AtkinsRéalis Group Inc.

Thank you for standing by. This is the conference operator. Good morning and welcome to SNC-Lavalin's third 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 Jasmin, Vice President, Investor Relations. Please go ahead.

Thank you, Ariel. Good morning, everyone, and thank you for joining the call. Our Q3 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 transcript 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-IFRS measures and ratios. These measures and ratios are defined, calculated, and reconciled with comparable IFRS measures in RMDNA, 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, Denise. Good morning, everyone, and thank you for joining us today. I want to start, as I do every quarter, by taking a minute to recognize the tireless efforts of our 33,000 employees worldwide. I also want to officially welcome the new employees that joined in the quarter. We are excited to have you in the S&C Loveland family. Our core purpose is engineering a better future for our planet and its people, and we're only able to do this through the hard work and dedication of our employees. whose contributions help us achieve our long-term growth aspirations. I appreciate everything that they do. With that, let's start on slide four. During the third quarter, we saw a continued uptick in top-line performance as total revenues increased 4.5% year-over-year to $1.9 billion, driven by the continued acceleration of our engineering services business. During the third quarter, Our LSTK projects backlog declined further by $164 million from the second quarter to $664 million. As we approach the completion of these projects, with the two Ontario projects on track to be largely physically complete by the end of the year, we remain confident in our financial risk estimates that we outlined earlier this year. SNCL services revenues were up 8.2% over Q3 of last year to $1.6 billion. Excluding the impacts of foreign currency, we achieved a robust organic growth of 12.6%. Segment-adjusted EBIT was $153 million and represented a 9.3% margin. We're especially pleased by the continued execution in our engineering services business, which achieved a record-high backlog for the second consecutive quarter. Results these past two quarters further highlight our ability to execute our pivoting to growth strategy and expand into our core geographies, which continue to demonstrate resilient growth. Total backlog for engineering services rose to $4.6 billion, which represented a 20% increase year over year with a further strong growth in the U.S. We have been intentional in our pivot into specific core geographies and our chosen markets. Success this quarter further emphasized the strengths of our pivoting to growth approach, and our growth opportunities are unfolding as we planned. We continue to believe the strategy put in place represents the best opportunity for S&C Leveland, and we expect to continue to deliver on our stated goals. While the macroeconomic environment is challenging and is projected to be so for the foreseeable future, our business model remains resilient. This is driven by public sector's focus on sustainable infrastructure and long-term energy solutions. Turning to slide five, our engineering services business continued its momentum from the last few quarters, delivering strong results during the third quarter. Business remains robust in our core geographies as evidenced by our 18.3% year-over-year organic revenue growth to approximately $1.2 billion. Our sustained improvement quarter-over-quarter highlights our ability to capture market share and provides a clear roadmap for the growth prospects for a sustainable infrastructure demand. Segment-adjusted EBIT margin and segment-adjusted EBIT dial-over net revenue margin were 8.3% and 14.5% respectively in our target ranges. On an absolute basis, segmented adjusted EBIT grew $5 million year-over-year. Before discussing key wins, I want to highlight how proud I am of our teams for the quick response to assist the US Emergency Relief Fund program set up by FEMA to help those Floridians in need following Hurricane Ian. We send best wishes to all of those continuing to be affected by this disaster. During the third quarter, we continued to realize significant wins across our core geographies, the US, the UK, and Canada. But we also saw increase in demand in the Middle East, where we continued to secure project wins in sustainable building development to support increased population growth in the region. Strong backlog increase in the US was achieved through several government contract wins, notably with the Department of Transport for infrastructure development in Florida, Georgia, Colorado, and Texas. These wins, in addition to others, elevated our backlog to $4.6 billion, another record level and 20% higher than where we stood as of September 30, 2021. Looking forward, we remain optimistic at the long-term potential for our engineering services business. Our pipeline remains robust and we're well positioned to continue growing, capturing market share from increased governmental focus on sustainable infrastructure and renewable power alternatives. We also believe that the global energy transition that we're currently witnessing is positive for S&C Leveland, not only for our nuclear and infrastructure sectors, but also for our mining and our industrial sectors, which have seen a significant increase in demand for our services, such as studies for new minerals extraction processes as well as engineering from new electrical vehicle battery plants. I'd like to now move on to slide six and the results for our nuclear business. During the third quarter, nuclear revenues and segment-adjusted EBIT were similar to prior year, with slightly lower revenue being offset by slightly higher segment-adjusted EBIT margin. We continue to make progress across our Canadian refurbishment projects at Darlington and Bruce Power, And we're also seeing growing demand for life extension work for the can-do reactor fleet around the world. As countries continue to make commitments to net zero, we're seeing this as a positive catalyst for nuclear, as a low-carbon way to produce electricity and mark an increased focus on new-build opportunities to deliver baseload power into an evolving and greener power grid. We are also well positioned to capitalize on major upcoming new-build projects and small modular reactors where we are dedicating a greater number of our highly skilled engineers to billable projects as we position our new-build business for growth. We are offering large reactor technology support and continue to partner with Rolls-Royce for small modular reactor work. The opportunity to participate in nuclear projects is robust, including sizeable sea in the UK, and the potential for Cernovoli units three and four in Romania. Looking out, the pipeline for potential growth in this arena is very strong. Over the past three months, we've added significant amount of new opportunities to the pipeline across all nuclear sub-sectors. Life extensions and refurbishment, decommissioning and waste management and new builds. These high-quality prospects show the potential growth opportunity in front of us. Our technology and scale positions us to be market leaders in nuclear support and boost the long-term growth potential of S&C Lavalin. Moving to slide seven in our O&M segment, which generated $124 million in revenue during the third quarter and a 12.2% organic increase year over year. This sector continued to deliver strong segment-adjusted EBIT of $16 million, representing 12.7% EBIT margin, well above our long-term target of 5 to 7. Looking out, we have highlighted several opportunities across the UK, the US, and Canada through building and road infrastructure improvements. With the progress we're making in our final LSDK project, We're also mobilizing for the O&M startup at the REN, Eglinton, and Trillium. We continue to see opportunities for growth in our strategic partnership with key industry players and by leveraging our capital group to maximize bidding opportunities for future growth in core markets. On slide eight, our links on business was impacted by supply chain and manufacturing delays during the third quarter revenues declining to $123 million, representing an organic revenue decrease of 11.1% compared to the third quarter 2021. Segment adjusted EBITDA fell $2 million in the quarter. Q3 and year-to-date margin is lower than our long-term target of 4 to 6. Therefore, our main focus, other than winning more profitable work, will be in performance improvement to ensure we meet our target, in 2023. The pipeline of opportunities remains robust, driven by significant investments across the globe towards grid infrastructure and renewable energy power. Our backlog ended the second quarter at $764 million. However, new orders of $217 million have been added to the backlog year-to-date, and we are anticipating further addition to the backlog in the fourth quarter, as we've secured a number of project wins. subsequent to the quarter close. Turning to slide nine in capital, third quarter revenues increased $29 million and segment adjusted EBIT rose to $25 million, mainly due to the dividend received from Highway 407 ETR. This was partially offset by the previous disposal of our investment in InPowerBC, which occurred in the first quarter of 2022. As COVID-19 restrictions in the province of Ontario continue to ease, traffic patterns, trends have been stronger on Highway 407, with traffic now reaching 88% at pre-pandemic level. We received a $14 million dividend during the third quarter, and subsequent to quarter close, we received a $24 million dividend in October. Moving to slide 10 and the update on the LSDK projects. Our backlog continues to decrease at a robust pace, with a year-over-year decline from $1.2 billion to $664 million, representing a 43% reduction. Sequentially, the backlog saw a 20% reduction from Q2. Segment-adjusted EBIT continues to be impacted by the macro factors that we've been managing over several quarters as we work to complete these projects, including supply chain disruptions, elevated inflation, labor shortages, and the impact early in the quarter from an Ontario safety inspector's strike. As was previously explained, these post-pandemic macroeconomic factors, in our opinion, are largely recoverable under the contracts we have with our customers. And ongoing negotiations are in progress to recover the losses. We continue to progress the majority of these projects to completion at our cost, despite the lack of payment from our customers for contractual issues for which we have a legal entitlement compensation. Our shortfall in cash flow this year has been significantly impacted by the failure to receive these compensation payments, and we will continue to actively pursue claims for a timely recovery as we move into 2023. As you can see on slide 11, we have provided, as in Q2, a more detailed update of the wind-down of the other CK projects. Two of the three Canadian projects, Eglinton and Trillium, remain on track to be largely physically complete by the end of the year, while REM continues to progress really well and is over 70% complete as of September 30, 2022. We have recognized $111 million of EBIT losses year-to-date, with $77 million of those losses related to the $300 million of total financial risk to complete the LSTK projects, represented on the chart on the right-hand side of the slide. The remaining $34 million in losses is mainly related to the overhead costs in managing these projects. With each passing quarter, we gain increased visibility into the completion cost of these projects. And we remain confident that any further additional financial risk should be contained within the $300 million envelope originally projected earlier this year. So before turning it over to Jeff, I just wanted to highlight our 2021 sustainability report that we published on the 26th of September. Helping customers reach their net zero carbon targets is a fundamental part of our work, and we want to be recognized as a global pioneer in sustainable infrastructure. We have proven our capabilities through a diverse track record that ranges from electrified light rail transportation, nuclear energy, to designing, building, financing, and maintaining projects focused on transforming the built environment for a greener future. We are investing in data-driven digital innovation that we believe can unlock significant value for our customers by providing greater certainty over project timing and cost, increased operational efficiencies, and a reduced carbon footprint. We are helping to engineer a better future by meeting the global demand for clean energy, decarbonizing the built environment, minimizing the impact of new infrastructure, and building resiliency to climate change impacts. Helping our customers adopt clean power and renewable energy is a global effort which is expected to require significant investment over the next 30 years. All of this is only achieved through the hard work and dedication of our employees. And we have successfully welcomed a net increase of 2,400 employees across the company year to date. And we are further invested in their career to grow through our global talent development program. This is an exciting time to be at S&C Loveland. And with that, I'll now turn it over to Jeff to discuss the financial highlights.