AECOM

AECOM fourth quarter 2020 conference call. I would like to inform all participants this call is being recorded at the request of AECOM. This broadcast is the copyrighted property of AECOM. Any rebroadcast of this information in whole or part without the prior written permission of AECOM is prohibited. As a reminder, AECOM is also seen in passing this presentation with slides at the investor section at www.aecom.com. Later, we will conduct a question and answer session. If you have a question, please press star and the number one on your touchtone phone. If you wish to be removed from the queue, please press the pound sign or hash key. I would now return the call over to Will Gabrielski, Senior Vice President of Investor Relations. Please go ahead. Will Gabrielski, Senior Vice President of Investor Relations.

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 use certain 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. As a reminder, we sold the management services business in January and intend to exit our remaining at-risk self-performed construction businesses, which includes the October 16th sale of the power construction business. These businesses are classified as discontinued operations in our financial statement. Today's comments will focus on the continuing operations of the professional services business unless otherwise noted. Today's references to margins and adjusted operating margins reflect 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 NSR growth will be adjusted for the impact of an extra week in the fourth quarter. Our discussion of margins will be on an NSR basis unless otherwise noted. Beginning today's call is Troy Rudd, our Chief Executive Officer. Troy?

Thank you, Will, and thank you all for joining us today. I will highlight our accomplishments over this past year, our confidence in fiscal 2021, and review our strategy and key priorities. Larry Polony, our president, will discuss key operational priorities, and Gar Kapoor, our CFO, will review our financial performance and outlook in greater detail. We will conclude with a question and answer session. 2020 has been anything but a normal year, and I want to begin by acknowledging the great work of our teams over this past year. The pandemic had profound impacts on the daily lives of our employees and their families, our clients, our communities, and our business. At AECOM, our professionals mobilized quickly to provide extraordinary support for our clients and communities during these challenging times. Our teams led the industry for disaster response work, including delivering temporary hospitals at the initial COVID peak in April. and we advised several prominent clients on their safe reopening, including the NBA's successful season in Orlando. We also changed the way we work with more than 90% of our employees working remotely at peak. We launched innovative solutions to help our employees remain deeply engaged with our clients, including our virtual public consultation solution. Through it all, our client satisfaction scores have increased, and our organization has come together in new ways to deliver for our clients. We all take great pride in what we have accomplished, and I want to say thank you to all of our people for their effort, dedication, and resilience. I also want to acknowledge Randy Watring, who recently announced his retirement after a 40-year career. Randy provided critical leadership to the organization over the past few years, and his contributions have been vital to our success. On a personal note, Randy has been a great partner, and I want to thank him for his support and continuing counsel. Now let's turn to our financial results. Despite the unprecedented challenges in 2020, we improved our underlying business and delivered on our financial commitments, including 14% adjusted EBITDA growth and $341 million of free cash flow for the year. Both metrics exceeded our guidance. Our backlog remains near an all-time high, increasing 13% and providing us with visibility to execute with certainty. We continue to deliver new highs for profitability. The segment adjusted operating margin was 12.3% for the year, reflecting a 160 basis point improvement from fiscal 2019. We are proud of the progress we have made on our margin improvement initiatives. To fully deliver on the value creation opportunity we see, we completed $455 million of stock repurchases between September and mid-November. We are confident in the trajectory of the business, and we believe the purchase of our stock continues to be a great opportunity. Accordingly, our board of directors recently approved an increase in our overall repurchase authorization to $1 billion. Finally, we have made substantial progress in our transformation into a pure-play professional services firm. In January, we completed the sale of the management services business, and last month, we closed on the divestiture of the power construction business. We are well positioned on the exit of our remaining at-risk construction businesses. With our accomplishments in the year, we are energized by a renewed sense of urgency to realize the full potential of our company. To describe how we will unlock this potential, today we unveiled our new Think and Act Globally strategy. As a global company with scale, our goal is to drive collaboration across the organization and to bring the best of AECOM to all clients. This strategy includes several key elements. First, we have simplified our business. This includes our recent announcement of one global design organization, creating clear lines of accountability on our key priorities while creating a culture that embraces collaboration to bring our global expertise to each client. Second, we're deepening our engagement with the clients to better capture untapped market share in our core markets. For instance, our top 20 clients represent approximately 20% of our NSR. And more broadly, our top nine geographies represent more than 90% of our profitability. We will focus our time and capital on these relationships and markets with an emphasis on delivering the full breadth of our capabilities to our clients. We view this as a key organic growth driver. Third, we are transforming how we work. This will include our workplace of the future initiative, designed to leverage technology and innovation to create efficiencies and greater flexibility for our employees. Our performance through the pandemic has made it clear that our people are consistently delivering for their clients while working remotely, including continued strong productivity and increased client satisfaction. Our clients are executing similar initiatives, which positions us to do what we do best. provide knowledge-based solutions to shape how our clients address challenges, and to capitalize on new opportunities. Fourth, core to everything we do is driving efficiency throughout our operations. By delivering higher margins, we can create a virtuous cycle of capital generation, wherein we are able to increase our investments in the business to drive further growth and increase our returns to our shareholders. Finally, we are committed to leading our industry in ESG, which is becoming a critical growth driver for our business. As a global leader in environment and water markets and a leading green designer and builder, we are uniquely well-positioned to capitalize on this trend. Please turn to the next slide for a review of market trends and our fiscal 2021 guidance. I'd like to begin with a brief comments on the recent US presidential election, which is poised to create opportunities for us. We are a leader in transportation, environment, water, and clean energy markets, providing knowledge-based critical services to public and private sector clients who are increasingly focused on ESG and sustainability. As it stands today, we see bipartisan support for funding to help our state and local clients weather the impacts of COVID, a continued focus on infrastructure investments as a job creator and competitive differentiator for the U.S., and an increasing regulatory emphasis on environment and water markets. This is great news for AECOM, and we stand ready to deliver for our clients. Looking across our markets more broadly, trends are mixed. In addition to the impact of COVID in our markets, other factors are influencing our business. In the U.S., our pipeline remains solid, but client decision-making has slowed due to funding uncertainty. In the UK, Brexit continues to weigh heavily on private sector activity, which is impacting growth even as our win rate and activity in the public sector improves. And in the Middle East, weak oil and gas prices continue to create market headwinds. Nevertheless, our win rate remains high and backlog increased this year, including a win for a key nine-figure pursuit in the third quarter, which will underpin our position in this market for several years. Encouragingly, tax revenues in the US have recovered from the lows earlier this year, and vehicle miles traveled and user fees are trending positively. In Canada, Hong Kong, and Australia, infrastructure spending remains a bright spot, and we are benefiting. We are seeing indications that private sector clients are advancing major projects again, and we recently won a substantial environment contract from a large energy client. We are also seeing customers increasingly invest in new sources of clean energy, a market where our leading environment and energy capabilities position us well for growth. The efforts we have made internally to align our cost structure with changing market trends has allowed us to deliver profit growth despite mixed market trends. Turning to our guidance, we are forecasting another year of earnings growth in fiscal 2021, including adjusted EBITDA growth of 9% at the midpoint of our range. We are also initiating guidance for adjusted APS growth of 23% at the midpoint. Underpinning this growth is the 13% backlog increase in 2020 and our expectation to improve our industry-leading margins by 90 basis points in 2021. As always, the cash-generative nature of our business remains firmly intact and supports our expectation for another year of strong free cash flow. Taking together our results this year, our strategy for the path ahead inspired confidence in our outlook. While we recognize that certain markets are challenging, we're encouraged by how we've responded and delivered in fiscal 2020 and by the progress we have made on our ongoing actions to create a more resilient and a more profitable business. We have an exceptional opportunity to extend our position in the market, and I'm excited to be leading this great organization of professionals who share my passion in pursuing this opportunity. With that, I will turn the call over to Lara.