© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning, and welcome to the AECOM First Quarter 2022 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. Later, we will conduct a question-and-answer session. [Operator Instructions]. I would now like to turn the call over to Will Gabrielski, Senior Vice President of Finance and Investor Relations. Please go ahead.
Thank you, Operator. I would like to direct your attention to the safe harbor statement on Page One of today's presentation. Today's discussion contains forward-looking statements about future business and financial expectations. Actual results may differ significantly from those projected in today's forward-looking statements due to various risks and uncertainties, including the risks described in our periodic reports filed with the SEC. Except as required by law, we undertake no obligation to update our Forward-looking statements.
We use certain non-GAAP financial measures in our presentation. The appropriate GAAP financial reconciliations are incorporated into our presentation where available, which is posted to our website. References to margins and adjusted operating margins reflect the performance for the Americas and International segments. We will refer to Net Service Revenue or NSR, which is defined as revenue excluding pass-through revenue.
As a reminder we closed on the sale of the power and civil construction businesses in October of 2020 and January 2021 respectively. And the sale of the oil and gas maintenance and turnaround services business in January 2022. The financial results of these businesses are classified as discontinued operations in our financial statements. The results from discontinued operations include the oil and gas sale and adjustments closing working capital estimates for previously completed transactions.
Today's comments will focus on the continuing operations of the Professional Services business, unless otherwise noted. On today's call, Troy Rudd, our Chief Executive Officer will begin with a review of our key accomplishments, strategy, and long-term growth expectations. Lara Poloni, our President will discuss key operational priorities, and Gaur Kapoor, our Chief Financial Officer will review our financial performance and outlook in greater detail. We will conclude with a question-and-answer session. With that, I will turn the call over to Troy. Troy?
Thank you, Will. And thank you all for joining us today. We are incredibly pleased with our first quarter performance and momentum is building across our business and our markets. I would like to begin today's call by thanking our professionals around the world who are working collaboratively to deliver outstanding results for our clients. Our success is a result of the passion and dedication that our teams bring to their work for clients every day.
This excellence was highlighted last week when Fortune reaffirmed our number one industry ranking on its World's Most Admired Companies list. The elements for uninterrupted multirate infrastructure in ESG investment growth are well-established. These include the $1.2 trillion by parts and infrastructure law in the U.S. and the global commitments by our clients to deliver on increasingly well-defined ESG objectives.
A global infrastructure Investment renaissance is beginning, and our strategy, focused on our teams, clients, communities, and innovation, has us better positioned than ever to win. Through our expanded services, including advisory and program management, a greater share of a growing market is now addressable by AECOM. And we are working to shape the priorities of our clients and deliver value for our stakeholders.
Turning to our first quarter's results, we exceeded our expectations on every key financial metric. NSR increased by 5% with strong growth in both our Americas and International segments. Importantly, we are winning work at the highest rate in the history of our company. Wins totaled $3.6 billion with a 1.4 book-to-burn ratio in our Americas design business and a 1.2 book-to-burn ratio across our global design business.
Our strong book-to-burn is worth emphasizing given our four quarters of consistent organic NSR growth. We also had key wins in our construction and management business and our pipeline has never been stronger. The segment adjusted operating margin increased by 60 basis points to 13.7%, reflecting continued investments in organic growth innovation. The benefits of our highly efficient global delivery capabilities, and the high-value our teams are delivering for our clients. Our margins lead our peers, but plenty of opportunity for improvement remains.
Our focus on deploying innovation and digital tools to transform how we deliver for clients against a backdrop of increasing demand for advisory and program management services supports our guidance for this year and our 17% longer-term margin target. Adjusted EBITDA increased by 10% and adjusted EPS increased by 44%. Our EPS is benefiting from the execution of our focused strategy, strong operational performance, and accelerating organic growth; as well as from share repurchases.
Including $213 million dollars of stock repurchases in the first quarter, we have now repurchased $1.2 billion dollars of stock since September 2020 when we launched our repurchase program; or 14% of our outstanding shares. Capital allocation benefit to shareholders is driven by our strong conversion of earnings to cash flow. In fact, cash flow in the quarter was one of the highest in our company's history for a first quarter.
The attributes of our business included a high return and lowest profile, and a capitalized business model with a highly variable cost structure underpins our expectations to consistently deliver strong cash flow and to deliver on our capital allocation priorities. Reflecting this confidence, we initiated a quarterly dividend program in December, and our first dividend payment occurred in January. It is our intention to increase our per share dividend by a double-digit percentage annually.
This marks a milestone for our company's history and demonstrates our steadfast commitment to use capital allocation tools to maximize total shareholder return. We'll turn to the next slide for discussion of the trends across our markets. Beginning in the U.S., our largest market, conditions are strong. Our federal, state, and local clients are gearing up for several years of sustained increases in infrastructure investment, which includes the expected benefits of the $1.2 trillion bipartisan infrastructure law.
This represents a generational investment in U.S. infrastructure and rise at an operating time. Typically, Federal support for infrastructure has been endorsed and correlated to state and local fiscal health. However, our state and local clients, which account for only 25% of our NSR, are reporting record revenues and budget surpluses, which is resulting in a very favorable backdrop. In addition, our public and private sector clients are increasingly prioritizing investments to advance ESG.
Today, nearly every project proposal has an element of ESG in its scope and our clients are demanding more holistic thinking and a broader advisory relationship to help them achieve that multi-decade ambition. Our momentum and the expansion of our addressable markets are apparent in our pipeline growth, which is up by double-digits. This is noteworthy when you consider how strong wins and backlog growth were this quarter.
The pipeline growth we are seeing is especially encouraging considering the benefits of the Bipartisan Infrastructure Law aren't likely to be material until our fiscal 2023. International markets are experiencing a very similar positive trajectory. ESG is fronting center on our clients agendas, and you're seeing strong demand for advisory services and technical expertise.
Our pipeline increased by high single-digit percentage, and our backlog increased in each of our largest international markets, highlighted by key transportation and infrastructure frameworks in the UK, expanded program management roles in the Middle East, and high win rates for key clients in the Asia-Pacific region. Looking ahead, the strong foundation we have built and favorable end-market trends have positioned us well for sustained multiyear growth.
We've spent the last two years narrowing our focus on our higher margin, lower-risk professional services business and implementing our Think and Act Globally strategy. The strategy is built on our leading technical capabilities, global expertise and on bringing new ways of solving our clients biggest and most complex challenges with innovative digital solutions. We continue to advance our digital AECOM strategy and with our success, we are accelerating our investments in this area.
Over the course of the year, as the solutions establish our market position, we will announce their launch similar to PlanEngage, which we announced last quarter. PlanEngage, our digital platform that reinvents the public engagement process for infrastructure project is quickly being introduced as a platform for community engagement across our global client base. As funding from the Bipartisan Infrastructure Act in the U.S. is connected with these projects later in 2023, our PlanEngage tool will become even more valuable.
Across our business, one theme is constant. Our investments will expand our advantage as demand grows and labor constraints challenge the industry. We are consistently winning our largest and highest priority pursuits, with our win rate at all-time high levels. For example, our leadership team identified ten global pursuits that we deemed to be a top priority for strategic positioning and for delivering on our accelerating growth expectations.
I'm very pleased to report, that we've already won [Indiscernible] and projects and two are still pending decisions. In addition, we've had several other key wins over the past few quarters, including a nine-figure takeaway from a key competitor in an international market. A nine-figure takeaway from a key incumbent on a high daily value U.S. federal environment program, and we have been selected for numerous other key pursuits that underpin our confidence. I can't say enough about how our culture of winning and excellence has expanded and what it means for our future. With that, I'll turn the call over to Lara.
Thanks, Troy. Please turn to the next slide. I couldn't be more pleased with what we have accomplished to-date and how well positioned we are for the future. Against the backdrop of strong clients in mind, and with our foundation for success now in place, we are taking actions to fully capitalize on the opportunities ahead. First, we are fostering a culture that celebrates winning.
This includes prioritizing our time and investments on the best scores opportunities and highest value pursuits. As latest in areas including electrification, transit systems, environmental assessment or mediation, water infrastructure, resilience, climate change, and new energy, we are poised to benefit from our exposure to rapidly growing market. This is giving us the opportunity to also be selective and disciplined about the types of opportunities on which we invest time and capital with a focus on profitable growth and strong returns on capital.
Second, we are continuing to invest in program management and advisory capabilities. Through these capabilities, we are expanding our addressable market opportunity by adding services that lead to earlier engagement with clients. We have onboarded key talent to support several large wins over the past year, including the NEON and Al-'Ula programs in Saudi Arabia. Looking ahead as the scope and complexity of infrastructure and ESG initiatives expand, high-value program management and advisory will take an even more central role in helping our clients and will distinguish a AECOM in the market.
Third, we are investing in digital AECOM to develop and deliver products that extend the capabilities of our change and transform how we engage with clients. Our PlanEngage tool and commercialization of [Indiscernible] a proprietary solution for the destruction of Payfacs compound, a great example. In addition, we are advancing the development of key digital solutions in the Transportation and Facilities market that will also leading Parametric and introduce design tools.
Finally, and most importantly, we are investing in and building teams to deliver in a growing market, which will be increasingly important going forward. We are focused on ensuring AECOM is the best place in our industry to build a career. At this point, I am pleased to report that the result of our recent employee survey reflects our continued high levels of employee engagement. Most notably, this included further increases in the percentage of employees that would recommend AECOM as a great place to work.
There is no high acknowledgment of our commitment to building a great culture than this measure. And this gives us confidence that we will remain an advantage as the overall labor market timing. With that, I will now turn the call over to Gaurav to discuss our financial performance and outlook in greater detail.
Thanks, Lara. Please turn to the next slide. We exceeded our expectations on every key financial metric in the first quarter. We delivered another quarter of positive organic NSR growth, a record first-quarter margin, double-digit adjusted EBITDA, and EPS growth and one of the highest first quarter free cash flows in our company's history. Tax will be fore spend benefit to EPS compared to our plan due to the timing and quantum of discrete items.
We also delivered on our capital allocation commitments, including ongoing investments in our teams and digital AECOM, more than 200 million of share repurchases and the initiation of a quarterly dividend program. The dividend is a compliment to our share repurchases. We have a strong balance sheet and highly predictable cash flow which allows for investments in the business, as well as consistently returning all available free cash flow to our shareholders. Importantly, we are winning work at a high rate.
Our pipeline across the business is up double-digits and we have not yet begun to see material benefit from the B ipartisan Infrastructure Law. Please turn to the next slide. In the Americas, NSR increased by 3%, highlighted by growth in both the design and construction management businesses. Our book-to-burn in the Americas design business was 1.4 and total backlog in design business increased by 5%, which continues to include a near record level of contracted backlog, which provides the strongest revenue visibility.
In addition, we are benefiting from strengthened conditions in our construction management business and believe backlog will increase over the course of the next year. First quarter adjusted operating margin was 17.7%, a 30 basis point increase from the prior year. This result reflects both ongoing investments we are making to support growth and ongoing benefits from the actions taken to operate a more streamlined organization that delivers more efficiently. Please turn to the next slide.
Turning to the International segment, NSR increased by 7% with growth across all of our largest regions. Our wins were strong and backlog increased by 6%. We continue to gain share in the UK public sector, our building, our gains in the Middle East, and have been successful on a number of key pursuits in Hong Kong and Australia. Our adjusted operating margin in the first quarter was 8.2%, a 110 basis point improvement from the prior year.
We are realizing the benefits of the actions we have taken to eliminate inefficiencies, regain market share, and better steel our cost structure, including increasing utilization of our global shared service centers. Please turn to the next slide. Turning to cash flow liquidity and capital allocation. First quarter operating cash flow was $195 million, and free cash flow was $163 million. This was better than we expected and is consistent with our focus on delivering more consistent phasing throughout the year.
This improves our return on capital and allowed us to execute substantial repurchases earlier in the year as a result. As Troy noted, our capital allocation policy is focused on returning substantially all free cash flow to investors in order to maximize total shareholder return and returns on capital. This included the milestone announcement we made during the first quarter of the initiation of a quarterly dividend program and our intent to grow our per-share dividend at a double-digit annual percentage.
Our first quarter new dividend payment was made on January 21st. The dividend is a testament to the steps we have taken over the past two years to reduce our financial and operational leverage which has contributed to consistently strong earnings and cash flow. As we look ahead, we continue to expect to convert our earnings to cash flow at a high rate, and we continue to expect free cash flow of between $450 million and $650 million in fiscal 2022.
As a reminder, our cash flow is typically weighted more strongly to the second half of the fiscal year, though, we expect our first half cash flow to improve from the prior year. Please turn to the next slide. We are increasing our fiscal 2022 adjusted EPS guidance to between $3.30 and $3.50, which would reflect 21% growth at the midpoint. This increase reflects operational out performance we delivered in the first quarter, the benefits of our share repurchases completed in the first quarter and a lower than planned tax rate. As a reminder, our adjusted EPS guidance only incorporates the benefit of already executed share repurchases.
But we expect to continue to buy back stock, as part of our capital allocation program. We also continue to expect to deliver adjusted EBITDA of between $880 million and $920 million, which would reflect 8% growth at the midpoint of the range. Based on our strong start to the year, we are also reaffirming our expectation for organic NSR growth of 6%, a segment adjusted operating margin of 14.1%, and our long-term 2024 financial targets including adjusted EPS of greater than $4.75 and approximately $700 million in free cash flow. We expect our full-year tax rate to be 25%, which incorporates the impact of our first-quarter tax rate and the expectations for approximately 28% for the rest of the year. Longer-term, we expect our tax rate to be in the mid-20s. With that, Operator, we are ready for questions.
Thank you very much. [Operator Instructions]. Our first question today comes from the line of Michael Feniger from Bank of America. Michael, your line is open.
Hey, everyone. Thank you for taking my questions. I just wanted to start off with the question on inflation. You guys are able to get your margins up in the first quarter, a good start to the year. I guess, where are you seeing inflationary pressure in the business, and maybe just how this industry built to handle inflation? Is it a contract structure that helps, and I guess, how would AECOM better able to handle an inflationary backdrop relative to peers?
Michael, Troy. Good morning. Thanks for your questions. With respect to inflation, if you go back and you look at the history of our industry, and certainly we've had some periods, we have -- don't have inflation like we do today, but we have had grids inflation. And typically that costs has been passed along to our customers. And so, I think when you look at an industry like ours, and in particular our business, a consulting business predominantly, that those costs continue to get passed along to our customers.
And what you pointed out in your question was is it is already part of our existing contract structures. We have wage escalations in using our longer-term contracts. And then as we continue to bid, we put together our bid costs and that will include the increased costs of either paying our professionals, all the other costs [Indiscernible] to turn things. But I'll take you back to one really important point is, there a lot of long-term costs in our business that are typically fixed. So our labor is certainly a flexible cost and we certainly see an increased cost of paying our professionals.
But there are number of costs like real estate and other items that are fixed costs in our business. And so we don't experience at least inflation today. And other proof point in terms of our ability to pass along those costs to our customers is the fact that, you pointed our margins continues to increase. And, in fact, increased at a time where we're investing in growing the business and growing our backlog, and investing in our people, and investing in our digital profile while we continue to improve margins. So, again, inflation, for the most part is not an impact on our business.
Great, Troy, and it's interesting to see you guys repurchased shares in the same quarter of the dividend initiation. Good to see that. Now, you are seeing some of your peers are being much more aggressive in M&A. Some we've been looking at software assets. I'm just curious how does AECOM view the M&A landscape and if there's any change in terms of how you guys are going about your capital allocation structure.
Yes. So first of all, there's no change in how we're going about our capital allocation structure. I think we are perhaps a little bit different than a lot of people in our industry that we believe that we're able to do invest in business through our margins. And we also believe that, we have an obligation to return capital to our shareholders over the long term. And in terms of paying a dividend, we -- again, think that's in the strong signal that we have in fact transformed the business to a lower risk, higher returning business with a track record of converting earnings to cash, and with our EPS growth, it gives us even more confidence to increase the permanent return of capital to our shareholders. So again I -- no change in how we're thinking about capital allocation. And we think we have ample capital to deploy to increase the value of the business and to grow the business.
Great. I'm just going to sneak one more in there on the CER.
Sure.
Are you seeing any disruption on your business with the CR that impact your view of infrastructure hitting 2023? You still had good organic growth even with the CR right now. But how should we -- how do you see the CR kind of playing out in the next few days? And is there any impact that would happen in 2023? Thanks.
Well, that's a good question. First of all, I'm not in the business of predicting what the federal government is going to do. So I'll decline to answer that question; but there is a decision to be made in the next few weeks about whether the federal government will continue to operate with their continued resolution or, in fact, they'll put it in a budget in place, which if a budget's in place then it creates the appropriations for funding under the Infrastructure Bill. But, again, we view that that is going to happen.
There's a lot of Bipartisan support for infrastructure. Again, we see the funding eventually coming in place and we believe that it's probably an impact on our business in 2023, but putting that all aside -- putting that aside, again, we've seen our business grow, more importantly in America as we started book-to-burn grow at 1.4 times; and I think that's just an indication of the funding that exists broadly across our customer base in U.S. So, again, I think about that the continuing resolution and the Infrastructure bill being upside for our business in the long term.
Our next question today comes from the line of Andy Kaplowitz from Citi. Andy, your line is open.
Good morning, everyone.
Good morning, Andy.
Full year 0.2% adjusted operating margin and International I think was the highest quarterly result we've seen from that segment. We know the result is just part of the progression to get to 10%. But International margin I think was stuck in the low to mid 7% range for all of '2021. So did mix improvement in the first quarter is just really just the shared service centers kicking in now? And does it mean that a sales continued increase here, we should see a comp progressive aids for the rest of '2022?
Yes. Andy, thanks for the question. And I'm going to pass it off to Gaur to answer it.
Hey, Andy, thanks for the question. Our International margins to your portion, increased significantly year-over-year and very consistent with our expectations. As you probably recall, we've invested quite heavily to uplift those margins in the marketplace and operational efficiencies, which we're starting to see come through at a higher clip now. We're going to continue to march towards double-digits, it's not just 10%.
Our longer-term aspirations overall for the enterprise to remind everybody 17% in International is going to be a large part of it. Now, specific to 2022 and progression of the margins for International, we will see consistent margin for the international business like we did last year. We're not incurring significant restructuring charges, our results are very clean. And therefore, the phasing is very consistent throughout the year.
Thanks for that, Gaurav. And then maybe I could ask you about phasing of revenue. So you did 5% NSR in Q1, you're guiding to 6% for the year. We know you've said the Infrastructure bill really kicks in more in '23, but do you continue to see like a slow and steady ramp up from here, normal season, seasonal cadence? Should we be concerned at all about disruption from Omicron on your supply chain? Or is it steady as she go and then maybe we see some money from the infrastructure build late in '2022?
So, Andy, Troy again, look, I think we're going to just see a steady improvement in growth throughout the year. There's certainly some seasonality to it but also, again, we could see in certain markets the funding from our clients and the project ramp up incurring overtime. So, again, I don't see anything but sort of continued slow, steady growth. You're right to point out that COVID did impact everyone's business and we were certainly not immune from that.
We certainly felt the impact of that in December and through January. But putting that aside, we still grew the business in the first quarter 5%, then our backlog grew fairly, substantially replacing those orders and adding towards significantly. So I -- again, I see nothing that will hold us back through just a continued steady improvement growth over the remainder of the year.
Appreciate it, guys.
Thanks, Andy.
Our next question comes from Sean Eastman from KeyBanc Capital Markets, showing the floor is yours.
Good morning, team. I'm just trying to think about the risks to this anticipated top-line growth acceleration, and of course, the war for talent tends to be front of mind there. So can you update us on the pace of hiring and perhaps what AECOM has been working on in terms of productivity enhancements and leveraging in our employee base?
Sure. So first of all, I think there's two things that go into revenue growth. First of all is winning, and you've got to win what matters, and I think we were clear in our prepared comments that we really feel comfortable based on what our people and the mark our professionals are doing in the marketplace and certainly we're winning the things that matter to us. So that's, again, think about it, tick back box off.
Secondly, you point out talent. You have to have a great group of professionals to deliver on network, and it certainly is a market that is challenging; but we did see an increase in our professional headcounts, during the quarter, so we continue to add people to grow the business. But also we are making other investments, again, those investments are in our people and in building a business that more people want to work.
We talked about it as building the place for people want to have a career. We are absolutely focused on that and investing in our people, invest in their technical or leadership development and offering opportunities for the long-term. We're also investing in digital tools, which is part of that investment is extending the capability or the capacity of our people. So they're able to actually accomplish more in the same day than they would have been in the past.
And that's the focus. And then the third thing is we've been investing in building capability centers so that we have the opportunity to take work and to put it in amongst these groups. So ultimately we can improve the efficiency or productivity on network. So really to address that second challenge, which is, are there enough talented people in the marketplace to deliver all this work? We're addressing in those three ways.
That's interesting. And going back to the inflation discussion, it's clear that the price cost element is not really a concern, it's probably more how inflation ultimately impacts demand. And I'm just curious how you would characterize the sensitivity of the core growth drivers behind that 6% organic target over the next couple years, around the broader macro and to the extent inflation does degrade the business cycle. How much risk there would be to that 6% that you've outlined?
Sure. Well, I guess, maybe the easiest way to answer that is that we're seeing an improvement in our pipeline. So the opportunities that we're pursuing in the Americas business and the international business, as you said are both increasing. And if I sort of look at the underlying conditions, we certainly see within our customer base, there is a significant amount of ambition to undertake infrastructure projects and a lot of that is ESG driven.
But also there's a tremendous amount of funding that has been made available. And typically when that funding is becoming available, it isn't that sensitive to the increase of in costs that we're currently seeing now. So again, we're just not seeing as a result of inflation, a change in the ambition and the change in the funds within our customer base.
Understood. Thanks for the insights.
Thanks, Sean.
Our next question today comes from Steven Fisher from UBS. Steven, please proceed with your question.
Shifting back, your win rate is very high. Could you maybe quantify what that was and how sustainable you think the underlying conditions are that support that level of great success?
So, Steve, your question is a little difficult to understand, but I believe you were asking about our win rate and whether our win rate is sustainable. So sorry, Steve. You were breaking out. But I'll try and answer that one question which is our win rate has been improving steadily over the last four or five quarters. And this last quarter, again, it's for us to hit an all-time high and we're capturing almost 50% of the work that we're bidding on, which for us, it's an extraordinary results.
And I look at the underlying competent -- the underlying conditions. So there's great competitors in the marketplace. There's no question. There are really good companies that we compete against. That's not changing. And in terms of what we're doing to win, those things that we're doing to win are changing and those things that we're doing are -- we're bringing the best to our organization, globally, to those clients that matter.
We are investing in digital tools to win the work and differentiate ourselves and we've been growing and investing, building an advisory and program management business, so it actually actually gives us an opportunity to bid on more than we typically have in the past. And, again, I don't see us changing what we're doing because it's working and I don't see the competition changing. Also, at the long-winded way of saying, I don't see a change in the underlying conditions. I expect us to have a high win rate for the long term.
Our next question today comes from Michael Dudas, from Vertical Research. Michael, please go ahead.
Good morning, gentlemen, Lara.
Good morning, Mike.
Good morning.
Just a follow-up on your answer to Steve's question about your project management advisory business. So in treat down the chart in the presentation of the opportunities that you see for that business. How different is that -- this to grow, whether you're growing other the traditional core design engineering services business relative to what you have. If you have the talent promoted within to that or is it the excellent three and the experts from other companies to get to that point?
And is there a difference in the type of cost or I'm assuming there's a difference in the margin profile over the lifetime of the project on the project management if you have all the design and engineering below it or separate from that. Could you just elaborate on that? And looking at that market size, how much that could be important to your margin improvement in the U.S. and abroad as well?
Sure. Again, Mike, thanks for your question. So we see our opportunities over the long term expanding as our clients, again, gain more funding. So, again, we see the market -- the size of the market increasing; but as we've added advisory and program management and building those businesses, what they do is they allow us to have a much greater share of that growing market, so we're now exposed to more of that addressable spend.
In the past, we were focused on a designed business and now adding program management advisory, we believe that we're exposed to a multiple of what we were exposed to in the past so that could be two or three times what we're exposed to in terms of those project budgets. The other thing it does by our advisory program management, it means that we actually will participate in those projects sooner or earlier in the process and it means that we have the opportunity to be -- to participate in those projects for obviously a longer period of time.
So, again, that's why we thought it was important to build those businesses because it obviously is complementary to what our design business does and the skills of our designers, and our design business work perfectly. They match perfectly with an advising program management business. So your second question was, are we hiring or are we building from within? And the answer is, we're doing both. We're actually adding, adding folks [Indiscernible] from outside and we're also then having our people who have those great skills already from the design business participating network. And we expect the margins. I'll turn it over to Gaurav to answer.
Yeah, Michael. For margins specific to our PM business, it's very consistent with our core design business. The reason for that is, when you look at the overheads that business need, it's minimal. The utilization is much higher, they're longer-term projects, the utilization is high -- much higher compared to the core designed business. And other overhead costs are minimal as most of those employees are within the facilities of our clients. Now clearly, our advisory services is a higher-value services we provide better margins. And those are all embedded within our respective business lines and geographies. So it's part of the design business.
Thank you. And is there certain end markets or clients who, regionally, that your program management platform can generate better, faster, more profitable growth than others?
Again, Mike, I'm going to turn that question over to Lara to give you a flavor of how the program management business rolls out across the globe for us.
Thanks, Troy, and good morning, Mike. We definitely see substantial opportunities in the infrastructure by for government clients in particular. There's obviously a lot of pent-up demand for major infrastructure gains around the world, beyond the Americas as well. But those clients are looking for those front-end advisory services to help them with rapid business case, project prioritization, and then the longer term involvement that we can provide through full project last cycle, program management will assist with ensuring that those projects are delivered with cost and time.
Certainty that we can get there earlier engagement with some of the contractor to provide constructability reviews. As Troy said, we are providing front-end advisory services and really extending our involvement so that support is much earlier, but it extends much longer through the program management role in particular, but it's predominantly those big construction schemes or we say, tremendous demand in particular.
But even in the private sector there are clients, for example, that need our assistance, that are approaching us every day with even just some of the front-end services like ESG advisory. How do they -- how do they gear up for that, how do they manage their energy transition, all those things. So it's a very futile ground for us to grow that business offering.
Excellent. Thank you so much guys.
Sure.
Our next question today comes from Jamie Cook from Credit Suisse. Jamie, your line is open.
Hey, good morning, nice quarter. I guess just two questions. The free cash flow conversion strengthening in the quarter, obviously it was a record of free cash flow quarter for you guys; but can you talk about what changed there? Is there any pull forward or is this just a structural improvement and why isn't there upside to the free cash flow guide given where we are in the first quarter?
And then, I guess, by second quarter to the margins are performing better when a lot of other companies are talking about headwinds associated with COVID, supply chain, people calling in sick because of Omicron. So, I guess, while your margins are very good, I'm wondering if they're being weighed down by that to some degree that perhaps your underlying performance is better or we're closer to where we need to be on your longer-term targets. Thanks,
Jamie, thank you. So I -- just a high-level comments and then I'm going to turn it over to Gar to answers to your questions. But I think over the last two years, the one thing that we have learned is learned that we have to be agile. Meaning, as we move from week-to-week, month-to-month, quarter-to-quarter we'll face with all kinds of challenges in the business, and I think our professionals and our leaders here have proven they're, just have their way to -- they've proven that they can navigate through those changing and sometimes difficult environments. And I think that's reflective in our results. But with respect to your specific question on free cash flow margin, I'll let some -- let Gar answer for you.
Hey, Jamie. So specific to cash flow, you've heard me say this before, we're fostering environment which focuses on continuous improvement and that includes cash. Focus on cash, as we've said before, better phasing throughout the year, that's always a priority for us and you saw that in the first quarter. Our focus for remainder of the year is to make sure that the first half cash flow phasing is better than last year, while also acknowledging that seasonality comes into play. And that's why our cash flow's always going to be weighted more towards the second half
But this is -- we're always going to strive to get the best result of cash, because you can see what it delivers in terms of capital allocation. It allows us to repurchase stock, it allows us to stability to initiate and issue dividends and we'll continue to do that. On the margin part, it's also part of our continuous improvement culture. But at the same time, technology into Troy’s earlier comments of how our operationals -- professionals operate over the last couple of years. They are not being reactive, right. They are really being thoughtful in how they plan and execute projects that businesses -- regions and business lines.
And that includes us investing strategically in our advisory and PM businesses, which are higher up for the value chain. To the earlier question we got from Michael Dudas. It also includes investing in digital and innovative solutions, which expand our internal capacity for the efficiency of our employees. And also in the marketplace that Troy and Lara has spoken to the various digital tools we have available, focusing on an international margins or workplace of the future, which we have talked about that includes continued focus on real estate, and also utilizing our global design services and business services capability that we have talked quite a bit in the past as well.
So all of those things have helped us strategically alleviate potential inflation pressures that are coming through because we will continue to invest in our workforce. And you're seeing the results of that in our margins where we continue to expand year-over-year. And the last thing I'll add to all of that is our results are clean. When you look at our GAAP results to adjusted results, we're not going through massive restructuring. This business all very bold thoughts strategic initiatives put in place to deliver the results you're seeing.
Okay. Thank you.
Thank you.
Our next question comes from Adam Salama from Thompson Davis. Adam, please go ahead.
Hey, good morning, guys. Congrats on the good start to the year. I wanted to ask just in general, how are your customers responding to higher materials prices?
Again, I think the best example of how they're responding is they're continuing to let out more work than they have in the past. Again, just at a macro level, we look at the funding environment is strong and improving and will improve over the long term. And our customers again have ambitions to take on more infrastructure projects and more work, and we're seeing our pipeline growth. So I said a macro level, we're just -- we're not seeing a dramatic impact from inflation on our customer base at the moment.
Great. And then I wanted to ask quickly about your construction management business; what are you seeing in your core metros there?
So we're actually seeing opportunities to grow. The pipeline in our construction management business, which is typically driven around core metros, has actually been growing. And, again, the work that we win in that business is lumpy from quarter-to-quarter but in terms of what we're pursuing, the opportunities have expanded; and one of the things that we're doing is we are being quite thoughtful and selective in how we're moving forward.
One of the things that happens in a marketplace like we're seeing now where the opportunities are expanding. And sometimes you have the appetite to maybe take on things very aggressively. And we're just really managing what we're pursuing and how we're going to grow that business. But for the time being, we've got $20 billion of backlog and a lot of that has been won over the course of the last two years, and they're great projects. Some of them very significant size in the Metro Cores.
Great. Thanks for the time.
Thank you.
Those are all the questions we have for today. So I will now hand back to you CEO, Troy Rudd, for any concluding comments.
Great. Thank you, Operator. Again, I want to thank our teams and our professionals for the great contribution that got us off to a really strong start of the year. We thought -- we feel like we put ourselves in the best position possible as we move forward in year and we are again increasing our confidence around with results, results we'll deliver for the year. And frankly the results we'll deliver in terms of achieving our long-term objectives. Again, thank you everyone for participating this morning. Look forward to talking to you in the next earnings call. Have a good day.
Thank you, everyone, for joining us today. This concludes our call. Please, now disconnect your lines.