AECOM recorded a $337 million pre-tax charge related to a construction management project awarded in 2019, with CEO Troy Rudd saying the contract was agreed to under terms that would not pass the company’s substantially transformed risk processes today.
The charge stems from higher projected costs to complete the project, including lower subcontractor productivity that has delayed completion. AECOM expects substantial completion during the second quarter of fiscal 2027. The company is pursuing claims related to the project, although management said full resolution could require several years of litigation.
The charge had a substantial effect on reported results. AECOM posted third-quarter revenue of $3.6 billion, an operating loss of $76 million, and a net loss of $84 million. Excluding the project charge, adjusted EBITDA would have increased 5% to $329 million and adjusted EPS would have increased 11% to $1.49.
At the same time, AECOM reported record new business activity. Backlog increased 13% to a record level, supported by record wins of $4.2 billion and a 1.6 book-to-burn ratio. Its design pipeline also reached another all-time high despite the record level of awards during the quarter.
The project charge prompted AECOM to update fiscal 2026 guidance. The company now expects approximately $300 million of free cash flow and adjusted EPS of $3.95 to $4.15. Excluding the construction management charge, prior adjusted EBITDA and EPS guidance remains intact.
KEY QUOTES:
“We are disappointed by the loss we took this quarter on the Construction Management project. The project is nearing completion, but lower subcontractor productivity is driving a delayed completion and a higher estimated cost to complete. This project was bid in 2019 under terms and conditions that would not clear our substantially transformed risk processes today.”
Troy Rudd, Chairman and CEO of AECOM
