AECOM

Good morning and welcome to the AECOM fourth quarter 2022 conference call. I would like to inform all participants this call is being recorded at 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 of the investors section at www.aecom.com. Later, we will conduct a question and answer session. If you would like to ask a question at that time, please press star followed by one on your telephone keypad. If you wish to withdraw, please press star followed by two. I would now like to turn the call over to Will Gabrielski, Senior Vice President, Finance, Treasury, 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 the 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 reconciliations are incorporated into our materials, which are posted to our website. Any references to segment margins or segment-adjusted operating margins will reflect the performance for the Americas and international segments. When discussing revenue and revenue growth, we will refer to Net Service Revenue, or NSR, which is defined as revenue including pass-through revenue. NSR and backlog growth rates are presented on a constant currency basis and less otherwise noted. For year-over-year constant currency growth for 2023 guidance, foreign exchange rates are based on the underlying rates used when we set our 2024 targets in late 2021. Return on invested capital is measured on the continuing operations of the business and excludes any retained assets or liabilities of previously disposed businesses. Today's remarks will focus on continuing operations and exclude impacts related to our exit from Russia. On today's call, Troy Rudd, our Chief Executive Officer, will review our key accomplishments, our strategy, and our outlook for the business. Alara Polonyi, our president, will discuss key operational successes and priorities. 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. Fiscal 2022 was a year of many accomplishments and successes. I want to begin by thanking our employees for their unwavering dedication to their clients and to our purpose of delivering a better world. Our teams truly differentiate us in the market and are key to our widening competitive advantage. To fully capitalize on this advantage, we are continuing to invest in the professional development and personal well-being of our teams. Let me give you a few examples. First, we recently made a substantial investment in employee healthcare benefits in the United States. Beginning in 2023, employees' premiums are being reduced by as much as 80%, which is especially beneficial against the backdrop of continued rising healthcare costs and inflation. We expect our healthcare benefits to lead both our industry and Fortune 500 companies. Second, we are investing to expand our technical practice networks, which bring together the best and brightest minds to share ideas and experiences. Today, tens of thousands of our professionals are connecting with colleagues around the world, which is furthering our commitment to enhanced collaboration. Finally, we're doubling down on professional career development. We have multiple leadership programs underway to expand opportunities for our employees. This includes a partnership with the Wharton School of the University of Pennsylvania. Our people are benefiting individually from these programs and the opportunity to expand their global collaborative relationships. Please turn to the next slide. Turning to our fiscal 2022 results, we extended our track record of delivering on all of our financial targets for the year. Our success in the market has transformed the trajectory and expanded the long-term earnings power of our business. Our fourth quarter results were highlighted by 9% organic NSR growth in the design business, which is the highest quarterly growth rate in more than a decade. This performance reflects our continued high win rate, a near record design backlog, and healthy end market conditions. Notably, this performance does not include a material benefit from IIJAE funding, which has materialized at a slower than anticipated pace. Turning to profitability, the full year segment adjusted operating margin increased by 40 basis points to a new high, exceeded guidance, and included accelerated business development investments in the fourth quarter. We also achieved our earnings guidance while overcoming a significant currency headwind, particularly in the fourth quarter. If not for these impacts, we would have exceeded our ranges for both adjusted EPS and EBITDA. Importantly, backlog in the design business, which accounts for approximately 90% of the NSR in profitability, increased by 8%, reflected an all-time high win rate, while our pipeline of opportunities is also at a record level. We are winning what matters to transform the earnings power of our business. Please turn to the next slide. Our successes are the direct result of the deliberate actions we have taken over the past two years to deliver on our think and act globally strategy and capitalize on our strengths. These actions have included collaborating globally like never before to capture the full power of our industry leading technical capabilities, expanding our addressable market through program management and advisory services to complement our technical expertise, investing in digital AECOM to enhance our value proposition for clients, and finally, prioritizing our resources to the highest returning growth opportunities. Today, these actions are bearing fruit in the form of our record win rate, accelerating growth, industry-leading margins, and increased return on capital. I should note that our momentum has continued on all these fronts into fiscal 2023. We've had notable design wins in the first quarter of fiscal 2023 that further underpin the confidence we have in our growth outlook. As we look ahead, three secular growth drivers are accelerating across our markets. The first secular growth driver is the global infrastructure investment renaissance, which is driving synchronized funding growth across a number of our largest markets. In the U.S., multiple bills have been signed into law to fund infrastructure investment, creating many years of funding visibility. This includes the IIJA where, as I noted, funding has not materialized as quickly as expected. However, this funding is committed and we expect these short-term impacts to resolve and create strong multi-year tailwinds. Internationally, the Australian and Canadian provincial governments are committed to to their sizeable infrastructure investments, and our backlog growth and win rates in these markets remain exceptionally strong. In fact, in both markets, we have secured large wins in the last few months that further solidify our confidence in growth for the next several years. The second secular growth driver is demand for sustainable, resilient infrastructure and investments in energy transition. The need for this investment is especially apparent in the aftermath of the hurricanes Ian and Fiona. In fact, we recently aided the rebuilding of the Sanibel Causeway that was severely damaged by Hurricane Ian. We were also recently selected by San Diego Gas and Electric for a program management contract to move a substantial share of its grid infrastructure underground to protect the communities against wildfire, which is a growing demand driver for which we are well positioned to deliver. Finally, our clients are accelerating investments to adapt assets and supply chains to a post-COVID new normal. The US, for instance, is prioritizing the reshoring of critical manufacturing capabilities, while Europe and many parts of the world are advancing energy transition priorities. It bears repeating that we are ranked at or near the top of every high-value market that is critical to delivering these secular growth drivers. We are number one in transportation design, facilities design, green design, environmental engineering, and hold several leadership positions in the water sector. In addition, we have built a world-class program management business, which is a distinguishing competitive advantage that we did not have at scale in prior cycles. This capability has resulted in a step change in how we engage with clients and the scope of the opportunities on each project, and has resulted in some of our largest wins over the past two years. For example, we just announced our appointment as the program manager for California High Speed Rail. Please turn to the next slide. We've initiated fiscal 2023 guidance for adjusted EBITDA of between $935 million and $975 million, and adjusted EPS guidance of between $3.55 and $3.75. This guidance is based on accelerating organic NSR growth of 8%, which is underpinned by our strong backlog position, and a 20% increase in bids and proposals submitted in our design business. This expectation is also balanced against near-term uncertainties in a few markets, most notably in the UK, where funding on major highway programs is uncertain due to the leadership transition and the potential austerity measures. In addition, we expect to deliver 40 basis points of adjusted operating margin expansion to 14.6%, a new high, with profitable growth enabling both margin expansion and a continued high level of investment in our teams, and to cap lays on our record pipeline. Finally, we expect another year of strong cash flow, and we are reiterating our returns-driven capital allocation policy, including our intent to return substantially all available cash flow to shareholders through repurchases and dividends. I should note the rising U.S. dollar, which is not within our control, is having a translational impact on our international earnings. In fact, if not for impacts of foreign exchange, we would have expected to deliver adjusted EBITDA in excess of $1 billion in 2023 at the midpoint. This would have been ahead of the expectation built into our long-term model that supports our 2024 targets. As a result of this underlying outperformance, we are affirming our 2024 adjusted EPS target of at least $4.75. We're also increasing our 2024 return on invested capital target from 15% to 17% to reflect our strong performance to date and continued discipline on capital allocation. Taken together, the strength of our outlook speaks to the durability of our strategy and platform and the benefits of our focus on organic growth and high returns. I am proud of how well we are collaborating and going to market. Through our actions, we have created enduring competitive advantages with unrivaled technical expertise and a culture that is fully committed to our purpose of delivering a better world. With that, I'll turn the call over to Lara.