AECOM

Good morning and welcome to the AECOM 3rd Quarter 2024 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. I would like to turn the call over to Will Gabrielski, Senior Vice President, Finance, Treasury, and Investor Relations. Please go ahead. Will Gabrielski, Senior Vice President, Finance, Treasury, and Investor Relations. Please go ahead.

Will Gabrielski, Senior Vice President, Finance, Treasury, and Investor Relations. Please go ahead. Will Gabrielski, Senior Vice President, Finance, Treasury, and Investor Relations. Please go ahead. Will Gabrielski, Senior Vice President, Finance, Treasury, and Investor Relations. Please go ahead. Will Gabrielski, Senior Vice President, Finance, Treasury, and Investor Relations. Please go ahead. Will Gabrielski, Senior Vice President, Finance, Treasury, and Investor Relations. Please go ahead. Will Gabrielski, Senior Vice President, Finance, Treasury, and Investor Relations. Please go ahead. Will Gabrielski, Senior Vice President, Finance, Treasury, and Investor Relations. Please 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 reconciliations are incorporated into our materials, which are posted to our website. Growth rates are presented on a year-over-year basis and less otherwise noted. 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 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 continuing operations. On today's call, Troy Rudd, our Chief Executive Officer, will review our key accomplishments, our strategy, and our outlook for the business. Laura Piloni, our President, will discuss key operational successes and priorities. And Gaurav Kapoor, our Chief Financial and Operations 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.

Thank you, Will, and good morning, everyone. I would like to begin by thanking our talented professionals across the globe. Through their dedication to our purpose of delivering a better world, we continue to create successful outcomes for our clients. Our teams are the best in the industry, and we lead in every market sector in which we operate. To that point, earlier this year, ENR recognized AECOM as the number one ranked water design firm. We now hold the number one ranking in water, environmental engineering, transportation, and facilities design. Today I'm also excited to share that we've moved up two spots to number two in ENR's ranking of program management firms. This reflects our deliberate focus on extending our competitive advantages with program management, which is ideally suited for projects of increasing size and complexity. Based on the 20% growth in our program management pipeline in the third quarter, I am confident that we are on track to be number one in this category within the next year. Turning to our results. Our third quarter performance exceeded our expectations. As a result, we are increasing our earnings guidance for a second consecutive quarter. For the quarter, NSR increased by 8% to a new high. Our adjusted EBITDA and EPS increased by 16% and 23% respectively, and we delivered record quarterly margins. We also delivered strong cash flow in the quarter, and on a year-to-date basis, free cash flow has increased by 32%. Importantly, our backlog is strong and our pipeline is at a record high. This provides us with significant visibility and is consistent with our view that we are in the early innings of a multi-decade secular growth cycle across our markets. This visibility gives us confidence in our future, which underpins the increase in our fiscal 24 guidance. We now expect to deliver 21% adjusted EPS growth at the midpoint this year. Our performance and our outlook demonstrate that we've built a tremendous competitive advantage to our strategy, which is resulting in a more valuable company. This is evident in our 20% adjusted EPS CAGR from 2020 to 2024, and in our commitment to deliver double-digit annual adjusted EPS and free cash flow per share growth. To fully realize the value creation opportunity, we are continuing to allocate substantially all available free cash flow to share repurchases after investment in high returning organic growth and dividend payments. To that end, we have repurchased $200 million of stock since the end of the second quarter, including $150 million since the close of the third quarter. We have more than $700 million remaining under our current board authorization, and we will continue to take advantage of the disconnect between price and value. I would now like to review our strategic priorities. First, we are committed as ever to winning what matters. That is, winning the key pursuits valued at greater than $25 million that enhance our visibility and expand the long-term earnings potential of our organization. Notably, our win rate is at a record level, securing 50 cents of every dollar we bid, and our success rate on large pursuits is even greater. Just this year, we have won seven out of eight program management pursuits, each valued at over $25 million. This brings our total to 19 out of the last 20 over the past two years. Across the enterprise, we are pursuing an unprecedented level of larger opportunities. In fact, the value of our larger pursuits expected to be awarded in 2025 is approximately 70% greater than at this time last year. This includes the growth in program management that I referenced earlier and strong trends in each of our other markets as well. In water, our large pursuit pipeline increased by 45%. The pipeline in facilities design business, the majority of which is public sector, has increased by nearly 25%. The trends are also strong in environment and transportation. Second, we are enhancing our employee value proposition, which has a very high payback. For instance, the number of employees enrolled in a leadership development program has tripled from just a few years ago. As a result, we are equipping our leaders and project managers with the best resources to promote our culture of technical excellence across the organization. These investments are directly linkable to our voluntary attrition being meaningfully lower than the industry average and are a key element of winning what matters through our technical leadership. Third, we are leveraging our scale and capacity to create meaningful long-term operational efficiencies. For instance, the adoption of digital tools is growing across the company. As we detailed during our December Investor Day, we aim for 5% to 15% of our work hours to be delivered through scripts and code that we create by leveraging our extensive digital libraries. This will increase the capacity and extend our capabilities of our teams. We're also transforming how we work through AI by integrating AI into specific areas of our business, such as our bid and proposal process. Although it is early to fully measure the potential benefits of these technologies, the signals are quite positive. Overall, these investments are designed to strengthen our company and help us exceed our 17% long-term margin target. Fourth, we are focusing our best resources on the fastest growing, highest value, and most resilient markets and clients to ensure that we fully capitalize on the opportunities ahead. This includes our four largest regions. the US, Canada, UK, and Australia, which generate approximately 90% of our profit. Also, our largest clients are growing at a rate that is several times faster than the rest of the business due to this effort. Finally, we are seizing new complementary high-value market opportunities. One example is the energy transition. Nearly every aspect of our business will be touched in one form or another by this long-term secular growth opportunity. Another great example is digital consulting. Our investments are growing rapidly for our infrastructure clients. Our revenue in this market has increased by 70% year-to-date, and we estimate this to be a $50 billion addressable opportunity for AECOM over the next decade. Traditionally, this market has been dominated by management consulting and IT consulting firms. However, we are winning because of our superior technical expertise, trusted client relationships, and extensive capabilities that set us apart from these traditional competitors. Taken together, we remain very confident in our ability to deliver on our increased guidance this year and on our long-term growth targets, which include our expectation for annual 5% to 8% net service revenue growth, as well as double-digit adjusted EPS and free cash flow per share growth. With that, I'll turn the call over to Laura.