AECOM Technology's CEO Discusses F1Q2012 Results - Earnings Call Transcript

AECOM Technology Corporation ( ACM)

F1Q2012 (Qtr End 12/31/2012) Earnings Call

February 2, 2012 11:00 am ET


Paul Cyril - SVP, IR

John Dionisio - Chairman & CEO

Steve Kadenacy - EVP & CFO

Mike Burke - President, Enterprise Management Team


Andrew Obin - Bank of America Merrill-Lynch

Brandon Verblow - UBS

John Rogers - D. A. Davidson

Andy Kaplowitz - Barclays Capital

Chase Jacobson - William Blair

Joe Ritchie - Goldman Sachs

Tahira Afzal - KeyBanc

Adam Thalhimer - BB&T Capital Markets

Min Tang-Varner - Morningstar

Andrew Wittmann - Robert W. Baird



Good day ladies and gentlemen and welcome to the first quarter 2012 AECOM Technology Corporation earnings conference call. At this time, all participants are in a listen-only mode. Later, we will be conducting a question-and-answer session. (Operator Instructions) I would now like to turn the conference over to host for today Mr. Paul Cyril, Senior Vice President of Investor Relations. Please go ahead sir.

Paul Cyri l

Thank you. Please turn to slide number two. As we begin let me remind everyone that today’s discussion contains forward-looking statement based on the environment as we see here today and as such does include risks and uncertainties. As you know our actual results might differ materially from these projected forward-looking statements.

Please refer to our press release or slide two of our earnings presentations and to our reports filed with the SEC for more information on the specific risk factors that could cause actual results to differ materially.

Important information about our earnings is posted to the investor website We posted our earnings release and updated financial statements on the slide for anyone who still needs access. Note that we are using some non-GAAP financial measures as references in the presentation. The appropriate GAAP financial reconciliations are posted on our website as well.

Finally, a replay of today’s call will be posted to the website at around middle eastern time and will remain there for approximately two weeks. Please turn to slide number three. Beginning today’s call and presentation is John M. Dionisio, Chairman and Chief Executive Officer. John, please go ahead.

John Dionisio

Thank you, Paul. Good morning everyone and thank you for joining our call. Here with me today are Mike Burke, our President; Steve Kadenacy our CFO; and Jane Chmielinski our COO. After my introduction, I will hand it over to Steve who will review our financial results. Mike will cover our outlook, future book of business and capital allocation strategy and I will discuss our markets.

We have several objectives on our call today. First is to provide you with an overview of our quarterly financial performance and the drivers behind the performance. Second, we will reaffirm our 2012 earnings per share guidance range and we will set forth our plan on how we will achieve the $2.45 to $2.65 range this year.

And then we are going to update you on our most important operating initiatives driving new growth and momentum inside our business. We will then begin the question-and-answer session.

With that I would like to turn the call over to Steve for our review of the quarter. Steve, please go ahead.

Steve Kadenacy

Thanks, John. Please turn to slide 4. We reported earnings per share of $0.42 for the first quarter. As we noted on our fourth quarter call, this quarter would be lighter than our historical average in terms of the percentage of annual earnings. The three items impacting the quarter specifically were our European transition costs and certain unrecoverable costs on two MSS projects. One, that now is completed and another that is scheduled to be completed in the second quarter.

In addition, you may recall that in the first quarter 2011, our Libya project was still active and a positive contributor. Further, we benefited from the R&D tax credit extension in the US during that quarter. The balance of the difference was driven by non-operating items and 7% underlying growth in the business. Our first quarter gross revenue increased 5% over last year to $2 billion and net service revenue increased just over 1% year-over-year.

On an organic basis, gross revenue increased 4% driven by increased construction management activity while organic net service revenue was up 0.4% year-over-year.

Our total organic net service revenue grew 1.4% on a constant currency basis excluding the impact of Libya. We continue to see strength internationally in geographies such as Asia, Australia, Canada and Latin America and in our private sector business of commercial construction, environmental management and energy.

On the other hand, Western Europe remains a challenge. However we anticipate that our restructuring efforts will reap benefits in the second half of the year and we are seeing increased opportunities in this geography including recent sizable wins that are not yet reflected in the backlog. We also won 2.2 billion in new work during the quarter for a book-to-burn ratio of 1.1 and our backlog increased 2% from the prior year to $15.8 billion.

Please turn to slide five. We would also like to highlight the cash flow performance in the quarter. Our cash flow from operations improved by $173 million year-over-year. This represents our best first quarter cash flow in five years and builds upon our record cash flow achieved in the fourth quarter. Our PTS DSOs came down by three days year-over-year.

In total, our cash and cash equivalents increased by 20% year-over-year to $507 million and our leverage ratio declined to 1.4 versus 1.7 in the prior year.

We continue to focus on cash flow as a key measure of operational performance and we’re on track to achieve our full-year target for free cash flow as a percentage of net income.

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