AECOM Technology Corporation (ACM)
F4Q08 Earnings Call
November 12, 2008, 11:00 am ET
John M. Dionisio - President and Chief Executive Officer
Michael S. Burke - Chief Financial Officer and Chief Corporate Officer
Paul J. Gennaro - Vice President Investor Relation
Steven Fisher - UBS Securities
Avi Fisher - BMO Capital Markets
John Rogers - D. A. Davidson
Joseph Foresi - Janney Montgomery Scott
Tom Carvey - Polen Capital Management
Masco - Colony Group
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I will now turn the conference over to Mr. Paul Gennaro, Vice President of Investor Relations; please go ahead, sir.
Thank you Michael and welcome everyone to AECOM’s fourth quarter and fiscal 2008 earnings conference call. Please go 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 on the specific risk factors that could cause actual results to differ materially. As we begin our call, let me remind you of some of the important information about our earnings that are posted on the Investor website, www.investors.aecom.com.
First, we posted our earnings release and updated financial statements on the site for anyone who still needs access. Second, a replay of today’s call will be posted there at around noon time Eastern and will remain there for approximately two weeks. Please go to next slide three and lastly, since we are using some non-GAAP financial measures and references, the appropriate GAAP financial reconciliations are posted on our website as well.
Presenting today will be John M. Dioniso, President and Chief Executive Officer; and Michael S. Burke, Executive Vice President, Chief Corporate Officer and Chief Financial Officer. John, please go ahead.
Thank you, Paul. Good morning everyone and welcome to AECOM’s fourth quarter and fiscal year end earnings call. To begin our call, Mike will take you through our 2008 financial results including the review of our balance sheet, liquidity position and backlog. We’ll then wrap up with a discussion of our 2009 guidance.
Following Mike, I will discuss our strategic priorities and action planes as we enter 2009 including the business trends we are seeing and why AECOM is well position for success in the current economic environment. We will then open the call up to your question.
Now, I’d like to turn the call over to Mike. Mike, go ahead.
Thank you, John. Please turn to slide five. First of all we are please with our strong fourth quarter results and our continuing momentum in this challenging business environment. I’ll provide more details on our fourth quarter performance in a moment, but I will first highlight our key performance metrics, all of which were significantly of in the fourth quarter.
Net income from continuing operations was $42.4 million, up 44% year-over-year. Earnings per share from continuing operations were $0.40 per share, up 38% year-over-year. Backlog increased 43% to $8.6 billion and we close the quarter with $271 million in cash and marketable securities. Please turn to the next slide.
During the fourth quarter we continue to generate solid top line growth and we increased our gross revenue by 46% to a recorded $1.6 billion. Our net service revenue was up 51% to $1 billion. As you know net service revenue reflects the true earnings power of our business since gross revenue includes a significant amount of pass-through costs that do not generate material margin.
During the quarter gross revenue grew 22% organically and net service revenue grew 24% organically. Strong revenue growth and continued margin improvements in and outside of the United States drove our operating income from continuing operations to $71 million, a 68% increase over last years fourth quarter.
Fourth quarter net income from continuing operations was $42 million, an increase of 44% over the last year. This led to earnings per share from continuing operations of $0.40 a 38% increase over last year.
Note that the net income and EPS from continuing operations excludes earnings from discontinued operations for the fourth quarter of $1 million or $0.01 per share that resulted from non-strategic assets required as part of the July 2008 Earth Tech acquisition. Overall these results reflect a successful execution of the strategies we have put in place and position as well for continued growth. Please turn to the next slide.
We reported our financial results in two segments; professional technical services and management support services. The PTS segment accounted for 85% of our fourth quarter gross revenue. We generated strong growth on our PTS segment during the quarter with gross revenues increasing 51% to $1.4 billion and net service revenues also increasing 51% to $964 million.
Operating income for our PTS segment increased 71% over the fourth quarter of last year to $91 million. This rapid growth in our operating income is attributable to better leverage of our overhead costs across the organizations. Our PTS net service revenue reflects a 22% organic growth rate mainly driven by large multi-year projects across diverse business lines with strong showing across all our regions. Please continue to the next slide.