AECOM

Good morning and welcome to the AECOM fourth quarter 2024 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 investor section at www.aecom.com. Later, we will conduct a question and answer session. If you have a question, please press star, then 1 on your touchtone phone. If you wish to be removed from the queue, please press star 1 again. 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 1 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 gap reconciliations are incorporated into our materials and are posted to our website. Growth rates are presented on a year-over-year basis unless 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 growth rates are presented on a constant currency basis and less 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.

Troy? Thank you, Will, and thank you all for joining us today. I want to begin by thanking our professionals across the globe for their unwavering commitment to our purpose of delivering a better world. The value that we bring to our clients and communities every day is a testament to the collective strengths of our organization. I would also like to thank our professionals for supporting our teams and communities impacted by both hurricanes Helene and Milton in the southeastern United States. All of our employees remain safe, and safety is a core value at AECOM. We take great pride in our best-in-class safety record, which is well above our peers. Before discussing our financials, I want to comment on the U.S. election. First and foremost, the election creates certainty. Infrastructure investment is a bipartisan priority and we do not foresee this changing. The incoming Trump administration is focused on a strong U.S. economy, which is built on a foundation of world-class infrastructure. While specific initiatives and objectives may shift, with 70% of our workforce fungible across market sectors, we are in a great position to capitalize on the investments in the U.S. economy. Specific to our U.S. federal exposure, I want to highlight the following. The U.S. federal client represents 9% of our revenue. Within that, nearly all of our work is for funded multi-year mission critical and essential infrastructure projects. The EPA and USAID combined represent less than 50 basis points of our enterprise revenue. And similarly, the Inflation Reduction Act accounts for less than 1% of our revenue. On the other side of the equation, we see several growth opportunities emerging from the new administration's priorities. For example, deregulation. Prudent deregulation is a positive for our clients and our business. This includes permitting reform, which is one of the greatest bottlenecks to infrastructure investment, and simplification would increase the volume of project opportunities. With respect to the IIJA, 95% of the IIJA funding is secure and not at risk. And with only one-third of the money allocated to date, plenty of runway remains. A reduction in government staffing would increase demand for advisory, technical, and program management services to support infrastructure investment. Lastly, voters demonstrated continued support for infrastructure funding in the November elections, including $41 billion of state and local transportation-specific ballot measures, as well as $20 billion of bonds in California that include sizable investments in water. Taken together, we expect the next several years to bring new growth opportunities for which we are well-suited to deliver on. Turning to our fiscal 2024 financial results and key accomplishments. First, our financial performance was strong on all fronts and included records for net service revenue, margins, earnings, and cash flow. We also exceeded the midpoints of our previously increased adjusted EPS and adjusted EBITDA guidance with 22% and 14% growth respectively. This was driven by 140 basis points of EBITDA margin expansion in the fourth quarter. And record free cash flow enabled the return of approximately $560 million to shareholders through repurchases and dividend payments. Second, we're winning what matters and extending our visibility. We had a 1.2 times book to burn ratio in the design business in the fourth quarter with strength in both segments, and we ended the year with a record backlog. In fact, our enterprise-wide book-to-burn ratio has been at one or greater in each of the last 16 quarters, which speaks to our competitive advantage and the strength of our end markets. Our pipeline achieved a new high and increased by 10%. Our win rate remains at a record high at 50% and is notably even higher on larger pursuits where our competitive advantages are greatest. And we are winning re-competes at a 90% plus pace in our largest markets. Third, we gained organic revenue market share. For the first time in our history, we achieved the number one ranking by engineering news record in the water design market. This is consistent with our goal of doubling our water practice over the next five years. And we are now number one in every key market sector. I also want to highlight that global program management took another big step forward, moving to the number two ranking, which is on track to be number one this year following 20% growth in fiscal 2024. Fourth, we executed on a returns-focused capital allocation policy. This includes record investments in organic growth initiatives, continued growth in our dividend, and $450 million of share repurchases during the year. Today, we also announced that the Board of Directors approved an increase in our repurchase authorization to $1 billion and an 18% increase in our quarterly dividend. Our dividend has increased by an average of 20% annually over the last three years, and the indicative dividend yield is now at the top of our direct peer group. We remain committed to double-digit annual growth in the per share value of our dividend for the long term. Finally, we are investing in new high margin growth businesses that leverage existing strengths. For instance, the water and environment advisory business, which draws on the technical leadership of our number one ranked water and environment practices, furthers our vision of becoming the global leader in infrastructure advisory services. We expect this business to double within three years from $200 million of NSR today and will become our next $1 billion platform. similar to what we've already accomplished with program management. Importantly, this growth will be at higher margins, which further underpins our confidence in not only delivering on our 17% long-term margin target, but exceeding it. As we look to 2025 and beyond, the secular growth drivers of our business are firmly intact. The need for infrastructure investment has never been greater. For instance, more than 46,000 bridges are considered structurally deficient in the U.S., and the average bridge is more than 40 years old. The IIJA created a competitive grant program with the goal of improving bridge safety and reliability. And larger projects, such as the Brent Spence Bridge, on which AECOM is the lead designer, received more than $1 billion of large federal bridge grants and will continue on for several more years. Funding for transit, highway, rail, and aviation infrastructure is also increasing. which is driving the record backlog and double-digit pipeline growth we are seeing in the Americas. Around the world, urbanization is transforming infrastructure demand. Nearly 70% of the world's population is expected to live in cities by 2050, which has created enormous investment demand for safe, reliable drinking water and for building modern transportation systems while minimizing environmental impacts. Additionally, energy demand for electrification and data centers to support AI creates several growth opportunities where we are poised to capitalize, from permitting to air quality to energy storage and grid modernization. To give you a sense of how this is directly benefiting us, our transmission and distribution backlog has increased five times compared to just a few years ago. Our role as a design partner on the UK's Great Grid project as the program manager on San Diego Gas and Electric's underground investment, and as the advisory partner for a major transmission grid build-out in Australia, demonstrate the depth of our expertise and the strength of our brand in the market. Turning to 2025, our backlog, pipeline, and continued high wind rates underpin our conviction in another record year for the business. This includes expectations for 5% to 8% NSR growth, and adjusted EBITDA and EPS of $1.19 billion and $5.10 at the respective midpoints. I could not be prouder of what we accomplished over the last several years. Through our strategy and focus on winning what matters, we've created and are expanding our competitive advantage. As we look to 2025 and beyond, the ceiling for what's possible has never been higher. With that, I will turn the call over to Laura.