi-domestic strategy and through the focus on multiple markets. We're going to continue to leverage our cash position for strategic acquisitions and I'll talk more about all of those things later in the discussion.

The thing I want to focus on here is our ability to continue to drive down costs. We had an excellent quarter from a cost control point of view. As you know, we were very disappointed about cost control last quarter but we have recovered nicely and feel pretty good about our ability to continue to control costs going forward. That puts us in an excellent cost position just at the time when margins broadly are improving. We're seeing nice improvement in margins in the private sector. The public sector continues to be more price-sensitive than ever, although that's good for us. But of course, the margins have always been stronger in the public sector and they continue to be good margins going forward. So overall, I think our cost position is a positive in terms of our outlook.

Turning now to Slide #8, this is our relationship model. We've showed this to you in different forms at different times, trying to help make it clear how the process works. But it really is a function of long-term relationships creating value, which creates repurchase loyalty, creates a stable business for us that we can then grow, reinvest in the business and have this sort of virtuous circle of continuous improvement. It is different than many of our competitors, most of whom follow a big events kind of model, many of whom have a substantial portion of their business in the lump sum turnkey arena. As you know by now, I'm sure that's just not the Jacobs way. This model continues to work well for us. Repeat business last quarter was 91.3%, consistent with what we do pretty much every quarter. And we continue to get a significant part of our business north of 75% to 80% from preferred relationships with our customers.

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