AECOM (ACM) Earnings Call Transcript

Good morning, and welcome to the AECOM 2021 Investor Day Conference Call. I would like to inform all participants this call is being recorded at the request of AECOM. This broadcast is the copyrighted property of AECOM. Any rebroadcast of this information in whole or part without the prior written permission of AECOM is prohibited. As a reminder, AECOM is also simulcasting this presentation with slides at the Investors section at www.aecom.com. [Operator Instructions] I would like to turn the call over to Will Gabrielski, Senior Vice President, Finance, Investor Relations. Please go ahead.

Thank you, operator. I would like to direct your attention to the safe harbor statement on Page 1 of today's presentation. Today's discussion contains forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the SEC. Except as required by law, we undertake no obligation to update our forward-looking statements. We are using certain non-GAAP financial measures in our presentation. The appropriate GAAP financial reconciliations are incorporated into our presentation where available, which is also posted on our website. As a reminder, we sold the Management Services business last January and sold our Power and Civil Construction businesses in October 2020 and January 2021, respectively. These businesses are classified as discontinued operations in our financial statement. Today's comments will focus on the continuing operations of the Professional Services business, unless otherwise noted. Today's references to margins and adjusted operating margins reflect segment level performance for the Americas and International segments. We will also refer to net service revenue or NSR, which is defined as revenue excluding subcontractor and other direct costs. Our discussion of margins will be on an NSR basis unless otherwise noted. On today's virtual Investor Day, Troy Rudd, our Chief Executive Officer, will detail our strategy, key operational priorities and discuss our long-term financial targets. Gaurav Kapoor, our Chief Financial Officer, will discuss our financial performance, priorities for expanding our industry-leading margins and profitability and our financial targets in greater detail. We will conclude with a question-and-answer session. With that, I will now turn the call over to Troy. Troy?

Thank you, Will, and thank you all for joining us today. Today's virtual format is a bit different, but our intent is the same. We want you to walk away with a solid understanding of the strength of our teams, our strategy, our capital allocation priorities and what it means for our stakeholders. Of course, we are eager to engage with you in person as soon as it is safe to do so. We will look to schedule another event, hopefully, later in the year, so we can dive even deeper into our vision and give you an opportunity to meet our leadership team. I also want to acknowledge our teams across the globe for their contributions to our success and for their ongoing commitment to the safety of their teams and families. Thank you all for choosing to be part of AECOM and our journey. Please turn to Slide 5. I'd like to begin by reviewing the key messages for today and highlight why we are well positioned to outgrow the industry and to deliver superior margins and returns for our shareholders. First, we are an industry-leading professional services firm with a track record of delivering on our commitments. Through consistent execution, we are focused on continuing to meet or exceed our financial targets. This is very important to us as a company and as a management team. Second, we are the best positioned firm in our industry to deliver on our clients' growing focus on decarbonization, sustainability and ESG. We are clear leaders in the right markets, environment, water, climate adaptation, resiliency, green design and program management, all of which are already inflecting positively. We think this is the first inning of a very long cycle, and no other company is better positioned. Third, accelerating our top line organic growth is a priority. We have an enviable position. We lead in nearly every market and sector in which we operate. This is a great starting point and foundation, and we don't need M&A to succeed. Today, we have structured the organization to capitalize on our advantages, whether it's our scale or investments in innovation to transform how we operate. As a result, we are committing to outgrow our peers and the industry. Fourth, we expect to deliver a 15% segment adjusted operating margin by fiscal 2024, which is a few years ahead of what we expected when we set this long-term goal in December of 2019. We will talk through the details of our plan to achieve this target today. And finally, today, we are committing to more than double our adjusted earnings per share and free cash flow from fiscal 2020 to fiscal 2024. This is built around our growth initiatives, continued margin expansion and ongoing commitment to return substantially all free cash flow to shareholders through repurchases. Turning to Slide 6. I want to begin by highlighting our competitive advantages in the marketplace. First and foremost, it begins with our people. We have the best technical experts, architects, engineers, planners, program managers, advisers, environmental scientists and innovative thinkers in the industry. Second, with nearly 50,000 people, our scale is a competitive advantage in how we go-to-market and how we deliver. We can make investments and deploy innovation in ways that make us stand out in the market. This creates a flywheel effect of margin expansion, increased profitability, strong cash flow and additional capital to reinvest in organic growth and return to our shareholders. Third, we have restructured the business and today, we're in the strongest position we've ever been in. Our vision is highly focused on higher returning, lower risk professional services markets. We have aligned our strategy and our actions and organizational structure, including through our Think and Act Globally strategy. We have eliminated unproductive cost in bureaucracy, and we have identified areas where we can invest organically to outgrow the market. Finally, we are the market leaders. We are already #1 in environment, #1 in transportation design, #1 in facilities design, and we hold many top water and green design rankings. We have the leading position in markets where clients are investing: transit, clean environment, next-gen energy, water, per- and polyfluoroalkyl substances, otherwise known as PFAS and others. These markets are poised to grow in response to the complex microeconomic themes such as infrastructure capacity, social equity, energy transition and environmental resiliency, to name a few. Common to all of these markets are our clients' aspirations to decarbonize their portfolios and advance their sustainability objectives. I will emphasize again, our clients have new priorities focused on ESG and we stand out as the company that can best advise and execute for them. Turning to Slide 7. We have transformed the company and are better positioned today to capitalize on the opportunities in front of us. First, at our core, we've always been a higher margin, lower risk professional services business. However, along the way, the strategy evolved, and we found ourselves in markets and businesses that weren't consistent with this profile. Over the past few years, in an effort to get back on this core, we undertook a number of actions to eliminate distractions, reduce risk and sharpen our focus. We exited businesses that didn't create acceptable financial returns and exposed us to asymmetrical risk reward profiles. This includes the sale of our Civil and Power Construction businesses and an ongoing exit from other underperforming markets. These were distractions on our time and diluted the return on our capital. We have refocused our strategy on our core professional services and knowledge-based capabilities since this is where we generate the most profit, highest returns, and we see the best opportunities for growth. One of the clear benefits has been more consistent execution. We're now consistently meeting or exceeding financial targets as demonstrated by our results. We grew our adjusted EBITDA by double digits in each of the last 2 years. And we've guided for strong growth again in 2021. You can also see this in our margins. We have gone from one of the lowest to one of the best in the industry. We made it a point to make the business more efficient and drive continuous improvement. As a result, we are consistently exceeding our margin objectives while continuing to invest in business development and key talent. We're also delivering value through capital allocation. We have bought back 630 million of stocks in September or nearly 9% of our shares outstanding, and we've done this at an attractive price. We want to be known for consistently delivering on our commitments, and our recent results should inspire confidence in what we are capable of. Turning to Slide 8. We are our clients' key partner in the delivery of their ESG, decarbonization, net zero and sustainability priorities. These are the megatrends that each and every one of our clients are grappling with. To make the point tangible, consider that more than 1,500 companies in 800 cities have net zero mandates. These are our clients. The opportunity is enormous. As you can see from the slide, a number of emerging trends and drivers for our clients' ambitions, and as a result, for our business. How will cities respond to changes after the pandemic? What are cities going to do to electrify transit systems and adapt their infrastructure to the world with electric and autonomous vehicles? How will cities build resiliency to protect against the impacts of climate change? How will our clients address a greater focus on the environment, including cleaning up forever chemicals such as PFAS? How will our clients meet renewable energy mandates? We need more and cleaner water. Social equity, economic justice and resiliency are key themes that cut across master planning of all cities. These are not simple problems. These are large megatrends that both our public and private clients have as their top priorities. And as a result, our clients need a partner that can be the experts in shaping their strategies across the life cycle of their assets. Again, these markets and opportunities play to our strength as a leader in environment, water, green design and sustainability solutions. Please turn to Slide 9. So we've talked about the megatrends, the key growth drivers. Now I want to talk about what is happening inside AECOM and how we are prioritizing resources to capitalize on this opportunity. For us, the focus is on outgrowing the industry and doing so organically without large acquisitions. In November, we announced our Think and Act Globally strategy that set our foundation for growth. It focuses the organization on capitalizing on the advantages I spoke about earlier. What does this mean in practice? The executive leadership team is refreshed with growth-focused leaders in charge of our largest opportunities. Drew Jeter, who we recently brought on to lead our Program Management business, is recognized as an industry leader, having won some of the largest program management contracts in the industry. His focus is simple: Grow the business by leveraging the full capabilities of AECOM. In addition, Jen Aument joins AECOM to lead our globally ranked #1 Transportation Practice. Jen brings global experience delivering mega infrastructure projects from concept through execution. She's a proven winner in the sector, having advised clients on their biggest projects and programs. These new leaders complement our existing strong leadership team, many of whom are new to their roles in this past year. The people on this team own P&Ls in regions and business lines. We have eliminated silos and regional mindsets and are focused on global priorities. We've empowered our business to grow and to collaborate. This means our people know they can bring the best people and ideas anywhere in the world. This is a big advantage against our competitors who continue to use local capabilities only. For example, if an engineer in Australia develops a new technology, that person and idea needs to be available to the teams supporting the Port of Long Beach or transport for London. That's the type of collaboration we're encouraging. We also focus on deepening our engagement with clients to best achieve our growth ambitions. To do this, first, we are expanding our advisory role. When our clients sit down to plan for the biggest challenges, we are sitting there with them, bringing our multidisciplinary expertise to the table. We bring incredible global insights, because at any given time, we have 50,000-plus projects across the world. There's not much we haven't seen. And this breadth of capabilities and experience are what make us stand out. Second, we are growing the Program Management business, enabling us to build on our advisory role to see programs through execution. As these programs become multi-decade and multibillion dollars in size, our experience and deep understanding of our clients and their priorities are critical advantages. Through the pandemic, many of our public sector clients have lost in-house delivery and technical capabilities. And this has created demand for our professionals to help them rapidly advance their projects. Third, through deep engagement, we're able to deliver our core engineering, design and other professional services that bring multidisciplinary expertise to clients. Finally, we are transforming the way our design services are delivered, effectively replacing hours with technology to deliver faster, better and with more predictable outcomes. We're going to fully capitalize on the benefits of scale and data to enhance our digital capabilities and change how we do our work. We view this as a growth driver, a margin driver and a client satisfaction tool. It really is a virtuous cycle for us. These focus areas underpin our conviction that we will outgrow the market and our peers. I want to reiterate, we will focus our growth on organic growth, not M&A. These investments in growth are built into our outlook for margins and don't require big CapEx. We don't need to do a $1 billion deal. We're already built to win. We see this as a big competitive advantage with less time spent on distractions, integrations and restructuring. Some companies spend a lot on acquisitions and add leverage, we are focused on the opposite. We are shrinking our share count and not issuing our undervalued equity to fuel growth. We certainly have no intention of levering up. Instead, we are focused on what we can do to enable our people to deliver. Today, we already have scale and market positioning we need to lead our industry. Our clients expect tailored solutions, flexibility and responsiveness and large M&A does not enable this. Turning to Slide 10. So what does this growth strategy look like for AECOM? And how will we deliver for clients? Our relationship with the client begins in the planning phases of our clients' larger programs. We serve as their strategy adviser during this time. Our clients come to us to help them with their problems or challenges or when they have large budgets to spend on infrastructure. This could mean that they need us to convert gas stations to hydrogen or need a wastewater treatment plant to increase throughput, but have no more land to expand. In these instances, we are sitting at the table with these clients with our expertise as leaders in these fields. We are advising on how to plan, how to mitigate risks, how to navigate regulations and stakeholder engagement requirements among a host of complex issues. This is what makes us a great partner. Being an adviser to our clients gives us a different perspective on their priorities and a very different and very strong relationship. We build on this deep advisory relationship with our clients to help them deliver and this is where our investments in our leading program management capabilities become important drivers of our ability to extend client relationships and to grow. As programs increase in size and complexity, program management is a market that plays to our strength, especially as we leverage on our early advisory positions with clients. Today, we are already a top rank program manager with approximately $400 million of net service revenue. We're elevating this practice internally, and we're pursuing several 9-figure opportunities that highlight a growing pipeline and strong client demand. Under Drew's leadership, with our focused investment and expected market growth, we expect to grow the program management business multiple times over in the coming years. A good example of this work is our role as program manager for NEOM in Saudi Arabia, which is designed to be a net zero city and powered completely by renewable energy. We were awarded the first phase of the $500 billion mega project, where we will provide program management, contract administration, technical and environmental support and site supervision services. This is anything but a traditional PM role. We started at the advisory end, we helped the client scope the project, and we evaluated technologies that would allow NEOM to be a cutting-edge for decades to come and serve as a model for future cities. Importantly, through this work, we were able to expand our role with design services for the transportation and utilities backbone for an entirely new city. We are complementing our industry-leading engineering and design capabilities with new expertise and a stronger global structure to enable growth. An example of this is our digital consultancy practices, which is another area where clients need help on complex and technical challenges. Today, we have a few hundred professionals around the world that are dedicated to this practice. This is a rapidly growing market. Our clients are large Fortune 500 companies and large public sector agencies that have complex organizations and are adapting to changing digital trends. This is a natural extension of our existing design, advisory and program management capabilities. We have scale and we have technical leadership, and we are investing to expand these capabilities. Taken together, we see where outsized growth opportunities exist. And by focusing on these areas, we are confident we can outgrow the market. Turning to Slide 11. We've touched on our focus around delivering innovation at scale, but I want to dive in a bit more. One particular area I want to focus on is on the future of design. You've heard for a long time about the stagnant pace of innovation in our industry. While many industries have transformed with digital tools and technology, the engineering industry has lagged. This is our priority for us to lead this change. We have all the necessary attributes of a company that can leverage technology, including scale, large volumes of data and many repeatable or standardized elements in everything that we do. This means that when we design a bridge, we shouldn't be starting from scratch every time. And today, we aren't. Where we're only scratching the surface of what is possible, we are utilizing technology to automate and prepopulate certain elements of our designs into standardized elements that can be tailored to the client's specific specifications. Let me make this a bit more tangible. Take the example of designing a bridge, and we do a lot of them. We have a lot of data. And today, with our innovation around script and code, we are now seeing the opportunity to remove up to 10% of the design errors of a standard bridge project. This is a quantum leap for us and is well ahead of the industry. This is a big deal for us, particularly as we deploy these tools further across our platform. Our technology gets better, quality improves, and we can provide more value for our clients. We're doing this in the field today, and we will deploy this at scale over time. Another example of innovation and scale is our Workplace of the Future initiative. We started this initiative recognizing that we could substantially reduce our real estate footprint and transform how we work by enabling our digital tools to connect our people and clients around the world. We've seen through COVID just how productive people are while working remotely, and our clients and employees are increasingly working this way. Of course, this initiative is reducing real estate costs. That part is easy, and that is what most companies are focused on. At AECOM, we're going well beyond this. The harder part and the part that we're really excited about is the opportunity to use our technology to transform how we deliver. We've already made the investments in systems and IT to enable this. We can work effectively around the clock for our clients. I call this the Follow the Sun to Deliver. Again, this is a big competitive advantage we are focused on capturing and another example of scale being an enabler of differentiation. Turning to Slide 12. We know demand is strong, and we have positioned the company for growth, but we are especially encouraged by the funding that is now coming into our markets. The U.S. is our largest market, and the Biden Administration has proposed several trillion dollars of funding for our largest clients and broad-based infrastructure, environment and water investments. This is great news for AECOM and is well aligned with our clients' priorities around ESG and sustainability. With our market leading positions, we're incredibly well aligned with these administrative priorities. We see this line up to be a growth driver in fiscal '22 and beyond. It's important to distinguish the priorities of this administration that will be of a more traditional infrastructure focus. This administration's ambitions go far beyond what has been included in prior infrastructure proposals. There's a broad focus on the environment, water, transportation, mass transit, social equity, safety, new energy, world broadband, offshore wind, all areas that fit precisely into our areas of expertise. We haven't built any benefits from these proposals into our guidance. But as it comes to fruition, we are well positioned. An example I want to touch on, because it is always topical, is PFAS. President Biden and the EPA are prioritizing PFAS remediation, including an expectation to classify PFAS as a hazardous substance, which we expect will result in strong long-term demand. We've been leading our clients' efforts on this for several decades, and we have exclusive relationships with some of the largest private companies in this space. We also have worked extensively with the U.S. DoD. In addition to leading with our program management, environment and water expertise, we have developed a proprietary PFAS destruction technology that is currently in pilot programs. We have gone well beyond our peers by leading in destruction. If successful, by the end of this year, this technology will become commercially available and create the industry standard for PFAS destruction. This is a game changer we're excited about. This is exactly the sort of market where our multi-decade client relationships position us well to grow as the demand drivers manifest. Finally, it's also important to note that we see key indicators trending positively for our state and local clients, which is our largest client base in the U.S. Vehicle miles traveled have recovered meaningfully from the lows experienced last year's and state tax collections have largely outperformed expectations. In addition, the proposed funding for state and local clients and the current Biden proposal would provide significant budget support. In fact, it is most likely that the stimulus funding would result in a healthy surplus of budgets for many of our clients. Again, this is great news for AECOM. Turning to Slide 13. So what does this all mean for value creation? A key component of this is our margins. Today, we are announcing our commitment to achieve a 15% segment adjusted operating margin by 2024, which would mark a nearly 700 basis point improvement from 2019. Our culture of continuous improvement is a key driver. This means we will continue doing a few things on a consistent basis. First, we're constantly evaluating our portfolio to ensure we invest in the right areas. We have an ROIC in our long-term incentive compensation and return on investment and time are key elements of our capital allocation process. This led us to exit numerous businesses and aligned around our core markets with the best margins and growth expectations. Second, we are operating more efficiently, a big element of which is our Workplace of the Future program. Enabling more flexible working environments will reduce our real estate cost, but I want to be clear. This is not cost-cutting. Since more importantly, it is allowing us to transform how we deliver, as I mentioned previously. Third, we are improving overall productivity by better utilizing centralized design and shared service centers. This is a great example of where we can use scale and innovation to enable more efficient delivery. Finally, we are constantly looking at our structure, client account programs and incentives and asking what we can do to make the business function at its highest possible level. I will use key accounts as an example. While our top 40 accounts represent 20% of our business, approximately half of these clients are only buying 1 service from AECOM. This provides a clear market where we can grow with minimal incremental cost, particularly compared to the cost of pursuing a new market or a new client. That means more predictable outcomes and higher margins. I want to put our confidence in achieving our 15% margin target in context against our recent margin successes. At our Investor Day in December of 2019, we set ambitious targets as part of a 3-year plan. We exceeded these targets in fiscal '19 and fiscal '20, and we're off to a strong start against our guidance in fiscal '21. We did all of this despite COVID, despite changing our structure and our management and against a backdrop of uneven macro trends. We did this by continuing our focus on changing how we work and innovating how we deliver for our clients, all while maintaining strong levels of BD investment to support growth. In total, these efforts underpin our confidence today in achieving our 15% margin in 2024, which is well in excess of our peers and what anyone has ever done in our industry. And yet, we have a clear path to achieve this. Turning to Slide 14 and concluding my remarks. When we take all of these initiatives together, we have a platform for exceptional shareholder value creation. Through our plan, we are confident we will more than double our adjusted EPS by fiscal '24 as compared to where we were in fiscal '20. It is driven by a combination of ongoing margin improvement, organic growth from initiatives we spoke about today and our continued focus on capital allocation. Reflecting the strong cash profile of the business, we expect to also more than double our free cash flow. We expect to achieve our 15% margin target by fiscal '24 and also expect to achieve our ROIC target by this time as well. Gaur will discuss further elements of this plan, but I want to underscore that while the ultimate path to achieve our plan will likely look different than it's drawn up today, our confidence in getting there with multiple levers is high. I also want to share where we see margins heading in the longer term. We're setting a new long-term aspiration to deliver a margin of 17%. This aspiration builds on our focus of continuous improvement, providing more value to clients and transforming how we work and deliver for our clients. Importantly, this aspiration reminds ourselves that we're not done. There's a lot more potential within AECOM, and it's up to us to capture it through our investments and our decision-making. I'm energized by the opportunities in front of us. And with the passion and dedication of our teams, I'm confident we will create great value for our shareholders. With that, I'll turn the call over to Gaur.

Thanks, Troy. Please turn to Slide 16. I want to begin by taking a moment to speak to our inherent attributes and fundamental advantages that make AECOM a high-quality business. First, our clients are high-quality, blue-chip private sector clients as well as Tier 1 governments around the world. Having a high-quality client base reduces risk and volatility in our results. Second is our highly variable cost structure. We have a very low capital intensity and fixed operating costs. We can flex our cost structure up and down with the market as needed. This was apparent last year when we had to do exactly that due to COVID. Third is our backlog. We have a substantial high-quality backlog with up to 2-plus years of revenue in our design business and 4-plus years in our CM business. I will discuss this in more detail shortly. Fourth is our low-cost to achieve incremental growth. We operate a low capital intensity business with high incremental returns on capital. We don't need to reinvent the wheel to grow. It comes from organic investment. And finally, we generate consistently strong cash flow, having met or exceeded our guidance for the past 6 years. This is because of the attributes we just talked about, low risk, good clients, strong backlog and variable cost structure. It is just as important to have these attributes as it is to make sure you don't do anything to erode your advantage. We are focused on profitable growth, our largest market, adding services to existing clients and allocating capital to our shareholders. We are not doing anything to undermine our value creation opportunity. Turning to Slide 17. We reported earnings last week, so I won't belabor the details. We're off to a strong start to the year. I am particularly proud of our margin improvement, and we exceeded our targets on every key financial metric. I do want to spend a moment on our backlog since it is important to understand a few moving pieces that underscore why we are confident in growth. Our backlog in the global design business, which accounts for approximately 91% of our profitability in the last 12 months, has increased steadily in each of the past 3 quarters, even in a challenging market. This is due to our investment in BD and focus on growth. Within our design pipeline in the Americas, our pursuits in the capture stage or what we refer to as pipeline of future bids have increased by approximately 40%, and with the funding environment improving, we are positioned for continued backlog growth. Backlog also increased year-over-year in Construction Management, which accounts for approximately 56% of the backlog, but only 9% of our profitability due to the high pass-throughs in this business. However, we are seeing a slowdown in decision-making, which resulted in sequential decline in backlog in the first quarter. It is important to note, though, that wins trended positively in January, and our backlog is equal to 4-plus years of revenue. Taken as a whole, we are growing backlog in our businesses that represent more than 90% of our profitability, which gives us confidence that we are well positioned. And particularly as the funding environment improves, we expect to drive the growth we spoke about today. Turning to Slide 18. I want to turn to value creation, a critical element of which is prioritizing investments in the right markets. First and foremost is how we allocate capital internally to make the right decisions to create value and importantly avoid the wrong decisions that destroy value. This is a big focus internally. How do we make the right decisions to position the organization to succeed? We start with identifying where we generate our highest profitability. We believe the best place to make more money without changing our risk profile is in our core markets today. We have ROIC as an incentive metric, it holds us accountable for profitable growth and cash collections. And so we exited countries to eliminate distraction. We have a rigorous review process for all capital allocation decisions, be it business development dollars, sweat equity, new technologies or new services. We have set margin, return, cash flow hurdles that we have to reach before moving forward. This rigor underpins the value we have created over the past few years which you can see in our higher ROIC and in the value we will create going forward in pursuit of our 15-plus-percent margin and ROIC growth. Turning to Slide 19. Another focus in our value creation effort is identifying how we turn one of our advantages, scale, into a driver of value creation. Shared Services is a great example of the way the organization leverages its scale to become a lot more efficient and create value. Over the past 2 years, we prioritized investment to expand our shared service centers. Why? We are a global enterprise, but many of our traditional support and back office type work can be standardized and executed out of the best cost centers. It's not only the cost but also quality from repeatable task being delivered from a centralized location. This year is a big focus for us on what we call finance transformation. Billers are an example. We are constantly sending out invoices to clients. This is a repeatable function that can be centralized effectively and standardized to create more efficiency and throughput. Payroll is another good example. The quality of the talent available to us in our Manila Center are top-notch. There is an established market of employees who are good at it and have been supporting Fortune 500 entities for a long time. Since we have ramped up our global services center a few years ago, the payback on our investments has been less than a year. We expect our finance transformation initiative to be better than that. We expect this to be a $20 million annualized savings for us, which is built into our outlook for further margin improvement and strong profitability. Turning to Slide 20. Finally, on value creation, let's talk about cash flow and capital allocation. We generate strong cash flow. We expect to convert our adjusted EBITDA to a triple unlevered free cash flow at 75% rate on a normalized basis. It bears repeating we are a high-quality, low-risk professional services business. We have a strong client base. We are in low-risk markets. We have incentive structures tied to cash and ROIC. And we have a highly variable cost structure and low capital intensity. These are inherent advantages of our business that allows us to consistently convert cash at the rate we do. Today and for the foreseeable future, we intend to only use our free cash flow to buy back our stock. Of course, we will continue to invest in growth, which mainly comes through operating cash. You can see what we have done over time with our share count. We know our stock tends to reflect a truer estimate of our underlying value when we are disciplined with capital allocation. Turning to Slide 21. We are setting ambitious but achievable goals for growth from fiscal 2020 to fiscal 2024. We expect to more than double adjusted EPS to more than $4.30 and more than double free cash flow to more than $680 million. You can see that based on the assumptions in our model, including a fully diluted average share count to 120 million in fiscal 2024, this would imply free cash flow per share of at least $5.50, which is a substantial improvement from the $2.11 in fiscal 2020. There are multiple levers to achieve our goals. Our baseline case is that 1/3 of our EPS growth will come from revenue growth. We expect mid- single-digit organic NSR growth following the investments in program management, digital, new energy, bringing the best practices to our client that Troy spoke to earlier and capitalizing on ESG trends across our markets. Another 1/3 we expect to come from achieving 15% margins in 2024 from the various initiatives Troy outlined earlier. We continue to drive our culture of continuous improvement, which includes driving international margins to double digits. And the final 1/3 is from repurchases resulting from the substantial cash generation that I spoke to previously. We expect to deliver $2.5 billion of free cash flow in 2021 through 2024. That represents approximately 30% of our market cap today. We acknowledge that it is tough to pinpoint any one of these with extreme precision, but the point is that these 3 levers provide us with multiple paths to achieve our goals. We don't need to hit all of them to achieve this plan, but we are pursuing all of them as well as opportunities to outperform. I want to show you how we think about capital allocation and why we are so bullish on allocating such a large amount of capital to continue to buy stock. We think our stock is attractively valued, as evidenced by the $630 million we have already spent to buy back stocks in September. We make this determination based on a number of factors. On a free cash flow basis, we are at a severe discount to our peers. We believe that this is unwarranted and we will earn a high-return on capital allocated to repurchases over time. We look back at periods like 2008 to 2012, when public sector investment was growing, a period not too dissimilar to today, we traded at a much higher valuation. This was closer to our estimate of fair value, but again, a disconnect that we can capitalize through our share repurchases. We have scale, technical excellence, the best teams in the industry, a strong strategy and are making investments to drive organic growth. We see others out there paying a high multiple for inferior businesses that don't have anything competitively distinguishable. Meanwhile, we can buy our stock at a much lower valuation. To us, that is a no-brainer use of capital for as long as this discount persists. Taken together, these are all the reasons why we are confident in our ability to achieve our plans and create exceptional value for our investors. With that, operator, we are now ready for questions.

[Operator Instructions] Your first question comes from Sean Eastman with KeyBanc Capital.

I just wanted to start on -- as we talk about changing the way design services are delivered, kind of more automation in the design process, more efficiencies, how is that shared with the client? I mean, does some of that value-add have to be given to the client? Any discussion on sort of the commercialization and the monetization of those investments would be really helpful.

Sure, Sean. It's Troy. I'll take that. But just before I answer your question, I just want to let you know that we've got Lara Poloni, our President on the line with us as well. And so Gaur and Lara and I will answer the questions this afternoon or this morning. So with respect to the changing design, you're right in asking that question, it's no doubt as we create efficiency in the design, it does mean that ultimately, there would be some less hours involved in that design. And I would expect us to be sharing part of that with our customers over time. And we haven't exactly worked out what that's going to look like. I think as you start with the change in how the design is delivered, we clearly would look at that as an opportunity to provide some value to our clients through a lower cost. But ultimately, I don't believe that's truly what the value is for our client, because by improving how we design, we improve the quality of the design, the certainty of the design, the speed at which we deliver the design. And more importantly, it improves how effectively and how quickly we can deliver change orders. So while it's valuable in all those respects, we certainly do expect to share ultimately some of the cost reduction to our client, and that ultimately builds into our growth strategy. That gives us a platform, again, to help us grow in our key area of focus, which is our engineering and design business. And we'll add one further point that I think is important in terms of [indiscernible] and the targets that we've announced is that in all of this, we clearly have built some leakage for all of this into our estimates.

Okay. That's really helpful. And second one for me is just on this program management growth, I mean, I'd just like to understand better how such a huge revenue opportunity has remained untapped until today and really what's changed? And whether you think this is something that the competition is going to be trying to tap into as well?

Well, I guess first of all, I don't want to give you the impression that's something that's untapped because there's no question. This is an important part of our organization. We have a great platform to build. If you look at how we're ranked in terms of program management, we're ranked in the top few already globally. But we do believe, given the trends in our business and how we are uniquely positioned to advise clients on trends, that there is an opportunity for us to also help in the execution of those plans. And so I think I would attribute this to our recognition of the opportunity and our change in focus, building off the strengths of what our people already do and the strength of our organization. So again, it's -- I don't think there's a change necessarily other than our focus and our belief and certainly some market opportunity. And like with everything, I would expect that where there is success, that all others always follow. But I think if you develop a market-leading position, you can still keep that advantage.

Your next question comes from Andy Kaplowitz with Citigroup.

Troy, it seems like you're committing to 20% annual EPS growth here. You laid out the growth well in terms of the 1/3 in growth, 1/3 in margin, 1/3 in repurchases. But it seems you're counting on a level of core growth that you haven't achieved before. So maybe give us a little more assumptions into your forecast there? How are you thinking for market growth in your forecast? Obviously, some of the trends in energy transition stimulus are favorable to you? And then how much outperformance are you factoring in?

So I'll tell you what, Andy, I'm going to give you a couple of comments on that, and then I'll pass it over to Gaur to answer some more of that specifically. But just in terms of achieving our results, again, as I said in our prepared comments, I see us having multiple ways to achieve that. And we've sort of broken it down into, as we said, 1/3, 1/3, 1/3. Ultimately, we're going to look back and it's going to be very different. But nevertheless, in terms of growth, the market is creating an opportunity for us to take advantage of the skills across the world. So the market conditions have -- certainly have been improving. If you look back a few years, we had seen funding momentum in a lot of our markets, pre-pandemic, and we had started to see some growth coming into the market. Obviously, the pandemic disrupted all of that. But again, as we look forward, we see the market trends improving and with some -- again, with some further government support improving in a way that create a great backdrop for growth in '22 and beyond. Now just in terms of what the rest of your question, what's in the model, I'll turn it over to Gaur.

Andy, so in terms of the modeling for growth purposes, we have approximately 3% built in, and it could lever a little bit up based on what market opportunities present to us. So nothing here clearly built-in. And to Troy's point, I think it's important to note, there's multiple levers to doubling our EPS. It is not solely dependent on achieving a static number of growth. But we have margin expansion. We have cash that's going to be generated, utilized for our capital allocation purposes. And specifically, you look at some of the more recent trends in Q1 where our design business grew at 1.1 for backlog book to burn. Troy also mentioned in his comments before, how we're seeing significant pipeline activity, it expanded by 40%, and our Americas business almost to prepandemic levels, all of this is adding to the confidence we've put forth in the model.

Yes. Very helpful, guys. And then maybe just a similar question on margin, if I could. You still have some regions of the world, primarily internationally, that have some decent underutilization. So when you look at that 180 basis points that you're expecting going forward, how much do you expect is just sort of the global economy improving and helping utilization internationally versus those 4 buckets that you laid out? And maybe which bucket do you think can give you the biggest margin boost over the next few years?

Andy, this is Gaur. I'll respond to that question. So specific to your question on international, it is absolutely modeled into our 2024 vision of doubling EPS that we will achieve double-digit margin growth in international as well, right? I mean, if you just take a step back, we doubled our margins in 2020 for international. We grew by another 130 bps in Q1 to where we sit today, and our aspiration is to be best-in-class, just as we are in Americas. We are focused on the initiatives that have already been identified from better utilization of design services, business services, workplace of the future, continue to evaluate our geographic footprint, but the key thing to also advise here is we're not factoring any growth to getting to that 10% margin initiative. That is based on all the current cost initiatives that Troy said in his prepared remarks and what I just articulated right now.

Your next question comes from Andrew Wittmann with Baird.

I just wanted a couple of clarifications, I guess. You guys said on previous calls that any benefit from the proposed Biden stimulus plan is not baked into the '21 outlook. And I was wondering over the out years, where there could be more benefit, is the Biden plan part of that 3% that you just talked about, Gaur? And I guess the other question that I have, that's kind of related to some of the targets that you outlined here. Specifically on the aspirational 17% target, given that, that's probably up beyond the '24 -- is out beyond the '24 view here, does that potentially consider an inorganic contribution?

All right. I'll take those ones. First of all, just -- you're right, with respect to fiscal '21, we did say that there's no benefit from any infrastructure support provided by the Biden administration. But when we look forward, we certainly do expect some support, but I will say it's not built into our plan. Our plan is really built off the fact that we believe the markets around the world are lining up to support the opportunities to take advantage of the strength of our team and what we do. The agendas of our clients, the decarbonization agendas are a significant part of that, and we see that trend building and accelerating through the pandemic, and we think that's creating an opportunity for us. If it turns out that there is another infrastructure package or there is a COVID support package coming from the Biden administration, that certainly is additive. But when we look at the future, we're not saying there's one single item we're pinning our growth hopes on, not at all. In fact, it's broader market trends across the world that we view as long-term and sustainable. And certainly, some of these things being passed and funding kind of placed certainly support and helped that ambition. In terms of the 7 -- I was going to say the 17% is an aspiration. And if you call back in 2019, our Investor Day then, we set a 15% aspiration. We now have moved, where the 15% is our target [indiscernible] done. So 17%, we think we get there by just continuing to transform how we work and how we deliver and having a culture that's focused on continuously improving. We believe that's how we'll get there. There isn't one single thing or a single initiative that I would point to. It's really how we've learned to work and it's ingrained in our culture. Again, I go back and say that our Americas business has already proven that we can certainly achieve a 17% ambition. We have operating margins in excess of 17%. We still think, again, there's room for improvement. But the 17%, if you think about it as our North Star, we're setting this out so it reminds us to keep challenging ourselves and keep challenging the industry paradigms. And we think like the old 15%, we set an aspiration, and we'll look to turn that into an achievable target.

That's really good context. I don't usually dig into specific end market opportunities. But I think the PFAS one is one that is obviously drawing a lot of attention and has significant opportunity. The solution that AECOM is working at developing, this proprietary technology, sounds pretty unique in that context. So I was hoping that you could just spend a little bit more time here in the Q&A section to talk about how unique this is in the marketplace. I think you called it a game changer or something like that. But if you could just talk about the development of this, the timing of it, how differentiated it really is just for some broader context, I think that would help as well.

Yes, Andy, you know what, I'm going to turn that question over to Lara, so he can give you -- she can give you the background on our PFAS solution.

So as Troy mentioned, Andy, in his earlier remarks, PFAS is one of those core opportunities, particularly coming through the Biden Administration, it's going to be a key U.S. EPA policy initiative and new regulations are moving at a fast pace. So that's definitely [indiscernible] and I think as I said on earlier calls, we come from a real position of long-standing strength. We've got the #1 environmental business globally. And we have a couple of decades of experience in consulting services, let's call them, in PFAS. But the real game changer, as we're saying, is this on-site destructive remediation solution. We think we've got a real prime mover position with that. We've got ready-made group of clients, defense departments, aviation clients, their related core customers that have -- they've got immediate issues in terms of high concentration, remediation requirements as a result of the historic use on their sites of these Five for Fighting fines. So we are at a good stage, and many of these clients are coming to us and they're interested in piloting these PFAS remediation solutions ahead of many of these regulatory drivers and this out-to-grow capability and solution is basically electrochemical oxidation technology. And we really believe that it's one of the most promising potential PFAS destructive solutions. And we've got the pilots already in place. As Troy mentioned, we're hoping to sort of commercialize that by end of year. So we're really excited about that much. I think it will really strengthen our position in this segment of the market, and it's very timely with all of these triggers between advances and changes and momentum that exist around the world at the moment.

And I just -- just one point on top of that, which is it is technology that we would -- we certainly all would own the rights for it. So we have -- it's something that we've patented. So if it is commercially viable as we determined to these pilots, we'll own the technology.

And your next question comes from Michael Feniger with Bank of America.

Yes. And as you mentioned, I think you said public customers have lost in-house capabilities due to COVID. I was hoping you could expand on that for us and what that can mean for AECOM? And then earlier in the presentation, you talked about this inflection in water and environment. Just to be clear, are you starting to see the pipeline build currently, even without the Biden stimulus package passing yet?

Sure. First of all, I'm not going to comment on any particular public agency. But just in terms of a general trend, there is certainly an increase in ambitions and programs. And then given the strain put on local governments, to support recovery from COVID has meant that there isn't budget opportunity to increase the capacity of the folks that would be responsible for those projects. So there certainly is broadly an opportunity to provide program management services to help our customers achieve those ambitions. With respect to water and environment, absolutely. We believe that water and environment are positioned to be some of our fastest-growing businesses as we move forward. And so where we are today, typically as we're having discussions, advisory type discussions where people are planning to achieve their decarbonization ambitions [indiscernible] in terms of scope and engagement. But obviously, that's -- those are the seeds of a lot of work that has to be done in the future. And so we'll see that grow over time. So while we're not seeing a spike in certainly the prospects or the opportunities today, we're starting to see, again, the seeds of the trends that we believe will lead to that.