Q1 2024 AECOM Earnings Call

Operator: Ladies and gentlemen, this is the operator. Today's conference is scheduled to begin momentarily. Until that time, your lines will again be placed on music hold.

Ladies and gentlemen, this is the operator today's conference is scheduled to begin momentarily until that time your lines again will be placed on music hold thank you for your patience.

[music].

Speaker: Thank you for your patience. Good morning, and welcome to AECOM's first 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, and any rebroadcast of this information in whole or part without the prior written permission of AECOM is prohibited.

Good morning, and welcome to the a E com's first quarter 'twenty 'twenty four conference call I would like to inform all participants. This call is being recorded at the request of the H E com.

This broadcast is copyrighted property of eight com and any rebroadcast of this information in whole or part without the prior written permission of E. Com is prohibited as a reminder, E. Com is also Samuel casting this presentation with slides at the investors section at Www.

Speaker: As a reminder, AECOM is also simulcasting this presentation with slides in the instructor section at www.aecom.com. Later, we will conduct a question and answer session. If you have a question, please press star, then the number 1 on your touchtone phone. If you wish to be removed from the queue, please press star 1.

H E Com Dotcom later, we will conduct a question and answer session. If you have a question. Please press Star then the number one on your Touchtone phone if you wish to be removed from the queue. Please press star one I would now like to turn the conference call over to well Gabriel Ski Senior Vice President.

William Gabrielski: I would now like to turn the conference call over to Will Gabrielski, Senior Vice President, Finance, Treasury, and Investor Relations. Please go ahead. Thank you, operator. I would like to direct your attention to the Save Harvest Statement on page 1 of today's presentation. Today's discussion contains forward-looking statements about future business and financial expectations. However, 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.

Finance Treasury and Investor Relations. Please go ahead.

Thank you operator, I would like to direct your attention to the Safe Harbor statement on page one of today's presentation. Today's discussion contains forward looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward looking statements due to various risks and uncertainties, including the 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, unless otherwise noted and you referenced at the segment margins or segment adjusted operating margins were four.

William Gabrielski: We use certain non-GAAP financial measures in our presentation. The appropriate GAAP reconciliations are incorporated into our materials, which are posted on our website. Growth rates are presented on a year-over-year basis, unless otherwise noted.

William Gabrielski: Any references to segment margins or segment-adjusted operating margins will request 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 be focused on continuing operations. Our discussion excludes the results of the AECOM capital business, which we announced our intended exit from last year.

The performance for the Americas and international segments, when discussing revenue and revenue growth, we will refer to net service revenue or MSR, which is defined as revenue excluding pass through revenue and its armed backlog growth rates are presented on a constant currency basis, unless otherwise noted today's remarks will focus on continuing operations our discussion excluded the results of the <unk>.

<unk> business, which we announced our intent to exit from last year during the quarter based on current market conditions, we incurred a $29 million after tax adjustment to the carrying value of our investments. We continue to expect positive cash recovery as we exited our investments on today's call Troy Rudd, Our Chief Executive Officer will review, our key accomplishments our strategy and our outlook for the business.

William Gabrielski: During the quarter, based on current market conditions, we incurred a $29 million after-tax adjustment to the carrying value of our investments. We continue to expect positive cash recovery as we exit our investments. On today's call, Troy Rudd, our Chief Executive Officer, will review our key accomplishments, our strategy, and our outlook for the business. Laura Polony, our President, will discuss key operational successes and priorities. And Garth 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.

Laura Polonia, our president will discuss key operational successes and priorities and golf Kapoor, 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 thank you all for joining us our first quarter performance exceeded our expectations and I'm very proud of how the organization is delivering on our key priorities.

Troy Rudd: Thank you all, and thank you all for joining us. Our first quarter performance exceeded our expectations, and I'm very proud of how the organization is delivering on our key priorities. We are establishing ourselves as a trusted infrastructure consulting firm at a time when funding is accelerating at an unprecedented pace across our market. As a professional services organization, our people and their passion to deliver a better world create the competitive advantage we bring to our clients. It is through their unrivaled technical expertise and our collaborative culture that we can certainly win at a high rate and distinguish ourselves from the competition. To that point, I am also pleased to report that we were recently recognized as one of Fortune's World's Most Admired Companies for the 10th consecutive year.

We've established ourselves as the trusted infrastructure consulting firm at a time when funding is accelerating at an unprecedented pace across our markets.

As a professional services organization, our people and their passion to deliver a better world creates a competitive advantage, we bring to our clients. It is through their unrivaled technical expertise and our collaborative culture that we consistently win at a high rate and distinguish ourselves from the competition to that point I'm also pleased to report that we were recently recognized.

Ignite as one of Fortune's world's most admired companies for the 10th consecutive year. In addition, our employee satisfaction scores remain at an all time high and employee retention means well ahead of both internal and industry benchmarks, which is significantly better than our pre COVID-19 levels.

Troy Rudd: In addition, our employee satisfaction scores remain at an all-time high, and employee retention rates are well ahead of both internal and industry benchmarks, which is significantly better than our pre-COVID levels. Our headcount also continues to increase organically across our largest markets, demonstrating the health and strength of our workforce and business. These outcomes demonstrate the value we realize when we consistently invest in our teams through technical and leadership development and the positive benefits to recruiting and retention from winning marquee projects globally. 34th For the quarter, Organic MSR in the design business increased by 9% in the Americas and 8% overall. Growth was also especially strong in our global water and transportation markets. The segment-adjusted operating margin increased by 100 basis points to 15%, which is a new first-quarter high.

Our head Count also continues to increase organically across our largest markets demonstrating the health and strength of our workforce and business. These outcomes demonstrate the value we realized when we consistently invest in our teams through technical and leadership development and the positive benefits to recruiting and retention for many marquee projects globally.

Turning to our financial performance for the quarter.

Organic MSR in the design business increased by 9% in the Americas and 8% overall.

Growth was also especially strong in our global water and transportation markets.

The segment adjusted operating margin increased by 100 basis points to 15%, which is a new first quarter high. This performance reflects the high returns we deliver on our organic growth and our commitment to efficient delivery as a result, adjusted EBITDA and adjusted EPS increased by 14% and 25% respectively.

Troy Rudd: This performance reflects the high returns we deliver on organic growth and our commitment to efficient delivery. As a result, adjusted EBITDA and adjusted EPS increased by 14% and 25%, respectively, which puts us firmly on track to deliver on our full-year guidance. During the quarter, we continue to execute on a returns-focused capital allocation policy. We had free cash flow of $87 million, and we returned nearly $100 million to repurchases and dividends. In addition, in November, our board approved an increase to the share repurchase authorization to $1 billion, and our January dividend payment reflected a 22% increase in our quarterly dividend program.

Which puts us firmly on track to deliver on our full year guidance.

During the quarter, we continue to execute on our returns focused capital allocation policy free.

Free cash flow was $87 million, and we returned nearly $100 million through repurchases and dividends in.

In addition in November our board approved an increase to the share repurchase authorization to $1 billion and our January dividend payment reflected a 22% increase in our quarterly dividend program.

Troy Rudd: Supporting future organic growth, our design backlog hit a new record high, and our pipeline continued to expand, reflecting the strength of our end markets and the continued expansion of our addressable markets through our Day 1, Day 2, Day 3 strategies. To that point, our program management pipeline remains at an all-time high, which is consistent with our long-term aspiration for program management and advisory services to represent 50% of our revenue. We are encouraged by our clients' investment plans, the growth of which is apparent in our record pipeline of pursuits. Even more encouragingly, growth is accelerating in the earlier stages of our pipeline, which aligns well with our expectation for an extended period of elevated growth and opportunity. Please turn to the next slide.

Supporting future organic growth, our design backlog hit a new record high and our pipeline continues to expand reflecting the strength of our end markets and the continued expansion of our addressable market through our day one day two day three strategy.

To that point, our program management pipeline remains at an all time high which is consistent with our long term aspiration for program management and advisory to represent 50% of our revenue. We are encouraged by our clients' investment plans the growth of which is apparent in our record pipeline of pursuits, even more encouragingly growth has accelerated.

In the earlier stages of our pipeline, which aligns well with our expectation for an extended period of elevated growth and opportunity.

Please turn to the next slide.

Our strong start to the year and consistently strong execution as a result of our thinking that globally strategy, which we discussed in detail at our Investor day in December our will further discuss our strategy is delivering results across our business, but before that I'd like to highlight a few notable trends first the funding outlook at our core markets is never.

Troy Rudd: Our strong start to the year and consistently strong execution is a result of our Think and Act Globally strategy, which we described in detail at our Investor Day in December. Lara will further discuss how our strategy is delivering results across our business, but before that, I'd like to highlight a few notable trends. First, the funding outlook in our core markets has never been stronger. In the Americas, IITA's funding is accelerating, as evidenced by another milestone program management win for Amtrak's subquadrant bridge replacement project, which will improve operations on one of the busiest rail corridors in the U.S. Additionally, state and local budgets remain strong, and our private sector clients are investing to reshore capacity and adapt to water and energy transition In Canada, large transit projects are advancing against a backdrop of continued national and provincial investment, and water and mining markets also remain robust. Other international markets are similarly strong. In the UK, growth in the water market is set to accelerate from the substantially expected AMP-A funding.

Been stronger in the Americas I J funding is accelerating as evidenced by another milestone program management win for Amtrak's Susquehanna Bridge replacement project, which will improve operations on one of the busiest rail corridors in the U S.

Additionally, state and local budgets remained strong.

Private sector clients are investing to re short capacity and adapt to water and energy transition impacts and.

In Canada.

Large transit projects are advancing against a backdrop of continued national and provincial investment and water and mining markets also remain robust.

Other international markets are similarly strong in the U K growth in the water market is set to accelerate from the substantially expected amp aid funding and in Australia, we want to substantial water projects in the quarter that reflect the continued focus amongst our clients on water capacity expansion and achieving net zero ambitions.

Troy Rudd: And in Australia, we want to deliver two substantial water projects in the quarter that reflect a continued focus amongst our clients on water capacity expansion and achieving their net zero ambitions. Second, investments in sustainability, resilience, and energy transition are expanding rapidly, which is creating new opportunities for which we are ideally suited. Today, more than one trillion dollars is spent annually on the energy transition alone, and this is expected to double by the year 2030. As a result, projects are increasing in size and complexity, and clients are seeking more holistic, programmatic solutions to create execution certainty. For instance, we are helping the New York City Department of Environmental Protection achieve its 80% greenhouse gas reduction goal. Water infrastructure accounts for nearly 15% of the city's emissions, and reducing water's emissions is a key element to their plan.

Second investments in sustainability resilience in energy transition are expanding rapidly, which is creating new opportunities for which we are ideally suited.

Today more than one trillion dollars is spent annually on energy transition alone and this is expected to double by the year 2030. As a result projects are increasing in size and complexity and clients are seeking more holistic programmatic solutions to create execution certainty.

For instance, we're helping in New York City Department of Environmental protection achieved their 80% greenhouse gas reduction goal water infrastructure accounts for nearly 15% of the city's emissions and reducing waters emission is a key element to their plan.

Nearly every market and clients. We serve is working to address a similar challenge, which is evidenced on a record pipeline.

Troy Rudd: Nearly every market and client we serve is working to address a similar challenge, which is evident in our record pipeline. Third, we continue to gain market share organically by winning at a high rate while bidding record levels of work. Our share of $25 million or greater wins represents more than one-third of our wins in the past 12 months, and our overall win rate has remained at the historically high 50% mark. Finally, we are successfully investing to build highly complementary revenue streams that pair well with our strong domain expertise and high credibility with clients. A great example of digital consulting, we are helping clients with their digital journeys in markets such as water and transportation. Our recent selection on the UK's Intelligent Automation Framework for the National Health Service showcases our advantages.

Third we continue to gain market share organically by winning at a high rate while bidding record levels of work our share of <unk> $25 million of greater wins represents more than one third of our wins in the past 12 months and our overall win rate remained at historically high 50% Mark.

Finally, we are successfully investing to build highly complementary revenue streams that pair well with our strong domain expertise and high credibility with clients.

A great example of digital consulting we are helping clients with their digital journeys in markets, such as water and transportation.

Our recent selection on the UK as intelligent automation framework for the National Health service showcases our advantage.

Troy Rudd: ACOM was the only infrastructure firm selected amongst a field of traditional IT and management consulting firms, demonstrating the enhanced value proposition we bring to our infrastructure clients on their IT journeys. This is a multi-billion dollar market and a substantial growth opportunity. Importantly, as we look ahead, momentum in the business is strong, and the overall funding environment is robust. As such, we are affirming our fiscal 2024 guidance, which includes an expectation of 20% adjusted EPS growth resulting from high margin and high return organic growth. Cat, we'll turn the call over to Lara.

<unk> was the only infrastructure firm selected amongst the field of traditional it and management consulting firms demonstrating the enhanced value proposition, we bring to our infrastructure clients and their Iot journeys.

This is a multibillion dollar market and a substantial growth opportunity.

Importantly, as we look ahead momentum in the business is strong and the overall funding environment is robust as such we are affirming our fiscal 2024 guidance, which includes an expectation for 20% adjusted EPS growth, resulting from high margin and high returning organic.

Growth.

That I will turn the call over to Laura.

Lara: Thanks, Troy. Please turn to the next slide. Our teams are energised by our strong start to the year, including our continued high win rate, backlog, pipeline, and the momentum in our market. Key to our success is our client-focused, innovative, and collaborative culture. We engage early and often with clients to fully understand their needs and strategic priorities, and by collaborating globally, we are able to holistically address their needs by bringing the best of our technical, advisory, digital, and program management experts to each client. Let's look at two success stories that exemplify what we mean by winning what matters organically.

Thanks, Troy, Please turn to the next slide.

Our teams are energized by our strong start to the year, including our continued high win rate backlog pipeline and the momentum in our markets.

<unk> success is our client focused innovative and collaborative culture, we are engaging early and often with clients to fully understand their needs and strategic priorities and by collaborating globally. We are able to holistically address their needs by bringing the best of our technical advisory digital and program management exits to each client.

Let's look at two success stories that exemplify what we mean by winning what Matt is organically first we have gained significant market share with FEMA, having won several of the most significant contracts over the past few years.

Lara: First, we have gained significant market share with FEMA, having won several of their most significant contracts over the past few years. This was highlighted by our selection last month to support its largest public assistance grant program in its most active zone, the Atlantic, that covers disaster recovery efforts across the North East to the Caribbean. This win, combined with our existing Consolidated Resource Center and flood mapping contracts, positions us for the first time as the leader across FEMA's critical missions of preparedness, mitigation, response, and recovery at a time when the stakes have never been higher. Importantly, these successes exemplify the strength of our teams and the benefits of collaboration across our regions and business lines. Second, our global leadership in transit has been on full display in Canada, where we have won large roles on several key projects over the past year.

This was highlighted by our selection last month to support its largest public assistance program in its most active the Atlantic because disaster recovery efforts across the north face to the Caribbean. This.

This when combined with our existing consolidated resource center and flood mapping contracts positions us for the first time as the leader in cross famous critical missions and preparedness mitigation response and recovery at a time when the stakes have never been higher.

Importantly, these successes exemplifies the strength of our teams and the benefits of collaboration across our regions and business lines.

Our global leadership in transit has been on full display in Canada, where we have one large roles on several key projects over the past year. As a result, we have delivered double digit organic MSR growth a one four book to burn ratio and have a record backlog for our Canadian business.

Lara: As a result, we've delivered double-digit organic NSR growth, a 1.4 book-to-burn ratio, and a record backlog for our Canadian business. Our high win rate is enabled by several factors that underpin our competitive advantage. First, we have leading transit and rail system capabilities. Second, we have a strong local presence and great relationships and track records with our clients. Third, our program management expertise is distinguishing us from both traditional design firms and program management firms.

High win rate is enabled by several factors that underpin our competitive advantage first we have leading transit and rail system capabilities second we have a strong local presence and great relationships and track records with our clients.

Third our program management expertise is distinguishing us against both traditional design firms and program management.

Fourth we have built strong partnerships that best position us for commercial success.

Lara: Fourth, we've built strong partnerships that best position us for commercial success. Finally, our scale enables us to draw on our global expertise and to augment local capabilities to create more efficient delivery for our clients. Our growth in FEMA and in the Canadian transit Market is emblematic of the strength of our platform and the power of our strategy. We position early, advise, and bring the full AECOM suite of capability from across the globe to our clients. As a result, we have created an unrivaled value proposition for our clients. These successes aren't unique to us.

Finally, our scale and I will have to draw on our global expertise and to augment local capabilities to create more efficient delivery for our clients.

With FEMA and the Canadian transit market is emblematic as the strength of our platform and the power of our strategy, we positioned Ellie advise and bring the full E comm slate of capabilities from across the globe to our clients.

As a result, we have created an unrivaled value proposition for our clients.

These successes are unique for us we are delivering consistently strong growth and capitalizing on accelerating trends across our markets for.

Lara: We are delivering consistently strong growth and capitalizing on accelerating trends across our markets. For instance, opportunities for lead pipe replacement are expanding, supported by IAJA funding, state and local investment, and the prospects of expanded federal support from the EPA's proposed lead and copper rules. We were an early mover in this market, including our ongoing support for Denver Water's Accelerated Lead Service Line Replacement Program, as just one example. On this program, we brought both our program management and digital capabilities to bear, including developing and deploying an AI-enabled tool that enabled our teams to double the amount of lead pipes identified in Denver's hotspots. Ultimately, this reduced costs and accelerated service line replacement.

For instance, the opportunities for lead pipe replacement are expanding supported by IHA funding state and local investment and the prospects of expanded federal support from the API proposed lead and copper rule. We were an early mover in this market, including our ongoing support the Denver orders accelerated lead service line replacement program as <unk>.

Just one example on this program, we bought by that program management, and digital capabilities to bear, including developing and deploy an AI enabled tool that enabled our teams to double the amount of lead pipe identified in Denver's hotspot.

Ultimately this reduced cost and accelerated service line replacement.

We expect this market to accelerate from here.

Lara: We expect this market to accelerate from here. Another example is big modernization, where investments are increasing, and our pipeline has expanded to nearly $1 billion. This growth is driven by the additional capacity required to facilitate ongoing electrification and renewable energy generation capacity growth.

Another example is grid modernization, where investments are increasing and our pipeline has expanded to nearly $1 billion. This.

This growth is driven by the additional capacity required to facilitate ongoing electrification and renewable energy generation capacity growth.

Lara: Clients are seeking programmatic support and digital innovation to deliver projects on schedule and within budget, which plays right to our strengths, as demonstrated by our several notable wins in this market over the past year. Finally, our leadership position in the tunneling market remains a competitive differentiator for large and complex transportation and water programs. Our win on the two-mile-deep Kensico Water Conveyance Tunnel in New York City demonstrates our ability to deliver on the most complex and critical projects in the world. Additionally, our luxury transportation wins in the quarter were defined by both our tunneling and program management expertise. Taken together, across each of our markets, the strength of our strategy and our technical expertise is differentiating us and positioning us well for continued strong growth in the years ahead. Thanks, Laura.

Lyons is taking programmatic support and digital innovation to deliver projects on schedule and within budget, which plays right to our strength as demonstrated by our several notable wins in this market over the past year finally, our leadership position in the tunneling market remains a competitive differentiator on large and complex transportation and water programs.

Alwyn on the two mile deep cancer co water conveyance tunnel in New York City demonstrates our ability to deliver on the most complex and critical projects in the world. Additionally, this transportation wins in the quarter were defined by both at tunneling and program management expertise.

Taken together across each of our markets the strength of our strategy and our technical expertise is differentiating us and positioning us well for continued strong growth in the years ahead.

With that I will turn the call over to go.

Thanks, Laura Please turn to the next slide.

Gail: Please turn to the next slide. Our first quarter results exceeded our expectations, highlighted by continued strong organic NFR growth, a record first quarter margin, double-digit earnings growth, and strong free cash flow. We are really pleased to start the year with such strong, Our backlog in nearly every market is at an all-time high, and our pipeline is at a record level. We are realizing both the benefits of our organic growth at higher incremental margins and the investments we've made to deliver our work more efficiently, including a shift in our headcount, with digital and program management representing the fastest-growing areas of headcount increases across the country. As a result, innovation is accelerating, and we are bringing new solutions to our clients that further enhance our advantage. For instance, our Fund Navigator tool has been utilized by clients to position for and successfully run funding from IIHA programs, and we're expanding these successes to help our clients deliver on these projects through our Day 1, Day 2, and Day 3 capabilities. All of this strengthens our confidence for the future. Please turn to the next slide.

Our first quarter results exceeded our expectations highlighted by continued strong organic MSR growth a record first quarter margin double digit earnings growth and strong free cash flow.

We are really pleased to start the year with such strong momentum are.

Our backlog in nearly every market is that an all time high and our pipeline is at record levels.

We are realizing both the benefits of our organic growth at higher incremental margins and the investments we've made to deliver our work more efficiently, including a shift in our head count with digital and program management, representing the fastest growing areas of head count increases across the company.

As a result innovation is accelerating and we are bringing new solutions to our clients that further enhance our advantage.

For instance, our navigator tool has been utilized by clients to position for and successfully when funding from IHA programs and we're expanding the successes to help our clients deliver on these projects through our day, one day, two and day three capabilities.

All of this strengthens our confidence into the future. Please turn to the next slide.

Speaker: Turning to our results in more detail, organic NSR in America's design business increased by 9%, led by growth in water, transportation, and program management. Our adjusted operating margin in the Americas expanded to 18.3%, which was a new first quarter high.

Turning to our results in more detail.

Organic MSR in the Americas design business increased by 9% led by growth in water transportation and program management.

Our adjusted operating margin in the Americas expanded to 18, 3%, which was a new first quarter high.

Speaker: Our backlog in the design business is at a record level and includes 23% growth in contracted backlog, reflecting our high win rate and focus on winning what matters to expand our long-term earnings power. I should note that our construction management backlog declined due to our decision to remove two projects from the awarded backlog where the final terms and conditions were inconsistent with our RISC framework, which did not materially impact our profit in the backlog given the high pass-through revenue in this business. Please turn to the next slide.

Our backlog in the design business is at a record level and included 23% growth in contracted backlog, reflecting our high win rate and focus on winning what matters to expand our long term earnings power.

I should note that our construction management backlog declined due to our decision to remove two projects from awarded backlog, where the final terms and conditions were inconsistent with our risk framework, which did not materially impact our profit in backlog given the high pass through revenue in this business.

Please turn to the next slide.

Speaker: Organic MSR growth in the international segment was 8%, driven by growth in our highest returning markets. This is reflected in 230 basis points of margin expansion in the quarter to 10.6%. Further, improvement in our international margins will continue to be a key driver of our enterprise-wide margin extension goals. That margin also increased across all our regions in the quarter and positions us for continued strong growth in the year. Please turn to the next slide.

Organic MSR growth in the international segment was 8% driven by growth in our highest returning markets. This is reflected in 230 basis points of margin expansion in the quarter to 10, 6%.

Further improvement in our international margins will continue to be a key driver of our enterprise wide margin expansion goals.

Backlog also increased across all our regions in the quarter and positions us for continued strong growth in the year. Please.

Please turn to the next slide.

Speaker: We had a strong start to the year on cash flow with free cash flow of $87 million. This enabled a return of nearly $100 million to shareholders in the quarter. As Troy noted, the board of directors increased our repurchase authorization to $1 billion in November, and our quarterly dividend payment increased by 22% beginning with our January payment. We remain committed to our disciplined, returns-focused capital allocation policy. We continue to expect at least 100% conversion of adjusted net income to free cash flow for the full year, which will support ongoing dividends and share repurchase. Importantly, our balance sheet remains strong. Both S&P and Moody's upgraded our credit ratings over the past few months, and we are operating with low leverage and cost adjustments. Please turn to the next slide.

We had a strong start to the year on cash flow with free cash flow of $87 million.

This enabled the return of nearly $100 million to shareholders in the quarter as Troy noted the board of directors increased our repurchase authorization to $1 billion in November and our quarterly dividend payment increased by 22% beginning with our January repayment, we remain committed to our disciplined returns focused capital allocation.

Policy.

We continue to expect at least 100% conversion of adjusted net income to free cash flow for the full year, which will support ongoing dividend and share repurchases importantly, our balance sheet remains strong both S&P and Moody's upgraded our credit ratings over the past few months and we are operating with low leverage.

Cost of that certainty.

Please turn to the next slide.

With our accomplishments in the quarter and a strong start to the year, we reaffirmed our guidance across all financial metrics for fiscal 2024.

Speaker: With our accomplishments in the quarter and the strong start to the year, we've reaffirmed our guidance across all financial metrics for fiscal 2024. This includes our expectations for 13% and 20% adjusted EBITDA and adjusted EPS growth, enabled by our expectations for 8 to 10% organic MSR growth and 90 basis points of margin expansion to a new record. I will continue to note that our adjusted EPS guidance only incorporates the benefit of repurchases completed to date, even though it is our intent to continue repurchasing stock over the course of the year. For modeling purposes, we also expect our second and third quarter tax rates to be in the high 20s, consistent with the phasing we experienced last year.

This includes our expectations for 13% and 20% adjusted EBITDA and adjusted EPS growth enabled by our expectations for 8% to 10% organic MSR growth and 90 basis points of margin expansion to a new record.

I will continue to note that our adjusted EPS guidance only incorporates the benefit of repurchases completed to date, even though it is our intent to continue repurchasing stock over the course of the year.

For modeling purposes, we also expect our second and third quarter tax rates to be in the high 20% consistent with the phasing we've experienced last year with that operator, we are ready for questions.

Operator: With that, operator, we are ready for questions. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. To withdraw your question, again, press star 1.

As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.

To withdraw your question again press Star one.

Michael Feniger: Your first question comes from the line of Michael Feniger, from Bank of America. Please go ahead. Yeah, thanks for taking my question. Hey guys, there will be a focus on the overall backlog being down. I'm just curious about the gross profit in the backlog. So the overall backlog is down. You discussed kind of the moving pieces of construction management, design up. Maybe you can help us with with that overall figure down. What does it actually look like when we think of the gross profit in the backlog? I'm trying. Yeah, good morning. Thanks for the question. And I'm going to let Gar walk you through that. Yeah, thanks, Troy. Morning, Michael.

Your first question comes from the line of Michael Feniger.

From Bank of America. Please go ahead.

Yes, thanks for taking my question.

There will be a focus on the overall backlog being down I'm just curious about the gross profit in the backlog. So the overall backlog is down.

Speaker Change: Discuss kind of the moving pieces with construction management design up maybe.

Maybe you can help us with that overall figure down what does that actually look like when you think of the gross profit from the backlog trending.

Yeah. Good morning, Thanks for the question and I'm going to let.

Car walk you through that.

Thanks, Roy Good morning, Michael.

So in regards to the overall backlog trajectory if you recall one of the things.

Speaker: So in regards to the overall backlog trajectory, if you recall, one of the things we have done over the last couple of years, including our most recent Investor Day, was continue to highlight where the profitability lies in our. Particularly, BCS represents 94% of our NSR, and the thin percentage in probability, the residual being in CMBIS. And what you see overall in the backlog, even though it's a 3% decline when you combine both of The total backlog decreased 3%, but the total backlog possibility increased 9%. Again, highlighting why we continue to emphasize... The core of our business being design and the profitability in it. Now, specific to the backlogs, I just want to comment very quickly.

We have done over the last couple of years, including our most recent investor day, which continue to highlight where the profitability lies in our businesses, particularly Dcs represents 94% of our MSR and the same percentage in profitability the residual being in the <unk> business.

And what you see overall in the backlog, even though it's a 3% decline when you combined both of them, but when you separate the design backlog increased 9%.

In the quarter for us.

The total backlog decreased 3%, but the total backlog profitability increased 9% again, highlighting why we've continued to emphasize.

The core of our business being design and the profitability unit now specific to the backlog cm I just wanted to comment very quickly, we actually had over $1 billion of wins in the current quarter and our cm business and consistent with our IR day, where we highlighted one of our foundational opt.

Speaker: We actually have over $1 billion in wins in the current quarter in our CMQ, and consistent with our IR date, where we highlighted one of our foundational operating principles is risk management. This was the perfect example in the current quarter in our CM business for backlog, because what you saw were two developer projects on commercial sites, high-floor construction, where the developers wanted to pass incremental risks to us after the project had been awarded, but before it had been contracted, and we just said no, because, as we said, We're always going to make investments that are towards the highest and best. We don't have to change work because of the diversification But mind you, commercial real estate in the CM business represents less than two and a half percent of our total NSR.

<unk> principals is risk management.

This was the perfect example, in the current quarter in RCM business for backlog, because what you saw were to developer projects.

On commercial side Hi.

Hi floor construction, where the developers wanted to pass incremental risk to us. After the project had been awarded but before it had been contracted and we just said no because as we've said.

We're always going to make investments that are towards the highest and best use.

We're all shareholders and to create profitability.

We don't have to we don't have to chase work because of the diversification strategy we've employed in CGM.

Or a third of our backlog is in sports third in aviation hospitality and third another including commercial real estate, but mind you commercial real estate in the <unk> business represents less than two 5% of our total MSR. So there is no reason for us to deviate from our returns focused strategy and Theres No reason for us.

Speaker: So there's no reason for us to deviate from our returns-focused strategy, and we're going to continue to do that. And there's no reason for us to take on onerous risk because all of our end markets, especially in our design business, shown through our backlog growth, profitability growth, are extremely robust, and a high level of fit activity that's going on globally. Makes sense, and just my follow-up question, you guys kind of flag, earlier stages of the pipeline are increasing, and maybe that's a lead indicator. And I just wanted to ask, because You kind of lose momentum.

To take an onerous risk because all of our end markets, especially in our design business shown through our backlog growth profitability growth are extremely robust and a high level level of bidding activity, that's going on globally for us.

Makes sense and just my follow up you guys kind of flag.

Early earlier stages of the pipeline are increasing.

And maybe that Thats, a lead indicator and I just wanted to ask is there are some concerns that maybe the stimulus dollars and the project pipeline may be peaks out in 'twenty four.

You kind of lose momentum what are these early discussions that you are seeing the pipeline what does that kind of tell you about the visibility and sustainability, maybe we can start to even think about 'twenty five and beyond even as we're facing a year.

Speaker: What are these early discussions that you're seeing this type of? What does that tell you about visibility and sustainability? Maybe we should start to even think about 2025 and beyond, even as we're facing a year of election uncertainty. So to help us contextualize what those early discussions kind of tell us about the lead in terms of how we kind of think about the business and the project pipeline, even as we look beyond 2024. Thanks, everyone.

That's an uncertainty so just help us contextualize what those early discussions kind of tell you about.

The lead in terms of how we kind of think about the business and the project pipeline, even as we look beyond 'twenty four thanks, everyone.

Yes.

Troy Rudd: Yeah. So, we have actually seen our early, again, I've made a prepared comment, we've seen our early stage pipeline continue to improve, and that's not isolated to the U.S., but your comments are focused on the U.S. We are seeing the early stage pipeline continue to grow year over year, and over the past few years, we've continued to see improvement in that trajectory. So for us, what that means is those projects will come to market sometime in the next six months or possibly 18 months for award, and then we'll start work on them. So, you know, us seeing the pipeline continue to grow means that we have great longer-term visibility for growth in the business, and particularly in our U.S. infrastructure market. When you look around the world, we see something very similar.

So we have actually seen our earliest again has made our prepared comments we have seen our early stage pipeline continued to improve.

And.

That is not isolated to the U S. But your comments were focused on the U S.

We are seeing in the early stage pipeline continued to grow year over year and over the past few years. We've continued to continue to see an improvement in that trajectory. So for us what that means is those projects will come to market sometime in the next six months or possibly 18 months.

For award and then we'll start work on them so.

I've seen the pipeline continue to grow means that we have great.

Longer term visibility to growth in the business and particularly in our U S infrastructure market.

When we look around the world, we see something very similar we see growth in our pipeline and our continued growth in those longer term investments infrastructure.

Troy Rudd: We see a growth in our pipeline and a continued growth in those long-term investments in infrastructure. As with, again, as with everything, there's always a few opportunities, or there's always a few markets where there are some difficulties. I think everyone is aware, and as Gar pointed out, certainly in, you know, commercial office, and I'll call it, tall buildings, in North America, we see a slowdown.

As with again as with everything there is always a few opportunity or there is always a few markets where in factors. Some difficulty is.

I think everyone is aware and as guard pointed out certainly in.

Commercial office and I'll call it in tall buildings.

In North America, we see a slowdown.

Troy Rudd: We also see very strong opportunities in the UK, but within our transportation business, we actually see a slowing of investment in large transportation projects. And we don't think that will pick up until after there is an election and perhaps for a few quarters after that. But the ambitions in the UK are still the same. There's still a need for large long-term investments in infrastructure. But we think that there's a pause for the moment, although perhaps there will be no change of government.

We also see it in the U K very strong opportunities, but within our transportation business, we actually see a slowing of investment in large transportation projects and we don't think that will pick up until after there is an election and perhaps for a few quarters after that but the.

The ambitions in the UK are still the same there is still a need for large long term investments infrastructure, but we think that there is a pause for a moment, while the perhaps might be a change of government.

Troy Rudd: But again, I would... Come back to the fact that around the world, we are seeing very positive momentum, and we think it will build for the long term for us in terms of our pipeline. Your next question comes from the line of Sabahat Khan from RBC Capital Markets. Go ahead. Thanks, Greg. Thanks, and good morning.

But again I would just come back to the fact that around the world.

Speaker Change: We are seeing very positive momentum and we think it will build for the long sort of long term for us in terms of our pipeline.

Your next question comes from the line of <unk> Khan from RBC capital markets. Please go ahead.

Sabahat Khan: Maybe shifting a bit over to the margin side, can you really talk through the puts and takes? I know you tried a little bit of color earlier, but just kind of, you know, America's segment was maybe a little bit softer to our expectations, but international came in much better. Maybe just the puts and the takes on the two segments and your expectations for the rest of the year across the two geographical segments. Hey, Sabah, this is Garib.

Okay, great. Thanks, and good morning, maybe just shifting a bit over to the margin side.

Can you maybe talk through the puts and takes on a credit a little bit of color earlier, but just kind of Americas segment.

Maybe a little bit soft relative to our expectations on international came in much better maybe just the puts and takes on the two segments and your expectations for the rest of the year.

Across the two geographical segments.

Hey, Saba did starve I'll take that.

Speaker: I'll take back a warning to you as well. On the margin side, it was definitely ahead of our expectations of what we had laid out. And it's, again, our continued focus on making sure we deliver on our commitment. I'll expand what I mean by that.

Good morning to you as well.

It was definitely ahead of our expectations of what we had laid out.

And it's again continued focus on.

On making sure we deliver on our commitments I'll expand what I mean by that so.

Speaker: So, you know, the key things when we operate, we make sure, as we've said over and over again, we're focused, not trying to be everything to everybody everywhere. And that's, especially when you look at our international business, it's a country we have exited because we want to focus on the key geographies where we are the premier professional service provider of choice by our clients to leverage our technical expertise and that have the best growth opportunities, as Troy just laid out in the previous response. Now, we also make very sound decisions that are returns-focused and return-on-investment-focused. An example of that is the restructuring that we took in Q4 and are also executing those efficiency initiatives in the current year. Those margins are what you're seeing in international business.

The key things when we operate we make sure as we've said over and over again, we're focused not trying to be everything to everybody everywhere and Thats you wouldn't especially when you look at our international business is the countries we have exited.

Because we want to focus on key geographies, where we are the premier professional service provider of choice by our clients to leverage our technical expertise and that have the best growth opportunities as Troy just laid out in the previous response.

Now we also make very sound decisions that a returns focused.

Return on investment focus and example of that is the restructuring that we took in Q4 and are also executing those efficiency initiatives.

In the current year.

Those margins are what you are seeing in international Youre seeing also that coming through in Americas, and also allowing us to continue to invest in the business in the Americas with the pipeline the bidding level is at historic levels.

Speaker: You're also seeing that coming through in America and also allowing us to continue to invest in the business in the Americas, where the pipeline, the bidding level is at a historic level, and this is us holding ourselves accountable. It's not restructuring that we just do, but it doesn't just go into ether. You see it in our results, with a 90 percent depth increase year over year we just saw in Q1, and what you should be expecting We expect and are confident now, with Q1 behind us, to deliver on our margin target. And again, just on BC, on our Americas business, I'm gonna make the same comment again as I just said a few seconds earlier, which is that margins are expanding through our initiatives of providing the right level of technical expertise, which allows us to put the right commercial pricing structure in place. But more importantly, it allows us to focus on BD to invest in our business development to continue to invest in the future because the pipeline is... It's quite strong and robust enough for us.

And this is us holding ourselves accountable that is not restructuring that we just do but it doesn't just go into either you see it in our results from the 90 bps increase year over year. We just saw in Q1, and what you should be expecting as we continue.

Through the remaining three quarters into FY 'twenty four is consistent phasing in performance, what you've seen us from before we expect and are confident now with Q1 behind us to deliver on our margin targets.

And again, just on Dcs on our Americas business I'm going to make the same comment again as I just said a few seconds earlier, which is the margins are expanding through our initiatives of providing the right level of technical expertise, which allows us to bring the right commercial pricing structure in place, but more importantly allows us to focus on.

BD to converse or business development to continue to invest in the future.

Speaker Change: Because the pipeline is as is quite quite strong and robust for us.

Speaker: Alright, great. And then, just, I guess, on the ACAP business, I guess, maybe if you could just remind us what kind of plan there is. I know there's a transition out of it, but maybe just remind us what the plan is over the next little while to sort of transition that or exit that business completely. Sure, absolutely. Now, if you recall, in 10 before 8 and a half, we moved that into health for sale a few quarters ago. And what that basically requires is that it's got to be carried at fair market value of cost or the accounting rules.

Alright, Great and then just I guess on the the ACA AP business.

Maybe you can just remind us what kind of the plan. There is I know there is a transition out of and maybe just remind us what the plan is over the next little while to sort of transition that or exit that business completely.

Sure absolutely now you recall for a cap we move that into held for sale a few quarters ago and would that basically requires us it's got to be carried at fair market value or cost per the accounting rules. So what you saw through was just an accounting entry coming through in the current quarter because the credit markets continue to tighten.

Speaker: So what you saw through was just an accounting entry coming through in the current quarter because the credit markets continue to tighten. But our expectations that we had communicated a few quarters ago on the expected cash flow from this business now being part of non-core, that have not changed. Also, you know, I think it's important to note that there's minimal value left off our direct investment in ACAP on our balance sheet. I believe it's less than $15 million. Nothing has changed in terms of what our strategy was, or what we communicated a few quarters ago. And we continue on the timing, consistent with our expectations to execute on that strategy. Okay, one last quick one.

But our expectation that we had communicated a few quarters ago on the expected cash flow from.

This business now being part of noncore that has not changed.

Also I think it's important to note theres minimal value left off our direct investments and a cap on our balance sheet I believe it's less than $15 million nothing has changed in terms of what our strategy was what we communicated a few quarters ago and we continue on the timing consistent with our expectations to execute on that strategy.

Okay, Great and then just one last quick one.

Speaker: You know, how are you thinking about dealing with the share prices today? How are you thinking about buybacks as we look ahead for the rest of the year? Is there a certain amount that you definitely want to do?

How are you thinking about given where the share prices today, how are you thinking about buybacks as we look ahead for the rest of the year. There are certain amount that you definitely want to do or is there going to be more opportunistic over the next few quarters.

Speaker: Or is it going to be more opportunistic over the next two quarters? So, Sabah, first I should point out that with respect to how we allocate capital, nothing has really changed. And so, again, what we've described in the past, and we'll stick to this, is that we're going to be return-focused in terms of allocating our capital. We will continue to invest in organic growth. It's a little bit different investing in organic growth, as Gar pointed out.

Yes.

So first I'd just point out that with respect to how we allocate capital.

That has really changed.

And so again, what we've described in the past we will stick to this is that we're going to be a returns focused in terms of allocating our capital.

We will continue to invest in organic growth, it's a little bit different invest in organic growth as GARP pointed out that does go through our margin. So.

Speaker: That does go through our margins, so. You know, our margins actually contain a pretty significant investment in the future. Secondly, we believe that we should be returning capital to shareholders, and we've increased the dividend, and as I said in the prepared comments, we've got a board authorization for a billion dollars of repurchases, and we will continue to repurchase our stock. What we said with respect to timing is that we will effectively use our cash flow through the year to buy back our stock. So that might be a way to think about just the timing of it. We don't look at it as being opportunistic.

Our margins actually contained pretty significant investment in the future.

Secondly, we believe that we should be returning capital to shareholders and we've increased the dividend and as I said in the prepared comments.

Speaker Change: We've got a board authorization for $1 billion of repurchases and we will continue to repurchase our stock.

We said with respect to timing is that we will effectively use our cash flow through the year to.

To buyback our stock so that might be a way to think about just the timing of it. We don't we don't look at being opportunistic we look at just doing it consistently over the course of the year.

Speaker: We look at just doing it consistently over the course of time. Great, thanks very much for the call. Thank you. Your next question comes from the line of Andy Kaplowitz from Citigroup. Please go ahead. Good morning, everyone.

Great. Thanks, so much for the color.

Thank you.

Your next question comes from the line of Andy Kaplowitz from Citigroup. Please go ahead.

Good morning, everyone.

Good morning, good evening.

Andrew Kaplowitz: Morning, Troy Rudd, Garth, you beat the Schneeg excluding the lower tax rate by something like 5 cents, and your design backlog is up nicely, as you said, but you need to increase the guide at either end of the range. I know it's early in the year, but is there anything that you've seen that gives you some pause? And then what do you think about EPS cadence and Q2 for the rest of the year? Should it just be some sort of normal seasonality?

Clear.

You beat the street, excluding the lower tax rate by something like <unk> in your design backlog is up nicely as you said, but you can increase the guide at either end of the range I know it's early in the year, but is there anything that you're seeing that gives you. Some pause and then how do you think about EPS cadence in Q2 and for the rest of the year sort of just sort of normal seasonality.

Yes, Andy Thank you for the question and morning to you as well.

Speaker: Yeah, Andy, thank you for the question and good morning to you as well. We did have a very strong first quarter, and it's a valid question, right? Because we have met, indeed, expectations the last four years. But as you would recall, this management team, our mantra is to be brutally conservative, especially in Q1. So we're going to continue to operate with that mantra. Q1 definitely gives us a lot of confidence.

We did have a very strong first quarter and then.

Valid question right, because we have met and beat expectations in the last four years, but as you would recall this management team our mantra is to be prudently conservative, especially in Q1. So we're going to continue to to operate with that mantra Q1 definitely gives us a lot of confidence.

And continuing the trend we have accomplished over the last four years.

Speaker: In continuing the trend we have accomplished over the last four years, and I think from a phasing standpoint, as we've said before, the phasing is going to be consistent with earnings with the historical phasing we have delivered. But there's nothing in the horizon that would give us pause as we continue operating FY24, given the backdrop of how strong our businesses are, including, again, I can't emphasize enough how the robust pipeline and record level of bidding where we're experiencing. Thanks, Sagar. And then, Troy, you need to give us a little more color on end markets within the Americas.

And I think from a phasing standpoint, as we said before the phasing is going to be consistent on earnings.

Our historical facing we have delivered upon but there is nothing in the horizon that would give us pause as we continue to operate in FY 'twenty for given the backdrop of how strong our business are businesses are including again I can't emphasize enough.

Have to be redundant.

How.

We're experiencing in the business.

Thanks for that color and then maybe you could give us a little more color on churn markets within the Americas, you mentioned strength in water and transportation, but didn't really highlight facilities for instance, yet I think it has good datacenter design exposure. So could you elaborate on what you're seeing across all the end markets in the Americas.

Troy Rudd: You mentioned strength in water and transportation, but you didn't really highlight facilities, for instance, yet. I think AECOM has good data centers around exposure, so could you elaborate on what you're seeing across all the end markets in the Americas? Yeah, sure.

Yes sure.

Troy Rudd: The simple answer is that we're seeing strength across all of our markets, including our facilities business. And again within our facilities business, we have shifted our focus over the past three years from what we had done in the past to again some more public infrastructure, and that includes transportation projects. So we see strength across the entire business. But I think there's another important trend to call out, which is that we've actually changed the focus. So that we are now, instead of being a design firm that's exposed to, say, 10% to 15% of a project's duration. Through the expansion of our advisory program management offering, we're now exposed to, say, 30% of the project's spend, but more importantly, we were exposed to, we think, more than 50% of the profitability of the projects. That's given us an opportunity.

Speaker Change: The simple answer is we're seeing strength across all of our end markets.

Including our facilities business and again within our facilities business.

We have shifted our focus over the past three years from what we had done in the past to again to more public infrastructure.

And that includes transportation projects.

So we saw strength across the entire business, but I think theres. Another in portable another important trend to call out which is.

We've actually changed the focus so that we are now instead of being a design firm that's exposed to say, 10% to 15% of our project spend.

So the expansion that are advising program management offering we're now exposed to say, 30% of the project spend but more importantly.

We're exposed to we think more than 50% of the profitability of the projects and so.

That has given us an opportunity so even where there might be some slowness in the market because we are exposed to much greater client spend.

Troy Rudd: So even where there might be some slowness in the market, because we are exposed to much greater client spend, we have the opportunity to support businesses that might even be seeing some slowing in the market. Again, strength across the business, because of healthy markets, but also because of our, you know, increased exposure to client projects and spend, and with respect to cross-programming... Over the course of the last year, on projects that we did that were greater than $50 million in size. We've bid on 11, and we've won all 11.

Have the opportunity to support businesses that might even they might even be seeing some slowing in the market again strength across the business.

Because of healthy markets, but also because of our increased exposure to client projects and spending.

And with respect to product program management.

Over the course of the last year.

On projects that we bid that are greater than $50 million in size.

We've been 11, and we've won all 11.

Troy Rudd: So, again, I think that this speaks to the strength of our program management offering, but it also gives you an example of the opportunity that we see, again, across all of our markets and all of our projects and our agencies. Appreciate the progress. Your next question comes from the line of Esen Gita Jain from KeyBank Capital Markets. Please go ahead.

Speaker Change: So again I think that just speaks to the strength of our program management offering but it also gives you. An example of the opportunity that we see again across all of our all of our markets and all of our projects and our end customers.

I appreciate the color guys.

Thanks again.

Your next question comes from the line of <unk> Jain from Keybanc capital markets. Please go ahead.

Esen Gita Jain: Yes, hi. Thanks for taking my question. Troy, you talked about the UK elections and a little bit of a pause in spending there. Can you give us some color on the U.S. and EU elections, which are also coming up, and whether you think you're seeing a pull-forward of business there, or people are in a wait-and-see mode, maybe? Certainly. So with respect to the US, we are not seeing a change in, as you described, spending patterns or spending habits.

Yes, hi, thanks for taking my question.

You talked about the UK elections, and a little bit of a pause in spending there can you give us color on the U S and the EU elections, which are also coming up and whether you think youre seeing a pull forward of business. There are people in a wait and see mode maybe.

Certainly so with respect to the U S.

We're not seeing.

Speaker Change: A change in as you described and spending patterns are spending habits.

Speaker: There is, first of all, over the last few years, there has been a lot of funding put in place that is long-term and multi-year funding. And that's all supported, again, I think, in a bipartisan way in the United States. So we haven't seen a change in funding or a change in the appetite for our U.S. government clients to invest in infrastructure.

There is first of all over the last few years.

There have been a lot of a lot of funding put in place that is long term and multiyear funding.

Speaker Change: And that's all supported again I think in a ballpark bipartisan way.

In the United States. So we haven't seen a change in funding nor a change in the appetite for our U S government clients to invest in infrastructure with respect to the EU again, I'd just start by saying our exposure to the EU market is quite small.

Speaker: With respect to the EU, again, I just have to say our exposure to the EU market is quite small. If you recall, 90% of our business actually comes from four countries: the U.S., Canada, the U.K., and Australia.

If you recall.

Speaker Change: 90% of our business actually comes from four countries. The U S. Canada, the UK and Australia, So well Europe may be choppy in terms of infrastructure funding.

Speaker: So while Europe may be cutting in terms of infrastructure funding, we just don't see it having a large impact on us. But we still see, again, there are some places across the EU where there is certainly money being put into infrastructure, in particular, water programs. Great, thank you so much.

We just don't see it having a large impact on us, but we still see again there are some places across the EU, where there are certainly money being put in infrastructure.

In particular into water programs.

Great. Thank you so much and if I can ask you. Another one on the project management portfolio, obviously, you've been seeing some phenomenal wins. There can you talk a little bit about the typical pushback that you may be seeing as you take share from incumbents in these projects maybe.

Speaker: And if I can ask you another one on your project management portfolio, obviously, you've been seeing some phenomenal wins there. Can you talk a little bit about the typical pushbacks that you may be seeing as you take share from incumbents in these projects, maybe? Um, well, it's an interesting question.

Okay.

Well, it's an interesting question, we really when we really haven't seen much.

Speaker: We really, We really haven't seen much pushback, as evidenced by our wind rate. I have to say, I think that, you know, there's a large opportunity that was driven a few years ago by our customers. And our customers recognized that with all the funding that was available, and frankly, the complexity and size of these programs, the only way they could advance them was actually having help from someone like us who has the technical ability to understand these complex projects and then has the management ability to deliver them. So, you know, our opportunity was born out of a need from our customers, and then we've just taken advantage of the opportunity to take our skills across the platform and grow them by supplementing them with people from across the industry with those skills.

Much pushback as evidenced by our <unk>.

Win rate.

Aye.

I have to say I think that.

There is a large opportunity that was a long it was driven a few years ago from our customers and our customers recognize that with all of the funding that was available and frankly, the complexity and size of these programs.

That the only way they could advance them was actually having help from someone like US who has the technical ability to understand these complex projects and then has the management ability to deliver them. So.

R.

Our opportunity was born out of a need from our customers and then we've just taken advantage of the opportunity to take our skills across the platform and to grow it by supplementing it with people from across the industry with those skills. So we've built up a really strong impressive core team and I think it's a combination of our skills in that core team and then frankly.

Speaker: So, we've built up a really strong, impressive core team, and I think it's a combination of our skills and that core team, and then, frankly, some of the things we're doing with respect to our digital innovations to make the customer process much more transparent and improve the communication, or think about it as an improved client experience. So, all those things have come together, and we are just not seeing the pushback in the market, as evidenced by our winners. Great, thanks so much.

Some of the things, we're doing with respect to our digital innovations to make the customer process much more transparent and to improve the communication or thinking about it as an improved client experience. So all those things have come together and we're just not seeing the pushback in the market as evidenced by our win rate.

Great. Thanks, so much.

Thank you your next.

Speaker: Your next question comes from the line of Steven Fisher from UBS. Please go ahead. Thanks, good morning. I just wanted to come back to regional growth for a second. I'm curious how you see the relative growth rates overall in the United States versus international over the next several quarters. Which should be growing faster and what would drive that?

Our next question comes from the line of Steven Fisher from UBS. Please go ahead.

Thanks. Good morning, just wanted to come back to the regional growth for a second and just curious how you see the relative growth rates overall in the Americas versus international over the next several quarters.

It should be growing faster than what would drive that.

Steven Fisher: Yeah. Good morning, Steve. Will.

Yes, good morning, Steve.

Well.

We're actually seeing a little bit more momentum in our Americas market in Canada and the U S.

Speaker: We're actually seeing a little bit more momentum in our America's market in Canada and the U.S. than we have seen in the U.S., but not to point out that we're seeing significant, LARGUEEEE, We're actually just seeing more projects come to market because the funding is available, again, across the Americas, Canada and the U.S. And, you know, you can, again, you can see that in The other thing I'll point out is that, you know, you saw this on NSR, our DCS business in America is refactoring internationally during the quarter. That also is helpful because our margins are significantly higher in America than in the U.S. And, as we see, the opportunities accelerate in North America. We also think that this, again, bodes well for the future of the profitability of the country. Great And just a cadence question.

Then we have seen.

In the U S, but again not to point out that we're seeing.

Significant slowing.

<unk> just seen.

More projects come to market because of the finance available again across the Americas, Canada and the U S.

And.

You can again, you can see that in our contracted backlog.

Speaker Change: The other thing I'll point out is as dead.

You saw that our MSR, our Dcs business in the Americas grew faster than the data internationally during the quarter.

That also is helpful. Because our margins are significantly higher in our Americas business in the U S and so as we see.

The opportunities accelerate in North America, we also think that again bodes well for the future of the profitability of the business.

Great and then just a cadence question silver, 7% MSR growth in Q1, and an 8% to 10% below your expectation.

Speaker: So with 7% NSR growth in Q1 and an 8 to 10% four-year expectation, can you give us a sense of how the rest of the year's cadence will play out? Do you think as soon as Q2 we'll start to be sort of towards the upper end of that range? Or do you think, you know, we're sort of like somewhere in that range just for the rest of the year? Yeah, Steve Visgard.

Can you just give us a sense of how the rest of the year's cadence will play out do you think as soon as Q2, we will start to be towards the upper end of that range.

Speaker Change: Or do you think it's sort of like somewhere in that range as the rest of the year.

Art: Yes, Steve This is art.

Speaker: In terms of the annual forecast, that hasn't changed. It's 8 to 10%, and we fully expect to be within that range. In terms of savings and phasing, in Q2, we expect, because there's a smaller number of work, So there's just going to be a shift between Q2 and later quarters and what you and we have historically experienced. We can work with that with you offline.

In terms of the annual forecast that Hasnt changed its 8% to 10% and we fully expect to be within that range in terms of cadence and phasing in Q2, we expect because there is fewer number of work days.

Art: So theres just going to be a shift between Q2 and later quarters than what you and US we have historically experienced and we can work with that with you offline if thats okay.

Sure Thanks very much.

Speaker: Sure. Thanks for having me. Thank you. Your next question comes from the line of Michael Dudas from Vertical Research. Please go ahead. Good morning, ladies and gentlemen. Good morning!

Thank you.

Your next question comes from the line of Michael Dudas from vertical research. Please go ahead.

Good morning, Lara gentlemen.

Good morning, good morning.

Troy thinking about.

Michael S. Dudas: Troy, thank you. Thank you. Is the growth rate there surprising to you one way or the other, and as you look at your 5-8% long-term net revenue growth, I don't know. I don't know.

Public sector versus private just maybe generally you need you can break it down from Memphis International book.

Is the growth rates, there surprised you one way or the other and as you look at your 5% to 8% long term.

Revenue growth.

Art: Panic expectations.

It seems you would be focusing more on public and as that mix going to change a bit and.

Speaker: It seems you'll be focusing more on public, and is that mix going to change a bit? And I guess on top of that, on the CM business... Are you being much more selective? Are you pulling back? Where's the cadence or the pace of what you're doing in that market given the mix and importance? Groves also was out of ACOM.

On top of that on the cm business are you being much more selective are you pulling back.

We'll see.

Art: So the pace of what you're doing in that market given.

The mix of importance of growth elsewhere.

Speaker: Mike, thank you. I'm going to share this with Laura. I'll let her take the first part of your question, and I'll take the second part of your question. Thank you. Yeah, thanks, Michael. So, in terms of that balance in our portfolio, I mean, it remains pretty constant. It's about 60% public and 40% private.

<unk> is a platform.

Mike Thank you I'm going to I'm going to.

Sure this with Laura I'll, let her take the first part of your question then I'll take the second part of your question on <unk>.

Thank you, yes, thanks, Michael.

In terms of that balance in our portfolio it remains pretty constant.

Laura: About 60% public and 40% private we see substantial opportunities in both sectors going forward in line with those ongoing secular trends are long term infrastructure very robust a lot of wins in this first quarter for many of our public transportation clients. Some nice wins in terms of.

Lara: We see substantial opportunities in both sectors going forward in line with those ongoing secular trends. So, long-term infrastructure, very robust, a lot of wins in this first quarter for many of our public transportation clients, some nice wins in terms of the resiliency and sustainability play, signaled by our great win with FEMA, which rounds out the project life cycle work that we're undertaking for them, including water and environmental services. And then in terms of that outlook, obviously, strong opportunities are ahead of us in terms of our market leadership with PFAS, but that's a good example of where those opportunities are actually nicely balanced between public sector clients in, for example, the defense space, but private sector opportunities also in aviation, and the growing opportunities that are going to come up for private industrial clients, where we know there are a lot of longer-term liabilities.

With the resiliency and sustainability play.

Signaled by a great when we find out which rounds out the project lifecycle work that we're undertaking to them water and environmental services and then in terms of that outlook. Obviously strong opportunities ahead of us in terms of our market leadership with <unk>.

That's a good example of where those opportunities are actually nicely balanced between public sector clients. For example in the defense space private sector opportunities also in aviation and the growing opportunities that are going to come up for private industrial clients <unk> done a lot of longer term liability. So that gives you a couple of example.

Lara: So that gives you a couple of examples around how we have a pretty balanced portfolio going forward between public and private. And with respect to CM, I'll, you know, Gar covered a little bit of this, so I'll just, I'll try and leave you with three, what I think are three important points. The first is, you know, construction management, those debookings. We're frankly immaterial to the profit that we had in backlog, and just to give you a sense of the strength of DCF's business and the strength of margins that reside in that business. Seconded.

That's about around how we have a pretty well go ahead.

Balanced portfolio going forward between public and private.

And with respect to CMS.

Again, Gary covered a little bit of this so I'll just I'll try and leave you with three what I think are three important points.

First is is that.

Construction management those deep bookings.

We're frankly immaterial to the profit that we had in backlog and it gives you a sense of the strength of the Dcs business and the strength in margins that reside in that business.

Second as those de bookings.

Troy Rudd: Those debookings were frankly at our discretion. They were places where we had been awarded the work, and the client wanted us to take on a different set of terms and conditions that we weren't comfortable with. So it just gets to the point that we're not going to, you know, again, chase work, perhaps in a market that would be difficult and have some sort of commercial tall buildings environment. And the third thing is... You know, we saw this through our conversations and with our clients. And through our pipeline a number of years ago, we saw that there was going to be a sort of a slowing in tall buildings. And so we made the decision to actually pivot the CM business and start to focus on other kinds of projects and build experiences for the future. And, as Garth pointed out, one-third of our business comes from aviation. If you go back five years ago, we didn't have that same expertise.

Frankly at our discretion.

They were places where we haven't been awarded the work and the client wanted us to take on a different set of terms and conditions that we werent comfortable with so.

It just gets to the point that we're not going to again chase work.

Perhaps in a market that would be difficult and that's sort of the commercial tall buildings environment.

And the third thing is.

We saw this through the conversations with our clients.

And through our pipeline a number of years ago that there was going to be a sort of a slowing in tall buildings and so we made the decision.

Laura: It's actually pivot.

<unk> <unk> business and start to focus on other kinds of projects and build experiences for the future and as Karl pointed out one third of our business comes in or it comes from aviation. If you go back five years ago. We didn't have that same expertise and so we are building experience and frankly world class calls so.

Speaker: And so we are building experience and, frankly, world-class qualifications so that team will be able to pivot to that market in the future, where we see long-term opportunities. And so that's been the focus with CM; we think that business in the future, we're making some good decisions as the business evolves, but we see there being strength in the future, and the business will just look different if you look forward five years. Thank you all. Your next question comes from the line of Adam Thalhimer from Thompson Davis. Please go ahead. Hey, good morning guys. Congratulations on the strong start to fiscal 24. Nice Q1 beat.

That team will be able to pivot to that market in the future, where we see long term opportunity and so that's been a focus with CMS, we think that that business in the future.

Excellent. Thank you Larry Thank you Troy.

Thanks.

Your next question comes from the line of Adam Thalheimer from Thompson Davis. Please go ahead.

Hey, good morning, guys. Congrats on the strong start to fiscal 'twenty four nice Q1 beat.

Adam Robert Thalhimer: I also wanted to ask about the early stages of your project funnel. So, when you look at stage one and two of your pipeline, are there any particular end markets that are contributing to strength? Well, it's sort of as we, as I described a little bit earlier, we are seeing strength across all of our end markets. And so we think about that as an environment. Energy, transportation, water, even our facilities and buildings and places for us. And then across all of that, it's a combination of design work and program management advisory work. And just to see that strength across the entire pipeline in the early stages. But again, as I said, there are some places where it doesn't work. In other words, it's not a perfect world. There are places where there is some slowness in the market, which is pointed out in the UK in transportation and certainly in tall buildings here in North America, where we're exposed. But overall, great. Okay, that's my... Yeah. Oh, sorry.

Thank you I also wanted to ask about the early stages of your project funnel.

So when you look at stage, one and two of your pipeline are there any particular end markets that are contributing the strengths there.

Well, it's sort of as we as I described a little bit earlier, we are seeing strength across.

All of our end markets and so we think about that is as environment energy transportation water, even our <unk> facilities of buildings in places for us.

And then across that it's a combination of design work and program management advisory work so.

Again.

I, just see that strength across the entire pipeline in the early stages, but again as I said there are some places where we are.

It's not a perfect world there are places where there is some slowness in the market, which you pointed out in the UK and transportation and certainly in tall buildings here in North America, where we're exposed.

Okay. Okay, that's much.

Speaker Change: That's my second question.

Yes.

So the weakness that youre seeing in U S tall buildings.

Speaker: So the weakness that you're seeing in U.S. tall buildings... Do you think that will broaden into other sectors, or do you think that the vast majority of your end markets will stay strong while tall buildings go through down? Well, again, I think that if you look at the long-term trends or needs, and again, this sort of goes back to the long-term trends around the need for improved infrastructure, funding is available for it. Secondly, is, you know, there's large investments as infrastructure is being transitioned, and there's funding for it as well. But, you know, you think about the long-term investment in building semiconductor chip capacity here in North America. So those trends are changing.

Do you think that broaden into other sectors or using the vast majority of your end markets will stay strong wells tall buildings goes through a downturn.

Well again, I think that if you look at the long term trends our needs and again this sort of goes back to the long term trends around.

The need for improved infrastructure the funding is available for secondly.

As you know.

There is large investments is this sort of as infrastructure is being transitioned and theres funding for it as well, but think about the long term investment and building semiconductor.

But chip capacity here in North America. So those trends are changing and then the other big trend, which we're seeing all of our activity is in.

Speaker: And then the other big trend, which we're seeing a lot more activity in, is energy transition. There is a lot of long-term investment in energy transition that is taking place. And so we don't see that changing. And again, when we look at, I'll call it again, commercial office markets or mixed-use markets, that's really the private developer market. And I think that's very interest rate sensitive, and that's what's driving it out. But the funding, the need, and the funding across our other markets. Their names lined up well.

Energy transition.

There is a.

Long term investment in energy transition that is taking place and so we just we don't we don't see that changing and again when I when we look at I'll call. It again.

Our commercial office markets are mixed use markets, that's really in the private developer market and I think thats very interest rate sensitive and thats whats driving that outcome.

The funding of the need and the funding across our other markets still remains lined up well and again I'll just make the point about that again are kind of <unk>.

Speaker: And again, I just make the point about that, you know, again, our kind of Commercial Office Market or Commercial Retail Market represents less than a few points of NSR for our entire business. And as I said, we've been actively transitioning away from that work to a more well-funded office. Registered. Thanks for the call.

Commercial office market, our commercial retail market that represents less than a few points of MSR for entire business and as I said, where we're at we've been actively transitioning.

Away from that work to other we're well funded opportunities.

Speaker Change: Understood. Thanks for the color.

Great. Thank you.

Troy Rudd: We have no further questions in our queue at this time. I will now turn the conference over to Troy Rudd, Chief Executive Officer, for closing remarks. Thank you, operator. Again, I want to thank all of our teams for their contributions to a very strong first quarter. We've extended our track record of delivering on our commitments, so thank you to our teams. And I thank you all for joining us today and look forward to talking to you next quarter. Have a good day. This concludes today's conference call. Thank you for your participation, and you may now disconnect.

And we have no further questions in our queue. At this time I will now turn the conference over to Troy Rudd, Chief Executive Officer for closing remarks.

Thank you operator.

Again, I want to thank all of our teams for their contributions to a very strong first quarter.

We've extended our track record of delivering on our commitments. So thank you to our teams.

I. Thank you all for joining us today, and we look forward to talking to you.

The next quarter.

Have a good day.

This concludes today's conference call. Thank you for your participation and you may now disconnect.

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