AECOM(US:ACM)2023-11-14 16:00Revenue and Financial Performance - Revenue for fiscal year 2023 increased to $14.378 billion, up from $13.148 billion in fiscal year 2022[177] - Revenue for the year ended September 30, 2023 increased by $1,230.3 million (9.4%) to $14,378.5 million compared to $13,148.2 million in the previous year[215] - Revenue for September 2023 increased to $14,378 million, up 9.4% from $13,148 million in September 2022[309] - Total revenue for the fiscal year ended September 30, 2023 was $14,378.5 million, compared to $13,148.2 million in 2022 and $13,340.9 million in 2021[357] - Revenue from Americas region was $10,976.4 million in 2023, up from $9,941.6 million in 2022[357] - Europe, Middle East, India, Africa region revenue increased to $1,937.3 million in 2023 from $1,759.8 million in 2022[357] - Asia-Australia-Pacific region revenue was $1,464.8 million in 2023, slightly up from $1,446.8 million in 2022[357] - Revenue recognized from contract liabilities was $1,043.7 million in 2023, up from $565.2 million in 2022[358] - The company's revenue is primarily generated from planning, consulting, architectural and engineering design, construction, and program management services[178] - Contract revenues for the year ended September 30, 2023, were $14.4 billion, including $3.4 billion from fixed price contracts and $4.9 billion from guaranteed maximum price contracts[297] - Pass-through revenues accounted for 53% of total revenue in 2023, up from 52% in 2022, with absolute values increasing from $6.8 billion to $7.7 billion[215] - The company's pass-through revenues for the years ended September 30, 2023, 2022, and 2021 were $7.7 billion, $6.8 billion, and $7.2 billion, respectively[351] - Revenue for the International segment increased by $195.4 million (6.1%) to $3,402.1 million in FY 2023, driven by growth in the UK, Middle East, and Australia[233] - Americas segment revenue grew by $1,036.4 million (10.4%) to $10,975.7 million, driven by increased project activity in Water, Transportation, and Environment markets[229] - Revenue for the company and its subsidiary guarantors was $7,077.5 million for the twelve months ended September 30, 2023, with net income of $3.2 million[266] Gross Profit and Margins - Gross profit for fiscal year 2023 was $945 million, compared to $848 million in fiscal year 2022[177] - Gross profit increased by $97.5 million (11.5%) to $945.5 million, with gross profit margin improving to 6.6% from 6.4%[216] - Gross profit for September 2023 rose to $945 million, an 11.5% increase from $848 million in September 2022[309] - Gross profit for the International segment rose by $39.2 million (19.0%) to $245.1 million, with gross profit margin increasing to 7.2% from 6.4% in FY 2022[234] Restructuring and Impairment Costs - The company incurred a restructuring cost of $188 million in fiscal year 2023, up from $108 million in fiscal year 2022[177] - Restructuring costs increased by $80.9 million (75.3%) to $188.4 million, mainly related to real estate portfolio alignment and Southeast Asia exits[219] - The company expects restructuring costs of approximately $50 million to $70 million in fiscal 2024, primarily related to office real estate optimization and exiting certain Southeast Asian countries[175] - The company expects to spend approximately $110 million in restructuring costs in FY 2024 to improve margins and efficiencies[238] - AECOM Capital recorded an impairment charge of $307.0 million in the third quarter of fiscal 2023 due to strategic changes and accelerated investment exits[174] - Equity in losses of joint ventures was $279.4 million, a significant decline from earnings of $53.6 million in the previous year, primarily due to impairment losses in the AECOM Capital segment[217] - Equity in earnings of joint ventures decreased by $328.3 million (1345.5%) to a loss of $303.9 million due to impairment losses in Q3 FY 2023[237] - The company recorded a $86.199 million impairment of long-lived assets in 2023, compared to no impairment in 2022 and $105.194 million in 2021[316] Net Income and Comprehensive Income - Net income attributable to AECOM declined by $255.3 million (82.2%) to $55.3 million[211] - Net income attributable to AECOM for September 2023 decreased to $55 million, down 82.2% from $311 million in September 2022[309] - Comprehensive income attributable to AECOM for September 2023 was $108 million, a 53.1% decline from $231 million in September 2022[311] - Net income from continuing operations for September 2023 was $157 million, a 62.0% decrease from $415 million in September 2022[309] - Net income for fiscal year 2023 was $100.141 million, a significant decrease from $334.702 million in 2022 and $202.980 million in 2021[316] - Net loss from discontinued operations for September 2023 was $58 million, an improvement from $79 million in September 2022[309] Cash Flow and Liquidity - Cash and cash equivalents increased by $85.4 million (7.3%) to $1,262.2 million at September 30, 2023, primarily due to reduced stock repurchases[240] - Net cash provided by operating activities was $696.0 million in FY 2023, a decrease of $17.6 million compared to FY 2022[241] - Net cash used in investing activities decreased to $138.2 million in FY 2023 from $175.0 million in FY 2022, mainly due to the absence of cash outflows for discontinued operations[242] - Net cash provided by operating activities in 2023 was $695.980 million, slightly lower than $713.636 million in 2022 and $704.670 million in 2021[316] - Net cash used in investing activities was $138.177 million in 2023, an improvement from $175.034 million in 2022 and $421.087 million in 2021[316] - Total cash and cash equivalents as of September 30, 2023, were $1.26 billion, up from $1.17 billion in the previous year[306] - The company repurchased $379.284 million worth of common stock in 2023, less than $472.970 million in 2022 and $867.091 million in 2021[316] - The company has approximately $220 million remaining from its $1.0 billion stock repurchase authorization as of September 30, 2023[172] Debt and Interest - Total debt stood at $2,217.3 million at September 30, 2023, with long-term debt at $2,113.4 million[246] - The company's average effective interest rate on total debt was 5.3% for the year ended September 30, 2023, up from 3.8% in 2022 and 4.4% in 2021[260] - The company paid $153.975 million in interest in 2023, higher than $104.644 million in 2022 but lower than $255.679 million in 2021[316] - Interest income surged to $40.3 million from $8.2 million, driven by higher interest rates on interest-bearing assets[220] - Interest expense rose by $49.1 million (44.6%) to $159.3 million due to increased interest rates on variable debt[221] - A 1.00% increase in short-term floating interest rates would have increased the Company's interest expense by $8.6 million for the year ended September 30, 2023[284] - The estimated fair value of the company's 2027 Senior Notes was approximately $939.9 million as of September 30, 2023, with an interest rate of 5.125% per annum[257] - The company had $1,119.8 million in outstanding borrowings under term credit agreements and revolving credit facility as of September 30, 2023[284] Accounts Receivable and Contract Assets - Accounts receivable are recorded net of an allowance for doubtful accounts, estimated based on client financial condition and contract performance[191] - Total accounts receivable-net was $2,544.5 million as of September 30, 2023, compared to $2,317.8 million in 2022[361] - Accounts receivable—net increased to $2.54 billion as of September 30, 2023, compared to $2.32 billion in the previous year[306] - Contract assets rose to $1.53 billion as of September 30, 2023, from $1.41 billion in the previous year[306] - Significant claims recorded in contract assets and other non-current assets as of September 30, 2023, were approximately $160.0 million[297] - Significant claims recorded in contract assets were approximately $160 million as of September 30, 2023, up from $110 million in 2022[361] - The company sold $291.0 million of trade receivables to financial institutions as of September 30, 2023, compared to $240.3 million in 2022[362] Pension and Employee Benefits - Pension liabilities and net periodic costs are sensitive to changes in assumptions such as discount rates, with a 25 basis point reduction increasing plan liabilities by $26.6 million[204] - The aggregate worldwide pension deficit decreased from $204.4 million to $165.3 million between September 30, 2022, and September 30, 2023, due to increased discount rates[207] - The company's defined benefit pension plans had an aggregate deficit of approximately $165.3 million at September 30, 2023[262] - The company's defined benefit pension plans calculate the market-related value of assets, with cumulative net unrecognized gains or losses exceeding 10% of the greater of the projected benefit obligation or the fair market-related value of plan assets subject to amortization[333] Goodwill and Intangible Assets - Goodwill is tested for impairment annually, with impairment losses recognized if the fair value of a reporting unit is less than its carrying value[201][202] - Goodwill impairment testing is conducted annually in the fourth quarter, with additional tests if significant changes in legal factors, business climate, or industry trends occur[331] - The company uses qualitative and quantitative assessments to evaluate goodwill impairment, with impairment losses recognized if the fair value of reporting units is less than their carrying amounts[332] Tax and Deferred Tax Assets - Income tax expense decreased by $80.0 million (58.8%) to $56.1 million, primarily due to a $65.0 million tax benefit related to AECOM Capital impairment charges[223] - Deferred tax assets are reduced by a valuation allowance if it is more likely than not that a portion will not be realized, with adjustments for changes in tax laws and rates[195][196] - Undistributed non-U.S. earnings of approximately $1.3 billion are not subject to deferred taxes as the company intends to permanently reinvest these earnings overseas[198] - The Company adopted new FASB accounting guidance on income taxes starting October 1, 2021, which did not significantly impact consolidated financial statements[278] Government Contracts and Regulations - Government contracts are subject to Federal Acquisition Regulations (FAR), limiting recovery of certain indirect costs and subject to audits by agencies like DCAA[189] - DCAA audits may result in material cost disallowances if costs are not accounted for in accordance with Cost Accounting Standards (CAS)[190] - The company's federal government contracts are subject to Federal Acquisition Regulations (FAR) and ongoing audits by agencies like the Defense Contract Audit Agency (DCAA)[321] Joint Ventures and Noncontrolling Interests - Noncontrolling interests in joint ventures are accounted for under the equity method, with fees and costs recorded as revenues and costs in the period services are rendered[192] - Equity in losses of joint ventures was $279.4 million, a significant decline from earnings of $53.6 million in the previous year, primarily due to impairment losses in the AECOM Capital segment[217] - Equity in earnings of joint ventures decreased by $328.3 million (1345.5%) to a loss of $303.9 million due to impairment losses in Q3 FY 2023[237] Stockholders' Equity and Share Repurchases - Total stockholders' equity decreased to $2.38 billion as of September 30, 2023, from $2.61 billion in the previous year[306] - Total stockholders' equity as of September 30, 2023, stood at $2,384 million, down 8.5% from $2,605 million in September 2022[314] - The company has approximately $220 million remaining from its $1.0 billion stock repurchase authorization as of September 30, 2023[172] - The company repurchased $379.284 million worth of common stock in 2023, less than $472.970 million in 2022 and $867.091 million in 2021[316] - Weighted average shares outstanding (diluted) for September 2023 decreased to 140 million, down 1.8% from 143 million in September 2022[309] Legal and Contingent Liabilities - The company was contingently liable for approximately $883.3 million in issued standby letters of credit and $4.6 billion in issued surety bonds as of September 30, 2023[270] - Outstanding standby letters of credit totaled $878.9 million at September 30, 2023, up from $640.3 million at September 30, 2022[259] - The Company's Former Affiliate performed additional work worth over $90 million and is entitled to payment of approximately $144 million from the refinery owner[275] - The refinery owner claimed $93.0 million in damages and offsets against the Company's Former Affiliate[275] - The Company completed the sale of its Management Services business, including the Former Affiliate, on January 31, 2020, but retained the Refinery Turnaround Project and related claims[276] - Total contractual obligations and commitments as of September 30, 2023, amounted to $3,529.9 million, with $436.2 million due within one year and $1,912.3 million due in three to five years[277] Depreciation and Amortization - Depreciation and amortization expenses increased to $175.725 million in 2023 from $170.886 million in 2022 and $176.400 million in 2021[316] - Depreciation expense for fiscal year 2023 was $152.3 million, up from $147.0 million in 2022 and $143.6 million in 2021[364] Revenue Recognition and Contract Liabilities - Claims recognition involves estimating potential additional contract revenue, with amounts disclosed in financial statements if material[188] - The company's revenue recognition is dependent on estimates such as engineering progress, material quantities, and labor productivity, with variable consideration included in the transaction price only if a significant reversal is not probable[352] - The company's major contract types include cost reimbursable contracts, where revenue is recognized based on actual direct costs incurred and applicable fixed rates or fees[353] - The company had $21.9 billion of transaction price allocated to unsatisfied performance obligations as of September 30, 2023, with 55% expected to be satisfied within the next 12 months[357] - Revenue recognized from contract liabilities was $1,043.7 million in 2023, up from $565.2 million in 2022[358] Foreign Currency and Risk Management - The company uses foreign currency forward contracts to mitigate foreign currency risk, with most contracts requiring client payments in currencies corresponding to the currency in which costs are incurred[336] Business Divestitures and Acquisitions - The company exited substantially all of its self-perform at-risk construction businesses and divested its remaining non-core oil and gas businesses in January 2022[173] - The company completed the sale of its civil infrastructure construction business in Q2 2021, recording an additional $40.0 million loss in Q1 2022 and a $38.9 million loss in Q2 2023 related to revised estimates of contingent consideration receivable[342] - The company completed the sale of its oil and gas construction business in January 2022 for a purchase price of $14 million, recording a pre-tax gain of approximately $3.0 million and collecting $9.2 million in contingent consideration in Q3 2023[343] Internal Controls and Audits - The company's consolidated financial statements for the years ended September 30, 2023, 2022, and 2021 were audited and found to be in conformity with U.S. GAAP[290] - The company's internal control over financial reporting as of September 30, 2023, received an unqualified opinion from the auditors[291] - The company maintained effective internal control over financial reporting as of September 30, 2023, based on COSO criteria[300] Other Comprehensive Income and Expenses - Other comprehensive income for September 2023 was $53 million, compared to a loss of $80 million in September 2022[311] - Stock-based compensation for September 2023 increased to $46 million, up 19.3% from $38 million in September 2022[314] Working Capital and Leverage - Working capital decreased by $99.4 million (23.7%) to $319.2 million at September 30, 2023, while net accounts receivable and contract assets increased to $2,880.8 million[243] - The company's consolidated leverage ratio was 2.00 to 1.00 at September 30, 2023, well below the required maximum of 4.00 to 1.00 under the Credit Agreement[255] - As of September 30, 2023, the company had $1,145.6