AECOM FY2021 Form 10-K Summary
Reporting period: Fiscal year ended September 30, 2021; the filing is an annual report, not a standalone Q4 filing. AECOM provides infrastructure consulting, design and program/construction management services, with Americas and International operations and a smaller real-estate investment segment.
Financial performance and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $13.341 billion | $13.240 billion |
| Gross profit / margin | $798.4 million / 6.0% | $709.6 million / 5.4% |
| Operating income / margin | $629.6 million / 4.7% | $381.5 million / 2.9% |
| Income from continuing operations attributable to AECOM | $294.7 million | $170.4 million |
| Net income (loss) attributable to AECOM, including discontinued operations | $173.2 million | $(186.4) million |
| Diluted EPS | $1.16 | $(1.16) |
| Operating cash flow | $704.7 million | $329.6 million |
Revenue rose 0.8%, while gross profit increased 12.5%. The improvement in reported net income also reflects a substantially smaller loss from discontinued operations; FY2021 included $116.8 million of discontinued-operation losses versus $340.6 million in FY2020. Fourth-quarter FY2021 revenue was $3.354 billion and net income attributable to AECOM was $96.2 million, or diluted EPS of $0.66.
Cash and cash equivalents were $1.235 billion at year-end, including cash held for sale; continuing-operations cash was $1.229 billion. Total debt was $2.236 billion, up from $2.085 billion, and working capital was $651.8 million, down from $1.440 billion. The company reported $1.145 billion available under its revolving credit facility and a 2.4 consolidated leverage ratio; it was in compliance with credit covenants. Net cash used in investing activities was $421.1 million, and net cash used in financing activities was $872.5 million.
FY2021 interest expense was $238.4 million, including a $117.5 million premium to redeem the remaining 5.875% senior notes due 2024. AECOM repurchased $867.1 million of common stock during the year. DSO improved to 76 days from 93 days.
Business and segment developments
- Americas: Revenue increased 0.9% to $10.226 billion; gross margin improved to 6.2% from 5.7%.
- International: Revenue increased 0.4% to $3.113 billion; gross margin improved to 5.3% from 3.9%.
- AECOM Capital: Revenue was $2.0 million, down from $6.8 million; equity in joint-venture earnings also declined.
- Government clients generated 43% of revenue, compared with 42% in FY2020. No single client represented 10% or more of revenue.
- Backlog was $38.6 billion, down 6.3% from $41.2 billion, primarily reflecting lower construction-management backlog. Remaining unsatisfied performance obligations were $18.7 billion; the filing cautions that backlog may be reduced, delayed or canceled.
Outlook, risks and unusual items
- Management said proposed U.S. infrastructure initiatives could benefit the business if enacted, but gave no quantified revenue or earnings guidance. It cited COVID-related uncertainty, state and local budget shortfalls, and project delays in the U.K., Middle East and Southeast Asia.
- AECOM had substantially exited self-perform at-risk construction and expected to divest remaining non-core oil and gas markets. It also said it had substantially completed exits from 30 countries.
- The filing contains inconsistent FY2022 restructuring-cost estimates: approximately $30–$40 million in the liquidity discussion, versus $20–$30 million in the MD&A outlook and Item 9B. The expected cash costs are also stated as $20–$30 million in the latter disclosures.
- Key risks include fixed-price and guaranteed-maximum-price contract losses, government funding and termination decisions, project claims and collection delays, joint-venture and real-estate guarantees, cybersecurity, foreign-exchange and variable-rate debt exposure, and environmental or professional-liability claims.
- Notable contingencies include disputed DOE project claims (AECOM is pursuing recovery and cannot assure success), a New York environmental-permit matter whose potential loss cannot be estimated, and retained refinery-project litigation with an undetermined resolution and loss range.
- The defined-benefit pension deficit was approximately $345.5 million, down from $428.4 million; management expected FY2022 contributions of $24.8 million to international plans and $11.4 million to U.S. plans.
- Management announced a 2030 net-zero target covering Scope 1, 2 and 3 emissions. The auditor gave unqualified opinions on the financial statements and internal control over financial reporting.
Important facts for investors to verify
- Reconcile the FY2022 restructuring estimate, which differs within the filing.
- Assess how much of operating cash flow is repeatable: divestitures affected year-over-year comparisons, and receivables sales provided a $90.2 million net benefit in FY2021.
- Track backlog conversion and margins, particularly after the 6.3% backlog decline and amid ongoing project delays.
- Monitor debt, interest expense and covenant headroom following refinancing and the costly redemption of the 2024 notes.
- Follow the DOE claims and other litigation, as well as fixed-price contract estimates and the approximately $140 million of significant claims recorded in contract assets and other non-current assets.