AECOM reports first quarter fiscal year 2020 results

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, risk profile and investment strategies, any statements regarding future economic conditions or performance, the expected financial and operational results of AECOM, and expectations regarding AECOM's business or organization following the Management Services transaction. 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; losses under fixed-price contracts; limited control over operations 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; high leverage and potential inability to service our debt and guarantees; exposure to Brexit; exposure to political and economic risks in different countries; currency exchange rate 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; AECOM Capital real estate development projects; managing pension cost; cybersecurity issues, IT outages and data privacy; risks associated with the benefits and costs of the Management Services transaction, including the risk that the expected benefits of the Management Services transaction or any contingent purchase price will not be realized within the expected time frame, in full or at all, or that any purchase price adjustments could be unfavorable or result in lower aggregate cash proceeds; the risk that costs of restructuring transactions and other costs incurred in connection with the Management Services transaction will exceed our estimates or otherwise adversely affect our business or operations; 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, adjusted tax rate, organic revenue, 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 EBITDA, adjusted EPS, adjusted net/operating income and adjusted tax rate to exclude the impact of non-operating items, such as amortization expense, taxes and non-core operating losses to aid investors in better understanding our core performance results. We use free cash flow to represent the cash generated after capital expenditures to maintain our business. We present constant currency information, such as organic revenue, to help assess how our underlying businesses performed excluding the effect of foreign currency rate fluctuations to aid investors in better understanding our international operational performance. We present net service revenue to exclude subcontractor costs from revenue to provide investors with a better understating of our operational performance.

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.

When we provide our long term projections for adjusted EBITDA and free cash flow on a forward-looking basis, the closest corresponding GAAP measure and a reconciliation of the differences between the non-GAAP expectation and the corresponding GAAP measure generally is not available without unreasonable effort due to the length, high variability, complexity and low visibility associated with the non-GAAP expectation projected against the multi-year forecast which could significantly impact the GAAP measure.

AECOM
Consolidated Statement of Income
(unaudited - in thousands, except per share data)

	Three Months Ended
	December 31, 2018			December 31, 2019			% Change

Revenue	$	3,356,338		$	3,235,610		(3.6	%)
Cost of revenue		3,232,942			3,069,810		(5.0	%)
Gross profit		123,396			165,800		34.4	%

Equity in earnings of joint ventures		6,632			9,928		49.7	%
General and administrative expenses		(35,907	)		(43,614	)	21.5	%
Restructuring costs		(63,295	)		(44,925	)	(29.0	%)
Income from operations		30,826			87,189		182.8	%

Other income		2,985			4,008		34.3	%
Interest expense		(39,425	)		(40,377	)	2.4	%
(Loss) income before income tax (benefit) expense		(5,614	)		50,820		(1005.2	%)

Income tax (benefit) expense		(42,535	)		15,906		(137.4	%)

Income from continuing operations		36,921			34,914		(5.4	%)
Discontinued operations, net of tax		28,165			18,180		(35.5	%)
Net income		65,086			53,094		(18.4	%)

Net income attributable to noncontrolling interests from continuing operations		(4,940	)		(4,047	)	(18.1	%)
Net income attributable to noncontrolling interests from discontinued operations		(8,627	)		(8,443	)	(2.1	%)
Net income attributable to noncontrolling interests		(13,567	)		(12,490	)	(7.9	%)

Net income attributable to AECOM from continuing operations		31,981			30,867		(3.5	%)
Net income attributable to AECOM from discontinued operations		19,538			9,737		(50.2	%)
Net income attributable to AECOM	$	51,519		$	40,604		(21.2	%)

Net income attributable to AECOM per share:
Basic
Continuing operations	$	0.20		$	0.20		0.0	%
Discontinued operations		0.12			0.06		(50.0	%)
Basic earnings per share	$	0.32		$	0.26		(18.8	%)

Diluted
Continuing operations	$	0.20		$	0.19		(5.0	%)
Discontinued operations		0.12			0.06		(50.0	%)
Diluted earnings per share	$	0.32		$	0.25		(21.9	%)

Weighted average shares outstanding:
Basic		156,416			157,332		0.6	%
Diluted		159,603			160,657		0.7	%

AECOM
Balance Sheet and Cash Flow Information
(unaudited - in thousands)

	September 30, 2019			December 31, 2019
Balance Sheet Information:
Total cash and cash equivalents	$	885,639	$		725,436
Accounts receivable and contract assets, net		4,451,022			4,511,279
Working capital		1,072,891			1,005,475
Total debt, excluding unamortized debt issuance costs		3,352,464			3,503,915
Total assets		14,461,591			15,229,359
Total AECOM stockholders’ equity		3,690,576			3,673,002

AECOM
Reportable Segments
(unaudited - in thousands)
Reportable Segments:	Americas			International			AECOM Capital			Corporate			Total

Three Months Ended December 31, 2019:
Revenue	$	2,451,982		$	783,095		$	533		$	—		$	3,235,610
Cost of revenue	2,312,550			757,260			—			—				3,069,810
Gross profit	139,432			25,835			533			—				165,800
Equity in earnings of joint ventures	6,429			2,836			663			—				9,928
General and administrative expenses	—			—			(2,419		)	(41,195		)		(43,614	)
Restructuring costs	—			—			—			(44,925		)		(44,925	)
Income (loss) from operations	$	145,861		$	28,671		$	(1,223	)	$	(86,120	)	$	87,189

Gross profit as a % of revenue	5.7		%	3.3		%	—			—				5.1	%

Contracted backlog	$	13,949,059		$	3,610,945		$	—		$	—		$	17,560,004
Awarded backlog	17,248,843			843,248			—			—			18,092,091
Unconsolidated JV backlog	865,791			—			—			—				865,791
Total backlog	$	32,063,693		$	4,454,193		$	—		$	—		$	36,517,886


Three Months Ended December 31, 2018:
Revenue	$	2,560,401		$	792,004		$	3,933		$	—		$	3,356,338
Cost of revenue	2,453,180			779,762			—			—				3,232,942
Gross profit	107,221			12,242			3,933			—				123,396
Equity in earnings of joint ventures	6,264			2,853			(2,485		)	—				6,632
General and administrative expenses	—			—			(1,727		)	(34,180		)		(35,907	)
Restructuring costs	—			—			—			(63,295		)		(63,295	)
Income (loss) from operations	$	113,485		$	15,095		$	(279	)	$	(97,475	)	$	30,826

Gross profit as a % of revenue	4.2		%	1.5		%	—			—				3.7	%

Contracted backlog	$	11,005,725		$	3,589,901		$	—		$	—		$	14,595,626
Awarded backlog	18,776,367			1,078,341			—			—				19,854,708
Unconsolidated JV backlog	1,460,594			—			—			—				1,460,594
Total backlog	$	31,242,686		$	4,668,242		$	—		$	—		$	35,910,928

AECOM Regulation G Information (in millions)
Reconciliation of Revenue to Revenue, Net of Subcontractor Costs (NSR)
	Three Months Ended
	December 31, 2018			December 31, 2019

Americas
Revenue	$	2,560.4	$		2,452.0
Less: subcontractor and other direct costs		1,685.4			1,546.4
Revenue, net of subcontractor and other direct costs	$	875.0	$		905.6

International
Revenue	$	792.0	$		783.1
Less: subcontractor and other direct costs		155.0			149.5
Revenue, net of subcontractor and other direct costs	$	637.0	$		633.6

Consolidated
Revenue	$	3,356.3	$		3,235.6
Less: subcontractor and other direct costs		1,840.4			1,695.9
Revenue, net of subcontractor and other direct costs	$	1,515.9	$		1,539.7

Reconciliation of Total Debt to Net Debt
	Balances at
	Dec 31, 2018		Sep 30, 2018		Dec 31, 2019
Short-term debt	$	46.1	$	47.9	$	55.0
Current portion of long-term debt		95.3		50.5		56.6
Long-term debt, gross		3,739.8		3,254.0		3,392.3
Total debt, excluding unamortized debt issuance costs		3,881.2		3,352.4		3,503.9
Less: Total cash and cash equivalents		686.3		885.6		725.4
Net debt	$	3,194.9	$	2,466.8	$	2,778.5

Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
	Three Months Ended
	Dec 31, 2018			Sep 30, 2019			Dec 31, 2019
Net cash (used in) provided by operating activities	$	(200.4	)	$	793.7		$	(206.9	)
Capital expenditures, net		(21.9	)		(14.3	)		(31.1	)
Free cash flow	$	(222.3	)	$	779.4		$	(238.0	)

	Fiscal Years Ended Sep 30,
		2015			2016			2017			2018			2019
Net cash provided by operating activities	$	764.4		$	814.2		$	696.7		$	774.6		$	777.6
Capital expenditures, net		(69.4	)		(136.8	)		(78.5	)		(86.9	)		(83.4	)
Free cash flow	$	695.0		$	677.4		$	618.2		$	687.7		$	694.2

AECOM
Regulation G Information
(in millions, except per share data)
	Three Months Ended
	Dec 31, 2018			Sep 30, 2019			Dec 31, 2019
Reconciliation of Income from Operations to Adjusted Income from Operations
Income from operations	$	30.8		$	131.6		$	87.2
Noncore operating losses & transaction related expenses		9.4			(1.2	)		5.6
Impairment of long-lived assets, including goodwill		-			24.9			-
Restructuring costs		63.3			16.2			44.9
Gain on disposal activities		-			(3.6	)		-
Amortization of intangible assets		6.3			6.2			6.1
Adjusted income from operations	$	109.8		$	174.1		$	143.8

Reconciliation of Income Before Income Taxes to Adjusted Income Before Income Taxes
(Loss) income before income tax expense (benefit)	$	(5.6	)	$	94.9		$	50.8
Noncore operating losses & transaction related expenses		9.4			(1.2	)		5.6
Impairment of long-lived assets, including goodwill		-			24.9			-
Restructuring costs		63.3			16.2			44.9
Gain on disposal activities		-			(3.6	)		-
Amortization of intangible assets		6.3			6.2			6.1
Financing charges in interest expense		2.4			3.4			2.0
Adjusted income before income tax expense	$	75.8		$	140.8		$	109.4

Reconciliation of Income Taxes to Adjusted Income Taxes
Income tax (benefit) expense	$	(42.5	)	$	16.6		$	15.9
Tax effect of the above adjustments ^*		22.4			9.6			15.2
Valuation allowances and other tax only items		33.6			3.6			(0.4	)
Adjusted income tax expense	$	13.5		$	29.8		$	30.7
^* Adjusts the income tax expense (benefit) during the period to exclude the impact on our effective tax rate of the pre-tax adjustments shown above.

Reconciliation of Noncontrolling Interest to Adjusted Noncontrolling Interests
Noncontrolling interests in income of consolidated subsidiaries, net of tax	$	(4.9	)	$	(6.8	)	$	(4.0	)
Amortization of intangible assets included in NCI, net of tax		(0.1	)		(0.2	)		(0.1	)
Adjusted noncontrolling interests in income of consolidated subsidiaries, net of tax	$	(5.0	)	$	(7.0	)	$	(4.1	)

Reconciliation of Net Income Attributable to AECOM to Adjusted Net Income Attributable to AECOM
Net income attributable to AECOM	$	32.0		$	71.5		$	30.9
Noncore operating losses & transaction related expenses		9.4			(1.2	)		5.6
Impairment of long-lived assets, including goodwill		-			24.9			-
Restructuring costs		63.3			16.2			44.9
Gain on disposal activities		-			(3.6	)		-
Amortization of intangible assets		6.3			6.2			6.1
Financing charges in interest expense		2.4			3.4			2.0
Tax effect of the above adjustments ^*		(22.4	)		(9.6	)		(15.2	)
Valuation allowances and other tax only items		(33.6	)		(3.6	)		0.4
Amortization of intangible assets included in NCI, net of tax		(0.1	)		(0.2	)		(0.1	)
Adjusted net income attributable to AECOM	$	57.3		$	104.0		$	74.6
^* Adjusts the income tax expense (benefit) during the period to exclude the impact on our effective tax rate of the pre-tax adjustments shown above.

Reconciliation of Net Income per Diluted Share to Adjusted Net Income per Diluted Share
Net income attributable to AECOM - per diluted share	$	0.20		$	0.45		$	0.19
Per diluted share adjustments:
Noncore operating losses & transaction related expenses		0.05			(0.01	)		0.03
Impairment of long-lived assets, including goodwill		-			0.15			-
Restructuring costs		0.40			0.10			0.28
Loss on disposal activities		-			(0.02	)		-
Amortization of intangible assets		0.04			0.04			0.04
Financing charges in interest expense		0.02			0.02			0.01
Tax effect of the above adjustments ^*		(0.14	)		(0.06	)		(0.09	)
Valuation allowances and other tax only items		(0.21	)		(0.02	)		-
Adjusted net income attributable to AECOM - per diluted shares	$	0.36		$	0.65		$	0.46

Weighted average shares outstanding - diluted		159.6			160.9			160.7
^* Adjusts the income tax expense (benefit) during the period to exclude the impact on our effective tax rate of the pre-tax adjustments shown above.

AECOM
Regulation G Information
(in millions, except per share data)
	Three Months Ended
	Dec 31, 2018			Sep 30, 2019			Dec 31, 2019
Reconciliation of Net Income Attributable to AECOM to EBITDA to Adjusted EBITDA and to Adjusted Income from Operations
Net income attributable to AECOM	$	32.0		$	71.5		$	30.9
Income tax (benefit) expense		(42.5	)		16.6			15.9
(Loss) income attributable to AECOM		(10.5	)		88.1			46.8
Depreciation and amortization ¹		40.0			70.6			41.1
Interest income ²		(2.2	)		(3.0	)		(3.4	)
Interest expense ³		39.4			40.2			40.3
Amortized bank fees included in interest expense		(2.4	)		(3.4	)		(2.0	)
EBITDA	$	64.3		$	192.5		$	122.8
Noncore operating losses & transaction related expenses		9.4			(1.2	)		5.6
Impairment of long-lived assets, including goodwill		-			24.9			-
Restructuring costs		63.3			16.2			45.0
Gain on disposal activities		-			(3.6	)		-
Depreciation expense included in noncore operating losses and acquisition and integration expenses above		-			(24.9	)		-
Adjusted EBITDA	$	137.0		$	203.9		$	173.4
Other income		(3.0	)		(3.5	)		(4.0	)
Depreciation ¹		(31.4	)		(36.3	)		(33.1	)
Interest income ²		2.2			3.0			3.4
Noncontrolling interests in income of consolidated subsidiaries, net of tax		5.0			6.8			4.1
Amortization of intangible assets included in NCI, net of tax		-			0.2			-
Adjusted income from operations	$	109.8		$	174.1		$	143.8
⁽¹⁾ Excludes depreciation from noncore operating losses, and acquisition and integration-related items. ⁽²⁾ Included in other income. ⁽³⁾ Excludes related amortization.

Reconciliation of Segment Income from Operations to Adjusted Income from Operations
Americas Segment:
Income from operations	$	113.5		$	148.7		$	145.9
Noncore operating losses & transaction related expenses		9.4			(0.9	)		-
Impairment of long-lived assets		-			15.6			-
Amortization of intangible assets		4.8			-			4.7
Adjusted income from operations	$	127.7		$	163.4		$	150.6

International Segment:
Income from operations	$	15.1		$	35.1		$	28.7
Noncore operating losses & transaction related expenses		-			(0.3	)		(0.1	)
Impairment of long-lived assets		-			4.4			-
Gain on disposal activities		-			(3.6	)		-
Amortization of intangible assets		1.5			1.4			1.4
Adjusted income from operations	$	16.6		$	37.0		$	30.0

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