Aecon Group (TSX:ARE) reported third-quarter financial results on Friday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
Aecon Group Inc. reported record quarterly revenue of $1.9 billion, up 26% year-over-year, driven by strong organic growth and significant improvements in adjusted EBITDA, which increased by 40% to $130 million.
The company secured a historic $3 billion contract for the Pickering Nuclear Generating Station refurbishment, adding $1.75 billion to its backlog, and achieved a record backlog of $14.6 billion, a 39% increase over the previous quarter.
Aecon received Gold Partnership accreditation in Indigenous Relations, launched Maple Fiber for next-gen network infrastructure, and anticipates double-digit revenue growth for 2026, supported by a diversified project pipeline and increased recurring revenue programs.
Financial metrics showed improved gross profit and operating profit, with adjusted diluted EPS rising to $0.86 from $0.49 last year. Free cash flow generation was strong at $645 million over the trailing twelve months.
Management emphasized a strategic shift to lower-risk contract structures, enhancing margin predictability, and highlighted ongoing investments in nuclear and fabrication capacity as key differentiators.
Full Transcript
OPERATOR
Good day and thank you for standing by. Welcome to the Q3 2026 Aecon Group Inc. earnings conference call. At this time all participants are in a listen-only mode. After the speakers’ presentation there will be a question-and-answer session. To ask a question during the session you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star and 1 again.
Please be advised that today’s conference is being recorded. I would now like to turn the conference over to your speaker for today, Adam Bugatti, Senior Vice President of Corporate Development and Investor Relations. Please go ahead.
Adam Bugatti (Senior Vice President of Corporate Development and Investor Relations)
Thank you. Good morning everyone and thanks for participating in our call today. Joining me are Jean Louis Servranx, President and CEO, Jerome Julier, Executive Vice President and CFO, and Alfred McCallum, Senior Vice President, Finance. Our earnings announcement was released yesterday evening and we posted a slide presentation on our website, which we’ll refer to during this call. Following comments, we’ll be happy to take questions from analysts, and we ask that you keep to one question and a follow up if necessary before getting back into the queue.
As noted on slide 2 of the presentation, listeners are reminded the information we’re sharing with you today includes forward-looking statements 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. Turning to slide 3, I’m pleased to share key highlights and accomplishments from the quarter. Aecon delivered record quarterly revenue of 1.9 billion, increasing 26% over the same period last year. Seventy-one percent of the revenue growth in the quarter was organic. Adjusted EBITDA improved significantly in the quarter to $130 million compared to $93 million last year, an increase of 40%, driven by strong revenue growth and year-over-year margin improvement in the Construction segment.
Aecon was awarded contracts in joint ventures with an aggregate value of $3 billion for the Pickering Nuclear Generating Station refurbishment execution phase. Our $1.75 billion share of the contracts was added to backlog in the quarter and represents the largest nuclear award in Aecon’s history. The award, along with continued investments in fabrication capacity, reinforces Aecon’s position as Canada’s nuclear builder, supported by an established record of delivering complex nuclear projects across the full nuclear value chain.
Backlog at September 30 was 14.6 billion, up 39% over last quarter, representing the highest reported backlog in Aecon’s history and underpinned by a diversified mix of long-term projects with appropriate risk balance. Over 80% of Aecon’s backlog is tied to non-fixed price or collaborative fixed-price contract models. We’re extremely proud to achieve Gold Partnership accreditation in Indigenous Relations status, becoming the first construction company with nationwide operations to achieve the highest level of certification. Building strong, respectful relationships with Indigenous peoples and communities has long been part of how Aecon operates. This recognition reflects that history and our commitment to meaningful Indigenous partnerships.
We also continue to advance our strategic priorities in Concessions, including the launch of Maple Fiber, a strategic alliance to finance, design, build and own next generation network infrastructure. Aecon reinforces its positive outlook supported by the expectation for double-digit revenue growth for the full year 2026, based on our strategic positioning in sectors with attractive demand profiles, growing recurring revenue programs and a healthy pipeline of project opportunities.
With that, I’ll hand the call over to Jerome.
Jerome Julier (Executive Vice President and Chief Financial Officer)
Thanks, Adam, and good morning everyone. I’ll speak to Aecon’s consolidated results, review results by segment, and then address Aecon’s financial position. Turning to slide 4, revenue for the three months ended September 30, 2026 of 1.9 billion was up 390 million, or 26%, compared to the same period in 2025. Adjusted EBITDA of 130 million increased 40% compared to $93 million last year, while operating profit of 83 million compared to an operating profit of 61 million in the same period last year. The improvement in the period was driven by higher gross profit of 70 million compared to the same period in 2025.
Adjusted diluted earnings per share was $0.86 in the quarter, an improvement compared to $0.49 in the third quarter of last year. Financial results in the quarter were impacted by negative gross profit of $9 million from the legacy projects. The final legacy project reached completion in June and commenced operations in July of this year. Aecon and its joint operations partners continue to pursue commercial resolution on the matter. Backlog of 14.6 billion at the end of the third quarter is the highest reported backlog in Aecon’s history and compares to backlog of 10.8 billion at the same time last year.
New contract awards of 6 billion were booked in the quarter, and 10.1 billion were booked over the trailing 12 months. Now looking at results by segment, turning to slide 5, Construction revenue of 1.9 billion in the third quarter was 410 million, or 27%, higher than last year. Construction revenue growth in the quarter was 72% organic and was broad based, with higher revenue in all sectors. The largest increase of 184 million was registered in Utilities operations, driven by a higher volume of electrical, gas, and telecommunications work, including contributions from acquisitions completed in the first quarter of 2026.
Nuclear operations increased 130 million due to a higher volume of core refurbishment, decommissioning, and engineering services at nuclear generating stations in Ontario and the United States. Revenue in Civil operations increased 45 million, primarily from higher work volume on power and rail projects and in foundations work, partially offset by a lower volume of highway, road, and bridge construction activity. In Industrial operations, revenue increased 42 million, primarily from a higher volume of field construction work in the United States, with most of the revenue growth attributable to businesses acquired in the third quarter of 2025, as well as from an increase in the industrial components of power generation projects. Urban Transportation Solutions increased 9 million, driven by a higher volume of subway and commuter rail system work, partially offset by a lower volume on LRT projects that achieved substantial completion or became operational in 2025.
Turning to slide 6, Construction segment adjusted EBITDA of $132 million compared to $88 million last year, with an adjusted EBITDA margin of 6.8% compared to 5.8% in 2025. The increase was primarily driven by an improvement in gross profit margin in Civil and Nuclear operations. More broadly, and as Jean Louis will further discuss, the improvements reflect the continued shift towards a lower-risk work mix, stronger execution, and the gradual normalization of earnings as legacy project exposure winds down.
Turning now to slide 7, Concessions adjusted EBITDA for the quarter was $12 million compared to $15 million in the same period last year, largely due to the deferral of intercompany construction profit related to network assets under development. Turning to slide 8, at September 30, 2026, Aecon held core cash and cash equivalents of 529 million, which is over and above the $537 million of cash representing Aecon’s proportionate share of cash held in joint operations. In addition, at September 30, 2026, Aecon had committed revolving credit facilities of $1 billion, of which 342 million was drawn and 4 million was utilized for letters of credit. Combined with our 960 million EDC Performance Security Guarantee facility, Aecon can access total credit facilities for working capital and letter-of-credit requirements totaling approximately $2 billion.
Net debt as of September 30, 2026 was 338 million. This includes only our core cash balances and also recognizes the 320 million repayment agreement for the preferred shares of Aecon Utilities as debt. The repayment continues to be anticipated to close in the fall quarter. Net debt to trailing twelve months adjusted EBITDA was 1 times. Aecon generated free cash flow of 645 million in the trailing twelve-month period ended September 30, 2026 compared to negative 41 million free cash flow in the same period last year.
Cash performance was driven by relentless focus on working capital management and contract structure. At this point, I’ll turn the call over to Jean Louis to address our business performance and outlook.
Jean-Louis Servranckx (Chief Executive Officer)
Thank you, Jerome. Turning to slide 9, Aecon continues to drive broad-based growth across our nuclear, civil, utilities, industrial, and urban transportation sectors. In the third quarter, the Construction segment generated record revenue with increases across all sectors. Power and utility services collectively represent 58% of Aecon’s 6.4 billion in trailing twelve-month Construction revenue. Nuclear is a key part of that position and a genuine differentiator for Aecon, Canada’s nuclear builder.
Our capabilities span engineering and reactor construction, nuclear-qualified fabrication and modularization, refurbishment, decommissioning, and new build in North America. We are acquiring additional fabrication capacity in Ontario to expand Aecon’s nuclear fabrication network to four facilities in Canada and the United States to support some of the largest nuclear refurbishment and new build projects in North America. Our Concessions portfolio also continues to grow and diversify, leveraging our unique project development, financing, and integrated construction capabilities. We recently launched Maple Fiber, a majority-control strategic alliance with a Tier 1 telecommunication operator to finance, design, build, and own next-generation network infrastructure. Aecon Concessions holds a majority interest in the partnership and Aecon Utilities has commenced construction for Maple Fiber in Ontario.
Turning to slide 10, I want to spend a moment on the strengths of our current positioning and the visibility we have into future growth. We ended the quarter with record backlog of 14.6 billion. That backlog tells an important story, but it’s really only part of the story. On the right-hand side of the slide we show 10 major projects where Aecon is currently in development or collaborative delivery phases, but where significant future scope is not yet reflected in backlog.
In nuclear, for example, our backlog includes the recently announced Pickering Unit 5 refurbishment and full turbine generator replacement awards, while future opportunity associated with the refurbishment of Units 6, 7, and 8 is not yet reflected. Similarly at Darlington, Unit 1 of the new nuclear SMR project is under construction, while the future three units represent additional opportunity under development for work beyond our current backlog.
The same dynamic applies across other major projects and programs shown here, including the Cascade advanced energy facility, the hydroelectric Mactaquac extension project, the port and marine construction project at Roberts Bank Terminal 2 in Vancouver, the defence project for Arctic Over-the-Horizon Radar, and the Regional Rail Network GO Expansion program, where additional programs under development are opportunities to convert to new work over time.
And the backlog we do report is long-dated — approximately two-thirds extends beyond the next 12 months and over 40%, or 6 billion, beyond 24 months. Taken together, our reported backlog represents only the fully contracted portion of a much broader portfolio of secured and developing work, providing significant visibility into future growth. Turning to slide 11, trailing 12 months recurring revenue was over 1.1 billion at September 30, 2026, with recurring revenue from utility services increasing to 987 million from 695 million last year, an increase of 42%. Importantly, this recurring revenue is also not reflected in our reported backlog. Our MSA programs have a weighted average contract term of approximately three years and a near 100% renewal rate, providing significant multi-year visibility beyond the backlog we report today.
Aecon Utilities is generating nearly 1 billion of recurring revenue today with continued growth across Canada and the U.S. It is an integral part of our growth platform with capabilities spanning power, transit, electrification, battery storage, data center, electrical infrastructure, airports, and nuclear development. Turning now to slide 12, we have an unwavering focus on risk-adjusted profitability, highlighted by the relationship between our contract mix and our margin performance. At September 30, approximately 64% of our backlog was comprised of variable price contracts, which covers cost-plus or unit price work. Of the remaining 36% classified as fixed price, close to half of this was booked following collaborative and fully integrated development phases.
Taken together, approximately 81% of our 14.6 billion backlog is derived from collaborative model or non-fixed price work. On a trailing twelve-month revenue basis, approximately 69% of Construction revenue was generated from collaborative or non-fixed price contracts. As our backlog converts into revenue over time, we expect the lower-risk profile of our backlog to continue to support greater predictability in our results. This evolution in our risk profile is particularly important when looking at margin. This is the right part of Slide 12. Construction trailing 12 months adjusted EBITDA margin has increased from 3.7% in the third quarter of 2025 to 5.6% today, while we have maintained a consistent lower-risk revenue profile throughout that period. This slide — Slide 12 — is extremely important and we’ll come back to it probably during the question. As we have said previously, our focus is on stabilizing and gradually improving margins.
We’ve done it and are focused on driving further improvements in risk-adjusted profitability. Our strategic position in key sectors, lower-risk contract mix, stronger execution, and the continued wind-down of legacy project exposure provide a stronger foundation for more predictable performance. Turning to Slide 13, Aecon expects double-digit revenue growth in 2026. Our expectation for a broad-based revenue increase in 2026 and further revenue growth in 2027 is underpinned by secured backlog exceeding 14 billion, recurring revenue programs, recent acquisitions, and a pipeline of project opportunities tied to nuclear and conventional power, critical resource development, transit, water, defence, and digital infrastructure.
This clearly positions Aecon at the center of many of the infrastructure priorities Canada needs to deliver over the coming years, while our growing U.S. and international presence provides additional diversification and avenues for growth. In the Concessions segment, there are several opportunities to add to the existing portfolio of Canadian and international concessions in the next six to 12 months to support trends in aging infrastructure, mobility, connectivity, energy, and population growth.
Aecon’s deliberate shift toward a greater weighting of improved risk-adjusted work programs, in combination with a strong focus on operational excellence, is anticipated to support the gradual improvement of adjusted EBITDA margins in the Construction segment in 2026 and 2027. Our outlook for 2026 continues to be very positive. We are excited about the momentum we have built so far this year and remain focused on fully executing our strategy to drive long-term shareholder value.
Turning now to Slide 14, I want to congratulate our Indigenous Relations team for achieving Gold Partnership Accreditation in Indigenous Relations Stages. This achievement reflects the dedication of teams across Aecon and the strength of the relationships we have built with Indigenous communities, businesses, and partners over many years. We are proud of what we have accomplished and invite our partners to join us in advancing sustained action with lasting benefits for generations to come.
In closing, I would like to thank our outstanding team at Aecon. In the quarter, over 14,000 team members across all our operating sectors delivered on our potential with an unwavering safety-always mindset and commitment. We will now turn the call over to analysts for questions.
OPERATOR
Thank you. As a reminder, if you would like to ask a question, please press star-1 on your telephone. You will then hear the automatic message advising your hand is raised. We also ask that you please wait for your name and company to be announced before proceeding with your question. One moment while we compile the Q&A roster. Our first question will be coming from Yuri Lynk of Canaccord Genuity. Please go ahead.
Yuri Lynk (Analyst at Canaccord Genuity)
Good morning, guys. Just want to go back to the margin discussion and if you could maybe go through some of the puts and takes on how the Construction segment margin improves from here, particularly if you could address operating leverage because there has been a known increase in SG&A and also if mix has anything to do with it.
Jean-Louis Servranckx (Chief Executive Officer)
Okay, I’m going to begin on a general basis and then Jerome will probably address the last point of your question. So, obviously, I mean, we at Aecon, we have been patiently and steadily preparing for this moment and the path forward from here. I used to give to my team the image of the way the helicopter pilots are being trained in the army. They have to get the left eye totally focused on the instruments, which is for us executing project per project the best we can.
The right eye is pointing two or three miles ahead, which is about our strategy. It’s exactly the same thing that we have. I mean, at our management team level, I mean, at Aecon we consider that we have acquired a strategic and unique positioning on the infrastructure market. We have acquired a de-risked project mix, which is very important and that will give us a much better margin predictability. This page 12, as I announced it, I mean a few minutes ago, is extremely important.
I mean, if you see the four pure economic figures of the quarter, 1.9 billion of revenue, 130 million of EBITDA, a backlog of 14.6 billion, and a creation during the last trailing twelve months of 645 free cash flow. All this is linked together and this page 12 is quite important. This 80%, 81% of non-fixed price contract, or collaborative fixed-price contract, is the global answer to your question. And it’s important. Jerome, maybe on the two or three additional questions.
Jerome Julier (Executive Vice President and Chief Financial Officer)
Yeah, for sure. On the margin profile, Yuri, in furtherance of what Jean‑Louis just mentioned, margins are increasing when you include the legacy projects, obviously as the losses increasingly move to the rearview mirror. But if you exclude those losses, what we’ve seen is a stabilization of the Construction margin profile with the overall risk balance of the business improving. So I would describe that almost like as the best-of-both-worlds situation.
That was the objective across 2026. Your question is focused in 2027, where we continue to see opportunities to enhance the margin profile. That’s informed by the work that we have in backlog and the embedded margins that we see there. But I think one thing that’s important is not to get ahead of ourselves. Aecon is executing on a very broad and large, long-term portfolio of very strong risk balance. And so we view these things as incremental improvements over time.
So I’d just say the expected is you just don’t want people to get ahead of themselves. On the operating leverage, I make the observation that, you know, SG&A Growth in the quarter was tied to, you know, incentive compensation, M&A costs, an ERP program implementation, and then additional SG&A from companies that we’ve acquired over the last 12 months. So on that basis there’s a decent level of control there. Some of this has to do with where you want to book costs, whether you pile them back up into gross profit, where we’ve obviously seen a large expansion in margin, or whether you maintain them in the SG&A bucket, which we do.
At the end of the day, overall we’re seeing an increase in the operating profit margin or adjusted EBITDA profit margin, which I think is the indicator that you want to track against. And then on the mix front, I mean the overall execution mix that we have in front of us is balanced by client type, by region, by contract model, and by sector. That was the case in the last 12 months. That’s the case with what we see coming in the future in the next 12 months.
So I wouldn’t see mix as being a determinative factor here.
Yuri Lynk (Analyst at Canaccord Genuity)
Okay, and last, just a clarification question. Did I hear you say there was 9 million of legacy costs in the Construction EBITDA this quarter?
Jerome Julier (Executive Vice President and Chief Financial Officer)
That’s right.
Yuri Lynk (Analyst at Canaccord Genuity)
Okay, thanks, guys. I’ll turn it over.
OPERATOR
Thank you. One moment for the next question. Our next question is coming from the line of Chris Murray of ATB Capital Markets.
Chris Murray (Analyst at ATB Capital Markets)
Yeah, thanks, folks. Good morning. You know, congratulations on probably a record backlog build, you know, certainly very positive and, as you noted, you know, lots more to come. You know, I know we’re talking about a double-digit number which I think was sort of expressed to me as, you know, higher than 11, less than 98. But, you know, I think that if we think about the level of growth that you’re going to see over, probably, the next, call it, decade, can you talk a little bit about your ability to manage that growth both in terms of your staffing, both at the construction management level and also at the trade level?
Jean-Louis Servranckx (Chief Executive Officer)
Yes, I think I can handle this. I mean, obviously we are extremely focused on our capacity to perfectly execute this backlog. We have been investing during the last years a lot on operational excellence, recruiting, training, motivating our workforce at all levels, bringing as much loyalty as we can in a rather hot market. We have been extremely cautious about the mix of our different activities between our different sectors. You don’t have the same people renovating tracks or building industrial facilities, or working in the nuclear, or laying part of electrical grids or pipelines.
Those are different kinds of people. And our balance of activity helps us on this one. It just means that we do not see so far a danger in being able to perfectly execute our backlog.
Chris Murray (Analyst at ATB Capital Markets)
Okay, that’s helpful. And then the other question is more around nuclear. I guess we’re expecting some sort of decision, I would think, towards the end of the year, maybe from Bruce, maybe from OPG. Can you explain or kind of lay out what would be involved depending on how those decisions go? There’s also some debate about technology selection. Can you talk about your exposure to both CANDU and, if they decide to go Westinghouse, how that would change?
And could you maybe elaborate a little bit on what you’ve acquired in the nuclear business in Ontario for additional support?
Jean-Louis Servranckx (Chief Executive Officer)
First of all, we are not the ones making the decision, obviously. But what is extremely important for us is the position we have been building in nuclear where I think we are extremely strong. I mean, we are going to refurbish the totality of the 14 CANDU units in Ontario. There is not one single general contractor except Aecon Group. We are in association with AtkinsRéalis, who has a kind of Difference Corp. But not one single general contractor has entered into a CANDU reactor for years.
So if the decision is for CANDU, obviously we are extremely well positioned. This being said, we are also part of the team to build this small modular reactor number one, which is a GE Hitachi 300 megawatt boiling water technology. We are one of the only North American contractors who have fabricated already for Westinghouse their very important ATMEQ modules. And we are also in full steam ahead in our development phase of the Cascade Energy project which is under another kind of reactor, X Energy. It means that whatever the decision, because we are technological, because we have an incredible workforce at all levels, this will obviously favor Aecon Group.
And when I read, I mean, Canada nuclear builder, I tend to say Canada, the nuclear builder is Aecon Group. Fabrication is important. It’s one of the key success factors of the generation to come. It’s about modularization and SMR. I used to say, okay, it’s small modular reactor, but it should be standardized modular reactor. This is the key of success. And we are getting stronger and stronger. This is why we have been acquiring an additional facility in Ontario. Maybe Jerome, you can speak a little about it. This is why we are investing a lot in robotics and this is why we are extremely focused on tracking all our productivity reports day after day because it’s part of the future.
Jerome, you want to speak a little about acquisition and fabrication capacity.
Jerome Julier (Executive Vice President and Chief Financial Officer)
So in the release we announced that Aecon Group agreed to acquire additional fabrication capacity for the nuclear sector in Ontario. I’ll probably provide a little bit more detail on that. So it’s going to close in the fourth quarter. Expectation is in the rough area of 50 million dollars. We look to own assets that we view as kind of critical and strategic and this would certainly be one of them. The footprint on the facility is larger than our current Cambridge facility, which is continuing to operate and will continue to produce, by roughly 40%.
It has additional acreage next to it and expansion capability as well. These two facilities in Ontario, we have an additional leased facility where we’re executing work and then an additional facility we have in the United States. So fabrication capacity is what we view as a differentiator for Aecon Group’s nuclear capability. Candidly, if we’re going to meet the needs of what’s required here, some of the work absolutely needs to be taken off site just to manage peaking levels. So that’s four facilities on the nuclear side of the house.
And then we have an additional two facilities on the industrial side, one in Alberta and then one in Texas where we’re also looking to expand. So this is all part of a long-term plan. Your first question was just around execution capacity. We’re thinking about it from a technology standpoint, we’re thinking about it from a system standpoint, we’re thinking about it from a real asset standpoint. And as Jean‑Louis mentioned, most importantly, we’re thinking about it from a people standpoint.
Jean-Louis Servranckx (Chief Executive Officer)
Maybe I can add something on nuclear to close this question. Yes, the new build is important, but the real strong market for the years to come is what we call EPU, enhanced power upgrade, or life extension of the reactor. This is the best return for the utilities, to invest in their existing reactor. Just consider that for each reactor it represents something like 1 billion. And we are present, I mean of course through this major component refurbishment program in Ontario.
But we are now deeper and deeper in the United States on this sub‑market, which is extremely important. We have more than 1,500 workers in the nuclear industry in the U.S. at the moment. And it’s quite important to highlight this point.
Chris Murray (Analyst at ATB Capital Markets)
Okay, that’s very helpful. Thank you.
OPERATOR
Thank you. One moment for the next question. Our next question is coming from the line of Michael Tupholme of TD Cowen. Please go ahead.
Michael Tupholme (Analyst at TD Cowen)
Thank you. Good morning. The first question is just around the outlook. So you continue to call for further revenue growth in 2027. Just given that we’re nearing the end of the year here and given the strength of the backlog that you ended the third quarter with and the visibility that gives you, is there any way to provide a little bit more detail around your expectations for top‑line growth in 2027, how you see those evolving?
Jerome Julier (Executive Vice President and Chief Financial Officer)
I’ll tackle that one. So Aecon Group doesn’t provide guidance, but maybe I’ll give you some of the underlying factors that can at least help you give a pretty reasonable assumption. So of the $14.6 billion backlog, our expectation is roughly $5 billion will be executed in the next 12 months. In addition, we have something in the order of $1.1 billion of recurring revenue programs, and that’s obviously in the LTM, has been growing, expected to continue to grow.
So those two together give you a number, $6.1 billion. Aecon Group has a pretty strong history of, one, growing the work programs on the recurring revenue side and then additionally securing additional work and then additional change orders and additional scopes on work that we have in progress as well. Historically there’s a broad range on these items, right, but if you kind of try to take somewhere like the P25 to P75, something in the $750 to $1.2 billion range, and that gives you an idea that there’s something that could probably crest the $7 billion mark.
Michael Tupholme (Analyst at TD Cowen)
That’s very helpful, thank you. And then just regarding the outlook, I guess as it relates to new awards, so obviously very strong backlog, record level. You talked in the prepared remarks about all of the various projects that are in the development phase, which give you some further visibility as those will eventually convert. Can you just speak about the demand environment today as far as the conversations you’re having for that next group of projects that could go into the development phase or future awards?
So I understand the backlog is strong, you know what you’ve already been awarded that you’re working toward getting to execution, but sort of that next group of projects that’s going to kind of feed future years. What are you seeing there as far as activity levels, discussions, pipeline, et cetera?
Jean-Louis Servranckx (Chief Executive Officer)
I will begin. Canada, globally, has decided to invest, and we have a Prime Minister who just decided that it is the focus for the years to come. So I would tend to say we are optimistic on our capacity to translate those development phases into execution of real projects. We have extremely strong teams dedicated to those development phases. So we think that the rate of translating it is probably going to be quite high. I think it was the first part of your question.
The second one was about equity.
Michael Tupholme (Analyst at TD Cowen)
Sorry, go ahead. Yeah, so the second part was just… It’s really a question around the demand environment as it relates to the conversations you’re having now that are going to feed into that next round of awards, whether those are awards that get going right away or other projects that enter a development phase for a period of time. So I’m just trying to compare and contrast sort of what you’re seeing now versus maybe what you would have seen 12, 18 months ago.
Again, I appreciate what you have secured and what you have in the development pipeline is already very robust. I’m looking at sort of other things that have yet to be awarded to you and how robust that looks.
Jean-Louis Servranckx (Chief Executive Officer)
I think I’ve covered the answer. Probably in my life I’ve not seen such a dynamic situation for infrastructure construction in the five years to come.
Michael Tupholme (Analyst at TD Cowen)
Okay, that is helpful. I will leave it there. Thank you.
OPERATOR
One moment, please, for the next question. Our next question is coming from the line of Sabahat Kamp of RBC Capital Markets. Please go ahead.
Sabahat Kamp (Analyst at RBC Capital Markets)
Thanks and good morning. I guess on the sort of the line of questioning around the backlog and the outlook in Canada that management’s been commenting on, I guess, you know, when you look at the pipeline opportunities, we’ve all seen the headlines. Are you sort of comfortable with this level of backlog and, you know, do you look at it as a relatively stable range even before some of those nation‑building projects sort of start to get into the mix here?
Just trying to think about, you know, the ability to sort of sustain it at these levels. And I think an optimistic way to look at it is it’s at a reasonable level even before we get into the procurement for some of the larger stuff that could come over the next several years. Just curious on how you’re thinking about the pipeline of opportunities and is it fair to assume much of the stuff we’ve been seeing in the headlines hasn’t really even begun to make its way into the system yet?
Adam Bugatti (Senior Vice President of Corporate Development and Investor Relations)
Yeah, I think you’re thinking about it the right way, Saba. So current backlog clearly was just an exceptional quarter of conversion with regards to backlog additions. We tend to take kind of the thousand‑yard view on this one, which is backlog on any given period is going to be lumpy. An expectation of kind of like a continuously high kind of book‑to‑bill ratio exceeding like three times. And if we look LTM to LTM, you know, 24 to 25 or 25 to 26 we were at two times or 1.6 times.
You know, these are really astronomical levels. So we’re not really focused on the actual backlog number per se. I think it’s something that others are quite focused on. It’s a helpful indicator of work to come, but I think we can say with high certainty Aecon’s got a comfortable level of work to execute in front of it. And so on that basis it’s not kind of like a daily thing to be tracked. That being said, could it flex up or down by amounts in any given quarter? Yes, I don’t think people should be focused on it, but given what we have in front of us with regards to projects in validation or development, we could see pretty chunky additions that could crest the number upwards.
That being said, as you can see by the overall productivity of Aecon, we’re also a business that can basically deliver a lot of revenue, which drives it down. So I think on a quarter‑to‑quarter basis it’s really hard to tell where that’s going to land. I say just don’t focus on it too much, but it’s definitely a possibility to continue to move up.
Sabahat Kamp (Analyst at RBC Capital Markets)
Thanks. And then just for my follow‑up, just looking at the recurring revenue sort of just above the billion‑dollar range, can you talk about sort of the. Is this sort of a number that given the, I guess, framework agreement, master service agreement nature of this work, this is something we can think about over the medium term? How do the adds to this sort of line item work? Just trying to think of the growth outlook over the next few years. Should we just assume recurring revenue back up to over a billion? Probably a fair amount to think about when we look ahead, sort of 27 and 28. Thanks.
Jean-Louis Servranckx (Chief Executive Officer)
I think you’re right and I think we spoke about it, I mean, when we started this 1 billion, I mean mainly is coming from utilities. Mainly those MSAs are three years duration and, mainly speaking, the rate of renewal is extremely high. I mean it’s superior to 90, 95%. So yes, I mean it comes back naturally to the top line coming back to utilities. I mean when you just realize the growth in terms of revenue but also the quality and the predictability of the margin to come in utilities, I mean you probably understand why in Q2, 2026 we decided to buy back treasury shares.
We negotiated it in Q2 and we are going to execute it in Q4. I mean we perfectly understood the trend that was coming.
Sabahat Kamp (Analyst at RBC Capital Markets)
Thanks very much.
OPERATOR
Thank you. Our next question will be coming from the line of Frederic Bastien of Raymond James. Please go ahead.
Adam Bugatti (Senior Vice President of Corporate Development and Investor Relations)
Hello, Mr. Bastien.
Frederic Bastien (Analyst at Raymond James)
Oh, thank you. Good morning, guys. Your plans to expand fabrication capacity in Ontario builds on a purchase of a facility in South Carolina earlier this summer. Can you put some numbers around these investments? Specifically, what was your fabrication capacity entering the year? How much are you hoping to add with these two investments? And in aggregate, where does that position you versus your North American peers?
Adam Bugatti (Senior Vice President of Corporate Development and Investor Relations)
Yeah, so the facility in South Carolina is a facility that has nuclear qualifications and supports programs that we’re executing in the United States. That facility was being leased and, as I mentioned, the strategic nature, fabrication, and the kind of paradigm of what we believe comes next, it’s just important to have full ownership over these types of assets. So that facility plus the existing network, plus what we have in Alberta, something in the order of 300,000‑plus square feet of fabrication capacity.
The new facility adds something in the order of 120 to 100. And so, kind of pro forma, we’re going to be at just over 400,000 square feet of fabrication capacity. That excludes the office space and other items tied to it. So money‑wise, something in the order, on a gross capex basis for the new facility, $50 million, including some investments required to support additional cranage. And then the facility that we bought in the United States wasn’t like a huge dollar amount, right? Like kind of low tens of millions, like 10 or 15. I can’t remember the exact amount, but ended up being effectively a wipeout against what would be on the consolidation basis.
Frederic Bastien (Analyst at Raymond James)
Okay, but where does. I would assume that positions you right at the top in terms of fabrication capacity in North America, but maybe I’m wrong.
Adam Bugatti (Senior Vice President of Corporate Development and Investor Relations)
Yeah, so it depends. There’s a lot of ways to look at it. Right. So one way is, you know, we believe in the scopes that we attack. It puts us in a very, very strong position, you know, certainly in the markets where we are in a leading position. That being said, there’s a lot of very high‑quality fabricators out there who do structural steel, piping, additional items. That’s a relatively broad market. The big differentiation is the ability to do it under quality programs.
That is the barrier to entry. It’s not easy. It requires systems, processes, experience, résumé that just is not easily replicable. And so from that basis, like a lot of things can be built in a lot of different places. Off‑site construction is clearly a long‑term trend here. We’re seeing it across almost every single sector. It’s really the number one release valve against capacity constraints. And so from our perspective, getting ahead of this wave, rather than trying to play catch‑up, is the right way to do it, given what we see in the…
Frederic Bastien (Analyst at Raymond James)
Great. That’s very useful. Thank you.
OPERATOR
Thank you. One moment for the next question. And our next question is coming from the line, Maxim Sytchev of National Bank Financial. Please go ahead.
Maxim Sytchev (Analyst at National Bank Financial)
Hi, good morning team. Jerome, I just had a brief one in relation to working capital. Obviously you freed up a lot in kind of Q3. How should we think about Q4 seasonality in terms of those moving parts?
Jerome Julier (Executive Vice President and Chief Financial Officer)
Yeah, Max, going to turn that one over to Alice, our SVP Finance.
Alice (Senior Vice President, Finance)
Thanks. Thanks for the question. So our teams did an amazing job in Q3 of reducing our unbilled, resolution of a number of claims, achievement of a number of milestones. And also we’ve improved our contract management and advanced billing. So that really helped us in the quarter, and also for the full year so far. Q4, as you know, working capital can be lumpy depending on the timing of payments. But I think Q4 will be slightly positive, but it won’t be what we saw in Q3.
And then, I mean, the one big thing, as you know, in construction you need a really strong balance sheet. So I think so far this year we’ve really strengthened the balance sheet, and that sets us up for good growth going forward.
Maxim Sytchev (Analyst at National Bank Financial)
Yeah, for sure. Makes sense. And then just overall, sort of thinking it from a sort of more structural perspective, given the amount of growth and given the projects you’re doing, is there anything we should keep in mind in terms of kind of working capital intensity on a prospective basis, or should it kind of revert back to the sort of pre‑difficult projects sort of time frame? How should we think about that on a prospective basis?
Alice (Senior Vice President, Finance)
Yeah, I mean, I think you’re naturally going to see improved cash flow from our operations before working capital, you know, just over the course of time with the improvement of EBITDA. And then I do think that, you know, there’s still a few opportunities to improve working capital next year, but it won’t be at the size of this year.
Jerome Julier (Executive Vice President and Chief Financial Officer)
Yeah, maybe, Max, the way we’re thinking about it is the third quarter is really like a shift in the overall level, right. And then now we want to try to operate, you know, more at this new level, just given the way that we’re trying to manage the contracts and…
Maxim Sytchev (Analyst at National Bank Financial)
Okay, that’s great. Thank you so much.
OPERATOR
Thank you. And one moment, we have a follow‑up from Michael Tupholme of TD Cowen. Please go ahead.
Michael Tupholme (Analyst at TD Cowen)
Thank you for taking the follow‑up. Just hoping to get a bit of an update on the Greenlight Electricity Center contract you announced in early July. Just in terms of, I know the project’s just getting going, but sort of if you can talk about where things stand right now, how we see that ramping up as you move forward.
Jean-Louis Servranckx (Chief Executive Officer)
So I will begin with a broader answer about power. It was part of what we disclosed. The share of the power in Aecon activity is now around 58%. And this is quite important because, in parallel with the size, the quality of the backlog, what I call the page 12, I mean, of the slide presentation, this power, this shift toward power is very important. I mean, a few years ago, we were principally a roads and bridge company. I mean, we are now definitely a power company, and we will tackle the Greenlight project after.
But you probably have noticed that the issue now around us, it’s not anymore who can produce the most, but also who can keep energy flowing under stress. And this is why our portfolio of power activities and the balance is extremely important. We are strong in power generation. It may be nuclear, it may be conventional, it may be hydro, but we have also deliberately increased our strength in transmission and distribution. It may be in Canada and U.S. You probably have noticed that during the last five to six years, all our acquisitions were about that. It’s also about battery storage. I mean, at the end of the year, we’ll have installed something like 1,000 megawatts of battery storage capacity in Canada.
We are getting extremely strong in this. To come back to power generation, we already tackled nuclear. You know that hydro is very strong, especially in B.C. for us. Conventional, we decided that we had to be in this gas turbine sub‑market because there will be still a lot of activity within this market. It was one of the main reasons to acquire United, I mean, one year and a half ago, to get much more engineering strength. We have been partnering on this Greenlight with TRC Tecnica 3 Universe, which is probably the best engineer in terms of track record for gas turbine.
I mean, they have more than 35 of these kind of animals within their backpack already here. We like our client. I mean, Mbina is a client that we know quite well. We are very comfortable because it’s near Edmonton where we are strong in industrial. All this just makes that the startup of this project, which is now in terms of execution advanced at a few percent only, and in terms of engineering reaching 40, 50% detailed engineering. The startup is extremely good and it’s perfectly in line with what we were expecting.
Michael Tupholme (Analyst at TD Cowen)
Okay, that is very good color. Thank you.
OPERATOR
Thank you. One moment for the next question. Our next question is coming from the line of Ian Gillis of Stifel. Please go ahead.
Ian Gillis (Analyst at Stifel)
Morning everyone. See you.
Jean-Louis Servranckx (Chief Executive Officer)
You probably have listened to the Prime Minister during the summit on Invest Canada. This one-year rule and one gate to get all approved. So all this goes in the right direction. We can obviously see, in terms of authorizations to proceed, environmental assessments, and all kinds of preparatory work, we can obviously see that it’s getting better. Infrastructure projects are big animals. They are not all easy, but it’s going in the right direction. So we are not that much worried with this issue as we were a few years ago.
So part of the answer is about the balance of our activity. As I’ve been saying, you don’t require the same kind of people to do mining installation, on nuclear near Toronto, or some roads, I mean in Alberta. So this is a kind of parachute or resiliency insurance that we have. Second point, Aecon Group is an old company. I would tend to say with an extreme— I mean, I’ve been working in construction all my life. I’ve never seen this kind of loyalty from our workforce in front of their company. This is important. We are working a lot because, yes, the market is tense. So when you speak about aggressive recruitment, it’s not exactly this. I mean, usually the one who begin to work with Aecon Group try to go on working with Aecon Group during all their life.
And this is what we are trying, what we are trying to promote. Now we know that at the federal level, at the provincial level, they are working a lot at the moment to increase the capacity of attracting and entering new labor within Canada. That’s good at all levels—I mean project management, staff, trade—and we are participating with different levels and kinds of governments in this discussion to be sure that we can have the necessary workforce in the years to come.
OPERATOR
Thank you. This does conclude today’s Q and A session. I would like to now turn the call back over to Adam for closing remarks. Please go ahead.
Adam Bugatti (Senior Vice President of Corporate Development and Investor Relations)
Thanks very much, Lisa, and appreciate everyone’s attention today. Welcome any feedback or questions that you may have post-call, and have a great rest of the day and into the weekend.
OPERATOR
Thank you for joining today’s program. You may now disconnect.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.
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