AECOM reports first quarter fiscal 2023 results

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, 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; 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; 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; AECOM Capital real estate development projects; managing pension cost; cybersecurity issues, IT outages and data privacy; risks associated with the expected benefits and costs of the sale of our Management Services and self-perform at-risk civil infrastructure, power construction and oil and gas construction businesses, including the risk that any contingent purchase price adjustments from those transactions could be unfavorable and result in lower aggregate cash proceeds and any future proceeds owed to us under those 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, 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 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 represent the cash generated after capital expenditures to maintain our business. We present net service revenue to exclude subcontractor costs from revenue to provide investors with a better understanding of our operational performance. We present adjusted operating margin to reflect segment operating performance of our Americas and International segments, excluding AECOM Capital.

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 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.


AECOM
Consolidated Statement of Income
(unaudited - in thousands, except per share data)

	Three Months Ended
	December 31, 2021			December 31, 2022			% Change

Revenue	$	3,266,716		$	3,382,355		3.5	%
Cost of revenue		3,066,512			3,167,367		3.3	%
Gross profit		200,204			214,988		7.4	%
Equity in earnings of joint ventures		7,950			9,829		23.6	%
General and administrative expenses		(36,501	)		(35,612	)	(2.4	)%
Restructuring costs		(3,371	)		(37,459	)	1011.2	%
Income from operations		168,282			151,746		(9.8	)%
Other income		2,874			7,870		173.8	%
Interest expense		(25,383	)		(36,700	)	44.6	%
Income from continuing operations before taxes		145,773			122,916		(15.7	)%
Income tax expense for continuing operations		22,556			25,765		14.2	%
Income from continuing operations		123,217			97,151		(21.2	)%
Loss from discontinued operations		(61,940	)		(388	)	(99.4	)%
Net income		61,277			96,763		57.9	%
Net income attributable to noncontrolling interests from continuing operations		(5,456	)		(9,644	)	76.8	%
Net loss attributable to noncontrolling interests from discontinued operations		5,727			826		(85.6	)%
Net loss (income) attributable to noncontrolling interests		271			(8,818	)	(3353.9	)%
Net income attributable to AECOM from continuing operations		117,761			87,507		(25.7	)%
Net (loss) income attributable to AECOM from discontinued operations		(56,213	)		438		(100.8	)%
Net income attributable to AECOM	$	61,548		$	87,945		42.9	%

Net income (loss) attributable to AECOM per share:
Basic continuing operations per share	$	0.83		$	0.63		(24.1	)%
Basic discontinued operations per share		(0.40	)		—		(100.0	)%
Basic earnings per share	$	0.43		$	0.63		46.5	%

Diluted continuing operations per share	$	0.81		$	0.62		(23.5	)%
Diluted discontinued operations per share		(0.38	)		0.01		(102.6	)%
Diluted earnings per share	$	0.43		$	0.63		46.5	%

Weighted average shares outstanding:
Basic		141,778			138,687		(2.2	)%
Diluted		144,637			140,642		(2.8	)%

AECOM
Balance Sheet Information
(unaudited - in thousands)

	September 30, 2022			December 31, 2022
Balance Sheet Information:
Total cash and cash equivalents	$	1,172,209	$		1,160,350
Accounts receivable and contract assets, net		3,723,111			3,922,228
Working capital		418,639			469,749
Total debt, excluding unamortized debt issuance costs		2,224,602			2,225,775
Total assets		11,139,315			11,405,670
Total AECOM stockholders’ equity		2,476,654			2,555,634

AECOM
Reportable Segments
(unaudited - in thousands)

	Americas			International			AECOM Capital			Corporate			Total

Three Months Ended December 31, 2022:
Revenue	$	2,579,311		$	802,796		$	248		$	—		$	3,382,355
Cost of revenue		2,416,406			750,961			—			—			3,167,367
Gross profit		162,905			51,835			248			—			214,988
Equity in earnings of joint ventures		883			3,298			5,648			—			9,829
General and administrative expenses		—			—			(2,678	)		(32,934	)		(35,612	)
Restructuring costs		—			—			—			(37,459	)		(37,459	)
Income (loss) from operations	$	163,788		$	55,133		$	3,218		$	(70,393	)	$	151,746

Gross profit as a % of revenue		6.3	%		6.5	%								6.4	%

Contracted backlog	$	19,238,125		$	3,930,046		$	—		$	—		$	23,168,171
Awarded backlog		15,680,479			1,751,686			—			—			17,432,165
Unconsolidated JV backlog		224,259			—			—			—			224,259
Total backlog	$	35,142,863		$	5,681,732		$	—		$	—		$	40,824,595

Total backlog – Design only	$	14,218,518		$	5,681,732		$	—		$	—		$	19,900,250


Three Months Ended December 31, 2021:
Revenue	$	2,463,477		$	802,461		$	778		$	—		$	3,266,716
Cost of revenue	2,313,529			752,983			—			—				3,066,512
Gross profit	149,948			49,478			778			—				200,204
Equity in earnings of joint ventures	3,269			3,585			1,096			—				7,950
General and administrative expenses	—			—			(2,999		)	(33,502		)		(36,501	)
Restructuring costs	—			—			—			(3,371		)		(3,371	)
Income from operations	$	153,217		$	53,063		$	(1,125	)	$	(36,873	)	$	168,282

Gross profit as a % of revenue	6.1		%	6.2		%	—			—				6.1	%

Contracted backlog	$	18,681,217		$	4,104,551		$	—		$	—		$	22,785,768
Awarded backlog	14,749,909			1,063,481			—			—			15,813,390
Unconsolidated JV backlog	201,066			—			—			—				201,066
Total backlog	$	33,632,192		$	5,168,032		$	—		$	—		$	38,800,224

Total backlog – Design only	$	13,345,789		$	5,168,032		$	—		$	—		$	18,513,821

AECOM
Regulation G Information
(in millions)

Reconciliation of Revenue to Net Service Revenue (NSR)
	Three Months Ended
	December 31, 2021		September 30, 2022		December 31, 2022
	December 31, 2021		September 30, 2022		December 31, 2022
Americas
Revenue	$	2,463.5	$	2,618.9	$	2,579.3
Less: Pass-through revenue		1,575.7		1,671.4		1,655.6
Net service revenue	$	887.8	$	947.5	$	923.7

International
Revenue	$	802.4	$	806.8	$	802.8
Less: Pass-through revenue		148.1		165.3		133.9
Net service revenue	$	654.3	$	641.5	$	668.9

Segment Performance (excludes ACAP)
Revenue	$	3,265.9	$	3,425.7	$	3,382.1
Less: Pass-through revenue		1,723.8		1,836.7		1,789.5
Net service revenue	$	1,542.1	$	1,589.0	$	1,592.6

Consolidated
Revenue	$	3,266.7	$	3,426.1	$	3,382.4
Less: Pass-through revenue		1,723.8		1,836.7		1,789.5
Net service revenue	$	1,542.9	$	1,589.4	$	1,592.9

Reconciliation of Total Debt to Net Debt
	Balances at
	December 31, 2021		September 30, 2022		December 31, 2022
	December 31, 2021		September 30, 2022		December 31, 2022

Short-term debt	$	6.7	$	5.0	$	4.6
Current portion of long-term debt		41.4		43.6		48.4
Long-term debt, excluding unamortized debt issuance costs		2,180.9		2,176.0		2,172.8
Total debt		2,229.0		2,224.6		2,225.8
Less: Total cash and cash equivalents		1,082.4		1,172.2		1,160.4
Net debt	$	1,146.6	$	1,052.4	$	1,065.4

Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
	Three Months Ended
	December 31, 2021			September 30, 2022			December 31, 2022
	December 31, 2021			September 30, 2022			December 31, 2022

Net cash provided by operating activities	$	194.9		$	315.6		$	120.0
Capital expenditures, net		(32.2	)		(58.2	)		(36.3	)
Free cash flow	$	162.7		$	257.4		$	83.7

AECOM
Regulation G Information
(in millions, except per share data)

	Three Months Ended
	Dec 31, 2021			Sep 30, 2022			Dec 31, 2022
Reconciliation of Income from Operations to Adjusted Income from Operations
Income from operations	$	168.3		$	184.0		$	151.7
Restructuring costs		3.4			18.5			37.5
Amortization of intangible assets		4.7			4.7			4.7
Adjusted income from operations	$	176.4		$	207.2		$	193.9

Reconciliation of Income from Continuing Operations Before Taxes to Adjusted Income from Continuing Operations Before Taxes
Income from continuing operations before taxes	$	145.8		$	154.4		$	122.9
Restructuring costs		3.4			18.5			37.5
Amortization of intangible assets		4.7			4.7			4.7
Financing charges in interest expense		1.2			1.3			1.2
Adjusted income from continuing operations before taxes	$	155.1		$	178.9		$	166.3

Reconciliation of Income Taxes for Continuing Operations to Adjusted Income Taxes for Continuing Operations
Income tax expense for continuing operations	$	22.6		$	33.0		$	25.8
Tax effect of the above adjustments*		2.3			7.2			10.2
Valuation allowances and other tax only items		(4.2	)		6.9			—
Adjusted income tax expense for continuing operations	$	20.7		$	47.1		$	36.0
^* Adjusts income taxes during the period to exclude the impact on our effective tax rate of the pre-tax adjustments shown above.

Reconciliation of Net Income Attributable to Noncontrolling Interests from Continuing Operations to Adjusted Net Income Attributable to Noncontrolling Interests from Continuing Operations
Net income attributable to noncontrolling interests from continuing operations	$	(5.4	)	$	(6.0	)	$	(9.6	)
Amortization of intangible assets included in NCI, net of tax		(0.1	)		(0.1	)		(0.2	)
Adjusted net income attributable to noncontrolling interests from continuing operations	$	(5.5	)	$	(6.1	)	$	(9.8	)

Reconciliation of Net Income Attributable to AECOM from Continuing Operations to Adjusted Net Income Attributable to AECOM from Continuing Operations
Net income attributable to AECOM from continuing operations	$	117.8		$	115.4		$	87.5
Restructuring costs		3.4			18.5			37.5
Amortization of intangible assets		4.7			4.7			4.7
Financing charges in interest expense		1.2			1.3			1.2
Tax effect of the above adjustments*		(2.3	)		(7.2	)		(10.2	)
Valuation allowances and other tax only items		4.2			(6.9	)		—
Amortization of intangible assets included in NCI, net of tax		(0.1	)		(0.1	)		(0.2	)
Adjusted net income attributable to AECOM from continuing operations	$	128.9		$	125.7		$	120.5
^* Adjusts the income taxes during the period to exclude the impact on our effective tax rate of the pre-tax adjustments shown above.

AECOM
Regulation G Information
(in millions, except per share data)

	Three Months Ended
	Dec 31, 2021			Sep 30, 2022			Dec 31, 2022
Reconciliation of Net Income Attributable to AECOM from Continuing Operations per Diluted Share to Adjusted Net Income Attributable to AECOM from Continuing Operations per Diluted Share
Net income attributable to AECOM from continuing operations per diluted share	$	0.81		$	0.82		$	0.62
Per diluted share adjustments:
Restructuring costs		0.02			0.13			0.27
Amortization of intangible assets		0.03			0.03			0.03
Financing charges in interest expense		0.01			0.01			0.01
Tax effect of the above adjustments*		(0.01	)		(0.05	)		(0.07	)
Valuation allowances and other tax only items		0.03			(0.05	)		—
Adjusted net income attributable to AECOM from continuing operations per diluted share	$	0.89		$	0.89		$	0.86
Weighted average shares outstanding – basic		141.8			139.6			138.7
Weighted average shares outstanding – diluted		144.6			141.3			140.6
^* Adjusts the income taxes during the period to exclude the impact on our effective tax rate of the pre-tax adjustments shown above.

Reconciliation of Net Income Attributable to AECOM from Continuing Operations to EBITDA to Adjusted EBITDA and to Adjusted Income from Operations
Net income attributable to AECOM from continuing operations	$	117.8		$	115.4		$	87.5
Income tax expense		22.6			33.0			25.8
Depreciation and amortization		41.1			44.1			43.4
Interest income ⁽²⁾		(1.3	)		(2.3	)		(5.9	)
Interest expense		25.4			33.3			36.7
Amortized bank fees included in interest expense		(1.2	)		(1.2	)		(1.2	)
EBITDA	$	204.4		$	222.3		$	186.3
Restructuring costs		3.4			18.6			37.5
Adjusted EBITDA	$	207.8		$	240.9		$	223.8
Other income		(2.9	)		(3.7	)		(7.9	)
Depreciation ⁽¹⁾		(35.3	)		(38.3	)		(37.7	)
Interest income ⁽²⁾		1.3			2.2			5.9
Noncontrolling interests in income of consolidated subsidiaries, net of tax		5.4			6.0			9.6
Amortization of intangible assets included in NCI, net of tax		0.1			0.1			0.2
Adjusted income from operations	$	176.4		$	207.2		$	193.9
⁽¹⁾ Excludes depreciation from discontinued operations. ⁽²⁾ Included in other income.

Reconciliation of Segment Income from Operations to Adjusted Income from Operations
Americas Segment:
Income from operations	$	153.2		$	169.5		$	163.8
Amortization of intangible assets		4.3			4.4			4.4
Adjusted income from operations	$	157.5		$	173.9		$	168.2

International Segment:
Income from operations	$	53.0		$	57.6		$	55.1
Amortization of intangible assets		0.4			0.3			0.3
Adjusted income from operations	$	53.4		$	57.9		$	55.4

Segment Performance (excludes ACAP):
Income from operations	$	206.2		$	227.1		$	218.9
Amortization of intangible assets		4.7			4.7			4.7
Adjusted income from operations	$	210.9		$	231.8		$	223.6

AECOM
Regulation G Information

FY2023 GAAP EPS Guidance based on Adjusted EPS Guidance
(all figures approximate)		Fiscal Year End 2023
GAAP EPS guidance		$3.21 to $3.47
Adjusted EPS excludes:
Amortization of intangible assets		$0.12
Amortization of deferred financing fees		$0.04
Restructuring expenses		$0.28 to $0.21
Tax effect of the above items		($0.11) to ($0.09)
Adjusted EPS guidance		$3.55 to $3.75

FY2023 GAAP Net Income Attributable to AECOM from Continuing Operations Guidance based on Adjusted EBITDA Guidance
(in millions, all figures approximate)		Fiscal Year End 2023
GAAP net income attributable to AECOM from continuing operations guidance*		$453 to $490
Adjusted net income attributable to AECOM from continuing operations excludes:
Amortization of intangible assets		$17
Amortization of deferred financing fees		$5
Restructuring expenses		$40 to $30
Tax effect of the above items		($15) to ($13)
Adjusted net income attributable to AECOM from continuing operations		$500 to $529
Adjusted EBITDA excludes:
Depreciation		$152
Adjusted interest expense, net		$120
Tax expense, including tax effect of above items		$163 to $174
Adjusted EBITDA guidance		$935 to $975
*Calculated based on the mid-point of AECOM’s fiscal year 2023 EPS guidance.

FY2023 GAAP Interest Expense Guidance based on Adjusted Net Interest Expense Guidance
(in millions, all figures approximate)		Fiscal Year End 2023
GAAP interest expense guidance		$135
Finance charges in interest expense		($5)
Interest income		($10)
Adjusted net interest expense guidance		$120

FY2023 GAAP Income Tax Expense Guidance based on Adjusted Income Tax Expense Guidance
(in millions, all figures approximate)		Fiscal Year End 2023
GAAP income tax expense guidance		$148 to $161
Tax effect of adjusting items		$15 to $13
Adjusted income tax expense guidance		$163 to $174

Note: Variances within tables are due to rounding.

AECOM
Regulation G Information

FY2023 GAAP Operating Cash Flow Guidance based on Free Cash Flow Guidance
(in millions, all figures approximate)		Fiscal Year End 2023
Operating cash flow guidance		$575 to $775
Capital expenditures, net of proceeds from equipment disposals		($100)
Free cash flow guidance		$475 to $675

FY2023 GAAP Income from Operations as a % of Revenue Guidance based on Segment Adjusted Operating Income as a % of Net Service Revenue Guidance
(all figures approximate)	Fiscal Year End 2023
Income from operations as a % of revenue	5.6%
Pass-through revenues	7.8%
Amortization of intangible assets	0.1%
AECOM Capital income from operations	(0.1)%
Corporate net expense	1.0%
Restructuring expenses	0.2%
Segment adjusted operating income as a % of net service revenue	14.6%

Note: Variances in tables are due to rounding.

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