AECOM Price & Performance (ACM)

Growth rates are presented on a year over year basis unless otherwise noted. Any reference to segment margins or segment adjusted operating margins reflects 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 growth rates are presented on a constant currency basis unless otherwise noted. Remarks will focus on continuing operations, On today's call, Troy Rutt, our Chief Executive Officer, will review our key accomplishments, our strategy and our outlook for the business. Lara Paloni, 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 [indiscernible] With that, I will now turn the call over to Troy. [indiscernible] Thank you, Will, and thank you everyone for joining us today.

We'd like to start by acknowledging the devastation caused by the fires in Southern California. We are relieved to report that all of our employees in the region are safe. However, we recognize that the community will face significant challenges during what is We are committed to providing direct support to our teams, and the affected areas in the LA Metro region. As the rebuilding process gets underway, our highly skilled teams are well equipped to assist our clients with the recovery and reconstruction efforts throughout the region. We pride ourselves on having the best workplace culture in the industry. I'm pleased to report our efforts are paying off. Last week, we were named for the 11th consecutive year on Fortune's World Most Admired Companies list including being featured as the number one ranked company in our industry. In addition, employee engagement reached a new all time high in our recent firm wide survey, which is directly linked to employee satisfaction the results in strong employee retention.

We we discuss our Q1 performance, I would like to share some insight regarding our end markets and client exposure, which underscore our confidence in Fisk 1st and foremost, our business is highly diverse eliminating reliance on any single market or client. As we detailed last quarter, the EPA and USAID together account for only 50 basis points of our trailing 12 months revenue. And reflect a similar proportion of our pipeline and backlog. Notably, the Inflation Reduction Act is not material to us. The majority of our U. S. Federal engagements revolve around essential and mission critical services for the Department of Defense, where we anticipate strong funding growth in the coming years. Consequently, we expect any disruption stemming from the temporary freezes or 90 day reviews to be negligible and short term. A sentiment reflected in our increased financial guidance for fiscal 2020 Looking ahead, we anticipate opportunities arising for the new administration's commitment to a robust new economy supported by prudent deregulation and a push for energy independence that World class infrastructure is at the heart of these objectives. Turning to our Q1 performance. NSR increased by 5.5%, which slightly ahead of our expectations. Growth was strongest in our largest and most profitable segment.

The Americas, where NSR increased by 9% in the design business. The segment adjusted operating margin increased by 40 basis points in exceeding our annual guidance for 30 basis point increase. Our consistently strong and industry leading margins enhance our competitive advantage. Allowing us to invest in business development and growth initiatives, including in our Water and Environment Advisory and Disaster Response Practices. Adjusted EBITDA rose by 8% while adjusted EPS increased by 25%. The year over year growth in EPS benefited from a lower tax rate compared to the prior year. Adjusting for this variance, EPS increased by 14% It's important to note that the lower 1st quarter tax rate was due to the timing of items that were contemplated in our initial tax rate guidance. Which is unchanged at approximately 24%. We also had strong cash flow Free cash flow increased by 28% and we returned $55,000,000 to shareholders through repurchases and dividends. Turning to our backlog and pipeline. Backlog in the design business increased by 5 percent, including 7% growth in the Americas. As a result, total backlog achieved new all time high. Importantly, our pipeline is also at a record. And included double digit growth in later stages pursuits.

As we remain on a multiyear growth cycle. To reiterate, have less than 1% exposure in our pipeline to the areas expected to be under the most budget pressure, including EPA and USAID. As our consistently strong performance demonstrates, we have created a competitive advantage which is apparent in several ways. First, we are winning at a record rate in gaining market share. In fact, we had a 100% win rate in our largest and most strategic pursuits in the Q1. This consistently high success rate reflects our technical expertise and scale as evidenced by our number one rankings by E and R in Water, Environment, transportation and facilities markets and the deliberate approach we bring to each client and pursuit to create an advantage. 2nd, we are expanding our addressable market with highly complementary professional services that build on our existing technical expertise and create an even greater value proposition for our clients. The substantial growth over the past several years in our program management business is a great example of the opportunity. Today, we are investing in our next $1,000,000,000 NSR platform Water and Environment Advisory which has similar characteristics to program management with growing client demand for added services that leverage our domain expertise.

This business generates approximately $200,000,000 annually in net revenue and we expect to double that in the next 3 years. 3rd, our margins continue to lead our industry. And we're committed to further expansion. Our strong margins are the direct result of the technical value we deliver to our clients, as well as our global delivery and scale advantages. This profitability creates the capital to invest in AI, and our greater higher margin advisory capabilities. We remain confident in delivering a 17% margin exiting fiscal 2026 and in achieving meaningfully higher margins over time. Finally, our returns based capital allocation policy is a key driver of shareholder value creation and compounds the benefits of our strong operating performance. Allocate time and capital to the highest returning opportunities and return substantially all available remaining cash flow to shareholders. We have nearly $1,000,000,000 remaining under our existing share repurchase authorization and have grown our dividend at a 20% CAGR over the past 3 years. Which leaves our industry several multiples. Turning to a review of our end markets. The secular growth drivers of investment in infrastructure, sustainability, resilience and energy are gaining momentum. In the U. S, our largest market these drivers are apparent in the priorities of the Trump administration, including declaring a National Energy emergency and creating incentives to track capital investment to the U. S. This includes the potential for permitting reform.

Which we have long supported as a means of accelerating timelines and reducing costly delays. And in turn will attract more capital to the industry. Across our international markets, long term trends remain favorable. [indiscernible] the final determination of the multiyear Ampere Water investment period came in higher than expected at more than £100,000,000,000 We won 100% of our recompetes as well as positions on several new frameworks that position us to expand our market share. Additionally, investments in energy and electric transmission infrastructure remained strong Our positions on key transportation frameworks create additional visibility. In the Middle East, growth continues to be strong supported by key priority investments in Saudi Arabia. Well as growth the UAE Importantly, investments to support upcoming global events such as the World Cup and Expo 2,030 continue to create new opportunities for which we are ideally suited. More broadly, against a backdrop of change, the inherent attributes of our professional services business position us for continued success. First, our backlog and pipeline of opportunities are at a record level. Creating strong visibility 2nd, we are expanding our addressable market. 3rd, we have a highly variable cost model. 4th, we have an agile workforce. More than 70% of our professionals can work across disciplines, which allows us to quickly pivot resources to the highest growth opportunities.

Finally, we have a strong balance sheet with low leverage, and strong cash flow, which gives us the ability to be opportunistic and operate with certainty. Our confidence is underscored in our increased guidance for fiscal 2025. In which we expect another year of record revenue margins and earnings with continued strong free cash flow conversion. With that, I'll turn the call over to Laura.

Thanks, Troy. We are off to a strong start to the year reflecting the benefits of our Think and Act globally strategy and our technical advantage. Which is cited as the key reason we are selected on more than 90% of our largest wins. As we navigate our markets, we see the project size and complexity continue to rise, presenting challenges for our clients, but also significant growth opportunities for us. To capitalize on these opportunities, we have expanded our high margin professional services, including the rapid growth of our program management capabilities over the last several years. I am pleased to report that our program management business has increased threefold in the past 4 years and now accounts for over 15% of our total revenue. In fact, one of our largest wins in the quarter was for a program management award to support the Toronto Pearson International Airport's capital improvement program. Our success resulted from an early advisory role helping the client with environmental master planning, which further informed a deeper understanding of the client's needs for the larger program management opportunity. This project draws on elements of all 4 of our major business lines, which further cemented our advantage by being able to bring multifaceted expertise to the client.

Looking ahead, we are actively investing in what we anticipate will become our next $1,000,000,000 growth platform, through our Water and Environment Advisory business. Similar to program management, this advisory service complements our established informed advisory services. I'm pleased to report that the Water and Environment Advisory business has already reached several key milestones. Last quarter, we appointed a leader, Jill Hudkins, who brings a wealth of experience and expertise to AECOM. Over the past few months, we have made several senior hires that further enhance our credibility in the space. We have had key wins and we are pursuing a robust pipeline of opportunities. Client feedback has been overwhelmingly positive. Emphasizing the unique value our technical expertise adds to the advisory space. In recent months, we have further evaluated the market opportunity and are increasingly confident in the growth potential of the underserved white space that exists in the market. Last quarter, we highlighted a significant opportunity in the $70,000,000,000 digital water market as clients seek our guidance and expertise for their digital and automation investments. This quarter, I want to highlight the opportunity in the nonrevenue water market which refers to water that is unaccounted for and goes unpaid.

Annually, the amount of water lost is equivalent to the total usage of Germany, France, Spain, Italy and the UK combined which S and P estimates costs our clients nearly $200,000,000,000 annually in lost revenue. This growing challenge positions us well to provide higher end advisory services. Recently, we were selected by a major U. S. Water client for a significant advanced metering project. Given the age and declining accuracy of existing metering infrastructure, investing in more advanced metering technology has become a priority for our water clients. As a result, we have already developed a substantial pipeline in this market and are excited about the promising growth potential that lies ahead. [indiscernible] Over time, we expect program management and advisory services to represent at least 50% of our business. As evidenced by our early successes and expanding pipeline, we are more confident than ever about the opportunities that await us. With that, I will turn the call over to Gar.

Thanks, Laura. I'm pleased to report strong results to start the year. NSR increased by 5.5% adjusted EBITDA increased by 8%, and adjusted EPS increased by 25%. As Troy noted, our EPS was up 14% after adjusting for the year over year variance in the tax rate. Our results included strong performance on margins and cash flow, which enabled investment in organic growth as well as ongoing Our book to burn ratio in the design business was 1.2 This marks the 17th consecutive quarter in which our enterprise wide book to burn ratio was greater than 1. Which is a testament to our industry leading technical expertise strong client relationships and highly effective business development investments It is because of high returns we realized on our investments that we are delivering today and why we are so confident in achieving both our near and long term financial targets. Turning to our segment results beginning in the Americas. NSR growth accelerated to 8% including 9% in the design business. Growth was broad based by client type and market. We are benefiting from strong IIJA funding, which remains less than 35% deployed with several years of remaining visibility. State and local trends are also strong and we had double digit growth in the quarter and we expect continued growth Adjusted operating margin increased by 40 basis points to 18.7%.

A new first quarter high. This margin includes the benefit of high returning organic growth and included substantial investments in business development as well as key hires as we expand our higher margin advisory services. Importantly, we not only grew at an accelerating pace but we continued to grow our backlog as well.

Our Americas Design backlog increased by 7% driven by a 1 point to book to burn ratio. Our book to burn was driven by sizable transportation wins in the U. S. Canada as well as positive contributions across our water environment and facilities practices. In the international segment, revenue increased although it varied across different markets. Our largest market, the UK, was up slightly benefiting from the stability afforded by our diverse backlog strong positions on key frameworks and our focus on growth sectors such as water and energy In the near term, certain markets like transportation remains lower, However, the UK business had a 1.4 book to burn in the quarter which supports our expectation for improving trends as we move through the year. Revenue in the Middle East increased in the high single digits with work on our mega projects continuing and new investments ramping up in Saudi Arabia and the UAE. International growth was partially offset by revenue decline in Australia. Even so, backlog in Australia increased by 9% and our wins in the water sector were strong. International backlog remains at an all time high in Adjusted operating margin increased by 20 basis points to 10.8% also a new high for the Q1.

Turning to cash flow and capital allocation. We executed on our returns focused capital allocation policy during the quarter In total, we returned $55,000,000 through share repurchases and dividends supported by our strong first quarter cash flow and balance sheet. As a reminder, our cash flow trends to be weighted to the second half of the year and our strong start to the year gives us confidence in our 100% free cash flow conversion guidance. Our capital allocation priorities are unchanged. We will maximize opportunities to invest in high returning organic growth and return substantially all available cash to shareholders over time. Turning to guidance. We are increasing the midpoints of our guidance [indiscernible] EBITDA and EPS. This guidance includes our strong year to date performance record backlog and pipeline. And strong funding across majority of our markets, which is balanced against a headwind from foreign exchange rates that have moved against us so far this year. Our full year 24% tax guidance is unchanged as the outperformance in the Q1 was driven by timing of items only. We expect our tax rate to approximate 25% in the 2nd quarter and to be in the high 20s in the second half of the year.

We continue to expect our tax rate to approximate 24% over the next several years. With that operator, we are ready for questions.

Thank you. We will now begin the question and answer session. Your first question comes from the line of Michael Feniger from Bank of America. Line is open.

Hi, everyone. Thanks for taking my question. [indiscernible] Look, I just to talk big picture, you guys are starting the year off NSR growth of 5.5%, positive start, [indiscernible] feels like there's visibility with the pipeline. Do you still expect that build through the year, is that more Americas driven or is it really international starting to come back in the back half? And just secondly, Troy, there's obviously a lot of headlines out there on funding freezes for certain programs, impact to certain agencies, some of your peers that maybe have different exposure have had to highlight that. Has even been some headlines around some IAAJ and IRA projects. I realize IRA is not your wheelhouse you just kind of talk broadly what you guys are observing in recent weeks?

What you're hearing on the ground kind of gives you visibility into that project pipeline to how that growth is building even as we kind of come across some of these headlines. From week to week? Thank you. Thanks for the question, Mike.

I'm going to take him in reverse order. First, just sort of starting with what we're seeing in the marketplace. And I'm going to start by saying, over the last 2 weeks, there certainly has been a lot to digest But as we've been going through that process of the last 2 weeks, what we found is that there just isn't a material impact at all on our business. And I think it's attributed to a few things. First of all, as you already pointed out, Where there is risk of significant funding change, for some of our clients at the federal government level, we're just not exposed to that. But when you look broadly across our portfolio, again, I think the best example of this is we see our backlog growing And importantly, we still continue to see our pipeline grow. And as we said, our pipeline across the world was up year over year for the quarter. So So, well, again, you sort of look forward and you say there's probably going to be more to digest over the coming weeks and certainly months. But I think when you sort of step back and look at the sort of the macro impact and where we that we're aligned with really and I again kind of what are the global objectives around infrastructure are.

And there still are these really important trends. There still are investments being made in infrastructure in the U. S. If you look at the current administration's goals, they're looking at economic development in the United States. And if your agenda is economic development in the long term in the United States, that means that it's going to be supported by infrastructure. And whether that's energy infrastructure, water infrastructure, transportation infrastructure, so you get your goods to markets domestically and internationally. And then all of the work that would be done if there is permitting environmental permitting reform. There certainly is going to be more work done because that should accelerate projects. So we look broadly in the U. S. And we see that we're aligned with the the objectives around infrastructure and globally. We do see the same thing, although we see something similar in certain markets. Where there certainly are governments that have been switching their agendas. And so that has impacted us, we think, in the first half of the year. Let me turn to your question just about NSR growth. And we don't see anything changing. We had expected that our Innosar growth would be not quite as good as it was in the Q1.

Did a little better than we expected. But we do expect expect it to ramp up in the second half of the year. And that's a function of the opportunities that we have in our pipeline and also the things that we've won in backlog. I think if you sort of look at our backlog and and our ability to address the opportunities in the marketplace, we have a very high win rate. And we may mention to this that our significant pursuits, as we define them, are pursuits that are over $50,000,000 in size. We said we had 100%. And I'll just point out that is not 1 for 1. In the quarter, that was 8 for 8. And so that's a pretty significant example. Of how we're winning in the marketplace.

Our next question comes from the line of Andrew Kais from Citigroup. [indiscernible] good morning, everyone. Troy, just looking at Americas growth, NSR actually accelerated a little bit in the quarter.

Your design backlog is good. Obviously, you just talked about there's a lot of cross crunched out there. So what would you expect to drive your growth in FY 5? Is it more weighted to state and local revenue growth versus private sector? Is it more equally balanced? And then would you say it's more water related or is it kind of balanced between water facilities? Like how do we think about it?

Yes. Think about it in terms of just being balanced. Again, we've we've built the business in a certain way. So that's aligned against what we think is important for longer term investments in infrastructure. Now kind of every every part of our marketplace has slightly different objectives And so we might look at certain markets, for example, like the UK, and we say that what used to be transportation focused is now going to be more water and energy focused. But when we look across the entire business, we are exposed to trends across the business that would imply that we're just going to see success across transportation, water, environment, energy and our buildings business.

Very broad based.

Helpful. And then I know you've already talked about limited exposure to federal budgets and but given sort of all the noise should we expect a period of floor bookings on that side of the business or would you and do you worry that the uncertainty could drift in state and local Or would you still expect on average book to bill at or above 1 over the rest of the year?

Well, based on our pipeline and based on our win rate, we would expect it to be over 1 throughout the year. And actually sort of look at again, we look at our pipeline and we certainly do see as you move through the year, there are opportunities that actually improve over the course of the year. So we don't anticipate our pipeline of opportunities shrinking. We actually view it as expanding over the course of the Helpful. Thanks, Troy. Thank you.

Your next question comes from the line of Jamie Cook from Truist Securities.

Hi, good morning and congrats on a nice quarter. I guess my first question, can you just talk maybe Gaurav talk about some of the investments that you're making this year in order to continue to ignite the organic growth organically in particular in the water in the environmental business and sort of compare that to sort of compare that to last year. And then I guess my second question, on the international side, it sounded like there were some positives in terms of the book to bill turning 1. As we exit the year, how do you think about sort of international design backlog growth for the year? Thank you.

Thanks, Jamie. It's Lara here. I might start with just responding to the first part of the question around water and environment advisory. And the update is we're 100 days in. We've got great momentum. We're running ahead of some of the key milestones that we expected in terms of winning good solid backlog, a growing pipeline of opportunities. But most importantly, we've had great success in great talent joining the team, but most recently [indiscernible] those team members are straight to work. And with still quite optimistic. There's tremendous white space and adjacencies for us in this sector where as you know we already have the sort of market leading position in water and environment across our operations. So there's a lot more addressable market for us to attack in terms of water and environment and the client response has been very positive And as I said, we've had some great wins in the quarter. We had a large for example, advanced metering infrastructure project. So we still believe that's our next big catalyst, a higher margin growth accelerated for us. That builds on that technical advantage that we have. And then I'll just make some comments about international and some of the bookings and what we're seeing across that market.

It was patchy, but it was basically in line with expectation But I think as Troy said earlier, we had growth in backlog across the portfolio. So in international as well as Americas. We did see Middle East leading the way grew 7% for the quarter and 1 point 1% book to burn. U. K. For us continues to be strong. I mean, we are capitalizing on those long term frameworks that we have. And most importantly, we are looking forward to Ambatte as we know, doubling of the total dollar addressable market that's going to exist up from Amp 7. As Troy said, we have captured 100% of all of the recompetes on Ampek. So a lot of positivity around that. But also as you said, the wins continue and the position continue across all the I think overall, a positive picture and shows that we're not dependent on any sort of single geographic market and that we have the fungibility of workforce to work across our various operations.

Thank you. [indiscernible] Your next question comes from the line of Adam Yves from Goldman Sachs. Your line is open. Hi, good morning.

So, like really strong momentum in program management Can you just update us on your outlook for growth in that business line this year And what are the levers being pulled to continue to drive capacity for sustained growth in the medium term in that business?

Yes. So first of all, our outlook for program management remains unchanged. From the level of success that we have. Sort of think about again, I'm going to start by taking you back to what we said at our Investor Day last year, which is we set out an objective so that ultimately 50% of our business will be kind of in our design and our science based business is. And with that expertise, we're expanding into program management and into advisory. At this moment, we now have I think during the quarter about 16% of our NSR came from program management work, which is up significantly and is grown again at a double digit rate. We expect to continue to grow at a double digit rate. But importantly, as we're now building out the advisory practice, we're heading towards that fifty-fifty split. And the reason that becomes important for us is, we're exposing ourselves to significantly more of our clients budgets. So sort of if you again think about the confidence that we're describing in the business and our success is, we've got exposed to the right what we think are the right diverse marketplaces. We believe that we're being exposed to a much greater degree of influence at our clients and their spend.

Through our design, our program management and advisory business. And then we're experiencing really a very high win rate. And so we've been doing that now for a few years that extraordinarily high win rate in those large projects. And so That's that again, that just gives us the overall confidence in the future of the business, even when you experience some some bumps along the way.

And I think that's showing up in the really strong Americas revenue growth at 9%. Is there any way to sort of bifurcate that growth between what you're seeing in the underlying end market trend versus what could be the targeted increase project scope and share gains Well, again, we're seeing a higher growth rate in program management. But when you look across kind of the way we think about our business lines or our markets, it is it's broad based.

And then last one for me, really strong margins in the quarter, up 40 basis points. Can you help us just think about puts and takes on margins this quarter and the balance of the year You have an accelerating investments in digital and advisory, but wondering on the positives contributor side, how much of a benefit is mix versus the enterprise capability centers and automation initiatives you folks have laid out previously? So [indiscernible] I'll let Gar take that question and then I'll follow-up with a little bit of discussion on our digital investment Hey, Adam. How are you?

So you're right. Margins continue to be very strong. As you recall, our guidance for the year was 30 bps in increase. We've exited Q1 at 40 bps of increase led by all time high margins in both of our segments in Americas and in the international markets And you also are correct to point out this includes continued significant organic investments we make in our business. Let it be through the water advisory environment advisory business, [indiscernible] [indiscernible] any opportunities where we think we can drive the right returns through business in our international markets. Please We're very pleased to report the 1.2 book to burn, which was ahead of our expectations in that international market. So the international margins definitely had a lot higher than planned business development And I'd also be remiss not point out, compared to plan, our international [indiscernible] year over year. So as we move forward, we continue to expect good strong margin generation based on all the investments we will continue to make because it's very representative of the culture that has seeped through this operation, especially in the people business, a culture which is just focused on finding opportunities to drive the right value for our clients, which in turn also drive value for our shareholders.

So just to talk a little bit about the nature of some of the investments. As Gar pointed out, we're investing more than ever in business development, We're investing more than we ever have in our people. In their professional development. We're investing in building the advisory business And then we're continuing to invest in growing and building the program management business. But also importantly, we're investing in what we call our, again, our digital transformation, the way we deliver work. And that really has developed in something that's slightly different. So we started out a few years ago making those investments to transform how we digitally delivered to the underlying work. But we recognized about 18 months ago that digital was transforming itself into artificial intelligence. And so we developed a roadmap and we've been working against that roadmap starting with investing to actually prepare our bids using AI tools. And so now that is something we do across the organization. On that roadmap, we also developed some other use cases and those use cases are now underway executing against those. And those were supporting how we actually run the business or support our projects.

Next on that roadmap that we've started working on is actually the way we deliver our design and our engineering work. And so that is going to I have a profound impact and we're investing a significant amount of money in those digital initiatives. And I would again think about it this way, as we gave guidance in our Investor Day, last year that through our digital efforts, we thought we would we thought we would reduce the amount of effort to deliver work by 5% to 15% With where we're headed now and based on the investments we're making in digital and AI, we see that number being larger as we move forward. So hopefully that gives you perspective on the investments that we're that we're making through our margins.

Appreciate all the color. Thanks so much.

Your next question comes from the line of Sangeetha Jain from KeyBanc Capital Markets. Your line is open.

Thanks for taking my question. So if I can ask about the LA rebuild, and how we should think of your contribution to that? If it's going to be more FEMA work in the short term and also what type of type of long term revenue opportunity there could be? Maybe there's a historical parallel that you can help us to understand the scope?

Yes. So thanks for the question. And I I would just I would say, first of all, we don't sort of call out kind of individual projects or individual pieces of work.

Or our participation in the certainly not without discussion with our customers. The main way to think about the recovery work and resiliency work and think about it as 2 phases and here's our participation is. Over the last decade, we've participated in the recovery from over 700 kind of climate disasters. So this is really kind of part of our business, which is continuing to support communities as they have to recover from I'll just say again, climate events and other kinds of disasters, but helping them recover. So that's a short term where we help them do that. And we have a great deal of experience to do that. And then in the long term is helping them become more resilient And as you sort of get through that phase of recovery, there's even a really significant amount of work to help that community become more resilient so that if there is an event like that in the future, You can certainly reduce the impact in the cost. You can never mitigate it, but you can certainly go a long way Sorry, we had a problem with the line. It certainly goes a long way to go beyond recovery.

In making those those communities more resilient. So again, we have a long history of doing that. Around the world and certainly in the U. S. And working with multiple agencies, whether they're local, state or federal, in helping communities recover.

Great. Appreciate that color. And if I can ask on segment margins, clearly a lot of progress has been made And do you still feel like international margins will grow faster this year than Americas margins based on what you're seeing in the pipeline? What do you think that's going to be driven by? Thank you.

Hey, Sangeetha, this is Garav. I'll take that question. Appreciate again the comment on the margins. It is impressive even with industry leading margins. Our professionals continue to drive to even a higher for better North Star than what we have created before. And then it's probably as important to note that this margin generation is is very clean in terms of all the restructuring activities that we had taken in the past.

Current year, we don't expect any of those restructuring activities. So you're seeing that strong margin generation continue to grow. As I mentioned before, better than the guidance we had put forth of 30 bps. I do expect international margins will continue to outpace American margins. Consistent with the commentary we had provided before, just because we were coming off a lower base. So the opportunities to drive that margin from a better value generation standpoint existed still exist in front of us from international. And our ambitions are very consistent with what we've already delivered in Americas. In Americas, we're heading shoulders above our peers and international, that's what we're going to drive to. Now with that said, there's always a balance, as we've said. We will make organic investments that are necessary to ensure that our business is positioned for sustained long term value creation. And as we look in our international business, from a growth standpoint, consistent with our plan, the guidance we had put forth, we knew international is going to have not as strong of a growth year, but the pipeline, the opportunities and pursuits continue to be abundant. So we've made those business investment dollars.

You're seeing the returns of it in our book to burn and we'll continue to do that throughout the year. So instead of focusing so much on the segment margins, we look at it from an overall enterprise standpoint and feel very confident we'll be able drive those strong results, if not better.

Thank you.

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

Good morning, gentlemen, Laura. Troy, you highlighted in your comments that you're seeing expansion now your backlogs pipeline is growing as well.

Over the past, let's say, 3 months since the election, do you expect you get the sense of your clients are being more optimistic about bringing capital forward and investing in the U. S. As the reshoring opportunities accelerating? And and remind us how you can with your water business so they could could be helpful on a lot of those types of projects, especially in the power side, people are really talking to count and certainly on the data center front. Is that part of where the pipeline could expand here in the next several quarters?

So the answer the simple answer is yes.

But let me give a little more detail. In our pipeline at the moment, we have not we have not seen a change in the makeup of the pipeline. Or the pursuits, certainly not in the markets that we play in. Some of the markets we're not exposed to, that's where you're seeing the change. But as we look forward, there's no question that the intention of the administration is to reshore activities. And if you combine that, with an improvement in a permitting environment, where you can actually expedite the delivery of those projects we think that creates [indiscernible] U. S. Markets And so I think we're very well aligned against that. We haven't seen an impact yet. It will take time, no doubt, for that to have an impact. And I think you'll probably start to see the impact of that.

After the federal government puts forward its next budget.

That makes sense. I appreciate that. Thanks, Trey. Okay. [indiscernible] Your next question comes from the line of Judah Ronovitz from UBS. Your line is open.

Hey, good morning. Thanks for taking the question. On for Steve Fisher.

So we're now squarely within the long term 5% to 8% organic growth range And as we look out over the next few years, what are the factors that could drive acceleration toward the upper end of that range versus maybe moderation or [indiscernible] Well, again, I think it's a combination of things. First of all, as we pointed out, over the last really 9 months, we've been in this unusual period where I think we said this before, there was a period of 9 months or a year where there were 53 federal elections. Around the world, which means that you've had a significant change of governments or Thomas' reelection, sometimes those agendas change. And so we've been in this period where some decision change, and obviously, you have to work to react to that. But through that entire period, there has been some uncertainty in those markets and there's certainly a change in agendas, Our business has been very successful in growing. And I think that's as a result of Again, the clients that we work with the markets that we have been exposed to, The way that we are working with our clients a more meaningful or influential way by focusing on design program management and now advisory work.

And then a high win rate. And so I think as you see stability over the course of the next few years. I think that Same way we are, we would have more optimism around improved growth in the business over the next few years. I think that's helpful. And then just One last question. Leverage, I think it's under one time You mentioned being opportunistic. So what would get you to do more M and A? I know that comment probably didn't necessarily refer to M and A, but [indiscernible] Yes. So first of all, just again, we say this all the time, we take a returns based approach. And so there's no question that the highest return opportunities we see today are organic growth organic investments in the business. The limitation that we have on making investments in the business is actually time. It's time with the management team and the leaders. And so we're investing everything we think we can into the business at the moment. Then when you start sort of looking externally, we do believe that we should continue to return capital to shareholders. I think it becomes a question of how much. And that's where we look at this returns based approach.

There's no doubt that as we look out there might be places where we would consider M and A to accelerate our organic growth. So for example, in our advisory business, there may be some opportunities for us to invest to accelerate the growth of our advisory business. But again, we'll stick, we'll hold true to our returns based approach. But I maybe think about it that way is if we can find ways to accelerate organic growth, we would look at M and A to do that. Broad based M and A is not something that we've done or that we see in our future. Again, I'll say, especially in an environment where Because of the investments that we're making, we would actually see needing less people to deliver the same amount of work. Or said differently, it means that it creates a wonderful opportunity for our people to accomplish even more with their clients. And that concludes our question and answer session.

I will now turn the call back over to Troy Rudd, CEO for closing remarks.

Great. Again, thank you everyone for joining us today. Appreciate your support and engagement. And thank you to all the employees and professionals at AECOM. For the amazing job they've done over this past quarter and continue to do. Thank you very much.

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