AECOM, the world’s trusted infrastructure consulting firm, reported first quarter fiscal 2024 results.
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First Quarter Fiscal 2024 |
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(from Continuing Operations; $ in millions, except EPS) |
As Reported |
Adjusted1 (Non-GAAP) |
As Reported YoY % Change |
Adjusted YoY % Change |
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Revenue |
$3,900 |
-- |
15% |
-- |
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Net Service Revenue (NSR)2 |
-- |
$1,708 |
-- |
7% |
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Operating Income |
$163 |
$223 |
7% |
17% |
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Segment Operating Margin3 (NSR) |
-- |
15.0% |
-- |
+100 bps |
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Net Income |
$97 |
$144 |
11% |
22% |
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EPS (Fully Diluted) |
$0.71 |
$1.05 |
15% |
25% |
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EBITDA4 |
-- |
$251 |
-- |
14% |
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Operating Cash Flow |
$143 |
-- |
19% |
-- |
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Free Cash Flow5 |
-- |
$87 |
-- |
4% |
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Design Backlog |
$21,847 |
-- |
9%6 |
-- |
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First Quarter Fiscal 2024 Highlights
- Revenue increased 15% to $3.9 billion, operating income increased 7% to $163 million, the operating margin decreased 30 basis points to 4.2%, net income increased 11% to $97 million and diluted earnings per share increased 15% to $0.71; results included a ($29) million after-tax adjustment to the fair value of AECOM Capital investments.
- Organic net service revenue2 in the design business increased by 9% in the Americas and 8% overall.
- The segment adjusted1 operating margin3 on an NSR basis increased by 100 basis points to 15.0%, which marked a new first quarter high.
- Margin expansion was driven by high-returning organic growth; the Company reaffirmed its 17% long-term margin goal.
- Adjusted1 EBITDA4 and adjusted1 EPS increased by 14% and 25%, reflecting the benefits from high-returning organic growth initiatives, expanding profitability and a returns-focused capital allocation policy.
- Total design backlog increased by 9%6 to a new record, driven by a near record win rate and continued strong end market trends.
- Contracted backlog in the design business increased by 17%6, which is supported by funding strength across the Company’s key geographies.
- The share of trailing twelve-month wins valued at $25 million or greater expanded further and remains at an all-time high, which reflects the benefits of the Company’s strategy that has expanded its addressable market and contributed to high win rates on larger pursuits.
Cash Flow, Balance Sheet and Capital Allocation Update
- Operating cash flow was $143 million and free cash flow5 was $87 million, which enabled the return of nearly $100 million to shareholders in the first quarter through repurchases and dividend payments.
- Including share repurchases executed through March 2024, the Company has repurchased $1.8 billion of stock since the program commenced in September 2020.
- The Company affirmed its commitment to its returns-focused capital allocation policy, which includes prioritizing investments in organic growth followed by share repurchases and dividends.
- This includes continued share repurchases under the $1 billion share repurchase authorization that was approved by its Board of Directors in November 2023.
- This also included the 22% increase in the Company’s quarterly dividend payment in January, consistent with its long-term commitment to double-digit annual increases.
Fiscal 2024 Financial Guidance
- Building on a strong first quarter and positive momentum across the Company’s end markets, AECOM reiterated its financial guidance for fiscal 2024, which includes expectations for strong organic NSR2 growth, a record segment adjusted1 operating margin3, and double-digit adjusted1 earnings per share growth. The Company’s guidance also includes expectations for:
- Organic NSR2 growth of approximately 8% to 10%.
- A segment adjusted1 operating margin3 of approximately 15.6%, representing a 90 basis point increase from fiscal 2023.
- Adjusted1 EBITDA4 of between $1,065 million and $1,105 million, representing a 13% increase at the mid-point over fiscal 2023.
- Adjusted1 EPS of between $4.35 and $4.55, representing a 20% increase at the mid-point over fiscal 2023.
- Other assumptions incorporated into guidance:
- Reflecting the highly cash generative nature of its Professional Services business, the Company expects 100%+ adjusted1 net income to free cash flow5 conversion.
- An average fully diluted share count of 138 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 between 24% and 26% for the full year.
- This includes an expected adjusted effective tax rate in the high 20%’s in the second and third fiscal quarters, consistent with last year’s phasing.
- The Company expects to deliver a return on invested capital7 (ROIC) of approximately 20% in fiscal 2024.
“Our strong first quarter performance reflects the strength of our strategy and culture, which is focused on winning what matters and collaborating to bring the best of our technical resources to our clients globally,” said Troy Rudd, AECOM’s chief executive officer. “We delivered a record design backlog, strong organic NSR growth, record first quarter margins and strong free cash flow. Importantly, funding growth in our largest markets is accelerating, we are organically gaining market share as evident in our near record high win rates, and we are expanding our addressable share of the highest-value elements of our clients’ most critical investments through our Program Management and advisory business. All of this positions us to deliver on both our financial guidance for fiscal 2024 and on our long-term financial framework to outgrow the market organically and deliver double-digit annual compounding of per share earnings and cash flow.”
“Through our Think and Act Globally strategy, we have created a competitive advantage at a time when investments are increasing across our largest and most profitable markets,” said Lara Poloni, AECOM’s president. “The megatrends of global infrastructure investment, sustainability and resilience, and the energy transition are firmly intact and through our culture of collaboration and innovation, along with the benefits of our Day 1, Day 2, and Day 3 strategy, our teams are ideally suited to continue to gain organic market share and outperform the overall market.”
“We have created an algorithm for superior shareholder value creation by focusing our time and capital on high-returning organic growth opportunities, investing in innovation, and executing on our disciplined returns-focused capital allocation policy,” said Gaurav Kapoor, AECOM’s chief financial and operations officer. “As our recently authorized $1 billion share repurchase program demonstrates, we believe there is a substantial value creation opportunity ahead as we execute on our strategy.”
Business Segments
Americas
Revenue in the first quarter was $3.0 billion. Net service revenue2 was $978 million and included 9% growth in the design business, driven primarily by growth in the Company’s transportation, water and program management businesses.
Operating income increased by 7% over the prior year to $175 million. On an adjusted1 basis, operating income increased by 6% to $179 million. The adjusted operating margin on an NSR2 basis of 18.3% included a 10 basis point increase over the prior year and a new first quarter record, reflecting the underlying strength of the business, positive impacts of growth, and ongoing reinvestment in long-term organic growth initiatives including our teams, key hires, business development and digital innovation.
International
Revenue in the first quarter was $861 million. Net service revenue2 was $730 million, an 8% increase from the prior year, which included growth across all of the Company’s largest geographies.
Operating income increased by 40% over the prior year to $77 million. On an adjusted1 basis, operating income increased by 40% to $77 million. The adjusted operating margin on an NSR2 basis increased by 230 basis points over the prior year to 10.6%, which set a new quarterly record for the International segment as the Company executes on its continuous improvement initiatives.
Backlog
Backlog in the design business increased by 9%6 to $21.8 billion to a new record and included strong growth in both the Americas and International segments, which reflected a continued near all-time high win rate. Contracted backlog in the design business increased by 17%6, and when combined with continued strong pipeline growth, provides for substantial visibility.
Balance Sheet
As of December 31, 2023, AECOM had $1.2 billion of total cash and cash equivalents, $2.2 billion of total debt and $1.0 billion of net debt (total debt less cash and cash equivalents). Net leverage8 was 0.9x.
Tax Rate
The effective tax rate was 19.5% in the first quarter. On an adjusted1 basis, the effective tax rate was 22.0%. The adjusted tax rate was derived by re-computing the quarterly effective tax rate on adjusted net income9. 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.
