Good morning, and welcome to AECOM's First Quarter 2024 Conference Call. I would like to inform all participants that this call is being recorded at the request of AECOM. This broadcast is a copyrighted property of AECOM, and 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. I would now like to turn the conference call over to Will Gabrielski, Senior Vice President, Finance, Treasury and 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 use certain non-GAAP financial measures in our presentation. The appropriate GAAP reconciliations are incorporated into our materials, which are posted to our website. Growth rates are presented on a year-over-year basis unless otherwise noted. Any references to segment margins or segment adjusted operating margins will reflect the performance for the Americas and International segments. When discussing revenue and revenue growth, we will refer to net service revenue or NSR, which is defined as revenue excluding pass-through revenue. NSR and backlog growth rates are presented on a constant currency basis unless otherwise noted. Today's remarks will be focused on continuing operations. Our discussion excludes the results of the AECOM Capital business, which we announced our intended exit from last year. During the quarter based on current market conditions, we incurred a $29 million after-tax adjustment to the carrying value of our investments; however, we continue to expect positive cash recovery as we exit our investments. On today's call, Troy Rudd, our Chief Executive Officer, will review our key accomplishments, our strategy, and our outlook for the business; Lara Poloni, our President, will discuss key operational successes and priorities; and Gaurav Kapoor, our Chief Financial and Operations Officer, will review our financial performance and outlook in greater detail. We will conclude with a question-and-answer session. With that, I will turn the call over to Troy.

Thank you, Will, and thank you all for joining us. Our first quarter performance exceeded our expectations, and I'm very proud of how the organization is delivering on our key priorities. We've established ourselves as a trusted infrastructure consulting firm at a time when funding is accelerating at an unprecedented pace across our markets. As a professional services organization, our people and their passion to deliver a better world create the competitive advantage we bring to our clients. It is through their unrivaled technical expertise and our collaborative culture that we consistently win at a high rate and distinguish ourselves from the competition. To that point, I'm also pleased to report that we were recently recognized as one of Fortune's World's Most Admired Companies for the 10th consecutive year. In addition, our employee satisfaction scores remain at an all-time high, and employee retention remains well ahead of both internal and industry benchmarks, significantly better than our pre-COVID levels. Our headcount continues to increase organically across our largest markets, demonstrating the health and strength of our workforce and business. These outcomes demonstrate the value we realize when we consistently invest in our teams through technical and leadership development and the positive benefits to recruiting and retention from winning marquee projects globally. Turning to our financial performance for the quarter, organic NSR in the design business increased by 9% in the Americas and 8% overall. Growth was especially strong in our global water and transportation markets. The segment adjusted operating margin increased by 100 basis points to 15%, which is a new first-quarter high. This performance reflects the high returns we deliver on our organic growth and our commitment to efficient delivery. As a result, adjusted EBITDA and adjusted EPS increased by 14% and 25%, respectively, which puts us firmly on track to deliver on our full-year guidance. During the quarter, we continued to execute on a returns-focused capital allocation policy. Free cash flow was $87 million, and we returned nearly $100 million through repurchases and dividends. In addition, in November, our Board approved an increase to the share repurchase authorization to $1 billion, and our January dividend payment reflected a 22% increase in our quarterly dividend program. Supporting future organic growth, our design backlog hit a new record high, and our pipeline continued to expand, reflecting the strength of our end markets and the continued expansion of our addressable market through our day 1, day 2, day 3 strategy. To that point, our program management pipeline remains at an all-time high, which aligns with our long-term aspiration for program management and advisory to represent 50% of our revenue. We are encouraged by our clients' investment plans, the growth of which is apparent in our record pipeline of pursuits. Even more encouragingly, growth is accelerating in the earlier stages of our pipeline, which aligns well with our expectation for an extended period of elevated growth and opportunity. Please turn to the next slide. Our strong start to the year and consistently strong execution is a result of our Think and Act Globally strategy, which we discussed in detail at our Investor Day in December. Lara will further discuss how our strategy is delivering results across our business. But before that, I'd like to highlight a few notable trends. First, the funding outlook in our core markets has never been stronger. In the Americas, IIJA funding is accelerating as evidenced by another milestone program management win for Amtrak's Susquehanna Bridge Replacement Project, which will improve operations on one of the busiest rail corridors in the U.S. Additionally, state and local budgets remain strong, and our private sector clients are investing in reshoring capacity and adapting to water and energy transition impacts. In Canada, large transit projects are advancing against a backdrop of continued national and provincial investment, and water and mining markets also remain robust. Other international markets are similarly strong. In the U.K., growth in the water market is set to accelerate from the substantially expected AMP8 funding. And in Australia, we won two substantial water projects in the quarter that reflect a continued focus among our clients on water capacity expansion and achieving their net-zero ambitions. Second, investments in sustainability, resilience, and energy transition are expanding rapidly, creating new opportunities for which we are ideally suited. Today, more than $1 trillion is spent annually on the energy transition alone, and this is expected to double by the year 2030. As a result, projects are increasing in size and complexity, and clients are seeking more holistic, programmatic solutions to create execution certainty. For instance, we are helping the New York City Department of Environmental Protection achieve their 80% greenhouse gas reduction goal. Water infrastructure accounts for nearly 15% of the city's emissions, and reducing Water's emissions is a key element of their plan. Nearly every market and client we serve is working to address a similar challenge, which is evident in our record pipeline. Third, we continue to gain market share organically by winning at a high rate while bidding record levels of work. Our share of $25 million or greater wins represents more than one-third of our wins in the past 12 months, and our overall win rate remained at the historically high 50% mark. Finally, we are successfully investing to build highly complementary revenue streams that pair well with our strong domain expertise and high credibility with clients. A great example is in digital consulting. We are helping clients with their digital journeys in markets such as water and transportation. Our recent selection on the U.K.'s intelligent automation framework for the National Health Service showcases our advantage. AECOM was the only infrastructure firm selected among the field of traditional IT and management consulting firms, demonstrating the enhanced value proposition we bring to our infrastructure clients and their IT journeys. This is a multi-billion dollar market and a substantial growth opportunity. Importantly, as we look ahead, momentum in the business is strong, and the overall funding environment is robust. As such, we are affirming our fiscal 2024 guidance, which includes an expectation for 20% adjusted EPS growth resulting from high margin and high returning organic growth. With that, I'll turn the call over to Lara.

Thanks, Troy. Please turn to the next slide. Our teams are energized by our strong start to the year, including our continued high win rate, backlog, pipeline, and the momentum in our markets. Key to our success is our client-focused innovative and collaborative culture. We are engaging early and often with clients to fully understand their needs and strategic priorities. By collaborating globally, we can holistically address their needs by bringing the best of our technical, advisory, digital, and program management experts to each client. Let's look at two success stories that exemplify what we mean by winning what matters organically. First, we have gained significant market share with FEMA, having won several of their most significant contracts over the past few years. This was highlighted by our selection last month to support its largest public assistance grant program in its most active zone, the Atlantic, covering disaster recovery efforts across the Northeast to the Caribbean. This win, combined with our existing Consolidated Resource Center and Flood Mapping contracts, positions us for the first time as their leader across FEMA's critical missions of preparedness, mitigation, response, and recovery at a time when stakes have never been higher. Importantly, these successes exemplify the strength of our teams and the benefits of collaboration across our regions and business lines. Second, our global leadership in transit has been on full display in Canada, where we have won large roles on several key projects over the past year. As a result, we've delivered double-digit organic NSR growth, a 1.4 book-to-burn ratio, and have a record backlog for our Canadian business. Our high win rate is enabled by several factors underpinning our competitive advantage. First, we have leading transit and rail system capabilities. Second, a strong local presence and great relationships with our clients. Third, our program management expertise distinguishes us against both traditional design firms and program management firms. Fourth, we've built strong partnerships that best position us for commercial success. Finally, our scale enables us to draw on our global expertise and augment local capabilities to create more efficient delivery for our clients. Our growth with FEMA and in the Canadian transit market is emblematic of the strengths of our platform and the strategy we’re pursuing. We position early, advise, and bring AECOM's suite of capabilities from across the globe to our clients. As a result, we've created an unrivaled value proposition for our clients. These successes aren't unique for us; we are delivering consistently strong growth and capitalizing on accelerating trends across our markets. For instance, opportunities for lead pipe replacement are expanding, supported by IIJA funding, state and local investment, and the prospects of expanded federal support from the EPA's proposed Lead and Copper Rule. We were an early mover in this market, including our ongoing support for Denver Water's Accelerated Lead Service Line Replacement Program as just one example. On this program, we brought both our program management and digital capabilities to bear, including developing and deploying AI-enabled tools that enabled our teams to double the amount of lead pipe identified in Denver's hotspots. Ultimately, this reduced costs and accelerated service line replacements. We expect this market to accelerate from here. Another example is grid modernization, where investments are increasing, and our pipeline has expanded to nearly $1 billion. This growth is driven by the additional capacity required to facilitate ongoing electrification and renewable energy generation capacity growth. Clients are seeking programmatic support and digital innovation to deliver projects on schedule and within budget, which plays right to our strengths, as demonstrated by several notable wins in this market over the past year. Finally, our leadership position in the tunneling market remains a competitive differentiator on large and complex transportation and water programs. Our win on the two-mile-deep Kensico water conveyance tunnel in New York City demonstrates our ability to deliver on the most complex and critical projects globally. Additionally, our largest transportation wins in the quarter were defined by our tunneling and program management expertise. Taken together, across each of our markets, the strength of our strategy and technical expertise differentiates us and positions us well for continued strong growth in the years ahead. With that, I will turn the call over to Gaur.

Thanks, Lara. Please turn to the next slide. Our first quarter results exceeded our expectations, highlighted by continued strong organic NSR growth, a record first quarter margin, double-digit earnings growth, and strong free cash flow. We are really pleased to start the year with such strong momentum. Our backlog in nearly every market is at an all-time high, and our pipeline is at record levels. We are realizing both the benefits of our organic growth at higher incremental margins and the investments we've made to deliver our work more efficiently, including a shift in our headcount, with digital and program management representing the fastest-growing areas of headcount increases across the company. As a result, innovation is accelerating, and we are bringing new solutions to our clients that further enhance our advantage. For instance, our Fund Navigator tool has been utilized by clients to position for and successfully win funding from IIJA programs, and we're expanding these successes to help our clients deliver on these projects through our day 1, day 2, and day 3 capabilities. All of this strengthens our confidence in the future. Please turn to the next slide. Turning to our results in more detail. Organic NSR in the Americas design business increased by 9%, led by growth in water, transportation, and program management. Our adjusted operating margin in the Americas expanded to 18.3%, which was a new first quarter high. Our backlog in the design business is at a record level and includes 23% growth in contracted backlog, reflecting our high win rate and focus on winning what matters to expand our long-term earnings power. I should note that our construction management backlog declined due to our decision to remove two projects from awarded backlog where the final terms and conditions were inconsistent with our risk framework, which did not materially impact our profit and backlog given the high pass-through revenue in this business. Please turn to the next slide. Organic NSR growth in the International segment was 8%, driven by growth in our highest returning markets. This is reflected in 230 basis points of margin expansion in the quarter to 10.6%. Further improvement in our international margins will continue to be a key driver of our enterprise-wide margin expansion goals. Backlog also increased across all our regions in the quarter and positions us for continued strong growth in the year. Please turn to the next slide. We had a strong start to the year on cash flow with free cash flow of $87 million. This enabled a return of nearly $100 million to shareholders in the quarter. As Troy noted, the Board of Directors increased our repurchase authorization to $1 billion in November, and our quarterly dividend payment increased by 22% beginning with our January payment. We remain committed to our disciplined returns-focused capital allocation policy. We continue to expect at least 100% conversion of adjusted net income to free cash flow for the full year, which will support ongoing dividend and share repurchases. Importantly, our balance sheet remains strong. Both S&P and Moody's upgraded our credit ratings over the past few months, and we are operating with low leverage and cost of debt certainty. Please turn to the next slide. With our accomplishments in the quarter and the strong start to the year, we reaffirm our guidance across all financial metrics for fiscal 2024. This includes our expectations for 13% and 20% adjusted EBITDA and adjusted EPS growth enabled by our expectations for 8% to 10% organic NSR growth and 90 basis points of margin expansion to a new record. I will continue to note that our adjusted EPS guidance only incorporates the benefit of repurchases completed to date, even though it is our intent to continue repurchasing stock over the course of the year. For modeling purposes, we also expect our second and third quarter tax rates to be in the high 20s, consistent with the phasing we've experienced last year. With that, operator, we are ready for questions.

Your first question comes from the line of Michael Feniger from Bank of America.

There will be a focus on the overall backlog being down. I'm just curious about the gross profit in the backlog. So the overall backlog is down. You discussed kind of the moving pieces of the construction management design up. Maybe you can help us with that overall figure down, what does it actually look like when we think of the gross profit in the backlog trending?

Yes. Thanks for the question. And I'm going to let Gaur walk you through that.

Yes. Thanks, Troy. So in regard to the overall backlog trajectory, if you recall, one of the things we have done over the last couple of years, including our most recent Investor Day, was continue to highlight where the profitability lies in our businesses. Particularly, DCS represents 94% of our NSR and the same percentage in profitability, the residual being in the CM business. What you see overall in the backlog, even though there's a 3% decline when you combine both of them, but when you separate, the design backlog increased 9% in the quarter for us. The total backlog decreased 3%, but the total backlog profitability increased 9%, again highlighting why we've continued to emphasize the core of our business being design and the profitability in it. Now specific to the backlog CM, I just want to comment very quickly. We actually had over $1 billion of wins in the current quarter in our CM business. And consistent with our IR day, where we highlighted that one of our foundational operating principles is risk management. This was the perfect example in the current quarter in our CM business for backlog because what you saw were two developer projects on the commercial side, high-floor construction, where the developers wanted to pass incremental risk to us after the project had been awarded, but before it had been contracted. And we just said no, because as we've said, we're always going to make investments that are towards the highest and best use for our shareholders and to create profitability. We don't have to chase work because of the diversification strategy we've employed in CM, where one-third of our backlog is in sports, one-third in aviation hospitality, and one-third in other, including commercial real estate, but mind you, commercial real estate in the CM business represents less than 2.5% of our total NSR. So there's no reason for us to deviate from our returns-focused strategy. And there's no reason for us to take on onerous risk because all of our end markets, especially in our design business, shown through our backlog growth and profitability growth are extremely robust and a high level of bidding activity that's going on globally for us.

Makes sense. And just my follow-up. You guys kind of flagged earlier stages of the pipeline are increasing, and maybe that that's a lead indicator. And I just wanted to ask because there are some concerns that maybe the stimulus dollars and the project pipeline may peak out in '24, you kind of lose momentum. What are these early discussions that you're seeing in the pipeline? What does that kind of tell you about the visibility and sustainability? Maybe we can start to even think about '25 and beyond, even as we're facing a year of election uncertainty. So just help us contextualize what those early discussions kind of tell you about the lead in terms of how we kind of think about the business and the project pipeline, even as we look beyond '24?

We have observed a consistent improvement in our early-stage pipeline, which is not limited to the U.S., although your focus was on that market. The early-stage pipeline has shown year-over-year growth, demonstrating a positive trajectory over the past few years. This indicates that we expect those projects to enter the market within the next six to 18 months, allowing us to begin work on them. The growing pipeline provides us with strong long-term visibility for growth, especially in the U.S. infrastructure sector. Globally, we are observing similar growth in our pipeline and sustained investment in infrastructure. However, there are some markets experiencing challenges, particularly in commercial office spaces and tall buildings in North America, where we see a slowdown. In the U.K., while there are substantial opportunities, our transportation sector is witnessing a decrease in investment in large transportation projects. We anticipate that this situation may not improve until after an election, possibly taking a few quarters to recover. Nonetheless, the need for significant long-term infrastructure investments in the U.K. remains unchanged, though we expect a temporary pause potentially linked to a change in government. Overall, we believe we have strong momentum worldwide, which will contribute positively to building our pipeline for the long term.

Your next question comes from the line of Sabahat Khan from RBC Capital Markets.

Can you discuss the factors affecting margins? The Americas segment was somewhat softer than we had anticipated, while international performance exceeded expectations. Please share your thoughts on these two segments and your outlook for the remainder of the year across both regions.

On the margin side, it exceeded our expectations. We are continuing to focus on delivering on our commitments. We consistently aim to concentrate on key areas rather than trying to reach everyone everywhere. In our international business, we have exited certain countries to prioritize geographies where we are the top choice for professional services, leveraging our technical expertise in the best growth markets, as outlined previously. We also make prudent, return-focused decisions, exemplified by our restructuring in Q4 and the efficiency initiatives we are currently executing. The margin improvements are visible in international operations and are translating into our performance in the Americas, where we continue to invest due to a historically high pipeline and bidding activity. We are committed to accountability, and the effects of our restructuring can be seen in our results, with a 90 basis points increase year-over-year. As we proceed through FY '24, we expect to maintain this performance momentum and achieve our margin targets. Regarding our Americas business, I reiterate that margins are expanding through our initiatives, which enhance our technical expertise and enable us to adapt our commercial pricing effectively. This focus also enables us to invest in business development to ensure a strong future pipeline.

All right. Great. Could you remind us about the plan for the ACAP business? I know there’s a transition happening, but please outline the plan for transitioning out of or completely exiting that business in the near future.

Sure. Absolutely. As you may remember, we moved ACAP into held for sale a few quarters ago. This requires it to be valued at fair market value according to accounting rules. What you observed this quarter was simply an accounting entry due to the tightening credit markets. However, our expectations regarding the anticipated cash flow from this business, now classified as non-core, remain unchanged. Additionally, it's important to highlight that there is minimal value left in our direct investments in ACAP on our balance sheet, which I believe is under $15 million. Our strategy has not altered from what we communicated a few quarters ago, and we are proceeding with the timeline consistent with our expectations to carry out that strategy.

Okay. Great. And then just one last quick one. How are you thinking about, given where the share price is today? How are you thinking about buybacks as we look ahead for the rest of the year? Is there a certain amount that you definitely want to do? Or is it going to be more opportunistic over the next few quarters?

So Saba, first, I'd just point out that with respect to how we allocate capital, nothing has really changed. And so again, what we've described in the past, we'll stick to this, is that we're going to be returns-focused in terms of allocating our capital. We will continue to invest in organic growth. It's a little bit different investing in organic growth, as Gaur pointed out, that does go through our margins. So our margins actually contain a pretty significant investment in the future. Secondly, we believe that we should be returning capital to shareholders, and we've increased the dividend. And as I said in the prepared comments, we've got a Board authorization for $1 billion of repurchases, and we will continue to repurchase our stock. What we said with respect to timing is that we will effectively use our cash flow through the year to buy back our stock. So that might be a way to think about just the timing of it. We don't look at being opportunistic. We look at just doing it consistently over the course of the year.

Your next question comes from the line of Andy Kaplowitz from Citigroup.

Troy or Gaurav, you beat the street excluding the lower tax rate by something like $0.05 and your design backlog is up nicely as you said. It increased the guide at either end of the range. I know it's early in the year, but is there anything that you're seeing that gives you some pause? And then how do you think about EPS cadence in Q2 and for the rest of the year? Should it just be sort of normal seasonality?

Yes, Andy, thank you for the question. We did have a very strong first quarter, and it's a valid question, right? Because we have met and beat expectations for the last four years. But as you would recall, this management team, our mantra is to be prudently conservative, especially in Q1. So we're going to continue to operate with that mantra. Q1 definitely gives us a lot of confidence in continuing the trend we have accomplished over the last four years. And I think from a phasing standpoint, as we've said before, the phasing is going to be consistent on earnings with our historical phasing we have delivered upon. But there's nothing in the horizon that would give us pause as we continue to operate in FY '24, given the backdrop of how strong our businesses are, including, again, I can’t emphasize enough the robust pipeline and record level of bidding we're experiencing in the business.

And then, Troy, maybe you can give us a little more color to your end markets within the Americas. You mentioned strength in water and transportation, but didn't really highlight facilities, for instance. I think AECOM has good data center design exposure. So could you elaborate on what you're seeing across all the end markets in the Americas?

We're seeing strength across all of our end markets, including our facilities business. Over the past three years, we have shifted our focus within our facilities business towards public infrastructure, particularly transportation projects. This has resulted in increased strength throughout the entire business. Additionally, our focus has changed; we have moved from being a design firm with exposure to 10% to 15% of a project’s spending to now being exposed to around 30% of the project spend through our expanded advising program management offering. More importantly, we believe we now have access to over 50% of the projects' profitability. This shift provides us with opportunities, especially in areas where there may be some market slowdowns. We can support businesses that might be feeling this slowdown because we are now connected to a larger portion of client spending. Our program management capabilities are strong; in the last year, we bid on 11 projects over $50 million and won all of them. This highlights the strength of our program management offering and represents the significant opportunities we see across all markets, projects, and end customers.

Your next question comes from the line of Sangita Jain from KeyBanc Capital Markets.

Troy, you talked about the U.K. elections and a little bit of a pause in spending there. Can you give us color on the U.S. and the EU elections, which are also coming up? And whether you think you're seeing a pull forward of business there? Are people in a wait-and-see mode maybe?

Certainly. So with respect to the U.S., we're not seeing a change in, as you described in spending patterns or spending habits. There is, first of all, over the last few years, there have been a lot of funding put in place that is long-term and multi-year funding. And that's all supported, again, I think in part bipartisan way in the United States. So we haven't seen a change in funding or change in the appetite for our U.S. government clients to invest in infrastructure. With respect to the EU, again, I'd just start by saying our exposure to the EU market is quite small. If you recall, 90% of our business actually comes from four countries. It's the U.S., Canada, the U.K., and Australia. So while Europe may be choppy in terms of infrastructure funding, we just don't see it having a large impact on us. But we still see, again, there are some places across the EU, where there is certainly money being put into infrastructure, in particular, into water programs.

Great. And if I can ask you another one on your project management portfolio. Obviously, you've been seeing some phenomenal wins there. Can you talk a little bit about the typical pushbacks that you may be seeing as you take share from incumbents in these projects maybe?

Well, it's an interesting question. We really haven't seen much pushback as evidenced by our win rate. I have to say I think that there's a large opportunity that was driven a few years ago from our customers. And our customers recognize that, with all of the funding that was available and frankly, the complexity and size of these programs, the only way they could advance them was actually having help from someone like us who has the technical ability to understand these complex projects and then has the management ability to deliver them. So our opportunity was born out of a need from our customers. And then we've just taken advantage of the opportunity to take our skills across the platform and to grow it by supplementing it with people from across the industry with those skills. So we've built up a really strong impressive core team. And I think it's a combination of our skills and our core team and then frankly, some of the things we're doing with respect to our digital innovations to make the customer process much more transparent and to improve the communication or think about it as an improved client experience. So all these things have come together, and we are just not seeing the pushback in the market as evidenced by our win rate.

Your next question comes from the line of Steven Fisher from UBS.

I just wanted to come back to the regional growth for a second. I'm just curious how you see the relative growth rates overall in the Americas versus international over the next several quarters, curious which should be growing faster and what would drive that?

We are observing increased momentum in our Americas market, particularly in Canada and the U.S., compared to other regions. Although there's a notable slowdown, we are seeing more projects coming to market due to available funding across the Americas. This is reflected in our contracted backlog. Additionally, our DCS business in the Americas outpaced international growth during the quarter, which is advantageous since our margins are significantly higher in the U.S. As opportunities in North America increase, we believe this will positively impact the future profitability of our business.

Great. And then just a cadence question. So with 7% NSR growth in Q1 kind of 8% to 10% for your expectation, can you just give us a sense of how the rest of the year's cadence will play out? Do you think as soon as Q2 will start to be sort of towards the upper end of that range? Or do you think we're sort of like somewhere in that range, just the rest of the year?

Steve, this is Gaur. In terms of the annual forecast, that hasn't changed. It's 8% to 10%, and we fully expect to be within that range. In terms of cadence and phasing in Q2, we expect because there are fewer workdays, so there's just going to be a shift between Q2 and later quarters than what you and us, we have historically experienced and we can work with that with you offline, if that's okay.

Your next question comes from the line of Michael Dudas from Vertical Research.

Troy, considering the differences between the public and private sectors, what are your thoughts on the growth rates in these areas? Can you break it down for the Americas and International? Are you surprised by the growth rates in either category? As you aim for 5% to 8% long-term net revenue growth and organic expectations, does this indicate a shift towards a greater focus on the public sector? Will this mix evolve? Additionally, regarding the CM business, are you adopting a more selective approach? Are you scaling back, and what is the current pace of your activities in that market given the importance of growth from AECOM's overall platform?

Mike, thank you. I'm going to share this with Lara. I'll let her take the first part of your question, then I'll take the second part of your question on CM.

Thank you, Michael. Regarding the balance in our portfolio, it remains fairly stable at approximately 60% public and 40% private. We anticipate significant opportunities in both sectors moving forward, in line with ongoing secular trends. The long-term infrastructure outlook is very strong, and we've had many successes in the first quarter with our public transportation clients. We achieved notable victories related to resiliency and sustainability, highlighted by our significant collaboration with FEMA, which complements the project life cycle work we’re executing for them, including water and environmental services. Looking ahead, we see strong opportunities in our market leadership with PFAS. This illustrates how nicely these opportunities are balanced between public sector clients, particularly in defense, and private sector prospects in aviation and the emerging opportunities for private industrial clients. We recognize the presence of long-term liabilities, which reassures us that our portfolio will remain balanced between public and private sectors in the future.

In regard to construction management, I would like to highlight three key points. First, the recent de-bookings were not significant enough to impact our backlog profit, reflecting the strength of the DCS business and its margins. Second, the de-bookings were made at our discretion; we had been awarded the work, but the client proposed terms and conditions we were not comfortable accepting. This indicates our willingness to avoid pursuing work in challenging markets, particularly in the commercial tall buildings sector. Third, we anticipated a slowdown in tall buildings a few years ago, which led us to pivot the CM business towards different types of projects and enhance our future capabilities. As mentioned, a third of our business now comes from aviation, an area where we have developed expertise over the past five years. We are building experience and world-class qualifications, enabling us to adapt to market opportunities where we see long-term potential. Our ongoing focus with CM is to make sound decisions as the business evolves; we believe there will be strength in its future, though it may look different in five years.

Your next question comes from the line of Adam Thalhimer from Thompson, Davis.

Congrats on the strong start to fiscal '24, nice Q1 beat. I also wanted to ask about the early stages of your project funnel. So when you look at Stage 1 and 2 of your pipeline, are there any particular end markets that are contributing to strength there?

We are observing strong performance across all our end markets, including environment, energy, transportation, water, and even facilities in some areas. This strength is reflected in the combination of design work and program management advisory work. While we see solid activity in our early pipeline stages, it's important to note that there are some areas, such as transportation in the U.K. and tall buildings in North America, where we are experiencing some market slowdowns. Overall, though, we remain optimistic.

Okay. That's my second question.

Yes.

Sorry. So the weakness that you're seeing in U.S. tall buildings, do you think that will broaden into other sectors? Or do you think the vast majority of your end markets will stay strong, while tall buildings goes through a downturn?

I believe that if you examine the long-term trends and requirements, it goes back to the ongoing need for enhanced infrastructure, for which funding is available. Additionally, there are significant investments in transitioning infrastructure, including the long-term investment in semiconductor chip manufacturing capacity in North America. These trends are shifting. Another significant trend we are observing is the increasing demand in our pipeline for energy transition. There is ongoing long-term investment in this area, and we don't anticipate that changing. When we assess our commercial office markets or mixed-use markets, which are primarily in the private development sector, those areas are highly sensitive to interest rates, influencing their outcomes. However, the need for funding across our other markets continues to align positively. It's important to note that our commercial office and retail markets account for only a small fraction of our total business. We have been actively shifting away from that work to pursue more well-funded opportunities.

And we have no further questions in our queue at this time. I will now turn the conference over to Troy Rudd, Chief Executive Officer, for closing remarks.

Thank you, operator. Again, I want to thank all of our teams for their contributions to a very strong first quarter, and we've extended our track record of delivering our commitments. So thank you to our team. And I thank you all for joining us today, and look forward to talking to you at the next quarter. Have a good day.

This concludes today's conference call. Thank you for your participation, and you may now disconnect.