Aecon Group Inc.

Good day and thank you for standing by. Welcome to the Q4 2025 ACON Group, Inc. Earnings Call. 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 will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Adam Borgatti, Senior Vice President of Corporate Development and Investor Relations. Please go ahead.

Thank you, Didi. Good morning, everyone, and thanks for participating in our year-end 2025 results conference call. Joining me today are Jean-Louis Servrance, President and CEO, Jerome Julliet, Executive Vice President and CFO, and Alistair McCallum, Senior Vice President, Finance. Our earnings announcement was released yesterday evening, and we've posted a slide presentation on our website, which we'll refer to during this call. Following our call, we'll be glad to take questions from the analysts, and we ask analysts to 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 that the information we're sharing with you today includes forward-looking statements. These statements are based on assumptions that are subject to significant risks and uncertainties. Although ACON believes the expectations reflected in these statements are reasonable, we can give no assurance that the expectations will prove to be correct. Before moving to our financial results, I'll first turn the call over to Jean-Louis to highlight a few of ACON's important accomplishments in 2025.

Thanks, Adam.

As noted on slide 3, 2025 was a transformative year of growth and significant milestones for ACON, with record revenue of $5.4 billion and backlog additions of $9.5 billion, supported by a balanced and de-risk backlog profile. Revenue grew 28% over 2024, with 84% of the $1.2 billion increase in revenue through organic growth. Revenue from US and international markets also increased by $386 million or 87% in 2025 over 2024. We delivered our strongest safety performance in over five years while maintaining disciplined risk management across major projects and programs. We further advanced our nuclear leadership in North America with our partnership selection to deliver the G7 First Grid Scale Small Modular Reactor, or SMR, at the Darlington Nuclear Generating Station. We also commenced the definition phase of the Pickering Refurbishment Program and an ACON partnership was awarded a development phase contract at Energy Northwest's Cascade SMR project in the U.S. Backlog growth was also highlighted by ACON's largest contract award to date, the Scarborough Subway Extension Progressive Design-Build Project, adding approximately $2.8 billion under a collaborative target price model. We expanded strategically through the acquisitions of Baudel Construction, Trinity Industrial Services, and KPC Power and Electrical Services. We strengthened our leadership team with the appointment of Thomas Clochard as Chief Operating Officer and received industrial recognition with gold stages on Renew Canada's Top 100 Infrastructure Projects list, reflecting our involvement in 17 ranked projects

including four of the top five.

And as noted on slide four, we achieved significant operational milestones, including completing the world's largest nuclear refurbishment program at the Darlington Nuclear Site ahead of schedule and below budget in early 2026, providing a model for major nuclear projects on a global scale. Substantial completion was achieved on the Finch West and Eggleston Crosstown LRTs, which were two of the three remaining legacy projects. And we delivered Canada's largest battery energy storage facility, the Oneida Energy Storage Project. I will now turn the call over to Jerome for our financial results, and we'll return to address our outlook at the end of the call.

Thanks, Jean-Louis, and good morning, everyone. I'll speak to ACON's consolidated results, review results by segment, and address ACON's financial position. Additional information has been provided to help clarify the underlying results, excluding impacts from the legacy projects and divestitures. Detailed reconciliation tables are included on slides 15 through 17 in the conference call presentation. Turning now to slide five, on a reported basis, Record revenue for the year of $5.4 billion was $1.2 billion, or 28% higher compared to 2024. Adjusted EBITDA of $235 million compared to $83 million last year. An operating profit of $87 million compared to an operating loss of $60 million in 2024. Adjusted EBITDA and operating profit in 2025 were negatively impacted by $94 million in legacy project losses compared to legacy project losses of $273 million in 2024. Adjusted diluted earnings per share for the year was $0.40, compared to adjusted diluted loss per share of $0.99 in 2024. As only noted, reported backlog of $10.7 billion at the end of 2025 was a record year-end level, and compared to backlog of $6.7 billion a year ago, new contract awards of $9.5 billion were booked in the year, compared to $4.7 billion in the previous year. Now looking at results by segment. Turning to slide six, construction revenue $5.4 billion in 2025 was $1.2 billion or 28% higher than the previous year. Revenue was higher in all sectors with the largest increase in nuclear operations driven by a higher volume of refurbishment, new build, and engineering services work in Ontario and the United States. Higher revenue in industrial was driven by an increase in field construction work on critical mineral facilities in Western Canada and incremental revenue in the U.S. from the Bodell and Trinity acquisitions completed in the third quarter of 2025. Revenue was also higher in urban transportation solutions, primarily from an increase in subway and commuter rail system projects. In civil operations, higher revenue was mainly due to an increase in power and rail projects volume of highway road and bridge building activity in utility operations higher revenue is due to a higher volume of gas distribution work in Canada and electrical work in the United States partially offset by a lower volume of telecommunications work and battery energy storage systems as our team successfully delivered three grid scale projects in the year on that adjusted basis construction to $4.1 million last year. Turning to slide seven, adjusted EBITDA of $220 million compared to $34 million last year. The primary driver of the increase was lower losses from fixed price legacy projects in the year. On an adjusted basis, the adjusted EBITDA was $315 million in 2025. Turning to slide eight, concessions adjusted EBITDA for the year was $57 million compared to $87 million last year driven by lower income from O&M activities and a decrease in management and development fees related to concession projects nearing or achieving substantial completion of construction activity in 2025. The book value of equity of our concessions portfolio at year-end was $251 million, up 7% versus the end of 2024. On slide 9, we brought together the as-adjusted information to exclude impacts of the legacy projects and divestitures provide insight into the underlying performance of the business. For the construction segment, on an as-adjusted basis, adjusted EBITDA was $315 million in 2025, representing a 6% margin and $8 million increase over 2024. On slide 10, at the end of 2025, ACON held core cash and cash equivalents of $94 million, which excludes $393 million of cash representing ACON's proportionate share held in joint operations. In addition, at December 31, 2025, ACON had committed revolving credit facilities of $1 billion, of which $257 million was drawn and $4 million was utilized for letters of credit. ACON has no debt or working capital credit facility maturities until 2029, except equipment loans and leases in the normal course. ACON's Board of Directors approved an annualized increase to the dividend of $0.01 per share, resulting in a quarterly dividend of $0.19.25 per share. The dividend will be paid on April 2, 2026, to shareholders of record on March 23, 2026.

At this point, I'll turn the call back over to Jean-Louis to address our business performance and output. Thank you, Jerome.

Turning now to slide 11, ACON continues to build resiliency through a balanced and diversified work portfolio. In 2025, roughly 55% of ACON's construction revenue was related to power and utility services across the nuclear, civil, utilities, and industrial sectors, with nuclear representing the largest share. This represents a purposeful transition in our business with a percentage of power activity increasing significantly over the past five years. Approximately 30% of ACON's construction revenue was derived from power and utility services in 2020.

Through our growth and diversification, ACON is a profoundly different company now than we were several years ago. Turning to slide 12, demand for ACON services continues to be strong.

With backlog of $10.7 billion at the end of 2025, recurring revenue programs seeing robust demand and a strong bid pipeline, ACON believes its position to achieve further revenue growth in 2026 and is focused on achieving improved profitability and margin predictability.

all while improving the risk profile of our business.

Recurring revenue was $926 million in 2025, and the proportion of recurring revenue from utility services increased from $610 million to $728 million, an increase of 19% over 2024. 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 13, ACON expects 2026 revenue to exceed 2025 levels based on ACON's strategic positioning in sectors with attractive demand profiles and a healthy pipeline of project opportunities tied to power generation, critical resource development, mass transit infrastructure, water, and defense. In the concessions segment, ACON continues to focus on opportunities to add to the existing portfolio of Canadian and international concessions to support trends in aging infrastructure

mobility, connectivity, energy, and population growth.

Beyond the fixed price legacy projects, we believe that the deliberate shift towards a greater weighting of improved risk-adjusted programs, in combination with a strong focus on operational excellence, is anticipated to support a stabilization and gradual improvement of adjusted EBITDA margins in the construction segment in 2026. ACON plans to maintain a disciplined capital allocation approach focused on long-term shareholder value through acquisitions and divestitures, organic growth, dividends, capital investments, and share repurchases on an opportunistic basis. We are focused on making strategic investments to support our strong growth, whether through the concessions portfolio to provide access and entry into new markets or to increase operational effectiveness.

Our overall look for 2026 is very positive.

We are extremely excited about the momentum we have built and remain focused on executing our strategy to drive long-term shareholder value. I want to express my sincere thanks to our growing team for their resilience, high professionalism, and safety always mindset that has positioned ACON for what comes next.

Thank you. We'll now turn the call over to analysts for questions.

Thank you. As a reminder, to ask a question, please 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. Please stand by while we compile the Q&A roster. And our first question comes from Sabahat Khan of RBC Capital Markets. Your line is open.

Great. Thanks and good morning. Just you provided a bit of color on the sort of the opportunities ahead. I was hoping you could dig a little bit into some of the announcements we've been seeing from the Canadian government on the infrastructure side. Just hoping to provide a bit of color behind all these headlines. Where are we in maybe some of these projects hitting the bidding process? Are you bidding on some of these already? And then maybe if you could just tie in the announcement from the other day related to NORAD as well. Just curious to get some more color on that project. Thanks.

Yeah, I will take this one. First of all, as an introduction, where we are today, is the result of being extremely serious and focused about our strategy.

We are extremely disciplined with this. We are now following our plan 2024-2027. And we had an update mid-2025.

Basically, where we are today belongs to four

vectors. The first one was ACON has to become a powerhouse. And as I've noted during my speech, we are now a little more than 55% related with power. It's an incredibly important shift for our company that was before much more road and bridges. Point number two, ACON has become what we call a sovereignty champion, and we're coming to your question. You probably have noticed that we were among the first five projects of national importance that were defined with the Contrecoeur Port in Montreal and the SMR construction in Darlington. But we also announced a few days ago that we had been awarded this Arctic Over the Horizon project. This project was a target for ACON. I mean, we wanted to come back to Defense Construction Canada. We had not been there for quite a number of years because the jobs were much more refurbishments of buildings, hangars, and not that much infrastructure. We decided that we had to be back. We have been awarded the first pieces of this job. Ultimately, there will be several others for what has been announced as a total size that could exceed $3 to $5 billion. It's a complex project. We are leaders. We want it with an outstanding scoring result. It's a purely collaborative job. It means that we first have a validation phase. Then we have a development or a detailed definition phase. Then we have construction that should begin in 2027. It was very important for us, and we got it. Third point of our strategy, we'll come back to this. ACON has to be a national and a local strong player in the U.S. We'll come back to it. And number four, ACON has to become more international, what we also have been doing. I hope I've answered your question.

Yeah, just maybe a bit more, if I could follow up there on just, you know, behind some of these initial projects, have you seen an uptick in bidding activity, or are these projects still initial phases? Just wondering sort of when some of the other larger projects or some of this investment might hit the ground.

When you discuss with Defence Construction Canada, or you also can go to their website, I mean, obviously, the number of projects that are now on the list and that will be put on the market, I mean, during the few years to come, has been multiplied by quite an interesting factor. So we are tracking this. And, of course, you have also, for example, learned about Alto, I mean, the high-speed train with the first phase between Montreal and Ottawa. I mean, this is a pure kind of project for which ACON is excellently positioned now.

And then just my last question. Obviously, you're talking a bit about the power opportunity and the business here. Can you maybe just sort of rehash sort of the utility strategy? Is that something that, you know, is it more growing it via some of these power project opportunities? How big of a role would M&A play in that? Maybe there's a little bit of color there and I'll pass the line. Thank you.

Yeah, I mean, obviously, the power part of utilities is growing and is growing well. Our utility sector is also about gas. It's also about telecom. It's also about fiber to the home and those kind of activities. But power is what is growing. At the same time, in the United States and in Canada. I mean, basically, the main topic of today is about electricity addition. This is the wave, and we were not wrong three years ago when we just called this and decided to focus our efforts on this part of the business. This being said, as I've always told you, AECON has to stay balanced. It has to stay balanced between the different core competencies that we have. It's about urban transportation. It's about industrial. It's about nuclear. It's about utilities. And it's about civil. We have to keep balance, but we know that the wave is about power.

And, Jérôme, you want to add something? Sure. And just to close the loop on it, on the utility services side of the business, The capability that we have both in Canada and the United States centers around grid scale, battery storage, substations, distribution, transmission. And then now increasingly electrical testing, verification, meter replacement with the new team that's joined us. So our perspective is we want to continue to build capacity to serve these end markets. There's an undeniable growth trend. Even in the more bearish case for power demand, we just see an enormous opportunity for us to continue to build out that area. We'll do it organically. We'll do that through M&A to the extent the opportunities fit our buy box, our culture, and our safety record. And we continue to view it as an area of opportunity for capital deployment, for sure.

Great. Thanks very much.

Thank you.

And our next question comes from Uri Link of Canaccord Community. Your line is open.

Hey, good morning.

Good morning. Good morning. Just want to dig in a little bit on the outlook for construction segment adjusted EBITDA margin. Calling for some stabilization here after a number of quarters of decline and then maybe some improvement in the back half of the year. So maybe just what are the puts and takes? that get us stable here, and then what could possibly drive some upside in the back half of the year in the margin? Thanks.

For sure. The message is simply that the direction of travel for the construction margin, whether you look at it on a reported or as adjusted basis, that the message is very much consistent is stabilization on the direction of travel with the potential for improvement That's largely a function of through 2025, the business has moved the type of execution that's flowing through and being recognized into revenue away from some of the progressive elements and fixed price contracts which generally carry higher emergence, but in some ways on fixed price, certainly higher risk, to a much more stable risk-adjusted return that we view as very attractive from an ACON perspective. We've now reached that point where we've stabilized that transition. The vast majority of our work is done under more appropriate contract structures. The risk-adjusted margin profile that we're recognizing is strong, given the contract structures that we're in front of. And the improvement is going to stem largely from operational efficiency gains. as the drop-off of Legacy and then the Western Civil area that's added a dilutive impact to the overall merchant profile in 25 and late 24. So I think from that perspective, it's a mix of factors, but I think all of this is in the context of a business that continues to grow quite well. And so we think there's good torque in that message.

And are those Western Civil contracts, still dragging or they're finished or stable?

Our view is we have a handle on their completion and amount, right? They're, they're effectively, I think backlog wise, we're probably talking kind of sub a hundred million dollars here. Um, same thing on the legacy side, some a hundred million dollars in the context of, you know, 5.4 billion of, of overall rev. Uh, and so we're, we're feeling better about it.

Yeah. Uh, last one for me, just on the bookings, I mean, a huge bookings year, 2025, um, safe assumption that we're not going to get to that level of bookings in 26. And can you just remind us of any progressive contracts that might come up for, that might be suitable to be booked in 26? Like I'm thinking Pickering is probably one, but any help on just how we think about the new awards outlook this year?

I will take this one. Yes, you're right. I mean, the increase in our backlog, I mean, in 2025 is mainly due to big chunk of job. I mean, we told you about Scarborough. So what is coming now? There are, I mean, obviously pickering is an important one. We are also on Winnipeg on a very interesting wastewater treatment plant where we are finishing the development phase. We are also working, you probably remember, on a fish passage and a civil job in the United States. I mean, over Anson Dames. That should most probably come to our construction backlog. And we are waiting for a few research and eventual awards on some UDS projects on which we have been bidding during the last months.

Okay, that's helpful. I'll turn it over there, guys. Thanks.

Thank you. And our next question comes from Chris Murray of ATB Cormorant Capital Markets. Your line is open.

Yeah, thanks, folks. Good morning. Maybe kind of following on kind of what to expect in 2026, especially on the revenue line. Certainly, you know, really strong revenue growth through this year. You know, there's a few projects that, you know, we've been in. Actually, I was thinking of, you know, the Ontario Go electrification project as well. You gave the indication that you expect revenues to be higher in 26 and 25, which, you know, given where the backlog is, that's, I guess, probably what we should have been expecting. But I'm just trying to gauge how you think the magnitude is going to show up. Because I can't believe that this 20% clip year-over-year growth is going to continue. But maybe if you can characterize it a little bit better, that would help us kind of shape our view.

Sure thing, Chris.

The growth in 25, I mean, we'd likely describe as exceptional rather than just very good. 80 plus percent of that was organic, which is roughly a billion dollars. Just the growth that AECON produced in 2025, if that was its own business, would have been a top 20 construction company in Canada that was formed out of AECON. So the We are not anticipating that level next year. Our commentary and the outlook is formed on the basis of, number one, the backlog. Number two, really strong recurring revenue programs across the business, but in particular, the utilities group. Number three, all sectors are really well positioned for where demand trends exist today. If we look, 2025 was effectively a flat or down year in construction in North America, except for a select few sectors, and those sectors were the five sectors in which we were involved. 2026, we continue to see good outlook. Overall general industry trends, people are calling for something in the order of low, mid-single-digit growth. And again, we think we can handily beat that, but we're not going to get to the level we got in 2025. I just don't anticipate that absent some significant M&A. We're expecting another good year after an excellent year, but not, you know, we have to temper expectations, right? We can't expand our human capacity and deliver the amount of skilled trades that we use as a basis for business at that clip on a continual basis, right? We need to be smart about it.

Okay. Maybe if I ask the question a different way, if I think, you know, if I look at your backlog kind of characteristics today, you've got about $3.6 billion that looks like delivered or planned for the next 12 months. a billion of probably recurring revenue that's in the pipeline. And then how should we think about, you know, at least even with the project demand in here, is it fair to think, like, what would be about the right number to think about stuff that you can actually book and execute in the same year kind of on a normal run rate? Maybe that's a different way to think about this.

Yeah, if I gave you that, we'd be plugging to the – the revenue number that we have in our business plan, which we're not going to disclose. So the opportunity set is strong, both procurement, go-get, change orders, ability to expand in existing projects and secure additional work packages. If you go back historically, it's a relatively broad range that we've been able to pull together across the years. You know, 2025, if you look at where we were in 2024, obviously that kind of go-get element was quite strong. I don't think it'll be as strong in 26 if you want to try to track back against that.

Okay. Next question, really quick. You know, we're starting to see, you know, another one of these kind of legacy issues getting solved, I guess, in the quarter. Can you just give us any color around the solution and if it had any material impact on the numbers in the quarter?

Maybe I just begin with where are we physically on this job, and then Jérôme will add a few figures that are all in our reports. So as you have noticed, we are now substantially completed on Finch and Eglinton LRT, following what we call the revenue service demonstration, which is an extremely complex demonstration of the capabilities of all the systems we have been building. This is done on those two LRT. Our maintenance and the TTC operation is going quite well, so we are very happy about it. Gordie Howe, we are nearing substantial completion. It's about finalizing operational readiness of all our systems and finalizing the onboarding of all border agencies and installation in their office. I've read a few comments, so just to be clear, substantial completion is totally separated from opening of the bridge. It means that we are now in the last centimeters to go to substantial completion. The opening of the bridge is a different topic. We are on Zulu's three job finalizing our commercial discussion with all our clients. I mean, we have no disputes. We are under discussion and we think that within the next few months, we will be over with that.

A few figures. Financially, the legacy projects had a negative impact of $6 million in the quarter, Chris. The total for the year was $94 million. It's obviously substantially less than what we had last year. The big focus in 2026, as Jean-Louis mentioned, is the successful and then the closeout of the commercial toners associated with all three. Given where we stand today, I'm not sure it's actually additive or constructive for the overall ACON discussion to zoom in too much on these items. We're basically narrowing down the level of outcomes to not immaterial, but less material levels, and so what we might and then close out this chapter. We're in the twilight phase of the legacy. We're focused on what comes next around some pretty stellar opportunities that we're in execution and procurement on, and I think we're going to want to talk a lot about that in 26 and a lot less about this very difficult phase that I think the team's done an extraordinary job managing through.

Okay, great. Thanks. I probably asked the question a little bit wrong. I was actually more curious about the Rio Tinto agreement and just if that had any material impact on the quarter.

If it was material, we would have disclosed it. No, that's just another successful completion by our operational legal team to settle a dispute or claim situation with a client, and it's closed off. And I think from a macro level, if you kind of take it out a little bit, The real message here is that ACON does a really good job at managing risk exposures and reducing the overall enterprise level of risk that we're putting forward. So 24 to 25, the business has been in a better position, and 25 to 26, again, we think we're in a better risk-adjusted position. So the idea is creating a more boring, more stable, more predictable ACON from a financial perspective and then a more exciting ACON more thrilling ACON from a perspective of the people who work and, you know, a very dependable ACON from the perspective of our clients.

So I think we're branching along all three of those. All right. I'll leave it there. Thanks for the call.

Thank you.

And our next question comes from Michael Tupom of TD Cal, and your line is open.

Thank you. Good morning. My first question is just about the nuclear business. So obviously a key growth area for ACON in 2025, I think was your most important growth area in the year. I guess as we look to 2026, the question is beyond executing on the substantial volume of nuclear work that you already have in hand,

what should we be watching for and expecting as far as nuclear developments and progression in terms of new nuclear opportunities in 2026 okay um as an introduction i just want to come back to this incredible new about darlington refurbishment i mean in in february of 2026 we just finalized the refurbishment of the four reactor and the budget and four months ahead of schedule. I mean, it's extraordinary. You cannot imagine the number of calls and questions that we are receiving. I mean, something like, this is the first time we have good news on a big nuclear project for the last 20 years. How did you do it? And we are extremely proud because ACON, during the last eight years of this project, was on the critical path of its execution. So it's very good news for ACON the nuclear industry to have been able to demonstrate that when it is well organized it works so obviously i mean on refurbishment we are we are still on two major programs i mean bruce with four reactors to complete up to 2032 and pickering i mean four reactors we have just begun the development phase and turbine up to 2035. regarding new construction in In Canada, so we are working on the first unit of the small modular reactor, the 300 megawatt from GI-TACHI, a completion forecasted around 2030. It's going well. We have at this stage something like 1,100 people, I mean, between staff and workers on site. Nothing has yet been decided regarding new big nuclear in Canada in terms of technology from OPG or from Bruce, but we are working with those two utilities on the development phase with various options. In United States, I mean, We are working on three different topics. Major component replacement, mainly with Dominion, but also now with Energy Northwest. Second vector is the Department of Energy on their national lab in Savannah River. And the third one, you have noticed, we have been awarded for Energy Northwest. collaborative development to complete the planning, the design, and the construction of a 12-time 80-megawatt X energy reactor with Kiwit and Black & Veatch. It's just beginning. We are planning a pure definition phase, but it's a new build. What's important with this is to say that ACON is technology agnostic. I mean, we work for CANDU and we are extremely strong with CANDU. We work with GI-TACHI. We are beginning with XNG. We have been working in the past and we are working today with Westinghouse. It just means that we are ideally positioned for what is coming.

That's helpful. Thank you very much. Maybe just one quick follow-up on that response. As far as the Energy Northwest Cascade Advanced Energy Facility opportunity, is that something that as you move through this next phase, you could get to the point where you are booking more meaningful amounts into backlog in 2026, or is that a beyond 2026 opportunity?

So it's going to be beyond. I mean, at the moment, we are in pure definition phase. I mean, it's a new kind of reactor. This will require some time just to get it well in the box between the next phases will be launched.

Got it. Thank you. And then maybe for... Jerome, you have a few questions about 2026 revenue outlook. I think you provided us some good information. The question is really about as we look beyond 2026. Obviously, all of the transformation that's occurred at the company and the focus on different vectors has been done with a longer-term view. Can you talk about what sort of visibility you have into revenue growth beyond 2026 as we look to 2027 and and future years? You talked a moment ago about sort of 2026 being able to hopefully do better than industry-level growth. How do we think about sort of that period beyond 2026?

There's a few things. So one, we've done a good job building out the stable recurring revenue side of the business on the utilities front, and we see opportunities to build out there. The next component is, if you look at our backlog, something in the order of $5 billion of the backlog is executable, you know, effectively kind of beyond the two-year period. And the way we define backlog, Mike, as you know, is it needs to be a project that has been awarded with costs and scope and schedule. And so it's really kind of an air quotes hard backlog definition. We have visibility for... financials that extend beyond based on the projects that we're in procurement on. For instance, Arctic Over the Horizon, that will not enter backlog until we exit the validation phase, but we have a pretty good handle given the work that's been done by the reconstruction teams as to what that could look like. Where we sit today, one, items that have been, you know, we've effectively secured but not entered into backlog, backlog, recurring revenue, pipeline of work, and then just overall trends in the sectors where we're present and then the inbounds that we're receiving from a demand perspective gives us a strong degree of confidence that the business is positioned where it ought to be positioned. And so that, you know, You're probably looking for something a little bit more than that, other than to say that we feel pretty good about the trajectory that ACON's on today and an ability, certainly in the medium term, to outpace the overall industry.

Okay, that's helpful.

I will turn it over there. Thank you.

Thank you.

And our next question comes from Frederick Bastien of Raymond James. Your line is open.

Good morning. Guys, it's been almost two and a half years since Oak Tree made its strategic investment in Akon Utilities. How would you grade yourself or Akon on a report card with respect to that investment, and what can we be looking forward to in the future?

So the utilities business has been... performing well in the context of a very difficult regulatory environment in Canada. When OT entered into the equity of AECON Utilities, we were facing some pretty good demand tailwinds, not totally thereafter. Telecom regulations, OEB regulations, a lot of the core markets where AECON Utilities has historically been focused, We're just faced with customer profile reducing capex to redeploy to other jurisdictions based on regulatory challenges in those markets. The team did a very good job reimagining where they could put their resources. And so in the context of a business that was very heavily focused on pipeline and telecom, what we saw in 2025 was The addition of the extreme group in Michigan provided very strong growth in the United States. Our execution on three major grid scale battery projects, which is an internal partnership between industrial and utilities, all those got done with just extraordinary schedule and cost performance. And then we also had KPC and then Ainsworth added to the mix as well. Overall, the performance in a very tough environment where we operate wasn't bad. It wasn't bad at all. The team is very proud of what they've been able to produce. OKC is a constructive partner. They've got a very good read on aspects of the market in the United States, which when combined with our own intel and perspectives gives us a very good growth algorithm for that market.

We're not going to give ourselves a letter grade, but we're happy with how it's worked out. Great.

And I think one of the options that you would be contemplating further down the pipe is potentially turning this ACOT and utilities into an IPO. What are your thoughts there?

Our focus with the business is to continue to grow and build out the recurring revenue programs. and expand its diversification from a market, client, and geographic perspective. So first things first.

We saw, obviously, the recurring revenues, type 2 utilities go up nicely year over year. What's behind the – there was a drop, and if you look at the other side of the recurring revenue pie, there's been a drop. from about 50%. What's in there as well?

So that would capture a variety of items ranging from aggregate sales, but most of the change that we've seen on that level relates primarily to some of the progressive design So when we think about some of these collaborative projects that we're on and we're expanding kind of design and pre-construction resources where it's not tied to backlog, but it's kind of like an ongoing recognition of revenue, it falls into this bucket from a kind of disclosure perspective. And then as those projects have flipped into construction, it's now just moved into another part of the business. So it's less here, but more elsewhere.

Gotcha. That's a good call there. Appreciate the answers. Thank you.

No problem. Thank you.

And our next question comes from Krista Friesen of CIBC. Your line is open.

Hi. Thanks for sharing my question, and congrats on the quarter. Obviously, a number of opportunities in front of you guys, whether it's utilities, nuclear defense, Build Canada, How are you feeling about your capacity? Maybe that's the labor force or task in a different way. What do you feel is your limiting factor when you're looking at all of these opportunities?

Obviously, construction, as I used to say, is about people and processes. we have to be careful about people availability. At this stage, we have no issue. I remind you that we have extremely strong relations with the trades community and the trade unions. We have been able, because it was part of our strategy and we had quite a good view about what was coming, to discuss with them and to be ready. We do not have at this stage an issue, for example, our workforce in the nuclear sector to finish Bruce and Pickering is extremely strong. I mean, not only in Canada, I mean, in the United States, we have something like 1,500 workers in our nuclear sector, very much loyal to the company. So I would tend to say so far, so good. The battle on the staff, And the executive, I mean, has always existed. Between company, it's an open market. The fact that ACON, I mean, has a bright future is helping us a lot to be able to attract, to train, to retain a lot of new and former executives. So at this stage, I would say I'm not that worried. We are extremely focused on the contract mode of our new project, of our backlog, and I think we have done quite a good exercise to de-risk you. You remember that we have inverted our proportion of fixed lump sum costs and collaborative progressive variable costs.

So this is what I can say to you at this stage.

Thank you. And maybe just thinking about defense specifically, do you feel that you have all the capabilities that you would like to have to execute on these defense projects? Or are there M&A opportunities to build out your expertise in that space? Thank you.

I mean, for what we have at the moment, specifically Arctic over the horizon, I mean, we already, I mean, it was a target. and we have been preparing this extremely carefully. Now, obviously, you have heard that there is going to be four new bases, I mean, four aircraft in the northern territories. We're not going to take and win those four jobs. We don't want to. I mean, we are extremely careful. We are not looking at M&A to be able to execute those jobs.

Thank you. I'll leave it there.

Thank you.

And our next question comes from of NBCM. Your line is open.

All right, good morning, gentlemen. Jean-Louis, maybe first question for you. I mean, nuclear right now is 30% of the business, and given the visibility of all the new-built stuff that's coming up and, I mean, obviously the construction revenue is sort of attached to it, is it conceivable we could be driving, like, maybe close to half of revenue in five to seven years from nuclear for ACON, or is that too aggressive of a potential assumption?

Thanks. I think it's too aggressive, Maxime. You know, we just have to realize when we speak about new build and new technology, for example, or upgraded reactors, I mean, it takes quite a lot of time to take them from definition or planning phase toward construction where the bulk of the revenue is. So this will take time, and that's good. That's good for us. So I think that the 50% is too much aggressive. And this being said, I come back to the fact that we want to be balanced. We want to be balanced because, I mean, we don't have in hand the control of all the parameters. So we think we have a good mix at the moment. We worked a lot to modify it. So it may grow, I mean, on the nuclear side, but not... up to the level you have been citing.

Just to layer on top of it, all other sectors are also growing. We're in a dynamic where we only have one shining star in the constellation. It probably wouldn't be a crazy assumption, but the fact that all five of our sectors in the construction segment are very well positioned I think, reduces that impact quite materially.

Yeah, yeah. Okay, no, that's fair. And then quickly, just in terms of potential M&A in the U.S., I mean, I presume anything in the utilities, power space, tool commands, you know, pretty lofty multiples. I'm just wondering what are your thoughts there and what you are seeing on the ground while obviously benefiting from your own multiple expansion. So any comments would be great. Thanks.

Sure. There's

Multiples are strong and it's a reflection of the dynamic in that market. It's very clear the people who have the ability to service utilities are doing quite well now in the context of the CapEx budgets that the utilities need in order to keep pace with the demand profile. Part of that is clearly tied to compute consumption, whether it's for AI or kind of Bitcoin mining or whatever it is that is running through those server farms. Part of it is also re-industrialization, which I think we shouldn't lose track of. The administration's policies are focused on on-shoring a lot of that productive capacity, and that just consumes a ton of energy as well. So, yes, the multiples are expanding. Yes, it's creating acquisition opportunities. We need to be very specific with what we want to target. We have very particular parameters and ways that we approach it. We generally don't want to find ourselves in a situation where we're bidding for businesses that are mercenary or private equity companies. This is a challenging dynamic. We need to have businesses that will be additive to ACON from not just revenue and EBITDA and earnings perspective, but they need to be additive from a capability standpoint, safety standpoint, team standpoint. And so our job is to find the way. And so if you look at the average multiples that we've We pay for M&A over the last dozen acquisitions that the company's done. They tend to be appropriate for what we trade at at the ACON level, and our job is to thread the needle and finesse that. That's why if people want to go pay whatever the multiple font is trading at, they can easily go do that. If they want to find a better way of doing it, that's our job.

Okay, great call. Thank you so much, gentlemen.

Thank you. I'm showing no further questions at this time. I'd like to turn it back to Adam Borgatti for closing remarks.

Thanks very much, Judy, and appreciate everyone's attention and interest. We're available for follow-up calls at any time. Wish you a great rest of your day. Speak with you soon.

This concludes today's conference call. Thank you for participating, and you may now disconnect.