Good morning, and welcome to the AECOM F ourth Quarter 2021 Conference Call. I would like to inform all participants that 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 where you may register your questions by pressing star followed by one on your telephone keypads. If you change your mind and would like your question removed from the queue, you may do so by pressing star and then two. I would now like to turn the call over to Will Gabrielski, Senior Vice President, 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 on our website. References to margins and adjusted operating margins reflect the performance for the Americas and International segment. We will refer to net service revenue, or NSR, which is defined as revenue excluding pass-through revenue.
Our discussion of year-over-year NSR growth for the fourth quarter and full year is adjusted to exclude the benefit of the extra week for the prior year fourth quarter. As a reminder, we sold the managed and services business in January 2020, and we closed on the sale of the power and civil construction businesses in October 2020 and January 2021 respectively. The financial results of these businesses are classified as discontinued operations in our financial statements. Today's comments will focus on our 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 strategy and key accomplishments. Lara Poloni, our President, will discuss key operational priorities, and Gaurav 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. I wanna begin by acknowledging our teams across the globe whose contributions made fiscal 2021 a tremendous success. Our people remain our greatest assets, and it's because of their commitment to our success that we are so well positioned for the future. I'm proud of our team's accomplishments, and I'm energized by the opportunity we see in 2022 and beyond. Turning to our results. We exceeded our expectations on every key metric, highlighted by accelerating organic NSR growth, record operating margins, double-digit earnings growth, and strong cash flow. It really was a very successful year. Our NSR for the fourth quarter increased by 6.5%, which marked a third consecutive quarter of accelerating organic growth and included strong contributions from both the Americas and International businesses.
We delivered a 14.8% segment adjusted operating margin in the fourth quarter and 13.8% for the full year. Both results exceed our expectations and extend our lead over the industry. To put this performance into context, our margin in the fourth quarter is more than 600 basis points higher than in fiscal 2018. This performance directly reflects the high value we provide to clients and the actions we have taken to create the best industry delivery platform. Looking back to February at our Investor Day, we set margin targets at the time that were very ambitious. Today, we're ahead of schedule on our plans. We have even greater conviction in our 17% longer-term goal, which we now view as achievable rather than aspirational.
Importantly, our strong margins afford us the opportunity to accelerate investments in our teams to drive organic growth and into our Digital AECOM capabilities, which I will discuss in greater detail in a moment. Turning to earnings. We delivered at the high end of our guidance ranges for both Adjusted EBITDA and EPS. Full year Adjusted EBITDA was $830 million, and adjusted EPS was $2.82, which marked an 11% and a 31% increase respectively. Free cash flow was $583 million and was driven by our strong earnings and continued high cash flow conversion. Our cash flow result is a testament to the focus on efficiently converting our earnings to cash, as well as the high quality, low-risk mix of our business.
We have repurchased more than $1 billion of stock since last September, or 13% of the company, and we have $940 million remaining under our current authorization. We remain committed to repurchasing stock with available cash and cash flow, which we believe is the best and highest returning use of our capital after our investments in growth. Turning to our wins and backlog. Our win rate remains high, and we continue to gain market share. We delivered $3.7 billion of wins in the fourth quarter, including a 1.2 book-to-burn ratio in the design business. Our contracted backlog, which is a key indicator of revenue growth, increased by 18% and included 4% growth in the design business. Our pipeline of opportunities is up to double digits in the Americas design business.
Based on our clients' strengthening funding backdrop, including benefits from the $1.2 trillion infrastructure bill in the U.S., we expect our backlog to continue to grow. Overall, our performance demonstrates that we are outgrowing the industry organically and capturing market share. There are two areas in particular that highlight our success and showcase the value we deliver to clients. First, we set as a key objective to substantially grow our program management business, and we are delivering. This is especially apparent in the Middle East, where we had several recent successes on high priority and larger programs where a combination of technical leadership, global thinking, and program management expertise were instrumental in our success.
This includes winning significantly expanded program management and design roles in transformational projects in Saudi Arabia, such as for AlUla City and a large transportation project in Qatar, where more than 100 employees have joined AECOM from the incumbent to support this work. Second, we are demonstrating our leadership on ESG. Our investment at the Natural Capital Laboratory in the U.K. is a great example. We established this project in 2019 to study the environmental change and biodiversity impact with precision by leveraging drones, artificial intelligence, GIS data, and thermal imaging. The ability to more exactly measure the impacts of decarbonization is a critical element for the global agenda to drive decarbonization and carbon sequestration.
Our investment in our work at the NCL underscores how AECOM and our professionals are leading in the development of standards and methods to measure decarbonization, which will be especially important for creating reliable markets for sustainability investments. Please turn to the next slide. I mentioned earlier that our strong performance in fiscal 2021 has created the opportunity to accelerate investments and expand our advantages. We break these investments into three categories: people, clients, and digital. Beginning with our people, we're in a knowledge-based business, and our diverse professionals serve as our greatest advantage. Therefore, it is critical that we have the right culture and programs in place to attract and retain the best talent in the industry. To do this, we've implemented a flexible work model designed to facilitate optimal work-life balance.
In addition, we've enhanced the benefit programs and increased our investment in technical and professional development. Most importantly, our people are winning and delivering the most challenging and iconic projects. All this culminates in a culture of high engagement, high satisfaction, and low attrition. Turning to how we deliver for clients. We are leading with our higher-margin program management and advisory capabilities and investing across our key account programs to ensure our clients are benefiting from our best expertise globally. We're also developing technology to automate and pre-populate certain elements of our designs, which capitalizes on our vast expertise, accelerates the design process, and extends the capacity of our workforce. Finally, today we unveiled Digital AECOM, which brings together all of our innovative digital capabilities. After more than a year of focused investment in the launch of many digital solutions, we are now formally rolling out our digital products.
A great example of this is PlanEngage, our digital platform that reinvents the public engagement process for an infrastructure project by creating greater certainty on cost, time, and stakeholder management. Successful community engagement is a critical step in a project. This process is rarely digitized. PlanEngage simplifies this process by integrating all the key elements of a project into a digital tool, which allows our clients to capture information to make more informed decisions and advance projects more quickly. The solution is years ahead of the competition by our estimation, and we see PlanEngage becoming the industry standard. With the passage of the Infrastructure Act in the U.S., this tool will be even more valuable. Across these focus areas, one theme is constant. Our investment will expand our advantage as demand grows and labor constraints challenge some in our industry.
Please turn to the next slide. Looking to fiscal 2022 and beyond, the spotlight on infrastructure has never been brighter. In the U.S., the $1.2 trillion Infrastructure Investment and Jobs Act marks a generational investment in America's infrastructure. This bill provides much-needed long-term funding certainty across our strongest end markets, such as transit modernization, electrification, environmental remediation, and climate resilience. Importantly, we are positioned to benefit from nearly every line item over the coming years, and we expect the most meaningful benefits in fiscal 2023 and beyond. In addition to the strengthened federal funding environment, all of our state and local clients are on equally strong footing. Today, state DOT budgets are significantly above prior projections, and their fiscal outlooks are stronger.
Our public sector pipeline in the U.S. is up double digits, and with the strong funding backdrop now in place, we anticipate the pace of decisions will accelerate as well. Our international markets are equally strong. Conditions in our largest markets have improved, and we're delivering strong growth across all major international markets in the fourth quarter. In addition, we had strong backlog growth in each of our larger geographies. I'm especially pleased to see that our strategy with a focus on program management contributing to the success in places like the Middle East and in key transportation wins in the U.K., where regaining market share has been a key priority. As the number one ranked transportation, facilities, and environmental engineering firm, as well as the number two ranked water design firm, we are uniquely positioned to benefit. Turning to our financial guidance.
$80 million and $920 million, and between $3.20 and $3.40. This reflects 8% and 17% growth at the respective midpoints. Underpinning this growth is an expectation for another year of accelerating organic NSR growth and at least 30 basis points increase in our margins.
To another record high of 14.1%. Our guidance incorporates all the planned growth investments we are making in our people, business development. I want to comment on the 2024 financial projections we shared at our Investor Day in February. Based on our strong performance to date and the returns we expect on our investments, we are raising our long-term adjusted EPS guidance to at least $4.75 in fiscal 2024. This would represent a more than doubling of our fiscal 2020 earnings and a nearly 20% CAGR from 2021- 2024. With that, I'll turn the call over to Lara.
Thanks, Troy. To our new strategy and their many accomplishments in fiscal 2021. In particular, I'd like to highlight our success on some of our larger key pursuits. Our global approach, technical leadership, program management capabilities, advisory expertise, and multi-year investments are bearing fruit. A great example of this is in the Middle East, where we prioritize as a long-term growth opportunity. We have gained market share with wins from mega cities, including NEOM and AlUla in Saudi Arabia. Key to these successes was the integration of global capabilities, including expertise from every region and market sector. Our culture of collaboration has truly distinguished us from competitors, particularly as our clients work to address multi-decade investment programs that require more holistic thinking.
Another great example is in the U.S., where we were recently selected for a large program for a client in many verticals, including in PFAS, even as PFAS expertise wasn't the main criteria in the pursuit. High win rate over the past year and our confidence in continued market share gain. Looking ahead, our clients continue to prioritize investments in ESG, and we are well-positioned to capitalize on this trend. At the COP26 summit earlier this month, this commitment was front and center as the most prominent public and private sector voices spoke with unity on the challenge and beyond. Last week, which includes disclosures aligned with the SASB and TCFD frameworks. This report is an important step in our ESG journey and underscores our commitment to regularly communicating our progress on our sustainable legacy strategies.
Finally, Troy Rudd spoke about our focus on ensuring we attract and retain the industry's best talent and strong position. To that point, we conducted a global employee survey in September that revealed very strong levels of engagement, including as a great place to work. High employee engagement is also leading to the highest client satisfaction scores in our company's history in fiscal 2021. With our momentum, we are in an enviable position from which to deliver another strong year in fiscal 2022. With that, I will now turn the call over to Gaurav Kapoor for the outlook in greater detail.
Thanks, Lara Poloni. Our fourth quarter and full year results serve as clear evidence of the strength of our business and the benefit of our focus strategy growth. The highest margins in our double-digit Adjusted EBITDA adjusted EPS growth and a seventh consecutive year of free cash flow at or above our guidance range. Our strong opportunities to invest in organic growth while also bolstering our confidence, organic growth, and financial goals. Importantly, all of this was achieved while making critical investments in people, teams, and digital capabilities that will sustain our advantages in fiscal 2022 and beyond. Please turn to the next slide. In the Americas in the fourth quarter, including growth in both design and construction management businesses, contracted backlog increased by 21% to set a new record.
This included growth in the design business and a large construction contract backlog and firmed up our outlook for the year. I should note that our awarded backlog was reduced by $1.3 billion as a result of this client-only project at this time. The shift is not material to our growth outlook, for the construction management business is higher than it ever has been in many years. The fourth quarter adjusted operating margin was 19.8%, a 290 basis point increase from the prior year to a new all-time high and reflects strong execution. Please turn to the next slide. Turning to the International segment, NSR increased by 6% in the fourth quarter, including growth across all of our largest regions, and backlog increased by 10%.
This is a result of our organic growth investments, market share gains, steadily improving market conditions. Our adjusted operating margin in the third quarter was 7.4% and we're confident in our goal of achieving double-digit international margins. Please turn to the next slide. Turning to cash flow, liquidity, and capital allocation. Fourth quarter free cash flow of $290 million contributed to full year free cash flow of $583 million. Our performance reflects the benefit of our improved cash phasing throughout the year, which allowed us to accelerate our stock repurchases. We have now repurchased nearly 20.5 million shares since September 2020, for approximately 13% of our starting share count at an average price of approximately $51. As we look ahead, we will continue to make critical investments to build on our industry-leading organic growth.
As a result, we expect our capital expenditures in fiscal 2022 to include investments primarily relating to the advancement of our digital strategy, as well as ongoing investments to reconfigure our real estate footprint to support our flexible work programs. These investments will impact the conversion of our earnings to free cash flow in fiscal 2022. However, the underlying cash generation within the business is from $150 million- $650 million in fiscal 2022. Importantly, our investments in growth and innovation will continue to separate us from our peers, and we are progressing towards our 17% longer term margin target. Please turn to the next slide.
For fiscal 2022, we are guiding to Adjusted EBITDA of between $880 million and $920 million, or 8% growth at the midpoint and adjusted EPS of $3.20 and $3.40, or a 17% growth at the midpoint. This guidance contemplates the improved market conditions we're experiencing today, our substantial backlog and pipeline, and the benefits of our investment in our people, client, and digital capabilities. To be clear, this guidance does not reflect any expected benefit from the recently passed legislation in the U.S., which, as Troy mentioned, is expected to benefit us more materially in fiscal 2023 and beyond. We expect our NSR growth to accelerate to approximately 6% in fiscal 2022. This is all organic growth.
In addition, we project a further 30 basis points of margin expansion to 14.1% as we continue to expand our lead on the industry while investing in people, clients, and innovation. I also want to emphasize that our adjusted EPS guidance only incorporates the benefit of our share repurchases completed to date, though we expect to continue to buy back stock in fiscal 2022 as part of our capital allocation program. Also incorporated into our guidance is a 26% effective tax rate. I should note that we expect our EBITDA to track with our phasing in fiscal 2021. As a result, our EPS phasing may be more first half weighted than our seasonal pattern.
With our outperformance in fiscal 2021, our expectation for strong growth again in fiscal 2022, and the successful launch of our digital platform, we're also increasing our long-term financial targets for fiscal 2024. This includes our expectation to now achieve adjusted EPS of at least $4.75 in fiscal 2024, which is 10% above our prior projection and is nearly 20% compounded annual growth rate from 2020. Operator, we are ready for questions.
Thank you very much. If you have a question please register this now by pressing star followed by one and ask the question. Please ensure that your device is unmuted likely. Today comes from Sean Eastman from KeyBanc. Sean, your line is open.
Hi, team. Great update here. I just wanted to start on the organic NSR guidance for next year. Could you give us a flavor of how that 6% looks maybe by design versus construction management, international versus domestic? If we're at 6% for fiscal 2022, what's the updated CAGR built into revised fiscal 2024 target?
Sean, it's Troy. Thank you for the question. First of all, when we look forward, we actually see that organic growth being relatively even across all of our businesses. When we think about our construction management and our, you know, U.S. design business, part of what we've been working to accomplish is to have them work together. When we deliver a project in construction management, there's a material or significant design element to it. Again, we look at the market backdrop, and it is increasingly positive and the business momentum is increasingly positive. We see it across the Americas. We also see something similar internationally. Again, we see the opportunities across the entire portfolio of our business improving over the course of this next year.
It's driven by the momentum that we're seeing in the business, but also by increasingly positive markets. You know, if we look longer term, the investment that is being made in infrastructure here in the U.S. and being made in infrastructure globally is very significant and long lasting. We actually see that being accelerated by all the various p ublic and private, you know, ESG ambitions. Right? We think about it as a catalyst for really a large long-term investment being made in infrastructure. We almost think about this as a, you know, global infrastructure investment renaissance. It's a really unusual time.
Hey, Sean, this is Gaurav. We do have a 6% CAGR built in for our long-term guidance as well. Now, keep in mind, you know, off the strong 2021 and actually a very strong start to 2022 in regards to wins as well, what it does not include is any material impact in fiscal year 2022 for the Jobs Act. Confident in our projections for 2022 before Jobs Act provided confidence now. But we really haven't fully baked it in either. As we get more incremental upside to that.
Okay, super helpful. I guess the growth tailwinds in the U.S. are pretty obvious around the Jobs Act, but in the prepared remarks you guys highlighted some big PM wins in the Middle East. Sounds like you unseated an incumbent there. Talked about some strength in the U.K. Maybe you could just expand on the market share element in the international business. I just wanna make sure we're getting the right takeaway there.
Sure. On gaining market share is isolated to international.
Yep.
We really see this across the business. Specifically with international, we are seeing opportunities across the business in program management and in, again, as I said, you know, larger programs. You've got Canada that's making very significant investments in infrastructure. Australia's making those investments. The U.K. is making those investments. We see that in the Middle East. Layer on top of that a lot of investments in their own infrastructure, and they're, again, driven around driving their environment that they've set out. We see this broadly across our entire portfolio.
Again, the accelerant to that for us has been how we're delivering work for clients, how we're focused on bringing the best that we have around the globe to those particular focus that we have on providing that front-end advice and those program management services. Our clients are investing in projects over the next, let's say, between five and eight years because of the accelerated investments in infrastructure. Our clients need help to manage that CapEx. It's not just doing the design work and doing the construction work, but actually being there to help them manage these large CapEx programs, which are far larger than they've had in the past years. You know, for us, investing in building a program management business is our way to participate in that.
We view this as we're participating in those projects sooner, in a more meaningful way, and frankly longer by having our program management business.
Okay, excellent. I'll sneak one last one in. 30 basis points of margin expansion for fiscal 2022. You're also saying investments in BD, HR, digital are accelerating. What would you say the underlying expansion is there if we kinda neutralize those investments, and what kind of tail should we expect on the level of investment in the business that you're highlighting here for fiscal 2022?
Sean, this is Gaurav Kapoor again. I'll take that question. You know, just keep in mind, we're coming off in fiscal year 2021, where expectations were at 13.2%, and we over-delivered on those.
Yeah.
Simply put, even when you look at 2022 and beyond, we're ahead of schedule in certain regards, way ahead of schedule. Nine months ago, when we provided a long-term guidance of 15% being achievable, that being a ceiling, today where we sit of what we've accomplished, 17%, which was ambitious, we now have building blocks that are taking place as part of the investments we're making into the business that we made in 2021 and will continue into 2022. We're focused on our key geographies where we dominate in the business lines that we operate in those geographies, and it's taking with strategy.
You know, 50,000 of the brightest professionals in this industry taking their ideas to our clients and delivering value to them, which you're seeing in our capture rates, highest ever we've experienced in our history. This is all before the infrastructure renaissance Troy spoke to.
Very helpful. Thanks so much, gents. I'll turn it over.
Thank you, Sean, for your question. Our next question comes from Andrew Kaplowitz from Citigroup.
Good morning, everyone.
Morning, Andrew.
Troy, maybe you can give us a little more Americas design. You mentioned your Americas contracted backlog up 21%, although a lot of that is construction management. For instance, from some of your state and local customers who I think last quarter seemed to still be relatively careful about moving forward, especially considering the U.S. infrastructure bill signed today.
We did see an improvement in the overall Americas business in terms of the client decision making. More importantly, we saw a willingness and some very clear agendas to put some long-term programs in place. A lot of this was being done even without the support of the federal infrastructure bill. Now, again, we're working towards the assumption that it will be signed today at 3:00 P.M. When that happens, it certainly provides support for even broader infrastructure investment at the state and local government level. I just, you know, again, I'll just use the example of New York and New Jersey.
You know, there are plans for the large transit and transportation agencies in the New York-New Jersey area to invest over the next five years almost $200 billion in capital programs. That was before the passage of the IIJA. Obviously, this support broadly to those agencies. We saw an acceleration in the pipeline. First of all, what we were seeing in terms of the wins, but also in terms of the pipeline of opportunities. We see this being accelerated, expanded beyond what we've already seen and then into 2023.
Andrew, if I can-
Go ahead. Sorry.
Expand on Troy's points. I mean, in terms of the IIJA, we see all of our capability being brought to every single line item of investment in that. That portfolio that's coming up is a good balance of long-term planning work for a lot of these infrastructure agencies, as well as a very robust pipeline of design build. The other thing I think that we're seeing a lot of near-term opportunities in is a very robust program of federal work where we're very strongly positioned as well. I think we're in a great position to attack.
Say it's a bit of conservatism then that you're forecasting, you know, NSR to be up 6% in 2022. I think it's up, you know, underlying 6.5% in Q4. I don't think your comps get much more difficult. Anything else going on to think about? Because it seems like, you know, you could even have acceleration off Q4 levels.
Yeah. Again, I think as we tried to point this out in our prepared comments that we increased our long-term view based on the performance of the business to date. Also what we saw is the momentum being created in the business and the success that our people have been having with their clients and the investments that we've made. We really haven't sorted out exactly what that will mean. We simply think it provides upside to our results. You know, we try and at least be, you know, somewhat conservative. You know, we just don't want to be out kind of, you know, making some statements where we don't.
Like just in terms of the free cash flow guidance, is $21 at the midpoint? Is that just extra CapEx and the investments you're making? Anything else to think about in terms of conversion 2022 versus 2021?
Yeah. It's exactly what you stated. We're making conscious decisions we see coming and also expansion of our margins. No longer, like I said, 15%, but really putting the building blocks in place for 17%. It's investment in our digital, in our IT investments. And when you look at the conversion, the underlying cash flow of the business remains strong. We've always said it will be in the mid-70%, and that's what you see for fiscal year 2022. Free cash flow conversion lower because of CapEx.
Appreciate all the color.
Yeah. Thanks, Andrew.
Our next question comes from Andrew Wittmann from Baird. Andy, please .
Great. I want to just keep going on the free cash flow question there, Gaurav, a little. CapEx is up like $40 million. Should we think of that full delta as unusual? It sounds like there's a little bit of added CapEx this year. If you could also just refresh us. I mean, there's some other items in your free cash flow guidance for this year. Could you remind us of the CARES Act headwind? I think you have to pay back half of that here in the fiscal first quarter. It looks like you've got $20 million-$30 million of restructuring costs. Are those cash or non-cash? I just want to get a better sense of what the underlying free cash flow are.
Maybe, if you wanted to comment, are there any unusual collections to the positive in your guidance for this year that we should be aware of as well? Sorry, there's a lot of pieces in there, but I think that'll capture it if you address those. Thanks.
No problem, Andrew. Hopefully, I respond to all of them. Please let me know if I don't. In regards to the CapEx, the $40 million, it is proper to think about it as a temporary investment we're making into the business for all the reasons Troy and I've stated earlier. There's nothing unusual related to the CARES Act or restructuring. We've had restructuring cash flow in the current year. What we're expecting the 20- 30 we incur in predominantly in our real estate and IT infrastructure as we progress to a flexible workplace of the future. Those are gonna be predominantly cash in the year. We incurred that in 2021 as well. There's so many puts and takes, Andrew, it's hard to just point at one unusual item, either in 21 or 22.
We have 10s of thousands of projects going on at a given point in time, so it's hard to be that precise.
Fair enough. Troy, I thought we'd just check in with you on, I guess, the staffing of the organization, the utilization of the organization and the capacity of the company to handle more work. Could you just talk about how much more flexibility your people that you currently have to do that work and what the recruiting environment looks like and what that means for your overall kind of compensation, labor inflation characteristics? I think you kinda understand where we're headed here.
Yep. That was a very big, broad question. I'll do the same thing. I'll be like Gaurav. Hopefully, I'll hit them all, and if I don't, remind me. Just at a high level, absolutely. We're not unlike anyone else. There certainly is constraints in terms of our ability to bring people on in the industry. As we see the business growing, there's no question that becomes even more important, retaining and attracting very talented people to the organization. In terms of this year, you know, again, so far this year, we've added about 1,000 people to the organization. As we move forward, we're focused on creating a great place for people to have a career.
The things that we're doing, flexible workplace is an important element of that, right? It's actually creating an environment where people are comfortable, they want to be, and it's a great place for them to be. We're looking at investing in their technical and their professional development. We've also evaluated things like, you know, benefits and compensation and making sure that, you know, we're certainly at the market for that, which all that does, again, as you said, can create some labor inflation. But the nature of our business is that a lot of those costs in our contracts are passed along to our customers.
You know, if you have time and materials or cost plus contracts, there's always escalations built into that. As we move forward and bid projects, those costs get built into our, you know, into our rates, and they get passed on to our customers. More importantly, there's something that we're doing which we think is the more important element of this, which is through our investments in how people are delivering their work, which, you know, we refer to this as element of our digital investments or digital transformation. You certainly can't ask people to work harder than they are. What we're doing is we're looking to making these investments in digital and extending what they can, you know, what they're able to accomplish with their workday.
Frankly, at the same time, it creates a better work environment. It creates an environment that's more fun and more challenging in terms of your career. That's a market concern and a concern that we have. Then the last thing is, you know, we're continuing to build centers of excellence so that, you know, we excel by being members or participating in these centers of excellence or great capability. That's, you know, that's it's something that's not gonna impact our margins because our industry passes along to customers. We think we've done some so that we can, you know, manage through what would be a great problem to have. It's not something that our industry has had to deal with for a decade.
Fair enough. Thank you for the responses. Have a good day.
From Steven Fisher from UBS. Steven, please go ahead.
Thanks. Good afternoon. Good morning. I just wanted to come back again to the digital investments that you're making. If you could give us some sense of are they all through CapEx, or are there some examples of I mean, it sounds like it's IT, but maybe just some examples of what kind of investments you're making and then just how you know, there'll be a less visible drag after fiscal 2022.
Sure. Steve, I'm gonna let Gaurav answer the margin question. But first, just let me answer the second half of that question, which is, we don't see this being a drag on the business or margins. We actually see this as an important path for us, you know, again, moving beyond the 15% target into the 17% range. How the value that we deliver to customers and how we deliver it is what's improving our margins. We're not cutting costs. You know, there certainly is some money that we're investing in the business to get there, and we'll continue to invest that. But we believe that's just an ongoing journey. It will be an ongoing journey. It's not a one-time investment. That's part of how we're gonna continue to invest to change the way we deliver work.
The other important point here is that we're not announcing something new. We've actually been working on this and investing in this for about 18 months. What we're doing is we're starting to unveil the things that we're already having success with. I made reference to something that we call PlanEngage in my comments. PlanEngage is a digital tool that we've been working with customers throughout the globe for this past year, and they've been using it as the tool for the permitting process, especially during COVID. This is something we think is gonna become even more valuable, and we believe that this PlanEngage large agencies will use it to engage with their communities to get their projects approved. It really is a unique product.
Again, as I said, we're not unveiling it. We've already had success with it and with large transportation and transit agencies around the world. T hat's an example of the things that we're talking about.
Steven, specific to both. Initially when we're developing it'll go to monetize in the marketplace, or if it's internally focused to Troy alluded to expand the efficiency of our workforce. At that time, it'll go through OpEx.
Okay. That's very helpful. Just related to the stimulus, given that, you know, like you said, it's essentially being signed this afternoon, does this trigger any particular type of action inside the company? Is this sort of like, or is it gonna be more of a wait and see? You know, like, do you have any now? Internally, see how you're going to approach this and what today's activities actually trigger inside the company, if anything?
You know, obviously had line of sight to this for a long period of time, and that activity has been talking to our clients to figure out how it's going to impact them and helping them understand how they can take advantage of it. You know, that dialogue and that planning has been going on for a while. Obviously, as we've been getting closer to something getting signed, that activity has been accelerating. It's just a continuing ongoing discussion with our clients about, you know, helping them think through their plans and think through, you know, how they're gonna take advantage of this. But more importantly, as they take advantage of it, how are they gonna do that? You know, clients or agencies whose CapEx could be increasing by 10 times or more than that.
That's why we say, you know, having a program management team to help them through that is so important, and that's the investment we've been making. We're not doing anything all of a sudden as of this afternoon. We've been thinking about this and working with our clients over a long period of time.
Steven Fisher, it's Lara Poloni. I mean, back to Troy Rudd's earlier comments, it's no different than applying to all of the infrastructure programs around the world, and we see a similar very significant pipeline of opportunity. There's a very strong infrastructure outlook and our program management capabilities that we're growing, our front-end advisory. They are the critical areas of support that all of these key infrastructure agencies are looking for and where we're very strongly positioned to address that at global scale going forward.
Terrific. Thank you very much.
Thanks, Steve.
Our next question comes from Michael Feniger from Bank of America. Michael, please go ahead.
Yes. Hey, guys. Thanks for taking my questions. We're seeing a lot of M&A right now in the engineering space, including, you know, private equity. Just how are you in the business at this stage versus acquisition with where maybe multiples are today?
It's a good question, Michael. There are obviously, you know, again, there are two points of view in this. We have our very clear stated point of view is that we believe that invest in organic growth and return capital to our shareholders. I just wanna mute this all this stuff on my... Thank you. Again.
Sorry.
Invest in organic growth and at the same time returning capital to shareholders is our stated point of view. There are all kinds of ways to look at it, but we're looking at the long-term CAGR of cash earnings. If you look at a long-term CAGR of cash earnings, we believe, as we've said, we think that we're, you know, in the 20% range at how capital is deployed, that the long-term CAGR is perhaps lower than that. Now, this also comes with the, you know, the ability to actually integrate businesses and more importantly, integrate cultures, which can be a difficult thing to do and takes years to find out whether you're successful.
We just have our point of view that we believe now that we have the opportunity to invest in our business and have turned it into the highest performing business in the industry, with the highest margins. We believe continuing to do that produces the best result for our investors, which is the highest long-term, you know, cash earnings CAGR or cash earnings per share CAGR.
Thanks, Troy. I guess just to follow up with that, you're, I think, 1 x levered. If we assume the midpoint of your EBITDA growth and another good year free cash flow, I mean, your leverage would move down considerably, just at status quo. What is the right net leverage range for us to think about this business with the stability and the runway we see over the next year? Is there any view of like instituting a dividend given the stability of this business? Just curious of how to think about that leverage range as well as we're moving into this growth period.
Yeah. I guess first I'll simply say this, that that's an ongoing dialogue we have with the board, right? How we allocate capital is an important question that we have continued to evaluate and answer. Today we're very clear on what that answer is. You're right. As our business grows, our net leverage, you know, will decline, meaning that we say one is the right place to be for our business. You know, if we look at that we have, the certainty we have around the business, the cost of capital that comes along with our current leverage ratio or our leverage position, then we just think we're in a very good spot to be, which is 1x net leverage. You're right. As we move forward, we will create an even larger opportunity to invest.
What you described that, you know, the question about dividends, that's just an ongoing dialogue we have with our board about what is the right way to think about allocating capital. Today we're very clear on what that answer is.
Our next question comes from Jamie Cook from Credit Suisse. Jamie, your line is open.
Hi, good morning. Nice quarter. I guess.
Hey, Jamie. Thank you.
Two questions. You know, you guys have made good progress on reducing the cyclicality or the seasonality associated with the free cash flow. I'm just wondering if there's any more opportunities there or, you know, in 2022. I guess just my second question. I know you're still committed to sort of the double-digit margins in the international business, but just sort of, you know, the timeline to get there. Are we ahead of schedule where you think you should be? Thanks.
Jamie, this is Gaurav. I'll take both of those questions. In regards to cash, you know, we had a very strong conversion of 80% in 2021, and the quality of the cash flow was very strong. Phasing was good. Our focus across all key operational metrics is of continuous improvement. There's always gonna be opportunities, you know, to negotiate better terms, better working capital management, and that's what we're gonna be focused on to make sure that our phasing is optimal and we're extracting the maximum amount of conversions possible.
In regards to the margins for International, as I said in my opening comments, we had 80 basis points growth in 2021, and we expect that growth in margin to continue in International as we march towards double-digit margins in International business. It's all being supported by strategy we're able to go after in the market and executing upon them profitably. We see no hindrance to our ambitions in International margins.
Thank you.
Thanks, Jamie.
Our final question today comes from Michael Dudas from Vertical Research Partners. Michael, please go ahead.
Good morning, gentlemen, Lara.
Hi, Michael.
Two thoughts. First, maybe you can elaborate a little bit more on the opportunities. I know you're basically focused on transportation infrastructure, but on your water business, I would think that there's been some funding and some opportunities certainly here and abroad that could be very supportive. So maybe just share some thoughts on that. To follow up with that, you know, you mentioned in your prepared remarks, COP26 and the excitement there, thereabouts. You know, how's the private and public sector balance of work prior to this to the conference? Is that some an accelerant that you'll see that we see some visibility in some of the global design business and the opportunities for energy transition advice and efforts?
Certainly, obviously the wind farm project infrastructure is quite a nice award last quarter, that going forward in your plan the next, let's say next 12 month- 24 months.
Okay. Yeah, Mike. Mike, it's Gaurav. I'll take the first one, and then I'll share the second one with Lara Poloni. First of all, you're right. There is a subset that is baked into the Infrastructure Investment and Jobs Act. Again, there's some large line items, including $15 billion that are dedicated to improving drinking water infrastructure projects. There's a significant amount, and I think it's over $50 billion that is focused on PFAS and eliminating emerging contaminants. And then there's also money that will go and help improving water quality at the state level. There again, this infrastructure bill is just so significant that we focus on the transportation element.
You're right, there's a lot of money that's going into aviation, a significant amount of money going into water, and certainly in terms of environmental remediation and contaminants, which we'll participate in. Then, you know, there are other line items included in there. There's $21 billion being dedicated to just environmental remediation work for Superfund sites. There just are all these line items that are scattered through there that are in that budget. As we've said, we believe that we participate in a meaningful way in almost every single line item in that bill. I'll let Lara answer your COP question.
Yeah, sure. Thanks for the question. It's very timely. As you know, we in April launched our sustainable legacy strategy just last week. As Troy said, we also released our sustainability report. COP was very timely for us and such a great platform for us to showcase our tremendous ESG capabilities, which we've had for a number of years. I feel like we're really bringing all that together very strongly, and it was great to see and have such a strong presence in showing at COP, and to see so many nations coming together to talk about the serious challenges of climate change and to talk about the sort of financial commitments that are gonna be required to achieve that.
For us, it was just a fantastic opportunity to showcase all of that and to talk to many of our partners and clients about how we take that forward. You know, it's a core element of our ESG strategy going forward, and I think we're in the strongest position in the industry to make that one of our key growth strategies going forward.
Yeah. Just to add two quick points to what Lara said, which is, you know, what's been happening in the last six months has been a little unusual in that we've seen private financial institutions, banks, insurance companies and, you know, other providers of private capital, change their thinking about where they're going to allocate it. Towards ESG related projects that, you know, that provide return environmentally and socially and away from other projects, which again, we think is important because that's going into different types of infrastructures we're positioned to support. The other thing that has come out of COP that for us we think is fantastic is, you know, we're participating in determining how in fact decarbonization or sequestration is going to be measured.
Because today the standards for measurement and how you go about measuring that are still as yet undetermined. Until that happens and there's certainty around it makes it very difficult to actually have markets, right, where you're actually selling carbon credits. You know, we've been doing an investment in that. We mentioned our natural capital project during the call. But we're also, you know, working again through a group that is standardizing the terms of actually measuring so that we can support decarbonization markets. I really think that that provides us a great leadership opportunity.
Excellent. Thanks, Lara. Thanks, Troy.
Thank you, Michael.
We currently have no further questions. I'll now hand back to CEO Troy Rudd for any closing remarks.
Well, again, thank you for your time today and participating in the call. I just wanna remind everybody, I wanna give a big thank you to our people for doing such a fantastic job in delivering this past year and creating momentum in the business. I hope you've walked away with understanding that there are tremendous opportunities in front of us that are long term, that we haven't seen in a long period of time, and we look forward to talking to you and catching up in our next earnings call. Thank you.
Thank you everyone for joining today. This now concludes our conference call. Please disconnect your lines.