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

Good morning, everyone. This is Sheila Kahyaoglu with the Jefferies Aerospace and Defense Equity Research team, and welcome to our virtual IT Services Summit. Today, we're very lucky to have the Jacobs team with us for our third Annual Tech Summit. We have Caesar Nieves here, who's Executive Vice President of Divergent Solutions; and John Doros, who's Senior Vice President of Investor Relations and Treasury. Thank you both so much for being here. We're going to stick to a fireside chat format. But first, Caesar has some slides that he wants to go through. Caesar's just recently appointed EVP of Divergent Solutions, which was created in March of 2022. It's part of the company's 3-year strategy to advance initiatives and achieve goals by 2025. We can never keep up with Jacobs. So it's great that you guys keep moving. And Caesar, I'll hand it over to you to go through some of the 101s of it.

Great. No, look, thank you for allowing us to participate. I've got our partner in crime here, John Doros, so he'll be able to bail me out when we get to the fireside chat discussions. But look, we wanted to just give everybody an update of Jacobs today and really talk about what we've been doing over the last, I would say, 3 or 4 months and then go into a little bit about Divergent Solutions and how that's really taken off and where we're going to go from there. So the first slide you see here, just high-level, big company overview. Think about Jacobs, for those of you who may not know, Jacobs, right? Today, we operate in 3 segments. One's our Critical Mission Solutions, which is really kind of tied to our government services business; and then it's People & Places Solutions, think about that organization or that line of business is more tied to critical infrastructure, such as utilities, transportation, energy, health and life sciences. And then our third segment is PA Consulting, right? We've done -- put a strategic investment in PA Consulting, and they make up our third segment. But if you put all that together, little over 55,000 folks today, about $14 billion in revenue, and we span across 7 core markets here in the U.S. and globally. You see up there on the top left, 3 little circles there. Those are what we call our growth accelerators that we created as part of our 3-year strategy. And so think about climate response, more on the ES&G side -- ESG side, transportation, energy and water, consulting and advisory, more on the PA Consulting, the higher-end consulting advisory support that we have; and then data solutions, which we'll dive into, a lot of what we call Divergent Solutions in our cyber intelligence and digital components. So those 3 accelerators are the key drivers for our growth and our strategy going into the next 2 to 3 years. Next slide. So this next slide, really, I think a lot of folks have heard and seen really, we wanted to kind of highlight some things on the IIJA, right, the Infrastructure Investment Jobs Act. And when you look at Jacobs, the great thing about us is that we're not a pure player in government services, right? So we span across government services and commercial market and critical infrastructure. And when you look at the IIJA, you look at our core business within People & Places Solutions, and we feel that we have a solid baseline tied to the budget, really aligned to, what I'll say, the transportation and water sectors within the IIJA. So that line of business is very focused. We've set up a program management office that's really tracking, getting ready for a number of brands coming through the spicket and really positioning to, what I would say, contribute and take our share here in the U.S. And then there's another component that we have really tied to the U.K. and some of the European areas. Next slide. So we wanted to also highlight some things that, as we've said, it's not a pure-play government services, but the government services business that we do have is very mission-oriented. And so as you guys know and have been tracking all the things going on in Ukraine, what we wanted to do is highlight some things that Jacobs does and is doing for customers today in support of the Ukraine crisis. So not to go through all of the pieces here, but just some highlights, right? And it's really tied to what I would say, information and data solutions. And so we have, I would say, a number of data analysts and scientists performing open source intelligence, really looking at misinformation, disinformation activities In the space arena, we do a lot of geo-spatial analysis. And then within the actual space domain, which is Space Command, we do a lot of the offensive and defensive analysis on the activities that are orbiting up in the space domain. You hear a lot about cyber and really hacktivism, right, if I said that the right way, right? But it's really -- we've got a lot of folks in the front line, looking at the bad actors, the advanced and persistent actors in there and really being able to provide that real-time, what I would say, decision-based intelligence back to our customers to make decisions. In other areas that are tied to the Ukraine that we're involved in is really the analytics tied to the financial markets and then the energy side, right, of the global grids and things of that nature. So it's -- it used to be just these computer systems. Right now, it's evolved to space, financial markets as well as the energy and power grids. Next slide. So when you talk about Jacobs and you look at the last, I would say, 5 years of what we've done, it's been a deliberate focus and journey for us to really grow and align in certain new markets and as well as bring in new technologies, capabilities and, what I would say, software platforms. And so you see this top line here of a number of logos. I would say from a capital deployment perspective, over the last 4 to 5 years, we've spent over $2 billion in acquiring specific companies, specific capabilities and gaining market share in areas that normally would take you 12 to 18 months. So it's been a very, very deliberate focus. With that, it brought a unique set of capabilities, what I would say, a number of products and some software-enabled services. But the main piece that brought to us was, what I would say, people who think differently and who are bringing new ways of looking at the business and providing support to customers across the markets that we had discussed. When you think about Divergent, and you look at Divergent Solutions that we announced back in the 1st of March. The primary focus with Divergent was really to be that enabler and to operationalize all these capabilities that we have across both lines of business and really help gain market share, provide extra and unique disruptive capabilities to both of the lines of business. We have 7 markets that we're really focused on, you see that below. But when you look at it collectively, and we'll go into some more details, what we hadn't done and really focused on was really being able to take these capabilities and globalize them across these areas that we have within the lines of business. That's where we're going now with Divergent. And now we'll go into some details on what that really means. Next slide. So Divergent Solutions, right? And we announced it earlier this year, it is a key piece of our strategy. We anticipate it being that fourth segment going into FY '23. But think about Divergent as more of that creative, innovative, thinking differently and bringing really those next-generation cloud, cyber data digital capabilities globally, right, globally within both lines of business and then be able to go to market directly too as a segment. And so we have 3 units identified and created. And if we start with the one on the left is Cyber & Intelligence Solutions, Think about that as our core legacy business that we have today, the Cyber & Intelligence business that is probably around 3,000 folks. And when you look at just pure government services that this plays in, it is in that margin profile of that 10% to 12% just because of the government caps and things of that nature. But that has been the foundation of Divergent Solutions. But then we created 2 other business units. And the technical and Innovative Solutions is really focused on bringing the same capabilities we have within Cyber & Intelligence. but really focused on the critical infrastructure markets such as transportation, water, the utilities area, advanced manufacturing, getting into some of the commercial areas and then bringing to bear a focus on our federal civilian markets, right? So think about the -- specifically focused on DHS, FBI, the IRS, obviously, the health market as well. And this organization also is going to be primarily focused on the European areas, right? So the U.K., where we have a big solid footprint, Australia, New Zealand. And then think about the Ministry of Defense, right, the MoDs, there's a lot of adjacencies and connections that we do within the Cyber & Intelligence unit that we'll be able to leverage and grow and accelerate within the technical innovative solutions. And then the last unit here, Platforms, Technology and Software Solutions. It's pretty cool, right? This is where, what I would say, our platforms or product sit. And so as I mentioned in the previous slide, a lot of acquisitions, a lot of capabilities, a lot of products really built into certain environments. Now we've identified a series of them that will globalize, that we'll be able to take across multiple markets. multiple customer sets and then globally within other regions. Pretty cool stuff. Also part of that is building up a strategic alliance base, and we'll go into some details on what that really means. But we're not developing every product from scratch. There's going to be a number of partnerships and alliances that we lock into to help accelerate and leverage the scalability that they have. But as you look at that PTSS, think about specific platforms that are tied to the markets and think about, I would say, 3 to 5 solutions within there. And those solutions could be a product, a software or some sort of analytics component there. The official standup was [ 10 1 ], right? And I think, like I said, we will -- we're looking to be 1 of 4 reporting segments. Expectations as far as numbers, right? You see that anticipated 50% growth. As you put all this together, right, the foundation comes from Cyber & Intelligence, whether it will be by [ 10 1 ], a little close to a little over $1 billion in size. And then our growth trajectory, right, we're anticipating that $1.5 billion of include organic and some inorganic growth as we go forward. All in total, it will have about 4,000 specialists, but they won't just be U.S.-based, they'll be globally, specifically in the U.K. as well as the Australia and New Zealand area. Next slide. So we put this slide out there. And I think if you go from right to left, right, you've taken Divergent and really dissected it into capability sets. And I'm not going to go through every letter in there, but it was a great opportunity for us to highlight some things. So just think about Divergent, really if you think about the big D, right, up there, right? We want to be disruptive, right? Positive disruption is good. really tied to our emerging technologies. And that's existing within our current business base as well as externally helping new customers really look at different things, different ways. When you think about E, right, Jacobs, like I said, is really a global company that's doing more than just government services. So we look at it from an ESG perspective, too. So think about the energy, the smart mobility and other things that tie to the ESG construct, climate response and things of that nature. Globally, right, from a G perspective, I'll just look at the analysts that we have and the data scientists. So probably collectively close to 2,000 data analysts and scientists. And those individuals are able to play in multiple markets now, where traditionally, in the intelligence arena, they would just stay in the intelligence market. Now we've provided that opportunity for them to upscale or rescale and work virtually instead of working in these classified locations to be able to do other things. And then the last one I'll throw out here is just technology-enabled, right? So I'd mentioned just a core set of platforms that we have as part of our -- one of our units. And it's really tied to transportation and national security as well as the water platforms. But then there's new areas that we're looking at, too, to really kind of accelerate such as health and life sciences, energy and space. So as you kind of spend some time going around our globe here, right, we thought it was a pretty unique way to just highlight some capabilities within Divergent Solutions. So the next couple of slides, I'll just highlight some of these platforms that I've been talking about, right? And our first platform is called National Security. And if you just take the first layer of this platform, that was all through the [ Q ], right? So Ginkgo+ is a learning management training platform that we train over, I think the last count was close to 8,000 government employees in it. And that's cyber training that they do, what I call, first responder-type training, forensic analysis, all the components of protect and defend the areas within the networks that we support for the federal government. Insights Stack and Geopod, other capabilities that we have, right? But again, it's all tied to data and the information that we have available to us and that we're actually looking at and working with. The bottom layer there, you see Mission Analytics, KnackStack and BlackStack. Really, that is from our BlackLynx acquisition, which is a pretty solid acquisition that we made that really kind of put us into a primary focus on productization and be able to take, what I would say, products that are deployed already in organizations and accredited and then bringing them into other markets and things of that nature. And so some of the things that we're doing, you'll see some of these products on marketplaces like Carahsoft and WWT, where we can resell these. And we'll be able to expand, what I would say, the integration of the services as we go forward. The next slide is really the critical infrastructure platform. So we talked about 2 areas, national security and critical infrastructure that we focus on within Divergent. Critical infrastructure area is really kind of in our People & Places Solutions area, and so you think about transportation in the water platform. Transportation, we've seen probably the most recent acquisition we did earlier this year on StreetLight Data. And if you look at our portfolio, right, we're pretty dominant, I would say, in the transportation market. But what we didn't have is the true data and analytics component and, what I would say, software platforms to be able to ingest and pull information that ties to safety, that ties to looking at certain environments and able to, what I would say, have reoccurring revenue too tied to the Department of Transportation. Right now, that's really focused on the U.S. and then we believe we can take that into other areas outside of the U.S. You see the other areas within the water platforms. I think one of the big things that we said was that we're not in a place to be a product factory where we're creating product from scratch. We want to do a certain number, right, given the domain expertise we have. But then we also want to partner and lock in with a number of strategic alliances. So you see Hitachi and Palantir as examples of partnerships, that we work with them to create white labels or customized products to be able to deliver into areas that we're in today and then going to market together. Next slide. And so we talk a lot about partnerships and strategic alliances. And I think one of the great things that we've done is really taken a step back and said, hey, who are those companies, those partnerships, those startups that we really want to focus on that have, what I would say, more agile technology and that are really out there and have the same focus that we do? And so we created a partnership with NightDragon, which has a portfolio of companies that they provide advice and invest in. And in our areas, we looked at cyber safety, security and privacy as those core industries that we want to focus on. And so that partnership with NightDragon has led to an investment that we have within HawkEye, looking at partnerships with NetAbstraction, where we're looking at ransomware, white label products tied to academia, right, specifically focused on a specific market. And then Interos, when you think about supply chain, when you think about the things that Jacobs does from advanced manufacturing and things of that nature, really looking at the analytics and the AI/ML, tied to Interos and their platforms. The other cool thing is we've also kind of looked at some energy investments as well. And so you see on the left, on the right-hand side, MGL and Electreon. And the cool thing is if you just look at Electreon, I don't have an electric car, right, or electric vehicle, but I do know a number of folks. I think you can go sometimes no more than 300 miles, you got to plug in and so Electreon is really just wireless highway grid, if you will, that allows you to really drive and charge as you drive, whereas you have to stop somewhere every 300 miles and plug in. So, those are the types of investments and alliance we're looking at, all tied to data solutions, all tied to the safety, energy and, what I would say, sustainability that really is kind of the core bread and butter of Jacobs. And I think this is our last slide coming up. And so when you think about Jacobs, think about Divergent Solutions now, right, as really being that world-class enabler for our internal businesses as well as our customers that we have today. We're not starting from scratch. We do have a foundational national security business, where we do have data, cyber and digital capabilities today. What we're doing is taking this now and focusing on our commercial and critical infrastructure markets and really accelerating our go-to-market and our growth in those areas. We're not going to do it alone, right? We're going to have strategic alliances and partnerships and really going to be focused on customized solutions or white label solutions. And then we're going to invest. We're going to continue to invest on those emerging technologies, and obviously, the start opportunity, right? There's just a different way of thinking and a different way of addressing as well, right? So probably next time you'll see in a T-shirt, if Sheila will have me next time, but it's just a different way of thinking. And then as we grow within Divergent Solutions, we'll continue those organic -- inorganic investments that I mentioned, we've done over the last 5 years. That is a creep component for us to grow going forward with Jacobs.

Thanks for that overview, Caesar. And I was going to say I'm really surprised you don't have an electric vehicle, so given your business. But yes, shirt for next time, just like your [indiscernible] with sports dress. So that's a pretty healthy overview, $1 billion business for fiscal '23 growing 50% by 2025. I wasn't good at math this morning, so I thought I was $2 billion, but it's $1.5 billion. Can you talk about that healthy growth? Like what's driving it? What's the underlying addressable market growing? How much of that is organic? And maybe if you could give us an idea of the profit profile of the business as well?

Yes, look, I think it's an aggressive growth focus for us, right? But I think one of the things we did was we wanted to put our flag out there to say, "Hey, we're going to focus and invest." And I would say today, if we go into FY '23, right, the business will be about $1 billion, right? We will call these pieces together, strong foundation, strong pipeline. But now we're going to expand that pipeline into those commercial and, what I would say, critical infrastructure area. So there will be a big push on organic and growing internally. But then, as I mentioned before, right, we'll look for those inorganic bolt-ons, if you will, that will help us accelerate or gain specific market share primarily in, what I would say, the critical infrastructure market, right? We believe that today, national security market, we've got a solid footprint. As you've seen, right, over the last 2, 3 years, a lot of investment in really kind of gaining some market share and putting the brand out there. And so now really looking, at going forward, driving that. When you look at the margin profiles -- and it will be a little different for each of the units, right, just because the government services always has that cap unless you're at a fixed price and you're doing things a little differently. But that government services will be at the highest peak, right, within the 10% to 12%. And then when you look at the commercial and critical infrastructure, our target is really in that 15% to 18% margin profile. And in our product side. I think corporately, we'd like to be in that 50% plus, but I think reality will say that, hey, look, we'll probably be in that 20% to 35%, and then we'll wrap around, what I'll say, some true advisory services or integration service as part of those products.

Maybe if you could -- you could go back to the slides if you want. But can you sort of divide up the businesses for us and the sizing of each? Are they equally weighted? Do you think one of them is a better -- a higher growth versus lower growth?

Yes. I think probably the most mature, obviously, is the Cyber & Intelligence business. I think that over the last 3 years since I've been with Jacobs, that has been the primary focus. I think what we're doing is now putting a lot more focus and emphasis in the other pieces, right, the critical infrastructure and the commercial areas. And if you look at the technical and innovative solutions, the vision and the plan is for that to be very similar, more professional services, tie it to -- similar to our Cyber and Intelligence business. The great thing is we're in these markets already today. So we're doing the design build, we were doing O&M of those areas, but what we're not going to bringing in the technical and innovative solutions to, what I would say, hey, we're designing and building a hospital. But now we can get into the modernization of their apps and their -- modernizing them to the cloud, right? So those things we're not looking at, but we're not looking at trying to figure out entry points. We have those entry points from a domain perspective. I think the platform area, if you just look at that entire -- if you throw that $1.5 billion out there, I think our goal is to be in that 20% range, right, 20% to 30% range as far as that products and platform area. Just because, as you know, there's a lot of R&D and investment that we have to put in there to really get that thing moving. And I think the goal would really be to really have 5 to 8 core products and platforms that we're able to resell and then build upon that.

And how do we kind of think about these 3 sort of subsegments of the business working together? Is it one solution over time? How do you sort of manage these businesses?

Yes. So the great thing is we do have these 2, what I would say, foundational lines of business, right: Critical Mission Solutions, which is really our government services side; and then People & Places Solutions. So where this horizontal that enables and that work with the lines of business to help them expand in certain areas of the market. I think previously, you would say that cyber or digital or data AI/ML, they would be built into a number of contracts. Now what we're seeing is there are stand-alone contracts now. so you can actually go and pursue those. And so that's the vertical piece as well that we're looking to go into. So it will be a hybrid, Sheila, but I would say that the great thing is we've got a core foundation already to have entry points in the areas that we want to continue to grow into. Now what we're saying is we're bringing in those technical and innovative solutions to help expand and accelerate that.

And then just on cyber, it gets a little bit confusing. How big is your cyber portfolio overall? And is it all now cyber -- seeped into the Cyber & Intelligence Solutions Group? You said sometimes it's broken out or all cyber contracts. So you're seeing a shift to the latter. Maybe if you could discuss that a little bit and then what the difference is between defensive and your offensive cyber offerings are.

Yes. So cyber, right? I think one of the big things that we did was we combined our intelligence organization with our cyber organization because the work that we're doing today is really tied to data and analytics. And so don't look at Jacobs -- don't think about Jacobs as really kind of going out there and doing patch management, right? Look at us as, one, we're training the federal government's leaders, first responders in cyber, right? Whether that's the analytics of bad actors and information coming in, whether that's really kind of doing assessments internally on, what I would say, adversarial things that are going on. But I would say our cyber business is probably about 50% of the Cyber Intelligence piece. I think the great thing here, too, is that those cyber expertise and folks now we can tie into the critical infrastructure areas. So you talk about your industrial systems, all the things that they're looking to do because they haven't been modernized, right? There's abilities and capabilities for us to really kind of pull into the critical infrastructure side. But I wouldn't view us as folks that are doing patch management, password changes, all the, what I would say, blue-collar type things. Look at Jacobs as really kind of the high-end data analytics capabilities and being able to really digest and transform information into decision-making tools.

And how do you think about the U.S. government as a purchaser of cyber support? How does it work? What budgets do you look at? How does the government buy it or does a certain service by it? Can you maybe talk a little bit about contract structures there?

Yes. Like I said, I think the great thing is, I think previously, cyber was really built into a number of these enterprise contracts. And that's still happening. But I think now and what we see now is that there's separate contracts that are being just focused on cyber. So the cyber commands, right, that we deal with our cyber, U.S. Cyber Command, NSA, even the intelligence [ arena ]. They have their own cyber or analytics contracts or, I would say, data solution contracts that they're getting unique capabilities from companies like Jacobs or even smaller companies, right, that are not blended into these big enterprise contracts. So we do see this budget, obviously, it continues to go up, right? You see certain organizations standing up, such as artificial intelligence, machine learning, right, training virtually is always key. But the offensive the defensive really is really now tied to space, financial, looking at watch list components, right, all the things that we have on the perimeter to really protect and defend federal assets.

And how has sort of Ukraine changed that? Have you seen any incremental sort of support for it?

Yes. Look, we had a slide up there that really talked about all the things that we're doing with Ukraine. Those are actual added task areas that they've had us really look at because of the focus on that. And I think when you just look at the news and the media, right, we're seeing all these attacks everywhere but within the U.S., right? And I would say that we're just as vulnerable on receiving those attacks and those bad actors and the bad threats. But we're putting together, right, certain things to be able to predict those sooner than later versus being a reactive mode. And I think traditionally, a lot of our areas, specifically in the nongovernment side, is in a very reactive mode. And so now with the partnership and the information sharing that's going on, whether that's with DHS, the FBI, NSA, has been really key to get everybody on the same page and not be redundant and trying to set up your own capability.

How do you think about your broader competitors in this market and how you determine win rates? Like what are your terms, win rates and what were they historically?

Yes. So I think the usual number of competitors that we have right, so the Leidos, Booz Allens, I think you see Parsons and CACI who is out there. I think with Jacobs if you were to just take a step back and look at our portfolio, the companies I had mentioned are really pure play government services or at least predominantly government services. Our focus now is a lot broader. But our pipeline, I would say, today, just a few -- just take the legacy Cyber & Intelligence business, it's about $3 billion in size right now that we have a winning award. And of that, it's about 20 opportunities, right? So it's very transactional, 3- to 5-year type contracts, I'm not sure, $800 million, $600 million contracts, they're really that $150 million contracts, very niche-focused on, what I would say, building software to analyze certain things, offensive capabilities, looking at certain aspects of different regions and threats and then, what I would say, doing a lot of multi-domain components, right, [indiscernible] and bringing all those pieces together. But our win rates have been -- we feel -- have been pretty good. I would say we're still waiting for a lot of awards to happen with the CR that's pushed everything to the right for 6 months, which has probably hammered and beat up a lot about the other companies as far as what they're tracking from a revenue perspective. But we do -- just like last year, we ended the year with 3 solid wins really in NGA and DIA and then within the army. And we expect the same this year as we kind of close in our fiscal year, 3 to 5 core wins that really expand our market share.

Then I'm just looking at the slide and trying to compare some of these words I see that what other IT services folks provide. So it's a little bit difficult to sometimes differentiate what cyber as a solutions offering is and how you differentiate versus peers. So I guess, maybe how would you summarize your competitive edge versus peers?

Yes. So we're very focused on data solutions, right, and information. And those are the opportunities that we're going after, right? So as you think about open source, the dark web, you think about specific things on watch lists and just information that we ingest to really protect and defend full motion video, right, all those capabilities that tie to the intelligence arena as well as the cyber arena has really been focused on data and information, and this is the data and information that really builds the perimeter around our national defense. And so I think that's really the main focus within Jacobs and our cyber as well as our intelligence piece. It's not just analysts doing -- looking at open source things that are just social media components, right? It's a multiple number of things that our folks are doing.

And you guys have won a bunch of AI awards recently. How does the AI offer and couple with what you offer in cyber and intel?

Yes. So I think we -- our last one was the [ Jake ], and I think a couple of other folks won that AI. And I think BlackLynx for example, was a critical -- it was a critical acquisition for us because of their AI/ML, their algorithms; as well as StreetLight Data, unique algorithms that they pull information from that, we would say, just separate us from a lot of other folks because of the different domains that they're in. And so it's not saying that we do AI for everybody. It's really focused on specific domains or specific areas such as transportation, such as, what I would say the space arena as well as some of the intelligence areas, right, that we do our work in.

And can you talk about some of your broader strategy in terms of partnerships across cyber. Just over the past year and half we've seen announcements from IronNet, you mentioned it, and then NightDragon among others. So what -- how do you even manage all these partnerships? And what do they bring to the table? And how do you decide if you're going to partner with somebody? Is it when you bid on a certain contract? Or is it -- you start it and then that's how you go after contracts?

Yes. So this has been a little different. This technology, what we're calling our partner technology-enabled ecosystem. Our partnerships -- traditionally, people look at partnerships as bidding on contracts. This is completely different. This is, for us, looking at unique start-up capabilities that align with, what I would say, is our focus, right? Cyber safety, people, privacy, things of that need within the industries that we have. And so we really looked at companies that have unique capabilities whether that's geospatial with a HawkEye, whether that's, hey, we're doing a lot with universities today. You see ransomware is a big deal today, right, dealing with the net extraction and really kind of focusing on ransomware or just with the supply chain and all the things we do from a manufacturing perspective, looking at someone like an Interos to look at the analytics. So it's really been based on our foundation and where we're at today versus the traditional, "Hey, we're bidding this contract. We need to add these 2 or 3 capabilities." So we've kind of taken a different approach to that. And like you said, before, I would say there wasn't a lot of folks like a Palantir, for example, that were saying, "Hey, we want to work with Jacobs to get into certain markets." Now that's starting to happen a lot faster,; and they look at our domain access and say, "Hey, you guys aren't just that pure play government services. You guys do have another domain or another area that if we work together, we can grow faster." And so that's been the focus Sheila is not primarily to help us increase our win on contracts, but give us unique capabilities that we can penetrate existing businesses that we have today.

Just a silly question. How do the financials work? Is it like a JV structure once you do win a contract with a partner?

Yes. So no. So if we're -- if we've got an existing base of business today, let's say, I'll use HawkEye 360, for example. We have a number of customers today. We'll bring them in. There's some geospatial components in there, and then that will be part of that contract, so there will be like an added partner or added sub to that. Or if you go differently, they can bring us in a number of things that they're doing as well. So...

Okay. And then maybe in terms of financials for Divergent Solutions, you didn't really give us much in the way of financials back there. I just wanted to go through the margin targets or the returns of the cyber business, if you could maybe give us some ideas there.

Yes. So I'll let Doros throw it.

Yes. So the only -- the reason why we haven't is because once you start providing that level of detail, you're just required to start -- immediately start breaking that out in your 10-Qs and 10-Ks, and we're just not ready to do that yet from a financial reporting standpoint. But we're going to start our first fiscal quarter breaking those numbers out and providing all the historicals. But I think high level, you gave like a rough idea of what the business is and what the margins are.

And then just in terms of hiring, how you think about hiring for this business? Does it actually require less labor because of all the software content associated with it or the AI work associated with it? And what are you seeing in terms of hiring and attrition overall? .

Well, I would say that our market, right, what we're doing probably has the highest attrition across the industry, right? If you just think about the nontraditional government services companies that are different ways of working, different styles of working but doing the same thing, right? So for us, it's kind of exciting, if you take that core piece of Cyber and Intelligence business where they're traditional government folks, and turn COVID, everybody had to go to a [ step ] and everybody else is virtual. Now they could do the same thing maybe in a different market and move wherever they want to move, right? And so giving folks that ability to rescale or relocate has been a powerful message for us. And then the other thing I would say is when you talk about the talent out there, one of the big things that we are working to do is really identify a set number of folks within Jacobs and then push them through a number of training courses, right? So let's train our folks to have newer skills, more diverse skills versus trying to go and fight with my neighbor to the left or right on those individuals and things like that.

I'm guessing you have similar issues when you think about M&A in your market, too. It's probably the most aggressive in terms of outside competition. So how do you think about your strategy, your returns on your cyber pursuits when it comes to inorganic opportunities? .

Yes. Look, I think the last 2 pure ones we did was the Buffalo Group, and BlackLynx, and then you saw a StreetLight Data. I think as we're growing the inorganic focus on M&As, we're really focusing on, what I would say, more productized companies, right? So probably smaller in revenue but obviously looking at that reoccurring subscription type models that we could take further in down the line. Now you know as multiples, right, are extremely high versus the professional services, so something that we're working through within Jacobs to make sure everybody understands that, hey, yes, buying that software company that multiple is whatever x it is versus that traditional professional services company. So it's a culture change, right, for us, but I think it's -- we feel we've been pretty successful doing the professional services side. And we'll use the same strategy to build upon the bolt-on products and platforms, too.

And just on those multiples, how do you think about it? Is it you look at sales multiples because they're not necessarily profitable yet so you can't look at EBITDA? How do you justify those potential numbers? Is it looking on a bottoms-up contract structure? If you could give us any insights there.

Yes. Look, I think when you look at the last 2, we did BlackLynx and StreetLight I think, those were product-based companies, 2 different markets, right? And so then within the BlackLynx piece, right, they've got long-term contracts, right? Within the StreetLight standpoint, right, these are highly transactional type things more on the commercial side. So it is completely different, right? The investments that are put back into the companies are completely different. And it's a hybrid model that we're looking at that, I would say, the great thing is we're not just focused on buying or acquiring companies that are just pure play government services. We want to get out and get those startups that are niche. We know that, hey, they might not be the most profitable, but the long-term play is what we're looking at. And so that's that 2025 focus for us.

Great. And then, Caesar, maybe just to wrap it up, one last question for you. What are 1 or 2 takeaways you want people to walk away with from your business that you're running? .

Look, I think if you look at just our history, Jacobs, right, we're bold and disruptive, right? And we're not the traditional Jacobs that you knew 5 years ago. And when you look at us going forward, think of us as this positive disruptor playing in both markets, right, national security and critical infrastructure. And look, it's not -- we're not starting from scratch. We've been here for a number of years, and we've invested and we've grown over the last 3 to 4 years and we'll continue to do that. Hopefully, John Doros will help us kind of get more aggressive and do a lot more things a little faster. But we'll work that. We're still working that. But it's a fun time to be at Jacobs. I've had a great journey here over the last 3 years. And I think if I was to look at the next 3 years, I think you'll see a different Jacobs going forward.

I'm glad you've enjoyed it, and we've enjoyed hearing about it. So thank you very much for sharing it with us. That concludes our session. Thank you, Caesar. Thank you, John.

Thank you.