aecom analyst meeting · 2013. 7. 24. · on growth markets of saudi arabia and qatar. capex $500bn...

Q4 and Full Year FY2011 Earnings Presentation

Analyst MeetingDecember 4, 2012

December 4, 2012

AECOM Analyst Meeting


Analyst MeetingDecember 4, 2012 Page 2

Disclosures

Safe HarborExcept 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 MeasuresCertain 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: http://investors.aecom.com.


Agenda

I. Organic Growth OpportunitiesJohn M. Dionisio Chairman and Chief Executive Officer

Jane A. Chmielinski Chief Operating Officer

Frederick W. WernerPresident, EMEA

II. Balanced Capital Allocation Priorities

Michael S. BurkePresident

III. Financial Discipline

Steve M. KadenacyChief Financial Officer

Page 3

Kingdom Centre, Riyadh, K.S.A.



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

Professional Technical Services (PTS)

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

Management Support Services (MSS)

Cyber Support, Contingency

Support, Information

Management, International

Development, Linguistics,

Logistics and Field Services,

Operations and Maintenance,

National Security Programs

Segments

End Markets

Market Sectors

Page 4Analyst MeetingDecember 4, 2012


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.

Geographies

Americas Asia-Pacific

EMEA

End MarketsPower,Energy & Mining

Environmental

Transportation

Facilities

MSS

Funding Sources

Private

Non-U.S. Government

U.S. State/Local

U.S. Federal

17%

19%

25%39%

28%50%

22%

13%

32%

25%18%

12%

Page 5

Operations andMaintenancePlanning

Program/ConstructionManagement

ConsultingArchitectureandEngineeringDesign

Cyber Security/I.T. Services

Logistics/SupportServices

Services

Diversified Geographies, End Markets, Funding Sources, and Services



AECOM Long-Term Goals and Objectives

Page 6

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. Los Angeles International Airport, California, U.S.A. Cleveland Clinic Rendering, Abu Dhabi, U.A.E Sutong Bridge, Jiangsu, ChinaSutong Bridge, Jiangsu, China



Catalysts for Growth: Strong Industry Fundamentals

0.40.5

0.7

0.80.4

2

3

4

5

6

7

2010 China India Other Asia

Africa RoW 2050

(Urban population, billions of people)

+3 billion people in cities

31

4954

20

30

40

50

60

1990 2011 2016

(% of world GDP)

Urbanization Emerging markets

Demand for natural resources Aging infrastructure

0

200

400

600

800

1990 2000 2008 2015 2020 2025 2030 2035

Non-OECD OECD

(World energy consumption, quadrillion Btus) Estimatedinvestment needed in developed countries:

Source: OECD estimate for investment in roads, water, electricity, telecommunications and rail in OECD countries up to 2030

Source: United Nations Source: International Monetary Fund

Source: U.S. Energy Information Administration



Large and Growing Infrastructure Spend Across all Regions

*CAGR (2012-2017) expenditures based on entire regions. Sources: Business Monitor, Global Insight and AECOM estimates

Americas• Annual Expenditure: $1.1 trillion

• 5-year CAGR: 5%*

Europe, Middle East & Africa• Annual Expenditure: $1.3 trillion


Asia Pacific• Annual Expenditure: $2.1 trillion




Enhancing Operational Excellence and Extending Competitive Advantage

Page 9

Strengthen client relationship management approachStrengthen performance management feedback and dialogueContinue improvement in project deliveryImprove risk management capabilities and results

Integrated service delivery modelMega project credibilityExtensive local presence backed by global expertiseBreadth and depth of technical expertiseClient relationships – number and qualityIndustry leadership

Operational Priorities AECOM Differentiators



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.

Organizational Structure as Driver of Growth and Improved Client Experience



Global Business Line Priorities

Page 11

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.



Strategic Use of Global Expertise for Organic GrowthLeveraging the Global Enterprise

Page 12

Creating Centers of Excellence to deliver high-quality solutions.Example: 80% of hydro work performed in Canada is for projects located outside of Canada.

Exam

ples

of G

loba

l Cen

ters

of E

xcel

lenc

e

Oil & Gas

Hydropower

Health care

Sports

MiningMass transportation

Industrial design

Infrastructure design

Building engineering


Note: Centers of Excellence are at varying stages of development.

Strategic use of Global Expertise for Organic GrowthLeveraging 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 CityDamman, 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.

King Khalid Medical City

Health Care Center of Excellence

Saudi Arabia

Project staffing



Industrial client: AECOM in 17 countries

Mining client: AECOM in 5 countriesOil & Gas client: AECOM in 21 countries

Note: Each symbol represents a country where AECOM has delivered one or more projects for the specified MNC client.

Organic Investments: Growing with Top Multinational Clients

Page 14

BKSAnalyst MeetingDecember 4, 2012

• Top MNCs continue to accelerate CapExKey clients for AECOM thru M&ATrends 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

Organic Investments: Capitalizing on Growth Markets Middle East Case Study

– 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.

Opportunity Plan

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.

Goal

New Doha Port, Doha, Qatar

Example: Middle East

21%

63%

16%

2010 2012E

$95 billion $290 billion

Construction contract awards, $ billions

Note: Excludes Oil & Gas investmentsSource: MEED

U.A.E.

Saudi Arabia

Qatar U.A.E.

Saudi Arabia

Qatar

9%34%

57%



Agenda

Page 16

Long Beach Courthouse, California, U.S.A.










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.

Page 17

Balanced Capital Allocation Priorities

Expect to generate at least $1bn+ in free cash flow over next five years..

Compensation KPIs support increased focus on cash flow.


Key Global Market and Industry Trends Shaping AECOM Strategy

– Emerging markets’ growth more robust than developed markets’.

– 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.

Macro-economy

– Increasing demand for integrated service delivery.

– EPCM capabilities a requisite in higher-growth end markets such as power, energy, and mining.

Client procurement preferences

– 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.

Risk sharing and capital deployment


Organic Investments: Expanding Alternative Deliveryand Infrastructure Investment Capabilities

2006

Current

Strategy provides investment returns and positions us for additional service revenues.

• External investment fund

Investment participation: Meridiam investment

Investment focus

– Transportation and social infrastructure P3s in OECD countries

• 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.



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

Page 20

Targeted Acquisitions: Emerging Markets


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)

49%44%

92%

FY11 FY12 FY13PF

Percentage of Free Cash Flow Returned to Shareholders(1):

(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, 2012. 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.


%100 -90 -80 -70 -60 -50 -40 -30 -20 -10 -0 -

Strategy Will Continue To TransformAECOM’s Business Profile

Leverage unique value proposition• Global footprint — local presence to serve

MNC clients across the world

• Global expertise and breadth of servicesIntegrated delivery to reduce cycle time/cost

Capitalize on higher growth markets• Geographic

Emerging markets

• End marketsOil & GasTransmission & Distribution

Capital allocation• Balanced approach

Organic investmentsNiche acquisitionsOpportunistic debt pay downShare repurchases

Alternative delivery• Enhance alternative delivery

capabilities

Effectively price risk

• Meridiam relationship

• AECOM Capital

StrategicPriorities


Agenda

Taizhou BridgeJiangsu, China

Image credit: Jiangsu Provincial Yangtze River Highway Bridge Construction Commanding Department










Financial Overview: Track Record and Long-Term Goals

1 AECOM’s initial public offering occurred in 2007. Compound annual growth shown for revenue, EPS, and backlog based on 2006-2012 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 2006-2012. 3 Based on earnings per share from continuing operations.

Optimal balance of growth, profitability and liquidity

EBITDA Margin2

increase 200 bps

FCF equal or greater than net income

Balanced capital

allocation

Key Objectives

Gross Revenue+16%

Backlog+22%

EPS3

+21%

EBITDA Margin2

+280 bps

Track Record2006-2012 CAGR1


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


Improve Operating Leverage and Efficiency: Project Execution

GoalsReduce cost and schedule overruns.

– Improve customer satisfaction.– Drive project margin expansion.

ActionsOnline 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.



Designing More For Less — Relative Geographic Price Point1

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.

Page 27

Improve Operating Leverage and Efficiency

1 Full employee costAnalyst MeetingDecember 4, 2012


Operating Leverage and Efficiency Drives Higher UtilizationUtilizationImplemented rigorous operational action plan to combat global recession.300 basis point improvement in consolidated utilization driven by more optimized project delivery and support processes.

Page 28

73.0%

73.5%

74.0%

74.5%

75.0%

75.5%

76.0%

76.5%

2009 2010 2011 2012

Utilization



Pathway to 12% EBITDA Margins

Page 29

• 200 basis point improvement in EBITDA margin.• Key influencers are: growth, mix, and SG&A scaling.

ScenariosNo 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



Cash Flow at Inflection Point

Page 30

Significant progress made on cash flow conversion since 2010.

Initiatives implemented over past several quarters + FY13 initiatives and incentives reinforce cash flow focus.

Well positioned for sustained improvement in free cash flow conversion.

(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.

81

62

81

36

71

142

FY07 FY08 FY09 FY10 FY11 FY12

AECOM Free Cash Flow Conversion (1)

Measurable progress since 2010


% .160 -140 -120 -100 -80 -60 -40 -20-0-


Reaffirm Fiscal 2013 Outlook

Continued margin improvement(1) Free cash flow Net income(2)

8.1% 8.7%9.4%

9.9%10.1%

9.6% 9.6%

12.0%

$mm

Page 31

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.

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.

50100150200250300350400

Free cash flow Net income


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.


Thank you


Q&A

Appendix


Regulation G Information($ in millions, except EPS)

Reconciliation of Revenue to Revenue, Net of Other Direct CostsFiscal Years Ended September 30,

2012 2011 2010 2009 2008 2007

Revenue 8,218.2$ 8,037.4$ 6,545.8$ 6,119.5$ 5,194.7$ 4,237.3$ Less: other direct costs 3,034.3 2,856.6 2,340.0 2,300.5 1,905.2 1,832.0

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

Net Income

Net Income Attributable to

AECOM Diluted EPS260.3$ 258.6$ 2.30$

Goodwill impairment, net of tax (317.2) (317.2) (2.82)

(56.9)$ (58.6)$ (0.52)$

Sep 30, 2012

Amount including goodwill impairment

Amount before goodwill impairment

Twelve Months Ended


Regulation G Information($ in millions)

Reconciliation of EBITDA Before Goodwill Impairment to Net Income Attributable to AECOMFiscal Years Ended September 30,

2012 2011 2010 2009 2008 2007

497.5$ 525.4$ 417.5$ 358.5$ 284.5$ 195.9$ Less: goodwill impairment 336.0 - - - - -

EBITDA 161.5 525.4 417.5 358.5 284.5 195.9 Less: interest (income)/expense* 42.7 39.2 9.9 10.7 (1.3) 3.3 Less: depreciation and amortization 103.0 110.3 78.9 84.1 62.8 45.1

15.8 375.9 328.7 263.7 223.0 147.5 Less: income tax expense 74.4 100.1 91.7 77.0 76.5 47.2

(58.6) 275.8 237.0 186.7 146.5 100.3 Discontinued operations, net of tax - - (0.1) 3.0 0.7 -

(58.6)$ 275.8$ 236.9$ 189.7$ 147.2$ 100.3$

* Excluding related amortization.

Reconciliation of Net Cash Provided by Operating Activities to Free Cash FlowFiscal Years Ended September 30,

2012 2011 2010 2009 2008 2007

433.4$ 132.0$ 158.6$ 228.6$ 169.0$ 137.5$

Capital expenditures (62.9) (78.0) (68.5) (62.9) (69.1) (43.2) Settlement of deferred compensation plan liability - 90.0 - - - - Excess tax benefit from share-based payment (associated with DCP termination) - 58.0 - - - -

370.5$ 202.0$ 90.1$ 165.7$ 99.9$ 94.3$

Net income attributable to AECOM

Free Cash Flow

Net cash provided by operating activities

Income from continuing operations attributable to AECOM

Income from continuing operations attributable to AECOM before income taxes

EBITDA before goodwill impairment


aecom analyst meeting · 2013. 7. 24. · on growth markets of saudi arabia and qatar. capex $500bn...

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