AtkinsRéalis Group Inc.

Thank you for standing by. This is the conference operator. Good morning and welcome to SNC-Lavalin's first quarter 2022 results conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there'll be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star, then zero. I would now like to turn the conference over to Denis Jesmin, Vice President, Investor Relations. Please go ahead.

Thank you, Ariel. Good morning, everyone, and thank you for joining the call. Our Q1 earnings announcement was released this morning, and we have posted a corresponding slide presentation on the Investors section of our website. The recording of today's call and its transcripts will also be available on our website within 24 hours. With me today are Ian Edwards, President and Chief Executive Officer, and Jeff Bell, Executive Vice President and Chief Financial Officer. Before we begin, I would like to ask everyone to limit themselves to one or two questions to ensure that all analysts have an opportunity to participate. You are welcome to return to the queue for any follow-up questions. I would like to draw your attention to slide two. Comments made on today's call may contain forward-looking information. This information, by its nature, is subject to risk and uncertainties, and as such, actual results may differ materially from the views expressed today. For further information on these risks and uncertainties, please consult the company's relevant filings on CDAR. These documents are also available on our website. Also during the call, we may refer to certain non-RFRS measures and ratios. These measures and ratios are defined, calculated, and reconciled with comparable IFRS measures in our MD&A, which can be found on CDAR and our website. Management believes that these non-IFRS measures provide additional insight into the company's financial results, and certain investors may use this information to evaluate the company's performance from period to period. And now I'll pass the call over to Ian Edwards. Ian?

Thank you, Denis, and good morning, everybody. Before we begin, I'd just like to take a minute to recognize the tireless efforts of our 31,000 employees worldwide in delivering every day for our customers. Every one of them continues to take pride in being part of the S&C Leveling community, and I can't thank them enough for their dedication and positive impact. So I'd like to begin today on slide four. During the first quarter, we saw continued growth in top-line performance as total revenues increased 3.8% year-over-year to $1.9 billion, driven by our SNCL services business, where revenues were up 6.8% over the first quarter last year to $1.7 billion. Excluding the impacts of foreign currency, we achieved a robust organic growth of 8.4%, SNCL services segment adjusted EBIT of $127 million represented a 7.6 percent margin. Over the first three months, our LSTK backlog decreased by $210 million to just under a billion dollars, and we remain on path to substantially closing out these projects over the next several quarters. Following our first quarter results, we are reaffirming our 2022 outlook, including SNCL services revenue growth of between 4 and 6 percent versus 2021, with a segment-adjusted EBIT to segment revenue ratio of 8 to 10 percent, and overall company-positive net cash from operating activities. Our solid start to 2022 reinforces our optimism in regaining the sustainable progress on our journey to align the company on key growth trends, such as government-funded infrastructure programs, digital innovation, climate change to net zero, all of which leverage our unique end-to-end solutions from design through to decommissioning. Turning to slide five, our engineering services business capitalized on momentum from the fourth quarter 2021. delivering strong results for the first quarter of 2022. Leveraging the depth and breadth of our services, the capabilities of our team, and the long-standing relationships with our client base, we continue to take strides in achieving above-market growth. Revenues were up 10% on an organic revenue basis over Q1 last year, to just over $1.1 billion, driven by strong growth in the U.S., Canada, and the UK. Segment-adjusted EBIT was flat year over year as the continued strong performance in the UK was offset by increased business development costs to win new project and expenses related to executing on our pivoting to growth strategy. The quarter witnessed key wins across the US and Europe, such as a recent contract extension for our work on the expansion of Southwest Florida's International Airport in Fort Myers. near-term growth trajectory is on track against our plan we continue to execute on our land and expand strategy in the US particularly Colorado and New York as a result backlog increased seven percent compared to the prior year to three point nine billion dollars and gives us confidence in delivering our revenue targets for the full year on slide six As a key element of our strategy, I'd like to highlight some of the recent wins that demonstrate our journey to delivering engineering net zero. First, I want to reemphasize our goal of achieving net zero carbon emissions by 2030, a critical component of our purpose. To that end, in March, we committed to the science-based targets initiative, joining over 2,000 companies globally to set emission reduction targets in line with the Paris Agreement. Beyond our own efforts, we can enable a step change in this arena by assisting our clients with broad range of net zero solutions. In the UK, we're working with and supporting the national grid in decarbonization of the energy system, which is required for the UK net zero targets. We're providing design and project management services across the entire construction cycle to assist National Grid in delivering a transmission network capable of supporting the transition to net zero. This project is a prime example of our ability to utilize the broad capabilities of SNC-Lavalin network to deliver multiple solutions for the client in their decarbonization efforts. In Dubai, S&C Leveling has successfully been selected by Five Holdings to investigate how the design of the award-winning Five Jumeirah Village, Dubai can be redefined to deliver net-zero carbon. Lastly, at home here in Canada, our successful track record of delivering trusted solutions for the major component of Bruce Power's CANDU reactor redesign has led to additional requests for our services across additional reactor units. Our work on this project will allow Bruce Power to continue to generate residential power at 30% of the cost and extend the life of the units by another 30 years. Advancing net zero projects around the world for our clients and making continued strides in our path to achieving net zero carbon emission is critical to our purpose. I'd like to move to slide seven and the results of our nuclear business. We recently announced the appointment of Joe St. Julian as the new president of our nuclear business. Succeeding Sandy Taylor, Joe brings an exceptional background in strategic and commercial management in the nuclear sector, and I really look forward to working with Joe to deliver our plans for the business. I'd also like to take this opportunity to thank Sandy for his leadership over the last years, and in particular, the role of bringing together all of our full lifecycle capabilities in the nuclear sector. During the first quarter, nuclear revenues had 2 percent organic growth compared to the first quarter, 2021, increasing to $232 million as we continue to witness strong demand for our reactor support services in particular. Segment adjusted EBIT was $34 million, with segment adjusted EBIT margin increasing 90 basis points to 14.8 percent. During the quarter, We made significant progress across a number of projects, including Darlington and Bruce Power. Our pipeline for can-do reactor upgrades remains robust, and our portfolio is well-positioned to capitalize on new-build projects should they materialize. At the same time, our proprietary technology-related nuclear products are increasingly in demand by our customers globally. Overall, our nuclear segment provides a predictable and stable base of work that is highly profitable for S&C Loveland. Our position in the marketplace drives our right to win and captures our high-quality, substantive, near-term prospects that will deliver long-term value creation and supporting our pivoting to growth strategy. Moving to slide eight and our O&M segment, which generated $137 million in revenue during the first quarter, slightly below first quarter 2021 performance. Segment-adjusted EBIT of $12 million was in line with last year's 6.8 percent margin. We continue to see stable financial performance and strong operational metrics across the O&M portfolio with robust projects in the pipeline over the next 12 months. We remain focused on increasing the pipeline with strategic partnerships across the industry while leveraging the expertise of our capital group to maximize bidding opportunities. On slide nine, our links on business generated robust top line growth during the quarter, increasing revenues to $151 million represented organic growth of 21.3% compared to the first quarter of 2021. Year-over-year growth was mainly due to an increased level of activities in the U.S. and the Middle East. Much of this demand is driven by the net carbon zero agenda as the growth in renewable power generation and the increasing electrification of transport and infrastructure is driving additional demand for LinksOn's offerings. We recorded a segment-adjusted EBIT loss of $5 million in the quarter. mainly resulting from project delays and higher costs on one European project installation, partially offset by high contributions from projects in the US and the Middle East. This European project will be commissioned in the second quarter this year, and we expect the business to return to its forecasted EBIT margins of 4% to 6% for the remainder of the year. Our backlog ended the first quarter at $920 million, slightly below the first quarter 2021 backlog, but we remain really confident that our solid pipeline of prospects will continue to allow us to deliver on our growth targets. We have a strong standing in the marketplace and see robust growth opportunities across our key markets, underpinned by decarbonization trends and grid infrastructure investments. Turning to slide 10 and capital, First quarter revenues declined to $16 million, mainly due to the successful disposal of InPowerBC in February. We remain committed to the recycling of capital investments when opportunities arise. No dividend was received from Highway 407 ETR in Q1 2021 and 2022. Amidst the easing of COVID-19 restrictions by the province of Ontario, traffic pattern trends on the 407 improved 37% versus the first quarter of 2021. And looking forward, we remain active on the business development front, and we continue to make progress on our new strategy and close alignment with our O&M business. Moving to slide 11. I'd like to provide more color on the pace of the wind down of our LSDK projects before turning it over to Jeff to discuss our financial performance in the quarter. Year to date, we continued to take strides towards completion of our three remaining LSDK projects. Our backlog decreased more than 40% compared to the first quarter of 2021 and now stands at $957 million, This represents a decline of 18% compared to the end of December 2021. Last quarter, we outlined some of the unprecedented factors that we've been managing through as we work to complete these projects. These included supply chain disruption, elevated inflation in building and construction indices, and COVID-19 absenteeism on our sites. These remain impactful from a productivity and a cost management standpoint. That being said, we remain confident in our potential future financial risk projection and our forecasted timeline of the completion of these projects. Throughout this process, we will continue to have discussions with our customers regarding certain recoveries, which we believe we are entitled to and will pursue vigorously. With that, I'll now turn over to Jeff to discuss the financial highlights.