Aecon Group Inc.

and thank you for standing by. Welcome to the Q1 2025 earnings call for Akon Group. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 1 on your telephone. You'll then hear an automated message advising that your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Adam Borgatti, SVP, Corporate Development and Investor Relations. Please go ahead.

Thank you, Kathy. Good morning, everyone, and thanks for participating in our first quarter results conference call. This is Adam Borgatti speaking. Joining me are Jean-Louis Servronks, President and CEO, Jerome Julliet, Executive Vice President and CFO, President Finance. Our earnings announcement was released yesterday evening, and we posted a slide presentation on our website, which we'll refer to during the call. Following our comments, we'll be glad to take questions from analysts, and we ask that analysts keep to one question and a follow-up before getting back into the queue. As noted on slide two of the presentation, listeners are reminded the information we're sharing with you today includes forward-looking statements, and these statements are subject, and based on assumptions, subject to significant risk the expectations reflected in these statements are reasonable, we can give no assurance that these expectations will prove to be correct. And with that, I'll hand the call over to Jerome.

Thanks, Adam, and good morning, everyone. I'm now going to speak to ACON's consolidated results, review the results by our segments, and address ACON's financial position before turning the call over to Jean-Louis. Consistent with prior quarters, we've provided additional information to help clarify the underlying results, excluding the impacts on the fixed price legacy projects and divestitures. Detailed direct tables are included in slides 15 through 17 in the conference call presentation. Let's turn now to slide 3. On a reported basis, revenue for the three months ended March 31, 2025 was $1.1 billion, $215 million or 25% higher compared to the same period in 2024. Higher revenue was driven by increases in nuclear, industrial, utilities, and civil operations, just partially offset by lower revenue in urban transportation solutions. Adjusted EBITDA of $4 million compared to $33 million last year and operating loss of $41 million in the quarter compared to an operating loss of $4 million last year. Adjusted EBITDA and operating profit in the first quarter were largely impacted by negative gross profit of $29 million on a fixed price legacy project. Additionally, results were further impacted by weaker gross profit in civil operations in Western Canada and a decline in gross profit earned due to lower margins on LRT projects and urban transportation solutions as these projects progressed towards substantial completion. Excluding the impacts from the legacy project, as adjusted revenue for the first three months ended March 31, 2025 of $1 billion compared to $772 million in the same period last year, and adjusted EBITDA of $32 million compared to $33 million last year, essentially flat. Adjusted diluted loss per share in the quarter of $0.54 compared to the loss of $0.44 last year. AECON reported backlog of $9.7 billion at the end of the first quarter. This is a significant accomplishment from the operating teams, as AECON now stands at the highest reported backlog in its history. New contract awards of $4.1 billion were booked in the quarter, largely from the target price contract Scarborough Subway Extension Project and additional refurbishment work at the Pickering Nuclear Generating Station. Now looking at results by segment, turning to slide four, Construction revenue of $1.1 billion in the first quarter was $214 million, or 25% higher than the same period last year. Revenue is higher in nuclear operations, driven by an increased volume of refurbishment work in nuclear generating stations in Ontario and the United States, and in industrial operations, primarily from a higher volume of field construction work in industrial facilities in Western Canada. Revenue is also higher in utility operations, from an increased volume of electrical transmission work in the U.S., in the second half of 2024, and from an increase in battery energy storage system work, and in civil operations, primarily from a higher volume of foundations work. Partially offsetting these increases was lower revenue in urban transportation solutions, largely from a lower volume of LRT work in Ontario and Quebec, as three projects near completion. On an as-adjusted basis, construction revenue was $1 billion compared to $770 million in the same period last year, representing a 34% increase. As noted, the new contract awards of $4.1 billion in the first quarter of 2025 were exceptionally high and compared to $960 million in the same period last year. Turning now to slide five, adjusted EBITDA of negative $1 million compared to $28 million last year, an operating loss of $30 million compared to an operating profit of $7 million last year. As previously mentioned, adjusted EBITDA in the first quarter was largely impacted by a negative gross profit of $29 million on a fixed price legacy project. On an as-adjusted basis, Adjusted EBITDA for the three months ended March 31, 2025 of $27 million compared to $28 million in the same period in 2024. Operating profit in the quarter was similarly impacted by the negative growth profit of $29 million on a fixed price legacy project, as well as roughly $8 million of M&A-related amortization costs. Absentee's effects operating profit in the quarter was effectively flat. Turning to slide six, concessions revenue for the first quarter was $2 million compared to $3 million in the same period last year. Adjusted EBITDA in the million last year, an operating loss of $2 million compared to an operating profit of $1 million last year. On slide 7, we brought this all together with the as-adjusted information to exclude the impact of legacy projects and investors to provide insight into the underlying performance of the overall business. On an as-adjusted basis, revenue for the trillion-12-month period ending March 31 was $4.4 billion compared to $3.8 billion the same period last year. Adjusted EBITDA was $349 million in the trillion-12-month period compared to $353 million in the period prior. For the construction segment, on an as-adjusted basis, adjusted EBITDA was $307 million for the trillion-12-month period, representing a 7% margin. As adjusted EBITDA margin was impacted by lower fees earned from the earlier stages of collaborative projects as these projects approached the respective construction phases, the margin diluted impact of performance and civil operations in Western Canada and the ramping up of projects with more appropriate contract execution structures. Turning to slide 8, at the end of the first quarter, ACON held cash and cash equivalents of $38 million, excluding $348 million of cash held in joint operations. In addition, at March 31, 2025, AECON had committed revolving credit facilities at $850 million, of which $306 million was drawn and $8 million was utilized for letters of credit. Draws on the credit facilities reflect increased working capital needs as AECON ramps up its seasonal construction volumes. AECON has no debt or working capital credit facility maturities until 2027, except equipment loans and leases in the normal course.