AECOM

Good morning and welcome to the AECOM first quarter 2022 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 investors section at www.aecom.com. Later, we will conduct a question and answer session. If you wish to ask a question during the Q&A of today's call, please do so by pressing star and then one on your telephone keypads. To remove your question from the queue, please press star followed by two. When preparing to ask your question later on, please ensure that your device is unmuted locally. 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 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 to 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 close on the sale of the power and civil construction businesses in October of 2020 and January 2021, respectively, and the sale of the oil and gas maintenance and turnaround services business in January 2022. The financial results of these businesses are classified as discontinued operations in our financial statements. Our results from discontinued operations include the oil and gas sale and adjustments to closing working capital estimates for previously completed transactions. 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 key accomplishments, strategy, and long-term growth expectations. Laura Pelloni, our President, will discuss key operational priorities, and Garth Kapoor, our Chief Financial Officer, will review our financial performance analysis 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. We are incredibly pleased with our first quarter performance and momentum is building across our business and our markets. I would like to begin today's call by thanking our professionals around the world who are working collaboratively to deliver outstanding results for our clients. Our success is a result of the passion and dedication that our teams bring to their work and clients every day. This excellence was highlighted last week when Fortune reaffirmed our number one industry ranking on its world's most admired companies list. The elements for uninterrupted multi-year infrastructure in ESG investment growth are well established. These include the $1.2 trillion bipartisan infrastructure law in the U.S. and the global commitments by our clients to deliver on increasingly well-defined ESG objectives. A global infrastructure investment renaissance is beginning, and our strategy, focused on our teams, clients, communities, and innovation, has us better positioned than ever to win. To our expanded services, including advisory and program management, a greater share of a growing market is now addressable by AECOM, and we are working to shape the priorities of our clients and deliver value for our stakeholders. Turning to our first quarter's results, we exceeded our expectations on every key financial metric. NSR increased by 5% with strong growth in both our Americas and international segments. Importantly, we're winning work at the highest rate in the history of our company. Wins total $3.6 billion with a 1.4 book-to-burn ratio in America's design business and a 1.2 book-to-burn ratio across our global design business. Our strong book-to-burn is worth emphasizing given our four quarters of consistent organic NSR growth. We also had key wins in our construction management business, and our pipeline has never been stronger. The segment-adjusted operating margin increased by 60 basis points to 13.7%, reflecting continued investments in organic growth and innovation, the benefits of our highly efficient global delivery capabilities, and the high value our teams are delivering for our clients. Our margins lead our peers, but plenty of opportunity for improvement remains. Our focus on deploying innovation and digital tools to transform how we deliver for clients against a backdrop of increasing demand for advisory and program management services supports our guidance for this year and our 17% longer-term margin target. Adjusted EBITDA increased by 10%, and adjusted EPS increased by 44%. Our EPS is benefiting from the execution of our focus strategy, strong operational performance, and accelerating organic growth, as well as from share repurchases. Including $213 million of stock repurchases in the first quarter, we have now repurchased $1.2 billion of stock since September 2020, when we launched our repurchase program, or 14% of our outstanding shares. This capital allocation benefit to shareholders is driven by our strong conversion of earnings to cash flow. In fact, cash flow in the quarter was one of the highest in our company's history for a first quarter. The attributes of our business included a high returning and low risk profile and a capitalized business model with a highly variable cost structure underpin our expectations to consistently deliver strong cash flow and to deliver on our capital allocation priorities. Reflecting this confidence, we initiated a quarterly dividend program in December and our first dividend payment occurred in January. It is our intention to increase our per share dividend by a double digit percentage annually. This marks a milestone for our company's history and demonstrates our steadfast commitment to use capital allocation tools to maximize total shareholder return. Let's turn to the next slide for discussion of the trends across our markets. Beginning in the U.S., our largest market, conditions are strong. Our federal, state, and local clients are gearing up for several years of sustained increases in infrastructure investment, which includes the expected benefits of the $1.2 trillion bipartisan infrastructure law. This represents a generational investment in U.S. infrastructure and arrives at an opportune time. Typically, federal support for infrastructure has been inversely correlated to state and local fiscal health. However, our state and local clients, which account for nearly 25% of our NSR, are reporting record revenues and budget surpluses, which is resulting in a very favorable backdrop. In addition, our public and private sector clients are increasingly prioritizing investments to advance ESG. Today, nearly every project proposal has an element of ESG in its scope, and our clients are demanding more holistic thinking and a broader advisory relationship to help them achieve their multi-decade ambitions. Our momentum and the expansion of our addressable market are apparent in our pipeline growth, which is up by double digits. This is noteworthy when you consider how strong winds and backlog growth were this quarter. The pipeline growth we are seeing is especially encouraging considering the benefits of the bipartisan infrastructure law aren't likely to be material until our fiscal 2023. International markets are experiencing a very similar positive trajectory. ESG is front and center on our clients' agendas, and we're seeing strong demand for our advisory services and technical expertise. Our pipeline increased by high single-digit percentage, and our backlog increased in each of our largest international markets, highlighted by key transportation and infrastructure frameworks in the UK, expanded program management roles in the Middle East, and high win rates for key clients in the Asia-Pacific region. Looking ahead, the strong foundation we have built and favorable end market trends have positioned us well for sustained multi-year growth. We've spent the last two years narrowing our focus on our higher margin, lower risk professional services business and implementing our Think and Act globally strategy. The strategy is built on our leading technical capabilities, global expertise, and on bringing new ways of solving our clients' biggest and most complex challenges with innovative digital solutions. We continue to advance our digital AECOM strategy, and with our success, we are accelerating our investments in this area. Over the course of the year, as these solutions establish a market position, we will announce their launch summer to planning gauge, which we announced last quarter. PlanEngage, our digital platform that reinvests the public engagement process for an infrastructure project, is quickly being introduced as a platform for community engagement across our global client base. As funding from the Bipartisan Infrastructure Act in the U.S. is connected with these projects later in 2023, our PlanEngage tool will become even more valuable. Across our business, one theme is constant. Our investments will expand our advantage as demand grows and labor constraints challenge the industry. We are consistently winning our largest and highest priority pursuits with our win rate at all time high levels. For example, our leadership team identified 10 global pursuits that we deemed to be a top priority for strategic positioning and for delivering on our accelerating growth expectations. I'm very pleased to report that we've already won eight of these 10 projects and two are still pending decisions. In addition, We've had several other key wins over the past few quarters, including a nine-figure takeaway from a key competitor in an international market, a nine-figure takeaway from a key incumbent on a high-value U.S. federal environment program, and we have been selected for numerous other key pursuits that underpin our confidence. I can't say enough about how our culture of winning and excellence has expanded and what it means for our future. With that, I'll turn the call over to Laura.

Thanks, Troy. Please turn to the next slide. I couldn't be more pleased with what we have accomplished to date and how well positioned we are for the future. Against the backdrop of strong client demand and with our foundation for success now in place, we are taking action to fully capitalize on the opportunities ahead. First, we are fostering a culture that celebrates winning. This includes prioritizing our time and investments on the best growth opportunities and highest value pursuits. As leaders in areas including electrification, transit systems, environmental assessment, remediation, water infrastructure, resilience, climate change and new energy, we are poised to benefit from our exposure to rapidly growing markets. This is giving us the opportunity to also be selective and disciplined about the types of opportunities on which we invest time and capital, with a focus on profitable growth and strong returns on capital. Second, we are continuing to invest in program management and advisory capabilities. Through these capabilities, we are expanding our addressable market opportunity by adding services that lead to earlier engagement with clients. We have onboarded key talent to support several large wins over the past year, including the NEOM and Alula programs in Saudi Arabia. Looking ahead, as the scope and complexity of infrastructure and ESG initiatives expand, high-value program management and advisory will take an even more central role in helping our clients and will distinguish ACOM in the market. Third, we are investing in digital ACOM to develop and deliver products that extend the capabilities of our teams and transform how we engage with clients. Our planning gauge tool and commercialization of DeFluoro, our proprietary solution for the destruction of PFAS compounds, are great examples. In addition, we are advancing the development of key digital solutions in the transportation and facilities market that will offer leading parametric and iterative design tools. Finally, and most importantly, we are investing in and building teams to deliver in a growing market, which will be increasingly important going forward. we are focused on ensuring AECOM is the best place in our industry to build a career. To this point, I am pleased to report that the results of our recent employee survey reflect our continued high levels of employee engagement. Most notably, this included further increases in the percentage of employees that would recommend AECOM as a great place to work. There is no higher acknowledgement of our commitment to building a great culture than this measure. And this gives us confidence we will remain at an advantage as the overall labor market tightens. With that, I will now turn the call over to Gar to discuss our financial performance and outlook in greater detail.