AECOM reports fourth quarter and full year fiscal 2024 results

AECOM (NYSE:ACM), the trusted global infrastructure leader, today reported fourth quarter and full year fiscal 2024 results.

Fourth Quarter and Full Year Fiscal 2024 Highlights:

• Reflecting as reported performance from continuing operations, fourth quarter revenue increased 7% to $4.1 billion, operating income increased 194% to $236 million, net income increased 396% to $168 million and diluted earnings per share increased 421% to $1.25. Full year revenue increased 12% to $16.1 billion, operating income increased 155% to $827 million, net income increased 343% to $506 million and diluted earnings per share increased 358% to $3.71.
• Full year net service revenue ² (NSR) reached an all-time high and included strength across the Company’s largest end markets and geographies.
  • Delivered 8% growth in the design business, driven by 9% growth in the Americas.
• Earnings exceeded previously-increased guidance and set new records.
  • Fourth quarter adjusted ¹ EBITDA ⁴ and adjusted ¹ EPS increased by 15% and 26%, respectively.
  • For the full year, adjusted ¹ EBTDA ⁴ and adjusted ¹ EPS increased 14% and 22%, respectively.
• Delivered record margins that exceeded guidance as the Company realized the benefits of its ongoing investments in high-margin organic growth and its continuous improvement initiatives.
  • The adjusted EBITDA margin ⁵ was 16.7% in the fourth quarter and 16.0% for the full year, reflecting an increase of 140 basis points and 100 basis points, respectively.
  • The segment adjusted ¹ operating margin ³ was 16.7% in the fourth quarter; for the full year, the margin was 15.8%, which exceeded guidance of 15.6%.
• Design backlog ⁷ increased by 5% and total backlog increased 3% to a new record.
  • Design book-to-burn ⁸ in the fourth quarter was 1.2x, including 1.2x in both the Americas and International segments.
  • The Company’s pipeline of opportunities increased by 10% and achieved a new high, driven by robust funding across all of its largest markets.
  • The Company’s design win rate of 50% remains at an all-time high and was even higher on larger pursuits.
• Free cash flow ⁶ exceeded prior guidance and achieved a new high of $708 million, a 20% increase from the prior year
  • Free cash flow represented 10% of net service revenue.

Fiscal 2025 Financial Guidance

• AECOM expects to deliver record net service revenue and profitability, margins and continued strong cash flow conversion, including:
  • Organic NSR ² growth of 5% to 8%.
    • Expect phasing to follow a normal seasonal pattern with accelerating growth as the year progresses.
  • Adjusted ¹ EBITDA ⁴ of between $1,170 million and $1,210 million, reflecting an increase of 9% at the mid-point over fiscal 2024.
  • An adjusted EBITDA margin ⁵ of 16.3%, representing a 30 basis point increase from fiscal 2024.
  • Adjusted ¹ EPS of between $5.00 and $5.20, reflecting an increase of 13% at the mid-point compared to fiscal 2024.
  • 100%+ free cash flow ⁶ conversion.
• Other assumptions incorporated into guidance:
  • An average fully diluted share count of 134 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 24% for the full year.
    • The Company expects to maintain an approximately 24% tax rate for the next several years.
• 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.

Long-Term Financial Framework for Value Creation

• The Company’s long-term financial framework includes expectations to deliver annually:
  • Organic NSR ² growth of 5% to 8%.
  • At least 20 to 30 basis points of adjusted EBITDA margin ⁵ expansion.
  • At least 100% conversion of adjusted net income to free cash flow ⁶ .
  • Double-digit adjusted EPS ¹ and free cash flow ⁶ per share growth.
• The Company also expects to achieve an at least 17% adjusted EBITDA margin ⁵ exiting fiscal year 2025 and an at least 25% ROIC ⁹ over the long term.

Cash Flow, Balance Sheet and Capital Allocation Update

• Fourth quarter operating cash flow of $299 million and free cash flow ⁶ of $275 million, contributed to full year free cash flow ⁶ of $708 million, an increase of 20% from the prior year.
  • Full year free cash flow represented 10% of net service revenue, reflecting the high quality of the Company’s earnings.
• The Company returned approximately $560 million to shareholders through repurchases and dividends in the year.
• The Board of Directors approved an increase to its share repurchases authorization to $1 billion and an 18% increase to its quarterly dividend program to $0.26 per share.
• The Company has increased its annual dividend by an average of 20% over the last three years, delivering on its commitment to increase the value of its per share dividend by double digits annually.
• Since the initiation of its repurchase program in September 2020, the Company has repurchased $2.2 billion of stock, which represents approximately one-third of the Company’s market capitalization at the time it began repurchases.

“We delivered strong results that reflect the strength of our strategy and our competitive advantage, including exceeding the mid-points of our previously-increased EBITDA and EPS guidance and generating record free cash flow,” said Troy Rudd, AECOM’s chief executive officer. “As our largest markets now have certainty following recent elections, several growth opportunities are emerging. In the U.S., our largest market, the incoming Trump Administration’s emphasis on a strong economy requires a foundation of world-class infrastructure, which plays to our strengths. Importantly, we are investing at record levels to create new higher-margin platforms, in business development and in technical excellence, which positions us for continued success. This is evident in our consistently high win rate, record backlog and pipeline, as well as our expectation for another year of strong financial performance, including double-digit EPS growth.”

“By winning what matters and creating record visibility through our backlog and pipeline, we are in an advantaged position to capitalize on the tremendous growth opportunities in front of us,” said Lara Poloni, AECOM’s president. “The newly-created Water and Environment Advisory business expands our addressable market in the high-value and higher-margin white space between our existing technical services and traditional consulting and advisory services, creating another path for competitive differentiation and value creation.”

“With our strong 2024 results, we have compounded earnings per share by 21% annually since fiscal 2020, including 22% growth in fiscal 2024,” said Gaurav Kapoor, AECOM’s chief financial and operations officer. “Our record backlog and pipeline, including a 1.2x book-to-burn in the design business in the fourth quarter, gives us confidence in delivering on our 2025 guidance. When coupled with our disciplined capital allocation and the Board approved increases to our share repurchase authorization and dividend program, we are committed to delivering continued strong earnings growth, cash flow and return on invested capital over the long term.”

Business Segments

Americas

Revenue in the fourth quarter was $3.2 billion, an 8% increase from the prior year. Full year revenue was $12.5 billion, a 14% increase from the prior year.

Net service revenue ² in the fourth quarter was $1.1 billion and included 8% growth in design revenue. Full year net service revenue ² was $4.2 billion. The fourth quarter growth rate included a 50 basis point headwind due to the impacts from Hurricane Helene in September.

Fourth quarter operating income increased by 9% over the prior year to $203 million and increased by 8% for the full year to $775 million. On an adjusted ¹ basis, fourth quarter operating income increased by 9% to $208 million and increased by 8% to $792 million for the full year. The fourth quarter adjusted operating margin on net service revenue increased by 70 basis points to 19.6%. The full year adjusted operating margin on net service revenue increased by 20 basis points over the prior year to 18.8%, a new record that reflects the ongoing execution of initiatives to deliver operating efficiencies, as well as strong execution and growth.

International

Revenue in the fourth quarter was $948 million, a 5% increase from the prior year. Full year revenue was $3.6 billion, a 6% increase from the prior year.

Net service revenue ² in the fourth quarter was $754 million, a 4% increase from the prior year. Full year net service revenue ² was $3.0 billion, a 6% increase from the prior year.

Fourth quarter operating income increased by 31% over the prior year to $95 million and increased by 32% to $337 million for the full year. On an adjusted ¹ basis, operating income increased by 31% to $95 million in the fourth quarter and increased by 32% to $339 million for the full year. The fourth quarter adjusted operating margin on net service revenue increased by 260 basis points to 12.6%. The full year adjusted operating margin on net service revenue increased by 230 basis points over the prior year to 11.5%, which reflected continued strong execution and the benefits of actions taken to narrow the Company’s focus on high-returning opportunities across its largest geographies.

Balance Sheet

As of September 30, 2024, AECOM had $1.6 billion of total cash and cash equivalents, $2.5 billion of total debt and $959 million of net debt (total debt less cash and cash equivalents). Net leverage ¹⁰ was 0.8x.

Tax Rate

The effective tax rate was 16.0% in the fourth quarter and 21.3% in the full year. On an adjusted ¹ basis, the effective tax rate was 21.8% in the fourth quarter and 24.8% in the full year, which was consistent with the Company’s guidance. The adjusted tax rate was derived by re-computing the quarterly effective tax rate on adjusted net income ¹¹ . 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 global infrastructure leader, committed to delivering a better world. As a trusted professional services firm powered by deep technical abilities, we solve our clients’ complex challenges in water, environment, energy, transportation and buildings. Our teams partner with public- and private-sector clients to create innovative, sustainable and resilient solutions throughout the project lifecycle – from advisory, planning, design and engineering to program and construction management. AECOM is a Fortune 500 firm that had revenue of $16.1 billion in fiscal year 2024. Learn more at aecom.com.

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.