管理層發言
Hello, everyone. Thank you for joining us, and welcome to AECOM's Third Quarter 2026 Earnings Conference Call. I will now hand the conference over to Will Gabrielski, Senior Vice President of Finance and Investor Relations. You may begin.
Thank you, operator. I would like to direct your attention to the safe harbor statement on Page 1 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 reconciliations are incorporated into our materials, which are posted to our website. Growth rates are presented on a year-over-year basis unless otherwise noted. Any references to segment margins or segment adjusted operating margins will reflect the performance for the Americas and International segments. When discussing revenue and revenue growth, we will refer to net service revenue, or NSR, which is defined as revenue excluding pass-through revenue. NSR growth rates are presented on a constant currency basis unless otherwise noted. Today's remarks will focus on continuing operations. On today's call, Troy Rudd, our Chief Executive Officer, will review key developments and accomplishments this quarter as well as our outlook for the business; Lara Poloni, our President, will discuss key trends across our markets; and Gaurav Kapoor, our Chief Financial and Operations Officer, will review our financial performance and outlook in greater detail. We will conclude with a question-and-answer session. With that, I will turn the call over to Troy. Troy?
Thank you, Will, and thank you all for joining us today. We had many accomplishments in the quarter, and I am proud of our teams and the positive impact we are having on our clients' critical infrastructure investments. But before getting into the details of our results, I'd like to address the $337 million pretax charge included in the quarter. The charge is primarily the result of a delay in delivering a large construction management project due to several factors, the largest of which is overall productivity of subcontractors on the last phase of this project. We had expected this project to be substantially completed in the first quarter of fiscal 2027 and now expect this near the end of the second quarter of fiscal 2027. In addition to the financial impacts in this period, we are pursuing sizable claims for this project, and our confidence in recovery has been validated by our success in the dispute resolution process to date. We expect resolution of the remaining claims will take some time, and this will continue to burden our cash flow through the first half of 2027. We are disappointed with this outcome, but I want to add some context. This project was bid in 2019. Since that time, we have changed leadership and tightened our risk controls. We decided many years ago to no longer pursue design-build work for P3 clients in the construction management business due to the inherent challenges this structure can present. As a result, this project would not clear our risk hurdles today. I also want to provide an update on the second design-build P3 project in construction management which was bid around the same time. We are progressing towards the planned substantial completion date of Phase 1 in the first quarter of fiscal 2027, and this remains consistent with our previous forecast. The second CM project also has a significant claim position to recoveries due to delays not caused by us. Finally, notwithstanding these two projects, the construction management business has produced strong cash flow and high returns on capital consistently over time. And based on the composition of our backlog and pipeline today, I expect this trend will continue. Now turning to the details of our results. Our teams are winning work at a record rate. Our backlog increased 13% to a new all-time high on record quarterly wins and a 1.6 book-to-burn across the business, including 1.8x in the Americas. Year-to-date, our book-to-burn is 1.4x, providing extraordinary long-term visibility. Adjusted for one less working day in the quarter, NSR in the design business increased by 5%. This was led by 6% growth in the Americas design business as well as a return to growth in the international business which increased 4%, led by the U.K. and Australia. Even so, overall NSR growth in the quarter was below our expectations. The primary drivers are slower-than-anticipated new project starts in the construction management business and the continued impact from the conflict in the Middle East, which we see continuing through the fourth quarter. While both businesses have fallen short of our expectations in the second half of fiscal 2026, they have strong backlogs and are well positioned for return to growth in 2027. Excluding the financial impacts of the construction management project charge, adjusted EBITDA and EPS improved year-over-year by 5% and 11%, benefiting from the return to NSR growth, which resulted in margin expansion in the International segment. We also delivered positive free cash flow of $55 million despite the headwind from the construction management projects mentioned earlier, demonstrating the strength of our historically consistent free cash flow conversion. Turning to financial guidance. Our updated financial guidance captures three main changes from last quarter: The impacts of the construction management project charge, lower-than-expected NSR growth and continued margin outperformance. As a result, we now expect full year NSR of approximately $7.3 billion and adjusted EBITDA and EPS of $950 million and $4.05, respectively, at the midpoint of the ranges. Adjusted for the charge and to help with comparability, we now expect full year NSR of $7.65 billion to $7.7 billion and adjusted EBITDA and EPS consistent with our prior guidance at $1.29 billion and $6 at the midpoint. This includes a raised expectation for adjusted EBITDA margin to 17.4% versus the 17% previously. We also expect to deliver free cash flow of $300 million for the full 2026 fiscal year. With that, I will turn the call over to Lara.
Thanks, Troy. The strength of our technical expertise and the success we are having in the market are a testament to our teams and the investments we are making to extend our advantages. There are many marquee wins this quarter, but there are two in particular I want to highlight. Included within our record backlog, we won two of our largest recompetes ever. Both are in the environment business, one public and one private. And despite the industry's vast amount of consolidation, our leadership position persists. And more importantly, our scope across these projects has expanded significantly. As I look across our markets, there are several additional positive developments that give us optimism. Starting with the U.S., our state and local clients continue to prioritize infrastructure and water investment. In recent months, several of our largest state clients have announced major multiyear infrastructure plans focused on highways, bridges, transit and rail, all areas where we have the #1 ranked practice. Additionally, growth opportunities are robust in our U.S. water business, where our pipeline expanded by 30%. On the U.S. federal front, rapidly growing investment in national defense remains a key theme and our pipeline with the Department of Defense, our largest single client, increased by approximately 30% in the quarter. Congress continues to advance fiscal 2027 defense budget legislation, and we expect healthy growth in the key areas we support. This includes significantly increased facilities work where we are a leading provider to the Army and Navy. Additionally, Congress is progressing the next five-year surface transportation authorization. The House's initial $580 billion proposal includes key funding for all areas to which we are exposed and gives us further conviction in the continued bipartisan commitment to infrastructure investment. It is worth noting that unlike past reauthorization cycles, today's funding environment is incredibly healthy. Less than half of the IIJA funding in our core markets has been spent, which adds to our visibility and confidence. U.S. private sector investment is also accelerating. This is particularly true in data centers, which remains one of our fastest-growing businesses and where we have been expanding our hyperscaler relationships. In Canada, activity has been very strong and broad-based across all market sectors, driving continued double-digit NSR growth. Notably, after the quarter, we won a 10-year program management role for a highway and bus transit project that represents one of our largest wins in Canada to date. Additionally, and underscoring the trend of increased global defense spending, Canadian defense spending reached its highest level in recent years, and the government has committed to more than doubling that share to 5% of GDP by 2035. In step with this, our pipeline is up significantly, tied to the government's efforts to upgrade military bases across its Arctic and Northern regions. Turning to the International segment. In the U.K., NSR growth accelerated to high single digits with ongoing strength in water, environment and energy. Work on the Great Grid upgrade project is progressing well and was a key contributor to growth this quarter. As a reminder, this is one of the most significant electricity infrastructure programs in U.K. history. AMP8 is also accelerating with additional workloads and more opportunities from large frameworks coming through. Even so, while transportation continues to lag, growth is benefiting from our diverse positioning. In Australia, growth accelerated in the quarter, up double digits, and our backlog reached a new multiyear high, up more than 40% year-over-year. Along with continued defense infrastructure wins during the quarter, transportation activity is accelerating, which bodes well for 2027 and beyond. In the Middle East, the ongoing military conflict continues to create near-term uncertainty, specifically in the end markets exposed to tourism and hospitality. Nonetheless, wins remained strong, driven by the infrastructure demand, allowing us to deliver double-digit growth in backlog during the quarter. Further, after the quarter, we were awarded a large rail project in Saudi Arabia, which better positions us in an expanding rail market there. And there is likely to be a significant amount of work needed to repair, fortify and expand U.S. military infrastructure in the region, which presents another long-term growth opportunity for us. Asia remains soft, but backlog grew double digits year-over-year, driven by a large Northern Metropolis highway win, which is the first major transportation project tied to this initiative and a top priority development for the Hong Kong government. This positions us well, including on further opportunities as this mega project continues to advance. To conclude, I am extremely proud of the dedication of our professionals and their unmatched technical expertise that drive our business performance. With that, I'll turn the call over to Gaur.
Thanks, Lara. I want to start by highlighting several strengths that underpin our convictions in our strategy, the investments we are making to scale our strength and the long-term value of the business. First, winning. Our 1.6x book-to-burn and 13% backlog growth are tremendous accomplishments for a business that expanded. We've spoken for several quarters about the value we are delivering to clients through our differentiated offering. Advisory, program management and early AI wins are transforming client interactions and with it, our ability to bring unrivaled solutions. Not only are we winning more with existing clients, opportunities are now emerging in new markets where our scale and technology are opening new avenues for growth. Second, margins. The return to growth in international, delivering on our continuing improvement promise and early benefits from AI across our cost base are apparent. While performance was masked this quarter by the construction management project, underlying profitability demonstrates the opportunity ahead as we advance towards our 20% margin exit target for FY '28. Finally, our balance sheet and cash flow. We built a resilient balance sheet with no maturities for several years and cost certainty on majority of our debt. We ended the third quarter with $2 billion of undrawn borrowing capacity. And we've delivered positive free cash flow in the fiscal year-to-date period despite cash burn on the two construction management projects referenced earlier. We expect continued cash burn on these projects through the first half of fiscal 2027. Turning to our segments. In the Americas, NSR declined 29%, primarily reflecting the construction management charge. The design business increased 6% when adjusted for one less working day in the period. Beyond the project-related revenue impacts in construction management, NSR lagged our expectations as new construction management wins ramp up slower than we expected. Nonetheless, backlog in the design and construction management businesses continue to be strong and growing high single digits, while the design pipeline has also grown over 20% for three straight quarters. The Americas adjusted operating margin was negative 16.1%. Excluding the construction management impact, the margin was 18%, which reflects a few key items. The first factor was slower-than-anticipated start-up of several construction management wins, which affected utilization of resources. Second, we had record business development activities in the period that impacted Americas margin by approximately 140 basis points. Large pursuits in particular consume a lot of time and resources but provide a high ROI as evidenced by the segment 1.8x book-to-burn we delivered in the quarter. It should be noted that in quarterly periods in prior years, we have experienced similar impact to segment margins due to elevated business development spend. And consistent with those years, we will continue to deliver on the quarterly and annual enterprise margin targets. Accordingly, we expect Americas margins to normalize in the next quarter. Turning to International. NSR increased 4%. Australia and the U.K., in particular, are driving better growth. Our backlog continues to be strong, up 28% versus prior year. The International adjusted operating margin was 14.3%, reflecting much better growth in Australia, which is a higher-margin market, better margins in the U.K. from higher utilization and the initial benefits we are realizing from our proprietary AI strategy while continuing to invest consistent with our earlier guidance. Turning to financial impacts of construction management projects. NSR and EBITDA were impacted by $337 million. EPS was impacted by $1.99. Cash flow included a $185 million use. Because of this expected use and higher average debt balances, we expect our interest expense to be higher in 2027. We are currently estimating $30 million to $35 million of year-on-year impact. With respect to capital allocation, our returns-based discipline remains intact. There are no impacts to any ongoing or planned organic growth investments. With that, let's turn to Q&A. Operator?
分析師問答
Your first question comes from the line of Sabahat Khan with RBC Capital Markets.
Great. I appreciate the color you shared on the charges. I think between Troy and Gaur, you outlined the projects are on the way to getting completed. Maybe if you can just detail out — it looks like about a $100 million drawdown in the previous free cash guide for this year, and you mentioned more cash to finish these. Maybe you can detail the timeline from here to complete these projects and any metrics you can share around the cost to complete through late this year and into next year?
Sure. Thank you, Saba. So just in terms of the timeline on the two projects you're referring to, just to be clear, with our construction management business, there are two P3 design builds. They are the only ones that exist in that business. And the first project, which we did take the charge on during the quarter, we now expect to be complete in the second quarter of fiscal 2027. And the second project, which we also went through the same forecasting process, and there is no change to its delivery date, that will be in the first quarter of fiscal 2027. In terms of cash, the impact in the fourth quarter resulted in our overall free cash flow moving from $400 million for the full year down to $300 million for the full year. And as we go into 2027, we actually see this having a significant cash impact for the first two quarters of fiscal 2027 and the overall impact will be about $0.5 billion.
Great. And then maybe just on the base business guidance, can you detail the base business guidance revision and what was impacted there? And any early thoughts on how fiscal 2027 is shaping up for the base business with and without these projects?
Yes. Sure. Let me cover this at a high level, and then for some details I'll pass it over to Gaur. First of all, with respect to the base business, which is our design business and, of course, our construction management business, we've actually had a very good year in terms of winning work and building visibility into the future. We said in our results that our book-to-burn for the quarter was 1.6x across the entire business. Year-to-date, that's 1.4x, and that gives us good visibility. Within that backlog, we have focused on very large awards and programs, and they extend and provide multiyear visibility. As we look forward, the best way to describe it is we have confidence because of that visibility in our long-term growth algorithm, which we said is organic growth for the business between 5% and 8%. That's the best way to think about the entire business moving forward. I'll pass it over to Gaur to give you some detail.
In terms of the base business, echoing Troy's point: the base business continues to be very healthy, excluding the project charges we reported. That is evidenced by — if you exclude the project charge, there's no change in our earnings metrics. EPS and EBITDA for the year, we continue to expect to deliver what we had raised our guidance to last quarter. From an NSR standpoint, looking forward, there is an impact on NSR that is coming from our CM business and our international business compared to plan. Specifically, our CM business had large projects coming down from prior year, and there's a cadence when large projects drop off and new projects come online; there's a time lag. For one of those projects, specifically a convention center in Texas, that has been delayed for a few months. That impacted us in the current quarter for the CM business and will impact us in the next quarter as well. As importantly, many of our resources in that business are focused on delivering these two projects, which reduces availability for other ramping projects. That ties to the 1.9 book-to-burn in the current quarter. Moving to the design business, Americas design continues to be strong. Year-to-date, almost 7% organic growth adjusted for workdays. We expect that to continue into Q4 at that healthy run rate. When you step back and look at the backlog we have, it continues to provide that tailwind, including a very strong and healthy pipeline in our Americas business that we'll continue to capture and monetize. On the international side, the Middle East has gotten better compared to the second quarter. Hospitality, tourism and developer-related end markets are tougher right now for obvious reasons. At the same time, the wins we've had over the last nine months in the Middle East are very focused on transportation, infrastructure and rail, which is encouraging for FY 2027. Other guidance impacts we've shared include interest expense being impacted due to the cash burn on the terminal projects, as Troy highlighted. Share count will also be impacted because our focus is going to be on delivering these projects as we move forward. We're still in the early phases of planning for FY 2027, and I think that's the right color we have at this point in time.
Great. And if I could squeeze in a quick one: you mentioned some sensitivity analysis on getting these done. Can you share the level of confidence in getting these projects wrapped up in the next fiscal year and some sensitivity around the timeline?
Yes. Sure, Saba. On the first project where we took the charge: that project is in the phase where physical completion of the building is on track to the original deadline. What's impacting this is systems testing, integration and commissioning work, which is drawing that out. Based on the last six weeks of work, we have that project a little ahead of the schedule we had anticipated — think about that as 20% of the remaining completion. We forecasted based on recent production rates and built some slack into the schedule. In our scenario planning, we've included reasonable scenarios and are comfortable with our estimate to complete in the second quarter. On the other project, we have reforecasted and it has held. It is further along, effectively two months from completion. We're through almost physical completion and systems testing is underway. We forecasted based on historical subcontractor productivity rates. On both projects we have a degree of confidence in delivering within those time frames.
Your next question comes from the line of Andy Kaplowitz with Citi.
Troy, Gaur, margin was down year-over-year in the Americas in Q3 excluding the CM charge, which you said was a result of higher business development costs and timing of construction management. Yet you raised your overall margin forecast for '26, which looks driven by strong international margin. How should we think about Americas margin moving forward? You mentioned Americas margin will normalize in Q4, Gaur. Does that mean up year-over-year? And do we still expect to see a bigger increase in margin in FY 2027?
Andy, I'll take that question. The margin in the current quarter was impacted by business development efforts. Every few years, large pursuits converge and create a quarter with elevated BD spend; we experienced similar trends in FY '22 and FY '24. Our expectation is margins will normalize and be consistent with our historical cadence. You should expect Americas margin to normalize and be a little better than last year. International margins have been a very good story in the current quarter, and I expect those to continue in Q4. International margin improvement is driven by growth in Australia — which is a higher-margin market — and improved margins in the U.K. from higher utilization, plus initial benefits from our technology and AI efficiency tools. Combined with continued disciplined investment, this supports our confidence in margin expansion toward our FY '28 exit target of 20% plus.
That's helpful, Gaur. Troy, could you give more color on what changes you've made or will make to construction management to prevent a recurrence? You talked about double-digit backlog growth in CM and a record pipeline, but also about delays. Do you think CM can grow in line with your 5% to 8% algorithm next year, or could it be a drag?
Let me take those in reverse order. The 5% to 8% growth algorithm refers to the entire company, including construction management. If you look at CM separately, growth in CM will come in the second half of next year, not the first half. As backlog builds in CM, it takes time for the business to ramp, typically 12 to 18 months. The awards and wins we are seeing now will start contributing next year. Also, as we complete these troubled projects in the second quarter, people will be redeployed onto other projects as they ramp up.
Andy, on the other part of your question regarding CM changes: the first project where we've taken a charge was bid in December 2018. The second project was bid in March 2020. Over the past five to six years, we have revised our risk matrices and changed leadership in that business. Importantly, we no longer approve design-build P3 projects under our current commercial structure. These kinds of projects would not qualify under today's standards. Outside of these legacy projects, we don't have design-build P3s in our CM portfolio. So the program we are delivering now is under the current structure and time line.
Your next question comes from the line of Andrew Wittmann with Robert W. Baird.
I wanted to get an accounting on where the claims stand. In the 10-Q last quarter it was about $650 million. Where does it stand at the end of the quarter? And Gaur, is it fair to think of the total claim as the current amount on the books plus the roughly $500 million cash impact you mentioned for 2027? Also, how are you approaching recovery and what level of confidence do you have? Any detail would be helpful.
No, absolutely, Andy. In terms of claims, baseline to the prior quarter, you shouldn't expect a material change in the current quarter. It will be within that $600 million range. By the time these projects are completed, there won't be a material change in that number; it will be somewhere in the $600 million to $650 million range based on percentage of completion because these projects are largely complete. Regarding recovery, we will keep some of the tactical details confidential. There have been significant scope changes for which we've funded working capital that is far in excess of the claims on our books. We believe we have been prudent in reviewing all aspects of the claims — operational, financial and legal — and have put a number on the books that we feel confident in recovering. The amounts recorded on our books are a fraction of the total we are claiming against third parties.
Okay. The next area I wanted to ask about is the planned restructuring for fiscal '26. Earlier in the year you indicated $150 million to $200 million of restructuring costs. Through the first three quarters you've booked $54 million. Does that guidance range still hold? And is that one reason why Q4 margin is getting focus today, with a potential uptick sequentially?
Sure. Andy, our overall guidance stands; there's no change. Our strategy also remains intact. We're focused on how we approach clients and operate internally to create value. Demand and adoption for that change have been high. We're thoughtful about change management and ensuring clients see value. Our backlog growth this quarter and year-to-date demonstrates strong visibility supporting our growth algorithm. We'll continue to be thoughtful as we roll out changes and deliver client value. In terms of margin impact, the restructuring-related impacts will not be reflected in Q4 because most of the restructuring will take place later; you will see the benefits and margin impacts as we implement them and pivot how we approach differentiated offerings in the marketplace.
Your next question comes from the line of Steven Fisher with UBS.
I wonder if you could give us a sense of the timing of when those extra business development costs could translate into bookings and revenues? And what's the competitive environment looking like for these large pursuits at the moment?
Yes. I'll let Lara take that question.
The competitive environment remains consistent, and we are confident given the amount of work we've been winning and the growing pipeline. Win rates on substantial projects in excess of $50 million remain healthy. This quarter, in particular, the record wins of over $4 billion included marquee wins in the environment business. The federal program recompete gives us visibility and confidence over multiple years, and we also won a significant private client environment engagement. These were bid and won against the usual competitor set, and we were not in a joint venture for any of those wins; we won them on our own. The competitive landscape did include multi-headquartered combinations from some peers. I'll hand to Gaur to provide additional color.
Yes, Steve, thank you for noting the strong book-to-burn. The ROI from BD investments is immediate; you saw the benefit in the quarter. We invested margin hours in incremental BD time and will continue to do so because BD delivers immediate ROI. Our book-to-burn was 1.8x for Americas design, 1.9x for our CM business and 1.4x for international in the quarter. Contracting and revenue flow-through are with high-quality clients where revenue streams have been consistent regardless of political cycles, giving us confidence in the long-term algorithm. Another data point: our win rates continue to be 80% plus, including the results that produced the book-to-burn and backlog growth in the current quarter.
That's helpful. I'd also like to get a sense of the outlook for international growth — should we expect acceleration from here or mid-single digits steady pace? And on modeling Q4 Americas design, did you mean to indicate roughly 7% adjusted for workdays?
Steve, I'll start and then hand to Gaur for detail. Starting with international design: we have a healthy book-to-burn of 1.8x and a broad outlook tied to a healthy pipeline and strong win rates across key dimensions. Environment is strong, federal defense is growing, data center work is fast-growing, and other parts of the business are rebounding. Australia returned to double-digit revenue growth, backlog is up more than 40% year-on-year. U.K. continues to have long-term visibility from projects like Great Grid and AMP8. In the Middle East, infrastructure-focused wins are strong and capture rates on significant pipeline elements have been high. I'll hand to Gaur for specifics on Q4.
Yes. For Q4, Steve, you heard correctly: we expect Americas design to be about 7% adjusted for workdays. As for FY 2027, we think our long-term growth algorithm will continue to hold for the overall business. We are early in our planning process for FY 2027 and will provide more detail next time.
Your next question comes from the line of Sangita Jain with KeyBanc.
So if I can go back to the NSR growth algorithm. At the Analyst Day, the target excluded construction management from the equation. If we keep CM in the model the whole time, how should we think about that revenue algorithm on an apples-to-apples basis?
Sangita, I would think about the algorithm as applying to the entire business. At present, the entire business, including construction management, is captured in our long-term growth guidance of 5% to 8%.
Got it. And then on free cash flow and uses once the cash outflow on the legacy PM projects conclude: with leverage having picked up a bit, how are you thinking about use of free cash flow between deleveraging and buybacks?
I would think about it this way: first, we will remain focused on the highest-returning opportunities, and for us that is organic growth. We will continue to invest at the same pace in organic growth. We also remain committed to returning capital to shareholders through the dividend. After we get past the second quarter of next year and our leverage returns to a low level on a net and gross basis, we would expect to return more capital to shareholders, subject to valuation and other considerations.
Your next question comes from the line of Jamie Cook with Truist Securities.
I have two questions. First, on 2027: you said CM will grow that year and that growth is weighted to the second half of the year. Does that mean first half '27 organic growth could be weaker and then improve in the second half? Second, Troy, given the problems are related to the two projects and CM was under strategic review recently, have you scrubbed the other CM projects in backlog, and why is this a good business to be in?
Sure. First, it's a bit early to give full-year guidance for 2027, but your framing is reasonable: if CM contribution is weighted to the second half, you could see a ramp in growth through the year. Also note that construction management represents only about 6% to 7% of NSR in a typical year, so the scale of its swing is limited. Regarding the CM business review: yes, we have scrubbed the backlog and pipeline. These are the two projects with this profile — legacy design-build P3 projects. The rest of the backlog in the business has a very different, lower-risk profile: predominantly fee-for-service or GMP and guaranteed max price work. We made changes years ago about the types of projects we accept in the CM business, and that discipline is embedded today. We feel good about the business going forward. If you take these two projects out, CM historically produces very high returns and margins consistent with the broader Americas business, so it remains an attractive line of business.
Your next question comes from the line of Adam Bubes with Goldman Sachs.
As we think about the $500 million of costs in 2027 related to the two projects, how much of those costs do you have visibility on being reimbursed? Specifically, are you pursuing reimbursement of costs only or costs plus margin? And could you clarify accounting: those costs flow through with zero margin, so should we expect a margin headwind next year from construction management? What's the net revenue associated with those projects?
Adam, I'll take that. In terms of margin impact: the project where we've taken the charge has no remaining margin; the second project has very little margin remaining. When you look at go-forward NSR related to these two projects, there's very little NSR remaining — we're generally less than 5% NSR on total project value in CM, and both projects are more than 80% to 85% complete today. So there's very little NSR left. What's impacting results is the cash required to complete these projects and the redeployment constraint of resources that could otherwise be used on backlog. The cash use and the accounting are separate: the impairment recorded reflects the expected financial statement impact through completion, and the cash flow relates to the funding needed to finish them.
Adam, to add: think of it this way — from an accounting perspective, the impairment recorded this quarter captures the expected earnings impact through project completion. The cash flow impact is what we need to fund the projects through the next three quarters. The $500 million relates to cash use in the first two quarters of fiscal 2027. So the financial statements reflect the earnings impact and the cash flow reflects the funding requirements.
I appreciate the color. You mentioned risk evaluation changes and leadership changes in CM and that design-build P3s are no longer pursued. Can you explain how your bidding procedures and risk controls work today in CM — what level of risk do you still underwrite?
Sure. Gaur will take that.
Yes. Predominantly, in the CM portfolio we take on guaranteed maximum price (GMP) commercial terms. The process is: for the first 12 to 18 months we work on a time-and-materials (T&M) agency basis with the client to ensure designs are substantially complete — often 70% to 95% complete. Subcontract costs are forecasted, scheduled and bid in conjunction with the client. Once design risk is largely removed and construction documents are complete, we enter into GMP commercial terms. The biggest difference under this model is risk is flowed down to subcontractors and other parties performing the construction work. Our primary exposure is generally limited to our fee on those jobs.
I'll add two points. First, the work we take on today in CM has a risk profile similar to our design business. Second, decision-making for material projects has been revised and these projects undergo detailed review before bidding. We have a prohibition on taking design-build P3 projects, which was put in place years ago. We feel good about the business going forward. If you remove these two projects, CM historically delivers high returns and margins consistent with the broader Americas business.
Your next question comes from the line of Michael Dudas with Vertical Research Partners.
Troy, can you characterize the new business growth over the first three quarters — the roughly 29% or 30% growth. How much was from existing clients versus new clients, scope expansion versus new projects? What areas benefited most and are there areas where you plan to deploy organic investment to drive added growth?
Yes. The wins across the business and in this quarter were distributed across our major markets, and we have been particularly successful in the Americas. We have been pursuing very large programs because we're well suited to differentiate ourselves with deep global teams. Our win rates on those programs are very high, over 80%, which provides long-term visibility. Some of our investments and changes in delivery are opening up new markets where we previously had less presence. Those investments are creating opportunities to have different conversations with new customer groups, which is encouraging as we look forward.
What type of new customers or areas?
We're looking at the buildings and places market and program management. Our capabilities are enabling a stronger push into commercial markets, health care and data centers in a more robust way.
There are no further questions at this time. I will now turn the call back to Troy Rudd for closing remarks.
Again, thank you, everybody, for joining us today. And again, I want to thank our employees and our folks here at AECOM for their diligence in delivering projects and infrastructure for the customers. Thank you.
This concludes today's call. Thank you for attending. You may now disconnect.