AECOM Q1 2026 AECOM Earnings Call | AllMind AI Earnings | AllMind AI
Q1 2026 AECOM Earnings Call
Speaker #2: by. My name is JL, and I will be a conference operator today. quarter 2026 earnings conference At this time, I would Thank you for standing prevent any background noise.
Speaker #2: the speakers' remarks, there will be a you would like to ask a question during this time, simply call. telephone keypad. If you would like All lines have been placed on mute to again.
Operator: If you would like to withdraw your question, simply press star one again. I would now like to turn the conference over to Will Gabrielski, 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 one of today's presentation. Today's discussion contains forward-looking statements about future business and financial expectations.
Will Gabrielski: 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. Any references to segment margins or segment-adjusted operating margins will reflect the performance for the Americas and international segments. When discussing revenue and revenue growth, we will refer to net service revenue or NSR, which is defined as revenue excluding pass-through revenue. NSR growth rates are presented on a constant currency basis unless otherwise noted. Today's remarks will focus on continuing operations.
Will Gabrielski: 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. Any references to segment margins or segment-adjusted operating margins will reflect the performance for the Americas and international segments. When discussing revenue and revenue growth, we will refer to net service revenue or NSR, which is defined as revenue excluding pass-through revenue. NSR growth rates are presented on a constant currency basis unless otherwise noted. Today's remarks will focus on continuing operations.
Speaker #2: net service revenue, or NSR, which is prior year first quarter. otherwise noted. Any references to management. Also, as a reminder, Accordingly, our discussion will include results.
Speaker #2: Defined as revenue excluding pass-through. After website, growth rates are presented on a constant currency basis. Today's remarks will focus on continuing obligation to update our forward-looking. I would now like to turn the conference—completion of the review of strategic revenue.
Speaker #2: This morning, we announced the impacted by fewer workdays compared to the our Chief Executive Officer, will review our key quarter results demonstrate, we are off to an exceeded expectations across every record first quarter NSR, adjusted EBITDA, margins, our President, will discuss key and backlog.
Will Gabrielski: This morning we announced the completion of the review of strategic alternatives for the construction management business. We have concluded that we will continue to own and operate the business. Both our reported results and financial guidance are inclusive of construction management. Also, as a reminder, our year-over-year growth rates were impacted by fewer workdays compared to the prior year's first quarter. Accordingly, our discussion will include adjustments to improve comparability of results. On today's call Troy Rudd, 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. Troy?
Will Gabrielski: This morning we announced the completion of the review of strategic alternatives for the construction management business. We have concluded that we will continue to own and operate the business. Both our reported results and financial guidance are inclusive of construction management. Also, as a reminder, our year-over-year growth rates were impacted by fewer workdays compared to the prior year's first quarter. Accordingly, our discussion will include adjustments to improve comparability of results. On today's call Troy Rudd, 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. Troy?
Speaker #2: We have concluded that we will continue NSR growth rates. Both our reported results and financial guidance are inclusive of construction unless otherwise noted. We will continue to own and operate the business.
Speaker #2: Business. We have concluded that we will continue NSR growth rates. Both our reported results and financial guidance are inclusive of Construction, unless otherwise noted.
Speaker #2: accomplishments, our strategy, and our outlook alternatives for the construction management operational successes and priorities, and Gaurav Kapoor, our Chief Financial and Operations for the business.
Speaker #2: Lara Poloni: Shutdown. Key financial metric, including, I should note that bills. As a result, we expect award activity in the U.S., our visibility is high, and we are increasing our full-year financial guidance, which I will discuss shortly.
Speaker #2: Officer, will review our financial performance and outlook in greater operations. our year-over-year growth rates were adjustments to improve comparability of the call over to Troy.
Will Gabrielski: Thank you, Will, and thank you all for joining us today. As our first quarter results demonstrate, we are off to an exceptional start to the year. We exceeded expectations across every key financial metric, including record first quarter NSR, adjusted EBITDA, margins, and backlog. Backlog increased 9% to a new all-time high fueled by a 1.5 book-to-burn ratio even while managing through an unprecedented 43-day US federal government shutdown. I should note that we expect award activity in the US to pick up with the recent passage of all critical federal funding bills. As a result, our visibility is high, and we are increasing our full-year financial guidance, which I will discuss shortly. Across the business, our focus remains on extending our competitive advantages. We have a strong moat that is built on our scale, technical leadership, trusted client relationships, and domain expertise.
Troy Rudd: Thank you, Will, and thank you all for joining us today. As our first quarter results demonstrate, we are off to an exceptional start to the year. We exceeded expectations across every key financial metric, including record first quarter NSR, adjusted EBITDA, margins, and backlog. Backlog increased 9% to a new all-time high fueled by a 1.5 book-to-burn ratio even while managing through an unprecedented 43-day US federal government shutdown. I should note that we expect award activity in the US to pick up with the recent passage of all critical federal funding bills. As a result, our visibility is high, and we are increasing our full-year financial guidance, which I will discuss shortly. Across the business, our focus remains on extending our competitive advantages. We have a strong moat that is built on our scale, technical leadership, trusted client relationships, and domain expertise.
Speaker #2: Backlog increased 9% to a new Troy? all-time high. Fueled by a exceptional start to the year. Thank you, Will. joining us today. And thank you all for As our first We ratio, even while managing through an question-and-answer session.
Speaker #2: On extending our competitive advantages; we have a strong moat that is built on our scale, technical leadership, $1.5 book-to-burn domain, unprecedented $43 US federal government trusted client relationships, and expertise.
Will Gabrielski: Our target investments in program management, advisory services, AI, and technology position us to unlock greater value for our clients and deliver on our multi-year financial targets. Underscoring our confidence in the long-term value creation opportunity, today we also announced an increased share repurchase authorization to $1 billion. We repurchased more than $300 million in the first quarter and expect to continue to deploy our strong free cash flow to deliver greater value to our shareholders over time. Turning to financial performance. Net service revenue increased by 5% when adjusted for fewer billable days in the period. The segment-adjusted operating margin increased by 100 basis points to 16.4%. This is a new first quarter record and reflects the ongoing benefits of our strategy and high-returning investments.
Troy Rudd: Our target investments in program management, advisory services, AI, and technology position us to unlock greater value for our clients and deliver on our multi-year financial targets. Underscoring our confidence in the long-term value creation opportunity, today we also announced an increased share repurchase authorization to $1 billion. We repurchased more than $300 million in the first quarter and expect to continue to deploy our strong free cash flow to deliver greater value to our shareholders over time. Turning to financial performance. Net service revenue increased by 5% when adjusted for fewer billable days in the period. The segment-adjusted operating margin increased by 100 basis points to 16.4%. This is a new first quarter record and reflects the ongoing benefits of our strategy and high-returning investments.
Speaker #2: AI and technology position us to unlock greater value for our clients. With that, I will turn and deliver on our multi-year financial program targets. Our target investments in program targets.
Speaker #2: Underscoring all critical federal funding management, advisory services, and opportunity, today we also announced an increased share of purchase authorization—our confidence in the long-term value creation—to $1 billion.
Speaker #2: We were purchased more than 300 million continue to deploy our strong free cash over time. Turning to financial 5% when adjusted for fewer billable days in the period.
Speaker #2: Flow to deliver greater value to our shareholders was 16.4%. This is a new first quarter record and reflects the dollars in the first quarter, and we expect to be up by 100 basis points to high-returning investments.
Speaker #2: These investments include key hires to drive the segment-adjusted operating margin, increased growth in our advisory business, to build on our technology teams and capabilities, and in business development to capitalize on strong demand.
Will Gabrielski: These investments include key hires to drive growth in our advisory business, to build on our technology teams and capabilities, and in business development to capitalize on strong demand. Reflecting this outperformance, both Adjusted EBITDA of $287 million and Adjusted EPS of $1.29 exceed our expectations. As I mentioned earlier, we ended the quarter with a record backlog and our book-to-burn ratio has been above 1 for 21 consecutive quarters. This consistent performance is a function of the value we bring to our clients. Our win rate remains strong in this quarter, especially on large pursuits. I would like to highlight 2 key wins that provide greater insight into how we are advantaged in the marketplace. First, we were selected as a delivery partner for the 2032 Olympic and Paralympic Games in Brisbane, Australia.
Troy Rudd: These investments include key hires to drive growth in our advisory business, to build on our technology teams and capabilities, and in business development to capitalize on strong demand. Reflecting this outperformance, both Adjusted EBITDA of $287 million and Adjusted EPS of $1.29 exceed our expectations. As I mentioned earlier, we ended the quarter with a record backlog and our book-to-burn ratio has been above 1 for 21 consecutive quarters. This consistent performance is a function of the value we bring to our clients. Our win rate remains strong in this quarter, especially on large pursuits. I would like to highlight 2 key wins that provide greater insight into how we are advantaged in the marketplace. First, we were selected as a delivery partner for the 2032 Olympic and Paralympic Games in Brisbane, Australia.
Speaker #2: Reflecting this outperformance, both adjusted and adjusted EPS of $1.29 exceed our expectations. As I mentioned performance, net service revenue increased by EBITDA of $287 million been above 1 for 21 backlog, and our book-to-burn ratio has we bring to our clients.
Speaker #2: Our win rate remains strong in this quarter, especially on large consecutive quarters. pursuits. I would like to highlight two key This wins that provide greater insight into how we are advantaged in the selected as a delivery partner for the 2032 Olympic and Paralympic Games in Brisbane, Australia.
Speaker #2: Our selection is a testament to the trust and credibility we've built with clients in delivering complex infrastructure projects on a marketplace, worldwide stage. It also underscores the benefits of combining, first, our consistent performance as a function of the value with programmatic delivery capabilities.
Will Gabrielski: Our selection is a testament to the trust and credibility we've built with clients in delivering complex infrastructure projects on a worldwide stage. It also underscores the benefits of combining our leading technical expertise with programmatic delivery capabilities. Further, this win builds on our proud history as a critical infrastructure partner to the Olympic Games across the globe, including our ongoing role as the infrastructure delivery partner for the LA28 Games. Another great example is our selection to provide the engineering services for Scottish Water's multi-year capital investments program, which represents one of the largest capital programs in the world. This win demonstrates several key advantages. For one, we're the world's number one ranked water firm. In addition, our rapidly expanding technology roadmap was key to our selection as we were able to demonstrate a tangible value opportunity from AI and technology over time.
Troy Rudd: Our selection is a testament to the trust and credibility we've built with clients in delivering complex infrastructure projects on a worldwide stage. It also underscores the benefits of combining our leading technical expertise with programmatic delivery capabilities. Further, this win builds on our proud history as a critical infrastructure partner to the Olympic Games across the globe, including our ongoing role as the infrastructure delivery partner for the LA28 Games. Another great example is our selection to provide the engineering services for Scottish Water's multi-year capital investments program, which represents one of the largest capital programs in the world. This win demonstrates several key advantages. For one, we're the world's number one ranked water firm. In addition, our rapidly expanding technology roadmap was key to our selection as we were able to demonstrate a tangible value opportunity from AI and technology over time.
Speaker #2: Further, this win builds on our proud history as our leading technical expertise infrastructure delivery partner, including our ongoing role in the LA28 Games.
Speaker #2: Another great example is our selection to provide the engineering services for Scottish Water's multi-year capital gains across the globe, investments program, which represents one of the largest capital programs in the world.
Speaker #2: This win demonstrates several key advantages. For one, we're the world's number one–ranked water firm. In addition, our rapidly expanding technology roadmap was key to our selection, as we were able to demonstrate a tangible value opportunity from AI and technology over time.
Speaker #2: Our emphasis on bringing best-in-class, overwhelmingly positive client response is a critical infrastructure partner to the Olympic growing trend in our business. And we believe this win serves as a blueprint for the value we expect to deliver from our investments.
Will Gabrielski: Our emphasis on bringing best-in-class technology-led solutions and the overwhelmingly positive client response is a growing trend in our business, and we believe this win serves as a blueprint for the value we expect to deliver from our investments. Turning to a discussion of our end markets. In the US, market conditions are strong. The recent passage of all key federal funding bills for fiscal 2026 provides greater certainty for our clients and for us. Additionally, over half of the IIJA funding remains to be spent, and progress is accelerating for the multi-year surface transportation authorization. Our expectation is for another sizable investment that will build on this momentum and support a growing US economy. Investment in the private sector is also gaining momentum. This is evident in the booming data center market where we benefit both directly and indirectly from the infrastructure opportunities.
Troy Rudd: Our emphasis on bringing best-in-class technology-led solutions and the overwhelmingly positive client response is a growing trend in our business, and we believe this win serves as a blueprint for the value we expect to deliver from our investments. Turning to a discussion of our end markets. In the US, market conditions are strong. The recent passage of all key federal funding bills for fiscal 2026 provides greater certainty for our clients and for us. Additionally, over half of the IIJA funding remains to be spent, and progress is accelerating for the multi-year surface transportation authorization. Our expectation is for another sizable investment that will build on this momentum and support a growing US economy. Investment in the private sector is also gaining momentum. This is evident in the booming data center market where we benefit both directly and indirectly from the infrastructure opportunities.
Speaker #2: Turning to a discussion of our end markets, in the US, market conditions are strong. The recent passage of all key federal funding bills for fiscal 26 provides greater certainty for our funding remains to be spent, and Additionally, over half of the IIJA progress is accelerating for the multi-year surface transportation another sizable investment that will build on this momentum in support of economy.
Speaker #2: Gaining momentum. This is evident in the benefit both directly and indirectly from the facilities, energy, and environmental services, all infrastructure opportunities. Investment in the private sector is also growing US sectors where we lead our booming data center market, where we—this industry.
Will Gabrielski: This includes water, facilities, energy, and environmental services, all sectors where we lead our industry. Additionally, incentives in the One Big Beautiful Bill and ongoing reshoring initiatives are creating new opportunities with several years of visibility ahead. Turning to international. Near-term trends remain varied, but strong long-term demand for infrastructure investment is undeniable. In the UK, we had the significant Scottish Water win, and the AMP-8 water cycle is underway. In the Middle East, we are successfully navigating the reprioritization of funding with substantial wins in Q1 that underpin our outlook for this year and beyond. This includes our new leading design role on the Dubai Metro and ongoing growth opportunities in the UAE and across Saudi Arabia. In Australia, our backlog reached a new multi-year high and included strong wins in the quarter, notably in the transportation sector.
Troy Rudd: This includes water, facilities, energy, and environmental services, all sectors where we lead our industry. Additionally, incentives in the One Big Beautiful Bill and ongoing reshoring initiatives are creating new opportunities with several years of visibility ahead. Turning to international. Near-term trends remain varied, but strong long-term demand for infrastructure investment is undeniable. In the UK, we had the significant Scottish Water win, and the AMP-8 water cycle is underway. In the Middle East, we are successfully navigating the reprioritization of funding with substantial wins in Q1 that underpin our outlook for this year and beyond. This includes our new leading design role on the Dubai Metro and ongoing growth opportunities in the UAE and across Saudi Arabia. In Australia, our backlog reached a new multi-year high and included strong wins in the quarter, notably in the transportation sector.
Speaker #2: Includes water. Additionally, incentives in the re-shoring initiatives are creating new, one big, beautiful bill and ongoing opportunities with several years of visibility internationally. Near-term trends remain ahead. Varied.
Speaker #2: Includes water. Additionally, incentives in the reshoring initiatives are creating new, one big, beautiful bill and ongoing opportunities with several years of visibility international. Near-term trends remain ahead.
Speaker #2: But strong long-term demand for infrastructure investment is Turning to undeniable. In the UK, we had the significant Scottish Water win and the AMP-8 water cycle is underway.
Speaker #2: In the Middle East, we are successfully navigating substantial wins in the first quarter that underpin our outlook for this year and the reprioritization of funding with and ongoing growth opportunities in the design role on the Dubai Metro Arabia.
Speaker #2: Beyond, backlog reached a new multi-year high. This includes our new leading wins in Australia, notably in the transportation sector, and included strong wins in the quarter.
Speaker #2: Offsetting this in the from geopolitical and funding near term, our pockets of weakness resulted UAE and across Saudi reposition across international markets are 25% backlog growth and record paying off.
Will Gabrielski: Offsetting this in the near-term are pockets of weakness resulting from geopolitical and funding uncertainties. Importantly, our efforts to reposition across international markets are paying off as our 25% backlog growth and record pipeline demonstrate. As a result, we expect revenue trends to improve as the year progresses and into fiscal 2027. Globally, national defense budgets are meaningfully increasing. This is a key driver for our business as defense represents approximately 10% of our NSR. The US Department of Defense is our largest client and spending is set to increase for the next several years. Further, our other key clients are also ramping investment including the US Coast Guard and the broader DHS. President Trump also reaffirmed the US commitment to the AUKUS Trilateral Defense Pact with Australia and the UK, and we are pursuing a substantial pipeline.
Troy Rudd: Offsetting this in the near-term are pockets of weakness resulting from geopolitical and funding uncertainties. Importantly, our efforts to reposition across international markets are paying off as our 25% backlog growth and record pipeline demonstrate. As a result, we expect revenue trends to improve as the year progresses and into fiscal 2027. Globally, national defense budgets are meaningfully increasing. This is a key driver for our business as defense represents approximately 10% of our NSR. The US Department of Defense is our largest client and spending is set to increase for the next several years. Further, our other key clients are also ramping investment including the US Coast Guard and the broader DHS. President Trump also reaffirmed the US commitment to the AUKUS Trilateral Defense Pact with Australia and the UK, and we are pursuing a substantial pipeline.
Speaker #2: result, we expect revenue trends to improve as the year progresses and into fiscal 27. Globally, national pipeline demonstrate, as a defense budgets are meaningfully as defense represents approximately 10% of our NSR.
Speaker #2: increasing. The US Department of War is our largest As our client, and spending is set to increase for the next several years. This is a key driver for our business Further, our other key clients are also ramping investment, including the US Coast Guard, and the broader DHS.
Speaker #2: President Trump also reaffirmed the U.S. commitment to the AUKUS trilateral defense pact with Australia and the U.K., and we are pursuing a substantial pipeline.
Speaker #2: Before turning the call to Lara, I want to provide an update on two strategic initiatives. Beginning with technology and AI acquisition. We have already doubled the—we've completed the integration of our September, deeply engaged and collaborating to extend our capabilities.
Will Gabrielski: Before turning the call to Lara, I want to provide an update on two strategic initiatives. Beginning with technology and AI, we've completed the integration of our September acquisition. We have already doubled the size of our team, and the engineers are deeply engaged and collaborating to extend our capabilities. The technology is now live on our projects, and the initial performance results achieved have matched our expectations. Our confidence in these investments and the potential positive benefits is getting stronger. Every day we're uncovering fresh use cases and new opportunities. We're deploying our resources to tackle new problems, and in doing so we are creating significantly more value for our clients. All this rests on the foundation we've built, namely our technical leadership, the deep trust we've earned with our clients over many years, and the domain expertise we have at scale.
Troy Rudd: Before turning the call to Lara, I want to provide an update on two strategic initiatives. Beginning with technology and AI, we've completed the integration of our September acquisition. We have already doubled the size of our team, and the engineers are deeply engaged and collaborating to extend our capabilities. The technology is now live on our projects, and the initial performance results achieved have matched our expectations. Our confidence in these investments and the potential positive benefits is getting stronger. Every day we're uncovering fresh use cases and new opportunities. We're deploying our resources to tackle new problems, and in doing so we are creating significantly more value for our clients. All this rests on the foundation we've built, namely our technical leadership, the deep trust we've earned with our clients over many years, and the domain expertise we have at scale.
Speaker #2: The size of our team, and engineers are achieved have matched our expectations. Our confidence in these investments and the potential positive benefits is getting stronger.
Speaker #2: Every day, across projects, and with the initial performance results, we're uncovering fresh use cases and new opportunities. We're deploying our technology, which is now live. In doing so, we are creating significantly more value for our clients.
Speaker #2: All this rests on the foundation we've built, namely our technical leadership, the deep trust we've earned with resources to tackle new problems and, in domain expertise we have at scale.
Speaker #2: Our clients over many years, and we also reaffirmed our long-term value creation algorithm, which includes achieving a 20% margin exit rate by fiscal '28, and delivering mid-teens compounded earnings and free cash flow growth per share of 5 to 8 percent.
Speaker #2: As it relates to the construction management review of strategic own and operate the business and believe it is exceptionally well positioned for the future.
Speaker #2: As it relates to the construction management review of strategic own and operate the business, and believe it is exceptionally well positioned for the business, we've completed our comprehensive backlog is strong, and the pipeline continues to reflect a robust set of opportunities.
Will Gabrielski: As it relates to the construction management business, we've completed our comprehensive review of strategic alternatives. We concluded we will continue to own and operate the business and believe it is exceptionally well positioned for the future. Backlog is strong, and the pipeline continues to reflect a robust set of opportunities. As we look ahead, our confidence is underpinned by our successes and growing backlog. We increased our Adjusted EBITDA and EPS expectations for fiscal '26, which includes operational outperformance in the first quarter and the benefits from capital allocation. We also reaffirmed our long-term value creation algorithm, which includes expectations for annual revenue growth of 5% to 8%, achieving a 20% margin exit rate by fiscal '28, and delivering mid-teens compounded earnings and free cash flow growth per share. With that, I will turn the call over to Lara. Thanks, Troy.
Troy Rudd: As it relates to the construction management business, we've completed our comprehensive review of strategic alternatives. We concluded we will continue to own and operate the business and believe it is exceptionally well positioned for the future. Backlog is strong, and the pipeline continues to reflect a robust set of opportunities. As we look ahead, our confidence is underpinned by our successes and growing backlog. We increased our Adjusted EBITDA and EPS expectations for fiscal '26, which includes operational outperformance in the first quarter and the benefits from capital allocation. We also reaffirmed our long-term value creation algorithm, which includes expectations for annual revenue growth of 5% to 8%, achieving a 20% margin exit rate by fiscal '28, and delivering mid-teens compounded earnings and free cash flow growth per share. With that, I will turn the call over to Lara.
Speaker #2: As we look ahead, alternatives. We concluded we will continue to successes and growing backlog. Our confidence is underpinned by our—we increased our adjusted EBITDA and outperformance in the first quarter, and the EPS expectations for fiscal benefits from capital allocation.
Speaker #2: With that, I will turn the call over to Lara. Thanks, Troy. Echoing your sentiments, our teams of infrastructure delivery are proud of our many accomplishments to date, as well as how we are redefining the future. Demand for infrastructure has never been greater.
Lara Poloni: Thanks, Troy. Echoing your sentiments, our teams are proud of our many accomplishments to date as well as how we are redefining the future of infrastructure delivery. Demand for infrastructure has never been greater. Rapid urbanization has pushed 45% of the world's population into cities today, with projections showing dramatic further growth. Even in advanced economies, aging and inadequate systems are under severe strain. The US alone faces a $3.7 trillion investment gap over the next decade. Meanwhile, energy systems face mounting pressure from data center expansion and widespread electrification. These dynamics are intensifying, and we're deliberately positioning with clients to capitalize on this demand. This includes our ongoing investment to expand our higher margin advisory practice attacking what we believe to be a $50 billion addressable annual spend.
Will Gabrielski: Echoing your sentiments, our teams are proud of our many accomplishments to date as well as how we are redefining the future of infrastructure delivery. Demand for infrastructure has never been greater. Rapid urbanization has pushed 45% of the world's population into cities today, with projections showing dramatic further growth. Even in advanced economies, aging and inadequate systems are under severe strain. The US alone faces a $3.7 trillion investment gap over the next decade. Meanwhile, energy systems face mounting pressure from data center expansion and widespread electrification. These dynamics are intensifying, and we're deliberately positioning with clients to capitalize on this demand. This includes our ongoing investment to expand our higher margin advisory practice attacking what we believe to be a $50 billion addressable annual spend.
Speaker #2: Rapid urbanization has driven population into cities today, with economies, aging, and inadequate infrastructure pushing 45% of the world's systems under severe strain. Projections show dramatic further increases, with a $3.7 trillion investment gap. The US alone faces this over the next decade. Meanwhile, energy systems face mounting pressure from data center expansion and widespread electrification.
Speaker #2: Even in advanced market. This is a We have made substantial progress on our goal to double this business. The team is growing, and hiring activity is expected to continue to accelerate through the year.
Speaker #2: These dynamics are intensifying, and we're deliberately positioning with clients to capitalize on this demand. This includes our ongoing investment to expand our higher margin advisory practice, billion addressable annual that we combine our deep infrastructure domain expertise and technical growth.
Will Gabrielski: Our advantage is that we combine our deep infrastructure domain expertise and technical leadership with superior strategic advice to deliver greater value for our clients. This is a distinct offering and fills a large gap in the market. We have made substantial progress on our goal to double this business. The team is growing, and hiring activity is expected to continue to accelerate through the year. Importantly, our pipeline is also expanding rapidly, and several recent wins demonstrate our value to clients and how our addressable market is expanding. Let me highlight two examples. First, in the UK, we were selected to advise the water industry to advance business plans for the AMP-9 water cycle. This is an important win and a great demonstration of how we are positioning to help shape our clients' investments.
Lara Poloni: Our advantage is that we combine our deep infrastructure domain expertise and technical leadership with superior strategic advice to deliver greater value for our clients. This is a distinct offering and fills a large gap in the market. We have made substantial progress on our goal to double this business. The team is growing, and hiring activity is expected to continue to accelerate through the year. Importantly, our pipeline is also expanding rapidly, and several recent wins demonstrate our value to clients and how our addressable market is expanding. Let me highlight two examples. First, in the UK, we were selected to advise the water industry to advance business plans for the AMP-9 water cycle. This is an important win and a great demonstration of how we are positioning to help shape our clients' investments.
Speaker #2: leadership with superior strategic advice to deliver greater value for our spend. Our advantage is distinct offering and fills a large gap in the clients.
Speaker #2: rapidly, and several recent wins demonstrate our value to clients and how our pipeline is also expanding addressable market is expanding. Let me highlight two examples.
Speaker #2: advise the water industry to advance business plans for the AMP-9 water cycle. This is an important First, in the UK, we were selected to Importantly, our win and a great demonstration of how we are advisory, we are positioned to support the trillions of dollars of private capital seeking investments. to invest in infrastructure.
Speaker #2: advise the water industry to advance business plans for the AMP-9 water cycle. This is an important First, in the UK, we were selected to Importantly, our win and a great demonstration of how we are advisory, we are positioned to support the trillions of dollars of private capital seeking investments.
Will Gabrielski: Second, through advisory, we are positioned to support the trillions of dollars of private capital seeking to invest in infrastructure. For these clients, we can accelerate and de-risk their investments and achieve better outcomes. This is a valuable benefit that also extends to our public clients who are increasingly partnering with private investors. As is evident, we are expanding the value we can deliver for clients, which is driving strong performance across the business. With that, I'll turn the call over to Gaurav. Thanks, Lara. As first quarter operational outperformance and financial guidance demonstrate, we continue to extend our track record of exceeding our expectations and creating a more valuable company. A few highlights from our performance bear repeating. First, we overdelivered on the financial expectations we provided for the first quarter, and we are raising our guidance for the full year as a result.
Lara Poloni: Second, through advisory, we are positioned to support the trillions of dollars of private capital seeking to invest in infrastructure. For these clients, we can accelerate and de-risk their investments and achieve better outcomes. This is a valuable benefit that also extends to our public clients who are increasingly partnering with private investors. As is evident, we are expanding the value we can deliver for clients, which is driving strong performance across the business. With that, I'll turn the call over to Gaurav.
Speaker #2: de-risk their investments and achieve better outcomes. This is a valuable positioning to help shape our clients' benefit that also extends to our public these clients, we can accelerate and with private investors.
Speaker #2: De-risk their investments and achieve better outcomes. This is a valuable positioning to help shape our clients' benefit that also extends to our public. These clients, we can accelerate and with private investors. As is evident, we are expanding the value we can deliver for clients, which is driving strong performance across the business.
Speaker #2: With that, I'll turn the call over to clients, who are increasingly partnering Gar.
Gaurav Kapoor: Thanks, Lara. As first quarter operational outperformance and financial guidance demonstrate, we continue to extend our track record of exceeding our expectations and creating a more valuable company. A few highlights from our performance bear repeating. First, we overdelivered on the financial expectations we provided for the first quarter, and we are raising our guidance for the full year as a result.
Speaker #3: Laura. As first quarter operational outperformance and financial guidance demonstrate, we continue to extend our track record of exceeding our expectations and creating a more valuable
Speaker #3: A few highlights from our performance bear repeating. First, we overdelivered on the financial expectations we provided for the first quarter, and we are raising our guidance for the full year as a result. Thanks.
Speaker #3: Second, we saw strong increases in both our NSR and margins. This serves as clear evidence that we are scaling our advantages, and second, through expanding our operating leverage.
Will Gabrielski: Second, we saw strong increases in both our NSR and margins. This serves as clear evidence that we are scaling our advantages and expanding our operating leverage. Third, our backlog and pipeline are both at an all-time high. This reflects our competitive advantages, the strength of our end markets, and continued expansion of our addressable market. And finally, we continue to execute our returns-based capital allocation priorities. After investments in high-returning organic growth and efficiency initiatives which are expensed through our margins, we returned nearly $350 million to shareholders in the first quarter and over $3.3 billion over the last several years. We're also pleased to announce an increase in our share repurchase authorization to $1 billion. Going forward, we'll continue to deploy capital thoughtfully while maintaining a nimble balance sheet so we can maximize the benefits of our strong operational performance for our shareholders. Turning to our segment performance.
Gaurav Kapoor: Second, we saw strong increases in both our NSR and margins. This serves as clear evidence that we are scaling our advantages and expanding our operating leverage. Third, our backlog and pipeline are both at an all-time high. This reflects our competitive advantages, the strength of our end markets, and continued expansion of our addressable market. And finally, we continue to execute our returns-based capital allocation priorities. After investments in high-returning organic growth and efficiency initiatives which are expensed through our margins, we returned nearly $350 million to shareholders in the first quarter and over $3.3 billion over the last several years. We're also pleased to announce an increase in our share repurchase authorization to $1 billion. Going forward, we'll continue to deploy capital thoughtfully while maintaining a nimble balance sheet so we can maximize the benefits of our strong operational performance for our shareholders. Turning to our segment performance.
Speaker #3: Third, our backlog and pipeline are both at an all-time high. This reflects our competitive advantages to strengthen our addressable markets and continued expansion. And finally, we continue to execute our returns-based capital allocation priorities.
Speaker #3: Investments in high-returning organic growth and efficiency initiatives, which after are expensed through our margins, we returned nearly $350 million to shareholders in the first quarter and over $3.3 billion over the last several years.
Speaker #3: To announce an increase in our share repurchase authorization to $1 billion. We're also pleased going forward, we'll continue to deploy capital thoughtfully while maintaining a nimble balance sheet so we can maximize the benefits of our strong operational performance for our shareholders.
Speaker #3: Turning to our segment performance, in the Americas, NSR increased due to Canada, where budgets and visibility are best. The adjusted operating margin was 19.9%, up 120 basis points from the prior year.
Will Gabrielski: In the Americas, NSR increased by 9%. Growth was broad-based but stronger in the Eastern States and Canada, where budgets and visibility are best. The adjusted operating margin was 19.9%, up 120 basis points from the prior year. This includes the operating leverage created by strong growth, mix shift to higher margin services, and the benefits from deploying technology to deliver efficiencies. Turning to international, NSR was essentially flat after adjusting for fewer billable days. This was materially consistent with our expectations as we've discussed now for several quarters, the slower level of activity in areas including UK, Australia transportation, and in Hong Kong.
Gaurav Kapoor: In the Americas, NSR increased by 9%. Growth was broad-based but stronger in the Eastern States and Canada, where budgets and visibility are best. The adjusted operating margin was 19.9%, up 120 basis points from the prior year. This includes the operating leverage created by strong growth, mix shift to higher margin services, and the benefits from deploying technology to deliver efficiencies. Turning to international, NSR was essentially flat after adjusting for fewer billable days. This was materially consistent with our expectations as we've discussed now for several quarters, the slower level of activity in areas including UK, Australia transportation, and in Hong Kong.
Speaker #3: This includes the operating leverage created by strong growth, makeshift to higher margin services, and the stronger in the Eastern States and deliver efficiencies. Turning to international, NSR was materially consistent with our expectations 9%.
Speaker #3: Quarters, the slower level of activity in areas including benefits from deploying technology to UK, Australia transportation, and in Hong Kong, billable days. While international segment growth will likely remain subdued in the second quarter, this was consistent with expectations we had at the start of the year. The successful areas resulted in a 25% growth. Growth was broad-based but quarter, and we expect growth to pick up as we've discussed now for several in the second half of the year as a result.
Will Gabrielski: While international segment growth will likely remain subdued in Q2 consistent with the expectations we had at the start of the year, the successful repositioning of the business to growth areas resulted in a 25% backlog increase in the quarter, and we expect growth to pick up in the second half of the year as a result. Turning to details of our guidance. We are increasing the midpoints of our Adjusted EBITDA and Adjusted EPS guidance ranges for the full year and now expect Adjusted EPS of $5.95 at the midpoint of our range as compared to $5.75 previously. This increase reflects the operational outperformance we delivered in Q1, the benefits of our capital deployment strategy, a lower expected tax rate, and the strong visibility from our record backlog. I want to share a few details on phasing to help with modeling.
Gaurav Kapoor: While international segment growth will likely remain subdued in Q2 consistent with the expectations we had at the start of the year, the successful repositioning of the business to growth areas resulted in a 25% backlog increase in the quarter, and we expect growth to pick up in the second half of the year as a result. Turning to details of our guidance. We are increasing the midpoints of our Adjusted EBITDA and Adjusted EPS guidance ranges for the full year and now expect Adjusted EPS of $5.95 at the midpoint of our range as compared to $5.75 previously. This increase reflects the operational outperformance we delivered in Q1, the benefits of our capital deployment strategy, a lower expected tax rate, and the strong visibility from our record backlog. I want to share a few details on phasing to help with modeling.
Speaker #3: Turning to backlog increases in the guidance. We are increasing the midpoints of our adjusted EBITDA and adjusted EPS guidance ranges for the full year, and now expect adjusted EPS of $5.95 at the midpoint of our range as compared to previously.
Speaker #3: This increase reflects the operational outperformance we delivered in the our capital deployment strategy, a lower expected tax rate, and the strong visibility from our record details on phasing to help with modeling.
Will Gabrielski: We expect second quarter NSR and adjusted EBITDA to approximate 24% of our full-year guidance. We also expect the second quarter tax rate to be approximately 12 to 13%. 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 star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are 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 when asking your question. Your first question comes from line of Sabahat Khan of RBC Capital Markets. Your line is open. Great. Thanks and good morning.
Gaurav Kapoor: We expect second quarter NSR and adjusted EBITDA to approximate 24% of our full-year guidance. We also expect the second quarter tax rate to be approximately 12 to 13%. With that, operator, we are ready for questions.
Speaker #3: Quarter NSR and adjusted EBITDA to—we expect second of our full-year guidance—to be approximately 12% to 13%. With that, operator, we are ready for questions.
Operator: Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again. If you are 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 when asking your question. Your first question comes from line of Sabahat Khan of RBC Capital Markets. Your line is open.
Speaker #1: Thank you. The floor is now open for questions. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the
Speaker #1: To queue questions, simply press star one again. If you are called upon to ask a question and you're listening via loudspeaker on your device, please go on mute when asking your $5.75 question.
Speaker #1: Your first question comes from a line of Sabahat Khan of RBC Capital Markets. Your line is:
Sabahat Khan: Great. Thanks and good morning. Just before I get into kind of the fundamental stuff, maybe if you can just share some thoughts. I want to get some color on the decision made to sort of keep the CM business. Obviously, you guys kind of put up strategically one on that, and then just a follow-up question. If you can just talk about sort of compared to last year, the evolution of sort of the demand environment in the US given some of the stability I would say at this point relative to last year on the priorities of the US government. So maybe just kind of the broad outlook and sort of any synergies, etc., there from keeping the CM business. Thanks.
Speaker #4: Great.
Speaker #4: Thanks and good morning. Just before I get into kind of the fundamental stuff, maybe if you can just share some thoughts. I want to get some color open.
Will Gabrielski: Just before I get into kind of the fundamental stuff, maybe if you can just share some thoughts. I want to get some color on the decision made to sort of keep the CM business. Obviously, you guys kind of put up strategically one on that, and then just a follow-up question. If you can just talk about sort of compared to last year, the evolution of sort of the demand environment in the US given some of the stability I would say at this point relative to last year on the priorities of the US government. So maybe just kind of the broad outlook and sort of any synergies, etc., there from keeping the CM business. Thanks. Great. Sabahat, thank you. And I'll take the first question with respect to construction management, and then I'll turn the second part of this question over to Gaurav.
Speaker #4: Keep the CM business. A follow-up question: if you can just talk on the decision made to sort of—about sort of how that compares to the demand environment in the US, given some of the last year, the evolution. Obviously you guys have kind of stability, I would say, at this point relative to last year and the priorities of the US government.
Speaker #4: of sort of the Thanks.
Speaker #4: So maybe just kind of the broad outlook and sort of any synergies,
Troy Rudd: Great. Sabahat, thank you. And I'll take the first question with respect to construction management, and then I'll turn the second part of this question over to Gaurav. So, first, just we said that we would evaluate options last quarter, including a sale, but that also always included ways that we would drive more value in the business and CM the business and the combined AECOM business in general. As we went through that process, a couple of important factors that were key to our decision. One is recognizing the construction management business is a high-quality business. In fact, I'd consider it a strong industry leader, and it does have great backlog and opportunities in front of it. It also has a great cash flow profile that creates the ability for us to invest. But most importantly, we see substantial opportunities resulting from a closer connection between the construction management team and the rest of AECOM. That alignment and collaboration, we think, will give substantial opportunity beyond where we see those businesses operating today.
Speaker #1: you. And I'll take the first Great. Sabah, thank construction management, and then I'll turn the pick up your handset and ensure that your phone is not evaluate options last second part of this question over to more value in the business and CM the business and the combined ACOM business in general.
Will Gabrielski: So, first, just we said that we would evaluate options last quarter, including a sale, but that also always included ways that we would drive more value in the business and CM the business and the combined AECOM business in general. As we went through that process, a couple of important factors that were key to our decision. One is recognizing the construction management business is a high-quality business. In fact, I'd consider it a strong industry leader, and it does have great backlog and opportunities in front of it. It also has a great cash flow profile that creates the ability for us to invest. But most importantly, we see substantial opportunities resulting from a closer connection between the construction management team and the rest of AECOM. That alignment and collaboration, we think, will give substantial opportunity beyond where we see those businesses operating today.
Speaker #1: quarter, including a sale, but then also As we went through management business is of important factors that were key to our decision. a high-quality business.
Speaker #1: I'd consider it a strong industry; always included are ways that we would drive. In fact, leader, and it does have a great backlog of opportunities in front of us. One is, we're recognizing the construction—us to invest.
Speaker #1: But most importantly, we see substantial opportunities flow profile. resulting from a closer connection between the construction That creates the ability for ACOM. That alignment and collaboration, we think, will give substantial opportunity management team and the rest of beyond where we see those businesses operating today.
Speaker #1: And a couple of it together on the—It also has a great cash LA28 Games, and now we'll begin that work on the Brisbane 2032 Games.
Will Gabrielski: A couple of examples of that are the work that we're doing together on the LA28 Games and now we'll begin that work on the Brisbane 2032 Games. So we see great opportunities for the business to work together and we were pleased to get through that process quickly and get to this decision. Hey, Sabahat. This is Gaurav. Thanks for the question. I'm glad you raised it. We're seeing continued strength in our Americas market, particularly across our design business. All of our end markets from transportation, water, and facilities continue to deliver very strong growth including what we reported in Q1 which was 9% for our design business. And if you look over the last two and a half years, our organic growth has been very strong leading the enterprise at high single digits.
Troy Rudd: A couple of examples of that are the work that we're doing together on the LA28 Games and now we'll begin that work on the Brisbane 2032 Games. So we see great opportunities for the business to work together and we were pleased to get through that process quickly and get to this decision.
Speaker #1: So we see great opportunities for the business to work together, and examples that are the work that we're doing we're pleased to get to that Gar.
Speaker #1: Process quickly and get to this decision.
Gaurav Kapoor: Hey, Sabahat. This is Gaurav. Thanks for the question. I'm glad you raised it. We're seeing continued strength in our Americas market, particularly across our design business. All of our end markets from transportation, water, and facilities continue to deliver very strong growth including what we reported in Q1 which was 9% for our design business. And if you look over the last two and a half years, our organic growth has been very strong leading the enterprise at high single digits.
Speaker #5: Hey, Sabah. This is Gaurav. Thanks for the question. I'm glad you raised
Speaker #5: We're seeing continued strong leading the enterprise years, our organic growth has been very reported in the first quarter, which was we continue to dive deeper into the And if our pipeline continues to be at high single digits.
Speaker #5: market, particularly across our design from transportation, water, facilities continue to deliver it. very strong growth, including what we you look over the last two and a half 9% for our design business.
Will Gabrielski: When we continue to dive deeper into the markets, our pipeline continues to be very robust. It's up 20% year-over-year at the end of Q1. In fact, the early-stage pipeline for us is up 34% over that same time frame. While IIJA funds, as you guys are all aware, less than 50% is still unspent. What sometimes gets lost in some of the numbers that we report is, in our business, we do have and have positioned ourselves in this very healthy environment, funding environment on MSAs and IDIQs within our transportation, our water, and our environment business lines. These IDIQs, MSAs, they're not generally part of our awarded or contracted backlog because it's call-off task order work and provide a lot of support, book-to-burn support just during the quarter.
Gaurav Kapoor: When we continue to dive deeper into the markets, our pipeline continues to be very robust. It's up 20% year-over-year at the end of Q1. In fact, the early-stage pipeline for us is up 34% over that same time frame. While IIJA funds, as you guys are all aware, less than 50% is still unspent. What sometimes gets lost in some of the numbers that we report is, in our business, we do have and have positioned ourselves in this very healthy environment, funding environment on MSAs and IDIQs within our transportation, our water, and our environment business lines. These IDIQs, MSAs, they're not generally part of our awarded or contracted backlog because it's call-off task order work and provide a lot of support, book-to-burn support just during the quarter.
Speaker #5: very robust. It's up 20% year over year at the end of the markets, first quarter. And in fact, the early-stage pipeline for us is up 34% over that same timeframe while IIJA funds, as you And when guys are all aware, less than 50% And sometimes get lost in some of the is still unspent.
Speaker #5: The numbers that we report have positioned ourselves very healthily on MSAs and IDIQs within our transportation, our water, and our environment business lines.
Speaker #5: And these IDIQs, MSAs, they're not generally part of our awarded or contracted backlog because it's call-off or support book-to-burn task order work, and provide a lot—between 35,000 to 50,000 contracts ongoing across the globe.
Speaker #5: Support just during the quarter. At any given point in time, we have—at backdrop, we have a lot of confidence as we look forward into the near-term funding environment, not just FY26, but going—growth drivers continue to be well in place for our Americas.
Will Gabrielski: At any given point in time, we have between 35,000 to 50,000 contracts ongoing across the globe. So given that backdrop, we have a lot of confidence as we look forward into the near term, not just FY 2026 but going beyond, that the growth drivers continue to be well in place for our Americas business. Great. Thanks very much. Thank you. Your next question comes from a line of Andy Kaplowitz of Citigroup. Your line is open. Hey, good morning, everyone. Morning, Andy. Morning, Andy. Troy, just regarding how to think about AI's impact on AECOM, I'm just trying to understand a little more what you're saying today. So to be clear, in your opinion, does a new value model shaped by AI not lead to shrinking revenue for AECOM?
Gaurav Kapoor: At any given point in time, we have between 35,000 to 50,000 contracts ongoing across the globe. So given that backdrop, we have a lot of confidence as we look forward into the near term, not just FY 2026 but going beyond, that the growth drivers continue to be well in place for our Americas business.
Speaker #5: business.
Sabahat Khan: Great. Thanks very much.
Speaker #4: Great. Thanks very
Gaurav Kapoor: Thank you.
Speaker #5: Thank much.
Operator: Your next question comes from a line of Andy Kaplowitz of Citigroup. Your line is open.
Speaker #1: Your next question comes from a line of Andy you. beyond, that the Kaplowitz of Citigroup. Your line is open.
Andy Kaplowitz: Hey, good morning, everyone.
Troy Rudd: Morning, Andy.
Speaker #5: Good morning,
Speaker #5: Andy.
Gaurav Kapoor: Morning, Andy.
Andy Kaplowitz: Troy, just regarding how to think about AI's impact on AECOM, I'm just trying to understand a little more what you're saying today. So to be clear, in your opinion, does a new value model shaped by AI not lead to shrinking revenue for AECOM? And then when you look at that EBITDA to employee calculations, it's up, as you said, I think, 50% over the last 5 years. Does that rate of improvement now shift up substantially? So for instance, you could gain 15% or more productivity in the year from AI. Any thoughts on all that?
Speaker #6: Regarding how to think about AI a little more—what you’re saying today, Troy, just does a new value model shape—hey, good morning. So, to be clear, in your opinion, by AI not leading to impact on AECOM, I’m just trying to understand: is it a shrinking revenue for AECOM?
Speaker #6: And then when you look at that EBITDA to employee calculations, it's up, as you said, I think, 50% over the last five years. Does that rate of everyone.
Will Gabrielski: And then when you look at that EBITDA to employee calculations, it's up, as you said, I think, 50% over the last 5 years. Does that rate of improvement now shift up substantially? So for instance, you could gain 15% or more productivity in the year from AI. Any thoughts on all that? Yeah, Andy. That was a pretty broad question. Let me sort of start at the top, which is I think you sort of have to step back and look at the construct, which is our clients are always expecting more value from us. And when we can provide more value, they've always been willing to pay us for more value.
Speaker #6: 15% or more productivity in a year improvement now shift up from AI. Any thoughts on all substantially? So for instance, you can gain
Troy Rudd: Yeah, Andy. That was a pretty broad question. Let me sort of start at the top, which is I think you sort of have to step back and look at the construct, which is our clients are always expecting more value from us. And when we can provide more value, they've always been willing to pay us for more value.
Speaker #4: broad question. And let me sort of start at the top. Which
Speaker #4: is, I think you sort of have to step back and look at the Yeah, Andy. always expecting more value from That was a pretty construct.
Speaker #4: And when we can, always been willing to pay us for that—for more value. And so if we provide more value, they've... you sort of look at the underpinnings, which is, our clients are—of AI, it's really no different from what we're talking about in our investment business.
Will Gabrielski: And so if you sort of look at the underpinnings of what we talk about in our investment of AI, it's no different than any of the other investments we've made in the business and in technology or in delivery. And so it's just simply an extension of that. So again, what we're experiencing is when we have these conversations with clients, when we can demonstrate that we can provide more value to them, they're happy to ultimately reward us for providing that value. And that can be in fees, but that can also be in additional work because we can help extend their funding. And when you dig a little bit deeper on that, think about it this way: the attributes that you are required to win in this business remain unchanged. I want to describe that.
Troy Rudd: And so if you sort of look at the underpinnings of what we talk about in our investment of AI, it's no different than any of the other investments we've made in the business and in technology or in delivery. And so it's just simply an extension of that. So again, what we're experiencing is when we have these conversations with clients, when we can demonstrate that we can provide more value to them, they're happy to ultimately reward us for providing that value. And that can be in fees, but that can also be in additional work because we can help extend their funding. And when you dig a little bit deeper on that, think about it this way: the attributes that you are required to win in this business remain unchanged. I want to describe that.
Speaker #4: And we're in technology, more than any of the other investments we've made in the delivery. And so it's just simply an extension of that.
Speaker #4: So again, what we're experiencing is, is when we have these conversations with clients, when we can demonstrate that we can provide more value to them, they're happy to ultimately reward us for providing that value.
Speaker #4: And that can work because we can help be in fees, but that can also be in additional extend their funding. And when you dig a little way, is the attributes that you are required to win in with clients that you've built a bit deeper on that, think about it this unchanged.
Will Gabrielski: That starts with clients that you've built a longstanding trusted relationship with. And then secondly is you have to have great technical leadership, which we believe we have the industry's best technical leadership in what we do. And then you need domain expertise. And that's broad and deep domain expertise. And so that remains unchanged. And then when you layer on top of that the fact that technology has always been supporting our industry's development and evolution, AI is just another step in that technology evolution that we've invested in. And so we think that that adds to those underlying attributes and creates much better and longer-term opportunity for us. And then I will say that we are seeing across the businesses some really great acceptance by our clients. And I think it was referred to by Gaurav in his comments about Scottish Water.
Troy Rudd: That starts with clients that you've built a longstanding trusted relationship with. And then secondly is you have to have great technical leadership, which we believe we have the industry's best technical leadership in what we do. And then you need domain expertise. And that's broad and deep domain expertise. And so that remains unchanged. And then when you layer on top of that the fact that technology has always been supporting our industry's development and evolution, AI is just another step in that technology evolution that we've invested in. And so we think that that adds to those underlying attributes and creates much better and longer-term opportunity for us. And then I will say that we are seeing across the businesses some really great acceptance by our clients. And I think it was referred to by Gaurav in his comments about Scottish Water.
Speaker #4: And then secondly, is you have to have long-standing, trusted relationships. This business remains, have the industry's best technical—I want to describe that.
Speaker #4: leadership in what we do. And then you It starts great technical leadership, which we believe we broad and deep domain expertise. And so that remains unchanged.
Speaker #4: And then, when you layer on top of that the fact that technology has always been supporting our industry's development and need for domain expertise. And that’s evolution—AI is just another step in that technology evolution that we’ve invested in.
Speaker #4: And so we think that that adds to those underlying attributes and creates much better and longer-term opportunity for us. And then I will say that we are seeing, across the businesses, some really great acceptance by our clients.
Speaker #4: And I think it was referred to by Gaurav in his comments about Scottish Water. And in that, we had a client that we didn't have a long-standing, deep relationship with.
Will Gabrielski: And in that, we had a client that we didn't have a longstanding deep relationship with. But we built a relationship through a process including a bid process for the work that we're going to perform for them. But we also demonstrated that we had those underlying attributes. But more importantly, we demonstrated that we brought something new which was the ability to use AI to transform the way they think about and the way they design over the coming years and decade. And so again, I think we're very positive on what we've done in terms of the investment. But I think about it this way is if you create more value ultimately for your clients, you're rewarded for that. I appreciate all the color there, Troy. Maybe just shifting gears, can you give more color how your private-facing business is doing in the US?
Troy Rudd: And in that, we had a client that we didn't have a longstanding deep relationship with. But we built a relationship through a process including a bid process for the work that we're going to perform for them. But we also demonstrated that we had those underlying attributes. But more importantly, we demonstrated that we brought something new which was the ability to use AI to transform the way they think about and the way they design over the coming years and decade. And so again, I think we're very positive on what we've done in terms of the investment. But I think about it this way is if you create more value ultimately for your clients, you're rewarded for that.
Speaker #4: We built a relationship through a process, including a bid process for the work that we're going to perform for them. But we also demonstrated that we had those underlying attributes, but more importantly, we demonstrated that we brought something new, which was the ability to use AI to transform the way they think about, and the way they design, over the coming years and decade.
Speaker #4: And so again, I think we're very positive on what we've done in terms of the investment. But I think, think about it this way: if you create more value ultimately for your clients, your reward for
Andy Kaplowitz: I appreciate all the color there, Troy. Maybe just shifting gears, can you give more color how your private-facing business is doing in the US? I'm sure, as you know, one of your large peers seemed to get a relatively sizable amount of, let's call it, advanced facilities work in areas such as data centers. You mentioned your strong positioning in data centers and maybe its offshoots. Can you remind us of AECOM's positioning? Do you expect to see an inflection in this private work here over the next few quarters?
Speaker #6: I appreciate all the color there, Troy. Maybe just shifting gears, can you give is doing in the US? I'm sure, as
Will Gabrielski: I'm sure, as you know, one of your large peers seemed to get a relatively sizable amount of, let's call it, advanced facilities work in areas such as data centers. You mentioned your strong positioning in data centers and maybe its offshoots. Can you remind us of AECOM's positioning? Do you expect to see an inflection in this private work here over the next few quarters? Andy, I'm going to let Lara answer that question. Yeah, thanks, Andy. We have one of the larger global data center practices in our industry. In fact, we grew the business 50% in FY '25. We see a lot of very positive trends for this high growth to continue.
Speaker #6: you know, one of your large peers seemed to get relatively sizable more color how your private-facing business amount of, let's call it, advanced facilities work in areas such as data centers.
Speaker #6: And you mentioned your strong positioning in data centers and maybe its offshoots. But can you remind us of AECOM's positioning in that? Do you expect to see an inflection in this private work here over the next few—
Speaker #6: quarters?
Troy Rudd: Andy, I'm going to let Lara answer that question.
Speaker #4: Andy, I'm going
Speaker #4: to let Laura answer that question.
Lara Poloni: Yeah, thanks, Andy. We have one of the larger global data center practices in our industry. In fact, we grew the business 50% in FY '25. We see a lot of very positive trends for this high growth to continue. As Troy said in his earlier remarks, we're a direct beneficiary of the growth in this segment through the work that we do serving the entire digital ecosystem, the electrical engineering, and the infrastructure. But also, we're seeing growing opportunities in terms of the indirect work, the associated work. So that includes some of our advisory services, the work that we do around due diligence. And we're performing this work for all of the major hyperscalers around the world. But it also includes some of the associated water and power studies, which are obviously critical to getting these projects moving. So we remain pretty positive about our continued growth in the sector.
Speaker #3: Yeah, thanks, Andy. We have one of the larger global data center practices in the business 50% in FY25. And we see a lot of very positive trends for this high growth to remarks, we our industry.
Will Gabrielski: As Troy said in his earlier remarks, we're a direct beneficiary of the growth in this segment through the work that we do serving the entire digital ecosystem, the electrical engineering, and the infrastructure. But also, we're seeing growing opportunities in terms of the indirect work, the associated work. So that includes some of our advisory services, the work that we do around due diligence. And we're performing this work for all of the major hyperscalers around the world. But it also includes some of the associated water and power studies, which are obviously critical to getting these projects moving. So we remain pretty positive about our continued growth in the sector. All right, guys. Thank you. Thanks, Andy. Thank you. Your next question comes from Adam Bubes of Goldman Sachs. Your line is open. Hi, good morning.
Speaker #3: We have a direct beneficiary of the growth in this segment through the work that we do serving the entire digital ecosystem, the electrical engineering, and the infrastructure.
Speaker #3: But also, we're seeing growing—and in fact, we grew indirect work, the associated work. So that includes some of our advisory services, the work that we do around due opportunities in terms of the diligence.
Speaker #3: And we're performing this work for all of world. But it also includes some of the associated water and power the major hyperscalers around the studies, which are obviously critical to getting continue.
Speaker #3: these projects our continued growth in the moving. So we remain pretty positive about sector.
Andy Kaplowitz: All right, guys. Thank you.
Speaker #6: All right, guys. Thank
Lara Poloni: Thanks, Andy.
Speaker #5: Thank you, Andy.
Troy Rudd: Thank you.
Operator: Your next question comes from Adam Bubes of Goldman Sachs. Your line is open. Hi, good morning.
Speaker #1: from Adam Bubes
Speaker #1: Of Goldman Sachs. Your line is open.
Speaker #7: Hi, good As Troy said in his earlier morning. Can we update can you update us on Your next question comes integration of the acquired AI technology across your workflows?
Will Gabrielski: Can you update us on integration of the acquired AI technology across your workflows? Which workflows and end markets are you targeting to scale via AI in 2026? Just trying to get a sense of what milestones we should be tracking as the investments progress. Yeah. So Adam, I'll let Gaurav talk you through the integration. Hey, Adam. Thank you for that question. Specific to the integration question that you asked, we're 3 months into our roadmap. And it has actually gone exceptionally well compared to our initial expectations. Integration is complete. Investments that we will make as we laid out beginning the year will ramp up as we go through the year. And as a result, there's a lot of great deal of momentum and excitement across the organization that we have.
Adam Bubes: Can you update us on integration of the acquired AI technology across your workflows? Which workflows and end markets are you targeting to scale via AI in 2026? Just trying to get a sense of what milestones we should be tracking as the investments progress.
Speaker #7: You’re targeting to scale via AI in 2026? Just trying to get which workflows and end markets are a sense of what milestones we should be tracking as the investments progress.
Troy Rudd: Yeah. So Adam, I'll let Gaurav talk you through the integration.
Speaker #4: Yeah. So Adam, I'll let Gaurav talk you through the
Speaker #4: integration. Hey, Adam.
Gaurav Kapoor: Hey, Adam. Thank you for that question. Specific to the integration question that you asked, we're 3 months into our roadmap. And it has actually gone exceptionally well compared to our initial expectations. Integration is complete. Investments that we will make as we laid out beginning the year will ramp up as we go through the year. And as a result, there's a lot of great deal of momentum and excitement across the organization that we have.
Speaker #5: Thank you for that question. Specific to the integration months into our roadmap. And it has actually gone exceptionally well compared to our initial question that you asked, we're three expectations.
Speaker #5: Integration is complete. laid out beginning of the year will ramp up as we go through the year. And as a result, there's a lot of great deal of momentum and excitement across the as Troy alluded to earlier, happened in our clients are reaching out to us to better industry for multiple decades.
Will Gabrielski: Because as Troy alluded to earlier, clients are reaching out to us to better understand how we will deliver value for them through this process. As it has happened in our industry for multiple decades, anytime there has been a technological inflection, it has created a higher TAM for everybody. Profitability has always gone up when things like that have happened in our industry. Let it be when we went from paper to CAD designs to BIM modeling and the like that happened about a decade ago. So when you break that down into what business lines are we focused on, what milestones are we focused on, I think your question is correct in terms of looking at the workflows. Specifically, our focus is on the facilities market.
Gaurav Kapoor: Because as Troy alluded to earlier, clients are reaching out to us to better understand how we will deliver value for them through this process. As it has happened in our industry for multiple decades, anytime there has been a technological inflection, it has created a higher TAM for everybody. Profitability has always gone up when things like that have happened in our industry. Let it be when we went from paper to CAD designs to BIM modeling and the like that happened about a decade ago. So when you break that down into what business lines are we focused on, what milestones are we focused on, I think your question is correct in terms of looking at the workflows. Specifically, our focus is on the facilities market.
Speaker #5: Anytime for them through this process as it has organization. there has been a technological inflection, it has created That we have because a higher temp for everybody profitability has always gone up when things like that have happened in our understand how we will deliver value from going from paper to CAD designs to BIM modeling and like that happened about a decade ago.
Speaker #5: Into what business lines are we focused on, what milestones are we—and so when you break that down, focused on, I think your question is correct in terms of looking at the workflows.
Speaker #5: So specifically, our focus is on the facilities market. Because again, as we had laid out back in November, our initial roadmap is disciplines and asset types that our clients have already good existing focused on commercial structures that would But at the same time, as we go through and create these be advantageous to everybody.
Will Gabrielski: Because again, as we had laid out back in November, our initial roadmap is focused on disciplines and asset types that our clients have already good existing commercial structures that would be advantageous to everybody. But at the same time, as we go through and create these solutions, these workflow operating leverage efficiencies, it is impacting all of our business lines to some extent. And from a metric standpoint, I think a key metric that we have now started sharing is employee NSR and employee EBITDA, profitability by headcount. These are similar to what Troy alluded to earlier in the initial response. When we step back and look at what we have accomplished over the last five years, it has been making investment and differentiating ourselves in that competitive edge platform. That is investments in our clients, investments in our professionals.
Gaurav Kapoor: Because again, as we had laid out back in November, our initial roadmap is focused on disciplines and asset types that our clients have already good existing commercial structures that would be advantageous to everybody. But at the same time, as we go through and create these solutions, these workflow operating leverage efficiencies, it is impacting all of our business lines to some extent. And from a metric standpoint, I think a key metric that we have now started sharing is employee NSR and employee EBITDA, profitability by headcount. These are similar to what Troy alluded to earlier in the initial response. When we step back and look at what we have accomplished over the last five years, it has been making investment and differentiating ourselves in that competitive edge platform. That is investments in our clients, investments in our professionals.
Speaker #5: solutions, these workflow operating leverage efficiencies, it is impacting all of our business lines to some think a key metric that we have now started sharing is employee NSR and employee EBITDA, profitability by headcount.
Speaker #5: These are similar to what Troy alluded to earlier, to an extent. And from a metric standpoint—in the initial response—when we step back and look at what we have accomplished over the last five years, it has been making investments and differentiating ourselves in that competitive landscape: investments in our clients, investments in our professionals.
Speaker #5: edge platform. And it continues to drive better profitability, better That is NSR growth. And this will be no different than
Will Gabrielski: And it continues to drive better profitability, better NSR growth. And this will be no different than it. Great. And then really strong bookings performance in international. Can you just expand which regions drove the acceleration in bookings and how much you attribute that performance to project timing versus this being a clear positive inflection in the demand backdrop? So let me sort of let me kind of give a little bit of background on the international markets. And then I'll have Lara answer the specific question. And I just sort of want to take you back to the way we describe what was happening in the international markets more than about 18 months ago. And that there was a substantial amount of elections going on around the world, in particular in the international markets. And when that happens, there's always changes of agendas. There's certainly changes in governments.
Gaurav Kapoor: And it continues to drive better profitability, better NSR growth. And this will be no different than it.
Adam Bubes: Great. And then really strong bookings performance in international. Can you just expand which regions drove the acceleration in bookings and how much you attribute that performance to project timing versus this being a clear positive inflection in the demand backdrop?
Speaker #6: Great. And then really
Speaker #6: international. Can you just expand which regions drove the strong bookings performance in attribute that performance to it. project timing versus this being a clear positive inflection in the demand backdrop?
Troy Rudd: So let me sort of let me kind of give a little bit of background on the international markets. And then I'll have Lara answer the specific question. And I just sort of want to take you back to the way we describe what was happening in the international markets more than about 18 months ago. And that there was a substantial amount of elections going on around the world, in particular in the international markets. And when that happens, there's always changes of agendas. There's certainly changes in governments.
Speaker #4: Well, let me so let me sort
Speaker #4: of let me kind of give a little bit of background on the international markets. And then I'll have Laura answer the specific question. And it just sort of want to take you back to the way we describe acceleration in bookings?
Speaker #4: what was happening in the international markets more than 18 months about 18 months ago. And there was a substantial amount of elections going on around the world, in particular markets.
Speaker #4: And when that happens, there's in the international agendas. There's certainly changes in governments. But even when a government remains in place, there's a always changes of
Will Gabrielski: But even when a government remains in place, there's a change in agenda. And so we recognized that with all that change, we needed to figure out how we were going to reposition the business so that we took advantage of those changes in agenda. And we've seen that over the last 18 months. Now we're seeing the agendas being fixed. The funding come to market for what are the priorities, the infrastructure priorities for those foreign governments. And as a result of that, our repositioning, we're winning and building very significant backlogs so that we can fuel the future of the business in 2026 and well beyond that. And so Lara, I'll turn it over to you.
Troy Rudd: But even when a government remains in place, there's a change in agenda. And so we recognized that with all that change, we needed to figure out how we were going to reposition the business so that we took advantage of those changes in agenda. And we've seen that over the last 18 months. Now we're seeing the agendas being fixed. The funding come to market for what are the priorities, the infrastructure priorities for those foreign governments. And as a result of that, our repositioning, we're winning and building very significant backlogs so that we can fuel the future of the business in 2026 and well beyond that. And so Lara, I'll turn it over to you.
Speaker #4: Change in agenda. And so we recognize that with all that change, we needed to figure out how we were going to—and how much do you—reposition the business so that we... months.
Speaker #4: Now we're seeing the agendas being fixed. The funding comes to market for what are the priorities, the infrastructure priorities for agenda, governments. And as a result of that, ours took advantage of those changes in those foreign markets. And we've seen that over the last 18 months—future of the business in.
Speaker #4: that backlog so that we can fuel the—And so, Laura, I'll turn it over to you.
Speaker #3: Yeah. I think as Troy
Will Gabrielski: Yeah, I think as Troy just explained, one of the examples for the quarter was the Sydney Metro win in ANZ, which goes to Troy's point about we're now last year was characterized by the end of the sort of 10-year infrastructure cycle. Wins like that highlight that we are now seeing the uptick in the next wave of infrastructure investment. And that is particularly focused in Sydney and also in Brisbane. So the wins in the quarter really demonstrated that upturn. And the rest of the wins, to answer your question, were pretty balanced. The wins such as Scottish Water in Europe, the Middle East wins such as the Dubai Metro. So there was good balance in terms of those ongoing infrastructure investments. And importantly, they were beyond transport. They were balanced across other segments of our business as well. Great. Thanks so much. Thank you.
Lara Poloni: Yeah, I think as Troy just explained, one of the examples for the quarter was the Sydney Metro win in ANZ, which goes to Troy's point about we're now last year was characterized by the end of the sort of 10-year infrastructure cycle. Wins like that highlight that we are now seeing the uptick in the next wave of infrastructure investment. And that is particularly focused in Sydney and also in Brisbane. So the wins in the quarter really demonstrated that upturn. And the rest of the wins, to answer your question, were pretty balanced. The wins such as Scottish Water in Europe, the Middle East wins such as the Dubai Metro. So there was good balance in terms of those ongoing infrastructure investments. And importantly, they were beyond transport. They were balanced across other segments of our business as well.
Speaker #3: examples for the quarter was '26.
Speaker #3: the Sydney Metro win in ANZ, which goes to Troy's point And well beyond about we're now last year was characterized just explained, one of the by the end of the sort of
Speaker #3: the Sydney Metro win in ANZ, which goes to Troy's point And well beyond about we're now last year was characterized
Speaker #3: the uptick in the next wave of infrastructure investment. So and that is particularly focused in Sydney and also in Brisbane. So the 10-year infrastructure cycle.
Speaker #3: wins in the quarter really demonstrated that upturn. And the rest of the wins to answer your you. question, were pretty balanced. The wins such as Scottish Water in Europe, the building very significant Middle East wins such as the Dubai Metro, that highlight that we are now seeing so there was good balance in terms of investments.
Speaker #3: those ongoing infrastructure business as well. And importantly, there were beyond transport. Thank
Adam Bubes: Great. Thanks so much.
Speaker #6: Great. Thanks so much. Wins like
Lara Poloni: Thank you.
Speaker #3: you.
Will Gabrielski: Your next question comes from a line of Jamie Cook of Truist Securities. Your line is open. Hey, good morning. Troy, not to continue on the AI topic, but just as you've been communicating with customers and given the analyst data you had, are customers coming back to you and looking for opportunities to sort of renegotiate projects? Or is that more so on stuff that's up and coming? And I'm wondering if that could be an incremental positive to numbers over the longer term as both you and customers understand better how to extract value on both sides. And then my second question, Gaurav, just on the cash flow in the quarter. The cash flow in the quarter was a little weaker than I thought. And then just trying to understand, was there anything to that, and just your confidence level in the cash flow for the year?
Operator: Your next question comes from a line of Jamie Cook of Truist Securities. Your line is open.
Jamie Cook: Hey, good morning. Troy, not to continue on the AI topic, but just as you've been communicating with customers and given the analyst data you had, are customers coming back to you and looking for opportunities to sort of renegotiate projects? Or is that more so on stuff that's up and coming? And I'm wondering if that could be an incremental positive to numbers over the longer term as both you and customers understand better how to extract value on both sides. And then my second question, Gaurav, just on the cash flow in the quarter. The cash flow in the quarter was a little weaker than I thought. And then just trying to understand, was there anything to that, and just your confidence level in the cash flow for the year? Thank you.
Speaker #8: morning. Troy, not to continue on the continue on the AI topic, but just as you've been communicating with customers and given the analysts' data you had, are customers coming back to of renegotiate projects?
Speaker #8: Or
Speaker #8: is that more so on stuff that's up and coming? And I'm wondering if that could be an incremental positive to numbers over the longer term as both you and customers you and looking for opportunities to sort understand better how to extract value on both sides?
Speaker #8: And then my second question, Gaurav, just on the cash flow in the quarter—the cash flows, they were balanced across other segments, I thought.
Speaker #8: And then in the quarter was a little weaker than I the year?
Will Gabrielski: Thank you. So, Jamie, certainly expected some questions on AI. When we're having these discussions with our clients, they really are focused around sort of what we bring in terms of the increase in customer value through deploying it on projects. And I wouldn't characterize this as a renegotiation. I would actually characterize this as our clients trying to seek out ways that they can employ us to actually deploy something that is more valuable. So it's not necessarily a renegotiation. It's more of a discussion about how can we find ways to do more work with you and your teams because you're bringing something that's clearly of value to us. What we also are seeing is that in some of those discussions, our clients are recognizing that we might not have a way of contracting that makes sense.
Troy Rudd: So, Jamie, certainly expected some questions on AI. When we're having these discussions with our clients, they really are focused around sort of what we bring in terms of the increase in customer value through deploying it on projects. And I wouldn't characterize this as a renegotiation. I would actually characterize this as our clients trying to seek out ways that they can employ us to actually deploy something that is more valuable. So it's not necessarily a renegotiation. It's more of a discussion about how can we find ways to do more work with you and your teams because you're bringing something that's clearly of value to us. What we also are seeing is that in some of those discussions, our clients are recognizing that we might not have a way of contracting that makes sense.
Speaker #4: So
Speaker #4: Jamie, certainly expected some questions on
Speaker #4: Jamie, we certainly expected some questions on Thank AI. When we're having these discussions with our clients around sort of what we bring in, they really are focused on customer value through deploying it on projects.
Speaker #4: And I wouldn't characterize this renegotiation. terms of the customer or the increase in I would actually as our clients trying to seek out that in just your confidence level in the cash flow for ways that they can employ us to actually valuable.
Speaker #4: So it's not necessarily renegotiation. It's can we find ways to do more of a discussion about how characterize this as a you're bringing something that is deploy something that is more us.
Speaker #4: What we also are seeing is clearly of value to that in some of those discussions, our clients are recognizing that we might not have a contracting way of contracting.
Speaker #4: That makes sense. And so they're bringing up in the dialogue, how they would like to move to a method of more work with you and your teams because contracting that recognizes that value.
Will Gabrielski: And so they're bringing up in the dialogue how they would like to move to a method of contracting that recognizes that value. So moving away from something like cost-plus to something that looks more like a fixed fee because it is in their interest and, of course, it is in our interest to do that. And that really just focuses around the value discussion. As I said this a little bit earlier in the call, is if you bring something of value to clients, they want to pay you for it. And they certainly want to do more of it. And that's what we're finding in our discussions with customers. Hey, Jamie, this is Gaurav. So specific to your question on cash, cash was quite consistent with our expectations. If you look at historically, especially over the last five years, that's when we've really phased our cash properly.
Troy Rudd: And so they're bringing up in the dialogue how they would like to move to a method of contracting that recognizes that value. So moving away from something like cost-plus to something that looks more like a fixed fee because it is in their interest and, of course, it is in our interest to do that. And that really just focuses around the value discussion. As I said this a little bit earlier in the call, is if you bring something of value to clients, they want to pay you for it. And they certainly want to do more of it. And that's what we're finding in our discussions with customers.
Speaker #4: So moving away from something something that looks more like a fixed fee like cost plus to because it is in their interest and, of course, it is in our interest to do that.
Speaker #4: And that really just focuses around the value discussion. As I said this a little bit earlier in the—you know, they want to pay you for it.
Speaker #4: And they were finding in our discussions with
Speaker #4: And what we're finding in our discussions with the call is, if you bring something of
Gaurav Kapoor: Hey, Jamie, this is Gaurav. So specific to your question on cash, cash was quite consistent with our expectations. If you look at historically, especially over the last five years, that's when we've really phased our cash properly.
Speaker #5: This is GARV. So in specific to your value to clients, they want consistent with our expectations. If you look at historically, especially
Speaker #5: This is GARV. So in specific to your value to clients, they want consistent with our expectations.
Speaker #5: properly. You go prior to that, we used to have question on cash, cash was quite of the year. So if you look at the last five years, first quarter is approximated about 10% of our outlook.
Will Gabrielski: You go prior to that, we used to have negative cash flow in the first half of the year. So if you look at the last 5 years, first quarter is approximated about 10% of our outlook. That's what this quarter was, very consistent. I'm sorry, first quarter has been 10%. First half is approximately 30% when we look over that time frame. That's very consistent with our expectations. So there is a ramp consistent with our historical experience and our actual delivery in the second half of the year because our first half does have some meaningful large disbursements related to compensation matters, 401(k) bonuses, a lot of large vendor software payments that we go through in the first half of the year as well. But that's normal for us. Thank you. Thank you. Thanks, Jamie.
Gaurav Kapoor: You go prior to that, we used to have negative cash flow in the first half of the year. So if you look at the last 5 years, first quarter is approximated about 10% of our outlook. That's what this quarter was, very consistent. I'm sorry, first quarter has been 10%. First half is approximately 30% when we look over that time frame. That's very consistent with our expectations. So there is a ramp consistent with our historical experience and our actual delivery in the second half of the year because our first half does have some meaningful large disbursements related to compensation matters, 401(k) bonuses, a lot of large vendor software payments that we go through in the first half of the year as well. But that's normal for us.
Speaker #5: And that's what—this quarter was very consistent. And I'm sorry, customers. Negative cash flow in the first half is approximately 30%, when we look—consistent with our expectations.
Speaker #5: So there is a ramp consistent with our historical experience and our certainly want to do more of it. our first half does have some
Speaker #5: actual delivery in the second half of the year because line is open.
Speaker #5: meaningful large disbursements related to vendor software payments that we go through in the first quarter has been 10%. over that time frame. And that's what And first half us.
Speaker #5: First half of the year as well. And that's very you.
Speaker #5: But that's normal for
Jamie Cook: Thank you.
Speaker #8: Thank you.
Gaurav Kapoor: Thank you.
Troy Rudd: Thanks, Jamie.
Speaker #4: Thanks,
Speaker #4: Jamie.
Will Gabrielski: Your next question comes from a line of Sangeeta Jain of KeyBanc Capital Markets. Your line is open. Good morning. And thank you for taking my questions. So maybe, Troy, now that you've decided to keep the construction management business, do you have any plans of running it maybe differently? I know it's just 8% of your NSR today. But do you think it can grow more as you synergize this with your design business more? So the answer is yes. We're going to look to actually run it differently. And when I say run it differently, we're going to look to get an even closer alignment and find the opportunities we think are in front of us to collaborate across the rest of our business. If you think about our program management offering and the construction management offering, those two being more closely aligned creates a very significant opportunity.
Operator: Your next question comes from a line of Sangeeta Jain of KeyBanc Capital Markets. Your line is open.
Speaker #1: Jain of KeyBank Capital Markets. Your
Sangita Jain: Good morning. And thank you for taking my questions. So maybe, Troy, now that you've decided to keep the construction management business, do you have any plans of running it maybe differently? I know it's just 8% of your NSR today. But do you think it can grow more as you synergize this with your design business more?
Speaker #9: Good
Speaker #9: morning and thank you for taking my Troy, now that you've decided to keep the construction management
Speaker #9: morning and thank you for taking my Troy, now that you've decided to keep the construction management
Speaker #9: of running it maybe differently? I
Speaker #9: more as you synergize this with your design business know it's just 8% of your NSR Your next question comes from the line of Sangeeta more?
Troy Rudd: So the answer is yes. We're going to look to actually run it differently. And when I say run it differently, we're going to look to get an even closer alignment and find the opportunities we think are in front of us to collaborate across the rest of our business. If you think about our program management offering and the construction management offering, those two being more closely aligned creates a very significant opportunity.
Speaker #4: So the questions. answer is yes. We're going to look
Speaker #4: to actually run it So maybe, compensation matters, differently. And when I say run it differently, we're going to look to get an even closer alignment and today, but do you think it can grow
Speaker #4: to actually run it So maybe, compensation matters, differently. And when I say run it differently, we're going to look to get an even closer alignment and today, but do you think it can grow
Speaker #1: find the And opportunities of us to collaborate we think are across our the rest of business . our If you our offering and management construction management you know , offering those two being more program close the about our to the We management offering and the a very .
Will Gabrielski: Ultimately, they provide a value to customers that is much, much greater than just a traditional program management offering. So we view that as actually a competitive advantage, which we think is more valuable for customers. And so there are some other things. But I'll point that out as what we're thinking about is how we bring it together and we actually operate differently to drive more value for customers. Great. And then maybe following up on the design backlog for fiscal 1Q, you guys highlighted the federal shutdown. But can you talk a little bit more about what you're seeing on the state and local level because that is kind of a much bigger portion of your NSR? Hi, Sangeeta. This is Gaur. I'll take that question.
Troy Rudd: Ultimately, they provide a value to customers that is much, much greater than just a traditional program management offering. So we view that as actually a competitive advantage, which we think is more valuable for customers. And so there are some other things. But I'll point that out as what we're thinking about is how we bring it together and we actually operate differently to drive more value for customers.
Speaker #1: Offering and management—you know, those two being more aligned creates a very significant opportunity. And, ultimately, they provide customers a program that is much more than just traditional program management offering.
Speaker #1: offering . management You know , those two being more aligned creates a very significant opportunity . , And provide a ultimately they customers that is program much than just traditional program management a So , you know , actually a that as which we think is more for And competitive there are so some other greater But , you know , I'll point that we view out as what we're thinking about is how we bring it customers . together .
Speaker #1: offering . management You know , those two being more aligned creates a very significant opportunity . , And provide a ultimately they customers that is program much than just traditional program management a So , you know , actually a that as which we think is more for And competitive there are so some other greater But , you know , I'll point that we view out as what we're thinking about is how we bring it customers .
Sangita Jain: Great. And then maybe following up on the design backlog for fiscal 1Q, you guys highlighted the federal shutdown. But can you talk a little bit more about what you're seeing on the state and local level because that is kind of a much bigger portion of your NSR?
Speaker #1: differently to value for
Speaker #2: maybe And then advantage ,
Speaker #2: highlighted the federal shutdown ,
Speaker #2: highlighted the federal shutdown , but can talk a little
Gaurav Kapoor: Hi, Sangeeta. This is Gaur. I'll take that question. Yeah, the shutdown impacted, as we said, our fourth quarter because that's when we would normally see high level of awards. And then anytime there is shutdown events, usually the following quarter, you kind of see that come back up. It's always a timing issue. And what we saw this time around was because there was noise about a shutdown again in February, that timely pickup that we were expecting really didn't come through. So there was some impact related to it. And we now expect now that there's been a resolution, second, third quarter, we should see that pickup we're expecting in the federal award activity to come through.
Speaker #2: about what you're seeing
Speaker #2: kind bigger that is
Will Gabrielski: Yeah, the shutdown impacted, as we said, our fourth quarter because that's when we would normally see high level of awards. And then anytime there is shutdown events, usually the following quarter, you kind of see that come back up. It's always a timing issue. And what we saw this time around was because there was noise about a shutdown again in February, that timely pickup that we were expecting really didn't come through. So there was some impact related to it. And we now expect now that there's been a resolution, second, third quarter, we should see that pickup we're expecting in the federal award activity to come through.
Speaker #2: .
Speaker #3: question said ,
Speaker #3: . of a much Yeah . The has , you shutdown know , as we shutdown Gaurav our fourth quarter because that's when we would normally see high level I'll take that impacted awards .
Speaker #3: there And always a up . It's timing that usually the is following quarter , you . And we saw drive more around was operate because there time a shutdown .
Speaker #3: there And always a up . It's timing that usually the is following quarter , you . And we saw drive more around was operate because there time a shutdown .
Speaker #3: there was impact related some
Speaker #3: there's been customers a resolution
Will Gabrielski: Now, what we are seeing on the federal side, and then I'll answer your question on the state and municipal side as well, is we expect in the spring, based on all the information we have and discussions we're having with the parties, is there's probably going to be a new federal bill in this spring that is in discussion for national highways. And that's going to continue to provide positive momentum for our transportation business and ancillary business lines that provide services like environment. When we look at our state and our municipal budgets, they're quite healthy, especially when you look at the larger markets in California, Florida, and Texas. The state tax projections for FY25 collections are better than what they had expected 6 months ago, 12 months ago for a variety of reasons.
Gaurav Kapoor: Now, what we are seeing on the federal side, and then I'll answer your question on the state and municipal side as well, is we expect in the spring, based on all the information we have and discussions we're having with the parties, is there's probably going to be a new federal bill in this spring that is in discussion for national highways. And that's going to continue to provide positive momentum for our transportation business and ancillary business lines that provide services like environment. When we look at our state and our municipal budgets, they're quite healthy, especially when you look at the larger markets in California, Florida, and Texas. The state tax projections for FY25 collections are better than what they had expected 6 months ago, 12 months ago for a variety of reasons.
Speaker #3: see that And third expecting in the should activity come through . Now think , what we we now are seeing to side and this then I'll answer your events , award municipal side as the again is for state spring , on all the based question on we have expect in and the discussions information we're having with the with the is there's going to be a new come back bill , bill in the spring that is what discussion probably National highways .
Speaker #3: we And to continue and positive to momentum for our to ancillary And we business in business lines provide parties , environment business we look at transportation and federal municipal up on they're look at when markets in California , Florida and Texas .
Speaker #3: The and state larger projections for our you better 25 collections are they had 12 months ago . variety reasons . And For a we're level of funding , that confidence through the tax state departments various and municipal , especially .
Will Gabrielski: We're seeing that level of funding, that confidence continue through the various state departments and municipal organizations and departments as well. Great. Thank you so much. Thank you. Your next question comes from a line of Michael Dudas of Vertical Research Partners. Your line is open. Good morning, gentlemen, Lara. Good morning. Good morning, Mike. Troy, as we've indicated, we've talked about the strong book-to-bill and the pipelines and such. Maybe in this quarter or the last few quarters, how has the mix been relative to your historical business of design with some project management and engineering advisory to a more balanced? Are we seeing tangible evidence of that? And then back to your comments on contract pricing, is there any significant in your incoming orders of fixed fee versus cost-plus versus time and materials? Any meaningful change there?
Gaurav Kapoor: We're seeing that level of funding, that confidence continue through the various state departments and municipal organizations and departments as well.
Sangita Jain: Great. Thank you so much.
Speaker #3: continue
Troy Rudd: Thank you.
Speaker #3: well tax departments , as .
Operator: Your next question comes from a line of Michael Dudas of Vertical Research Partners. Your line is open.
Speaker #2: Thank you
Speaker #2: so much
Speaker #2: so much
Michael Dudas: Good morning, gentlemen, Lara. Good morning. Good morning, Mike. Troy, as we've indicated, we've talked about the strong book-to-bill and the pipelines and such. Maybe in this quarter or the last few quarters, how has the mix been relative to your historical business of design with some project management and engineering advisory to a more balanced? Are we seeing tangible evidence of that? And then back to your comments on contract pricing, is there any significant in your incoming orders of fixed fee versus cost-plus versus time and materials? Any meaningful change there?
Speaker #4: .
Speaker #5: Your next question
Speaker #5: of Vertical When Research . Your line is comes from the .
Speaker #5: of Vertical When Research . Your line is comes from the
Speaker #6: Hey , good morning ,
Speaker #6: .
Speaker #7: Good
Speaker #7: morning . Good morning
Speaker #6: Troy , you
Speaker #6: we've healthy indicated , we've about the talked strong Bill and the book to gentlemen . such . Maybe in this quarter or the last few quarters , expected six months ago .
Speaker #6: How is the mix been
Speaker #6: design ? With some line project maybe . burgeoning advisory to a more Great . we seeing balanced .
Speaker #6: Back to — and then comments on contract your pricing. Is there any significance in your orders of fixed fee business versus management and plus versus time and your— is there any meaningful change we can expect?
Speaker #6: back to And then comments on contract your pricing . Is there any significant in your orders of fixed fee business versus management and plus versus time and your .
Will Gabrielski: Is there any meaningful change we can expect maybe in the next few quarters as your book-to-burn stays hopefully relatively strong? Thanks. So I'm going to answer the second question first, which is at the moment, we haven't seen any material changes in terms of the pricing or the discussion with our customers. Again, I think it's when you're talking about long, large programs that it's a little premature to be thinking about how that might change. But again, as I said, what we have been noticing is that what we're bringing to customers is being very well received. And being received as being more value in that equation. And so ultimately, what that does is it's going to help our positioning, help our win rate.
Michael Dudas: Is there any meaningful change we can expect maybe in the next few quarters as your book-to-burn stays hopefully relatively strong? Thanks. So I'm going to answer the second question first, which is at the moment, we haven't seen any material changes in terms of the pricing or the discussion with our customers. Again, I think it's when you're talking about long, large programs that it's a little premature to be thinking about how that might change. But again, as I said, what we have been noticing is that what we're bringing to customers is being very well received. And being received as being more value in that equation. And so ultimately, what that does is it's going to help our positioning, help our win rate.
Speaker #6: Any .
Speaker #6: next few Maybe in the quarters , incoming you book cost the bill , stay as hopefully a relatively change there ? ? evidence of strong .
Speaker #1: So I'm
Speaker #1: second question answer the at moment we haven't Is material any any changes the or the discussion customers . Again , with our think it's talking long , about large programs it's in a little when you're that that might change .
Speaker #1: second question answer the at moment we haven't Is material any any changes the or the discussion customers . Again , with our think it's talking long , about large programs it's in a little when you're
Speaker #1: about how pricing we have been of noticing is that bringing to what we're large , But very well received received . as customers value in being that more terms thinking And so , you know , does is it's going being equation .
Will Gabrielski: Then over time, as we improve our delivery through the use of technology, it will ultimately improve our margins regardless of a change in the profile of our actual contract makeup. And your first question? On the design, project management, advisory, the mix of those services and some of the newer bookings and going forward. Yeah. So we are very intentionally trying to drive a transition so that we have a broader base of business between advisory, program management, design, all rooted in the underlying knowledge and expertise we have in our people around our design work. And so that transition is taking place. We are actually seeing our program management business continue to grow at a slightly faster rate than our design business. And our advisory business, while in its second year of infancy, is also growing at a higher rate.
Michael Dudas: Then over time, as we improve our delivery through the use of technology, it will ultimately improve our margins regardless of a change in the profile of our actual contract makeup. And your first question? On the design, project management, advisory, the mix of those services and some of the newer bookings and going forward. Yeah. So we are very intentionally trying to drive a transition so that we have a broader base of business between advisory, program management, design, all rooted in the underlying knowledge and expertise we have in our people around our design work. And so that transition is taking place. We are actually seeing our program management business continue to grow at a slightly faster rate than our design business. And our advisory business, while in its second year of infancy, is also growing at a higher rate.
Speaker #1: know , to , you our help , our positioning again , as I our win ultimately , what rate . And then over improve our delivery through the use time , as technology , it will improve our ultimately regardless of a change in the we of our our actual is profile up contract of first question make margins
Speaker #6: design advisory . The management project services and some of bookings and going forward .
Speaker #6: Design advisory, the management project services, and some of the bookings and going forward of those.
Speaker #6: design advisory . The management project services and some of bookings and
Speaker #1: very intentionally trying to mix a . transition
Speaker #1: So that we base our business on advisory management, all of it underlying and rooted in the expertise we have—design, knowledge, and design around our program work.
Speaker #1: And so that have a seeing our program management actually business And your continue to at a faster rate than our design business . .
Speaker #1: transition is taking place are
Will Gabrielski: So we are slowly seeing that shift in mix over time with the long-term objective of getting to where advisory and program management represent about 50% of our business. Excellent. Thank you, Troy. Thanks, Mike. Your next question comes from a line of Judah Aranovitz of UBS. Your line is open. Hey, good morning. Thanks for taking my questions. Wanted to ask about international. Given some of the improving trends you talked about in Australia and the Middle East, should we expect a continued trend of book-to-bill greater than one? And then in terms of the margins embedded in those bookings, I'm just curious if we should expect the margin step up in international from some of these bookings, or should we expect kind of a similar margin profile? Hey, Judah. This is Gaurav. I'll take that question. So in regards to international, it's a very good question.
Michael Dudas: So we are slowly seeing that shift in mix over time with the long-term objective of getting to where advisory and program management represent about 50% of our business.
Speaker #1: business . We Well , slightly in , design , is also growing our at a rate . So we are its seeing second year in and mix over with the infancy , objective of to where advisory program slowly about 50% of our long term .
Judah Aronovitz: Excellent. Thank you, Troy. Thanks, Mike. Your next question comes from a line of Judah Aranovitz of UBS. Your line is open. Hey, good morning. Thanks for taking my questions. Wanted to ask about international. Given some of the improving trends you talked about in Australia and the Middle East, should we expect a continued trend of book-to-bill greater than one? And then in terms of the margins embedded in those bookings, I'm just curious if we should expect the margin step up in international from some of these bookings, or should we expect kind of a similar margin profile? Hey, Judah. This is Gaurav. I'll take that question. So in regards to international, it's a very good question.
Speaker #1: getting
Speaker #1: management
Speaker #6: Excellent . Thank you . Troy
Speaker #6: Excellent . Thank you .
Speaker #6: Excellent . Thank you . Troy
Speaker #6: .
Speaker #5: next from the line of . Your Judah broader question comes Aronowitz of UBS . business Your time .
Speaker #8: Thanks for Hey . Good morning . represent
Speaker #8: Middle the we expect a trend of book to build continued one ? And then of the margins embedded in those bookings , should curious greater than expect a margin up I'm just international from some of bookings , or should we expect kind some of of similar margin in profile these
Speaker #3: Judah , this is Gary . that question Thanks , So in
Speaker #3: Judah , this is Gary . that question Thanks , So
Will Gabrielski: If you look at over the last six months, we've delivered a very strong book-to-burn. And one would think with that strong book-to-burn. Valid question is, how does the pipeline look? Well, the great news is our pipeline is still up. And not only is it up, it's up double-digit percentage, again, on the early stage. So overall, the pipeline is up. Early-stage pipeline is up. It all bodes well for what Lara had explained earlier, that we are seeing early signs of a good inflection point coming in our Australia and our Middle East business. Now, at the same time, just to make sure we're consistent in the information we're sharing with you guys, we are expecting headwind from working days in Q4. So we expect the second half will be inflection point for international.
Judah Aronovitz: If you look at over the last six months, we've delivered a very strong book-to-burn. And one would think with that strong book-to-burn. Valid question is, how does the pipeline look? Well, the great news is our pipeline is still up. And not only is it up, it's up double-digit percentage, again, on the early stage. So overall, the pipeline is up. Early-stage pipeline is up. It all bodes well for what Lara had explained earlier, that we are seeing early signs of a good inflection point coming in our Australia and our Middle East business. Now, at the same time, just to make sure we're consistent in the information we're sharing with you guys, we are expecting headwind from working days in Q4. So we expect the second half will be inflection point for international.
Speaker #3: very good If you at last question . six months , we've delivered look very strong book to And one would think with that strong book to burn , valid over the question is burn .
Speaker #3: how does to look ? Well , great news . Is our still up . And not only is it up , . it's up double digit step on the early percentage again stage .
Speaker #3: it's pipeline is early stage pipeline is
Speaker #3: up pipeline is pipeline bodes So for what had well explained earlier are seeing a good inflection point coming in our our business . Now at the same Middle East time , you know , just a up sure consistent in information , we're sharing with you Australia and guys , we are expecting had headwind overall , the from working Q4 .
Speaker #3: Laura And when days in margin always manage the business from a from an enterprise standpoint we have that we signed current the early up for in gross is margin we're expansion of somewhere around 90 to 100 bips at the level you investments we're net the on technology in the said we year , expect 30 Bips of of margin expansion and our making expectation both is Americas and international will deliver good , strong we margin expansion .
Will Gabrielski: You just have to look out for that adjustment on the Q4 workdays. When we look at from a margin profile, we've always said we manage the business from an enterprise standpoint. What we have signed up for in the current year is gross margin expansion of somewhere around 90 to 100 bips at the enterprise level. Once you net the investments we're making on technology in the current year, expect 30 bips of margin expansion. Our expectation is both Americas and International will continue to deliver good, strong margin expansion net of those technology investments that we have laid out beginning of the year because that's just the culture of continuous improvement that has percolated throughout the organization. We always try to deliver better than what we have signed up for. Okay. Thanks.
Judah Aronovitz: You just have to look out for that adjustment on the Q4 workdays. When we look at from a margin profile, we've always said we manage the business from an enterprise standpoint. What we have signed up for in the current year is gross margin expansion of somewhere around 90 to 100 bips at the enterprise level. Once you net the investments we're making on technology in the current year, expect 30 bips of margin expansion. Our expectation is both Americas and International will continue to deliver good, strong margin expansion net of those technology investments that we have laid out beginning of the year because that's just the culture of continuous improvement that has percolated throughout the organization. We always try to deliver better than what we have signed up for. Okay. Thanks.
Speaker #3: So expect the second half will be point for inflection . And you just have to look out for that international signs of adjustment on the Q4 workdays .
Speaker #3: continue to , net Once of those technology that we have beginning of the laid out Because that's just , you know , of continuous has percolated organization .
Will Gabrielski: And then where do you think we are in the bigger picture of America? Is there any acceleration potential here, or should we just expect steady growth? Sorry, Judah. Is that question specific to margins or just organic? Oh, no. Top line, organic growth. Thanks. Top line. Yeah. As I mentioned before, we're seeing very good trends in our Americas business, especially when you look at our backlog. It's up 3% year-over-year. Our pipeline is up 20% overall. Early-stage pipeline is up 34%. IIJA funding, including the matching that state governments are doing on the transportation projects to take advantage of the funds that are available at the federal level from IIJA, all these portend really strong to drive growth.
Judah Aronovitz: And then where do you think we are in the bigger picture of America? Is there any acceleration potential here, or should we just expect steady growth? Sorry, Judah. Is that question specific to margins or just organic? Oh, no. Top line, organic growth. Thanks. Top line. Yeah. As I mentioned before, we're seeing very good trends in our Americas business, especially when you look at our backlog. It's up 3% year-over-year. Our pipeline is up 20% overall. Early-stage pipeline is up 34%. IIJA funding, including the matching that state governments are doing on the transportation projects to take advantage of the funds that are available at the federal level from IIJA, all these portend really strong to drive growth.
Speaker #3: We always have that improvement, that up for culture, try to.
Speaker #8: Thanks . And Okay . where do have signed the in
Speaker #8: Thanks . And Okay . where do have signed the in the
Speaker #8: Or should we just then expect steady growth?
Speaker #3: Sorry , Judah , is that question Is there any margins potential here just specific to or organic ?
Speaker #8: I line acceleration top
Speaker #3: Top line ? We're than what we
Speaker #3: in our trends business
Speaker #3: in our trends
Speaker #3: when you backlog . organic up 3% year over Our year . year . Early stage 20% pipeline is our overall . Iija funding , including the up matching that state governments are doing on the take projects to growth , bigger before , we're transportation up 34% .
Will Gabrielski: And as we've laid out, it gives us a lot of confidence that we're going to be delivering growth consistent with what we signed up for, which is on constant currency, organically delivering 6% to 8% in the current year. Your next question comes from a line of Nandita Nayar of Bank of America. Your line is open. Hey, everyone. This is Nandita Nayar from Mike Feniger. Thanks for taking my questions. So I was just hoping if you guys could just provide a bit more color around the 1.5 times book to bill during the quarter, particularly the 2.3 times in international. You mentioned some impressive wins there earlier in the call. But just high level, if you could break it down, how much would you say was that, was the overall market?
Nandita Nayar: And as we've laid out, it gives us a lot of confidence that we're going to be delivering growth consistent with what we signed up for, which is on constant currency, organically delivering 6% to 8% in the current year. Your next question comes from a line of Nandita Nayar of Bank of America. Your line is open. Hey, everyone. This is Nandita Nayar from Mike Feniger. Thanks for taking my questions. So I was just hoping if you guys could just provide a bit more color around the 1.5 times book to bill during the quarter, particularly the 2.3 times in international. You mentioned some impressive wins there earlier in the call. But just high level, if you could break it down, how much would you say was that, was the overall market?
Speaker #3: of the available at the federal level from advantage Iija . All these pretend really strong drive growth . And as laid out , it a lot of confidence that to be delivering consistent to which is constant currency , organic on , 6 to 8% in the current delivering year .
Speaker #3: we've funds that we're going
Speaker #5: Your signed up for , question comes from the line Nayyar of Bank of line is America . open Your .
Speaker #9: Hey
Speaker #9: Thanks for taking questions my just I was hoping
Speaker #9: was You mentioned some wins everyone , impressive next earlier in the there call , but just high level . If you could the break it down , how much would you say gives us was that was like the overall much would you say was was market and how by kind secured of leveraging your AI capabilities ?
Speaker #9: Just hoping, so guys, could you just provide a bit more color around the 1.5 times book-to-bill during the quarter, particularly if you could comment on the 2.3 times in International?
Will Gabrielski: And how much would you say was secured by kind of leveraging your AI capabilities? Yeah. And then this is Gaurav. I'll take that question for you. So yeah, we delivered very strong backlog growth on the back of what we delivered in Q4, which was also exceptionally strong in our international business. And as Lara pointed out, outside of our Asia business, every other region, UK, Americas, Australia, New Zealand, and Middle East, all drove to that very healthy, exceptional backlog growth and book-to-burn that you see. And the drivers of it are many, many drivers to it. Our clients, as Troy has mentioned, they were dealing with a lot of geopolitical questions, over 60+ election cycles that our clients were going through. So they were looking for some level of stability, which occurred. And you always have to take a step back.
Nandita Nayar: And how much would you say was secured by kind of leveraging your AI capabilities? Yeah. And then this is Gaurav. I'll take that question for you. So yeah, we delivered very strong backlog growth on the back of what we delivered in Q4, which was also exceptionally strong in our international business. And as Lara pointed out, outside of our Asia business, every other region, UK, Americas, Australia, New Zealand, and Middle East, all drove to that very healthy, exceptional backlog growth and book-to-burn that you see. And the drivers of it are many, many drivers to it. Our clients, as Troy has mentioned, they were dealing with a lot of geopolitical questions, over 60+ election cycles that our clients were going through. So they were looking for some level of stability, which occurred. And you always have to take a step back.
Speaker #3: , I'll take question you . So delivered very strong backlog growth on the we delivered in in Q4 , which was also exceptionally strong in our international pointed out our , outside every other that .
Speaker #3: and UK I Australia , New Zealand and drove to that of East very all backlog exceptional book to burn that you and back drivers of it That are the , many drivers it clients as Troy .
Speaker #3: out , they were dealing with a many to , growth and of geopolitical questions over election election Our clients through . So they for were looking some of stability some level see .
Will Gabrielski: And this is going to also delve into your second part of your question as to how much is technology, AI, driving the outcomes of this? We operate in an industry where the demand for our services far outstrips the funding that exists, right? If you look at the stats that I've shared previously, approximately 30% to 40% of the world's population lives in metropolitan cities over the next three decades. Estimates are it's going to double in size, where the infrastructure that we currently have in these cities needs significant upgrade, replacement, new construction. So once you start laying it out, it kind of builds support to what we see on the ground and what our clients are telling us.
Nandita Nayar: And this is going to also delve into your second part of your question as to how much is technology, AI, driving the outcomes of this? We operate in an industry where the demand for our services far outstrips the funding that exists, right? If you look at the stats that I've shared previously, approximately 30% to 40% of the world's population lives in metropolitan cities over the next three decades. Estimates are it's going to double in size, where the infrastructure that we currently have in these cities needs significant upgrade, replacement, new construction. So once you start laying it out, it kind of builds support to what we see on the ground and what our clients are telling us.
Speaker #3: you know , you which always have And , back . And this is going to to take a occurred second part of your question as into your to step AI driving the outcomes how much is this delve operate ?
Speaker #3: in an where industry our technology , services Far We . previously approximately , 30 to 40% of the world's cities three decades . in next over the in size , where metropolitan double currently have in these .
Speaker #3: significant to also upgrade , infrastructure that we new construction . So start laying it out , it kind of builds Estimates are exists support we see on the demand for what our outstrip the us .
Will Gabrielski: Then when you piggyback our technical expertise, our résumé of delivering world-class solutions to our clients with the domain expertise, our clients are always asking us, and they're reaching out to our teams as we've laid out our technology roadmap, "Okay, how will you drive a better return on their CapEx, on their investments? How will we deliver assets on a concrete firm deadline for them? How will we reduce delivery risk for them?" So when you combine all these things into a solution for the client, clients are willing to discuss how to drive symmetry in commercial terms so all parties drive value from it. And again, I'll revert back to a great example, which is part of this exceptional book-to-burn we've delivered in our international business. It's for the Scottish Water. This is a client that we had practically no exposure for.
Nandita Nayar: Then when you piggyback our technical expertise, our résumé of delivering world-class solutions to our clients with the domain expertise, our clients are always asking us, and they're reaching out to our teams as we've laid out our technology roadmap, "Okay, how will you drive a better return on their CapEx, on their investments? How will we deliver assets on a concrete firm deadline for them? How will we reduce delivery risk for them?" So when you combine all these things into a solution for the client, clients are willing to discuss how to drive symmetry in commercial terms so all parties drive value from it. And again, I'll revert back to a great example, which is part of this exceptional book-to-burn we've delivered in our international business. It's for the Scottish Water. This is a client that we had practically no exposure for.
Speaker #3: clients are piggyback telling delivering of to our technical clients with the class the of you clients are asking domain they're expertise technology our Okay , roadmap .
Speaker #3: a how laid out better as we've drive funding that return their we investments ? on their deliver assets on a concrete deadline for them ?
Speaker #3: We reduce delivery risk. How will things be for the firm? Clients are willing to discuss how client commercial terms affect them once you—so all—so when you drive from value, it—
Speaker #3: we reduce delivery risk How will things for the firm , clients are willing to discuss how client commercial terms . them ? once you So all So when you drive How will And again , world back to a symmetry and great parties which is part of this exceptional book to will you burn .
Will Gabrielski: In fact, as we were positioning ourselves for the RFP response, there was already an incumbent. By the way, this is the largest contract this client has let out in their history. It's a decade-long program that only 2 contractors were selected for to deliver. Every single competitor of ours was pursuing this contract. Everybody brought their best game to the table. During that process, the client asked us, "They're willing to sign an NDA to understand what we have developed and what we will be developing over the next quarter, the next few years." Clearly, we were 1 of the 2, including the incumbent, that were successful in securing this nine-figure contract over a 10-year period.
Nandita Nayar: In fact, as we were positioning ourselves for the RFP response, there was already an incumbent. By the way, this is the largest contract this client has let out in their history. It's a decade-long program that only 2 contractors were selected for to deliver. Every single competitor of ours was pursuing this contract. Everybody brought their best game to the table. During that process, the client asked us, "They're willing to sign an NDA to understand what we have developed and what we will be developing over the next quarter, the next few years." Clearly, we were 1 of the 2, including the incumbent, that were successful in securing this nine-figure contract over a 10-year period.
Speaker #3: delivered We've in our national business . the Scottish win . this And is a that we had for practically no Water client It's for , over positioning fact .
Speaker #3: as we RFP response , there was And by the largest incumbent . were out in client has their history . is the It's a long for exposure only already a two contractors were program that to deliver selected for and every single competitive way , this ours was contract decade of contract brought their .
Speaker #3: pursuing let this best game to the Everybody table . And the process , asked us they're sign an willing NDA to to understand we have developed and what we will what over next quarter .
Speaker #3: few during . And The the be , next of the two , incumbent , that were were one we successful in nine figure securing including the clearly contract years period .
Will Gabrielski: And this is a very early proof point, but a clear proof point, that clients are looking for that complete solution, for the value, for the age-old problems that they've always had. So it gives us a lot of confidence as we continue to make these investments and arm our teams with better solutions in the marketplace to create value for their clients. Got it. That's super helpful. And also, guys, we've been hearing a slight change in the tone regarding the reauthorization bill with some conversations around a CR potentially entering the discussion. Just curious, what's the latest you guys have been hearing on the ground? And what would you say could be the best-case, worst-case scenario here? Thanks, guys. I'll pass it over. Okay. Thank you.
Nandita Nayar: And this is a very early proof point, but a clear proof point, that clients are looking for that complete solution, for the value, for the age-old problems that they've always had. So it gives us a lot of confidence as we continue to make these investments and arm our teams with better solutions in the marketplace to create value for their clients. Got it. That's super helpful. And also, guys, we've been hearing a slight change in the tone regarding the reauthorization bill with some conversations around a CR potentially entering the discussion. Just curious, what's the latest you guys have been hearing on the ground? And what would you say could be the best-case, worst-case scenario here? Thanks, guys. I'll pass it over. Okay. Thank you.
Speaker #3: this So , you know , the age of it gives confidence as continue to make these we and arm teams with for the in the solutions create for that value for our their and , .
Speaker #3: this And will this is very early proof proof point that but a clear point , over clients are complete solution value for problems that they've always had .
Speaker #9: Got
Speaker #9: helpful .
Speaker #9: And you in the change know , tone . You reauthorization bill with
Speaker #9: And you in the change know , tone . You reauthorization bill with
Speaker #9: know ,
Speaker #9: a potentially entering the discussion . it . curious , Just what's the latest marketplace to you guys old That's the have been And what ground ?
Will Gabrielski: I think the answer is that we now have, at least in terms of the federal government, we now have, for the most part, all of the funding put in place through the end of the year. And what we do here is that there are some key long-term authorizations that need to be put in place as we move into 2026. And those discussions are positive, and they're moving forward. Beyond that, of course, it's virtually impossible to predict the US federal government legislative agenda. But in terms of the tone, I agree with what you described. It's certainly a positive tone in Washington. With no further questions, that concludes our Q&A session. I'll now pass the call over to Troy for closing remarks. Yes. Thank you, operator. And let me just conclude with two things.
Nandita Nayar: I think the answer is that we now have, at least in terms of the federal government, we now have, for the most part, all of the funding put in place through the end of the year. And what we do here is that there are some key long-term authorizations that need to be put in place as we move into 2026. And those discussions are positive, and they're moving forward. Beyond that, of course, it's virtually impossible to predict the US federal government legislative agenda. But in terms of the tone, I agree with what you described. It's certainly a positive tone in Washington.
Speaker #9: would you around better worst scenario here ? guys . I'll pass it over CR investments us a lot .
Speaker #4: . Okay case
Speaker #1: Thank you
Speaker #1: is answer think the that we . have , at least I in terms of the federal we have best case , part , government , all Thanks , of the most put in funding through year .
Speaker #1: And what here is that there of the are some term the end authorizations now put in that place as you move key long now positive and beyond that , of course , it's impossible to predict the the government legislative agenda virtually but .
Operator: With no further questions, that concludes our Q&A session. I'll now pass the call over to Troy for closing remarks.
Speaker #1: Tone, in terms of that. But what you—it's certainly a positive described. Need to be...
Troy Rudd: Yes. Thank you, operator. And let me just conclude with two things. First of all, thank you, everyone, for joining us today and appreciate the questions and the dialogue. And second, and very importantly, I want to thank all of our professionals and our AECOM folks around the world that have done such an outstanding job this quarter and continued an outstanding job delivering value for their clients. It proves. It shows up in our results. Thank you very much.
Speaker #5: With
Speaker #5: no further questions . That concludes Will now our call over
Speaker #5: session . .
Will Gabrielski: First of all, thank you, everyone, for joining us today and appreciate the questions and the dialogue. And second, and very importantly, I want to thank all of our professionals and our AECOM folks around the world that have done such an outstanding job this quarter and continued an outstanding job delivering value for their clients. It proves. It shows up in our results. Thank you very much. This concludes today's conference call. You may now disconnect.
Speaker #5: remarks
Speaker #5: .
Speaker #1: Operator . you . Yes just And let me conclude with two things . First of all , thank you , everyone , for joining us questions and the that .
Speaker #1: Operator . you . Yes just And let me conclude with two things . First of all , thank you , everyone , for joining us questions and the
Speaker #1: appreciate the And second , . in agree with want to thank all of very pass the Thank importantly , I today and Washington and our folks around the done such world outstanding an that have quarter and professionals to an outstanding delivering job this It it value for
Operator: This concludes today's conference call. You may now disconnect.
Speaker #1: it our results our continue . Thank you much their federal
Speaker #1: shows up in
Speaker #1: . today's
Speaker #5: call . it . may now very disconnect This
