ACM - Earnings call transcript Q4 2018

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Operator

Good morning, and welcome to the AECOM Fourth Quarter 2018 Earnings 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. like President, the Investor would Will over I Vice Gabrielski, Relations. Instructions] to call turn to [Operator

Will Gabrielski

Thank you, X operator. future differ attention Today’s to significantly I contains business would like safe discussion Actual statement to and harbor from financial on results statements Page forward-looking of expectations. presentation. the today’s about direct may your Except law, those today’s forward-looking reports and take risks the including our to projected forward-looking statements periodic risks update by in statements. described with filed as no obligation SEC. the uncertainties, we due to required in our various

progress, financial in Please as reconciliations website. which non-GAAP using are noted. GAAP our posted appropriate is presentation. note financial that We incorporated presentation, except into measures year-over-year our all our The percentages on are to refer

tax adjusted financing earnings business assets, of interest disposals and impacts today’s and Burke, intangible U.S. Chairman and unless Our results adjusted noncore discussion and exclude Executive noted. Today’s and constant-currency tax dispositions, businesses. and acquisition noncore is sale, charges is of the items, tax for effects revaluation guidance and and loss organic for gains of integration-related Mike in year-over-year is assets associated on the growth discrete deferred asset otherwise taxes, and of basis on Mike? Officer. to reform, presentation a with is Beginning of items amortization and discussion expense, Chief held AECOM’s

Mike Burke

everyone. Welcome Will. you, Thank

growth and greater review X. business. an growth and which Operating discuss as MS Organic call our will a turn turning of our and We respectively backlog Troy I XXXX in over higher fiscal today AECOM’s before margin of the me by wins for our in record and XX% Troy Officer; our the session. financial XX% in Randy with Americas XXXX, led and year, and Then, trends our half Rudd, well are continued detail, position beyond. Financial overview in accelerated across design second the Officer. question-and-answer the delivered to Joining and revenue, growth Wotring, will outlook for begin Chief performance winds Chief Slide results Please in businesses.

we result, over to a a growth prior expect a more year represent for another year, wins we the billion, deliver to $X.X in billion. billion Fourth at backlog. wins annual $XX than of XX% and $XX revenue in year XXXX. a over increased As high XX% set Full new by resulting record $XX of quarter increase billion,

billion large momentum project the of Our into continued with MS CS wins in and first October. than $X more quarter

of $XXX of We to also year fourth quarter, a delivered of million straight greater free cash flow. contributed fourth $XXX in flow quarterly cash record than a million free which of the

As accelerated $X repurchase we authorization, shares reduced a our down by our outstanding continue debt which million under $XXX result, share executed and to X%. we pay approximately billion

However, specifically, underperformance business, our items performance. UK. most for our and in expectations other EBITDA CS solid a business growth challenges volume including: These mask delivered the and performance handful was segment and related below profit strength the shortfall Capital of the year of Americas the the across of AECOM related on our expectations execution in a timing in due to segment, three the projects factors MS underlying design another areas exceeded the

Importantly, three executing record maximize actions. we our strategic to profitability are the backlog, billion $XX of

improvements beyond. will DCS in primarily benefit savings we and annual in taking we of XXXX are actions the the $XXX implementing operating First, with fiscal the The segment year. reduce most adjusted where following fiscal plan by a in the expect X% review margin further to G&A of G&A our a million our to first the exceed cost structure, with place half of XXXX

our deliver as structure benefit of segments work our backlog. from we a more cost all efficient compete will and Importantly, for

track unacceptable. we leadership in have and more stellar. vast XXXX were or our changed of expectations impacted Second, majority avoidable execution issues fiscal Though our and remained the exceeded broadly, the our projects CS met record segment. our The have that

the portfolio we of thorough review execute have to the in a encountered the root greater ensure causes change, identified leadership addition and we to with certainty conducted the In we future. challenges

growth currently our plan and with are of advantages we a of Finally, our are competitive investments on XX and greatest. to evaluating ongoing exit geographic attention is than our more largest This exposure focus review an prioritizing part markets a highest where countries. towards our

we significant both had geography, XXXX. rate Beginning Americas, business quarters. segment, All in delivered industry financial most Slide enhanced growth our our business the our our of cash in years the end a X third and fourth including our in these Please DCS profile several We on to focus the our hone flow. for discussion risk our leading our performance, in the actions largest in including of consistency growth profitable markets, design accomplishments turn trends. in XX% reduce and our highest of

Our result Strong the position leadership in visibility markets. that than billion created contributed Act FAST ballot digit to growth more growth of these and in passed transportation markets double $XXX measures XXXX in by in this funding the water growth. economic and

for funding states of XX parties of over week, by maintain were specific and leadership hopes comprehensive in D.C. federal a decade. which also of bill Voters by infrastructure the other with addition, tax, a next $XX last transportation the gas expressing our over for In over bill. support need provide a investments infrastructure both billion void revenue in will And demonstrated transportation billion for approved. by infrastructure largest $XX reaffirm California, voting in their support $X.XX state infrastructure voters overwhelming to

conditions favorable years. market next we a As persist several expect to over very result, the

services Virgin Texas. year, to quickly aid in provide in also and the critical to mobilized storm we efforts the Islands, recovery the Rico, During Puerto U.S.,

in advantages success the leadership storm capitalize scale the opportunities. recovery Our of the quickly our team our reflects emerging agility and of effort to on

substantial transportation In international remain this leader the we growth the for Pacific quarter, contract market. In X% led In tunnel continued to our Australian the robust. demand funding as year, Asia a adds The capabilities fourth by to budget delivered ensure and Kong, region, a which our we in of outlook. positive Melbourne’s is we mixed. making further In a visibility. effort. remains strong are also project, Hong which strength ongoing from the market surpluses Metro was infrastructure We remained Greater trends long-term investments in China part our in want supports markets,

We in the are which benefiting strong is we from have in developed breadth of growth Hong and also depth capabilities Mainland, China. Kong, driving the

range continued market to mid in UK separation from ahead date the the our key Turning impact of market to March below Uncertainty the and our impacts of volumes Brexit the long AMEA were expectations. largest the Union. around region, XX European the

this slow taken decisive have prepare actions We for down. to

we have improve. cost result, a the structure a and respond have today maintained we key capabilities As better market conditions as to

which management We our digit year. fourth in leading growth and rates. testament position win to DOE to is quarter, contributed services segment. return for Turning XX% growth high key reflects the DOD full and high continued across growth investments our the and our markets delivered the to double This performance a on a

included our substantial at backlog MS by fiscal classified XXXX a MS nearly result, for of has a Today, of XXX% we year is more programs. the expansion classified This start growth a the our and near exited increased XX% backlog record of work. level. since As is than

provides with the large historic competitive and budget The a clearance, U.S. of base have continue employees with DOD security us a highs advantage. for which we pursue substantial growth. remains We opportunities for at to further

expanding our are actively have DOE of remediation pipeline we capabilities a strong market. and this opportunities addition, In in

contract. defense In $XXX fact, in the we were quarter first million for selected a

across services. bids to pipeline, that to that Gas I As we am Pivoting pleased confident under evaluation, report strong on our we which includes plant. look continue construction $XX this billion nearly we $XX power billion make to progress continue. will the client are Alliant momentum of

schedule We and and budget. XX% on are complete approximately on remain

remains high. Our competence the successful and outcome

However, our CS on results, including down impacted right fourth in a projects. the quarter execution of across handful challenges

We portfolio a thorough our and of of the business review conducted leadership have changed projects. the of

our in and JFK New to at Walsh metro X ended, joint future. fourth Total for in backlog of target XXXX York Construction, backlog Terminal leadership we XXXX to revenue Airport from and With by in increased optimistic top consecutive strong growth end selected pipeline ambitious Angeles XX%. of new projects redevelopment quarter billion venture with set which core the the XX York led organic AECOM of doubled a $X fiscal markets. the will for was record. and a year City, place, none for After our wins and Building Importantly, for our New Construction pursuits. the of a new Building we our double-digit year in increase In Los by achieved are

West expectations and favorable our past have and Demand over been substantial Coast driving year. The visibility. our as We in more better and business continue construction markets solid margins civil sold to performed core is conditions. contributor the has terms to

As gains. benefit we achieved Canyon concept costs, being goal on provide will to and close business, venture a our Across fees in balance Finishing and for upside our we new opportunity this capital capital, XXXX, we us to positioned real The will the tremendous are selective estate highly the of management the investment work limits we of first AECOM with are was the new to from support us a financial size on AECOM with with continued Partners. our investment out joint capital fund third-party prove our manage of fully the sheet. are our quarter pursuing. started given the result, milestone that third-party When success. with we allowing

trends we years over several ability discuss growth. strong the record over drive rate call to We confident efficient a I’ll Troy, to in will our and who With more continue are detail. the in market more operations, several focused and at next quarter winning the to years. work performance support turn are now of

Troy Rudd

We’ve results turn X. of Please delivered to Mike. on key number Slide a metrics. Thanks, strong

including continue stock. strong fourth delivered of in the approximately flow, Importantly, our enabled debt of shares a which million record and we reduction repurchase X.X the quarter, cash

fully in a foundation, and had implemented and operating margin future we As year, model the reductions. enhancements Mike foundation have emphasize, on which sets more primarily this several efficient solid the through initiatives, for we accomplishments a to capitalize G&A

backlog We expect are XX% $XX of on of Generating our savings million have approximately reductions and delivering EBITDA to XXXX. G&A made and record savings the fiscal already fiscal expect in in growth the components G&A in key plan, realize substantial progress targeted XXXX. we our

our well drive long as by term by year. driven result, This growth our Slide half to and we improved ability confident performance full are our increased the in XX% the in a sustained for to Revenue segment second quarter in business. As transportation XX% full and in Americas and in create the water XX% fourth in of to the the DCS X% turn value markets shareholders. in growth Please earnings year. for grew strong The as and year was the by results environment our core X.

are storm executing multi-billion a of a of we In where pursuing addition, work, recovery are opportunities. portfolio we dollar growing pipeline

As a XX margin is a for business. fiscal expect the in XXXX. we reflects basis year point momentum the growth to continue was prior the in and The X.X% adjusted over positive which the operating quarter, result, improvement

delivered these in While activity align strengths. and business UK market of levels conditions strong cost our that to ongoing performance in offset lower with we and Americas Asia the regions, Pacific

our Importantly, we’re on plan to with improvement deliver margin G&A a reductions. path substantial

improvement operating the further than expected margin X% by basis least more fiscal As expect in XXXX. at increase we XXX a adjusted to in fiscal .With XXXX points result, a to

of X.X%, the since expectations. realize you the was of the XXX% MS Revenue annual full Slide the XXXX. backlog actions. fiscal full adjusted year, which benefits ahead quarter segment in for Revenue a XX% in and was consistent The start growth with X. this Please our the by is full margin to was year mostly XX% As result accelerating increased our turn operating of an G&A expectations. of as the

our An robust As fiscal are percentage and including expect within prime our the we on we operating projects in the of X%, and we pivot books to first in wins our margin position. these backlog share increasing projects percentage, with of through from to increasing margin run dilute the where XXXX, will strong revenue quarter. our approximate adjusted coming already revenue pipeline

business. X% quarter the with goal the year of in Building we We achieved the in of the Slide Please Mike our CS trajectory organic are continued spoke X. in positioned and Construction and we growth double-digit ambitious confident to of Revenue in increased X% consecutive the in are the segment turn full to delivering wins in fourth you, well fourth by year, the quarter that positive growth. business a our substantial for first

which Mike X.X%, a was margin results. impacted poor operating performance across was negatively year slightly of handful most full below the mentioned, performance as Our while projects on strong was of our portfolio, expectations,

a to conducted our Importantly, and portfolio accountability. we’ve of leadership thorough change the improve review

$XXX approximate Please track We free all industry year record XXXX. XX% in XX. million past million, expect years. cash our of fiscal leading and underscores Slide generation. X% of in $XXX margins the the cash XXXX flow was strong of will our free turn which Fiscal Operating flow to four now prior improvement year. cash was billion over generated over $X.X We’ve flow were cash

ability consistently to shareholder our Our has cash actions. convert flow capital earnings enabled allocation focus

we year, accelerated best million share repurchase. a $XXX and continued use, highest capital the debt the reduction allocated to During including and

our remaining return long our continuing all priorities our We free commitment intend we forward, to cash value. be price in to billion substantially repurchase below Going on With at authorization. our million under including capital is to allocation what term to flow believe market trade the stock shareholders, a buying the remain $XXX $X shares. the unchanged

fiscal will and that $XXX volumes with EBITDA flows, between Slide EPS guidance the We’ve course, million half weighted business. and balance million We $X.XX between for calls initiated XXXX XX. $X.XX. adjusted of cash turn adjusted which and for typically to of repurchase $XXX Please in of our are second

the Our underlying after midpoint XXXX than tax better XX% of midpoint reduction we’re G&A includes in is in adjusting realized growth which $XX our our EPS at the growth, and plan million XXXX business. for At expected of performance. from range, the EBITDA benefits our expecting growth XX%

expect know for it of in the margins segment, I exceed the benefit X%. we realized the savings majority DCS DCS to As

fiscal we and XXXX expect driven reductions addition, improve benefit the from growth. In EBITDA further, G&A annual will of by revenue our

CAGR costs the expect impacts million expect Importantly, XXXX. in the our these we EBITDA expectation we million our first we full in to plan, realize be reduction the and as XXXX With will with note, the anticipate midpoint phasing the to restructuring half $XX from half expected be a restructuring with growth expect X% timing of for million of million. progresses. record approximately year cash Majority fiscal approximately Total the of in $XX EBITDA are year our between $XX account are XXXX incur to quarter Of cost. XX% for G&A for most first and reiterating to AECOM capital of we respect expect year. We of included the during to $XX the outsized realizations. however, is benefit the will first million Today, year the of guidance the incurred $XX the of the our of to of anticipated costs guidance. backlog, a at

for now $X.X XXXX Operator, to full will between free question. the and least call $XXX I to that, to expect flow flow Q&A. deliver over deliver at year ready million million remain turn XXXX. and for We With cash for our plan $XXX we’re billion the committed from of cash through

Operator

you. Thank

session. We question. line Fleming Instructions] Citi from the [Operator with will now Alan the begin is the on question-and-answer

Alan Fleming

the everywhere morning like it of in to regardless through organically outposts. like long then strategy. DCS announcement reversal good of least establish Mike, guys. the almost of essentially growth kind and those world strategy, that kind AECOM seems Hey, around a or a cost, either and of outposts, at was time, for Today’s inorganically be seems

of profitability the million XXXX just faster about? couldn’t improvement? cost talking $XXX XXXX savings be So happen FY the point why than you’re why time it for starting that the DCS shouldn’t frame of or maybe kind And

Mike Burke

we where but results. – from had we in strategy those than countries and evident less had that – strategy important more opportunity. revenue from this away present or slightly management is that evident the we’re the made, about that – we breakeven but negative And taking changing Well, retrench first XX of we will of strategic the where from our X% XX what’s on that markets focusing energies away greater all, countries is announcement in is time

XX So will by the the on Troy, impact But stand and question I both want that? you do your markets. of And on from greater had margins. the the the second the deployed was impact we be time the think the to part return of investment return capital maybe, on much on retrenching those – investment, management’s in DCS

Troy Rudd

Yes.

the year, first So of million – expect between $XX in drive million, the $XX again, first we in to savings.

were importantly, of So million in savings drive, year. that rate, that’s by expect actions the run to the in that $XXX And year. first that driven bulk more of half of we coming first the the taken is been the

QX. the the quarter with at to expect XX% those end complete the first of end of XX% actions at and We be

we we the and it year had really, behind at XXXX, was generating first when the actions the well. will, through there the we exiting end that us what So take at And the savings of behind it, million. those bulk – $XXX we as first year and be quarter, to the of have most in we of then meant there are really said some of half

run really So we’ll at be rate exiting XXXX. through that halfway

Mike Burke

Yes. just for cost margins and restructuring what in out we margins DCS point And that this Alan, will think, the means it’s X%. structure, where have business. we’ve at the margins X% had streamlined With to important I DCS

means the that organic is in backlog growth and of backlog we expect. puts higher $XX out peers we we that sector. be think, profit that, year point business, DCS more our because restructuring we margin of heard quartile in growth the means that from of of second that margins extract in that X% upper now And half the us $XX double-digit this should I billion is to And had able What billion of the the in the us that you what in so mention overall. DCS, that the the will it the

Alan Fleming

forecasting maybe a XXXX East about Middle as Maybe growth DCS? quantify you’re the organic thinking from in drag a Are that, and as FY – you think slowdown or And offset on – the And to the the the a in decline there is perspective. UK Mike. talk world? off? any how this quarter? I you takes more would of in slowdown Is the Americas this continued a prepared I about were a can a a Okay. is by I follow-up, East. do more prolonged about maybe UK and in the part you in that assume appreciate much way the and that strong Or growth puts ask are UK Middle organic strength in cooling temporary your growth growth for the

Mike Burke

So I’ll let talk in Troy three growth trends those those about regions. organic

Troy Rudd

Yes.

cover pass-through, I’ll So the what I’ll the first about talk just then see in – we future.

again, very in growth to driven the call, There for provided past this had strong So business what clients. significant half XX%. we storm that work was going recovery year, Americas we a of the our of second that in amount year, growth I’m by, the

year, Our our particular, X%. the digits Asia Pacific declined, about in grew business mid-single quarter, business then during Middle fourth in year-over-year by our shrunk and EMEA East the business

forward, Americas we strong business. our growth in see moving So

healthy being our actually Pacific, Europe we East and we possibly single coming off modest in Although flat significant of next a growth viewing mid us doesn’t year this Americas in this exit to where the look coming restructuring business of growth being with a the we Asia year, the the are But we operating that taking more years, see Asia business, Pacific consistent took some we’re we the has healthy in conservative and believe smaller business. even growth. so those the grow, this business. that business growth the year countries Middle as operating we we’re year digits. actions in When at think, course the we this margins in and put if importantly, modest in of I some And in being this see in have past in and that opportunities position

modest growth summary, that Americas most growth DCS of our business. the across business coming I the we’re largest forecasting market, year. in this think, in coming is particularly So And

Mike Burke

color what Europe Middle the the a and got add do of And we March. little part for decision – there we’ve on I in to up portend your one to got coming business, East think, obviously, question Brexit

with gives oil for that getting upside prices, part than us across across uncertainty expenditure public East, Middle I In behind us there’ll more other think higher region. expectation money the the that the be of not. more

our in XX Middle sense the and think, Europe, outlook future I that both East past in the So did UK it looks than the is better for months.

Alan Fleming

appreciate guys. Thanks perspective. the I

Operator

Your Cook from next Jamie question with Suisse. Credit is

Jamie Cook

Hi, DCS look, and I Services, the their margins guess, that, the business for higher. of can that has couple look targeted one found DCS targeted a understanding Management I good margins. just and if interesting One, – Whereas restructuring achieving your sort haven’t been go But the the considerably has part, Construction of questions. been if mean, I forecast. most we achieving been you we margin at Services morning.

the So Mike, loaded why businesses, My better issues the you two think execution seasonality the anything is, year, to cash prepared be good in you. for and usual? then in the in or the aren’t flow in and why half backend generally out there the question should still thinking restructuring actions question be I focused more – there’s it Troy. term? the seasonally cash second having, DCS? a your about comments particular to is Construction is And business did of Thank third longer is flow towards half? your Services relative Is about and than my in when Understanding back cash reading the XXXX in more in releases. flow that Is press always we point about back you, and for guess, those profitability business low that you you’re

Mike Burke

Okay. the of piece? to take margin want you Troy, there. in questions do There’s a lot

Troy Rudd

Yes.

in couple CS of CS our are combined of some to were taking actions the in business. cycle construction, the the we respect in with year, around we made So this quarter to focusing first points And that exit business. one the, on is Number power here. in projects that just delivering some all, business. business, second we on decision past Power A plant particular when

we’re one I’m is, burning we’re complete, Alliant on some and have we off that that which schedule. reposition that business. what business finishing, time say, that in But on We Power which backlog XX% means as the for it, project, happy to

And so year-over-year. down come we’re going business that see to

the look that year. business the in we CS when in So we with restructuring and overall, to consistent that margins at current business expect be

And The other Building X% about margin say thing is terms a I’ll the as you with lot talk the working our construction a in margins looked management we self has in actually more where is margins business business. do are that being we business almost it a Construction range work, capital. at about that of business, but perform it really like if that that no deliver XX% work

So on invested that capital in it return an business. our infinite has almost

is little think, our rest as a the that of being have prime joint in see In because a significant of self-help, you business that of Defense. through through That overall business. to have the really to MS business you lot going also, than our DOE last get of economically about most let I’m successful in margins work actions, our Randy like Department exceeding and of over of a member in I the year margins margins same. look we when instead we next In Services, it we this And for X% the well improvement, Defense the Construction that has and So weighing the as down. those course partially our business venture, pointed been Department that But typically Services are has terms now actually we to of the it’s a DCS margin, work been we see our we because margins distinguished be business. the business as own P&L, lower more growth, margins in with very forward. of coming driving significant to this of from Management impact a amount through more as year. going a they’re margins talk have out, but move bit business, the revenue

Randy Wotring

MS very we’re business Jamie. going Yes, And the bullish forward. about

last indicated, DOD activity had most contracts Troy that we on of cost large As years, the were of very couple because over reimbursable. bidding the were

So lower business. the a contracting by nature, they their see margin very in you government would fixed-price than normal were in

$XX looking However, activity. see lumpy to over the more billion of contracts, three because four of in of bidding Department Energy forward, the the nature the next years. DoE, large the opportunities of they’re We

So opportunities looking to not in DoE great our but see still grow forward, business. only the backlog we grow higher-margin

Mike Burke

there’s wide Yes. back to CS, it. me of underscore of to the Services Troy covered just I Jamie, you let just asked within Construction But that and question about come most think strategic segment. business, a variety businesses our

have we million power. for That’s XXXX, good was market First FY from that we by over we have, analyzed created but EPC carefully headwind it that a past so, the derisking of believe $XX in eight all, of and months very business cycle derisking or that been have combined portfolio extracting a portfolio. ourselves the fixed-price

we in and business, it. segment also, by been of another close And to market also our the phase appropriate Construction gas the X% of Building the margins, that think currently I and growth talk portfolio one segment the infinite. revenue derisking a the working cost basis, in at have in look when of Building selling like so to We focus to had piece when months But the building net our oil you And off diligence billion On due margins. people of point $XX to are capital wins service on invested structure on capital alone. in service negative net management business, in in XX% a that are Construction requiring revenue returns net margins basis. business, the four on Construction, Building the pass-through the about to the look we at we’re it’s last because more

revenue capital at at invested growth like service net I when business, the business. the that margins, the So on we look I in and infinite return the look XX%

don’t we our going to have place that might forward bets identify portfolio, to what really asymmetrical for eight anymore. we and continue evaluate months, markets like to we where present Now want our we as the past risk

on we’re a continue don’t So they go evaluate had have different today, but lot we’ll like, detail Construction of aspects from and prepared lot to and our like we more into shareholders a that Services on not to feedback that of that.

Jamie Cook

Okay, just thank the you. And then flow? cash on

Troy Rudd

of even anything first going respect cash forward, in the our we the make of cash XXXX, profile of even XX% year. XX% won’t exception restructuring I cash in as XXXX, with of similar first the restructuring don’t see when the to I cash flow, the been to that flow. charges. this With being to not actually free beyond I’ll Typically, costs of year, year. And timing that the flow the business the we change look see in in the of second point we’re That’s incurring with half terms Yes. the that cash similar half I different incurring they’ve be half move forward

So our I of terms range fiscal XXXX. in in cash actually see some flow upside

beyond So XXXX.

Jamie Cook

Okay. question. Thanks. let I’ll the to ask someone

Operator

question Our comes from Andrew Baird. next Wittmann from

Andrew Wittmann

Great. Thanks.

can want I characteristics Troy, give Was keep here? the Was in flow. us here do about flow – guess, cash the the start? just Let’s flow, talk, of bit going here, with free the guys. extended quarter? you any Where cash I a little cash sources maybe which there some good that the very that quarter? drove obviously it were was the of payables factoring Maybe in this to

Mike Burke

from the actually, We cash our during Sure. this from – the year, earnings. converted cash course comes of

were see to converted the you going cash. when you’re earnings P&L, that at So really, the look to

had depreciation, year, have the tax we during some you and If of then the do of We course remember, tailwind we to employees. a equity provided excess CapEx. meaning do have

management, past did to cash us convert factoring. the the impact way puts And year. to The in that free was There this a was flow generate quarter we factoring. of zero no in in consistent position where DSOs terms and from able our of had cash All we’re earnings in our our our growth in don’t businesses quarter-over-quarter. lot working days capital of decline in working construction actually our those we two a we capital. we business, use took the where business, on that design particular And

so that AP So growth, nature based perform. in while those increased does underlying work you AR with of that on we will see the the businesses

converted we’ve in past. have earnings – converted just nothing to the really as our So year-over-year. cash unusual we We have

Andrew Wittmann

Okay.

here, guidance, being then to we other income this million. here, XXXX looks as $XXX at earnings your at With it like to reconcile net each the cash look is and trying one. implied fiscal So I’m with tied

restructuring the in million you’re in cash of more forecasting level XXXX? lower do some cash in costs, the level still of the have flow to excess with of How cash the of $XX high reconcile going free earnings yet relatively you million. You’re $XXX

Mike Burke

Yes.

different think There a couple items that bridge. this. are in of particular about So

being depreciation is than planned the year. greater CapEx again, for So

our for of that taxes there’s the And that P&L near year. provide the to will which a stock-based part of as being have And midpoint in compensation of We but go forecasting the flow our our that consistent again free taxes this we couple is the that, in also other into year. cash is lower bridge. for – we smaller that employees still we’re of year-over-year, items past. the all that gets cash has into year, Then of terms NCI you range have then been it than

Andrew Wittmann

the, years. say, Mike, have I in recently, Okay. Helpful. Scantech most let’s companies derisking space, services last business. up across that portfolio, stuff of and government Jacobs. Then couple look they’ve there’s been engineering of the doing type that. announcement they guess, with who construction I that the just, was plenty deemphasized But before less Jacobs before construction got Petrotech bought it by the exited is CHXM doing as

are going who who you DBFO of to about still You talked guys you’re have your as kind and strategy be.

you’re talk kind the derisking of taking broadly restructuring You that portfolio here. actions the about through

As type work? that of or more DBFO the gotten of do, recognizing construction thing lot others right risky look is still have a forward, burned to that doing you

Mike Burke

we think, actions Yes. for we’ve past eight been as in a focused on have about been I portfolio. while, mean, the talking I of number We’ve months. taken a carefully derisking very the

think we asymmetrical of We not of analyzing And us risk. in and parts the deeply derisk where in are certain there’s still the to process portfolio. continuing you market see will the play

fully the and issues. the competitors taken for so I we’re And and have that I of that them understand exact applaud same some decisions analyzing our

what actions, more So it’s prepared come. taken process. to that’s number a continuing say we’re and a of about to is today there’s We’ve

Andrew Wittmann

Thank leave you. it Okay. there. I’ll

Operator

from question Fisher Our from Steven next UBS. comes

Steven Fisher

the mean, do flat quantify the trying mean, the going DCS for margin? you decline puts from in think And in assumptions but the could be growth for help be the growth the MS. could a just just that could the on then assumptions of about in was decline growth Wondering do more profitability I on growth, sounds the like basically to morning. good segment the how of could Thanks, the it and us. us profit majority is a little profit you segment. there if math Services we Services. coming the takes? be seems It make bit I and I Management XXXX. growth with to revenues and margins within in in like revenue CS Maybe Construction

Troy Rudd

Yes.

me So of Steve, let kind just business. – me through let the walk

are business out the grows X.X% you X%. – pointed the in the expecting and from move As margins DCS, margins to we as over

operating business. see margin do significant or operating improved Construction I’ll our we our and year-over-year. Construction the growth being and business, that from do Services, Building O&M the gas say performance expect flat In We in income business see business, oil in we

markets. think, quarter project. terms you Construction work. second Building mentioned, had that the the that you and in in And delivered, you’re X% half preconstruction our operating already that in doing coming in has only in we’ve winning year see as work year, typically phenomenal the of work first later the coming of core I is the year But way through a the first of income business in as see

means a made this ramps operating will of see and that the we year-over-year its in part business year-over-year Management that really Services, work around half this business impact the income. profit. business So decision But decline which leading will it. year of of modest XXXX. growing a then first terms second All and of we do it strategic have in reposition year Power to the XXXX. it decline our will the XXXX in that that modest In cause up decision And won the have we’ve on operating business, terms a that CS in Power year-over-year in the

year, past third quarter the this up picked recall in about a claim third we of we quarter, in the had $XX you that If million.

improving that flat business as opposed it’s $XX we it looks to businesses. actually its profitability like the while So million by year-over-year, about see

Steven Fisher

be you forward? you will to of segment. to Troy. continuing And and simpler considering. become business and want And – understood the what I you’re years the easier to clearly difficult last that make then they’re Andy, the things That’s since sounds the and Is Yes. I’m that like think simplifying looking guess business even what questions business that you’re have that businesses countries strategic – to it you’re you’re with it in last AECOM, manage. a the about about just this to just to suggesting? complex did manage. about broad further really some deal, I that derisking, does easier to very some action, the manage of I sure out thinking you’re make When exiting, guess, really, the to then I think helpful, you about and few these in I commenting do maybe XX get but discussion been on four URS once going the and to some of just construction simplify Jamie potential get

Mike Burke

this organization. this the working focus countries been this with been that’s the working best where realize have having the hone greatest our is restructuring. since us We’ve We’ve through deeply Yes, allows doing entire exactly incredible what the to year. analyze on That in Bain the we’re focus resources, growth. we we’ve process on spring we in XX markets our markets of deploy of been to and where

in mentioned of year, in growth, half the Troy over growth year – significant the double-digit even growth full second for Americas in DCS DCS Americas. had But the the year. past the we You XX%

here returns, our to the our – of opportunities we’re give opportunities That and just the us countries where The is we’ve that present the be to business throughout so allowing at our while and execution will focus, double helped been taken risk So is of restructuring again, time, year or we allow certain again and it all in October. sort year, exploring, us don’t to hone this same I the the whether fiscal right path. of focus profile and in are significantly focusing strategic that or digits on a pieces of month out going best markets first the place this that opportunities further that’s our best us refine continue us oil others to has at down get to growing think growth. far year on for today gas for have backlog opportunities up the the what mention margin we’ll refocus that the present that look Power lower to taking

wins You’ve the just come seen billion another $X October alone. in of month of

both of – of things on in this Building think And beyond. all Troy and of us I XXXX that growth one So Construction. the lot gives I the in confidence a touched

of the to lot these you’re But a business, win after you starts profitability the this of phase. of in preconstruction growth in your first in know, that. you accelerate As year wins, because a don’t have then lot

midpoint the So XX% EBITDA in while better FY a we range Steven about for even feel feel we growth at pretty that good Fisher for XXXX. of means what about XXXX, the

Steven Fisher

Great. temporary a just up. clarification. like back a work It’s quick And X% here? floor margin MS, more not he The DOE in said is Randy that got picking

it temporary So what even forward just is X% this mix of should sort setting sort or a X% maybe an on or is? back be up going depending of the and expectation goes we lower of

Randy Wotring

Yes.

$XX from the of next opportunities billion And for be see to timing lot in margin bid standpoint, they Department the opportunities over expansion. great a are years. to three we of so of give Energy just forward, a opportunities that market us four Looking

very, some DOE well always see addition, very incentives, in markets. we continue In the performance to have – perform we and

performance to overachieve our performance is always milestones. opportunity on So good, there’s and an so

Steven Fisher

you. Thank Okay.

Operator

Afzal Our Tahira from KeyBanc. next comes question from

Tahira Afzal

taken realigned your Thanks. longer Mike, little and Australia. remember in look what oil when business I in the you thought. than been you past, in gas. following a And if happened obviously, we’ve Things you have

to presented that in that us? incorporated you time learning you’ve line curve So the any

Mike Burke

Yes. in speed I said earlier, effort. like this Tahira, currently matters we

mentioned underway being them end earlier QX, cost by the of been and it decisions this have what’s done with that think, for XX% XX% in several months of on will the I happen of We important, with Troy takeouts QX. project now,

already actions So of most of the fiscal year those XX% this in and restructuring. month when clearly – have done place to cost first QX, in taken respect I say with

course, But we the of being achieve So the end rate $XXX in FY pace I believe, the of $XX at that we’re FY EBITDA the million to ensure XXXX. for that those also of requires run savings moving, this XXXX. million by

Tahira Afzal

it. Got

the of us being in believe trickier like But the might countries where obviously, areas there be viewpoint we’ll operations lot from of operations DSOs countries details other you’re time some Okay, in at. are by. twice where you’re time can out I have that the overarching on took the into a countries consideration? economic UNCs the they’re remaining the stretched I where a you’re as done, streamlining a climate. goes factors laws headed remaining you give and guess, find we the higher the Was perhaps high out sort looking by your Mike. of DSOs, to of the into one And because really, as operate some seems it labor of

Mike Burke

of and return So our investment we’re talking are The factor an about in investment countries on time. most these revenue. less important the have X% not management’s that factor. we enormous those the is than return The countries are that DSOs Tahira a on of

of are limited, out countries where in XX and prospects And resources, real right being additional – making growth the those focused on markets by the have years. the see growth We we an resources always. course, have we don’t not as distracted that sure

deployed number. it’s management return more but time it’s a capital well of on So big DSO not some as as a

Tahira Afzal

it. Got

gain in of look needle – it’s as labor the enough terms move really I you And to Okay. are forward. guess, not a laws, you big

Mike Burke

enough restructuring the the labor estimates it’s and cost have the we of timing all in to No, not in the We’ve baked big and it. needle. factored the of into that laws countries it’s move the identified

Tahira Afzal

very Got much, it. you bye. Thank

Mike Burke

Thank you, Tahira.

Operator

Deutsche Our Bank. Chad Dillard comes from from next question

Chad Dillard

everyone. Hi, good morning

Mike Burke

Chad. morning, Good

Chad Dillard

So I allocation. just capital wanted to time on spend some

and mean, thinking should those there’s be then you also, back over secondly, plan wrong go rather a I reimbursable balancing are I’m work? a I as looking to understand this, them you if that decisions? me correct to how just on just restructuring And business, how thinking targets between trying but milestones about what simplification, buybacks your reduction? as you into you we if DCS making at. your do XXXX, how giving debt guess, and And Just savings leverage retain when then mainly cost on investors about than top is to given And those of are margin your

Troy Rudd

Yes. Chad, it’s Troy.

first, So just the repurchase on plan.

in shares. and ASR to past quarter, million this than X.X again, did we So we a more million $XXX were able repurchase little

our shareholders, – past, of going market business. flow buy what But buy to to be do with the in the this to expect continue phasing we’re that year, with of capital our we said. in a the way As said return cash course, to we intention It’s next that’s consistent the into to in we move as and to we shares. we consistent shares

did had finish is not we ratio of more the year aggressive, with have ended about been leverage a little would the or X.Xx. ASR net And million The leverage a we X.Xx. other ratio at point we $XXX done year

buy to growth, year flow. earnings cash ability this over continue course us the of get pricing target, to the again, that just we over through to giving of we’ll leverage on shares. So next net back ratio the But to based going the X.Xx manage year, course that are

Mike Burke

And ought just to we out. Troy, point thing one

Troy emphasize stock. that price tomorrow you’ll the purchasing in market market results us being and in to plan we the prices on price, to this on to Just At be in our that the shortly. throughout capital starting be for year, see the our at of be stock said we to what expect like used allocation, this aggressive certain of

Troy Rudd

DCS there’s to certain into do of and we clients, your In respect costs that we question, gave already the for plus business, absolutely. a that our you. And component Chad, work factored with numbers second that is

million $XX impact we bottom the run effectively after fall the with line plus out for the Those that same clients cost million net will So and of we’ve rate. netted work $XXX numbers. do are – to

Randy Wotring

that point, in execution planning. of this in more is And so just execution to at this ahead It’s regard with our mode understand well at plan time. we’re restructuring no and milestones, point there’s place, plans

Chad Dillard

of mix understand next next you provide opportunities And what’s and comment and versus just other your couple up years. $XX months, over can on between of details ahead any we new coming helpful. XX bid over That’s work the investor there. the zoom Maybe in can recompete billion about what’s and to follow the

Troy Rudd

XXXX, they’re environmental of opportunities in Yes. new all environmental work. cases, five in others opportunities Most be is program. all There’s will management will the work bid FY DOE There of management and those these expanded programs. are that us In FY XXXX one one recompete, for there’ll the be be in but this. for outside

river still the is recompete. other ongoing then one So and

be The others work. new all will

Mike Burke

to I we’ve think, in rates it’s had important that. win the recognize that

last XXXX, think, over our but you started we’ve has years. know, of had around that importantly, bids wins has And of our two since the pursued. XX% backlog win grown rate FY I $XX we billion been as we’ve by XXX%

the is So record darn good. on these track bids pretty

Troy Rudd

contracts good into cost risk a revenue that forward and good it’s on us And low other our of own will years, reimbursable gives the help visibility number great on DOD bids, with clients programs bidding and it moving activities. extremely for for leverage

Chad Dillard

in back queue. hop I’ll Thanks.

Operator

Dudas comes question Michael next Vertical from with Our Research.

Michael Dudas

morning. Good

– You at changes with you any emphasizes you reporting either mentioned there with run of are in markets What and, the in some the maybe more or conjunction targeting business Randy, the end model maybe changes encompassed business remarks with put restructuring is organization prepared there. that’s this how about this? CS wise your things throughout

Mike Burke

did we of issues had. this handful leader execution replace our few Construction that year the a small Well, Services business we because of of

resources don’t pursue on which markets ground. experience and in and we in core We have not are have projects the the in have pursuing will the years random of we strength we markets markets changed so be pursuing projects, projects where we where will

today. done part other business work we cycle, oil mentioned And that our changes and all prepared no work. there’s gas we’re to derisking. in combined I And So on derisking about EPC talk model than that had other of that’s previously work, other the that, the

Michael Dudas

to had when and And on is higher maybe little about just restructuring appreciate forward, growth the little what’s but to that bit coming because generating such there – more from a you of it selective, and and through because I profitability tremendous such thinking board, to Mike, of book-to-bill that. Or the given in reemphasizing you’ve being expenses? have through business – backlog generate tremendous with that maybe be a more and across looking a bit you ability working back the great you’re pull still backlog and but bidding profitability is the your backlog? trying just got plate level selective lot to a

Mike Burke

things. So couple of

going X%. instance margins that ensure wanted all, with the months us to at maximum size we the X% help the to looking backlog in structure ensure our maximize focused of we were the which to First extract started on we we is got we when DCS backlog, for drove that bank what value project of had this growth, that. consulting to to cost six ago from what that That’s right from

our markets is expensive scale. don’t – it much scaling any it’s a we business that in also the earlier, XX not costs, costs, that pursue but selling where way development mentioned on not more you I business realized markets certain like we to are in our So in back countries have significant

on return dollars in business strength much core so is markets your And you greater. have development where

efforts backlog we’ve we see revenue And past any couple so the the years. of had over of do the the restructuring growth growth, not impacting that

Michael Dudas

week – of add you, with final or indication that of early been some that do The with couple in on see and through XXXX? Any with how impact win opportunities initiatives, California? XXXX that the my ballot California the the could and up of to – a admittedly fire. that the for you business and Mike. And read here opportunities business terrible tragedies any California And it’s thought your into flows in real passed some then just one with all A on in can visibility follow things.

Mike Burke

don’t fires any our from in California we impacts the So on business. see real

coming we in not part repealed the house like funding of but having is creates of Of negative good is we’ve course, Troy But tax. really us Angeles California employees that – in it having that the we $XX the either which about we Los so including have rejected in X, U.S. $XX will a some other that billion see strongest $XXX type Prop was gas have the we billion house, our affected, impact to state the or evacuated the pretty his over that, heels be we on another that our home good. a is That’s to were there than safe. M market an in your from second in fund. don’t recently. question, somewhat seen upside To actually rebuilding, feel disaster business transportation, decade, the in which P&D would from our his done. see lot affects have business But recovery the everything billion some of Voters work southeastern have the be our transportation-specific and next of city on is Measure That

investments. November support infrastructure in voters on nationwide XX X, states for their showed So transportation

heading the in to is revenue right support about see now renewed Washington bipartisan And clients after right an on of our broad are for top direction we in talking again bill. the space. that this elections for so that, in provide then everything both excitement sides more midterm infrastructure And

good looking for pretty is us. side supply the So

Michael Dudas

Thanks, thoughts. your Appreciate Mike.

Operator

next of America. Our comes Anna from question Bank Kaminskaya,

Anna Kaminskaya

Canyon slipped remaining I start into, reporting guys. kind A, capital. us Is change provide what of Partners. what’s I to in more your and how let’s JV just It’s same Maybe it way a can you if XXXX remind half AECOM to project different AECOM first also the of, existing redeploy afternoon, Good a in Capital. announced strategy guess, guess, color on capital And happened the you co-investment. the of of the Capital? income your that with with equity you

broad on it can you what details just If means. provide

Mike Burke

Yes, sure.

simple an a in built, project mentioned, completed, being we that is sale. for our of explanation we missed AECOM As up, was leased due that QX had that Capital two asset out. we that The guidance third moved to to have

extended means receiving through will those on the our side on important capital, that sheet upside But a to What’s change fees we – construction been it it interest offer, will a meant FY going position, forward. we because that had incredibly but both will AECOM have the past will the have to of top out note money we that strategy I to it expected along. all also we on a We it complete. so end They to any we not realize the had an the of did offer help that now our deploy – not be offer. business gains gain year. We right with negative in that top is valuable It’s firm of but asset and in be that period closing revenue a only partner call balance a nice still strategy, growth that strategy going had projects the will support With is in don’t fund off potential third-party to capital, so had are and always is respect to own have raise our we have want the raise invest. to there and We Capital. the in of things to third-party of a the operating that XXXX. and capital will fund outside couple underway. also our out intended with there. our to change Canyon carry now We gains first to from it a outside Partners forward, our partnership closing support That capital go on it’s the

So build our this has realize and that’s coming all been off a then not up gains expertise, the invest our process have to projects planned up balance that in build raise outside we sheet. capital money to along, credibility,

Anna Kaminskaya

you’ve AECOM large look you I’m just the of pricing to assets risk on the exposure Any of existing kind some to And homes. is some risk already the that of Again, New at the in book projects? built? Capital, a thinking some existing as in your there multifamily York, on

Mike Burke

that completion. built-in the about the good gains feel in are We in No. the have assets we of remaining process that

returns track so an assets higher on We of one any that had of record far have every double-digit developed incredible changed of the on we’ve has and nothing those.

the feel have realized like that of number be we So will a built-in-gains we future. into assets good

Anna Kaminskaya

final Great. question And my DCS then backlog. the on

of have like I growth on color relative the any think comments been more my end bulk if business, to look book-to-bill that’s is positive kind sequentially down? reconcile trending kind the and I just backlog at sub on how by backlog I market of for trending new down, calculation, as and your been your onetime, awards

Troy Rudd

Anna, it’s Troy. Yes.

book-to-bill DCS this was X.X our And it more or Our past importantly, was X.Xx. business, year. X.Xx across Americas in

highest seeing we’re in we, business be margins So course, opportunities growth, post actually restructuring. in the highest where book-to-bill we’re better the of seeing especially growth actually Americas and have it than our our our X,

Anna Kaminskaya

looking And this backlog? last or booked quarter are both and and X.X, just selected is I’m was it’s backlog so… quarter, selected just X.X at that

Troy Rudd

quarter, the during Again, looking contracted the place. of the contracts putting of and awards, of So you are in changes some that’s at timing course are between a there backlog. our

impact or there on out our is year-over-year other The been has point thing an to FX that non-Americas I non-U.S. backlog. will

Mike Burke

to while growth the point out growing backlog during you incredible. see organic double-digit year important that it’s to Anna, is pretty had

the I we sight So to and don’t total. still want revenue growth Americas just the lose that fact on of in backlog grew line the XX% and

Anna Kaminskaya

appreciate comments. I your Okay. Thank you.

Operator

comments. We back Burke questions closing have Mike over this turn will now further to I time. at call for the no

Mike Burke

Thank you, operator.

a underscore call we before So conclude wanted to the points. I few just today,

the our taking a to backlog we enterprise. great all, maximize We and of the growth. for we’re for revenue fiscal second, And XXXX free exited proactive foundation also and delivered highest with here First record real wins generated profitability cash ever quarterly flow. steps

markets to in put plans our growth for hone on and our reductions margin G&A a the enhancement. Our focus highest substantial us path

$XXX we’re growth guiding see at growth As our cash, said, capital create long-term earlier. us as XX% industry-leading our our on track I to generating buying accelerated FY mentioned debt. finally, And prudent XXXX, I and our that remain you million through remaining midterm. to value then from we can attractive our for our with And levels, can at the price for through to the growth expect of you record fiscal shareholders reduced share earnings an will of stock. repurchase. our continue EBITDA in we stock the In XXXX, executed guidance market allocation substantial We

our with So last you I the Investor Day you us. in December, and spending seeing look for at annual hour thank to forward

Operator

for and today’s conference. Thank gentlemen. participating. Thank you, you concludes ladies This

may You now disconnect.

AECOM (ACM) 12 Nov 182018 Q4 Earnings call transcript