AECOM reports third quarter fiscal 2024 results

• Increased earnings guidance for fiscal 2024
• Delivered record third quarter performance
• Backlog remains near an all-time high, and total pipeline is at a record level
• Returned $407 million to shareholders fiscal year-to-date, including $150 million of share repurchases since the end of the fiscal third quarter

AECOM (NYSE:ACM), the world's trusted infrastructure consulting firm, today reported third quarter fiscal 2024 results.

Third Quarter Fiscal 2024 Highlights:

• Reflecting as reported performance from continuing operations, revenue increased 13% to $4.2 billion, operating income increased to $227 million, net income increased to $129 million, and diluted earnings per share increased to $0.95.
• Net service revenue² increased by 8% to a record high, driven by growth across all of the Company's largest end markets and the benefits from continued addressable market expansion.
• The adjusted EBITDA margin⁵ increased by 130 basis points to 16.5% and the segment adjusted¹ operating margin³ increased by 110 basis points to 16.3%, both of which set quarterly records, reflecting strong execution and the high return on the Company's organic growth investments.
  • The Company is investing in growth while delivering record quarterly margins.
• Adjusted¹ EBITDA⁴ increased by 16% and adjusted¹ EPS increased by 23%.
• Total backlog increased and is near an all-time high.
  • The book-to-burn ratio⁸ in the higher margin Americas segment was 1.1.
  • The Company's win rate across the enterprise remains at a record high.
  • The pipeline of opportunities reached another new high, and the pipeline of larger $25+ million pursuits with decisions expected in fiscal 2025 is approximately 70% higher compared to this time last year.
  • Long-term demand and funding for investments in global infrastructure, sustainability and resilience, and the energy transition, combined with the Company's focus on expanding its addressable market and gaining market share, support its long-term annual 5 - 8% net service revenue growth target.

Fiscal 2024 Financial Guidance

• The Company increased its earnings guidance for fiscal 2024, including its expectation to deliver adjusted¹ EBITDA⁴ of between $1,075 million and $1,105 million and adjusted¹ EPS of between $4.45 and $4.55, reflecting 13% and 21% year-over-year growth, respectively.
• The Company's fiscal 2024 guidance also includes expectations for:
  • Organic NSR² growth at the lower end of the 8% to 10% range.
  • A segment adjusted¹ operating income margin³ of approximately 15.6%, representing a 90 basis point increase from fiscal 2023.
  • 100%+ free cash flow⁶ conversion, reflecting the highly cash generative nature of the Company's Professional Services business.
  • An average fully diluted share count of 136 million, which reflects only shares repurchased to-date, though the Company intends to continue repurchasing stock that would provide a benefit to per share earnings.
  • An adjusted effective tax rate of approximately 25% for the full year.
  • Return on invested capital⁹ (ROIC) of approximately 20%.
• See the Regulation G Information tables at the end of this release for a reconciliation of non-GAAP measures to the most directly comparable GAAP measures.

Cash Flow, Balance Sheet and Capital Allocation Update

• Third quarter operating cash flow of $291 million and free cash flow⁶ of $273 million, contributed to year-to-date free cash flow⁶ of $434 million, an increase of 32% over the prior year period.
• The Company's returns-focused capital allocation policy prioritizes investments in organic growth followed by share repurchases and dividends.
  • Inclusive of $150 million of share repurchases since the end of the fiscal third quarter and the Company's July dividend payment, the Company has returned $407 million to shareholders this year.
  • The Company has more than $700 million remaining under the current share repurchase authorization.

"Our third quarter performance was highlighted by record revenue and margins, strong cash flow growth, and we increased our earnings guidance for a second time this year, which reflects our competitive advantages," said Troy Rudd, AECOM's chief executive officer. "We have built a record pipeline, trends across our markets are strong, and we are energized by the opportunities ahead. As the number one ranked water, environmental engineering, transportation and facilities design firm by ENR, along with our most recent rise to number two in Program Management, the leadership position we've built in each of our market sectors is unrivaled. We remain confident in delivering on our near- and long-term financial commitments and will continue to deploy capital to share repurchases to fully realize the value creation opportunity."

"With record levels of investment across nearly every market in which we operate, clients are turning to AECOM now more than ever to help deliver the largest and most complex projects and programs in the world," said Lara Poloni, AECOM's president. "We are increasingly capitalizing on opportunities to expand our addressable market and lead with high-value advisory and consulting services that complement our industry-leading technical expertise. The investments we are making in our technical academies and in leadership development programs are fortifying and expanding this advantage as the employer of choice in our industry."

"Through our consistent execution, double-digit earnings growth and strong cash flow, we are delivering on the key elements of shareholder value creation," said Gaurav Kapoor, AECOM's chief financial and operations officer. "We are executing on our returns-focused capital allocation policy, which is led by share repurchases after investments in high-returning organic growth opportunities. We will not hesitate to continue deploying capital in this manner to maximize shareholder value."

Business Segments

Americas

Revenue in the third quarter was $3.2 billion. Net service revenue² was $1.1 billion, an 8% increase from the prior year.

Operating income increased by 11% over the prior year to $207 million. On an adjusted¹ basis, operating income increased by 11% to $212 million. The adjusted operating margin on net service revenue increased by 50 basis points to 19.3%. The Company's profitability reflects the strong returns on investments in business development, leadership development and technical training, as well as productivity enhancing investments in digital initiatives.

International

Revenue in the third quarter was $904 million. Net service revenue² was $729 million, a 7% increase from the prior year.

Operating income and adjusted¹ operating income both increased by 25% to $85 million. The adjusted operating margin on net service revenue increased by 180 basis points over the prior year to 11.7%, which marked a new quarterly high for the International segment. This result reflects the benefits of the Company's focus on its highest-returning end markets.

Balance Sheet

As of June 30, 2024, AECOM had $1.6 billion of total cash and cash equivalents, $2.5 billion of total debt and $897 million of net debt (total debt less cash and cash equivalents). Net leverage¹⁰ was 0.8x.

Tax Rate

The effective tax rate was 23.9% in the third quarter. On an adjusted¹ basis, the effective tax rate was 26.9%. The adjusted tax rate was derived by re-computing the quarterly effective tax rate on adjusted net income¹¹. The adjusted tax expense differs from the GAAP tax expense based on the taxability or deductibility and tax rate applied to each of the adjustments.

Conference Call

AECOM is hosting a conference call tomorrow at 8 a.m. Eastern Time, during which management will make a brief presentation focusing on the Company's results, strategy and operating trends, and outlook. Interested parties can listen to the conference call and view accompanying slides via webcast at https://investors.aecom.com. The webcast will be available for replay following the call.

About AECOM

AECOM (NYSE:ACM) is the world's trusted infrastructure consulting firm, delivering professional services throughout the project lifecycle – from advisory, planning, design and engineering to program and construction management. On projects spanning transportation, buildings, water, new energy, and the environment, our public- and private-sector clients trust us to solve their most complex challenges. Our teams are driven by a common purpose to deliver a better world through our unrivaled technical and digital expertise, a culture of equity, diversity and inclusion, and a commitment to environmental, social and governance priorities. AECOM is a Fortune 500 firm and its Professional Services business had revenue of $14.4 billion in fiscal year 2023. See how we are delivering sustainable legacies for generations to come at aecom.com and @AECOM.

Forward-Looking Statements

All statements in this communication other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws, including any statements of the plans, strategies and objectives for future operations, profitability, strategic value creation, capital allocation strategy including stock repurchases, risk profile and investment strategies, and any statements regarding future economic conditions or performance, and the expected financial and operational results of AECOM. Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements. Important factors that could cause our actual results, performance and achievements, or industry results to differ materially from estimates or projections contained in our forward-looking statements include, but are not limited to, the following: our business is cyclical and vulnerable to economic downturns and client spending reductions; potential government shutdowns or other funding circumstances that may cause governmental agencies to modify, curtail or terminate our contracts; losses under fixed-price contracts; limited control over operations that run through our joint venture entities; liability for misconduct by our employees or consultants; failure to comply with laws or regulations applicable to our business; maintaining adequate surety and financial capacity; potential high leverage and inability to service our debt and guarantees; ability to continue payment of dividends; exposure to political and economic risks in different countries, including tariffs, geopolitical events, and conflicts; currency exchange rate and interest fluctuations; retaining and recruiting key technical and management personnel; legal claims; inadequate insurance coverage; environmental law compliance and adequate nuclear indemnification; unexpected adjustments and cancellations related to our backlog; partners and third parties who may fail to satisfy their legal obligations; managing pension costs; AECOM Capital real estate development projects; cybersecurity issues, IT outages and data privacy; risks associated with the benefits and costs of the sale of our Management Services and self-perform at-risk civil infrastructure, power construction and oil and gas businesses, including the risk that any purchase adjustments from those transactions could be unfavorable and result in any future proceeds owed to us as part of the transactions could be lower than we expect; as well as other additional risks and factors that could cause actual results to differ materially from our forward-looking statements set forth in our reports filed with the Securities and Exchange Commission. Any forward-looking statements are made as of the date hereof. We do not intend, and undertake no obligation, to update any forward-looking statement.

Non-GAAP Financial Information

This press release contains financial information calculated other than in accordance with U.S. generally accepted accounting principles ("GAAP"). The Company believes that non-GAAP financial measures such as adjusted EPS, adjusted EBITDA, adjusted net/operating income, segment adjusted operating margin, adjusted tax rate, net service revenue and free cash flow provide a meaningful perspective on its business results as the Company utilizes this information to evaluate and manage the business. We use adjusted operating income, adjusted net income, adjusted EBITDA and adjusted EPS to exclude the impact of certain items, such as amortization expense and taxes to aid investors in better understanding our core performance results. We use free cash flow to present the cash generated from operations after capital expenditures to maintain our business. We present net service revenue (NSR) to exclude pass-through subcontractor costs from revenue to provide investors with a better understanding of our operational performance. We present segment adjusted operating margin to reflect segment operating performance of our Americas and International segments, excluding AECOM Capital. We present adjusted tax rate to reflect the tax rate on adjusted earnings. We also use constant-currency growth rates where appropriate, which are calculated by conforming the current period results to the comparable period exchange rates.

Our non-GAAP disclosure has limitations as an analytical tool, should not be viewed as a substitute for financial information determined in accordance with GAAP, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies. A reconciliation of these non-GAAP measures is found in the Regulation G Information tables at the back of this release. The Company is unable to reconcile certain of its non-GAAP financial guidance and long-term financial targets due to uncertainties in these non-operating items as well as other adjustments to net income. The Company is unable to provide a reconciliation of its guidance for NSR to GAAP revenue because it is unable to predict with reasonable certainty its pass-through revenue.