Atkinsrealis Group Inc.

Thank you for standing by. This is the conference operator. Good morning and welcome to Atkins Realis' third quarter 2024 results conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the You may signal an operator by pressing star then zero. I would now like to turn the conference over to Denis Jasmin, Vice President, Investor Relations. Please go ahead.

Thank you, Grim. Bonjour tout le monde. Good morning, everyone, and thank you for joining us today. Before diving in, we invite you to view the slide presentation that we have posted in the investor section of our website, which we will refer to today during this call. So this call is also webcast. With me are Ian Edwards, Chief Executive Officer, and Jeff Bell, Chief Financial Officer. Before we begin, I would like to ask everyone to limit themselves to one or two questions to ensure that all attendees have an important space. You are welcome to return to the queue for any follow-up questions. I would like to draw your attention to slide two. looking information. This information, by its nature, is subject to assumptions, risks, and uncertainties, and as such, actual results may differ materially from the views expressed today. For further information on these assumptions, risks, and uncertainties, please consult the company's relevant filings on Citadel+. These documents are also available on our website. Also during the call, we may refer to certain non-RFRS financial measures. Reconciliation of these amounts to the current are reflected in our earnings release and MD&A, which can be found on the SIDAR Plus and our website. Before I pass the call to Yen, I would like to take the opportunity to acknowledge the retirement of Jacob Boot, Managing Director, Equity Research at CNBC, who is participating through his last quarterly call with us today. Thank you, Jacob, for all your help, advice, and support over the years. We wish you all the best in your retirement. And now I'll pass the call over to Yen Edwards. Yen?

Thank you, Denis. Good morning, everyone, and thank you for joining us today. I'm going to begin today's call by providing an overview of our performance in the third quarter, our continually growing backlog, and the current success and opportunities we are seeing in our four engineering services regions and our nuclear businesses. I'll then pass it to Jeff to provide more detail on our financial results before we open it to Q&A. So let's get started on slide three. We're entering the final months of 2024 with continued momentum following another quarter of strong results. Success is Passporter further highlights the growing demand for our services to address the energy transition and an aging global infrastructure. We're encouraged by the steady profitable growth of our services and our nuclear businesses across the majority of the geographies and markets in which we operate. increased 14%, with segment-adjusted EVA increasing 27% to approximately $239 million. Engineering services regions revenue organically increased 8% to $1.8 billion, while nuclear revenue organically grew 35% to $369 million. That log, at the end of the third quarter of 2024, was approximately $16.8 billion, an increase of 35% year over year, another record high for Atkins Realis. Results year-to-date reflect our purpose-built strategy of expanding into geographies and end markets with high total returns. Our nuclear expertise continues to be a distinct competitive advantage as we secure key wins this quarter and have a clear line of sight to substantial near-term revenue, and we generated over $200 million in operating cash flow this quarter. We are helping public and private entities achieve their net zero goals and address the energy trilemma, providing clean, affordable, and secure energy solutions. Our historical track record makes us the partner of choice in these endeavors, and we're proud to play a role in providing a better future for our planet and its people. On slide four, you can see the continued progression of our backlog growth across Atkins Realis services. Our 35% growth in the third quarter versus last year was driven by key wins across our core engineering services and nuclear businesses. In nuclear, we secured a life extension contract at the Quinshan Nuclear Generating Station. As discussed in detail at our June investor day, the entire lifecycle of a nuclear asset from design to decommissioning. This new agreement is only one example showcasing the global demand of our nuclear capabilities. In the UK and Ireland, we continue to support major capital investments by the government in transportation, like the latest technology screening services we are implementing at Heathrow. Our end-to-end capabilities in engineering services enable us to win in the market, including at one of the world's busiest airports. Turning to slide five, our engineering services business had a robust organic top-line growth. achieving an 8% increase year-over-year in the third quarter. Our revenue generation was driven by the continuation of our ability to secure new wins across our geographic scope. Segment-adjusted EBITDA over net revenue margin was 16.9% during the quarter and represents an increase of 160 basis points compared to Q3 2023. we continued to increase our backlog, which now stands at $12 billion, representing a 17% growth versus our backlog as of September 30, 2023. Beginning on slide six, we will provide an overview of each of our four regions and their performance in Q3. In Canada, we saw year-over-year organic revenue decline 8%, while segment-adjusted EBITDA was $35 million, representing an approximately 15% margin. Gross revenue declined due to the ending of a project which had a high percentage of flow-through revenue. But as you can see, the underlying net revenue increased 12% year-over-year to $226 million, and our business in Canada continues to strengthen. Backlog increased 23% year-over-year. We continue to capture key awards across transportation, buildings and places, power and renewables, and are increasing our presence in Ontario and Western Canada. In Toronto, we were awarded a key rail project, and in Quebec, we entered into an agreement for the expansion of the sterile injectable facility in Montreal. We are executing on our strategy for Canada, and we're making meaningful progress on our margin enhancement mandate as we lean into a profitable pipeline. In the UK and Ireland, we continue to win notable contracts utilising our end-to-end capabilities, particularly in defence, water, aviation and power and renewables. Our nimble and focused approach has built a solid foundation for our presence in the region and is a leading to our performance. Organic revenue grew 6% versus the third quarter of 2023, while segment-adjusted EBITDA grew to $93 million. We witnessed a record high EBITDA margin of 18.5% this past quarter, supported by a gain from a closeout of a major project. We saw continued battle of growth during the third quarter for approximately $1.7 billion. primarily due to new work orders in the water and rail signalling businesses. We continue to demonstrate that our partners of choice would network rail as we secure a key contract to upgrade and digitise the UK's signalling for the next 10 years. We also entered into an agreement to renew and enhance the infrastructure on 6,000 miles of track in the east of England. Additionally, we've made further progress in expanding our access to the growing water market in the UK, with several major framework wins related to the AMP8 programme. Currently, announced plans indicate that the water sector aims to increase its investment significantly to £96 billion by March 2030, and near doubling of current levels. This will provide ample opportunity for Atkins Realis to capture further water projects related to this investment in the UK. Our long-standing position in the UK has as well aligned to key commitments by the public sector to create a cleaner future. We're making meaningful progress on opportunities in transnational renewable projects and plans to upgrade the UK grid. We are also trusted advisors across defence, as capacity and spend is expanding under the AUKUS trilateral security partnership. Turning to slide eight, in the US and Latin America, we saw continued growth trajectory across many high-growth customer and markets. Organic revenue grew 11% year over year, while segment-adjusted EBITDA increased to $51 million. We continue to leverage our expertise in transportation with key wins across Georgia and Florida in the quarter. Our thoughts go out to those impacted by the destruction from Hurricanes Helen and Milton. We are partnering with FEMA to support recovery efforts in the communities most impacted. Q3 backlog increased 7% year over year. as we continue to advance our land and expand strategy, prioritize our key clients, and leverage our unique differentiators. Our list of prospects for further contract wins is expanding across geographies within the U.S., and we believe represents solid opportunities for sustainable growth. We will be steadfast in our approach to accelerating our foothold across the US to ensure that we are winning our share of potential new contracts. We also believe that potential M&A opportunities exist to expand our presence in the regions and in markets where we have a line of sight to our growth potential. revenue grew 33% on an organic basis versus the third quarter of 2023, as we saw higher volume for the buildings and places projects in the Middle East. This work also led to a segment adjusted EBITDA of $39 million, representing a 17% margin over net revenue. The Middle East part of our business has grown materially over the last 18 months, and it is a level we are comfortable with, and therefore we expect to be more moderate in future courses. Total backlog in EMEA grew 16% in the third quarter. In Asia, we successfully re-secured the Formula One work we have been delivering for the last 10 years, enhancing our already strong relationship. In South Korea, we secured a design, engineering, and procurement services for a new bioprocessing product center. We have expanded capacity and capabilities in Australia as we are seeing the pipeline of prospects accelerate in the power and renewables and defence markets. The future is bright in this region and there are exciting long-term opportunities ahead for our end-to-end capabilities. I'd now like to move to slide 10 and the results of our nuclear business. We continue to demonstrate significant growth with an organic revenue increase of 35% in the quarter compared to the third quarter of 2023. Our nuclear backlog is $3.2 billion, which represents more than a 200% growth versus our backlog as at September 30, 2023, driven primarily by life extension bookings in the Can-Do fleet. segment-adjusted EBIT grew 18% to $46 million. As a percentage of segment revenue, segment-adjusted EBIT was 12% in the quarter. On slide 11, we highlight the achievements across our nuclear can-do and services portfolios. The demand for our expertise in nuclear was emphasized again this quarter as we signed key wins and made continued progress on projects across each of the regions we serve. In Canada, we continue to garner support from the public and private sector as we onboarded additional key stakeholders for our Canadians for Can Do campaign. In our Can Do business, we're making excellent progress, particularly on our Can Do life extension projects. In our services business, Atkins Realis was selected in the US to develop the pre-concept design for Type 1 Energy's fusion pilot plant in Tennessee. We also see increasing opportunities to work with other technologies or providers for SMR development. In the UK, we entered into an agreement with GE Hitachi to support the delivery of its small modular reactor technology, and we are continuing to provide new build support at Hinkley Point C and Seisel C and decommissioning services at Sutherfield. Our success is being recognized by third parties. As you can see on the slide, we have recently received a number of awards in the US and in the UK. Turning to slide 12, I want to further highlight the near-term and long-term can-do revenue opportunities within our nuclear business. As you can see, through our backlog growth and contract wins over the past couple of years, our customers are continuing to recognise our nuclear expertise. This is translating into revenues that we are booking today, while also building a robust backlog of strong future revenues for Atkins Realis. As I mentioned earlier, we secured a 30-year life extension contract for the two CANDU reactors at the Quinshan Nuclear Generating Station. In addition, we continue to make good progress on new build contract negotiations for C3 and C4 at Cerna Voda in Romania. When signed, it will mark the return of CANDU reactors to the world nuclear market. and discussions continue on the next phase of our Cernobolus C1 life extension project. Our current success in Canada and Romania highlights the opportunities for CANDU support and life extensions across the globe today. We're also currently building the technology for our Monarch nuclear reactor. In tandem, we're in discussions with public entities about building new reactors to help support net zero goals. These potential contracts represent a massive opportunity for our business and could deliver significant growth over the next 10 years and beyond. We are one of the few public companies with the expertise and capabilities to service the entire lifecycle of a nuclear asset. And through this, we can build a backlog that will grow over time and providing recurring revenue for decades to come. The projects you see on this slide are representative of today's wins, but offer a glimpse into the future potential of this business. Our growth and key wins today showcase the demand and potential of our nuclear prowess across the globe. Now, moving to slide 13 and our links on LSGK and capital businesses. Our links on segments saw 32% year-over-year organic revenue growth in the third quarter, maintaining its strong volume momentum from the first half of the year, and realized 310 basis points of EBIT margin expansion. Backlog of $1.6 billion at the end of the third quarter was 32% higher than the third quarter of last year. Demand for our transmission and distribution services remains robust. On LSDK projects, the commissioning and testing on our two Ontario projects are running as planned. The trial running of the Trillion line just took place, and the result was a success, and we expect substantial completion of this project imminently. The total backlog decreased 38% to $190 million at the end of the third quarter, primarily reflecting the REN project, which is progressing well. As we finalize the LSDK projects for our clients, we continue to pursue claim recoveries that we believe are owed. and these discussions remain ongoing with our clients. On capital, we received $15 million of dividends from Highway 407 and Q3 as traffic patterns continue to improve year over year. Subsequent to quarter close, we received an additional $47 million in dividends in the fourth quarter. There are also no updates to provide as it pertains to our planned deposition of our interest in links on and Highway 407. We will update you when we have more information in the future. So with that, I'll now turn over to Jeff to discuss the financial highlights. Thank you, Ian.

Good morning, everyone. Turning to slide 15, total revenues for the quarter increased 11% year over year, totaling $2.5 billion. Revenues from professional services and project management increased by 12%, which included a revenue increase of 15% for our services business and a decrease of 42% in LSTK projects. As Ian mentioned, the engineering services region's revenue organically grew by 8% this quarter compared to Q3 2023, bringing the year-to-date organic growth to 12.6%. We've taken a prudent approach for forecasting revenue in the fourth quarter as closeouts of a couple of major projects recently and a particularly strong growth in Q4 2023 could result in relatively flat organic growth in Q4. We remain confident in our 8% to 10% revenue growth outlook for the full year and our ability to deliver on our greater than 8% annual organic growth target outlined at our June Investor Day. Total segment adjusted EBIT for the quarter dollars, 25% higher than last year, and was comprised of $239 million for Atkins Riala Services, $25 million for capital, and negative $18 million for LSTK projects. Corporate SG&A expenses from PS and PM totaled $27 million in the quarter, compared to $47 million last year. as Q3 last year included a higher expense related to revised estimates on long-term employee incentives and the company's rebranding costs. We continue to anticipate that the corporate SG&A expenses from PSMPM should be approximately $130 million for the full year to 2024, but could be around $10 to $15 million higher if the significant share price increase we've seen recently remains through the end of the year and thereby impacting on our long-term compensation costs. Net financial expenses for the quarter were $41 million, lower than Q3 2023, due to a lower level of recourse debt and lower interest rates on our variable rate debts. We would expect a similar amount of expense for Q4. The effective income tax rate from PSMPM was approximately 29% in order, higher than the Canadian statutory tax rate, mainly due to the geographic mix of earnings and other non-recurring items. As expected, our year-to-date income tax rate on our adjusted PSMPM net income was higher than last year. We continue to believe that the full year 2024 should be around the Canadian statutory rate of 26%. The IFRS net income this quarter was $104 million, compared to $105 million in Q3 2023. But it is important to note that Q3 last year included a $46 million gain on the disposal of the company's Scandinavian Engineering Services business. Excluding this gain, the company's net income increased by 76%. Adjusted EPS from PS and PM for the quarter was $0.63 per an increase compared to $0.38 in the third quarter last year. And backlog ended the quarter at a record high level of $17 billion, 21% higher than at the end of last year and 33% higher than at the end of September, with a strong increase in the engineering services, nuclear, and links on businesses. We now move on to slide 16 in free cash flow. Net cash generated from operating activities was $267 million in the third quarter. As expected, our services businesses delivered strong cash flows, with the improvement compared to the prior year coming from higher EBITDA and improved working capital positions, and included a sizable advance on a nuclear refurbishment contract. The small positive cash inflow from LSDK projects this quarter was mainly due to anticipated cash advances received as the projects are progressing towards their full completion. We anticipate that the net cash generated from operating activities for the company should be slightly in excess of $400 million for the full year. After CapEx and payment of lease liabilities, our free cash flow stood at $226 million for the quarter. Capital expenditures, including development costs for the Can-Do Monarch nuclear reactor, were $37 million in the quarter, in line with our expectations. We continue to forecast full-year capital expenditure in a range of $140 to $160 million as the Monarch development continues to ramp up in the fourth quarter. With that, I'll now hand the presentation back to Ian. Thank you, Jeff.

Our revenues are growing. Our backlog is building. Our margins are improving, and we're generating positive operating cash flows. We continue to build on our momentum with key wins across our four engineering services regions and our nuclear business that is growing our backlog and providing a line of sight to sustainable revenues for years to come. General market conditions for our engineering services and our nuclear business remain strong. As we continue to support public and private entities in achieving their involvement in power needs and net zero goals. Our strategic positioning in high growth geographies and end markets is leading to our ability to capture our share in these healthy markets. And we are harnessing operational efficiencies across the company through the work of our COO office. All of this is underpinned by the need to service the energy trilemma and aging infrastructure, and we are even excited by the scale of our longer-term opportunities emerging from these megatrends. Our new strategy of delivering excellence and driving growth is built on optimizing the business to drive profitable growth, accelerating our footprint in growing end markets and regions, and exploring untapped opportunities across the organization. We will continue to do this by utilizing our positive pre-cash flow to invest organically and inorganically to bolster our position in high growth geographies and end markets. So with that, let's open it up for questions.

We will now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, Please pick up your handset before pressing any keys. To withdraw your question, please press star then two. We will pause for a moment as callers join the queue. The first question comes from Jacob Boot with CIBC. Please go ahead.

Good morning, and thank you for your kind words going into retirement. My first question is on margins. You take a look at engineering services at the high end of 24 targets, nuclear I think was at the low end. Maybe just comment on what margins are baked into backlog currently and your confidence in your three-year outlook for 25 to 27 margin targets.

Yeah, thank you and congratulations. So, yeah, I mean, obviously, if we look at the quarter itself, really pleased with the EBITDA net revenue margin of 6.9%, 160 basis points up on a year ago. So that's great. But our objective, as we said at the investor day, is to build through the Chief Operating Officer's office a sustainable approach to improvement of margins across the engineering services business. And that will take us on a year-to-year journey to those margins that we committed to by 2027 of 17% to 18%. And the reason I say it like that is because you will see some quarter-to-quarter variants through the year. It's not going to be a quarter-to-quarter linear process. It's going to be a year-to-year linear process. And the reason for that is that there are some fundamental business improvements that we've got to build in to our engineering services business And those are obviously winning the right work, and that's very much in progress. You know, we are, particularly in Canada, got a whole better quality of backlog than we would have had two years ago. You know, we've done really well in the Middle East, but we are conscious that, you know, that is high-quality work, and we're going to maintain that level in the Middle East. The UK and the US are both doing... really well on their margin journeys. So it's winning the right work. The next is the overhead, the business overhead cost and being as optimum as we can be in getting that overhead cost as efficient as possible. The utilization of our resource. One of our key overhead costs is getting the best utilization out of our people across the planet. And we do that by connecting the organization together across geographies You know, we've got this culture of collaboration, and we have this culture of sharing across the company that will improve our utilization rates. And lastly, it's the technology center, 4,500 very capable people in India that obviously there's a significant arbitrage from the wage perspective. So, you know, betting that into the business. All those things will give us the 18%, 17% to 18% that we're committed to. Now, what you will see, obviously, in Q4, is the target that we will identify for 2025. We've done well this year, and I think we've got a good incremental improvement this year, and we'll continue to do so. On the nuclear side, we've committed to a 12% to 14% range. We believe that's the right range for nuclear. And clearly, nuclear is about servicing the market as this phenomenal renaissance comes upon us, and we're focused on growth there. but not at the expense of margin. You know, the margin will be in that range, 12 to 14. So a bit of a long answer, but I hope that helps.

It does help. Maybe just a bit more on the nuclear side. So, you know, you just announced this $2 billion contract for the operation maintenance with the U.S. Department of Energy. You know, how should we think about margins for those types of contracts versus, you know, some of the rebuild work that you're doing?

Jeff, do you want to?

Yeah, Jacob, it's Jeff. So those types of contracts we're in joint venture with, and effectively we get an equity pickup for our share of the net profit from those types of contracts. So it's helpful to the margins, and we're really pleased with that contract and that contract win. Waste decommissioning in the U.S. is an area of strength for us, provides a very stable and long-term financial contribution to the nuclear group. And on that contract, we've been involved with that since 2016, and great to see we'll be involved for another 10 years.

Helpful. Thank you. Thanks.

Thank you. The next question comes from Sabahat Khan with RBC Capital Markets. Please go ahead.

Okay, great. Can you maybe just provide a bit of an update on sort of your strategy in the U.S. market and apply a bit of color on sort of the guidance, but just, I know that was a focus at the investor day, both in terms of sort of your organic growth as well as M&A, just maybe some of the green shoots you've been seeing there as well as I think the growth in that region has been pretty strong. How do you think about maybe lapping that as we head into 2025 and beyond? So some details there, thank you.

Yeah, yeah, absolutely. I mean, as you know, we refer to this as our land and expand strategy. And we have a very, very deliberate plan to get us into the top 10 player in the US. And currently, we're very strong in the southeast, and we've opened offices in the northeast, and we've opened offices on the west coast. But we really, and it's been very much an organic land and expand strategy up until really about a year ago and about a year ago we started looking at M&A and we started looking at how do we complement those white space areas if you like in the west and in the northeast and obviously we're looking for quality companies that can add value and add connectivity and our capability into our existing kind of business in the US. So nothing to announce today on the M&A front, but very, very key to securing some acquisitions to complement the organic growth drive. Now, in addition to that, when we think about end markets in the US, our businesses really heavy on the Department of Transport state by state, and we would want to continue to grow that geographically. There is a good water program in the US, which we certainly are, I would say, in an evolving space, but we see great opportunity from the water market as water infrastructure needs to be upgraded. And that's an end market play that we need to add. But all in all, We have a clear plan. We're executing on that plan. We're pleased. We saw 11% double-digit growth in Q3, as you've seen. And we are, as I said, committed to getting into the top 10.

Great. And then maybe just on the margin side of the story, and you provided a little bit of color earlier, can you maybe just provide a bit of an update on some of the initiatives you outlined yesterday on what drives margin improvement through the guidance period and where you are sort of on that journey?

Yeah, I mean, you know, as I said in the last question, we've got four very, very specific areas of margin enhancement through winning the right work, through reduction of overhead, through improved utilization, through the incorporation of the GTC. Our chief operating officer, Phil Hall, has taken on the challenge to work with the presidents to embed those improvements in the engineering services businesses regionally. We have a very clear plan with very clear targets and KPIs that we measure on a quarter-to-quarter basis and a month-to-month basis. It's going well. You will see... I guess the rubber hit the road when we put out a target for 2025 in Q4, and you will have seen improvement in 2025, and you will have seen improvement in 2024. So the journey will take us to the range that we put out for 27, which is 17% to 18%, and we're confident we can land that. Jeff, I don't know if you would add anything.

No, I think that's right. I think it's It's in one sense early days, but on the other hand, the team and the business has been making good progress, and we're already starting to see some of the initial works and initiatives starting to flow into our numbers here in the back half of the year.

I mean, that optimization of the existing business is as important to us as growth. We need to do both.

And then just one last quick one. You know, obviously a lot of questions out there on what the new administration might do for just kind of the base organic business. But if you look at it from sort of the M&A angle and your engagement with potential targets in the U.S., do you find, do you think it's possible people take a bit of a wait and see approach potential sellers? Do you think people might want to sell faster? Or just some of your perspectives on how that operating backdrop or just kind of the change in climate might impact, you know, seller willingness to engage? Yeah.

Yeah, I mean, you know, there's a... I think there's a high degree of alignment around the industry in that the effect on engineering services businesses is pretty neutral. I mean, we've obviously got our own views and we believe it's neutral. And there's a couple of key drivers for that in the way that we think about it and the way that we believe that it's neutral. First, the infrastructure is... across the United States is aging, and they have to upgrade, maintain, and replace, particularly in transport infrastructure, particularly in water infrastructure. In addition to that, energy security is going to be top of mind. Maybe not the journey to net zero as much, but energy security for sure. And energy security, particularly to fuel the demands of the future, when you think about AI, when you think about electric vehicles, when you think about the increase in manufacturing, it's going to require more electricity generation. That's going to be grid upgrades. That's going to be more power plants, more nuclear. So all of that for ourselves we see as positive. But certainly on the engineering services side, I think it's pretty neutral. I don't see the IIJ8. being affected. Potentially the IRA may come back as something a bit different, but it's a really good market. Very important.

Thank you.

The next question comes from Chris Murray with ATB Capital Markets. Please go ahead.

Good morning. Just maybe turning back to nuclear and that portfolio of opportunities you were talking about. You know, I know you just announced a fairly large contract and certainly some good year-over-year growth and backlog. Can you talk a little bit about maybe more granular, you know, the timing of some of those projects? Like what's your expectation for when you think you can book those? And particularly on some of the longer tail stuff. I know we talked a little bit about this at the investor day, but yeah, I think the indication was a lot of that was going to be very back-end loaded for some of the newer stuff, but any sort of color on timing of backlog loads would be helpful.

Yeah, and that's why we put the extra bell chart slide in the deck today to try to be helpful to put in the context of what is the $3.2 billion of backlog that we have at Q3? What does that represent? And what are the opportunities ahead of that, both near-term opportunities and maybe longer-term opportunities? So maybe referencing that slide, we're showing here what is secured in terms of the Darlington Bruce that we've been working on for some time, which was showing what we've secured in terms of the first phase of CERN of order and the first phase of Quinshan and retubing. But on top of that, there's further phases to come on CERN of order one and on Quinshan. There's also negotiations on place to retube the Wulsang in South Korea. We're very close to concluding the Cernavoda 3 and 4 negotiations, which is a game-changing new build, which would be the first in 20 years, new build contract that we will have won. And those, all of those revenues and backlogs are yet to come. Pickering, there's clearly negotiations ongoing to retube Pickering, which is a considerable amount of units there. So, I mean, obviously, We can't get into specific kind of revenues and dates because a lot of these things are in negotiation, but we try to be indicative on this slide as to when those are coming in. I mean, as far as the hard targets we got out there, 1.8 to 2 billion revenues by 27, those we're very confident of achieving. Now, on top of all of that, then we've obviously got new bills, which are not even on this slide, both domestically and internationally. Many conversations, many opportunities. We need to secure something on the international market. We need to secure something on the domestic market. That is likely, you know, to see something maybe secured at 25%. But revenues from that will be slow to start with and then sort of ramp up towards the end of the decade, just to give you a feel for it. But I think where we are lucky and where we are differentiated in our nuclear business is our re-tubing business is bringing real revenues into the business today, but we have the same opportunity as other nuclear OEMs in the fact that we've got this market ahead of us for tomorrow.

Okay, that's helpful. Thank you. The other question I wanted to ask was about Trillium, and I think you kind of mentioned that you thought that the substantial completion would be imminent in your words. I did notice in the subsequent events, I guess you're just kind of moving some financing around. Can you just kind of maybe walk us through what we should expect if you actually believe you're going to get the substantial completion, let's just say by year end? What does that look like in terms of impact on you know, either operating costs or anything else in there and, you know, just, you know, how we should think that plays into cash flows into 2025.

Yeah. Jeff, if you can sort of take the cash flow side of it. As far as the asset itself, I mean, as we said, you know, a lot of the cost and a lot of the expenditure and the challenge we had was sort of pre-23, because they're in the construction work. But then there's quite a lot of commissioning work, a lot of documentation work, which has been going on 23, 24. The finalization of all of this is a trial running period over a certain period of time, a certain level of reliability. We've passed that. That's a pretty major milestone for a railway because it's quite complex, but we've passed that. So that automatically leads to a process of completion substantial completion we call it so we would expect to receive that this year and that's kind of then the the the asset is handed over to the to the client it's kind of done yeah and i think from a cash a capital perspective chris

you know, we would expect to, you know, sort of, you know, post that, you know, final accounts, holdbacks, you know, supply chain, you know, through Q4. Some of that may spill into Q1, but, you know, that would be the end of it.

Okay, that's helpful. And then really quick, Jeff, just to go back to your comment on your script. So your expectation just for stock-based comp would be an additional, call it $10 to $15 million for Q4, right? over the 130 year-to-date kind of guide. Is that the right way to think about that, if the share price stays where it is?

Yeah, yeah, that's exactly right. I mean, with the rapid rise we've seen in the share price in the last, you know, kind of six weeks or so, if it's, you know, kind of finished the year at, you know, those sort of elevated levels, then we would have, you know, that sort of exposure. But you've characterized that correctly. Okay. All right. Thank you.

The next question comes from Devin Dodge with BMO Capital Markets. Please go ahead.

Thanks. Good morning. I wanted to start with the nuclear business. There was a recent announcement that Atkins Riales is working with the Canadian Nuclear Regulator on approving the monarch. Just wondering if you could provide some background there and what the benefits should be for the business.

Just say the name again, sorry, I just didn't pick that.

On the approval of the Monarch.

Right, yeah, sure, yeah, for sure. So look, let me back up on the Monarch. I mean, we decided 18 months ago through research and through client engagement that the optimum reactor size for the new renaissance and the global market going forward would be a gigawatt reactor. Now, we have got a fully licensed EC6 reactor, which is a 600 megawatt reactor. It's called a Gen 3 plus. I mean, it's got all the latest safety features. It's deployable today. But what we're working on is an upgrade to that. Now, the interesting thing about the Monarch is it's actually an upgrade. There are components of this reactor which have been built before. And what we're doing is enhancing it to get out more power and to make it marketable. We're also bringing in some modularization to make it efficient in the build. We're also digitizing it and obviously putting all of the latest safety controls and passive safety systems to it. So we're going through a process right now, which we believe will take us to the end of 26 to take it through the regulator, get the design complete, and get it to a point that it's deployable. And we're on schedule for that. I mean, you know, it's going well. I mean, we've got about 250 people working on this. You know, we've been clear about the cost of this, and we think it's going to be a very, very differentiated product for the market. I mean, just a reminder that our specific technology uses natural uranium, so that takes away many hurdles for many countries. It also produces as a byproduct medical isotopes, which actually It's a very big differentiator because it's a revenue stream beyond electrical power, which is very significant as medical isotopes become in demand across the world. So it's going well. Obviously, we've not sold any yet, but we're marketing hard. The readiness of it around 27 is very appropriate because any clients or any countries or utilities are looking to build this. have to go through their own regulatory and permitting process for any site anyway. So we think we're highly competitive across the globe. Okay.

Thanks for that. Okay. And then maybe just sticking with nuclear new builds. If we look out five plus years and assume that that interest that you're currently seeing for new builds have turned into real opportunities, do you see a risk the industry could be you know, capacity constraint, either from a supply chain, labor, or financial support perspective? And how would you position the business ahead of that to overcome those potential constraints?

Yeah, and that's top of mind question for us. I mean, we've onboarded over a thousand people in the last year or so to put into our nuclear business. Now, you know, we do that in many ways. We do it through bringing in at the junior end through graduates and through working with universities and schools. We do it through retraining our engineers that are in our engineering services business. We do it by retraining project managers from our ES business, but we also do it by being a really good employer and taking nuclear professionals from around the globe. That's going well, and we believe that we can build the capacity that's needed for, for example, what you see on slide 12. The supply chain, we have had this campaign that has been running called Canadians for Can Do to bring the supply chain along with our journey to make sure they're also equipped, specifically in Canada, for the very strong domestic market and the export market from Canada to the projects that we're doing overseas. And I think that program is going really well. A lot of suppliers have come on board. We have a group now that we chair and meet such that we can communicate what's necessary to build capacity. there may be a need to develop relationships, stronger relationships globally. And we have ties with very strong global companies that can help. But our focus in the short term is definitely Canada and building the Canadian strength.

Okay, thanks a lot. I'll turn it over.

Thank you.

The next question comes from Michael Tupholm with TD Cowan. Please go ahead.

Thank you. Good morning. I'm just hoping to go back to the very strong increase in nuclear backlog seen sequentially and year over year. I appreciate the slide that you pointed out earlier, highlighting all the various nuclear opportunities. And I know you did press release the Kinshan Award. which I believe would have benefited backlog in the quarter. But if you can just maybe expand on what were some of the other drivers to the very strong growth besides Kin Shan?

Well, you know, I spoke through the slide in a previous question and talked about CanDo. Maybe it might be helpful if we think about the nuclear business, you know, just step back a little bit and talk about the nuclear business as a whole. Because CanDo is really important, and CanDo is the primary driver for the backlog growth right now. But it's not the only driver. I mean, we have a full service global nuclear business. And we're seeing this super cycle in nuclear across the globe. And obviously, that's driven by the need to not only convert the 85% of fossil fuel electrical generation that we see across the world, we're also going to have to up the grid by about three times. And that target is moving. I mean, if you think about AI and these data centers that are necessary to support AI, that is putting a big strain on the electrical grid. I mean, these things are well over a gigawatt, the new generation. So the market's strong. It's very, very strong. And if you think about our own business, we support SMRs. You can see we support GE Itachi. We support Rolls-Royce. We support the waste remediation across the US and the UK and Sellafield and the project we've just won, which is also bringing in new work. We also actually support fusion projects in the UK. We support fusion projects just had a win in the US. And these are long research projects, but they take resource and they take people to add to that. So all of those things together in our full-service business, and not to mention supporting other technologies such as EDF in the UK for Hinkley and Sizewell C, which are not insignificant projects for us. And we've got, like Hinkley, it's still running quite high, and we've got Sizewell sort of ramping up. So if you add all of that together and that can do life extension work. That's fueling backlog today. Tomorrow, it's a lot more of the same, certainly with Pickering, with Wolsang, with second phases of Quinshan and Cernovoda on the retube side. And then, of course, this C3-C4, which would be the first phase new can-do nuclear order in 20 years. And that, on the world stage of nuclear, is really significant for Atkins Realis, but it's also significant for Canada. And that will position us globally really, really well. And we would hope to announce something imminently on that.

Okay, that's awful. Thank you. Just looking at the cash flow performance, obviously very solid in the quarter, and Jeff, I think you reiterated the expectation for over $400 million of cash flow from operations for the full year 2024. I guess as we look to the fourth quarter, typically also a very strong quarter for cash flow, can you just comment on any dynamics we should be thinking about, particularly as you near the end of the LSDK project, and then as sort of a follow-on to that, Help us think about capital allocation priorities at this point, given, again, the stronger cash flows, the fact that leverage came down in the quarter. How have your priorities evolved from a capital allocation perspective?

Yeah, no, happy to. So, as you say, you know, we head into the fourth quarter in a good position. You know, we saw the benefit of, you know, nuclear advance in that third quarter, which also helped us. But very confident in the $400 million. And if I then pivot, as your question does, to capital allocation, I think what that shows, both our current leverage and our forecast through the end of the year, which all else being equal, would continue to improve our leverage and our balance sheet. it puts us, you know, financially in a very strong position to execute on, you know, for instance, our, our land and expand in organic strategy in the U S and identifying and, you know, ultimately trends acting on, you know, bolt on acquisitions is clearly part of our strategy. And I think our back really well set up to do this.

Just, just to, to build on that though, with the, we have seen you buying back some stock with, All of these elements coming together as they are in terms of cash flow and leverage coming down. Where do buybacks fall at this point in your list of priorities?

Yeah, I think, as you saw, I mean, we wanted to, under our capital allocation framework, to be effectively exercising all elements of it. We've been reducing debt. We've been returning some money to shareholders, and we would hope to also execute on M&A. So I think we'll continue to, in a sense, do that, with the difference being that our intention would clearly be going forward to be able to ultimately announce something from an M&A perspective as well. Perfect. I'll leave it there. Thank you.

Thank you. The next question comes from Benoit Poirier. with Desjardins Capital Markets.

Please go ahead. Thank you very much and good morning everyone. Congrats for the results and also thank you for the improved disclosure and the prepared remarks. First question, when we look at the US-LA strong organic growth margins was down about 50 bps year over year due to lower income of emergency work but also change in business mix. Could you maybe provide greater color about the mix and also the contribution from emergency work in Q4 last year, just trying to gauge what we should expect from a margin standpoint, especially on the back of the impact with Milton recently?

Yes, Jeff, why don't I take that one? She's absolutely right, Benoit. We had been seeing less of that emergency work through FEMA that we've done in the past. And that certainly played into part of the business mix. We had a couple of projects finishing out at lower margins, so that played into it as well. But we see both of those, frankly, as as sort of temporary headwinds. Not surprisingly with, you know, the hurricanes we've seen recently, you know, we expect the emergency work and indeed, you know, we are winning contracts now to provide our, you know, the valuable skill set that we bring as well as others to helping those hard hit areas. You know, we would expect to see that improving through Q4 and then into, you know, and then into next year. So I think that will be helpful from a margin perspective. And the underlying business itself, absence of few projects, continuing to have strong margins, and we'd expect to see that normalize over Q4 and into next year. Okay.

And earlier on the call, Jeff, you mentioned some color about the organic growth in the four quarters, that it could be flat given the closeout of a couple of major projects and a harder year-over-year comp. So is there any risk of this project timeline dynamic bleeding into 2025 and impacting organic growth for the next couple of quarters? Or is it just more one quarter issue?

For us, it's a couple of specifics in Q4. A couple of headwinds. I mean, we had an incredible Q4 2023. Very exceptional. And we have projects in Canada that we didn't win the second phase of. So something's really specific. As far as going forward, the market, our confidence in our businesses from the four regions, our positioning, we're really pleased with the wins that we're getting and the marketplace and our ability to continue to win those. We're confident in the range that we've put out of growth year over year, 25, 26, 27. This is a bit of a blip in the Q4 that we would anticipate. So, obviously, we're trying to be prudent in building that in.

Okay. And just on the free cash flow side, you reiterate your guidance of $400 million plus in terms of cash flow from operations. You also made great comments about the advance from nuclear projects in Q3 driving up free cash flow generation. So just wondering about the Q4, if you could provide more color about some working capital movement. And given the big growth that we see for the next few years, are there any working capital movement that we should take into account in 2025 either in a positive way or a negative way.

Yeah, let me comment on the fourth quarter. And then, Ben, I'd probably leave most of my comments for 2025 around the shaping of cash flow to our Q4 results, as we normally do. But I think as we head into Q4, it's normally a strong quarter for us from a working capital perspective. And I think our expectation is we would continue to see that this quarter as well. And the business continues to obviously perform well also. At the same time, we have successfully launched our next phase of our ERP implementation system into about 40 or 50% of the business here in the fourth quarter. So that always has the potential to kind of move our working capital around a little bit as well. We don't think at this point that would be material, but we're obviously working hard on that. So As a part of all of that, we remain confident in our ability to deliver that guidance of greater than $400 million, but there's a lot of heavy lifting to be done through the quarter at this point, and we'll come back and talk about 2025 in March.

Okay, and maybe just a quick one last one for me. Your leverage obviously nice improvement in the quarter down to 1.4 times. So could you maybe provide some color on the recent discussion with the credit agencies, the timeline for investment grade and whether the 407 is still required to provide the credit protection?

Yeah, I mean, we have regular conversations with the rating agencies. Ultimately, their decision in terms of maintaining or changing their rating is for them. So I don't have any more insight into that. We'll see as we go. Certainly from our perspective, our Q3 results once again reinforces the fact that We think we're very much an investment-grade company and organization, but they need to do their work to get to that point as well over time. Sorry, what was the second 407? Sorry, yeah. Nothing to obviously announce on the 407. We think fundamentally that the business risk, as both we would look at it and we think as rating agencies would look at it, the fundamental business itself with the type of leverage ratios we've put out there is very much consistent with being investment grade. But obviously, we'll kind of work that through with the rating agencies over time.

Thank you very much for the time, gentlemen. Thank you.

The next question comes from Maxim Sychev with National Bank Financial. Please go ahead.

Hi, good morning, gentlemen.

Morning.

Morning, Max. Most questions have been asked, so I'll just stick to one, if I may. When we look at M&A multiples, especially in the U.S., there seem to be some pretty heavy sort of read-throughs that we're seeing right now. I'm just wondering, How are you thinking about sort of the accretion algorithm and so forth? Maybe, you know, Ian and Jeff, if you can refresh this for us. Thanks so much.

Yeah. I mean, let's both answer. I mean, we've got clear kind of metrics that we're working towards. And I think the overriding thing I would say is that we also have a pretty clear understanding of what we want from an alignment strategy perspective looks like and what quality looks like and obviously we've not announced anything but we've actually been working at this now for some time because it's the quality of the assets that we bring into the business that's important and we're not in a hurry to do something which doesn't align to our strategy, our culture, and the ability to enable our land and expand and our margin expansion program to be delivered. So those are kind of the macro requirements. And the great thing about the U.S. is that there are so many businesses that are state-by-state, employee-owned businesses that are available. So whilst PE is active, They're not always the first choice for these businesses to join. So we think we can actually acquire what we need for our purposes that aligns to our strategy and our metrics. And we're confident we're going to be able to deliver on that. So, Jeff, I don't know if you would add anything on the metrics.

Yeah, I think the only thing I'd add to that is that, you know, at the small tuck-in range, you know, we see lots of opportunity in that range at, frankly, attractive multiples, Max, that we can create a lot of value at. Obviously, for larger, you know, high-quality regional-type platforms, you pay a higher price. But frankly, in our land and expand strategy, an opportunity like that, we think we could drive an enormous amount of value through with having that type of acquisition, even if you end up having to pay a higher multiple. So we think on both fronts, there's great opportunity over time for us to have high-quality businesses that will be very value-agreed to us.

And the other consideration here is that We are underweight in the U.S., so we've got more white space than you might see from our peer set. So we can build on that white space through M&A.

Okay, that's great. Thank you so much.

Thank you.

Thanks, Matt. This concludes our question and answer session. I would like to turn the conference back over to Vinny Jasmine for any closing remarks.

Thank you very much, everyone, to join us today. If you have any further questions, please don't hesitate to contact me. Thank you very much, and have a very good rest of the day. Bye-bye.

This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.