AEGXFAEGXFOTC
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Operator: "
Adam Borgatti: "
Jean-Louis Servranckx: "
Jerome Julier: "
Alistair MacCallum: "
Ian Gillies: " Stifel Nicolaus Canada Inc., Research Division
Yuri Lynk: " Canaccord Genuity Corp., Research Division
Frederic Bastien: " Raymond James Ltd., Research Division
Sabahat Khan: " RBC Capital Markets, Research Division
Benoit Poirier: " Desjardins Securities Inc., Research Division
Krista Friesen: " CIBC Capital Markets, Research Division
Michael Tupholme: " TD Cowen, Research Division
Maxim Sytchev: " National Bank Financial, Inc., Research Division
Operator: Good day, and thank you for standing by. Welcome to the Q3 2025 Aecon Group, Inc. Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Adam Borgatti, SVP, Corporate Development and Investor Relations.
Adam Borgatti: Good morning, everyone, and thanks for participating in our third quarter results conference call. This is Adam Borgatti speaking. And joining me are Jean-Louis Servranckx, President and CEO; Jerome Julier, Executive Vice President and CFO; and Alistair MacCallum, Senior Vice President of Finance. Our earnings announcement was released yesterday evening, and we posted a slide presentation on our website, which we'll refer to during the call. Following comments, we'll be glad to ask and take questions from analysts. And we ask that analysts keep to one question and a follow-up before getting back into the queue. As noted on Slide 2 of the presentation, listeners are reminded that the information we're sharing with you today includes forward-looking statements, and 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. With that, I'll now hand it over to Jerome.
Jerome Julier: Thanks, Adam, and good morning, everyone. I'll now speak to Aecon's consolidated results, review results by segment, and address Aecon's financial position before turning the call over to Jean-Louis. Additional information has been provided to help clarify the underlying results, excluding impacts from the fixed price legacy projects and divestitures. Detailed reconciliation tables are included on Slides 16 through 18 in the conference call presentation. Turning to Slide 3. On a reported basis, revenue for the 3 months ended September 30, 2025, of $1.5 billion, the highest quarterly revenue in Aecon's history, was up $255 million or 20% compared to the same period in 2024. Revenue grew across all our operating sectors with strong performance in nuclear, Industrial, and Urban Transportation Solutions. Adjusted EBITDA of $93 million compared to $127 million last year, and operating profit of $61 million in the quarter compared to an operating profit of $81 million in the same period last year. Adjusted EBITDA and operating profit in the third quarter of 2025 were negatively impacted by $21 million in legacy project losses. There were no reported losses on legacy projects in the comparative period last year. Excluding the impacts from the legacy projects and divestitures, as adjusted revenue for the 3 months ended September 30, 2025, of $1.5 billion compared to $1.2 billion in the same period in 2024, and adjusted EBITDA as adjusted of $114 million compared to $127 million last year. Adjusted diluted earnings per share in the quarter of $0.53 compared to adjusted diluted earnings per share of $0.86 last year. Reported backlog of $10.8 billion at the end of the third quarter was the highest reported backlog in Aecon's history, surpassing the previous record of $10.7 billion set last quarter. This level and diversification of backlog is a result of significant efforts through progressive and collaborative procurement models, and Aecon anticipates a moderation in backlog growth in the near term, given the current lag levels. New contract awards of $1.6 billion were booked in the quarter compared to $1.1 billion in the prior period. Looking now at the results by segment. Turning to Slide 4. Construction revenue of $1.5 billion in the third quarter was $255 million or 20% higher than the same period last year. Revenue was higher in nuclear operations from an increased volume of refurbishment, new build, and engineering services work at nuclear generating stations in Ontario and the United States. In industrial operations, primarily from an increased volume of field construction work in Western Canada, as well as revenue growth in the U.S. associated with the Bodell acquisition. And in Urban Transportation Solutions, primarily from an increase in mass transit project work driven by a progressive design-build transit project moving from the development phase in 2024 to the implementation phase in 2025, partially offset by a lower volume of LRT work in Ontario and Quebec as several projects near completion. Revenue was also higher in our utility operations from higher volume of gas distribution work in Canada and electrical transmission work in the United States, partially offset by a lower volume of battery energy storage and telecommunications work. And in civil operations, primarily from a higher volume of major project work internationally, partially offset by lower weather-related volumes of road building work in Western Canada. On an as-adjusted basis, construction revenue was $1.5 billion compared to $1.2 billion in the same period last year, representing a 25% increase. New contract awards of $1.6 billion in the third quarter and construction compared to $1.1 billion in the same period last year. Turning now to Slide 5. Adjusted EBITDA of $88 million compared to $114 million last year, and operating profit of $70 million compared to an operating profit of $90 million last year. On an as-adjusted basis, the adjusted EBITDA for the 3 months ended September 30, 2025, of $109 million compared to $114 million in the same period in 2024. Moving on to Concessions on Slide 6. Revenue for the third quarter was $2 million compared to $3 million in the same period last year. Adjusted EBITDA in the Concessions segment of $15 million in the quarter, compared to $22 million last year, and operating profit of $1 million compared to $5 million last year. Lower adjusted EBITDA and operating profit in the quarter were driven by lower operating results from Skyport and from lower management and development fees in the balance of the segment. On Slide 7, we've brought together the as-adjusted information to exclude the impacts of legacy projects and divestitures to provide insight into the underlying performance of the business. On an as-adjusted basis, revenue for the trailing 12-month period ended September 30, 2025, was $5 billion compared to $4 billion in the same period last year. Adjusted EBITDA was $338 million for the trailing 12-month period compared to $348 million in the prior period. For our Construction segment, on an as-adjusted basis, adjusted EBITDA was $316 million for the trailing 12-month period, representing a 6.3% margin. As adjusted EBITDA margin was impacted by lower gross profit in the civil sector, driven by weaker performance on projects in the Western region and Urban Transportation Solutions, from lower gross profit on mass transit projects that are nearing completion, had been completed in the prior period or have moved into the execution phase. Turning to Slide 8. At the end of the third quarter, Aecon held core cash and equivalents of $21 million, which excludes the $370 million of cash representing Aecon's proportionate share held in joint operations. In addition, on September 30, 2025, Aecon had committed revolving credit facilities of $1 billion, of which $294 million was drawn and $4 million was utilized for letters of credit. Aecon has no debt or working capital credit facility maturities until 2029, except equipment loans and leases in the normal course. Aecon repurchased approximately 341,000 shares to normal course issuer bid or NCIB in the quarter, and the Toronto Stock Exchange approved a renewal of Aecon's NCIB for an additional year. At this point, I'll turn the call over to Jean-Louis to address our business performance and outlook.
Jean-Louis Servranckx: Thank you, Jerome. Turning to Slide 9. Aecon continues to build resiliency through a balanced and diversified work portfolio. Over the trailing 12-month period, 47% of Aecon's construction revenue was generated from the utilities and nuclear sectors, and over 50% of construction revenue was derived from power-related work programs, which encompasses utilities and nuclear and also includes power-related activities in Aecon civil and industrial sectors. Last week, Cascade Nuclear Partners, an equal joint venture comprised of Aecon, Kiewit, and Black & Veatch, was selected by Energy Northwest to collaboratively complete the design, planning, and construction of the first 4 of the 12 Xe-100 small modular reactors or SMRs under a progressive design-build model. The first phase of the project will generate up to 320 megawatts through the delivery of 4 reactors modules and will be located adjacent to Energy Northwest Columbia Generating Station near Richland, Washington State. This is one of the first SMR projects to be developed in the United States, and we are excited to contribute to its ultimate delivery while also executing on the construction phase of the Darlington new nuclear SMR project in Ontario. We are confident that these efforts position us well to further expand our nuclear business and capitalize on long-term growth opportunities in the sector. In addition, this month, Contrecoeur Terminal Contractors, comprised of Aecon and Pomerleau, completed the collaborative development phase and reached financial close on a design-build contract with the Montreal Port Authority for the Port of Montreal expansion in water work project in Contrecoeur, Quebec. Overall, balancing growth and opportunity with proper risk management is key to Aecon's future success. We continue to maintain balance in our Construction and Concession segments as we embrace new opportunities to grow in areas linked to the energy and power sectors and in U.S. and international markets. Turning to Slide 10. Demand for Aecon services across our markets continues to be strong. With record backlog of $10.8 billion at September 30, 2025, recurring revenue programs continuing to see robust demand and a strong bid pipeline, Aecon believes it's positioned to achieve further revenue growth in 2025 and over the next few years and is focused on achieving improved profitability and margin predictability. 3/4 of Aecon's record backlog at September 30 is on fixed price. This compares to just over 50% non-fixed price last year and roughly 1/3 non-fixed price in the third quarter of 2021. Additionally, our trailing 12-month revenue at September 30, 2025 was 66% non-fixed price, up from 59% in the same period last year. We have continued to shift the nature of our backlog and our business over time, including through more collaborative and progressive procurement models while seeking to reduce risk in our performance and target greater profitability and margin predictability. Trailing 12 months recurring revenue of $900 million at September 30, 2025, compared to $1 billion at the same time last year. Recurring revenues are typically executed on a non-fixed price basis, with the majority being over and above our reported backlog figures. Turning to Slide 11. On September 2, Thomas Clochard was appointed to the Chief Operating Officer role at Aecon. In this role, Thomas will work closely with Aecon's operational leadership teams across North America and internationally to drive enhanced operational and financial performance in the context of Aecon's Safety Always structure. Turning to outlook on Slide 12. Revenue in 2025 is expected to be stronger than 2024 due to a record backlog of $10.8 billion. The impact of business acquisitions completed in 2024 and '25, solid recurring revenue, and a strong bid pipeline. Aecon believes it's positioned to achieve further revenue growth in 2026. In the Construction segment, demand for Aecon services across Canada and in select U.S. and international markets continues to be strong with opportunities across all sectors. And in the Concession segment, there are several opportunities to add to the existing portfolio of Canadian and international concessions in the next 6 to 12 months. The Ontario government recently announced the completion of the revenue service demonstration or RFD phase for the Finch West LRT project, a crucial step indicating the system's readiness for operational launch. The Toronto Transit Commission, TTC, is set to assume full control of the line shortly. This represents a significant accomplishment for Aecon and our joint venture partners, underscoring significant progress towards completion. We want to take this opportunity to sincerely thank our teams for their outstanding dedication and hard work in reaching this very important milestone. The Eglinton Crosstown LRT officially began its RLD phase in October, and we are continuing to work towards project completion in 2025 alongside our client and the operator. With that, on the remaining 3 legacy projects, 2 are currently expected to be substantially complete by the end of 2025, and the final project is expected to be construction complete before the end [indiscernible], substantially complete as soon as early 2026. The finalization of this project is anticipated to lead to improved profitability and margin predictability. The remaining backlog to be worked off on the 3 remaining legacy projects was $53 million or less than 1% of total backlog at September 30, 2025. We are very close and are dedicating all necessary resources to drive the remaining legacy projects to completion while pursuing fair and reasonable settlement agreements with the respective clients in each case. Until the 3 remaining projects are complete and the related claims have been resolved, there is a risk that profitability could be impacted in future periods. Turning to Slide 10. Aecon recently completed 2 strategic U.S. acquisitions: Bodell Construction and Trinity Industrial Services. Bodell specializes in capital expenditure projects across the oil and gas, mining, water and wastewater, and power generation sectors throughout the Western and Southern U.S. Trinity focuses on fabrication and O&M projects for industrial clients, primarily in Texas and surrounding regions. These 2 strategic acquisitions position Aecon with a strong growth platform in the U.S., targeting high-momentum sectors such as energy, power, mining, and water in key geographic markets. Together, the transaction are highly complementary, broadening Aecon's U.S. presence, deepening local client relationships, and unlocking additional cross-selling opportunities. We are very pleased to welcome the employees of Trinity and Bodell to the Aecon family. Thank you. We will now turn the call over to analysts for questions.
Operator: [Operator Instructions]. Our first question comes from Ian Gillies of Stifel.
Ian Gillies: I was hoping you guys could perhaps spend a bit of time talking about your capabilities in the U.S. as it pertains to nuclear, your abilities as an agnostic service provider, and how you're thinking about capturing work, whether as a prime contractor or sub?
Jean-Louis Servranckx: Okay. I will check this one. I mean, broadly speaking, let's speak about our nuclear sector. I mean it's very strong. We are very happy with the performance of this sector. You know our Canadian activity, basically, we have a 100% market share in the rehabilitation market. I mean, the major component replacement in Canada. We are finalizing the last unit at Darlington Unit 4. We are finalizing the second unit at Bruce out of 6 Unit 3. And we have begun work in Pickering, I mean, the 4 units 5, 6, 7, 8. In addition, in Canada, we are part of the small modular reactor alliance with OPG. Interesting to know all the refurbishment of CANDU reactors. This SMR is GE Hitachi reactor. In U.S., we are also progressing in major component replacement with a few clients. We are working with the Federal Department of Energy. And you have noticed the announcement about Cascade for Energy Northwest, I mean, new class, I mean, Class 4 reactor, high-temperature gas cool with pebbles. It's for the first set of 80-megawatt reaction with ex-energy patent. It's very interesting. You have also noticed the team. I think this is one of the strongest teams we could dream of, Kiewit, Black & Veatch, and Aecon. We, at the moment, have something like 1,300 persons working for us in U.S. related with our nuclear sector. It's not new. You remember that in -- at the end of 2018, I mean, we acquired a small company named Wachs, now Aecon-Wachs. And we have been working in the past to fabricate modules for the AP1000 reactor. And another proves that, as you say, Ian, we are technology-agnostic Westinghouse. So you have heard the recent announcements in U.S. about the Westinghouse, the U.S. government, and we are very familiar with the AP1000 due to the model we have been fabricating in the past. We have a cooperation agreement with Westinghouse covering all countries about cost estimation, planning, development, fabrication support. So we are very much plugged in to with Westinghouse. So this is where we are at the moment. It's a very dynamic market. As usually, we go prudently, but steadily.
Operator: Your next question comes from Yuri Lynk of Canaccord Genuity Corp.
Yuri Lynk: Can we just talk a little bit about the Western Civil contracts? Curious if those are collaborative in nature? And if so, can you talk about how the pain and gain sharing mechanism in those contracts is kind of working for you as you work through those difficulties?
Jerome Julier: Yes. It's Jerome here. So the Western Civil, I mean, we're specifically zooming in on a handful of projects across a pretty broad portfolio across Aecon. As Jean Louis noted in his prepared remarks, the majority of the revenue that we're accruing today is based on non-fixed price, but we still have elements of fixed price in our business. And when those work well, they work well. And then when those work poorly, they can have a declining presence on our margin profile. And so these -- the Western Civil items under subject here are not part of this progressive or collaborative approach. They'd be kind of like more traditional or older-type projects. And we've deployed teams to support and improve schedule safety and financial performance, like we're ending the near -- we're near the end of the completion on these things, right? So our hope is we'll be able to stop talking about the impact that's having on the overall margin profile and then hopefully kind of the rest of the decline that we've seen in the construction as adjusted EBITDA margin on a go-forward basis, like we're almost there. But until they're done, they're not fully done. But these ones would not be part of that set. This is like just more traditional work that is just not being executed to the level that we're happy with.
Yuri Lynk: And does that contract structure reflect the fact that they were just not put out to bid under a collaborative framework? And is that more timing-related before that, that kind of became the prevalent contracting structure?
Jean-Louis Servranckx: Yes, Yuri, you're right. I mean those are rather ancient projects, almost all completed now. And the bidding structure was under a lump sum. So this is where we are with those projects. As Jerome said, I mean, we're not very happy or not happy at all with some phases of the execution, but it's just getting done. As I've noticed during a few times, I mean, there's not such a word that everything lump sum is bad and everything progressive is good. We have other lump sum jobs that give regular ramp-ups that are progressing. So just have to be more and more careful about any project, and we have the organization now to do it.
Yuri Lynk: Okay. And I guess it kind of ties in with that my next question. Your Construction segment trailing normalized EBITDA margin, 6.3% TTM, down about 50 bps sequentially from Q2. Understand what's weighing on it. I get that. I'm just trying as we look to '26, does that number start with a 6? Does that TTM number slide a bit more before it gets better? Just how do we think about kind of the puts and takes on the underlying profitability of the Construction segment?
Jean-Louis Servranckx: Tricky one, because as you know, we don't provide guidance. Maybe I'll position it like this. Part of the change that we've seen in the margin profile stems from 3 specific factors. So one is Western Civil, we've talked about it. That is transitionary, so to speak, as that completes and as we burn off the quarters where that's impacted us, we'll hope to see a return that will help accrete up the margins. Another aspect is in the prior periods, we were in the collaborative design phase on a lot of projects where the margin profile was more supportive. And then now we're in the execution phase. And so we're booking a ton more revenue, right? Like we don't want to lose the story here, which is when you have 20% or 25% revenue growth, like that's not a bad thing for us, like we're quite proud of what the teams have done here, especially in the context of effectively flat construction market in Canada overall. But the key thing here is that what we're executing today is just going to be different type of work we're executing in the prior period. And also, what we're executing today in general is lower risk. And so we're taking a much more portfolio-driven approach to the way that we assess our projects with a risk-reward balance that I think is a lot more appropriate. So that doesn't answer your question at all, but that gives context to this, which is also not going to answer your question. But the view is we'd like to arrest the decline in the margin profile and then start bending the curve upwards in 2026. Like that's obviously a key objective for us. We think we have the programs to execute against that, but we got to get through the back half of the year here, and we got to close out these projects can be more definitive on it. But the hope here is we'll be able to bend the curve upward next year.
Yuri Lynk: Okay. Can you recall if Q4 of last year had better margins in Civil? Like is it a tough comp? Yes. I mean look, this quarter was the toughest of all comps, right? Last year was a stellar quarter, and we hope we can get back to these levels. Last year was, I think, like an okay quarter. So I think we'll just have to work at it.
Operator: Our next question comes from Frederic Bastien of Raymond James.
Frederic Bastien: I don't recall you ever turning to a CEO in my time covering the stock. What made you decide to first establish that position today and second, to select Thomas as your COO?
Jean-Louis Servranckx: So I'm very happy to have Thomas as a COO, Chief Operating Officer. I've been knowing Thomas for the last 20 years. I've been working with him at VINCI. I've been working with him at Eiffage and now at Aecon; he has always delivered above the target at 50. I arrived in 2018 and very quickly discovered that those legacy projects would be a major concern and that we also had to pivot and push our client towards those progressive models, more collaborative model. I had to be myself the CEO of the company during the first years. We are arriving now at a stage where it is natural for the size of the company. We have now become a much bigger company than in 2018 for the complexity of the market trends and rapid changes. It was now and it is the time to have a Chief Operating Officer at Aecon. And because I'm working with most of my peers and sometimes competitors' teams, I can tell you that I really think we have one of the strongest executive teams in the market at the moment. Reciate.
Frederic Bastien: Now just piggybacking on Yuri's question about margin profile. Recognizing that, that will inch a bit lower as you favor less volatile and higher quality collaborative work, I would have expected to see slightly more operating leverage in the quarter, considering the big top line growth you enjoyed. Was that entirely related to the lower margin in Western Civil? Or is there more to it?
Jean-Louis Servranckx: It's a component of it. It's an important component of it. The other part that I think is maybe a little bit of just construction accounting, we're in the opening phases of several large projects that were executed on collaborative models. So I'm thinking the Drington new nuclear project, I'm thinking of the Scarborough project, and other large projects, things like Surging stations. And on that basis, when you're opening up a project, you tend to book with full contingency baked into your cost profile. And so the natural cadence, the way it should work in the perfect world, is as you move through the percentage completion, you look at how much contingency you have in the project and say to yourself, okay, we'll hopefully be able to release this and then the margin profile ought to improve as you execute well through the back half of it. So I think part of it is Western Civil, part of the type of work we're doing. Part of it is just the phase that we're in today, and all those combined have resulted in what you've identified as a lack of operating leverage. But I think if you kind of unpack it, you see there's different components to it, some of which are -- some will all resolve as time passes and some will be there in a more permanent mixture. Your next question is what's the various weighting of each component, and I'm not going to give you that.
Frederic Bastien: No, I didn't ask that. But last for me, just wondering if those Bodell and Trinity acquisitions, can they be used as conduits for your nuclear activities in the U.S.? Or will these be conducted strictly through United engineers? Just curious.
Jean-Louis Servranckx: No. I mean they are not nuclear. Nuclear is a very special word, sorry, Frederic, and it's our nuclear sector. I mean this nuclear sector in the U.S. now has boots on the ground in 15 states of the United States. Those are purely industrial; they are different companies. As I said, I mean, very complementary. Bodell may be a little more on project management organization, and Trinity with a very efficient workshop, I mean, in Texas, they are complementary. They will serve, I mean, obviously, the petrochemical industry, the water industry, the conventional power industry, but they will not be mixed with our nuclear group, which is based in Charlotte.
Operator: Our next question comes from Sabahat Khan of RBC.
Sabahat Khan: Just a bigger picture question around kind of the outlook. You talked about the outlook for nuclear and construction. Can you maybe just talk about nuclear as a percentage of revenue based on your current visibility? It looks like the number sort of ticked higher from the low 20% to the high 20%. The backlog is very significant just overall. Maybe what does that mix look like over the next two to three years, given your visibility to the pipeline?
Jean-Louis Servranckx: I'll take this one. Yes, nuclear is growing, and it is getting stronger. The figures you are putting in your question are the right one. It's strong, but remember that part of our core strategy is to have our sectors balanced. I mean we all know that construction is about cycle. And so we are balanced. What issue is that Aecon has dramatically changed, I mean, during the last seven years because I arrived in 2018. I mean we're a company something like EUR 3 billion revenue, more than 70% in civil and pipeline with a backlog around EUR 4.5 billion. This backlog being more than 70% on fixed price. We are now a company that is getting around the EUR 5 billion of revenue, more than 50% related with power and more than 70% on non-fixed price. So this has changed. The wave, I would say, the major trend in construction in the market is related with power. And Aecon has perfectly with agility being able to adapt to serve this market. So the demand, the future demand is huge in power. In generation and in transmission and distribution. So, and generation, everybody is speaking about AI data center, but it's not only AI data centers. I mean you have also a lot of conventional data centers, but it's also growing in transportation. I mean, public transportation, private transportation. It's growing, I mean, in buildings. I mean, more and more heat pumps are getting installed. It's growing in factories. You have more and more digital factories that are requiring more and more electricity. So you have probably noticed that the [indiscernible] change from sustainability to energy transition and then to electricity addition. I mean even if it's only half of the projected figures between 2025 and 2035, it's still huge. This is for the generation. And for the grid, it's even more important. We know that more than 40% of the grid infrastructure, I mean, have gone there and the age. I mean they are at the end of life or have already passed. So there's a huge work to do there, and we are perfectly positioned for that.
Sabahat Khan: And then just looking over to the concession side, there's some commentary in the material here that you are looking at options to maybe add to that portfolio. Is that just referring to the project that you're sort of working on? Or are there other opportunities to get involved with concessions outside of what we know already?
Adam Borgatti: It's Adam here. Yes, for sure, the U.S. Virgin Islands Airport redevelopment projects are squarely in that camp. We're hoping to get those done as soon as we can. Still in the collaborative phase, which, again, as you know, is helpful because we're working collaboratively with both the clients, the airlines, the authorities to make sure we've got the right structure and plan in place. So that's taking the time it needs to get to hopefully a good outcome soon. We've also got obviously an excellent concessions development team that's working in a number of sectors, both in power and other assets, not just the typical B3s, but are now advancing that program into new opportunities. So there's always a few things on the go there.
Sabahat Khan: And then just last one for me. On the recurring revenues, it's been a side of the business that's been growing for some time. just on an LTM basis, looks to have moderated. Are you just sort of between projects? Maybe just talk about the opportunity set on the recurring revenue side. That's it for me.
Jerome Julier: Yes. It's just a slide down in some of the progressive design phases where that's more of like a service model and then now we've just moved that moved into construction in kind of like the more traditional contracted sets. So we're happy with the level and the growth profile that underpins it. Almost everything we see there today is going to be in utilities. We strengthened also MSA-based work across nuclear and industrial. So we're feeling good about the recurring revenue programs. Just as a reminder, none of that -- almost none of that stuff touches our backlog, right? So it's book and burn as we go, and underpinned by MSA. So it's like it's a good business. It's a growing business. And as Jean-Louis mentioned some of the grid issues that we're seeing across the markets where we operate and help support us as that business continues to grow.
Operator: Our next question comes from Benoit Poirier of Desjardins.
Benoit Poirier: Yes, Thank you very much, and good morning, everyone. Jean-Louis, when we look at the backlog, it's now a record level with still many opportunities ahead. Could you talk maybe about the bidding pipeline and maybe the ability to flex up resources in order to sustain upcoming growth?
Jean-Louis Servranckx: Yes. As you say, I mean, our backlog is record at $10.8 billion plus the $1 billion of recurring revenue, I mean, that we don't enter in those figures. how is the pipeline looking like strong. In Canada, you heard about all what we call the sovereignty projects. I mean it's a little more than 100 billion during the next 5 years. So we cannot dream. I mean, it's not going to be 5 years. It may be 10 years or 15 years. But even with this, I mean, those are very big amount and infrastructure, I mean, where Aecon is strong. As I told you before, I mean, the power sector is also going very strong. Are we ready for this? I mean, yes, we are because this is part of our job at the executive level to recruit train, to certify, I mean, internally our people, or to make acquisition. I mean it's not -- I hope it was not a surprise for you when we invested last year in United. I mean, because with United, we now have a grip on a group of highly professional engineers related with power. The point that could have been of concern was the nuclear in Canada. and OPG has been extremely smart, I mean, to [indiscernible] not too early, not too late. I would say not too early because most of our people were in Darlington, not too late because those people could go in United States or in other places to work because they have a very good track record of refurbishment on time, on budget. So I would say those major refurbishment will require a lot of people. It's going to be a smooth translation of our skilled people from Darlington to [indiscernible] for the rest, I mean, we are ready. We are ready for what is coming.
Benoit Poirier: Okay. And my follow-up question, when we look -- you've been quite successful to diversify away from fixed price. Now if we look at non-fixed price contract, 60% of revenue, 75% of backlog. How do you see the mix evolving in the next few years? And now that the business has been reshaped nicely, do you see an opportunity to maybe go back smoothly and more fixed price? How do you see the mix evolving between the 2 going forward?
Jean-Louis Servranckx: It was a decision and a commitment, I mean, to our shareholders. I mean, in 2019, to really shift the profile of Aecon in terms of fixed, non-fixed. So we inverse more or less, I mean, where we were 35% non-fixed to 65% non-fixed. This being said, I repeat, there's not such a word where everything fixed is bad and everything progresses is good. I mean -- so it will probably stay around this. But in some occasions, I mean, where we can find some lump sum job with the right size, the right client, and where we have excellent core competency in working on lump sum is not bad. So I would tend to say we want it to be where we are now, and we are happy about it. It may fluctuate a little. And this is the way we can see the future. I mean we still have quite a number of progressive design-build, I mean, either in development phase or in execution. There are 2 we don't speak that much about, which is the Red River wastewater plant in Winnipeg, or in the Buffalo, I mean near Saskatoon. Those are progressive job, I mean, under development and construction phase. So it's more or less the trend for us
Operator: Our next question comes from Krista Friesen of CIBC.
Krista Friesen: Maybe just a follow-up on margins just as we think about 2026 and beyond, how much should we be considering your overall mix and how that's evolving with the utilities business and nuclear, for example?
Jean-Louis Servranckx: Yes. I mean, look, we should be considering it --- both of those businesses have margin profiles that reflect the competitive position that we hold in the market, the investment that's required. I remember, utilities tends to have a higher margin profile because there's a fairly significant investment in equipment required, think bucket trucks, directional drill, like when you see storm response and see the pictures of dozens of vehicles lined up with crews working through the night to get power back on, those trucks need to be paid for on the CapEx line. And so the margin profile needs to reflect it. So I would say that, that's likely going to be a factor. However, on the same side of the consideration box, we have work that we're doing where we're being a lot more thoughtful in the margin that's required and the balance that we place in the other sectors. So the industrial team does extraordinary work, the work is in demand, civil, a lot more things in the nature of tunneling or foundations work, that comes with a strong margin profile as well. So I wouldn't say like this is one side of the house will do kind of like an exceptionally high number, another side does something much more poorly. I think it's just more variance around the mean that we're thinking about here. But on balance, the sectors that are growing most rapidly in our view are ones that also come with strong margins. And we have a return on capital employed model where we allocate capital to the groups that perform best. And so I think it's on us to make sure that we continue to feed the beast where it's performing best.
Krista Friesen: And then just on the nuclear business, specifically in the U.S., as you think out the next couple of years, how do you feel about your capacity? And how much of a priority is it for you to grow your capacity in the U.S.?
Jean-Louis Servranckx: We are growing our capacity every month. I mean, in the U.S., as I say, we are now working in 15 states. We have more than 1,300 people. I think we have very good teams and teams that we have been able to attract at Aecon that we were used to work together, that are perfectly known by the big utilities. So I would tend to say so far, so good. I'm happy with the team and the performance of the team. I'm also very happy about the trends of the Group, I mean, say, Kiewit, and Black & Veatch, and Aecon. Our partnership with Kiewit that we initiated in Canada is just growing nicely, and that's good for us in terms of predictability of our successes in the future.
Operator: Your next question comes from Michael Tupholme of TD Cowen.
Michael Tupholme: As a follow-on to some of the earlier discussion about nuclear, evidently, Aecon has been very active in the sector for many years, has a very strong resume. I'm wondering if you can speak to the competitive landscape in the U.S., including specifically to what the nuclear skill set among your other contracting competitors in the U.S. looks like in nuclear.
Jean-Louis Servranckx: Basically, Mike, as I used to say to my team, there's no anywhere in the world. What is sure is that we have grown very seriously and steadily our Works acquisition. We have been able to attract the right team. And for example, if we speak about the major component refurbishment, you will probably remember that everything was stopped in the U.S. during COVID, and it's just starting now. But we have a lot of lessons learned, a lot of capacity from Canada that we can also push there. So this gives us definitely a kind of competitive advantage because we have been doing this refurbishment, I mean, for the last 7 years now, and with a lot of success. In new build, as I've already said, I mean, there's no way we're going to go alone in new build in U.S., and this is why this partnership, this cas partnership, I mean, is quite good for us. So yes, it is competitive. But there is a high demand, I mean, from the utilities for new work and refurbishment work. So we are happy to have grown during the last years and now to be ready for the pattern.
Michael Tupholme: And then, Jean, just to clarify, the 1,300 employees working in nuclear in the U.S., these are Aecon employees as opposed to employees that are sort of spread across a joint venture that would involve other contractors. These are specifically your employees?
Jean-Louis Servranckx: No. I mean, there are Aecon employees. I mean, Energy Northwest, I mean, has been disclosed last week. We are just beginning to ramp up there. And on the other job, we are working alone at the moment. Those are major component refurbishment or working for the Department of Energy and the Federal. Part of it is going to be engineers with United, part of it is going to be full-time staff, part of it is going to be craft labor, right? The bigger part being obviously the craft labor and specialized component.
Michael Tupholme: Just -- and I guess what I was hoping to understand in addition to clarifying that was, how does that compare to the similar number of people or comparable number of people you'd have in Canada right now?
Jean-Louis Servranckx: It's about 1/3. 1/3 of the headcount is based in the United States.
Michael Tupholme: And then just one last one. In the outlook commentary, you provided commentary around your expectations for further revenue growth in 2026, which I don't think should come as a surprise to anybody, but nevertheless, that's new commentary. And I guess I'm just wondering if you can talk a little bit about how you're thinking about 2026, what you see as the key drivers to the revenue growth you expect? Any sort of additional detail you can provide for us on that front?
Jean-Louis Servranckx: Yes, I'll tackle that one. That's it's based on the backlog that we have in front of us, right? -- We provide a breakdown of the overall backlog in our materials. And just on the kind of rough facts of $3.7 billion in the next 12 months of hard secured backlog, roughly $1 billion a year in addition on recurring revenue. And there's obviously significant opportunities over and above that. And so I think just our perspective, just backlog secure addition, if we have change orders under negotiation, or [Indiscernible]. We have we won't people understand are we basically cresting and then going to slide back down or we built enough resiliency in the enterprise and invested to try to continue. And I think it's really the latter.
Operator: [Operator Instructions] Our next question comes from Maxim Sytchev of NBCCM.
Maxim Sytchev: Jean-Louis, just wanted to go back to nuclear for one second. I mean, given the fact that all the new builds are on a collaborative basis, do you mind maybe providing a bit of a range of potential outcomes just in terms of how we should be thinking about sort of the upside/downside handicap on the execution stage of these very large projects?
Jean-Louis Servranckx: You are speaking about construction in general, not nuclear.
Maxim Sytchev: Nuclear, specifically, that's possible.
Jean-Louis Servranckx: Nuclear, specifically. Yes, I mean, it seems obvious now from the past experience that every new build in nuclear is going to be on a progressive basis. Nobody really wants to come back to new build and lump sum. So this gives, I mean, obviously, more predictability. All those contracts usually are structured the same. There is a development phase that can be something like 2 years. At the end of the development phase, you agree with your client on a target, then you have a system of dead band, but then you have pain share and gain share. We limit the pain share. I mean we don't want this to be open-ended. I mean, obviously, so that the margin, I mean, has a floor in case there is a pain. So all this makes it more, I would say, a more predictable and obviously much less risky market. But as I tend to say, too, I mean, no free lunch. I mean we are not the only one trying to offer our capacity. What issue is that we have begun to run probably earlier than anybody else in North America.
Maxim Sytchev: And sorry, and the floor would still imply a positive EBITDA margin? Or does it crest kind of below 0?
Jean-Louis Servranckx: No. I mean it's not going to be below 0. I mean the floor is positive. I mean it's positive. I mean this is the end of the paint share. What I say is that we have usually the paint share, we don't accept paint shares that are opening just in case.
Maxim Sytchev: Of course. Makes sense. And then just a couple of quick ones for Jerome, if I may. So I mean, on legacy fixed price projects, so we already booked kind of $125 million based on sort of the envelope you telegraphed. So does it mean that we're sort of done in terms of taking kind of the mark-to-market? Or is there still, based on your prepared remarks, some potential spillover effect depending on how these projects land? I just want to clarify the language exactly.
Jean-Louis Servranckx: Yes, there's still risk, there is the short answer. But I'll also note that it took a question before we got to the legacy project. So it feels like we're starting to turn the page. We're -- so look, Finch, as mentioned, Finch successfully completed RSD, Edmintons being worked on, another one -- the other project we have construction completion this year, like we're getting there. But until they're done, there's still risk associated with these schedules can slip, things can happen. We also need to reach commercial and dispute resolution with our clients with regards to claims. And so I think what we're trying to effectively do is really starting to narrow the outcomes. But you're right to note that we've effectively -- we're at 124, 125 now, and there's still additional risk associated with it. So -- we don't want to say we're done because I don't think that's a fair representation, right? If we knew we had more now, we just take it, but things can change. So we just got to work through it, and we are working through it.
Maxim Sytchev: And then do you mind just in relation to concessions because, again, you are in the development stage of a number of things. And I think the contribution in Q3 was a bit stronger than we expected. How should we think, I guess, about like Q4 and maybe 2026, if you can provide any, I guess, parameters there, that would be super helpful.
Jean-Louis Servranckx: Yes. So on the concessions front, a couple of things. One is the business in prior periods was supported by some revenue programs associated with the actual construction and management fees being on the legacy projects. As that falls away, I think we'll enter into a more normalized environment. So we're now kind of trending down to that level. There's probably more to go, and then there'll be a view to trying to stabilize that out. And so we're basically replacing these management fees that are being charged with which is more normal O&M style programs. So that stabilizes out. The way the future airport additions could work, that would obviously be, at some point, EBITDA additive to the program, but we likely need to get to the finalization of commercial terms on that USC&F project to understand the quantum and when that would realize. And then as Adam mentioned, part of our capital allocation model is we do look at additional opportunities within the concessions platform. We take kind of this -- the way our Head of Concessions describe it economics view. And so we try to understand the impact from concessions on a pure returns basis, and it needs to meet our hurdle rates. And then in association with that, we also have benefits on the construction side of the house where we can basically provide effectively a full constructability package to clients. So it's a broad picture. But as you noted, the downturn is likely to continue just as these legacy projects roll off.
Operator: This concludes the question. [Indiscernible] SVP of Corporate Development and Investor Relations for closing remarks.
Adam Borgatti: Thanks very much, Corinne, and I appreciate everyone's attention and participation today. We're happy to take any follow-up questions that you have. Just feel free to reach out. Have a great rest of your day and go Blue Jays.
Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.