AtkinsRéalis Group Inc.

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

Thank you, Adria. Good morning, everyone, and thank you for joining the call. Our Q4 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 of them have an opportunity to participate. They 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 uncertainty, 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 Yimid Wurjian.

Thank you, Jenny. Good morning, everyone, and thank you for joining us today. 2022 was a good year for S&C Loveland, as we achieved many of the goals we laid out at the beginning of the year. The tireless effort of our 34,000 employees worldwide is what drives the company every day. Our core purpose is engineering a better future for the planet and its people, and we're only able to do so through the hard work and dedication of our employees. I can't thank them enough. On slide three, we outline our accomplishments against our pivoting to growth strategy that we introduced during our investor day in 2021. As a reminder, our goal was to wind down our LSDK projects and pivot into growing our SMCL services businesses in our chosen geographies to drive long-term value creation. 2022 was a year of strong progress against this strategy. We are now largely physically complete on our two Ontario LSDK projects. And we remain on schedule to hand these over to clients in 2023. And REM continues to progress well. We expect that this will result in positive free cash flow in the second half of the year. We also remain focused in pursuing all monies owed due to the increased project cost. We continue to grow our engineering services business, expanding organically our revenue by 9% year-on-year. We achieved record backlog for the third consecutive quarter, as demand for our services remains very strong in our chosen markets. We continue to be recognized as leaders in the nuclear sector. Governments and public entities around the globe are making strides towards a greener power grid and to build new nuclear, and SNC-Lavalin is well positioned to win its fair share of these opportunities. We have been intentional in our pivot into specific core geographies and our chosen end markets. Success this past year further emphasizes the strengths of our new strategy, and our growth opportunities are unfolding as planned. We continue to believe the strategy put in place represents the best opportunity for S&C Loveland, and we expect to continue to deliver on our stated goals. The macroeconomic environment is challenging. and is projected to be so for the foreseeable future. But our business model, which is focused on geographies and end markets that we have intentionally chosen, remains resilient, driven by public sector's focus on sustainable infrastructure and long-term energy solutions. As we continue to deliver on our strategy, we are undertaking a strategic review to optimize our portfolio of businesses to ensure that capital and human resources are prioritized to the areas of the business with the highest value creation potential. On slide four, we highlight our achievements this past year versus our stated targets. Continued demand for our S&CL services, coupled with our focus on operational initiatives across the businesses, led us to hit the top end of our target range for organic revenue growth, and in the middle of our segment-adjusted EBIT to segment revenue ratio range. In 2022, developing our people and attracting new talent was a key focus area. As a result, we successfully grew our headcount by approximately 3,000 people, and we increased our focus on training and development. This resulted in an engagement score of 6% from our previous Vox survey done in 2019. While I'm truly proud of this achievement, we will continue to focus on employee engagement. and the development as we grow S&C Leveling. We also continue to grow the sustainability of our operations and are proud to say that our sustainable revenues now represent almost half of our total revenues. In addition, we are partnering and supporting indigenous socioeconomic development in Canada and extended our credit facilities through a sustainability-linked framework. We remain on track to deliver our 2030 net zero roadmap, and our 2025 ED&I targets. Turning to slide five, I want to focus on a few of the highlights from the fourth quarter. We ended the year on a strong footing as SNCL services had an organic revenue growth of 7%. If we exclude the positive $93 million outcome from an arbitration in the engineering services in the fourth quarter of 21, Segment-adjusted EBIT was $156 million and represented a 9% margin. Total backlog for SNCL services rose to $11.8 billion, which represented a 5% increase year-over-year with a further strong growth in engineering services. During the fourth quarter, segment-adjusted EBIT for our LSTK projects was negative $150 million, following what management expects is the last material cost-free forecast on these projects. Today, we're introducing the 2023 outlook, which Jeff will provide in more detail shortly. We anticipate SNCL services' organic revenue and profitability to remain strong and in similar ranges as our latest 2022 guidance. We have largely physically completed our two Ontario LSDK projects and are on track to hand these over to clients in 2023. We expect the operating cash flow to be positive in the second half of the year. Turning to slide six, our engineering services business continues to drive robust growth for S&C Loveland and delivered strong results again during the fourth quarter. The business remains resilient and is accelerating in our core geographies, as evidenced by the 2% year-over-year organic revenue growth during the quarter, or 11% excluding the $93 million favorable outcome from the arbitration. Our year-over-year improvement highlights our ability to capture growth and provides a clear roadmap for the growth prospects for a sustainable infrastructure demand in 2023 and beyond. Segment-adjusted EBIT and EBITDA margins were 9.6% and 16% respectively during the quarter, at the high end of our target ranges. with particularly strong margin performance in the UK and the US. We achieved a record backlog during the fourth quarter, marking our third consecutive quarter of backlog growth. Backlog now stands at approximately $4.7 billion, which represents a 24% increase versus our backlog as of December 31st, 2021. The strong backlog increase in the US was achieved through several government contract wins, notably through delivery management services for Hurricane Ian and highway design services. In addition, for further support against future natural disasters, we were recently awarded a design and engineering contract to replace the Shepherd Broad Causeway Bridge in South Florida, which will increase safety and enhance hurricane evacuation capabilities. These wins, in addition to others, elevated our U.S. backlog to another record level and 30% higher than where we stood as of December 31, 2021. Our outlook for continued growth in the U.S. through our engineering services business remains bright, fueled by infrastructure governmental programs such as the Infrastructure Investment and Jobs Act and the Inflation Reduction Act. In the U.K., our diverse project portfolio, as well as our presence in all seven of our primary end markets, highlight the resiliency of our demand generators in uncertain economic environments. Our backlog is at an all-time high, and this past November, the UK autumn statement signalled a commitment to $600 billion in infrastructure spend, providing good visibility for near-term revenues. Over the past few years, we have focused on improving our position in these growing regions and in markets through digital investments and increased hiring and the use of our global technology center in India and training all our business development and engineering teams. Results this year and our outlook for the future highlight these investments are proving fruitful and for the long term. Looking out into 2023, our pipeline remains robust and we are well positioned to continue growing. I'd now like to move to slide seven and the results of our nuclear business. During the fourth quarter, nuclear revenues in segment-adjusted EBIT were similar to prior year, with a continued uptick in segment-adjusted EBIT margin across all geographies. Our backlog stood at $937 million as of December 31st, and we saw bookings growth in all of our geographies during 2021. This level represents double-digit growth versus 2021. As we continue to see growth Across all of our core geographies, we are also witnessing accelerating activity in each of our core nuclear end markets. We remain bullish on the nuclear sector, as several countries around the world continue to make commitments to net zero. Government entities see nuclear as a low-carbon way to produce electricity, creating new build opportunities to deliver baseload power into an evolving and greener power grid. We are very excited about our recent award with GE Itachi to build the Darlington Nuclear Generation Station small modular reactor. This SMR is the first to be built in North America and could become a game changer for the nuclear industry. This is a great example of the substantial opportunity for our full lifecycle services business in our core geographies. Additionally, a recent decision by the UK government to fund the Sizewell Sea new build is another example of our capabilities being in demand for new build opportunities needed to deliver a greener baseload power. We remain active in reactor support and life extension projects as indicated by our work in Europe and Canada. In the US, there are a number of opportunities with the National Nuclear Security Administration and potential projects that would utilize our learnings from the work we have begun on the Ontario Power Generation SMR. The high quality prospects across our three nuclear sub-sectors show the potential growth opportunities happening now and for years to come. Our track record and technology expertise has put us in an enviable position and we continue to make strides to be the partner of choice. Moving to slide 8, and our O&M segment, which generated $132 million in revenue during the fourth quarter and a 12% organic increase year over year. Segment adjusted EBIT margin last quarter was 7.8%, above our long-term target of 5% to 7%. Revenue this past quarter was primarily driven by transit projects, and our LSTK projects moved towards operation We are mobilizing for the OEM startup at Wren, South Shore, Eglinton, and Trillium. We continue to see opportunity for growth in the UK through building and road infrastructure improvements. We're also utilizing our strategic partnerships with key industry players and leveraging our capital group to maximize bidding opportunities for future growth in core markets. On slide nine, our links on business revenue was impacted by low bookings, in prior periods in Europe and Asia Pacific, which was only partially offset by significant revenue growth in the Middle East. And as a result, organic revenue decreased 17% compared to the fourth quarter of 2021. We also needed to take an additional charge on certain European projects that were completed or nearing completion to reflect cost re-forecast, resulting in a $14 million EBIT loss in the quarter and a 10 million EBIT loss for the full year. We have already taken action to improve profitability of the business, and we're also undertaking a further strategic review. Turning to slide 10 and capital, four-quarter revenues decreased to $49 million, and segment EBIT fell to $45 million, mainly due to decreased contribution from InPowerBC following its disposal in the first quarter of 2022. and lower contribution from a power asset due to a planned maintenance shutdown. We continue to see opportunities to release value from the capital portfolio and in the fourth quarter we exited our investment in a fund of the Carlyle Group. We will continue to assess our portfolio of investments to determine long-term strategic fit and to look to release value where we see opportunities to realize additional value. Our capital concessions remain consistent sources of income for the business most notably our stake in the Highway 407 ETR, yielded dividends against this past quarter in the amount of $37 million. Looking out, we remain very active on the business development front and progressing on our new strategies and alignment with the O&M segment. Moving to slide 11 and an update on the LSTK projects, we achieved a major milestone during the fourth quarter as our two Ontario projects, Eglinton and Trillium, are now largely physically complete, a significant step towards our goal of being a professional services and project management company. Our last project, REM, continues to progress well and is more than 75% complete as of December 31st. Segment-adjusted EBIT continued to be impacted by the macro factors that we've been managing over the past several quarters, including supply chain disruption, elevated inflation, and material rates, labor shortages. This led to a four-year impact of $217 million of the $300 million risk envelope we outlined at this time last year to complete these projects. As we indicated earlier, we see this as the last material cost re-forecast for the LSDK projects. As was previously outlined, we believe a significant portion of these additional costs Related to the pandemic, supply chain disruption, inflation, and labor strike action is recoverable, and ongoing discussions are in progress to recover these losses. With that, I'll now turn it over to Jeff to discuss the financial highlights.