• Operating cash flow in the first half of the year was $131 million and free cash flow⁵ was $63 million.
  • The Company’s track record of consistently strong conversion of earnings to cash flow has enabled increased investments in organic growth and continued execution of its returns-focused capital allocation policy.
  • Under this policy, the Company intends to reinvest in high-returning organic growth opportunities and return substantially all remaining available cash flow to stockholders through share repurchases and dividends.
  • The Company has returned more than $1.6 billion of capital to shareholders since September 2020 through dividends and stock repurchases, including repurchasing more than 16% of shares outstanding over that period.

Fiscal 2023 Financial Guidance and Long-Term Fiscal 2024 Financial Targets

• Due to strong operational performance and despite removing AECOM Capital’s previously expected contribution from guidance, AECOM reiterated its fiscal 2023 guidance for adjusted¹ EBITDA⁴ of between $935 million and $975 million and adjusted¹ EPS of between $3.55 and $3.75, both of which would reflect 10% constant-currency growth at the mid-point of the respective ranges.
• The Company’s guidance includes expectations for:
  • Organic NSR² growth accelerating to approximately 8% for the full year.
  • An adjusted¹ operating margin of approximately 14.6%, a 40 basis point increase from the prior year, which includes strong underlying performance and ongoing investments in growth.
  • 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 continues to expect free cash flow⁵ of between $475 million and $675 million in fiscal 2023, reflecting continued strong underlying cash conversion within the Professional Services business.
• The Company also reiterated its financial targets for fiscal 2024, which include an expectation to deliver adjusted¹ EPS of $4.75+, a 15% segment adjusted¹ operating margin³ and return on invested capital⁸ of 17%, and reiterated its long-term target to achieve a segment adjusted operating margin of 17%.

“Against a backdrop of rising demand and strong secular tailwinds, our focus on building the best franchises and culture in our industry is resulting in strong returns, as our second quarter performance underscores,” said Troy Rudd, AECOM’s chief executive officer. “Through the investments we are making in our teams and our focus on winning what matters to expand our long-term earnings power, we are delivering on our key priorities. This includes highly profitable and high returning organic growth and strong shareholder value creation through our returns-focused capital allocation policy. Importantly, our teams are highly engaged, voluntary attrition rates have declined and are substantially ahead of key industry benchmarks and our internal targets, and through collaboration, we are bringing the full strength of our technical abilities and the ingenuity of our global teams to our clients. As we look ahead, these competitive advantages will be an essential element of continued outperformance and long-term value creation against a backdrop of strong secular demand drivers.”

“I am proud of our teams’ unrivaled technical excellence and collaboration, which are distinguishing us in the market and extending our competitive advantage,” said Lara Poloni, AECOM’s president. “With unprecedented levels of funding from the three secular megatrends – including continued investments in global infrastructure, sustainability and resilience, and long-term supply chain and energy transitions – combined with our continued market share gains and expanding addressable market, we are highly confident in our ability to capitalize and outperform.”

“Our consistently strong financial performance has been enabled by our strong balance sheet, the highly cash generative nature of our business, and investments in people, organic growth initiatives, and operational efficiencies,” said Gaurav Kapoor, AECOM’s chief financial officer. “As an organization, our focus is on continuing to allocate capital towards our highest returning and fastest growing markets, while investing to take full advantage of our scale to extend the capacity of our teams and capitalize on our record backlog and pipeline. The result has been consistently strong margin performance and return on capital.”

Business Segments

Americas

Revenue in the second quarter was $2.6 billion. Net service revenue² was $976 million, highlighted by 5% growth in the design business.

Operating income increased by 9% over the prior year to $178 million. On an adjusted¹ basis, operating income increased by 9% to $182 million. The adjusted operating margin on an NSR² basis of 18.7% reflected a 100 basis point increase over the prior year, which is enabled by and creates further opportunities to invest in organic growth.

International

Revenue in the second quarter was $860 million. Net service revenue² was $703 million, a 12% increase from the prior year, which included growth in the largest geographies within the segment.

Operating income increased by 10% over the prior year to $60 million. On an adjusted basis¹, operating income increased by 9% to $60 million. The adjusted operating margin on an NSR² basis increased by 30 basis points over the prior year to 8.6%, which reflects continued strong execution toward the Company’s target of a double-digit margin in this business.

AECOM Capital

AECOM has initiated a process to explore strategic options for the AECOM Capital business. AECOM Capital will continue to manage existing investment products. This process is consistent with the Company’s focus on its Professional Services business. Beginning in the second quarter and for comparable historical periods, the results of the AECOM Capital segment have been classified as non-core and excluded from adjusted financial results, as reconciled in this release.

Discontinued Operations

Results from discontinued operations this quarter included a non-cash reduction to previously expected contingent consideration related to the previously sold Civil Construction business.

Balance Sheet

As of March 31, 2023, AECOM had $1.1 billion of total cash and cash equivalents, $2.2 billion of total debt and $1.2 billion of net debt (total debt less cash and cash equivalents). Net leverage⁹ was 1.1x.

Tax Rate

The effective tax rate was 24.6% in the second quarter. On an adjusted¹ basis, the effective tax rate was 26.4%. The adjusted tax rate was derived by re-computing the quarterly effective tax rate on earnings from 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 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. 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, non-core AECOM Capital 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 On a constant-currency basis.
⁷ 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.