Parsons Corporation (PSN) Earnings Call Transcript & Summary

Good afternoon, everybody. I'm Noah Poponak. I'm the Aerospace and Defense Equity Research Analyst here at Goldman. The next presentation out of my sector is going to be from Parsons. I'm very happy to welcome on the stage here with me the CEO, Carey Smith; and the CFO, Matt Ofilos. So thanks so much for being with us. It's great to have you.

Thanks, Noah. Happy to be here.

So we have to start with the DOGE. I've been waiting for my first government services company. So I've asked -- we just had a sort of quasi-defense company that claimed it would be great. But no, in all seriousness, I mean, it is a pretty shocking thing, I guess, to see some of the statements and some of the headlines. But for a long time, people in the government have talked about doing things better, more efficient. We definitely buy things we don't need. We definitely buy things imperfectly. And so I could see scenarios where they reduce the size of some things in the government, and it actually accrues to you because you do it better, more efficient. But I could also see scenarios where they just aren't able to implement it that smartly, and it's just blanket reductions to budgets, and your revenues are highly correlated to budgets. So what are you guys thinking? How are you managing the business for it? What are the internal discussions like? What do we think happens with DOGE?

Well, first, I'd say we support the objectives of the Department of Government Efficiency. It is an advisory board, so it's not a congressionally-mandated department. So they will be providing advice and recommendations to the various agencies to implement focused on 3 areas. One is how do you become more efficient? Two is how do you reduce cost? And three is looking at regulations that are unnecessary. And I think all 3 of those things are very important. And so what we've been focused on is, first, can we provide ideas? We can do technology applications to improve efficiency, areas like artificial intelligence, areas like automation. On reducing costs, there's been a discussion about some elimination of agencies or reduction in scope. Fortunately, Parsons is not involved in any of the agencies that they've discussed, which include Department of Education, Veterans Affairs, IRS, FBI. But on the other hand, we can help them with ideas on how to perhaps privatize or run those more efficiently, so it's actually upside opportunity for us. And then I'd say on the regulation side, we're focused on what's kind of slowing down our business, what's slowing down procurement and how do we capitalize on that? Parsons is in a unique position as well because of our portfolio. 40% of our work does not even fall under the federal government, and the part that does is in Department of Defense, intelligence community and Department of State, not areas that have been discussed. So we see it as upside opportunity.

Interesting. And you're saying you officially support it.

We think it's a great objective to be able to try and make things more efficient, lower cost and eliminate unnecessary regulations.

And are you actively engaged in discussions with the government or the incoming administration on what some of the ideas you just walked through could look like?

We are at early stages of that. We're putting together basically white papers, position papers to help achieve certain objectives.

Okay. And we should think of the infrastructure side of your business as just not related to DOGE.

That's correct. So it's pretty much state and local and international.

Okay. Okay. That's a good answer. Appreciate that.

You're welcome.

If I look at the Parsons model, the top line organic revenue growth has been very strong. I want to talk about what's behind that and where it goes from here in terms of the drivers and the new program wins you've had and how you've aligned the business. But first question is just how worried should an investor be about just the pure base effects and the compares as you start to lap these high growth rates? Is there a rapid deceleration just purely from working off of a higher base? Or is the company still actually small enough within its markets that it can keep growing at pretty high rates for a while?

Yes. First, we're very pleased with 6 consecutive quarters of growing greater than 20%. And I would say the key that's behind that is we're in the 6 right end markets. All of our end markets are expecting growth between 5% to 12% compound annual growth rate. Obviously, we've been able to deliver ahead of that. I would say as we look forward, we haven't even hit the peak in the infrastructure bill. So in the United States, that's expected to peak around the 2027 time frame, but yet we've won 6 of our largest contracts in our company's history in just the last 16 months. A lot of those around this area, the Gateway Program, the Newark Bay Bridge, JFK roads and highways. We were just announced last week for the Newark AirTrain program as the lead design subcontractor. We also won the Hawaii rail and transit program, and then we were awarded the State Route Georgia 400 Express Lanes. So these are major projects. So that is still on the uptick. If you look at the Middle East, where we're the #1 program management consultant, we're involved in pretty much every single giga project that's going on in Saudi Arabia. That's not expected to peak until around the 2030 to 2032 time frame. Then within the UAE, we're also seeing quite a bit of uptick. There are many people that are moving there. There's a lot of development, including man-made islands that are being built. We're also helping [indiscernible] the unfortunate flood that occurred there, so we're doing a lot of water and sewage programs in Dubai and Abu Dhabi. So moving over to the federal side of the house, what's exciting in the federal side of the house, also, I'd say, with the new administration, there's an increased emphasis on cybersecurity. Our cybersecurity business grew 26% year-to-date, so we expect to see significant increase there. There's focus on how do we revive our Army Ammunition Plants that are 30 to 50 years old. We're involved in 2 of the largest ones of those, Holston and Radford. If Russia-Ukraine comes to a ceasefire or an ending, Parsons has the opportunity to be involved in the rebuild of Ukraine. Not just the rebuild, but we can actually go in and help with the de-mining effort. That country, unfortunately, is covered with 40% mines. We have an exportable system. It's a directed energy laser system that can help there. We can do environmental remediation. If you look at the INDOPACOM region, the focus really is shifting -- well, it's always been on China, but I'd say it's becoming even more on outpacing near peer threats and making sure that we have integrated deterrents. We've been in that region for over 3 decades on Guam and Kwajalein in Hawaii, so quite a bit of tailwinds as far as that. Now do we expect always to continue to have over 20% growth? No. As we go into next year, what we've been indicating is mid-single digit or better growth.

Okay. You mentioned that you've -- the 6 largest contracts in your history in the last 16 months or 18 months, that's within infrastructure, specifically or that's at the total company level?

That's within infrastructure, North America.

Okay. On the federal side, is there a -- I think you've had -- or I know you've had some...

Sorry, Noah, they're not the largest for Parsons. It's the largest for the infrastructure.

Largest for infrastructure. Sixth largest in the history of your infrastructure business the last 16 months.

In North America.

North America. On the federal side, you've had some new wins. Are there similarly new programs on the federal side that are large relative to your history, relative to the size of the company, that have not actually hit their run rate level yet? And what would those pay, if they are there?

Yes. So we won a program that I can't talk much about with a confidential client, and also the size of the program is confidential. That was a very large win we had early in 2023. And the other one that we were awarded, which was the GSA contract for $1.2 billion, that's a single award to Parsons. That one is still on the ramp-up. In Q3, in fact, we just exercised the first option year on that because we built up enough task orders quarters to get through the base share funding. And then some of the other ones I talked about earlier, like the Army Ammunition Plants, the work that we're doing with Defense Threat Reduction Agency and other cyber contracts are still ramping.

And Noah, for some numbers, just to give you an idea that GSA FEDSIM win that Carey mentioned will do about $90 million this year. At scale, that will be about $240 million, $250 million, so there's still some great ramp there. Cyber and intel business has been growing about mid-20s, 25%-ish this year, and that will contribute to helping that continue to grow in the 20s next year or up double digits next year.

Are you able to give the same numbers on the classified business? The classified win?

No. We're not allowed to share that.

Thought so. Just checking. Got it. And then those 6 on the infrastructure side, I'm not going to ask you to give me all the numbers on those right here, but are those still early in their path to the recurring number as well?

Yes. So some are and some aren't. JFK roadways, a lot of that design is done. Everybody living here will be excited about that. That was about $130 million contract over 3 years. The Newark Bay Bridge, $147 million contract over about 4 years. The one in Hawaii and the Georgia, those are multibillion-dollar jobs for the general contractor, and we're the lead design subcontractor on those. And likewise, with the Newark AirTrain, that's over $1 billion job and we're the lead designer.

Okay. So ultimately, what I'm trying to get at is sustainability of the growth rate, how much growth is left in front of you? And in infrastructure, 6 of your largest contracts ever are in the last 1.5 years and are mostly or half of them are still ramping, that seems like -- and then that's all North America, and as you've mentioned, outside of North America is kind of still ahead of you. And then on the federal side, it sounds like you have a few new wins that are -- $90 million as a percent is less than half of $240 million. So I guess the next question then is, are there enough new bids, and what's your confidence in your ability to win them to then keep the next set of new awards and new revenue that comes behind that?

The size of our pipeline currently is $55 billion. We've been over $50 billion pipeline for the last 4 consecutive quarters. Within that $55 billion, 100 programs are greater than $100 million. So quite excited about the pipeline.

What were those numbers 3, 4, 5 years ago?

It would have been probably close to half or 2/3.

I think in the 2022, we might have 12 of them, so it's almost double.

And that's essentially pivoting the business into these 6 channels that are growing faster or have a larger pipeline?

Yes, really focusing on strategy, setting the strategy and then being laser focused on execution in 6 end markets. They're all growing sustainable and profitable.

Okay. And then is there anything rolling off, any major recompetes in the next 2, 3 years?

No, the 1 program with the confidential client, that did peak this year. So we are going to see a little bit of ramp down as we go into next year, and we're currently working with the customer on that.

Is that a sizable contract? Or is that sort of just like the only one to point out?

Yes, we're not allowed to share any information on it.

Okay. Fair enough. Maybe moving then to margins. The federal margin has been pretty stable and maybe a little higher, moved above 10%. I think you've talked about that being 10%, it's now above 10%. Maybe let's start there. We just think about that as kind of 10% sustainably for a long time? Or can that go higher?

Yes. To your point, this year has been a great year. We've historically said kind of mid-9s felt like the right run rate from a federal margin given the scope of cost-plus contracts. As you'd expect, a lot of early phase R&D-type contracts, weak requirements and just kind of a mission-based. We're in a cost-type environment so you're kind of restricted from structural perspective. And so we've always said kind of mid-9s was a good target for the federal business. This year, we've had a bit of a mix shift, so we've seen an uptick in the fixed price jobs. That's driven us up into the mid-10s this year, to your point, Noah. And so we're very happy with the performance on the federal business. I do suspect, as Carey mentioned, we have a little bit of coming down on that classified job. So we're pretty comfortable that the federal business can continue to perform. But as the mix shift, as we continue to grow that GSA FEDSIM win that I mentioned, that's a cost-type job. So that's going to be kind of a little bit lower on the margin side. And so we'll -- that outpaces the growth on the fixed price. We expect margins to kind of stabilize in kind of the high 9s, low 10s is a good place on the federal side, I believe.

Okay. And then the CI margin has, I guess, a lot more improvement potential. You've talked about shifting from the legacy of the company in engineering and construction, the leg work, to out of construction and really into the sort of general contractor role, and that takes on less risk. Maybe for those that aren't as familiar with it, walk us through that transition, and what does that mean for the margins of that business over time?

I'll start with the transition and Matt will hit on what it means for the margin. So we refocused the company. I took over as the Chief Operating Officer back in November of 2018, and we refocused the company back to what I'm going to call our core roots. Parsons has been an architecture and engineering firm for 8 decades. And what we're good at, there are 3 things. We do design work, we are a program manager and we're an owner's engineer. So it's really about getting back to the core. I think over a period of like 2010 and 2015, the company had gotten into some construction projects and as a construction JV contractor. That's the part of the company that we've changed. So really focusing on the core, and very nicely, it aligns with unprecedented global spend.

Yes. So Noah, to your point, the CI business will be kind of low to mid 7s this year, really driven by the -- as we wrap up these programs, we have the last 2 legacy programs wrapping up this year. The first one was a first half wrap-up. Second one, we're counting down the days any minute now. Hopefully, before the end of the year, we'll have completion on that job, but normalize that business for the impacts that we've taken in Q3, we had about a $23 million impact on one of the programs. But normalized, so you take the 1,000 programs that we performed on there and you adjust for these 2, and we've kind of been in the high 9s, low 10s. And so as we get out from under these programs, Carey and I have said 20 to 30 basis points per year of margin expansion. This year in 2024, we're really excited we're going to go -- we're 8.5% last year, we're going to be 9 -- we just raised to 9% this year. So 50 basis points of margin expansion in 2024. 2025, if we can get another 20 to 30, that would be, if you think about it all coming from the CI side, you can get 40 to 60 basis points off infrastructure. So we want to trend the infrastructure business towards double digits over time. We can see that the programs we've bid and what's in our backlog and the programs we're proposing support that higher margin rate. And so it's really just executing and getting up from underneath these contracts, and we'll trend in that direction.

Does the math of the adjusted margin, excluding those 2 contracts, not suggest more than 50 basis points of margin expansion next year?

That's our goal, Carey and I's goal, of course, is to accelerate this as much as possible. I don't think it's exactly like a light switch where all of a sudden 1,000 programs, you don't have any write-downs. We're just watching our program portfolio. There's the opportunity, obviously, to outperform, but our goal has been that 20 to 30 basis points at the company level per year.

Are there still small write-downs and adjustments here and there across that total portfolio?

Yes, I'd say across the whole portfolio, there's always going to be positive and negative adjustments. So there are some, but nothing to the scale of the ones that we've had, probably 3 $20 million write-downs over the past 4 or 5 quarters, and so nothing to that scale. It's kind of onesie, twosies, I would say.

Because that's the work we've exited. If you look back in 2018, we had about 10 to 15 of those programs. Entering this year, we only had the 2 remaining. As Matt mentioned, we're about to wrap up the last one. That's a business we're no longer in.

That last ramp-up has not yet occurred.

It's days, I'm hoping.

We submitted for substantial completion. Customer came back with some pressure, so we're just working our way through that negotiation on substantial completion.

What does that mean, that they came back?

Well, so when you make substantial completion, there's a certain checklist that you have to go through of technical performance, key performance indicators. And so we feel we've met it, and we're just working with the customer to show them that we've met those.

And they're pushing back on the...

No. Just in discussion. Part of the normal process.

Okay. Got it. Infrastructure in the Middle East seems like something that would have risk of scope creep, specification creep, cost creep. And even if not in traditional E&C or the construction, part of the job have write-down risk. I guess, how do you -- do investors ask you about that? And how do you get people comfortable that the building of islands or brand-new cities is not the type of project that comes with cost creep risk?

It's the role that we play in the Middle East. In the Middle East, we're a program manager consultant. So we're not the designer or the general contractor. So if you're the program management consultant, your job is to help the customer implement those projects and basically oversee who is the general contractor. For us, it's time and material contract. So you start on day 1 on the program, you're on until the end of the program, beginning to end, assisting the customer. And we intentionally take that low-risk position there.

So it's really like a consulting business with a fee.

Yes. Program management consulting.

And so you essentially have -- is it fair to say you have 0 risk associated with the scope and cost creep of the project, if it does happen?

We don't have, I'm going to say, incentive fee contracts or anything like that. So it's strictly time and material.

Yes. I think the risk, though, would be on the top line. If you're not performing as a program manager, typically, they'll move on to a different contractor. But we've got a great reputation, we've been delivering on a lot of these jobs, so I think we're in a great place there. But the risk isn't necessarily on the margin or cash side.

Okay. I'd like to better understand where Saudi, specifically, and I guess total international infrastructure is as a percentage of your infrastructure business now and how large that gets once these Saudi and other projects have fully ramped, if you could talk about that. And then in the U.S., is it your expectation that the new incoming administration on infrastructure is just going to take what already exists in terms of spending packages and just run with that, that infrastructure is fairly bipartisan? Or just is there some turmoil that holds things up while they change administration?

Yes. So starting with Middle East, Middle East comprise 15% at the Parsons level of revenue, and it makes up about half of our revenue relative to infrastructure. It's hard to say which is going to outpace, I think the 2 profit and loss centers are running at very healthy rates. They're both double-digit growth. And again, neither one has peaked. So it's going to be -- we've got great tailwinds that we can see long into the future. On the U.S. side, the Infrastructure Investment and Jobs Act was passed into law November 2021, so it is in the law. What ARPA had reported back in May of this year, which would have been the halfway point, is that about 40% of the projects were announced and there still was about 80% of funding yet to come. So that is basically secure funding. The Trump administration has been very supportive of infrastructure, particularly of modernizing our roads and highways, our bridges, airports, ports, et cetera. So we believe that's good. Now we do not tap into areas which have been questioned, which would be like electrification or broadband or the Inflation Reduction Act. We do not get any funds from those areas.

Okay. Great. All right. Maybe turning to balance sheet, cash flow, capital deployment. Matt, talk about -- the balance sheet leverage is not particularly high, given the cash characteristics of the business. I guess where are you comfortable taking that? How do you want to manage that? And what's the free cash to net income conversion rate we should be looking for over time, given the noncash items you have on the P&L?

Yes. So to your point, the cash flow for the start of the year, first 3 quarters, has been phenomenal. I think at the end of Q3, DSO was down to 51 days from 66 the prior year, so down about 15 days. And as you suspect, you wrap up some of these challenged program and you start to collect on completion bonuses and things. But again, just really great cash performance from the company. At the end of Q3, our leverage was about 1.2x. We purchased BCC for just over $200 million within the quarter. So on a pro forma basis, we'd be at about 1.6 at the end of Q3, positive cash in Q4. So we'll be kind of to your point in the mid-1s at the end of the quarter -- at the end of the year, we believe. I would say leverage, we're comfortable up to 2, 2.5. Carey and I look -- I'd say the sweet spot for the deals that we've seen has been in that $150 million to $250 million purchase price, up to $300 million purchase price, but we're looking at everything. I would say just the deals that we find, the companies that are performing quite well, the ones that we're not betting on the come, they're positive profitability today, positive cash flow today. They've really been in that couple of hundred million dollar range, so we're able to kind of purchase and pay down pretty quickly. And so the balance sheet is in great shape, able to continue that capital deployment strategy. M&A has been the focus. We have a $100 million share buyback program in place. And the intent really there is $20 million to $25 million per year just to kind of eliminate any dilution related to the ESOP. And so all in all, again, the strong cash flow, I think -- if I look forward on cash conversion, I think over the last 12 months, we're 120%, 130% cash conversion. So the company is doing quite well. And as we look forward, we expect still north of 100% for an extended period of time. So again, balance sheet cash flow is in really great shape and really predictable.

And I'd say our valuations that we've paid for the companies have been within the 10 to 13x range. We don't factor in any synergies. So we -- when we get revenue synergies, cost synergies, that's all additive. We keep very strict criteria for M&A. So it has to be companies growing greater than 10% on the top line, greater than 10% EBITDA margin and something with technology differentiation. It's been quite exciting to bring these great companies into the fold. It's really helped us move up the value chain and bid and win much larger projects.

Do you think of Parsons as an acquisition compounder platform? Not independent, it's all integrated, but do you think of that as an M&A function that you run with its own team, separate from running the organic federal and infrastructure business and sort of differentiated from how most companies do it?

Yes. So we have an M&A development team, and we have a dedicated M&A integration team, and then the way we do it is the profit and loss center that is making an acquisition, they partner with those organizations to bring it in. And we think that's the best model. So you have people around that know how to identify which type of companies will fit with us. You have people that best know how to integrate. We try and integrate them within 12 months to be able to maximize synergies. And then you have the profit and loss ownership of that asset.

Okay. We kind of all know of the 7, 8, 9 greater than $1 billion in market cap publicly-traded government services companies. Are there just hundreds of $100 million to $200 million enterprise value-sized government services companies out there?

There's a lot. Just for a point of reference, we passed on 100 companies in the last 12 months.

What makes you pass on a company?

If they don't meet our criteria, either financial, technical or we discover something in due diligence that wasn't to our satisfaction. The other thing we try and do is we try and do preemptive deals and avoid auctions. So we like to get with companies that we've worked with over a period of time. That way, we know we have a common mission focus, we have a common culture, and there's more likelihood of that acquisition being successful.

And I think -- no, it's -- BCC, which was the most recent acquisition, we started talking to them 3 years ago. So it's something. Long courting phase. I look at BlackSignal, the one we acquired in late second quarter, early third quarter. That was another one. We met with them 18 months ago, Carey and I, it was January of 2023. So we're very much in the courting phase on a lot of things and making sure that the culture fits, their capability, and when we meet with our customer set, it's like, hey, how do you feel about these companies? So we're pretty confident once we make the acquisition, that the story is real.

If you passed on 100 assets in a year, wouldn't you run out of things to look at pretty quickly?

No. We still have a really robust list. You can expect to see us do 2 to 3 deals as we go into next year as well.

Okay. It's fascinating that there's that many companies out there. Maybe just on your last -- on the 2 deals you just mentioned, just to help everyone better understand, because you -- looking for 10% growth and a 10% EBITDA margin is super interesting, but also you mentioned it having differentiated capability technology. What do those 2 to bring to you?

Starting with BlackSignal, BlackSignal brings electronic warfare, basically signals intelligence capability. We have that within Parsons as well, but we cover different parts of the electromagnetic spectrum. So it gives you more an end-to-end capability. They also bring cyber capability, and what's great is it's very compatible with our cyber capability. They were more focused on research and development, whereas Parsons was more focused on operations. Also, we had a different customer set. They were predominantly with the Air Force and with the intelligence community, whereas Parsons was predominantly with the Army as well as the Air Force and a little bit of intel community. But coupling those together, you have full-spectrum cyber operations. Then if you look at the space area, they have Hack-A-Sat capability where they can basically hack satellites. They're one of the leaders there. They have a digital twin on-orbit capability, and that couples with Parsons' space domain awareness capability quite nicely. So kind of end-to-end space, end-to-end cyber, end-to-end electronic warfare, and broadening our customer set and breadth. Moving over to BCC. BCC is the #1 consultant in South Florida, a transportation engineering firm, that's 90% of their business. They cover every single district in Florida. Florida is one of our top 6 states out of the 50 states. We've selected -- it's New York, New Jersey, California, Texas, Florida and Georgia. And the reason is those are the states that are going to get the most money from the infrastructure bill through the formula funds. So we've been specifically targeting Florida, and to be able to get a quality asset like BCC that has very deep relations across state of Florida is really helpful.

If I had the extremely unique, hard-to-replicate capability that you just described from BlackSignal or I was positioned in a state that was about to receive many billions of dollars of infrastructure funding like you just described for BCC, why would I -- why do they sell to you for 12x EBITDA?

Because they like the scale to be able to do what we're able to do, and they have a bigger platform and better capabilities. One thing we pride ourselves on is keeping the founders of the companies we buy and keeping the people. So if you take somebody like the CEO of BCC, he could bid certain size projects in Florida, but when you're coupling that with a Parsons, you can bid much larger projects. If you look at BlackSignal, same thing. They could bid electronic warfare, but they couldn't bid end-to-end electronic warfare, cyber, space programs.

So they know their business can do much more inside of Parsons, and they stay on board to...

That's correct.

Yes, no, when I think about kind of the attachment to mission, I think if you -- whether it's infrastructure, or we talk about it often on the federal side, but even on infrastructure, people want to deliver capability kind of across the board. And so being part of Parsons, whether it's access to a large HR team, having access to IDIQ vehicles that they didn't previously have, all these things that we can offer folks. And in some cases, I would say, I think back to some of the acquisitions we've done, they've kind of grown so quickly. At the end of the day, the CEO, the founder was really technical in nature or wanted to deliver infrastructure projects in nature. And so bringing them back to their core rather than have them worry about collecting cash and other things that really aren't their focus areas. One of the acquisitions we did last year, he came into Carey and I and said, I can't wait to be a CTO again rather than a CEO. And so those are the types of things that we really want to take advantage of and find opportunities where together we're worth more.

1/3 of our executive leadership team formerly came from acquisitions. And I'd say one thing that we really pride ourselves on, particularly in the federal business, we've got a purpose-built federal business. We've put it together very intentionally, to be focused on next-generation threats and provide national security. And when people have a part of that mission, I've been in it for almost 4 decades, Matt as well for almost 3 decades, it really gives you a sense of pride to be able to deliver those capabilities for our customers.

Really interesting. Okay. We just have a few minutes left, if anybody in the room here has a question for Carey and Matt. Last chance. Okay. If not, we skipped over environmental remediation and PFAS, generally. Maybe just talk about how big is that today? I understand that's a pretty small piece of the business today, but I'm not sure. And what's the time line around when larger projects start to come to you in that business? How big could that get over time?

Yes, so our environmental remediation business runs about $100 million, that includes PFOS/PFAS. For us at Parsons, the total market is about $200 billion addressable. For Parsons, it's over $40 billion addressable market. One question we get asked a lot is, look, if the EPA changes maximum contaminant levels, will there be an impact? And the answer is we do not think so. And the reason is 34 states have put in place their own regulations. So if you look at our customer community, we've got, on the federal side, Department of Defense and Federal Aviation Administration, because they're replacing the firefighting foam. If you look on the critical infrastructure side, our customer are airports as well as industrial customers, many of which are facing lawsuits due to PFOS/PFAS issues. Our company has been involved in water/wastewater treatment activities for over the last 3 decades. We have a research and development facility in Syracuse, New York. We hold patents in PFOS/PFAS. We see it as a very important marketplace for helping public health and one that's going to be there. We don't expect to peak until about the 2032 time frame.

I guess if it's -- out of $40 billion, I guess I'm a little surprised that's not a larger revenue stream for you at this point.

It's still at early stages. So we've done, for example, 2,000 investigations. We've done 7,000 point of use investigations, but the remediation of treatment is where the larger market is going to be. I think people are waiting to see what the MCLs level got set to under the EPA guidance, and because that just came out last year, you're still at very early stages of the market.

So you've done thousands of investigations, but a much smaller amount of actual remediations.

That's correct.

Okay. All right. We have 25 seconds left, so we'll cut it there. This was great. Thank you so much for being with us today.

Thanks, Noah.

Thanks for hosting us. I appreciate it.