AECOM (ACM) 2015 Q1 法說會逐字稿

Good morning and welcome to the AECOM first-quarter 2015 earnings conference call.

I would like to inform all participants this call is being recorded at the request of AECOM.

This broadcast is the copyrighted property of AECOM.

Any rebroadcast of this information in whole or part without the prior written permission of AECOM is prohibited.

As a reminder, AECOM is also simulcasting this presentation with slides at the investors section at www.AECOM.com.

(Operator Instructions).

I would like to turn the call over to Will Gabrielski, Vice President, Investor Relations.

Thank you, operator.

Before reviewing our fiscal 2015 first-quarter results, I would like to direct you to our safe harbor statement on page 2 of today's presentation materials.

Today's discussion contains forward-looking statements based on the environment as we currently see it and includes risks and uncertainties.

Actual results may differ significantly from those projected in today's forward-looking statements.

Please refer to our press release, page 2 of our earnings presentation, or our reports filed with the SEC for more information on the risk factors that could cause actual results to differ materially from projections.

We are using certain non-GAAP financial measures as references in the presentation.

The appropriate GAAP financial reconciliations are incorporated into our press release, which is posted on our website.

Please also note that all percentages refer to year-over-year progress except where otherwise noted.

In addition, our discussion of financial results will exclude the impact of acquisition- and integration-related expenses, including transaction costs related to financing, reported, and interest expense and the amortization of intangible assets unless otherwise noted.

Please turn to slide 3.

Beginning today's presentation is Mike Burke, Chief Executive Officer.

Mike?

Thank you, Will.

Welcome, everyone, to our fiscal first-quarter earnings call.

Joining me today is Steve Kadenacy, President and Chief Financial Officer.

I will begin with an overview of AECOM's results for the quarter.

Then, Steve will review our financial performance in greater detail and provide specifics on our full-year outlook.

Finally, I will conclude with additional remarks on the trends across our diverse business.

Please turn to slide 4.

In July 2014, we announced the agreement to bring AECOM and URS together, marking the largest combination in the sector's history.

Now, four months removed from the closing of that transaction, AECOM is closer than ever to fulfilling our vision to become the world's premier fully integrated infrastructure firm.

Today, we have nearly 100,000 employees in more than 150 countries.

These talented employees are qualified to work anywhere in the industry, but they choose to work at AECOM because we offer a truly differentiated platform and growth opportunity.

As we bring these two large companies together, we remain focused on ensuring smooth day-to-day operations and delivering strong financial performance.

In the first quarter, we had wins of $4.6 billion and a backlog of almost $41 billion.

Adjusted earnings per share were $0.71.

We delivered strong free cash flow, and we began to reduce our debt.

For the full year, we are reiterating our EPS guidance and remain on track with our financial and strategic objectives.

Our diversified model is proving resilient in the face of uneven economic conditions, and we remain optimistic about the trends in many of our end markets.

I will now turn the call over to Steve, who will discuss the quarter's financial performance.

Thanks Mike.

Please turn to slide 5.

Please note that the fiscal first quarter growth rate benefited from the consolidation of 11 weeks of URS financials and the first full quarter of contribution from Hunt Construction.

My comments today speak to the adjusted results unless otherwise noted.

First-quarter revenue was $4.2 billion.

Organic revenue increased over 3% on a constant currency basis, driven by 25% growth in our building construction business and strength in Asia and EMEA.

During the quarter, we successfully closed the financing for the URS transaction and delivered strong cash flow, which I will discuss in a moment.

Please turn to slide 6.

As Mike noted, we ended the first quarter with almost $41 billion in backlog.

The first quarter was the fifth consecutive where we delivered a book to burn ratio that was over 1. Organic backlog increased 18% on a constant currency basis driven by favorable trends in Americas design, Asia, and private construction.

Please turn to slide 7.

First-quarter revenue in our Design and Consulting Services segment was $1.9 billion, which was in line with our expectations.

Excluding the approximately $32 million gain in prior year results due to the consolidation of the AECOM Arabia joint venture, the operating margin was unchanged at 4.4%.

The backlog growth we had in the quarter was broad-based, supporting our view that the trends that drive the Americas design business are improving, and activity in our international markets remains strong.

Please turn to slide 8.

The Construction Services segment delivered another solid quarter that included 25% organic revenue growth.

The operating margin increased by 300 basis points to 4.5%.

This increase is the result of the acquired operations and improvement in our legacy building construction business.

I should also note that margins benefited by nearly 1 percentage point from the timing of revenue and due to a project settlement, neither of which is expected to repeat the second quarter.

We are executing on a large backlog of high-quality projects and expect the organic growth to remain positive.

This should help offset weaker macro trends that are impacting oil and gas spending, underscoring the value of having such a diversified business.

Please turn to slide 9.

In the Management Services segment, revenue was $779 million.

As anticipated, organic revenue declined by 8% from the prior year.

Margins increased from 10.2% last year to 12.3%, and were higher than prior levels, even adjusting for the favorable impact of chemical demilitarization this quarter and excluding the Libya gain in the year-ago period.

Consistent with the guidance that we gave at the start of the year, the chem demil program generated $37 million in operating income in the quarter, and we are on track to achieve our $46 million guidance for the year.

The remainder of this year's chem demil operating income will come from the ongoing work we have at the Pueblo and Bluegrass sites in Kentucky and Colorado, respectively, work that will continue into the next decade as we leverage our industry-leading position in this market.

Please turn to slide 10.

Turning to the balance sheet and capital allocation, we are committed to reducing gross leverage to levels approaching two times EBITDA by the end of 2017.

During the quarter, we generated $253 million of free cash flow.

We deployed this cash to reduce our debt.

The balance on our revolving credit facility was already $350 million lower than at the close of the URS transaction.

We used $235 million for cash for acquisitions and integration-related items in the quarter, including $140 million on financing-related items.

These cash outlays will decline as we move through the year, providing liquidity for additional debt reductions.

Please turn to slide 11.

Now let's turn to our financial guidance.

All figures are adjusted to exclude acquisition- and integrated-related expenses, transaction costs related to financing that are reported in interest expense, and the amortization of intangible assets.

AECOM has a diverse and lower risk business model.

Because of this, we have absorbed the negative impact of lower oil and gas prices and a strong US dollar and are maintaining our EPS guidance of $2.75 to $3.35.

Our guidance includes $110 million of realized synergy savings, interest expense of $220 million, and is based on a 30% tax rate and 151 million shares.

We expect depreciation of approximately $210 million and capital expenditures of approximately $170 million.

We are forecasting amortization of approximately $220 million and we expect approximately $340 million of acquisition- and integration-related expenses.

The majority of increase in our acquisition and integration guidance is from accelerated real estate consolidation expenses.

These expenditures were already contemplated in our overall A&I plan and will result in accelerated synergies in 2016.

Before turning the call back to Mike, I would note that because of the positive impact in the first quarter from chem demil and the other timing items I've already discussed, we expect our quarterly EPS progression to be similar to last year.

I will now turn the call over to Mike for an overview of the operations and end market trends.

Mike?

Thanks, Steve.

Please turn to slide 12.

I will begin by summarizing key trends in our markets and then move into more detailed review of our segments.

Beginning in the US, the private sector remains strong and we are executing a number of major infrastructure projects.

Layer cycle state and local clients are benefiting from improved tax receipts and incremental funding from recent infrastructure bond measures, and activity levels are improving.

The backdrop in the federal market is also better.

The passage of the omnibus bill in December, along with the recently released budget request for fiscal 2016, demonstrate a high level of support for the federal clients we serve.

Internationally, our design business continues to grow, highlighted by the backlog growth in our Asia-Pacific markets and robust infrastructure demand in the UK.

In the Middle East, our business remains on track and we are pursuing some of the largest opportunities we have ever seen in the region.

Let me move on to the segments, beginning with Design and Consulting Services.

The Americas design business performed in line with our expectations.

Our wins were strong and reflected new work from both public and private sector clients.

The dialogue around funding for federal transportation is encouraging, especially the bipartisan support for increasing the federal highway trust fund.

The President's 2016 budget put forth a six-year $478 billion highway and transit plan, which is an 11% increase from prior levels.

There are several options on the table to help increase funding, from raising the gas tax to deploying tax revenue from repatriated corporate profits.

We are increasingly confident in our outlook for the Americas market.

As you know, this is one of AECOM's most meaningful business units and has a high degree of operating leverage once revenue growth resumes.

I will now pivot to our international markets and begin with EMEA.

Activity in the United Kingdom is benefiting from investment in large-scale projects where AECOM is providing program and design management services such as the London Crossrail.

The UK highway agency is making progress towards increasing the involvement of the private sector in its planned GBP15 billion investment to manage and modernize its roads.

AECOM is better positioned today than at any other point in our history to participate in the growth of this market.

In the Middle East, our clients remain committed to the iconic projects that mark the landscape, as evidenced by the $229 billion budget announcement from Saudi Arabia that reflected an increase over 2014 spending.

Our prospects across the region remain bright and our ongoing activities are on track.

Let's move to the Asia-Pacific market, beginning with the operations in Asia.

We delivered another quarter of revenue and backlog growth led by China and Southeast Asia.

GDP growth in the region has slowed, but demographic realities and a push for greater urbanization are driving continued infrastructure growth.

We are also beginning to see private capital into the market in a more meaningful way, and expect public-private partnership opportunities to emerge over time.

The recovery of our operations in Australia progressed in the quarter.

On a constant currency basis, our backlog increased nearly 10% from the prior year.

As you know, the decline in the natural resource industry required us to respond by aggressively restructuring our Australia operations over the past few years.

Market activity remains depressed, but the efficiency and discipline we have built into the business is producing better operating performance.

Moving to Construction Services, private construction remains our strongest market.

And as Steve mentioned, we delivered 25% organic growth in the Construction Services segment.

During the quarter, construction began on the Flushing Commons project in Queens, New York, where we are providing a client with both construction management services and financing through AECOM Capital.

We were also pleased to have executed an amendment to our existing construction management services contract for the construction of World Trade Center Tower 3 in New York.

AECOM continues to be a key partner in the development of the World Trade Center site and, under the new contract, will support construction activities through 2018.

Turning to the oil and gas market, the 30% decline in oil prices since our last earnings call is having varying impacts across the Company.

The 15% of our revenue that is directly exposed to oil and gas CapEx and OpEx is seeing a slowdown, which is having a negative impact on our performance.

We are focused on aligning our own overhead costs and capital spending with the reduction in spending we are seeing from clients.

However, the diversity of our Company is a key advantage when markets are volatile and trends change, and we are seeing new opportunities in markets that benefit from lower oil and gas prices.

For instance, in the power sector, clients facing stricter environmental rules with potential plant retirements are turning to gas power as an alternative.

Within the chemical sector, we are already working on a plant that converts natural gas to ammonia for fertilizer, and we see other opportunities on the horizon in this market that would take advantage of lower domestic energy prices.

These are markets that we can now more fully address due to the skill sets acquired from URS.

Across the Construction Services segment, we remain focused on leveraging our construction capabilities and AECOM's global footprint to pursue larger projects, several of which we hope to be able to announce as the year progresses.

I will finish my comments today on our Management Services business.

AECOM's legacy operations performed well and our results have benefited from the combination.

Our intelligence sector revenue growth helped to partially offset continued declines in overseas contingency work.

The growth we delivered in our equity earnings is a direct result of the combination, and reflects the strength of our diversified operations.

We are equally upbeat about the future.

The President's fiscal 2016 budget request, if enacted, would increase funding for key areas within the Department of Defense and the Department of Energy, including funding to modernize the military as well as ongoing nuclear and environmental remediation work.

We currently have more than $5 billion of bids being evaluated by our national government clients, along with another $3 billion of active pursuits.

And we remain confident in our ability to grow our Management Services backlog over time.

Let me close by saying that we are executing well on our integration plan and that our diverse model is a key advantage in riding out volatility in some of our end markets.

We continue to focus on delivering against our commitments, whether they be synergies, executing on our projects, or our capital allocation strategy.

Operator, we are now ready to open the lines for questions.

(Operator Instructions) Anna Kaminskaya, Bank of America.

Hi, guys.

Good quarter.

Just first, I wanted to touch on the outlook.

Maybe if you look at lower tax rate and interest expense, that may be added about $0.12 to the year.

So where did you take off 4% of growth on your core operating outlook for 2015?

Is it oil and gas, or are you seeing weakness somewhere else?

Yes, Anna, thank you.

As you heard us mention in the comments here, there's really two headwinds there.

One is oil and gas, and the second one is the stronger US dollar is impacting us with a little over 20% of our revenue coming from foreign currencies that are not US dollar denominated.

Okay.

And is it possible to break out that in to two of buckets?

The majority, I would assume, is still oil and gas.

Yes, the majority is oil and gas.

And so what do you forecast for that business?

How much would it be down?

And if I think about it, it does tend to have higher fixed cost component.

Is there a way to look at it from incremental margins, or is that not the right way to look from the volume decline in oil and gas?

We are not prepared to give specific revenue forecasting on the oil and gas business just yet.

But, suffice to say it is a challenged market, not just for us but for the entire sector.

And the past quarter, we've seen a lot of disruption as people are starting to get their heads around the forward price on oil.

And we think we will have more clarity in the coming months as people start locking in on what they really believe the forward oil price will be, and how that will affect their capital expenditures.

But suffice to say, it's clearly our most challenged segment.

But the good news is that only 15% of our revenue comes from the oil and gas sector.

So that's a positive for us and speaks to our diversified business that we have.

And we are also very focused on new opportunities that are being presented to us that will benefit from the lower price of energy, whether that be fertilizer plants, whether it be the automotive industry, or certain pet chem end markets.

Okay, great.

And just wanted to switch quickly to your synergy outlook.

Just given that I guess growth with some of the market is still pretty choppy, how do you see the risk of maybe growth synergies being diluted by pricing pressure were being passed down to the customers to ensure better topline growth?

How should we be thinking about that growth synergies number being converted to your net income?

This is Steve.

Our synergy outlook is pretty robust.

If anything, we are gaining more confidence in it.

We are always in a competitive market, so we are always facing the need to be efficient in our pricing.

Other than in that oil and gas market where Mike is referring, where you're having kind of a macroeconomic change, we're not seeing significant changes to our already competitive markets in other places.

So our expectation is still to drive that to the bottom line on a net basis.

Thank you very much.

Andrew Kaplowitz, Barclays Capital.

Guys, good morning.

It's Alan Fleming in for Andy this morning.

Nice quarter.

Morning.

I wanted to start with a question on your cash flow; a very strong result this quarter.

So Steve, maybe you can talk about how sustainable that level of cash flow is, if there was anything lumpy in there that caused or contributed to the strong performance this quarter.

Yes, I don't think we will do that well every quarter, but we're still very bullish on our overall cash flow situation and our ability to get the leverage ratio down to approaching 2 times debt to EBITDA by 2017.

So we had a great cash quarter.

That was $250 million; that was also impacted, by the way, about $100 million in A&I, so it was actually more robust than that.

But of course, cash in general is lumpy.

The implication in our guidance to get down to approaching 2 times is roughly $2 billion in debt pay down over that three-year period, which would imply somewhere between $600 million and $800 million in cash flow a year, and our expectation is that we will do that.

The reason we put a range on it is that cash, unlike accrual accounting -- if a payment comes in, and one period or one day versus another day, it could flow between quarters and between years.

But on a three-year basis, we are very positive.

Okay.

I appreciate that.

And maybe switching gears, I can push you a little more on your design business.

Your commentary there seems more constructive this quarter.

You were able to grow backlog in your Americas design business.

I think last quarter you had talked about the pipeline of opportunities there and Americas design being up something like 20%, so maybe you can compare how that pipeline looks today versus a couple months ago.

And maybe, Mike, you can talk about your confidence that this business is reaching an inflection point.

Well, listen, we've been on the precipice of an inflection point for a while, it seems like.

But we have had two quarters of very solid backlog growth in that segment, and we are starting to see improving economic conditions across the US as it relates to infrastructure.

And I mentioned in some of my comments, we are seeing increased tax receipts.

We are seeing an increased bond measures at the municipal level.

We're seeing great bipartisan support in Washington for investment in infrastructure.

The economic conditions generally are improving.

And all of that seems to be pointing in the right direction.

I don't want to suggest we are entirely out of the woods yet, though.

The Americas design business has been difficult for a few years now, and two quarters of good wins doesn't make a real strong trend.

But things are pointing in the right direction, and we are seeing macro conditions that should support the opportunities that we seek over the coming year.

So I think -- I would suggest we are somewhat optimistic, but we are cautiously optimistic.

Okay.

I appreciate that.

I'll pass it on, guys.

Tahira Afzal, KeyBanc.

Good morning folks and congratulations on the quarter.

Thank you.

I guess first question, would love to get a sense on -- you provided the details around this past quarter.

You've kept your guidance for the full year pretty wide still.

So I would love to get a sense on, given all the moving parts of the first quarter, what made you decide to keep it fairly wide for this year.

I think, Tahira, there's still the two big uncertainties I mentioned earlier: the oil and gas space and FX.

Still those numbers, just in the past two months, have been bounced around quite a bit.

Oil is off 30% since we had our last earnings call.

FX moved quite harshly against us in the past few weeks alone.

And so, given the volatility around those two big components, we still have -- we still want to keep that range fairly wide.

Got it, okay.

And the second question is really around the macro side.

You mentioned in your prepared commentary about the proposed highway budget, etc., and it does look very promising.

Within that, the biggest category that seems to be introduced is around safety measures, particularly on bridges.

So could you give us a bit of an idea of your exposure currently in the British market domestically, and where you think that could go going forward?

Yes, listen, we are one of the biggest players in that space by a fairly large margin -- highways, bridges, transportation between the legacy AECOM business and the URS business.

We were number one -- AECOM was number one in that business before we joined with URS, so clearly we have a very significant position in that space.

We are very well poised to take advantage of funding coming into that sector.

And there has been a lot of talk about bridge safety for quite some time, and we hope that the bipartisan support that we are seeing in Washington now will put some money behind all the talk we've seen for years in that space.

But we definitely have the right skill sets and expertise to take advantage of any funding that comes to bridge safety.

Got it.

Thank you very much.

Andy Wittmann, Baird.

Hey guys, thanks for taking my questions.

The cash flow was quite impressive.

I wanted to understand a little bit more inside of that, Steve.

Was there a positive or negative effect of the net factoring in addition to the -- did you say it was $100 million of cash restructuring expenses?

The factoring was net $19 million, so it wasn't significant to the overall free cash flow situation.

It was just strong performance by both legacy URS and AECOM.

And then you said I think in the prepared remarks there is -- I think you said $250 million is something and $140 million is something else.

Was that operating?

Can you just clarify what those numbers were again?

Are you talking about acquisition and integration related costs?

I think that's what it was, yes.

So we had a $206 million P&L, $236 million in cash A&I costs during the quarter.

And the bulk of the cash costs were in financing-related, which I mentioned $140 million.

And -- but there were also transaction fees that would boost that number even higher just to close the deal.

So the vast majority of the cash expended was to close the transaction.

Got you.

So we know that there was a big receivable sticking out there from the chem demil contract.

Should we assume that a substantial portion of that was the driver of this quarter's results, or was it something more broad-based with the (multiple speakers) business?

No, I think was under $50 million contribution from chem demil.

Okay, great.

And then Mike, I just wanted to get your thoughts on Sellafield and how that impacted your guidance, if at all.

Was that maybe already contemplated in the initial guidance that you gave us?

Was there an impact in the backlog in the reported quarter, or has it been pulled out already?

Or is that potentially something that the future -- we have to be expecting?

Your thoughts on that would be helpful.

Sure.

It has not impacted our outlook for FY 2015.

Just by way of background for people that may not be fully up to speed on that, the UK government has decided to change their procurement model for the Sellafield site.

We have about $17 million of operating income in FY 2015 from that project.

We fully expect to earn all of that in FY 2015.

We still do not know how long it will take to transition.

At a minimum, we have 15 more months working on that project at that operating income level that I mentioned.

It is my best estimate that it will take longer than 15 months to transition that project.

And then when it transitions, the UK government will still need significant -- very significant support from contractors like ourselves.

So we fully expect to continue to have a very meaningful role and a profitable role on the Sellafield site, regardless of the change in the procurement methodology that the UK government will use.

With regard to your question on backlog, that has already been taken out of backlog for -- anything that would happen in the future is already taken out of backlog.

So we have correctly stated our backlog as of the 12/31 number to account for the current expectations during the transition period.

And there is nothing in the backlog beyond that period.

That's very helpful.

Thank you, Mike.

Maybe just one final question.

I know it's been asked a few times since the announcement of the URS deal, but I figured -- give me one more shot here as you have closed the deal a little bit longer, which is just how should investors be thinking about the margins by segment?

Are you prepared to give ranges as to what you think is realistic there?

Or, maybe how does this quarter's results compare to what you would expect over the longer-term?

By segment, we are not quite ready to comment and give guidance out yet, as we pull our arms around this and also combine the businesses and drive the integration through, which will ultimately drive synergies.

On a combined basis, all segments, we are driving to get to the high 6% range on gross revenue, which would equate to that 12% legacy AECOM guidance of -- on NSR.

So I think over time, we will give you guys more guidance within the segments and as we drive the integration.

But, given as much as we have going on and the moving pieces, we are not prepared to do that yet.

But we will.

All right, that makes sense.

Thanks guys.

John Rogers, DA Davidson.

Good morning.

Mike, Steve, just going back to the Construction Services segment for a second, can you give us a sense of how much of that work right now, or backlog, is private versus public?

John, I don't know that number exactly off the top of my head.

But the very significant majority of it, I'm going to estimate about 70% of it is private sector, and about 30% public.

Okay.

But the growth now is coming more so out of the private side?

Is that right?

Yes.

No question the very, very strong segment there is the private sector.

Tall vertical construction in the major metropolitan areas is stronger than it's been since 2006 or 2007.

Okay.

And is there any opportunities or expectation that significant project closeouts or timing issues that we should be aware of this year?

No, nothing that stands out.

Okay, okay, great.

Thank you.

Chase Jacobson, William Blair.

First, on the synergies and the acquisition costs, I know that you maintained the outlook for the expected synergies for the year.

I was wondering if you could give us any color on what the cost synergies were in the quarter.

And then as it relates to the higher acquisition and integration costs, Steve, I know you mentioned that it had to do with accelerated real estate consolidation.

How much of that has already been recognized and how much of that is expected in the future?

Just any color you could give on those.

Those are good questions, Chase.

The synergies in the quarter were immaterial largely because, in the first few weeks of closing the transaction, we were in the planning phase for integration and we had a formal launch day at the beginning of this quarter.

So, many of the actions that we are taking or occurring now will ramp up to the $110 million of realized synergies that we have guided to.

In terms of the accelerated real estate costs, those were contemplated in our overall real estate plan that we've already commited to in the $275 million.

But we weren't contemplating doing certain consolidations until 2016.

And we have realized, based on our real estate team's performance, that we are able to accelerate those.

And those will therefore drive some of the $275 million sooner than we would've experienced over the three-year period.

We're going to get it in 2016.

Okay, that's helpful.

And then, just another question to follow up here as we try to figure out the new segments, and we look at organic growth for the year.

I guess there was 3% constant currency for the quarter.

How does -- how do you expect organic revenue growth to progress through the year relative to the first quarter?

So is the 3% sustainable and should we -- I think I know the answer, but how is the mix between the segments going to change relative to the first quarter as we go out through the year?

I don't know that we are prepared to get specific on organic growth by segment, but we have had two quarters in a row now of organic growth after both URS and AECOM having previous two years of significant challenges to grow.

So I don't want to be -- don't want to commit specifically to organic growth by quarter for the rest the year, but backlog would suggest that we have -- that we are winning the kind of work that would contribute ultimately to organic growth.

Clearly, the strongest growth segment is Construction Services right now, with a significant headwind on the oil and gas side.

Our growth in Asia is still significant, but we all know that Asia -- the economic conditions have slowed just a bit.

We are seeing growth in Europe and the Middle East.

And the big engine is growth in Americas design.

And that's -- as we mentioned earlier, that is an encouraging market.

We feel like we are on the precipice of growth there.

But I'm not willing to pound my fist on the table and say the US design business is about to take off.

But that's what we are very focused on.

Okay, very helpful, thank you.

Jamie Cook, Credit Suisse.

I guess just two quick follow questions.

One, with regard to URS, obviously people have brought up Flint and Sellafield.

I guess, Mike, can you talk about are there any areas of surprise potentially on the upside that you are seeing within URS, whether parts of the business are growing faster on a core basis, on a synergistic basis, on a -- are there more cost opportunities or cash flow there?

Can you talk about sort of the potential offsets to Flint and Sellafield?

And then I guess my follow-up question is are there any other up-and-coming contracts that you will be bidding on over the next 12 months to 18 months with the UK that could potentially help offset some of Sellafield?

Thanks.

Sure.

Let me take the last question first is, we're bidding on a whole host of very interesting opportunities in the UK that would offset Sellafield.

We have been very enthusiastic about the direction of the UK government to outsource to the private sector in areas other than Sellafield.

So Sellafield is a changing procurement model.

But we are seeing certainly on the Ministry of Defense side, as I think you know, we acquired a fairly significant contract with the Ministry of Defense through the URS transaction.

And I have spent time there personally with the MOD and the DOE, and there's still a lot of opportunity in UK for outsourcing that could offset that.

But going back to your first question, I wouldn't say there is any material positive surprises that we've seen from URS that I would call out.

What I can say is that we are very enthusiastic about the opportunities that are in front of us due to the new capabilities that we acquired.

And in particular, if you look at the industrial sector, when I mentioned earlier -- although we've got headwinds on the oil and gas side, there are a whole host of opportunities that will be driven by lower energy prices.

And through the URS transaction, we acquired numerous capabilities in the industrial sector, the petrochemical sector, the fertilizer sector, the automotive sector, all of which are creating quite a bit of demand right now.

We also are enthusiastic about the upside in opportunities from using the industrial capability skill set from URS to deliver through our global platform.

So right now, we have four very significant projects in Southeast Asia in the industrial sector, where we are bidding on projects for some of our global multinational clients, the big five oil companies and other multinationals that want us to do work for them in that region where we have a geographic platform.

And URS brought us those expertise.

So the pleasant surprises are the synergy opportunities to take the skill sets that we gathered from the URS transaction and bring them into our global markets.

We've had the URS teams from federal government services in Australia pursuing opportunities for the Australian government, again, because we had a big platform and relationships there.

So those are the opportunities that are most exciting for us as we get through the integration phase here and quickly now turn our attention to the revenue synergies as we capture the cost-saving synergies.

Alrighty, thanks, I will get back in queue.

We have no further questions at this time.

Okay.

All right, so if there's no further questions, thank you operator.

Let me close by saying that today, we can confidently say our addressable market opportunity has never been bigger.

Our customer engagement has never been higher, and our passion to deliver on the vision to be the leading provider of integrated infrastructure services globally has never been greater.

We look forward to all the opportunities in front of us and we look forward to speaking with you again in three months.

Have a great day.

Thank you.

Ladies and gentlemen, this concludes today's conference.

Thank you for participating.

You may now disconnect.