AECOM on Tuesday reported a 5% drop in overall revenue for the third quarter of its 2020 fiscal year, while income figures mostly rose.
Revenue fell from nearly $3.4 billion in third-quarter 2019 to just shy of $3.2 billion for the three-month reporting period through June 30. However, net service revenue (which excludes subcontractor expenses) remained flat at $1.5 billion.
Quarterly operating income dipped 5% on an as-reported basis for the Los Angeles-based infrastructure multinational, to $119 million. Adjusted operating income, though, rose 21% on a year-over-year basis, to $156 million. Net income was up in both line items: rising 63% on an as-reported basis, to $91 million; and up 28% on an adjusted basis, to $88 million.
Through three quarters of fiscal 2020, AECOM brought in $9.7 billion in revenue, which was also down 5% from the prior year. Net service revenue remained steady there as well, at $4.6 billion. Income numbers were up across the board: $316 million in operating income on an as-reported basis, and $459 million on an adjusted basis; $171 million in net income on an as-reported basis, and $251 million on an adjusted basis.
As the COVID-19 pandemic spread, AECOM shifted over 90% of its workforce to telework to curb the spread of the virus. However, much of its work has been deemed essential or critical, blunting the impact on earnings, according to a press release.
“I want to say that in this unprecedented time, I’m incredibly proud of the teams and our people here have pulled together and worked through this environment,” ,” Chairman and CEO Michael Burke said Tuesday during the company’s quarterly earnings call. “It certainly instills confidence in the leaders in the organization and to our professionals in our ability to achieve the goals that we’ve talked about today. We finished with a strong balance sheet, strong cash flows, record backlog and it does give us confidence as we move forward and expect growth in fiscal ‘21.”
Burke is preparing to retire after six years as AECOM chief executive. He will be succeeded on Aug. 15 by Chief Financial Officer W. Troy Rudd. That is about six weeks ahead of the company’s previous succession schedule. Lara Poloni, currently chief executive of AECOM’s Europe, Middle East, and Africa (EMEA) business, will become company president. A new chief financial officer should be announced ahead of Aug. 15, Rudd said.
On Jan. 31, AECOM completed the $2.4 billion sale of its Management Services business, which housed contracts for the Department of Energy and other federal government agencies. Under ownership of private-equity firms Lindsay Goldberg and American Securities, the business is now the stand-alone company Amentum.
AECOM is also winding down its at-risk self-perform construction segment, which includes its partnership with nuclear services firm EnergySolutions in the decommissioning contractor for the San Onofre Nuclear Generating Station (SONGS) in San Diego County, Calif. Management has said it plans to sell its stake in SONGS Decommissioning Solutions, but to date has not identified the intended buyer.
While they did not cite the SONGS business specifically, executives said they remain focused on exiting that segment of AECOM’s work, but that progress has been slowed by the current health crisis. Transactions expected to close at the beginning in the third quarter instead became frozen and then terminated, Rudd said.
However, “as we started to see some more certainty in terms of how the world is going to progress over the next few quarters, as we’ve seen financing kind of become more certain in the marketplace, we’ve seen the opportunity to now take up that those dialogues with groups of buyers and take all of those businesses to market together,” he added. “And we are out in the marketplace with those businesses and in discussions with multiple parties.”
