Name: AECOM Q2 2025 Earnings Call
Start: 2025-05-06T12:01:00.000Z

Executive Summary

Q2 FY25 delivered record second‑quarter profitability: adjusted EPS rose 20% to $1.25 and adjusted EBITDA grew 8% to $290M, while NSR increased 4% despite a 100 bps workday headwind; total revenue fell 4% to $3.77B as pass‑through declined .
Versus S&P Global consensus, ACM posted an EPS beat ($1.25 vs $1.19*) but a revenue miss ($3.77B vs $4.17B*) as Street models GAAP revenue inclusive of pass‑through; ACM emphasizes NSR for core performance (see estimates table) .
Backlog reached a new record $24.27B with a 1.1x enterprise book‑to‑burn for the 18th straight quarter; management raised FY25 adjusted EBITDA ($1.18–$1.21B) and EPS ($5.10–$5.20) for the second consecutive quarter .
Americas NSR grew 6% and margins expanded 130 bps to 19.4%; International NSR grew 1% with margins up 10 bps to 11.1%, aided by selective mix and capability centers; free cash flow rose 141% to $178M and net leverage was 0.7x .
Narrative catalysts: sustained margin expansion, record backlog and pipeline, LA28 Olympics venue partnership, and raised guidance despite election‑related delays; focus on advisory/program management and AI/digital initiatives supports further mix‑led margin gains .

What Went Well and What Went Wrong

What Went Well
- Margins and earnings set Q2 records: segment adjusted operating margin up 90 bps to 16.1%, adjusted EBITDA margin to 16.3%, driving adjusted EPS +20% to $1.25 and adjusted EBITDA +8% to $290M .
- Backlog and pipeline hit new highs with 1.1x enterprise book‑to‑burn; Americas design posted 1.2x; management emphasized record win rates and competitive edge platform (LA28 Olympics win) .
- Free cash flow execution: FCF +141% to $178.4M and operating cash flow $190.7M; net leverage at 0.7x supports continued buybacks/dividends .
- Management quotes:
  - “We are increasing our financial guidance for a second consecutive quarter…” — CEO Troy Rudd .
  - “We also further expanded our industry‑leading margins… well advanced on our 17%+ margin target” — CFO/COO Gaurav Kapoor .
What Went Wrong
- GAAP revenue declined 4% YoY to $3.77B, and trailed Street consensus as pass‑through revenue fell and fewer workdays (~100 bps headwind) impacted growth .
- Election‑related project delays and federal agency reviews removed ~$100M from backlog; management noted ongoing client decision changes post‑U.S. election, though U.S. federal exposure is only ~8–9% of NSR .
- International trends mixed (Australia transportation pause; timing of holidays in Middle East) partially offset strength in U.K./Hong Kong; International NSR +1% with modest margin improvement .

Financial Results

Headline metrics trend (GAAP unless noted; $USD Billions/Millions; margins on NSR)

Metric	Q4 2024	Q1 2025	Q2 2025
Revenue ($B)	$4.110	$4.014	$3.772
Net Service Revenue (NSR) ($B)	$1.812	$1.801	$1.867
Adjusted EBITDA ($M)	$289.9	$271.4	$289.7
Adjusted EPS ($)	$1.27	$1.31	$1.25
Segment Adjusted Operating Margin (%)	16.7%	15.4%	16.1%
Adjusted EBITDA Margin (%)	16.7%	15.6%	16.3%

Street vs Actuals (S&P Global consensus)

Metric	Consensus	Actual	Surprise
Revenue ($B)	$4.170*	$3.772	-$0.398B (Miss)*
EPS ($)	$1.19*	$1.25	+$0.06 (Beat)*

Values with asterisk retrieved from S&P Global.

Segment breakdown – Q2 FY25 (as reported; NSR basis for margins)

Segment	Revenue ($B)	NSR ($B)	Adj. Operating Income ($M)	Adj. Margin on NSR (%)	YoY NSR
Americas	$2.897	$1.125	$217.7	19.4%	+6%
International	$0.875	$0.742	$82.2	11.1%	+1%

KPIs and balance sheet

KPI	Q2 2025
Total Backlog ($B)	$24.269
Book‑to‑burn (enterprise)	1.1x (18th straight >1.0)
Design Backlog ($B)	$22.943
Free Cash Flow ($M)	$178.4
Operating Cash Flow ($M)	$190.7
Net Leverage	0.7x
Adjusted Effective Tax Rate	~25.0% (Q2)
Diluted Shares (MM)	133.1

Guidance Changes

Metric	Period	Previous Guidance (Q1 FY25)	Current Guidance (Q2 FY25)	Change
Adjusted EBITDA	FY25	$1.175–$1.210B	$1.180–$1.210B	Raised (midpoint +$5M)
Adjusted EPS	FY25	$5.05–$5.20	$5.10–$5.20	Raised (midpoint +$0.05)
Segment Adj. Op Margin (NSR)	FY25	+30 bps to 16.1%	+30 bps to 16.1%	Maintained
Adjusted EBITDA Margin (NSR)	FY25	+30 bps to 16.3%	+30 bps to 16.3%	Maintained
Free Cash Flow Conversion	FY25	100%+	100%+	Maintained
Adjusted Effective Tax Rate	FY25	~24%	~24%	Maintained
Avg. Diluted Share Count	FY25	~134M	~134M	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q4 2024, Q1 2025)	Current Period (Q2 2025)	Trend
Guidance outlook	Initiated FY25 guide; double‑digit EPS growth; margins to 16.3%	Raised EBITDA/EPS midpoints again; confidence in H2 balance of top‑line and margins	Improving
Advisory & Program Mgmt mix	Launched Water & Environment Advisory; targeting higher‑margin platforms	Advisory/program mgmt cited as key margin drivers (pricing rigor, scaling)	Positive mix tailwind
AI/digital & capability centers	Investment focus but limited detail	Explicit driver of margin expansion alongside capability centers	Increasing emphasis
Macro/politics (elections, permitting)	Post‑election clarity cited as tailwind	Isolated delays, ~$100M backlog removal; permitting/deregulation tailwinds; visibility strong	Mixed near‑term; supportive medium‑term
U.S. funding (IIJA)	FY25 expected to accelerate; backlog strong	<35% of IIJA spent; Americas NSR +6%, book‑to‑burn 1.2x; state/local stable	Constructive
International regions	UK improving; AMP8 acceleration ahead	UK backlog at highs; Australia transpo pause; Middle East timing; HK Northern Metropolis starting	Mixed but building
Private sector exposure	Not highlighted	~30% of rev; 2/3 water/environment OpEx, less cyclical; facilities tied to quasi‑public funding	Supportive, less cyclical

Management Commentary

Strategic message: “We continue to deliver on our financial and strategic objectives… increasing our financial guidance for a second consecutive quarter,” underscoring a competitive edge across architecture, engineering, program and construction management; secular infrastructure, energy, sustainability and resilience tailwinds remain intact .
Market positioning: “We moved up… to become the number one design firm overall… maintained #1 rankings in transportation, water and facilities,” validating technical leadership and win rates .
Margin trajectory: “We are well advanced on our 17%+ margin target and… confidence is increasing in further margin expansion beyond this target over time” .
Backlog and pipeline: “Backlog increased… to a record level… pipeline… at a record level,” with enterprise book‑to‑burn 1.1x and design 1.2x in the U.S. .
Key quote on H2 balance: “We see our success in the second half… being balanced both in NSR growth and margins improvement” .

Q&A Highlights

H2 visibility and balance: Management expects both NSR growth and continued margin improvement to drive H2, supported by contracted backlog, frameworks/MSAs, and early‑stage pipeline growth .
Election‑related delays: Company has “arms around it,” but expects some continued personnel‑driven delays at U.S. federal agencies; U.S. federal is only ~8–9% of NSR .
Free cash flow: Targeting 100%+ conversion of adjusted net income and ~10% of NSR FCF margin annually; Q2 phasing was the best in over a decade .
Capital allocation: No change; repurchases paced with FCF and typically second‑half weighted .
Americas margin drivers: Multi‑year investments (program management from ~3% to >13% of top line), advisory pricing rigor, capability centers, and lapping last year’s restructuring benefits .
Book‑to‑burn sustainability: Confidence in >1.0 continuing; win rates >50% overall, ~80% on large enterprise pursuits YTD .

Estimates Context

S&P Global consensus vs actual: EPS $1.19* vs $1.25 (beat), revenue $4.17B* vs $3.77B (miss). The revenue shortfall reflects lower pass‑through (ACM focuses on NSR as core activity), while margins expanded on NSR, supporting EPS upside .
Implications: Street models may need to reflect (1) stronger NSR margin trajectory, (2) advisory/program management mix shift, and (3) pass‑through variability; FY25 EBITDA/EPS midpoint raises suggest upward bias to EPS estimates if margin execution persists .
Values marked with asterisk retrieved from S&P Global.

Key Takeaways for Investors

Mix‑led margin expansion remains the core upside driver; management reiterated confidence to exceed 17% long‑term margin over time .
Record backlog/pipeline and sustained >1.0x book‑to‑burn underpin H2 revenue ramps; Americas remains the growth/margin engine .
EPS upside can continue even when GAAP revenue is below consensus given NSR focus and operating discipline; monitor NSR/margin vs GAAP revenue optics .
Macro/policy noise created isolated delays, but secular funding (IIJA, state/local, U.K. AMP8, Hong Kong Northern Metropolis) and LA28 partnership provide multi‑year visibility .
Cash generation robust with 100%+ FCF conversion target and 0.7x net leverage enabling continued buybacks/dividend growth .
Near‑term watch items: pace of International reacceleration (Australia, Middle East timing), federal agency staffing/decisions, and workday/calendar normalization tailwinds .
Thesis: Underappreciated quality of earnings (NSR/margins/FCF) and durable demand backdrop support medium‑term double‑digit EPS growth despite episodic GAAP revenue volatility .

Additional Context (Q2‑related press releases)

LA28 Olympics: AECOM named Official Venue Infrastructure Partner with unprecedented scope spanning architecture, engineering, program and construction management—high‑visibility, multi‑year program reinforcing leadership .
UK&I Water & Energy: Acquisition of Allen Gordon LLP strengthens position ahead of >£250B decade‑long investment cycle, supporting advisory/design growth and International margin trajectory .

AECOM (ACM)·Q2 2025 Earnings Summary