Earnings Call Transcript - ACM Q3 2021

Operator, Operator

Good morning, and welcome to the AECOM Third Quarter 2021 Conference Call. I would like to inform all participants that 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 in part without prior written permission from AECOM is prohibited. As a reminder, AECOM is also simulcasting this presentation with slides at the Investors section of the AECOM website. I would like to turn the call over to Will Gabrielski, Senior Vice President, Finance and Investor Relations.

Will Gabrielski, Senior Vice President, Finance and Investor Relations

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 financial reconciliations are incorporated into our presentation where available, which is posted on our website. References to margins and adjusted operating margins reflect the performance for the Americas and International segments. We will refer to net service revenue, or NSR, which is defined as revenue excluding pass-through revenue. As a reminder, we sold the Management Services business in January 2020 and we sold the Power and Civil Construction businesses in October 2020 and January 2021, respectively. The financial results of these businesses are classified as discontinued operations in our financial statements. Today's comments will focus on the continuing operations of the Professional Services business, unless otherwise noted. On today's call, Troy Rudd, our Chief Executive Officer, will begin with a review of our strategy and key accomplishments. Lara Poloni, our President, will discuss key operational priorities; and Gaur Kapoor, our Chief Financial 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. Troy?

Troy Rudd, CEO

Thank you, Will, and thank you all for joining us today. I'd like to begin by acknowledging the continued great contributions of our teams globally. In many parts of the world, day-to-day activities are beginning to resemble normalcy. However, the pandemic and its variants continue to impact our teams and their families. Against this backdrop, I am proud of how we are collaborating to deliver for our clients and communities. As the COVID-19 variants spread, we all need to remain agile until we reach a point where the threat from the virus is eliminated. We have the best teams in the industry and our focus remains on keeping our people safe and enabling them to be successful in their careers. Turning to a discussion of our performance. Four themes are apparent across our business. First, our third quarter results extend our track record of delivering on our financial and strategic commitments. And with our strong year-to-date performance, we are increasing our guidance for fiscal 2021 and we are increasingly confident in delivering our long-term financial targets, including doubling adjusted earnings per share from fiscal 2020 to 2024. Second, the success of our Think and Act Globally strategy and investments in our people and innovation are contributing to accelerating growth. In fact, our design business that accounts for approximately 90% of our profit, organic NSR, and backlog growth are at the top of the industry, and our strengthening pipeline portends well for continued leadership. Third, we expect to deliver strong results into the future, built around secular growth themes, centered on infrastructure and ESG-driven opportunities. With our increased focus on advisory and program management, we are engaging with clients much earlier in their planning for large investments and we are advising them through the execution, which expands our addressable market. And finally, we remain committed to creating shareholder value by investing in growth and innovation and enhancing per share value by allocating substantially all available cash flow to share repurchases. We believe these are the highest returning uses of capital as compared to large-scale M&A where today's deal multiples are elevated and the execution and integration risks are higher. Turning to our results. We exceeded expectations on every key measure. NSR increased for a second consecutive quarter, including accelerating growth in our design business. In addition, backlog in the design business increased by 8% and included 7% growth in contracted backlog, which is a leading indicator of revenue growth. Our adjusted operating margin reached a new high this quarter at 14.1%, an increase of 90 basis points from the prior year. With this outperformance, we now expect to exceed our margin guidance for the full year. This performance includes growth in higher margin projects and efficiencies in how we deliver and is creating the capital to invest in our teams and innovation. As a result of this revenue and margin performance, adjusted EBITDA increased by 15% and adjusted EPS increased by 33%. We're also continuing to convert our earnings to strong cash flow. We delivered the highest third quarter and year-to-date free cash flow in four years. And consistent with our capital allocation policy, we repurchased approximately 12% of our shares outstanding as compared to last September when we began our repurchase program. Turning to our backlog and pipeline. Funding across our markets is improving and our investments in growth are bearing fruit. We delivered $3.7 billion of wins and we had a greater than 1 book-to-burn ratio for the enterprise for the first time since the pandemic began. With this strong performance, backlog in the Construction Management business increased sequentially, albeit modestly for the first time in several quarters. In addition, our pipeline of opportunities in our Americas design business has increased by double digits since the beginning of the year, and the international pipeline increased by single digits. These are great signs for the health of our markets and the success of our strategy. The strength is before any material contributions from previously enacted stimulus funding and we do not include any benefit in our guidance from the proposed infrastructure bill in the US. Please turn to the next slide. Our accomplishments reflect the benefits of our Think and Act Globally strategy and our focus on growth. Over the past several quarters, we have prioritized investments in growth markets, simplified our operating structure, and eliminated inefficiencies. Today, we are a more agile organization and we are benefiting from stronger collaboration across the business. We've also invested in our key account program to ensure we deploy the best practices to all of our clients. This will be critical to outgrowing the industry. All these efforts have resulted in strong NSR, backlog, and pipeline growth. Another key component of our strategy is leveraging our industry-leading margins to invest in our people and innovation. Demand is accelerating in the majority of our largest markets and AECOM and others in our industry will be increasingly challenged to attract and retain the strongest talent. In fact, our growth this past quarter was constrained in some areas by the pace of hiring relative to increased demand. And what is noteworthy is that this constraint is apparent even as our pace of hiring has doubled compared to last year. As a leader in our industry, we have certain advantages from our background. First, our workforce is global and we can draw on this global expertise to deliver anywhere in the world due to the investments we've made in technology to enhance collaboration. Second, we're also investing in professional development programs so our people can grow within AECOM. Third, we are using technology to extend the capacity of our teams and to deliver in new and innovative ways. And finally, we've implemented flexible work policies to provide our people even greater freedom to deliver for their clients in ways that work best for them and their teams. All these efforts are centered on creating a culture where the industry's top talent can begin and build meaningful careers. As we look ahead, several trends support our confidence and growth. First, we are winning and delivering critical projects that highlight our strong position in key growth markets. Most recently, these include; the first-ever digital NEPA compliant environmental impact statement for a transportation client in the US, showcasing our investments in innovation and digital solutions; additional wins with major metros to advance more modern and equitable transit systems; key wins to advise clients on their long-term sustainability and resilience strategies; key wins in next-generation energy, a smaller but rapidly growing practice within AECOM that includes a presence in the northeast offshore wind market; wins in the healthcare sector that further broaden our client base; and large program management wins for multibillion-dollar programs across the globe. Second, through our sustainable legacy strategy and commitment to ESG, we are distinguishing ourselves in the market as our clients advance complex multi-decade initiatives. In fact, year-to-date, there have been a record number of corporate commitments to emission reduction targets, outpacing last year's total already and sustainable bond issuances are at an all-time high. AECOM is a leader in advising clients and delivering technical solutions to support ESG goals. Today, we estimate approximately 70% of our revenue is directly related to ESG initiatives, while nearly all of our revenue has at least some ESG element as a driver. We are leaders in green and advanced facilities design, energy efficiency, next generation energy, sustainability, resiliency, environmental remediation, clean water systems, and transit electrification. Our services in these markets are in high demand and our leadership in these fast-growing markets underpins our confidence in organically outgrowing the market well into the future. Finally, our public sector clients across the world are benefiting from strong budgets and investments in infrastructure markets where we lead. In the US, strength in state and local tax receipts, strong federal funding, and ongoing stimulus measures are contributing to an improving environment for growth. Similarly, our international markets are prioritizing infrastructure investments, especially in our largest end market, transportation. In Australia, the New South Wales government has advanced a $130 billion package for four years of transportation spending. While in Canada, there is more than $20 billion of public transit and green infrastructure spending. And in Europe, the $1 trillion recovery fund requires 30% of spending to be dedicated to green and sustainable infrastructure. These initiatives are before you factor in a potential US federal infrastructure bill in our largest market. As currently proposed, nearly every line item in the current draft would be addressable by AECOM. In conclusion, I want to remind everyone that we are the number one transportation design firm, the number one facility design firm, the number one environmental science and environmental engineering firm, we have grown to number two in water and lead in several other end markets, all positioned for secular growth. No firm is better positioned to capitalize on these opportunities. With that, I will turn the call over to Lara.

Lara Poloni, President

Thanks, Troy. Please turn to the next slide. We are building momentum within the business as a result of our strengthened culture and strategic alignment. One area where this is apparent is in growing demand for ESG-related services. In April, we launched our Sustainable Legacies strategy to ensure we embed sustainability and ESG into all elements of our business. This included our commitment to achieving science-based net carbon zero by 2030, expanding diversity and inclusion across our company and advancing the impact we can have on the world by embedding carbon reduction principles into our work for clients. Since launching Sustainable Legacies, it has been exciting to see how passionate our people are to create a positive impact in their communities and what it means for us in the market. For example, we were awarded a sizable transportation project in the quarter to modernize the transit lines for a client in the US. The ultimate determining factor in our selection was our Sustainable Legacies strategy and the community building and ESG elements of our proposal. This success underscores how we are building stronger competitive advantages. We continue to advance our Think and Act Globally strategy to ensure we focus on the highest growth and margin opportunities while investing in our people and innovation. With demand for our services increasing, we are focused on bringing new talent to AECOM and investing in our teams to create the culture Troy spoke about earlier. Going forward, we are focused on ensuring we have the strongest workforce, which will be critical to capturing the full benefits of increased demand. We also continue to make investments in our digital platforms and services to extend capabilities and enhance our team's productivity. We can deploy innovation at scale to enable our people to use their hours most productively for their clients. We already have several hundred digital consultants within AECOM that are helping clients progress their own digital transformations. This is all part of the more than 1,000 digital practitioners we have across AECOM working to ensure we remain an innovator and use our plan engage platform that has enabled the first-ever NEPA compliant and fully digital environmental impact statement in the US. Our solution streamlines the engagement process and provides higher value services for our clients. Our investments in these digital solutions and innovations will continue to be key differentiators as demand accelerates. Importantly, we know we are headed in the right direction as our people and our clients are responding favorably. I am pleased to report that our client satisfaction scores reached their highest level in our company's history this quarter. And I have no doubt that this will translate into a continued high win rate and growth going forward. With that, I will now turn the call over to Gaur to discuss our financial performance and outlook in greater detail.

Gaur Kapoor, CFO

Thanks, Lara. Please turn to the next slide. Our third quarter results reflect another quarter of strong performance. Revenue increased and included accelerating growth in our design business. Our pipeline and backlog grew. Margins reached a new high and continue to lead the industry and earnings increased by double digits. Our year-to-date performance is at the upper end of the industry. And looking ahead, our strategy inspires confidence that we will build on this lead. I want to touch on our margin performance. Compared to our fiscal 2018 margin, our third quarter segment adjusted operating margin of 14.1% marks a 540 basis point improvement. With increased delivery of higher margin work and our operational improvements, we expect to exceed our prior 13.2% margin guidance this year and we are confident in delivering our 15% by 2024 goal and longer term 17% aspirational target. I am equally pleased to report that we have delivered more consistent cash flow phasing. This was a real focus of ours this year and the organization has responded. As a result, we already have been able to deploy substantial capital towards share repurchases and continue to take actions that improve our cost of debt and extended the duration of our debt maturities well into the future. Please turn to the next slide. In the Americas, design revenue increased for a second consecutive quarter. Total NSR declined slightly due to the expected decline in the Construction Management business where we saw the deferral of a number of projects over the past 18 months. However, this trend is improving, as evidenced by our sequential backlog growth and growing pipeline of pursuits. Importantly, backlog in the Americas design business increased by 8%. Our investments in business development are translating to a higher win rate on our work, and our pipeline also increased by double digits since the start of the year. The adjusted operating margin was 18.9%, a 100 basis point increase from the prior year to a new high. Profitability in both the Americas design and Construction Management businesses was strong. Please turn to the next slide. Turning to the International segment. Our NSR increased by 7%. Our adjusted operating margin in the third quarter was 7.3%, a 160 basis point improvement from the prior year and more than 500 basis point improvement since the beginning of fiscal 2019. This progression provides us confidence in our ability to achieve double-digit international margin target. Please turn to the next slide. Turning to cash flow, liquidity, and capital allocation. Our third quarter free cash flow of $295 million marked the highest level in four years, putting us on a strong path to achieving our full year guidance of between $425 million and $625 million. With our strong cash flow, we have executed stock repurchases at attractive prices. Since September 2020, we have repurchased $930 million of stock, which represents nearly 19 million shares or 12% of our starting share balance. In addition, we have strengthened our balance sheet through a number of actions taken to lower the cost of our debt and extend our maturity. During the quarter, we completed the tender and redemption of all 2024 senior notes. We now have no maturities until at least 2026 and are operating with a high degree of financial certainty while driving a benefit to the bottom line. Finally, while we have incurred costs related to the tender and redemption of the 2024 notes, the NPV of the transaction was very positive and accretive to earnings per share. Please turn to the next slide. With our year-to-date outperformance, we are raising our adjusted EBITDA guidance to between $810 million and $830 million or 10% growth at the midpoint. We are also increasing our adjusted EPS guidance for the full year to between $2.75 and $2.85 or 30% growth at the midpoint. This is the third increase to our EPS guidance this year despite the challenges posed by the pandemic and associated macroeconomic trends. Our teams are delivering. This guidance does not contemplate any additional repurchases, although it is our plan to continue to buy back stock. Finally, I should note that our fourth quarter comparisons will be impacted by the extra week we adjusted out of our growth rate in the prior year's fourth quarter. This impact should be considered when modeling and analyzing year-over-year growth trends for the coming quarter. An extra week is approximately 7.5% of our quarterly NSR. With that, operator, we are ready for questions.

Sean Eastman, Analyst

Nice quarter and nice update here. I just wanted to start on the top line. I mean, double-digit growth in the Americas pipeline. Maybe if you could just comment on how that pipeline is converting to awards. I mean, book-to-bill of 1.1 times is great. But do you guys see a step change coming in terms of the conversion of that pipeline to awards? What needs to happen, what kind of timeline are you thinking about around that dynamic?

Troy Rudd, CEO

I'm going to give you a little bit of detail on this to sort of build into that answer. But we've actually seen the trends improving within our markets and within our backlog over the course of the last few quarters. And then, behind that, as we said, the focus this last year has actually been gaining market share. So while we're seeing our backlog improve 8%, in particular in our design business and we've seen our pipeline increase actually in the Americas at double digits and internationally in mid-single digits, it is lining up for us to have improved growth opportunities in the future. And then you combine that with what we've seen in terms of our ability in gaining market share and our higher win rate in terms of the win rates on the proposals that we're bidding, I think it indicates that we're going to see an acceleration for growth into '22 and certainly beyond that. But as I look back over the last two quarters, again, as I said, I feel like we've hit a bit of an inflection. We did grow a little bit in our design business, which is 90% of our business in the prior quarter, 3% this quarter. And when I look across our peer set, the organic growth around our peer set was actually a decline of mid-single digits. So I feel like we're gaining ground and we've actually hit that inflection point. And then lining up even behind that for us and for our entire industry, here in the US I think we all have confidence that the infrastructure bill is likely to finally be passed, which will obviously create federal funding that we're exposed to very significantly. But also it will inspire some confidence when our state and local clients who with that certainty of federal funding will be able to commit to projects. And so that all leads to the fact that I think we've started to hit that inflection point. And as we move forward, I would see, as I said in the prepared comments, growth accelerating. And again, just a reminder is when we prepared our comments, we didn't see the infrastructure bill getting through Congress. I think we're a little more optimistic about that now, so that certainly was not built into our forward-looking guidance or our thinking about the future. So that's sort of a little bit of tailwind that we hope will be expected in '22 and beyond.

Sean Eastman, Analyst

And then I just have to comment on the margins being quite outsized, particularly in the Americas this quarter. Could you maybe update us on how we should be thinking about the trajectory from where we are exiting kind of in the mid-13% range exiting fiscal '21 towards the 15% by fiscal '24? I mean, is this kind of an outsized performance this year or should we think about kind of an even sort of 50 basis points annually toward the 15%? Any thoughts there on maybe how we're comping into next year from a margin perspective?

Troy Rudd, CEO

Let me turn that over to Gaur. He'll give you that answer.

Gaur Kapoor, CFO

Sean, regarding our margin in the current quarter, there was nothing unusual to note. It is a result of our emphasis on core markets and directing our business development towards areas where we anticipate meeting our growth, margin, and cash targets, which enables us to execute higher-margin projects. Additionally, the efficiency cost initiatives we have implemented give us significant confidence as we aim for our 15% target in 2024. We foresee that margins will continue to progress positively over the next few years as we reach the 15% benchmark and strive towards our longer-term goal of 17%.

Andy Wittmann, Analyst

Troy, you mentioned some hiring challenges in your prepared remarks that may have affected your ability to recognize additional revenue. Could you provide some insight into the extent of that impact? Were these completely missed opportunities due to the lack of personnel, or will the work just be delayed and addressed in a different quarter? Additionally, could you discuss the specific end markets or regions where these labor challenges are occurring? It's interesting to note that, broadly speaking, most of the labor challenges in the market seem to be related to lower-end jobs, while you are dealing with professionals. Your thoughts on this would be valuable.

Troy Rudd, CEO

We are experiencing some challenges in hiring in specific areas of our business and certain markets, although it's not a global issue. In particular, our environmental business, especially in remediation work, has faced difficulties in attracting talent. I mention this not because it's significant to our quarterly results, but as we enter a growth phase, it becomes increasingly important. We need to recruit new people and retain our current workforce, which is a priority. We are committed to making our workplace appealing and investing in the technical and professional development of our employees while providing them with flexibility. Additionally, we are focused on balancing workloads globally. Our industry has seen cycles of hiring when the market is strong and then overhiring during downturns. We aim to leverage lessons learned over the past 18 months to distribute work more evenly across our business, which should help alleviate hiring concerns in the future. We are also prioritizing innovation through our digital strategy, which will enhance our team's ability to handle more without needing to increase the time they spend working. Together, these strategies will position us well despite potential labor market constraints ahead.

Andy Kaplowitz, Analyst

Troy, I just wanted to focus on the comment you actually made in your press release that you're focused on being well positioned to deliver even greater growth in '22 than you're going to deliver in '21. Does that statement mean that you have relatively high confidence in delivering double-digit EBITDA and EPS growth in '22, given the current conditions you see and the pipeline you have or do you need, for instance, those US state and local customers still ramp up their spending? I mean it's good to see the Senate passed the bill today a few minutes ago, so I guess that will help if we can get through the half.

Troy Rudd, CEO

Yes, so I did. I intentionally said I see our growth accelerating. And again, when I think about growth, I think about the overall profitability of the business. And that is obviously, as we've said in the past, a combination of growing the capacity of the work that we're performing for our customers and at the same time, improving our margins. And we certainly see that accelerating as we move into '22 and beyond where we are today. So obviously, it's premature for us to offer any guidance. But I certainly wanted to offer that comment about our confidence to continue to grow the bottom line while the business itself is growing.

Andy Kaplowitz, Analyst

And then, is there a theoretical margin ceiling on your Americas business, can you record 20% margins in the Americas? And then back during your Analyst Day, you said you expected 180 basis points of tailwind from continuous improvement initiatives. As you've been implementing those initiatives, such as the workplace of the future, would you say so far you've been able to find more savings than you expected, you're ahead of schedule versus that 180 basis points?

Troy Rudd, CEO

Well, I guess I would characterize it as two components. One is it certainly is the efficiencies that we've been driving in the business and I would say that we're on schedule with that. But the other impact is the actual work that we're bidding and how we're delivering it. We're actually, within our projects, seeing improvements in the overall profitability of the projects we're taking on and how we're actually delivering them. So I'm going to attribute that our margin improvement to a combination of the two. I don't want to pinpoint something for the Americas. Again, it's always a balanced equation, meaning we try and balance work in the business around the globe. So I would see us being on track and having a high degree of confidence of getting to the 15% target that we set for ourselves. And as Gaur said, we're trying to look beyond that. But I think it's a combination of things; it's not necessarily just driving efficiency in the business. It's that coupled with the work that we're taking on and how we're looking to change how that work is delivered.

Andy Kaplowitz, Analyst

But Troy, just to clarify, you're reaching a high level in your Americas margin. There is still potential for improvement in terms of mix, utilization, or execution, correct?

Troy Rudd, CEO

Yes, absolutely. Our core focus is on engineering and design, but we are also aiming to expand our advisory and program management businesses. By developing these areas, we can engage with clients earlier in the process. Taking on longer-term, larger projects in program management allows us to enhance our efficiency in delivery, which also improves our margins. Our strategy involves entering specific markets and types of work to evolve from our previous position. We are concentrating on innovating and utilizing digital technology to change how we deliver our services, along with maintaining operational efficiencies. It's essential for us to continually seek ways to enhance the efficiency of our work every day.

Michael Feniger, Analyst

You guys just grew EBITDA, I think, it was 15% year-over-year. The guidance implies that the growth slows or decelerates in the fourth quarter. I think you mentioned this extra week impact. Is there anything else you're seeing today that should really suggest that level of slowdown on a year-over-year basis? Is it more conservatism? Is there anything for us to read into that fourth quarter that would indicate maybe a slower start in 2022 that would then take up through the year?

Troy Rudd, CEO

So Michael, regarding the current year, we are not indicating any change in our expectations. As we've mentioned in previous quarters, we believe it's important to maintain a prudently conservative outlook. Therefore, we hold the same perspective and expect our fourth quarter bottom line to grow year-over-year. We're not signaling anything specifically about 2022. Looking ahead, I previously mentioned that we anticipate growth to actually accelerate in 2022. Although I'm not providing specific guidance, I wanted to convey the optimism we have as we move into 2022.

Michael Feniger, Analyst

And there's apparently a lot of private equity money and just M&A in the engineering space right now. You mentioned it in your remarks and how you're being prudent to not overpay and that's not part of your strategy. But does it make you reevaluate your portfolio? Like do you still view Construction Management as core to the portfolio? And with some of this aggressive M&A, are you seeing more aggressive bidding out there on projects?

Troy Rudd, CEO

I haven't seen the environment change in terms of bidding on projects. Just to be clear, it's always a competitive environment. And I think that that is unchanged. The comment that I made about M&A wasn't intended to be focused on anything than our ability to deploy capital. We still believe, based on the growth opportunity that we see in the business and where we're headed, that we're much better to deploy our capital to acquire our own shares and not to be in the market thinking about large M&A. And for the reasons that you described is that the multiples for large M&A are, in fact, being driven up because there's competition for those deals. But also the risk of execution in terms of a deal and its integration is much different in terms of buying back our stock. So I just wanted to be clear that we see, for us, the best opportunity for deploying our capital is buying back our stock today.

Michael Feniger, Analyst

And if I could just squeeze one in. Market's obviously worried about inflation, Troy. And I think you flagged that your win share is going up. But does that also mean, how much more selective can you be, especially with the infrastructure bill coming through? Should we expect the mix of your backlog to move into higher margin areas, I think, like your water business, for example? Do you have to price your projects differently as bidding starts coming up? Do you worry about potential inflationary pressures and some of the labor constraints you were discussing earlier?

Troy Rudd, CEO

Well, I think the nature of the industry and the nature of the business is that we sort of have always bid work to include an estimate of inflation. So a lot of projects, you actually have the ability to price labor inflation into those projects based on the contract terms that exist. And we certainly do pay attention to that as we move forward. Those are ultimately client decisions in terms of the ultimate cost of a project. And so when we go to bid work, we're going to look at what's an appropriate return for those projects for what we're contributing. And if that includes an increase in labor rates, we'll end up bidding it that way. So I don't view us as, in the medium term or even in the short term, having an impact from labor inflation.

Steven Fisher, Analyst

So the Construction Management backlog inflected. Just curious how broad-based were the drivers of that inflection and what does that tell you about the timing of when the Construction Management revenues could actually turn positive year-over-year, or at least neutralize to a large degree?

Troy Rudd, CEO

So Steve, on that point, we certainly have seen the opportunities in our Construction Management improve, again, I'm going to say modestly and our backlog grew modestly. The other phenomenon is that there are a number of projects that were delayed or deferred, and so we actually see those projects gaining momentum to start or restart. And so all of that is built into more optimism around growth in the Construction Management business. It's a little premature to pinpoint exactly when we see that but I certainly think as we look forward into '22 and beyond, we have an expectation that that business would start to grow. And in terms of your question about it, how broad is that, it is fairly broad-based. And in fact, we're seeing the backlog and the pipeline grow in markets that might be a little unexpected but the markets that were strong. So certainly, even within New York and Manhattan, we're seeing that grow. But it is fairly broad-based but again, it's in line with where we actually have the footprint of that business.