AECOM

Ladies and gentlemen, thank you for standing by, and welcome to the AECOM fourth quarter 2019 earnings conference call. At this time, all participants are in listening mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today. Will Gabrielski, Vice President, Investor Relations. Thank you. Please go ahead, sir.

Thank you, operator. I would like to direct your attention to the safe harbor statement on page one 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 undertake no obligation to update our forward-looking statements. We're using non-GAAP financial measures in our presentation. The appropriate GAAP financial reconciliations are incorporated into our presentation where available, which is posted on our website. All percentages in today's discussion refer to year-over-year progress, except as noted. Organic growth is presented on a year-over-year and constant currency basis and is adjusted to exclude impacts of non-core businesses and planned and actual dispositions. I should note we will now refer to our building construction business as a construction management business consistent with the professional services nature of the work. we will refer to our professional services business in our presentation, which is comprised of the design and consulting services segment, the construction management business, and AECOM Capital. Adjusted EBITDA for these businesses exclude stranded costs associated with plant separations and divestitures, which are expected to be eliminated. Historical professional services financial metrics reflect our current estimates based on information available as of the date of this presentation. The final figures may differ materially from these preliminary amounts due to the completion of our financial closing procedures Final adjustments and other developments that may arise between the date of this presentation and the time the recast quarterly results are finalized. We believe adjusted EBITDA for the professional services business provides additional insights into business performance by excluding the results of planned business divestitures. However, such estimates are forward-looking statements and are inherently uncertain. As such, you should not place undue reliance on such statements as actual results may differ materially. Reconciliation of adjusted EBITDA for the professional services business for fiscal 2020 to the most directly comparable gap measure is not available without unreasonable effort because the company cannot predict with sufficient certainty all the components required to provide such a reconciliation at this time. Today's call includes discussion related to the previously announced sale of the management services business, which has not yet been completed, and includes potential risks and uncertainties, including that the transaction does not close or that closing may be delayed. Finally, I should note that fiscal 2020 is a 53-week period. 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 Wattring, our chief operating officer. I will begin with a discussion of AECOM's results and the trends across our business, including an update on the strategic actions we are executing that have resulted in a substantial increase in shareholder value. 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. Fiscal 2019 was a successful year for AECOM on several fronts. First, we exceeded our expectations on nearly every key financial metric. Adjusted EBITDA grew by 13%, and we delivered a fifth consecutive year of free cash flow in excess of $600 million, including record cash flow in the fourth quarter. Importantly, our professional services business delivered an even stronger 25% adjusted EBITDA growth rate. Second, through the sale of the management services business at a premium valuation, we unlocked substantial shareholder value. The expected cash proceeds will transform our balance sheet and enable us to accelerate stock repurchases at a highly attractive price under our existing authorizations. Third, the restructuring actions we have taken and continue to take are resulting in record profitability, including an all-time high DCS margin in the fourth quarter and for the full year. With the additional actions we are taking to enhance profitability, we reiterated our expectation to achieve an 8% DCS margin in fiscal 2020. On a net service revenue basis that excludes pass-throughs, this translates to an approximately 11.5% margin, which is consistent with our peers. Finally, we are winning work at a strong pace, and backlog remains near an all-time high at $60 billion. As our fiscal 2020 guidance confirms, we expect another year of strong adjusted EBITDA growth, including our expectation for 12% adjusted EBITDA growth in our professional services business, supported by a 19% backlog growth in fiscal 2019. All of these accomplishments and our positive outlook for fiscal 2020 are the result of our deliberate and focused efforts we began executing two years ago to enhance shareholder value. Please turn to slide four. We have been steadfast in our commitment to enhance profitability and to fully capitalize on our near-record backlog. We executed a $225 million restructuring plan during 2019, and we announced additional restructuring actions in August. As a result, we continue to expect to achieve a greater than 210 basis point increase in DCS margin by 2020 compared to fiscal 2018, supported by the already achieved 120 basis point increase in fiscal 2019. We are evaluating additional opportunities for further margin upside. These include further investments in best cost shared service centers and global design centers to lead our industry in delivering work consistently and efficiently. Additionally, we are focused on improving return on capital and return on management time. This includes continued progress on our plan to exit more than 30 countries where we are nearly 50% complete. We are continuing to evaluate our entire portfolio to ensure we are investing in markets that are aligned with our strategic and financial priorities. We are also making progress on our commitment to de-risk our business. The Alliant Combined Cycle Gas Power Plant is expected to achieve substantial completion on time later this year. In addition, we have divested several lower returning businesses over the past two years, including our international development business and numerous oil and gas businesses that were not aligned with our strategic and financial priorities. As we continue to pursue the exit from our remaining self-performed construction businesses, we are managing our risk-reward profile on this work to maximize the ongoing value and attractiveness of these businesses to third parties. We are committed to an end-state goal of nearly zero at-risk self-performed construction exposure. Finally, last month, we announced the sale of the MS business for $2.405 billion at a premium valuation, which is expected to close in the second quarter. The sale unlocks value much sooner than the proposed spinoff and creates certainty for all stakeholders. This transaction will generate substantial cash proceeds, which we will deploy to reduce debt and repurchase our stock at what we view as a substantial discount to professional service peers in our estimate of intrinsic value. Please turn to slide five for a discussion of our business trends. Beginning in our professional services business in the DCS segment, performance was strong in 2019. This was highlighted by record profitability in our largest market, the Americas, where we are benefiting from efficiency gains and favorable market conditions in both the U.S. and Canada. State and local clients continue to operate with healthy budgets and record rainy day funds. In addition, over the past year, five states phased in gas tax increases, underscoring our clients' focus on funding critical infrastructure. Importantly, bipartisan support for infrastructure investment remains strong. We are also delivering growth in our work for federal clients, where we support a number of agencies and have a growing pipeline. Conditions in Canada are similarly strong. We are executing on several large transportation projects in the region and delivered double-digit revenue growth for the year, led by our leading transportation franchise. Turning to our international markets. We delivered solid results in the EMEA region, led by large wins in Saudi Arabia and growth in the U.K., Across the region, profitability is benefiting from the actions we have taken to more efficiently deliver work and to extract ourselves from lower returning markets. With Brexit now delayed until at least January, we are closely monitoring the macroeconomic environment to ensure our business is resilient across a range of potential outcomes. Importantly, the UK government remains committed to supporting economic growth and is prioritizing infrastructure investments to address potential economic weaknesses. We maintain a leading position that allows us to capitalize on these opportunities. In the Asia-Pacific region, the macroeconomic backdrop is mixed, but execution remains strong. Geopolitical uncertainty and a slowing rate of economic growth in Hong Kong is balanced against public sector investment in Australia, resulting in stable growth across the region. Profitability is benefiting from a sharp focus on execution and operating efficiencies. Pivoting to the construction management business, Execution was strong, which led to a substantial increase in profitability. Our backlog increased by 45%, and we're pursuing a robust pipeline of larger opportunities. The year was highlighted by our selection to deliver the new Terminal 1 project at JFK Airport in New York City, demonstrating both our strength in the aviation market and our leadership position in New York. As a result, our backlog represents nearly four years of annual revenue, and we expect revenue and profit growth in 2020 and beyond. In management services, we delivered 12% revenue growth, which reflects the successful growth investments we've made and strong market trends. The strength of this platform was evident in the premium valuation we realized as part of last month's announced sale. Across AECOM, execution in 2019 was stellar across a number of key financial and strategic initiatives. We are continuing to make progress on our transformation into a higher-returning and lower-risk professional services business, where we are energized by our performance in 2019, including 25% adjusted EBITDA growth and 19% backlog growth. This momentum underpins our expectations for another year of double-digit growth this year. We remain focused on capitalizing on the opportunity to further enhance value in 2020 as we continue to deliver against our commitments. I will now turn the call over to Troy, who will discuss the quarter in more detail. Thanks, Mike.