Jacobs Solutions Inc. (J) Earnings Call Transcript & Summary

Good day, and welcome to Jacobs and PA Consulting: A Powerful Partnership conference call. [Operator Instructions] I would now like to turn the call over to Jonathan Doros. Please go ahead.

Thank you for joining us today for a special webcast presentation regarding Jacobs' strategic partnership with PA Consulting. I'm joined on the call today by Steve Demetriou, our Chair and CEO; Bob Pragada, President and Chief Operating Officer; and Kevin Berryman, President and Chief Financial Officer. Before we begin, I will refer you to Slide 2 for a specific legal and financial commentary as well as our forward-looking statements and other disclaimers. With that, I'll now turn the call over to Steve, our Chair and CEO.

Thank you, John, and hello, everyone. I'm excited to announce another significant milestone on our journey to become a company like no other. Today, we announced that Jacobs and PA Consulting are forming a strategic partnership to capture the next wave of the digital revolution by combining both companies' next-generation science and technology expertise, with deep domain knowledge across multiple sectors. Before we review this powerful partnership, it's important to recap how today's announcement is consistent with the strategic vision and journey we outlined to our shareholder community over the past several years. Back in 2015, we began by reshaping Jacobs' senior management, which started with Kevin, Bob and I joining the company followed by several key strategic promotions and external hires. This leadership team conducted a comprehensive review of our business, analyzing our cost structure, our current offerings and potential market adjacencies. Together with our Board of Directors, in 2016, we set in place a new strategic vision for Jacobs that leverage the strong core values of the company while refocusing to execute against long-term secular growth opportunities. In addition, we restructured the company into global lines of business to further drive accountability and a deeper customer intimacy and to ensure success in executing this strategy, we ignited our culture through inspiration and inclusion. Pivotal to achieving our potential was establishing the right business portfolio and significantly changing our mindset to provide high-value solutions to our customers, not just billable hours. A key and well-timed catalyst for our transformation was the bold decision to divest our energy, chemicals and resources business. Equally important was the acquisition of global environmental and infrastructure provider, CH2M, and as well as a series of bolt-on acquisitions that strengthen our capabilities in cyber, analytics and national security solutions. And most recently, we furthered our journey with our global rebranding centered around our promise, Challenging today. Reinventing tomorrow, driving a dynamic culture of inclusion, inspiration and innovation. And we looked into the future and our vision for a company like no other. Our new focus, 2023 Initiative, provides the ability to improve efficiency in our foundational business -- businesses to enable us to invest in becoming a premier high-end solutions provider. Our dynamic culture, robust portfolio of technology-enabled solutions and strong global client relationships position us for double-digit growth. And to further accelerate this growth, our journey includes selectively deploying capital toward compelling investments that drive shareholder value. Turning to Slide 5, which you may recognize from our 2019 Investor Day, during which we specifically outlined digital consulting as a critical focus to drive the next phase of our strategy as it offers both strong long-term secular growth and high-profit margins. Both organically and through targeted niche M&A, we have grown our digital consulting offerings. However, not at the scale needed to capture the sheer size and growth of this $100 billion opportunity. So over the last 2 years, we've engaged and evaluated numerous large-scale digital investment opportunities. And from the beginning, PA Consulting stood out as our clear priority, driven by a strong cultural alignment through their superior technical and digital consulting capabilities. We've been engaged in discussions with PA for nearly 2 years, gaining both a deep appreciation of their business and an understanding of the megatrends that are driving significant demand opportunities for innovation-driven consulting, as shown on the next slide, Slide 6. Globally, the world is experiencing multiple converging megatrends, creating the next wave of the digital revolution across all sectors. This next digital wave is driven by 5G compute power, combined with advances, such as in robotics, autonomous technology, machine learning automation and geospatial technology. All of which will unlock amazing opportunities to solve many of the world's most complex challenges and result in the disruption of traditional business models. All of this points to the opportunity from PA Consulting as an exciting partner and powerful fit for Jacobs. Turning to Slide 7. Let me provide more detail on this powerful partnership. We plan to acquire a 65% share in PA Consulting for $1.8 billion, which places PA at a total enterprise value of $2.4 billion. Kevin will provide additional financial details on the structure of our partnership in his remarks. PA is a strategic consulting firm with deep domain and exceptional digital expertise, solving critical challenges for customers. Given Jacobs' and PA's complementary expertise and deep domain knowledge in the fast-growing markets I just outlined, together, we are in a unique position to capture these opportunities. Core to this partnership is driving global revenue synergies with an initial focus in 4 key growth sectors of health and life sciences, public services, consumer and manufacturing and defense and security. Overall, we believe this combination unlocks an additional $100 billion in addressable market opportunity for Jacobs as we are now squarely positioned to win in the digital consulting sector. From a financial standpoint, we believe the partnership will drive compelling value for our shareholders. PA has demonstrated strong double-digit annual profit growth with adjusted EBITDA margins north of 20%. We expect in fiscal 2022 an adjusted EPS accretion in the range of $0.52 to $0.57 and an internal rate of return of over 15%. Now I'll turn the call over to Bob Pragada to provide additional detail on PA.

Thank you, Steve. Now turning to Slide 9. PA Consulting's purpose, bringing ingenuity to life, guides them as they support their clients, people and communities to build a positive human future in a technology-driven world. They are an innovation-led consultancy operating globally from offices across the U.K., U.S., Europe and the Nordics. At the heart of their business are their people, a diverse group of strategists, innovators, designers, consultants, digital experts, scientists, technologists, engineers as well as developers all working to deliver enduring and tangible results to clients. PA is not a traditional consulting firm. Their clients recognize that they are different, different in what they do and how they do it. PA has a strong and differentiated competitive market position. PA addresses the sweet spot across a number of converging client needs. Rapidly evolving landscapes and the need to adapt at a faster pace than ever before are driving the demand for an integrated innovation-driven consultancy provider. Clients' needs are no longer limited to a single area of expertise and often transcend traditional consulting boundaries and approaches. PA has delivered robust revenue and EBITDA growth over the last 5 years through increased focus on innovation-led and multi-capability services. Moving to Slide 10. PA brings together unrivaled sector insight with a comprehensive toolkit of technical offerings. Their capabilities are centered around assisting clients in innovating and transforming their business in the wake of changing customer needs and behaviors, technological disruption, growing environmental and social consciousness, and other business challenges. They bring to market a differentiated proposition, providing the ability to turn strategy into working reality, integrating multiple capabilities to deliver end-to-end solutions. By taking the time to understand each challenge and opportunity, they provide innovative and pragmatic solutions. Our partnership with PA will initially focus on high-growth sectors, including health care and life sciences, public services, consumer manufacturing, and defense and security. This partnership broadens our existing digital consulting portfolio in terms of diversity and scale in cybersecurity, Internet of Things, predictive analytics and automated design. All of which are crucial for the future we want to build together. Moving to Slide 11, which shows the operating model. The partnership respects and preserves PA's heritage and independence under PA Consulting's CEO, Ken Toombs' leadership, while creating superior value for Jacobs' shareholders and significant opportunities for both companies' clients and employees through collaboration and co-creation of innovative solutions. This partnership will further elevate PA to a global player at scale, accelerating their growth plan through access to Jacobs' client base and global platform, particularly in the U.S. PA will continue as a stand-alone entity and independently managed business with active collaboration between leadership teams. Moving to Slide 12. From its inception in 1943, PA has worked with a wide range of clients, from startups with a promising idea to change the world to some of the most important global companies and organizations. Through a cutting-edge global innovation and technology center and innovation hubs, PA specialists tackle challenges across a range of disciplines from high-end engineering to new product design, to business transformation and strategy launch, helping on every step of the innovation journey, taking clients further, faster. PA has 7 attractive industry sectors with a focus on developing innovation capabilities while still maintaining broad transformational skill sets, allowing them to address the highest growth market segment. As Steve discussed earlier, megatrends and industry disruptors are affecting the world. PA is in the middle of solving these challenges. We're excited about the power of what we can accomplish together. So now let me share with you the ways PA is bringing ingenuity to life. Moving to Slide 13. Improving people's lives takes more than just cutting-edge technology. It takes a diverse team of experts who know how to unite multiple disciplines, zeroing on a problem and apply the technology to deliver life-changing results. With the coronavirus pandemic escalating and the U.K. fast running out of life-saving ventilators, the government asked PA to lead one of the largest mobilizations of innovation, science and engineering since the Second World War. PA drew up requirements and specifications for new ventilator designs and sourced millions of parts from across the globe during the greatest period of global supply chain disruption seen in our lifetimes. They put the ventilators through clinical trials and then got them approved by the medical regulator and distributed to hospitals across the country where demand levels change by the hour. And they trained thousands of medical professionals on their use. The effort was a resounding success and against all odds, everyone in the U.K. who needed a ventilator got one. Cell and gene therapies represent a significant breakthrough in the treatment of patients suffering from cancer and other rare disease. PA is working with Ori Biotech, a London- and Philadelphia-based innovator in cell and gene therapy manufacturing to enable the production of these therapies at commercial scale for market-relevant costs. PA has a deep expertise in medical device development, and one great example is their work with Pharmaxis to design and develop an inhaler that made it easier for people suffering with cystic fibrosis to use inhalers. And it's technologies like this designed for one use that PA then takes and looks to apply in other ailments, such as tuberculosis, to enhance quality of life for those in need. Moving to Slide 14. Sustainability is one of those defining issues of our time. Business leaders need practical solutions and new technology to make a tangible difference to the challenges impacting our world. Working with PulPac, a Swedish startup, PA developed a revolutionary low-cost approach to sustainable packaging using cellulose pulp that can replace single-use plastics at a lower cost. The PulPac method makes it possible to dry mold paper fibers into almost any shape or appearance in less than a second. Working with PA, one start-up, Stuffstr, has developed a database solution that collects unwanted apparel and accessories from consumers in any condition and feeds it into either a secondhand clothing market or into materials recycling streams, a circular business model solution. Many of you will know Ørsted as one of the most innovative companies in the energy field, aiming to increase their green energy production to 99% by 2025. PA has worked with Ørsted to fundamentally transform the organization, changing the culture, building capacities and strengthening process in a transformation recently recognized by Harvard Business Review as one of the top 20 business transformation of the last decade. Moving to Slide 15. Protecting the world. It's a big statement. But as technologies develop, threats proliferate and commercial interests are at play, keeping people safe as a mission has never been more important. The U.K. has big ambitions for commercial space travel but needed a regulator to ensure market participants protect public safety and security, safeguard the environment and meet UN treaty obligations. That's where PA came in, helping to craft a regulatory strategy, design the operating model for the organization and a stakeholder engagement strategy to encourage innovation and U.K. investment. The future threats created by today's technologies may still be hard to imagine. But PA stepped in to help the U.K. Ministry of Defense to visualize the organization's future thinking with a set of inspirational innovation tools. They created tools like virtual reality games to immerse decision-makers in future worlds, futurology questionnaires that illuminates expert opinion on possible impacts and exercises to bring different scenarios to life, all to make sure MoD's defense strategy is always a step ahead of the latest threats. The harm from online child sexual exploitation and abuse is growing as Internet's -- Internet use spreads across the globe and crimes become more sophisticated. PA has been key to establishing the WePROTECT Global Alliance, an independent international institution that collaborates with international governments, law enforcement agencies, the technology industry and civil society organizations to tackle the threat facing our children online. Moving to Slide 16. Smart infrastructure is better for people, for business and for the planet. PA is working on some of the most exciting infrastructure projects that are changing the way we live and work. With San Diego Gas & Electric Company, PA's utility reliability experts co-developed a proprietary machine learning-based product called iPredict, which predicts asset failures so the utility can address them before they become costly issues. Together with Virgin Hyperloop One, PA is creating the first major new mode of transportation in more than a century, devising the technology blueprint for the new transportation system, which features speeds 2 to 3x faster than high-speed rail and an on-demand experience that can reduce a 300-kilometer commute to under 20 minutes. PA's work as a part of consortium High-BIAS to develop a breakthrough proof-of-concept and a commercialization model for a portable quantum sensing device that has the potential to fundamentally strengthen global navigation by eliminating dependence on GPS and ensuring 0 drift, meaning that it can locate and navigate vehicles with pinpoint accuracy. Through these examples, you can see that our partnership with PA provides a platform to build significant business and high-value innovation, ethical and digital consulting solutions in response to the secular trend. PA's digital consulting and innovation capabilities combine seamlessly with Jacobs' domain expertise to broaden clients' offerings. This high-impact partnership provides access to unparalleled technical, digital and strategic consulting expert -- expertise across a customer's full project life cycle. Now I'll turn the call over to Kevin to review the financial details of the partnership.

Thank you, Bob. And turning to Slide 17. Jacobs has always emphasized the importance of taking a disciplined approach to deploying our shareholders' capital, the criteria of achieving risk-adjusted returns that are in excess of share purchases and dividends. Our process involves a deep analysis of factors such as our target's cultural alignment, end market growth, competitive advantage, customer advocacy and operational performance. Today's partnership with PA is both a strategic fit and is compelling from a return on capital and shareholder value creation. Let me turn to Slide 18 to discuss the summary of the transaction. Please note that my comments today will focus on U.S. dollar values. We are making a $1.8 billion investment in PA in the form of preferred and common equity as well as providing PA with debt financing. This investment is comprised of a $995 million equity investment and $845 million of debt financing. From a reporting standpoint, we will be consolidated -- consolidating PA financials in accordance with GAAP. The earnings related to the PA shareholders' minority interest will be adjusted in noncontrolling interest. As a result, our EPS and adjusted EBITDA metrics will reflect our proportion of ownership in PA. Cash flow from operations and free cash flow will represent the cash generation from the entire PA entity as the minority interest component is reflected in cash flow activities from financing. Turning to valuation. Jacobs' investment indicates a total enterprise value for PA of $2.4 billion, which represents a value of 13.6x calendar year 2021 expected adjusted EBITDA. While the valuation is in line with our current multiple on consensus 2021 EBITDA, we believe PA has the ability to accelerate adjusted EBITDA growth to levels beyond Jacobs' stand-alone growth for multiple years, both driven by PA's organic strategy and from our joint Jacobs and PA revenue synergies. As a result, the internal rate of return for the transaction is highly attractive at above 15%. We will fund our equity investment in PA through existing cash, our revolver line of credit and an expected new term loan. As a result, our Q4 2020 pro forma debt, including the new debt and assuming that we factor in our Worley equity ownership as cash, is approximately $2.4 billion. This represents approximately 2x net debt-to-adjusted calendar 2021 pro forma adjusted EBIT -- EBITDA of the combined Jacobs and PA. As we expect that the transaction will close by the end of our second fiscal quarter ending in March 2021, we would expect EPS benefits approaching $0.25 in our fiscal 2021 figures. And we would expect our fiscal year 2022 adjusted EPS to improve by over $0.52. Turning to Slide 19. I'll provide more detail on the components of the transaction with additional disclosure available on our press release on Form 8-K filed this morning. Again, the total enterprise value of PA is nearly $2.4 billion, with an equity value of $1.53 billion, of which Jacobs will own 65% and PA employees own 35%. The PA employees will be reinvesting at least 50% of their consideration received from this transaction, which represents the approximate 35% ownership at closing of approximately $535 million. Our $995 million equity investment is in the form of both preferred equity, which provides the 65% value interest in PA and common shares, which represents a 65% voting interest. The preferred equity accrues value at a 12% annual compounded coupon. Jacobs will also provide the $845 million of debt finance to PA Consulting at LIBOR plus 425 basis points. To incentivize PA employee shareholders to drive accelerated, sustainable, profitable growth, an equity incentive pool equal to 25% of common shares will be established. Specifically, funding of the common equity and equity incentive pool will be subject to PA valuations reaching levels that first satisfy the terms of the 12% coupon on preferred equity and the outstanding debt of the partnership. Turning to Slide 20. PA has demonstrated strong double-digit adjusted EBITDA growth from 2016 through its forecasted calendar year 2020. The performance was driven by high single-digit pro forma revenue growth, margin expansion and small strategic bolt-on acquisitions. The company's industry-leading EBITDA margins of over 20% are a testament to the high-value solutions they provide to their clients. Given our collective partnership to drive expected revenue synergies, we believe organic revenue growth can accelerate into the low double digits with additional growth driven by bolt-on M&A. From a profitability standpoint, while PA's expected 22% adjusted EBITDA margins are impressive, we would expect future adjusted EBIT margins to temper slightly, but remain above 20% in the medium to longer term. Turning to Slide 21. As a result of the PA consolidation into our reported financials, over the medium term, we expect an accretion of approximately 75 basis points of benefit to our organic net revenue growth and an approximate 70 basis point benefit to adjusted operating profit as a percentage of net revenue. Adjusted EBITDA growth will also be enhanced on a pro forma basis by approximately 75 basis points. And finally, from a free cash flow conversion standpoint, PA will support a pro forma improvement in our free cash flow conversion, given PA's very efficient working capital levels. And in summary, on Slide 22. Both Jacobs and PA see significant opportunity to partner and solve many of the world's most complex challenges posed by climate change, urban development and ongoing health care challenges. Our collective talent can and will accelerate the development of solutions that help clients to successfully leverage next-generation digital technologies and innovation. We are excited about our aligned culture centered around a common purpose of innovation to create a more sustainable, connected and technology-driven world. With that, I will open the call for your questions.

[Operator Instructions] The first question comes from the line of Michael Dudas with Vertical Research.

I see you didn't have much time for -- to enjoy Thanksgiving dinner, it seems, after with this transaction announcement today.

You're correct for the most part. We stuck out, but we worked out over the weekend.

Terrific. My first question here -- 2 questions. First, thinking about with this transaction, the ability to leverage the PA Consulting talent through the Jacobs platform, what type of revenue opportunities did you see through this pretty long due diligence process that emerged? And you indicated in the prepared remarks, either Bob or Steve, about the U.S. mix and PA's business and there's opportunities there. So can you maybe share a little bit of that thought? And is there some sort of percentage basis or target level over the next medium term that can help the current Jacobs platform with the PA's solutions?

Yes. So Mike, thanks for the question. I'll start and then hand it over to Bob and Kevin to build on it. It's -- there's a tremendous amount that PA brings to Jacobs and obviously, as we're announcing it today, that PA perceives that Jacobs brings to them. And you mentioned one of the areas is the U.S. market. Clearly, PA has done an amazing job on growing around the world, especially in U.K. and Europe. And that's going to -- that's really going to be a market that, together, we each bring complementary domain capability and client relationships, et cetera. But the geographic expansion, the clients that we have around the world, the geographic presence we have specifically in the U.S. is going to be a significant revenue growth and revenue synergy opportunities. Bob highlighted the 4 initial sectors. Again, we'll obviously be covering all of the great market opportunities that they have and we have, but health and life sciences, the defense and security, the public services, consumer manufacturing are the initial areas where teams are going to be formed and working collaboratively to drive significant revenue synergies, which we believe are definable and real. Bob, anything to add to that?

Yes, absolutely, Steve. So Mike, I mean, if you could think about it from a capability standpoint and really that early upfront, high-end type solutions that the PA brings while our clients are looking at business challenges. So I think it's that element that then if you look at how those business challenges then morph into whether it'd be a project or the transformation within the business or even a reinvention of the business is where those capabilities really come together. The other thing I'd highlight is that if you remember in February of '19, we talked about market connectivity, where we see our end markets, our end sectors, starting to converge in solutions whether they be digitally enabled or some form of technology, AI, predictive analytics, other things within data science are spreading different markets such as transportation and water, in our health and life sciences business. PA is really going to help accelerate that. So from a percentage of effect on the Jacobs business, I think it gives us more visibility, greater expertise in order to address what the challenge is and then enhances our ability to solve those.

I appreciate that answer. My follow-up would be relative to -- a 2-part follow-up. First, does the deal structure allow for Jacobs an ability to increase the investment in PA over time? And how does that look on relative to the partnership going forward? And maybe for Kevin, how does -- given the net debt leverage ratio you have now and what the -- historically you've talked about being comfort. Maybe you can refresh us on that level of comfort levels on net debt ratios, how deleveraging fits in the queue relative to your enhanced free cash flow generation and given this transaction on a go-forward basis.

Yes. Let me just start with just the kind of a future thinking is that we spent a lot of time thinking together with PA on the right structure. And as we outlined today, the success scenario that we believe is keeping their independence, which has had a great track record and to keep that going into -- well into the long term. And so under Ken Toombs' leadership, you can see the structure is that it will be a -- essentially a third leg of Jacobs, but run independently with the collaborative teams in place to drive what Bob just talked about. And the way it's set up where both companies are highly incentivized to succeed, we'll -- we just see that going on and continuing in the future. Kevin?

Yes, Steve. So Mike, on the leverage factor, we kind of talked about the fact that we'd be in this kind of mid-2s on a net debt basis as we characterize the numbers that we just discussed, actually getting to when you take into account the cash, probably closer to 2x. And so at this particular point in time, probably as we close, there will probably be an initial stance that we will be thinking about, ensuring that the leverage factors can be reduced a tad, but we're not pressured by any stretch of the imagination. And with our ongoing cash flow opportunities that are driven by, not only our existing business but PA's as well, the ability to delever will happen very, very quickly. Consequently, I think after 6 months, we're going to be in a really, really good position, and we'll be able to be thinking about any other potential opportunities to deploy capital to the extent that they may make sense.

The next question comes from the line of Joseph DeNardi with Stifel.

Maybe I think just a couple of quick ones for Kevin. You all talked about kind of double-digit EBITDA growth beyond FY '21, I think, with earnings. I'm assuming this is additive to that. That was kind of an organic expectation. Is that right?

Correct.

Okay. And then maybe, Steve or Bob, just in terms of the leverage for PA, the necessity or the comfort level of putting $845 million on the business, like, why do they need it? What are they going to use it for? Can you maybe just explain that a little bit?

Bob, go ahead and take that one.

Yes. It really, Joe, is around expansion to the U.S. I think that's really -- if you look at the synergies between the 2 companies, that access -- taking those capabilities that I talked about previously and applying them to our client base in the U.S. and extending that successful track record that they've had in the U.K. and abroad, I think, is the real benefit here as far as putting their balance sheet to work through successful engagements with their clients. So I think that's going to be the key. And the cash-producing elements of the business stand-alone are really, really strong. So we see that kind of being a machine that can feed itself.

The next question comes from the line of Andy Kalapowitz (sic) [ Kaplowitz ] with Citigroup.

So PA has obviously had strong revenue growth, which you talked about over the last 5 years, I think, 11%. Could you go into a little more detail regarding that growth? How much of it has been organic versus acquisitions? What's the strategy been there? And then I think you guys mentioned the jump in EBITDA margin in 2020 and a bit of a tempering there going forward. Is that because costs might be coming back from the pandemic? Is there something else that tempers the margin there?

So you want...

Yes.

So do you want me to go, Steve, or you want to go?

Yes. Okay. Go ahead. Jump in, Kevin.

No, look, the margin has been extraordinarily strong obviously in 2020, and they've been doing very, very well within the construct of the pandemic. So it's a clear indication of the value that they're bringing to their client base during some very challenging times. We do believe that the opportunity in the U.S. is going to be substantial and the margin profile in the U.S. is probably a little bit lower than the rest of their business. So no other reason other than the mix of the business as the U.S. opportunity continues to expand, which we think is a great opportunity, as Bob highlighted as well that there will be some mix dynamics associated with the margin profile. So nothing other than that is really our expectations.

The next question comes from the line of Jamie Cook with Crédit Suisse.

So question, I guess, one -- 2 follow-ups and then -- one, what was the company's just sort of strategic rationale to make this investment with you today? I think you said on -- during prepared remarks, you've been talking to them for 2 years. I'm just trying to figure out what the motivation is today versus where we've been. And then, Kevin, can you just give us color on what the backlog you're acquiring and what their geographic mix is?

So thanks for the questions. So look, there's some good comments in their press release, PA Consulting's press release, that outlines their rationale and how they got to this decision. But clearly, they had choices. And the main choice, one of the main choices they had was to stay completely independent and flip the Carlyle ownership to the next PE firm, and there was significant interest in that across the market. And what we did, and we took the time to meet with them and lay this out that we can give them the best of both worlds, that we can mirror that independency and structure and continue to have them unleash their growth or their organic growth and inorganic growth that they've been -- then they've had a great track record on. But that we can bring the additional benefits that we've been outlining in our prepared remarks and some of the answers to the initial questions around not just unleashing the U.S. market and other markets around the globe where we have strong positions, but just the several joint opportunities. We have a tremendous opportunity to leverage their IP across our client base. They have world-class innovation centers. And you've heard us talk about starting up and investing in innovation centers. We now can shift to utilizing their innovation capabilities, which are huge. And even culturally, there's things that were pretty amazing as we got into it that we're both on the journey of really focusing on our culture and recognizing how culture drives performance. And so things like inclusion and diversity and other elements that we can, together, take it to another level. And so it's pretty broad-based on the opportunity for them to continue their journey in their independent fashion, but leverage the power of what this partnership can do under a common ownership.

So Jamie, let me just take the question on the backlog. The backlog is a little bit shorter in nature than what I would characterize as a typical Jacobs backlog, but their strength is robust at this particular point in time. Actually, backlog is up 33% over the last 12 months. I think that's as of August '20. So they're obviously very, very strong, well positioned for not only 2021 but beyond. But their backlog does tend to be a little bit shorter in nature relative to ours, just given that we have some of these very large, larger contracts, which extend beyond a year or 2.

Next question comes from the line of Louie DiPalma with William Blair.

Just one follow-up on some of the previous questions. Are you able to disclose what percentage of PA's revenue currently comes from the U.S. market?

Yes. It's approaching almost 80%.

No, no. That's from the U.K. U.S. if you [ have it ]. Yes.

Sorry, 10%.