AECOM reports second quarter fiscal year 2019 results

LOS ANGELES–(BUSINESS WIRE)–AECOM (NYSE:ACM), a premier, fully integrated global infrastructure
firm, today reported second quarter fiscal year 2019 results.

         
Second Quarter First Half Fiscal 2019

($ in millions,
except EPS)

    As Reported    

Adjusted1
(Non-GAAP)

   

As Reported
YoY %
Change

   

Adjusted
YoY %
Change

As Reported    

Adjusted1
(Non-GAAP)

   

As Reported
YoY %
Change

   

Adjusted
YoY %
Change

Revenue     $5,040         5%     $10,078         4%    
Operating Income     $168     $211     NM     18% $252     $395     189%     17%
Net Income     $78    

$109

    NM     0% $129     $198     NM     (1%)
EPS (Fully Diluted)     $0.49     $0.69     NM     3% $0.81     $1.24     NM     0%
EBITDA         $235         17%     $442         16%
Wins     $8,100         17%     $17,800         37%    
Backlog     $61,014         22%2                        
                       

Second Quarter and First Half Fiscal 2019
Accomplishments:

  • Revenue of $5.0 billion in the second quarter increased by 5% over the
    prior year; organic3 revenue increased by 7%, highlighted
    by 14% and 10% growth in the Company’s higher-margin Management
    Services and Americas design businesses, respectively.
  • Net income and diluted earnings per share were $78 million and $0.49
    in the second quarter, respectively, compared to net loss of $120
    million and diluted loss per share of $0.75 in the prior year, which
    included a $168 million non-cash charge on non-core Oil & Gas assets
    held for sale; on an adjusted basis, diluted earnings per share1
    was $0.69.
  • Second quarter adjusted EBITDA1 increased by 17% over the
    prior year to $235 million, which reflected strong execution,
    favorable end market trends, and the benefits of the Company’s $225
    million G&A reduction plan.
  • Year-to-date adjusted EBITDA1 increased by 16% to $442
    million.
  • Total backlog increased by 22%2 and set a new record at $61
    billion.
  • Wins in the quarter were $8.1 billion, highlighted by an 18-month
    extension at the Savannah River Site for the U.S. Department of
    Energy, a 1.2 book-to-burn4 ratio in the Americas design
    business; year-to-date wins of $18 billion set a new record with broad
    strength across the business.
  • Second quarter operating cash flow of $107 million and free cash flow5
    of $85 million were consistent with expectations, with the exception
    of negative impacts from continued working capital investment to
    support storm recovery efforts in the U.S. Virgin Islands.
  • The Company is reiterating its full year financial guidance for
    adjusted EBITDA1 growth of 12% at the mid-point, adjusted
    EPS1 in the range of $2.60-$2.90, and free cash flow5
    in the range of $600-$800 million; the Company expects to achieve at
    least $1 billion of adjusted EBITDA in fiscal 2020.

Committed to Delivering Strategic Value
Creation Actions and Fiscal 2022 Financial Targets:

  • AECOM has completed nearly all of the actions necessary to achieve its
    expected $225 million of annual G&A savings by fiscal 2021, and the
    Company expects to achieve an adjusted operating margin1 in
    the DCS segment of at least 7% in fiscal 2019 and at least 7.5% in
    fiscal 2020.
  • In order to reduce its risk profile and simplify its operating
    structure, the Company is accelerating its review of its at-risk
    construction exposure and is no longer pursuing at-risk construction
    opportunities in international markets.
  • Collectively, these actions position the Company to capitalize on its
    record backlog by focusing resources on higher-margin and lower-risk
    professional services businesses where its competitive advantages are
    greatest and financial returns are highest.
  • The Company remains committed to its fiscal 2018-2022 financial
    targets, including a 9% adjusted EBITDA1 CAGR, a 12%-15%
    adjusted EPS1 CAGR, and at least $3.5 billion of cumulative
    free cash flow5.
  • The Company continues to execute on its capital allocation priorities
    with $210 million of shares repurchased to-date under its $1 billion
    Board authorized repurchase plan; if the stock remains attractively
    valued, management expects to seek to expand its repurchase capacity
    and maximize value for its stockholders, while continuing to target
    achieving 2.5x net leverage6 by year end.

We delivered 17% adjusted EBITDA growth in the second quarter and 16%
adjusted EBITDA growth in the first half of the fiscal year, which
reflects strong execution on our $225 million G&A reduction plan that
best positions us to maximize the profitability of our record $61
billion backlog,” said Michael S. Burke, AECOM’s chairman and chief
executive officer. “Because of this performance, we are confident in
achieving our guidance for 12% adjusted EBITDA growth this year, and we
are on track with our financial targets for adjusted EBITDA, adjusted
EPS, and free cash flow through fiscal 2022. Our more efficient
operating structure, robust end market trends, and strong execution
create a favorable environment for us, and we are capitalizing, as
evidenced by a record $18 billion of wins in the first half of the year.
To maximize the value creation opportunity in the long run, we remain
committed to allocating substantially all available free cash flow to
execute share repurchases under our $1 billion authorization, while in
the short run we will pay down debt to achieve our 2.5x net leverage
target by the end of the fiscal year.”

Our earnings performance in the first half of the year has exceeded our
expectations,” said W. Troy Rudd, AECOM’s chief financial officer.
While free cash flow has been impacted by ongoing investments in
working capital to support storm recovery efforts in the U.S. Virgin
Islands, these impacts are expected to be timing related only, and we
expect to deliver free cash flow between $600 million and $800 million
for the fifth-consecutive year. We are committed to achieving 2.5x net
leverage by the end of fiscal 2019 through debt reduction and EBITDA
growth, and allocating substantially all available free cash flow to the
best and highest use, which remains share repurchases.”

Wins and Backlog

Wins were $8.1 billion and resulted in a book-to-burn ratio4
of 1.5. Wins included strong contributions across the business,
highlighted by an 18-month extension at the Savannah River Site for the
U.S. Department of Energy, a 1.2 book-to-burn ratio in the Americas
design business, and substantial wins in the Building Construction
business. Total backlog increased by 22%2 over the prior year
to $61 billion, which set a new record for the Company and increases
visibility into future growth.

Business Segments

Design & Consulting Services (DCS)

The DCS segment delivers planning, consulting, architectural and
engineering design services to commercial and government clients
worldwide in markets such as transportation, facilities, environmental,
energy, water and government.

Revenue in the second quarter was $2.1 billion and increased by 5%.
Constant-currency organic3 revenue increased by 8%. This
performance was highlighted by 10% organic growth in the Americas, which
was driven by the water and transportation markets, including a positive
contribution from the storm recovery efforts in the Caribbean and
Southeastern U.S. In addition, international design markets delivered
positive organic growth.

Operating income was $135 million compared to $123 million in the
year-ago period. On an adjusted basis, operating income1 was
$140 million compared to $130 million in the year-ago period. Adjusted
operating income increased over the prior year period due to strong
performance across the business and the benefits from the $225 million
of G&A reductions.

Construction Services (CS)

The CS segment provides construction services for energy, sports,
commercial, industrial, and public and private infrastructure clients.

Revenue in the second quarter was $1.9 billion and increased by 2%.
Constant-currency organic3 revenue increased by 4%, due
primarily to continued strong contributions from the Civil construction
and Energy businesses, and a slight decline in the Building Construction
business.

Operating income was $24 million compared to operating loss of $180
million in the year-ago period. On an adjusted basis, operating income1
was $36 million compared to $26 million in the year-ago period.
The increase in adjusted operating income was due to strong project
execution.

Management Services (MS)

The MS segment provides program and facilities management and
maintenance, training, logistics, consulting, technical assistance and
systems-integration services and information technology services,
primarily for agencies of the U.S. government, national governments
around the world and commercial customers.

Revenue in the second quarter was $1.0 billion. Revenue and organic3
revenue growth increased by 14%, reflecting strong conversion of a
record level of backlog and strong funding for the U.S. Departments of
Defense and Energy clients.

Operating income was $51 million compared to $43 million in the year-ago
period. On an adjusted basis, operating income1 was $61
million compared to $53 million in the year-ago period. The increase in
adjusted operating income is the result of strong revenue growth and
execution on the business’s record backlog, and a favorable funding
environment.

AECOM Capital (ACAP)

The ACAP segment invests in and develops real estate projects. Revenue
in the second quarter was $1.5 million and operating income was $9.5
million. During the quarter, ACAP completed the sale of a property that
resulted in an approximately 40% IRR and an approximately $10 million
gain on its investment.

Tax Rate

The effective tax rate in the second quarter was 18.3%. On an adjusted
basis, the effective tax rate was 23.0%. The adjusted tax rate was
derived by re-computing the annual effective tax rate on earnings from
adjusted net income.7 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.

Cash Flow

Operating cash flow for the second quarter was $107 million and free
cash flow5 was $85 million. Strong underlying cash
performance was offset by continued working capital investment related
to the Company’s storm recovery work in the U.S. Virgin Islands.
Excluding this impact, cash performance was consistent with
expectations, and the Company expects its annual free cash flow for
fiscal 2019 to be in line with prior guidance of $600 million to $800
million.

Balance Sheet and Capital Allocation

As of March 31, 2019, AECOM had $827 million of total cash and cash
equivalents, $3.9 billion of total debt, $3.1 billion of net debt and
$1.04 billion in unused capacity under its $1.35 billion revolving
credit facility. During the quarter, the Company repurchased $30 million
of stock and has repurchased 6.7 million shares since August 2018 under
its $1 billion Board authorization.

Financial Outlook and Impacts of Strategic
Actions

AECOM’s fiscal 2019 financial guidance is as follows:

      Fiscal Year 2019 Outlook
Adjusted EBITDA1       $920 – $960 million
Adjusted EPS1       $2.60 – $2.90
Free Cash Flow5       $600 – $800 million
Adjusted Interest Expense

(excluding amortization of deferred financing fees)

      $200 million
Amortization8       $89 million
Full-Year Share Count       160 million
Effective Tax Rate for Adjusted Earnings7       ~25%
Capital Expenditures9       ~$120 million

AECOM continues to expect to incur restructuring costs of between $80
and $90 million in fiscal 2019, nearly all of which have been actioned.
The Company continues to expect total cash costs for the restructuring
of between $60 and $70 million.

Also included in the Company’s fiscal 2019 guidance is approximately $13
million of EBITDA from AECOM Capital contributions.

Conference Call

AECOM is hosting a conference call today at 12 p.m. Eastern Time, during
which management will make a brief presentation focusing on the
Company’s results, strategies and operating trends. Interested parties
can listen to the conference call and view accompanying slides via
webcast at http://investors.aecom.com.
The webcast will be available for replay following the call.

1   Excluding acquisition and integration-related items,
transaction-related expenses, financing charges in interest expense,
foreign exchange gains, the amortization of intangible assets,
financial impacts associated with expected and actual dispositions
of non-core businesses and assets, restructuring costs and the
revaluation of deferred taxes and one-time tax repatriation charge
associated with U.S. tax reform. If an individual adjustment has no
financial impact then the individual adjustment is not reflected in
the Regulation G Information tables. See Regulation G Information
for a reconciliation of Non-GAAP measures.
2 On a constant-currency basis.
3 Organic growth is year-over-year at constant currency and excludes
revenue associated with actual and planned non-core asset and
business dispositions. Results expressed in constant currency are
presented excluding the impact from changes in currency exchange
rates.
4 Book-to-burn ratio is defined as the amount of wins divided by
revenue recognized during the period, including revenue related to
work performed in unconsolidated joint ventures.
5 Free cash flow is defined as cash flow from operations less capital
expenditures net of proceeds from disposals.
6 Net debt-to-EBITDA, or net leverage, is comprised of EBITDA as
defined in the Company’s credit agreement, which excludes
stock-based compensation, and net debt as defined as total debt on
the Company’s financial statements, net of cash and cash equivalents.
7 Inclusive of non-controlling interest deduction and adjusted for
acquisition and integration expenses, financing charges in interest
expense, the amortization of intangible assets and financial impacts
associated with actual and planned dispositions of non-core
businesses and assets.
8 Amortization of intangible assets expense includes the impact of
amortization included in equity in earnings of joint ventures and
non-controlling interests.
9 Capital expenditures, net of proceeds from disposals.

About AECOM

AECOM (NYSE:ACM) is built to deliver a better world. We design, build,
finance and operate critical infrastructure assets for governments,
businesses and organizations. As a fully integrated firm, we connect
knowledge and experience across our global network of experts to help
clients solve their most complex challenges. From high-performance
buildings and infrastructure, to resilient communities and environments,
to stable and secure nations, our work is transformative, differentiated
and vital. A Fortune 500 firm, AECOM had revenue of approximately
$20.2 billion during fiscal year 2018. See how we deliver what others
can only imagine at aecom.com
and @AECOM.

All statements in this press release other than statements of historical
fact are “forward-looking statements” for purposes of federal and state
securities laws, including any projections of earnings, revenue, cost
savings, profitability, cash flows, tax rate, share count, stock
repurchases, interest expense, capital expenditures, amortization of
intangible assets and financial fees, or other financial items, 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. 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; long-term
government contracts and subject to uncertainties related to government
contract appropriations; government shutdowns; governmental agencies may
modify, curtail or terminate our contracts; government contracts are
subject to audits and adjustments of contractual terms; losses under
fixed-price contracts; limited control over operations run through our
joint venture entities; liability for misconduct by our employees or
consultants; failure to comply with business laws and regulations;
maintaining adequate surety and financial capacity; high leveraged and
potential inability to service our debt and guarantees; exposure to
Brexit; exposure to political and economic risks in different countries;
currency exchange rate 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; 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. We do not
intend, and undertake no obligation, to update any forward-looking
statement.

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, adjusted interest expense, organic 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, adjusted EPS, adjusted net/operating income, adjusted
tax rate and adjusted interest expense to exclude the impact of
non-operating items, such as amortization expense, taxes, acquisition
and integration expenses, and non-core operating losses 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 constant currency information, such as
organic revenue, to help assess how our underlying businesses performed
excluding the effect of foreign currency rate fluctuations to aid
investors in better understanding our international operational
performance.

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.

When we provide our long term projections for organic revenue growth,
adjusted EBITDA, adjusted EPS growth, and free cash flow on a
forward-looking basis, the closest corresponding GAAP measure and a
reconciliation of the differences between the non-GAAP expectation and
the corresponding GAAP measure generally is not available without
unreasonable effort due to the length, high variability, complexity and
low visibility associated with the non-GAAP expectation projected
against the multi-year forecast which could significantly impact the
GAAP measure.

               

AECOM

Consolidated Statements of Income

(unaudited – in thousands, except per share data)

 
Three Months Ended Six Months Ended

March 31,
2018

     

March 31,
2019

     

%
Change

March 31,
2018

     

March 31,
2019

     

%
Change

 
Revenue $ 4,790,910 $ 5,040,022 5.2 % $ 9,701,742 $ 10,077,517 3.9 %
Cost of revenue 4,649,638 4,844,660 4.2 % 9,424,318 9,711,542 3.0 %
Gross profit 141,272 195,362 38.3 % 277,424 365,975 31.9 %
 
Equity in earnings of joint ventures 13,038 25,963 99.1 % 42,758 38,467 (10.0)%
General and administrative expenses (30,217 ) (37,426 ) 23.9 % (64,887 ) (73,333 ) 13.0 %
Impairment of assets held for sale, including goodwill (168,178 ) (100.0)% (168,178 ) (100.0)%
Restructuring costs (15,875 ) NM (79,170 ) NM
(Loss) income from operations (44,085 ) 168,024 NM 87,117 251,939 189.2 %
 
Other income 12,507 4,266 (65.9)% 14,790 7,863 (46.8)%
Interest expense (100,577 ) (57,828 ) (42.5)% (156,742 ) (113,854 ) (27.4)%
(Loss) income before income tax (benefit) expense (132,155 ) 114,462 NM (54,835 ) 145,948 NM
 
Income tax (benefit) expense (24,400 ) 20,943 NM (71,493 ) (12,657 ) (82.3)%
 
Net (loss) income (107,755 ) 93,519 NM 16,658 158,605 852.1 %
 

Noncontrolling interests in income of
consolidated
subsidiaries, net of tax

(11,978 ) (15,674 ) 30.9 % (25,077 ) (29,241 ) 16.6 %
 
Net (loss) income attributable to AECOM $ (119,733 ) $ 77,845 NM $ (8,419 ) $ 129,364 NM
 
Net (loss) income attributable to AECOM
per share:
Basic $ (0.75 ) $ 0.50 NM $ (0.05 ) $ 0.83 NM
Diluted $ (0.75 ) $ 0.49 NM $ (0.05 ) $ 0.81 NM
 
Weighted average shares outstanding:
Basic 159,495 156,621 (1.8)% 158,702 156,519 (1.4)%
Diluted 159,495 158,416 (0.7)% 158,702 159,010 0.2 %
 

NM — not meaningful

             

Balance Sheet Information

(unaudited – in thousands)

 
September 30, 2018 March 31, 2019
Balance Sheet Information:
Total cash and cash equivalents $ 886,733 $ 826,878
Accounts receivable and contract assets – net 5,468,821 5,712,831
Working capital 997,645 1,350,453
Total debt, excluding unamortized debt issuance costs 3,673,463 3,933,872
Total assets 14,681,131 14,737,023
Total AECOM stockholders’ equity 4,092,780 4,199,936
 
AECOM
Reportable Segments
(unaudited – in thousands)
                                         

 

Design &
Consulting
Services
Construction
Services
Management
Services
AECOM
Capital
Corporate Total
Three Months Ended March 31, 2019
Revenue $ 2,100,797 $ 1,917,801 $ 1,019,937 $ 1,487 $ $ 5,040,022
Cost of revenue   1,971,017   1,901,099   972,544       4,844,660
Gross profit 129,780 16,702 47,393 1,487 195,362
Equity in earnings of joint ventures 5,509 6,810 3,923 9,721 25,963
General and administrative expenses (1,681 ) (35,745 ) (37,426 )
Restructuring costs           (15,875 )   (15,875 )
Income (loss) from operations $ 135,289 $ 23,512 $ 51,316 $ 9,527 $ (51,620 ) $ 168,024
 
Gross profit as a % of revenue 6.2% 0.9% 4.6% 3.9%
 
Three Months Ended March 31, 2018
Revenue $ 2,004,745 $ 1,888,342 $ 897,823 $ $ $ 4,790,910
Cost of revenue   1,884,511   1,901,637   863,490       4,649,638
Gross profit 120,234 (13,295 ) 34,333 141,272
Equity in earnings of joint ventures 2,763 1,208 9,067 13,038
General and administrative expenses (2,880 ) (27,337 ) (30,217 )
Impairment of assets held for sale, including goodwill     (168,178 )         (168,178 )
Income (loss) from operations $ 122,997 $ (180,265 ) $ 43,400 $ (2,880 ) $ (27,337 ) $ (44,085 )
 
Gross profit as a % of revenue 6.0% (0.7)% 3.8% 2.9%
 
Six Months Ended March 31, 2019
Revenue $ 4,130,476 $ 3,932,303 $ 2,009,318 $ 5,420 $ $ 10,077,517
Cost of revenue   3,885,057   3,912,385   1,914,100       9,711,542
Gross profit 245,419 19,918 95,218 5,420 365,975
Equity in earnings of joint ventures 9,409 14,633 7,189 7,236 38,467
General and administrative expenses (3,408 ) (69,925 ) (73,333 )
Restructuring costs           (79,170 )   (79,170 )
Income (loss) from operations $ 254,828 $ 34,551 $ 102,407 $ 9,248 $ (149,095 ) $ 251,939
 
Gross profit as a % of revenue 5.9% 0.5% 4.7% 3.6%
 
Contracted backlog $ 9,570,692 $ 10,520,026 $ 3,480,258 $ $ $ 23,570,976
Awarded backlog 6,896,030 12,652,887 15,488,265 35,037,182
Unconsolidated JV backlog     1,611,494   794,126       2,405,620
Total backlog $ 16,466,722 $ 24,784,407 $ 19,762,649 $ $ $ 61,013,778
 
Six Months Ended March 31, 2018
Revenue $ 3,946,645 $ 4,013,829 $ 1,741,268 $ $ $ 9,701,742
Cost of revenue 3,748,565 4,000,045 1,675,708 9,424,318
Gross profit 198,080 13,784 65,560 277,424
Equity in earnings of joint ventures 10,225 14,614 17,919 42,758
General and administrative expenses (5,487 ) (59,400 ) (64,887 )
Impairment of assets held for sale, including goodwill     (168,178 )         (168,178 )
Income (loss) from operations $ 208,305 $ (139,780 ) $ 83,479 $ (5,487 ) $ (59,400 ) $ 87,117
 
Gross profit as a % of revenue 5.0% 0.3% 3.8% 2.9%
 
Contracted backlog $ 9,238,472 $ 10,981,745 $ 2,715,448 $ $ $ 22,935,665
Awarded backlog 7,935,382 5,719,996 10,218,800 23,874,178
Unconsolidated JV backlog     2,267,647   858,389       3,126,036
Total backlog $ 17,173,854 $ 18,969,388 $ 13,792,637 $ $ $ 49,935,879

Contacts

Investors:
Will Gabrielski
Vice President, Investor
Relations
213.593.8208
[email protected]

Media:
Brendan Ranson-Walsh
Vice President, Global
Communications & Corporate Responsibility
213.996.2367
[email protected]

Read full story here

error: Content is protected !!