AECOM reports first quarter fiscal year 2020 results

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, any statements regarding future economic conditions or performance, the expected financial and operational results of AECOM, and expectations regarding AECOM's business or organization following the Management Services transaction. 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; 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 laws or regulations applicable to our business; maintaining adequate surety and financial capacity; high leverage 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; risks associated with the benefits and costs of the Management Services transaction, including the risk that the expected benefits of the Management Services transaction or any contingent purchase price will not be realized within the expected time frame, in full or at all, or that any purchase price adjustments could be unfavorable or result in lower aggregate cash proceeds; the risk that costs of restructuring transactions and other costs incurred in connection with the Management Services transaction will exceed our estimates or otherwise adversely affect our business or operations; 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, organic revenue, 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, adjusted EPS, adjusted net/operating income and adjusted tax rate to exclude the impact of non-operating items, such as amortization expense, taxes 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. We present net service revenue to exclude subcontractor costs from revenue to provide investors with a better understating of our 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 adjusted EBITDA 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 Statement of Income

(unaudited - in thousands, except per share data)

 

 

Three Months Ended

 

December 31, 2018

 

December 31, 2019

 

% Change

 

 

 

 

 

 

Revenue

$

3,356,338

 

 

$

3,235,610

 

 

(3.6

%)

Cost of revenue

 

3,232,942

 

 

 

3,069,810

 

 

(5.0

%)

Gross profit

 

123,396

 

 

 

165,800

 

 

34.4

%

 

 

 

 

 

 

Equity in earnings of joint ventures

 

6,632

 

 

 

9,928

 

 

49.7

%

General and administrative expenses

 

(35,907

)

 

 

(43,614

)

 

21.5

%

Restructuring costs

 

(63,295

)

 

 

(44,925

)

 

(29.0

%)

Income from operations

 

30,826

 

 

 

87,189

 

 

182.8

%

 

 

 

 

 

 

Other income

 

2,985

 

 

 

4,008

 

 

34.3

%

Interest expense

 

(39,425

)

 

 

(40,377

)

 

2.4

%

(Loss) income before income tax (benefit) expense

 

(5,614

)

 

 

50,820

 

 

(1005.2

%)

 

 

 

 

 

 

Income tax (benefit) expense

 

(42,535

)

 

 

15,906

 

 

(137.4

%)

 

 

 

 

 

 

Income from continuing operations

 

36,921

 

 

 

34,914

 

 

(5.4

%)

Discontinued operations, net of tax

 

28,165

 

 

 

18,180

 

 

(35.5

%)

Net income

 

65,086

 

 

 

53,094

 

 

(18.4

%)

 

 

 

 

 

 

Net income attributable to noncontrolling interests
from continuing operations

 

(4,940

)

 

 

(4,047

)

 

(18.1

%)

Net income attributable to noncontrolling interests
from discontinued operations

 

(8,627

)

 

 

(8,443

)

 

(2.1

%)

Net income attributable to noncontrolling interests

 

(13,567

)

 

 

(12,490

)

 

(7.9

%)

 

 

 

 

 

 

Net income attributable to AECOM from continuing operations

 

31,981

 

 

 

30,867

 

 

(3.5

%)

Net income attributable to AECOM from discontinued operations

 

19,538

 

 

 

9,737

 

 

(50.2

%)

Net income attributable to AECOM

$

51,519

 

 

$

40,604

 

 

(21.2

%)

 

 

 

 

 

 

Net income attributable to AECOM per share:

 

 

 

 

 

Basic

 

 

 

 

 

Continuing operations

$

0.20

 

 

$

0.20

 

 

0.0

%

Discontinued operations

 

0.12

 

 

 

0.06

 

 

(50.0

%)

Basic earnings per share

$

0.32

 

 

$

0.26

 

 

(18.8

%)

 

 

 

 

 

 

Diluted

 

 

 

 

 

Continuing operations

$

0.20

 

 

$

0.19

 

 

(5.0

%)

Discontinued operations

 

0.12

 

 

 

0.06

 

 

(50.0

%)

Diluted earnings per share

$

0.32

 

 

$

0.25

 

 

(21.9

%)

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

Basic

 

156,416

 

 

 

157,332

 

 

0.6

%

Diluted

 

159,603

 

 

 

160,657

 

 

0.7

%

AECOM

Balance Sheet and Cash Flow Information

(unaudited - in thousands)

 

 

 

 

 

September 30, 2019

 

December 31, 2019

Balance Sheet Information:

 

 

 

Total cash and cash equivalents

$

885,639

 

$

725,436

Accounts receivable and contract assets, net

 

4,451,022

 

 

4,511,279

Working capital

 

1,072,891

 

 

1,005,475

Total debt, excluding unamortized debt issuance costs

 

3,352,464

 

 

3,503,915

Total assets

 

14,461,591

 

 

15,229,359

Total AECOM stockholders’ equity

 

3,690,576

 

 

3,673,002

         

AECOM

 

Reportable Segments

 

(unaudited - in thousands)

 

Reportable Segments:

 

 

Americas

 

International

 

AECOM
Capital

 

Corporate

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31, 2019:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

2,451,982

 

$

783,095

 

$

533

 

$

 

$

3,235,610

 

Cost of revenue

 

2,312,550

 

757,260

 

 

 

 

3,069,810

 

Gross profit

 

139,432

 

25,835

 

533

 

 

 

165,800

 

Equity in earnings of joint ventures

 

6,429

 

2,836

 

663

 

 

 

9,928

 

General and administrative expenses

 

 

 

(2,419

)

(41,195

)

 

(43,614

)

Restructuring costs

 

 

 

 

(44,925

)

 

(44,925

)

Income (loss) from operations

 

$

145,861

 

$

28,671

 

$

(1,223

)

$

(86,120

)

$

87,189

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit as a % of revenue

 

5.7

%

3.3

%

 

 

 

5.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Contracted backlog

 

$

13,949,059

 

$

3,610,945

 

$

 

$

 

$

17,560,004

 

Awarded backlog

 

17,248,843

 

843,248

 

 

 

18,092,091

 

Unconsolidated JV backlog

 

865,791

 

 

 

 

 

865,791

 

Total backlog

 

$

32,063,693

 

$

4,454,193

 

$

 

$

 

$

36,517,886

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31, 2018:

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$

2,560,401

 

$

792,004

 

$

3,933

 

$

 

$

3,356,338

 

Cost of revenue

 

2,453,180

 

779,762

 

 

 

 

3,232,942

 

Gross profit

 

107,221

 

12,242

 

3,933

 

 

 

123,396

 

Equity in earnings of joint ventures

 

6,264

 

2,853

 

(2,485

)

 

 

6,632

 

General and administrative expenses

 

 

 

(1,727

)

(34,180

)

 

(35,907

)

Restructuring costs

 

 

 

 

(63,295

)

 

(63,295

)

Income (loss) from operations

 

$

113,485

 

$

15,095

 

$

(279

)

$

(97,475

)

$

30,826

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit as a % of revenue

 

4.2

%

1.5

%

 

 

 

3.7

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Contracted backlog

 

$

11,005,725

 

$

3,589,901

 

$

 

$

 

$

14,595,626

 

Awarded backlog

 

18,776,367

 

1,078,341

 

 

 

 

19,854,708

 

Unconsolidated JV backlog

 

1,460,594

 

 

 

 

 

1,460,594

 

Total backlog

 

$

31,242,686

 

$

4,668,242

 

$

 

$

 

$

35,910,928

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                     

AECOM

Regulation G Information

(in millions)

Reconciliation of Revenue to Revenue, Net of Subcontractor Costs (NSR)

 

 

Three Months Ended

 

December 31,
2018

 

December 31,
2019

 

 

 

 

Americas

 

 

 

Revenue

$

2,560.4

 

$

2,452.0

Less: subcontractor and other direct costs

 

1,685.4

 

 

1,546.4

Revenue, net of subcontractor and other direct costs

$

875.0

 

$

905.6

 

 

 

 

International

 

 

 

Revenue

$

792.0

 

$

783.1

Less: subcontractor and other direct costs

 

155.0

 

 

149.5

Revenue, net of subcontractor and other direct costs

$

637.0

 

$

633.6

 

 

 

 

Consolidated

 

 

 

Revenue

$

3,356.3

 

$

3,235.6

Less: subcontractor and other direct costs

 

1,840.4

 

 

1,695.9

Revenue, net of subcontractor and other direct costs

$

1,515.9

 

$

1,539.7

 

 

 

 

           
Reconciliation of Total Debt to Net Debt

 

 

Balances at

 

 

 

Dec 31,
2018

 

Sep 30,
2018

 

Dec 31,
2019

 

 

Short-term debt

$

46.1

 

$

47.9

 

$

55.0

 

 

Current portion of long-term debt

 

95.3

 

 

50.5

 

 

56.6

 

 

Long-term debt, gross

 

3,739.8

 

 

3,254.0

 

 

3,392.3

 

 

Total debt, excluding unamortized debt issuance costs

 

3,881.2

 

 

3,352.4

 

 

3,503.9

 

 

Less: Total cash and cash equivalents

 

686.3

 

 

885.6

 

 

725.4

 

 

Net debt

$

3,194.9

 

$

2,466.8

 

$

2,778.5

 

 

 

 

 

 

 

 

 

 

Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow

 

 

Three Months Ended

 

 

Dec 31,
2018

 

Sep 30,
2019

 

Dec 31,
2019

 

 

Net cash (used in) provided by operating activities

$

(200.4

)

 

$

793.7

 

 

$

(206.9

)

 

 

Capital expenditures, net

 

(21.9

)

 

 

(14.3

)

 

 

(31.1

)

 

 

Free cash flow

$

(222.3

)

 

$

779.4

 

 

$

(238.0

)

 

 

 

 

 

 

 

 

 

 

 

Fiscal Years Ended Sep 30,

 

 

 

2015

 

 

2016

 

 

2017

 

 

2018

 

 

2019

 

Net cash provided by operating activities

$

764.4

 

$

814.2

 

$

696.7

 

$

774.6

 

$

777.6

 

Capital expenditures, net

 

(69.4

)

 

(136.8

)

 

(78.5

)

 

(86.9

)

 

(83.4

)

Free cash flow

$

695.0

 

$

677.4

 

$

618.2

 

$

687.7

 

$

694.2

 

AECOM

Regulation G Information

(in millions, except per share data)

 

Three Months Ended

 

 

 

Dec 31,
2018

 

Sep 30,
2019

 

Dec 31,
2019

 

 

Reconciliation of Income from Operations to Adjusted Income from Operations

Income from operations

$

30.8

 

$

131.6

 

$

87.2

 

 

Noncore operating losses & transaction related expenses

 

9.4

 

 

(1.2

)

 

5.6

 

 

Impairment of long-lived assets, including goodwill

 

-

 

 

24.9

 

 

-

 

 

Restructuring costs

 

63.3

 

 

16.2

 

 

44.9

 

 

Gain on disposal activities

 

-

 

 

(3.6

)

 

-

 

 

Amortization of intangible assets

 

6.3

 

 

6.2

 

 

6.1

 

 

Adjusted income from operations

$

109.8

 

$

174.1

 

$

143.8

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Income Before Income Taxes to Adjusted Income Before Income Taxes

   

(Loss) income before income tax expense (benefit)

$

(5.6

)

$

94.9

 

$

50.8

 

 

Noncore operating losses & transaction related expenses

 

9.4

 

 

(1.2

)

 

5.6

 

 

Impairment of long-lived assets, including goodwill

 

-

 

 

24.9

 

 

-

 

 

Restructuring costs

 

63.3

 

 

16.2

 

 

44.9

 

 

Gain on disposal activities

 

-

 

 

(3.6

)

 

-

 

 

Amortization of intangible assets

 

6.3

 

 

6.2

 

 

6.1

 

 

Financing charges in interest expense

 

2.4

 

 

3.4

 

 

2.0

 

 

Adjusted income before income tax expense

$

75.8

 

$

140.8

 

$

109.4

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Income Taxes to Adjusted Income Taxes

               

Income tax (benefit) expense

$

(42.5

)

$

16.6

 

$

15.9

 

 

Tax effect of the above adjustments *

 

22.4

 

 

9.6

 

 

15.2

 

 

Valuation allowances and other tax only items

 

33.6

 

 

3.6

 

 

(0.4

)

 

Adjusted income tax expense

$

13.5

 

$

29.8

 

$

30.7

 

 

* Adjusts the income tax expense (benefit) during the period to exclude the impact on our effective tax rate of the pre-tax adjustments shown above.

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Noncontrolling Interest to Adjusted Noncontrolling Interests

   

Noncontrolling interests in income of consolidated subsidiaries, net of tax

$

(4.9

)

$

(6.8

)

$

(4.0

)

 

Amortization of intangible assets included in NCI, net of tax

 

(0.1

)

 

(0.2

)

 

(0.1

)

 

Adjusted noncontrolling interests in income of consolidated subsidiaries,
net of tax

$

(5.0

)

$

(7.0

)

$

(4.1

)

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Net Income Attributable to AECOM to Adjusted Net Income Attributable to AECOM

 

Net income attributable to AECOM

$

32.0

 

$

71.5

 

$

30.9

 

 

Noncore operating losses & transaction related expenses

 

9.4

 

 

(1.2

)

 

5.6

 

 

Impairment of long-lived assets, including goodwill

 

-

 

 

24.9

 

 

-

 

 

Restructuring costs

 

63.3

 

 

16.2

 

 

44.9

 

 

Gain on disposal activities

 

-

 

 

(3.6

)

 

-

 

 

Amortization of intangible assets

 

6.3

 

 

6.2

 

 

6.1

 

 

Financing charges in interest expense

 

2.4

 

 

3.4

 

 

2.0

 

 

Tax effect of the above adjustments *

 

(22.4

)

 

(9.6

)

 

(15.2

)

 

Valuation allowances and other tax only items

 

(33.6

)

 

(3.6

)

 

0.4

 

 

Amortization of intangible assets included in NCI, net of tax

 

(0.1

)

 

(0.2

)

 

(0.1

)

 

Adjusted net income attributable to AECOM

$

57.3

 

$

104.0

 

$

74.6

 

 

* Adjusts the income tax expense (benefit) during the period to exclude the impact on our effective tax rate of the pre-tax adjustments shown above.

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Net Income per Diluted Share to Adjusted Net Income per Diluted Share

 

 

Net income attributable to AECOM - per diluted share

$

0.20

 

$

0.45

 

$

0.19

 

 

Per diluted share adjustments:

 

 

 

 

 

 

 

 

 

 

Noncore operating losses & transaction related expenses

 

0.05

 

 

(0.01

)

 

0.03

 

 

Impairment of long-lived assets, including goodwill

 

-

 

 

0.15

 

 

-

 

 

Restructuring costs

 

0.40

 

 

0.10

 

 

0.28

 

 

Loss on disposal activities

 

-

 

 

(0.02

)

 

-

 

 

Amortization of intangible assets

 

0.04

 

 

0.04

 

 

0.04

 

 

Financing charges in interest expense

 

0.02

 

 

0.02

 

 

0.01

 

 

Tax effect of the above adjustments *

 

(0.14

)

 

(0.06

)

 

(0.09

)

 

Valuation allowances and other tax only items

 

(0.21

)

 

(0.02

)

 

-

 

 

Adjusted net income attributable to AECOM - per diluted shares

$

0.36

 

$

0.65

 

$

0.46

 

 

 

 

 

Weighted average shares outstanding - diluted

 

159.6

 

 

160.9

 

 

160.7

 

 

* Adjusts the income tax expense (benefit) 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,
2018

 

Sep 30,
2019

 

Dec 31,
2019

 

 

Reconciliation of Net Income Attributable to AECOM to EBITDA
to Adjusted EBITDA and to Adjusted Income from Operations

Net income attributable to AECOM

$

32.0

 

$

71.5

 

$

30.9

 

 

Income tax (benefit) expense

 

(42.5

)

 

16.6

 

 

15.9

 

 

(Loss) income attributable to AECOM

 

(10.5

)

 

88.1

 

 

46.8

 

 

Depreciation and amortization 1

 

40.0

 

 

70.6

 

 

41.1

 

 

Interest income 2

 

(2.2

)

 

(3.0

)

 

(3.4

)

 

Interest expense 3

 

39.4

 

 

40.2

 

 

40.3

 

 

Amortized bank fees included in interest expense

 

(2.4

)

 

(3.4

)

 

(2.0

)

 

EBITDA

$

64.3

 

$

192.5

 

$

122.8

 

 

Noncore operating losses & transaction related expenses

 

9.4

 

 

(1.2

)

 

5.6

 

 

Impairment of long-lived assets, including goodwill

 

-

 

 

24.9

 

 

-

 

 

Restructuring costs

 

63.3

 

 

16.2

 

 

45.0

 

 

Gain on disposal activities

 

-

 

 

(3.6

)

 

-

 

 

Depreciation expense included in noncore operating losses and
acquisition and integration expenses above

 

-

 

 

(24.9

)

 

-

 

 

Adjusted EBITDA

$

137.0

 

$

203.9

 

$

173.4

 

 

Other income

 

(3.0

)

 

(3.5

)

 

(4.0

)

 

Depreciation 1

 

(31.4

)

 

(36.3

)

 

(33.1

)

 

Interest income 2

 

2.2

 

 

3.0

 

 

3.4

 

 

Noncontrolling interests in income of consolidated subsidiaries, net of tax

 

5.0

 

 

6.8

 

 

4.1

 

 

Amortization of intangible assets included in NCI, net of tax

 

-

 

 

0.2

 

 

-

 

 

Adjusted income from operations

$

109.8

 

$

174.1

 

$

143.8

 

 

(1) Excludes depreciation from noncore operating losses, and acquisition and integration-related items. (2) Included in other income. (3) Excludes related amortization.

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of Segment Income from Operations to Adjusted Income from Operations

 

 

Americas Segment:

 

 

 

 

 

 

 

 

 

 

Income from operations

$

113.5

 

$

148.7

 

$

145.9

 

 

Noncore operating losses & transaction related expenses

 

9.4

 

 

(0.9

)

 

-

 

 

Impairment of long-lived assets

 

-

 

 

15.6

 

 

-

 

 

Amortization of intangible assets

 

4.8

 

 

-

 

 

4.7

 

 

Adjusted income from operations

$

127.7

 

$

163.4

 

$

150.6

 

 

 

 

 

 

 

 

 

 

 

 

 

International Segment:

 

 

 

 

 

 

 

 

 

 

Income from operations

$

15.1

 

$

35.1

 

$

28.7

 

 

Noncore operating losses & transaction related expenses

 

-

 

 

(0.3

)

 

(0.1

)

 

Impairment of long-lived assets

 

-

 

 

4.4

 

 

-

 

 

Gain on disposal activities

 

-

 

 

(3.6

)

 

-

 

 

Amortization of intangible assets

 

1.5

 

 

1.4

 

 

1.4

 

 

Adjusted income from operations

$

16.6

 

$

37.0

 

$

30.0

 

 

 

 

 

 

 

 

 

 

 

 

 


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