An 18-month extension for a major Department of Energy contract gave a boost to AECOM’s earnings for the second quarter and first half of its 2019 fiscal year. Executives said this week they expect more wins in the years ahead.
The Los Angeles-based infrastructure multinational on Wednesday reported just over $5 billion in revenue for the quarter and $10 billion for the six months through March 31. Those numbers were, respectively, up by 5% and 4% from the prior year.
Net income for the second quarter landed at $78 million, or $0.49 per diluted share, against a loss of nearly $120 million, or $0.75 per share, in the same period of fiscal 2018. In a press release on the earnings, AECOM attributed last year’s loss partially to a $168 million non-cash charge for “non-core” oil and gas resources that were held for sale.
Overall, the company grew its backlog by 22% in the quarter, to $61 billion. It secured $8.1 billion worth of new contracts, including the extension for AECOM-led Savannah River Remediation (SRR), which provides liquid radioactive waste management at DOE’s Savannah River Site in South Carolina. The March extension, worth $750 billion, keeps SRR on the job through Sept. 30, 2020. The other partners in the contractor are Bechtel, CH2M, and BWX Technologies.
“We are also tracking several more DOE opportunities that we expect to be awarded over the next three years that would add to our $30 billion pipeline,” Chairman and CEO Michael Burke said during the company’s quarterly earnings conference call.
The company anticipates a greater number of opportunities at the Energy Department, which offer a higher margin than work it has won over the past 18 months at the Department of Defense, said Troy Rudd, AECOM chief financial officer. AECOM would partner with other companies in joint ventures for some projects, he indicated.
“So it could happen that we actually win some work through JVs that creates some more equity income or we could win it where it’s a consolidated revenue. That’s difficult to predict,” Rudd told financial analysts.
Executives avoided discussing specific opportunities. However, three multibillion-dollar contracts could be issued this summer at the Hanford Site in Washington state, the Energy Department’s largest and most complex cleanup project. They are the Hanford Tank Closure Contract, the Hanford Mission Essential Services Contract, and the Central Plateau Cleanup Contract, each potentially lasting for up to a decade.
AECOM leads Washington River Protection Solutions, the current radioactive tank management prime at Hanford under a one-year extension to its original contract through September. A source told Weapons Complex Monitor in April that AECOM had partnered with Atkins, its junior partner in WRPS, to bid on the potential follow-on 10-year, $13 billion Tank Closure Contract.
AECOM also partnered with CH2M to bid on the next Savannah River Site liquid waste contract. It lost out to a team led by BWXT in October 2017, but the Government Accountability Office in February 2018 upheld a protest on the award by the AECOM-CH2M team. The Energy Department allowed all three bidding teams, including a Fluor-Westinghouse venture, but ultimately scrapped the procurement in favor of keeping Savannah River Remediation on the job. There has been no word on when that contract process might start again.
AECOM’s Management Services business handles its Energy Department contracts, which also include management of the Waste Isolation Pilot Plant in New Mexico. Management Services reported just over $1 billion in revenue for the quarter, up 14% from $897.8 million on a year-over-year basis. Income from operations grew from $43.4 million to $51.3 million. For the six-month period, Management Services reported just over $2 billion in revenue and $102.4 million in income from operations; the comparable numbers for fiscal 2018 were $1.7 billion in revenue and $83.5 million in income from operations.
“We are benefiting from a 127% backlog growth since the start of fiscal 2017, which has been driven by our successful business development investments and leading capabilities, especially in the classified market,” Burke said. “Our backlog is at record levels, including more than $3 billion of wins in the first half of the year.”
