Mr. Ian Edwards reports

ATKINSREALIS REPORTS STRONG THIRD QUARTER 2023 RESULTS, DELIVERS POSITIVE OPERATING CASH FLOWS AND RAISES OUTLOOK FOR REVENUE GROWTH

AtkinsRealis (SNC-Lavalin Group Inc.) has released its financial results for the third quarter ended Sept. 30, 2023.

The AtkinsRealis Services line of business (formerly SNCL Services line of business) delivered another quarter of record organic revenue growth and a significant year-over-year increase in segment adjusted EBIT (earnings before interest and taxes). The company's operating cash flows turned positive in the quarter, while backlog continued to be solid with strong increases in the engineering services and nuclear segments.

Q3 2023 financial highlights and 2023 outlook (all results reflect comparisons with prior-year period of Q3 2022, except otherwise indicated)

Note that the SNCL Services line of business has been renamed AtkinsRealis Services following the company's name change announced on Sept. 12, 2023:

• AtkinsRealis Services revenue reached a quarterly record-high of $2-billion, an increase of 24.4 per cent, or 19.5 per cent on an organic revenue growth basis, above the company's full-year outlook range:
  • Engineering services revenue growth of 29.0 per cent, or 23.3 per cent on an organic revenue growth basis;
  • Nuclear revenue growth of 23.4 per cent, or 19.6 per cent on an organic revenue growth basis;
• AtkinsRealis Services segment adjusted EBIT increased by 22.6 per cent to $187.1-million, representing a 9.2-per-cent margin, in line with the company's full-year outlook range:
  • Segment adjusted EBIT for engineering services increased by 34.7 per cent to $131.8-million, representing a margin of 8.7 per cent, while the segment adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) to net revenue ratio was 14.4 per cent;
  • Segment adjusted EBIT margin for nuclear and O&M (operation and maintenance) was 14.3 per cent and 14.2 per cent, respectively;
• AtkinsRealis Services backlog reached a record-high and totalled $12.5 billion as at Sept. 30, 2023, an increase of 7.2 per cent; bookings in Q3 2023 totalled $2.3-billion, representing a 1.13 booking-to-revenue ratio:
  • Engineering services backlog reached a record-high and totalled $5.1-billion as at Sept. 30, 2023, an increase of 10.8 per cent; bookings in Q3 2023 totalled $1.7-billion, representing a 1.10 booking-to-revenue ratio;
  • Nuclear backlog increased by 22.6 per cent to $1.1-billion as at Sept. 30, 2023;
• LSTK (lump-sum turnkey) project segment adjusted EBIT of negative $13.2-million, in line with expectations;
• Corporate selling, general and administrative expenses from PS&PM (professional services and project management) were $47.2-million, compared with $24.8-million in Q3 2022, as a result of extraordinary costs related to the company's rebranding and revised long-term incentives estimates; as a result, corporate selling, general and administrative expenses from PS&PM outlook for full-year 2023 raised to between $130-million and $140-million, from the previous amount of approximately $100-million;
• Net income attributable to AtkinsRealis shareholders from continuing operations totalled $105-million, or 60 cents per diluted share, compared with $44.7-million, or 25 cents per diluted share, in Q3 2022;
• Adjusted net income attributable to AtkinsRealis shareholders from PS&PM totalled $67.3-million, or 38 cents per diluted share, compared with $52.1-million, or 30 cents per diluted share, in Q3 2022;
• Positive net cash flows generated in the quarter driven primarily by:
  • Net cash generated from operating activities of $6.4-million;
  • Cash received on disposal of the company's Scandinavian engineering services business of $147.1-million and on the disposal of a capital investment of $34.3-million;
• Net limited recourse and recourse debt to adjusted EBITDA ratio improved to 2.7 as at Sept. 30, 2023, from 3.1 as at June 30, 2023;
• AtkinsRealis Services organic revenue growth outlook for full-year 2023 versus 2022 raised to between 15 per cent and 17 per cent from the previously revised range of between 12 per cent and 15 per cent.

"Strength across our services business this quarter was primarily driven by the consistent demand for our capabilities as public entities focus on and invest in energy security and transition. Performance in our engineering services and nuclear segments was robust across our core geographies and the near-term outlook looks equally strong, bolstering our confidence in achieving our updated 2023 outlook," said Ian L. Edwards, president and chief executive officer of AtkinsRealis. "Our new name, AtkinsRealis, denotes an inflection point for the repositioning of the company and a fresh identity for a dynamic organization. As a premier fully integrated professional services and project management company, AtkinsRealis is positioned for long-term sustainable value creation."

Third quarter financial results

Professional services and project management are collectively referred to as PS&PM to distinguish them from capital activities. PS&PM groups together five of the company's segments, namely engineering services, nuclear, Linxon, operation and maintenance (O&M), and lump-sum turnkey (LSTK) projects, while capital is its own reportable segment and separate from PS&PM.

The increase in net income attributable to AtkinsRealis shareholders from continuing operations was mainly due to higher segment adjusted EBIT and a $46.2-million net gain on disposal of the company's Scandinavian engineering services business, partially offset by higher corporate selling, general and administrative expenses and net financial expenses.

Quarterly dividend

The board of directors has declared a cash dividend of two cents per share, unchanged from the previous quarter. The dividend is payable on Dec. 8, 2023, to shareholders of record on Nov. 24, 2023. This dividend is an eligible dividend for Canadian federal and provincial income tax purposes.

Third quarter 2023 conference call/webcast

AtkinsRealis will hold a conference call and audio webcast today at 8 a.m. Eastern Time to discuss and present its third quarter financial results. The live audio webcast of the conference call can be accessed through a link posted on the company's website. The call will also be accessible by telephone, for which an accompanying slide presentation can be accessed on the company's website.

Please dial toll-free at 1-800-319-4610 in North America or dial 1-604-638-5340 outside North America. You can also use the following numbers: 416-915-3239 in Toronto, 514-375-0364 in Montreal or 0808-101-2791 in the United Kingdom. A recording and a transcript of the conference call will be available on the company's website within 24 hours following the call.

About SNC-Lavalin Group Inc. (AtkinsRealis)

Created by the integration of long-standing organizations dating back to 1911, AtkinsRealis is a world-leading professional services and project management company dedicated to engineering a better future for the planet and its people. AtkinsRealis creates sustainable solutions that connect people, data and technology to transform the world's infrastructure and energy systems. AtkinsRealis deploys global capabilities locally to its clients and delivers unique end-to-end services across the whole life cycle of an asset, including consulting, advisory and environmental services, intelligent networks and cybersecurity, design and engineering, procurement, project and construction management, operations and maintenance, decommissioning, and capital. The breadth and depth of AtkinsRealis's capabilities are delivered to clients in key strategic sectors such as engineering services, nuclear, operations and maintenance, and capital.

We seek Safe Harbor.