Q4 2023 Aecon Group Inc Earnings Call

Yes.

Operator: Good day, and thank you for standing by. Welcome to the AECON Group 4th Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question, you will need to press star 11 on your telephone.

Good day and thank you for standing by welcome to the Aegon Group fourth quarter 2023 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question you will need to press the star one one on your telephone you will then hear an audit we didn't mess.

Operator: You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Mr. Adam Borgatti. Please do so.

Advising your hand is raised to withdraw your question. Please press star one again, please be advised that today's conference is being recorded I would now.

To hand, the conference over to Mr. Adam Forgotten. Please go ahead.

Adam Borgatti: Thank you, Abigail. Good morning, everyone, and thanks for participating in our year-end 2023 results conference call. This is Adam Borgatti speaking, Senior Vice President, Corporate Development and Investor Relations. Joining me today are Jean-Louis Servranc, President and CEO, and Alastair McCallum, Senior Vice President, Finance.

Thank you Abigail and good morning, everyone and thanks for participating in our year end 2023 results Conference call. This is Adam <unk> speaking senior Vice President corporate development and Investor Relations. Joining me today are John <unk>, President and CEO, and Alistair Mccallum Senior Vice President Finance.

Adam Borgatti: Our earnings announcement was released yesterday evening, and we have posted a slide presentation in the investing section of our website, which we will refer to during this call. As noted on slide 2 of the presentation, listeners are reminded that the information we are sharing with you today includes forward-looking statements. These statements are based on assumptions that are subject to significant risks and uncertainties. Although AECON believes the expectations reflected in these statements are reasonable, we can give no assurance that these expectations will prove to be correct.

Our earnings announcement was released yesterday evening, and we have posted a slide presentation on the investing section of our website, which we referred to during this call.

As noted on slide two of the presentation listeners are reminded that the information we are sharing with you. Today includes forward looking statements. These statements are based on assumptions that are subject to significant risks and uncertainties.

Although <unk> believes the expectations reflected in these statements are reasonable we can give no assurance that these expectations will prove to be correct.

Adam Borgatti: I'll touch first on highlights from Aecon's year-in-review, and Alistair will then review our consolidated and segment results for the year and address Aecon's financial position. We would normally then turn the call over to Jean-Louis for our operational review and outlook, but unfortunately, he's lost most of his voice at this time, so I'll read his prepared remarks, and we'll save what voice he has left On that note, following our comments, we'll be glad to take questions from analysts and ask that analysts keep one question before getting back into the queue to ensure others have a chance to contribute. Now, turning to slide three.

I'll touch first on highlights from Econ yearend review and Alastair will then review our consolidated and segment results for the year and address <unk> financial position.

We would normally then turn the call over to John <unk> for our operational review and outlook, but Unfortunately, he has lost most of his voice at this time. So I'll read his prepared remarks, and we will see what voice. He has left for your questions. Following the presentation.

On that note following our comments, we'll be glad to take questions from analysts and asset analysts keep one question before getting back into the queue to ensure others have a chance to contribute.

Now turning to slide three.

Adam Borgatti: 2023 was a transformational year for Aecon, driven by three strategic transactions that allowed us to capture unlocked value for shareholders, partner with respected institutions with significant experience to help Aecon grow in alignment with our strategy, and strengthen Aecon's balance sheet and capital position. Through the tremendous efforts of our teams, we were able to realize over half a billion dollars in proceeds through the sale of Aecon Transportation East. 49.9% sale in Skyport and Old Trees Investment and Aecon Utilities, all at attractive and accretive valuations. The transactions strengthened Aecon's capital position, including through the repayment of $184 million in convertible debentures at the end of the year, and will provide financial flexibility to capitalize on attractive growth opportunities ahead. Aecon's free cash flow in 2023 of $123 million improved by $258 million compared to a negative $135 million in 2022.

2023 was a transformational year for icon driven by three strategic transactions, which allowed us to capture unlock value for shareholders partnered with respected institutions with significant experience to help <unk> grow in alignment with our strategy and strengthened <unk> balance sheet and capital position.

Through the tremendous efforts of our teams we were able to realize over half a billion in proceeds through the sale of a contrast rotation east at 49, 9% sale in Sky Port and <unk> investment in Econ utilities, all at attractive and accretive valuations.

The transactions strengthened <unk> capital position, including through the repayment of $184 million in convertible debentures at the end of the year and we will provide financial flexibility to capitalize on attractive growth opportunities ahead.

<unk> free cash flow in 2023 of $123 million improved by $258 million compared to a negative $135 million in 2022.

Adam Borgatti: And we continue to focus on de-risking our business, with 58% of 2023 revenue on a non-fixed price basis, compared to 49% of 2022. Finally, interim agreements were reached on the four legacy projects, with one reaching substantial completion in 2023, two expected to be substantially complete by the end of 2024, and the final one expected to be substantially complete during 2025. The four legacy projects represent 7% of backlog at December 31, 2023, compared to 17% at the end of 2022. We would be the first to acknowledge that despite the progress made to date, risk remains if assumptions, estimates, and or circumstances change. But we and our joint venture partners are focused on project completions, pursuing further recoveries, and putting these legacy projects behind us. Every day, we are getting closer to the end.

And we continue to focus on Derisking, our business with 58% of 2023 revenue on a non fixed price basis compared to 49% non fixed price work in 2022.

Finally interim agreements were reached on the four legacy projects with one reaching substantial completion in 2023 to expect it to be substantially complete by the end of 2024 and the final one expected to be substantially complete during 2025.

The four legacy projects represent 7% of backlog at December 31, 2023, compared to 17% at the end of 2022.

We would be the first to acknowledge that despite the progress made to date risk remains if assumptions estimates <unk> circumstances change, but we and our joint venture partners are focused on project completions pursuing further recoveries and putting these legacy projects behind US every day, we are getting closer to the end and with that ill.

Alastair McCallum: And with that, I'll turn the call over to Alice. Thanks, Adam, and good morning. Turning to slide four, revenue for the year of $4.6 billion was $52 million, or 1% lower compared to 2022. Lower revenue is largely attributable to the sale of Aecon's transportation ease business in the second quarter of 2023, which generated $51 million of revenue in 2023, compared with $326 million of revenue in 2014. Suggesting the sale of Aecon's transportation east business, revenue increased on a life-for-life basis by $223 million. Thank you.

Turn the call over to Alastair.

Hi.

Thanks, Adam and good morning, everyone.

Turning to slide four revenue for the year of $4 6 billion with $52 million or 1% lower compared to 2022.

The lower revenue is largely attributable to the sale of Acons transportation each business in the second quarter of 2023, which generated $51 million of revenue in 2023, compared with $326 million of revenue in 2022.

Adjusting for the sale of Aegon Transportation East business revenue increased on a like for like basis by $223 million or 5% in the year.

Alastair McCallum: Adjusted EBITDA of $143 million, a margin of 3.1%, compared to $219 million, a margin of 4.7%. An operating profit of $241 million compared to an operating profit of $97 million, excluding the impact of the four legacy projects on results in 2020. Adjusted EBITDA on the balance of the business was $359 million, a margin of nine percent. Diluted earnings per share for the year were $2.10, compared to diluted earnings per share of $0.47.

Adjusted EBITDA of 143 million a margin of three 1% compared to $219 million a margin of four 7% last year and operating profit of $241 million compared to an operating profit of $97 million in 2022.

Excluding the impact of the four legacy projects on results in 2023, adjusted EBITDA from the balance of the business with 359 million a margin of nine 1%.

Diluted earnings per share for the year was $2.10 compared to diluted earnings per share of <unk> 47.

In 2022.

The improvement in operating profit and diluted earnings per share was largely due to a gain related to the sale of 49, 9% interest in the Bermuda International Airport concessionaire of $139 million, including a fair value re measurement gain of $80 million, an acre and 51% retained interest in the <unk>.

Alastair McCallum: ...

Alastair McCallum: The improvement in operating profit and diluted earnings per share was largely due to a gain related to the sale of a 49.9% interest in the Bermuda International Airport concessionaire for $139 million, including a fair value re-measurement gain of $80 million on Aecon's $50.5 million concessionaire....

Session here, a gain of $37 million from the sale of ETE and higher gains on the sale of property buildings and equipment of $39 million.

Alastair McCallum: Thank you. Reported a backlog of $6.2 billion at the end of 2023 compared to a backlog of $6.3 billion at the end of 2020. Its backlog at the end of 2022 included $391 million. Aecon's Transportation. New contract awards of $4.5 billion were booked in the year, compared to $4.8 billion a year. As announced yesterday, Aecon's Board of Directors approved an increase to the quarterly dividend to $0.19 per share from $18.5 million. $18.50 per share, with the next payment to occur in April. Now looking at results by, turn to page.

Reported backlog at $6 2 billion at the end of 2023 compared to backlog of $6 3 billion at the end of 2022.

Backlog at the end of 2022 included $391 million from <unk>.

<unk> transportation East business.

New contract awards of $4 5 billion were booked in the year compared to $4 8 billion a year ago.

As announced yesterday <unk> board of directors approved an increase to the quarterly dividend to <unk> 19 per share from 18, 5%.

$18 five per share previously with our next payment to occur on April <unk> 2024.

Now looking at results by segment.

Turn to page.

Turning to slide five construction revenue of $4 6 billion in 2023 was $48 million or 1% lower than the previous year.

The largest decrease in revenue occurred in civil operations, driven by lower volume of road building construction work as a result of the sale of ATB does.

Alastair McCallum: Turning to slide five, construction revenue of $4.6 billion in 2023, which is $48 million, or 1% lower than the previous year. The largest decrease in revenue occurred in civil operations, driven by a lower volume of road building construction work as a result of the sale of ATE earlier, and partially offset by a higher volume of major. Revenue was also lower in nuclear operations, driven by a lower volume of refurbishment work, and in industrial operations, driven by a lower volume, primarily at chemical facilities in the, and partially offset by increased activity on. In the utilities operations, lower revenue resulted primarily from a decrease in gas. Partially offsetting these decreases were higher revenues in urban transportation solutions, primarily from an increase in rail expansion and let and work in on. New contract awards of $4.4 billion in 2023 compared to $4.7 billion in the previous year. Construction backlog at the end of 2020. $6.1 billion. Turning to slide 6, adjusted EBITDA of $99 million, a margin of 2.2%, compared to $193 million, a margin of 4.2%. The largest driver of the decrease was a negative gross profit of $215 million in 2020.

Just earlier and partially offset by a higher volume of major projects.

Revenue was also lower in nuclear operations, driven by a lower volume of refurbishment work in an industrial operations driven by a lower volume of work primarily at chemical facilities in Eastern Canada, and partially offset by increased activity on mainline pipeline work.

And the utilities operations lower revenue resulted primarily from a decrease in gas distribution work.

Partially offsetting these decreases were higher revenue in urban transportation solutions, primarily from an increase in rail expansion.

Vacation work in.

Ontario.

New contract awards of $4 4 billion in 2023 compared to $4 7 billion in the previous year.

Construction backlog at the end of 2023 of $6 1 billion compared to $6 2 billion at the end of 2022.

Turning to slide six adjusted EBITDA of 99 million a margin of two 2% compared to 193 million a margin of four 2% in 2022.

The largest driver of the decrease was negative gross profit of $215 million in 2023.

Three of the four fixed price legacy projects versus a negative gross profit of $120 million last year for.

A negative year over year impact on operating profit of $95 million.

Other than the impact of fixed price legacy projects in 2023 higher operating profit in the balance of construction segment was driven by higher volume and gross profit margin in urban transportation solutions.

Gross profit margin and industrial operations and higher gains on sale of property plant and equipment and utilities operations.

Alastair McCallum: 3 of the 4 fixed-price legacy projects versus a negative gross profit of $120 million, or a negative year-over-year impact. The Bulletproof Executive 2013, Except for the impact of fixed-price legacy projects in 2020. Higher Operating Profit and the Balance of Consumption, driven by higher volume and gross profit margin and urban transportation solutions. Higher Gross Product. Margin and Industrial Operations and Higher Gains on Sales of Property, Plants, and Equipment. However, these gains were partially offset by lower operating profit from road building construction work due to the

However, these gains were partially offset by lower operating profit from road building construction work due to the sale of <unk>.

Okay cause transportation E business, and lower volume and gross profit margin in nuclear operations.

At the end of 2023, the remaining backlog to be worked off on the four legacy projects was $420 million compared to $1 1 billion at the end of 2022.

These projects comprise 16% of consolidated revenue in both 2023 and 2022, while comprising 7% of backlog at the end of 2023 compared to 17% at the end of 2022.

Turning to slide seven concessions revenue for the year was $74 million compared to $76 million in 2020 to the.

The decrease in revenue was largely driven by the sale of a 49, 9% interest in the Bermuda International Airport concessionaire.

And the use of equity method of accounting on a prospective basis for <unk> retained 51% interest in Skype for it.

In 2023 passenger traffic levels in Bermuda averaged 75% of 2019 pre pandemic traffic compared to 58% in 2022.

Alastair McCallum: Transportation East Business, and Lower Volume and Gross Profit Margin in New, At the end of 2023, the remaining backlog to be worked off on the four legacy projects was $420 million, compared to $1.1 billion at the end of the year. These projects comprise 16% of consolidated revenue in both 2023 and 2045, comprising 7% of backlog at the end of 2020.

Adjusted EBITDA in the concessions segment of $90 million compared to $71 million in 2022, primarily driven due to improved results from the Bermuda Airport and an increase in management and development fees.

As noted previously operating profit in concessions reflects a gain in the sale and the year of $139 million.

Turning to slide eight at the end of 2023, a tonne held cash and cash equivalents of 259 million.

Alastair McCallum: Turning to slide 7, concessions revenue for the year was $74 million compared to $76 million in 2022. The decrease in revenue was largely driven by the sale of a 49.9% interest in the Bermuda International Airport concession area and the use of the equity method of accounting on a prospective basis for Aecon's retained 50.5%... In 2023, passenger traffic levels in Bermuda averaged 75.

Excluding cash in joint operations. In addition at December 31, 2023, Aegon had committed revolving credit facilities of $850 million of which $112 million was drawn and $6 million was utilized for letters of credit.

On December 29, 2023 convertible debentures with a face value of 184 million repaid in cash.

Hey, Don has no debt, our working capital credit facility maturities until 2027, except equipment loans and leases in the normal course.

Hey, Tom plans to maintain a disciplined capital allocation approach focused on long term shareholder value through acquisitions, and divestitures organic growth dividends and capital investments capital expenditures in 2024 are expected to be similar to previous years.

At this point I'll turn the back the call back over to Adam.

Thanks Alastair.

Turning to slide nine <unk>.

Continuing to build resilience through a balanced and diversified portfolio of work, while enhancing critical execution capabilities and project selection to play to our strengths.

Alastair McCallum: 2019 pre-pandemic, compared to 58. Adjusted EBITDA in the concession segment of $90 million, compared to $71 million in 2000, primarily driven due to improved results from the Bermuda airport and an increase in management. As noted previously, operating profit and concessions reflect a gain in sales. Turning to slide 8, at the end of 2023, Aecon held cash and cash equivalents of $259 million, excluding cash in joint. In addition, at December 31, 2023, Aecon had committed revolving credit facilities of $850 million, of which $112 million was drawn and $6 million was utilized for. On December 29, 2023, Convertible debentures with a face value of $184 million were repaid. Aecon had no debt or working capital credit facility maturities until 2009.

Moving forward, we remain focused on leveraging our self perform capabilities and one econ approach to maximize value for clients through improved cost certainty and schedule, while offering a broad range of infrastructure services from development engineering investment and construction to longer term operations and maintenance.

We will continue to pursue and deliver the majority of our work in our established markets, while embracing new opportunities to grow in areas linked to de carbonization and the energy transition as well as in the U S and international markets.

These opportunities are intended over the long term to diversify.

<unk> geographic presence provide further growth opportunities and deliver more consistent earnings through economic cycles.

Turning to slide 10.

Demand for <unk> services across Canada continues to be strong with backlog of $6 2 billion at the end of 2023 recurring revenue programs seeing robust demand and a strong bid pipeline Aegon believes it is positioned to achieve further revenue growth over the next few years and is focused on achieving improved profitability and.

Alastair McCallum: AECON plans to maintain a disciplined capital allocation approach focused on long-term shareholder value through acquisitions and divestitures, organic growth, dividends, and capital. Capital expenditures in 2024 are expected to be similar to previous years. At this point, I'll turn the call back over to you. Thanks, y'all.

Margin predictability.

Revenue from recurring revenue programs increased to $1 $1 billion in 2023 from $896 million in 2022, representing growth of over 27% over last year and 67% versus two years ago.

In addition development work.

He is ongoing and consortiums and which icon is a participant to deliver the <unk> expansion on corridor works project Scarborough Subway extension stations rail and systems project and the Darlington New nuclear project all in Ontario.

Adam Borgatti: We will continue to build resilience through a balanced and diversified portfolio of work while enhancing critical execution capabilities and project selection to play to our strengths. Moving forward, we remain focused on leveraging our self-performed capabilities and one AECON approach to maximize value for clients through improved cost certainty and schedule while offering a broad range of infrastructure services from development, engineering, investment, and construction to longer-term operations and maintenance. We will continue to pursue and deliver the majority of our work in our established markets while embracing new opportunities to grow in areas linked to decarbonization and the energy transition, as well as in U.S. and international markets. These opportunities are intended over the long term to diversify AECON's geographic presence, provide further growth opportunities, and deliver more consistent earnings to our economy. Turning to slide 10, demand for Aecon's services across Canada continues to be strong.

These projects are being delivered using progressive design build models and each project is expected to move into the construction phase in 2025.

The <unk> expansion project also includes an operations and maintenance component over a 23 year term commencing January one 2025.

As a reminder, none of the anticipated work from these III progressive design build projects is yet reflected in backlog.

Turning to slide 11, <unk> continues to support the energy transition to build and operate sustainable infrastructure projects, such as the United Energy storage project co expansion the server subway extension and the Darlington SME demonstrate the path Acorn is on to embrace the opportunities linked to the carbonization.

Sustainability and the energy transition.

Revenue tied to sustainability projects represented 64% of 2023 revenue versus <unk> versus.

Adam Borgatti: With a backlog of $6.2 billion at the end of 2023, recurring revenue programs seeing robust demand, and a strong bid pipeline, Aecon believes it is positioned to achieve further revenue growth over the next few years and is focused on achieving improved profitability and margin predictability. Revenue from recurring revenue programs increased to $1.1 billion in 2023 from $896 million in 2022, representing growth of over 27% over last year.

Versus 60% in 2022.

Turning to slide 12 and in conclusion.

2023 was a transformational year for <unk>, driven by significant transactions aligned with our strategy and the strengthening of our capital position all paving the way for growth.

I want to thank our employees for their contributions to the achievements. This year and we look forward to the years ahead as we continue to build resilience through a balanced and diversified portfolio of work.

2020 for revenue will be impacted by the three strategic transactions completed in 2023 the.

Adam Borgatti: 67% versus two years. In addition, development work is ongoing in consortiums in which AECON is a participant to deliver the GO Expansion on Corridor Works Project, the Scarborough Subway Expansion, Stations, Rail, and Systems Project, and the Darlington New Nuclear Project, all in Ontario. These projects are being delivered using progressive design-build models, and each project is expected to move into the construction phase in 2025. The GO Expansion Project also includes an operations and maintenance component over a 23-year term commencing January 1st, 2025. As a reminder, none of the anticipated work from these three progressive design-build projects is yet reflected in the background.

The substantial completion of several large projects in the year end.

And the three major projects currently in the development phase being delivered under Progressive design build models, which are expected to move into the construction phase in 2025.

The completion and satisfactory resolution of claims on the four legacy projects with their respective clients remains a critical focus for <unk> and our partners. While the remainder of the business continues to perform as expected supported by the strong level of backlog and New awards during 2023, and the strong demand environment for <unk> services, including.

Recurring revenue programs.

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

At this time, we will conduct a question and answer session.

Adam Borgatti: Turning to slide 11, AECON continues to support the energy transition to build and operate sustainable infrastructure. Projects such as the Oneida Energy Storage Project, CoExpansion, the Cerro Subway Extension, and the Darlington SMR demonstrate the path Aecon is on to embrace the opportunities linked to decarbonization, sustainability, and the energy trend. Revenue tied to sustainability projects represented 64% of 2023 revenue versus 60% in 2022.

Minder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

One moment for our first question.

Our first question comes from Jacob bout with CIBC. Your line is open.

Good morning.

Good morning.

Question on how are you thinking about revenue growth in 2024, I know theres, a number of moving parts with the strategic divestments and completion projects, but.

Adam Borgatti: Turning to slide 12 and in conclusion, 2023 was a transformational year for AECON, driven by significant transactions aligned with our strategy and the strengthening of our capital position, all paving the way for growth. We want to thank our employees for their contributions to the achievements this year, and we look forward to the years ahead as we continue to build resilience through a balanced and diversified portfolio of work. 2024 revenue will be impacted by the three strategic transactions completed in 2023, and the substantial completion of several large projects in the year. And the three major projects currently in the development phase being delivered under progressive design-build models, which are expected to move into the construction phase in 2025. The completion and satisfactory resolution of claims on the four legacy projects with the respective clients remains a critical focus for Aecon and our partners, while the remainder of the business continues to perform as expected, supported by the strong level of backlog and new awards during 2023 and the strong demand environment for Aecon services, including Thank you.

Can we expect revenue growth to be similar to the year on year performance, we saw in the fourth quarter.

And then.

What are your thoughts on the U S utilities contribution in 2024 and are you still targeting kind of longer term 100 to 200 million revenue.

Okay.

Taking each one as much as I can.

My belief.

The revenue in 2024.

He's about pure math.

Taking into account the sweet transaction of last year.

The fact that.

Most of our major lump sum turnkey project targeting competed.

The fact that we have.

I need to take any more being lump sum job.

Spoken with you about a limit around $1 billion and the fact that we have embarked a few progressive design build.

Contract I mean.

This is our strategy, which is totally focused on margin predictability built on ballooning revenue. It means that we are extremely comfortable with our backlog.

Doug.

You'll remember that in our six 2 billion backlog, we don't have the progressive design build we are always speaking about <unk>, we achieved a small modular reactors carbon we will see some in station and the gold trading expansion you have seen a few days ago that we are ready to force, London, which is horrible.

Operator: And we'll now turn the call over to analysts for questions. At this time, we'll conduct the question and answer session. As a reminder, to ask a question, you will need to press star 1-1 on your telephone and wait for your name to be announced.

In inventory. So this is our strategy.

Jacob Jonathan Bout: To withdraw your question, please press star 11 again. One moment for our first question. Our first question comes from Jacob Bout with CIBC. Your line is open. Good morning.

Exactly what we wanted you probably also notice that we have.

Go on to the way we want you to go in terms of.

Jean-Louis Servranckx: Morning. Question on how are you thinking about revenue growth in 2024? I know there's a number of moving parts with the strategic investments and completion of projects. But, you know, can we expect revenue growth to be similar to the year-on-year performance we saw in the fourth quarter? And then, you know, what are your thoughts on the US utilities contribution in 2024? And are you still targeting kind of a longer term 100 to 200 million revenue? Okay, I will take this one as much as I can. Sorry for my voice.

Transiting from fixed price contract fixed price contract.

We will be presenting the non fixed price contract, 49% to <unk>, 58%.

Sure.

We are targeting for the years to come 65%.

De risking our CVT, we are focused on margin predictability not only improving it.

The revenue growth.

This is without taking into account the $1 1 billion.

Our recurring revenue.

That you have seen in our <unk>.

Presentation.

Jean-Louis Servranckx: The revenue in 2024. It's about pure math, taking into account the three transactions of last year, the fact that most of our major lump-sum turnkey projects are getting completed, the fact that we have decided not to take any more big lump-sum jobs, I've spoken with you about a limit of around 1 billion, and the fact that we have embarked on a few progressive design-build contracts. I mean, this is our strategy, which is totally focused on margin predictability, not on ballooning revenue. It means that we are extremely comfortable with our backlog. You remember that in our 6.2 billion backlog, we don't have the progressive design-build. We are always picking about three, which are a small modular reactor, the Scarborough system and station, and the Gold Train expansion. You may have seen a few days ago that we have added a fourth one, which is the Harbour of Contrecoeur in Montreal.

This is what is going to happen in 2024.

I'd say that most of all a progressive design build big job will ramp up during the two last quarter of the year too.

To be ready for work on a much bigger scale from early 2025.

And I think Jacob the second part of your question was about USD utilities expansion.

Yes, it's still very much on track and very keen to get.

Our strategy in place with our partners at Oaktree.

So far it's gone very well.

Very like minded group and great access and an experienced and exactly what we're looking for so we expect 2024 to be a growth year in that business and leveraging all of the efforts that we've put into deep into our success moving forward. I think you had mentioned a number about $200 million was that in reference to the sizes were looking at.

Yes, I think you had given some guidance in the past as far as what you were targeting and just curious what youre, what youre thinking today as far as the USB Chargers.

So both consistent with that if we were to take on kind of new investments I would say kind of low one hundreds of millions if you will plus or minus depending on what we're finding.

Okay.

Thank you.

Okay, one moment our next question.

Okay.

Our next question comes from Yuri Lynk with Canaccord Genuity. Your line is open.

Good morning, guys.

Eric.

Sure.

Jean-Louis Servranckx: So, this is our strategy. It's exactly what we wanted. You probably also have noticed that we have gone the way we wanted to go in terms of transitioning from fixed-price contracts to non-fixed-price contracts, we're representing the non-fixed-price contract 49% two years ago, 58% this year, and we are targeting 65% for the year to come. We are de-risking our activity. We are focused on margin predictability, not on improving revenue per sea.

Maybe I mean, obviously the balance sheet.

<unk> as we've ever seen it.

Almost almost no net debt there.

And the underlying EBITDA of the business appears very strong so.

How do we think about <unk>.

Capital allocation.

Here.

And does the.

Does the arbitration process.

Jean-Louis Servranckx: This is without taking into account the $1.1 billion of recurring revenue that you have seen in our presentation. So this is what is going to happen in 2024. This being said, most of our progressive design-build big jobs will ramp up during the last two quarters of the year to be ready for work on a much bigger scale in early 2025. I think, Jacob, the second part of your question was about U.S. utilities' expansion. Yes, still very much on track and very keen to get our strategy in place with our partners at Oak Tree. So far, it's gone very well; a very like-minded group and great access. The Bulletproof Executive 2013, So we expect 2024 to be a growth year in that business and leverage all of the efforts that we've put into us so far forward. I think you had mentioned a number of about 200 million though, was that in reference to the sizes we're looking at?

Coming up in the third quarter on CGM.

Does not knowing how thats going to go play a big role in maybe preventing you from going out and doing.

A buyback or something like that that might benefit shareholders.

Yes, Jerry its alastair here.

So.

Exactly I think.

You saw a small dividend increase.

Reflective.

Our improved balance sheet improved cash position.

And with the general business improved outlook.

We still we still have to complete the legacy projects and we also have the arbitration.

With CGI later in the year.

Jonathan we will talk about in a minute.

But yes, we would want to really get through.

Two.

<unk> projects and then also get through the CGM arbitration before we make any.

Decisions on really what to do with.

The cash on the balance sheet.

With regards to an NCIC or something like that so.

We're kind of in a wait and see mode.

2024 will be a bit of a transition year.

But as you know in construction, we need a strong balance sheet and so we're going to maintain that.

Yeah.

Sure.

Get through this year.

To add some.

Color I mean.

We are extremely happy with our own.

Almost $1 billion of liquidity at the end of the year 2023.

Jean-Louis Servranckx: Yeah, I think you've given out some guidance in the past as far as you know, what you were targeting, and just, you know, curious what you're thinking today, as far as the US utility. So, consistent with that, if we were to take on kind of new investments, I'd say kind of low hundreds of millions, if you will, plus or minus, depending on what we're... Thank you. One moment, our next question. Thank you. The next question comes from Yuri Lynk with Canaccord Genuity. Your line is open. Good morning, guys. Eric.

This is what is needed and this will Lewis.

<unk>.

Different alternatives in front of the opportunity we could see.

Okay. That's helpful.

How are your clients adapting to your.

This push for progressive design in a more collaborative approach.

Okay.

How how is business changed in kind of the discussions around contract structure.

You had some great success last year, you won the contract in Montreal I mean, it appears on the surface. So that's being well accepted by the market, but any additional color there.

Yuri Lynk: I'm, Maybe, I mean, obviously, the balance sheet is as strong as we've ever seen it, with almost no net debt there. And, you know, the underlying EBITDA of the business appears very strong. So how do we think about capital allocation here, and does the arbitration process that's coming up in the third quarter on CGL, does not knowing how that's going to go play a big role in maybe preventing you from going out and doing a buyback? Something like that that might benefit Sheridan. Yeah, Yuri, it's Alistair here.

Yes, I mean.

I consider it as a win win.

For clients and for contractors in terms of Derisking.

In a progressive design build you don't have land sea and proactive.

Ed negotiation dispute claim.

I just can see the level of collaboration for example.

Go expansion.

Alastair McCallum: So, exactly. I think you saw a small dividend increase...

Tony Xing the way, we can optimize the project working together so.

Alastair McCallum: , with the general business, improved. We still have to complete the legacy projects, and we also have the arbitration with CGL later in the year. John.

<unk>.

Little by Little I would say.

Jean-Louis Servranckx: But yes, we want to really get through to www.youtube.com through the CGL arbitration before we make any... The Bulletproof Executive 2013, We're kind of in a wait-and-see mode, and... 2024 will be a bit of a transition year. As you know, in construction, we need a strong balance through this year. Yeah, to add some color, I mean, we are extremely happy with our almost 1 billion in liquidity at the end of the year 2023. This is what is needed. And this will allow us, I mean, a lot of different alternatives in front of the opportunity we can see. Okay. Thank you.

Our clients that have been pushed.

Through this new mode of contracting.

Because of lack of competition.

Discovering that it's also de risking.

The way of investing and they are I would say job embracing these new way off.

Also contracted.

As you'll notice timing during the first one and half.

It's a development phase.

Yes.

And we don't have the revenues that we have on all of the.

Schemes of contracting, but all in all.

Jean-Louis Servranckx: How are your clients adapting to your push for progressive design and a more collaborative approach? How has business changed and the kind of discussions around contract structure changed? You had some great success last year. You won the contract in Montreal.

To conclude I don't think we have to go to 100% progressive.

The whole of the resilience of Acorn is about balance.

Our balance between recruiting revenue between unit price job between some lump sum job provided.

Jean-Louis Servranckx: I mean, it appears on the surface that it's being well accepted by the market, but any additional color there? I mean, I consider it is a win-win for clients and for contractors in terms of de-risking. In a progressive design bill, you don't have lengthy and proactive negotiation, dispute, and claim.

I mean, the contractual condition, okay provided.

Client, Okay, probably the side diesel gate and some progressive design build and we will navigate balancing at each of those contractual bonds.

Jean-Louis Servranckx: I can just see the level of collaboration, for example, on the Go expansion. It's astonishing the way we can optimize a project by working together. Little by little, I would say, our clients that have been pushed, I mean, to this new mode of contracting because of the lack of competition, are just discovering that it's also de-risking their way of investing, and they are, I would say, embracing this new way of contracting. As you noticed, I mean, during the first one year and a half, it's a development phase, and we don't have the revenue It's about balance between recurring revenue, between unit price jobs, between some lump sum jobs, provided the contractual conditions are okay, provided the client is okay, provided the size is okay, and some progressive design build, and we will navigate balancing each of those contractual requirements. Okay, thanks for the color, guys.

Okay. Thanks for the color guys I'll get back in the queue.

Okay.

One moment please.

<unk>.

Our next question comes from Chris Murray with ATB capital markets. Your line is open.

Yes, thanks folks.

I'm kind of looking at slide 14, which shows the normalized.

Earnings profile for the company for last year, and I guess, what I'm trying to figure out.

You've taken write downs and adjustments all the projects so far for.

Through 'twenty three.

Also 22.

But we're getting pretty close to the end here.

Can you maybe walk us through.

In terms of pacing.

Realistically or shall we just keep assuming kind of the run rate that we saw in Q4 in terms of losses until we get past the all our key contracts.

But any color you can give us on how to think about.

What to expect as we go into 'twenty call would be would be helpful.

Okay.

We still.

Our full legacy project on our shoulders.

So the situation is getting better and better I mean, you have noticed we have something like $420 million of backlog.

Each represents 7% to a steep decrease on this 420 million of backlog I mean, 60% of these about Gordie Howe, which is not the most difficult one.

Jean-Louis Servranckx: I'll get back to you on that. Thank you. One moment, are there any questions? Our next question comes from Chris Murray with ATB Capital Markets. Your line is open.

Something like 90% to 95 on CGM, but most probably we're not going to execute it because the client is also alternative to finalize a cleanup so its remaining rather weak on egginton.

Christopher Allan Murray: Yeah, thanks, folks. I'm kind of looking at slide 14, which was the normalized earnings profile for the company for last year. And I guess what I'm trying to figure out is that you've taken write-downs and adjustments on all the projects so far, you know, through 23 and also 22. But we're getting pretty close to the end here. Can you maybe walk us through in terms of pacing, you know, realistically, or should we just keep assuming kind of the run rate that we saw in Q4 in terms of losses until we get past the LRT contracts? But any color you can give us on how to think about what to expect as we go into 24 would be helpful.

On Fitch.

So.

Hey, where all the issues basic kidney Omega Linkedin and Finch one of the main issue is not about finalizing the job it's not about testing and commissioning we are extremely advanced there for example.

Next Friday in a few days.

We will have three trains.

<unk> come down as a whole finish line.

It just means that all the signaling and <unk>.

Jean-Louis Servranckx: OK. We still have our full legacy project on our shoulders, but the situation is getting better and better. I mean, you have noticed we have something like 420 million in backlog, which represents 7%, so it's a steep decrease. On this 420 million in backlog, I mean, 60% is about going out, which is not the most difficult one. There are something like 90 to 95 on CGL, but we're probably not going to execute the project because the client has other alternatives to finalize the cleanup. So it's remaining rather weak on Eglinton on CGL.

Train control system are perfectly adequate.

We are facing is that we are not.

Not really in control of the timing for the operator, which is PTC to take over the operation all of this.

Contractual implications. So we are working with our client on that.

So it just means that we are not totally finished.

Mainly.

It does not change first of all we need to finish construction.

Second we need to protect our cash to the moment we are over.

Third we need to finalize all these cute claim.

Jean-Louis Servranckx: So, where are the issues? Basically, on Eglinton and Finch, one of the main issues is not about finalizing the job. It's not about testing and commissioning.

Conciliation eventually.

Ill be equation as quick as we can and as good as we can.

Jean-Louis Servranckx: We are extremely advanced there. For example, next Friday, in a few days, we will have three trains integrated up and down the whole Finch line. We just mean that all the signaling and train control systems are perfectly adequate.

Okay, and so I guess my question is.

In terms of the magnitude of anything that we should maybe allow for in 2024.

I would assume under accounting rules.

The loss adjustment that we saw for Q4 take you to your best estimates is that the right way to think about it or one of the other overhead costs or other things that we should allow for.

Jean-Louis Servranckx: The issue we are facing is that we are not totally in control of the timing for the operator, which is TTC, to take over the operation. All this has contractual implications, so we are working with our client on that. So, it just means that we are not totally finished. Basically, it has not changed.

Yeah Fair point, Chris I mean, the <unk>.

<unk> are positioned as we expect them to be completed currently.

In the fourth quarter, you would've seen some more impacts on the <unk>, which.

From Q3 to Q4.

Reflected some of the changes to scheduling and.

Our requirements to complete those and so.

Jean-Louis Servranckx: First of all, we need to finish construction. Second, we need to protect our cash until the moment we are over, and third, we need to finalize all disputes, claims, and conciliation, and eventually arbitration, as quickly as we can and as well as we can. Okay, and so my question is, you know, in terms of the magnitude of anything that we should maybe allow for in 2024, I would assume under accounting rules, you know, the last adjustment that we saw for Q4, you know, takes you to your best estimates. Is that the right way to think about it? Or will there be other overhead costs or other things that we should allow for? Yeah, fair point, Chris.

When those things come up in the future, we will adjust accordingly, but from what we know currently the projects are all positioned properly.

<unk>.

Based on all of the interim settlement that we had last year from an operational perspective, we feel much better this year going through completions and as John noted more of the potential impact down the road could come from the ultimate arbitrations and settlements.

Okay.

And then the other quick question I had for you is just any update on that.

As much as I'm sure you guys are enjoying doing the call any update on the <unk>.

Bo search in that process and did that actually impacting your tying your hands a little bit on any sort of capital deployment.

So the CFO search is well on its way.

We are exploring internal.

Alastair McCallum: I mean, the projects are positioned as we expect them to be completed currently. In the fourth quarter, you would have seen some more impacts on the LRTs, which from Q3 to Q4, reflect some of the changes to scheduling and requirements to complete those. When those things come up in the future, we will adjust accordingly, but from what we know currently, the projects are all positioned properly, and based on all the interim settlements that we had last year, from an operational perspective, we feel much better this year going through to completions, and as Sean will note, more of the potential impacts down the road can come from the ultimate arbitrations and so on. Okay. And then the other quick question I had for you is just any update on, as much as I'm sure you guys are enjoying doing the call, any update on the CFO search and that process? And did that actually impact, you know, tie your hands a little bit on any sort of capital deployment?

Possibilities and external possibilities, what I can tell you that I have just discovered.

During these.

Two last months.

Tony.

Is the team that had been created by David So we should be over with research probably.

Within the next few weeks.

Hey.

And this is what is important I mean, an extremely strong team.

All focused on closing out our legacy project all focused on goals.

For Acorn in being able to tackle the opportunities around us.

Okay. That's helpful. Thanks, a lot.

Okay.

One moment our next question.

Our next question comes from Ian Gillies with Stifel. Your line is open.

Good morning, everyone.

Good morning.

With respect.

The competitive environment, obviously margins are getting much better.

Jean-Louis Servranckx: So, the CFO search is well on its way. We are exploring internal possibilities and external possibilities. What I can tell you is that, during these last two months, I've just discovered how strong the team that was created by David is.

The outlooks much healthier.

Are you seeing any increased competition from international firms that may have exited the market previously or are you seeing anyone trying to come back and back into Canada at this juncture.

Jean-Louis Servranckx: So, we should be over with this search probably within the next few weeks. Thank you. And this is what is important. I mean, an extremely strong team, all focused on closing out our legacy project, all focused on growth for Aecon and being able to tackle the opportunities around us. Okay, that's helpful.

Ive some big international.

Two we entered Canada on huge lump sum job. Good luck I mean, we're not going to compete with them on those one.

We know we know what it means so I don't think that the competition is.

Is really increasing I mean, a economies is a partner of choice of most of our clients on most of our projects.

Christopher Allan Murray: Thanks, folks. One moment for our next question. Our next question comes from Ian Gillies with Stiefel. Your line is open. Good morning, everyone.

It's extremely rare I would say that we are not pre qualified on a job and then after I mean, we have our priorities. We can design in front of our strategy in full of our workload what else do we want to go and where we already we already to pause, but E. Com in terms of infrastructure is extremely well.

Ian Brooks Gillies: Morning. With respect to the competitive environment, obviously, margins are getting much better, and the outlook is much healthier. Are you seeing any increased competition from international firms that may have exited the market previously? Or are you seeing anyone trying to come back into Canada at this juncture?

Our position.

On another hand, I mean, as you have noticed from our slide on page 24.

Jean-Louis Servranckx: The Bulletproof Executive 2013, If some big international firm wants to re-enter Canada on a huge lump-sum job, good luck. I mean, we're not going to compete with them on those ones. We know what it means.

The underlying business results of legacy project.

Extremely strong.

Interested in looking at the reserves just by a few of our competitors and peers. So it seems to be very happy with an EBITDA at the mid tens.

Jean-Louis Servranckx: So I don't think that the competition is really increasing. I mean, Aecon is the partner of choice of most of our clients on most of our projects. It's extremely rare, I would say, that we are not pre-qualified for a job.

Okay.

We were extremely strong debt outside of our legacy project. Our strategy is right. We are focused on it margin predictability.

Jean-Louis Servranckx: And then after, I mean, we have our priorities. We can decide, I mean, in front of our strategy, in front of our workload, where we want to go and where we are ready to go. But Aecon, in terms of infrastructure, is extremely well positioned. On the other hand, as you have noticed from our slide on page 24, the underlying business, without the legacy project, is extremely strong. I mean, I've been interested in looking at the results just published by a few of our competitors and peers. They seem to be very happy with the EBITDA at the mid-tens. I mean, we are extremely strong outside of our legacy project.

<unk> predictability and we are going forward.

Sure.

That's helpful and then moving to the arbitration with respect to CGI and perhaps the other projects.

As we think about some of the losses the crude over the last number of years related to those projects.

Would that take into account any.

Any potential outcomes from arbitration or will that be incremental either to the positive or negative way.

Bench fully finalized.

Okay.

We'll begin to at least to me.

Jean-Louis Servranckx: Our strategy is right. We are focused on it. Margin predictability, margin predictability, and we are going forward. That's helpful.

We have taken position on <unk>.

All our legacy project, depending on the knowledge that we have on the schedule.

Ian Brooks Gillies: And then moving to arbitration with respect to CGL and perhaps the other project. As we think about some of the losses accrued over the last number of years related to those four projects, would that take into account any potential outcomes from arbitration, or would that be incremental, either to the positive or negative, when eventually finalized? Okay, I mean, I will begin, and Alistair may as well, we have taken a position on all our legacy projects, depending on the knowledge that we have of the schedule, of our future revenue, of our execution costs. There is still work to do, there are still negotiations. I mean, you mentioned the arbitration on CGL; I mean, just remember that it began one year and a half ago, it is ongoing, it's going to accelerate in Q3 2024, but meanwhile, every week we are negotiating with our clients, which means that we are using the two vectors. We are all totally in control of the result of the arbitration.

Of our future revenue of our execution cost.

There is to look to do that off keep negotiation I mean, you mentioned the arbitration on CGM just remember that.

In one year and a half ago is.

These ongoing going to accelerate in Q3 2024.

But meanwhile.

Every week, we are negotiating with our clients means that.

We are using the.

The two vectors.

We are not.

Totally in control of the result of the arbitration you remember that it is a panel of three arbitrators one.

Chosen by Us.

<unk> as soon as one chooses to.

Two arbitrators, we're working it.

Best we can with the best team.

Jean-Louis Servranckx: You remember that it's a panel of three arbitrators, one chosen by us, one by CGL, and the third one chosen by the two arbitrators. We are working, I mean, the best we can with the best team that we have on it, but there is still a note about it. Alistair, do you want to add something?

But we still are known about Alistair do you want to add something yes, Ian I mean, when it comes to our positions on the legacy jobs, we essentially.

We take a position.

And our claims with our with our partners and based on legal entitlement and.

Alastair McCallum: Yeah, Ian, when it comes to our positions on the legacy jobs, we essentially take a position on our claims with our partners and, you know, based on legal entitlement. Essentially, if there's an outcome that differs from that, we could either have a write-up or a write-down. Our positions are based on the best information that we have, based on... legal experts. Any difference?

The values and.

Yes.

Essentially if it.

If there's an outcome that differs from that we could either have a write up or a write down but our.

Our positions are based on the best information that we have based on.

Legal experts in.

And so.

Any difference would arise from.

Alastair McCallum: Would... an outcome that's different from what the J.D. understood. Thanks very much.

An outcome that's different from what the JV partners have on the four legacy projects.

Understood. Thanks, very much I'll turn the call back over.

Sabahat Khan: I'll turn the call back over to you. One moment for our next question. Our next question comes from Sabahat Khan with RBC Capital Markets. Your line is open. Great, thanks and good morning. Thanks for providing the call on the CGL.

Okay. Thanks again.

Our next question.

Our next question comes from <unk> Khan with RBC capital markets. Your line is open.

Okay, great Thanks, and good morning.

Thanks for providing the color on the CGM I guess, just thinking about the other three projects.

Jean-Louis Servranckx: I guess just thinking about the other three projects. Can you maybe just talk through, you know, what the process or kind of the road ahead there might be on recoveries and hypo, but those are there going to be eventually? Arbitration is there, or will there be a different mechanism?

Can you maybe just talk through what the process or kind of the road ahead, there might be on recoveries and how you thought about those as theyre going to be eventual.

Arbitrations areas it will there be a different mechanism.

Jean-Louis Servranckx: Thank you. So, at the moment, on Gordiao, there is no pending claim or negotiation. I mean, we are just trying to... We have to go perfectly within the schedule that has been agreed upon with the client. When we had the last deal at the end of 2023, which is the bridge to be closed around mid-2024, and the test project to be substantially completed and ended before the end of 2025. On the LRT, the two LRT jobs, yes, we have claims. We have ongoing negotiations, I would say, every day on the substance of those claims. And it will go, I mean, probably a little further after substantial completion. As I have said, we have gathered the best team within our company and externally to put the outcome of those negotiations and or disputes on the best side for. Okay, great.

So.

At the moment on <unk>.

There is no pending claim no negotiation I mean, we are.

Just.

Trying to.

Go perfectly within the scheduled that has been agreed upon with the client when we had the large deal at the end of 2023.

She is a bridge to be close around mid 2024 and <unk>.

<unk> to be substantially completed in need over before the end of 2025.

On the LTE to LTE jobs.

Yes, we have we have claims.

Ongoing.

Negotiation I would say everyday on.

On the substance.

All of those claims and it will go I mean.

Probably a little further after substantial completion.

As I have said I mean, we have the best team.

In our company and externally.

To be to put the.

The outcome of this negotiation and or dispute.

On the best site for Us.

Okay, Great and then I guess.

Alastair McCallum: And then I guess the color you provided on sort of pro forma EBITDA margins, understanding it's illustrative, but I guess, is that something we should look at and look, is that kind of the long-term potential margin? Is there any sort of, should we expect that over the medium term, any timeline you can share? Just trying to get an idea of how we should be thinking about those margins as we forecast over the next few years. Thank you. Yes, Sabah, it's consistent with the last year or two, as we've provided some of this color in the past.

The color you provided on sort of pro forma EBITDA margin understanding it's illustrative, but I guess right.

Is that something we should look at it look because that kind of long term potential margin is there any sort of should we expect that over a medium term any timeline you can share just trying to get an idea.

How should we be thinking about those margins as we forecast over the next few years. Thank you.

Yes.

It's consistent with the last year or two as we've provided some of this color in the past so excluding the four legacy is in 'twenty two 'twenty three and as we look ahead.

Jean-Louis Servranckx: So, excluding the four legacies in 22, 23, and as we look ahead, we've seen this kind of margin consistency, and as we remind everybody not to look at any one quarter in isolation but to look at it on kind of a rolling 12-month basis. We would not see any reason to believe that those wouldn't be at or above the next levels. And as a reminder, you know, these progressive design build ones have very good floor mechanisms that come into backlog next year. And so we feel comfortable with the numbers you're seeing on Proforma. What is also important to note is that from September 2018, we have not created any new legacy projects and have drastically reduced the size of the Lufthansa Key.

<unk> seen this kind of margin consistency as we remind everybody not to look at any one quarter in isolation, but to look at it on kind of a rolling 12 month basis.

We would not see any reason to believe that those wouldn't be at or above the next levels and as a reminder.

These progressive design build ones have very good floor mechanisms that come into backlog next year.

And so we feel comfortable with what the numbers youre seeing on pro forma these projects.

What is also important to notice that from September 2018, I mean, we.

We have not created any new legacy project.

Drastically reduce the size of the lump sum turnkey we are again zero process.

Is that low this to evaluate the risk of the of our post suites.

Jean-Louis Servranckx: We have a gate zero process that allows us to evaluate the risk of our pursuits. I think we are becoming extremely professional and acute at this, and this is important. There will always be a project more difficult or an easier project, but what is sure is that we'll never, ever come back to the situation where we were, and we are still, I mean, for a time, with too many big, too dangerous fixed-price jobs. This world is over. Great, thanks very much for the color.

I think where we are.

We are getting extremely professional in acute on this.

And this is what is important I mean.

We'll always be.

Project more difficult so project easier, but what is truly that we will never ever come back to the situation, where we have been and we are still I mean for the time.

Too many big too dangerous fixed price job. This world is over.

Great. Thanks, so much for the color.

Sabahat Khan: One moment for our next question. Our next question comes from Michael Capraios with the Jardins. Your line is open. Good morning and congratulations on the strong results. Maybe switching to cash, you received a pretty significant working capital release in the quarter with some strong contribution from deferred revenue. Can you provide some more details on the drivers of this inflow?

Thanks, Kevin.

One moment our next question.

Our next question comes from Michael <unk> with Desjardins. Your line is open.

Good morning, and congrats on the strong results maybe switching to the cash you received a pretty significant working capital release in the quarter with some strong contribution from deferred revenue can you provide some more details on the drivers of this inflow, it's onetime nature and your expectations for working cap.

Michael Tupholme: It's one-time nature and your expectations for working capital and free cash flow in 2024, please? Yeah, thanks, Michael. So, you're right; we did have a big inflow of cash from working capital in Q4. Part of that came from one of our large settlements that we've previously talked about. Bridge Project. And then, really, the other component that came through deferred revenue was two other large advances for projects that are starting up. So that certainly helped the quarter.

And free cash flow in 2024 please.

Yes.

Thanks, Michael.

So youre right, we did have a big inflow of cash from working capital in Q4.

Part of that came from one of our large settlements.

<unk>.

That we've previously talked about.

Our French project.

And then really the other.

Component that came through deferred revenue was.

Two other large advances for projects that are that are starting up.

So that certainly helped.

Alastair McCallum: And obviously, for the year, we had positive working capital and really positive cash for the first time in a couple of years, so a great result on the cash flow side. Expectations for 24 are similar to 23 in that we expect to have a good year. I think it'll follow the seasonal patterns that we've seen in previous years, so using cash in Q1 and Q2 and returning cash in Q3 and mostly Q4. That always seems to be our strong quarter from a cash perspective. And obviously, you know. For more information, please visit www.fema.gov. And the other thing I'd note is our working capital tends to be a bit lower. Take that into account.

The quarter and obviously for the year, we were we had positive working capital in and really positive cash.

So for the first time in a couple of years. So a great result on the cash flow side.

Expectations for 'twenty four are similar to <unk> 23, and that we expect to have a good year.

I think it will follow the seasonal patterns that we've seen in previous years, so using cash in Q1, and Q2 and returning cash in Q3 and mostly.

Q4 that always seems to be a strong quarter from a cash.

Cash perspective, and obviously.

As per our earlier conversations and subject to settlements on our on our legacy projects.

And the other thing I'd note is where our working capital tends to be a bit lumpy so take that into account.

I appreciate it.

Alastair McCallum: One moment for our next question. Thank you. Our next question comes from Jonathan Lamers with Lauritzen Bank. Your line is open. Good morning.

One moment for our next question.

Okay.

Our next question comes from Jonathan Lamers with Laurentian Bank. Your line is open.

Good morning.

Jonathan Lamers: I'm just taking a look at your slide with your updated mix of business. Looking out, say, three years or five years, as the work in the backlog and the pending backlog converge, and you continue to grow, you know, utilities, like how do you see the mix evolving in a few years? Okay, so... First of all, you probably remember.

We're just taking a look at your <unk>.

Slide with.

Your updated mix of business.

Looking out say three years five years.

As the work in the backlog and the pending backlog converts.

Tom and you continue to grow utilities like how do you see the mix evolving in a few years.

Okay.

First of all.

You probably remember.

Jean-Louis Servranckx: We have two vectors, I mean, in terms of development. The first one is that we want to be able to master the totality of the value chain in infrastructure. Developing our projects, financing them, engineering or coordinating the engineering, building and operating our assets. This is our strategy because this is where the value is, this is where the money is. For example, Bermuda is a pure example of what I'm saying.

We have two Victor.

In terms of development. The first one is that.

We want to be able to master the totality of the value chain and infrastructure. It means.

Developing our project financing them and junior Ingo coordinating the engineering building and operating our assets.

This is our strategy because this is where is the value. This is where is the money. You're for example, Bermuda is a pure example.

What I'm, saying the second point the second vector is about balancing our activities.

Jean-Louis Servranckx: The second point, the second vector is about balancing our activity. And it's balancing between our different sectors. This being said, I see AECON becoming more and more electrical and probably less about civil works. We were overweighted, I think, in civil works.

And it's balancing between our different sectors.

This being said the ICA couldnt be coming.

More and more electrical.

And probably less about ceded works, we were overweight icq see if it works.

Jean-Louis Servranckx: The usual opportunities on the ground are about energy transition. I mean, it's about decarbonizing and upgrading the grid. It's about being able to produce electricity in a cleaner way.

Huge opportunities on the ground are about energy transition I mean, it's about decarbonizing and upgrading the grid.

It's about being able to produce electricity on a cleaner way we're extremely strong in nuclear.

Jean-Louis Servranckx: We are extremely strong in nuclear. You know that our utilities sector is working extremely well. You know that we are extremely ambitious about the growth of this utility business. Although we do it prudently, but we'll do it steadily, I mean, to grow in the United States with the utility sector. So probably, I mean, as a...

You know that our utilities amitiza deep sector is working.

Extremely well utilize that we are extremely ambitious.

On the growth of the strategic business.

Although we'll do it prudently, but we'll do it steadily I mean to grow into the United States was the utility sector.

Probably I mean.

In a nutshell more electric.

Jean-Louis Servranckx: In a nutshell, more electric, less civil. And just following up on that, I believe your earlier comments are that you would expect the underlying margin in the construction business, you know, extra legacy project losses to be sustained or potentially improved as you continue to shift that way. Yes, we do. We think our strategy is the right one. We are extremely focused on it, and we are also focused every day on closing our legacy project, as you probably have noticed. I mean, they are still in our backpacks, I mean, less and less every day, but there's still work to do before we can consider that it's over.

<unk>.

And just following up on that.

I believe your earlier comments are that you would expect the.

Underlying margin in the construction business extra legacy project losses.

To be sustained or potentially improved is as you continue to shift that way.

Yes, we do we think our strategy is the right one.

Extremely focused on it.

And we also focused everyday on closing out our legacy project.

You probably have noticed.

In our backpack less.

Less and less every day, but there's still work to do to be able to consider that.

Jean-Louis Servranckx: Pass the line. Thank you. One moment for our next question. Our next question comes from Michael Tupholme with TD Securities. Your line is open. Thank you. Good morning.

Pass the line. Thank you.

One moment for our next question.

Our next question comes from Michael <unk> with TD Securities. Your line is open.

Thank you good morning.

Hey, Mike.

Michael Tupholme: Earlier in the call, there was a question about capital allocation, although I think it was fairly specifically focused on the potential for buybacks, and I think, Alastair, you suggested that. In some respects, this is a bit of a transition year, a transformation year, and you want to see how the legacy projects unfold before contemplating buybacks. I'm wondering if you can maybe talk about capital allocation a little more broadly. Specifically, thinking about acquisition opportunities, one, would it be fair to say that sort of the comments you made about waiting to see how things play out? has no bearing on your thoughts around the utilities business in the U.S., and possible acquisitions there. And then, secondly, are you still looking at acquisitions in other parts of AECON, be it in Canada or elsewhere outside of the utilities area? And if so, how should we think about the potential?

Earlier on the call there was a question.

Our capital allocation, although I think it was.

Fairly specifically focused on the potential for buybacks and I think Alistair you suggested that.

In some regards this as a bit of a trance transition year of transformation year, and you want to see how the legacy projects unfold before contemplating buybacks I'm wondering if you can maybe talk about capital allocation a little more broadly.

Specifically thinking about acquisition opportunities.

One.

Would it be fair to say that sort of the comments you made about waiting to see how things play out.

It has no bearing on your thoughts around the utilities business in the U S.

Possible acquisitions, there and then secondly.

Are you still looking at acquisitions in.

In other parts of <unk>.

Corn being in Canada or elsewhere outside of the utilities area in <unk>.

Alastair McCallum: Yeah, Mike, so we are continuing to look at opportunities for utilities, both in Canada and in the U.S. Also... Across our businesses, we continue to look for tuck-in businesses that we can add to grow the company. So certainly, the growth side of our strategy is a huge focus for us in, in 24. And really, when I was talking about the strong balance sheet and preserving that, it was really in regards to the NCIB, holding tight there until the Old Comer. Certainly, our focus is on growth and a strong balance sheet; we want to put that to work in looking at things that will help strengthen our business in the future. The question you just received a few minutes ago about working capital, I guess you talked about typical seasonality, but there have been a lot of changes in the business over the last 12 to 18 months.

So how should we think about the potential there.

Yes, Mike so.

We are continuing to to look at.

Opportunities for utilities.

Both in Canada, and the U S.

Across our businesses, we continue to look for tuck in businesses that we can add to grow the company. So certainly.

The growth side of our strategy is a huge focus for us in <unk>.

In 'twenty four.

And really what I was when I was talking about the strong balance sheet and preserving that it was really in regards to CIB and.

And just holding tight there until the end.

Coming to your legacy projects is done, but certainly our focus is on growth and the strong balance sheet, we want to put that to work and looking at things that will help strengthen our business in the future.

Okay perfect. Thanks.

And then you.

Can you just received.

Few minutes ago about working capital I guess you talked about.

Typical seasonality, but there've been a lot of changes in the business over the last 12 to 18 months.

I guess, when we're thinking about seasonality and Mccann imagine that things have changed.

Dramatically in that Q1 has always been a weaker quarter seasonally but I'm just wondering if you can comment on.

Any changes that we should be thinking about.

A seasonal perspective, given all of the evolution that's occurred in the last 12 to 18 months with the various divestitures and whatnot.

Sure, Yes, I mean Q1 continues to be our slowest quarter and again, while we sold our transportation.

Business, we still have our transportation west business, that's impacted by by winter conditions, and obviously, our utilities business is heavily impacted by winter conditions. So the seasonality has may be lessened a little bit, but it's still exists in the construction business in Canada and Robin.

Never get away from that because even our civil business to agree to a small degree of impact.

With winter.

So.

Jail, if theres anything you want to add to that.

No.

Yes.

The only business we are doing that is not dependent on Q1, and whether you can clear.

Basically so it depend on the on the way.

We are piloting our activity between gross and net.

And Darlington.

Sure.

Alright, that's all from me thank you.

Okay.

As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced our next question comes from Maxim <unk> with National Bank Financial Your line is open.

Hi, good morning, gentlemen.

Okay.

There's only I was wondering if you mind, maybe commenting about what's what's out there in terms of concessions.

When it comes to opportunities how is the market. What are you guys tracking maybe any color there. Thanks.

Yes, I mean, basically the former piece really big infrastructure market in Canada is is decreasing.

They have not been used.

Kind of scheme not come to the market for the last.

For the last two to three years so.

We are changing in the energy transition you, probably remember or need a deal. There are a few other deals that we're looking at.

About concession.

Also looking at airport mainly international.

We haven't been just quantified for the concession I mean, it took some caicos, which is quite similar.

Jobs and so what we did in Bermuda.

Just put on one preliminary offer four also kind of <unk> in the U S. Virgin Island two airports.

So we are very active also on this front the market is changing but I think between the energy transition and the airports, which is our sweet spot.

We are able to find.

New ways of growing with our concession business.

Okay, and I guess I can tell the competition some of the bigger guys would not be I presume most interested in some of these small assets is that the right way to think about it.

Yes, exactly I mean, we we don't want to go and its too small we don't want to go where it's too big I mean, I'm not going to go to JFK or something like this.

We have our our sweet spot with a complete we can perfectly manage the competition because we have our own competitive advantage.

Okay makes sense and then just one clarification because when I look at Florida results and their references to Gordie Howe I think they had a true up on their EBITDA in Q4.

So did you guys have.

A reversal in working capital also on EBITDA in your results.

No. It's interesting we watch that as well I guess about a week or so ago.

Well, we can't really comment on partners and competitor accounting.

Policies.

Yes.

Pick up in the.

In the quarter based on the very health settlement that we announced basically in Q2 and Q3 and recall, we had provisioned Gordie Howe downwards in Q2, and Q3 last year and so our Q4 position reflected all of those adjustments already so there were no impacts to us in the quarter from that on EBITDA or <unk>.

To the P&L.

Also referenced earlier some of the working capital unwind was from that settlement along with the other projects. So while it was cash positive from the outcome and we think we're now on the path to completion.

No other impacts flowing through the P&L such as what we saw in Florida.

Okay. So I guess, yes.

I guess Mike.

The negative impact from legacy contracts, it's all accumulated right.

This quarter correct, yes, the two entities.

Okay. Okay perfect. That's it for me thanks, so much.

One moment for our next question.

Yeah.

Our next question comes from Sean Jack with Raymond James Your line is open.

Hey, good morning, guys.

Just a quick question looking at the slide from the newest investor deck on utilities, and just thinking about potential revenue growth for next year.

Did a 13% CAGR over the last five years is that.

Attainable for 2024, and if you don't mind I'm talking about some of the puts and takes that might go into.

Look for next year.

Sure.

We saw a little bit of compression in the.

Last quarter or so last year in 2023, just as some of the major utilities and telco on gas and others.

Had capital to earn a little bit to the right.

That work was all still there and we expect that to pick back up in 2024. So I think from four main areas that we focus on we saw that pretty good tailwind and all of them are electricity transmission distribution from all of the elements we've talked to so far in the energy transition the grid hardening storm response, all of those sorts of.

Areas telecommunications still quite steady as I said, some pullback in the fourth quarter, but we expect that to increase again in the next.

Next year.

We've got renewables in home services and other driving good growth in gas as well so I think across all areas, we still see some pretty reasonable outcomes organically and that also includes expansion of our programs in the U S. We started.

From a smaller scale last year growing into a few telco in T&D opportunities and then of course as we talked to the real key to the strategy or the catalyst would be acquisitive growth along the way so organically I'd say, what you've seen on a CAGR basis is quite achievable and maybe more and.

From an M&A or inorganic perspective that could catalyze the growth.

Okay perfect.

All for me thanks, guys.

Thank you.

That concludes the question and answer session. At this time I would like to turn the call back to Adam for closing remarks.

Great. Thanks, very much and thank you all for your attendance and participation today as always feel free to reach out to us anytime with further follow up questions and we wish you a great rest of the day and little chat to you next quarter take care.

Thank you for your participation in today's conference. This does conclude the program you may now disconnect.

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Okay.

Good day and thank you for standing by welcome to the Aegon Group fourth quarter 2023 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.

Ask a question you will need to press star one on your telephone you will then hear an audit admitted message advising your hand is raised to withdraw your question. Please press star one again, please be advised that today's conference is being recorded.

I'd now like to hand, the conference over to Mr. Adam <unk>. Please go ahead.

Thank you Abigail and good morning, everyone and thanks for participating in our year end 2023 results conference call.

As Adam <unk> speaking senior Vice President corporate development and Investor Relations. Joining me today are John <unk>, President and CEO, and Alistair Mccallum Senior Vice President Finance.

Our earnings announcement was released yesterday evening, and we have posted a slide presentation on the investing section of our website, which we referred to during this call.

As noted on slide two of the presentation listeners are reminded that the information we are sharing with you. Today includes forward looking statements. These statements are based on assumptions that are subject to significant risks and uncertainties.

Although <unk> believes the expectations reflected in these statements are reasonable we can give no assurance that these expectations will prove to be correct.

I'll touch first on highlights from <unk> year end review and Alastair will then review our consolidated and segment results for the year and address <unk> financial position.

We would normally then turn the call over to John <unk> for our operational review and outlook, but Unfortunately, he has lost most of his voice at this time. So I'll read his prepared remarks, and we will save what voice. He has left for your questions. Following the presentation.

On that note following our comments, we'll be glad to take questions from analysts and asset analysts keep one question before getting back into the queue to ensure others have a chance to contribute.

Now turning to slide three.

2023 was a transformational year for icon driven by three strategic transactions, which allowed us to capture unlocked value for shareholders partner with respected institutions with significant experience to help <unk> grow in alignment with our strategy and strengthened <unk> balance sheet and capital position.

Through the tremendous efforts of our teams we were able to realize over half a billion dollars in proceeds through the sale of a contrast rotation east at 49, 9% sale in Sky Port and <unk> investment in Econ utilities, all at attractive and accretive valuations.

The transactions strengthened <unk> capital position, including through the repayment of $184 million in convertible debentures at the end of the year and will provide financial flexibility to capitalize on attractive growth opportunities ahead.

<unk> free cash flow in 2023 of $123 million improved by $258 million compared to a negative $135 million in 2022.

And we continue to focus on de risking our business with 58% of 2023 revenue on a non fixed price basis compared to 49% non fixed price work in 2022.

Finally interim agreements were reached on the four legacy projects with one reaching substantial completion in 2023 to expect it to be substantially complete by the end of 2024 and the final one expected to be substantially complete during 2025.

For legacy projects represent 7% of backlog at December 31, 2023, compared to 17% at the end of 2022.

We would be the first to acknowledge that despite the progress made to date risk remains if assumptions estimates <unk> circumstances change, but we and our joint venture partners are focused on project completions pursuing further recoveries and putting these legacy projects behind US every day, we are getting closer to the end and with that I'll turn.

The call over to Alastair.

Yeah.

Thanks, Adam and good morning, everyone.

Turning to slide four revenue for the year of $4 6 billion with $52 million or 1% lower compared to 2022.

Lower revenue is largely attributable to the sale of Acons transportation each business in the second quarter of 2023, which generated $51 million of revenue in 2023, compared with $326 million of revenue in 2022.

Adjusting for the sale of Aegon Transportation East business revenue increased on a like for like basis by $223 million or 5% in the year.

Adjusted EBITDA of 143 million a margin of three 1% compared to $219 million a margin of four 7% last year and operating profit of $241 million compared to an operating profit of $97 million in 2022.

Excluding the impact of the four legacy projects on results in 2023, adjusted EBITDA from the balance of the business with $359 million margin of nine 1%.

Diluted earnings per share for the year was $2 <unk> compared to diluted earnings per share of <unk> 47.

In 2022.

The improvement in operating profit and diluted earnings per share was largely due to a gain related to the sale of 49, 9% interest in the Bermuda International Airport concessionaire of $139 million, including a fair value re measurement gain of $80 million on 851% retained interest in the <unk>.

Session here, a gain of $37 million from the sale of ETE and higher gains on the sale of property buildings and equipment of $39 million.

Reported backlog at $6 2 billion at the end of 2023 compared to backlog of $6 3 billion at the end of 2022.

Backlog at the end of 2022 included $391 million from <unk>.

Icons transportation East business.

New contract awards of $4 5 billion were booked in the year compared to $4 8 billion a year ago.

As announced yesterday <unk> board of directors approved an increase to the quarterly dividend to <unk> 19 per share from $18 five.

$18 five per share previously with our next payment to occur on April <unk> 2024.

Now looking at results by segment.

Turn to page.

Turning to slide five construction revenue of $4 6 billion in 2023 was $48 million or 1% lower than the previous year.

The largest decrease in revenue occurred in civil operations, driven by lower volume of road building construction work as a result of the sale of ATB.

Discussed earlier, and partially offset by a higher volume of major projects.

Revenue was also lower in nuclear operations, driven by a lower volume of refurbishment work in an industrial operations driven by a lower volume of work primarily at chemical facilities in Eastern Canada, and partially offset by increased activity on mainline pipeline work.

And the utilities operations lower revenue resulted primarily from a decrease in gas distribution with.

Partially offsetting these decreases were higher revenue in urban transportation solutions, primarily from an increase in rail expansion and let electrification work.

Ontario.

New contract awards of $4 4 billion in 2023 compared to $4 7 billion in the previous year.

Construction backlog at the end of 2023 of $6 1 billion compared to $6 2 billion at the end of 2022.

Turning to slide six adjusted EBITDA of 99 million a margin of two 2% compared to $193 million a margin of four 2% in 2022.

The largest driver of the decrease was negative gross profit of $215 million in 2023.

Three of the four fixed price legacy projects versus a negative gross profit of $120 million last year for.

Or a negative year over year impact on operating profit of $95 million.

Other than the impact of fixed price legacy projects in 2023 higher operating profit in the balance of construction segment was driven by higher volume and gross profit margin in urban transportation solutions.

Gross profit margin and industrial operations and higher gains on sale of property plant and equipment and utilities operations.

However, these gains were partially offset by lower operating profit from road building construction work due to the sale.

Okay cause transportation, each business and lower volume and gross profit margin in nuclear operations.

At the end of 2023, the remaining backlog to be worked off on the four legacy projects was $420 million compared to $1 1 billion at the end of 2022.

These projects comprise 16% of consolidated revenue in both 2023 and 2022, while comprising 7% of backlog at the end of 2023 compared to 17% at the end of 2022.

Turning to slide seven concessions revenue for the year was $74 million compared to $76 million in 2022.

The decrease in revenue was largely driven by the sale of a 49, 9% interest in the Bermuda International Airport concessionaire.

And the use of equity method of accounting on a prospective basis for Aegon is retaining 51% interest in Skype for it.

In 2023 passenger traffic levels in Bermuda averaged 75% of 2019 pre pandemic traffic compared to 58% in 2022.

Adjusted EBITDA in the concessions segment of $90 million compared to $71 million in 2022, primarily driven due to improved results from the Bermuda Airport and an increase in management and development fees.

As noted previously operating profit in concessions reflects a gain in the sale and the year of $139 million.

Turning to slide eight at the end of 2023, Aegon held cash and cash equivalents of $259 million, excluding cash in joint operations. In addition at December 31, 2023, Aegon had committed revolving credit facilities of $850 million of which $112 million was.

Drawn and $6 million was utilized for letters of credit.

On December 29, 2023 convertible debentures with a face value of $184 million were repaid in cash.

Aegon has no debt or working capital credit facility maturities until 2027, except equipment loans and leases in the normal course.

Hey, Tom plans to maintain a disciplined capital allocation approach focused on long term shareholder value through acquisitions, and divestitures organic growth dividends and capital investments capital expenditures in 2024 are expected to be similar to previous years.

At this point I'll turn the back the call back over to Adam.

Thanks Alastair.

Turning to slide nine <unk>.

Continuing to build resilience through a balanced and diversified portfolio of work, while enhancing critical execution capabilities and project selection to play to our strengths.

Moving forward, we remain focused on leveraging our self perform capabilities and one acorn approach to maximize value for clients through improved cost certainty and schedule, while offering a broad range of infrastructure services from development engineering investment and construction to longer term operations and maintenance.

We will continue to pursue and deliver the majority of our work in our established markets, while embracing new opportunities to grow in areas linked to de carbonization and the energy transition as well as in the U S and international markets.

These opportunities are intended over the long term to diversify.

<unk> geographic presence provide further growth opportunities and deliver more consistent earnings through economic cycles.

Turning to slide 10.

Demand for <unk> services across Canada continues to be strong with backlog of $6 2 billion at the end of 2023 recurring revenue programs seeing robust demand and a strong bid pipeline Aegon believes it is positioned to achieve further revenue growth over the next few years and is focused on achieving improved profitability and.

Margin predictability.

Revenue from recurring revenue programs increased to $1 1 billion in 2023 from $896 million in 2022, representing growth of over 27% over last year and 67% versus two years ago.

In addition development work.

He is ongoing and consortiums and which icon is a participant to deliver that go expansion on corridor works project Scarborough subway extension stations rail and systems project and the Darlington New nuclear project all in Ontario.

These projects are being delivered using progressive design build models and each project is expected to move into the construction phase in 2025.

The <unk> expansion project also includes an operations and maintenance component over a 23 year term commencing January one 2025.

As a reminder, none of the anticipated work from these three progressive design build projects is yet reflected in backlog.

Turning to slide 11, <unk> continues to support the energy transition to build and operate sustainable infrastructure projects, such as the United Energy storage project co expansion with server subway extension and the Darlington SLR demonstrate the path Acorn is on to embrace the opportunities linked to the carbonization.

Sustainability and the energy transition.

Revenue tied to sustainability projects represented 64% of 2023 revenue versus.

Versus 60% in 2022.

Turning to slide 12 and in conclusion.

2023 was a transformational year for <unk>, driven by significant transactions aligned with our strategy and the strengthening of our capital position all paving the way for growth we want to thank our employees for their contributions to the achievements. This year and we look forward to the years ahead as we continue to build resilience through a balance.

<unk> and diversified portfolio of work.

2020 for revenue will be impacted by the three strategic transactions completed in 2023 the.

The substantial completion of several large projects in the year.

And the three major projects currently in the development phase being delivered under Progressive design build models, which are expected to move into the construction phase in 2025.

The completion and satisfactory resolution of claims on the four legacy projects with their respective clients remains a critical focus for <unk> and our partners. While the remainder of the business continues to perform as expected supported by the strong level of backlog and New awards during 2023, and the strong demand environment for <unk> services include.

<unk> recurring revenue programs.

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

At this time, we will conduct a question and answer session.

Minder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.

One moment for our first question.

Our first question comes from Jacob <unk> with.

With CIBC your line is open.

Good morning.

Good morning, good evening.

Question on how are you thinking about revenue growth in 2024, I know theres, a number of moving parts with the strategic divestments and completion of projects but.

Can we expect revenue growth to be similar to the year on year performance, we saw in the fourth quarter.

And then.

What are your thoughts on the U S utilities contribution in 'twenty 'twenty four and are you still targeting kind of longer term $100 million to $200 million revenue.

Okay.

I will take this one as much as I can.

For my voice.

The revenue in 2024.

He's about pure math.

Taking into account the the three transaction of last year.

<unk> that.

Most of our major lump sum turnkey.

<unk> targeting competed the.

The fact that we have decided not to take any more big lump sum job.

Spoken with you about the limit around $1 billion and the fact that we have embarked a few progressive design build.

Contract I mean, this is our strategy, which is totally focused on margin predictability built on ballooning revenue. It means that we are extremely comfortable with our backlog.

You remember that in our six 2 billion that we don't have the progressive design build we have.

Always speaking about three which is a small modular reactors carbon we will see similar station and the gold trading expansion you have seen a few days ago that we have added a fourth one which is <unk>.

In Montreal. So this is our strategy.

Exactly what we wanted you probably also of note is that we have.

Gone the way we want you to go in terms of.

Transiting from fixed price contract to do fixed price contract.

I'll be presenting the non fixed price contract, 49% two years ago, 58%.

We are targeting for the years to come 65%.

We are derisking, our CVT, we are focused on margin predictability not only improving the.

Revenue per seat.

Without taking into account the $1 1 billion.

Our recurring revenue.

<unk> seen in our own.

Our presentation.

So this is what is going to happen in 2024.

I'd say that most of our progressive design build big job.

Ramp up during the two <unk>.

Last quarter of the year to be ready for work on a much bigger scale from early 2025.

And I think Jacob the second part of your question was about U S utilities expansion.

Yes, still very much on track and very keen to get.

Our strategy in place with our partners at Oaktree. So.

So far it's gone very well.

Very like minded group.

Great access and an experienced and exactly what we're looking for so we expect 2024 to be a growth year in that business and leveraging all of the efforts that we've put into deep into our success moving forward. I think you had mentioned a number about 200 million, though was that in reference to the sizes. We were looking at.

Yes, I think you had given some guidance in the past as far as what you were targeting and just curious what youre, what youre thinking today as far as the U S utilities.

So both consistent with that if we were to take on kind of new investments I'd say kind of low one hundreds of millions if you will plus or minus depending on what we're finding.

Okay.

Thank you.

Okay, one moment our next question.

Okay.

Our next question comes from Yuri Lynk with Canaccord Genuity. Your line is open.

Good morning, guys.

Eric.

Sure.

Maybe I mean, obviously the balance sheets.

Strong as we've ever seen it.

Almost almost no net debt there.

And the underlying EBITDA of the business appears very strong so.

How do we think about.

Capital allocation.

Here.

And does the.

Does the arbitration process.

Coming up in the third quarter on CGM.

Does not knowing how thats going to go play a big role in maybe preventing you from going out and doing.

A buyback or something like that.

That might benefit shareholders.

Yes, Jerry.

Its alastair here.

So.

Exactly I think.

You saw a small dividend increase.

Reflective.

Our improved balance sheet improved cash position.

And with the general business improved outlook.

We still we still have to complete the legacy projects and we also have the arbitration.

With CGI later in the year and its.

John John and we will talk about in a minute.

But yes, we do we want to really get through.

To UTI.

<unk> projects and then also get through the CGM arbitration before we make any.

Decisions on really what to do with.

The cash on the balance sheet.

With regards to an NCIC or something like that so.

We're kind of in a wait and see mode.

2024 will be a bit of a transition year.

But as you know in construction, we need a strong balance sheet and so we're going to maintain that.

And make sure we're.

Get through this year.

To add some color.

We are extremely happy with our almost $1 billion of liquidity at the end of the year 2023.

This is what is needed and this will allow us I mean, a lot of <unk>.

Different alternatives in front of the opportunity we could see.

Okay. That's helpful.

How are your clients adapting to your.

This push for progressive design in a more collaborative approach.

Okay.

How how is business changed in kind of the discussions around contract structure.

You had some great success last year, you won the contract in Montreal I mean, it appears on the surface. So that's being well accepted by the market, but any additional color there.

Yes, I mean.

I consider it as a win win for clients and for contractors.

Terms of Derisking.

In a progressive design build you don't have land sea and proactive.

Ed negotiation dispute claim U.

I just can see the level of collaboration for example on the <unk>.

<unk> expansion it's astonishing.

Way, we can optimize our project working together so.

<unk>.

Little by Little I would say.

Our clients that have been pushed.

Through this new mode of contracting.

Because of lack of competition.

Discovering that it's also de risking.

The way of investing and they are I would say that are embracing these new way off.

Contracting.

As Youll notice timing during the first one on the half.

It's a development phase.

Yes.

And we don't have the revenues that we could have on all of the.

Schemes of contracting, but all in all that.

To conclude I don't think we have to go toward 100% Progressive design build.

The whole of the resilience of Acorn is about balance.

Our balance between recurring revenue between unit price job between some lump sum job provided.

I mean, the contractual condition, okay provided.

<unk>, Okay, probably the side diesel gate and some progressive design build and we will navigate balancing at each of those contractual bonds.

Okay. Thanks for the color guys I'll get back in the queue.

Okay, one more.

Our next question.

Our next question comes from Chris Murray with <unk> capital markets. Your line is open.

Yes, thanks folks.

I'm kind of looking at slide 14, which shows the normalized earnings profile for the company for last year, and I guess, what im trying to figure out.

You've taken write downs and adjustments on all the projects so far.

223, and also 'twenty two.

But we're getting pretty close to the end here.

Can you maybe walk us through.

In terms of pacing.

Realistically or shall we just keep assuming kind of the run rate that we saw in Q4 in terms of losses until we get past the all our key contracts.

But any color you can give us on how to think about.

What to expect as we go into 'twenty four would be would be helpful.

Okay.

We still.

Our full legacy project on our shoulders.

So the situation is getting better and better I mean, you have noticed we have something like $420 million of backlog, which represents 7% to a steep decrease on this $420 million of backlog I mean, 60% is about Gordie Howe, which is not the most difficult one.

Something like 90% to 95 on CGM, but most probably we're not going to executed because the client is also alternative to finalize a cleanup so its remaining rather weak on egginton.

On Fitch.

So.

We're all of the issues basic kidney on Eglinton and Finch one of the main issue is not about finalizing the job, it's not about testing and commissioning.

Extremely advanced there for example.

Next Friday in a few days.

We will have three trains.

<unk> up and down the whole finish line.

It just means that all the signaling and train.

Control system are perfectly adequate the issue we are facing is that we are not.

Totally in control.

All of the timing for the operator, which is TTC.

Take over the operation.

All of this.

As contractual implications, we are working with our client on that.

So it just means that we are not totally finished.

Mainly.

It does not change first of all we need to finish construction.

Second we need to protect our cash up to the moment, we are over and third we need to finalize all dispute claim.

Conciliation eventually.

Ill be equation as quick as we can and as good as we can.

Okay, and so I guess my question is.

In terms of the magnitude of anything that we should maybe allow for in 2024.

I would assume under accounting rules.

The loss adjustment that we saw for Q4 take you to your best estimate.

The right way to think about it or what are the other overhead costs or other things that we should allow for.

Yeah Fair point, Chris I mean, the <unk>.

<unk> are positioned as we expect them to be completed currently.

In the fourth quarter, you would've seen some more impacts on the <unk>, which.

From Q3 to Q4.

Reflected some of the changes to scheduling and.

Requirements to complete those and so.

When those things come up in the future, we will adjust accordingly, but from what we know currently the projects are all positioned properly.

<unk>.

Based on all of the interim settlement that we had last year from an operational perspective, we feel much better this year going through to completion and as John noted more of the.

Potential impact down the road could come from the ultimate arbitrations and settlements.

Okay.

And then the other quick question I had for you is just any update on as much as I'm sure you guys are enjoying doing the call any update on the <unk>.

Bo search in that process and did that actually impacting your tying your hands a little bit on any sort of capital requirement.

So as the CFO search is well on its way.

We are exploring internal.

Possibilities and external possibilities, what I can tell you that I have just discovered.

During these.

Two last ones.

Tony.

Is the team that had been created by by David So we should be over with the search probably.

Within the next few weeks.

Hey.

And this is what is important and extremely strong team.

All focused on closing out our legacy project all focused on growth.

For E comm and being able to tackle the opportunities around us.

Okay. That's helpful. Thanks, a lot.

Thanks, guys.

One moment our next question.

Our next question comes from Ian Gillies with Stifel. Your line is open.

Good morning, everyone.

Good morning.

With respect.

The competitive environment, obviously margins are getting much better.

The outlooks much healthier.

Are you seeing any increased competition from international firms that may have exited the market previously or are you seeing anyone trying to come back and back into Canada at this juncture.

Yes.

If some big international.

Once we entered Canada on huge lump sum job. Good luck I mean, we're not going to compete with them on those one.

We know we know what it means so I don't think that the competition is.

Is really increasing I mean, a economies is a partner of choice of most of our clients on most of our projects.

It's extremely rare I would say that we are not pre qualified on a job and then after I mean, we have our priorities. We can decide in front of our strategy in full of our workload whatever do we want to go and where we already we already two part but in terms of infrastructure is extremely well.

Our position on.

On another hand, I mean, as you have noticed from our slide on page 24.

The underlying business results of legacy project.

Extremely strong.

Interested in looking at the reserves just by a few of our competitors and peers.

It seems to be very happy with an EBITDA at the mid tens.

Okay.

We were extremely stronger outside of our legacy project. Our strategy is right. We are focused on it margin predictability.

Predictability and we are going forward.

Sure.

That's helpful and then moving to the arbitration with respect to CGI and perhaps the other projects.

As we think about some of the losses the crude over last number of years related to those projects.

Would that take into account any.

Any potential outcomes from arbitration or will that be incremental either to the positive or negative when bench fully finalized.

Okay.

To begin and at least to me.

We have taken a position on all our legacy project, depending on the knowledge that we have on the schedule.

Of our future revenue of our execution cost.

There is still work to do that off keep negotiation I mean, you mentioned the arbitration on CGM, just remember that it has been.

One year and a half ago.

He is ongoing.

Two accelerated Q3 2024.

But meanwhile ever.

Every week, we are negotiating with our clients it means that.

We are using it.

The two vectors.

We are not.

Totally in control of the result of the arbitration you remember that its a panel of three arbitrator one.

Chosen by Us Ron.

<unk> says one chosen by the two arbitrators.

Looking at the.

The best we can with the best team.

We have on it but there is still a known about it Alistair do you want to add something yes, Ian I mean, when it comes to our positions on the legacy jobs, we essentially.

We take a position on our on our claims with our with our partners and based on legal entitlement and.

The values and.

Essentially if if there is an outcome that differs from that we could either have a write up or a write down but our.

Our positions are based on the best information that we have based on.

Legal experts in.

And so.

Any difference.

<unk> from.

An outcome that's different from what the JV partners have on the four legacy projects.

Understood. Thanks, very much I'll turn the call back over.

Okay. Thanks again.

Our next question.

Our next question comes from <unk> Khan with RBC capital markets. Your line is open.

Okay, great Thanks, and good morning.

So thanks for providing the color on the CGI I guess, just thinking about the other three projects.

Can you maybe just talk through what the process or kind of the road ahead, there might be on recoveries and hype about those is there going to be eventual.

Arbitration is areas that will there be a different mechanism. Thank you.

So.

At the moment on <unk>.

There is no pending claim no negotiation I mean, we are just.

Trying to.

Go perfectly within the scheduled that has been agreed upon with the client and we have the large deal at the end of 2023.

She is a bridge to be close around mid 2024 and the <unk>.

<unk> to be substantially completed in the over before the end of 2025.

On the LRT two LRT jobs.

Yes, we have we have claimed.

And going.

Negotiation I would say every day on the substance.

<unk> claim and it will go I mean.

<unk> a little further after substantial completion.

I have failed I mean, we we have gathered the best team within our company and externally.

To be to put the.

The outcome of it.

This is a negotiation and or dispute.

The best site for us.

Okay, Great and then I guess.

The color you provided on sort of pro forma EBITDA margin understanding it's illustrative, but I guess right.

So now if you look at it look because that kind of long term potential margins is there any sort of should we expect that over our medium term any timeline you can share just trying to get an idea.

How should we be thinking about those margins as we forecast over the next few years. Thank you.

Yes.

It's consistent with the last year or two as we've provided some of this color in the past so excluding the four legacy in 'twenty two 'twenty three and as we look ahead. We've seen this kind of margin consistency and remind everybody not to look at any one quarter in isolation, but to look at it on kind of a rolling 12 month basis.

We would not see any reason to believe that those wouldn't be at or above the next level as a reminder.

Progressive design build ones have very good floor mechanisms that come into backlog next year.

And so we feel comfortable with what the numbers youre seeing on a pro forma these projects.

What is also important to notice that from September 2018.

We have not created any new legacy project.

Drastically reduce the size of the lump sum turnkey we.

We have a gate zero process.

Is that low this to evaluate the risk of the of our post suites.

I think where we are.

Getting extremely professional in acute on this and this is what is important I mean, there will always be.

Project more difficult so project easier, but what is sure is that we will never ever come back to the situation, where we have been and we are still I mean for the time.

Too many big too dangerous fixed price job. These world is over.

Great. Thanks, so much for the color.

Okay.

One moment our next question.

Our next question comes from Michael Lewis with Desjardins. Your line is open.

Good morning, and congrats on the strong results maybe switching to the cash you received a pretty significant working capital release in the quarter with some strong contribution from deferred revenue can you provide some more details on the drivers of this inflow.

Onetime nature and your expectations for working capital and free cash flow in 2024. Please.

Yes.

Thanks, Michael.

So youre right, we did have a big inflow of cash from working capital in Q4.

Part of that came from one of our large settlements.

<unk>.

That we've previously talked about.

Our French project.

And then really the other.

Component that came through deferred revenue was.

Two other large advances for projects that are that are starting up.

So that certainly helped.

The quarter and obviously for the year, we were we had positive working capital in and really positive cash.

So for the first time in a couple of years. So a great result on the cash flow side.

Expectations for 'twenty four are similar to <unk> 23, and that we expect to have a good year.

I think it will follow the seasonal patterns that we've seen in previous years, so using cash in Q1, and Q2 and returning cash in Q3 and mostly.

Q4 that always seems to be a strong quarter from a cash.

Cash perspective, and obviously.

As per our earlier conversations and subject to settlements on our on our legacy projects.

And the other thing I'd note is where our working capital tends to be a bit lumpy so take that into account.

I appreciate it.

One moment for our next question.

Okay.

Our next question comes from Jonathan Lamers with Laurentian Bank. Your line is open.

Good morning.

We're just taking a look at your <unk>.

Slide with.

Your updated mix of business.

Looking out say three years five years.

As the work in the backlog and the pending backlog converts.

Tom and you continue to grow utilities like how do you see the mix evolving in a few years.

Okay.

First of all.

You probably remember.

We have two Victor.

In terms of development. The first one is that.

We want to be able to master the totality of the value chain and infrastructure. It means.

Developing our project financing them and junior Igor coordinating the engineering building and operating our assets.

This is our strategy because this is where is the value. This is where is the money. You're for example, our Bermuda is a pure example.

What I'm, saying the second point the second vector is about balancing our activities.

It's balancing between our different sectors.

This being said ICA com, becoming.

More and more electrical.

And probably less about ceded works we were overweight IC can see if it works.

Huge opportunities on the ground are about energy transition I mean, it's about decarbonizing and upgrading the grid.

It's about being able to produce electricity on a cleaner way we're extremely strong in nuclear.

You know that our utilities.

Deep sector is working.

Extremely well he knows that we are extremely ambitious.

On the growth of the strategic business.

Although we'll do it prudently, but we'll do it steadily I mean to grow into the United States was the utility sector.

Probably I mean as the.

In a nutshell more electric.

Yes.

And just following up on that Bill.

Leave your earlier comments that you would expect the.

Underlying margin in the construction business extra legacy project losses.

To be sustained or potentially improved is as you continue to shift that way.

Yes, we do we think our strategy is the right. One we are extremely focused on it.

And we also focused everyday on closing out our legacy project.

You probably have noticed.

They are still in our backpack less.

Less and less everyday, but there's still work to do to be able to consider that.

Pass the line. Thank you.

One moment for our next question.

Our next question comes from Michael <unk> with TD Securities. Your line is open.

Thank you good morning.

Hey, Mike.

Earlier on the call there was a question.

Our capital allocation, although I think it was.

Fairly specifically focused on the potential for buybacks and I think Alistair you suggested that.

In some regards this as a bit of a trance transition year transformation year, and you want to see how the legacy projects unfold before contemplating buybacks I'm wondering if you can maybe talk about capital allocation a little more broadly.

Specifically thinking about acquisition opportunities.

One.

Would it be fair to say that sort of the comments you made about waiting to see how things play out.

It has no bearing on your thoughts around the utilities business in the U S.

Possible acquisitions, there and then secondly.

Are you still looking at acquisitions in.

In other parts of Acorn beat in Canada or elsewhere outside of the utilities area.

And if so how should we think about the potential there.

Yes, Mike so.

We are continuing to look at.

Opportunities for utilities.

Both in Canada, and the U S.

Also.

Across our businesses, we continue to look for tuck in businesses that we can add to grow the company. So certainly.

The growth side of our strategy is a huge focus for us in.

In 'twenty four.

And really when I was when I was talking about the strong balance sheet and preserving that it was really in regards to CIB and.

And just holding tight there until.

Coming to your legacy projects is done, but certainly our focus is on growth and the strong balance sheet, we want to put that to work and looking at things that will help strengthen our business in the future.

Okay perfect. Thanks.

Then you had a question I just received a few minutes ago about working capital I guess you talked about.

Typical seasonality, but there have been a lot of changes in the business over the last two.

18 months.

I guess, when we're thinking about seasonality and Mccann imagine that things have changed.

Dramatically in that Q1 has always been a weaker quarter seasonally but I'm just wondering if you can comment on.

Any changes that we should be thinking about.

A seasonal perspective given.

All of the evolution that's occurred in the last 12 to 18 months with the with the various divestitures and whatnot.

Sure, Yes, I mean Q1 continues to be our slowest quarter and again, while we sold our transportation.

Business, we still have our transportation west business, that's impacted by by winter conditions, and obviously, our utilities business is heavily impacted by winter conditions. So the seasonality has may be lessened a little bit, but it's still exists in the construction business in Canada.

Never get away from that because even our civil business to agree to a small degree impacts.

With winter.

So.

Jail, if theres anything you want to add to that.

No.

Yes.

The only business we are doing that is not dependent on Q1, and whether you can clear.

Basically so it depend on the on the way.

We are piloting our activity between gross and net.

And Darlington.

Alright, Thats all for me. Thank you.

Okay.

As a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced our next question comes from Maxim <unk> with National Bank Financial Your line is open.

Hi, good morning, gentlemen.

Okay.

Theres only I was wondering if you don't mind, maybe commenting.

What what's out there in terms of concessions.

When it comes to opportunities How's the market what are you guys tracking maybe any color there. Thanks.

Yes, I mean basically the former <unk>.

Big infrastructure market in Canada is is decreasing.

They have not been I mean.

Just kind of scheme not come to the market for the last four.

For the last two to three years so.

We are changing the energy transition, you, probably remember or need a deal.

A few other deals that we're looking at.

About concession.

So looking at airport mainly international.

We have been just quantified for the concession, let me Turks and Caicos, which is quite similar.

Jobs and so why do we did in Bermuda.

We have just put on one preliminary offer four also kind of <unk> in the U S. Virgin Island two airports.

So we are very active also on this front the market is changing but I think between the energy transition and the airports, which is our sweet spot.

We were able to find it.

New ways of growing with our concession business.

Okay, and I guess I can tell the competition some of the bigger guys would not be I presume most interested in some of these small assets is that the right way to think about it.

Yes, exactly I mean, we we don't want to go and its too small we don't want to go where it's too big I mean, I'm not going to go to JFK or something like this but I think we have our our sweet spot was a complete we can perfectly manage the competition because we have our own competitive advantage.

Okay. Okay makes sense and then just one clarification because when I look at <unk>.

<unk> results and their references to Gordie Howe I think that a true up on their EBITDA in Q4.

So did you guys have a reversal in working capital also on EBITDA.

<unk>.

Hey, Max.

And we watch that as well I guess about a week or so ago.

Well, we can't really comment on partners and competitor accounting policies.

Policies.

Yes.

Pick up in the.

In the quarter based on the very health settlement that we announced basically in Q2 and Q3 and recall, we had provisioned Gordie Howe downwards in Q2, and Q3 last year and so our Q4 position reflected all of those adjustments already so there were no impacts to us in the quarter from that on EBITDA or <unk>.

The P&L as also referenced earlier some of the working capital unwind was from that settlement along with the other projects. So while it was cash positive from the outcome and we think we are now on the path to completion there were no other impacts flowing through the P&L such as what we saw at quarter.

Okay. So I guess, yes.

I guess Mike.

The negative impact from legacy contracts, it's all related right.

This quarter correct, yes, <unk>, yes, okay. Okay. Okay perfect. That's it for me thanks, so much.

One moment for our next question.

Our next question comes from Sean <unk> with Raymond James Your line is open.

Hey, good morning, guys.

Just a quick question looking at the slide from the newest investor deck on utilities, and just thinking about potential revenue growth for next year.

Did a 13% CAGR over the last five years.

Attainable for 2024, and if you don't mind I'm talking about some of the puts and takes that might go into.

Look for next year.

Sure.

We saw a little bit of compression in the last quarter or so of last year in 2023, just as some of the major utilities and telco on gas and others.

Had the capital to earn a little bit to the right.

That work was all still there and we expect that to pick back up in 2024. So I think from four main areas that we focus on we saw that pretty good tailwind and all of them are electricity transmission distribution from all of the elements, we've talked to so far and the energy transition the grid hardening. Our storm response all of those sorts of.

Areas telecommunications still quite steady as I said, some pullback in the fourth quarter, but we expect that to increase again in the next year.

We've got renewables in home services and other driving good growth in gas as well so I think across all areas, we still see.

Some pretty reasonable outcomes organically and that also includes expansion of our programs in the U S. We started.

From a smaller scale last year growing into a few telco and <unk> the opportunities and then of course as we talked to the real key to the strategy or the catalyst would be acquisitive growth along the way so organically I'd say, what you've seen on a CAGR basis is quite achievable and maybe more and from.

From an M&A or inorganic perspective that could catalyze the growth.

Okay perfect. That's all for me thanks, guys.

Thank you.

That concludes the question and answer session. At this time I would like to turn the call back to Adam for closing remarks.

Great. Thanks, very much and thank you all for your attendance and participation today as always feel free to reach out to us anytime with further follow up questions and we wish you a great rest of the day and we'll chat to you next quarter take care.

Thank you for your participation in today's conference. This does conclude the program you may now disconnect.