AECOM Analyst Meeting

Transcription

1 AECOM Q4 and Full Year FY2011 Earnings Presentation Page 1

2 Disclosures Safe Harbor Except for historical information contained herein, this presentation contains forward-looking statements. All statements other than statements of historical fact are forward-looking statements for purposes of federal and state securities laws, including any projections of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words may, will, estimate, intend, continue, believe, expect or anticipate and other similar words. Although we believe that the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, such as those disclosed in this presentation. Important factors that could cause our actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in forward-looking statements include, among others, the following: uncertainties related to appropriations for funding of, or issuing notices to proceed under, government contracts; our relationships with governmental agencies that may modify, curtail or terminate our contracts; delays in the completion of the budget process of the U.S. government could delay procurement of our services; potential adjustments to government contracts which are subject to audits to determine reimbursable contract costs; adverse results from losses under fixed-price contracts; limited control over operations run through our joint venture entities; misconduct by our employees or consultants or our failure to comply with laws or regulations applicable to our business; current deficits in our defined benefit plans could grow in the future and create additional costs; exposure to legal, political and economic risks in different countries as well as currency exchange rate fluctuations; risks related to security in international locations; failure to successfully execute our merger and acquisition strategy; the need to retain the continued services of our key technical and management personnel and to identify and hire additional qualified personnel; uncertainties about security clearances for our employees; the competitive nature of our business; our liability and insurance policies may not provide adequate coverage; unexpected adjustments and cancellations related to our backlog; dependence on other contractors or subcontractors who could fail to satisfy their obligations; systems and information technology interruption; changing client preferences/demands, fiscal position and payment patterns; and the continuing economic downturn in the U.S. and international markets and tightening of the global credit markets. Additional factors that could cause actual results to differ materially from our forward-looking statements are set forth in our Annual Report on Form 10-K for the period ended September 30, 2012, and our other filings with the Securities and Exchange Commission. We do not intend, and undertake no obligation, to update any forward-looking statement. Non-GAAP Measures Certain measures contained in these slides and related presentation are not measures calculated in accordance with generally accepted accounting principles (GAAP). They should not be considered a replacement for GAAP results. Non-GAAP financial measures appearing in these slides are identified in the footnotes. A reconciliation of these non-gaap measures to the most directly comparable GAAP financial measures is available on the Investors section of our Web site at: Page 2 Q4 and Full Year FY2011 Earnings Presentation Page 2

3 Agenda I. Organic Growth Opportunities II. John M. Dionisio Chairman and Chief Executive Officer Jane A. Chmielinski Chief Operating Officer Frederick W. Werner President, EMEA Balanced Capital Allocation Priorities Michael S. Burke President III. Financial Discipline Steve M. Kadenacy Chief Financial Officer Q4 and Full Year FY2011 Earnings Presentation Page 3 Kingdom Centre, Riyadh, K.S.A. Page 3

4 AECOM Today The Global Enterprise 2 segments, 5 end markets and over 30 market sectors Leverage global end-to-end service platform and diversification across services, end markets, geographies and funding sources. AECOM Segments Professional Technical Services (PTS) Management Support Services (MSS) End Markets Market Sectors Facilities Commercial, Data Centers, Education, Government, Health Care, Hospitality, Sports and Entertainment Transportation Aviation, Highways and Bridges, Freight Rail, Transit, Ports and Marine Environmental Chemicals/ Pharmaceutical, Government, Manufacturing, Water, Wastewater Power, Energy & Mining Power/Electric Utilities, Hydropower, Geothermal, T&D, Wind and Solar, Mining, Oil & Gas Cyber Support, Contingency Support, Information Management, International Development, Linguistics, Logistics and Field Services, Operations and Maintenance, National Security Programs Q4 and Full Year FY2011 Earnings Presentation Page 4 Page 4

5 Diversified Geographies, End Markets, Funding Sources, and Services Services Planning Consulting Architecture and Engineering Design Program/ Construction Management Operations and Maintenance Cyber Security/ I.T. Services Logistics/ Support Services End Markets MSS 12% 13% Power, Energy & Mining Geographies Environmental 18% 25% Transportation Funding Sources Americas 50% 28% Asia-Pacific Facilities 32% Non-U.S. Government 25% 39% Private 22% EMEA U.S. State/Local 17% 19% U.S. Federal Notes: Estimated funding sources and end markets based on Q4 FY12 gross revenue. Estimated geographies based on Q4 FY12 net service revenue where work is performed. Q4 and Full Year FY2011 Earnings Presentation Page 5 Page 5

6 AECOM Long-Term Goals and Objectives 1. Increase shareholder value through balanced capital allocation and financial discipline. 2. Increase mix of high-margin technical and construction services. 3. Five-year plan driven predominantly by organic growth. 4. Increase mix of private sector clients. 5. Increase penetration in top 100 private and multinational clients. 6. Increase revenue and profit from emerging markets in Africa, China, India, the Middle East, Eastern Europe, Latin America and natural resource rich economies. Los Angeles International Airport, California, U.S.A. Cleveland Clinic Rendering, Abu Dhabi, U.A.E Sutong Bridge, Jiangsu, China Q4 and Full Year FY2011 Earnings Presentation Page 6 Page 6

7 Catalysts for Growth: Strong Industry Fundamentals (Urban population, billions of people) 0.4 Urbanization billion people in cities Emerging markets (% of world GDP) China India Other Source: United Nations Asia Africa RoW Source: International Monetary Fund Demand for natural resources (World energy consumption, quadrillion Btus) 800 Non-OECD OECD Aging infrastructure Estimated investment needed in developed countries: Source: U.S. Energy Information Administration Q4 and Full Year FY2011 Earnings Presentation Page 7 Source: OECD estimate for investment in roads, water, electricity, telecommunications and rail in OECD countries up to 2030 Page 7

8 Large and Growing Infrastructure Spend Across all Regions Europe, Middle East & Africa Annual Expenditure: $1.3 trillion 5-year CAGR: 7%* Americas Annual Expenditure: $1.1 trillion 5-year CAGR: 5%* Asia Pacific Annual Expenditure: $2.1 trillion 5-year CAGR: 9%* *CAGR ( ) expenditures based on entire regions. Sources: Business Monitor, Global Insight and AECOM estimates Q4 and Full Year FY2011 Earnings Presentation Page 8 Page 8

9 Enhancing Operational Excellence and Extending Competitive Advantage Operational Priorities Strengthen client relationship management approach Strengthen performance management feedback and dialogue Continue improvement in project delivery Improve risk management capabilities and results AECOM Differentiators Integrated service delivery model Mega project credibility Extensive local presence backed by global expertise Breadth and depth of technical expertise Client relationships number and quality Industry leadership Q4 and Full Year FY2011 Earnings Presentation Page 9 Page 9

10 Organizational Structure as Driver of Growth and Improved Client Experience Advance the matrix and optimize management structure. Clear roles and responsibilities leading to faster decision making. This will allow us to: Further integrate service offerings with end market focus. Enhance collaboration among business lines and across the super geography. Advance technical practice networks. Simplify all work streams. Q4 and Full Year FY2011 Earnings Presentation Page 10 Page 10

11 Global Business Line Priorities Execution on growth strategies across entire enterprise. Identify Hire Retain marquee industry luminaries. Position AECOM in emerging geographies. Develop the thought leaders in our space as a competitive advantage. Serve as the conduit to ensure we deliver world-class solutions/talent to our clients around the globe matched with equally strong professionals in each geography and region. Q4 and Full Year FY2011 Earnings Presentation Page 11 Page 11

12 Strategic Use of Global Expertise for Organic Growth Leveraging the Global Enterprise Creating Centers of Excellence to deliver high-quality solutions. Example: 80% of hydro work performed in Canada is for projects located outside of Canada. Examples of Global Centers of Excellence Sports Health care Hydropower Mass transportation Industrial design Building engineering Infrastructure design Mining Oil & Gas Q4 and Full Year FY2011 Earnings Presentation Page 12 Note: Centers of Excellence are at varying stages of development. Page 12

13 Strategic use of Global Expertise for Organic Growth Leveraging the Global Enterprise Leveraging our global enterprise presents significant growth opportunity and superior solutions for our clients. Health Care Case Study Global Health Care Infrastructure spend $90+ billion annually. King Khalid Medical City King Khalid Medical City Damman, Saudi Arabia $1.2 billion medical city comprising 1,500- bed hospital and research center, office buildings and staff accommodations. AECOM delivering $28 million contract to provide architecture, engineering design and production services. Project execution will leverage health care experts from across AECOM. Health Care Center of Excellence Project staffing Saudi Arabia Page 13

14 Organic Investments: Growing with Top Multinational Clients Top MNCs continue to accelerate CapEx Key clients for AECOM thru M&A Trends match well with AECOM s strengths Clients looking for consistent delivery across global platform Infrastructure development key to success AECOM investments focused on expanding offering in key core markets Industrial client: AECOM in 17 countries Oil & Gas client: AECOM in 21 countries Mining client: AECOM in 5 countries Note: Each symbol represents a country where AECOM has delivered one or more Q4 and Full Year FY2011 Earnings Presentation Page projects 14 for the specified MNC client. BKS Page 14

15 Organic Investments: Capitalizing on Growth Markets Middle East Case Study Example: Middle East Goal Expand Middle East presence by capitalizing on growth markets of Saudi Arabia and Qatar. CapEx $500Bn in Saudi Arabia; $100Bn in Qatar over next 5 years. New Doha Port, Doha, Qatar Construction contract awards, $ billions Saudi Arabia Qatar 9% E 57% 34% U.A.E. Saudi Arabia Qatar 16% 63% 21% $95 billion $290 billion U.A.E. Opportunity Plan Leverage strong AECOM footprint in Middle East with over 4,000 personnel (1,500 in Saudi Arabia) and operating over 30 years. Focus on AECOM strengths in infrastructure, health, sports & commercial. Bring global expertise matched with strong local delivery. Increased military sales from U.S. government. Note: Excludes Oil & Gas investments Source: MEED Page 15

16 Agenda I. Organic Growth Opportunities II. John M. Dionisio Chairman and Chief Executive Officer Jane A. Chmielinski Chief Operating Officer Frederick W. Werner President, EMEA Balanced Capital Allocation Priorities Michael S. Burke President III. Financial Discipline Steve M. Kadenacy Chief Financial Officer Q4 and Full Year FY2011 Earnings Presentation Page 16 Long Beach Courthouse, California, U.S.A. Page 16

17 Balanced Capital Allocation Priorities Expect to generate at least $1bn+ in free cash flow over next five years.. Pursue organic and acquisitive investments that further our strategy and present attractive long-term returns. Maintain ample liquidity and strong balance sheet. Deleverage when appropriate. Share repurchase. Compensation KPIs support increased focus on cash flow. Q4 and Full Year FY2011 Earnings Presentation Page 17 Page 17

18 Key Global Market and Industry Trends Shaping AECOM Strategy Emerging markets growth more robust than developed markets. Macro-economy Emerging market growth and rapid urbanization driving continued demand for commodities and energy. U.S. federal spending to remain constrained, with anticipated declines in defense budgets and continued budget pressure at state/local levels. Client procurement preferences Increasing demand for integrated service delivery. EPCM capabilities a requisite in higher-growth end markets such as power, energy, and mining. Risk sharing and capital deployment PPP gaining traction as means of filling shortfall in public funding. Necessitates capital deployment. Growing demand for design-build and other alternative delivery models to transfer risk and reduce costs. Page 18

19 Organic Investments: Expanding Alternative Delivery and Infrastructure Investment Capabilities 2006 External investment fund Investment participation: Meridiam investment Investment focus Transportation and social infrastructure P3s in OECD countries Current Alternative delivery capabilities External and internal investment fund Alternative delivery capabilities: Design-build, construction management fee at risk, energy savings performance contracting Illustrative projects: North Tarrant Expressway (TX), Long Beach Courthouse (CA) Investment participation: Meridiam ($3 billion under management) + AECOM Capital Investment focus Transportation and social infrastructure P3s Private real estate projects in major U.S. cities, London, Hong Kong Co-invest with fund/developer partners (e.g., Meridiam). P3 and real estate projects being pursued. Strategy provides investment returns and positions us for additional service revenues. Page 19

20 Targeted Acquisitions: Emerging Markets Targeting emerging markets in Africa, China, India, the Middle East, Eastern Europe, Latin America and natural resource rich economies. Expect acquisitions to satisfy one or both of the following criteria: 1. Provide technical capability that can be driven across our global platform or 2. Provide geographic base from which we can expand and offer our global services Q4 and Full Year FY2011 Earnings Presentation Page 20 Page 20

21 Share Repurchases Share repurchases remain current investment priority. On track to retire 20% of shares since program inception. Industry leading Free Cash Flow Yield of 15%. (1) % Percentage of Free Cash Flow Returned to Shareholders (1) : 49% 44% 92% FY11 FY12 FY13PF (1) Free cash flow (FCF) is defined as cash flow from operations less capital expenditures and is a non-gaap measure. Free cash flow yield is defined as last 12 months free cash flow as of September 30, 2012, divided by equity market capitalization as of November 30, Percentage of free cash flow returned to shareholders is defined as share repurchase expenditures divided by free cash flow. FY11 amount excludes deferred compensation plan termination ($90 million) and associated excess tax benefits ($58 million). FY13 proforma assumes free cash flow approximates net income and remaining share repurchase authorization exercised in FY13 divided by FY13 net income implied by the mid-point of FY13 EPS guidance range of $2.40-$2.50 multiplied by 106 million shares. Page 21

22 Strategy Will Continue To Transform AECOM s Business Profile Leverage unique value proposition Global footprint local presence to serve MNC clients across the world Global expertise and breadth of services Integrated delivery to reduce cycle time/cost Alternative delivery Enhance alternative delivery capabilities Effectively price risk Meridiam relationship AECOM Capital Strategic Priorities Capitalize on higher growth markets Geographic Emerging markets End markets Oil & Gas Transmission & Distribution Capital allocation Balanced approach Organic investments Niche acquisitions Opportunistic debt pay down Share repurchases Page 22

23 Agenda I. Organic Growth Opportunities II. John M. Dionisio Chairman and Chief Executive Officer Jane A. Chmielinski Chief Operating Officer Frederick W. Werner President, EMEA Balanced Capital Allocation Priorities Michael S. Burke President III. Financial Discipline Steve M. Kadenacy Chief Financial Officer Taizhou Bridge Jiangsu, China Image credit: Jiangsu Provincial Yangtze River Highway Bridge Construction Commanding Department Page 23

24 Financial Overview: Track Record and Long-Term Goals Track Record CAGR 1 Gross Revenue +16% Key Objectives Optimal balance of growth, profitability and liquidity EBITDA Margin bps EPS 3 +21% EBITDA Margin 2 increase 200 bps FCF equal or greater than net income Balanced capital allocation Backlog +22% 1 AECOM s initial public offering occurred in Compound annual growth shown for revenue, EPS, and backlog based on data series. FY12 results exclude goodwill impairment impact. 2 EBITDA/Net Service Revenue, both are non-gaap measures. These results are from continuing operations. Cumulative EBITDA margin improvement shown from Based on earnings per share from continuing operations. Q4 and Full Year FY2011 Earnings Presentation Page 24 Page 24

25 Improve Operating Leverage and Efficiency: Cost Containment Ongoing cost optimization efforts to improve margins Rationalized headcount Consolidating real estate footprint and optimizing operating costs Rigorous controls to bring down travel spending Achieving procurement savings through contract renewals Page 25

26 Improve Operating Leverage and Efficiency: Project Execution Goals Reduce cost and schedule overruns. Improve customer satisfaction. Drive project margin expansion. Actions Online project-monitoring tool and standard KPIs implemented across all geographies. Enterprise Project Management Office set up to facilitate consistency of project management practice throughout AECOM. Globally consistent accreditation program and project management training program rolled out. Project management career pathway created. KPIs being restructured. Page 26

27 Improve Operating Leverage and Efficiency Design Centers High-value design centers in China, India, and Spain not merely low-cost production sites. Attract strong local talent to deliver high-quality, cost-effective solutions. Leverage technology to foster seamless collaboration with client-facing teams in mature markets. Create foundation for strong local business. Designing More For Less Relative Geographic Price Point 1 1 Full employee cost Q4 and Full Year FY2011 Earnings Presentation Page 27 Page 27

28 Operating Leverage and Efficiency Drives Higher Utilization Utilization Implemented rigorous operational action plan to combat global recession. 300 basis point improvement in consolidated utilization driven by more optimized project delivery and support processes. 76.5% Utilization 76.0% 75.5% 75.0% 74.5% 74.0% 73.5% 73.0% Q4 and Full Year FY2011 Earnings Presentation Page 28 Page 28

29 Pathway to 12% EBITDA Margins 200 basis point improvement in EBITDA margin. Key influencers are: growth, mix, and SG&A scaling. Scenarios No growth: A challenge to achieve 12% in the short term would require $120MM cut to SG&A. High-growth: Pure operating leverage of NSR flow through. Unlikely in current macroeconomic environment. Balanced: Modest NSR growth, improved margin mix and SG&A scaling. Margin Mix improvement driven by: Increase share of wallet of existing clients Improved project execution Increased mix of higher-margin services Q4 and Full Year FY2011 Earnings Presentation Page 29 Page 29

30 Cash Flow at Inflection Point Significant progress made on cash flow conversion since Initiatives implemented over past several quarters + FY13 initiatives and incentives reinforce cash flow focus. Well positioned for sustained improvement in free cash flow conversion. AECOM Free Cash Flow Conversion (1) %. Measurable progress since FY07 FY08 FY09 FY10 FY11 FY12 (1) Free cash flow (FCF) is defined as cash flow from operations less capital expenditures and is a non-gaap measure. Free cash flow conversion is defined as free cash flow as a percentage of net income prior to deduction of noncontrolling interests. FY11 amount excludes deferred compensation plan termination ($90 million) and associated excess tax benefits ($58 million). FY12 amount excludes goodwill impairment impact. Q4 and Full Year FY2011 Earnings Presentation Page 30 Page 30

31 Reaffirm Fiscal 2013 Outlook EPS range of $2.40-$2.50 Excludes benefit of additional share repurchase. Free cash flow equal to or greater than net income. Aggressive but achievable target of 80-day DSO by year-end FY13. Continued margin improvement (1) Free cash flow Net income (2) 8.1% 8.7% 9.9% 10.1% 9.6% 9.6% 9.4% 12.0% $mm Free cash flow Net income 1 EBITDA/Net Service Revenue, both are non-gaap measures. These results are from continuing operations. FY12 results exclude goodwill impairment impact. 2 Free cash flow (FCF) is defined as cash flow from operations less capital expenditures and is a non-gaap measure. Net income is shown prior to deduction of noncontrolling interests. FY11 free cash flow excludes deferred compensation plan termination ($90 million) and associated excess tax benefits ($58 million). FY12 results exclude goodwill impairment impact. Q4 and Full Year FY2011 Earnings Presentation Page 31 Page 31

32 Key Takeaways Organic Growth Opportunities Attractive market opportunities supported by strong, long-term fundamentals. AECOM is well positioned given our market leadership and client-centric global delivery capabilities. Balanced Capital Allocation Significant cash generation capability over the next five years. Allocating capital to drive profitable organic growth by investing in high growth markets, expanding our business with MNCs, and further developing alternative delivery. Focused on generating attractive returns and capital allocation priority remains returning cash to our shareholders. Financial Discipline Clear path to expanding EBITDA margins by 200 basis points. DSOs target of 80 days, free cash flow equal to or in excess of net income. Page 32

33 Thank you Q&A Page 33

34 Appendix Page 34

35 Regulation G Information ($ in millions, except EPS) Reconciliation of Revenue to Revenue, Net of Other Direct Costs Fiscal Years Ended September 30, Revenue $ 8,218.2 $ 8,037.4 $ 6,545.8 $ 6,119.5 $ 5,194.7 $ 4,237.3 Less: other direct costs 3, , , , , ,832.0 Revenue, net of other direct costs $ 5,183.9 $ 5,180.8 $ 4,205.8 $ 3,819.0 $ 3,289.5 $ 2,405.3 Reconciliation of Net Income and Diluted EPS Before Goodwill Impairment to Net Income and Diluted EPS Amount before goodwill impairment Twelve Months Ended Sep 30, 2012 Net Income Attributable to Net Income AECOM Diluted EPS $ $ $ 2.30 Goodwill impairment, net of tax (317.2) (317.2) (2.82) Amount including goodwill impairment $ (56.9) $ (58.6) $ (0.52) Page 35

36 Regulation G Information ($ in millions) Reconciliation of EBITDA Before Goodwill Impairment to Net Income Attributable to AECOM EBITDA before goodwill impairment Fiscal Years Ended September 30, $ $ $ $ $ $ Less: goodwill impairment EBITDA Less: interest (income)/expense* (1.3) 3.3 Less: depreciation and amortization Income from continuing operations attributable to AECOM before income taxes Less: income tax expense Income from continuing operations attributable to AECOM (58.6) Discontinued operations, net of tax - - (0.1) Net income attributable to AECOM * Excluding related amortization. $ (58.6) $ $ $ $ $ Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow Net cash provided by operating activities Fiscal Years Ended September 30, $ $ $ $ $ $ Capital expenditures (62.9) (78.0) (68.5) (62.9) (69.1) (43.2) Settlement of deferred compensation plan liability Excess tax benefit from share-based payment (associated with DCP termination) Free Cash Flow $ $ $ 90.1 $ $ 99.9 $ 94.3 Page 36