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Item 7. Management’s Discussion and Analysis

2024-11-19 compared with 2023-11-15 · 134 added, 111 removed, 498 unchanged (33% of the section changed)

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ability to continue payment of dividends;

exposure to political and economic risks in different countries, including tariffs;

exposure to political and economic risks in different countries, including tariffs, geopolitical events, and conflicts;

currency exchange rate and interest fluctuations;

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For clarity of presentation, we present all periods as if the year ended on September 30.

We refer to the fiscal year ended September 30, 2022 as “fiscal 2022” and the fiscal year ended September 30, 2023 as “fiscal 2023.” Fiscal years 2023, 2022, and 2021 each contained 52, 52, and 52 weeks, respectively, and ended on September 29, September 30, and October 1, respectively.

We refer to the fiscal year ended September 30, 2023 as “fiscal 2023” and the fiscal year ended September 30, 2024 as “fiscal 2024.” Fiscal years 2024, 2023, and 2022 each contained 52, 52, and 52 weeks, respectively, and ended on September 27, September 29, and September 30, respectively.

In this section, we discuss the results of our operations for the year ended September 30, 2024 compared to the year ended September 30, 2023.

For a discussion on the year ended September 30, 2023 compared to the year ended September 30, 2022, please refer to Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended September 30, 2023.

We are a leading global provider of professional infrastructure consulting 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.

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.

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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.

Planning, 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.

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, 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.

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):

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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.

In September 2021, the Board approved an increase in our stock repurchase authorization to $1.0 billion.

At September 30, 2023, we have approximately $220 million remaining of the Board’s repurchase authorization.

We intend to deploy future available cash towards dividends and stock repurchases consistent with our return driven capital allocation policy.

We have exited substantially all of our self-perform at-risk construction businesses and divested our remaining non-core oil and gas businesses in January 2022.

At September 30, 2024, we had approximately $560.5 million remaining of the Board’s 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.

In March 2022, we substantially completed our exit of all business operations in Russia consistent with our announcement on March 7, 2022.

In fiscal year 2023, we initiated a process to explore strategic options for the AECOM Capital business.

This process is consistent with our focus on our professional services business.

AECOM Capital will continue to support AECOM’s existing investment vehicles and investments in a manner consistent with their current obligations.

We initiated a project-by-project review of the existing investment portfolio, including an analysis of the incremental cash requirements that might be required to carry the investments on our balance sheet if current market conditions persist.

We determined that the incremental investments to these assets did not meet the objectives of our capital allocation policy.

We reflected this change in strategy and the expected acceleration of these investment exits as an impairment charge of $307.0 million in the third quarter of fiscal 2023.

This impairment did not relate to investments in respect of which affiliates of AECOM Capital provide advisory services or manage third party capital.

We expect to incur restructuring costs of approximately $50 million to $70 million in fiscal 2024, primarily related to ongoing actions that are expected to deliver continued margin improvement and efficiencies.

Our estimated restructuring costs include the ongoing optimization of our office real estate portfolio and exit of certain countries in Southeast Asia, subject to applicable laws, as part of our ongoing plan to evaluate our geographic exposure and reduce our risk profile.

There were no acquisitions consummated during the years ended September 30, 2023, 2022 and 2021.

All of our acquisitions have been accounted for as business combinations and the results of operations of the acquired companies have been included in our consolidated results since the dates of the acquisitions.

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.

There was one business acquisition consummated during the year ended September 30, 2024, and there were no acquisitions consummated during the years ended September 30, 2023 and 2022.

All of our business acquisitions have been accounted for as business combinations and the results of operations of the acquired companies have been included in our consolidated results since the dates of the acquisitions.

Components of Income and Expense

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Cost of revenue

Equity in earnings of joint ventures

Equity in earnings (losses) of joint ventures

General and administrative expenses

Restructuring cost

Gain on disposal activities

Impairment of long-lived assets

Restructuring costs

Income from operations

We generate revenue primarily by providing planning, consulting, architectural and engineering design, construction and program management services to public and private clients around the world.

We generate revenue primarily by providing planning, consulting, advisory, architectural and engineering design, construction management and program management services to public and private clients around the world.

Our revenue consists of both services provided by our employees and pass-through revenues from subcontractors and other direct costs.

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General and administrative expenses include corporate expenses, including personnel, occupancy, and administrative expenses.

Restructuring Expenses

Restructuring expenses are comprised of personnel and other costs, real estate costs, and costs associated with the exit of our Russia-related businesses primarily related to actions that are expected to deliver continued margin improvements and efficiencies.

Restructuring Costs

Restructuring costs are comprised of personnel and other costs, real estate costs, and costs associated with business exits primarily related to actions that are expected to deliver continued margin expansion and operating efficiencies.

Geographic Information

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If the discount rate was reduced by 25 basis points, plan liabilities would increase by approximately $30.7 million.

If the discount rate and return on plan assets were reduced by 25 basis points, plan expense would increase by approximately $0.3 million and increase by approximately $2.7 million, respectively.

If the discount rate and return on plan assets were reduced by 25 basis points, plan expense would decrease by approximately $0.4 million and increase by approximately $2.8 million, respectively.

If inflation increased by 25 basis points, plan liabilities in the United Kingdom would increase by approximately $15.1 million and plan expense would increase by approximately $0.9 million.

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In assessing a plan’s asset allocation strategy, we and the plan trustees consider factors such as the structure of the plan’s liabilities, the plan’s funded status, and the impact of the asset allocation to the volatility of the plan’s funded status, so that the overall risk level resulting from our defined benefit plans is appropriate within our risk management strategy.

Between September 30, 2022 and September 30, 2023, the aggregate worldwide pension deficit decreased from $204.4 million to $165.3 million due to increased discount rates.

Between September 30, 2023 and September 30, 2024, the aggregate worldwide pension deficit decreased from $165.3 million to $134.0 million due to an increase in the actual return on plan assets partially offset by decreased discount rates.

If the various plans do not experience future investment gains to reduce this shortfall, the deficit will be reduced by additional contributions.

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Cost of revenue

Equity in (losses) earnings of joint ventures

Equity in earnings (losses) of joint ventures

General and administrative expenses

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Cost of revenue

Equity in (losses) earnings of joint ventures

Equity in earnings (losses) of joint ventures

General and administrative expenses

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Our revenue for the year ended September 30, 2024 increased $1,727.0 million, or 12.0%, to $16,105.5 million as compared to $14,378.5 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, and drinking water scarcity.

Our Transportation end market has been benefitting from incremental surface and transit investments across the globe, while our Environment end market has been benefiting from infrastructure that requires permitting and compliance, 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.

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Pass-through revenue as a percentage of total revenue was 56% and 53% during the year ended September 30, 2024 and 2023, respectively.

Cost of Revenue

Our cost of revenue increased to $15,021.2 million for the year ended September 30, 2024 compared to $13,433.0 million for the corresponding period last year, an increase of $1,588.2 million, or 11.8%.

Substantially all of the change in our cost of revenue for the year ended September 30, 2024 occurred in our Americas and International reportable segments, which is discussed in more detail below.

Our gross profit for the year ended September 30, 2024 increased $138.8 million, or 14.7%, to $1,084.3 million as compared to $945.5 million for the corresponding period last year.

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Gross profit changes were due to the reasons noted in Americas and International reportable segments below.

Equity in (Losses) Earnings of Joint Ventures

Our equity in losses of joint ventures for the year ended September 30, 2023 was $279.4 million as compared to equity in earnings of $53.6 million in the corresponding period last year.

The decrease in earnings of joint ventures for the year ended September 30, 2023 compared to the same period in the prior year was primarily due to impairment losses recorded in our AECOM Capital segment during the third quarter of fiscal 2023.

These impairments were primarily as a result of a project-by-project review of the existing investment portfolio, the expected acceleration of exits from certain investments caused by a change in strategy, and volatility in the commercial real estate market caused by higher interest rates and lack of liquidity.

Equity in Earnings (Losses) of Joint Ventures

Our equity in earnings of joint ventures for the year ended September 30, 2024 was $2.1 million as compared to equity in loss of $279.4 million in the corresponding period last year.

The increase in equity in earnings of joint ventures for the year ended September 30, 2024 compared to the same period in the prior year was primarily due to impairment losses recorded by our AECOM Capital segment in fiscal 2023 that did not repeat to the same extent in fiscal 2024.

General and Administrative Expenses

Our general and administrative expenses for the year ended September 30, 2024 increased $6.5 million, or 4.2%, to $160.1 million as compared to $153.6 million for the corresponding period last year.

For the years ended September 30, 2023 and 2022, general and administrative expenses as a percentage of revenue remained unchanged at 1.1%.

For the year ended September 30, 2024, general and administrative expenses as a percentage of revenue decreased to 1.0% from 1.1% for the corresponding period last year.

Restructuring Costs

Restructuring expenses are comprised of personnel costs, real estate costs, and costs associated with business exits.

During fiscal year ended September 30, 2023, we incurred total restructuring expenses of $188.4 million primarily related to actions taken to align our real estate portfolio with our employee flexibility initiatives and costs incurred in preparation for the exit of certain countries in Southeast Asia.

During fiscal year ended September 30, 2022, we incurred restructuring expenses of $107.5 million, primarily related to costs associated with exit of Russia-related businesses and management actions to deliver margin improvement and efficiencies that result in a more agile organization.

Restructuring costs are comprised of personnel costs, real estate costs, and costs associated with business exits.

During fiscal year ended September 30, 2024, we incurred total restructuring expenses of $98.9 million primarily related to costs incurred to continue to align our real estate portfolio with our employee flexibility initiatives, continue our exit of certain countries in Southeast Asia, drive support function efficiency, and reduce our risk profile.

During fiscal year ended September 30, 2023, we incurred total restructuring expenses of $188.4 million, primarily related to actions taken to align our real estate portfolio with our employee flexibility initiatives and costs incurred in preparation for the exit of specific countries in Southeast Asia.

Our other income for the year ended September 30, 2024 increased to $17.6 million from $8.3 million for the corresponding period last year.

The increase in other income for the year ended September 30, 2024 was primarily due to the increase in fair value of our investments measured at fair value.

Interest Income

Our interest income for the year ended September 30, 2024 increased to $58.6 million from $40.3 million for the corresponding period last year.

The increase in interest income for the year ended September 30, 2023 was primarily due to an increase in interest rates on our interest-bearing assets.

The increase in interest income for the year ended September 30, 2024 was primarily due to an increase in our interest-bearing assets.

Interest Expense

Our interest expense for the year ended September 30, 2024 was $185.4 million as compared to $159.3 million for the corresponding period last year.

The increase in interest expense for the year ended September 30, 2023 was primarily due to an increase in interest rates on the variable component of our debt.

The increase in interest expense for the year ended September 30, 2024 was primarily due to an increase in our debt as well as $7.6 million in financing charges recorded in fiscal 2024 related to the New Credit Facilities, defined below.

Income Tax Expense

Our income tax expense for the year ended September 30, 2024 was $152.9 million compared to $56.1 million for the year ended September 30, 2023.

The decrease in tax expense for the current period compared to the corresponding period last year was due primarily to a tax benefit of $65.0 million related to the AECOM Capital impairment charge, including an increase in valuation allowances of $21.0 million for the portion of the charge that is not expected to be realized, and a net tax benefit recorded in fiscal 2022 related to changes in valuation allowances providing a tax benefit of $21.9 million and foreign uncertain tax provisions generating a tax expense of $16.1 million.

During the first quarter of fiscal 2022, valuation allowances in the amount of $21.9 million primarily related to net operating losses in certain foreign entities were released due to sufficient positive evidence.

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 $504.8 million, an increase in tax benefit of $29.2 million related to changes in valuation allowances, an increase in tax expense of $20.2 million related to the sale of ACAP investments, a decrease in tax expense of $15.6 million related to foreign residual income, an increase in tax expense of $10.0 million related to nondeductible costs, and an increase in tax expense of $9.1 million related to uncertain tax positions.

During fiscal 2024, we recorded an increase in tax benefit of $38.4 million related to state income taxes due to apportionment factor changes for fiscal years 2016 through 2023.

This benefit was partially offset by an increase in tax expense of $23.0 million related to uncertain tax positions.

During fiscal 2024, we sold certain ACAP investments and recorded a reduction in valuation allowances of $21.0 million and a reduction in deferred tax assets of $20.2 million.

In addition, we recorded a valuation allowance of $9.3 million related to the remaining ACAP investments.

During fiscal 2024, we approved a tax planning strategy and restructured certain operations in Canada which resulted in a release of a valuation allowance related to net operating losses and other deferred tax assets of $11.7 million.

We are now forecasting the utilization of the net operating losses within the foreseeable future.

The positive evidence was evaluated against any negative evidence to determine the valuation allowance was no longer needed.

During fiscal 2024, we settled the 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.

During fiscal 2023, valuation allowances in the amount of $21.0 million related to the ACAP impairment charge were established for the portion of the charge that is not expected to be realized.

During fiscal 2022, valuation allowances in the amount of $21.9 million primarily related to net operating losses in certain foreign entities were released due to sufficient positive evidence.

The positive evidence included a realignment of our global transfer pricing methodology which resulted in forecasting the utilization of the net operating losses within the foreseeable future.

The OECD has introduced the Base Erosion and Profit Shifting (BEPS) 2.0 framework which includes Pillar 2.

Pillar 2 introduces a 15% global minimum tax for large multinational enterprises in each of the jurisdictions that they operate.

Many countries have enacted the Pillar 2 global minimum tax regime including some countries where we operate.

The implementation of Pillar 2 will affect our financial statements beginning October 1, 2024.

Based on our current analysis, we do not expect the implementation of Pillar 2 to have a material impact on our financial statements.

The company is actively monitoring developments related to Pillar 2 and will continue to assess the potential impact.

We are currently under tax audit in several jurisdictions including the U.S.

and believe the outcomes which are reasonably possible within the next twelve months, including lapses in statutes of limitations, could result in future adjustments, but will not result in a material change in the liability for uncertain tax positions.

where our federal income tax returns for fiscal 2017 through 2020 are being examined by the IRS.

Disputes can arise with tax authorities involving issues related to the timing of deductions, the calculation and use of credits, and the taxation of income in various tax jurisdictions because of differing interpretations or application of tax laws, regulations, and relevant facts.

The IRS is currently auditing certain tax credits and the methodology for calculating the credits.

While we have historically been able to sustain the credits in previous audit cycles without adjustment, we believe it’s reasonably possible there could be an adjustment to the liability for uncertain tax positions within the next twelve months related to this matter.

However, given the early stages of the audit of these credits, we are not able to reasonably estimate the range of potential outcomes.

We regularly integrate and consolidate our business operations and legal entity structure, and such internal initiatives could impact the assessment of uncertain tax positions, indefinite reinvestment assertions and the realizability of deferred tax assets.

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As a result of these strategic actions, the self-perform at-risk construction businesses were classified as discontinued operations.

That classification was applied retrospectively for all periods presented.

Net loss from discontinued operations was $57.2 million for the year ended September 30, 2023 and net loss was $79.9 million for the year ended September 30, 2022, a decrease of $22.7 million.

The decrease in net loss from discontinued operations for the year ended September 30, 2023 was primarily due to losses related to revisions of estimates for our working capital obligations to be paid and contingent consideration receivable related to the civil infrastructure business recorded in the first half of fiscal 2022 that did not recur to the same extent in fiscal 2023.

Net loss from discontinued operations was $105.0 million for the year ended September 30, 2024 and net loss was $57.2 million for the year ended September 30, 2023, an increase of $47.8 million.

The increase in net loss from discontinued operations for the year ended September 30, 2024 was primarily due to revisions of estimated contingent consideration related to the sale of our civil infrastructure construction business that did not occur to the same extent in fiscal 2023.

Net Income Attributable to AECOM

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Revenue for our Americas segment for the year ended September 30, 2024 increased $1,510.0 million, or 13.8%, to $12,485.7 million as compared to $10,975.7 million for the corresponding period last year.

The increase in revenue for the year ended September 30, 2023 was primarily driven by increased project activity in the Americas design business including growth in the Water, Transportation, and Environment markets.

The increase in revenue for the year ended September 30, 2024 was driven by organic growth and an increase in pass-through revenues of $1,224.4 million due to a higher proportion of contracts requiring us to subcontract work on behalf of our clients and revenue from increased project activity in the Americas, including growth in our Transportation end market of $224.2 million, or 11.2%, and Water and Environment end markets of $194.8 million, or 10.1%, 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 year ended September 30, 2024 increased by $1,450.6 million, or 14.1%, to $11,726.6 million compared to $10,276.0 million for the corresponding period last year.

The increase in cost of revenue for the year ended September 30, 2024 was consistent with the increases in revenue.

The increase in cost of revenue for the year ended September 30, 2024 was due to an increase in subcontractor and other direct costs of $1,224.4 million due to a higher proportion of contracts requiring us to subcontract work on behalf of our clients, with the balance of the increases due to higher labor volume compared to the same periods in the prior year.

Gross profit for our Americas segment for the year ended September 30, 2024 increased $59.4 million, or 8.5%, to $759.1 million as compared to $699.7 million for the corresponding period last year.

Gross profit, as a percentage of revenue, remained unchanged at 6.4% for the years ended September 30, 2023 and 2022.

The increase in gross profit for the year ended September 30, 2023 was primarily due to revenue growth and execution efficiency.

In addition, underlying revenue, excluding pass-through revenues, increased.

As a percentage of revenue, gross profit decreased to 6.1% of revenue for the year ended September 30, 2024 from 6.4% in the corresponding period last year.

The increase in gross profit for the year ended September 30, 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.

The decrease in gross profit as a percentage of revenue was due to an increase in pass-through revenues for the year ended September 30, 2024 as compared to last year.

International

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Revenue for our International segment for the year ended September 30, 2024 increased $216.3 million, or 6.4%, to $3,618.4 million as compared to $3,402.1 million for the corresponding period last year.

The increase in revenue for the year ended September 30, 2023 was primarily due to increased growth in the United Kingdom, Middle East and Australia compared to the prior year, which more than offset the impact of the stronger U.S.

dollar as compared to the functional currencies of our foreign operations.

Growth was led by the Transportation, Facilities, and Water markets.

The increase in revenue for the year ended September 30, 2024 was primarily due to growth in Europe of $104.5 million and the Middle East of $133.3 million compared to the corresponding period last year.

Growth was led by our Facilities, Water and Environment, and Transportation end markets, which increased $119.2 million, or 9.0%, $52.7 million, or 7.3%, and $31.5 million, or 2.5%, respectively, 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 International segment for the year ended September 30, 2024 increased $137.6 million, or 4.4%, to $3,294.6 million as compared to $3,157.0 million for the corresponding period last year.

The increase in cost of revenue for the year ended September 30, 2024 was consistent with the increase in revenue and was due to increases in subcontractor and other direct costs of $40.4 million and labor expenses of $97.1 million.

Gross profit for our International segment for the year ended September 30, 2024 increased $78.7 million, or 32.1%, to $323.8 million as compared to $245.1 million for the corresponding period last year.

As a percentage of revenue, gross profit increased to 8.9% of revenue for the year ended September 30, 2024 from 7.2% in the corresponding period last year.

The increase in gross profit and gross profit as a percentage of revenue for the year ended September 30, 2023 was primarily due to an increase in revenue and reduced costs resulting from country exits, ongoing investments in enterprise capability centers, shared service centers, and delivery efficiency.

The increase in gross profit and gross profit as a percentage of revenue for the year ended September 30, 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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(in millions)

Equity in earnings of joint ventures

Equity in losses of joint ventures

General and administrative expenses

* Not Meaningful

Equity in earnings of joint ventures for the year ended September 30, 2023 decreased $328.3 million, or 1345.5%, to a loss of $303.9 million compared to earnings of $24.4 million for the corresponding period in the prior year.

The decrease was primarily due to impairment losses recognized in the third quarter of fiscal 2023.

Equity in losses of joint ventures for the year ended September 30, 2024 decreased $277.0 million, or 91.1%, to $26.9 million compared to a loss of $303.9 million for the corresponding period last year.

The change in equity in losses of joint ventures for the year ended September 30, 2024 was primarily due to impairment losses recognized in the fiscal 2023 that did not repeat to the same extent in fiscal 2024.

The increase of $2.4 million in general and administrative expenses for the year ended September 30, 2024 compared to the corresponding period last year was due to nonrecurring expenses related to the evaluation of strategic options and the transition of the AECOM Capital business to a third-party platform.

Liquidity and Capital Resources

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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 $110 million in restructuring costs in fiscal 2024 associated with ongoing restructuring actions that are expected to deliver continued margin improvement and efficiencies.

We expect to spend approximately $45 million for restructuring 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.

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At September 30, 2024, cash and cash equivalents, including cash and cash equivalents included in current assets held for sale, were $1,584.9 million, an increase of $322.7 million, or 25.6%, from $1,262.2 million at September 30, 2023.

The increase in cash and cash equivalents was primarily attributable to a decrease of $93.7 million of cash used to repurchase common stock, of which $67.9 million was related to a decrease in repurchases under the existing Board repurchase authorization.

The increase in cash and cash equivalents was primarily attributable to $320.1 million in net cash proceeds pursuant to Amendment No.

14 of the Credit Agreement.

Net cash provided by operating activities was $827.5 million for the year ended September 30, 2024 as compared to $696.0 million for the year ended September 30, 2023.

The change was primarily attributable to a decrease in cash provided by working capital of approximately $84.2 million, offset by an increase in adjustments for non-cash items of approximately $301.1 million and a decrease in net income of approximately $234.6 million.

The change was primarily attributable to an increase in net income of approximately $360.1 million, offset by a decrease in cash provided by working capital of approximately $200.4 million and a decrease in adjustments for non-cash items of approximately $28.2 million.

The sale of trade receivables to financial institutions included in operating cash flows increased $32.7 million during the year ended September 30, 2024 compared to the year ended September 30, 2023.

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Net cash used in investing activities was $210.6 million for the year ended September 30, 2024, as compared to $138.2 million for the year ended September 30, 2023.

The decrease in cash used in investing activities was primarily due to cash outflows for sale of discontinued operations of $42.3 million in fiscal year 2022 that did not repeat in the current year.

The change was primarily attributable to an increase in cash payments for capital expenditures of approximately $14.0 million, cash paid for a business acquisition, net of cash acquired of $18.7 million, and $21.0 million cash funded pursuant to the revolving credit facility with the counterparty to our sale of the civil infrastructure construction business.

Net cash used in financing activities was $295.5 million for the year ended September 30, 2024, as compared to $472.9 million for the year ended September 30, 2023.

The decrease from the prior year was primarily attributable to decreased stock repurchases under the Stock Repurchase Program.

The change from the prior year was primarily attributable to $320.1 million in net cash proceeds pursuant to Amendment No.

14 of the Credit Agreement, offset by a $101.1 million increase in stock repurchases under our stock repurchase program, and a $19.0 million increase in dividends paid.

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, decreased $99.4 million, or 23.7%, to $319.2 million at September 30, 2023 from $418.6 million at September 30, 2022.

Working capital, or current assets less current liabilities, increased $482.8 million, or 151.3%, to $802.0 million at September 30, 2024 from $319.2 million at September 30, 2023.

Net accounts receivable and contract assets, net of contract liabilities, increased to $3,301.4 million at September 30, 2024 from $2,880.8 million at September 30, 2023.

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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 only to the extent that a significant reversal would not be probable.

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.

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Credit Agreement

On February 8, 2021, we entered into the 2021 Refinancing Amendment to the Credit Agreement (as amended, modified or otherwise supplemented, the “Credit Agreement”), pursuant to which we amended and restated our Syndicated Credit Facility Agreement, dated as of October 17, 2014 (as amended prior to February 8, 2021, the “Original Credit Agreement”), between the Company, as borrower, Bank of America, N.A., as administrative agent, and other parties thereto.

At the time of amendment, the Credit Agreement consisted of a $1,150,000,000 revolving credit facility (the “Revolving Credit Facility”) and a $246,968,737.50 term loan A facility (the “Term A Facility,” together with the Revolving Credit Facility, the “Credit Facilities”), each of which mature on February 8, 2026.

The outstanding loans under the Term A Facility were borrowed in U.S.

Loans under the Revolving Credit Facility may be borrowed, and letters of credit thereunder may be issued, in U.S.

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.

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 proceeds of the Revolving Credit Facility may be used from time to time for ongoing working capital and for other general corporate purposes.

The proceeds of the Revolving Credit Facility and the Term A Loan facility borrowed on February 8, 2021 were used to refinance the existing revolving credit facility and the existing term loan facility under the Original Credit Agreement and to pay related fees and expenses.

The New Credit Facilities replace in full our existing revolving credit facility (the “Original 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 Credit Facilities.

On April 13, 2021, we entered into Amendment No.

10 to the Credit Agreement, pursuant to which the lenders thereunder provided a secured term B credit facility (the “Term B Facility”) to the Company in an aggregate principal amount of $700,000,000.

The Term B Facility matures on April 13, 2028.

The proceeds of the Term B Facility were used to fund the purchase price, fees and expenses in connection with our cash tender offer to purchase up to $700,000,000 aggregate purchase price (not including any accrued and unpaid interest) of our outstanding 5.875% Senior Notes due 2024.

On June 25, 2021, we entered into Amendment No.

11 to the Credit Agreement, pursuant to which lenders thereunder have provided us with an additional $215,000,000 in aggregate principal amount under the Term A Facility.

We used the net proceeds from the increase in the Term A Facility (together with cash on hand), to (i) redeem all of our remaining 5.875% Senior Notes due 2024 and (ii) pay fees and expenses related to such redemption.

On May 23, 2023, the Company entered into Amendment No.

12 to the Credit Agreement, pursuant to which LIBOR as a benchmark rate of interest was replaced by, in the case of US Dollar-denominated loans, a secured overnight financing rate subject to a spread adjustment, and, in the case of loans denominated in other currencies, other customary successor rates, subject in certain cases to a spread adjustment.

On May 23, 2023, the Company entered into Amendment No.

13 to the Credit Agreement, pursuant to which the spread adjustments with respect to the Revolving Credit Facility and the Term A Facility was amended.

The applicable interest rate for loans under the Term B Facility is calculated at a per annum rate equal to, at our option, (a) the Term SOFR (as defined in the Credit Agreement) plus 1.75% or (b) the Base Rate (as defined in the Credit Agreement) plus 0.75%.

The applicable interest rate for U.S.

Dollar-denominated loans under the Revolving Credit Facility and the Term A Facility is calculated at a per annum rate equal to, at our option, (a) the Term SOFR (as defined in the Credit Agreement) plus an applicable margin (the “SOFR Applicable Margin”), which is currently at 1.2250% or (b) the Base Rate (as defined in the Credit Agreement) plus an applicable margin (the “Base Rate Applicable Margin,” and together with the SOFR Applicable Margin, the “Applicable Margins”), which is currently at 0.2250%.

The applicable interest rate for loans under the Revolving Credit Facility denominated in other currencies is calculated at a per annum rate equal to a customary floating reference rate for such currency specified in the Credit Agreement plus the SOFR Applicable Margin.

The Credit Agreement includes certain environmental, social and governance (ESG) metrics relating to our CO 2 emissions and the percentage of employees who identify as women (each, a “Sustainability Metric”).

The Applicable Margins

for the Term A Facility and the Revolving Credit Facility and the commitment fees for the Revolving Credit Facility will be adjusted on an annual basis based on our achievement of preset thresholds for each Sustainability Metric.

Some of our material subsidiaries (the “Guarantors”) have guaranteed the obligations of the borrowers under the Credit Agreement, subject to certain exceptions.

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 0.25% 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 and certain of our subsidiaries’ ability, 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, taken as a whole, and transact with affiliates.

We are also required to maintain a consolidated interest coverage ratio of at least 3.00 to 1.00 and 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 Covenants”).

The Financial Covenants do not apply to the Term B Facility.

Our consolidated leverage ratio was 2.00 to 1.00 at September 30, 2023.

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 their 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 September 30, 2024, we were in compliance with the covenants of the Credit Agreement.

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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 September 30, 2023 and September 30, 2022, letters of credit totaled $4.4 million and $4.4 million, respectively, under our Revolving Credit Facility.

As of September 30, 2023 and September 30, 2022, we had $1,145.6 million and $1,145.6 million, respectively, available under our revolving credit facility.

At September 30, 2024 and September 30, 2023, letters of credit totaled $4.4 million and $4.4 million, respectively, under our New Revolving Credit Facility and Original Revolving Credit Facility, respectively.

As of September 30, 2024 and September 30, 2023, we had $1,495.6 million and $1,145.6 million, respectively, available under our New Revolving Credit Facility and Original Revolving Credit Facility, respectively.

2027 Senior Notes

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Such arrangements include standby letters of credit, surety bonds, and corporate guarantees to support the creditworthiness or the project execution commitments of our affiliates, partnerships and joint ventures.

The Company’s unsecured credit arrangements are used for standby letters of credit issued in connection with general and professional liability insurance programs and for contract performance guarantees.

At September 30, 2024 and September 30, 2023, these outstanding standby letters of credit totaled $934.5 million and $878.9 million, respectively.

As of September 30, 2024, the Company had $389.8 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.

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At September 30, 2024, we have capital commitments of $5.9 million to the Fund over the next 4 years.

In addition, in connection with the investment activities of AECOM Capital, we provide guarantees of certain contractual obligations, including guarantees for completion of projects, repayment of debt, environmental indemnity obligations and other lender required guarantees.

In addition, in connection with the investment activities of AECOM Capital, we provide 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, we were informed of a potential liability as one of the indemnitors on a divested business’ surety bonds.

We do not have sufficient information to determine the range of potential impacts, however, it is reasonably possible that we 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, we agreed to act as an additional guarantor on the counterparty’s existing debt, which matured on September 30, 2024.

Department of Energy Deactivation, Demolition, and Removal Project

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Refinery Turnaround Project

A Former Affiliate of the Company entered into an agreement to perform turnaround maintenance services during a planned shutdown at a refinery in Montana in December 2017.

The Former Affiliate of the Company entered into an agreement to perform turnaround maintenance services during a planned shutdown at a refinery in Montana in December 2017.

The turnaround project was completed in February 2019.

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however, the Refinery Turnaround Project, including related claims and liabilities, has been retained by the Company.

Trial is expected to begin in the second quarter of fiscal year 2025.

The Company intends to vigorously prosecute and defend this matter;

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New Accounting Pronouncements and Changes in Accounting

In December 2019, the Financial Accounting Standards Board (FASB) issued new accounting guidance which simplifies the accounting for income taxes.

The guidance amends certain exceptions to the general principles of Accounting Standards Codification (ASC) 740, Income Taxes , and simplifies several areas such as accounting for a franchise tax or similar tax that is partially based on income.

We adopted the new guidance starting on October 1, 2021.

The adoption of the new guidance did not have a significant impact on our consolidated financial statements.

In October 2021, the FASB issued final guidance to companies that apply ASC 606, Revenue from Contracts with Customers , to recognize and measure contract assets and contract liabilities from contracts with customers acquired in a business combination.

The new guidance creates an exception to the general requirement to measure acquired assets and liabilities at fair value on the acquisition

Under this exception, an acquirer applies ASC 606 to recognize and measure contract assets and contract liabilities on the acquisition date.

We adopted the new guidance starting on October 1, 2022 on a prospective basis and the revised guidance will be applied to any business combinations the Company undertakes.

In November 2023, the Financial Accounting Standards Board (FASB) amended the guidance of Accounting Standards Codification (ASC) 280, Segment Reporting , requiring public entities to disclose significant segment expenses and other segment items on an annual and interim basis.

The new guidance is effective for the Company for its interim period ending December 31, 2025, with early adoption permitted.

We are currently evaluating the impact that the adoption of this new guidance will have on our financial statement presentation.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures, which includes amendments that further enhance the income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid.

The update also includes certain other amendments to improve the effectiveness of income tax disclosures.

The amendments are effective for the Company’s annual periods beginning October 1, 2025, with early adoption permitted.

We are currently evaluating the impact that the adoption of this new guidance will have on our financial statement presentation.

Off-Balance Sheet Arrangements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis