AECOM, the world’s trusted infrastructure consulting firm, reported fourth quarter and full year fiscal 2022 results.
|
Fourth Quarter Fiscal 2022 |
Full Year Fiscal 2022 |
||||||||
|
(from Continuing Operations; $ 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 |
$3,426 |
-- |
2% |
-- |
$13,148 |
-- |
(1%) |
-- |
|
|
Net Service Revenue (NSR)2 |
-- |
$1,589 |
-- |
7% |
-- |
$6,311 |
-- |
5% |
|
|
Operating Income |
$184 |
$207 |
8% |
9% |
$647 |
$773 |
3% |
10% |
|
|
Segment Operating Margin3 (NSR) |
-- |
14.6% |
-- |
(30) bps |
-- |
14.2% |
-- |
+40 bps |
|
|
Net Income |
$115 |
$126 |
21% |
6% |
$389 |
$495 |
32% |
17% |
|
|
EPS (Fully Diluted) |
$0.82 |
$0.89 |
26% |
10% |
$2.73 |
$3.47 |
39% |
23% |
|
|
EBITDA4 |
-- |
$241 |
-- |
7% |
-- |
$900 |
-- |
9% |
|
|
Operating Cash Flow |
$316 |
-- |
(1%) |
-- |
$714 |
-- |
1% |
-- |
|
|
Free Cash Flow5 |
-- |
$257 |
-- |
(14%) |
-- |
$586 |
-- |
0% |
|
Fiscal 2023 Financial Guidance
- AECOM expects to deliver another year of record profitability for the Professional Services business with accelerating NSR growth, margin expansion, and strong per share profit growth including:
- Organic NSR2growth accelerating to approximately 8%; actual NSR growth, which incorporates the impact of the strong U.S. dollar, is forecasted to increase by approximately 4%.
- An adjusted1operating margin of approximately 14.6%, a 40 basis point increase from the prior year, which includes strong underlying performance, an estimated 10 to 20 basis point impact from foreign exchange rate translation, and ongoing investments in growth.
- Adjusted1EBITDA4 of between $935 million and $975 million, an increase of 10% on a constant-currency basis at the mid-point.
- Adjusted1EPS of between $3.55 and $3.75, an increase of 10% on a constant-currency basis at the mid-point, which does not include expected incremental share repurchases.
- Excluding changes in foreign exchange rates since the start of fiscal 2022, fiscal 2023 adjusted1EBITDA4 guidance would have exceeded $1 billion at the mid-point, which is ahead of the performance contemplated in the Company’s fiscal 2024 financial targets driven by accelerating NSR growth and strong profitability.
- Other assumptions incorporated into guidance:
- An average fully diluted share count of 141 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 effective tax rate of between 24% and 26%.
- The Company expects free cash flow5of between $475 million and $675 million, reflecting continued strong underlying cash conversion within the Professional Services business.
- The stronger U.S. dollar equates to an approximately $25 million year-over-year headwind to free cash flow.
Long-Term Fiscal 2024 Financial Targets, Including Increased ROIC Target
- AECOM is on track to deliver on its long-term fiscal 2024 financial targets, including adjusted1EPS of $4.75+ and a 15% segment adjusted1 operating margin3.
- Underpinning this guidance is operational outperformance to date, including accelerating organic NSR growth and continued margin expansion.
- Additionally, the Company is increasing its fiscal 2024 return on invested capital6target to 17% from 15%, which reflects strong margin performance and working capital management.
- Importantly, the Company is more profitable than ever with an expanded long-term earnings power, reflecting the benefits of its Think and Act Globallystrategy and strong business execution.
Fourth Quarter and Full Year Fiscal 2022 Highlights
- Fourth quarter revenue increased 2% to $3.4 billion, operating income increased 8% to $184 million, the operating margin increased 30 basis points to 5.4%, net income increased 21% to $115 million and diluted earnings per share increased 26% to $0.82.
- Fourth quarter NSR2growth in the design business, which accounts for approximately 90% of NSR and adjusted EBITDA, accelerated to 9%, a high point for the year and the highest quarterly growth rate in more than a decade.
- The segment adjusted1operating margin3 was 14.6% in the fourth quarter, which contributed to a full year margin of 14.2%, which is a 40 basis point increase over the prior year and exceeded the Company’s guidance.
- The Company continued to expand margins while investing in growth and despite the impacts from the stronger U.S. dollar.
- Full year adjusted1EBITDA4 increased by 9% and adjusted1 EPS increased by 23%.
- Adjusted for foreign exchange impacts to fiscal 2022 results as compared to initial guidance, adjusted EBITDA and adjusted EPS increased by 10% and 26%, respectively.
- Total backlog in the design business increased by 8%7, including a 1.2 book-to-burn ratio8in the Americas design business in the fourth quarter.
Business Segments
Americas
Revenue in the fourth quarter was $2.6 billion, a 1% increase from the prior year. Full year revenue was $9.9 billion, a 3% decline from the prior year.
NSR2 in the fourth quarter was $947 million, a 4% increase from the prior year, led by 5% growth in the design business. This growth is the result of a continued record high win rate and strong execution against a near-record backlog. Full year NSR was $3.7 billion, a 3% increase from the prior year. The fourth quarter adjusted operating margin on NSR was 18.4%.
Fourth quarter operating income declined by 5% over the prior year to $169 million. On an adjusted1 basis, operating income declined by 5% to $174 million. For the full year, operating income was $654 million, a 2% increase over the prior year, and on adjusted basis, increased by 2% to $671 million. The full year adjusted operating margin on NSR of 18.1% reflected strong underlying execution and included ongoing investments in organic growth to capitalize on a record high pipeline of opportunities.
International
Revenue in the fourth quarter was $807 million, a 5% increase from the prior year. Full year revenue was $3.2 billion, a 3% increase from the prior year.
NSR2 in the fourth quarter was $641 million, a 13% increase from the prior year, reflecting continued growth in the Company’s largest and most profitable markets driven by a strong backlog and continued pipeline growth. Full year NSR was $2.6 billion, an 8% increase from the prior year. The fourth quarter adjusted operating margin was 9%.
Fourth quarter operating income increased by 32% over the prior year to $58 million. On an adjusted basis1, operating income increased by 26% to $58 million. The fourth quarter adjusted operating margin on NSR2 increased by 160 basis points over the prior year to 9.0%. The Company is on track with its goal of delivering a double-digit margin in the International segment. Full year operating income increased by 25% to $221 million and, on an adjusted basis, increased by 22% to $223 million. The full year adjusted operating margin on NSR2 increased by 130 basis points over the prior year to 8.6%.
AECOM Capital
Revenue in the fourth quarter was $0.4 million and operating income was $12.0 million. Revenue in the full year was $2.2 million and operating income was $14.0 million, which was ahead of the Company’s expectations. The Company expects a $5 million to $10 million earnings contribution from AECOM Capital in fiscal 2023.
Balance Sheet
As of September 30, 2022, AECOM had $1.2 billion of total cash and cash equivalents, $2.2 billion of total debt and $1.1 billion of net debt (total debt less cash and cash equivalents). Net leverage9 was 1.1x.
Tax Rate
The effective tax rate was 21.4% in the fourth quarter and 24.7% in the full year. On an adjusted1 basis, the effective tax rate was 27.3% and 24.5% in the full year. The adjusted tax rate was derived by re-computing the quarterly effective tax rate on adjusted net income.10 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 today at noon 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.
1 Excludes the impact of certain items, such as restructuring costs, amortization of intangible assets and other items. See Regulation G Information for a reconciliation of non-GAAP measures to the comparable GAAP measures.
2 Revenue, less pass-through revenue; growth rates are presented on a constant-currency basis.
3 Reflects segment operating performance, excluding AECOM Capital and G&A.
4 Net income before interest expense, tax expense, depreciation and amortization.
5 Free cash flow is defined as cash flow from operations less capital expenditures, net of proceeds from disposals of property and equipment.
6 Return on invested capital, or ROIC, reflects continuing operations and is calculated as the sum of adjusted net income as presented in the Company’s Regulation G Information and adjusted interest expense, net of interest income, divided by average quarterly invested capital as defined as the sum of attributable shareholder’s equity and total debt, less cash and cash equivalents.
7 On a constant-currency basis.
8 Book-to-burn ratio is defined as the dollar amount of wins divided by revenue recognized during the period, including revenue related to work performed in unconsolidated joint ventures.
9 Net leverage is comprised of EBITDA as defined in the Company’s credit agreement dated October 17, 2014, as amended, and total debt on the Company’s financial statements, net of total cash and cash equivalents.
10 Inclusive of non-controlling interest deduction and adjusted for financing charges in interest expense, the amortization of intangible assets and is based on continuing operations.
