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

All right. We're going to get started. We are really excited to have Jacobs with us today. We have Bob Pragada, who is the CEO of Jacobs; and then we have Jon Evans, who is the VP of IR.

Bob, as I walk over, I think you recently completed 1 year as CEO of Jacobs. And during this time, you obviously announced some major strategic decisions regarding your portfolio. So once the RMT closes, Jacobs becomes a company focused on high-value infrastructure services and solutions, but you still have a majority stake in the RMT, majority stake in PA Consulting, infrastructure design business. So where do you think Jacobs is in its journey towards becoming more simplified, focused?

Yes. A couple of things. Well, first of all, what a year -- what a difference a year makes. Seems like it's been a lot longer than that. But I'd say as far as additional things that we need to do, maybe clarify a few points. And Andy, I think you're aware of this is that the majority share in what will now be the merged company will be our shareholders. 8% retained stake that we'll have, we'll disposition that within the first 12 months. And so from a governance standpoint and involvement in the company, of course, we'll partner moving forward. We'll be completely separate companies and separately listed. So that's one item. On PA, we're really excited about PA. And wish it was the end of the quarter, we could maybe announce some really exciting things that happened during the course of the quarter, which will come in due time. But the way I've always described it before, the ultimate Venn diagram, PA has got a great business, same end markets as we -- high-end strategic consulting that is very much science-based and have clients in a direct access. We do the same. The shaded area of the Venn diagram is expanding, and it's expanding in the U.S. And so we like what's happening. Next month, we'll be 3 years into the investment, first 18 months, 20-plus percent compounded annual growth in the first 18 months.

Not too shabby.

Not too shabby. Second 18 months has been a little softer, down to 10%. And then this year with what's going on in the U.K., that softened a bit. Second half looks pretty bright. So I think as far as the fit with Jacobs, it's there. And now with -- the balance sheet is already in great shape for Jacobs with the dividend and then with the disposition of the retained stake, major share repo along with counting the PA shares as our own. So a great opportunity to even get closer.

Yes. No, that's very interesting, Bob. And I know I want to ask you a couple of questions about PA in a bit. So I want to -- a couple of other big picture questions. Like you also recently laid out a 13.8% margin target for RemainCo. But in your last earnings call, it did sound like there could be more upside. I know you just gave us a target, so you'd be careful with that. But you're moving your corporate costs, some of your corporate costs into P&PS. So if we took that $70 million, I think that you talked about, annually, you could add another 50 basis points of margin over time. Is that correct? And as you continue to work around RemainCo, are you finding more opportunity there?

So, Andy, your math works. And so that's correct. Remember, we always said and we even did an 8-K just so we could put a plus next to 13.8. That was a starting point and a little bit of caution around timing.

Yes.

But the answer to your second part of your question is absolutely. That $70 million that we effectively put now into our recoverability rates for our P&PS business, our infrastructure business, is going to yield about $20 million of incremental margin EBITDA. So that will continue, coupled with we're already seeing points of operating leverage that we're getting -- as we're getting after the corporate cost in a more aggressive way.

Yes. Got it. That's helpful, Bob. And then obviously, another way you can grow margin's by "mixing up," right? Booking higher-margin work. I was interested, you mentioned in your last call, gross margin in backlog was up almost 30 basis points. Are you booking -- like what's going on? Are you booking more consulting or advisory work, you're charging a higher price like what's going on?

Yes, a little bit of all of the above. If you think about the mix, when I say mix, clearly, now the end markets are -- there are clarity around that, transportation, water and environmental. All that's in advanced facilities with regards to life sciences and semi, nice generational tailwinds behind that. What we're also seeing is in the profile of our work, almost a 50-50 blend of higher-end consulting and advisory work. And 50% kind of in the standard production engineering, scopes are defined, and we're actually executing on projects. That probably just a year ago or 2 years ago was probably more like 25-75.

Yes, that's interesting.

And so that's changing. If I were to rank order what markets that's happening in, number one is water. And then second would be life sciences and semis. And then as we're getting mobility analytics and other things into our transportation business, that's probably the one that's got some upside opportunity.

Could I ask you about how you were able to change that mix like that? Like obviously, several years ago now was a CH2 deal, maybe it took a few years to germinate or something like that or I am sure you kind of a couple of years ago also went on and did some hiring of more sort of consultants and that stuff. So like how are you able to sort of change that mix maybe this past year?

Yes. I'd say -- and let's just take water because the CH acquisition ended up being tremendously successful in the business now. It's 2.5x the size that our combined entity was back in 2018.

Wow, that's pretty cool.

And so I would say this, probably the #1 driver has been long-term client relationships in a very science-based approach to our clients' work. And so we're that deep into the science of our clients' work. And now scopes have become more and more difficult. I'll use a water example. Before, client would know they have the issue, client would even put some kind of schematic of a solution together and then go out to an engineering firm to engineer it. Today, the issues are so complicated, and I'm picking on water, but they're so complicated. Client just knows they have an issue. So going in and co-creating and co-ideating on potential solutions is -- so it sounds like consulting. That's consulting. So that's become more and more of our business we've been doing in the life sciences world for quite a while. But that's become another great example right now in life sciences is everything around GLP-1 drugs and really knew that they had the product. But now they look at their manufacturing network and said, just the sheer capacity needs right now, how do we do this? And so we went in very early. That's consulting. So lower revenue, higher margin and it's become a big part of our business.

Is the way to think about that, like, obviously, we know what the PA margins are. Are you getting PA-like margins on this design and consultancy work in P&PS?

I'd say we're getting there, call it, mid-teens, higher teens.

Just on the design and consultancy stuff like is it -- like when you do a big water project, is it separate? Is it all one contract then it gets blended together? Like how do you think about that?

Two modes. One is we do have -- it is one contract. It's one engagement. But we would have a rate structure to where some of our higher-end design consultants, yes, or water specialists would be coming in under a different rate structure.

Yes. Now, that's helpful.

Not quite at PA's rate structures, but we're getting there.

Okay. Got it. And then if I dig into P&PS a little bit more, I think you reported adjusted net revenue growth at 8%-plus in your last quarter. But your total backlog has been growing maybe a little bit more slowly, like kind of mid-single digits. I think it was 4%. I think you described it to me as like you have some large projects that have passed through maybe in life sciences that have been running their course. But I think you also talked about maybe larger projects starting to pick up again in life sciences. So maybe talk about that. Do you see backlog growth accelerating from here?

Yes. Again, we'll have some news here coming up at the end of the quarter. But...

[indiscernible] is always good.

The pipeline in life sciences is pretty unique in that we don't actually get visibility past kind of a 3- to 6-month window. And when -- but these -- this is where long-term client relationships help, right? So these are phone calls that happen, not scopes and RFPs that are coming out. And so these things happen pretty quickly. And so that -- we weren't really -- hopefully, I came -- we came across that way. We weren't really concerned about a slight dip. Pretty confident that, especially all that's going on with metrics -- everything you hear on the news right now is around GLP-1. But what's going on in neuroscience, what's going on within oncology drugs and therapies, pretty remarkable stuff. So...

And I should ask you about GLP-1s. Like do you see that as another bigger growth driver or like...

Absolutely. I think I might have mentioned publicly that if we kind of go out into a '26, '27 time frame in our life sciences business, which today, Jonathan, I think we said what?

Mid-teens.

Yes. As far as the size, I think it's a little over $1 billion. It could be 50% of everything we do in life sciences. That's how big it possibly could be.

And right now, it's very small?

Probably about 20% -- 15%, 20%.

Okay. Got it. And then you guide to mid- to high single-digit growth for the year in P&PS, and that's right in line with your 6% to 9% longer-term target. But do you ultimately see a difference between public and private markets in terms of that growth?

Yes. Timing, right? I think the public sector market is the reason why we put that range on it, 6% to 9%. I think our peer competitors and competimates have said 8% to 10%. Is it 6% to 9%, 8% to 10%, I think all of us have maybe some views on timing. The outliers for us, which is the differentiator between us and maybe our competitors, is that we have these big blips, right, which are called life sciences and semiconductor projects that drop in. And so to get to the higher end or maybe even exceed the higher end, it would be the timing of those.

Got it. No, that's helpful. And I asked one of your peers this question. I'll ask you like maybe the maximum you think fiscal tailwind from all these bills, the 3 bills, like when do you think it comes for you guys? And do you worry about U.S. elections and how they'll impact your primary infrastructure and services business?

Yes. Let me answer the latter one and then maybe go to the first part. I don't think that it will, the election. And the reason I say that, I mean, I think what would be probably could have more of an effect is some kind of prolonged continuing resolution. But even in that scenario, probably more of a CMS topic, and it would deflect back to the '23 -- sorry, the '24 budget, which actually has been pretty good, right? We got in trouble in '22 as it deflected, and it was prolonged. It deflected back to a '21 budget, which was 0 or I'm exaggerating, but pretty dominated by [indiscernible] money and everything else. So that was some of the challenge there. On the first part, I think that if you look at the numbers, 3 years into a 5-year IIJA program, 54%, 53% of the appropriations have been made, 25% spent, right, in 3 years into it. So the '21, '22 delay is actually starting to catch up now. So I think it's probably more like a '27, '28.

Yes. And Bob, I should ask you because the chipset money is actually finally starting to flow like -- so what does that mean for Jacobs? Do you see an uptick on the semicon side? And when would you see it, I guess, is the...

We're starting to see it -- so let me talk about right now and then what we're seeing in the pipeline. Right now, what we're seeing is indexing towards R&D projects. So what does R&D mean in that space? Is there OEMs to manufacturers, you apply the Lam research, et cetera, that are pumping in -- taking government money and pumping it into tool enhancements and tool innovations that are pretty remarkable. Right now, those levels of tool innovation, most of those tools were going to China and going to Taiwan before. So now they're being done here. As far as the larger fabs, those are already all started, right? A lot of them have started. So I do think that we'll continue to see that pace probably on the lower-end fabs. So the issue is TSMC, Intel producing the highest, and then we've got TSMC as the contract manufacturer for today's big stock in the video. What we don't have in the U.S. is we don't have the lower-end chip production. So the chips that go into vehicles and chips that go into appliances and whatnot, almost 90% of those come from the East. And so we'll probably see more investment in those types of areas. And we're starting to see that, companies like GLOBALFOUNDRIES, Micron, and others.

Yes. So GLOBALFOUNDRIES has just got money, you would see that.

You would see that. Yes, yes.

Okay. And then 40% of your P&PS revenue is exposed to international. So maybe give us a little more color by region. I know you've mentioned strength in the Middle East, maybe near-term uncertainty in the U.K. Can international grow in that 6% to 9% range? And I should ask you about India, too, because that's been something that's been interesting to me today like -- or last couple of days. A lot of people talking of India, still small, but it's one of the higher growth areas. And I know you guys were in India early.

In a big way. Yes. So maybe, Andy, just to kind of go around the circuit, just starting with the U.K. and then head to the east. Look, I think if the election happens earlier in the year rather than later in the year, I think we could see a second half comeback. We're already starting to see some kind of early indications of that now, which is good. The good news for us is we've kind of held serve with a lot of those resources doing work in Scandinavia and in Continental Europe, predominantly Germany. So that's been a positive. The Middle East is going to grow driven by Saudi. I think it -- for us, we're probably a little bit more selective. We can grow the top line pretty robustly in the Middle East, but we're looking at all the dynamics with regards to cash flow and real margin-accretive type of work where we are differentiated as well. Interesting, you hear a lot about the giga projects in the Middle East or in Saudi. Those will continue. I think the winning of the Expo as well as winning the FIFA World Cup, which we're the program manager on both of those in Dubai and in Qatar. We're just -- we're trying to lift and shift those teams and put them now in Saudi, but a big growth in the infrastructure. The water networks that are being enhanced as well as, believe it or not, renewables in Saudi. We are long India. We see the pivot in real time. I was just there in December. I think what's unique about Jacobs is that we have 4,000 people in India, and they have the skill set of serving the west for their whole careers. And so that skill set that we have is high end, and that's what now, especially around chip manufacturing, and pivoting out of China, that's real. And I think that's definitely going to continue. So reason to be optimistic there. It just takes a lot of rupees to convert to $1. So it's something that's going to...

Small, but okay.

Singapore Ag is doing well as well as water work. And I think Australia, New Zealand for us has been a little flattish. But I think once the election is done there, we'll see it come back.

Canada?

And Canada is robust. Right now, for us, Canada with 2 major players that sit there predominantly represents water.

Got it. That's a good segue actually into water, like you've been talking about it a little bit, but I think you mentioned bookings were up 30% year-over-year. Maybe walk us through the key drivers first because it's just, again, like what are you've always been positive about but even more positive, let's say, last year. Why?

There's reason to be -- well, it's interesting. There's reason to be positive because it is such a negative situation. There's negative...

We get it. We understand.

So the predominance of the water -- of the work that we're doing is around dealing with water scarcity. And so if I were to profile all the work that we're doing within water, water reuse and combined sewer overflows have probably peaked right now, and that's a result of continued acceleration of climate. And so natural disasters are happening at a faster pace right now. That's driving the market. This is not waiting for federal funding because you got to do something right now or the number of potential Flint, Michigan is scary numbers that are out there. And so there's also a social equity component, too. So places like Jackson, Mississippi and other areas, we're in the middle of all of that. What I just mentioned about the U.S. is happening globally. And so that's why we were still staying, pretty exciting.

Bob, here's what I understand. Like I cover a couple of the equipment kind of either testing, filtration, whatever, like -- so first one of my companies that's testing kind of says, well, sometimes the municipalities are a little bit like slow to replace, it takes them and they -- their testing equipment in the last 6 or 7 years. But it seems like what you're saying is that U.S. municipalities are more aware of sort of what's going on and want to do stuff. Like is that what's happening? They're kind of getting more aware that they could have a Jackson or Flint? Or have you seen a change over the last couple of years?

Absolutely. In fact, we've seen a change in the last year. And so the answer would be yes. Back to the first part -- the first question, Andy, that's where the equipment manufacturers might not be seeing it yet. The reason why we're seeing it is we're in the middle of it with regard to...

You're starting the plan, more or less.

Exactly. The other thing, the reason why we got excited -- we're getting -- continue to be excited about water is the digital enablement that we're getting some real traction in the water space. And this is -- we broadcasted, published the partnership that we have with Palantir, the work we're doing around what we call the intelligent O&M of water plant. We operate 250 plants in the country right now. We have those implemented in, I think, 10 or 11 of...

Low double digits out of 250.

Yes. Low double digits. We got a lot of upside there. And that is -- that's driving what traditionally has been a very labor-intensive operation and maintenance type of service to -- and probably kind of in that 12% margin range to now adding 200, 300 basis points to those programs. And these are long-term programs while reducing chemical usage and energy usage as well.

It's so interesting, Bob, because like I cover companies like Xylem, right? And they're talking about sort of trying to do more digitization as well. So like what do you guys bring to the table versus a product, not necessarily Xylem, but you know what I mean, like in terms of the digitization side?

Yes. I would say ours is more -- and to a certain extent, I guess, Xylem is through the product is we're looking at optimizing plants, right, optimizing and extending lives of plants and getting it to the point where we're doing more -- and this is for stretching the capital dollar as well. We're doing more retrofits and upgrades rather than having to do brand-new plants. Now take Houston, for example. Houston has one more Harvey-like catastrophe, whole city is underwater for a couple of years. It was underwater. And so Houston had to build what is the largest water treatment plant in the country to support just how bad it got. And so we're seeing the use of the digital products to get municipalities and cities to the point where they don't have to go spend $1.7 billion on a brand-new water treatment plan.

Maybe just 1 or 2 more on water, like potential uptick from PFAS. Like I hear different things from everyone. What's your kind of view on that?

Yes. It's an issue. I think that the narrative is probably pretty far out ahead of what we're actually seeing in the marketplace. I think the private sector is probably the furthest along as well as the U.K. and Australians at getting it into regulated requirements. Right now in the U.S., it's still not, right? That's probably point one. And once it does get and there's a super fun like treatment of the eradication of PFAS, I think then that will happen. For that to happen in an election year...

It seems...

It's probably unlikely. Here's the other topic is, right now, when you hear about different efforts that are going on, we've all -- when I say we, collectively, the industry, we've learned how to assess it and identify it, how to segregate it, but now it gets stored. The actual remediation component of it, still in development stages.

Yes. And then is it -- so it sounds like you got a lot of North American water opportunities. How would you compare North America to international? Where do you have more opportunity?

We -- it's just because the market is bigger here, there's more opportunities. But relative to the size of those other locations, almost the same.

Interesting.

Hopefully, we can announce here soon. But the decel opportunities in Australia and new -- Australia and Saudi are coming about as well.

So I've asked this before, but since you mentioned NVIDIA, I'm just going to say, I mean, you guys are a leader in data center design. But you've told me like content-wise is still pretty small. But can I still see it move the needle for you guys, given how much is going on in that side there?

I don't know move the needle by just -- yes, you got $11 billion in revenue in this area. We're doing probably 100 in data centers. Even if that doubles, you probably still couldn't see it. Here would be the opportunity going into this is that the actual design of the data center is for a $200 million data center is probably $2 million to $5 million for us fee revenue. We've gotten very efficient at that, especially with the hyperscalers and some of the large colos is now the sustainability and the power optimization because these are now measured in gigawatts. And so the power requirements and the cooling requirements back to water, the water reuse components, that's driving the business. So instead of $5 million for an engagement, we might -- we could potentially double that.

Yes. Got it. So that's interesting. Okay. Let's shift to PA Consulting, and I'll open up to the room in a second. Like so we talked about it a little bit in the beginning, right? Growth has been slowing down a little, still high single digits in Q1. I think you said mid-single digits for '24. But maybe talk about the balance between the choppy U.K. macro that you mentioned, solid pipeline of opportunities, eventually build out in the U.S. I think you actually said the PA had a bit of air pocket in December, but that got better in January. Is that still the case?

It is. We are continuing to take some cost actions as well. And so that will recognize itself in calendar Q1 or Q2. Look, we still think that the prospects are great. Here would be some of the positives that are going on. The AI consulting component of PA and kind of the digital consulting, that's the piece that's growing the fastest. The other areas where -- that is growing, and the energy and utilities consulting work is growing. So asset identification, financial profiling, working with clients for different types of energy transition planning, that's growing as well. The area that I think we're going to see a bigger pop and more application in the U.S. is that digital consulting, AI consulting that PA is doing a very good job there.

Any questions from the room? Anybody have a question? All right. So just on PA, what would you say the risk is that it could grow more slowly than mid-single digits? Or is that pretty conservative? And then on the margin side, the cost out actions should keep you at 20% you think?

Yes. I think that the mid-single digit to potentially higher single digit is a near term. And just 80% of the business is in the U.K. And -- but with long-standing client relationships and work, our partner base that is focusing in on those markets are really dedicating their time in the U.K. We're moving that model into the U.S., a little slower than what we want, but making it more targeted. The PA growth model in the U.S. up until the time we made the investment was really buying smaller consulting firms one geography at a time, right, and then piecing them together. And so we're trying to take more of a sector approach and saying, okay, in the U.S., where do we want to be? Energy and utility's hot, life science is hot. Let's get that. But now let's get into the AI enablement component of that and consulting with our clients on how to do that.

Do you have an issue, Bob, where you go in and they're like, oh, we usually deal with McKinsey and like who's this PA Consulting? And then why don't you just buy out the rest of PA Consulting so you go in as Jacobs, something like that?

Could be. Could be. The brand is very meaningful in the U.K. and in Europe, in Scandinavia as well. And so I think that brand is very meaningful. The other thing too, Andy, is we have been around for 75 years. So if we go in with Jacobs, we're negotiating upward. We went in as PA, we're not, right?

So I see what you're saying like -- but at the same time, you do have the brand.

Yes. So that's something on the radar.

Right. Because the reality is I think you've talked and your main competitors talked about it, too. It's like you're talking about day 1 opportunity, more or less. So you've been pushing a day 1 as Jacobs anyway, right?

That's right. That's right. And so I think it's -- those are -- the great thing is with -- even now, but with the separation, we've got a lot of options. We had a lot of options and a lot of latitude.

Got it. Okay. And then just to that point briefly on CMS. One, on your last earnings call, you said you're on track to close the RMT second half of '24. I know it's only been a few weeks since you reported, but maybe update us on anything that's going on in terms of the RMT itself. And second, we -- for the segment, you mentioned pipeline growth outlook remains strong, not much in the way of recompetes, which is good. You mentioned the election year, like what do we need to watch? Do we need to see this stuff get resolved over the next month or so? It seems to be coming ahead in Washington soon?

Sure. Well, a couple of things. One, if in case folks didn't see it, we did release an 8-K earlier this week. So maybe just to talk about the timeline and where we stand, 8-K was positive. First milestone, think about the 3 big milestones: DOJ, IRS, and SEC. On the DOJ piece, the HSR filing period is complete. So now that's checked off right on plan. The IRS public -- I'm sorry, private letter ruling was submitted on time with a premeeting with the IRS. I don't see any issues there. So that's progressing ahead. And the Form 10, which everyone is anxiously waiting for that to be public, will be done this week. This week or potentially on Monday, but that's going out, all leading up to getting the management team to include Steve on the road by early June and out in front of our shareholders and talking about the strategy and the moving forward as well as having more clarity around the financials. All of that's very positive. What's also been happening internally is we have already on a weekly cadence, been doing integration planning, right? Not me personally or Jonathan, but the team that's going to be running the organization has been doing that. And so things like org structure, real estate, system utilization, all those things to create now the new company. The pipeline looks good. 1 quarter into the 3 quarter [indiscernible], you saw the CMS results and C&I results. Amentum also did well. So the early numbers that we disclosed in November are all going well. So we're excited. There, we compete schedule for '25, '26 is also you like. So a lot of the big nuggets are behind.

I just want to ask you, like you're pretty big NASA, like anything going on there, kind of just still steady as she goes?

Steady as she goes. I had a meeting with the NASA administrator, Steve Arnette did, and very positive on the transaction. DOE also very positive. Going to the U.K. this weekend and meeting with the U.K. government. But so far, we've been getting some positive receptivity. Employees getting excited. Attrition is declining. So you [indiscernible]. Normally, when these things get announced, you see a spike in attrition. That's not happening. And the discussion right now about portfolio transformation within that portfolio could even further accelerate. I mean already the cash flows have a deleveraging pathway, but potentially making some moves. You know Steve Demetriou really well. Andy is that -- he's not afraid to make some bold moves. And so I think you're going to see some things here very quickly.

Interesting. And then I want to ask about Divergent Solutions. I know it's a reasonably small part of RemainCo. But maybe talk about what it looks like post spin. We know there are software assets that are helping P&PS. So what would be -- how would you describe its purpose post RMT?

Yes. Great news is that the transportation and water platforms is the part that stays. It's also the piece that's been growing at greater than 50% per year, right, with the highest margins in the business. You're right, Andy, it's about $150 million part of that business but with a great, great growth trajectory. The growth has been driven horizontally through the -- today P&PS business, tomorrow the Jacobs business. So we'll have kind of an L-shape structure. It will be within Jacobs reporting. But we'll still have a direct go-to-market with our software and our SaaS products. And now this horizontal integration with our offering will be a lot stronger. Actually, it's strong now. It could even get stronger because that's really to -- again, that's almost like your data center question. The $100 million or $150 million in software sales, interesting, gets lost, right? But what we really want to see and we're seeing it is how many bps of margin expansion is this digitally enabled solution providing versus a standard service offering?

Yes. Right. Got it. Got it. So I think, Bob, you guys have done a good job on cash recently. I think maybe if I go back a few years ago, it was a little bit more lumpy. But it's gone, I think, a lot better. So maybe what have you done to sort of get it to where it is now and you're guiding 100% conversion again in '24? And what can you do to continue to improve it?

Yes. Well, the focus on working capital management and DSO has been enormous. We have dropped in the last 4 years within P&PS by almost 20 days. And so that's been, I'd say, point one is real rigor and discipline and enhancements of our systems in order to allow us to cash manage at the highest level. I'd probably put our DSOs in that business at the top of the class. Second, post separation, cash management even gets better. CMS has 20 days worse DSO than P&PS. And that whole sector is kind of in the [indiscernible]. So that gets better. And then the third is -- and I thought this is what you were going to ask me is stop the restructuring.

Yes, well, I said that to you for the last few years.

Yes. So that -- right now, 80% of that is adviser fees on the separation. So maybe 1/4 on the kind of the tail off post separation, but you're going to see that number come dramatically down post separation.

All right. And then you're going to be done transforming, right? Just done?

So our goal was to not have adjusted free cash flow, right? So just cash flow.

So speaking of just cash flow, so what are you going to do with the cash flow then? You got the $800 million repurchase authorization. But you go through these, I think, years of being acquisitive, then you slow down. Like I think about Jacobs [indiscernible] for a long time. So where are you in that sort of thought process? Could you ramp up again M&A? Or you're going to be careful for a little while?

Look, we like the portfolio the way it is today. We don't -- none of us wake up and say, well, in order to catalyze growth, we've got to go do that or we've got to go do this. We feel really strongly about that. If you look at the P&PS business, clearly, this ginormous deal that we did in 2018, CH2M, sizable investment in PA and then a smaller investment in StreetLight data. That's 8 years, 3 deals. All of the other ones is part of what's being separated. I think we're good. So big share repurchase and return to shareholders. On the 800, that is already -- at the end of the year, we'll probably be 400 to 500 into that on the pace that we're on and then continued increase of our dividend.

Got it. And then just my final question, I asked this from you guys last year and I ask every company. What are the top 2 or 3 innovations and structural changes affecting your company over the next 5 years? And are there any emerging initial trends that are perhaps being overlooked in the current discourse?

Well, on the last part of your question, I don't know that are being overlooked. Clearly, climate being the biggest as well as kind of the realignment of the supply chains in the world are the 2 that are driving our business. So those are the 2 that have continued to be strong, strong drivers across the world and across our P&PS business. National security and some of the geopolitical turmoil, I'd put it in the same category. So those are continuing, and we've been pretty vocal on those. I'd say as far as priorities on our continued focus, these 2 main ones. Today, we deliver of the 28,000 engagements, projects, programs are going on at one time in P&PS and now will be the RemainCo, the average size of those are $350,000. The average duration is 3 to 6 months. It's a big business and 3,700 clients with 2% turnover over the last 20 years, right? So this is a sticky business where we're so deep into our clients' business. It's -- you get this question all the time is modeling now is probably modeling more like an Accenture than it is a classic project-based E&C company. So I think when we look at that, global delivery and the digital enablement, the use of now going to the next stage of incorporating AI into our own running of the company as well as we have now the early stages of our own large language model with our own data on the thousands of bridges and roads and rail and water treatment plants, all that data we have. And so utilizing that in order to get even more efficient to where we're not completely dependent on headcount is a big opportunity for us moving forward.

Awesome. Well, on that note, thank you, Bob, Jon, for being here.

Excellent. Thanks for having us sir.

Thank you.