Despite the effects of the coronavirus pandemic, Los Angeles-based contractor AECOM has reported near-record Q2 new project awards of $8.6 billion that drove its backlog to an all-time high of $42 billion.
Revenue in the second quarter was $3.2 billion, up 5% from the same time period last year, the company announced yesterday in its second quarter earnings call.
While the company experienced COVID-19-related disruptions during the second quarter, most of its projects worldwide have been deemed essential, said CEO Michael S. Burke, who noted that work related to the pandemic, such as hospital builds or renovations and infrastructure projects spurred by stimulus packages, could help boost the company’s outlook even more in the near future. In total, Burke told investors, the company experienced only 18 cancellations on its 50,000 projects worldwide.
The company’s guidance for the rest of 2020 assumes that economic activity bottoms out in the third quarter, followed by a fourth quarter with no project delays or deferrals, said CFO W. Troy Rudd. Government incentives will help to improve the outlook for the company, which has already benefited from about $200 million worth of early payments from public projects in the United Kingdom, Canada and Australia, which have expedited payment in order to stimulate the economy.
While the company experienced a 10-day disruption in its China operations during the height of the outbreak there, its Asian markets “are beginning to normalize” and restrictions on travel of goods and people are being reduced, Burke said.
In the U.S., Burke is optimistic that federal and state government interventions such as via a second round of the CARES Act and national infrastructure legislation will benefit its clients.
“The outlook starts to look a little bit like what we saw after the global financial crisis [during the years of 2007-2009], where we experienced double-digit organic growth as a result of stimulus activity that came into the market,” he said.
Burke, who announced last year that he would retire from the company once a replacement has been found, said the search for a new CEO is progressing and the board is evaluating potential candidates, although the pandemic has slowed that process.
As with many other contractors nationwide, the pandemic has brought sweeping changes to the way that AECOM teams operate, with up to 90% of its employees working remotely during the second quarter. Company leaders said they have been pleased to see that the move to telework has accelerated productivity as workers gain back time formerly used for telecommuting and travel.
“We’ve seen employee engagement that is higher than when people are working in the office,” Burke said. “Our people are enjoying the additional flexibility of working at home.”
These developments could decrease real estate space needs in the near future, Burke noted. “We spend about $400 million a year on rent, so even a 20% reduction in that could be an additional opportunity for margin improvement going forward,” he said.
This nearly overnight shift to remote working environments was enabled by the company's investments in IT and technology-based tools, according to Rudd. The quick pivot was a “differentiator” for the company as it allowed projects to continue and teams to collaborate with clients with no delays.
“We now recognize how productive our employees can be while working at home,” said Rudd.
All employees have videoconferencing capability and access to job-specific digital libraries and cloud-based software like those from Autodesk and Bentley Systems, said COO Randy Wotring. In addition, the company's new web-based tool that enables clients to hold virtual public meetings has garnered positive reactions.
The platform creates a virtual reality experience that places a community member inside a virtual town hall meeting. Exploring the room allows for experiences including watching video, reading information panels, viewing maps and plans, listening to audio tracks, linking to outside websites, and providing comment and feedback.
"It's exactly like a real public meeting, but without the in-person element," Kevin Carlson, AECOM’s global lead for digital transformation, told Construction Dive.