AECOM

Good morning and welcome to the AECOM fourth quarter 2021 conference call. I would like to inform all participants that 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 investors section at www.aecom.com. Later, we will conduct a question and answer session, where you may register your questions by pressing start, followed by one on your telephone keypads. And if you change your mind and would like your question removed from the queue, you may do so by pressing start and then two. I would now like to turn the call over to Will Gabrielski, Senior Vice President, Finance and 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. Actual results may differ significantly from those projected in today's forward-looking statements to the various risks and uncertainties, including the risk described in our periodic reports filed with the S&C. 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 segment. We will refer to Net Service Revenue, or NSR, which is defined as revenue excluding pass-through revenue. Our discussion of year-over-year NSR growth for the fourth quarter and full year is adjusted to exclude the benefit of the extra week to the prior year fourth quarter. As a reminder, we sold the management services business in January 2020, and we closed on the sale of 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 our 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 Filoni, our President, will discuss key operational priorities, and Garth Kapor, 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 want to begin by acknowledging our teams across the globe whose contributions made fiscal 2021 a tremendous success. Our people remain our greatest assets, and it's because of their commitment to our success that we are so well positioned for the future. I'm proud of our team's accomplishments, and I'm energized by the opportunity we see in 2022 and beyond. Turning to our results. We exceeded our expectations on every key metric. highlighted by accelerating organic NSR growth, record operating margins, double-digit earnings growth, and strong cash flow. It really was a very successful year. Our NSR for the fourth quarter increased by 6.5%, which marked a third consecutive quarter of accelerating organic growth, and included strong contributions from both the Americas and international businesses. we delivered a 14.8% segment-adjusted operating margin in the fourth quarter and 13.8% for the full year. Both results exceed our expectations and extend our lead over the industry. To put this performance in context, our margin in the fourth quarter is more than 600 basis points higher than in fiscal 2018. This performance directly reflects the high value we provide the clients and the actions we have taken to create the best industry delivery platform. Looking back to February at our investor date, we set margin targets at the time that were very ambitious. Today, we're ahead of schedule on our plans. We have even greater conviction in our 17% longer-term goal, which we now view as achievable rather than aspirational. Importantly, our strong margins afford us the opportunity to accelerate investments in our teams to drive organic growth and into our digital AECOM capabilities, which I will discuss in greater detail in a moment. Turning to earnings, we delivered at the high end of our guidance ranges for both adjusted EBITDA and EPS. Full-year adjusted EBITDA was $830 million, and adjusted EPS was $2.82, which marked an 11% and a 31% increase, respectively. Free cash flow was $583 million and was driven by our strong earnings and continued high cash flow conversions. Our cash flow result is a testament to the focus on efficiently converting our earnings to cash, as well as the high-quality, low-risk mix of our business. We have repurchased more than $1 billion of stock since last September, or 13% of the company, and we have $940 million remaining under our current authorization. We remain committed to repurchasing stock with available cash and cash flow, which we believe is the best and highest returning use of our capital after our investments in growth. Turning to our wins and backlog, our win rate remains high, and we continue to gain market share. We delivered $3.7 billion of wins in the fourth quarter, including a 1.2 book-to-burn ratio in the design business. Our contracted backlog, which is a key indicator of revenue growth, increased by 18% and included 4% growth in the design business. Our pipeline of opportunities is up to double digits in America's design business. And based on our clients' strengthening funding backdrop, including benefits from the $1.2 trillion infrastructure bill in the U.S., we expect our backlog to continue to grow. Overall, our performance demonstrates that we are outgrowing the industry organically and capturing market share. There are two areas in particular that highlight our success and showcase the value we deliver to clients. we set as a key objective to substantially grow our program management business, and we are delivering. This is especially apparent in the Middle East, where we had several recent successes on high priority and larger programs where a combination of technical leadership, global thinking, and program management expertise were instrumental in our success. This includes winning significantly expanded program management and design roles in transformational projects in Saudi Arabia, such as for Alula City, and a large transportation project in Qatar, where more than 100 employees have joined AECOM from the incumbent to support this work. Second, we are demonstrating our leadership on ESG. Our investment at the Natural Capital Laboratory in the UK is a great example. We established this project in 2019 to study the environmental change and biodiversity impact with precision by leveraging drones, artificial intelligence, GIS data, and thermal imaging. The ability to more exactly measure the impacts of decarbonization is a critical element of the global agenda to drive decarbonization and carbon sequestration. Our investment in our work at the NCL underscores how AECOM and our professionals are leading in the development of standards and methods to measure decarbonization, which will be especially important for creating reliable markets for sustainability investments. Let's turn to the next slide. I mentioned earlier that our strong performance in fiscal 2021 has created the opportunity to accelerate investments and expand our advantages. We break these investments into three categories, people, clients, and digital. Beginning with our people, we're in a knowledge-based business and our diverse professionals serve as our greatest advantage. Therefore, it is critical that we have the right culture and programs in place to attract and retain the best talent in the industry. To do this, we've implemented a flexible work model designed to facilitate optimal work-life balance. In addition, we've enhanced the benefit programs and increased our investment in technical and professional development. Most importantly, our people are winning and delivering the most challenging and iconic projects. All this culminates in a culture of high engagement, high satisfaction, and low attrition. Turning to how we deliver for clients, we are leading with our higher margin program management and advisory capabilities. and investing across our key account programs to ensure our clients are benefiting from our best expertise globally. We're also developing technology to automate and pre-populate certain elements of our designs, which capitalizes on our vast expertise, accelerates the design process, and extends the capacity of our workforce. Finally, today we unveiled Digital AECOM, which brings together all of our innovative digital capabilities. After more than a year of focused investment, In the launch of many digital solutions, we are now formally rolling out our digital products. A great example of this is PlanEngage, a digital platform that reinvents the public engagement process for an infrastructure project by creating greater certainty on cost, time, and stakeholder management. Successful community engagement is a critical step in a project, but this process is rarely digitized. PlanEngage simplifies this process by integrating all the key elements of a project into a digital tool, which allows our clients to capture information to make more informed decisions and advance projects more quickly. The solution is years ahead of the competition by our estimation, and we see PlanEngage becoming the industry standard. With the passage of the Infrastructure Act in the U.S., this tool will be even more valuable. Across these focus areas, one theme is constant. Our investment will expand our advantage as demand grows and labor constraints challenge some in our industry. Please turn to the next slide. Looking to fiscal 2022 and beyond, the spotlight on infrastructure has never been brighter. In the U.S., the $1.2 trillion Infrastructure and Jobs Act marks a generational investment in America's infrastructure. This bill provides much-needed long-term funding certainty across our strongest end markets, such as transit modernization, electrification, environmental remediation, and climate resilience. Importantly, we are positioned to benefit from nearly every line item in this bill. We anticipate this funding will increase our addressable market and our most profitable business by double digits over the coming years, and we expect the most meaningful benefits in fiscal 2023 and beyond. In addition to the strengthened federal funding environment, all of our state and local clients are on equally strong footing. Today, state DOT budgets are significantly above prior projections, and the fiscal outlooks are stronger. Our public sector pipeline in the U.S. is up double digits, and with the strong funding backdrop now in place, we anticipate the pace of decisions will accelerate as well. Our international markets are equally strong. Conditions in our largest markets have improved, and we're delivering strong growth across all major international markets in the fourth quarter. In addition, we had strong backlog growth in each of our larger geographies. I'm especially pleased to see that our strategy with a focus on program management contributing to the success in places like the Middle East and in key transportation wins in the UK, where regaining market share has been a key priority. As the number one ranked transportation, facilities, and environmental engineering firm, as well as the number two ranked water design firm, we are uniquely positioned to benefit. Turning to our financial guidance, we've initiated adjusted EBITDA and adjusted EPS guidance of between $880 million and $920 million, and between $3.20 and $3.40. This reflects 8% and 70% growth at the respective midpoints. Underpinning this growth is an expectation for another year of accelerating organic NSR growth and at least 30 basis point increase in our margins to another record high of 14.1%. Our guidance incorporates all the planned growth investments we are making in our people, business development, client delivery, and digital capabilities. I also want to comment on the 2024 financial projections we shared at our investor day in February. Based on our strong performance to date, In the returns we expect on our investments, we are raising our long-term adjusted EPS guidance to at least $4.75 in fiscal 2024. This would represent a more than doubling of our fiscal 2020 earnings and a nearly 20% CAGR from 2021 to 2024. With that, I'll turn the call over to Lara. Thank you, Troy.