Q3 2025 AECOM Earnings Call
Thank you for standing by. My name is Jael, and I will be your conference operator today.
At this time, I would like to welcome everyone to the AECOM third quarter 2025 earnings conference call.
All lines have been placed on mute to prevent any background noise.
After the speakers remarks, there will be a question and answer session.
If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, press star 1 again.
I would now like to turn the conference over to will Gabrielle senior vice, president, finance and investor relations. You may begin.
Thank you, operator. I would like to direct your attention to the safe harbor statement on page 1 of today's presentation.
Today's discussion contains forward-looking statements about future business and financial expectations.
Actual results May differ significantly from those projected. In today's forward-looking statements due to various risks and uncertainties, including the risk described in our periodic reports filed with the SEC, except as required, by law, we undertake no obligation to update a forward-looking statements, we use certain non-gaap Financial measures in our presentation. The appropriate Gap, 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, any reference to segment margins or segment adjusted operating margins will reflect the performance for the Americas and international segments. When discussing revenue and revenue growth, we will refer to net service revenue or NSR which is defined as Revenue. Excluding pass through Revenue. NSR growth rates are presented on a constant currency basis unless otherwise noted, today's remarks will focus on continuing operations.
On today's call, Troy Rod, our Chief Executive Officer, will review our key accomplishments, our strategy, and our outlook for the business. Lara Poloni, our President, will discuss key operational successes and priorities, and Gaurav Kapoor, our Chief Financial and Operations Officer, will review our financial performance and outlook in greater detail. We will conclude with a question-and-answer session. With that, I will turn the call over to Troy.
Thank you will and thank you all for joining us today. Our third quarter Financial results surpassed our expectations
This performance stems from the dedication of our professionals: unmatched technical expertise, high-returning organic growth, investments, trusted client relationships, and strong market trends.
We set new records for NSR margins, EBITDA, EPS, backlog, and pipeline.
As a result, we are confident in raising our annual Financial guidance. For the third consecutive time this year,
Turning to the details of our results.
Organic NSR growth accelerated to 6% led by 8% growth in the Americas. Our highest margin segment, growth increased in most of our large International markets as well.
Importantly, we delivered a 17.1% segment, adjusted, operating margin, which is a new record for the organization. This performance, reflects 3, key elements of our strategy.
Have the highest returns.
This includes not only standing up and accelerating the growth of our program management and advisory businesses, but also the record level of Business Development investment. We make quarter after quarter.
Second, we continue to make organic investments in our technical capabilities to drive the highest level of productivity and quality in our industry.
This investment also includes the development of advanced technical solutions that drive greater client value, which allows us to excel in the marketplace and add to our record backlog position.
Third, we build trusted client relationships and offer the broadest and deepest capability set in the industry which gives us an advantage on our Pursuits.
Looking ahead. We have line of sight to several drivers of continued margin expansion as we continue to make critical Investments that are consistent with our long-term margin objectives.
Our third quarter adjusted EBITDA and EPS increased by 10% and not 16%.
On a year-to-date basis, we are up 9% and 20%.
Cash flow is also ahead of our expectations in the quarter and on a year-to-date basis.
We convert earnings to cash flow at an industry-leading rate, and year-to-date, our free cash flow increased by 27%.
We have also returned, nearly 240 million to shareholders this year.
Importantly, we have an unprecedented level of visibility for continued growth.
Backlog increased both sequentially and year-over-year to a new all-time high, and we delivered a 19th consecutive quarter with a book to burn ratio in excess of 1.
2 factors Drive the strength.
First, we continue to win work at an all-time high rate.
This includes another quarter where we won more than 50% of the value we bid.
Embedded within. This result is a more than 80% success rate on our largest Pursuits, where our competitive Advantage is greatest and where our focus on winning, what matters is evident.
Second the multi-decade secular Mega trends. That are driving. Our markets are accelerating.
This includes global investments in infrastructure, sustainability, resilience, and energy.
As the number 1, ranked Transportation water, environment, and Facilities firm in the world by enr. We are ideally ideally suited to benefit
These mega trends are apparent in our pipeline, which also achieved a new all-time high for the fifth consecutive quarter.
Within the pipeline, growth remains fastest in the earliest stages, which indicates several years of continued strong market conditions as our clients plan for a future of higher spending.
For example, in the UK, the government recently released its tenure infrastructure strategy committing to invest, 725 billion pounds including substantial investments, in transportation water, and energy.
Our leading positions on key Frameworks position us to ideally benefit.
In the Middle East where we maintain a market leading position. We've successfully navigated a reprioritization of investment dollars to emerging areas to support the World Expo and World Cup infrastructure in Saudi Arabia, our Revenue growth. Also picked up this quarter and our contracted backlog was up by double digits.
We are also experiencing strong growth in the UAE, another key Market in the region for us.
In Australia and Asia, long-term demand drivers are firmly in place.
However, near-term budgetary constraints have led us to a pause in larger Transportation Awards.
Which has weighed on the near-term revenue trends.
The water Market is strong, but these projects tend to be L longer in duration and therefore less impactful to near-term revenue as compared to the large civil projects that we completed during the last cycle.
Finally, in the US market environment continues to be 1 of the best in the world.
Only 36% of iija funding. Targeted to our markets has been spent which provides for continued growth opportunities as evident in our pipeline.
Furthermore, state and local budgets remain robust, with State DOT budgets forecasted to achieve another record high in 2026.
Our state and local clients continue prior, to prioritize infrastructure, spending to maximize available Federal matching funds.
The passage of the big beautiful Bill only enhances this opportunity.
The U.S. federal government is prioritizing investments in critical infrastructure to attract investment and secure a leadership position in growth industries, such as AI.
Structure necessary to meet unprecedented demand growth.
This bill also allocates 150 billion dollars of mandatory defense spending.
The dod is our largest single client and activity is gaining momentum.
It ALS includes substantial funding for Aviation and the Coast Guard, both markets where we have a leading presence.
Across the business. We built a track record of delivering on and exceeding our financial and strategic commitments.
As a result of our open performance this year, we are raising our fiscal 2025 financial guidance for the third consecutive quarter.
At the new, midpoints we expect full year adjusted ebitda and EPS to increase by 10% and 16%.
And we remain confident in delivering further growth and value for shareholders long into the future.
With that, I will turn the call over to Laura.
Thanks, Troy. We're excited about the significant growth opportunities ahead. Particularly in the U.S., our largest and most profitable market, government initiatives are driving infrastructure investment with a focus on advancing U.S. leadership. In key markets, this is especially true regarding AI, with U.S. data center investment projected to triple by 2030. Alongside it, demand is also expected to grow substantially for electricity and supporting infrastructure.
We can address this demand holistically like no other firm in our industry, through our advisory program, management and design capabilities.
In fact, we are ideally suited for the complexities of this growth and the new challenges facing our clients including scarce resources, like land Power and Water.
Looking at data centers, specifically, we have supported some of the most complex projects in over. 40 countries around the world establishing us as a global leader in this market, our scale and expertise. In environmental permitting, citing stakeholder, engagement, energy and water give us a significant advantage. In fact, our global data centers, practice doubled, insr in the last 2 years and we're confident growth will continue to accelerate
Moreover supportive government policies are critical to sustaining this growth and recent actions in several of our largest markets demonstrate the progress being made.
In the US of recent Supreme Court ruling and several executive orders are streamlining the need for permitting process while Transportation secretary Duffy's America is building again. Agenda, focuses on removing investment barriers.
Similarly, the UK's 10-year strategy. Prioritizes efficient project. Delivery and Canada is centralizing permitting. With the goal of approving projects, 60% faster. These are bold steps that will deliver better outcomes for our clients and attract more Capital to our markets within this accelerating demand environment and Global push for more efficient infrastructure delivery 3 key.
Areas, give us a Competitive Edge.
First, our advisory business informed by our technical expertise helps clients plan dynamically for their Investments and solve complex challenges. Faster than ever. This business grew at a double-digit pace. This quarter and we aim to double advisory to 4 0 0,
Our program management business excels in delivering our clients' largest and most complex projects. We have 1,990 of our largest program management pursuits this year, and we remain on track with our long-term target of delivering at least 50% of revenue from program management and advisory over time.
Finally, our competitive advantage would not be possible without our inspired and engaged professionals. As Troy noted, we're continuing to invest in leadership and technical development, as well as our AI capabilities, which provide our clients with the best technical solutions and generate high returns. In fact, we had record-high satisfaction in our most recent employee survey, and voluntary attrition remains well ahead of industry expectations.
Taken together, we stand in a very strong position through the first three quarters of the year and are continuing to build momentum as an organization. With that, I'll turn the call over to Ga.
Thanks, Laura. Our third quarter results continue to reflect strong operational performance across the company.
NSR growth accelerated margins and profitability reached, new records, our backlog and pipeline are at all-time high, and our cash flow was very strong.
Of note, our segment adjusted operating margin achieved a major milestone of 17.1%. This is a 90 basis point improvement over the prior year and exceeds our long-term target more than a year ahead of our prior expectation.
There were no extraordinary items in our margin leading. Our industry in margins, has been a Hallmark of our performance, over the past several years.
The head of our plan for the year which has been the case for many quarters.
These margins also continue to include record investment in organic growth initiatives, such as in our advisory business and in our technical capabilities, underpinning the high returns we earn on our investments and the continued opportunity to expand our margins over time.
Turning to our segment results. Beginning with America's NSR grew by 8%
The adjusted operating margin increased by 120 basis points to 20.5%, a new quarterly record that reflects growth in our largest market and the benefits from high-returning, organic growth investments in the business.
Backlog in the America's design business grew by 4%. We expect Business Development expense to increase as a share of Revenue. In the fourth quarter, as we will continue to capitalize on a record pipeline.
Turning to the international segment.
NSR grew by 3%, driven by the UK, and the Middle East, which was partially offset by a decline in Australia.
The adjusted operating margin increased by 20 basis points to 11.9% as we continue to execute across our largest and highest returning geographies.
Backlog grew by 8% in the international segment, and contracted backlog was even stronger at 15% growth, which underpins our expectation for growth accelerating in the fourth quarter.
Turning to our cash flow and capital allocation.
We delivered 262 million of free cash flow in the quarter contributing to a 27% increase for year-to-date period to a new all-time high.
We are on track with our guidance. For at least 100% free cash flow conversion for the full year, which would Mark the fifth year in a row. We have delivered at or better than this level.
We returned nearly 240 million to shareholders year to date and 2.7 billion of capital since September 2020. We maintain excellent balance sheet strength with net. Leverage of 0.6.
A low cost of debt and no maturities until 2029.
Our return space Capital allocation policy remains unchanged.
this includes our high returning organic growth, Investments and capital returns to shareholders through repurchases and dividends
While the timing of cash flow within the year and within a quarter can influence the pace of returns from period to period, importantly, all capital allocation decisions are returns based to ensure we build on our industry-leading return on Capital Performance.
Concluding with the details of our guidance.
We are raising our financial guidance for a third consecutive quarter. This is driven by our year-to-date outperformance, our record backlog, and a strong and Market environment.
We now expect adjusted EPs and evida to increase by 10% and 16% respectively at the midpoint of ranges.
We are also raising our full year margin guidance, including our expectation for a 16.5% segments adjusted operating margin, a 70 basis point increase over the prior year.
This Improvement is more than double the 20 to 30 basis, point annual Improvement. We have in our long-term Financial framework.
With that operator, we are ready for questions.
Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press *1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press *1 again.
If you're called upon to ask a question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute. Your first question comes from the line of RBC Capital markets. Your line is open.
Great, thanks and good morning. Uh just wanted to get you know do the evolving backdrop. If you could just share some thoughts specifically on the US market um and more Curious on sort of how the private sector is evolving and just giving some of the noise during calendar q1. Um did things sort of change or stabilized during calendar Q2? It's just curious sort of specifics on the US market across private and public places.
Yeah, good morning, sabat. Troy here. Um, just just to clarify your question. When you say, q1 and Q2, I think you are referring to the calendar year. So again, I'll I'll focus on that. Yeah, um, so first of all, I I, I think these comments actually apply to the US market and to our large International markets, which is
And for their agendas and the funding of those agendas to become clear. And so we've actually seen that now in the US we're seeing that in Canada, we're seeing that in the UK and we're starting to see that the very beginning of that in Australia.
Well, with respect to the US market, I I think inherent in your question, you said that there was some stability and there's no doubt there is stability in terms of the agenda of the US Federal, the new us um um, Administration and the US federal government.
Um, and we're seeing the funding now, come behind that. Um, and uh, it's becoming quite clear that. Um, there's a very important agenda which is investing in infrastructure in the United States, um, and there's a lot of support to do that and encouragement to do that encouragement through, first of all, funding coming from the, uh, the big, beautiful bill, um, encouragement coming through, reducing the regulation to get infrastructure into the market faster. Um, and encouragement in terms of the environment for focused investment in the US in the long term. So all those things seem to be coming to better together and are supporting um a more stable market and a much clearer picture in terms of the long term investment infrastructure in the US.
I also said in the, in the prepared, comments,
That we're all also seeing this at at a state level and um, you know, we're seeing next year, certainly in transportation infrastructure, uh, the expectation forming around State budgets so that they'll be more money spent in transportation by the states in aggregate next year than there has been in this current year. So overall, we're seeing Clarity come together. Um, and that Clarity means uh, what we think is continued long-term investment in infrastructure in the US.
Great. And then just for my follow-up, just got to, you know, the margins obviously trending in the right direction. Could you sort of just dig into some of the the drivers there just for this year and kind of over the next little while just across maybe operating leverage and just breaking out some of the operational initiatives that might be driving some of the margin Improvement. You know how much more juice is left there a bit more detail on the the margin side, please. Thanks.
Sure. I uh so if I'm going to turn that over to Gar,
Morning, and thanks for the question. You know, margins were very pleased with our margin performance and, and thanks for acknowledging. The delivery this quarter, we delivered a margin target that is almost 15 months ahead of schedule. First and foremost, the credit goes to our professionals who work hard every single day and operate not only in the marketplace where their clients are, but also from a quality delivery and having a DNA of always improving from a cost perspective.
Standpoint as well, you have to do all of those things. Well, across the board to have this kind of performance that we've had and for us specifically on margin and to your question, uh, delivery in the quarter and and what the trajectory opportunity looks like going forward for us. It starts in investing in high returning, organic growth opportunities, starting with our traditional core and markets, where Business Development expense is not only higher than prior year, but it's higher than what we had even planned year to date and quarter to date. So we continue to make robust, uh, investments in the pipeline to make sure our book to burn our backlog is very healthy, uh, as Troy commented in. In the opening comments, this is now 19th quarter in a row, where we've delivered our book to burn at, at, uh, 1 or greater a testament to that business development investment, organic investment that we make
It's also a lot of operational, focus on improving our our cost base. You know, while we're still in the early stages of benefiting, from some key strategic initiatives, such as our infrastructure advisory business, that we launched middle of last year, Solutions, focused drives higher margins for us, our Enterprise capability centers, where we're still in the mid to high single digit in terms of total, labor hours that we deliver and as we've stated before, we will get to Middle digits in in this delivery of our capability centers, uh, in the short term,
2 medium-term. So there's still a lot of opportunity left and I'm not yet going into a lot of detail but AI is not only something in the future but right now it has been providing us with a good lift in all facets of how we go to market, how we operate deliver and the opportunity to become more efficient in in each 1 of those phases. So for us uh you know you'll notice
A year ago, the confidence we were seeing internally is why we shifted that target to 17 percent plus. We knew the opportunity; it's not just a North Star of delivering 17 percent and being higher than anybody else in the industry, as we have been for the past few years. But the opportunity is still in front of us.
Thanks very much.
Your next question comes from the line of Adam Boobs of UH.
Goldman Sachs, your line is open.
Hi, good morning.
Good morning.
I'm wondering if if you folks could just uh, provide an update on the AI and automation initiatives, you know, how long until these initiatives start to move the needle on utilization or margins and just, where are we in that Journey?
Yeah. Um,
So we are already, we've already begun that Journey um, to actually deploy Ai. And we've we've talked about this, I think for about 18 months now. So we started, we started thinking about investing in an AI and how we would do that about 18 months ago and we've been doing that consistently, um, we think about it in 2 ways. First of all, we think about it. How how we actually use AI to sort of improve how we support or run the business and second is, we think about how it will actually change the way we deliver our work for customers. And obviously, there's a lot of discussion around the impact of AI.
Without getting into the details of how we're deploying it, the answer to your first question is, yes, it is having an impact on our margins and our results. The second most important thing is that we believe that AI will have a visible, material, and really favorable impact on our business over the next three years.
most importantly, is never lose sight of the fact that the most important thing in our businesses are people
and what they bring to solving our clients problems. Especially for our, from our perspective, the really complex, and highly visible, and important problems that our people solve, but the Investments that we're making in AI are absolutely going to extend their capabilities and I will just leave you with this. I just restate. The fact that we think that AI is going to have a material impact on our business over the next 2 or 3 years.
And um, if you think about this, as sort of the question about, you know, is there more juice left in margins? No question that there is
Great. And then I think you know, the EBA margin guidance. Uh implies margin step down slightly sequentially at the midpoint from these really strong levels in for Q looking at recent years. I think margins. Typically step slightly up for Q versus 3Q. Any moving pieces that should drive margins, different than normal seasonality, uh, in 4 q is at, maybe the, um,
Business Development expenses in America that were referenced.
Hey morning Adam. This is gar. Um, you're exactly right. And in our prepared comments 1 of the things we pointed out is we're very happy and pleased with how strong our pipeline is across all that and markets in all of our key regions. Um, so 1 thing, we're not going to shy away from is making sure we put our best foot forward to take advantage of these this great pipeline that we have, which means making the business development expense. Uh, as you can see, with high level of confidence, anytime we've made these organic Investments over the last 6 years, they've had an outsize organic return on that investment including the margin trajectory growth. So we're just being very balanced as we look forward into Q4 um saying we're going to make all these continuing great business development, uh, Investments expense, because we know the outsides return and drives for us in the future.
Great. Thanks so much.
Your next question comes from the line of Andy Wittmann of beard. Your line is open.
Yeah, great thanks for taking my questions and good morning everyone. Um, so I guess I'm going to ask a margin question, a little bit different way, uh, than some of the other ones have been asked. And obviously, basically, this year looks like you're on track to deliver. Actually, more than twice, the annual level. That was kind of the, the straight line affect the 20 to 30 basis points should be 7
Ish this year. So I guess as you think about kind of the planning period, is that, is that a pull forward of like some of next year's margins or, or does next year just build off a higher base, than maybe was originally anticipated? I guess I just kind of want to be clear as to how the the phasing of these margins go in, obviously, this is a relevant question for the investment Community, with your initial guidance coming up next quarter.
Say that you know the margins this year are not a pull forward of something from the future. They represent the run rate margins that we see in our business and in our backlog.
And you know, I I we I did try to give in the answer in the last question of preview of our expectations. Which is, you know we see that there is significant upside still remaining in our margins based on the Investments that we have been making and Investments that we think we're going that we know are going to continue to make next year.
Yeah, okay. Just wanted to, to make sure on that and then, I guess, um, from my follow-up question, I wanted to ask on, um, your Capital deployment and specifically, your buyback in the quarter was was really like compared to kind of where you've been and, you know, in the past it's been, uh, kind, you've kind of married it up with your, your cash flow. Fourth quarter is always a big cash flow quarter, so understand that. But you've done things to smooth out your your, your timing of your cash flow, the seasonality of it at least throughout the year. And so, your buyback has correspondingly been a little bit more smoothed out this quarter, pretty light. And I I was just wondering if there's something that we should know about that affected that uh, maybe it's just as simple as you're expecting a lot more cash in for you, but the balance sheet.
Here's a great spot. So maybe car can you just kind of talk about um the buyback and uh, how important it is? And and maybe the performance in the quarter which you did there? And why
Yeah, fair question. Andy um, no change in our Capital allocation policy. We will continue to execute that consistent with how we have acted in the past and specific to this quarter.
In this business, cash always comes in into the quarter and as we've stated before our BuyBacks will follow as we generate that free cash flow. So as we've generated in Q3 we'll execute it during Q4. And as we generate more cash in Q4 consistent uh, with our expectations. We'll continue on that on that path.
Okay. Okay. Okay, thanks.
Thanks Andy.
Your next question comes from the line of Andy Kepler, its of City. Your line is open.
Hey, good morning guys. This is Ashley Jose on Brandy.
Good morning. Um, the morning the last several quarters, they're booked to bill has been at a steady greater than 1X, even despite tariff uncertainty and increased volatility in the international markets. Do you think you can continue to record a book to build over 1 in the current environment based on your current pipeline? I know, your high wind rates have been helping you out particularly in your large Pursuits. So maybe you can talk about the
confidence level there and how sustainable, you know, these win rate levels are
Well.
I guess again I'll start with saying that um, you know, past is not a perfect predictor of the future but it certainly helps having a track record of 19 quarters, you know, with a book to bring greater than 1. So, um, I think that what that indicates is that we do have the underlying conditions to repeat that. And so again, going back to what some of the prepared comments is.
Uh, we have a very healthy pipeline um, and it's in the, you know, good locations where we have great strength in the marketplace.
We continue to have a uh, a very high win rate, which means that we are somehow have an edge um, uh, in that Mark in our Marketplace against the competition. And I described that edge is, you know, we focus on things where the place to our strengths. The strengths of our team is is that we have a large, very sophisticated, Global team with a very diverse set of experiences and qualifications and it allows us to to compete on those projects and to win at a very high rate. So, I I look at the business and say nothing has really changed. Our markets are strong and healthy. Um, we see more clarity around the funding agendas for our governments which allows us to preposition for the longer term and we have, uh, strength in the business that we're taking advantage of that manifests itself in our very high win rates.
So, we have confidence that we'll keep it up.
No, thanks for that. And then as a follow-up, I wanted to ask about the water and environment advisory business, you introduced in um, 1q 25, curious, if you could talk about, how you're seeing that business progress and and any development or opportunities that have made you you know, incrementally, more excited, about the growth, prospects of that business.
Yeah. Well, I will take that. Yeah, it's Larry here. Thank you for the question. We we continue to be really excited about it. Um, during the quarter of the advisory business group, double digits,
And for it to be our next billion-dollar platform. We've had, we continue to have such positive client feedback. We're winning great work, we're hiring great people. So we've got great momentum and we're absolutely on track, and really excited about the future growth of that business.
Experience.
Thank you.
Your next question comes from a land of Sangeeta Jean of Cuban Capital markets. Your line is open.
Great. Thank you for taking my questions. So, 1 question, I want to follow up on the AI discussion that we just had earlier. Um, how does the shifting of work to the overseas technical centers? Um intersect with the use of AI, do you think there could be a risk of possibly over investing in these? If AI can take over some of the tasks?
well, first of all, I think that they they work um, well together
I think you sort of have to look at the portfolio of skills that are required to solve our, you know, to solve the problems of our our our customers or to deliver those projects. And so there is always certainly a piece that you have to spend time um, on the ground. You have to spend time with your customers and that goes at the beginning and throughout those projects. I don't think that part is really frankly ever going to change. Um then you have to have you know again people with really sophisticated experiences and skills and that's a combination of people that are on the ground with customers and
And in our Enterprise capability centers and then what I think you'll see is that AI will certainly supplement what, both of those groups do. So, we think about, um, how AI Works, um, to support our teams. And it frankly supports our teams regardless of where they are and we're very conscious in terms of, you know, um, how we're thinking about, uh, investing in the teams and investing across the business. So that we take advantage of the existing strengths of the business and supplement our supplemented by investing in AI.
Great, that's helpful. Thank you and just on NSR growth. I know you're heading towards the end of your fiscal year. Um, this year looks like it's going to Trend towards the lower side of your guidance range and just wondering how that positions you for next year. Um, probably easier comps in certain areas and maybe you can pick up. So any thoughts early thoughts? There would be appreciated. Thank you.
Hi, this is I'll I'll take that question. Um, you're you're right in terms of, we are going to be within the range of guidance. We had provided, but it is going to Trend towards the lower part of it. We are expecting. Excuse me. We are expecting growth to pick up in Q4. Uh, it's historically consistent number of work days. Also, impacting us gives it gives us good strong confidence, going into Q4, and we're currently in our plan process. But again, you know, if you look at what we have delivered in terms of backlog, growth, contracted backlog growth.
When's book to burn it. All gives us confidence that long-term algorithm we had put out of 528 percent.
We have high level of confidence, even though we haven't completed, our planning process, that continues to be a a good range for us as we look into next year.
Thank you guys.
Thank you.
You next question, comes from line of uh Michael Duda, a vertical research Partners, your line is open.
Good morning, gentlemen, morning morning.
Uh, Troy you highlighted in your your prepared remarks.
I'll be earlier stage of investment from your clients and your seeing more opportunities and I guess more access to exposure there for your company. Um, is that
Provide the longer term.
You know, confidence in in organic growth and and and the cycle in front of us and is it your your the ability to grow? Some of these advisory opportunities and infrastructure and water that were. Um you're finding a lot of um lower hanging fruit to drive. The margin also drive more uh, while it's here, amongst your clients.
Well yeah, I think so. Mike. Think about this in 2 different ways. First of all, is that, as I said earlier, you know, we've seen a lot of our clients um formulating their agendas. So you know, if you come through an election, period takes a little while to formulate that agenda, but then when it is formed and the funding is made available through it to the legislative process.
There's good funding and good pipeline that will take you through the next 4 or 5 years.
and then the second point is,
You think about the diversity? We've created in the business. Now, focusing on advisory or being there earlier in the process. Um, bringing really good technical underlying skills to provide, that advice to our customers, um, which does differentiate from the typical advisor. Um, and then you have program management, which keeps us there throughout the process.
So, you know, as that pipeline forms, I think you rightly pointed out, you know, we're going to be more exposed to that pipeline. As we said in our investor day almost two years ago,
Um, we would typically in the past been exposed to our clients, you know, maybe to 10 to 15% of our clients budgets. Now, through advisory program management, in our design business, we're exposed to 30 to 35 or 40% of our clients budgets and more importantly, the margin in those budgets is higher than where it is in the other places of their infrastructure spend. So you know, you line those 2 things up and you know based on the Investments we've been making growing our at bats um and the early stage pipeline continuing to grow and gives us good visibility and confidence into the next 4 or 5 years.
Well said Troy. Thank you.
Thank you.
Your next question comes from the line of Nandita Nar of Bank of America. Your line is open,
Hey, good morning, guys. This is Nandita NY on for Michael, Fenger, thanks for taking my questions. Um, so you mentioned that, you know, advisory was up double digits, if we can kind of just pull on that thread, a bit more here. How much of this would you say is the overall market. And you know, how much is this, you know, a common initiative. Capturing more share. Thanks.
Um, thanks for the question and data. There's
In terms of the Project Life Cycle, I think we're capturing an earlier segment of the Project Life Cycle because we're advising clients how much earlier. So, I think that is additive. If you look at it in total Project Life Cycle terms. Um, and then for us, obviously, there is the love hanging fruit, which is are the existing clients where we can grow the share of wallets. So to speak, in terms of providing them additional advisory services and then with the pull through of all of the, the usual technical disciplines and design work that they know is for. So if they're the sort of 2 Dimensions that I would respond with,
and,
Uh, yeah.
Great, that's helpful. And uh if I can just squeeze 1 more in, you know, you mentioned margins hitting a bit, a big milestone. You know how much would you balance, you know, investing in the business and expanding margins going forward? And you know, like how much would you say, you know like the opportunity going forward is in the Americas versus International.
well, so look, I I think our margins have improved, not because we've been managing the costs
But we've actually been investing in generating returns from those Investments. So I think, you know, again our uh our belief and uh the strength of what we've been capable of doing is actually investing in growing margins in the business.
And that's not going to stop. We're going to continue to invest. And as we look forward, we actually see more opportunities to invest to drive a much better result than we have in the past. So, you know, looking back is a great track record, but looking forward, we actually are even more optimistic to continue to improve in the future based on what we think we can invest in.
Great, appreciating the answers.
Thank you.
Thank you. Thank you.
With no further questions that concludes our Q&A session, I will now turn to conference back over to Troy for closing remarks.
Good. Thank you everyone, for joining us today and we we thank thank you for your support. Um, and most importantly, I thank all of the employees and all the people working here at AECOM for their fantastic contributions, this quarter. They've continued to uh, to provide just a superior result for the work that we do for our clients. So thank you.
this concludes today's conference calling, you may now disconnect