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

All right. Good morning, everyone. Thank you once again for joining us. I'm Jerry Revich at Goldman Sachs, head of our machinery, infrastructure and sustainable tech coverage out of the Americas. I'm delighted to have with us here at Jacobs, where we'll be exploring evolving technologies and AI in Jacobs' Water business. We have from Jacobs on my left, Susan Moisio, Global Water Markets Director; Amer Battikhi, SVP of Platforms, Technologies and Software Solutions; and Jonathan Doros, SVP of FP&A, IR and Treasury, and I'm sure other things that we can fit on the title. Really appreciate you folks coming out to join us for our conference this morning. We are going to run this in a fireside chat format, and then we're going to leave some time for questions.

Susan, maybe just to kick off the conversation. Can you frame for the people in the audience the size of your water business today? And if you could break it out for us by the primary lines of business just to kick off the conversation.

Sure. We're about a $2 billion annual revenue business, gross revenue, and we look across the entire water cycle, and that means that we look at wastewater, drinking water and reuse, conveyance and storage and water resources. And we look at our business in this way because we feel strongly that in order to meet the challenges of today, we have to look at this as a system as OneWater. And so OneWater, we have come to firmly believe in these principles about OneWater. And first of all, all water has value. As we look at the industry today, the industry is very siloed, and folks think of themselves as a drinking water technologist or a wastewater technologist. Water doesn't care. It's just water. All water has value. And so we have to understand that the challenges before us are connected and they're complex. And in today's world, when we make investments and we bring solutions to our clients in the world, they've got to be sustainable, inclusive and equitable. We're really proud of our team. We are #1 ENR sewer and waste company, and we're #2 in water supply. And I'm very proud to share that 2 weeks ago in Copenhagen, my digital twins team won a gold award for the work that they did for Singapore PUB. So that gives you a flavor of who we are and how we approach water.

Super. Thank you. And maybe just to follow-up, as you think about the OneWater approach, can you talk about where do you folks add the most value for your customers? Where are you finding that your offering is really differentiated as a result of this approach?

Great question. And let me tell you a little bit more about my team. As we look across the world, we have over 9,000 folks that are water folks. And most of those that I'm talking about are planning and technical experts. We consider ourselves a thin mesh across the world. And what that means is that we can partner across the world. So something that we developed in Australia that is an innovation that helps a client in Australia, I can bring it to New York City. I can bring the innovation, I can bring the people, I can bring the ideas, and that's what we bring. We partner with our clients. We feel strongly that it's something that we work on together, and so that's how we add value.

And the example you mentioned with Singapore, is that something that you want to drill on as a tangible example where you folks took a differentiated approach? Or does another project come to mind?

I think Singapore as a whole would be a great example. And Singapore, being an island nation that is water stressed, is a great example of OneWater. And so when we look at partnering with Singapore, especially on the digital twins and the digital offerings, that's a great example of our deep domain knowledge. When I talk about our planning and technical expertise, that's what is a differentiator for us in that we have that deep domain knowledge. But there's another side of how we come to the market, and that is a large part of what we do is consulting. Second to what we -- in terms of our revenue would be the adaptive work such as design-build alternative delivery. The third would be our O&M. And our O&M is a real differentiator for us because we're out there operating water and wastewater treatment and collection systems ourselves. And that means that not only do we bring that deep domain knowledge to our consulting clients, but we use it ourselves, and we partner with ourselves to develop technologies and pilot them in our own facilities. And then the fourth way that we come to market would be our digital offerings.

Super. And as we look at the size of the business today, it seems like more or less a recurring line of business year-to-year. You're right around that $1.8 billion mark. Can you just talk about how are you folks able to do that, considering how big a portion of revenue is consulting and CapEx versus operations and maintenance? How do you folks keep from having more significant revenue volatility within your line of business?

We look at this across all -- it comes back to looking at this across consulting, alternative delivery and operations and digital. And we're able to keep this steady because we deploy ourselves across the world. And coming back to that idea of how we operate as a thin mesh across the world because we are not siloed and trying to bring something that sitting here in New York City, that only works in New York City and has only been developed in New York City because we can bring ideas and people and innovations from across the world, that gives us the opportunity to build something and then export it across many clients.

Maybe if I can add to that, if you think about the nature of what Susan described, being able to provide consulting across the full life cycle of an asset and you think about how utilities have peaks and troughs with their capital spend and their operations, our team actually, being able to consult on the capital side, on the operations side and then also having an O&M business, allows us to stay consistent with our clients. We stay very close across when they're spending high and they have the $1 billion capital spend versus when they're focused on their operations and optimizing their operations.

Super. And obviously, lots of interest in investing in water infrastructure. Can you talk about what would it take to see growth for this line of business for Jacobs to accelerate to get this to a $2.5 billion line of business? What would need to happen, investment in which countries? Or how do you think about what it would take to get the size of your water business to -- at the next level?

I mean the good news is there's a mid- to upper single-digit growth in the industry as a whole. People are more focused on more consistent water supply, so there's a natural growth trajectory for the industry itself. As we continue to think about digital transformation that the utilities are going on, we feel that, that's places where we can grow from an enhanced service. We are looking at geographic footprint. We've had some good success growing in Europe the last couple of years. And we have a vision around expanding in Asia to kind of increase our geographic footprints in areas that have been investing in water more than ever before.

Okay, great. And Amer, let's continue the conversation on the technology side that we spoke about digital twin at a high level. Can you talk about, from your vantage point, what are some of the unique technological offerings in the water portfolio? What are you folks most excited about within that software and technology part of the offering in particular?

Yes. Let me go -- I'm going to stop on this slide for a minute. So the great news is we've been kind of going on a journey for the last few years with leveraging data and software to serve our clients on different parts of the life cycle, focused on different challenges. We're now kind of pivoting to figure out how do we globalize and expand. As Susan was talking about, these solutions and products have been developed in different parts of the world. And our goal now is how do we kind of make sure there's more accessibility by our clients to these products and really coming up with a business model that best fits our water utility clients. It's different ways per client on how they can procure, how they want to use our solutions. And one of the areas that we're focused on is how do we create the business model that best fits the client. Maybe, Susan, you can kind of talk about the Digital OneWater topic?

So and Amer, by the way, has the clicky here so he's managing -- but he's landed on a good slide for this. So as I mentioned, that we look at this as a OneWater across all of water. And when we then came to develop what we want to offer in digital, we looked at that from that same standpoint as a Digital OneWater. And so what we're showing you on the screen right now is how we're going to market. And we look at this from, first of all, what helps our customers and what helps our customers and their customers. And so that's the first piece of this is understanding and developing offerings that can assist them in how they enhance that customer experience, how they improve their billing. The second piece of this is a very important piece and that's the regulatory compliance. And so looking at it from a regulatory compliance standpoint, 2 main drivers for us today in water are water quality and then how are you managing the system itself, sewer overflows. And you're seeing that not only here in America. That is a big driver in Europe and the U.K. as well. And the third is looking at this from the standpoint of do we have the tools that we can optimize the capital costs and optimize the capacity of the system? And finally, how are we operating these systems and looking at it from that standpoint. So then we look at it from where have we already developed a digital offering, and we have an amazing portfolio of digital tools that we've developed. Not all of them are to scale at this point and not all of them need to be to scale. So the idea of understanding this Digital OneWater and how you'll operate this system from the beginning from planning, operation, design, asset management and do that across all of water, that's what our digital tools are about today.

And so can you talk about with your Digital OneWater offering, who are you most often up against in the marketplace?

We are most often up against companies like Xylem would be a main competitor of ours. And depending upon the different pieces of it, other firms that would be in our ENR rankings.

Well, and actually, what's interesting about this digital transformation that our clients are going through, we're seeing unconventional competition come out from the software companies, start-up community, the consulting world. So everybody is interested in finding the solution for water. We feel we're in a very unique position in that sense.

And Amer, can you talk about the commonality on the digital offering in water with other parts of Jacobs? How much leverage are you able to get from other lines of business as we're talking about the product here?

Yes. So maybe to touch on Divergent Solutions a little bit now. So earlier in the year, we launched our strategy, which emphasized climate response, data solutions and consulting and advisory. And in order to operationalize the data solutions across Jacobs, the Divergent Solutions was created, which kind of intends to centralize our cyber and data analytics capabilities into a one platform that can leverage the technical digital know-how from different environments into one area. And as we kind of started looking at the products that we want to scale and how we want to enhance them, we've been able to identify capabilities from different markets that we can leverage in the water sector as an example. And suddenly, having a 500-strong software and product development team is allowing us to accelerate the enhancement of the tools that we've already developed over the years.

So at Jacobs, you have 500 software engineers?

We have developers between software engineers, architects, yes.

Okay. And so is there an underlying product line here that has, call it, 50% margins blended in the portfolio? Is that how we talk about the business model?

I mean, again, maybe back to my initial comment, the main principle is really we've got to adapt our business model to reflect what the clients' needs are. And in some cases, we have to do a business model that has professional service-heavy, product-light or vice versa. Wherever we have a product, it is north of 50% gross margin.

And across the offerings, is there anything that stands out to you as having particularly high ROI for customers that isn't broadly rolled out yet?

Maybe let me start with the ones that we're seeing growth in the short term and then maybe what we think is going to happen. In the short term, we're seeing the places where the fastest value creation for our clients and the best return on investment is around planning and O&M. So in the planning sense where clients in the world that are having capital deployment challenges, they're trying to optimize their existing capital. Where should it go? Our tools like Replica, which has helped us optimize elements of where we deploy capital assets for our clients, has kind of spread really quick. On the O&M, which you can kind of immediately see the financial economic benefit from any enhancement in power reduction, chemical reduction or reduced material selection, we're seeing a lot of growth. So in that case, AquaDNA and some of our intelligent O&M solutions like the ones we announced with Palantir as an example, those immediately get benefits in the short term to our clients, and we're seeing more adoption in those tools more than any others.

And what's the adoption rate of those tools today? And what's the revenue upside if you do get to 100% adoption?

So again, we've -- in the case of AquaDNA, we've seen more than double-digit growth consistently in adoption and growth in the last 3 years. And we feel we're very close to one significant contract that will allow us to exponentially grow that tool deployment. And then a key focus for us as part of deploying Divergent Solutions is scaling AquaDNA in the U.S. market, so that's going to be a key focus. In the case of our intelligent O&M portfolio, we've deployed it on our own portfolio, and we've seen the benefits already on the facilities we operate. And we've actually just signed an extended agreement with Palantir to deploy it on another 40 plants in the next 12 months. And we feel that is going to really kind of get us to the scale we want to from those 2 products.

What do you think -- maybe touch on what's the total number of plants in the U.S.?

So we operate around 155 plants, and the full market is north of 2,000 plants, an addressable market for us. So we feel between the plants we operate and the addressable market, there's a lot of opportunity there for us to deploy the solution.

So it sounds like we'll be in dozens of plants out of 155, so there's a natural line of sight on growth to hopefully 155 over time and maybe more?

Yes. We're working 2 parallel work streams, our own plants and then we are already in process on bidding on a number of external plants with our key core clients that we've been working with. So we think both will go in parallel. So it's an exciting opportunity.

And how much higher is revenue per plant with this product and without?

So again, there's 2 ways to look at this. In the case of our plants, we believe we can generate savings in our operational cost up to 20%. So that immediately goes to our bottom line and back to our clients, so we feel that's a win-win situation. In the case of consulting, we think that's going to be at an attractive rate and will generate the same level of savings but to the client this time. So there'll be a consulting opportunity but also a recurring revenue software opportunity within those plants.

Very interesting. And just to shift gears, what are the most interesting technologies from a sustainability standpoint where the economics aren't quite there yet but could potentially get there in 5 to 10 years? Any really outstanding environmental outcomes on the technology side?

Yes. So what's exciting is all these products are for water, so naturally, they are pro environment. They're helping reduce environmental impact, social impact. Fundamentally, all these products gets us excited from an environmental perspective. Maybe I'll cover one and I'll let Susan cover the other one. I'll talk about our cybersecurity solution, I'll let you talk about Flood Modeller. So ironically, the highest risk, lowest profitability right now is cybersecurity impact. Can you think of a hacker can stop a wastewater treatment plant for 9 days and the environmental impact on that? The level of adoption is not as high as you would think it should be with the high-risk elements, but there's a lot of regulatory work going on across the U.S. to accelerate that process. And we believe we've got a really unique cyber solution that can protect the IT and OT elements of a plant. These plants have technology that's 30 years old. They have new technology. As more technology adaptation happens, the risk is going to go up. We've decided not to wait. We've deployed our solution on our existing O&M test plants, and we've deployed them on 40 plants already with intention to go to 155 also. And we feel that this is something that every single utility should think about and prioritize. The consequences are really high from an environmental and social impact perspective. The probability right now is low but as digital transformation continues to increase, the probability will go up.

And I'll talk about Flood Modeller. So Flood Modeller is a software that we've developed that looks at how the watershed is reacting to storm water and river flooding. And so it is used by the environmental agency in the U.K. as part of their flood risk management. And so as we look at the world today and we look at what's happening in Florida, they're about to be hit by a hurricane where they're going to flood dramatically. And so that's the opportunity is to look at these areas where flood risk is really a problem and have a tool that -- where you can put that early warning system in place. That's one piece of it. Tying that into how we operate the full urban water system is another opportunity for us. And so right now, we look at that and folks look at that in a more siloed basis. And they think of the river system as separate from their sewer system and their storm water system and their drinking water system in an urban environment. But the opportunity is to tie all of this together and especially as climate change accelerates some of the issues in the world today, that's the offering that we want to bring to the table. So kind of going back, we've got it working in the U.K. now. It is approved by the government. It is more of a standalone. We want to integrate it across our Digital OneWater platform and bring it to the rest of the world.

Super. And if we can just shift gears to the margin conversation. Can you talk about at $1.8 billion top line, what the margin profile of your business versus broader Jacobs today? And a similar question, we've seen Jacobs' margins just steadily march higher. Has your business been on a similar journey as well?

So maybe let me start with that. The water sector in general is a healthy margin compared to the rest of Jacobs, so above our average margin as a whole. We've deployed our data analytics and software products to enhance how we deliver our conventional professional services historically. So that's improved our margin and we see that to continue year-over-year. And as we deploy these products as a SaaS or a DaaS model, we feel those are going to kind of also generate software and product margins in the future. So we feel pretty good around continuously improving our margin going forward.

Excellent. And is there a user number that you'd be willing to share when we talk about SaaS?

Not yet. I think that's going to be something that we will launch as we kind of talk more about Divergent Solutions in the next few years, and Jon will be definitely updating you on a regular basis on that front.

I mean, it could depend just given the dynamics of the industry. If you -- you may deploy 2 or 3 users to a huge plant, it's not like a traditional -- we're going to have tons and tons of users, times and ARPU. So it could be a little bit different. I don't know if we'd go with the user count, but maybe we got to think about what's the best metric for the investors to look at.

Okay. We'll look forward to that. And when you folks look to price these new value-added technologies, how are you thinking about your value capture versus customers' value capture? I think we've seen ranges anywhere from 10% to 30% on targeted SaaS solutions for very specific problems. Where does Jacobs shake out?

Yes. So I mean, kind of the principle is we want to make sure we're creating value for our clients. And I kind of talked about the different business models. The intention for that is to incentivize our clients for adoption of the solution and technology. So we will make sure, as we kind of deploy it, is we share as much as possible with the client and then also kind of capture value for Jacobs' shareholders and people, to be honest.

Okay. And can we talk about the white space as you look at the OneWater approach? Any obvious areas that would make for a good fit within the portfolio?

I'm going to take that one. Can you...

Go back?

Yes, switch me back a little bit. One more down. I just want to talk from this one from a white space standpoint. The white space is bringing all this together as a system and looking at it as OneWater and Digital OneWater, that's the opportunity for us. It's something that has not yet been done to scale. It's something that we've mentioned that we operate plants on our own. We're piloting this now at one of our plants in Delaware, where we're using our own digital twin to develop -- we're developing the digital twin of the plant and the collection system and starting to operate it together as a system. That's the white space that I see.

Super. Can we talk about the Palantir Technologies partnership? Can you just step us through why you folks opted for a partnership route? And what each of the partners bring to the table and the opportunity set?

Yes. As we continue to evaluate how best to accelerate our technology solutions, we clearly decided there's build, buy or partner opportunity. We want to focus our investments in where we bring the best value and find the right partners that we can grow together. In the case of the partnership with Palantir, what we thought was we have really strong AI technical algorithms that solve technical problems that are mature, that have been worked on for a number of years now. At the heart of it is Replica to kind of reference the one. And then our domain knowledge and an understanding of the system is the 2 key things that we bring to the table. As we've discussed with Palantir, we've learned that they have really good ability to collect data from multi-different sources. As I was describing earlier, these water and wastewater treatment plants will have data collected in things that are 30 years old and things that are pretty new in nature. And they've kind of helped us create a system that's pretty fast to deploy and collect that data. Plus their Foundry platform seem to be really useful from a user interface and a data analytics capability. Combining those, we were able to deploy the solution pretty quickly and achieve what we want to do and felt that, that was one of the best routes. And in general, we've kind of created a good partnership with Palantir on a number of different other fronts. So we think -- we thought it was a good partner to go to the market with on the intelligent O&M portfolio asset.

And is it as a traditional JV structure or were you just partnering up on joint bids?

So it's a general overall partnership with clear focused markets that we would establish more structured partnerships on this water area. For the O&M optimization tool, we've kind of structured a deal that we are going to have a joint go-to-market strategy on. And it's depending on the nature of the business model and the need of the client, it's almost a 50-50 kind of partnership.

And so when we're talking about scaling up the digitization of plants that you're operating, this is -- this partnership is an enabler to get you there?

It is, it is. And it's going to be coupled with other stuff that we've already developed, but it will be a key part of that and it will be on most of our offerings on most of our water and wastewater treatment plants.

Got it. Very interesting. And in terms of where we are in the process for additional bids, is this a partnership that you would expect to move the needle for you folks if we're having this conversation a year from now or are we in the earlier stages?

Yes. We have a pretty ambitious target for '23 and '24 as jointly, and we feel it will move the needle as we continue to progress.

Okay, super. Before we talk about your other responsibilities, I want to pause here and see if anybody in the audience has any questions. Okay, super. So Amer, technologies and software are really broad important topics for Jacobs as a whole. Can we just talk about how you're viewing the opportunity for your business over the next 3 to 5 years? What's your vision for what Divergent Solutions could look like over that time frame?

Yes. So as I mentioned earlier, we really believe Divergent Solutions is part of operationalizing our strategy. And we've looked at how do we accelerate the data and cyber accelerator in our strategy. And by bringing in all the capabilities from data and cyber from across the organization and kind of centralizing it in one place, we believe we create scale and size that allow us to grow. We've got a really robust cyber business in the federal side that is kind of the foundation on the cyber area. And our growth trajectory is what we're hoping to leverage that plus our domain knowledge in critical infrastructure and commercial to expand our cyber capabilities in those key markets. And then from a data analytics perspective, we brought in -- it was interesting looking at the first focused products that we're going to scale, 50% came from our legacy CMS business, 50% came from our legacy P&PS business. And as we combine those, we feel that we're going to have an opportunity to scale across both the federal, critical infrastructure and commercial leveraging those products.

And so when we're talking about the cyber offering within water, so that's applying your federal capability set?

It's a combination. So I would say 50% of that team used to work on the federal side. And then we've kind of homegrown some capability from our digital team, and we've kind of continuously created a capability that's focused on critical infrastructure. But there is connectivity back into the federal team that is kind of the nucleus start to our critical infrastructure cyber team.

And you folks, at the Analyst Day, spoke about this line of business being roughly $1 billion revenue range in 2022. Can you talk about what proportion of that is sales internal to Jacobs versus external? In other words, how big is the cross-selling as part of the business today?

Because we're pretty much focused on solution selling, we feel the cross-selling is going to still be very, very fundamental. Our combined professional service plus product capability plus data analytics capability will still be the majority of the work. So we're going to see a lot of cross-selling. But there are products that have a clear standalone go-to-market capability, some of the stuff that came from within or through an acquisition like StreetLight Data. So StreetLight Data already has a capability of product selling and they have a team of selling fewer products. But now we're also extending the solution selling that goes through our P&PS organization.

And when we look at the $1 billion rough revenue estimate, can you just help us put a finer point on that, how much is cyber versus other?

Yes. So the starting point in the majority right now is the cyber business for the federal business. But if I think about the growth, the majority of the growth and expansion is going to be around cyber and data for critical infrastructure and commercial clients and for our product line of business. And that's going to be how we achieve the 50% target growth that we announced in our strategy.

And so we'll see the impact on the water business in 2 ways: one, within the water business discretely and the second within Divergent Solutions? Is that the idea?

That's spot on. So that's...

Yes, it is. When it's a product sale, it'll hit your P&L. And when it's a services sale, it'll hit Susan's kind of line of business.

Got it, okay. And then Divergent Solutions, we're talking about some pretty advanced technology here. Can you just talk about the margin profile versus the rest of Jacobs for Divergent Solutions?

Yes. So as we kind of consolidate, it is all relatively higher margin, higher growth profile.

Yes. At the Analyst Day, we kind of said that we're going to kind of update that when we provide guidance in November because we're still kind of separating the business out. From, let's say, an SEC reporting standpoint, it's not fully separated yet. We'll start doing that in calendar year Q1 2023. So we're kind of hamstrung a little bit on what we can say until that process is complete.

Okay. But it sounds like as we have outsized growth in this line of business, servicing water and other end markets, this is going to be pretty margin-accretive for Jacobs especially for both cases?

Yes.

Good. And then in terms of the Divergent Solutions portfolio, Amer, let me ask you the same question we spoke with Susan about white space. So what else that's not part of Divergent Solutions today would fit well within the portfolio?

Yes. So our focus really is on delivering our strategy. And when we think about climate response, we've got a pretty well set-up area on the water side. We feel there are some interesting value propositions across supply chain, across cities and places on the ESG side that we're going to really hit really hard in the next few months. That will be a key part. Also, really emphasizing leveraging some of our advanced data analytics capabilities that have come out from the national security areas in use cases that are applicable in the transportation and water area, we feel we've got a couple of things that are really going to be differentiators for us in those 2 markets.

And Jon, let me ask you the same M&A white space question. You folks, with every acquisition, has seemingly come with better margins or better growth than legacy Jacobs with comparable valuation. What's the pipeline look like as you folks, as a management team, sit here today? And can you just remind us, you folks just had a big cash outflow, so how long until you folks are more probably back in the market?

The balance sheet's very healthy right now even with that cash payment. We're probably -- we're around 2x net debt to EBITDA. But I think we have a really robust organic growth in front of us across those 3 growth accelerators, climate change, data and consulting and advisory. So right now, I think we're focused on the organic growth opportunity. And then if there's an acquisition that helps accelerate that and the valuation is better than repurchasing our stock, then we'll act on that. But I would say in the foreseeable future, I think it's -- we're really focused on the organic growth of the business.

Super. And then maybe on that note, we could dive into the organic growth that we touched on for the water business earlier, mid- to high single-digit growth. Can we just maybe put a finer point on that? Is that the rate that the business is growing out over the course of this year? And what's the bid pipeline look like for you folks?

Maybe start with the Infrastructure Bill and how much that has increased the TAM, let's say, in the next couple of years?

Right. So if we look at our business, maybe break it out a little bit. 60% of the work that we do is in the Americas. And so the Infrastructure Bill is having an influence on where we're heading, and it will definitely increase -- we're already seeing the impacts of that bill coming through with the approval of some of the state revolving fund plans. And so money is starting to flow from the IIJA. And so that will impact our business and it will increase our margins.

And can you talk about the bid pipeline? What's been your book-to-bill year-to-date? And the comment about mid- to high single-digit growth, is that the revenue growth that you folks have seen this year?

That is the...

Yes. Look, it's a little bit tough to just isolate water because we can't run the business by regions, so there's kind of like a little bit of a matrix there. But I'd say, high level, it's healthy. It's probably one of the strongest growers in the pipeline. And the sales pipeline in water, at least from my perspective, probably this is the most robust I've ever seen it at the history of the company. I don't know if you want to just talk about it more on the sales pipeline business.

It is. We look at our sales pipeline year-over-year. And we have definitely increased our pipeline and increased our pipeline compared to the other markets. So -- and I would say that is because there is a renewed focus on water across the world and definitely in America. So we feel very strong about this.

And just in terms of timing of that sales pipeline turning into revenue, can you just help us get a feel for how long is that process typically in your line of business?

I would say...

Yes, I would say it depends on -- it's within the next 24 months. There's different large opportunities that are sitting out within that kind of time frame. Like the next 2 or 3 months, even in real time, we're seeing stuff convert. But there are some major projects in the pipeline for the entire world, I'd say, within the next 24 months, some of that probably within the next 12 months, would you say? But you can never be exact on the timing of when those would close.

Right.

And for most of Jacobs' line of business like transportation, if you folks win a participation on a project, your share of project CapEx runs in the 3% to 5% range. I'm wondering if you can comment on what does that look like in water. So if we see a headline, Jacobs has won a bid for a major water infrastructure project, what's the Jacobs revenue opportunity out of, let's say, a $100 million hypothetical project?

That is -- every one is different. I will just tell you that every one is different. Jacobs has the ability to do end-to-end work. I mean, we could do it all. When you look at any large pursuit, it depends upon -- it depends on the client, the region, what the offering is. We work with what is the best thing to do for our clients. And so it's really hard to say that they follow a certain category. Can you say more about that?

Yes. Well, maybe on the low end, like you said, I think 5% would be the low end. But let's say, we did -- we also did the program management. You maybe could pick up another 5% to 7% on that. So maybe 5% to 20% on a net revenue basis when you pull out the procurement. Is that...

I think that would be reasonable to think.

Super. And earlier in the conversation, we spoke about driving higher efficiency to customers on an ongoing operating basis. Is there an opportunity for your O&M business to grow as a portion of the pie? Is that a significant part of the plan?

Maybe I mean, when you look at the U.S. O&M business, it's a $7 billion business globally -- sorry, for -- as a TAM. And our share right now is we're one of the top 3. We feel we can get better market share. And as more and more resource challenges happen with the utilities, we feel as we automate, as we digitize, we can get more market share, we can get more expansion. And like I said earlier, it's really important for us because, A, it really aligns with the cyclicality of investments that utilities have. And then B, it is truly a differentiator. It allows us to test technologies, test solutions and really come up with the optimum answers for our clients globally. So we will continue to grow that business.

And maybe an interesting part about that business is that it's very under-penetrated. So of that $7 billion TAM, I forgot someone who wanted a number, I want to say 10% of it is actually being outsourced to a provider. So there's a huge opportunity if you can show value to kind of get like free market space.

So what do you think your market share is out of the external business? So I guess that implies what? You're at about 30% based on that 10% number?

I don't know how that...

I'm trying to do the math in my head. We do have a really robust market share. I don't -- I can't do the math in my head. But basically, the number that Jon was trying to quote is out of the $7 billion, around $1.5 billion is privatized and I think we do have almost 20% of the market share.

Maybe a good thing to end on is maybe, Susan, one thing that I think is interesting about Jacobs is that all the major water programs around the globe probably for the last 30 years, even longer than that, has been Jacobs through CH2M. I don't know if you can touch on just our domain knowledge really as the competitive advantage. If you can kind of end with a summary...

Right. So maybe ending with that, as you look across the world, I'm going to just start with Singapore, where the work that we've done for them on both water, wastewater and now moving into coastal resiliency for them, from both a consulting standpoint and a program management standpoint, to Tideway in London where we're the program managers and head of design for a 26-kilometer CSO tunnel underneath the Thames River, to Miami-Dade Ocean Outfall Legislation program, where we've done climate change impacts for them and gotten them ready to face a different future, to Delta Conveyance where a major conveyance project from Sacramento to San Francisco. So big water projects across the world, iconic projects that we have been the program managers and had the subject matter experts responsible for. So we're very proud of our deep domain knowledge across the world. We think that is what differentiates us.

Someone said Jacobs is the Goldman of water.

Wow. I'm going with that.

I did join 20 years ago because of -- they were the water prospect.

Is it on? Yes. Sorry. I have a question in relation to that. I'm just curious, on an earlier slide, I did see desalination, which you haven't really touched on that much. Can you touch on the degree to which you're currently involved in that part of the business and then also the growth that you see, growth opportunity and challenges maybe in desalination?

So where we are involved in desalination would be more in the Middle East. And in some in America, it's just starting to take off in America. And looking at it in other regions of the world, you probably can add more to that. We have deep domain knowledge in desalination. We see that it is a growth opportunity. But as you have alluded to, there are challenges. And some of the challenges have to do with the environmental challenges of doing desal. And so we have to look at this as a whole and what's best for that community. And -- but if you go back to Singapore and Singapore's 4 taps, one of those 4 taps is desal. And so depending on where you are in the world, it is key to having good drinking water. You want to add to that? You came from a region where that was strong.

Maybe the other market to mention is Australia, where we have some good desal experience. We focused our technology around energy efficiency and desal recently. We -- part of the limitation is how energy-intense desalination is. And as we look at different sources, renewable energy or unconventional energy sources, that's an area where we've been kind of looking at how we can add value in. But we are involved in a number of desalination projects across the globe, and we've done a lot of work in the Middle East around whether it's from design to program management. So we are involved in the desal market.

Good. Well, that's all the time we have. Susan, Amer, Jon, thank you so much for joining us. Please join me in thanking the Jacobs management team.

Thank you.