• As compared to the prior year, second quarter revenue increased by 1% to $3.3 billion, operating income increased by 43% to $158 million, the operating margin increased by 140 basis points to 4.8%, net income increased by 82% to $88 million and diluted earnings per share increased by 97% to $0.59.
• Net service revenue² (NSR) of $1.6 billion in the second quarter increased by 1%, consistent with the Company’s expectations.
• The segment adjusted¹ operating margin³ on NSR² increased by 140 basis points to 13.1% for both the second quarter and first half of the year, both record highs for the respective periods and reflective of the actions taken to drive operating efficiencies.
• Adjusted¹ EBITDA⁴ in the second quarter increased by 11% to $202 million and adjusted diluted earnings per share increased by 22% to a new quarterly record of $0.67; both metrics were ahead of the Company’s expectations.
• Backlog in the Company’s design business increased by 8% over the prior year, which was offset by a decline in the Construction Management business that was consistent with expectations, resulting in a 5% decrease in total backlog to $39.4 billion.
  • U.S. federal COVID relief legislation in December and March, combined with improving global economic conditions, have resulted in faster client decision making, a strengthened pipeline of opportunities and strong wins in April.
  • As underscored in ENR’s most recent rankings, AECOM increased its ranking in the water design market organically to number two, maintained its market leading position in transportation and facilities design, and remains the number one environmental consulting firm, which positions the Company well to capitalize on opportunities in these markets as funding improves.

Cash Flow, Balance Sheet and Capital Allocation Update

• Second quarter operating cash flow was $59 million and free cash flow⁵ was $3 million; for the first half of the fiscal year, operating cash flow was $66 million and free cash flow was an outflow of $11 million, representing substantially improved cash flow phasing compared to prior fiscal years.
• To date, the Company has executed $755 million of stock repurchases since the beginning of September 2020 that reduced its fully diluted share count by 15.8 million, or approximately 10% of shares outstanding, at an average price of $48 per share, including $125 million since the Company’s first quarter earnings call.
• Additionally, the Company executed several transactions over the past year to strengthen its balance sheet and lower its cost of debt, including extending the maturity of its debt through the redemption of senior notes due 2022 and tender of approximately 75% of its senior notes due 2024, as well as creating a sustainability-linked credit facility.
• The Company currently has $700 million of capacity remaining under its $1 billion stock repurchase authorization and remains committed to its capital allocation policy, which includes returning to investors substantially all available cash flow after investments are made in the business and maintaining leverage⁶ below 3.0x.

Fiscal 2021 Financial Guidance

• AECOM is increasing its diluted adjusted¹ EPS guidance to between $2.65 and $2.85, which would reflect 28% growth from fiscal 2020 at the mid-point; this guidance incorporates the Company’s first half outperformance, including the benefit of share repurchases completed to-date and a lower expected interest expense related to the Company’s recently completed debt refinancing.
  • The Company continues to expect adjusted¹ EBITDA⁴ of between $790 million and $830 million, which would reflect 9% growth at the mid-point of the range.
  • Other assumptions incorporated into guidance include:
    • An average diluted share count for the full year of approximately 150 million.
    • AECOM Capital earnings of between $5 million to $10 million.
• The Company continues to expect free cash flow⁵ of between $425 million and $625 million in fiscal 2021, which is consistent with the highly cash generative nature of its Professional Services business and reflects 75% unlevered free cash flow conversion of adjusted EBITDA at the mid-point of the range.

“I am proud of how our teams have come together against a backdrop defined by continued uncertainty and an uneven pace of recovery across the globe,” said Troy Rudd, AECOM’s chief executive officer. “Importantly, market conditions are improving, and our Think and Act Globally strategy is resulting in improved margin performance and earnings growth, and inspires confidence in our increased guidance for this year. As we look ahead, substantial COVID relief funding in the U.S., increasing tax receipts and improving global economic conditions have strengthened our clients’ budgets, resulting in accelerating award activity, strong wins in April and a growing pipeline of opportunities.”

“Our teams are collaborating to bring the full strength of our capabilities to bear for our clients around the world through the execution of our Think and Act Globally strategy,” said Lara Poloni, AECOM’s president. “We are ideally suited to capitalize on improving market conditions and to deliver long-term profitable growth, as underscored by ENR’s recent design rankings that reaffirmed our number one position in transportation and facilities and saw our position in water improve to number two. In addition, last month we launched our Sustainable Legacies strategy to best align our teams on the ESG opportunities apparent across our business – both internally through the advancement of our own industry-leading net zero and diversity commitments, as well as the opportunity, as the number one ranked environment firm, to advise leading public- and private-sector clients that are increasingly investing in their multi-decade sustainability initiatives.”

“I am very pleased with what we have accomplished in the first half of the fiscal year,” said Gaurav Kapoor, AECOM’s chief financial officer. “We made it a priority to deliver more balanced cash flow in the first half of the year when compared to prior years, and our results reflect strong execution against this priority. Additionally, the actions we have taken to strengthen our balance sheet are accreting immediate value to our shareholders and creating additional capital to invest in our teams, as well as enhancing our ability to consistently return capital to our shareholders.”

Business Segments

Americas

Revenue in the second quarter of $2.5 billion was effectively unchanged from the prior year and net service revenue² of $924 million declined by 1%.

Operating income increased by 10% over the prior year to $155 million and on an adjusted basis¹ operating income increased by 9% to $159 million. The adjusted operating margin on an NSR² basis of 17.2% was a 160 basis point increase over the prior year and marks a record high for a fiscal second quarter. This performance reflects the benefits of the actions taken to enhance margins through a simplified operating structure and reduced real estate, as well as investments in technology and shared service centers to enhance project delivery efficiencies.

International

Revenue in the second quarter was $796 million, a 3% increase from the prior year. Net service revenue² of $645 million increased by 3%. Market conditions are stabilizing and backlog increased by 16%.

Operating income increased by 28% over the prior year to $46 million. On an adjusted basis¹, operating income increased by 26% to $47 million. The adjusted operating margin on an NSR² basis increased by 130 basis points over the prior year to 7.3%, which set a new quarterly high and reflects a 510 basis point improvement since the beginning of fiscal 2019 when the Company began executing actions to improve margins, including consolidating real estate, implementing a streamlined overhead structure and exiting lower-returning markets and countries.

Discontinued Operations

In October 2020, the Company closed on the sale of its Power construction business and closed on the sale of the Civil construction business in January 2021. Results for discontinued operations included an approximately $39 million loss, primarily reflecting working capital adjustments related to the disposed of businesses.