AECOM Technology (NYSE: ACM) reported Q3 EPS of $0.56, $0.07 better than the analyst estimate of $0.49. Revenue for the quarter came in at $3.2 billion versus the consensus estimate of $3.14 billion.

Third Quarter and Year-to-Date Fiscal 2020 Accomplishments

• Revenue in the third quarter was $3.2 billion, and net service revenue2 was unchanged compared to the prior year on an organic basis3, reflecting 2% organic growth in the Americas segment, growth in the Asia-Pacific region and a decline in the Europe, Middle East and Africa (EMEA) region.
• Operating income in the third quarter was $119 million, net income was $91 million and diluted earnings per share was $0.56; on an adjusted1 basis, diluted earnings per share was $0.55.
• Third quarter adjusted EBITDA1 increased by 18% over the prior year to $187 million, marking the seventh consecutive quarter of double-digit adjusted EBITDA growth; year-to-date adjusted EBITDA of $542 million increased by 20% over the prior year.
• The segment adjusted operating margin1, 4 on NSR2 increased by 250 basis points over the prior year to 13.2% in the third quarter and was highlighted by 340 basis points of margin expansion in the Americas segment to 17.9%, which set a new record for the business and remains at an industry-leading level; this strong performance underscores the Company’s conviction in its ability to achieve its long-term margin target of 15%+.
• Operating cash flow in the third quarter was $186 million and free cash flow5 was $272 million, which was consistent with expectations and reflected strong collection trends as the cash generative nature of the Company’s business remains firmly intact; free cash flow included the receipt of $122 million as a result of a previously announced favorable net working capital purchase price adjustment associated with the sale of the Management Services business.
• Third quarter wins of $3.2 billion included a greater than 1 book-to-burn ratio7 in the Company’s design businesses and resulted in 16%6 backlog growth to $41.5 billion, which remains at near-record levels; contracted backlog increased by 13% and set a new record.
• The Company increased its full year adjusted EBITDA guidance to between $720 million and $740 million, or 11% year-over-year growth at the mid-point; this guidance includes an approximately $20 million headwind from changes in foreign exchange rates as compared to the Company’s initial guidance for the year.

Increasing Fiscal 2020 Financial Guidance

• AECOM is raising its full year adjusted EBITDA1 guidance to $720 - $740 million, which would reflect 11% growth over the prior year at the mid-point of the range and a second consecutive year of double-digit adjusted EBITDA growth for the Professional Services business.
• This guidance includes an expected negative $20 million full year impact due to changes in foreign exchange rates as compared to initial guidance.
• The Company continues to expect approximately $10 million of AECOM Capital earnings in the full year; year-to-date, the Company has realized approximately $2 million.
• The Company also reiterated its full year free cash flow5 guidance of between $100 million and $300 million.
• Company’s historical second half-weighted phasing of its cash generation.
• Included in the Company’s free cash flow guidance is the receipt of $122 million in the fiscal third quarter in connection with a previously announced favorable net working capital purchase price adjustment associated with the sale of the Management Services business.

“I am extremely proud of the organization’s efforts amidst unprecedented challenges and as we further our transformation to an industry-leading Professional Services business,” said Michael S. Burke, AECOM’s chairman and chief executive officer. “We have accomplished much over the past several years, and the company is better positioned than ever to deliver on its vision to build a better world.”

“Our third quarter performance is a testament to our industry-leading teams and the dedication of our professionals who have delivered through unprecedented challenges,” said W. Troy Rudd, AECOM’s chief financial officer. “Our commitment to creating value is underscored by 250 basis points of margin expansion in the quarter, a seventh consecutive quarter of double-digit adjusted EBITDA growth and our stronger balance sheet. As a result, we are raising our adjusted EBITDA guidance range and now expect to deliver 11% year-over-year growth at the mid-point. Our demonstrated resiliency this year instills a great deal of confidence in our ability to continue delivering for our clients, generating strong returns for our shareholders and positions us to deliver increased profitability in fiscal 2021.”

“In the face of great challenges, our people have achieved tremendous accomplishments thus far in fiscal 2020, including our quick mobilization to support COVID-related disaster resilience activities and agility to provide support and business continuity for our clients,” said Lara Poloni, AECOM’s chief executive of its EMEA business. “As a Professional Services business, our people will continue to be our greatest competitive advantage, and I am confident that in partnership with Troy and our great leadership team we will continue to build momentum and gain share in the marketplace.”

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