AECOM : Program Management + Water Event Transcript

RBCCM

Global Engineering Deep Dive Series

AECOM (ACM US) Water + Program Management

April 2, 2024

Sabahat:

Good morning everyone. My name is Sabahat Khan and I want to welcome you to

another installment of our RBC Global Engineering Deep Dive Series. This

morning we're pleased to be joined by the Senior Management team from

AECOM. The topic today will be Program Management and Water. We'll dig

into AECOM's practices on those two topics. The two leaders from those two

practices will walk us through AECOM's business, key points of differentiation

and how AECOM wins business in this space. And more importantly, the outlook

for those two end markets.

In terms of format here, I'm going to pass the call over shortly to Will Gabrielski,

VP Finance and Treasury and Investor Relations at AECOM. He'll introduce the

team; we'll get right into the presentation portion after that. And at the end we

will have Q&A for the audience that is dialed in. In the platform in front of you,

you can submit questions as the session goes on or as the speakers are presenting;

and I can convey those questions to the speakers. And you can do that kind of

throughout the session. Without further ado, Will, maybe I'll pass it over to you to

introduce the team and kick off the session. Thank you.

Will:

Awesome. Thank you Saba. I'll begin with a brief overview of AECOM and what

makes us an attractive investment opportunity; and then as you noted, we'll turn it

over to the business leaders. But first, for those of you who don't know us, we're

the world's trusted infrastructure consulting firm. We are going through, as you

can see, globally an infrastructure investment upcycle; and we think we're ideally

suited for this trend as a leader in our industry.

We're consistently ranked at the top of our industry in terms of key end markets.

So that's transportation, water, environment and facilities. Second, we've built a

real big competitive advantage in our industry, the results of which is evident in

our strong organic growth; record levels of profitability; 20% EPS growth CAGR

over the past several years; and our consistently strong free cashflow generation.

We have 52,000 of the industry's best technical experts. And today we'll talk

about how we're compounding that advantage by expanding our share of the high

value elements of an infrastructure project through program management and

advisory, which is what drew leads for AECOM.

And then finally, we have a very disciplined return focus capital allocation

program. First and foremost investments in organic growth for the highest and

best use of our capital. And then second we have a strong focus on repurchasing

our stock, which we do. It's continuing to trade at a discount. And two years ago

we launched a dividend program with a commitment to grow that dividend at a

double-digit CAGR every year. And in the first two years we increased it at an

average of 21%.

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I know today is a virtual event, but given we're speaking to a Toronto host, I

thought it would be worthwhile to point out our involvement in the area. So we're

involved in several key projects in the Toronto area, Ontario and South Hamilton

LRT was a delivery partner on the Eglinton Crosstown West Expansion. We're

doing a lot of work for the Greater Toronto Airport Authority, including master

planning work to help them with their environmental goals.

And in water, which Bev will speak to, we see a big opportunity, given the

expected increasing in housing supply; and recently had a large win for a water

process expansion project where our ability to implement digital solutions around

the client depth(?) for automation gave us a big competitive leg up. So Canada is

one of our core markets and one of our fastest-growing markets.

I'm going to turn it over to Drew who joined AECOM in 2021 with 39 years of

experience, including 23 years in the Airforce where he reached the rank of

Colonel. Today Drew leads AECOM's program management business and has

spearheaded the more than doubling of that business over the past two years. And

then Dr. Beverley Stinson who oversees our water practice will speak about our

business, with 30 years of experience and a Ph.D. in engineering. These really are

two great leaders that are very representative of the strength of our teams at

AECOM. And I'm looking forward to the conversation. So with that I will turn it

over to Drew.

Drew:

Thank you very much Will; and it's great to join you all today. Appreciate your

time and the opportunity to talk to you about our story, a story we're having fun

in and it's pretty exciting. And we believe this is going very well.

As Will mentioned, I spent the first half of my professional career as a US

Airforce Civil Engineering Officer, planning, building, managing infrastructure

on big airbase cities around the world. I joined CH2M Hill as I retired as a

Colonel in 2007. And that was really a Godsend for me in that CH2M Hill at the

time was really the preeminent program management company in the world,

delivering big jobs like the London Olympics and the Panama Canal expansion

and $10 billion Korea military base and large airports.

And so I learned program management from a civilian perspective really in the

best kind of learning laboratory. CH was #1 in program management for about 12

to 13 years in a row. And then CH was bought by Jacobs at the end of 2017. I was

asked to stand up the program management business within Jacobs, which I did,

and was there for about 2.5, 3 years. I found professionally that there was a

growing mismatch for me there; and so I went to Hill International. Was the

President of their Americas business unit for about less than a year when Troy

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focus really builds significant high value opportunities, as Drew commented on.

We have very much a leadership focus in securing those major projects.

But our other big enablers for growth are, of course, digital. And we talked a lot

about these complex integration projects. It is really meaningful when we bring

together our culture across business line collaboration to be able to no longer

address things in a silo, but holistically. And that holistic approach is really driven

by how we approach it as a program. And I think this is a game-changer. It's

really setting a new standard of how to deliver programs.

And we see the benefit of that across all of our end markets, public, private and

federal. We'll go to the next slide and just share a couple of those examples

recently.

And our clients are really seeking that streamlined, consistent comprehensive

delivery of their programs, no longer just fast getting things in projects; but they

want a holistic outcome. And this is where - this approach for marrying our

project and our program management with our water technical expertise made the

significant difference in securing these two very important projects highlighted

here.

One is an agency in Southern California, Metropolitan Water with their Southern

California program to bring a new resilient source of water to serve over 15 to 20

million people in Southern California. And it was that overarching programmatic

approach to deliver the outcomes that that client was seeking for the region that

really was the attraction in how we would bring more technical expertise.

And the same was true with FEMA. We were very aware of FEMA's desire to

have consistency, transparency in how they actually responded, delivered grant

approvals. And this is the first time that FEMA has taken its public assistance

grant reviews into one team, which was with AECOM. And so now we are

delivering our program through programmatic approach, which has aligned(?)

consistency and delivery for its programs.

So I think we're seeing tremendous benefit that our clients are seeking to deliver

these programs in a more consistent, transparent and a cost-effective manner,

through our programmatic delivery mechanism. So with that I think we'll take

questions.

Sabahat:

Thank you both for that. That was a lot of great color that you shared with us.

Again, for the benefit of the audience, we do have some questions already; but the

platform in front of you does allow you to submit questions as this session goes

on.

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But they're not normally equipped to, or have the expertise to make those critical

decisions, the right decisions at scale, at pace. And so we bring an incredible

amount of expertise into the client team to help them do just all kinds of things.

And so we think that we've really just kind of found the right balance and are so

committed to this area. As I mentioned, I mean Troy I think it was a month in that

he -- and it was the first time that I heard it was when he mentioned it to the

investors three years ago that we're going to double the business in three years.

That was the first I heard of it. And I thought oh my goodness.

I wish he had told me that before, while we were still kind of in the interview

process. But he's committed to this. And the AECOM board and the executive

leadership team, Bev and I and the other three global business line leaders, the

seven regional execs at AECOM, those 12 execs in the business. It's a full team -

it's a full-court press, everybody committed to this. And that's why we're

succeeding. This is not just kind of me and my team and that sort of thing. And so

we're committed to it.

And then the other thing I think is that I don't believe that the messaging of the

others is as focused as we are on the outcome. That's a risky kind of place to go,

because it's a complex world; but they know that we are fully committed to

helping them to be successful. And in the course of a 5, 10-year program, there'll

be lawsuits; there'll be funding lapses; there'll be regulatory changes; there'll be

public perception swings; there'll be leadership changes in the client organization.

There'll be a lot of things to navigate.

And so if you're not committed to that outcome that's at the endgame, that at the

beginning you said this business case was about, you're going to get into a mode

of just kind of supplying P&C and services to the client and sending them a bill.

And that you may be doing an okay job with that; but we're kinda ticken that up a

notch and saying, no, we're going to continue to help you solve this problem until

you're successful at the end of the ring.

Sabahat:

Great. And then the next question from the audience. The first portion will be for

Dr. Stinson and then maybe the second part for Will here. Is there any way to

measure your expertise apart from win rate across your practice, within water?

And then as - and then the second part is, any way we talk about your expertise

outside of water compares to your peers? Is it as low ranked as the water practice

might be?

Beverley:

So in terms of metrics aligned, our technical expertise, I think certainly yes, win

rate is a very good indicator. But really, our revenue generation and our EBITDA

are really the things that at the end of the day demonstrate the excellence that we

are delivering. And we only are able to do that because our clients are seeing the

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