Nandita Nayar

Nandita Nayar requested more detail on the 1.5x book-to-burn ratio, particularly the 2.3x in International, asking for a breakdown of how much was market-driven versus secured by leveraging AI capabilities. She also inquired about the latest information regarding the authorization bill, given discussions around potential Continuing Resolutions (CRs), and asked for best-case and worst-case scenarios.

Answer

CFOO Gaurav Kapoor attributed strong International backlog growth to UK&I, Australia/New Zealand, and the Middle East, driven by client stability post-elections. He explained that demand for AECOM's services often outstrips funding, and combining technical expertise with the AI roadmap helps clients achieve better CapEx returns and reduce delivery risk, citing the Scottish Water win as a key example where AI capabilities were crucial. CEO Troy Rudd stated that federal funding is largely in place for the year, with positive discussions ongoing for key long-term authorizations for 2026, noting a generally positive tone in Washington despite the inherent unpredictability of the legislative agenda.

Nandita Nayar requested more color on the 1.5x book-to-burn ratio, particularly the 2.3x in international, asking how much was attributable to the overall market versus leveraging AI capabilities. Nayar also inquired about the latest information regarding the authorization bill, discussions around a Continuing Resolution (CR), and potential best-case/worst-case scenarios.

Answer

CFOO Gaurav Kapoor attributed the strong international backlog growth to healthy regional drivers (UK&I, Australia/New Zealand, Middle East) and clients seeking stability after geopolitical questions and election cycles. He emphasized that demand for services far outstrips funding, and AECOM's technical expertise combined with AI solutions helps clients achieve better ROI, firm deadlines, and reduced delivery risk. He cited the Scottish Water win, where AI capabilities were a key differentiator against incumbents, as a clear proof point. CEO Troy Rudd stated that federal funding is mostly in place for the year, and discussions for key long-term authorizations for 2026 are positive, noting a generally positive tone in Washington.

Nandita Nayar of Bank of America Merrill Lynch questioned whether the double-digit growth in the advisory business is driven by the overall market or by AECOM capturing more share, and asked about the balance between investing in the business and expanding margins.

Answer

President Lara Poloni attributed the advisory growth to capturing an earlier segment of the project lifecycle and growing wallet share with existing clients. Chairman & CEO Troy Rudd emphasized that margin improvement has been driven by making high-return investments, not by cutting costs, and stated the company remains optimistic about future margin expansion through continued investment.

Nandita Nayar questioned Construction Partners' confidence in achieving its deleveraging target of approximately 2.5 times by calendar year-end from the current 3.18 times, and whether future M&A would primarily be funded by cash from operations. She also asked for the latest insights regarding the Surface Transportation Program reauthorization bill, particularly concerning potential Continuing Resolutions (CRs).

Answer

CFO Greg Hoffman expressed strong confidence in hitting the 2.5x leverage target, citing historical cash generation and the strategy of funding acquisitions like GMJ Paving with cash flow. CEO Jule Smith reiterated the commitment to pursuing compelling acquisitions, increasingly using cash, and expecting leverage to decrease as EBITDA grows. Regarding the reauthorization bill, Jule Smith stated positive expectations for its completion by September 30, focusing on hard infrastructure and increased state funding via formula, based on historical patterns of reauthorization at higher levels, despite past CRs.

Nandita Nayar from Bank of America questioned Construction Partners' confidence in achieving its leverage target of approximately 2.5 times by the end of the calendar year and whether future M&A would primarily be funded by cash from operations. She also sought the latest information regarding the Surface Transportation Program reauthorization bill.

Answer

CFO Greg Hoffman affirmed confidence in reaching the 2.5x leverage target, citing strong cash flow generation and the ability to fund recent acquisitions like GMJ with cash. CEO Jule Smith reiterated the commitment to strategic acquisitions, increasingly funded by cash, which will help reduce the leverage ratio as EBITDA grows. Regarding the reauthorization bill, CEO Jule Smith expressed optimism for its completion by September 30, anticipating increased funding for states focused on hard infrastructure, consistent with historical trends.

Nandita Nayar, on for Mike Feniger, asked for an update on real estate transaction activity and whether the company is seeing any 'green shoots' given the rate easing cycle.

Answer

Executive Alexander Hockman stated that with the easing of interest rates, NV5 'absolutely anticipates' continued growth in its real estate transaction business. Executive Chairman Dickerson Wright added that he has anecdotally seen 'very strong results' and a 'quite an improvement' from the company's real estate transactional groups, encouraging him about the market's direction.