AECOM

Good morning and welcome to the AECOM third quarter 2021 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 simulcasting this presentation with slides at the investor session at www.aecom.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 or the hash key. I would like to turn the call over to Will Gaberlowski, Senior Vice President, Finance and 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 report 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. References to margins and adjusted operating margins reflect the performance for the Americas and international segments. We will refer to net service revenue, or NSR, which is defined as revenue excluding pass-through revenue. As a reminder, we sold the management services business in January 2020. We sold the power and civil construction businesses in October 2020 and January 2021, respectively. The financial results of these businesses are classified as discontinued operations in our financial statements. Today's comments will focus on the continuing operations of the professional services business unless otherwise noted. On today's call, Troy Rudd, our Chief Executive Officer, will begin with a review of our strategy and key accomplishments. Laura Piloni, our President, will discuss key operational priorities, and Garth Kapoor, our Chief Financial Officer, will review our financial performance and outlook in greater detail. We will conclude with a question and answer session. With that, I will turn the call over to Troy.

Troy? Thank you, Will, and thank you all for joining us today. I'd like to begin by acknowledging the continued great contributions of our teams globally. In many parts of the world, day-to-day activities are beginning to resemble normalcy. However, the pandemic and its variants continue to impact our teams and their families. Against this backdrop, I'm proud of how we are collaborating to deliver for our clients and communities. As the COVID-19 variant spread, we all need to remain agile until we reach a point where the threat from the virus is eliminated. We have the best teams in the industry and our focus remains on keeping our people safe and enabling them to be successful in their careers. Turning to a discussion of our performance, four themes are apparent across our business. First, our third quarter results extend our track record of delivering on our financial and strategic commitments. And with our strong year-to-date performance, we are increasing our guidance for fiscal 2021, and we are increasingly confident in delivering our long-term financial targets, including doubling adjusted earnings per share from fiscal 2020 to 2024. Second, the success of our Think and Act Globally strategy and investments in our people and innovation are contributing to accelerating growth. In fact, our design business that accounts for approximately 90% of our profits organic NSR, and backlog growth are at the top of the industry, and our strengthening pipeline pertains well for continued leadership. Third, we expect to deliver strong results into the future, built around secular growth themes centered on infrastructure and ESG-driven opportunities. With our increased focus on advisory and program management, we are engaging with clients much earlier in their planning for large investments, and we are advising them through the execution, which expands our addressable market. And finally, we remain committed to creating shareholder value by investing in growth and innovation and enhancing per share value by allocating substantially all available cash flow to share repurchases. We believe these are the highest returning uses of capital as compared to large-scale M&A, where today's deal multiples are elevated and the execution and integration risks are higher. Turning to our results, we exceeded expectations on every key measure. NSR increased for a second consecutive quarter, including accelerating growth in our design business. In addition, backlog in the design business increased by 8%, and included 7% growth in contracted backlog, which is a leading indicator of revenue growth. Our adjusted operating margin reached a new high this quarter at 14.1%, an increase of 90 basis points from the prior year. With this performance, we now expect to exceed our margin guidance for the full year. This performance includes growth in higher margin projects and efficiencies in how we deliver, and is creating the capital to invest in our teams and innovation. As a result of this revenue and margin performance, adjusted EBITDA increased by 15% and adjusted EPS increased by 33%. We're also continuing to convert our earnings to strong cash flow. We delivered the highest third quarter and year-to-date free cash flow in four years. And consistent with our capital allocation policy, we repurchased approximately 12% of our shares outstanding as compared to last September when we began our repurchase program. Turning to our backlog and pipeline, funding across our markets is improving and our investments in growth are bearing fruit. We delivered $3.7 billion of wins and we had a greater than one book to burn ratio for the enterprise for the first time since the pandemic began. With this strong performance, backlog in the construction management business increased sequentially, albeit modestly, for the first time in several quarters. In addition, our pipeline of opportunities in our America's design business has increased by double digits since the beginning of the year, and the international pipeline increased by single digits. These are great signs for the health of our markets and the success of our strategy. The strength is before any material contributions from previously enacted stimulus funding, and we do not include any benefit or guidance from the proposed infrastructure bill in the US. Please turn to the next slide. Our accomplishments reflect the benefits of our think and act globally strategy and our focus on growth. Over the past several quarters, we have prioritized investments in growth markets, simplified our operating structure, and eliminated inefficiencies. Today, we are a more agile organization and we are benefiting from stronger collaboration across the business. We've also invested in our key count program to ensure we deploy the best practices to all of our clients. This will be critical to outgrowing the industry. All of these efforts are resulting in strong NSR, backlog, and pipeline growth. Another key component of our strategy is leveraging our industry-leading margins to invest in our people and innovation. Demand is accelerating in the majority of our largest markets, and AECOM and others in our industry will be increasingly challenged to attract and retain the strongest talent. In fact, our growth this past quarter was constrained in some areas by the pace of hiring relative to increased demand. And what is noteworthy is that this constraint is apparent even as our pace of hiring has doubled as compared to last year. As a leader in our industry, we have certain advantages against this backdrop. First, our workforce is global and we can draw on this global expertise to deliver anywhere in the world due to the investments we've made in technology to enhance collaboration. Second, we're also investing in professional development programs so our people can grow within AECOM. Third, we are using technology to extend the capacity of our teams and to deliver in new and innovative ways. And finally, we've implemented flexible work policies to provide our people even greater freedom to deliver for their clients in ways that work best for them and their teams. All of these efforts are centered on creating a culture where the industry's top talent can begin and build meaningful careers. As we look ahead, several trends support our confidence and growth. First, we are winning and delivering critical projects that highlight our strong position in key growth markets. Most recently, these include the first ever digital NEPA-compliant environmental impact statement for a transportation client in the U.S., showcasing our investments in innovation and digital solutions. Additional wins with major metros to advance more modern and equitable transit systems. Key wins to advise clients on their long-term sustainability and resilience strategies. key wins in next-generation energy, a smaller but rapidly growing practice within AECOM that includes a presence in the Northeast offshore wind market, wins in the healthcare sector that further broaden our client base, and large program management wins for multibillion-dollar programs across the globe. Second, through our sustainable legacy strategy and commitment to ESG, we are distinguishing ourselves in the market as our clients advance complex, multi-decade initiatives. In fact, year to date, there have been a record number of corporate commitments to emission reduction targets, outpacing last year's total already. And sustainable bond issuances are at an all-time high. AECOM is a leader in advising clients and delivering technical solutions to support ESG goals. Today, we estimate approximately 70% of our revenue is directly related to ESG initiatives, while nearly all of our revenue has at least some ESG element as a driver. We are leaders in green advanced facilities design, energy efficiency, next generation energy, sustainability, resiliency, environmental remediation, clean water systems and transit electrification. Our services in these markets are in high demand and our leadership in these fast-growing markets underpins our confidence in organically outgrowing the market well into the future. Finally, our public sector clients across the world are benefiting from strong budgets and investments in infrastructure markets where we lead. In the U.S., strengthened state and local tax receipts, strong federal funding, and ongoing stimulus measures are contributing to an improving environment for growth. Similarly, our international markets are prioritizing infrastructure investments, especially in our largest end market, transportation. In Australia, the New South Wales government is advancing a $130 billion package for four years of transportation spending. While in Canada, there's more than $20 billion of public transit and green infrastructure spending. And in Europe, the $1 trillion recovery fund requires 30% of spending to be dedicated to green and sustainable infrastructure. These initiatives are before you factor in a potential U.S. federal infrastructure bill in our largest market. As currently proposed, nearly every line item in the current draft would be addressable by ECOM. In conclusion, I want to remind, we are the number one transportation design firm, the number one facilities design firm, the number one environmental science and environmental engineering firm, have grown to number two in water, and lead in several other end markets, all positioned for secular growth. No firm is better positioned to capitalize on these opportunities. With that, I will turn the call over to Lara.