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The total amounts of employer contributions paid for the three months ended December 31, 2024 were $ million for U.S. plans and $ million for non-U.S. plans. The expected remaining scheduled annual employer contributions for the fiscal year ending September 30, 2025 are $ million for U.S. plans and $ million for non-U.S. plans.
7.
| | $ | | |
| 2027 Senior Notes | | | | | |
| Other debt | | | | | |
| Total debt | | | | | |
| Less: Current portion of debt and short-term borrowings | () | | | () | |
| Less: Unamortized debt issuance costs | () | | | () | |
| Long-term debt | $ | | | | $ | | |
| | 2026 | | | |
| 2027 | | | |
| 2028 | | | |
| 2029 | | | |
| Thereafter | | | |
| Total | | $ | | |
revolving credit facility (the “New Revolving Credit Facility”), a new $ term loan A facility (the “New Term A Facility” and, together with the New Revolving Credit Facility, the “New Pro Rata Facilities”) and a new $ term loan B facility (the “New Term B Facility” and, together with the New Pro Rata Facilities, the “New Credit Facilities”). The New Revolving Credit Facility and the New Term A Facility mature on April 19, 2029. The New Term B Facility matures on April 19, 2031. The New Term A Facility and the New Term B Facility were borrowed in full on April 19, 2024 in U.S. dollars. Loans under the New Revolving Credit Facility may be borrowed, and letters of credit thereunder may be issued, in U.S. dollars or in certain foreign currencies. The New Credit Facilities replace in full the Company's existing revolving credit facility, term loan A facility and term loan B facility, and borrowings under the New Credit Facilities were used to refinance in full the Company's existing credit facilities and for general corporate purposes. The Credit Agreement permits the Company to designate certain of its subsidiaries as additional co-borrowers from time to time. Currently, there are no co-borrowers under the New Credit Facilities. On October 29, 2024, the Company entered into Amendment No. 15 to Syndicated Facility Agreement, pursuant to which the Company reduced the interest rate spread applicable to its New Term B Facility.Borrowings under (a) the New Revolving Credit Facility (in U.S. dollars) and the New Term A Facility bear interest at a rate per annum equal to, at the Company’s option, (i) a Term SOFR rate (with a % floor and SOFR adjustment of %) or (ii) a base rate (with a % floor), in each case, plus an applicable margin of % in the case of the Term SOFR rate and % in the case of the base rate, and (b) the New Revolving Credit Facility in currencies other than U.S. dollars bear interest at a rate per annum equal to the applicable reference rate for such currency (including any related adjustments), plus an applicable margin of %. The applicable margin is subject, in each case, to adjustment based on the Company’s consolidated leverage ratio from time to time.
Borrowings under the New Term B Facility, after giving effect to Amendment No. 15 to Syndicated Facility Agreement, bear interest at a rate per annum equal to, at the Company’s option, (a) a Term SOFR rate (with a % floor and a SOFR adjustment of %) or (b) a base rate (with a % floor), in each case, plus an applicable margin of % in the case of the Term SOFR rate and % in the case of the base rate.
Certain of the Company’s material subsidiaries (the “Guarantors”) have guaranteed the Company’s obligations of the borrowers under the Credit Agreement, subject to certain exceptions. The borrowers’ obligations under the Credit Agreement are secured by a lien on substantially all of the Company’s assets and its Guarantors’ assets, subject to certain exceptions.
The Credit Agreement contains customary negative covenants that include, among other things, limitations on the ability of the Company and certain of its subsidiaries, subject to certain exceptions, to incur liens and debt, make investments, dispositions, and restricted payments, change the nature of their business, consummate mergers, consolidations and the sale of all or substantially all of their respective assets and transact with affiliates. The Company is also required to maintain a consolidated leverage ratio of less than or equal to to 1.00 (subject to certain adjustments in connection with permitted acquisitions), tested on a quarterly basis (the “Financial Covenant”). The Financial Covenant does not apply to the New Term B Facility. As of December 31, 2024, the Company was in compliance with the covenants of the Credit Agreement.
The Credit Agreement contains customary affirmative covenants, including, among other things, compliance with applicable law, preservation of existence, maintenance of properties and of insurance, and keeping proper books and records. The Credit Agreement contains customary events of default, including, among other things, nonpayment of principal, interest or fees, cross-defaults to other debt, inaccuracies of representations and warranties, failure to perform covenants, events of bankruptcy and insolvency, change of control and unsatisfied judgments, subject in certain cases to notice and cure periods and other exceptions.
At December 31, 2024 and September 30, 2024, letters of credit totaled $ million and $ million, respectively, under the Company’s New Revolving Credit Facility. As of December 31, 2024 and September 30, 2024, the Company had $ million and $ million, respectively, available under its New Revolving Credit Facility.
2027 Senior Notes
On February 21, 2017, the Company completed a private placement offering of $ aggregate principal amount of its unsecured % Senior Notes due 2027 (the “2027 Senior Notes”). On June 30, 2017, the Company completed an exchange offer to exchange the unregistered 2027 Senior Notes for registered notes, as well as related guarantees.
million. The fair value of the 2027 Senior Notes as of December 31, 2024 was derived by taking the mid-point of the trading prices from an observable market input (Level 2) in the secondary bond market and multiplying it by the outstanding balance of the 2027 Senior Notes. Interest is payable on the 2027 Senior Notes at a rate of % per annum. Interest on the 2027 Senior Notes is payable semi-annually on March 15 and September 15 of each year, commencing on September 15, 2017. The 2027 Senior Notes will mature on March 15, 2027.At any time and from time to time prior to December 15, 2026, the Company may redeem all or part of the 2027 Senior Notes, at a redemption price equal to % of their principal amount, plus a “make whole” premium as of the redemption date, and accrued and unpaid interest to the redemption date. On or after December 15, 2026, the Company may redeem all or part of the 2027 Senior Notes at a redemption price equal to % of their principal amount, plus accrued and unpaid interest on the redemption date.
The indenture pursuant to which the 2027 Senior Notes were issued contains customary events of default, including, among other things, payment default, exchange default, failure to provide notices thereunder and provisions related to bankruptcy events. The indenture also contains customary negative covenants.
The Company was in compliance with the covenants relating to the 2027 Senior Notes as of December 31, 2024.
Other Debt and Other Items
Other debt consists primarily of obligations under capital leases and loans, and unsecured credit facilities. The Company’s unsecured credit facilities are primarily used for standby letters of credit issued in connection with general and professional liability insurance programs and for contract performance guarantees. At December 31, 2024 and September 30, 2024, these outstanding standby letters of credit totaled $ million and $ million, respectively. As of December 31, 2024, the Company had $ million available under these unsecured credit facilities.
Effective Interest Rate
The Company’s average effective interest rate on its total debt, including the effects of the interest rate swap and interest rate cap agreements, during the three months ended December 31, 2024 and 2023 was % and %, respectively.
Interest expense in the consolidated statements of operations included amortization of deferred debt issuance costs for the three months ended December 31, 2024 and 2023 of $ million and $ million, respectively.
8.
| % | | February 2023 | | March 2028 | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| September 30, 2024 |
Notional Amount
Currency | | Notional Amount
(in millions) | | Fixed
Rate | | Effective
Date | | Expiration
Date |
| USD | | | | % | | February 2023 | | March 2028 |
In the fourth quarter of fiscal 2021, the Company entered into new interest rate swap agreements with a notional value of $ million to manage the interest rate exposure of its variable rate loans. The new swaps became effective February 2023 and terminate in March 2028. By entering into the swap agreements, the Company converted a portion of the SOFR rate-based liability into a fixed rate liability. The Company will pay a fixed rate of % and receive payment at the prevailing one-month SOFR.
In the third quarter of fiscal 2022, the Company purchased interest rate cap agreements with a notional value of $ million to manage interest rate exposure of its variable rate loans. The caps became effective on June 30, 2022 and terminate in March 2028. The caps reduce the Company’s exposure to one-month SOFR. In the event one-month SOFR exceeds %, the Company will receive the spread between prevailing one-month SOFR and %.
See Note 14 for accumulated balances and reporting period activities of derivatives related to reclassifications out of accumulated other comprehensive loss for the three months ended December 31, 2024 and 2023. Additionally, there were material losses recognized in income due to amounts excluded from effectiveness testing from the Company’s interest rate swap agreements.
Other Foreign Currency Forward Contracts
The Company uses foreign currency forward contracts which are not designated as accounting hedges to hedge intercompany transactions and other monetary assets or liabilities denominated in currencies other than the functional currency of a subsidiary. Gains and losses on these contracts were not material for the three months ended December 31, 2024 and 2023.
Fair Value Measurements
The fair values of the interest rate swap and interest rate cap agreements were derived by taking the net present value of the expected cash flows using observable market inputs (Level 2) such as SOFR rate curves, futures, volatilities and basis spreads (when applicable).
As discussed in Note 3, the Company received an equity investment in the civil infrastructure construction business buyer and concurrently participated as a member of a lending group in a revolving credit facility. The Company elected the fair value option for its equity investment due to the availability of quoted prices of identical assets. The fair value option was also elected for the credit facility investment. Changes in fair value of both investments are classified within other income on the consolidated statements of operations. The Company records interest income at the stated coupon rate of the credit facility and classifies it within interest income on the consolidated statement of operations. Fair value for the equity investment is determined using Level 1 inputs, and fair value of the credit facility investment is determined using Level 3 inputs, such as estimated cash flows and estimated discount rates. The Company recorded a gain of $ million in other income in the first quarter of fiscal 2025 representing the increase in fair value of these investments.
| | $ | | | | $ | | | | $ | | | | Interest rate contracts | Other non-current assets | | | | | | | | | | | | |
| Interest rate contracts | Other current liabilities | | | | | () | | | | | | () | |
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| Finance lease assets | | Property and equipment – net | | | | | | |
| Total lease assets | | | | $ | | | | $ | | |
| | | | | | |
| Liabilities: | | | | | | |
| Current: | | | | | | |
| Operating lease liabilities | | Accrued expenses and other current liabilities | | $ | | | | $ | | |
| Finance lease liabilities | | Current portion of long-term debt | | | | | | |
| Total current lease liabilities | | | | | | | | |
| Non-current: | | | | | | |
| Operating lease liabilities | | Operating lease liabilities, noncurrent | | | | | | |
| Finance lease liabilities | | Long-term debt | | | | | | |
| Total non-current lease liabilities | | | | $ | | | | $ | | |
| | | | | | | | | | | | | | |
| As of | | As of | |
| December 31, 2024 | | September 30, 2024 | |
| Weighted average remaining lease term (in years): | | | | |
| Operating leases | | | | |
| Finance leases | | | | |
| Weighted average discount rates: | | | | |
| Operating leases | | % | | | % | |
| Finance leases | | % | | | % | |
| | $ | | | | Operating cash flows from finance leases | | | | | |
| Financing cash flows from finance leases | | | | | |
| Right-of-use assets obtained in exchange for new operating leases | | | | | |
| Right-of-use assets obtained in exchange for new finance leases | | | | | |
| | $ | | | | 2026 | | | | | | |
| 2027 | | | | | | |
| 2028 | | | | | | |
| 2029 | | | | | | |
| Thereafter | | | | | | |
| Total lease payments | | $ | | | | $ | | |
| Less: Amounts representing interest | | $ | () | | | $ | () | |
| Total lease liabilities | | $ | | | | $ | | |
13.
| | $ | | | | Accrued contract costs | | | | | |
| Other accrued expenses | | | | | |
| Total | $ | | | | $ | | |
Accrued contract costs above include balances related to professional liability accruals of $ million and $ million as of December 31, 2024 and September 30, 2024, respectively. The remaining accrued contract costs primarily relate to costs for services provided by subcontractors and other non-employees. Liabilities recorded related to accrued contract losses were not material as of December 31, 2024 and September 30, 2024. The Company did not have material revisions to estimates for contracts where revenue is recognized using the input method during the three months ended December 31, 2024 and 2023. During the first three months of fiscal 2025, the Company did not initiate any new transformational restructuring activities. During the first three months of fiscal 2024, the Company incurred restructuring expenses of $ million, including personnel and other costs of $ million and real estate costs of $ million, of which $ million was accrued and unpaid at December 31, 2023.
On November 18, 2024, the Company’s Board of Directors declared a quarterly cash dividend of $ per share, which was paid on January 17, 2025 to stockholders of record as of the close of business on January 2, 2025.
As of December 31, 2024, accrued and unpaid dividends totaled $ million and were classified within other accrued expenses on the consolidated balance sheet.
14.
) | | $ | () | | | $ | | | | $ | () | | | Other comprehensive (loss) income before reclassification | | | | () | | | | | | () | |
| Amounts reclassified from accumulated other comprehensive income (loss) | | | | | | | () | | | () | |
| Balances at December 31, 2024 | $ | () | | | $ | () | | | $ | | | | $ | () | |
| | | | | | | | | | | | | | | | | | | | | | | |
| Pension
Related
Adjustments | | Foreign
Currency
Translation
Adjustments | | Gain/(Loss) on
Derivative
Instruments | | Accumulated
Other
Comprehensive
Loss |
| Balances at September 30, 2023 | $ | () | | | $ | () | | | $ | | | | $ | () | |
| Other comprehensive (loss) income before reclassification | () | | | | | | () | | | | |
| Amounts reclassified from accumulated other comprehensive income (loss) | | | | | | | () | | | () | |
| Balances at December 31, 2023 | $ | () | | | $ | () | | | $ | | | | $ | () | |
15.
million and $ million, respectively. As of December 31, 2024, the Company had $ million available under these unsecured credit facilities. Performance arrangements typically have various expiration dates ranging from the completion of the project contract and extending beyond contract completion in some circumstances such as for warranties. The Company may also guarantee that a project, when complete, will achieve specified performance standards. If the project subsequently fails to meet guaranteed performance standards, the Company may incur additional costs, pay liquidated damages or be held responsible for the costs incurred by the client to achieve the required performance standards. The potential payment amount of an outstanding performance arrangement is typically the remaining cost of work to be performed by or on behalf of third parties. Generally, under joint venture arrangements, if a partner is financially unable to complete its share of the contract, the other partner(s) may be required to complete those activities.At December 31, 2024, the Company was contingently liable in the amount of approximately $ million in issued standby letters of credit and $ billion in issued surety bonds primarily to support project execution.
million to the Fund over the next years.In addition, in connection with the investment activities of AECOM Capital, the Company provides guarantees of certain contractual obligations, including guarantees for completion of projects, limited debt repayment, environmental indemnity obligations and other lender required guarantees.
In February 2024, the Company was informed of a potential liability as one of the indemnitors on a divested business’ surety bonds. The Company does not have sufficient information to determine the range of potential impacts; however, it is reasonably possible that the Company may incur additional costs related to these bonds.
In connection with the resolution of contingencies related to the sale of the civil infrastructure construction business, the Company agreed to act as an additional guarantor on the counterparty’s existing debt, which was extended to April 30, 2025.
Department of Energy Deactivation, Demolition, and Removal Project
A former affiliate of the Company, Amentum Environment & Energy, Inc., f/k/a AECOM Energy and Construction, Inc. (“Former Affiliate”), executed a cost-reimbursable task order with the Department of Energy (DOE) in 2007 to provide deactivation, demolition and removal services at a New York State project site that, during 2010, experienced contamination and performance issues. In February 2011, the Former Affiliate and the DOE executed a Task Order Modification that changed some cost-reimbursable contract provisions to at-risk. The Task Order Modification, including subsequent amendments, required the DOE to pay all project costs up to $ million, required the Former Affiliate and the DOE to equally share in all project costs incurred from $ million to $ million, and required the Former Affiliate to pay all project costs exceeding $ million.
Due to unanticipated requirements and permitting delays by federal and state agencies, as well as delays and related ground stabilization activities caused by Hurricane Irene in 2011, the Former Affiliate was required to perform work outside the scope of the Task Order Modification. In December 2014, the Former Affiliate submitted an initial set of claims against the DOE pursuant to the Contracts Disputes Acts seeking recovery of $ million, including additional fees on changed work scope (the “2014 Claims”). On December 6, 2019, the Former Affiliate submitted a second set of claims against the DOE seeking recovery of an additional $ million, including additional project costs and delays outside the scope of the contract as a result of differing site and ground conditions (the “2019 Claims”). The Former Affiliate also submitted three alternative breach of contract claims to the 2014 Claims and the 2019 Claims that may entitle the Former Affiliate to recovery of $ million to $ million. On December 30, 2019, the DOE denied the Former Affiliate’s 2014 Claims. On September 25, 2020, the DOE denied the Former Affiliate’s 2019 Claims. The Company filed an appeal of these decisions on December 20, 2020 in the Court of Federal Claims. Deconstruction, decommissioning and site restoration activities are complete.
On January 31, 2020, the Company completed the sale of its Management Services business, including the Former Affiliate who worked on the DOE project, to Maverick Purchaser Sub LLC (“MS Purchaser”), an affiliate of American Securities LLC and Lindsay Goldberg LLC. The Company and the MS Purchaser agreed that all future DOE project claim recoveries and costs will be split % to the MS Purchaser and % to the Company with the Company retaining control of all future strategic legal decisions.
The Company intends to vigorously pursue all claimed amounts but can provide no certainty that the Company will recover 2014 Claims and 2019 Claims submitted against the DOE, or any additional incurred claims or costs, which could have a material adverse effect on the Company’s results of operations.
million and is entitled to payment from the refinery owner of approximately $ million. In March 2019, the refinery owner sent a letter to the Company's Former Affiliate alleging it incurred approximately $ million in damages due to the Company's Former Affiliate's project performance. In April 2019, the Company’s Former Affiliate filed and perfected a $ million construction lien against the refinery for unpaid labor and materials costs. In August 2019, following a subcontractor complaint filed in the Thirteenth Judicial District Court of Montana asserting claims against the refinery owner and the Company’s Former Affiliate, the refinery owner crossclaimed against the Company’s Former Affiliate and the subcontractor. In October 2019, following the subcontractor’s dismissal of its claims, the Company’s Former Affiliate removed the matter to federal court and cross claimed against the refinery owner. In December 2019, the refinery owner claimed $ million in damages and offsets against the Company’s Former Affiliate.On January 31, 2020, the Company completed the sale of its Management Services business, including the Former Affiliate, to the MS Purchaser; however, the Refinery Turnaround Project, including related claims and liabilities, has been retained by the Company.
16.
reportable segments according to their geographic regions and business activities. In identifying its reportable segments, the Company considered the financial information provided to its chief operating decision maker (CODM), who is the chief executive officer. The financial data is organized by geographic region and global business lines. The CODM uses this information to allocate resources and assess the performance of the segments primarily based on revenue less pass-through revenue and attributable earnings before interest, tax, and amortization expense. After considering various factors, including the development and utilization of financial data to the CODM, the Company concluded that identifying its operating segments by geography was consistent with the objectives of ASC 280-10. Certain operating segments have been aggregated based on similar characteristics, including long-term financial performance, the nature of services provided, internal process for delivering those services, and types of customers, to arrive at the Company’s reportable segments. The Company’s Americas reportable segment provides planning, consulting, architectural and engineering design services, and construction management services to public and private clients in the United States, Canada, and Latin America and is comprised of the Design and Consulting Services Americas and Construction Management operating segments. The Company’s International reportable segment provides similar professional services to public and private clients in Europe and India, the Middle East and Africa, Asia, and Australia and New Zealand and is comprised of the operating segments in those geographic regions. The Company’s AECOM Capital (ACAP) operating segment is its own reportable segment and primarily invests in and develops real estate projects. Certain expenses that are determined to be related to the Company as a whole are not deemed to be part of an operating segment but are reported within Corporate.
| | $ | | | | $ | | | | $ | | | | $ | | | | Gross profit | | | | | | | | | | | | | | | |
| Equity in earnings of joint ventures | | | | | | | | | | | | | | | |
| General and administrative expenses | | | | | | | | () | | | () | | | () | |
| | |
| Operating income (loss) | | | | | | | | () | | | () | | | | |
| Gross profit as a % of revenue | | | % | | | % | | | | | | | | | % |
| | | | | | | | | | |
| Three Months Ended December 31, 2023: | | | | | | | | | | |
| Revenue | | $ | | | | $ | | | | $ | | | | $ | | | | $ | | |
| Gross profit | | | | | | | | | | | | | | | |
| Equity in earnings (losses) of joint ventures | | | | | | | | () | | | | | | () | |
| General and administrative expenses | | | | | | | | () | | | () | | | () | |
| Restructuring costs | | | | | | | | | | | () | | | () | |
| Operating income (loss) | | | | | | | | () | | | () | | | | |
| Gross profit as a % of revenue | | | % | | | % | | | | | | | | | % |
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| December 31, 2024 | | $ | | | | $ | | | | $ | | | | $ | | | | |
| September 30, 2024 | | $ | | | | $ | | | | $ | | | | $ | | | | |
Item 2. Management’s Discussion And Analysis Of Financial Condition And Results Of Operations
Forward-Looking Statements
This Quarterly Report contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 that are not limited to historical facts, but reflect the Company’s current beliefs, expectations or intentions regarding future events. These statements include forward-looking statements with respect to the Company, including the Company’s business, operations and strategy, and infrastructure consulting industry. Statements that are not historical facts, without limitation, including statements that use terms such as “anticipates,” “believes,” “expects,” “estimates,” “intends,” “may,” “plans,” “potential,” “projects,” and “will” and that relate to our future revenues, expenditures and business trends; future reduction of our self-perform at-risk construction exposure; future accounting estimates; future contractual performance obligations; future conversions of backlog; future capital allocation priorities, including common stock repurchases, future trade receivables, future debt pay downs; future post-retirement expenses; future tax benefits and expenses, and the impact of future tax laws; future compliance with regulations; future legal claims and insurance coverage; future effectiveness of our disclosure and internal controls over financial reporting; future costs savings; and other future economic and industry conditions, are forward-looking statements. In light of the risks and uncertainties inherent in all forward-looking statements, the inclusion of such statements in this Quarterly Report should not be considered as a representation by us or any other person that our objectives or plans will be achieved. Although management believes that the assumptions underlying the forward-looking statements are reasonable, these assumptions and the forward-looking statements are subject to various factors, risks and uncertainties, many of which are beyond our control, including, but not limited to, our business is cyclical and vulnerable to economic downturns and client spending reductions; potential government shutdowns; changes in administration or other funding directives and circumstances may 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 and 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; ability to continue payment of dividends; 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’s 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; as well as other additional risks and factors discussed in this Quarterly Report on Form 10-Q and any subsequent reports we file with the SEC. Accordingly, actual results could differ materially from those contemplated by any forward-looking statement.
All subsequent written and oral forward-looking statements concerning the Company or other matters attributable to the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements above. You are cautioned not to place undue reliance on these forward-looking statements, which speak only to the date they are made. The Company is under no obligation (and expressly disclaims any such obligation) to update or revise any forward-looking statement that may be made from time to time, whether as a result of new information, future developments or otherwise. Please review “Part II, Item 1A—Risk Factors” in this Quarterly Report for a discussion of the factors, risks and uncertainties that could affect our future results.
Overview
We are a leading global provider of professional infrastructure consulting and advisory services for governments, businesses and organizations throughout the world. We provide advisory, planning, consulting, architectural and engineering design, construction and program management services, and investment and development services to public and private clients worldwide in major end markets such as transportation, facilities, water, environmental, and energy.
Our business focuses primarily on providing fee-based knowledge-based services. We primarily derive income from our ability to generate revenue and collect cash from our clients through the billing of our employees’ time spent on client projects and our ability to manage our costs. AECOM Capital primarily derives its income from real estate development sales and management fees.
We report our continuing business through three segments, each of which is described in further detail below: Americas, International, and AECOM Capital (ACAP). Such segments are organized by the differing specialized needs of the respective clients and how we manage the business. We have aggregated various operating segments into our reportable segments based on their similar characteristics, including similar long-term financial performance, the nature of services provided, internal processes for delivering those services, and types of customers.
•Americas: Planning, advisory, consulting, architectural and engineering design, construction management and program management services to public and private clients in the United States, Canada, and Latin America in major end markets such as transportation, water, government, facilities, environmental, and energy.
•International: Planning, advisory, consulting, architectural and engineering design services and program management to public and private clients in Europe, the Middle East, India, Africa and the Asia-Australia-Pacific regions in major end markets such as transportation, water, government, facilities, environmental, and energy.
•AECOM Capital (ACAP): Primarily invests in and develops real estate projects.
Our revenue is dependent on our ability to attract and retain qualified and productive employees, identify business opportunities, allocate our labor resources and capital to profitable and high growth markets, secure new contracts, and renew existing client agreements. Demand for our services may be vulnerable to sudden economic downturns and reductions in government and private industry spending, which may result in clients delaying, curtailing or canceling proposed and existing projects. Moreover, as a professional services company, maintaining the high quality of the work generated by our employees is integral to our revenue generation and profitability. Given the global nature of our business, our revenue is exposed to currency rate fluctuations that could change from period to period and year to year.
Our costs consist primarily of the compensation we pay to our employees, including salaries, fringe benefits, the costs of hiring subcontractors, other project-related expenses and sales, general and administrative costs.
At December 31, 2024, we had approximately $974.8 million remaining of the Board’s stock repurchase authorization. On November 13, 2024, the Board approved an increase in our stock repurchase authorization to $1.0 billion. We intend to deploy future available cash towards dividends and stock repurchases consistent with our returns driven capital allocation policy.
We have exited substantially all of our former self-perform at-risk construction businesses. As part of our ongoing plan to improve profitability and maintain a reduced risk profile, we continuously evaluate our geographic exposure.
We completed a transaction that transitioned the AECOM Capital team to a new third-party platform in the third quarter of fiscal 2024. The team will continue to support AECOM Capital’s investment vehicles pursuant to certain advisory agreements in a manner consistent with their current obligations.
Results of Operations
Three months ended December 31, 2024 compared to the three months ended December 31, 2023
Consolidated Results
| | | | | | | | | | | | | | | | | | | | | | | | | | |
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| ($ in millions) | |
| Revenue | $ | 4,014.2 | | | $ | 3,899.9 | | | $ | 114.3 | | | 2.9 | % | |
| Cost of revenue | 3,745.8 | | | 3,655.9 | | | 89.9 | | | 2.5 | | |
| Gross profit | 268.4 | | | 244.0 | | | 24.4 | | | 10.0 | | |
| Equity in earnings (losses) of joint ventures | 9.6 | | | (29.0) | | | 38.6 | | | (133.1) | | |
| General and administrative expenses | (40.5) | | | (35.7) | | | (4.8) | | | 13.4 | | |
| Restructuring costs | — | | | (16.2) | | | 16.2 | | | (100.0) | | |
| Income from operations | 237.5 | | | 163.1 | | | 74.4 | | | 45.6 | | |
| Other income | 6.9 | | | 2.6 | | | 4.3 | | | 165.4 | | |
| Interest income | 16.6 | | | 12.1 | | | 4.5 | | | 37.2 | | |
| Interest expense | (43.0) | | | (41.3) | | | (1.7) | | | 4.1 | | |
| Income from continuing operations before taxes | 218.0 | | | 136.5 | | | 81.5 | | | 59.7 | | |
| Income tax expense for continuing operations | 29.3 | | | 26.6 | | | 2.7 | | | 10.2 | | |
| Net income from continuing operations | 188.7 | | | 109.9 | | | 78.8 | | | 71.7 | | |
| Net loss from discontinued operations | (9.6) | | | (1.3) | | | (8.3) | | | 638.5 | | |
| Net income | 179.1 | | | 108.6 | | | 70.5 | | | 64.9 | | |
| Net income attributable to noncontrolling interests from continuing operations | (11.3) | | | (13.1) | | | 1.8 | | | (13.7) | | |
| Net income attributable to noncontrolling interests from discontinued operations | (0.8) | | | (1.1) | | | 0.3 | | | (27.3) | | |
| Net income attributable to noncontrolling interests | (12.1) | | | (14.2) | | | 2.1 | | | (14.8) | | |
| Net income attributable to AECOM from continuing operations | 177.4 | | | 96.8 | | | 80.6 | | | 83.3 | | |
| Net loss attributable to AECOM from discontinued operations | (10.4) | | | (2.4) | | | (8.0) | | | 333.3 | | |
| Net income attributable to AECOM | $ | 167.0 | | | $ | 94.4 | | | $ | 72.6 | | | 76.9 | % | |
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Revenue
Our revenue for the three months ended December 31, 2024 increased $114.3 million, or 2.9%, to $4,014.2 million as compared to $3,899.9 million for the corresponding period last year.
Revenue increased across most of our end markets as a result of increased investment by large, publicly financed, global infrastructure programs including the Infrastructure Investment and Jobs Act in the U.S. and similar large programs in our largest end markets globally. Our Water end market has been benefiting from increased investment to address drought, flooding, emerging contaminant remediation, water storage,and clean and safe drinking water. Our Transportation end market has been benefiting from incremental investments across the globe to modernize transportation infrastructure and address growth and urbanization trends, while our Environment end market has been benefiting from infrastructure that requires permitting, compliance, and remediation as well as investments in energy. Our Facilities end market has been benefiting from positive trends in asset maintenance repositioning and demand for modern, efficient facilities. The quantification of the impact of these trends by end market is noted within our Americas and International reportable segments discussion below, where applicable, and represents substantially all of our revenue change.
In the course of providing our services, we routinely subcontract for services and incur other direct costs on behalf of our clients. These costs are passed through to clients and, in accordance with industry practice and GAAP, are included in our revenue and cost of revenue. Because these pass-through revenues can change significantly from project to project and period to period, changes in revenue may not be indicative of business trends. Pass-through revenues for the quarters ended December 31, 2024 and 2023 were $2.2 billion for both periods. Pass-through revenue as a percentage of total revenue was 55% and 56% during the three months ended December 31, 2024 and 2023, respectively.
Cost of Revenue
Our cost of revenue increased to $3,745.8 million for the three months ended December 31, 2024 compared to $3,655.9 million for the corresponding period last year, an increase of $89.9 million, or 2.5%.
Substantially all of the change in our cost of revenue for the three months ended December 31, 2024 occurred in our Americas and International reportable segments, which is discussed in more detail below.
Gross Profit
Our gross profit for the three months ended December 31, 2024 increased $24.4 million, or 10.0%, to $268.4 million as compared to $244.0 million for the corresponding period last year. For the three months ended December 31, 2024, gross profit, as a percentage of revenue, increased to 6.7% from 6.3% in the corresponding period last year.
Gross profit changes were due to the reasons noted in our Americas and International reportable segments below.
Equity in Earnings of Joint Ventures
Our equity in earnings of joint ventures for the three months ended December 31, 2024 was $9.6 million as compared to equity in losses of $29.0 million in the corresponding period last year.
The increase in equity in earnings of joint ventures for the three months ended December 31, 2024 compared to the same period in the prior year was primarily due to impairment losses of $35.9 million recorded by our AECOM Capital segment in fiscal 2024 that did not repeat in fiscal 2025.
General and Administrative Expenses
Our general and administrative expenses for the three months ended December 31, 2024 increased $4.8 million, or 13.4%, to $40.5 million as compared to $35.7 million for the corresponding period last year. For the three months ended December 31, 2024, general and administrative expenses, as a percentage of revenue, was 1.0% which was consistent with the corresponding period last year. The increase in general and administrative expenses was primarily due to increased costs related to investments to drive organic growth.
Restructuring Costs
Restructuring costs are comprised of personnel costs, real estate costs, and costs associated with business exits. No new transformative restructuring actions were initiated during the three months ended December 31, 2024. During the three months ended December 31, 2023, we incurred restructuring costs of $16.2 million, primarily related to costs incurred to continue to align our real estate portfolio with our employee flexibility initiatives, and continue our exit of certain countries in Southeast Asia.
Other Income
Our other income for the three months ended December 31, 2024 increased to $6.9 million from $2.6 million for the corresponding period last year.
The increase in other income for the three months ended December 31, 2024 was primarily due to the increase in fair value of our investments measured at fair value.
Interest Income
Our interest income for the three months ended December 31, 2024 increased to $16.6 million from $12.1 million for the corresponding period last year.
The increase in interest income for the three months ended December 31, 2024 was primarily due to an increase in our interest-bearing assets.
Interest Expense
Our interest expense for the three months ended December 31, 2024 was $43.0 million as compared to $41.3 million for the corresponding period last year.
The increase in interest expense for the three months ended December 31, 2024 was primarily due to an increase in our debt as compared to the prior year.
Income Tax Expense
Our income tax expense for the three months ended December 31, 2024 was $29.3 million as compared to
$26.6 million in the corresponding period last year. The increase in tax expense for the current period compared to the corresponding period last year was due primarily to the tax impact of an increase in pre-tax income of $81.5 million, partially offset by a tax benefit of $20.1 million related to deferred tax assets recognized due to legal entity restructuring implemented in the first quarter of fiscal 2025, and a tax benefit of $6.9 million related to an audit settlement in the first quarter of fiscal 2024 that did not repeat if fiscal 2025.
During the first quarter of fiscal 2025, we recognized deferred tax assets of $20.1 million related to legal entity restructuring. The restructuring resulted in the recognition of deferred tax assets related to tax attributes that are expected to be utilized against future taxable income.
During the first quarter of fiscal 2024, we settled our tax audit in Hong Kong for fiscal year 2011 through fiscal year 2021 and recorded a tax benefit of $6.9 million due primarily to changes in uncertain tax positions.
Net Loss From Discontinued Operations
During the first quarter of fiscal 2020, management approved a plan to dispose of via sale our self-perform at-risk construction businesses. As a result of these strategic actions, the self-perform at-risk construction businesses were classified as discontinued operations.
Net loss from discontinued operations was $9.6 million for the three months ended December 31, 2024 and was $1.3 million for the three months ended December 31, 2023, an increase of $8.3 million. The increase was primarily due to a change in our expected recovery on a project completed prior to the sale of our at-risk power construction business.
Net Income Attributable to AECOM
The factors described above resulted in net income attributable to AECOM of $167.0 million for the three months ended December 31, 2024 as compared to net income attributable to AECOM of $94.4 million for the three months ended December 31, 2023.
Results of Operations by Reportable Segment
Americas
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| Revenue | $ | 3,112.0 | | | $ | 3,038.7 | | | $ | 73.3 | | | 2.4 | % | |
| Cost of revenue | 2,921.8 | | | 2,867.7 | | | 54.1 | | | 1.9 | | |
| Gross profit | $ | 190.2 | | | $ | 171.0 | | | $ | 19.2 | | | 11.2 | % | |
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Revenue
Revenue for our Americas segment for the three months ended December 31, 2024 increased $73.3 million, or 2.4%, to $3,112.0 million as compared to $3,038.7 million for the corresponding period last year.
The increase in revenue for the three months ended December 31, 2024 was primarily driven by organic growth. Pass-through revenues on contracts for which we subcontract work on behalf of our clients was flat compared to the corresponding period last year. Revenue from increased project activity in the Americas included growth in our Transportation end market of $58.7 million, or 11.3%, Water and Environment end markets of $35.7 million, or 7.1%, and Energy end market of $19.6 million, or 58.5%, partially offset by a decrease in our Facilities end market of $39.8 million, or 2.0%, compared to the corresponding period last year, which have benefited from the end market trends discussed in the consolidated revenue section above.
Cost of Revenue
Cost of revenue for our Americas segment for the three months ended December 31, 2024 increased by $54.1 million, or 1.9%, to $2,921.8 million compared to $2,867.7 million for the corresponding period last year.
The increase in cost of revenue for the three months ended December 31, 2024 was consistent with the increases in revenue. The increase in cost of revenue for the three months ended December 31, 2024 was due to higher labor volume compared to the same period in the prior year.
Gross Profit
Gross profit for our Americas segment for the three months ended December 31, 2024 increased $19.2 million, or 11.2%, to $190.2 million as compared to $171.0 million for the corresponding period last year. As a percentage of revenue, gross profit increased to 6.1% of revenue for the three months ended December 31, 2024 from 5.6% in the corresponding period last year.
The increase in gross profit and gross profit as a percentage of revenue for the three months ended December 31, 2024 was primarily due to revenue growth and delivery efficiencies realized from cost reductions. In addition, underlying revenue, excluding pass-through revenues, increased as noted above.
International
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| Revenue | $ | 902.0 | | $ | 861.0 | | $ | 41.0 | | 4.8% | |
| Cost of revenue | 824.0 | | 788.2 | | 35.8 | | 4.5 | |
| Gross profit | $ | 78.0 | | $ | 72.8 | | $ | 5.2 | | 7.1% | |
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Revenue
Revenue for our International segment for the three months ended December 31, 2024 increased $41.0 million, or 4.8%, to $902.0 million as compared to $861.0 million for the corresponding period last year.
The increase in revenue for the three months ended December 31, 2024 was primarily due to growth in the Middle East of $34.7 million and the U.K. of $4.1 million, partially offset by a decrease in Australia of $7.9 million, compared to the corresponding period last year. Growth was led by our Facilities end market, which increased $51.4 million, or 15.6%, partially offset by a decrease in our Transportation end market of $13.3 million, or 4.2%, compared to the corresponding period last year, which have benefited from the end market trends discussed in the consolidated revenue section above.
Cost of Revenue
Cost of revenue our International segment for the three months ended December 31, 2024 increased $35.8 million, or 4.5%, to $824.0 million as compared to $788.2 million for the corresponding period last year.
The increase in cost of revenue for the three months ended December 31, 2024 was consistent with the increase in revenue and was due to increases in subcontractor and other direct costs of $20.7 million and labor expenses of $15.1 million.
Gross Profit
Gross profit for our International segment for the three months ended December 31, 2024 increased $5.2 million, or 7.1%, to $78.0 million as compared to $72.8 million for the corresponding period last year. As a percentage of revenue, gross profit increased to 8.6% of revenue for the three months ended December 31, 2024 from 8.5% in the corresponding period last year.
The increase in gross profit and gross profit as a percentage of revenue for the three months ended December 31, 2024 were primarily due to an increase in revenue and reduced costs resulting from ongoing exiting of lower margin countries, ongoing investments to expand enterprise capability centers, shared service centers, and delivery efficiencies.
AECOM Capital
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| Revenue | $ | 0.2 | | | $ | 0.2 | | | $ | — | | | — | % | |
| Equity in earnings (losses) of joint ventures | $ | 1.2 | | | $ | (36.9) | | | $ | 38.1 | | | (103.3) | % | |
| General and administrative expenses | $ | (2.4) | | | $ | (2.4) | | | $ | — | | | — | % | |
Equity in earnings of joint ventures for the three months ended December 31, 2024 increased $38.1 million, or 103.3%, to $1.2 million compared to a loss of $36.9 million for the corresponding period last year. The change in equity in earnings of joint ventures for the three months ended December 31, 2024 was primarily due to impairment losses of $35.9 million recognized in the fiscal 2024 that did not repeat in fiscal 2025.
Seasonality
We experience seasonal trends in our business. Our revenue is typically higher in the last half of the fiscal year. The fourth quarter of our fiscal year (July 1 to September 30) is typically our strongest quarter. We find that the U.S.
federal government tends to authorize more work during the period preceding the end of our fiscal year, September 30. In addition, many U.S. state governments with fiscal years ending on June 30 tend to accelerate spending during their first quarter, when new funding becomes available. Further, our construction management revenue typically increases during the summer months when weather and daylight hours are more conducive to outdoor activities. Within the United States, as well as other parts of the world, our business generally benefits from milder weather conditions in our fiscal fourth quarter. Our construction and project management services also typically expand during the summer months when weather and daylight hours are more conducive to outdoor activities. The first quarter of our fiscal year (October 1 to December 31) is typically our lowest revenue quarter. The harsher weather conditions impact our ability to complete work in parts of North America and the holiday season schedule affects our productivity during this period. For these reasons, coupled with the number and significance of client contracts commenced and completed during a particular period, as well as the timing of expenses incurred for corporate initiatives, it is not unusual for us to experience seasonal changes or fluctuations in our quarterly operating results.
Liquidity and Capital Resources
Cash Flows
Our principal sources of liquidity are cash flows from operations, borrowings under our credit facilities, and access to financial markets. Our principal uses of cash are operating expenses, capital expenditures, working capital requirements, acquisitions, repurchases of common stock, dividend payments, and refinancing or repayment of debt. We believe our anticipated sources of liquidity including operating cash flows, existing cash and cash equivalents, borrowing capacity under our revolving credit facility and our ability to issue debt or equity, if required, will be sufficient to meet our projected cash requirements for at least the next twelve months. We expect to spend approximately $45 million for restructuring costs in fiscal 2025 associated with restructuring actions taken in prior periods that are expected to deliver continued margin improvement and efficiencies.
Generally, we do not provide for U.S. taxes or foreign withholding taxes on gross book-tax basis differences in our non-U.S. subsidiaries because such basis differences are able to and intended to be reinvested indefinitely. At December 31, 2024, we have determined that we will continue to indefinitely reinvest the earnings of some foreign subsidiaries and, therefore, we will continue to account for these undistributed earnings based on our existing accounting under ASC 740 and not accrue additional tax. Determination of the amount of any unrecognized deferred income tax liability on this temporary difference is not practicable because of the complexities of the hypothetical calculation. Based on the available sources of cash flows discussed above, we anticipate we will continue to have the ability to permanently reinvest these remaining amounts.
At December 31, 2024, cash and cash equivalents, including cash and cash equivalents included in current assets held for sale, were $1,584.7 million, a decrease of $0.2 million from $1,584.9 million at September 30, 2024.
Net cash provided by operating activities was $151.1 million for the three months ended December 31, 2024 as compared to $143.1 million for the three months ended December 31, 2023. The change was primarily attributable to an increase in net income of approximately $70.6 million and cash provided by changes in working capital of $30.5 million, partially offset by a decrease in adjustments for non-cash items of approximately $93.1 million. The sale of trade receivables to financial institutions included in operating cash flows increased $66.2 million during the three months ended December 31, 2024 compared to the three months ended December 31, 2023. We expect to continue to sell trade receivables in the future as long as the terms continue to remain favorable to us.
Net cash used in investing activities was $24.7 million for the three months ended December 31, 2024, as compared to $86.8 million for the three months ended December 31, 2023. The change was primarily attributable to cash repayments of $16.3 million on the revolving credit facility from the counterparty to our sale of our civil infrastructure construction business and a decrease in cash payments for capital expenditures of approximately $16.0 million.
Net cash used in financing activities was $121.3 million for the three months ended December 31, 2024 as compared to $126.3 million for the three months ended December 31, 2023. The decrease from prior year was primarily attributable to a $33.2 million decrease in stock repurchases under our stock repurchase program partially offset by higher distributions to noncontrolling interests of $24.8 million. Total borrowings under our Credit Agreement may vary during the period as we regularly draw and repay amounts to fund working capital.
Working Capital
Working capital, or current assets less current liabilities, increased $57.8 million, or 7.2%, to $859.8 million at December 31, 2024 from $802.0 million at September 30, 2024. Net accounts receivable and contract assets, net of contract liabilities, decreased to $3,144.0 million at December 31, 2024 from $3,301.4 million at September 30, 2024.
Days Sales Outstanding (DSO), which includes net accounts receivable and contract assets, net of contract liabilities, was 69 days at December 31, 2024 compared to 70 days at September 30, 2024.
In Note 4, Revenue Recognition, in the notes to our consolidated financial statements, a comparative analysis of the various components of accounts receivable is provided. Except for claims, substantially all contract assets are expected to be billed and collected within twelve months.
Contract assets related to claims are recorded only if it is probable that the claim will result in additional contract revenue and if the amount can be reliably estimated. In such cases, revenue is recorded only to the extent that contract costs relating to the claim have been incurred. Award fees in contract assets are accrued only when there is sufficient information to assess contract performance. On contracts that represent higher than normal risk or technical difficulty, award fees are generally deferred until an award fee letter is received.
Because our revenue depends to a great extent on billable labor hours, most of our charges are invoiced following the end of the month in which the hours were worked, the majority usually within 15 days. Other direct costs are normally billed along with labor hours. However, as opposed to salary costs, which are generally paid on either a bi-weekly or monthly basis, other direct costs are generally not paid until payment is received (in some cases in the form of advances) from the customers.
Debt
Debt consisted of the following:
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| Credit Agreement | $ | 1,444.9 | | | $ | 1,446.6 | |
| 2027 Senior Notes | 997.3 | | | 997.3 | |
| Other debt | 104.9 | | | 95.9 | |
| Total debt | 2,547.1 | | | 2,539.8 | |
| Less: Current portion of debt and short-term borrowings | (69.4) | | | (66.9) | |
| Less: Unamortized debt issuance costs | (21.7) | | | (22.6) | |
| Long-term debt | $ | 2,456.0 | | | $ | 2,450.3 | |
The following table presents, in millions, scheduled maturities of our debt as of December 31, 2024:
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| Fiscal Year | | |
| 2025 (nine months remaining) | | $ | 61.3 | |
| 2026 | | 31.0 | |
| 2027 | | 1,020.7 | |
| 2028 | | 14.4 | |
| 2029 | | 756.8 | |
| Thereafter | | 662.9 | |
| Total | | $ | 2,547.1 | |
Credit Agreement
On April 19, 2024, we entered into Amendment No. 14 to Syndicated Facility Agreement (as amended, modified or otherwise supplemented, the "Credit Agreement"), pursuant to which we obtained a new $1,500,000,000 revolving credit facility (the “New Revolving Credit Facility”), a new $$750,000,000 term loan A facility (the “New Term A Facility” and, together with the New Revolving Credit Facility, the “New Pro Rata Facilities”) and a new $700,000,000 term loan B facility (the “New Term B Facility” and, together with the New Pro Rata Facilities, the “New Credit Facilities”). The New Revolving Credit Facility and the New Term A Facility mature on April 19, 2029. The New Term B Facility matures on April 19, 2031. The New Term A Facility and the New Term B Facility were borrowed in full on April 19, 2024 in U.S. dollars. Loans under the New Revolving Credit Facility may be borrowed, and letters of credit thereunder may be issued, in U.S. dollars or in certain foreign currencies. The New Credit Facilities replace in full our existing revolving credit facility, term loan A facility and term loan B facility, and borrowings under the New Credit Facilities were
used to refinance in full our existing credit facilities and for general corporate purposes. The Credit Agreement permits us to designate certain of our subsidiaries as additional co-borrowers from time to time. Currently, there are no co-borrowers under the New Credit Facilities. On October 29, 2024, we entered into Amendment No. 15 to Syndicated Facility Agreement, pursuant to which we reduced the interest rate spread applicable to our New Term B Facility.
Borrowings under (a) the New Revolving Credit Facility (in U.S. dollars) and the New Term A Facility bear interest at a rate per annum equal to, at our option, (i) a Term SOFR rate (with a 0% floor and SOFR adjustment of 0.10%) or (ii) a base rate (with a 0% floor), in each case, plus an applicable margin of 1.225% in the case of the Term SOFR rate and 0.225% in the case of the base rate, and (b) the New Revolving Credit Facility in currencies other than U.S. dollars bear interest at a rate per annum equal to the applicable reference rate for such currency (including any related adjustments), plus an applicable margin of 1.225%. The applicable margin is subject, in each case, to adjustment based on our consolidated leverage ratio from time to time.
Borrowings under the New Term B Facility, after giving effect to Amendment No. 15 to Syndicated Facility Agreement, bear interest at a rate per annum equal to, at our option, (a) a Term SOFR rate (with a 0% floor and a SOFR adjustment of 0%) or (b) a base rate (with a 0% floor), in each case, plus an applicable margin of 1.75% in the case of the Term SOFR rate and 0.75% in the case of the base rate.
Certain of our material subsidiaries (the “Guarantors”) have guaranteed our obligations of the borrowers under the Credit Agreement, subject to certain exceptions. The borrowers’ obligations under the Credit Agreement are secured by a lien on substantially all of our assets and the Guarantors’ assets, subject to certain exceptions.
The Credit Agreement contains customary negative covenants that include, among other things, limitations on our ability and certain of our subsidiaries, subject to certain exceptions, to incur liens and debt, make investments, dispositions, and restricted payments, change the nature of our business, consummate mergers, consolidations and the sale of all or substantially all of our respective assets and transact with affiliates. We are also required to maintain a consolidated leverage ratio of less than or equal to 4.00 to 1.00 (subject to certain adjustments in connection with permitted acquisitions), tested on a quarterly basis (the “Financial Covenant”). The Financial Covenant does not apply to the New Term B Facility. As of December 31, 2024, we were in compliance with the covenants of the Credit Agreement.
The Credit Agreement contains customary affirmative covenants, including, among other things, compliance with applicable law, preservation of existence, maintenance of properties and of insurance, and keeping proper books and records. The Credit Agreement contains customary events of default, including, among other things, nonpayment of principal, interest or fees, cross-defaults to other debt, inaccuracies of representations and warranties, failure to perform covenants, events of bankruptcy and insolvency, change of control and unsatisfied judgments, subject in certain cases to notice and cure periods and other exceptions.
At December 31, 2024 and September 30, 2024, letters of credit totaled $4.4 million and $4.4 million, respectively, under our New Revolving Credit Facility. As of December 31, 2024 and September 30, 2024, we had $1,495.6 million and $1,495.6 million, respectively, available under our New Revolving Credit Facility.
2027 Senior Notes
On February 21, 2017, we completed a private placement offering of $1,000,000,000 aggregate principal amount of our unsecured 5.125% Senior Notes due 2027 (the “2027 Senior Notes”). On June 30, 2017, we completed an exchange offer to exchange the unregistered 2027 Senior Notes for registered notes, as well as related guarantees.
As of December 31, 2024, the estimated fair value of the 2027 Senior Notes was approximately $979.8 million. The fair value of the 2027 Senior Notes as of December 31, 2024 was derived by taking the mid-point of the trading prices from an observable market input (Level 2) in the secondary bond market and multiplying it by the outstanding balance of the 2027 Senior Notes. Interest is payable on the 2027 Senior Notes at a rate of 5.125% per annum. Interest on the 2027 Senior Notes is payable semi-annually on March 15 and September 15 of each year, commencing on September 15, 2017. The 2027 Senior Notes will mature on March 15, 2027.
At any time and from time to time prior to December 15, 2026, we may redeem all or part of the 2027 Senior Notes, at a redemption price equal to 100% of their principal amount, plus a “make whole” premium as of the redemption date, and accrued and unpaid interest to the redemption date. On or after December 15, 2026, we may redeem all or part of the 2027 Senior Notes at a redemption price equal to 100% of their principal amount, plus accrued and unpaid interest on the redemption date.
The indenture pursuant to which the 2027 Senior Notes were issued contains customary events of default, including, among other things, payment default, exchange default, failure to provide notices thereunder and provisions related to bankruptcy events. The indenture also contains customary negative covenants.
We were in compliance with the covenants relating to the 2027 Senior Notes as of December 31, 2024.
Other Debt and Other Items
Other debt consists primarily of obligations under capital leases and loans, and unsecured credit facilities. The unsecured credit facilities are primarily used for standby letters of credit issued in connection with general and professional liability insurance programs and for contract performance guarantees. At December 31, 2024 and September 30, 2024, these outstanding standby letters of credit totaled $930.2 million and $934.5 million, respectively. As of December 31, 2024, we had $390.9 million available under these unsecured credit facilities.
Effective Interest Rate
Our average effective interest rate on our total debt, including the effects of the interest rate swap agreements and interest rate cap agreements during the three months ended December 31, 2024 and 2023 was 5.2% and 5.4%, respectively.
Interest expense in the consolidated statements of operations included amortization of deferred debt issuance costs for the three months ended December 31, 2024 and 2023 of $1.4 million and $1.2 million, respectively.
Other Commitments
We enter into various joint venture arrangements to provide architectural, engineering, program management, construction management and operations and maintenance services. The ownership percentage of these joint ventures is typically representative of the work to be performed or the amount of risk assumed by each joint venture partner. Some of these joint ventures are considered variable interest entities. We have consolidated all joint ventures for which we have control. For all others, our portion of the earnings is recorded in equity in earnings of joint ventures. See Note 5, Joint Ventures and Variable Interest Entities, in the notes to our consolidated financial statements.
Other than normal property and equipment additions and replacements, expenditures to further the implementation of our various information technology systems, commitments under our incentive compensation programs, amounts we may expend to repurchase stock under our stock repurchase program and acquisitions from time to time and disposition costs, we currently do not have any significant capital expenditures or outlays planned except as described below. However, if we acquire additional businesses in the future or if we embark on other capital-intensive initiatives, additional working capital may be required.
Under our secured revolving credit facility and other facilities discussed in Other Debt and Other Items above, as of December 31, 2024, there was approximately $934.6 million, including both continuing and discontinued operations, outstanding under standby letters of credit primarily issued in connection with general and professional liability insurance programs and for contract performance guarantees. For those projects for which we have issued a performance guarantee, if the project subsequently fails to meet guaranteed performance standards, we may either incur significant additional costs or be held responsible for the costs incurred by the client to achieve the required performance standards.
We recognized on our balance sheet the funded status of our pension benefit plans, measured as the difference between the fair value of plan assets and the projected benefit obligation. At December 31, 2024, our defined benefit pension plans had an aggregate deficit (the excess of projected benefit obligations over the fair value of plan assets) of approximately $119.9 million. The total amounts of employer contributions paid for the three months ended December 31, 2024 were $2.9 million for U.S. plans and $6.1 million for non-U.S. plans. Funding requirements for each plan are determined based on the local laws of the country where such plan resides. In some countries, the funding requirements are mandatory while in other countries, they are discretionary. There is a required minimum contribution for one of our domestic plans; however, we may make additional discretionary contributions. In the future, such pension funding may increase or decrease depending on changes in the levels of interest rates, pension plan performance and other factors. In addition, we have collective bargaining agreements with unions that require us to contribute to various third-party multiemployer plans that we do not control or manage. For the year ended September 30, 2024, we contributed $2.5 million to multiemployer pension plans.
Contractual Obligations
Refer to our Annual Report on Form 10-K for the year ended September 30, 2024 for a discussion of our contractual obligations. There have been no changes, outside of the ordinary course of business, to these contractual obligations during the three months ended December 31, 2024.
Condensed Combined Financial Information
The 2027 Senior Notes are fully and unconditionally guaranteed on a joint and several basis by some of AECOM’s directly and indirectly 100% owned subsidiaries (the Subsidiary Guarantors). Accordingly, AECOM became subject to the requirements of Rule 3-10 of Regulation S-X, as amended, regarding financial statements of guarantors and issuers of guaranteed securities. Other than customary restrictions imposed by applicable statutes, there are no restrictions on the ability of the Subsidiary Guarantors to transfer funds to AECOM in the form of cash dividends, loans or advances.
The following tables present condensed combined summarized financial information for AECOM and the Subsidiary Guarantors. All intercompany balances and transactions are eliminated in the presentation of the combined financial statements. Amounts provided do not represent our total consolidated amounts as of December 31, 2024 and September 30, 2024, and for the three months ended December 31, 2024.
Condensed Combined Balance Sheets
Parent and Subsidiary Guarantors
(unaudited - in millions)
| | | | | | | | | | | |
| December 31, 2024 | | September 30, 2024 |
| Current assets | $ | 3,390.2 | | | $ | 3,405.2 | |
| Non-current assets | 3,001.5 | | | 3,033.6 | |
| Total assets | $ | 6,391.7 | | | $ | 6,438.8 | |
| | | |
| Current liabilities | $ | 2,807.0 | | | $ | 2,918.1 | |
| Non-current liabilities | 2,906.6 | | | 2,913.0 | |
| Total liabilities | 5,713.6 | | | 5,831.1 | |
| | | |
| Total stockholders’ equity | 678.1 | | | 607.7 | |
| Total liabilities and stockholders’ equity | $ | 6,391.7 | | | $ | 6,438.8 | |
Condensed Combined Statement of Operations
Parent and Subsidiary Guarantors
(unaudited - in millions)
| | | | | |
| For the three months ended |
| December 31, 2024 |
| Revenue | $ | 2,319.4 | |
| Cost of revenue | 2,134.6 | |
| Gross profit | 184.8 | |
| |
| Net income from continuing operations | 122.5 | |
| Net loss from discontinued operations | — | |
| Net income | $ | 122.5 | |
| |
| Net income attributable to AECOM | $ | 122.5 | |
New Accounting Pronouncements and Changes in Accounting
For information regarding recent accounting pronouncements, see Notes to Consolidated Financial Statements included in Part I, Item 1.
Critical Accounting Estimates
Our accounting policies often require management to make significant estimates and assumptions using information available at the time the estimates are made. Such estimates and assumptions significantly affect various reported amounts of assets, liabilities, revenues and expenses. If future experience differs significantly from these estimates and assumptions, our results of operations and financial condition could be affected.
The Notes to Consolidated Financial Statements in Part II, Item 8 of the Company’s Annual Report on Form 10-K for the year ended September 30, 2024 (the “2024 Form 10-K”), and “Critical Accounting Estimates” in Part II, Item 7 of the 2024 Form 10-K describe the significant accounting policies and estimates used in the preparation of our consolidated financial statements. We have not materially changed our estimation methodology since the 2024 Form 10-K.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Financial Market Risks
Financial Market Risks
We are exposed to market risk, primarily related to foreign currency exchange rates and interest rate exposure of our debt obligations that bear interest based on floating rates. We actively monitor these exposures. Our objective is to reduce, where we deem appropriate to do so, fluctuations in earnings and cash flows associated with changes in foreign exchange rates and interest rates. In order to accomplish this objective, we sometimes enter into derivative financial instruments, such as forward contracts and interest rate hedge contracts. It is our policy and practice to use derivative financial instruments only to the extent necessary to manage our exposures. We do not use derivative financial instruments for trading purposes.
Foreign Exchange Rates
We are exposed to foreign currency exchange rate risk resulting from our operations outside of the U.S. We use foreign currency forward contracts from time to time to mitigate foreign currency risk. We limit exposure to foreign currency fluctuations in most of our contracts through provisions that require client payments in currencies corresponding to the currency in which costs are incurred. As a result of this natural hedge, we generally do not need to hedge foreign currency cash flows for contract work performed. The functional currency of our significant foreign operations is the respective local currency.
Interest Rates
Our Credit Agreement and other debt obligations are subject to variable rate interest which could be adversely affected by an increase in interest rates. As of December 31, 2024 and September 30, 2024, we had $ million and $ million, respectively, in outstanding borrowings under our term credit agreements and revolving credit facility. Interest on amounts borrowed under these agreements is subject to adjustment based on specified levels of financial performance. The applicable margin that is added to the borrowing’s base rate can range from 0.125% to 1.00% and the applicable margin that is added to borrowings in the Term SOFR rate can range from 1.125% to 2.00%. For the three months ended December 31, 2024, our weighted average floating rate borrowings were $1,669.3 million, or $969.3 million excluding borrowings with effective fixed interest rates due to interest rate swap and interest rate cap agreements. If short-term floating interest rates had increased by 1.00%, our interest expense for the three months ended December 31, 2024 would have increased by $2.4 million. We invest our cash in a variety of financial instruments, consisting principally of money market securities or other highly liquid, short-term securities that are subject to minimal credit and market risk.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Based on management’s evaluation, with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), our CEO and CFO have concluded that our disclosure controls and procedures as defined in Rules 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act), were effective as of December 31, 2024 to ensure that information required to be disclosed by us in this Quarterly Report on Form 10-Q or submitted under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in
the Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the fiscal quarter ended December 31, 2024 identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 and 15d-15 under the Exchange Act that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
As a government contractor, we are subject to various laws and regulations that are more restrictive than those applicable to non-government contractors. Intense government scrutiny of contractors’ compliance with those laws and regulations through audits and investigations is inherent in government contracting; and from time to time, we receive inquiries, subpoenas, and similar demands related to our ongoing business with government entities. Violations can result in civil or criminal liability as well as suspension or debarment from eligibility for awards of new government contracts or option renewals.
We are involved in various investigations, claims and lawsuits in the normal conduct of our business. We are not always aware if we or our affiliates are under investigation or the status of such matters. Although the outcome of our legal proceedings cannot be predicted with certainty and no assurances can be provided, in the opinion of our management, based upon current information and discussions with counsel, with the exception of the matters noted in Note 15, Commitments and Contingencies, to the financial statements contained in this report to the extent stated therein, none of the investigations, claims and lawsuits in which we are involved is expected to have a material adverse effect on our consolidated financial position, results of operations, cash flows or our ability to conduct business. See Note 15, Commitments and Contingencies, to the financial statements contained in this report for a discussion of certain matters to which we are a party. The information set forth in such note is incorporated by reference into this Item 1. From time to time, we establish reserves for litigation when we consider it probable that a loss will occur.
Item 1A. Risk Factors
There have been no material changes to the risk factors as disclosed in Part I, Item 1A, Risk Factors in our most recent Annual Report on Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Stock Repurchase Program
The following table shows the repurchase activity for each of the three months ended December 31, 2024:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Fiscal Period | | Total Number
of Shares
Purchased | | Average Price
Paid Per Share | | Total Number of
Shares Purchased
as Part of Publicly
Announced Plans
or Programs | | Maximum Approximate Dollar Value that May Yet Be Purchased Under the Plans or Programs(1) |
| | | | | | | | |
| October 1 - 31, 2024 | | 96,327 | | $ | 104.61 | | | 96,327 | | $ | 550,400,000 | |
| November 1 - 30, 2024 | | 9,051 | | $ | 112.45 | | | 9,051 | | $ | 999,000,000 | |
| December 1 - 31, 2024 | | 216,919 | | $ | 111.44 | | | 216,919 | | $ | 974,800,000 | |
| Total | | 322,297 | | | | 322,297 | | |
_____________________________________________________________
(1)On November 14, 2024, the Board approved an increase in the Company’s repurchase authorization up to an aggregate amount of $1.0 billion with no expiration date. Stock repurchases can be made through open market purchases or other methods, including pursuant to a Rule 10b5-1 plan.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosure
None.
Item 5. Other Information
During the fiscal quarter ended December 31, 2024, no director or officer of the Company or a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement as each term is defined in Item 408(a) of Regulation S-K.
Item 6. Exhibits
The following documents are filed as Exhibits to the Report:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Incorporated by Reference
(Exchange Act Filings Located
at File No. 0-52423) | | |
Exhibit
Numbers | | Description | | Form | | Exhibit | | Filing
Date | | Filed
Herewith |
| | | | | | | | | | |
| 3.1 | | | | Form 10-K | | 3.1 | | 11/21/2011 | | |
| | | | | | | | | | |
| 3.2 | | | | Form S-4 | | 3.2 | | 8/1/2014 | | |
| | | | | | | | | | |
| 3.3 | | | | Form 10-K | | 3.3 | | 11/17/2014 | | |
| | | | | | | | | | |
| 3.4 | | | | Form 8-K | | 3.1 | | 1/9/2015 | | |
| | | | | | | | | | |
| 3.5 | | | | Form 8-K | | 3.1 | | 3/3/2017 | | |
| | | | | | | | | | |
| 3.6 | | | | Form 8-K | | 3.1 | | 5/19/2023 | | |
| | | | | | | | | | |
| 4.1 | | | | Form 10-K | | 4.2 | | 11/19/2024 | | |
| | | | | | | | | | |
| 4.2 | | | | | | | | | | X |
| | | | | | | | | | |
| 10.1#* | | | | | | | | | | X |
| | | | | | | | | | |
| 10.2# | | | | | | | | | | X |
| | | | | | | | | | |
| 10.3# | | | | | | | | | | X |
| | | | | | | | | | |
| 31.1 | | | | | | | | | | X |
| | | | | | | | | | |
| 31.2 | | | | | | | | | | X |
| | | | | | | | | | |
| 32 | | | | | | | | | | X |
| | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 101 | | The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2024 were formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements of Comprehensive Income, (iv) Consolidated Statements of Stockholders’ Equity, (v) Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags. | | | | | | | | X |
| | | | | | | | | | |
| 104 | | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended December 31, 2024, formatted in Inline XBRL | | | | | | | | X |
# Management contract or compensatory plan or arrangement
* Portions of the exhibit have been omitted as confidential
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| | | | | | | | |
| AECOM |
| |
| | |
Date: February 4, 2025 | By: | /S/ GAURAV KAPOOR |
| | Gaurav Kapoor |
| | Chief Financial Officer |
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