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2 months ago
AECOM reports second quarter fiscal 2026 resultsMay 11, 2026 4:05 PM
Business Wire Delivered record second quarter performance Design book-to-burn ratio of 1.2 drove 8% total backlog growth to a record high; 22nd consecutive quarter with a book-to-burn ratio in excess of 1 Continued to execute returns-based capital allocation policy Raised earnings guidance for a second consecutive quarter AECOM (NYSE:ACM), the trusted global infrastructure leader, today reported second quarter fiscal 2026 results. Second Quarter Highlights: Reflecting as reported GAAP performance from continuing operations, second quarter revenue increased 1% to $3.8 billion, operating income declined 4% to $248 million, net income increased 19% to $184 million and diluted earnings per share increased 22% to $1.42. Net service revenue1 increased 4% on an as reported basis, or 2% on a constant-currency basis, highlighted by 8% constant-currency growth in the Americas design business. The segment adjusted2 operating margin3 increased by 50 basis points to 16.5% and the adjusted2 EBITDA margin4 increased by 20 basis points to 16.5%, both of which set new all-time highs for a second quarter. As a result, in the first half of the year, the segment adjusted operating margin and the adjusted EBITDA margin were both 16.5%, increasing by 70 basis points and 50 basis points, respectively, and set new records. Adjusted2 EBITDA5 increased by 8% and adjusted2 EPS increased by 27%. Total backlog6 increased by 8% to a record high, driven by a 1.2 book-to-burn7 ratio in the design business. The design pipeline increased by double-digits and reached a record level, driven by strong funding across the Company’s markets and an expanding addressable market opportunity. Second Quarter Fiscal 2026 (from Continuing Operations; $ in millions, except EPS) As Reported (GAAP) YoY % Change Adjusted2 (Non-GAAP) YoY % Change Revenue $3,801 1% -- -- Net Service Revenue (NSR)1 -- -- $1,948 2% Operating Income $248 (4%) $280 7% Segment Operating Margin3 -- -- 16.5% +50 bps Net Income $184 19% $205 23% EPS (Fully Diluted) $1.42 22% $1.59 27% EBITDA5 -- -- $312 8% EBITDA Margin4 -- -- 16.5% +20 bps Operating Cash Flow $4 (98%) -- -- Free Cash Flow8 -- -- ($27) NM Total Backlog6 $26,204 8% -- -- “Our strong second quarter and fiscal year-to-date performance highlights the strength and resiliency of our business,” said Troy Rudd, AECOM’s chairman and chief executive officer. “Our competitive advantages of scale, infrastructure domain and technical expertise, and strong client relationships are key to our successes. We are continuing to invest at record levels to enhance our client value proposition and expand our addressable market, which includes our proprietary AI investments and growing our Advisory practice. Taken together, we are well positioned to deliver on both our twice-raised fiscal 2026 guidance and our long-term financial targets.” “Our teams continue to build momentum and our investments to extend our competitive advantages are contributing to a strengthened client value proposition,” said Lara Poloni, AECOM’s president. “Now more than ever, we are positioned to deliver complex technical expertise at scale.” “As our second quarter performance and raised full year financial guidance underscore, we have an enduring competitive advantage that allows us to continue to deliver,” said Gaurav Kapoor, AECOM’s chief financial and operations officer. “Our competitive advantages have enabled us to consistently win increasingly valuable projects, and in turn, deliver continued earnings growth year after year.” Cash Flow and Capital Allocation Underlying cash flow in the second quarter was consistent with expectations, but was offset by delayed payment timing in the Middle East business, as well as longer-than-anticipated claim resolution on certain projects. Importantly, collections in the Middle East have already recovered in the fiscal third quarter and AECOM reiterated its full year free cash flow guidance, as well as its long-term 100%+ free cash flow conversion target. The Company returned $155 million to shareholders through repurchases and dividends in the quarter. Since the initiation of its repurchase program in September 2020, the Company has returned more than $3.5 billion of capital to shareholders. The Company remains committed to executing its returns-focused capital allocation policy, which includes returning substantially all available cash flow to shareholders through repurchases and dividends. The Company maintains a strong balance sheet with net leverage9 of 1.2x. Fiscal 2026 and Long-Term Financial Guidance The Company increased its fiscal 2026 earnings guidance, supported by its strong year-to-date performance, another quarter of record backlog and double-digit pipeline growth. As a result, the Company’s guidance now includes expectations for: Adjusted2 EPS of between $5.90 and $6.10, as compared to $5.85 to 6.05 previously, which now represents 14% year-over-year growth at the mid-point of the range. Adjusted2 EBITDA5 of between $1,275 million and $1,305 million, as compared to $1,270 million and $1,305 million previously, which now represents 7% year-over-year growth at the mid-point of the range. Reiterated organic NSR1 growth range of between 6% and 8%, which excludes the expected approximately 200 basis point impact of fewer working days in fiscal 2026. A segment adjusted operating margin3 of 16.8% and an adjusted EBITDA margin4 of 17.0%. Free cash flow8 of approximately $400 million. An average fully diluted share count of 130 million, which does not include any potential future benefits from capital allocation actions not yet taken, including potential repurchases. An adjusted effective tax rate of approximately 20 – 22%. In addition, the Company reaffirmed its long-term financial targets, which includes its expectation to deliver a 20%+ margin exit rate by fiscal 2028 and to grow adjusted2 EPS at a 15%+ CAGR from fiscal 2026 to fiscal 2029. See the Regulation G Information tables at the end of this release for a reconciliation of non-GAAP measures to the most directly comparable GAAP measures. Business Segments Americas Revenue in the second quarter was $2.9 billion, a 1% increase from the prior year. Net service revenue1 in the second quarter was $1.2 billion, a 5% increase from the prior year, driven by 8% growth in the Americas design business. Operating income increased by 5% over the prior year to $228 million and on an adjusted2 basis increased by 10% to $239 million. The adjusted operating margin on net service revenue increased by 60 basis points over the prior year to 20.0%, which marked a new all-time high for a second quarter. This performance reflects a continued focus on driving operating efficiencies across the business and the high returns on the investments the Company has made and continues to make in organic growth. Backlog in the Americas segment grew by 2% to a new record high, driven by a 1.0 book-to-burn ratio7. The Americas design business had a 1.1 book-to-burn ratio led by strong wins in the Transportation, Environment and Water end markets. International Revenue in the second quarter was $890 million, a 2% increase from the prior year. Net service revenue1 was $754 million, a 3% decrease from the prior year, driven by declines in the Asia and Middle East markets. Operating income decreased by 6% over the prior year to $77 million and on an adjusted2 basis increased 2% to $84 million. The adjusted operating margin on net service revenue was effectively unchanged over the prior year at 11.1%. This performance includes an impact from lower revenues in certain regions due to the conflict in the Middle East, as well as continued investments in business development and strategic growth initiatives. Backlog in the International segment grew 25% over the prior year to a new record high, driven by a 1.2 book-to-burn ratio7 and strong wins in the U.K. and Middle East markets. Tax Rate The effective tax rate was 12.1% in the second quarter. On an adjusted2 basis, the effective tax rate was 13.9%. The adjusted tax rate was derived by re-computing the quarterly effective tax rate on adjusted net income10. 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. 1 Revenue, less pass-through revenue; growth rates are presented on a constant-currency basis, unless otherwise noted. 2 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. 3 Reflects segment operating performance, excluding AECOM Capital and G&A, and margins are presented on a net service revenue basis. 4 Adjusted EBITDA margin includes non-controlling interests in EBITDA and is on a net service revenue basis. 5 Net income before interest expense, tax expense, depreciation and amortization. 6 Backlog represents the total value of work for which AECOM has been selected that is expected to be completed by consolidated subsidiaries and includes the proportionate share of work expected to be performed by unconsolidated joint ventures. 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. 8 Free cash flow is defined as cash flow from operations less capital expenditures, net of proceeds from disposals of property and equipment; free cash flow conversion is defined as free cash flow divided by adjusted net income attributable to AECOM. 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. About AECOM AECOM (NYSE: ACM) is the global infrastructure leader, committed to delivering a better world. As a trusted professional services firm powered by deep technical abilities, we solve our clients’ complex challenges in water, environment, energy, transportation and buildings. Our teams partner with public- and private-sector clients to create innovative, sustainable and resilient solutions throughout the project lifecycle – from advisory, planning, design and engineering to program and construction management. AECOM is a Fortune 500 firm that had revenue of $16.1 billion in fiscal year 2025. Learn more at aecom.com. Forward-Looking Statements 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, capital allocation strategy including stock repurchases, risk profile and investment strategies, and any statements regarding future economic conditions or performance, and the expected financial and operational results of AECOM. 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; government shutdowns; changes in administration or other funding directives and circumstances that cause governmental agencies to modify, curtail or terminate our contracts; government contracts are subject to audits and adjustments of contractual terms; long-term government contracts are subject to uncertainties related to government contract appropriations; losses under fixed-price contracts; limited control over operations run through our joint venture entities; liability for misconduct by our employees or consultants; changes in government laws, regulations and policies, including failure to comply with laws or regulations applicable to our business; maintaining adequate surety and financial capacity; potential high leverage and inability to service our debt and guarantees; our capital allocation strategy, including our ability to continue payment of dividends and purchase stock; exposure to political and economic risks in different countries, including tariffs and trade policies, geopolitical events, and conflicts; inflation, currency exchange rates and interest rate fluctuations; changes in capital markets and stock market volatility; retaining and recruiting key technical and management personnel; legal claims and litigation; inadequate insurance coverage; environmental law compliance and inadequate nuclear indemnification; unexpected adjustments and cancellations related to our backlog; partners and third parties who may fail to satisfy their legal obligations; managing pension costs; AECOM Capital real estate development; cybersecurity issues, IT outages and data privacy; risks associated with the benefits and costs of the sale of our Management Services and self-perform at-risk civil infrastructure, power construction and oil and gas construction businesses, including the risk that any purchase adjustments from those transactions could be unfavorable and any future proceeds owed to us as part of the transactions could be lower than we expect; risks associated with our strategic initiatives, including AI investments and potential acquisitions and divestitures; 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 communication 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 EBITDA margin, adjusted net/operating income, segment adjusted operating margin, adjusted tax rate, 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 operating income, adjusted net income, adjusted EBITDA, adjusted EBITDA margin, and adjusted EPS to exclude the impact of certain items, such as amortization expense and taxes to aid investors in better understanding our core performance results. We use free cash flow to present the cash generated from operations after capital expenditures to maintain our business. We present net service revenue (NSR) to exclude pass-through subcontractor costs from revenue to provide investors with a better understanding of our operational performance. We present segment adjusted operating margin to reflect segment operating performance of our Americas and International segments, excluding AECOM Capital. We present adjusted tax rate to reflect the tax rate on adjusted earnings. We also use constant-currency growth rates where appropriate, which are calculated by conforming the current period results to the comparable period exchange rates. 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 communication. The Company is unable to reconcile certain of its non-GAAP financial guidance and long-term financial targets due to uncertainties in these non-operating items as well as other adjustments to net income. The Company is unable to provide a reconciliation of its guidance for NSR to GAAP revenue because it is unable to predict with reasonable certainty its pass-through revenue. In addition, the Company is unable to provide a reconciliation of its guidance for financial metrics excluding the Construction Management business due to uncertainties in these non-operating items as well as other adjustments to these measures. AECOM Consolidated Statements of Income (unaudited - in thousands, except per share data) Three Months Ended Six Months Ended March 31, 2026 March 31, 2025 % Change March 31, 2026 March 31, 2025 % Change Revenue $ 3,801,143 $ 3,771,613 0.8 % $ 7,631,977 $ 7,785,765 (2.0 )% Cost of revenue 3,504,643 3,480,852 0.7 % 7,054,487 7,226,600 (2.4 )% Gross profit 296,500 290,761 2.0 % 577,490 559,165 3.3 % Equity in earnings of joint ventures 9,122 6,864 32.9 % 18,949 16,417 15.4 % General and administrative expenses (44,301 ) (40,054 ) 10.6 % (85,140 ) (80,513 ) 5.7 % Restructuring and acquisition costs (13,565 ) - NM (41,498 ) - NM Income from operations 247,756 257,571 (3.8 )% 469,801 495,069 (5.1 )% Other income (expense) 10,637 (8,748 ) (221.6 )% 18,456 (1,824 ) (1111.8 )% Interest income 13,712 14,530 (5.6 )% 27,453 31,094 (11.7 )% Interest expense (50,570 ) (42,205 ) 19.8 % (95,836 ) (85,239 ) 12.4 % Income from continuing operations before taxes 221,535 221,148 0.2 % 419,874 439,100 (4.4 )% Income tax expense for continuing operations 26,841 51,238 (47.6 )% 65,924 80,470 (18.1 )% Income from continuing operations 194,694 169,910 14.6 % 353,950 358,630 (1.3 )% Loss from discontinued operations (4,246 ) (10,370 ) (59.1 )% (70,150 ) (19,886 ) 252.8 % Net income 190,448 159,540 19.4 % 283,800 338,744 (16.2 )% Net income attributable to noncontrolling interests from continuing operations (10,588 ) (15,812 ) (33.0 )% (29,420 ) (27,182 ) 8.2 % Net income attributable to noncontrolling interests from discontinued operations - (334 ) (100.0 )% - (1,126 ) (100.0 )% Net income attributable to noncontrolling interests (10,588 ) (16,146 ) (34.4 )% (29,420 ) (28,308 ) 3.9 % Net income attributable to AECOM from continuing operations 184,106 154,098 19.5 % 324,530 331,448 (2.1 )% Net loss attributable to AECOM from discontinued operations (4,246 ) (10,704 ) (60.3 )% (70,150 ) (21,012 ) 233.9 % Net income attributable to AECOM $ 179,860 $ 143,394 25.4 % $ 254,380 $ 310,436 (18.1 )% Net income (loss) attributable to AECOM per share: Basic continuing operations per share $ 1.43 $ 1.16 23.3 % $ 2.50 $ 2.50 0.0 % Basic discontinued operations per share (0.03 ) (0.08 ) (62.5 )% (0.54 ) (0.16 ) 237.5 % Basic earnings per share $ 1.40 $ 1.08 29.6 % $ 1.96 $ 2.34 (16.2 )% Diluted continuing operations per share $ 1.42 $ 1.16 22.4 % $ 2.48 $ 2.48 0.0 % Diluted discontinued operations per share (0.03 ) (0.08 ) (62.5 )% (0.53 ) (0.15 ) 253.3 % Diluted earnings per share $ 1.39 $ 1.08 28.7 % $ 1.95 $ 2.33 (16.3 )% Weighted average shares outstanding: Basic 128,728 132,432 (2.8 )% 129,808 132,466 (2.0 )% Diluted 129,235 133,139 (2.9 )% 130,609 133,382 (2.1 )% AECOM Balance Sheet Information (unaudited - in thousands) March 31, 2026 September 30, 2025 Balance Sheet Information: Total cash and cash equivalents $ 1,034,257 $ 1,585,739 Accounts receivable and contract assets – net 4,628,940 4,282,326 Working capital 618,264 801,411 Total debt, excluding unamortized debt issuance costs 2,747,720 2,743,719 Total assets 12,007,347 12,200,249 Total AECOM stockholders’ equity 2,270,592 2,492,584 AECOM Reportable Segments (unaudited - in thousands) Americas International AECOM Capital Corporate Total Three Months Ended March 31, 2026 Revenue $ 2,911,571 $ 889,572 $ - $ - $ 3,801,143 Cost of revenue 2,688,473 816,170 - - 3,504,643 Gross profit 223,098 73,402 - - 296,500 Equity in earnings of joint ventures 4,841 3,583 698 - 9,122 General and administrative expenses - - (2,238 ) (42,063 ) (44,301 ) Restructuring and acquisition costs - - - (13,565 ) (13,565 ) Income (loss) from operations $ 227,939 $ 76,985 $ (1,540 ) $ (55,628 ) $ 247,756 Gross profit as a % of revenue 7.7 % 8.3 % - - 7.8 % Three Months Ended March 31, 2025 Revenue $ 2,896,772 $ 874,733 $ 108 $ - $ 3,771,613 Cost of revenue 2,684,279 796,573 - - 3,480,852 Gross profit 212,493 78,160 108 - 290,761 Equity in earnings (loss) of joint ventures 4,861 4,023 (2,020 ) - 6,864 General and administrative expenses - - (2,807 ) (37,247 ) (40,054 ) Income (loss) from operations $ 217,354 $ 82,183 $ (4,719 ) $ (37,247 ) $ 257,571 Gross profit as a % of revenue 7.3 % 8.9 % - - 7.7 % Six Months Ended March 31, 2026 Revenue $ 5,888,856 $ 1,743,121 $ - $ - $ 7,631,977 Cost of revenue 5,456,162 1,598,289 36 - 7,054,487 Gross profit (loss) 432,694 144,832 (36 ) - 577,490 Equity in earnings of joint ventures 9,357 8,175 1,417 - 18,949 General and administrative expenses - - (4,037 ) (81,103 ) (85,140 ) Restructuring and acquisition costs - - - (41,498 ) (41,498 ) Income (loss) from operations $ 442,051 $ 153,007 $ (2,656 ) $ (122,601 ) $ 469,801 Gross profit as a % of revenue 7.3 % 8.3 % - - 7.6 % Contracted backlog $ 8,977,642 $ 4,845,210 $ - $ - $ 13,822,852 Awarded backlog 9,122,890 3,257,814 - - 12,380,704 Total backlog $ 18,100,532 $ 8,103,024 $ - $ - $ 26,203,556 Total backlog – Design only $ 16,561,215 $ 8,103,024 $ - $ - $ 24,664,239 Six Months Ended March 31, 2025 Revenue $ 6,008,727 $ 1,776,743 $ 295 $ - $ 7,785,765 Cost of revenue 5,605,974 1,620,626 - - 7,226,600 Gross profit 402,753 156,117 295 - 559,165 Equity in earnings (losses) of joint ventures 10,373 6,904 (860 ) - 16,417 General and administrative expenses - - (5,202 ) (75,311 ) (80,513 ) Income (loss) from operations $ 413,126 $ 163,021 $ (5,767 ) $ (75,311 ) $ 495,069 Gross profit as a % of revenue 6.7 % 8.8 % - - 7.2 % Contracted backlog $ 8,854,297 $ 4,475,858 $ - $ - $ 13,330,155 Awarded backlog 8,930,751 2,007,993 - - 10,938,744 Total backlog $ 17,785,048 $ 6,483,851 $ - $ - $ 24,268,899 Total backlog – Design only $ 16,458,797 $ 6,483,851 $ - $ - $ 22,942,648 AECOM Regulation G Information (in millions) Reconciliation of Revenue to Net Service Revenue (NSR) Three Months Ended Six Months Ended Mar 31, 2026 Dec 31, 2025 Mar 31, 2025 Mar 31, 2026 Mar 31, 2025 Americas Revenue $ 2,911.6 $ 2,977.3 $ 2,896.7 $ 5,888.9 $ 6,008.7 Less: Pass-through revenue 1,717.3 1,862.6 1,772.0 3,579.9 3,833.1 Net service revenue $ 1,194.3 $ 1,114.7 $ 1,124.7 $ 2,309.0 $ 2,175.6 International Revenue $ 889.6 $ 853.5 $ 874.8 $ 1,743.1 $ 1,776.8 Less: Pass-through revenue 135.5 117.3 132.5 252.8 284.3 Net service revenue $ 754.1 $ 736.2 $ 742.3 $ 1,490.3 $ 1,492.5 Segment Performance (excludes ACAP) Revenue $ 3,801.2 $ 3,830.8 $ 3,771.5 $ 7,632.0 $ 7,785.5 Less: Pass-through revenue 1,852.8 1,979.9 1,904.5 3,832.7 4,117.4 Net service revenue $ 1,948.4 $ 1,850.9 $ 1,867.0 $ 3,799.3 $ 3,668.1 Consolidated Revenue $ 3,801.2 $ 3,830.8 $ 3,771.6 $ 7,632.0 $ 7,785.8 Less: Pass-through revenue 1,852.8 1,979.9 1,904.5 3,832.7 4,117.4 Net service revenue $ 1,948.4 $ 1,850.9 $ 1,867.1 $ 3,799.3 $ 3,668.4 Reconciliation of Total Debt to Net Debt Balances at: Mar 31, 2026 Dec 31, 2025 Mar 31, 2025 Short-term debt $ 2.2 $ 3.3 $ 3.2 Current portion of long-term debt 60.7 62.6 67.1 Long-term debt, excluding unamortized debt issuance costs 2,684.8 2,672.6 2,476.6 Total debt 2,747.7 2,738.5 2,546.9 Less: Total cash and cash equivalents 1,034.3 1,246.7 1,600.1 Net debt $ 1,713.4 $ 1,491.8 $ 946.8 Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow Three Months Ended Six Months Ended Mar 31, 2026 Dec 31, 2025 Mar 31, 2025 Mar 31, 2026 Mar 31, 2025 Net cash provided by operating activities $ 3.8 $ 70.2 $ 190.7 $ 74.0 $ 341.8 Capital expenditures, net (31.2 ) (28.3 ) (12.3 ) (59.5 ) (52.4 ) Free cash flow $ (27.4 ) $ 41.9 $ 178.4 $ 14.5 $ 289.4 AECOM Regulation G Information (in millions, except per share data) Three Months Ended Six Months Ended Mar 31, 2026 Dec 31, 2025 Mar 31, 2025 Mar 31, 2026 Mar 31, 2025 Reconciliation of Income from Operations to Adjusted Income from Operations to Adjusted EBITDA with Noncontrolling Interests (NCI) to Adjusted EBITDA Income from operations $ 247.8 $ 222.0 $ 257.6 $ 469.8 $ 495.1 Noncore AECOM Capital loss 1.5 1.2 4.7 2.7 5.7 Restructuring and acquisition costs 13.6 27.9 - 41.5 - Amortization of intangible assets 17.1 12.9 0.4 30.0 1.5 Adjusted income from operations $ 280.0 $ 264.0 $ 262.7 $ 544.0 $ 502.3 Other income (expense) 10.5 7.9 (8.7 ) 18.4 (1.8 ) Fair value adjustment included in other income (7.9 ) (5.1 ) 10.5 (13.0 ) 5.5 Depreciation 38.9 37.7 39.9 76.6 79.7 Adjusted EBITDA with noncontrolling interests (NCI) $ 321.5 $ 304.5 $ 304.4 $ 626.0 $ 585.7 Net income attributable to NCI from continuing operations excluding interest income included in NCI (9.4 ) (17.7 ) (14.7 ) (27.1 ) (24.6 ) Adjusted EBITDA $ 312.1 $ 286.8 $ 289.7 $ 598.9 $ 561.1 Reconciliation of Income from Continuing Operations Before Taxes to Adjusted Income from Continuing Operations Before Taxes Income from continuing operations before taxes $ 221.6 $ 198.3 $ 221.1 $ 419.9 $ 439.1 Noncore AECOM Capital loss 1.5 1.2 4.7 2.7 5.7 Fair value adjustment (8.3 ) (5.5 ) 10.6 (13.8 ) 5.0 Restructuring and acquisition costs 13.6 27.9 - 41.5 - Amortization of intangible assets 17.1 12.9 0.4 30.0 1.5 Financing charges in interest expense 3.5 1.4 1.2 4.9 2.6 Adjusted income from continuing operations before taxes $ 249.0 $ 236.2 $ 238.0 $ 485.2 $ 453.9 Reconciliation of Income Taxes for Continuing Operations to Adjusted Income Taxes for Continuing Operations Income tax expense for continuing operations $ 26.9 $ 39.0 $ 51.2 $ 65.9 $ 80.5 Tax effect of the above adjustments(1) and valuation allowance 6.2 7.8 4.3 14.0 4.3 Adjusted income tax expense for continuing operations $ 33.1 $ 46.8 $ 55.5 $ 79.9 $ 84.8 (1)Adjusts the income taxes 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 Six Months Ended Mar 31, 2026 Dec 31, 2025 Mar 31, 2025 Mar 31, 2026 Mar 31, 2025 Reconciliation of Net Income Attributable to AECOM from Continuing Operations to Adjusted Net Income Attributable to AECOM from Continuing Operations Net income attributable to AECOM from continuing operations $ 184.2 $ 140.4 $ 154.1 $ 324.6 $ 331.4 Noncore AECOM Capital loss, net of NCI 1.5 1.2 4.7 2.7 5.7 Fair value adjustment (8.3 ) (5.5 ) 10.6 (13.8 ) 5.0 Restructuring and acquisition costs 13.6 27.9 - 41.5 - Amortization of intangible assets 17.1 12.9 0.4 30.0 1.5 Financing charges in interest expense 3.5 1.4 1.2 4.9 2.6 Tax effect of the above adjustments(1) and valuation allowance (6.2 ) (7.8 ) (4.3 ) (14.0 ) (4.3 ) Adjusted net income attributable to AECOM from continuing operations 205.4 170.5 166.7 375.9 $ 341.9 (1) Adjusts the income taxes during the period to exclude the impact on our effective tax rate of the pre-tax adjustments shown above Reconciliation of Net Income Attributable to AECOM from Continuing Operations per Diluted Share to Adjusted Net Income Attributable to AECOM from Continuing Operations per Diluted Share Net income attributable to AECOM from continuing operations per diluted share $ 1.42 $ 1.06 $ 1.16 $ 2.48 $ 2.48 Per diluted share adjustments: Noncore AECOM Capital loss, net of NCI 0.01 0.01 0.04 0.02 0.04 Fair value adjustment (0.06 ) (0.04 ) 0.08 (0.10 ) 0.04 Restructuring and acquisition costs 0.11 0.21 - 0.32 - Amortization of intangible assets 0.13 0.10 - 0.23 0.01 Financing charges in interest expense 0.03 0.01 0.01 0.04 0.02 Tax effect of the above adjustments(1) and valuation allowance (0.05 ) (0.06 ) (0.04 ) (0.11 ) (0.03 ) Adjusted net income attributable to AECOM from continuing operations per diluted share $ 1.59 $ 1.29 $ 1.25 $ 2.88 $ 2.56 Weighted average shares outstanding – basic 128.7 130.9 132.4 129.8 132.5 Weighted average shares outstanding – diluted 129.2 132.0 133.1 130.6 133.4 (1) Adjusts the income taxes during the period to exclude the impact on our effective tax rate of the pre-tax adjustments shown above. Reconciliation of Net Income Attributable to AECOM from Continuing Operations to Adjusted EBITDA Net income attributable to AECOM from continuing operations $ 184.2 $ 140.4 $ 154.1 $ 324.6 $ 331.4 Income tax expense 26.9 39.0 51.2 65.9 80.5 Depreciation and amortization 59.5 52.0 41.6 111.5 83.9 Interest income, net of NCI (12.8 ) (12.5 ) (13.4 ) (25.3 ) (28.6 ) Interest expense 50.5 45.3 42.2 95.8 85.2 Amortized bank fees included in interest expense (3.5 ) (1.4 ) (1.3 ) (4.9 ) (2.7 ) Noncore AECOM Capital loss, net of NCI 1.5 1.2 4.7 2.7 5.7 Fair value adjustment included in other income (7.8 ) (5.1 ) 10.6 (12.9 ) 5.7 Restructuring and acquisition costs 13.6 27.9 - 41.5 - Adjusted EBITDA $ 312.1 $ 286.8 $ 289.7 $ 598.9 $ 561.1 AECOM Regulation G Information (in millions, except per share data) Three Months Ended Six Months Ended Mar 31, 2026 Dec 31, 2025 Mar 31, 2025 Mar 31, 2026 Mar 31, 2025 Reconciliation of Segment Income from Operations to Adjusted Segment Income from Operations Americas Segment: Segment Income from operations $ 227.9 $ 214.1 $ 217.4 $ 442.0 $ 413.2 Amortization of intangible assets 10.6 8.1 0.3 18.7 1.4 Adjusted segment income from operations $ 238.5 $ 222.2 $ 217.7 $ 460.7 $ 414.6 International Segment: Segment Income from operations $ 77.0 $ 76.0 $ 82.2 $ 153.0 $ 163.0 Amortization of intangible assets 6.6 4.8 - 11.4 - Adjusted segment income from operations $ 83.6 $ 80.8 $ 82.2 $ 164.4 $ 163.0 Segment Performance (excludes ACAP & G&A): Segment Income from operations $ 304.9 $ 290.1 $ 299.6 $ 595.0 $ 576.2 Amortization of intangible assets 17.2 12.9 0.3 30.1 1.4 Adjusted segment income from operations $ 322.1 $ 303.0 $ 299.9 $ 625.1 $ 577.6 AECOM Regulation G Information FY2026 GAAP EPS Guidance based on Adjusted EPS Guidance (all figures approximate) Fiscal Year End 2026 GAAP EPS guidance $4.25 to $4.86 Adjusted EPS excludes: Amortization of intangible assets $0.58 to $0.44 Amortization of deferred financing fees $0.06 Noncore AECOM Capital $0.02 Fair value adjustment ($0.11) Restructuring and acquisition costs $1.54 to $1.15 Tax effect of the above items ($0.44) to ($0.32) Adjusted EPS guidance $5.90 to $6.10 FY2026 GAAP Net Income from Continuing Operations Guidance based on Adjusted EBITDA Guidance (in millions, all figures approximate) Fiscal Year End 2026 GAAP net income from continuing operations guidance $617 to $696 Net income attributable to noncontrolling interest from continuing operations ($65) Net income attributable to AECOM from continuing operations $552 to $631 Adjusted net income attributable to AECOM from continuing operations excludes: Amortization of intangible assets $75 to $57 Amortization of deferred financing fees $8 Noncore AECOM Capital $3 Fair value adjustment ($14) Restructuring and acquisition costs $200 to $150 Tax effect of the above items ($57) to ($42) Adjusted net income attributable to AECOM from continuing operations $767 to $793 Adjusted EBITDA excludes: Depreciation $160 Adjusted interest expense, net $145 Tax expense, including tax effect of above items $203 to $207 Adjusted EBITDA guidance $1,275 to $1,305 FY2026 GAAP Interest Expense Guidance based on Adjusted Interest Expense Guidance (in millions, all figures approximate) Fiscal Year End 2026 GAAP interest expense guidance $195 Finance charges in interest expense ($8) Interest income, net of NCI ($42) Adjusted interest expense guidance, net $145 FY2026 GAAP Income Tax Guidance based on Adjusted Income Tax Guidance (in millions, all figures approximate) Fiscal Year End 2026 GAAP income tax expense guidance $146 to $165 Tax effect of adjusting items $57 to $42 Adjusted income tax expense guidance $203 to $207 Note: Variances in tables are due to rounding. View source version on businesswire.com: https://www.businesswire.com/news/home/20260511700814/en/ Investor Contact:
Will Gabrielski
Senior Vice President, Finance, Treasurer
213.593.8208
William.Gabrielski@aecom.com Media Contact:
Brendan Ranson-Walsh
Senior Vice President, Global Communications
213.996.2367
Brendan.Ranson-Walsh@aecom.com Original: AECOM reports second quarter fiscal 2026 results
US Market News
5 months ago
AECOM reports first quarter fiscal 2026 resultsFebruary 9, 2026 4:05 PM
Business Wire
Strong performance exceeded expectations on all key financial metrics
Raised earnings guidance for fiscal 2026
Backlog increased year-over-year and sequentially to a record high, driven by a 1.5x book-to-burn ratio
Completed review of strategic alternatives for the Construction Management business and will continue to own and operate the business
Returned more than $340 million to shareholders through repurchases and dividends during the quarter
Board of Directors approved an increase of the share repurchase authorization to $1 billion
AECOM (NYSE:ACM), the trusted global infrastructure leader, today reported first quarter fiscal 2026 results. Consistent with the decision to retain the Construction Management business, reported financial results include the Construction Management business as a continuing operation.
(from Continuing Operations; $ in millions, except EPS)
As Reported
YoY % Change
Adjusted1 (Non-GAAP)
YoY % Change
Revenue
$3,831
(5%)
--
--
Net Service Revenue (NSR)2
--
--
$1,851
5%3
Operating Income
$222
(7%)
$264
10%
Segment Operating Margin4
--
--
16.4%
+100 bps
Net Income
$140
(21%)
$171
(3%)
Tax Rate
19.7%
+630 bps
21.5%
+720 bps
EPS (Fully Diluted)
$1.06
(20%)
$1.29
(2%)
EBITDA5
--
--
$287
6%
EBITDA Margin6
--
--
16.4%
+80 bps
Operating Cash Flow
$70
(54%)
--
--
Free Cash Flow7
--
--
$42
(62%)
Total Backlog8
$25,962
9%
--
--
“We outperformed our expectations on every key financial metric in the quarter and raised our full year guidance as a result," said Troy Rudd, AECOM’s chairman and chief executive officer. “Importantly, backlog increased by 9%, highlighted by a 1.5 book-to-burn ratio that featured some of the largest and most iconic projects in the world. Our successes are built on the foundation of having the number one-ranked franchises in each of our end markets, technical leadership, infrastructure domain expertise, and trusted client relationships. Our investments in the Advisory and Program Management businesses, as well as in technology and AI enable us to scale these attributes, expand our addressable market, deliver even greater value to clients, and build an even stronger and more durable moat – all of which underscore our confidence in achieving our financial objectives.”
“Across our markets, clients are increasingly turning to us to deliver their biggest and most critical infrastructure projects and programs,” said Lara Poloni, AECOM’s president. “From our selection as a preferred bidder on Scottish Water’s new multi-billion-dollar investment program to our selection as Delivery Partner to the Games Independent Infrastructure and Coordination Authority for the Brisbane 2032 Olympic and Paralympic Games, we consistently win what matters through our unrivaled competitive advantages. These advantages are enhanced by our AI and technology investments, which have been instrumental in key wins and favorable commercial model discussions with clients. Our teams are energized by these investments and by the opportunity to redefine how infrastructure is delivered.”
“Our strong performance, record backlog and increased guidance demonstrate we are creating significant competitive differentiation in the market,” said Gaurav Kapoor, AECOM’s chief financial and operations officer. “Year after year we have expanded our productivity, which is evident in the persistent NSR and profit per employee growth we have delivered for the past six years. Importantly, through the investments we are making, the opportunity for this trend to continue has never been greater. We operate with a strong balance sheet, including no debt maturities for several years, and an attractive cost of capital. As a result, we continued to execute on our returns-based capital allocation policy in the quarter, which included returning more than $340 million to shareholders.”
First Quarter Highlights:
Reflecting as reported GAAP performance from continuing operations, first quarter revenue declined 5% to $3.8 billion, operating income declined 7% to $222 million, net income declined 21% to $140 million and diluted earnings per share declined 20% to $1.06.
Net service revenue2 increased 2%; net service revenue increased by 5% after adjusting for fewer working days compared to the prior year first quarter, highlighted by 9% growth in the Americas segment.
The segment adjusted1 operating margin4 and the adjusted1 EBITDA margin6 increased to 16.4% by 100 basis points and 80 basis points, respectively.
Our margins include the investments in the Company’s AI and technology teams and capabilities, in growing its Advisory teams, and in record business development.
Adjusted1 EBITDA5 increased by 6% and adjusted1 EPS decreased by 2%.
Adjusting for the lower tax rate in the prior year period, adjusted EPS increased by 8%.
Total backlog8 increased by 9% to a record high, highlighted by a 1.5 book-to-burn9 ratio.
The Company delivered a 21st consecutive quarter with a book-to-burn ratio in excess of 1.0.
The Americas design business had a 1.0 book-to-burn ratio despite the unprecedented 43-day U.S. federal government shutdown that resulted in award delays.
The pipeline of opportunities increased by double digits to a new record, including growth in both the Americas and International segments, with the fastest growth in the earlier stages of the pipeline demonstrating strong long-term demand trends.
Cash Flow, Capital Allocation and Raised Repurchase Authorization
Free cash flow7 was $42 million and the Company returned more than $340 million to shareholders through repurchases and dividends in the quarter.
After the quarter ended, the Board of Directors approved an increase to the share repurchase authorization to $1 billion.
Since the initiation of its repurchase program in September 2020, the Company has returned nearly $3.4 billion of capital to shareholders through repurchases and dividends.
The Company maintains a strong balance sheet with net leverage10 of 1.0x.
Fiscal 2026 and Long-Term Financial Guidance
The Company raised its fiscal 2026 earnings guidance, which reflects the outperformance delivered in the design business in the first quarter, the benefits of our capital allocation strategy, a lower than previously expected tax rate, and a record backlog and pipeline across the enterprise, which creates strong full year visibility.
As a result, the Company’s guidance, which includes the Construction Management business, now includes expectations for:
Adjusted1 EPS of between $5.85 and $6.05, as compared to $5.65 to $5.85 previously.
Adjusted1 EBITDA5 of between $1,270 million and $1,305 million, as compared to $1,265 million and $1,305 million previously.
Organic NSR2 growth of 6% to 8%, which excludes the expected approximately 200 basis point impact of fewer working days in fiscal 2026.
A segment adjusted operating margin4 of 16.8% and an adjusted EBITDA6 margin of 17.0%, which are materially consistent with prior expectations.
Free cash flow7 of approximately $400 million.
An average fully diluted share count of 131 million, which does not include any potential future benefits from capital allocation actions not yet taken, including potential repurchases.
An adjusted effective tax rate of approximately 20 – 22%, as compared to 22 – 23% previously.
In addition, the Company reiterated its long-term financial targets, which includes its expectation to deliver a 20%+ margin exit rate by fiscal 2028 and to grow adjusted1 EPS at a 15%+ CAGR from fiscal 2026 to fiscal 2029.
See the Regulation G Information tables at the end of this release for a reconciliation of non-GAAP measures to the most directly comparable GAAP measures.
Business Segments
Americas
Revenue in the first quarter was $3.0 billion, a 4% decrease from the prior year due to a reduction in pass-through revenue. Net service revenue2 in the first quarter was $1.1 billion, a 9% increase from the prior year when adjusted for the impact of fewer working days in the period, or 6% on an as reported basis at constant currency. Growth was strong in both the U.S. and Canada.
Operating income increased 9% over the prior year to $214 million and on an adjusted1 basis increased 13% to $222 million. The adjusted operating margin on net service revenue increased by 120 basis points over the prior year to 19.9%, a new first quarter high. This performance reflects the benefits of strong growth and a continued focus on driving operating efficiencies across the business.
Backlog in the Americas segment grew 3% to a new record high, driven by a 1.0 book-to-burn ratio9. The Americas design business had a 1.0 book-to-burn ratio despite award delays resulting from the unprecedented and now resolved 43-day U.S. federal government shutdown during the quarter.
International
Revenue in the first quarter was $854 million, a 5% decrease from the prior year. Net service revenue2 was $736 million, which was materially unchanged with the prior year when adjusted for the impact of fewer working days in the period, or a 3% decrease on an as reported basis at constant currency.
Operating income decreased by 6% over the prior year to $76 million and on an adjusted1 basis was effectively unchanged at $81 million. The adjusted operating margin on net service revenue increased by 20 basis points to 11.0%, which reflected a combination of strong execution, operational efficiencies, and a focus on high returning markets and clients.
Backlog in the International segment grew 25% to a new record high, driven by a 2.3 book-to-burn ratio9 and included substantial wins in each of the Company’s International regions.
Construction Management Strategic Alternatives Update
AECOM has completed the comprehensive review of strategic alternatives for its Construction Management business. The Company has concluded that it will continue to own and operate the business and believes it is exceptionally well positioned for the future.
The Construction Management business is an industry leader with a strong backlog and pipeline, great teams of professionals, and is widely recognized by its clients for its track record of delivering the largest and most iconic projects in its markets.
Tax Rate
The effective tax rate was 19.7% in the first quarter. On an adjusted1 basis, the effective tax rate was 21.5% in the first quarter. The adjusted tax rate was derived by re-computing the quarterly effective tax rate on adjusted net income11. 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.
Resolution of a Legacy Matter
After the quarter ended, AECOM agreed in principle to settle a legacy project-related matter that was acquired with the Company’s 2014 acquisition of URS Corporation. As a result, the Company expects to receive approximately $50 million in cash this fiscal year and recorded a $61.8 million non-cash loss in discontinued operations in the fiscal first quarter.
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.
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
Adjusted to reflect for fewer working days in the first quarter of fiscal 2026 compared to the prior year first quarter.
4
Reflects segment operating performance, excluding AECOM Capital and G&A, and margins are presented on a net service revenue basis.
5
Net income before interest expense, tax expense, depreciation and amortization.
6
Adjusted EBITDA margin includes non-controlling interests in EBITDA and is on a net service revenue basis.
7
Free cash flow is defined as cash flow from operations less capital expenditures, net of proceeds from disposals of property and equipment; free cash flow conversion is defined as free cash flow divided by adjusted net income attributable to AECOM.
8
Backlog represents the total value of work for which AECOM has been selected that is expected to be completed by consolidated subsidiaries and includes the proportionate share of work expected to be performed by unconsolidated joint ventures.
9
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.
10
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.
11
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.
About AECOM
AECOM (NYSE: ACM) is the global infrastructure leader, committed to delivering a better world. As a trusted professional services firm powered by deep technical abilities, we solve our clients’ complex challenges in water, environment, energy, transportation and buildings. Our teams partner with public- and private-sector clients to create innovative, sustainable and resilient solutions throughout the project lifecycle – from advisory, planning, design and engineering to program and construction management. AECOM is a Fortune 500 firm that had revenue of $16.1 billion in fiscal year 2025. Learn more at aecom.com.
Forward-Looking Statements
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, capital allocation strategy including stock repurchases, risk profile and investment strategies, and any statements regarding future economic conditions or performance, and the expected financial and operational results of AECOM. 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; government shutdowns or other funding circumstances that cause governmental agencies to modify, curtail or terminate our contracts; losses under fixed-price contracts; limited control over operations that 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; potential high leverage and inability to service our debt and guarantees; our capital allocation strategy, including ability to continue payment of dividends and stock repurchases; exposure to political and economic risks in different countries, including tariffs, geopolitical events, and conflicts; currency exchange rate and interest 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; managing pension costs; AECOM Capital real estate development projects; cybersecurity issues, IT outages and data privacy; risks associated with the benefits and costs of the sale of our Management Services and self-perform at-risk civil infrastructure, power construction and oil and gas businesses, including the risk that any purchase adjustments from those transactions could be unfavorable and result in any future proceeds owed to us as part of the transactions could be lower than we expect; risks associated with strategic initiatives, including AI investments and potential acquisitions and divestitures; 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 communication 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 EBITDA margin, adjusted net/operating income, segment adjusted operating margin, adjusted tax rate, 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 operating income, adjusted net income, adjusted EBITDA, adjusted EBITDA margin, and adjusted EPS to exclude the impact of certain items, such as amortization expense and taxes to aid investors in better understanding our core performance results. We use free cash flow to present the cash generated from operations after capital expenditures to maintain our business. We present net service revenue (NSR) to exclude pass-through subcontractor costs from revenue to provide investors with a better understanding of our operational performance. We present segment adjusted operating margin to reflect segment operating performance of our Americas and International segments, excluding AECOM Capital. We present adjusted tax rate to reflect the tax rate on adjusted earnings. We also use constant-currency growth rates where appropriate, which are calculated by conforming the current period results to the comparable period exchange rates.
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 communication. The Company is unable to reconcile certain of its non-GAAP financial guidance and long-term financial targets due to uncertainties in these non-operating items as well as other adjustments to net income. The Company is unable to provide a reconciliation of its guidance for NSR to GAAP revenue because it is unable to predict with reasonable certainty its pass-through revenue. In addition, the Company is unable to provide a reconciliation of its guidance for financial metrics excluding the Construction Management business due to uncertainties in these non-operating items as well as other adjustments to these measures.
AECOM
Consolidated Statement of Income
(unaudited - in thousands, except per share data)
Three Months Ended
December 31, 2025
December 31, 2024
% Change
Revenue
$
3,830,834
$
4,014,152
(4.6
)%
Cost of revenue
3,549,844
3,745,748
(5.2
)%
Gross profit
280,990
268,404
4.7
%
Equity in earnings of joint ventures
9,827
9,553
2.9
%
General and administrative expenses
(40,839
)
(40,459
)
0.9
%
Restructuring costs
(27,933
)
—
NM
Income from operations
222,045
237,498
(6.5
)%
Other income
7,819
6,924
12.9
%
Interest income
13,741
16,564
(17.0
)%
Interest expense
(45,266
)
(43,034
)
5.2
%
Income from continuing operations before taxes
198,339
217,952
(9.0
)%
Income tax expense for continuing operations
39,083
29,232
33.7
%
Income from continuing operations
159,256
188,720
(15.6
)%
Loss from discontinued operations
(65,904
)
(9,516
)
592.6
%
Net income
93,352
179,204
(47.9
)%
Net income attributable to noncontrolling interests from continuing operations
(18,832
)
(11,370
)
65.6
%
Net income attributable to noncontrolling interests from discontinued operations
—
(792
)
(100.0
)%
Net income attributable to noncontrolling interests
(18,832
)
(12,162
)
54.8
%
Net income attributable to AECOM from continuing operations
140,424
177,350
(20.8
)%
Net loss attributable to AECOM from discontinued operations
(65,904
)
(10,308
)
539.3
%
Net income attributable to AECOM
$
74,520
$
167,042
(55.4
)%
Net income (loss) attributable to AECOM per share:
Basic continuing operations per share
$
1.07
$
1.34
(20.1
)%
Basic discontinued operations per share
(0.50
)
(0.08
)
525.0
%
Basic earnings per share
$
0.57
$
1.26
(54.8
)%
Diluted continuing operations per share
$
1.06
$
1.33
(20.3
)%
Diluted discontinued operations per share
(0.50
)
(0.08
)
525.0
%
Diluted earnings per share
$
0.56
$
1.25
(55.2
)%
Weighted average shares outstanding:
Basic
130,888
132,500
(1.2
)%
Diluted
131,982
133,625
(1.2
)%
AECOM
Balance Sheet Information
(unaudited - in thousands)
December 31, 2025
September 30, 2025
Balance Sheet Information:
Total cash and cash equivalents
$
1,246,687
$
1,585,739
Accounts receivable and contract assets, net
4,383,899
4,282,326
Working capital
610,093
801,411
Total debt, excluding unamortized debt issuance costs
2,738,511
2,743,719
Total assets
11,940,036
12,200,249
Total AECOM stockholders’ equity
2,231,942
2,492,584
AECOM
Reportable Segments
(unaudited - in thousands)
Americas
International
AECOM Capital
Corporate
Total
Three Months Ended December 31, 2025:
Revenue
$
2,977,285
$
853,549
$
—
$
—
$
3,830,834
Cost of revenue
2,767,689
782,119
36
—
3,549,844
Gross profit (loss)
209,596
71,430
(36
)
—
280,990
Equity in earnings of joint ventures
4,516
4,592
719
—
9,827
General and administrative expenses
—
—
(1,799
)
(39,040
)
(40,839
)
Restructuring and acquisition costs
—
—
—
(27,933
)
(27,933
)
Income (loss) from operations
$
214,112
$
76,022
$
(1,116
)
$
(66,973
)
$
222,045
Gross profit as a % of revenue
7.0
%
8.4
%
7.3
%
Contracted backlog
$
8,789,324
$
4,699,425
$
—
$
—
$
13,488,749
Awarded backlog
9,241,609
3,231,872
—
—
12,473,481
Total backlog
$
18,030,933
$
7,931,297
$
—
$
—
$
25,962,230
Total backlog – Design only
$
16,408,768
$
7,931,297
$
—
$
—
$
24,340,065
Three Months Ended December 31, 2024:
Revenue
$
3,111,955
$
902,010
$
187
$
—
$
4,014,152
Cost of revenue
2,921,695
824,053
—
—
3,745,748
Gross profit
190,260
77,957
187
—
268,404
Equity in earnings of joint ventures
5,512
2,881
1,160
—
9,553
General and administrative expenses
—
—
(2,395
)
(38,064
)
(40,459
)
Income (loss) from operations
$
195,772
$
80,838
$
(1,048
)
$
(38,064
)
$
237,498
Gross profit as a % of revenue
6.1
%
8.6
%
6.7
%
Contracted backlog
$
8,818,821
$
4,352,692
$
—
$
—
$
13,171,513
Awarded backlog
8,689,718
2,015,736
—
—
10,705,454
Total backlog
$
17,508,539
$
6,368,428
$
—
$
—
$
23,876,967
Total backlog – Design only
$
16,241,174
$
6,368,428
$
—
$
—
$
22,609,602
AECOM
Regulation G Information
(in millions)
Reconciliation of Revenue to Net Service Revenue (NSR)
Three Months Ended
December 31, 2025
September 30, 2025
December 31, 2024
Americas
Revenue
$
2,977.3
$
3,240.0
$
3,112.0
Less: Pass-through revenue
1,862.6
2,042.3
2,061.1
Net service revenue
$
1,114.7
$
1,197.7
$
1,050.9
International
Revenue
$
853.5
$
935.2
$
902.0
Less: Pass-through revenue
117.3
166.2
151.8
Net service revenue
$
736.2
$
769.0
$
750.2
Segment Performance (excludes ACAP)
Revenue
$
3,830.8
$
4,175.2
$
4,014.0
Less: Pass-through revenue
1,979.9
2,208.5
2,212.9
Net service revenue
$
1,850.9
$
1,966.7
$
1,801.1
Consolidated
Revenue
$
3,830.8
$
4,175.3
$
4,014.2
Less: Pass-through revenue
1,979.9
2,208.5
2,212.9
Net service revenue
$
1,850.9
$
1,966.8
$
1,801.3
Reconciliation of Total Debt to Net Debt
Balances at
December 31, 2025
September 30, 2025
December 31, 2024
Short-term debt
$
3.3
$
4.1
$
3.5
Current portion of long-term debt
62.6
62.2
65.9
Long-term debt, excluding unamortized debt issuance costs
2,672.6
2,677.4
2,477.7
Total debt
2,738.5
2,743.7
2,547.1
Less: Total cash and cash equivalents
1,246.7
1,585.7
1,580.7
Net debt
$
1,491.8
$
1,158.0
$
966.4
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
Three Months Ended
December 31, 2025
September 30, 2025
December 31, 2024
Net cash provided by operating activities
$
70.2
$
196.1
$
151.1
Capital expenditures, net
(28.3
)
(62.0
)
(40.1
)
Free cash flow
$
41.9
$
134.1
$
111.0
AECOM
Regulation G Information
(in millions, except per share data)
Three Months Ended
Dec 31, 2025
Sep 30, 2025
Dec 31, 2024
Reconciliation of Income from Operations to Adjusted Income from Operations to Adjusted EBITDA with Noncontrolling Interests (NCI) to Adjusted EBITDA
Income from operations
$
222.0
$
237.3
$
237.5
Noncore AECOM Capital loss
1.2
2.0
1.0
Restructuring and acquisition costs
27.9
59.4
—
Amortization of intangible assets
12.9
0.4
1.1
Adjusted income from operations
$
264.0
$
299.1
$
239.6
Other income
7.9
11.5
6.9
Fair value adjustment
(5.1
)
(9.6
)
(5.0
)
Depreciation
37.7
43.6
39.8
Adjusted EBITDA with noncontrolling interests (NCI)
$
304.5
$
344.6
$
281.3
Net income attributable to NCI from continuing operations excluding interest income included in NCI
(17.7
)
(15.9
)
(9.9
)
Adjusted EBITDA
$
286.8
$
328.7
$
271.4
Reconciliation of Income from Continuing Operations Before Taxes to Adjusted Income from Continuing Operations Before Taxes
Income from continuing operations before taxes
$
198.3
$
207.7
$
218.0
Noncore AECOM Capital loss
1.2
2.0
1.0
Fair value adjustment
(5.5
)
(9.6
)
(5.6
)
Restructuring and acquisition costs
27.9
59.4
—
Amortization of intangible assets
12.9
0.4
1.1
Financing charges in interest expense
1.4
13.5
1.4
Adjusted income from continuing operations before taxes
$
236.2
$
273.4
$
215.9
Reconciliation of Income Taxes for Continuing Operations to Adjusted Income Taxes for Continuing Operations
Income tax expense for continuing operations
$
39.0
$
58.3
$
29.3
Tax effect of the above adjustments (1)
8.5
16.2
(0.5
)
Valuation allowances and other tax only items
(0.7
)
(0.2
)
0.5
Adjusted income tax expense for continuing operations
$
46.8
$
74.3
$
29.3
Reconciliation of Net Income Attributable to AECOM from Continuing Operations to Adjusted Net Income Attributable to AECOM from Continuing Operations
Net income attributable to AECOM from continuing operations
$
140.4
$
132.1
$
177.3
Noncore AECOM Capital loss, net of NCI
1.2
2.0
1.0
Fair value adjustment
(5.5
)
(9.6
)
(5.6
)
Restructuring and acquisition costs
27.9
59.4
—
Amortization of intangible assets
12.9
0.4
1.1
Financing charges in interest expense
1.4
13.5
1.4
Tax effect of the above adjustments (1)
(8.5
)
(16.2
)
0.5
Valuation allowances and other tax only items
0.7
0.2
(0.5
)
Adjusted net income attributable to AECOM from continuing operations
$
170.5
$
181.8
$
175.2
(1) Adjusts the income taxes 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, 2025
Sep 30, 2025
Dec 31, 2024
Reconciliation of Net Income Attributable to AECOM from Continuing Operations per Diluted Share to Adjusted Net Income Attributable to AECOM from Continuing Operations per Diluted Share
Net income attributable to AECOM from continuing operations per diluted share
$
1.06
$
0.99
$
1.33
Per diluted share adjustments:
Noncore AECOM Capital loss, net of NCI
0.01
0.01
0.01
Fair value adjustment
(0.04
)
(0.07
)
(0.04
)
Restructuring and acquisition costs
0.21
0.45
—
Amortization of intangible assets
0.10
—
0.01
Financing charges in interest expense
0.01
0.10
0.01
Tax effect of the above adjustments (1)
(0.07
)
(0.12
)
(0.01
)
Valuation allowances and other tax only items
0.01
—
—
Adjusted net income attributable to AECOM from continuing operations per diluted share
$
1.29
$
1.36
$
1.31
Weighted average shares outstanding – basic
130.9
132.3
132.5
Weighted average shares outstanding – diluted
132.0
133.4
133.6
(1) Adjusts the income taxes during the period to exclude the impact on our effective tax rate of the pre-tax adjustments shown above.
Reconciliation of Net Income Attributable to AECOM from Continuing Operations to Adjusted EBITDA
Net income attributable to AECOM from continuing operations
$
140.4
$
132.1
$
177.3
Income tax expense
39.0
58.3
29.3
Depreciation and amortization
52.0
47.5
42.3
Interest income, net of NCI
(12.5
)
(16.4
)
(15.2
)
Interest expense
45.3
58.9
43.0
Amortized bank fees included in interest expense
(1.4
)
(3.5
)
(1.4
)
Noncore AECOM Capital loss, net of NCI
1.2
2.0
1.0
Fair value adjustment included in other income
(5.1
)
(9.6
)
(4.9
)
Restructuring and acquisition costs
27.9
59.4
—
Adjusted EBITDA
$
286.8
$
328.7
$
271.4
Reconciliation of Segment Income from Operations to Adjusted Segment Income from Operations
Americas Segment:
Segment Income from operations
$
214.1
$
243.7
$
195.8
Amortization of intangible assets
8.1
0.4
1.1
Adjusted segment income from operations
$
222.2
$
244.1
$
196.9
International Segment:
Segment Income from operations
$
76.0
$
92.7
$
80.8
Amortization of intangible assets
4.8
—
—
Adjusted segment income from operations
$
80.8
$
92.7
$
80.8
Segment Performance (excludes ACAP and G&A):
Segment Income from operations
$
290.1
$
336.4
$
276.6
Amortization of intangible assets
12.9
0.4
1.1
Adjusted segment income from operations
$
303.0
$
336.8
$
277.7
AECOM
Regulation G Information
FY2026 GAAP EPS Guidance based on Adjusted EPS Guidance
(all figures approximate)
Fiscal Year End 2026
GAAP EPS guidance
$4.18 to $4.89
Adjusted EPS excludes:
Amortization of intangible assets
$0.57 to $0.31
Amortization of deferred financing fees
$0.04
Noncore AECOM Capital
$0.01
Fair value adjustment
($0.04)
Restructuring and acquisition costs
$1.53 to $1.15
Tax effect of the above items
($0.44) to ($0.31)
Adjusted EPS guidance
$5.85 to $6.05
FY2026 GAAP Net Income from Continuing Operations Guidance based on Adjusted EBITDA Guidance
(in millions, all figures approximate)
Fiscal Year End 2026
GAAP net income from continuing operations guidance
$613 to $705
Net income attributable to noncontrolling interest from continuing operations
($65)
Net income attributable to AECOM from continuing operations
$548 to $640
Adjusted net income attributable to AECOM from continuing operations excludes:
Amortization of intangible assets
$75 to $42
Amortization of deferred financing fees
$5
Noncore AECOM Capital
$1
Fair value adjustment
($5)
Restructuring and acquisition costs
$200 to $150
Tax effect of the above items
($57) to ($40)
Adjusted net income attributable to AECOM from continuing operations
$767 to $793
Adjusted EBITDA excludes:
Depreciation
$165
Adjusted interest expense, net
$140
Tax expense, including tax effect of above items
$198 to $207
Adjusted EBITDA guidance
$1,270 to $1,305
FY2026 GAAP Interest Expense Guidance based on Adjusted Interest Expense Guidance
(in millions, all figures approximate)
Fiscal Year End 2026
GAAP interest expense guidance
$180
Finance charges in interest expense
($5)
Interest income, net of NCI
($35)
Adjusted interest expense guidance, net
$140
FY2026 GAAP Income Tax Guidance based on Adjusted Income Tax Guidance
(in millions, all figures approximate)
Fiscal Year End 2026
GAAP income tax expense guidance
$141 to $167
Tax effect of adjusting items
$57 to $40
Adjusted income tax expense guidance
$198 to $207
Note: Variances in tables are due to rounding.
View source version on businesswire.com: https://www.businesswire.com/news/home/20260209894846/en/
Investor:
Will Gabrielski
Senior Vice President, Finance, Treasurer
213.593.8208
William.Gabrielski@aecom.com
Media:
Brendan Ranson-Walsh
Senior Vice President, Global Communications
213.996.2367
Brendan.Ranson-Walsh@aecom.com
Original: AECOM reports first quarter fiscal 2026 results
Bob2016
7 years ago
ENGINE CAPITAL ISSUES OPEN LETTER TO AECOM SHAREHOLDERS
https://www.sec.gov/cgi-bin/browse-edgar?CIK=acm&owner=exclude&action=getcompany&Find=Search
PX14A6G 1 px14a6g09488001_02122019.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
NOTICE OF EXEMPT SOLICITATION
Submitted Pursuant to Rule 14a-6(g)
(Amendment No. ____)
1. Name of the Registrant:
AECOM
2. Name of Persons Relying on Exemption:
Engine Capital, L.P.
Engine Jet Capital, L.P.
Engine Airflow Capital, L.P.
Engine Capital Management, LP
Engine Capital Management GP, LLC
Engine Investments, LLC
Engine Investments II, LLC
Arnaud Ajdler
3. Address of Persons Relying on the Exemption:
1345 Avenue of the Americas, 33rd Floor
New York, New York 10105
4. Written Material. The following written materials are attached:
Press release, dated February 12, 2019.
(Written material follows on next page)
ENGINE CAPITAL ISSUES OPEN LETTER TO AECOM SHAREHOLDERS
Troubled by Abysmal Compensation Practices Resulting in Significant Transfer of Value from Shareholders to Management Despite Poor Performance
Announces intention to Vote “Withhold” against ALL Incumbent Directors at 2019 Annual Meeting
Believes Board must form Value Enhancing Committee consisting of New Independent Directors to Evaluate Alternatives to Maximize Shareholder Value
NEW YORK, Feb. 12, 2019 /PRNewswire/-- Engine Capital LP (together with its affiliates, “Engine”), a shareholder of AECOM (the “Company”) (NYSE:ACM), today issued an open letter to the Company’s shareholders regarding Engine’s serious concerns with the Company’s compensation practices and announcing its intention to vote “Withhold” against all incumbent directors at the Company’s upcoming annual meeting scheduled to be held on March 6, 2019. The full text of the letter follows:
February 12, 2019
Dear Fellow Shareholders:
Engine Capital LP (together with its affiliates, “Engine” or “we”) is a shareholder of AECOM (the “Company”). We invested in AECOM because of the strength of its franchise, its leadership position in many of the markets it serves, our belief that the Company is deeply undervalued, and the fact that there are opportunities readily within the control of the Board of Directors (the “Board”) to significantly increase shareholder value. We wanted to share with you, our fellow shareholders, Engine’s decision to vote “Withhold” against the members of the Board standing for election at the upcoming annual meeting on March 6, 2019, particularly with respect to Compensation/Organization Committee (“Compensation Committee”) members James H. Fordyce, Linda Griego, Dr. Robert J. Routs and Clarence T. Schmitz. Given the severity of our concerns, we felt it was necessary to share our views with shareholders in advance of the upcoming annual meeting.
By way of background, Engine is a value-oriented investment firm launched in July 2013. Since its launch, Engine has negotiated board representation or settlements at 15 public companies and added 25 highly-qualified directors to these companies. Engine and its principals have significant experience investing in and engaging with engineering and construction (E&C) companies including: (1) gaining board representation at Hill International, Inc., a Philadelphia-based project management firm, and MYR Group Inc., a Chicago-based specialty contractor serving the electrical infrastructure market; (2) being an active shareholder of Michael Baker Corporation, a Pittsburg-based engineering firm, until its sale to DC Capital Partners; and (3) being part of the team that took Primoris Services Corporation, a specialty construction and infrastructure company, public.
We have followed AECOM and the industry for a number of years. As part of our due diligence, we have had an opportunity to discuss AECOM and its prospects with competitors, customers and former employees. We also had numerous calls with management, including a recent conference call with Chairman and CEO Mike Burke. These discussions have led us to the conclusion that AECOM is a high quality asset that is under-earning and is currently significantly undervalued. Despite the Company generating significant free cash flow and being a market leader, AECOM’s stock has been a long-term underperformer. We believe this poor performance is directly attributable to poor operational execution, poor capital allocation, poor governance and poor compensation practices. For example, since Mr. Burke became CEO of the Company on March 6, 2014, the stock is down over 9% compared to a 44% increase for the S&P 500. The table below exemplifies the Company’s significant underperformance over various periods.
Total Shareholder Return
1 Year 3 Year Since Mr. Burke Became CEO 5 Year 10 Year
AECOM -16.5% 18.2% -9.2% 0.0% 8.0%
S&P 500 4.9% 46.1% 44.3% 50.7% 224.8%
Relative performance to S&P 500 -21.4% -27.9% -53.5% -50.7% -216.8%
Note: Calculated as of February 8, 2019.
Despite this underperformance, management has been handsomely rewarded. In particular, Mr. Burke has earned cumulatively $79.6 million since 2014. While the Company’s proxy statement is replete with “pay for performance” lingo and buzzwords, the reality is far different, as highlighted below.
We are not the only one concerned by the compensation culture at the Company. Leading independent proxy advisory firm Institutional Shareholders Services (“ISS”) recommended that shareholders vote against the Company’s say-on-pay proposal at the 2017 and 2018 annual meetings and also assigned AECOM a Compensation QualityScore of “9” in connection with issuing such recommendations, indicating significant governance risk given that “10” is the worst possible score. Shareholders have similarly voiced their displeasure with the Company’s compensation practices, with the say-on-pay proposal receiving only 52.7% of votes cast in 2017 and 48.4% of the votes cast in 2018.
Somehow, despite the clear disapproval from shareholders and proxy advisory firms alike, it seems to be business as usual in terms of executive compensation at AECOM. In 2018, notwithstanding the Company’s poor operating performance that led to decreased profitability and an 11% decline in total shareholder returns (“TSR”), management was still handsomely rewarded. Based on the Company’s proxy statement, Mr. Burke had his bonus “trimmed” to a robust $2,475,000 and received over $15.6 million in total compensation from the Company in fiscal 2018. Troublingly, in fiscal 2018, the Company’s five named executive officers cumulatively received bonuses of $5,375,000 versus a cumulative target of $5,109,600. In other words, despite the poor operating and stock performance in 2018, the Compensation Committee felt it was appropriate for management to earn more than the established target. Even more alarming, the cumulative compensation received by the Company’s five named executive officers was approximately $28.5 million in fiscal 2018. Rarely have we seen such a transfer of wealth from shareholders to management for such poor performance. Clearly the status quo is completely unacceptable.
Detailing all of our concerns with the Company’s compensation practices would be impractical for the purposes of this letter, but we do wish to highlight the following:
• In 2017, as a result of feedback from shareholders, the Board introduced a relative three-year TSR metric for the equity awards granted starting in 2017. In 2018, equity awards also included TSR as one of the metrics; yet, in 2019, the metric was suddenly abandoned and not included in the Company’s proxy statement. We are extremely concerned and disappointed that the Board and the Compensation Committee removed this TSR metric, especially considering it was included based on shareholders’ feedback. We believe it is important that one of the metrics be tied to the Company’s long-term stock performance, particularly in light of the Company’s significant stock underperformance. Based on the Company’s disclosure, there seems to be a complete disconnect between management compensation and the Company’s stock price, which we find unacceptable.
• Targets for short-term bonuses are not properly set and are too easy to reach (and exceed), leading to excessive payouts. In particular, one of the metrics for the bonus is based on operating cash flow. As can be seen in the table below, the target and max goals were not ambitious and were far too easy to attain, allowing management to earn 200% payouts five years in a row. In our experience, compensation committees tend to learn, adjust and raise the bar to properly incentivize management. Historically, this hasn’t been the case at AECOM, but now, five years later and after receiving consistent negative feedback from shareholders, the Compensation Committee is finally raising the bar in 2019 and increasing the free cash flow target by increasing the conversion rate from 90% to 100% of adjusted earnings per share. Nonetheless, we believe this is still completely inadequate as this higher target would still have resulted in very high payouts in prior years, indicating management will continue to receive very high payout for this metric moving forward.
Threshold Target Max. Actual Earned
Amount Amount Amount Amount Percentage
2018 Operating Cash Flow per Share 2.8 3.05-3.17 3.27 4.77 200%
2017 Operating Cash Flow 477 519.4-540.6 556.5 758.2 200%
2016 Operating Cash Flow per Share 3.38 3.70-3.80 3.94 5.22 200%
2015 Operating Cash Flow per Share NA 3.83-3.90 NA 5.05 200%
2014 Operating Cash Flow per Share NA 2.50-2.57 NA 4.01 200%
Note: Figures in ($). 2017 in ($) millions.
• Too much weight (30%) is being given to qualitative key performance indicators (KPIs) as one of the metrics for the short-term bonuses. For example, one of Mr. Burke’s achievements per the Company’s latest proxy statement was “Increased brand recognition as shown by being referenced in the media at a rate twice that of our closest competitor, 4th consecutive year on Fortune’s Most Admired Companies list.” Beside the fact that it is not clear how this achievement is accurately measured, we don’t believe such an achievement necessarily translates into shareholder value creation. Generally, we believe these vague KPIs give too much leeway for the Compensation Committee to reward management in the face of poor performance. We note that Mr. Burke earned 100% of the target for his KPI metrics in 2018.
As a consequence of these poorly designed plans, we note that Mr. Burke’s annual cash bonus as a percentage of target has averaged well above 100% during his tenure as CEO despite the stock being down over 9% over the same timeframe. We also note that Mr. Burke received a $5 million bonus in 2015 for completing the URS acquisition, an acquisition that has not returned the value promised to shareholders. Unfortunately, the excesses don’t stop with executive compensation and a culture of overspending seems to have permeated throughout the organization. For example, the Company maintains a comprehensive security program that includes ground and air executive protection and the Board requires that the CEO use private air travel for purposes of “security, rapid availability and communications connectivity.” According to ISS, this perquisite was provided to only 8% of companies in the Russell 3000 index in 2017 and the value of the perquisite received at AECOM significantly exceeds the index median. We also believe that director compensation is exceedingly high at the Company, with non-employee directors receiving on average approximately $300,000 each in fiscal 2018 and Compensation Committee Chairman Mr. Fordyce taking home over $340,000.
Furthermore, we believe that corporate governance practices in general are poor at the Company. Specifically, we are concerned with Mr. Burke’s dual position as Chairman and CEO of the Company, which we believe is a factor in the Board’s ineffective oversight of the Company. Separating the roles of Chairman and CEO is broadly considered a corporate governance best practice as it promotes oversight of risk, curbs conflicts of interests and more effectively manages the relationship between the Board and management. Conversely, combining the Chairman and CEO roles is largely considered by governance experts and commentators to be a governance flaw because of the undue concentration of control and the inherent conflicts (which we believe may help explain the exorbitant compensation of the Company’s management team). We are also concerned with the background and experience of the independent Board members. We note that there is no relevant construction, engineering or design experience, and very little government services experience on the Board, which again makes it difficult for the Board to provide effective oversight.
In addition, while the Company touts the adoption of a majority voting standard for uncontested elections as a recent corporate governance action expanding shareholder rights, we note, however, that the majority voting standard does not become effective until the 2020 Annual Meeting. What could be the rationale for the delay other than serving to entrench the incumbents?
We believe that the Company’s poor governance and compensation practices are indicative of a broken culture and an overall lack of accountability and urgency at AECOM. Unfortunately, it is not surprising that share performance and operational performance have both been lackluster, at best, given this lack of accountability and complete misalignment of incentives between management and shareholders. These serious concerns cast a significant doubt on the value creation potential associated with the 2022 financial targets. It is time for the Board to start acting with a greater sense of urgency. We believe the Company needs to immediately form a “Value Enhancing Committee” to start exploring ways to maximize value of the Company with the help of a nationally recognized investment bank. We believe this committee must include new direct shareholder representatives who are capable of fully and fairly evaluating the best path forward for the Company, including a possible sale (in its entirety or in parts) or break-up of AECOM.
We stand ready to meet with the Board and management team to discuss the changes that we believe are necessary to improve the Company for the benefit of all shareholders. While it is our desire to work constructively with the Board to address the matters discussed herein, we must make abundantly clear our dissatisfaction with the status quo, which is why we intend to vote “Withhold” against the incumbent directors standing for re-election. We intend to monitor developments at the Company closely and will not hesitate to take any actions that we believe are necessary to protect the best interests of shareholders.
Very truly yours,
Arnaud Ajdler Brad Favreau
Managing Partner Managing Director
About Engine Capital
Engine Capital is a value-oriented special situations fund that invests both actively and passively in companies undergoing change.
Investor contact:
Engine Capital, L.P.
Arnaud Ajdler
(212) 321-0048
aajdler@enginecap.com
Written materials are submitted voluntarily pursuant to Rule 14a-6(g)(1) promulgated under the Securities Exchange Act of 1934. This is not a solicitation of authority to vote your proxy. Engine Capital LP (“Engine Capital”) is not asking for your proxy card and will not accept proxy cards if sent. The cost of this filing is being borne entirely by Engine Capital.
PLEASE NOTE: Engine Capital is not asking for your proxy card and cannot accept your proxy card. Please DO NOT send us your proxy card.
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