AECOM

Good morning and welcome to the ACOM second quarter 2022 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 credit and 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 would like to ask a question at a time, please press the star followed by number one on your telephone keypad. If you wish to be removed from the queue, please press the star followed by number two. I would like now to turn the call over to Will Gabrielski, Senior Vice President, Finance, Treasury, and Investor Relations. Please, Will, 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 risk 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 reconciliations are incorporated into our presentation, which is posted to our website. References to margins and adjusted operating margins reflect the performance of the Americas and international segments. We will refer to Net Service Revenue, or NSR, which is defined as revenue excluding pass-through revenue. NSR and backlog growth rates are presented on a constant currency basis unless otherwise noted. Today's remarks will focus on the continuing operations of the professional services business unless otherwise noted. During the quarter, we announced our immediate exit from Russia, and we incurred a $69 million pre-tax impact, which is excluded from our adjusted earnings results. The expected cash impact from our exit from Russia is approximately $10 million. On today's call, Troy Rudd, our Chief Executive Officer, will begin with a review of our key accomplishments, strategy and growth updates, and our outlook. Lara Pelloni, our President, will discuss key operational successes and priorities going forward. And Gaurav 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 would like to begin by expressing my deep appreciation to our professionals for their focus and commitment to their work and their clients. At AECOM, we are inspired by a shared purpose of delivering a better world and prepared for the huge opportunity ahead of us as the world embarks on the long-term transformation of our infrastructure. I'd also like to expand on the decision we made during the quarter to immediately exit our operations in Russia. We are saddened by Russia's ongoing invasion of the Ukraine. This action is inconsistent with our values. As a result, we accelerated our immediate exit from this market in February. While ceasing our operations, our priority was providing our colleagues with support during this transition. This includes an emphasis on the safety, security, and well-being of our teams. I want to thank our AECOM teams and their families in Romania and Poland for their tireless efforts to aid the families leaving the Ukraine as a result of the invasion. and all of our professionals for providing support for these humanitarian efforts. Turning to our results. We delivered strong results on every key metric in the second quarter. In the design business, NSR increased by 5% despite high levels of Omicron related absenteeism in January and February that has since subsided. Importantly, the US government passed its fiscal 2022 omnibus budget in March. which creates optimism around the pace of growth for our government clients in the U.S. in the second half of this year and fiscal 2023. We also delivered a record second quarter margin of 13.8%, which remains at the top of our peer group. Our margins reflect the value we bring to our clients, as well as the positive contribution of our digital, advisory, and program management capabilities. Against the backdrop of rising inflation, we are consistently delivering strong profitability, which is a direct representation of the inherent attributes of our professional services business model and the embedded inflation protections built into our contracts. Importantly, our growth and strong margins are translated to the bottom line. For the quarter, adjusted EBITDA increased by 10% and adjusted EPS increased by 24%. Across the business, our end markets are strengthening and our win rate remains at an all-time high. Our book-to-burn ratio was 1.6 and was highlighted by strength across the entire business. Contracted backlog, one of the best leading indicators for future growth, increased by 20% and the total backlog increased by 4%. We are realizing the benefits of our think and act globally strategy. which emphasizes collaboration and focuses our time and capital on the highest returning opportunities. I'm also pleased to report that our free cash flow in the first half of the year was one of the highest in our history. We returned nearly $300 million to shareholders through the first half of the year, which was ahead of our normal cadence and is an accelerant to value creation. I'm proud of our performance and what our professionals have accomplished over the past two years. Today, we are a highly agile professional services firm with market-leading franchises and a very well-defined and focused strategy. We're allocating resources to our largest, fastest-growing, and most profitable geographies and market sectors. And we are expanding the addressable market and enhancing our client value proposition by investing in high-value digital, advisory, and program management services. The rising inflation, the lingering impacts of the pandemic, supply chain disruptions, war, or integrated ESG and client investment decisions and planning, the pace of change is accelerating. Against this backdrop of rising macro risk and geopolitical uncertainty, the inherent advantages of our business are driving consistently strong performance. We turn to the next slide for discussion of the trends across our markets. In the U.S., the outlook for the next several years is as strong as it's ever been. State and local clients have record levels of funding and are set additionally to benefit from the IIJA funds. Our US federal clients are also prioritizing investments in areas where we excel, including environment, sustainability, and resilience. As a result, we expect a strong level of federal task activity in the second half of the year and growth to persist into 2023 and beyond. In addition, PFAS investment is accelerating, and our leadership in assessment and destruction are leading to substantial growth opportunities. In fact, the U.S. pilot of our groundbreaking PFAS destruction technology, DeFluoro, is now well underway, and we are advancing our plans to commercialize this proprietary technology at scale to meet a multibillion-dollar demand opportunity. Internationally, markets are also strong. In the U.K., revenue continues to increase, and there are several tailwinds for our business. including growing investments in rail and transportation, markets where we lead. In addition, the UK government's leveling up strategy, which includes key prosperity and equity-focused initiatives that touch on all elements of infrastructure, are creating opportunities for AECOM. In the Middle East, investments to create modern ESG-focused cities, such as Neom and Alula, are drawing on all of our expertise and are creating several years of visibility. In Australia, our revenue and backlog increased, and the outlook for growth across our market remains strong. At the same time, we are managing through ongoing COVID-related shutdowns in China. So as we always do, we are remaining agile and don't expect these impacts to be material. Please turn to the next slide. Across the business, we have built a platform that positions our professionals to innovate and deliver on three megatrends that will define the next several decades of investment. These are a global infrastructure investment renaissance, ESG investment, and the adaptation of infrastructure to a post-COVID world. I'd like to discuss a few examples that bring to life how AECOM is capitalizing on these opportunities. First, we're leveraging our strength as ESG leaders to capitalize on growing demand from our clients to decarbonize and advance sustainability initiatives. Most recently, we were awarded a contract for a top-tier cruise operator to reduce emissions at their cruise terminals, which alone account for a large portion of their total emissions footprint and are critical to achievement of their emissions reductions plans. We were also awarded a contract for one of the largest minor munition projects ever in Canada. As these winds evidence, the capabilities of our nearly 50,000 industry-leading experts are creating competitive advantages in the marketplace and positioning us for strong growth. Second, our advisory and program management business continue to create opportunities for high-value, long-duration contracts for long-standing clients. This was highlighted by our selection in the quarter for the Airside Master Plan at the Dallas-Fort Worth International Airport. We've delivered nearly $1 billion of work for this client over the past decade and are pleased to see our success translate into further growth opportunities. Finally, our scale, experience, and global execution capabilities are leading to success on complex mission-critical programs. This was apparent on our successful takeaway win from a competitor of the Atlantic region, Navy's NAVFAC Clean Environmental Action Program. We brought the capabilities of our whole company to bear to distinguish AECOM from the incumbent. Our comprehensive proposal, which also embedded our industry-leading PFAS capabilities, with a critical determinant of our success and a great representation of the power of our organization when we think and act globally. In closing, our business and brand are built on nearly 50,000 of the best professionals in our industry. Despite the numerous headwinds impacting various parts of the economy, we continue to deliver for clients and to create value for our stakeholders. As a result, I am as confident as ever that our strategy, focus, and discipline will allow us to continue to succeed into the future and capitalize on the opportunities ahead. With that, I will turn the call over to Laura.