AECOM (ACM) 2011 Q1 法說會逐字稿

Good day, ladies and gentlemen.

And, welcome to the first quarter 2011 AECOM earnings conference call.

(Operator Instructions).

As a reminder, conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Mr.

Paul Cyril, Senior Vice President of Investor Relations.

Please proceed.

Thank you and welcome everyone to AECOM's first quarter 2011 earnings conference call.

Please turn to slide two.

As we begin, let me remind everyone that today's discussion contains forward-looking statements based on the environment as we see it today, and, as such, does include risks and uncertainties.

As you know, our actual results might differ materially from those projected in these forward-looking statements.

Please refer to our press release, or slide two of the earnings presentation, and to our reports filed with the Securities and Exchange Commission for more information about the specific risk factors that could cause actual results to differ materially.

As we begin the call, Let me remind you that some of the important information about our earnings are posted on the investor website, investors.aecom.com.

We posted our earnings release and updated financial statements on the site for anyone who still needs access.

A replay of today's call will be posted there at around noon eastern, and will remain there for approximately two weeks.

Lastly, since we are using some non-GAAP financial measures and references, the appropriate GAAP financial reconciliations are posted to our website as well.

Presenting today will be John M.

Dionisio, Chief Executive Officer and President, and Michael S.

Burke, Chief Financial Officer, and Executive Vice President.

John, please go ahead.

Thank you, Paul.

Good morning, everyone, and thank you for joining our call today.

I will begin with some introductory remarks and a review of our key achievements for the first quarter of 2011.

I will then turn the call over to our CFO, Mike Burke, who will discuss our first quarter financial performance and our outlook for fiscal year 2011.

Following Mike's comments, I will provide an update on our market and business trends, and our recent acquisitions.

Overall, we had a solid first quarter which was driven primarily by a strong position in the national resource-rich economies of Canada, Africa, and Australia, and emerging markets of Asia.

By the way, emerging markets now account for 24% of AECOM's revenues.

Despite the mixed performance in our US market, we won $1.2 billion in new projects, new business wins in the PTS segment during the first quarter.

However, Western Europe continues to be challenged by public sector austerity.

During the quarter, Davis Langdon and RSW joined AECOM.

These acquisitions added about 3300 employees to AECOM, and expanded our non-US service offerings in construction services and energy and power.

We are encouraged by the early opportunities we see, and are making progress in our drive for the revenue synergies.

Lastly, I would like to take the opportunity to welcome our newest board member, Rob Routs, a former Senior Executive with Royal Dutch Shell, whose business strategy and energy expertise will be a great benefit to AECOM.

Now, I'd like to turn the call over to Mike Burke to review our first quarter financial results.

Mike, please go ahead.

Thank you, John.

Please turn to slide five.

Our first quarter gross revenue increased 31% over last year's first quarter to $1.9 billion.

Net service revenue was up 26% to $1.2 billion.

Organic net service revenue increased 7.3% year-over-year while constant currency organic net service revenue increased 5.8% year-over-year, a significant improvement from the growth rate that we achieved in the fourth quarter of fiscal 2010.

Our first quarter's growth was driven by strength in Asia, Australia, Canada, and our environmental business, as well as contributions from our recent acquisitions.

Operating income, as a percentage of net service revenue, improved 62 basis points year-over-year to 7.4% on a modest gross margin increase and strong G&A control.

During the quarter, we advanced our analysis of purchase price allocation for recent acquisitions, and, based on that analysis, amortization expenses were lower than we initially expected.

Net income was $57 million, up 25% year-over-year.

Diluted earnings per share were $0.48, up 20% year-over-year including minority interest expense our 26.5% effective tax rate in the first quarter was aided by the US tax law changes that occurred in December, and stronger growth in lower tax jurisdictions.

We won a record $2.4 billion in new business last quarter, representing a 50% increase in wins year-over-year.

Please turn to slide six.

Our PTS segment accounted for 81% of our first quarter revenue.

Net service revenue in our PTS segment increased 23% from last year to $1.1 billion.

This increase was the result of 5.7% organic growth, with the balance coming from recent acquisitions.

Operating margins in the PTS segment increased nine basis points year-over-year, as operating income rose 24% year-over-year to $92 million.

The performance of our Management Support Services segment, which accounted for 19% of revenue in the first quarter was strong.

Revenue for the quarter was $360 million, up 30% over last year.

Net service revenue increased 64% year-over-year, driven by 25% organic revenue growth and contributions from the McNeil acquisition.

Operating income increased 62% over last year to $22 million, and operating margins improved by 118 basis points year-over-year, and by 203 basis points sequentially.

This quarter's significant margin performance underscores our strategy of moving into higher valued added government services through the acquisitions of SSI and McNeil last year.

Going forward, we are well positioned to capitalize on numerous opportunities in the MSS Segment, both domestically and abroad.

Please turn to the next slide.

In the first quarter, our EBITDA margin was 9.7%, a 77 basis point improvement over last year.

Over the next four years, we aim to further improve our EBITDA margin to at least 12% as a percentage of net service revenue.

Our margin improvement efforts focus on four core drivers.

First, an emphasis on higher margin services both organically and through acquisitions.

Second, enhanced cross-selling efforts which reduce our business development costs.

Three, leveraging economies of scale as we grow, and finally, operational efficiencies.

For example, our office lease expense approximates $200 million annually, our second largest cost, after labor.

With over 300 leases expiring in the next three years, we target further savings from co-location, consolidation, and renegotiation.

In addition, we expect our operating margins to benefit from our recent acquisitions, particularly in 2012, when the amortization expense steps down.

Please turn to the next slide.

At the end of the first quarter, we had $421 million in cash and cash equivalents, $1.2 billion of debt, and $260 million in unused capacity under our credit facility.

Net cash used in operations was $179 million for the quarter.

After adjusting for ending our deferred compensation plan and associated tax benefits, our net cash used in operations would have been $31 million versus $35 million last year, in what is normally a seasonally weak cash flow quarter.

During the quarter, we closed the Davis Langdon and RSW acquisitions, bringing our pro forma net debt to EBITDA ratio to 1.4 times.

This is below our long term target ratio of 1.5 to 2 times.

As you know, acquisitions and the timing of their closing in the quarter can skew the comparison of changes in the balance sheet items, with our corresponding items on the P&L and the cash flow statement.

For example, our balance sheet indicates that net accounts receivable grew by $521 million or 29% year-over-year.

However, approximately $400 million of that increase to accounts receivable was attributable to companies we acquired in the prior 12 months, pointing to organic accounts receivable growth of 7% year-over-year.

This is consistent with our 7% organic net service revenue growth.

Please turn to the next slide.

New business wins in the first quarter totaled $2.4 billion, 24% higher than revenues, which is a positive sign for our business going forward.

In addition, our book-to-burn ratios increased each month throughout the quarter.

We closed the quarter with record backlog of $15.5 billion, a 55% increase over last year, and a 5% increase from the fourth quarter of fiscal 2010.

Organically, backlog was up 3% quarter over quarter.

Total backlog includes $7.9 billion of contracted backlog, and $7.6 billion of awarded backlog.

I should also note that our backlog figures do not include numerous IDIQ contracts that we have been awarded by the US federal government.

A solid stream of new wins, growing backlog, and a higher book-to-burn ratio provide us with good visibility for the foreseeable future.

Please turn to the next slide.

Now, I'd like to update you on our outlook for fiscal 2011.

We are increasing our fiscal 2011 earnings per share guidance to the range of $2.25 to $2.35 for fiscal 2011.

The midpoint of this guidance range implies a 12% year-over-year increase in earnings per share on a GAAP basis.

In addition, we expect that our 2011 earnings will be more heavily weighted to the second half of the year.

There are two primary drivers of this change in guidance.

First, following further analysis of our purchase price allocation for recent acquisitions, our total estimated amortization expense related to acquired intangible assets declined to $38 million.

The second factor impacting our earnings guidance is a reduction in our effective tax rate to 28%.

Our tax rate was lower, following recent changes in US tax law, and a higher contribution from regions with lower tax rates.

For those of you who model minority interests below the pre-tax line, you'll want to subtract roughly one percentage point from our 28% tax rate target to account for differences between tax rate calculations based on the location of the minority interest on the P&L.

In addition, our guidance assumes a steady foreign currency rate, $73 million in depreciation expense, $43 million of interest expense, and a diluted share count of 119 million shares.

While it's still early in the year and visibility remains limited in some parts of the business, we are highly confident in our ability to achieve our earnings guidance.

After adjusting for the intangible amortization expense, the midpoint of our FY '11 guidance implies a 16% increase in pro forma cash EPS.

Looking forward, we are confident on our long-term annual EPS growth projections of 15%.

With that, I would now like to turn the call back over to John who will provide additional detail on our first quarter performance and outlook.

John, please go ahead.

Thank you, Mike.

Please turn to slide 11.

AECOM has a globally diversified business and operates in over 100 countries.

Let me take a few minutes to walk you through some of our key market highlights.

I will start with the Americas, which we include the United States, Canada, and Latin America.

And, this region accounted for 54% of our first quarter net service revenue.

Although our US net service revenue was flat for the period, it does not tell the entire story.

On the funding side, while the Build America Bonds and the federal transportation bill have expired, there remain significant sources of funding to advance infrastructure projects in the United States.

As we have experienced in the past, the highway transportation bill has been extended, while the new bill is being debated.

And, the extensions provide $40 billion a year of ongoing funding.

We have also seen improvements in state and local tax revenues and growth in dedicated funding sources.

For example, 70% of our Q1 wins in the US transportation have dedicated funding sources, which make them less vulnerable to state and local budget changes.

In addition, there remains billions of stimulus dollars that have been allocated, but not yet spent, which we expect will be beneficial for our business.

For example, cities like Los Angeles and Philadelphia have only spent 16% and 29%, respectively, of the hundreds of millions of dollars they had been allocated by Washington.

We are heartened by President Obama's recent State of the Union Address, where he linked the rebuilding of America to job creation for the hard hit construction industry.

Alternative delivery is slowly getting traction in the United States, particularly in social infrastructure programs such as criminal justice, education, and health care.

As you may recall, AECOM is a 25% owner of Meridian, an independent infrastructure investor.

At the end of our first quarter, Meridian announced that it had closed on the funding for the Long Beach Courthouse project.

This represents the first availability payment social infrastructure P3 project to reach financial completion in the United States.

The project has a total capital value of approximately $500 million.

Meridian owns 100% of the equity, and AECOM will provide design services for this social infrastructure project.

This is a good example of the kind of P3 funding that is replacing traditional sources on a global basis.

The private sector is also gaining signs of recovery.

For instance, our environmental management business has bounced back over the past year, driven by a 20% year-over-year increase in oil and gas CapEx spending.

Another sign of gradual improvement in the private sector, after a two year delay, construction of the Revel Casino in Atlantic City is expected to resume in the next few weeks.

Tishman Construction, which leads our construction services business, was selected as construction manager on the project in 2007, and will resume its role in the final $600 million phase.

Our government service business, which accounts for 20% of net service revenue, performed well in the quarter.

And the outlook remains encouraging.

We further expanded our relationships across many federal agencies with important wins with the Department of Homeland Security, General Services Administration, Department of Energy, and the Department of Interior, as well as USAID.

We had notable large wins, including USA projects in Colombia and South Africa, a $900-million environmental management IQD contract for the Department of Energy.

And, electronic project management support systems and training project for the General Services Administration, and for the US Army, a vehicle maintenance project in support of Afghan's national army.

Next, to Canada.

Canada has been a strong performer due to ongoing demand for mining and environmental services.

It's active P3 market, and numerous large infrastructure projects with long term funding.

In addition, we see significant opportunities on the horizon in Transmission and Distribution and Power Generation.

We made great progress on cost selling efforts across the Canadian marketplace, and recorded key water and transportation project wins.

We are working with our new colleagues from RSW by leveraging our leading hydroelectric expertise in Canada, and across AECOM's global markets.

We also see significant growth opportunities in Latin America and all of our end markets, and, as a result, we continue to make organic investments and pursue strategic acquisitions.

Now, turning to EMEA, which is Europe, the Middle East, and Africa, which accounted for 24% of our first quarter net service revenue.

The UK remains a very challenging market, and we expect it to stay that way for the next 18 to 24 months.

Having said that, the general expectation, however, is that the UK will avoid a double dip recession as the private sector gradually comes back, and the government begins to make infrastructure investments.

For instance, the water market has already begun to improve.

The UK government has committed to a five-year spend of $30 billion to upgrade their water and wastewater facilities.

Moving east, we see exciting opportunities in eastern Europe, where we look to leverage our growing capabilities in the region.

While we have been active in Russia since 2002, key infrastructure catalysts such as the 2014 winter Olympics and the 2018 World Cup games should bolster growth in our markets, including PMCM, Transportation, and Facilities.

In the Middle East, we saw a healthy activity in Qatar, Abu Dhabi, and Saudi Arabia, while Dubai remains dormant.

We expect to benefit from the growing demand of health care and educational facilities in the region.

With an estimated $50 billion worth of social infrastructure projects in the gulf states alone, AECOM looks to leverage its local presence in global education, health care, and sports facilities expertise to help our clients meet their infrastructure needs.

Qatar will be hosting the 2022 World Cup games.

Plans to invest over $60 billion in the next five years on tourism infrastructure, such as airports, ports, hotels, stadiums, and railways.

In addition to Qatar, Saudi Arabia is expected to be one of the strongest markets in the region, due to significant infrastructure and social infrastructure demands.

Recently, we have been asked by the Saudi government to deploy a task force of water resource and construction experts to assist them in addressing their near and long-term flooding problems.

While AECOM has been in Africa for almost 50 years, our recent acquisitions has increased our footprint across the continent.

Last week, we announced that we had won a hydro-feasibility project on the Congo River.

The project has the potential to generate 39,000 megawatts of electricity.

This is 25% more than the California electricity consumption of today.

We are excited about the potential of this rapidly growing region, and we'll continue to investment in both organic and acquisitive growth opportunities.

Now, turning to Asia-Pacific, which includes Asia, Southeast Asia, Australia, and India.

This region, over the past several years, has been our strongest growth market.

Our organic growth in the region has been in excess of 20% year-over-year.

In the first quarter of this year, we had some good wins in Hong Kong, including the $150-million design contract for the Hong Kong boundary crossing, which when completed, will connect Hong Kong, China, and Macao.

In addition, we won a design contract for one of Asia's largest water treatment facilities in Hong Kong.

Looking ahead, we see a stream of good opportunities in Hong Kong and China, as well as in newer markets such as India, Vietnam, and Indonesia, which are bouncing back from economic downturn.

In Australia, the economy remains strong, due to robust demand for both infrastructure and natural resources.

For example, Australia's government recently announced that AECOM would lead a high-speed rail feasibility study, leveraging the expertise obtained through a recent acquisition.

We expect to see continued strong growth in this region over the long-term.

In summary, we expect that our most significant near-term growth opportunities will occur in Asia, Eastern Europe, and the Middle East.

And, in natural resource-rich markets such as Australia, Africa, and Canada.

The US markets, although its growth rate is modest, will remain a solid market and opportunity for AECOM.

While there are still our challenges in the global economy, the overall business environment is improving as indicated by our strong organic growth.

Please turn to slide 12.

Just to put this all in perspective, this slide indicates our four PTS segments' end markets, and the growth potential available in each.

These end markets are large, and their long term growth rates remain strong.

Given the highly fragmented nature of the industry, there are many opportunities for growth.

Furthermore, looking back over the past decade, AECOM's organic growth rate has exceeded the market due to steady market share gain.

Irrespective of specific challenges in certain markets, we are looking in confident at sustained growth over the next several years.

Please turn to slide 13.

Our latest acquisitions are now fully integrated into their respective business line areas and collaboration is well underway.

INOCSA is part of our transportation business, and brings unique high-speed rail capabilities, which we have already delivered on projects in North America and Australia.

SSI and McNeil expanded the spectrum of services we provide to the US government, and deepened our penetration in rapidly growing areas such as security and intelligence.

Tishman and Davis Langdon strengthen our Construction Services platform, which is an important part of AECOM's strategy to meet our clients' project needs, from conception, through planning, architecture, engineering, and construction and, ultimately, delivery and commission.

We now offer a full suite of integrated delivery services in the form of Design-Build, and other turnkey procurements, and have formed the AECOM Construction Services Group.

RSW enhances our global hydro capability as indicated by our recent win in the Congo.

Please turn to slide 14.

Over the next two to three years, despite the uneven growth in the global economy, we remain positive about our markets.

Our growth will be driven by emerging markets, which now account for 24% of our revenues, and natural resources-rich economies which represent 22% of our revenue.

We will continue to capitalize on new opportunities via synergies on both the revenue and cost side, including cross-selling, higher-margin services, and cost efficiencies.

Balancing the needs of vast infrastructure requirements and budget constraints, clients are moving to vertically integrate more of the procurement process, which fits with AECOM's full life cycle service offer.

Our enhanced construction management business and our expanding alternative delivery capabilities position us well for evolving client procurement towards Design-Build and P3.

And, lastly, we will continue to access new opportunities and markets through acquisitions that are critical to our long-term objectives, and are capable of driving increased shareholder return.

We remain committed to meeting our 15% long-term earnings growth target and we look forward to keeping you updated on our progress.

With that, let's go ahead and open the call for questions.

(Operator Instructions).

And, we will pause momentarily to compile a list of questions.

And, our first question comes from the line of Yuri Lynk with Canaccord Genuity.

Please proceed.

Hello, good morning, guys.

Good morning, Yuri.

Just so I'm clear on the guidance, you're very clear about the reasons for the increase.

Your expectations for organic growth for 2011, I think on the last call, you mentioned something like high single digits organic growth for the year.

That hasn't changed, I take it?

Yuri, I don't remember us giving that specific guidance last year.

But, certainly, high single-digit organic growth has been our long-term experience.

And, we now see that coming back and that's certainly possible that we'll be in that range, especially in light of the 7% organic growth that we experienced in Q1 as well as the healthy additions to the backlog.

Okay.

Maybe just another way then -- have your expectations for organic growth for 2011 changed compared to the last quarter?

No.

If anything, we feel more positive.

Good.

And, just a little more detail on Canada as it pertains to RSW.

I believe Tecsult acquisition you did a couple of years ago, they're also involved in Hydro.

There's some big projects in Canada ongoing.

The lower Churchill is the latest one.

You've also got Romaine River, and Juanita.

Is RSW and/or Tecsult involved in these?

Or looking to get involved?

Yes, we're actively involved in hydro projects in Canada.

We do a lot of work with Hydro Quebec.

So, I mean we track just about every hydro project there is in Canada and we compete for them.

Okay.

Thanks, guys.

I'll turn it over.

Thank you.

Our next question comes from the line of Vance Edelson with Morgan Stanley, please proceed.

Hi, guys.

Thanks for taking the questions.

Mike, with the leverage below the targeted range, do you plan to reverse the rising share count with any buybacks?

We are always considering a whole host of different various options with our capital structure.

We have not announced any buybacks.

We continue to look at strategic acquisitions around the globe, primarily in emerging markets and the natural resource energy arena.

And, we would rather deploy our money in those areas.

But, should we not be able to find the opportunities that our strategy at the right price, then we would consider a stock buyback.

Okay.

That makes sense.

And, John, are you hearing anything on how far the next continuing resolution will get us on the infrastructure funding.

Is it another stopgap?

Or, have you heard anything about bringing the back the Build America Bonds?

Or, for that matter, what the next highway bill looks like?

If you could just give us a feel for the longer term outlook.

What we mentioned on the last call has remained.

I don't think anything new has happened over the past few months with the new Congress coming in and then the elections.

We still feel that the -- there'll be continuing resolutions moving the funding forward.

I mean, the President speaks bullish about infrastructure funding, public/private partnerships.

I don't think anything has changed over the past three months that gives me any visibility on when or how large the next transportation bill will be.

Okay.

It's just a matter of time.

Sure.

And, then, lastly for me, if you could provide an update on the Tishman outlook, and the outlook for commercial construction in the US in general.

Would you characterize the prospects there as clearly better now than three months ago?

Yes.

It's interesting.

We mentioned the Revel project, which we didn't think was going to be coming back this soon.

It was something that Tishman Construction began in 2007.

But, we're also seeing that throughout the private commercial side of the business, opportunities beginning.

Clients are starting to brush off some of their plans and getting ready for, coming from or coming out of the recession.

The other thing that is a plus for us as a result of having Tishman in the AECOM family is the opportunity to do more of the Design-Build side and the construction management of major vertical construction.

And, also, we've been leveraging Tishman in Latin America, in the Middle East, as well as in China.

We just recently won with AECOM and Tishman, a Disney project in Shanghai.

Okay.

That's very helpful.

Thanks, guys.

Thank you.

Our next question comes from the line of Andy Kaplowitz with Barclays Capital.

Please proceed.

Good morning, guys.

Can you hear my okay?

Can't hear you, Andy.

There's a problem on the line.

Have him try again, I boosted his line.

Can you hear me okay or no?

Nope.

Can't hear you, Andy.

Okay.

I'll get back in queue.

Okay.

Our next question comes from the line of Andrew Obin with Bank of America Merrill Lynch.

Please proceed.

Yes.

Good morning, guys.

In terms of question, $90 million of the deferred comp termination that hit the cash flow.

Was there any impact on income statement?

What was it?

The income statement was already charged for the compensation expense in the year in which the compensation expense was deferred.

So, we would have taken the P&L hit, in many cases, over the last 20 years, and it was sitting on -- the cash was just sitting on the balance sheet and we distributed it out to the employees.

No, no impact this quarter?

No impact this quarter on the P&L.

Of course, there's a cash flow benefit in future quarters due to the tax deductibility of that deferred compensation.

But, it's a movement on the balance sheet, not on the P&L.

And, the second question, you sort of highlighted 25% organic growth in MSS.

What's the big driver here?

Are there specific programs that are driving this growth?

It's a wide variety of projects, Andrew.

As you know, we have been diversifying our penetration into a whole host of different agencies over the past few years.

If you go back a few years ago, we were almost 100% in the Department of Defense.

And, now, 60% of our business is in the Department of Defense.

A much wider penetration into the Department of Homeland Security, the GAO, and, now, the much higher-margin intelligence community that we're gaining access to through the two strategic acquisitions that we did the past 12 months, both SSI and McNeil.

No specific agencies driving this growth, right?

I think it's just across the board as Mike said.

We've increased the number of agencies we're working for.

And, the biggest and the Department of Energy, which is one of the largest ones we're working for.

So, it's a matter of us further penetrating all the different agencies in the US government.

Up until now, we hadn't really penetrated beyond, as Mike said, the Department of Defense, and that was mostly the US army.

Great.

Thanks a lot.

Okay, Andrew.

Our next question comes from the line of John Rogers with D.A.

Davidson.

Please proceed.

Hi.

Good morning.

Good morning, John.

Mike, just relative to your guidance on amortization and depreciation.

Does amortization -- I'm just saying about the quarters as they lay our this year -- does it drop off a lot in the fourth quarter?

Is that why the way the schedule works out?

It seems like you're at a higher quarterly run rate than that now?

Or is it just a gradual?

It doesn't necessarily drop off in the fourth quarter.

Slight movement, maybe from $11 million to about $8 million in Q4.

If we don't do any new acquisitions between now and then.

Right.

So, it really is going to depend on if we, if we do any more acquisitions in the remainder of our fiscal year.

Okay, okay.

Just wanted to make sure I was thinking about that right.

And, then, in terms of the long term EBITDA guidance of 12%, are you saying you can get there including half your growth coming out of acquisitions?

Or whatever the historic rate has been.

You're talking about the 12% margin?

I'm sorry.

The 12% margin.

The 12% margin is going to come through a few different primary reasons.

One is going to be, as we move upscale on our services.

We're moving in, as we've been talking about for a while, we're moving into higher-margin services on a couple fronts.

One, as we move into more construction services, construction management, program management, that produces higher margins than traditional design business.

Secondly, in the MSS segment, as we've been talking about for a while, we move into the intelligence community, which produces higher margins than the traditional Department of Defense-type MSS work that we've done.

So, that's on the project margin side, which is, of course, contributing to those net margins.

And, secondly, we are continuing to extract costs from the system, and running our business much more efficiently.

And, we've been talking about that for quite some time, is all the different components of the P&L that we continue to extract costs from and obtain operating leverage by driving more revenue through the same size platform.

Okay.

And, then, I guess for John, you talked or mentioned a little bit about the cycle improving for commercial and some of the other markets.

How far are we away from seeing some better organic pricing?

Or same service pricing?

I'd say 12 to 18 months.

Okay.

And, that'll wait until capacity gets filled up in the industry?

The 12 to 18 months we should be back to mid-season form.

For right now, the bottle neck is where the ice is starting to crack on the marketplace where they're percolating new opportunities, both here and in the United States and as well as abroad.

Okay.

Great.

Thank you.

Our next question comes from the line of Andy Kaplowitz Barclays Capital.

Please proceed.

Can you guys hear me okay now?

Yes, Andy.

All right, sorry about that technical difficulties.

A couple of questions.

Emerging markets generally have been the strength of your portfolio.

Have the growth rates continued unabated in the face of harder comps?

Have they started to decelerate a little bit?

Or are they still going strong, or have they even improved over the last six months?

The biggest improvement has been in Australia.

Our Australia, New Zealand business, organic growth rates on a constant currency basis are 24%.

And, even better on -- when you factor in the up side from FX.

You know, Asia, overall, is still running in the mid-20% organic growth rate.

So, those markets -- Asia's about the same.

We've been in 25% to 30% range for the past few years.

Australia bottomed out a little bit last year, but that came racing back, primarily as John mentioned earlier, due to the natural resource marketplace in Australia.

And, Mike, are those growth rates, you think, sustainable over the next couple of years?

You see enough visibility in large projects to get you there?

Well, that's a tough question to try to look out too many years.

China still seems to us as having a lot of legs in terms of GDP growth.

Can any market continue to grow, or any business grow, at 25% a year for many years?

That's tough to bet on.

But, we are very bullish on the growth opportunities we see in both of those markets for the foreseeable future.

And, Andrew, the other thing we're doing in terms of seeing the margins increase, is the type of work.

And, as I said on the -- my prepared statement, the looking at the PMCM doing some Design-Build, design turnkey, so we're going to be going into providing services which will demand higher margins.

And ambition is what we're looking at, not only in emerging countries, but also in the developed countries like North America and Europe.

That's great.

John and Mike, could you go over the UK market again in the sense that it almost seems like it's still weakening, it's still getting worse.

Is that a fair statement?

Has it stabilized?

I know there's a private sector and a public sector.

But, overall, your commentary around 18 to 20 more months being challenged seems a little bit more cautious to me.

Well, I was just over there about a week and a half ago to get an assessment, and I spoke with several people in different government agencies.

And, as I mentioned, there was initially a concern that there would be a double dip, but they feel that that's not going to happen, because the government itself is starting to spend some money on infrastructure programs.

They're continuing with Crossrail, which is a major project we're working on, the new subway line, which is one of the biggest civil jobs since the CHUNNEL.

They're looking at the water market which has expanded, and as a matter of fact, when we look at the different winds that we have in the UK, we're a little bit ahead of what our plan was when we put it together.

It's still a tough market though.

There's a lot of competition.

We're faring better than most of our competition.

And, you know but it's not going to be over for another 18 months, 18 to 24 months.

But, the good news is that it shouldn't be getting worse.

It should gradually be getting better, and that's what we're positioning ourselves for.

Okay.

That's fair, John.

One more quick one for me.

The PTS margin in the quarter, again, I cut out for a second so I don't know if anyone asked this.

They were a little weaker, but, is that really, seasonally, 1Q always has weak margins.

Is that what we're dealing with here?

Was there something else going on?

Or just sort of lumpiness?

It's right in line with our seasonality, Andy.

If you look at Q1 of 2010, we're up nine basis points over Q1 of 2010.

So a slight increase to 2010.

But, comparing it to Q4 is not a good comparison.

Q4 is always our strongest quarter of the year, and Q1 is our weakest quarter of the year.

Q1 a couple of big holidays in there.

You've got summer vacation for the southern hemisphere.

You add all those in, it's clearly in line with our expectations.

That's fair.

That's what I thought.

Thank you.

Okay.

Take care.

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

Please proceed.

Good morning.

Good morning.

I wonder if you could talk about the intangible amortization decline.

I think, if I could check my numbers, it went from $73 million from last quarter to $38 million this quarter for 2011.

Could you give a little explanation on why those allocations drove the reduction?

Yes, sure.

I think, as you know, at the time we do an acquisition, we are estimating the amortization expense based on some benchmarks that we have historically used.

And, it's not until after we close the acquisition we are then required to go in and do a deep analysis of all the intangible assets, including the backlog, scrubbing the backlog, looking at both the nature of the backlog and, more importantly, the duration of the backlog, and some of the businesses that we acquired in the past couple quarters had longer duration projects.

The other item that has a big impact is with acquisitions such as McNeil, where we are acquiring a work force that has a very high proportion of employees that have top secret government clearances, and the auditors require us to ascribe a much higher value to the installed work force in place, which, of course, then has an impact on the allocation of the other intangible values to the backlog.

And, so, when you factor all those in and all that analysis is done after the acquisition, or months after the acquisition, you find a much lower amortization.

Got it.

That's what drove that number.

You mentioned 300 leases expiring over the next, I think, three years maybe?

Yes.

How are those set to expire?

Is it ratably over the three years, or are there more dollars skewed to any one of those years?

I don't have the weighting and the time phasing off the top of my head.

I'd have to get back to you on that.

Okay.

And, then, is the domestic PTS business declining organically year-over-year?

I guess I'll start there.

It would be flat year-over-year.

Okay.

And, then, you mentioned you're growing organically in Latin America.

Is the pace of that expansion immaterial to the business currently?

I'm assuming it is, and I guess I'm just wondering what might accelerate growth plans via acquisition there?

It's definitely immaterial.

We don't have a major presence there.

We do work there, we have several hundred people.

But, going forward, we'll grow our position after an acquisition or two.

And, are you any closer to finding targets there?

Yes, we're closer.

But, it's baby steps.

Okay?

We're spending a good amount of time there.

Okay.

Thank you.

Our next question comes from the line of Avi Fisher with BMO Capital Markets.

Please proceed.

Good morning.

Good morning.

A few quick bookkeeping questions.

What was the amortization in the quarter?

And, what was the depreciation?

Amortization was $11million and depreciation was $18 million.

And, did you have an initial depreciation forecast?

Because you're putting it in this quarter.

I'm sorry?

You're forecasting $73 million in depreciation.

You didn't have a guidance for depreciation last quarter.

Has that changed at all?

The depreciation number expectation?

No, not materially.

The reason we put it in is, we were hearing some confusion from some of the analysts on what was in the D and what was in the A.

And, so, we thought we would just give a little more information to avoid that confusion going forward.

And, following up Steve's question, when I see a lower amortization number, I think, basically, lower profit and acquired backlog.

I think that's what you said.

Are there any unprofitable projects in the acquired backlog?

That's not what I said in my previous explanation.

It's the duration of the backlog.

So, if you are buying long-lived backlog, you will stretch out your amortization over a longer period of time.

If you're buying short lived backlog, you will accelerate the timing of that amortization.

So, those two items, that's just a matter of timing of the amortization.

It doesn't change the actual aggregate number.

On the workplace in force issue, it doesn't have anything to do with the profitability of the acquired business.

What it has to do with, the allocation of your purchase price to the different intangible assets, and the amount that's left over for goodwill.

And, with respect to any lost projects, that is not what's driving it either.

Because under the purchase accounting, if you have any loss projects that you acquire, or any outside game projects, those excess losses or gains go through purchase accounting.

That is not the right conclusion.

So, should we see a -- normally the slope of the amortization is pretty fast.

Should it be a little lower because of the longer duration in backlog?

That's exactly the right conclusion.

With respect to the first explanation of the contract duration.

With respect to the workplace in force, you would see an overall lower number of amortization.

That affects the aggregate amount but not the slope.

On the first one, the aggregate amount would be the same, but the slope would be less steep.

Got it.

And, on the acquired businesses, actually, your organic growth was much higher than I had expected.

Are your -- are the acquired businesses performing what you expected to?

Is there a lot of room for improvement?

Can you give us a little sense of what's happening at the Davis Langdon and McNeil?

Our acquired businesses fall into three broad categories, and the way to think about it is the businesses that we acquired in the federal government space are performing very well as you would expect from that space.

And, the rest of our business is performing in that space.

The ones in the private sector facilities market are starting to see signs of improvement.

We bought into that market at the bottom of the cycle, and we're starting to see the uptick.

As John talked about earlier, projects like the Revel Casino, where we're seeing capital come back to that market.

And, the businesses that we acquired that have exposure to Europe are challenged consistent with the rest of our business in that geography.

And, what about when you have more than any other EMC exposure to North Africa, specifically Libya.

Considering events that are going on in North Africa, can you give us a little color about what's happening in the Libyan business?

Clearly, there's a concern in North Africa, as well as the Middle East, and all the countries that they need to move forward in terms of providing jobs for, say, their -- the younger people.

In Libya, for instance, program that we're working on, they're moving ahead aggressively to have us bring on a couple of hundred young Libyan engineers as part of the training program.

So, they're very proactive in addressing some of the concerns that we heard about in Egypt.

And, to take some force corrections.

We feel confident that what the steps that are taken by the government in Libya are going to be both beneficial for Libya, as well as beneficial for the project that AECOM is on.

Okay.

And, I always ask this every quarter.

I look at backlog -- I like to look at it only on a contracted basis.

I wondered if you could break out what was acquired backlog on the PTS and MMS contracted?

So, acquired -- in aggregate

Per segment.

Per segment?

If you have it.

Just give me a minute here.

The aggregate contracted acquired backlog was $2.3 billion year-over-year.

And $2.2 billion is PTS and $90 million is MSS.

Got it.

And, just, quickly, you talked about the military intelligence business.

There have been -- insourcing is a new trend in government, particularly of inherently governmental activities.

Construction, transportation, logistics is obviously non-inherently governmental.

Is there any concerns that military intelligence would be seen as inherently governmental and, therefore, insourced going forward?

Just recently, I think it was a week ago, there was a communication came out that said that the US government is going to do away with insourcing because it became too expensive.

So, the trend is now to continue the cost that they had and not think about advancing insourcing.

I guess it depends on the day of the week.

Exactly.

The key as we often said, is much more expensive for them to do that.

Now, clearly, the security and intelligence of business is one that's growing significantly, as you can imagine, because of the world events.

On the transportation side, Ray LaHood is saying now that the stars may align for, potentially, a summertime reauthorization of the highway bill.

Obviously, that's up in the air.

But, if that were to occur, would you see any immediate benefit from that?

Or how long would it take to see any benefit to your US transportation business, if there is a reauthorization of the highway bill?

Because of the extensions, it puts limitations on many of our clients, in terms of who are in the transit business.

Because it doesn't give them visibility.

They need visibility over the next several years to, in terms of funding, if they want to proceed with some of these transit projects, which cost these days in the billions of dollars.

If-- and hopefully it does occur -- that they get the reauthorization done by the middle of the summer, we would see a pretty quick effect, in terms of these transit agencies which wanted to go forward with some of these projects but did not have the visibility.

They would be now in a position to go forward and start these projects up, which they have put on hold for the last 18 months.

Okay.

So, it would be a plus.

Okay.

Good, thank you for taking my questions.

Appreciate the color.

Our next question comes from the line of Joseph Foresi with Janney Montgomery Scott.

Please proceed.

Hi, gentlemen.

I might have missed this.

I think it was asked earlier in the call.

What was your original organic growth rate built into guidance?

And, has that changed at all?

We did not have an organic growth rate, at least we didn't forecast an organic growth rate built into that.

I think it's safe to say that the results that we had in Q1 were somewhat in line, maybe a little better than we had expected.

Okay.

A little better.

And, on the tax rate.

Looks like that adds $0.04 or $0.05 to EPS.

Is that about accurate on the tax rate change for what you're looking at?

It's really $0.03.

There's a couple of different pieces to that.

Unfortunately, now they require, up in the minority interest line, they require us to put that in net of tax.

So, it distorts your overall tax rate by one percentage point.

The real answer is the extension of the R&D tax credit benefit, as well as a little higher growth in geographies that have a lower tax rate like Hong Kong for instance, gave us exactly a $0.03 benefit in Q1.

In Q1.

And depreciation and amortization, that dropped by $30 some-odd million.

Maybe you can give us a rough idea of what you're expecting that impact on EPS to be throughout the year?

Well, I think you could probably do the math on $30 million, right?

But, I did do the math.

So, I guess I'm curious, with the tax rate giving you $0.03 this quarter, you raised guidance by about $0.05, but it looks like with that depreciation schedule coming down, that there's potentially more up side.

And, then, you also said that organic growth is potentially getting better.

So, I'm just curious as to how we derived present guidance.

Should we view that as being conservative, or how should we look at that, given those three factors?

Listen, we're really happy with the organic growth rate that we saw in Q1.

It's the highest organic growth rate we've seen since Q2 of FY 2009.

We're happy with the backlog moving up.

We had a 5% sequential increase in backlog, 3% of it was organic.

So, very nice momentum there.

So, we're happy with all the signs we're seeing.

The bottom line is one quarter does not make a full year.

And, we have -- I don't think we've ever increased our guidance in Q1, but we did this time.

We moved it up a little bit.

We feel very confident about the year.

We're feeling better and better with every day that goes by.

But, we're not ready to declare victory just yet.

And, your assessment of it being conservative guidance, I think that's accurate.

And, that's where we like to be on guidance.

But, the depreciation alone, is that spread out?

How should we think about that?

That alone should obviously add up side if the tax rate accounts for $0.03 of the $0.05?

The amortization is spread out over a number of quarters.

Okay.

Then, lastly, on the on the demand environment in general, I was wondering if you could just update us.

Has been any change in growth projections for North America given what you've been talking about today on the call, or the emerging markets?

Have those been revised up, or have they been held constant with the original expectations?

We think North America, we're constant in saying that the growth projections over the next period of time is going to be flat.

The growth projections for Asia and Australia remain constant.

We have high numbers now of 20%, 23%.

I think the opportunities for us for some growth is in leveraging our new presence in South Africa, as well as the African countries where we have, up until now, we really didn't have a big play there.

Now, we have the presence in South Africa which we could leverage all our markets.

And, then we're looking at Latin America.

We can secure some acquisitions over the next period of time, short period of time.

That'll be clearly a shot in the arm for us in terms of growth.

So, the one shot I showed up there with the markets are, they're all our key markets, end marks, transportation, facilities, water, environment, power and energy, are all strong.

And when we look at our share, it's relatively small compared to the size of the market.

And, we've always been in the process of taking market share and we're looking to do that as we go forward.

Thank you.

Thank you.

Our next question comes from the line of David Wells with Thompson Research Group.

Please proceed.

Hi, good morning, everyone.

Hi.

First off, just trying to get a sense of how you're thinking about the incremental margins of the business going forward?

And given your expectations for seeing economies of scale.

And historically, it looks like the business has seen the low-double digit type incrementals.

Can you help us quantify out some of the other dynamics that you talked about, be it a shift in mix of services?

What does that translate into on an incremental basis?

I think as clear as we can be about that, is as we said earlier, that we expect EBITDA margins off net service revenue to grow to 12% over the next four years, and there's a lot of moving parts in there as I mentioned earlier.

And, it's very difficult for us to try to quantify exactly of that couple of percentage point uptick, what pieces are going to be driven by a shift in the type of services, and which will be from reducing costs or other synergies.

So, I mean, I don't think it would be -- we'd be just guessing at this point to try to define the exact proportions of that increase over the next four years.

Okay.

And, if I were to look at your base, the operations currently, and think about head count over that period to that increased EBITDA target.

Do you feel like, is there adequate bandwidth with the headcount that's in place where you effectively have staff that's underutilized, where you can see meaningful top line moves without having to bring on a lot of additional head count?

Or, maybe what some of the staffing implications associated with those targets?

It's different in each geography.

In Asia, we need to bring on 1500 people immediately.

In the UK, we have excess in terms of utilization, and we're making adjustments there.

So we have room to grow.

In the United States, there's also some room that we have to grow, in terms of utilization, so, we can increased utilization.

When you look at our mix, the hot, hot markets like the Asia and Australia, clearly, we don't have enough people and we're in the process of bringing them on board.

Places like UK, the utilization is lower than we want, and we're looking to shift work and shift people into different locations.

So, it's the way we manage our business and try to manage our resources.

If we were just in one place and probably a very simple answer if we were just located in the United States, it would be one answer.

But since we're located in 100 different countries and each one has something different going on, it changes.

Eastern Europe is a hot market, and we're looking to hire people there.

That's helpful, I appreciate that.

Lastly, given the rule change that the house adopted at the start of the session which basically changes the highway trust fund expenditures to match the income.

If you could talk about what the potential impact of that would be on your US transportation business, and do you anticipate that being a meaningful head wind here as we go into the construction season this spring?

I don't think that's going to have an appreciable effect.

I really don't.

I think that there's going to be, again, it's another hurdle that we have to jump over.

But, there's a real need for transportation infrastructure improvements and both the change over is that.

And, if you heard Obama yesterday at the Chamber, he was encouraging private monies to be mobilized to invest in public private partnerships.

So, I think as we go forward, and if we can get the reauthorization bill done, that will be a shot in the arm.

But, still, there's a significant amount of, a significant amount of funding available.

And, also, I don't, I don't know if that bill -- or measure will be passed.

It still has to be approved by the Senate and the President.

And, the way I'm reading things, I don't think -- I don't know.

I don't mean to be reading tea leaves, here.

I don't know if the President is going to put another restraint on funding for projects because it's so closely tied to employment.

Okay.

That's helpful.

Thanks for taking my questions.

Sure.

Our next question comes from the line of Tahira Afzal with KeyBanc.

Please proceed.

Good afternoon, gentlemen.

And, congratulations, nice quarter.

Great, thank you.

Most of my questions have been answered.

I guess I had a couple of more questions.

Number one, if you look at Latin America, a lot of the domestic infrastructure companies are doing very, very well right now.

You talked a bit about that in your prepared commentary as being a potential market for you.

Do you feel you've missed out on some of the ramp up over there?

How do you look at the opportunities there in terms of close rate versus some of your faster growing markets?

Would I like to have been down there a year and a half ago, yes, but I don't think we missed the boat.

There's still a significant amount of opportunities.

Organically, teamed with local companies, we are in a good position to compete for the infrastructure projects as well as the sports and recreation projects.

We're looking for acquisitions in terms of the mining and energy.

So, there is still a significant amount of opportunity in countries like Brazil, for instance, which probably is the biggest catalyst to the region.

Got it.

Okay.

And, the second question is in regards to the competitive dynamics in some of your markets on the emerging markets side, such as the Middle East, and China and Australia.

Some of your peers have been more actively talking about aggressively pursuing opportunities there, making more inroads, gaining some market share.

Would love to get a sense from you whether the amount and extent of activity that's really indicated there is attracting more competition as well?

Okay.

But, let me say I don't know if I agree with what your stating that some of our competitors are going to come in and do certain things.

And, they may, and there truly is a significant amount of competition.

Putting in places like the Middle East, AECOM has a major position.

Major position in the UAE, major position in Qatar.

We're making significant investments in both places as well as in Saudi Arabia.

So, we're not holding back, in terms of our aggressive style in pursuing work in the Middle East or in North Africa.

In China and Hong Kong, we have about 4000 people.

I think we're probably one of the more significant Western companies in those regions.

Australia, we have significant market share, and we've been there like 35 years, and it's still remains a growing market for us.

So, the areas that we're looking to also make investments is in India as well as southeast Asia.

And, so, we're very aggressive.

And, I'm not shy about what we're doing there.

And I think -- we don't have any feeling that we're missing the boat, or not doing everything that's possible to capitalize on or exploit those markets.

Got it.

Thank you.

That's all I have.

Thank you.

Our next question comes from the line of Andy Whitman with Robert W.

Baird.

Please proceed.

Good morning, guys.

Thanks for taking my question.

I guess I wanted to try one more time on the guidance.

I apologize, I know this was kind of touched on.

How do we reconcile the $35 million decrease in amortization expense, which is about $0.20 per share?

With a guidance increase of only $0.05, given that the outlook basically hasn't changed or has even improved.

I guess I'm not really understanding that.

Could you just give me a little more clarity on that?

Yes, I don't know how to reconcile it.

We're not going to give guidance within guidance within guidance.

I think we feel very confident in our guidance range which implies -- the midpoint of the range implies a 12% increase in EPS year-over-year.

I'm sorry.

On a cash EPS basis, it's 16%.

It's 12% of the midpoint of the range.

So, we feel pretty good about that guidance.

And we feel good about what we saw this quarter.

But, as I said earlier, one quarter doesn't make a year.

And, we don't want to get too far ahead of ourselves.

And, I don't know what else I can say about the guidance that we've given.

Fair enough.

And on the amortization, then, just given there's a bit of a change for this year's outlook, can you give us a little bit more clarity as to what that -- I know you talked about how we expect to taper off a little bit more given amortization times.

Can you give us a little bit more guidance as to what the decreased amortization expense could be for next year given we've had a change in view?

I haven't started thinking about guidance for FY 2012 yet given I'm in Q1 of FY 2011.

I'd be guessing at that.

I don't have that number at my fingertips for amortization in FY 2012.

Okay.

And, then, just on curious as to any forex contribution to the organic revenue number we saw in the quarter or EPS.

Do you have that handy by any chance?

Yes, I do, it's about 1.0% organic, 1.0% on top of the organic growth.

Organic growth was 7.3%, total organic growth.

When I adjust that for the foreign exchange effect, I get the 5.9%.

So, it had a 1.4% benefit to our constant currency organic growth.

So, again, NSR constant currency organic growth was 5.9%.

Total organic growth 7.3%.

Okay.

That's helpful.

And, just final question, on the backlog, obviously, very strong growth in contracted, where it takes a little bit of a step back.

Is that just stuff moving through the pipeline?

Is it best to look at the average, basically the total of backlog growth to really understand what's going on there?

Or is there something else happening inside that?

I think it's just helpful to look at total backlog.

All of it is work that we have been awarded by our clients.

Some of it is in various stages of the final contract documentation.

I think for those of you that have been following our company for a while, you know that when stuff comes in to our awarded backlog, it has a high 90% -plus probability of moving into awarded.

We very rarely have something fall out of awarded backlog, or not move into contracted backlog.

We look at the aggregate of the total backlog, and that's what gives us the confidence in the outlook.

Perfect, thank you.

Our next question comes from the line of Jason Hope with Voyant Advisers.

Please proceed.

Thanks for taking my questions, guys.

Sure.

A couple of them.

Just wondering what the comparable -- and maybe this is kind of a rehash from what you guys were just talking about, but the comparable revenue number to that 1916 adjusted accounts receivable with that backs out.

Any contribution from acquisitions?

The compa -- I'm not sure.

Are you asking -- are you -- I'm not sure of the question?

Can you rephrase that?

Yes, just doing the same calculation you did to adjust the accounts receivable from the 2316 to the 1916.

Looks like you backed out all acquired or all receivables from your acquisitions in the last 12 months.

If you back out all revenue from the same acquisitions, what would be the comparable Q1 revenue number?

The Q1 -- are your talking organic gross revenue?

Yes.

$1.55 billion.

Okay.

And, you have -- can you split that 1916 receivables between billed and unbilled?

I can't do it on the fly here.

We have that number.

That's in the detailed management of our business.

We could clearly look at that.

What you're getting at, is you're trying to extrapolate to the increase in AR versus the increase in revenue.

That's-- is that the underlying question?

I think the takeaway point you ought to be thinking about, is if we back out the acquired account receivable balance, the organic growth in our account receivable balance is 7.0% which is almost exactly the same 7.0% organic growth rate in revenue.

So, in other words, our accounts receivable balance is growing at the same rate as our revenue organically, which you'll see by the DSOs being quite similar.

They went from 89 days to 90 days in sequential quarters.

So, that would make sense if you're seeing the same growth in organic receivables as organic revenue.

Is it fair to assume that the growth is equal billed and unbilled?

Or one growing more than the other?

Again, I don't have that number in my finger tips.

But, it's probably about the same, sure.

One final question.

You guys' I think your Q probably comes out tomorrow.

So, the review is probably done.

I was wondering why you don't give full complete financial statements in your earnings press release?

The Q, we'll be sending it out tomorrow.

We send it out as soon as it's ready, and gets through its final reviews.

And, we'll be ready to press send in less than 24 hours.

We send it out as soon as it's available and reviewed.

There's, of course, a lot more detail in that than there is in the press release.

Yes.

I'm wondering why you don't include balance sheet cash flow complete in the press release.

It comes out within 24 hours.

So, we send it out as soon as it's ready.

Okay.

It's just not ready yet then.

That's the answer.

Thank you.

Sure.

And, we have a follow-up question from Avi Fisher BMO Capital Markets.

Please proceed.

Hi, thanks.

Just two quick follow-ups.

The acquired revenues in the quarter, it looked like 150 PTS, about 30 million MSS.

Should we think about that -- should we annualize that?

Is that what we should be thinking about for acquired revenues?

Does it grow for the rest of the year?

Everything -- if you've got seasonality, that we mentioned earlier, you've got -- and you have at least one of the acquisitions happened, RSW happened in December.

So, you don't have the full quarter in there.

So, it would be tough to annualize that.

So, it'll get better, based on the seasonality, this being the weakest quarter.

And, then if I back out acquired backlog, particularly in PTS, the bookings were a bit weaker than I anticipated.

And, the question is, are there any large projects that you expect to book soon?

Are clients sitting on their hands because of the funding environment?

Is it just a function of timing?

Just wondered if you could comment on that.

I think it's timing.

In the first quarter, some of these acquisitions just came on.

Since December, we won several major projects.

A couple of them I mentioned today.

So, you know, it's the story that keeps developing.

And, you'll have a better visibility at the end of the second quarter, in terms of how the backlog is developing.

I wasn't sure of the comment about how it doesn't look good.

Organically, our backlog grew sequentially 3.0%.

It was up 5.0% total.

When I back out the acquisitive, it was 3% organic growth in backlog in sequential quarters.

I calculate bookings by prior backlog plus -- what am I adding in?

Gross revenues, less acquired, less current period backlog, less acquired backlog.

So, I get [$644 million] now maybe I should be adding in -- I'm trying to exclude the acquired gross revenues, maybe I should be adding --

Maybe we should talking off line about how we're looking at it to make sure we're looking at it the same way, or at least you understand how we're looking at it.

Okay.

Thanks very much.

Okay.

And, we have no further questions.

I'd like to turn the call back to John Dionisio.

Okay, first of all, I'd like to thank everyone for the interest you had in calling in today and joining our conference call.

As always, please, if we haven't answered all your questions and you need additional information, please call.

And, I want to again thank you and I'll speak to you next quarter.

Take care.

Ladies and gentlemen, that does conclude today's conference.

Thank you for your participation, you may now disconnect.

Have a great day.