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.

At this point, I'll turn the call over to Jean-Louis to address business performance and outlook. Thank you, Rome.

Turning to slide 9, ACON continues to build resiliency through a strong, balanced, and diversified work portfolio. Over the trailing 12-month period, 46% of ACON's construction revenue was generated from the utilities and nuclear sectors, compared to 36% of the comparative period in 2024. Balancing growth and opportunity with proper risk management is key to ACON's future success. We continue to maintain balance between our construction and concession segments, among our operating sectors, throughout our diverse client base, utilizing appropriate contract models and across selected geographies. We are also embracing new opportunities to grow in areas linked to the energy and power sectors and in U.S. and international markets. These opportunities are intended to diversify ACON's capabilities, provide new growth sectors, and deliver more consistent earnings through economic cycles. Turning to slide 10, demand for ACON's services across our markets continues to be strong. With a record backlog of $9.7 billion at March 31st, 2025, recurring revenue continuing to see robust demand and a strong bid pipeline, Akon believes its position to achieve further revenue growth in 2025 and over the next few years, and is focused on achieving improved profitability and margin predictability. The remaining backlog to be worked off on the three remaining legacy projects was 94 million, or 1% of total backlog, at March 31st, 2025. We're getting close, and we are remaining focused on driving this project to substantial completion, with all three projects currently expected to be substantially complete by the end of the third quarter of 2025. Rating 12 months recurring revenue was $1 billion, comparable to the previous period and up over 20% versus two years ago, taking into account the diversities of APE and the 49.9% interest in Skyport in prior periods on a like-for-like basis. Recurring revenues are typically executed on a non-fixed price basis, with the majority being over and above our reported backlog figures. Turning to slide 11 now, development phase work is underway on a number of major projects in which ACON is a participant, including the Darlington New Nuclear Project, the U.S. Virgin Islands Airport Redevelopment Project, the Contrecoeur Terminal Expansion, the GO Expansion on Corridor Works Project, the Winnipeg North Earth Treatment Plant Project, and the Orwood Anson Dam Project. These projects are being delivered using collaborative, progressive design-build model, with the majority expected to move into construction phase in 2025. Turning to slide 12, this week, ACON was recognized as one of Canada's greenest employers by Mediacorp Canada, recognizing our commitment to creating a culture of environmental awareness. ACON also released its sixth sustainability report, showcasing our commitment to sustainability in both what we build and how we build it. The Oneida energy storage project is a great example of this, and we have made great progress as a project now near completion. ACON has also currently passed our goal of a 30 percent reduction by one and scored two direct emissions based on intensity relative to revenue, achieving a 34 percent cumulative reduction since 2020. Turning to slide 13, ACON is focused on achieving solid execution of its projects and selectively adding to backlog through a disciplined bidding approach that supports long-term margin improvement in the construction segment. As previously mentioned, revenue in 2025 is expected to be stronger than 2024 due to a record backlog of $9.7 billion, the impact of business acquisitions completed in the second half of 2024, solid recurring revenue, and a strong bid pipeline. Revenue growth is expected in most of the construction sectors. In the concession segment, there are a number of opportunities to add to the existing portfolio of Canadian and international concessions in the next 12 to 24 months. The three remaining legacy projects are expected to reach substantial completion by the end of the third quarter of 2025, and this is anticipated to lead to improved profitability and margin predictability.

I want to be very clear

In front of you, we are dedicating all necessary resources to drive those remaining legacy projects to completion while vigorously pursuing fair and reasonable settlement agreements with the respective clients in each case. Until the three remaining projects are complete and the related claims have been resolved, there is a risk that profitability could also be negatively impacted in future periods. As such, the completion and satisfactory resolution of claims on this project with the respective clients remains a critical focus for ACON and its partners. To close, we are excited about the momentum we have built and remain focused on executing our strategy to drive long-term shareholder value. And we thank our dedicated team members for their contributions and for reflecting our safety always.

culture. Thank you. We will now turn the call over to analysts for questions.

Thank you. At this time, we'll conduct the question and answer session. As a reminder, to ask a question, you'll need to press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again while we compile our Q&A roster. Our first question comes from the line of Yuri Link with Canaccord Genuity. Your line is now open.

Hey, good morning, guys.

Good morning. Good morning.

Maybe for Jean-Louis, your underlying EBITDA margins continue to come down when you look at the trailing 12 months down from 8.4% to 7% as you outlined on slide 7. just trying to understand the, you know, is that higher margin of 8.4? Does that reflect, you know, some of the higher risk that's in those contracts? And, you know, the seven is more indicative of, you know, safer contracts. So you're taking less risk, but, you know, you would think you'd earn a lower margin. I'm just trying to understand the what's structural and what's kind of operational in the margin and if you could help us with what kind of range that might shake out to as you book more of these collaborative contracts into your backlog.

Okay. You're mainly speaking your right. It means that with our backlog of 9.7 billion, we have built, in terms of quality and quantity, an exceptional position for Agon in the years to come. This backlog has been built on discipline, and that's good. Now, what we are looking more than anything is the predictability of our margin. No more bumps on the road. And this is quite important, no more deviation. So when you look at the underlying profitability of the business, yes, I mean, the fact that we have de-risked most of our backlog, you remember that we went from 70% fixed lump sum to less than 30% on variable or collaborative project, just means that there will be a slight decrease in global margin. But There will be a strong growth in revenue, and we are working extremely hard, and we are very confident so that we'll be able to deliver no more bumps on the road. So all in all, we think it's quite good. Do you want to add anything, Jerome, to this?

Yeah, I mean, it's well said. The only thing I'll maybe add is in the current period, as noted, we've got a diluted margin impact from So, you know, we take within the global size of our enterprise, you know, it acts as a margin headwind probably through to the balance of the year. And so that adds like a little bit of additional softness. But your core thesis is right, is, you know, in the prior periods, stronger margins, but probably tied to a little bit higher risk appetite versus where we sit today is, you know, much more appropriate margin profile in consideration of the risk appetite that we're undertaking, right? We're just trying to create a little bit more of a boring company.

And those civil margins in Western Canada, can you just confirm that they're lower but still positive, or are they negative gross margins?

Yeah, I mean, we don't really provide detail on kind of a specific subsector basis, but let's just say it's a variety of projects, and we're kind of focused in on completing them and getting them through to the end of executions.

And is there a commonality on contract structure or anything like that?

Go ahead. Mainly speaking, those are projects that were taken quite a while ago. And yes, the commonality is that there are fixed price jobs. It means, as I used to say, all fixed price jobs are not bad or all variable price jobs are not always good, but when you say, is there a common root, yes, it is. Those projects, none of those projects are of important size.

Yeah, maybe describe it as a contributing factor, not the factor.

yeah okay and and last one i mean i think on on the last call you you guys kind of pointed to a seven and a half percent uh margin for underlying margin as is not a bad place to be um for 2025 underlying is that for the construction business or or was that overall and and now with these civil projects where where does that number stand thanks uh

So, you know, we previously referenced our adjusted margin profile, right? So that's the number that, you know, I would point out went from 8.4 to 7%. It'll operate within a range. You know, we don't provide guidance from a margin perspective for a variety of reasons. But I think, you know, based on all these commentary, you can probably assume better risk, more appropriate margin, and then the diluted impact of the margin on the Western civil projects gets layered in on top of that. And so you have to kind of run from where we are today and draw a conclusion against that.

Thanks. Thank you.

Our next question comes to the line of Krista Friesen with CIBC. Your line is now open.

Hi, thanks for taking my question. Just on the legacy contracts, can you speak to kind of your comfort around the costs you've talked about before related to the contracts and how comfortable you are with the costs given the timeline seems to be pushed out a little bit more on two of them?

I will take this one, maybe give you some information on where we are on those three contracts. We'll begin with Gordie Howe, because we have been speaking about Gordie Howe in those Q1 results. Our bridge is substantially completed. We are finalizing some lighting, barriers, traffic control, but the bridge is done. The Canadian POE has been totally handed over to the Canadian Border Agency. They are all inside setting up their system in all rooms. The U.S. POE has begun to be transferred to the U.S. Border Agency, and they are taking room after room to set up their equipment. So we are comfortable with the end date that we have been giving to you. Eglinton and Finch. You remember that during last year I was telling you construction is finished. We are now in testing and commissioning. What I can tell you is that testing and commissioning is finished on both these projects. I mean, system and train control are very delicate systems, and system integration is not always easy. We are now in the final phase before revenue service demonstration that is done by the TTC that will operate the line. So we are finalizing, training the trainer, and supervising the way the trainer from TTC are training the drivers. Then we should begin something like June, our revenue service demonstration, so we are also comfortable physically on substantially completing this job mid-year 2025. In terms of economy, so you have noted what I said regarding the remaining backlog, it's obviously still decreasing. We are getting really close to the end. In terms of margin, yes, we are as of today within the parameters that we defined in July 2024, and this is good.

Okay, great. Thank you. And then just a last question here. You've had one full quarter now of the United Engineers Can you just provide an update on that and how that's progressing? Thank you.

Yeah, I can say that the more we discover, the more we discuss and we go deep within this company, the happier we are with this acquisition for a few reasons. United is an engineering company, but I would say a very practical engineering company because part of its activity is related to steam generators. And we know them very well because we have been working with them at Bruce for the last five years. So this is part of their activity. It's an engineering company, and it's an engineering company dedicated to power. So it's nuclear, but it's also thermal. It's also renewable. At the same time, it's not only supply, but they are also quite good in energy. transmission and distribution engineering. So the idea is to grow this platform as an engineering company at the service of our growth in the power activity for ACON, but also at the service of other clients. And this is where it's quite interesting. It's a sort of gate of entry to a lot of utilities that we have not as clients before. So, yes, we are happy with the acquisition, and we are looking for growth with this acquisition.

Great. Thank you. I'll jump back in the queue.

Thank you. As a reminder, to ask a question, you'll need to press star 11 on your telephone and wait for your name to be announced. Our next question comes to the line of Chris Murray with ATB Capital Markets. Your line is now open.

Yeah, thanks, folks. I was wondering if we could talk a little bit about the U.S. utilities business to start. A lot of concern around business confidence in the U.S., and there's been some discussion in some of the early reporting that we've seen at a Q1 that folks are being a little hesitant on spending. Just wondering what you folks are seeing in terms of demand for utilities right now, and if that changes the U.S. strategy at all at this point?

Basically, no change. It means that we see for our activity related with power, utilities, a high capacity of growth in the United States. First, because there's a lot to do. Even if it's not always in terms of power supplies, from where it's going to come. I mean, one day you hear about coal coming back again, gas, but we know that there's a lot of purchase order on turbine, and the market is a little stuck. Renewable may go up and down, and it's not extremely clear about the real consumption and necessity of power from the big data centers. But this being said, even taking out this power supply that at the moment is growing extremely strong, The state of the grid, and we now know it because we have been in the United States for more than one year and a half studying everything. The state of the grid in terms of transmission and distribution is very poor. There's a lot of work to do. So we still think that there will be growth. And in addition, I mean, we just begin as a dwarf. I mean, it's a niche market for us. And we can be extremely selective on where we want to work, what kind of job, and with which client. Maybe, Jerome, you give a little more detail.

Yeah, for sure, Chris. And then, look, as it relates specifically to our utility services operations in the United States, we're extraordinarily pleased with the teams that have joined us, particularly in Michigan. They're locked in. Remember, the client base there is primarily funded at a rate base, right? So it's less sentiment driven and more requirement driven. And then, you know, there's a minor part of the work that's also just tied to storm impacts. And, you know, when the wind power goes out, you know, ACON and Extreme Cruise get roles to help support, you know, basically getting people back online. So from our perspective, yeah, we continue to kind of watch things very closely with regards to the overall macro environment. but largely across all of our sectors and in the concession space. Our end markets are generally not tied too deeply to economic cycles. We're looking to build the infrastructure required for future generations to thrive here, and it doesn't really swing that hard depending on a tariff impact or an economic impact because a lot of this stuff just needs to get done, and our teams are out there doing it.

Okay, that's helpful. The other question I had, and this is maybe more conceptual, but just we saw an application last week from Energy Alberta to build a new 4,800 megawatt nuclear power plant in Alberta, very similar to what Brucie was being proposed to look like. And I started thinking about a lot of the commentary that we've had over the past few years about call it the coordination and planning on some of the refurbishment projects to not overload the system and training. But all of a sudden, it feels like now we're starting to layer in new builds in future years. And I'm just wondering if you have an opinion or some thoughts around the feasibility or the reality of how you could actually get this stuff built. Because I still think you'll be doing refurbishments well into the next decade anyway. and we're starting to see schedules that are talking about having new nuclear starting up in that same sort of timeframe. So just thoughts about the level of demand coming at you and not really even theoretical projects, but maybe real projects and how you think that that gets addressed.

I will take this one. Nuclear. First of all, we are technology agnostic for new construction. It means that we know extremely well CANDU. I will say better than anybody else because we are refurbishing 100% of the reactors in Canada. The six at Bruce, the four at Darlington, the four at Pickering. So if on the new builds it comes to CANDU, I mean, I don't see ACON not being present on this one. We know those machines extremely well. We also have a cooperation agreement with Toshiba Westinghouse for the AP1000. And we are participating to the construction of the SMR, which is the G-Itachi boiling water reactor. It means that we're ready for this. We're ready for the new construction. Now it will go up and down. I mean, there will be announcements. Some will go forward. Some won't go forward. And we are preparing it. our team and our alliance to be perfectly fit for the purpose, depending on what is getting out, we are not worried. We are not preoccupied. And the change in the market regarding contract model is perfectly in line with what we are ready to do with nuclear.

Okay, we'll leave it there.

Thank you. Okay, thank you. Our next question is coming from the line of, just one moment, please.

Stand by one moment.

Our next question comes from the line of Ian Gillies with Stifel. Your line is now open.

Good morning, everyone. Ankur is obviously going to be a very large project that could help move the needle for ACON. Can you maybe talk a little bit about how you anticipate that project's going to enter backlog at this juncture and maybe how it scales up over the next number of years?

Yes. The main difference between the original idea and what is going to happen is that it's going to be phased. Remember that we were speaking a little down of 10 billion of investment. So I think the total amount of investment has not changed. I mean, to modernize the GTA transport, this is what is needed. Now it's a brownfield. It means that all those works are going to be executed under traffic. We cannot close the railway during 10 years. So it's just going to be fade between Lakeshore West, Lakeshore East, maybe Barrie, Union Station. But it will happen. It will just happen probably in the double of time that was envisaged. That was something like four or five years. It will be steady. We have a very strong team there. And we have begun preparatory works. We have begun... a track remediation, and we are working on a certain number of early works. So this is happening, but probably slower, which is not bad when you see our backlog and what's happening in other parts of our activity. So we are happy about this project.

That's helpful. As it pertains to, call it, what's transpired over the last few months in Canada, there seems to be a shifting sentiment that Canada needs to do a bit more of everything. Are you starting yet to see any leading-edge activity in the bids you're doing, or is it still too early?

Can you repeat your question, please? I'm not sure how to do the first part.

Yeah, I guess the simple way to frame the question is everyone seems to want to build more stuff in Canada now. Are you seeing any leading edge activity for bidding on that or is it still too early?

I think it's still too early. First of all, we have to go through the federal election so that we understand a little more about the programs to come. Whatever happens, I mean, with the backlog we have and the quality of what now we have been acquiring, I'm not worried. But, of course, I mean, we have a special team that is working in terms of preparation on everything linked with sovereignty, defense, rare metals, because this will come. It may not come at a super speed, but it will come, and we are getting ready for this.

Understood. Maybe I'll just leave it there now and turn it back over for questions. Thank you.

Thank you. Our next question comes from the line of Max from BCF. Your line is now open.

Hi, Max. You're coming through very softly. Sorry. Is it better now? Yeah, we got you.

Okay, perfect. Thanks. I was wondering if it's possible to get a comment on how we should be thinking about the working capital free up once the fixed price projects are fully behind, as you said, in Q3. So, yeah, maybe any comment there. Thanks.

For sure. So, we don't want to tie too preciously to any particular projects, Matt, but the question on working capital – is is an important one so i'll i'll answer it kind of like a broader level at the at the econ level so q1 you would have seen a pretty a pretty meaningful investment in working capital um part of that had to do with the starting point but part of it also just has to do with the amount of work programs that we're ramping into right now right revenue perspective that ACON's ever delivered, the outlook is quite robust. And so we expect ongoing investments in working capital. So through the year, we're probably looking at investment in working capital through to the end. That being said, there is a big focus on working capital relief on a number of projects and know that there's a number of folks whose full-time jobs are associated with that, right? So I'd say we don't want to tie anything to any one or two projects. Given the amount of growth we're seeing, I think it's very logical, expected, and appropriate to see investment work capital this year, just given where we're taking the business.

That makes sense. Do you mind maybe just commenting around the comfort level of the envelope of loss, as you telegraphed previously, just in terms of how that's going to pace throughout the year?

Yeah. Within the previously disclosed potential risks and impacts, we're still within that envelope and up through the completion of the projects. So no real change from that perspective. We analyzed a number of scenarios and possibilities and outcomes and options when it comes to this, and we're still comfortable with what we disclosed previously. So I think from that perspective, steady as she goes, right? Like, no real new news there. And phasing-wise, yeah. Adam was just reminding me, you asked about phasing. We take it when it comes, right? Like, we're now at the end game of this particular chess match, and the pieces are moving quite quickly, so the impacts come when the impacts come. So I wouldn't be able to, you know, I don't think we can provide, like, okay, we expect this, we expect that, we expect that, because if we expected it, we'd be taking it, which is what we saw in the quarter here with the project that we noted.

Yeah, and then maybe just one quick one for Jean-Louis, if I may. In terms of concessions, you know, opportunities, obviously you have, you know, kind of two smaller ones on the go right now. Can you talk about maybe your appetite for doing more on a prospective basis? Do you need to do more? Maybe in a column that would be helpful.

Thanks. Yeah, I mean, mainly speaking, part of our strategy is to be able to develop finance integrate the engineering, build and operate our assets when our clients allow us to do so. I mean, this is a real good vector to create value. I mean, we have just proved it with the Bermuda when we divested 49.9% of this airport. So yes, we are chasing opportunity. At the moment, we are very busy with U.S. Virgin Islands because we want to close during the year 2025. we are chasing other opportunities, either in district energy, power sectors, but we are extremely disciplined on this, and we are chasing also a few airports because this is really our core competency. On another hand, you probably have noted that we are extremely close to commercial operation on ANADA, and you remember that we have a path at the top level with Aleda, which is the battery storage, I mean the 250 megawatt near Toronto.

Okay. Excellent. That's it for me. Thank you so much. Thank you.

Our next question comes from the line of Sabahai Khan with RBC Capital Markets. Your line is now open.

Great. Thanks and good morning. extending that working capital discussion from earlier, Jerome, that you kind of highlighted that working capital is going to be an investment. Should we generally just assume maybe it will be a negative free cash flow year? Just trying to get your perspective on how you expect this overall cash and celebrity ratio to evolve kind of for the next three quarters. Thank you.

I mean, look, for sure, the investment in working capital, I mean, look,

There's a seasonal cadence to this, right? So as we land near the end of the year, obviously there's always a little bit of flex up and down depending on outflows and inflows, in particular with regards to our projects, right? The one thing that I think people are continually aware is when we look at our overall cash position, pin into where we'll be on the day we print the balance sheet. But overall, I think the themes you highlight are appropriate ones, which is one, the business is growing. We're taking on very good work. They'll be, you know, I'll say that to a certain extent will be releases from, you know, some of the things that we have ongoing today. But also remember, we do have some capital expenditures that we're putting into the business to support ongoing growth. Some of those items can be a little bit chunkier, things like tunnel boring machines, and depending on when we take delivery of that, that can move the cash figure a little bit. But overall, the thesis we have that underpins all of it is when we look to deploy capital resources within the business, there's a very keen focus from an operating capital committee on what are the returns associated with that capital that's being deployed to make sure that we're kind of exceeding our thresholds. Your next logical question would be, well, what's that threshold? And I'll say that it's an appropriate one that exceeds our cost of capital.

Great. That's helpful. And apologies if I miss this next one, but just a bit more philosophical one. I know expansion in the U.S. has been a bit of a focus. Has there been any change in sort of bidding there or anything like that, given some of the headlines we've been seeing, kind of geopolitical stuff, or is that U.S. strategy still go as it was previously? Thanks.

Okay, I will answer that. There are two vectors in our strategy. With a common umbrella, we will grow in the United States, where we are extremely competent in our own country, Canada. I'm not going to open new business in a new country. So then, this being said, the two vectors is, one is acquisition, and you know that we acquired this nuclear specialized company now named Acon Walks a few years ago. We are quite extreme in July 2024, united in December, and the first one is growing quite nicely, and the second one, extreme, as we have said, we are very happy about them, their professionalism and their agility. United, we are still defining the detailed strategy plan with them, but the idea is to grow The second way of growing is organically through project. And this we are here extremely careful. We are still analyzing partnership, specialty contractors, availability of labor, and quality of clients and budgets. And once we are good with this, then we will move prudently and always within our core competencies. So the rest, I know there's a lot of noise about tariff. As I've said, I mean, AECON is not a manufacturer. AECON is not an exporter. I mean, if we work in the United States, we're going to be local. And so on a first basis, it's not a problem for us. So we try to keep our head cool. And what is sure is that the extent of what is to be built in the United States in front of the number and the quality of the company existing in this market is a very good parameter for us.

Great. Thanks very much for the call.

Thank you. Our next question comes from the line of Michael Tupom with TD Cowen. Your line is now open.

Thank you. Good morning. Mike. Obviously, a very significant increase in backlog in the first quarter, helped in part by the addition of the Scarborough subway extension and the Pickering nuclear refurbishment projects. With respect to the other collaborative projects that you have in development, are there any of those projects that are expected to convert and be added to backlog in either Q2 or Q3?

I would tend to say

Yes, but we are always prudent. Obviously, the SMR, which is a collaborative contract, is not yet in our backlog. We are working with OPG on this. USVI, we are also working to try to get it closed in the year 2025. It's a very interesting project. progressive DBFOM, and we are very happy about it. We are working with the Port of Montreal about Contracur and with the city of Winnipeg about the sewage, the phase two of the sewage treatment plant. So, yes, they will most probably come to backlog in the months to come, but the development periods are not over, and the beauty of the development period is that You can calibrate it the way you want, just to be sure that at the end of the day, you have the perfect project for the client and perfectly priced for us.

Okay, that makes sense. Thank you.

Second question is about capital allocation. In the outlook section of the release, you talk about planning to maintain a disciplined approach to capital allocation. Wondering, though, if you can provide a bit more detail around your capital allocation priorities, including any commentary around potential for future acquisitions or additional acquisitions and also share buybacks and specifically on the subject of share buybacks. I guess wondering if that takes on a greater priority in your mind at the moment, considering where the shares are trading.

Yeah, look, it's a great question, one that's got robust discussion around the table here. So a couple of things. So one is the most important thing for ACON is to continue to grow and support the building of the business. And so from that perspective, needed for growth. On the equipment side, that's really centered around our Western Road business, which is a very high-performing business with extraordinary leadership. Then on the utility side, that's a business that does carry a degree of capital and investment just associated with things like bucket trucks and directional drills and other items. while they're hurtling, and so they get capital. Now, the next phase is we've got some growth capital associated with other items, a little bit chunkier items, so that goes there. Then comes what comes next. If we're satisfied with the strength of the balance sheet, we then look to one is obviously we've got a pretty intense dividend program that distributes something in the order of $47 million a year to shareholders. time. And then the final piece that you know really well is M&A and NCIP. And so where we trade today, we've got a tactical program that's been put in place. It's been put in place for a purpose. And so I'd say that we'll be monitoring that very closely and be making the appropriate disclosures as we execute on programs like that. And then from an M&A standpoint, the one challenge is it's not like a programmatic situation for us. We are very precious about how we deploy that capital, the opportunities that we pursue, how they map to our existing capabilities from a safety, culture, technical background standpoint, and markets, like the sectors that they're in and the geographies. And so what I'll say from an M&A perspective is we have seen a pretty robust bidding environment for assets um that that we've targeted um and it's actually it's gotten much more intense over the last six months so i think from that perspective we just need to keep extraordinary discipline and try not to get too excited in pursuing things um because there's a there's a lot of dollars who are chasing the types of assets that that you know that map take on ambitions and so we we just need to keep ourselves calm and you know every if there's no m&a availability um there is availability of the shares in the market which you know we continue to view as an opportunity

Okay, I appreciate all the detail, and I'll leave it there. Thank you.

Thank you. I'm showing no further questions at this time, and would now like to turn it back to Adam Bergotti for closing remarks.

Thanks so much, Kathy, and thank you all for joining us today. Feel free to reach out with any follow-up questions to us, and we will tune in to the next call, and have a great rest of the day.

Thank you for your participation in today's conference. This does conclude the program and you may now disconnect.