AtkinsRéalis Group Inc.

Good day and welcome to the Atkins Realist first quarter 2026 conference call. At this time, all participants are in listening mode. After the speaker's presentation, there will be a question and answer session. To ask a question, you will need to press star 1-1 on your touchstone telephone. Please note, this call is being recorded. I would like to turn the call over to Dennis Jasmine, Vice President of Investor Relations. Please begin.

Thank you, Michelle. Bonjour tout le monde. Good morning, everyone. And thank you for joining us today. For those dialing in, we invite you to view the slide presentation that we have posted in the investor section of our website, which we will refer to during this call. To this call is also webcast. With me today are Ian Edwards, Chief Executive Officer, and Jeff Bell, Chief Financial Officer. Before we begin, I would like to ask everyone to limit themselves to one or two questions to ensure that all NNS 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 assumptions, risks, and uncertainties, and as such, actual results may differ materially from the views expressed today. For further information on these assumptions, risks, and uncertainties, please consult the company's relevant filings on CEDAW+. These documents are also available on our website. Also during the call, we may refer to certain non-RFRS financial measures. Reconciliation of these amounts to the corresponding RFRS financial measures are reflected in our earnings release and MD&A, which can be found on CEDAW Plus and our website. And now I'll pass the call over to Ian Edwards. Ian?

Thank you, Denis, and good morning, everyone, and thank you for joining us today. I'm going to begin today's call by providing an overview of our performance for the first quarter. Before I pass it to Jeff to provide more detail on our financial results, we'll then open it up for questions. Our focus on helping clients address long-term global energy security and aging infrastructure needs drove a strong first quarter. We began the year with continued momentum from 2025, as total revenue grew 18% year over year, or 13% on an organic basis. Overall demand remains robust and resulted in record quarterly revenues for our nuclear business. We also grew adjusted EBITDA by 18%, which helped to translate to a 27% increase in adjusted EPS year over year. We continue leveraging efficient and innovative delivery models powered by AI, which are improving safety, quality, and productivity through all corporate functions and our operational business. We see AI as a strong enabler to our business. Engineering is a judgment-based profession that uses data and design to apply it to the built environment and, in our case, on nuclear power plants and complex structures. An example of progress in that field this quarter is our collaboration with NVIDIA on nuclear-powered AI factories which I will speak about shortly. Demand for our unique capabilities remains strong as we secured numerous wins in Q1 to further strengthen our $20 billion backlog. Subsequent to quarter close, we announced three acquisitions, WGA and Corus, Australian engineering and project management consultancy firms. These will expand our presence in this high growth region where rapidly building scale and capability. And additionally Tobin, an Irish engineering and project management consultancy firm, which will further strengthen our footprint in a growing and attractive Irish market. 2026 is off to a great start and we are proud of our accomplishments this quarter. Year two of our delivering excellence and driving growth strategy will continue to highlight our shareholder value creation opportunities. Turn into slide four. First quarter revenue in our engineering services regions business increased by 12% year over year. On an organic revenue basis, engineering services regions grew 5% year over year within our full year 2026 outlook range. Segment adjusted EBITDA over net revenue margin was 14.2%. As a reminder, Q1 is typically the lowest margin quarter. and we expect margin to step up on a quarterly basis over the balance of 2026. The year-over-year decline in margin was primarily due to the reprioritization and wind-down of high-margin projects in the Middle East and reduced federal emergency work in the US. Notably, the combined backlog for all regions has increased by 3% to $13.2 billion versus our backlog as at March 31, 2025. Beginning on slide five, we provide an overview of each of our four regions and their performance this quarter. In Canada, revenue in the first quarter increased 16% organically year over year, while segment-adjusted EBITDA grew to $28 million with a 13% margin. A 220 basis point increase highlighting our ongoing efforts on our margin improvement plan. Across Canada, despite a lower backlog due to strong revenue delivery in Q1, we continue to see solid demand and growth across all end markets. In addition to opportunities in power and renewables and industrial, we're also seeing opportunities for more defense contracts. This stems from recent announcements by the federal government that it plans to allocate approximately $35 billion to fund defense spending in the Arctic and northern regions. We are also well-equipped to capture transportation opportunities, as our unique end-to-end capabilities continue to position us as a critical partner in supporting new infrastructure projects. For instance, we were, through a consortium, recently named preferred proponent for one of the new some cities system contracts, a vital rail project in Quebec City. And lastly, as noted by our sustained margin enhancement, we are executing on our improvement initiatives through cost optimization, enhanced bid discipline, and more efficient project delivery. We anticipate this work will continue to yield consistent results. In UK and Ireland, first quarter revenue grew 13% and organically grew 10% year over year. driven primarily by continued strong demand in water, aviation, and defense projects in the UK. Segment-adjusted EBITDA grew to $105 million in the quarter, representing a 17.9% EBITDA margin. We are focused on improving the utilization of our concentrated presence in this growing region. This work, particularly in the transportation and market, drove strong margins for a second consecutive quarter. Backlog grew 10% year on year to $2 billion, driven mainly by wins in transportation, rail, water, and aviation markets. These end markets continue to demonstrate strong client demand underpinned by long-term commitments and supportive regulatory drivers. In transportation, rail and transit remains positive, with recent wins to support work on the Midland Rail Hub and Northern Powerhouse Rail. Highway work also continues to be contracted as we secured a strategic win on the National Highway's commercial and project management services framework. Overall, market conditions remain resilient, with a strong pipeline of opportunities in growing customer and markets. For instance, the UK government highlighted and its infrastructure strategy that it expects defense spending to rise from 2.3 to 2.5% of overall economic output by 2027, including intelligence services. Our proven experience in this market is leading to increased opportunities for us, not just in the UK and Ireland, but across the globe. First quarter USLA revenue was $529 million, up 22% year over year. Underlying performance in the quarter reflected sustained strength in transportation, while the pace of revenue conversion in other areas were more measured. Overall, the market backdrop remains constructive, and we continue to see healthy demand across our core end markets. Segment adjusted EBITDA was $47 million, representing an operating margin of 11% compared with 14% in the prior year. While the margin performance in the quarter reflected solid execution across much of the portfolio, supported by ongoing cost discipline, this was offset by market expansion and staff-related cost, as well as significantly lower emerging response work. Backlog increased 17% year over year to a new record high of $2 billion. showing continued momentum and healthy client demand across our end markets. The timelines from procurement award to actual work order releases are improving, although timelines remain longer than in prior periods. However, continued backlog growth gives us confidence in achieving our revenue growth outlook despite these challenges. Transportation continues to be a particular source of strength in the business. especially in highways, where market demand is both large and resilient. Beyond transportation, we're seeing a broader set of opportunities develop across buildings and places, industrial, water, and minerals and metals, which reflect the benefits of the investments we have made to land and expand. We are specifically encouraged by the momentum we are seeing in data centers, advanced manufacturing, water, and power-related infrastructure. Taken together, we are confident that growth in the US is becoming broader-based and creates a robust growth outlook for Atkins Realis in the region over the long term. In EMEA, revenue was $294 million in the quarter, down 8% year over year, primarily reflecting lower revenue on major buildings and places projects in the Middle East. This was partially offset by higher revenue in Australia following the acquisition of ADG in Q4 2025. Segment adjusted EBITDA was $18 million, representing a 10% margin on net revenue compared with 14% in the prior year period. The decline was primarily driven by less favorable business mix in the Middle East, including the reprioritization and winding down of higher margin buildings and places work. In addition to these headwinds, our business in the Middle East has been affected by the ongoing conflict. Our priority remains the safety and well-being of our staff in the region, and we continue to monitor the situation closely. Although the near-term environment remains uncertain, the long-term demand fundamentals in the region remain strong. As reflected, in the 15% backlog growth we've delivered this quarter. In Australia, we're focused on capturing the benefits of our ADG acquisition and continuing to build our position in an attractive growth market. We also expect the recently announced WGA and Chorus acquisitions to further strengthen our platform and enhance our ability to capture opportunities across multiple sectors particularly power, defence and activity related to the 2032 Brisbane Olympics. In Asia, we continue to see encouraging opportunities in both transportation and buildings in places, particularly in Hong Kong, where the northern metropolis development and related projects, such as the Northern Link, are expected to support future demand. More broadly, We expect other parts of the region to return to growth towards the end of 2026. I'd like to now move to slide 9 and discuss our first quarter results for our nuclear business. The business continues to demonstrate exceptional growth, achieving an organic revenue increase of 37% compared to the first quarter of 2025. Backlog. totaled 4.5 billion, down 15% from March 31, 25, primarily reflecting continued progress on the ongoing projects, particularly the OPG Pickering Life Extension project. Given the timing and phasing of major contracts, we would expect backlog to fluctuate from quarter to quarter, but with the ongoing refurbishment projects we currently have in place, we remain confident in our ability to deliver on our revenue growth outlooks for 26 and 27. Segment-adjusted EBIT grew 31% to a quarterly record high of $82 million, while segment-adjusted EBIT margin was 11%, and segment-adjusted EBITDA margin was 27%. On slide 10, we highlight some achievements across our nuclear can-do and services portfolios. In our can-do business, we are making strong progress on OPG Pickering and the Cernavoda life extension work. The refurbishment of the fourth and final can-do reactor at Darlington Nuclear Power Plant in Ontario was recently completed ahead of schedule and under budget. Our proven execution in Canada and Romania is creating new opportunities internationally. We recently signed a memorandum of understanding with Turkey Nuclear Energy Company in support of potential deployment of CANDU technology as the country looks to add reactors to its existing nuclear fleet. This is another good example of how successful delivery in our core markets is helping to drive broader interest in both our nuclear technology and our ability to service the entire lifecycle of an asset. In the US, we are continuing to grow our nuclear business by broadening our customer base and expanding into areas where we see clear demand, including waste management, digital, and robotics, alongside our existing federal work. We continue to see a more supportive backdrop for nuclear, which we believe can broaden the opportunity set across both reactor and nuclear services technologies and further enhance the strategic relevance of our can-do technology. In services, we are now part of the NVIDIA ecosystem, as we recently announced a collaboration with them on nuclear-powered AI factories. This is an important partnership to explore the integration of NVIDIA's technologies for the development and deployment of nuclear-powered large-scale AI factories. These technologies provide Atkins Realis with a framework to design and optimize integrated infrastructure systems in a 3D digital twin before building in the real world. This collaboration comes at a time when global AI infrastructure demand is rapidly outpacing available power supply, prompting governments and developers to pursue scalable solutions for gigawatt-class data centers. Nuclear power is emerging as a leading low-carbon baseload for AI factories. As the original equipment manufacturer and exclusive license holder of the can-do technology, Atkins Realis is well-positioned to work alongside NVIDIA for the next generation, hope supporting dedicated AI computing workloads. In the UK, growth continues to be supported by our work across nuclear lifecycle, including new build support at Hinkley Point C and Sizewell C and decommissioning activity in Sellafield. As we win more work and strengthen our position as a global leader in nuclear, we are advancing the development of our can-do monarch design alongside key clients. Importantly, the growth we are seeing in nuclear is supported by real work and real revenue today, which gives us confidence in opportunities ahead. Turning to slide 11, you can see our pictorial reminder of these near-term can-do revenue opportunities within our nuclear business. We have been working hard to bolster our backlog with high-quality wins, which reinforces the bright future we have ahead. I have spent the last several weeks traveling the world, meeting with global ministers, leaders, regarding investment in energy security. Amid continued tension in the Middle East, these discussions reinforced the strong momentum behind nuclear as a vital low-carbon and secure energy solution and underscored the significant growth opportunities ahead for our business. I also met with several hyperscalers, hyperscaler leaders in Canada and the US recently to discuss how can-do reactors can help them deliver power generation needs for data centers and AI factories. We strongly believe that can-do reactors would be a great solution for them. With that, I'll now turn it over to Jeff to discuss our financial highlights.

Thank you, Ian, and good morning, everyone. As Ian said, Q1 was a good start of the year, delivering strong year-over-year increases in revenue, adjusted EBITDA, and diluted EPS. We also have a balance sheet with significant financial flexibility, and our backlog remains strong. On slide 13, total revenues in the quarter increased 18% year-over-year to $3 billion, driven by both engineering services and nuclear. Total segment-adjusted EBIT growth was also strong with an increase of 12%, mainly due to the nuclear segment, which increased by 31%. Total corporate SG&A expenses totaled $39 million in the quarter, a decrease of 14% compared to the first quarter last year. We expect these expenses will be between $125 and $135 million for the full year 2026, in line with our guidance. Net financial expenses for the quarter were 62% lower than the first quarter of 2025, mainly attributable to a lower level of recourse debt and higher cash balances. As expected, the effective tax rate of 29% this quarter was closer to the company's Canadian statutory income tax rate, resulting in an increase of $28 million compared to Q1 2025. We continue to expect that for the full year 2026, the company's effective tax rate will be between 25 and 30%. The IFRS diluted EPS this quarter increased by 44% to $0.56 compared to $0.39 in Q1 2025, while the adjusted EPS, which we believe is a better reflection of the company's underlying performance, increased 27% to $0.80 per diluted share compared to $0.63 in the first quarter last year. Moving on to slide 14, I'll cover cash flow, capital resources, and liquidity. Net cash generated from operating activities more than doubled to $97 million for the quarter compared to Q1 last year. This was mainly driven by a stronger EBITDA delivery and improved working capital positions. We continue to expect to generate approximately $500 million of net cash from operating activities for the full year of 2026. with the majority of this weighted to the second half of the year. As you can also see on the slide, we took advantage of a pullback in our share price and continued to deploy capital to the benefit of our shareholders through share repurchases. At the same time, we continue to deploy capital to accelerate our strategic growth priorities through acquisitions, as Ian highlighted earlier with our recently announced transactions in Australia and Ireland. With our net debt ratio well below our 1 to 2 times ratio target, we would expect to continue to deploy capital to acquisitions and share buybacks opportunistically going forward. Also in April, we took advantage of our credit rating upgrade by DBRS to BBB and the constructive interest rate environment to issue $700 million of new debentures. The net proceeds were used to redeem two higher interest-bearing debenture series of the same amount, which were coming due in June this year and in March 2029. And finally, I'd like to now turn to slide 15 in our 2026 outlook. We are maintaining all our 2026 outlook metrics as communicated during our Q4 earnings call. We believe that we are well on track to deliver our nuclear revenue outlook for the full year 2026 of approximately $2.5 billion and deliver our engineering services regions 5% to 7% organic revenue growth outlook. We continue to expect in engineering services that growth will be more weighted to the second half of the year, with the impact of the ongoing conflict in the Middle East resulting in low single digit percentage growth in the second quarter for engineering services overall. With that, I'll now hand the presentation back to Ian. Thank you, Jeff.

Our solid first quarter performance kickstarts another year for Atkins Realis as sustained demand for our engineering services and nuclear capabilities continues to set us apart. We are now operating a simplified and de-risked portfolio and are shifting our focus to activating the breadth and depth of our world-class engineering services and nuclear capabilities. The global energy priorities of security, and low-carbon transition as well as infrastructure development are fueling growth in our markets. We are activating our clear competitive advantages and strengthening our market position by building on a strong foundation and by landing and expanding. We are leaning in to artificial intelligence as an enabler of productivity, safety, quality, and predictability. Our innovative tools are enabling more efficient delivery of our work and are winning more business as we are ideally positioned to help customers solve their most complex projects. As proven by past strategic actions, our balance sheet puts us in a distinctive position to capitalize on inorganic and organic opportunities in a constantly evolving macroeconomic landscape. Against a backdrop of increasing geopolitical uncertainty, including the growing importance of energy security and defense, we remained well-positioned to support our clients with our differentiated expertise. And finally, I want to thank our 40,000 colleagues whose commitment and integrity every day helped earn Atkins Realis' recognition in March as one of the 2026 most world ethical companies by Ethisphere. Their hard work and their dedication to engineering a better future for our planet and its people, continue to position the company to deliver excellence and drive growth. So with that, let's open it up to questions.

Thank you. As a reminder, to ask a question, please press star 1-1. If your question has been answered and you'd like to remove yourself from the queue, please press star 1-1 again. Our first question comes from Chris Murray with ATB Coremark Capital Markets. Your line is open.

Yeah, thanks, folks. Good morning. Just maybe starting on the margin profile in the quarter, but more importantly, thinking about the kind of how it's going to evolve over the year. So you did maintain your guidance for engineering services EBITDA margins. So can you just sort of walk us through some of the puts and takes for you to get there in terms of either project selection or volumes? So however you want to maybe go through it.

So let me talk about the kind of volume and an outlook that we see for engineering services, presumably, than specifically talking about, Chris. And then Jeff will kind of walk through the profitability angle of that, if that's okay. I mean, yeah, clearly, you know, top line growth, 12% in organic, 5% we're feeling pretty good, even with the kind of Q1 headwinds. in the Middle East and the US, feeling pretty good about landing the end of the year within that revenue range. So great performance coming out of Canada and UK. The market for ourselves remains really, really strong in aging infrastructure, maintenance, replacement, remains really strong in defense and energy. And I think The kind of headwind that we're talking about there in the Middle East is actually not in connection with the conflict. We're seeing kind of minimal impact because of this conflict situation in the Middle East. It's mainly because of the reprioritization during last year in Saudi Arabia, where we've repositioned our business onto the projects that have got longevity leading up to things like the expo and and and the world cup we're also seeing good opportunities actually in in the uae in transport so we're pivoting there so the emir region together with obviously australia feel good about the growth there and in the us we had a really good quarter in winning work um as you'll see through the backlog so that's given us pretty good confidence now that this sort of hold back or lack of confidence from some of the states in investing in projects is kind of coming to an end in some of those states, which will fuel our business specifically and allow us to return to growth. So that's kind of the overall picture from an ES perspective. And Jeff, maybe walk through the margins, if you will.

Yeah. Chris, as we normally see, the first quarter tends to be a slightly weaker quarter in terms of operating margins. Yeah, and we would, as we typically see and would expect to see sequential improvement, you know, quarter over quarter, you know, and remain, you know, very much of the view and confident in delivering our overall operating margin guidance in in engineering services of that 16 and a half to 17 and a half that we laid out at the end of February.

OK, I'll leave it there. And then just one quick question on nuclear, but a little bit of noise around the can do development. But at the same time, there was an announcement, I think, from Ontario talking about Brucie and starting that process. Can you just maybe update us on where we are in terms of the process with getting that fully developed?

Specifically for Ontario?

Well, just on the Monarch program as a whole, please.

Yeah. So, I mean, the Monarch development is going really well. And we are specifically developing the first iteration of the Monarch for the two customers in Ontario. So we are working with them and we are positioning to get that technology selection in place. Now, clearly, that's not a 100% guarantee, but obviously with the amount of supply chain the amount of ecosystem around the Candus technology in Ontario with 90,000 workers depending on it and a whole bunch of companies in supply chain, you wouldn't be surprised to hear that we remain confident, although not guaranteed. The development of the reactor itself is going really well. So we are in with the regulator. We have a commitment for a readout of the licensability of the monarch, which is not, you know, it's not a sudden kind of death situation. It's an iterative process. But we would get in Q3 a very good readout of the quantities, the scale, you know, the kind of technology acceptance. And from that, I have said repeatedly that I need then a decision on technology selection so that we can move forward and allow all of our supply chain to make the investments that are necessary to get ready for that build out, to scale up their people and their factories, and for ourselves to continue to commit. So all in all, the development of the reactor is going really well. And whilst we haven't got absolute clarity now, we are pushing to get that this year.

Okay. I'll leave it there. Thank you.

Thank you.

Our next question comes from Tom Osano with JPMorgan. Your line is open.

Hi. Good morning, everyone. Morning.

Morning.

Thank you. So nuclear has shown strong growth in Q1, and backlog was down 15% due to good conversions. Could you talk about the confidence in the sustainability of this momentum in 2027? And if you could talk about the backlog outlook for the remaining year, please. Thank you.

Yeah. Let me give a bit of an overview of how we're thinking about our nuclear business first. And then I'll come to the specific questions around backlog and 27 outlook, if that's okay. Because I think it's important that I share how we're feeling about this. I mean, our nuclear business is becoming a very significant part of Atkins Realis. The revenues are now 25% of the company, and only two years ago they were 15%. So as we move forward, we will see the nuclear part of Atkins Realis become a larger part of the whole of the company. We're seeing very, very significant opportunities in Canada overseas because of energy demand, energy security, net zero and affordability. But what's been really interesting in my recent activity with hyperscalers is that they're clearly significant demand from hyperscalers. But what's relevant or becoming relevant about our own nuclear tried and tested EC6 reactor is that from a time to inception to electricity on the grid, it's becoming very close to combined cycle gas power plants because the wait list of gas turbines is becoming very, very significant, in some cases up to 2032. So that is a very exciting prospect for our business. And as you know, we operate as the OEM of CANDU. It's owned by Canada, but we have the sole rights to deploy it. And we have a very large capacity that we've built, which differentiates our nuclear business because we've been rebuilding reactors for a decade. So we've got a supply chain of 90,000 people. We've got 6,000 nuclear specialists, and we've got 40,000 primarily engineers in the business. And CANDU is only one of six technologies that can be deployed today with proven technology. There's plenty of SMRs being developed, but there are only six technologies that today can be deployed. And as we look around the world, you can see that we're getting opportunity to compete in Poland, Turkey, Asia, obviously domestically now, where other provinces than Ontario have made announcements. that they would like to develop nuclear power assets. And our reactors, both the EC6 and the Monarch, are full Gen 3 plus updated reactors. So the market's strong. The guidance that we've got on the table, as you can see on the bar chart slide, which is slide 11, it actually shows that all of that opportunity is additive and additional to the almost secured backlog that we have to get to the 2027 guidance of $2.6 to $3 billion. And the reason I say that is because all we need to get to that $3 billion or $2.6 to $3 billion is the next phases of those projects that we're already working on. So everything I said at the beginning will be additional to what's on that slide and what's in our outlook. So I hope that, I know it's a long answer, but I wanted to frame out how we're really thinking about nuclear, and I hope that answers the specific as well.

Thank you, Jens. That's helpful. Just one follow-up. You recently announced an SMR

alliance with banco so what is the strategic significance of these partnerships and what impact do you expect on the revenue and backlog over the next five years please yeah i mean the the way again going back to my point um today there are six large nuclear technologies which have proven and tested and deployable today but but as atkins realities we we think about our nuclear business as a very very long term sustainable nuclear business. So we want to be part of the SMR industry that clearly in the future will have proven technologies that can be deployed in specific circumstances to complement large nuclear. So we're heavily involved in the GE Itachi project in Ontario with Franco. We've developed this relationship with them where they're developing a unique type reactor which is an advanced technology we want to be part of that we want to be in that learning more about that that type of technology it isn't going to bring significant revenues in the next two to three years but ultimately it will be a deployable technology that will in partnership bring revenues into the business and it's like our fusion approach we're involved in fusion projects around the world and that's again part of our involvement in evolving our nuclear business into full service, ready for the next decade and the decade after that.

So that's what that partnership's all about. Thank you very much.

Thank you. Our next question comes from Devin Dodge with BMO Capital Markets. Your line is open.

Yes, thanks. Good morning. I wanted to start with maybe another question on a recent partnership that you announced as with Handme Global. I'm just targeting some opportunities in the U.S. there. Just wondering, can you provide a bit more color on the strategy for that JV and what each company brings to that partnership?

Yeah. I mean, it depends clearly in many parts of the world because of the commitments that are being made to increase the percent of GDP investment in defense is a really exciting sector for Atkins Realis. We have a really strong defense business in the UK. And where we have been successful in the UK is twofold. Firstly, working directly for the Ministry of Defense on infrastructure assets that support Army, support Navy, support Air Force. but also by partnering with OEMs such as Rolls-Royce, BAE, or Babcock. So the Hanwha partnership is following that same strategy here in Canada as we see the increased commitment from the federal government to build out defense assets. And Hanwha specifically is under consideration for the submarine procurement and the supporting infrastructure in dockyards and in maintenance facilities will either be procured through Hanwha or they'll be procured directly through the federal government. So we're trying to get ahead and cover all the bases such that when the infrastructure assets are procured, we're in pole position for the design, project management and consulting of those assets. So it's quite an exciting market for our Canadian business. And it's the same in Australia. That's why we've built out our capability in Australia, because we're actually seeing significant investment, particularly in submarine and ship assets, where we have this specific capability in marine docks and in housing military assets that are for the Navy.

Patrick Corbett- Okay, that was a great color thanks again so second question look most of your divisions actually perform really well in the quarter, but the US divisions, maybe stood out there on the other side seems a bit sluggish. Patrick Corbett- It sounded like there was some expansion related costs may have played a role there. Patrick Corbett- So just trying to I know you touched on this in your prepared remarks, but just what is your your term outlook for that business i'm just trying to get a sense of we should expect earnings contributions shift higher in the next quarter or two or. Should it take a little bit more time, maybe more of a 2027 story?

So, I mean, I've actually just been on a tour around the U.S. the last few weeks. So I'm pretty fresh from visiting customers, clients, and government. And we remain very confident in the U.S. market. I mean, we're currently... Or last year, on the year in our rankings, we were 20. We've moved up to 16. But our goal is to be in the top five. I mean, that's the strategy, through land and expand, through organic growth, and through acquisitions. And we see a very strong market, a sustainable, strong market, you know, driven by investment in transport, the need to replace aging infrastructure in transport and water, and obviously, clearly, you know, energy demand and uh and industrials not least of which are data centers and the like very very strong market for us so we're relatively small compared to our peers so we see we have a long runway to grow and our commitment is unwavered in that what what what happened in 25 and i think you know most of the industry saw this is not a lack of funding for for infrastructure through the states but certainly a lack of confidence as to if they embark on major programs, will that get funded throughout the period of the current administration? And I think there's proof that it will. I mean, the IIJA, for example, isn't fully deployed by a long way. And we're actually seeing in the wins that we've achieved in Q1 and the backlog increase that we've achieved in Q1 what we're actually seeing is the forward-looking kind of picture is looking a lot better. And clearly, you know, disappointing Q1 in terms of growth, but absolutely confident we're going to end up with an overall range in the US that's within the 5% on the year. So you'll expect in the next quarters an uptick in that. And that's because we can see some visibility around that. And Jeff, I don't know if you'd want to talk to the The margin kind of situation.

Yeah, so you're right. One of the bigger impacts was just a lack of emergency response work. I mean, I think that's true in the industry as well as for us. But that's clearly just a timing thing more than anything else. From a year-over-year perspective, a little bit more cost in terms of, as Ian said, our land and expand and associated staff costs. But again, we expect an improved margin profile as we move throughout the year as well.

Okay. Good color. I appreciate that. I'll turn it over. Thank you.

Thank you. Our next question comes from Krista Friesen with CIBC. Your line is open.

Hi. Thanks for taking my question. Maybe just one on the M&A front. You've been active doing these small talk-ins. Just wondering what you're seeing in the private market in terms of valuations, given where we've seen some of the public engineers trading recently.

Yeah, I mean, good question. I mean, obviously, maybe talk about our strategy first and then come back to the specific evaluation second. I mean, we're in a disciplined process. I mean, we're looking for quality. We're specifically prioritizing the U.S. We did want to build a platform in Australia to capture the energy and defense Brisbane Olympics and transport market, but we're happy with those three acquisitions that we've done. We need to obviously close on the last two, and that will give us what we need there going forward with about 1,300 people. The priority really is then the U.S., That's not to say that we wouldn't do other acquisitions like Tobin, fairly small, but it's such a strong market in Ireland that we needed more capacity to meet the transport. In the US, as I've said in the past, it's a very fragmented market, state by state. There are numerous targets, numerous opportunities for a company like ourselves that has a limited geographical footprint in the US right now. And it's very attractive for companies to join a journey that we explain and a journey where rather than just get absorbed into a large kind of machine, they're going to become the Atkins Realis presence in a certain state. So specifically for ourselves, I think it's less in our conversations around paying the multiple It's more about paying the market rate multiple and making sure that we're culturally aligned and that we can get revenue synergies out of those acquisitions going forward that we select. As far as overall multiples, I don't think they've changed that much. It's just I think there's probably less ambition or less realization that people are going to pay a premium multiple. I think that's the way I see it. I mean, you know, I think if you go back a year or so, multiples were around the 13, 14, and probably there was an aspiration they might get 16 or more. And that's kind of gone. So it's more market rate. That's the way we see it. I mean, obviously, we're talking to specific targets with a specific reason. But yeah, thanks for the question.

Thanks. Appreciate that color. And then maybe just lastly, it feels like we're hearing more positivity around nuclear just in Canada, given we're going to be coming out with a nuclear plan by the end of this year. And it sounds like a national electricity agenda later today. Just wondering your thoughts on those and if you've been consulted on that.

Well, obviously, we we own the Canadian technology, or we own the rights to deploy the Canadian technology. I mean, the government, federal government, owns the technology. So because of that relationship, yes, clearly, we deal with the federal government. Specifically, what's in the strategy, I don't know what that is, but I know it's going to be good news for CANDU, because any expansion of the electricity grid and any desire of provinces to move to a large nuclear energy mix, you know, has got to be a really good opportunity for Cando and Atkins Realis. I mean, there's no guarantee, of course. You know, we have to have the right technology, we have to have the right approach, and we have to have the right solutions for those specific customers. But we're working with them all. I mean, we're working with Saskatchewan, we're working with Alberta, we're working with New Brunswick, and clearly, We're working very closely in Ontario. And this is a really, really exciting time for Atkins Realis with all of that opportunity. And again, I'll go back to this specific niche of available nuclear technologies today, that there's only Russian, Chinese, South Korean, French, American, which is Westinghouse, and ourselves, which is Canadians.

Thanks.

Yeah, no, certainly appreciate it and definitely sounds exciting. Thank you.

Thank you. Our next question comes from Benoit Poirier with Desjardins. Your line is open.

Yeah, good morning, Anne. Good morning, Jeff. Morning. Yeah, just to come back on the U.S., you call out the lower emergency response work. could you maybe quantify the impact that we've seen on organic growth and margin in the quarter and whether you're going to still be facing a tough compare going into Q2 and the second half?

Yeah, why don't I take that, Benoit? So in terms of, so it has, the emergency response work has definitely had an impact. You know, for instance, in the quarter, you know, our USLA business you know, was from a growth perspective, you know, relatively flat. If it hadn't been for that emergency response work, we would have seen it up in the mid single digits, you know, from a percentage perspective. So very much in line with our overall guidance. And as you heard Ian say earlier, as, you know, kind of quarters progress here in 2026, you know, the impact of that year over year lessens as we go forward. In addition to the fact that the significant backlog position we have and what we're seeing in terms of work being released, we think that also bodes well for continued progress and growth in the U.S. business.

Okay, that's a very good caller, Jeff. And maybe you mentioned the assumption of about a low single digit in Q2. Could you maybe provide some assumptions behind this low single digit that you would expect, whether AMIA is still expected to be negative, USLA negative? whether it becomes in a positive territory and whether the strong performance that we've seen in Canada and the UK is sustainable in the double-digit territory. Just overall direction I would be looking for.

Oops, sorry, the line cut.

Oops.

My bad.

Sorry, can you hear me, Benoit?

Operator, can you hear me? Yes, I can. No, no, Benoit, can you hear us?

Can you hear us? Operator, can you hear us?

Yes, I can.

Okay.

Benoit, can you hear us? Yeah, sure. Can you hear me? Sorry for the problem.

No problem. Listen, I'll summarize it really quickly. We expect continued strong good growth in Canada and the UK, and we'll see an improving perspective and result in the US. We do expect the Middle East to be weaker, and that would be not at a material level, but that will hold back growth a bit in the second quarter, as Ian said, largely related to the conflict. We would expect kind of low single-digit growth, we think, in Q2, but overall very confident in getting to our 5% to 7% for the full year.

That's great. And a very quick one for me. Could you talk about the defense opportunities you pursue in Canada among the $35 billion spending by the federal government and whether you've already seen some impact in the quarter inside the strong organic growth that you've been pulling from Canada?

No, I don't think we're seeing anything yet. We're seeing a lot of opportunities come into the pipeline. And as I kind of said before, they're going to come in two ways. It's going to be direct procurement from the federal government. And we're definitely seeing a pipeline of opportunities in the north and building out facilities, barracks and military facilities in the north directly from the federal government. And secondly, we'll see it come through the OEMs. Whether it's a marine asset or an air asset, often the enabling infrastructure, the maintenance, the hangars, the dockyards, where the assets are housed, are often procured by the OEM who manufactures those assets. So we're yet to see how that's going to play out. But clearly, as Atkins or Alice, having done all of this in the UK, we feel that we are really well positioned to capture our fair share of that market in the future. So it's a forward opportunity.

Thank you very much for the time.

Thank you. Our next question comes from Michael Toffolm.

With TD Cowan, your line is open.

Thank you. I wanted to circle back on the discussion about expectations for adjusted EBIT and EBITDA margin progression and ESR. You talked about expecting margins to step up on a quarterly basis over the balance of the year. I'm just hoping you can clarify, are you looking for year-over-year margin improvement beginning in Q2 and carrying on through the second half of the year, or is this more of a sequential comment? I guess just thinking about the full-year guidance and the expectation of seeing some year-over-year margin improvement, will that year-over-year improvement kick in in the second quarter and carry on?

Yeah, my comment when I made it, Michael, was about sequential, you know, from here, which maybe, you know, is obvious in terms of moving from kind of 14.2 here in Q1 to being in our range of 16.5 to 17.5 overall for the full year. You know, that overall improved, you know, that overall yearly guidance would imply, as we said back at Q4, you know, an improvement over 2025. So, you know, fundamentally, we would expect, you know, in the remaining quarters, you know, if not all of them, most of them, to also be higher, you know, year over year compared to last year. Otherwise, math wouldn't work. So, but yes, we would expect generally that to be the case.

Okay. So, it sounds like it's not It's not 100% certain that could happen in Q2, but it's obviously got to happen here sooner rather than later.

Yeah. I'm not going to give guidance by quarter per se, but yes, absolutely could happen in Q2. But fundamentally, regardless of the quarters themselves, we remain confident in terms of getting to that improved year-over-year profile, which will mean year-over-year guidance, improvement as well as obviously sequentially. Yep.

Thank you. And then just on the nuclear guidance, obviously, you've reiterated all of your 2026 financial targets. So nuclear revenue guidance is $2.5 billion still. Looking at what you did in the first quarter, obviously, very strong growth up 37% year over year. But if you simply have flat nuclear revenues the rest of the year, you get to that $2.5 billion level. So I guess, is there some conservatism here? Or what is it that would cause nuclear growth to drop off so dramatically in the rest of the year?

Yeah, maybe I'll continue on. I mean, the guidance was around 2.5, so obviously we're not being completely specific on exactly 2.5, but you're right, and I think our view would be we did see very strong, for instance, procurement work at the Pickering refurbishment. OPG continues to be very keen to move that at pace, and we saw some procurement that we were expecting to to have later in the year actually being pulled forward into the first quarter and potentially the first half here. So it is possible that we won't see exactly that level of revenue for the full year. But on the other hand, we may see some revenue continuing to accelerate into the back half of 2026. We'll have a much better view on that come the middle of the year. But at the moment, clearly very confident that we'll be around the 2.5 for sure.

Okay, that's perfect. Thank you.

Thank you. Our next question comes from Frederick Bastien with Raymond James.

Your line is open.

Good morning. I wanted to dig a little deeper into your partnership with NVIDIA to develop nuclear-powered data centers. Obviously, given that it's based on the CANDU technology, does that limit you in terms of territory or region where you can entertain the development of these data centers?

No, is the short answer on that relationship. The relationship with NVIDIA is, in the first instance, it's around collaboration to develop their own AI technologies in the engineering context, specifically in the first stages for what you said, for the development of a you know, a can-do nuclear-powered AI factory. So that's exciting in itself because we're at the kind of forefront of the development of technologies and tools to design, simulate, and obviously enable smarter delivery of those assets. It's not specific only to that. The relationship will then move to doing the same on other complex type of assets so that they have a capability in a product. And then we obviously learn how to use that product and that capability for all customers in the industry. But what's been interesting in that relationship is it's opened the door to meetings with other hyperscalers. And, you know, I've personally met some of those and my team have met others. And I go back to the point I made before that the issue is clearly electrical energy for data centers. And the data center capacity needs for energy and the way it was described to me need to increase tenfold. And with specifically our EC6 reactor, having been built once in under five years, and say you add a planning period to that of a couple of years, specifically, seven years is looking like it's getting comparable to combined cycle gas. That, for me, is a moment, and that's a big opportunity for us that we are looking to clearly exploit. And the licensing of the product in the U.S., is going well. We have been through the pre-licensing phase of our own analysis of acceptability and consultation with the NRC, and we are looking to make a formal application to the NRC in Q2 so that we can progress that licensing in parallel with marketing our EC6 product to hyperscalers. So I see this as an important kind of move forward in the opportunities ahead for CANDU and NUCLEAR.

Thanks, Ian. That's great, Collier. That's all I have. Thank you. Thank you.

Thank you. Our next question comes from Maxim Sychev. Your line is open with NBCM.

Hi, good morning, gentlemen. Most questions were asked, but just in terms of priorities between NCIB and M&A, I don't know if, you know, Ian or Jeff want to kind of tackle this one, but do you mind maybe walking perhaps through your frame of kind of reference and what is more creative right now from your perspective? Thank you.

Yeah, why don't I take that, Max? It's Jeff. I think, as we've always said about our capital allocation framework, what we like about it, now that we've got the balance sheet clearly in a great position, is that we see the opportunity to deploy capital in both areas. And I think what you've seen here in the first four or five months is exactly that. We've opportunistically looked at where the share price is and have a view clearly that the long-term value of the company is significant and significantly higher than today, and therefore have been happy to deploy capital through share buybacks. At the same time, very conscious that there is real opportunity for us And there is great opportunity, particularly on the engineering services side of the business in the US, as well as some of the other markets we've seen like Australia, to grab capability and use that as a platform to continue to drive our organic growth capability. And we think that creates significant value over a period of time as well. So I think we're in the position where both create significant value for shareholders. And therefore, you know, we will expect to deploy capital that way. And frankly, we'll be a bit opportunistic about, you know, the relative weight of that, depending on the opportunity set in front of us.

Okay. That's a great call. Thank you so much. Thank you.

Thank you. Our next question comes from Jonathan Goldman with Scotiabank. Your line is open.

Hey, good morning, team. Thanks for taking my questions. Just one for me. I just want to make sure. Good morning, guys. Just make sure I got this right. You know, you did EBITDA $254 million in the quarter. Looks like you didn't change the EBITDA seasonality guidance for the year. If we use the rate that you have for Q1, it implies you would do like $1.3 billion plus of EBITDA this year. That's materially above the street, like 13% above. And I know you've done some acquisitions, some tuck-ins, maybe that are not reflected there. But am I thinking about that the right way?

Yeah, I mean, I think what I'd say is, you know, the first quarter was clearly, you know, at or above, you know, what has historically been our guidance. I don't think I would just sort of straight line that from here. You know, so I think we would expect to move, you know, back towards that guidance. You know, and so I think that's the way I think about modeling it, Jonathan, not to just sort of straight line it off the first quarter, you know, which has been particularly strong, which we're really pleased about.

So would it be fair to say that Q1 was probably the higher end of that 18% to 20% range? Yeah. Yeah, for sure. Perfect. Thanks for taking my question. You're very welcome. Thank you.

Thank you. I'm showing no further questions at this time. I'll turn the call back over to Dennis Jasmine for closing remarks.

Thank you very much, everyone, for joining us this morning. I hope you have a nice rest of the day. If you have any further questions, please do not hesitate to contact me. Thank you very much, everyone. Bye-bye.

Thank you for your participation. You may now disconnect.

Good day.