AECOM : Program Management Fireside Chat with Bank of America Transcript

Corrected Transcript

07-Jun-2021

AECOM (ACM)

Analyst Meeting - Bank of America

	Total Pages: 16
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AECOM (ACM)	Corrected Transcript
Analyst Meeting - Bank of America	07-Jun-2021

CORPORATE PARTICIPANTS

William J. Gabrielski

Senior Vice President, Finance, Treasurer & Investor Relations, AECOM

Drew Jeter

Executive Vice President & Chief Executive-Global Program Management, AECOM

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OTHER PARTICIPANTS

Michael Feniger

Analyst, BofA Securities, Inc.

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MANAGEMENT DISCUSSION SECTION

Michael Feniger

Analyst, BofA Securities, Inc.

Good afternoon, everyone. I'm Michael Feniger, the Senior Engineering Analyst at Bank of America. I'm thrilled to welcome Drew Jeter and William Gabrielski of AECOM to this fireside discussion. I will pass the call off to Will, who will say a few words, and then Drew will spend 10 to 15 minutes on some slides that the company has put together on program management. If you need a hardcover or hard copy of the slides, please e-mail me at [e-mail]. Happy to send it over to you. Drew will then hand the call back to me for some Q&A.

And before I hand it off to Will, I'd just like to make a pitch for the Bank of America machinery engineering team. We'd appreciate your support in the II Survey. I believe Ross Gilardi and I have the broadest coverage across all our peers. Some only cover machinery. We cover machinery, engineering and waste. Your support would be appreciated. And also, we are hosting a PFAS event next week, next Tuesday, June 15, AECOM will be participating, Jacobs, along with panels with EPA administration, DoD deputies, litigation experts. It's going to be June 15, virtual. Reach out to me if you want details.

And with that being said, now over to you, Will.

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William J. Gabrielski

Senior Vice President, Finance, Treasurer & Investor Relations, AECOM

Yeah. Thank you, Mike. Thanks for hosting us today and we're pretty excited about the PFAS event in a few weeks as well. But I thought I would kick it off with a few brief comments on AECOM very briefly. I know everyone wants to hear Drew. But a lot has changed at AECOM. And if you haven't looked at us, in a few years, I think it's always helpful just to put out where we are today versus where we were.

So, today, we're a professional services company, nearly 50,000 people. And we deliver what we refer to and the industry refers to as knowledge-based services primarily for critical infrastructure projects. Our clients span US state and local, US federal, international governments, and large private sector clients. All clients that typically pay

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AECOM (ACM)	Corrected Transcript
Analyst Meeting - Bank of America	07-Jun-2021

their bills on time, so something we like. Our largest market is the US and it accounts for approximately half of our revenue and a much greater share of our profitability. And today, much different than the past, 90% of our revenue and profit is coming from just nine countries. So we've more narrowly focused our time and our growth investments.

I said we deliver knowledge-based services. Just in terms of what that means, and you can see a pie chart in our presentations 40% of our people are engineers, 15% consultants and planners, 10% scientists. We have program and project management specialists, expertise in digital consulting. These people have degrees, advanced degrees and are solving really the world's most complex infrastructure challenges. One thing we are not today is boots on the ground construction. And so, we have a much different risk profile, cash flow profile, and work makeup than we've had in the past but also than others in the industry have today. And the overwhelming majority of our work today is fixed fee or cost-plus design work, very low-risk profile, again, across 50,000-plus projects.

With the new strategy in place and a new management team in place, we've taken out a bunch of layers and costs over the past year or two. And to maximize the value of the transformation into lower risk and much higher margin, in fact, we're leading the industry on margins today, we've been actively buying our stock. Through the most recent earnings call, we bought back approximately 10% of our shares outstanding since September, and that's really the path we see going forward with the better use of our capital.

I would urge everyone, if you get a minute later, take a look at our ESG slide in the appendix or go to our ESG website. I know ESG is something everyone talks about today, but it really has been at the core of what we are and what we do since our founding. And if you look at our ranking, it's number one in environment, number one in transportation, number two in water, a leader in green design, a leader in green building.

Mike just mentioned PFAS, right, at the top of the list in terms of helping clients for the last two decades in front of what appears to be a big tsunami of funding that's coming to that market. Our clients are coming to us to help them deliver on their ESG initiatives and it really is day one in terms of figuring out how we're going to achieve these net-zero targets for our clients and align with all the different goals that are out there, and that shareholders and stakeholders are pressing companies to deliver on.

And as those projects get bigger and more complex, that's where program management comes in. And Drew is here today to talk about that. After a brief stint with the Hill International, 13 years before that, VP Program Management at another large company in the industry, has overseen more than $300 billion of capital infrastructure, was somebody who we went out and sought pretty aggressively over the past six or nine months and Drew can tell you about that.

But Drew brings a wealth of experience and knowledge into the role. He's what our CEO, Troy Rudd, would refer to as one of our rockstars. We've set some bold ambitions jointly with Drew in terms of what we think is possible in program management and why AECOM is very well-suited to take that market and grow it multiple times over. And as I'd like to say, all the pressures are on Drew to achieve those audacious goals.

And with that, I'll turn it over to Drew to take you through it.

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Drew Jeter

Executive Vice President & Chief Executive-Global Program Management, AECOM

Fantastic. Thanks, Will. All right. So, slides - are the slides shown? [Technical Difficulties] (00:05:50-00:06:21)

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AECOM (ACM)	Corrected Transcript
Analyst Meeting - Bank of America	07-Jun-2021

William J. Gabrielski

Senior Vice President, Finance, Treasurer & Investor Relations, AECOM

Yeah, Drew. Why don't you kick it off and Mike, figure out how to put those slides up while Drew is going?

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Michael Feniger

Analyst, BofA Securities, Inc.

Yeah.

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Drew Jeter

Executive Vice President & Chief Executive-Global Program Management, AECOM

Sure. Well, it's a pleasure to be with you and to talk with you all about program management. It's something that I am extremely passionate about. It is a powerful tool. I think it's often misunderstood. And so, hopefully, we'll have a chance to kind of give you a glimpse into how we see that here in AECOM and why we think it's such a powerful offering to our clients and to society, and why it will also, in the process, benefit AECOM.

Our clients, our infrastructure owners today are under an incredible amount of pressure. You think about not just the pandemic that has put a lot of infrastructure improvements behind the power curve in delays and - that doesn't mean those requirements have gone away. It just means that they're kind of stacking up and still needing to be done. You've got then, post-COVID, discussions about what sort of stimulus will come out. You've got different sorts of kind of crises, like here at the US, challenges at our border or other kind of new world dynamics that are putting big pressure on public and private sector clients.

Other market forces that they are dealing with as they try to make responsible decisions include looking for better models for how to access the supply chain, how to get better performance and results out of the construction supply chain. There are more projects - large projects and programs that failed to meet budget and schedule, then succeed. And so, clients are - before they spend that hard-earned dollar or that public dollar, are trying to make sure that they're getting the best bang for the buck. And so, there's an increased appetite for risk sharing, for public/private partnerships, for different types of other partnerships to kind of seek to get the best out of the supply chain. All of that being done in a very visible, public world stage environment.

There continues to be rapid increasing pressures in urbanization and stressing our urban footprint and infrastructure in order to keep up with those demands. And those demands are not just in numbers of people that are continuing to consolidate in urban centers, but also in what the expectations are for our clients' customer base. And so, an expectation that more will be done digitally, an expectation that each of these organizations will be responsible and demonstrate how they are taking very seriously environment, social, governance, ESG sorts of outcomes.

And so, I think back to an article that was written in ENR last June, where they were kind of listing the top 50 program management firms, and AECOM, of course, listed number one in there. And they mentioned that while the pandemic has hit construction and other parts of the industry hard and delayed a lot of projects and contracts, that this particular group, this group being program managers are needed more than ever because owners are saying, now more than ever, what do I do now and how best do I do.

And so, it's a target-rich environment for us in the program management business. As clients have big headaches, big challenges and programs, and program management is an outstanding solution, approach, to

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AECOM (ACM)	Corrected Transcript
Analyst Meeting - Bank of America	07-Jun-2021

meeting those complex sets of needs. So, I understand that the slides are showing. I'm just not seeing. So, if we can move to the slide entitled Program Management addresses our clients' emerging needs.

So, project management - some folks think program management is just kind of project management at a larger scale. But program management is actually almost fundamentally different than project management. Everybody knows what a project is. It's a specific endeavor, normally has some kind of schedule, some sort of a budget. And when you're successful in delivering that project, you get that thing delivered for that price at that time. And this is not just construction. You could think of, let's say, a city library that's putting in new shelves or something to hold their books and they have a new project to kind of put in the new shelves. Right? And so, everybody's got projects. You probably have honey-do projects at home or around the house to kind of get done.

When it comes to a program, a program is a collection of projects. It's something much bigger than a single project. And the art then of program management is not just being able to successfully manage the individual projects within that large program, but it's in managing all those moving parts in a coordinated way so that the way that you apply those resources, your time, your money, your human resources, your information is kind of optimized to get the best not only investment across those moving parts, but to get the right outcome. Because the reason that you spend that money, the reason that a city will redo its water system or regional transit authority will upgrade or expand its rail system or build a new airport or a university upgrade the facilities across its campus, it's not because they like to do construction, it's because this is an incredibly important investment. There's some sort of a business case that's probably taken them years to get the political will, the financial means in place to deliver some important outcome for that owner that kind of fundamentally changes and improves their place in what they do for a living.

And so, you can see here on this slide that that's kind of what is intended to - what's referred to there as a holistic approach is that you're looking at kind of the whole ball of wax, you're looking at what do those projects have in common, what are very different about those projects, how do we best sequence those projects, how do you manage risk across those projects and change. And so, it's something that is part science, is part art form. And those practitioners of program management are incredibly gifted problem solvers in addition to, in our industry, being strong engineers, builders, architects, because that's the kind of programs that we're involved in.

It's important for us to be outcome-focused, to not get distracted by just burrowing down into the projects, which is how I would suggest most program management in the industry right now has done, is if you win a contract as a program manager, the focus of the owner and the focus of that consultant tends to drive down into the details of managing those projects because that's where the comfort zone is.

But world-class program management focuses on that outcome. And that's important, because programs tend to take 3, 5, 10 years to complete and it's important to be able to kind of keep an eye on the prize as times change, as people change, as dynamics change during - over the course of those long delivery schedules.

And it's also an opportunity then to manage those benefits, like ESG, to say in addition to managing the infrastructure delivery on time and on budget, we can also manage the accomplishment of benefits like environmental improvements, like social - attaining social goals or equity goals, and manage those just like we manage the infrastructure projects.

All of that takes a lot of integration of moving parts, a lot of different stakeholders to collaborate with who have different agendas, as well as managing the entire supply chain that needs to bring their best to that program to achieve the kind of outcomes that you're looking for.

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