AECOM

Good morning and welcome to the ACOM first quarter 2019 earnings conference call. I would like to inform all participants this call is being recorded at the request of ACOM. This broadcast is the copyrighted property of ACOM. Any rebroadcast of this information in whole or part without the prior written permission of ACOM is prohibited. As a reminder, ACOM is also simulcasting this presentation with slides that the investors section at www.acomp.com. Later, we will conduct a question and answer session. If you have a question, please press R1 on your touchtone phone. If you wish to be removed from the queue, please press the pound key or the hash key. I would like to turn the call over to Will Gabrielski, Vice President, Investor Relations.

Thank you, Operator. I would like to direct your attention to the Safe Harbor Statement on page 1 of today's presentation. Today's discussion contains forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the SEC. Except as required by law, we take no obligation to update our forward-looking statements. We are using non-GAAP financial measures in our presentation. The appropriate GAAP financial reconciliations are incorporated into our presentation, which is posted on our website. Please note that all percentages refer to year-over-year progress, except as noted. Our discussion of earnings results and guidance refers to adjusted financial metrics as defined and reconciled in today's earnings press release filed with the SEC and the presentation accompanying this call. Today's discussion of organic growth is on a year-over-year and constant currency basis and is adjusted to exclude impacts of non-core businesses. Beginning today's presentation is Mike Burke, AECOM's Chairman and Chief Executive Officer. Mike?

Thank you, Will. Welcome, everyone. Joining me today are Troy Rudd, our Chief Financial Officer, and Randy Watring, our Chief Operating Officer. I will begin with a discussion of AECOM's results and discuss the trends across our business. I will also provide an update on the strategic actions we have taken and continue to take to enhance the value of our record backlog. Then Troy will review our financial performance and outlook in greater detail before turning the call over for a question and answer session. Please turn to slide three. Our first quarter results were ahead of our expectations on nearly all metrics. As a result, we are on track to achieve our fiscal 2019 financial guidance, including our expectation for continued revenue growth, 12% adjusted EBITDA growth, and $600 to $800 million of free cash flow. Organic revenue increased by 5%. This was led by a continued momentum in our highest margin businesses, including a third consecutive quarter of double-digit growth in the Americas design business and 17% growth in the management services segment. Both businesses are benefiting from favorable market conditions and near record levels of backlog. Strong revenue growth and solid execution contributed to 16% adjusted EBITDA growth, which was ahead of our expectations. Additionally, shortly after the quarter closed, we completed a sale of an AECOM capital property, which resulted in an approximately 40% IRR and provides a strong start to our second quarter. Wins of $11 billion set a new high for the company and have exceeded $6 billion for five consecutive quarters. Our book-to-burn ratio was 2.0, resulting in a record backlog of $59.5 billion over which is a testament to our competitive position and our investments in growth. Our successes were highlighted by the contract for the $7 billion Terminal 1 project at JFK Airport in New York City. In addition, backlog in the America's Design business increased for a ninth consecutive quarter, and we also delivered a 1.3 book-to-burn ratio in management services, where our pipeline of qualified pursuits increased by 20% to $35 billion. The second quarter is shaping up to be another stellar wins quarter, including awards for two projects in building construction valued at approximately $1 billion each. As a result, we expect backlog will increase again in the second quarter. The partial shutdown of the U.S. government had varied impacts to AECOM in the first quarter. Approximately 25% of our total revenue is for the U.S. federal government, primarily in our MS and DCS segments. Nearly 80% of this revenue is for the DOD and DOE, which are funded through this fiscal year, and our work was not interrupted. However, the shutdown's impact was more material to the phasing of our cash flow, which Troy will detail. Outside of the shutdown impact, cash flow met our expectations, and we expect to achieve our full-year cash flow guidance. I also want to provide an update on the strategic actions. we have continued to take to maximize the profitability of our record $59.5 billion backlog. First, we have taken nearly all the required actions to achieve our targeted $225 million of G&A savings. Net of estimated leakage and reinvestment, we expect to reduce G&A by $140 million in total, including $85 million expected to be realized in fiscal 2019. These cost reductions are enabled by our investments in IT systems, shared services, and other efficiency drivers. With these actions and underlying market strength, we are on a trajectory to significantly enhance our margins. Second, we continue to simplify our operating structure and hone our focus on our fastest-growing markets where our competitive advantages are greatest. We have completed approximately 25% of our planned country exits and continue to target the exit of more than 30 countries, which will ensure management time and capital are allocated to our best growth opportunities. In addition, we recently completed a spin-out of the infrastructure investment business, which further narrows AECOM Capital's focus on the real estate market. Finally, in addition to the previously announced decisions to exit the fixed-price combined-cycle gas power plant construction market, and certain non-core oil and gas businesses, we will no longer pursue at-risk construction projects in international markets, and we are continuing to review our at-risk construction exposure. Upon completion of these initiatives, we will have a greater concentration of higher-margin and lower-risk professional services work, which we believe will result in substantial long-term value creation. To take advantage of this value creation opportunity, we have repurchased $210 million of stock under our $1 billion board repurchase authorization. Going forward, we intend to synchronize repurchases with our cash flow, which is typically second-half weighted. Our conviction remains high that repurchasing stock at current levels is the best and highest use of our industry-leading free cash flow. Please turn to slide four for a discussion of our business trends. Beginning in the DCS segment in the Americas, Revenue increased by 12% with strength across nearly all market sectors. Performance was led by continued high levels of storm recovery work in the southeastern U.S. and ongoing growth in the transportation market. To date, we have won more than $1 billion of storm recovery work, and we continue to pursue a nearly $2 billion pipeline of opportunities. As such, we expect this market to continue to create opportunities for growth, and our scale and agility position us well to capitalize. Transportation, our largest market in America, is benefiting from increased state and local funding, which accounts for more than 70% of public infrastructure investment. Total funding has benefited from the more than $40 billion of transportation-specific funding initiatives in 34 states that passed in the 2018 election cycle. These measures, which build on the more than $200 billion of infrastructure-specific ballot measures that passed in 2016 and ongoing FAST Act investment, demonstrate our client's commitment to developing a diverse set of funding sources to meet demand. Turning to our international markets, beginning in the Asia-Pacific region, increased public sector infrastructure investment in Australia and stable trends in Hong Kong contributed to another quarter of revenue growth. In the EMEA region, uncertainty related to Brexit has negatively impacted business confidence and foreign investment into the UK, and our revenue declined slightly in the first quarter. Even so, the pipeline for major infrastructure projects remains strong, and we were recently selected for a nearly $100 million contract for Network Rail to support rail investment. We have already taken actions to align our cost structure with uncertainty ahead of the March 29th separation date, and we are well situated to benefit from a recovery in activity. Turning to the management services segment. Following several years of investments in organic growth, revenue increased by 17% in the first quarter. We had $1.4 billion of wins, including a nearly $500 million defense project in the UK and increased scope on a number of existing programs, including our classified work. As a result, our backlog remains near an all-time high. Importantly, the funding outlook is strong for both the DOD and DOE, our largest clients. As a result, our total pipeline of qualified opportunities has increased by 20% to $35 billion and is dominated by pursuits for these two clients. This pipeline features a growing set of higher margin DOE opportunities. As a result, we are reiterating our long-term 7% operating margin target. Pivoting to construction services. In building construction, we remain on track for a fifth consecutive year of growth, supported by a record nearly $20 billion backlog. Wins in the first quarter included a new $7 billion Terminal 1 at JFK Airport, underscoring our successful efforts to diversify the business. While our record wins and 51% backlog growth demonstrate our successes in the market, they do not tell the complete story. We were also selected for additional projects valued at nearly $1 billion in the first quarter, including another large aviation win. The full value of these wins is not reflected in our wins or backlog due to the accounting treatment of agency basis work. As I mentioned earlier, after a quarter closed, we were awarded two additional projects valued at approximately $1 billion each, which adds to our unprecedented visibility. Performance in the civil construction business exceeded our expectations in the quarter. The pipeline of opportunities is robust, and as-sold margins continue to improve, creating a favorable backdrop for continued profitable growth. In power, the Alliant Riverside gas power plant is approximately 85% complete and remains on schedule and on budget. We reached another major milestone in December with all buildings now substantially enclosed, and we expect to complete this project later this year. Finishing with AECOM Capital, I am pleased to report that in the second quarter, we closed on another property sale, which generated an approximately 40% IRR and $10 million gain on our investment. Activities are well underway to support our new third-party real estate investment joint venture with Canyon Partners. Importantly, we remain poised to fully benefit from the expected embedded gains in our existing portfolio while limiting future investments off our balance sheet. Our strong first quarter results are a testament to the progress we are making to hone our focus on our higher margin and lower risk professional service markets. I will now turn the call over to Troy, who will discuss the quarter in more detail. Thanks, Mike.