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

Good morning, everyone. I am Michael Feniger, the engineering and environmental services analyst at Bank of America. At the conference, we have many companies that are at the intersection of industrial end markets and technological solutions. You just heard from Rockwell Automation and Jacobs Engineering, Jacobs Solutions really fits the bill here, especially for where this company is going by 2025. So I think I'm going to turn it over to Kevin to introduce the team, and there's a short presentation followed by a dialogue and a Q&A. Over to you, Kevin.

Thanks, Michael, and good morning, everyone. Really excited to be here this morning. Jacobs is roughly a $12 billion scientific, technical, engineering, professional services company that has gone through a significant transformation over the last several years. And we're poised to take advantage of that transformation with exactly what Michael was talking about, this convergence of information technology and operational technology where we think we are uniquely positioned to be able to leverage off of our capabilities in those particular areas to be very successful, and to present some pretty exciting objectives that we've established. Just to give some context, perhaps, and then I'll turn it over to my colleagues here to give some additional comments. The transformation has been really since the new management team has come in probably about 6 years ago. And in our first strategy that we presented in 2016, it really was fundamentally about a deep dive into the organization to really consider what we wanted to be when we grew effectively what did we want to focus on and what ultimately, perhaps, we did not want to do. And so the no part of that was as important or more important than what we wanted to focus on, which led us to a significant reshaping of our portfolio over the last several years. Specifically, we took a bold move and we sold our oil and gas kind of engineering construction business, which represented 1/3 of our company earlier on in our strategy and used those proceeds to fundamentally double down on those areas where we did want to focus on, specifically a large acquisition of CH2M in -- shortly at the same time, really effectively in the same time relative to the divestiture of ECR and doubled down in environmental consulting, water kind of transformational repositioning of our company in a different way. And that was a very large change in our culture. And ultimately, a very big step in terms of the journey that we started to then fundamentally double down on relative to our ability to be a more technically, digitally oriented company. And that occurred through a series of a lot of other acquisitions, which are noted here, with the most sizable ones being KeyW that you see there, which really doubled down in cybersecurity and space intelligence areas of opportunity. And then actually software companies, the last 2 being BlackLynx and StreetLight Data, which have all of been executed within the last several months. And the single largest acquisition since CH2M with our investment in PA Consulting. So effectively, our strategy of changing from what we were historically a very, very competitive, well-positioned engineering construction firm to really a technical solutions entity, which is where we are today, and we're excited about that change. And what it's allowed us to do is fundamentally change our portfolio into something that looks very different and is aligned against long-term secular growth trends for our end markets. This is a chart that has a lot of information on, but I'll just focus on a couple of things which are important. You see the kind of portfolio of products' end markets of which we are competing in. And you can see that those are aligned with very strong growth trends across the globe. And I would point to the top right part of this market, which kind of identifies the end market growth, which we have been able to realize in our business over the last several years. If you go back to 2016, our end market growth was in the neighborhood of 3-ish percent. And with the change of our portfolio, we are now looking at end markets that are growing, on average, 5%. And we actually think that the growth that we're experiencing in those markets is actually decades long type of growth. So we even think beyond the 3 years of this current strategy that as we exit the strategic period 2024 -- ending 2024, we actually think the end markets will be growing even faster in 2025 and beyond. So we're very, very excited about the repositioning of our portfolio. If you go to the next slide, Jon. This kind of puts it in perspective. And if you look at the right side, you can see the end markets in which we're competing, the size of those markets and the estimated annual growth for each one of those, which if you add that all up and weight it, it's effectively 5% plus growth in our end markets. But I think there's an additional piece to say. For example, if you peel away the onion, these are very large addressable markets. But if you peel away the onion in each one of these areas, there are many instances where we're growing much faster in the exact market in which we are competing. For example, if you were to look at national security. National security is showing good 7% to 8%. But if you were to look at space intelligence, where we have a very strong position, it's going to be expected growth of over 10%. If you look at water, water within infrastructure, it is going to be growing faster than the average. If you look at advanced manufacturing, where we have very strong positions in pharma and semiconductors, those businesses now are growing well into the double digits. So we've repositioned ourselves to be a very, very uniquely positioned to be against formulating our growth plans against markets that were really showing high growth. But that's about the portfolio. I think I'd like to turn to Shelie Gustafson, our Chief People Officer, to really give you a sense if this did not happen. And all the good work to reposition our portfolio unless we had doubled down and focused on our culture. And I think it's important to understand because we wake up every single day at Jacobs, focused on culture and how to enhance it because we're a people business, and we don't win unless we've got excited and engage people. Shelie?

Thanks, Kevin. Good morning. I think it was Peter Drucker who said strategy eats -- culture eats strategy for breakfast. And to Kevin's point, we had to embed our culture and our people in the strategy to be able to unleash the talent and the mindset to accomplish the strategy. So over the past few years, we've laid a nice foundation to which to draw from, to build a culture to take us to this new strategy. Our culture is focused on a couple of things: ensuring accountability, driving performance and unleashing talent for growth for the organization, both talent and the mindset. So let me tell you briefly about the journey we've been on. In 2015, under a new leadership team, they really assessed the talent and the culture, what was working, what was not working. And through that process, we started by implementing accountability metrics and accountability actions. Layered upon that, we then focused on inclusion and diversity. And yes, we call it inclusion and diversity because we think that we have an inclusive organization where people contribute, they know their ideas and contributions are going to be valued. The diversity comes with that. And that leads to innovation, and that leads to innovative solutions for our clients. And today, our focus, layered on all of those, is to ensure that we have an agile culture that we can be agile in terms of meeting the demands of our clients, working agilely to develop the solutions quickly and that we institute a learning mindset to build that growth into our organization. So we're excited about where we've been, and we think that this will position us well for our future strategy. Just want to comment on one more -- on a couple of proof points. We must retain and attract talent. We know -- all know there's a race for talent. And this culture that we've defined, our purpose statement is attracting talent. One of our proof points is on our turnover. Our turnover is ticking up a bit pre-COVID levels. But it's not spiking like many organizations are experiencing. Our employees tell us they want to work for a company that is purpose-driven and to work with colleagues where they learn, they grow together. So we're excited about this foundation. We can talk more about it. But Bob, let me turn it to you.

Thanks, Shelie. So Jon, if we go to Slide 10. So maybe just to recap what Kevin started off by talking about where we are today. So historically, engineering foundation, strong, strong leadership position in the engineering world that grew to a very diversified set of technical services across the end markets that we feel really strongly about, and I'll get into some proof points just to crystallize when we say what we do, the impact that we're having not only with our clients, but the impact that we're having in the world. What's really the underpinning now as we move forward is our digital and our consultancy capabilities that are, in some cases, enabling that strong professional services background. In other cases, it's actually the offering itself, but all around providing solutions for our clients. So as of FY '21, you see that mix of our portfolio to date. And all in, and Kevin said it before, high-end growth sectors that have a pretty nice tale to them. Maybe just a couple of examples. On the left, we talked about the growth that we're seeing in the advanced manufacturing world. And a lot of that has to do with not only some reshoring and some learnings coming out of the pandemic with regards to global logistical supply chains getting locked down. But also the -- just the sheer need for novel therapies as well as semiconductor chips. So 2 areas to highlight. Our work with Intel. So we've been the engineer on record for Intel for several decades. And what we're experiencing right now with the capacity expansion going on with Intel is unprecedented. We're doing work right now in Israel, in Arizona, soon to be in the state of Ohio as well as recently announced a job that would be coming up in Germany later in the year. To put it in perspective, just 20 years ago, 80% of the world semiconductor production happened in the Western world, Western Europe as well as in North America and 20% in Asia. Today, that number has flipped over and 20% is manufactured in the Western world and 80% in Asia. So key leaders around the world are wanting to kind of balance that portfolio. Intel is on the front end of that. In the pharmaceutical world, pharmaceutical customers over the course of the pandemic really shifted their portfolio towards the coronavirus, both therapies as well as the vaccine, obviously. And now looking to kind of shift that back to some of the novel therapies that are happening. What's happening as a result, not only the reshoring effort, but Tier 1 customers in the pharmaceutical world like Pfizer, and Lilly, and Merck and AstraZeneca and others are honing in their own manufacturing capacity for these novel therapies and looking to contract manufacturers for some of the other bulk production, and that's leading to a significant rise in all the workload in that area. Then on the right kind of highlighting a couple of our infrastructure plays. And these are all recent wins that we've had. As a part of the infrastructure stimulus bill in the U.S., we're already starting to see some early wins even before the real money starts to flow on that front with a win there for Penn Station in New York City, and really opening up that northeast corridor that is in desperate need for transportation investment. The other I wanted to highlight here is the work around precision agriculture. This is both in the U.S. as well as in the U.K. In the U.S., Kevin mentioned that KeyW acquisition we made. The space intelligence or space ISR capabilities that -- in satellite technologies that we have are now being deployed from the geospatial sense to drive precision agriculture. And we're seeing that rise in the U.S. and just were recently awarded a program with our PA Consulting partners here in the U.K. for Defra using this technology. So really nice wins that are coming up, that we have and are pointing to a pretty bright future moving forward. Jon, maybe the next slide. I'm sorry, the accelerator slide. So now where do we go from here? So as a part of this 3-year strategy, we stepped back and looked at, okay, what are some of those market and global disruptors that are happening that are driving our business as well as what capabilities do we see will really help catalyze that growth. And so from a global disruption perspective, and this is almost cliche these days when you talk about it, but clearly, climate response is driving our infrastructure, our energy, multiple end markets that we serve. And we feel very strongly that, that -- this is an area, it also goes to our culture being purpose-driven. This is an area that we are going to put a tremendous amount of attention on. In the slide deck that you have, you'll see today, of the $12 billion, about half of that is in some form of climate response and ESG-related, and that's probably on maybe even a conservative look at our portfolio. And we think that, that -- we know that's going to grow as we continue to not only fine-tune our own capabilities. But these end markets give a substantial amount of investment, not just in the U.S. but in the U.K. and Australia and some of our other markets that we serve. Big Data. So if you go back. Big Data is driving everything. That also seems cliche to say these days, but we see it as a major growth driver for our business and the data platforms that we now both organically and have acquired is serving as part of another strong, strong undercurrent as we look to provide solutions for our clients. If you kind of step back and say, okay, the previous -- in the previous role or old school thinking -- not old school, conventional thinking. Our success criteria was based on being the best engineer in the world. Today, our success criteria is how are we solving the issues that our clients have. And we're doing that right now with not only our engineering power, but also data and consultancy goes too in the 2 primary end markets that we serve. And then lastly, consultancy and Advisory. It is a capability. So kind of switching from global market disruptor to a capability. But what we have organically been able to develop as well as now with the sizable investment in PA Consulting is a strong set of strategic consulting skills but not kind of the old playbook of the standard consultants that you would think of, strategic consultants that have a playbook and apply that playbook across several end markets. PA is different, and PA uses digital and product innovation in the same end markets that we described before. And that, coupled with our expertise has really served as a very applied technology-driven approach to solving challenges that our clients have. So when we step back and we look at that -- those accelerators in their entirety, we're -- it's a cause for real excitement as we move forward with the company. With that, I'll turn it back to Kevin.

Yes. Thanks, Bob. Go to the target slide. So look, we clearly have an ability to leverage off of the tailwinds associated with our end markets. That's pretty exciting to see. And what that translates into is a strong underlying growth opportunity for us. But it's about how we will execute within the construct of solving our clients' challenges relative to that. We take our deep domain technical services capabilities developed over multi decades and the relationships with our clients. We now combine this with consultative and advisory skill sets via primarily PA. And then we augment that further with data solutions, basically the convergence of operational technology and information technology. We think the offering collectively of those 3 key capability sets are unique in the industry. And consequently, it puts us in a competitive position to be able to grow faster and ultimately be more successful in solving our clients' challenges. So if you go specifically to the targets, again, that translates to a 7% to 10% organic growth. This is an organic growth number. This is not augmented with additional capital deployment. I'll talk about that in a second with continuing margin enhancement, which translates into double-digit operating profit growth. And at the same time, because of our continued focus on efficiency and working capital, ultimately, returns on invested capital also growing over time. If you go to the last slide, Jon, to talk about what it could potentially mean for us in terms of an EPS picture going long term. You can see where we were historically back in 2016. You can see where we ended up in 2021. And you can see that our expectations by the time we exit our 2024 year-end strategy, that we have the opportunity to deliver $10 of EPS in fiscal year 2025 with additional capital deployment, which we consider to be a strength of ours in terms of our agility to be able to execute at the right moment, at the right time to be able to ensure a nice return profile for our shareholders. We think there's an opportunity under a more share buyback-oriented scenario where we'd be willing to lever up to 2x, where we could be at $11 and a more aggressive M&A scenario where we could ultimately approach $12 of EPS in 2025. So we think that's a pretty compelling opportunity. And we think it's exciting probably first and foremost for our people. We're going to be the ones that are making this all happen relative to the culture dynamic that is so important to us for our clients because of the ability for us to solve those challenges that they're facing and obviously for our shareholders in terms of the return profile that's available to them. So maybe, Michael, we'll stop there and open it up for questions, but we're really very excited about the opportunity.

Yes. That was -- thank you, Kevin, thanks, team. That was great. And just touching on, Bob, your point about the intersection of managing operations and now the data capabilities. How should investors think about this company better positioned with higher levels of infrastructure funding going forward compared to the past. So in the U.S., there's a $1.2 trillion infrastructure package. How much of that can Jacobs participate in? And how is Jacobs now better positioned to participate in that going forward compared to maybe its conventional days as an engineering part?

Sure. I'd probably point to 2 or 3 main areas. One is that, that flow of money is going to be unprecedented and specifically in the U.S., but also, we're seeing the same thing happen here in the U.K. as well as in Australia. About 90% of our overall portfolio and capabilities touch specifically the infrastructure areas of focus. So that's clearly in our wheelhouse. Why we're probably more uniquely positioned today for growth than we were even 10, 15 years ago? I'd point to a couple of things. One, we've talked about it already, the data capabilities that we have today and that enabling a different type of solution is definitely a force multiplier and one that we continue to make -- we've made significant investment, and we continue to make significant investment to continue to build those out. The other is -- and this is interesting because it's actually -- the origins of it were around our oil and gas business and further got fine-tuned in the kind of the advanced facilities world and now is squarely in our infrastructure space, and it's the globality of our business. The global platform that we have is allowing us to -- historically, it gave us the ability to scale quickly. Today, that still exists, but also the level and depth of talent that we have around the world is allowing us to deliver some very unique solutions to our geographies with global talent delivering locally. And probably the area that's experienced the biggest growth in the infrastructure piece of that delivery model has been right here in the U.K. Just in the last 2 years, we have doubled our amount of global delivery here in the U.K., and it's allowed us to keep that competitive edge.

That makes sense. And can you just remind us -- the infrastructure legislation was signed in November. I believe either Friday or maybe even today, we finally got the passage for the funding to get to the states' level. So help us understand -- I know you have your targets out to 2025, but when should we start to see the bulk of infrastructure really hit the states, start to drive your backlog and earnings over the next few years?

Yes. Maybe I'll kick it off, and Kevin, I'll move it over to you. In fact, Kevin and I were just talking about this 10 minutes ago is we are starting to see both. Think about -- we see it in our pipeline, then we win jobs, and it turns into backlog and then we'll see it in our P&L. That continuum has already started. Our backlog -- I'm sorry, our pipeline growth just in the last 2 months has been significantly driven by projects and programs that are coming in through the IIJA. So that's happening in real time. The backlog growth has already started. I think in our Q1 numbers, we saw some of that backlog growth, and that will continue through the near-term quarters. And then probably second half of the year, we'll start to see it through the P&L, being a material difference is looking like FY '23.

Look, I think the reality is the finality of the IIJA has come to life when the omnibus budget was passed and the funding mechanism. It was actually passed a week ago effectively. And that's a big thing, both for our federal services business as well as infrastructure because what it has provided is the clarity and very clear, consistent view of what the growth looks like to the client base. They've been hesitating as it relates to fundamentally executing against some of the potential opportunities upcoming until they saw the full picture. And now effectively with that clarity, we know that the -- through the interaction of a program management office that we put in place, which is actually out there talking to our clients at the state and local level to determine -- help them understand when the money is coming, where is it going to be best suited to be spent against and what are they needing to think about in terms of how they have to drive the agenda going forward. So we're seeing that momentum now start to accelerate given the recent finality of the funding mechanism. It's not that the people weren't really understanding that the bill, the bill is law, so it's going to happen. But until the funding actually was approved -- there was a hesitation by some of the clients. So we're pretty excited about how that's now starting to quickly transition to a lot of talking to actually some doing.

It makes sense. And obviously, Jacobs has laid out a $10 organic EPS by 2025. You finished last year around $6.30. When we look at that target, and now we're seeing the Russia-Ukraine conflict. Any impact we should think about on your 2022 outlook? And if this maybe back-end weights the trajectory to get to that $10? Maybe just to flesh it out a little bit further. Could we see a slowdown with some of your European clients on capital spending? Or on the flip side, you guys have cyber, national security exposure to Department of Defense, could those businesses actually see maybe a pickup in activity?

One of the benefits of the portfolio that we worked really hard to create is this ability to have a consistency associated with our performance levels. And actually, in this particular question, we see there being probably more upside than downside, certainly versus what we contemplated in our strategy because our strategy was completed a few months ago. So didn't contemplate the Russia-Ukraine dynamic that, unfortunately, we're experiencing right now. So I think the dynamic of -- certainly from a U.S. perspective, the pivot to the Eastern kind of pivot on supporting defense security-related issues, I think that doesn't stop because that's a threat that continues to be in place. And if anything, I think a pivot back to Europe and what's going to be happening in NATO as well as the U.S. reinforcement of the old idea of being more secure, I think, obviously, is incremental to our business versus detrimental. And look, I know people are talking about, does this translate into a recession and these potential things. Look, I think we're well positioned because what we've seen in the past when there are recessions that are out there, the governments tend to double down on things like infrastructure to be able to support job growth in a time of some challenges. So we feel pretty good about the portfolio, and we think it provides us a lot of different avenues to be able to grow going forward.

And just to dig a little further. I think you guys had a couple of slides. What areas of that CMS segment would potentially see upside in this scenario? I believe there's -- you have space, I know there's cyber, intelligence. What areas do you think would kind of see upside with what has been unfolding over the last few weeks?

Do you want to take that, Bob?

Sure. Probably most simply stated, those areas that support security in 2 fronts. One, from an information perspective, the whole intelligence, surveillance and reconnaissance community. And remember, that's in multiple domains. So Kevin mentioned space intelligence that's low earth orbit space. It's also in air, it's also land, it's also sea, and we play in that multi-domain. So I think that's -- that will be key on the information aspect of that. The other piece, though, is the hard assets. So the base infrastructure on this pivot that we've been going through in Asia for almost a decade, as Kevin said, that doesn't stop. But spending in European base infrastructure, both the U.S. as well as allies has slowed over the years. There's been a lot of realignment work that's been going on since the '90s. We see that coming back, and we're already starting to talk to customers about that as well, not just the U.S., but allied nations. In fact, I think Germany has been pretty vocal about what's going to happen there.

That makes sense. And then the other big concern in the market, obviously, outside of Russia-Ukraine, but somewhat related is what we're seeing with inflation. So Kevin, maybe to kind of walk through with us how inflation kind of impacts the business model. When you think of your contracts, which many of them are multiyear, what type of protections are in place for investors to get comfortable with a company that has multiyear contracts and we're seeing acute and spike inflations in some areas?

Yes. Look, I think we are, really, I think, well positioned to manage through an inflationary environment. By the way, we haven't really assumed a material inflationary environment and the targets that we've established, that would provide upside if, in fact, inflation continues in a material way. But effectively, if you look at our contract portfolio right now, roughly 75% of our contracts are reimbursable in nature. We actually want that number to come down over time as we're offering software solutions or consulting and advisory capabilities, which tend to be more fixed price services, lower term, i.e., shorter projects, and so you can price appropriately as you enter into each one of those contracts as you see the inflationary environment. And if you think about the fact that we can pass along those costs to 75% of our contracts, that really is the contract structure for the multiyear, sometimes decades long, contracts that we have big enterprise contracts tend to be reimbursable in nature. The shorter-term contracts where we can price inflation in appropriately are more of the fixed-price services. So that's the first thing that's important to note. I think the second thing is this global capability that Bob was talking about. We basically sell locally and deliver globally. And consequently, we're managing our labor force, our talent base at the 55,000-person level as opposed to local levels. And that eliminates the challenge associated with spiking up and/or really tight labor markets in a local area because we're delivering at the global level. So there's a combination of factors that we have, not to say that we're not paying attention to it because we are. But we have an ability to mitigate a lot of the potential challenges associated with an inflationary environment. And actually, at the end of the day, we would think it provides upside to our company as opposed to downside.

Interesting. And maybe just to bring you in on the people side. Every public and private engineering firm is talking about how there's a war on talent. We're seeing a lot of M&A, partly just to try to get your hands on more headcount. So I'd love to get a perspective from your side, are we seeing pressure on wages just going to potentially continue? Whatever we were embedding in 2022, did that move higher? How do you improve retention relative to maybe an industry that it seems like there's kind of a war to try to grab as much talent as possible?

There's no denying that there is definitely a race for talent. And people are saying there's a -- we're going through a Great Resignation. We tend to call it the great reshuffle because we're hiring a lot as well. So there's sort of 3 prongs that we're looking at to ensure that we have the right capabilities to deliver on these solutions. Number one is talent, and it is both sides of that coin. It's talent attraction and talent retention. So a couple of things there. We, number one, have a recruiting machine that's pretty amazing in terms of finding the right skills and capabilities. And as I said earlier, they're very attracted to a purpose-driven organization. Two on that is we are expanding how we look at our workforce. So it used to be -- for most organizations, you're looking for that perfect person that fits your requirements 100%. And we're more flexible on that. We're also expanding programs to attract talent, whether it be apprentice, whether it be university grads and globalizing some of these programs. So that's from a talent attraction and then certainly retention as well. I spoke about inclusion and diversity. And we know that, that is a retentive factor for us at Jacobs. We have 8 very active employee network groups and over 20,000 of our employees are part of those network groups. So we know there's a retentive fact to that. So that's on the talent side. Number two, Kevin already spoke to this, but it is this global platform of talent that we have to leverage that. And interestingly enough, COVID actually helped us do that better. We are more engaging with people around the globe than ever before. We were with some of our employees recently and they talked about how it used to be. If they needed to have a job done, they wanted all of their employees there locally. It is nothing for them to now reach out to another state, another country to be able to leverage that talent. And then we have a global design center as well that is part of that global platform. And then the third element is technology. We have to utilize technology, so we don't need as many people. Bob gives examples of working for Intel and a job that used to take 3,700 employees is about 1,500 employees, and that is primarily due to technology. So we have example of example to share around that and need to do more of it. But the culture that I talked about is around talent attraction and retention, but it's also the mindset needed to be able to use technology, and that's why we're excited about the culture allowing us to do this.

That's great. And I have a few more questions, but I do want to turn to the audience to see if anyone has a question.

You mentioned you've made some disposals, particularly in oil and gas. Is there anything that doesn't really fit in the portfolio going forward?

Look, we've -- with this strategy, obviously, all of our end markets that we've already highlighted, we got a tailwind in. So fundamentally, the markets in which we are currently operating, we like them from that perspective. The ability for us to take our deep domain knowledge that we talked about and then augmenting with this consulting and, let's call it, data solutions capability, allows us to create an ability to leverage this across the entire portfolio. And so as we think about that 7% to 10% organic growth, we're feeling that the portfolio looks good, and we like it and we're going to execute against it. To your point, though, look, we are a team that is agile relative to understanding dynamics that may change into the future. And look, we sold 1/3 of our company back in '18. And so we are always evaluating what that looks like and what the right thing to do relative to unlocking our value and improve our focus is, in fact, we believe that's the right thing. Right now, we like the portfolio, but we continue to evaluate. And I think that at the end of the day, you shouldn't think that we're going to be materially changing the portfolio to any great extent, but we're always, as we should, as a management team, always be considering and thinking about that. But we like the portfolio right now. The 7% to 10% organic growth, I think, is an indication of that like.

And maybe just to follow up on that. And I think this is going to probably be a theme throughout the conference with a lot of people pushing on data and automated technology and services. As you shift from conventional engineering, planning and program management work to more of this consulting value-add model, do you have to educate the customer base? Or are your current customers now saying, we're willing to pay up for these services? We're seeing the energy efficiency, the productivity savings. How is that dialogue kind of playing out? Is it a push-pull? Is the market right now demanding we need this data? Or do you have to try to upsell it?

I'd say it's both right now. It's both by geography. We use the U.K. market specifically. Here, it's clearly a pull. Our U.K. clients have embraced the value of technology and digitally enabled type solutions and also realized that from a life cycle cost perspective, it actually costs less than the conventional means of delivering those types of solutions. So we're codeveloping products that help our -- that enable our services and are giving a long-term solution for our clients. I'll use an example here in a moment. In Australia, probably and in Southeast Asia, a bit behind where we are in Europe. Where I think that there's great upside potential is in the U.S. because right -- in the U.S., it's definitely a push and not a pull. And so I think -- and just the dynamics of every state being different; within states, every municipality sometimes being different. There's a blend in what we're seeing with some of our Western U.S. clients today, specifically in California, is that embracement of why you could do this? PG&E is a great example. I think the wildfires that have happened as a result of line sparks throughout the entire state made global news over and over again. We're working with PG&E right now to underground 10,000 miles of that cable, and we were able to provide a solution that had the digitization in the use of even geospatial to really get a lay of the entire state and where to strategically put those lines. And then once those lines are in place, in partnership with our PA Consulting family mates now, how do you even detect line breaks when it's underground because those are things you got to think about. So it's those types of solutions, and we've seen this before. They start in the West and then they'll gravitate to the East.

That's why we're here today. So I just want to thank the entire team for the presentation dialogue. If you have any questions, please feel free to reach out to me, plus the in charge with Jon and the team for any further discussion on Jacobs. Thanks, everyone.

Thank you.