ACM

AECOM 10-Q Filing Summary: Quarter Ended April 3, 2026

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended April 3, 2026 (Q2 Fiscal 2026) and the six months ended March 31, 2026. AECOM is a global provider of professional infrastructure consulting and advisory services, organized into three reportable segments: Americas, International, and AECOM Capital (ACAP). The company has exited substantially all self-perform at-risk construction businesses, which are now reported as discontinued operations.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue: Q2 revenue increased 0.8% year-over-year, driven by growth in Transportation and Water/Environment end markets. YTD revenue decreased 2.0%, primarily due to a $253.2 million reduction in pass-through revenues in the Americas segment.
• Profitability: Gross profit margin improved to 7.8% in Q2 and 7.6% YTD, up from 7.7% and 7.2% respectively in the prior year, aided by restructuring benefits and higher-margin advisory services.
• Restructuring Costs: The company incurred $13.6 million in Q2 and $41.5 million YTD 2026 in restructuring and acquisition costs, compared to none in the prior year periods. These costs relate to organizational optimization and AI deployment.
• Discontinued Operations: Net loss from discontinued operations was $4.2 million in Q2 and $70.1 million YTD 2026. The YTD loss increased significantly due to a $61.8 million non-cash loss related to revised recovery estimates on a Department of Energy project.
• Debt Refinancing: On March 10, 2026, AECOM amended its credit agreement, extending maturities to 2031 and refinancing existing facilities. The company also issued $1.2 billion in 6.000% Senior Notes due 2033 in July 2025 to redeem 2027 notes.

Guidance, Outlook, and Risks

• Capital Allocation: The Board approved a stock repurchase authorization increase to $1.0 billion on February 4, 2026. As of March 31, 2026, approximately $884 million remained available. The company intends to deploy cash toward dividends and repurchases.
• Outlook: Management expects continued growth in infrastructure investment driven by government spending (e.g., Infrastructure Investment and Jobs Act) and defense spending. The company anticipates spending approximately $36 million on restructuring costs for the remainder of fiscal 2026.
• Tax Matters: The effective tax rate for the six months ended March 31, 2026, was 15.7%, impacted by a $54.7 million tax benefit from legal entity restructuring and a $34.4 million reserve for uncertain tax positions.
• Risks: Key risks include exposure to government funding changes, potential losses on fixed-price contracts, currency fluctuations, and the resolution of ongoing legal claims (specifically the DOE project and refinery turnaround project).

Investor Verification Checklist

• Discontinued Operations Impact: Verify the final resolution status of the DOE deactivation project and the refinery turnaround appeal, as these drove significant non-cash losses in the current period.
• Working Capital Trends: Monitor Days Sales Outstanding (DSO), which increased to 83 days from 74 days, and the $282 million increase in cash used by working capital changes YTD.
• Debt Covenants: Confirm continued compliance with the consolidated leverage ratio covenant (max 4.00:1.00) under the amended Credit Agreement.
• Pass-Through Revenue Volatility: Assess the sustainability of revenue growth excluding pass-through costs, which declined significantly in the Americas segment YTD.
• Tax Reserve Adequacy: Review the $34.4 million reserve for uncertain tax positions and the potential for future adjustments based on IRS audit outcomes.