AECOM

Good morning and welcome to the ACOM second quarter 2020 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 at the investor section at www.acom.com. Later, we will conduct a question and answer session. If you have a question, please press star then one on your touchtone phone. If you wish to be removed from the queue, please press the pound sign. I would like to turn the call over to Will Gabrowski, Senior Vice President, Investor Relations. Please go ahead.

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, including expected and potential impacts of the COVID-19 pandemic. 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 are 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. The sale of the management services business closed on January 31st. The management services business, along with our at-risk, self-performed construction businesses that we intend to exit, are classified as discontinued operations in our financial statements. Today's comments will focus on continuing operations unless otherwise noted. The discussion of adjusted operating margins reflects segment level performance for the Americas and international segments. We will also refer to net service revenue or NSR, which is defined as revenue excluding subcontractor and other direct costs. Our discussion of margins will be on an NSR basis unless otherwise noted. 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 today's discussion with a review of our financial and strategic accomplishments. I will then review impacts from and our response to COVID-19. Troy will then review our performance and outlook in greater detail before turning the call over for a question and answer session. Please turn to slide three. I am very pleased with our performance in both the second quarter and the first half of the year, which reflects the benefits of the many actions we have taken over the past two and a half years towards achieving our long-term financial and strategic objectives. For the second quarter, adjusted EBITDA increased by 16% over the prior year to $182 million. For the first half of the year, adjusted EBITDA increased by 21%. Underpinning this strong performance was continued margin expansion of 200 basis points in the quarter. I am also pleased to report that we are continuing to win work at a high rate. Wins for the quarter totaled nearly $9 billion, a record for the professional services business. Strength was broad-based and included a greater-than-one book-to-burn ratio in both segments, led by several large multi-year wins in the Americas. As a result, backlog increased by 14% to new all-time high of $42 billion, providing substantial visibility against an increasingly dynamic macroeconomic backdrop. In late January, we closed the sale of the management services business for $2.4 billion, capitalizing on record high valuations for government services companies. We immediately repaid all of our $1.3 billion of secured debt, And we finished the second quarter with an all-time high cash balance of $1.3 billion and net leverage of 1.2 times. This leverage profile positions us extremely well at a time when liquidity is highly valued. I also want to highlight another accomplishment this quarter, and that is our recently announced industry-leading emissions reduction targets, which are designed to meet the goals of the Paris Agreement. This includes a goal of achieving a 20% reduction in emissions by 2025, as well as a 10% reduction in emissions across our supply chain. These reductions, when achieved, would be equivalent to eliminating the environmental impact of burning nearly 40 million pounds of coal every year. Our commitment to achieving these targets marks a major milestone on our continued journey to deliver a better world. Please turn to slide four. As a global company, COVID-19 has been a part of our daily routine since the beginning of the year. In Asia, nearly half of our offices were closed and 90% of our workforce was working remotely at peak. While we lost 10 working days in mainland China in February, we quickly called upon our resilience, IT, and HR teams to ensure that our employees were safe and accounted for, and we took immediate actions to ensure business continuity. I am proud of our response. In fact, in Asia, despite the challenges presented, we achieved our profitability target and exceeded our cash flow target for the quarter. Markets across Asia are beginning to normalize and restrictions on movement are being reduced. We are seeing similar impacts from COVID-19 across other markets. In our Americas and EMEA regions, 90% of our people are working remotely. Most major global metros have instituted shelter-in-place orders and halted nonessential activities, including nonessential construction. Additionally, state and local clients are bracing for steep tax revenue declines. However, coming into this crisis, rainy day funds were at a record high, and the CARES Act and Federal Reserve actions are expected to deliver $700 billion in direct support. Importantly, though, much of our work is of a critical nature for clients and has been deemed essential. We are working closely with federal, state, and local clients to respond to the immediate needs created by COVID-19, including temporary hospitals. In April, we won more than $200 million of work to deliver thousands of hospital beds in short order, and we are engaged with clients globally to provide additional services, including developing return-to-work strategies for our clients. In fact, we are ranked number one in our industry in terms of work one for the U.S. federal government for COVID-19. As a result, our momentum has continued into the third quarter. In April, utilization, NSR, and profitability were ahead of our expectations, and we are ahead of our plan for the first seven months of the year. Looking ahead, our confidence in achieving our financial targets is underscored by the strong year-to-day performance, as well as certain attributes inherent in our professional services business that position us well during periods of uncertainty. First, we deliver primarily knowledge-based critical and essential services. In most cases, these services can be delivered uninterrupted while working remotely, supported by our long-running investments in technology and innovation. These investments have enabled a relatively seamless transition to remote working, and our ever-expanding digital solutions are deepening our client engagement as well. In fact, last month, we announced an innovative virtual consultation tool, which has garnered very positive client reactions since launch. Many of these changes may accelerate innovation and digital transformation trends in our industry, which we are well positioned for. Second, our professional services business has a highly variable cost structure. This allows us to quickly respond to changes in the market. Beginning in February, we built robust mitigation plans to assess different potential virus durations and impacts. put in place a freeze on new hiring, discretionary spending, and instituted a global travel freeze. With these actions, we achieved our top priority, keeping our key assets, the many talented people across our organization, safe, employed, and highly engaged with clients. Third, most of our work has continued unabated. In most regions, transportation, water, and environmental services, our largest market sectors are considered critical or essential, and work continues. In our construction management business, more than 85% of our projects are continuing to move forward, including more than 70% in New York, despite temporary non-essential construction shutdowns. Now, the vast majority of our projects where work has been suspended, we continue to have our general conditions paid for by our clients, which covers our costs. Because of this and our agility in repositioning our workforce, we have retained nearly 99% of our employees, which positions us even better to respond directly as economic trends recover and client demand accelerates. Fourth, we have built a record $42 billion backlog, which provides all-time high levels of visibility with more than three years of trailing 12-month revenue in backlogs. This allows us to operate with a high degree of certainty against a rapidly evolving landscape. Finally, AECOM has a proven track record of delivering through periods of slower and negative economic activity as evidenced by our strong organic growth during the global financial crisis. This is largely due to having nearly 60% of our NSR from public sector clients where spending is often inversely correlated to GDP due to government stimulus investment in infrastructure that increases during periods of weaker economic activity. With the CARES Act and other measures taken, we have already seen historic levels of approved public funding. The CARES Act provides for more than $2 trillion of stabilization spending, and the Federal Reserve has created a $500 billion direct lending program for our state and local clients. In addition, substantial programs in our largest international markets have been put forward, including nearly $900 billion of funding across the UK, Canada, Australia, and Hong Kong. Encouragingly, these programs continue to prioritize investment in critical, large-scale transportation and infrastructure projects. These types of projects are precisely where AECOM excels, as evidenced by our number one ranking in the transportation and general building design markets, which was reaffirmed last week by ENR. As I look across the company, our strategic and financial position has never been stronger. We have transformed our balance sheet with substantially reduced leverage and ample liquidity. We have consistently exceeded our financial targets over the past six quarters while delivering 300 basis points of margin improvement since fiscal 2018. And our agility as an organization has proven to be a key competitive advantage as we quickly mobilized contingency plans for our people to support our clients in the face of unprecedented change. Before concluding my remarks, I'd like to thank our employees for their tireless commitment to our success and to delivering for our clients during these challenging times. The last few months have impacted all of us in profound ways, and the resilience of our people inspires a great deal of pride. With the most talented workforce in our industry, I remain confident that the best days for AECOM are yet ahead. With that, I will now turn the call over to Troy to discuss our performance and business trends in more detail. Troy? Thanks, Mike.