ARE Aecon Group Inc

Aecon Group Inc. (TSX: ARE) (“Aecon” or the “Company”) today reported results for the fourth quarter and year-end 2023 including full year revenue of $4.6 billion and backlog of $6.2 billion at December 31, 2023. Aecon's Board of Directors approved an increase to the quarterly dividend to 19 cents per share from 18.5 cents per share previously.

“2023 was a transformational year for Aecon – with our teams focused on safety and execution across all of our projects and driven by three significant transactions which allowed Aecon to capture unlocked value, partner with respected institutions with significant experience to help Aecon grow, and strengthen Aecon’s balance sheet and capital position,” said Jean-Louis Servranckx, President and Chief Executive Officer, Aecon Group Inc. “Demand for Aecon’s services across Canada continues to be strong, and we are strategically focused on embracing new opportunities to grow in the decarbonization and energy transition space, as well as U.S. and international markets.”

HIGHLIGHTSAll quarterly financial information contained in this news release is unaudited.

• Revenue for the year ended December 31, 2023 of $4,644 million was $52 million, or 1%, lower compared to 2022. The lower revenue is largely attributable to the sale of the Aecon Transportation East (“ATE”) business in the second quarter of 2023 which generated $51 million revenue in 2023 compared with $326 million revenue in 2022.
• Operating profit of $240.9 million (operating margin(4) of 5.2%) compared to operating profit of $97.2 million in 2022 (operating margin of 2.1%). The improvement in year-over-year operating profit was largely due to an increase in other income of $209.4 million.  This increase was primarily due to gains related to the sale of a 49.9% interest in Skyport, the Bermuda International Airport concessionaire, of $139.0 million, including a fair value remeasurement gain of $80.4 million on Aecon’s 50.1% retained interest in the concessionaire and the sale of ATE ($36.5 million), and higher gains on the sale of property, buildings, and equipment ($38.7 million).
• Adjusted EBITDA(1)(2) of $143.4 million for the year ended December 31, 2023 (Adjusted EBITDA margin(3) of 3.1%) compared to Adjusted EBITDA of $219.2 million (Adjusted EBITDA margin of 4.7%) in 2022.
• Net profit of $161.9 million (diluted earnings per share of $2.10) for the year ended December 31, 2023 compared to net profit of $30.4 million (diluted earnings per share of $0.47) in 2022.
• Four large fixed price legacy projects being performed by joint ventures in which Aecon is a participant (see Section 5 “Recent Developments”, Section 10.2 “Contingencies” and Section 13 “Risk Factors” of the Company’s December 31, 2023 Management’s Discussion and Analysis (“MD&A”) which is available on the Company’s profile on SEDAR+ (www.sedarplus.com) are being negatively impacted due to additional costs for which the joint ventures assert that the owners are contractually responsible, including for, among other things, unforeseeable site conditions, third party delays, COVID-19, supply chain disruptions, and inflation related to labour and materials. In 2023, due to the factors discussed above that impacted these four fixed price legacy projects during the year, Aecon recognized an operating loss of $215.2 million arising from three of the four projects compared to an operating loss of $120.0 million in 2022. At December 31, 2023 the remaining backlog to be worked off on these projects was $420 million compared to $1,079 million at December 31, 2022.
• Reported backlog at December 31, 2023 of $6,157 million compared to backlog of $6,296 million at December 31, 2022. New contract awards of $4,505 million were booked in 2023 compared to $4,795 million in 2022.
• Aecon was awarded a $290 million design-build contract by the Ontario government for the Eglinton Crosstown West Extension project’s Elevated Guideway in Ontario. The value of the contract was added to Aecon’s Construction segment backlog in the fourth quarter of 2023.
• Aecon was awarded a US$200 million contract by Dominion Energy for the replacement of Condensers and Feedwater Heaters at the North Anna Power Station in Mineral, Virginia. The value of the contract was added to Aecon’s Construction segment backlog in the fourth quarter of 2023.
• Aecon announced the full cash repayment of the $184 million principal amount owed under its 5.0% unsecured convertible debentures along with accrued unpaid interest on December 29, 2023.
• Subsequent to year-end, Contrecoeur Terminal Constructors General Partnership, a consortium in which Aecon holds a 40% interest, executed a contract with the Montréal Port Authority for the Contrecœur Terminal Expansion project in-water works under a Progressive Design-Build approach in Québec.
• Subsequent to year-end, Wicehtowak Aecon Industrial LP, a joint venture in which Aecon holds a 49% interest, was awarded a $222 million contract by BHP Canada for the Jansen Stage 1 Wet Mill Area – Structural, Mechanical, Piping, Electrical and Instrumentation project in Saskatchewan.

CONSOLIDATED FINANCIAL HIGHLIGHTS(1)
		Three months ended					Year ended
$ millions (except per share amounts)		December 31					December 31
		2023			2022		2023			2022
Revenue	$	1,130.2		$	1,266.8	$	4,643.8		$	4,696.5
Gross profit		98.0			98.7		255.6			356.0
Marketing, general and administrative expense		(51.8)			(48.1)		(177.8)			(196.4)
Income from projects accounted for using the equity method		5.5			5.9		18.7			17.7
Other income		2.6			8.1		223.5			14.1
Depreciation and amortization		(14.6)			(23.9)		(79.1)			(94.2)
Operating profit		39.6			40.7		240.9			97.2
Finance income		2.2			2.0		7.7			2.9
Finance cost		(21.4)			(16.9)		(71.0)			(57.1)
Profit before income taxes		20.3			25.8		177.5			43.0
Income tax expense		(10.7)			(6.1)		(15.7)			(12.6)
Profit	$	9.7		$	19.7	$	161.9		$	30.4
Gross profit margin(4)		8.7%			7.8%		5.5%			7.6%
MG&A as a percent of revenue(4)		4.6%			3.8%		3.8%			4.2%
Adjusted EBITDA(2)	$	70.2		$	67.5	$	143.4		$	219.2
Adjusted EBITDA margin(3)		6.2%			5.3%		3.1%			4.7%
Operating margin(4)		3.5%			3.2%		5.2%			2.1%
Earnings per share – basic	$	0.16		$	0.32	$	2.62		$	0.50
Earnings per share – diluted	$	0.15		$	0.26	$	2.10		$	0.47
Backlog (at end of period)						$	6,157		$	6,296

(1) This press release presents certain non-GAAP and supplementary financial measures, as well as non-GAAP ratios to assist readers in understanding the Company's performance (GAAP refers to Canadian Generally Accepted Accounting Principles). Further details on these measures and ratios are included in the “Non-GAAP and Supplementary Financial Measures” and “Reconciliations and Calculations” sections of this press release.(2) This is a non-GAAP financial measure. Refer to the “Non-GAAP and Supplementary Financial Measures” and “Reconciliations and Calculations” sections of this press release for more information on each non-GAAP financial measure.(3) This is a non-GAAP ratio. Refer to the “Non-GAAP and Supplementary Financial Measures” section of this press release for more information on each non-GAAP ratio.(4) This is a supplementary financial measure. Refer to the “Non-GAAP and Supplementary Financial Measures” section of this press release for more information on each supplementary financial measure.

Revenue for the year ended December 31, 2023 of $4,644 million was $52 million, or 1%, lower compared to 2022. Revenue was lower in the Construction segment ($48 million) driven by lower revenue in civil ($65 million), nuclear ($33 million), industrial ($24 million), and utilities ($5 million), partially offset by higher revenue in urban transportation solutions ($79 million). The lower revenue in civil was driven by a year-over-year decrease of $275 million as a result of the sale of ATE in the second quarter of 2023. In the Concessions segment, revenue was $2 million lower in 2023 compared to the prior year primarily due to the Bermuda International Airport concessionaire. Subsequent to the sale of a 49.9% interest in Skyport on September 20, 2023, the Company’s retained 50.1% interest in Skyport is reported using the equity method of accounting and as such, no amounts are reported in revenue on a prospective basis by Aecon (See Section 5 “Recent Developments” of the Company’s December 31, 2023 Management’s Discussion and Analysis (“MD&A”) for details of the sale of a 49.9% interest in Skyport and Note 12 “Projects Accounted for Using the Equity Method” in the Company’s audited consolidated financial statements for the year ended December 31, 2023). Inter-segment revenue eliminations increased by $2 million in 2023 compared to the prior year, due to higher revenue between the Concessions and Construction segments.

Operating profit of $240.9 million for the year ended December 31, 2023 improved by $143.7 million compared to operating profit of $97.2 million in 2022. The improvement in year-over-year operating profit was largely due to an increase in other income of $209.4 million. This increase was primarily due to gains related to the sale of a 49.9% interest in Skyport of $139.0 million, including a fair value remeasurement gain of $80.4 million on Aecon’s 50.1% retained interest in the concessionaire, and the sale of ATE ($36.5 million). Also contributing to the increase in other income was higher gains on the sale of property, buildings, and equipment ($38.7 million, of which $20.7 million was included in the Construction segment and $18.0 million in Corporate), a higher fair value gain on financial instruments ($0.9 million), and partially offset by lower foreign exchange gains ($1.4 million) and lower gains on other assets ($4.3 million).

The increase in operating profit from the above noted increase in other income was partially offset by lower gross profit in 2023 of $100.4 million. In the Construction segment, gross profit decreased by $101.6 million primarily as a result of negative gross profit related to four fixed price legacy projects in 2023 of $215.2 million, arising from three of the four projects, two of which were in urban transportation solutions and one in the civil sector, compared to negative gross profit on the fixed price legacy projects of $120.0 million in 2022. These four fixed price legacy projects are discussed in Section 5 “Recent Developments”, Section 10.2 “Contingencies”, and Section 13 “Risk Factors” in the Company’s December 31, 2023 Management’s Discussion and Analysis (“MD&A”) which is available on the Company’s profile on SEDAR+ at www.sedarplus.com. In addition to the impact of these four fixed price legacy projects in 2023, lower gross profit in the balance of the Construction segment was largely due to lower gross profit in civil operations primarily due to the sale of ATE in the second quarter of 2023, a volume driven decrease in gross profit in utilities, and lower volume and gross profit margin in nuclear operations, partially offset by improved gross profit margin in urban transportation solutions and industrial operations. In the Concessions segment and Corporate, gross profit in 2023 increased by $1.2 million compared to 2022.

Marketing, General and Administrative (“MG&A”) decreased in 2023 by $18.6 million compared to 2022. The decrease in MG&A was primarily due to lower personnel, project pursuit and bid costs, as well as the impact of the sale of ATE in the second quarter of 2023. MG&A as a percentage of revenue decreased from 4.2% in 2022 to 3.8% in 2023.

Reported backlog at December 31, 2023 of $6,157 million compares to backlog of $6,296 million at December 31, 2022. New contract awards of $4,505 million were booked in 2023 compared to $4,795 million in 2022.

REPORTING SEGMENTS

Aecon reports its financial performance on the basis of two segments: Construction and Concessions, which are described in the Company’s December 31, 2023 MD&A.

CONSTRUCTION SEGMENT

			Three months ended								Year ended
	$ millions		December 31								December 31
			2023				2022				2023				2022
	Revenue	$	1,127.2			$	1,246.3			$	4,572.5			$	4,620.8
	Gross profit	$	97.6			$	90.9			$	223.4			$	325.0
	Adjusted EBITDA(1)	$	65.0			$	57.5			$	99.4			$	192.5
	Operating profit	$	49.1			$	43.6			$	59.0			$	120.9
	Gross profit margin(3)		8.7	%			7.3	%			4.9	%			7.0	%
	Adjusted EBITDA margin(2)		5.8	%			4.6	%			2.2	%			4.2	%
	Operating margin(3)		4.4	%			3.5	%			1.3	%			2.6	%
	Backlog (at end of period)									$	6,053			$	6,197

(1) This is a non-GAAP financial measure. Refer to the “Non-GAAP And Supplementary Financial Measures” and “Reconciliations and Calculations” sections of this press release for more information on each non-GAAP financial measure.(2) This is a non-GAAP ratio. Refer to the “Non-GAAP And Supplementary Financial Measures” and “Reconciliations and Calculations” sections of this press release for more information on each non-GAAP ratio.(3) This is a supplementary financial measure. Refer to the “Non-GAAP And Supplementary Financial Measures” section of this press release for more information on each supplementary financial measure.

For the year ended December 31, 2023, revenue in the Construction segment of $4,573 million was $48 million, or 1%, lower than in 2022. The largest decrease in revenue occurred in civil operations ($65 million) driven by a lower volume of roadbuilding construction work in eastern Canada of $275 million as a result of the sale of ATE in the second quarter of 2023, and partially offset by a higher volume of major projects work in both eastern and western Canada. Revenue was also lower in nuclear operations ($33 million) driven by a lower volume of refurbishment work at nuclear generating stations located in Ontario, and in industrial operations ($24 million) driven by a lower volume of field construction work primarily at chemical facilities in eastern Canada and partially offset by increased activity on mainline pipeline work. In utilities operations, lower revenue ($5 million) resulted primarily from a decrease in gas distribution work. Partially offsetting these decreases was higher revenue in urban transportation solutions ($79 million) primarily from an increase in rail expansion and electrification work in Ontario.

Operating profit in the Construction segment of $59.0 million in 2023 decreased by $61.9 million compared to 2022. The largest driver of the decrease in operating profit was negative gross profit from the four fixed price legacy projects of $215.2 million in 2023 compared to negative gross profit on the four fixed price legacy projects of $120.0 million in 2022 for a net negative year-over-year impact on operating profit of $95.2 million. In civil operations, lower gross profit was driven by a negative gross profit of $75.7 million from one of the four fixed price legacy projects compared to a gross profit of $13.2 million related to the same project in 2022; in urban transportation solutions by a negative gross profit of $139.5 million in 2023 from two of the four fixed price legacy projects versus a negative gross profit of $117.8 million in 2022 from the same projects; and partially offset in industrial operations by gross profit of $nil from one of the four fixed price legacy projects compared to a negative gross profit of $15.4 million related to the same project in 2022. The four fixed price legacy projects are discussed in Section 5 “Recent Developments”, Section 10.2 “Contingencies”, and Section 13 “Risk Factors” in the Company’s December 31, 2023 MD&A. Other than the impact of these fixed price legacy projects in 2023, higher operating profit in the balance of the Construction segment was driven by higher volume and gross profit margin in urban transportation solutions, and in industrial operations from higher gross profit margin. These operating profit improvements were partially offset in civil operations primarily by lower operating profit from roadbuilding construction work due to the sale of ATE in the second quarter of 2023 ($23.5 million), in nuclear operations by lower volume and gross profit margin, and in utilities operations from lower gross profit.

Construction backlog at December 31, 2023 was $6,053 million, which was $144 million lower than the same time last year. Backlog decreased year-over-year in civil operations ($311 million), industrial operations ($309 million), urban transportation solutions ($268 million), and utilities operations ($89 million), and increased in nuclear operations ($833 million). Backlog at December 31, 2023 excludes all amounts related to ATE which was sold in the second quarter of 2023 (see Section 5 “Recent Developments” of the Company’s December 31, 2023 MD&A) at which time related backlog of $447 million was removed. New contract awards in 2023 totaled $4,428 million compared to $4,702 million in 2022. In 2023, Aecon was awarded a number of projects including delivery of the Deerfoot Trail Improvements project in Calgary, Alberta; a design-build contract for the Eglinton Crosstown West Extension project’s Elevated Guideway in Toronto, Ontario; the replacement of Condensers and Feedwater Heaters for Dominion Energy at the North Anna Power Station in Mineral, Virgina; and an Aecon joint venture was awarded the Fuel Channel and Feeder Replacement contract for four units at the Bruce Nuclear Generating Station in Tiverton, Ontario.

CONCESSIONS SEGMENT

			Three months ended						Year ended
	$ millions		December 31						December 31
			2023			2022			2023			2022
	Revenue	$	3.0		$	20.6		$	73.5		$	75.9
	Gross profit	$	1.0		$	8.3		$	32.4		$	31.0
	Income from projects accounted for using the equity method	$	2.6		$	4.1		$	15.8		$	14.2
	Adjusted EBITDA(1)	$	19.7		$	19.3		$	89.8		$	71.0
	Operating profit	$	4.6		$	7.1		$	174.1		$	22.1
	Backlog (at end of period)							$	104		$	99

 (1)  This is a non-GAAP financial measure. Refer to the “Non-GAAP And Supplementary Financial Measures” and “Reconciliations and Calculations” sections of this press release for more information on each non-GAAP financial measure.

On September 20, 2023, Aecon announced the closing of the previously disclosed agreement with Connor, Clark & Lunn Infrastructure (“CC&L Infrastructure”) to sell a 49.9% interest in Skyport. Following this transaction, Aecon holds a 50.1% interest in Skyport, the concessionaire responsible for the Bermuda International Airport’s operations, maintenance and commercial functions, and the entity that will manage and coordinate the overall delivery of the Bermuda International Airport project over a 30-year concession term that commenced in 2017. On December 9, 2020, Skyport opened the new passenger terminal building at the L.F. Wade International Airport. Prior to the transaction with CC&L Infrastructure, Aecon’s participation in Skyport was 100% consolidated and, as such, was accounted for in the consolidated financial statements by reflecting, line by line, the assets, liabilities, revenue and expenses of Skyport. Subsequent to the closing of the Skyport transaction during the third quarter of 2023, Aecon’s 50.1% concession participation in the Skyport joint venture is accounted for using the equity method. See Section 5 “Recent Developments” of the Company’s December 31, 2023 MD&A for details of the completed sale of a 49.9% interest in Skyport. Furthermore, Aecon’s concession participation in the Eglinton Crosstown light rail transit (“LRT”), Finch West LRT, Gordie Howe International Bridge, Waterloo LRT, and the GO Expansion On-Corridor Works projects are joint ventures that are also accounted for using the equity method.

For the year ended December 31, 2023, revenue in the Concessions segment of $74 million was $2 million lower than in 2022. The decrease was largely due to the Bermuda International Airport where revenue in 2023 was $61 million compared to revenue in 2022 of $69 million. This decrease in revenue was driven by the above noted sale of a 49.9% interest in Skyport and the use of the equity method of accounting on a prospective basis for the Company’s retained 50.1% interest in Skyport. In 2023, passenger traffic levels in Bermuda averaged 75% of 2019 pre-pandemic traffic compared to 58% in 2022.

Operating profit in the Concessions segment of $174.1 million for the year ended December 31, 2023 improved by $152.0 million compared to an operating profit of $22.1 million in 2022. The higher operating profit resulted primarily from gains related to the sale of a 49.9% interest in the Bermuda International Airport concessionaire of $139.0 million, including a fair value remeasurement gain of $80.4 million on Aecon’s 50.1% retained interest in the concessionaire. The balance of the improvement in operating profit was related to higher income from management and development fees and an improvement in operating results at the Bermuda International Airport.

Except for Operations and Maintenance (“O&M”) activities under contract for the next five years and that can be readily quantified, Aecon does not include in its reported backlog expected revenue from concession agreements. As such, while Aecon expects future revenue from its concession assets, no concession backlog, other than from such O&M activities for the next five years, is reported.

DIVIDEND Aecon's Board of Directors approved an increase to the quarterly dividend to 19 cents per share from 18.5 cents per share previously. The first increased dividend will be paid on April 3, 2024, to shareholders of record on March 22, 2024. Unless indicated otherwise, all common share dividends paid by Aecon to shareholders are designated as “eligible” dividends for the purpose of the Income Tax Act (Canada) and any similar provincial legislation.

OUTLOOK

2023 was a transformational year for Aecon driven by three significant transactions which allowed the Company to capture unlocked value in these assets, partner with respected institutions with significant experience to help Aecon grow, better align to its strategy, and strengthen Aecon’s balance sheet and capital position.

Moving forward, Aecon’s goal is to build a resilient company through a balanced and diversified work portfolio across sectors, markets, geographies, project types, sizes and delivery models while enhancing critical execution capabilities and project selection to play to its strengths. Aecon will continue to leverage its self-perform capabilities and One Aecon approach with a goal to maximize value for clients through improved cost certainty and schedule, while offering a broad range of infrastructure services from development, engineering, investment, and construction to longer term operations and maintenance. Aecon will continue to pursue and deliver the majority of its work in established markets, while embracing new opportunities to grow in areas linked to decarbonization and energy transition, and in U.S. and international markets. These opportunities are intended over the long term to diversify Aecon’s geographic presence, provide further growth opportunities and deliver more consistent earnings through economic cycles. To complement its priority markets, Aecon is pursuing a balanced portfolio of work delivered through both fixed and non-fixed price contracting models with the goal of reducing fixed price work to balance risk with acceptable returns.

Demand for Aecon’s services across Canada continues to be strong. Revenue from recurring revenue programs increased to $1,134 million in 2023 from $896 million in 2022, representing growth in recurring revenue programs of 27% over 2022. In addition, development phase work is ongoing in consortiums in which Aecon is a participant to deliver the long-term GO Expansion On-Corridor Works project, the Scarborough Subway Extension Stations, Rail and Systems project, and the Darlington New Nuclear Project, all in Ontario. These projects are being delivered using progressive design-build or alliance models and each project is expected to move into the construction phase in 2025. The GO Expansion On-Corridor Works project also includes an operations and maintenance component over a 23-year term commencing January 1, 2025. None of the anticipated work from these three significant long-term projects is yet reflected in backlog. With backlog of $6.2 billion at the end of 2023, recurring revenue programs continuing to see robust demand, and a strong bid pipeline, Aecon believes it is positioned to achieve further revenue growth over the next few years and is focused on achieving improved profitability and margin predictability.

In the Construction segment, Aecon was awarded a number of projects in 2023 that were added to backlog including delivery of the Deerfoot Trail Improvements project in Calgary, Alberta, the Elevated Guideway for the Eglinton Crosstown West Extension project in Toronto, Ontario, the replacement of Condensers and Feedwater Heaters for Dominion Energy in Mineral, Virginia, and an Aecon joint venture was awarded the Fuel Channel and Feeder Replacement contract for four units at the Bruce Nuclear Generating Station in Tiverton, Ontario. In addition, Oneida LP, a consortium in which Aecon Concessions is an 8.35% equity partner, executed an agreement with the Independent Electricity System Operator for the Oneida Energy Storage Project to deliver a 250 megawatt / 1,000 megawatt-hour energy storage facility near Nanticoke Ontario, with Aecon awarded a $141 million Engineering, Procurement and Construction contract by Oneida LP.

In the Concessions segment, there are a number of opportunities to add to the existing portfolio of Canadian and international concessions in the next 12 to 24 months, including projects with private sector clients that support a collective focus on sustainability and the transition to a net-zero economy as well as private sector development expertise and investment to support aging infrastructure, mobility, connectivity and population growth. The GO Expansion On-Corridor Works project and the Oneida Energy Storage project noted above are examples of the role Aecon’s Concessions segment is playing in developing, operating, and maintaining assets related to this transition.

Global and Canadian economic conditions impacting inflation, interest rates, and overall supply chain efficiency have stabilized, and these factors have largely been and will continue to be reflected in the pricing and commercial terms of the Company’s recent and prospective project awards and bids. However, certain ongoing joint venture projects that were bid some years ago have experienced impacts related, in part, to those factors, that will require satisfactory resolution of claims with the respective clients. Results have been negatively impacted by these four legacy projects in recent periods, undermining positive revenue and profitability trends in the balance of Aecon’s business. Until these projects are complete and related claims have been resolved, there is a risk that this could also occur in future periods – see Section 5 “Recent Developments” and Section 10.2 “Contingencies”, and Section 13 “Risk Factors” in the Company’s December 31, 2023 MD&A regarding the risk on four large fixed price legacy projects entered into in 2018 or earlier by joint ventures in which Aecon is a participant.

At December 31, 2023, Aecon held cash and cash equivalents, excluding balances held by joint operations, of $259 million. In addition, at December 31, 2023, Aecon had committed revolving credit facilities of $850 million, of which $112 million was drawn, and $6 million was utilized for letters of credit. On December 29, 2023, Aecon repaid, in cash, convertible debentures with a face value of $184 million. The Company has no debt or working capital credit facility maturities until 2027, except equipment loans and leases in the normal course. Aecon plans to maintain a disciplined capital allocation approach focused on long-term shareholder value through acquisitions and divestitures, organic growth, dividends, and capital investments. Capital expenditures in 2024 are expected to be similar to previous years.

2024 revenue will be impacted by the three strategic transactions completed in 2023, the substantial completion of several large projects in 2023, and the three major projects currently in the development phase by consortiums in which Aecon is a participant being delivered using the progressive design-build models which are expected to move into the construction phase in 2025. The completion and satisfactory resolution of claims on the four legacy projects with the respective clients remains a critical focus for the Company and its partners, while the remainder of the business continues to perform as expected, supported by the strong level of backlog and new awards during 2023, and the strong demand environment for Aecon’s services, including recurring revenue programs.

CONSOLIDATED RESULTS

The consolidated results for the three months and years ended December 31, 2023 and 2022 are available at the end of this news release.

CONSOLIDATED BALANCE SHEET

		December 31		December 31
$ thousands		2023		2022
Cash and cash equivalents and restricted cash	$	645,784	$	484,245
Other current assets		1,827,472		1,839,009
Property, plant and equipment		251,899		395,101
Other long-term assets		470,473		848,662
Total Assets	$	3,195,628	$	3,567,017
Current portion of long-term debt - recourse	$	42,608	$	56,564
Current portion of long-term project debt - non-recourse		-		3,347
Current portion of convertible debentures		-		178,878
Other current liabilities		1,695,249		1,595,674
Long-term debt - recourse		106,770		173,638
Long-term project debt - non-recourse		-		375,654
Other long-term liabilities		286,675		229,267
Equity		1,064,326		953,995
Total Liabilities and Equity	$	3,195,628	$	3,567,017

CONFERENCE CALL

A conference call and live webcast has been scheduled for 9 a.m. (Eastern Time) on Wednesday, March 6, 2024. A live webcast of the conference call can be accessed using this link and will be available at www.aecon.com/InvestorCalendar. Participants can also dial-in to the conference call and pre-register using this link. After registering, an email will be sent, including dial-in details and a unique access code required to join the live call. Please ensure you have registered at least 15 minutes prior to the conference call time.

An accompanying presentation of the fourth quarter and year-end 2023 financial results will also be available after market close on March 5, 2024 at www.aecon.com/investing. For those unable to attend, a replay will be available within one hour following the live webcast and conference call at the same webcast link above.

AECON 2024 ANNUAL MEETING OF SHAREHOLDERS

Aecon’s Annual Meeting of Shareholders will be held on Tuesday, June 4, 2024. Additional details will be set out in the Notice of Annual Meeting of Shareholders and Management Information Circular which will be filed on SEDAR+ prior to the meeting.

ABOUT AECON

Aecon Group Inc. (TSX: ARE) is a North American construction and infrastructure development company with global experience. Aecon delivers integrated solutions to private and public-sector clients through its Construction segment in the Civil, Urban Transportation, Nuclear, Utility and Industrial sectors, and provides project development, financing, investment, management, and operations and maintenance services through its Concessions segment. Join our online community on X, LinkedIn, Facebook, and Instagram @AeconGroupInc.  

For further information: 

Adam BorgattiSVP, Corporate Development and Investor Relations416-297-2600ir@aecon.com

Nicole CourtVice President, Corporate Affairs416-297-2600corpaffairs@aecon.com

NON-GAAP AND SUPPLEMENTARY FINANCIAL MEASURES

The press release presents certain non-GAAP and supplementary financial measures, as well as non-GAAP ratios to assist readers in understanding the Company’s performance (“GAAP” refers to Generally Accepted Accounting Principles under IFRS). These measures do not have any standardized meaning and therefore are unlikely to be comparable to similar measures presented by other issuers and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

Throughout this press release, the following terms are used, which do not have a standardized meaning under GAAP.

Non-GAAP Financial Measures

A non-GAAP financial measure: (a) depicts the historical or expected future financial performance, financial position or cash flow of the Company; (b) with respect to its composition, excludes an amount that is included in, or includes an amount that is excluded from, the composition of the most comparable financial measure presented in the primary consolidated financial statements; (c) is not presented in the financial statements of the Company; and (d) is not a ratio.

Non-GAAP financial measures presented and discussed in this press release are as follows:

• “Adjusted EBITDA” represents operating profit (loss) adjusted to exclude depreciation and amortization, the gain (loss) on sale of assets and investments, and net income (loss) from projects accounted for using the equity method, but including “Equity Project EBITDA” from projects accounted for using the equity method (refer to the “Reconciliations and Calculations” section of this press release for a quantitative reconciliation to the most comparable financial measure). 
• “Equity Project EBITDA” represents Aecon’s proportionate share of the earnings or losses from projects accounted for using the equity method before depreciation and amortization, finance income, finance cost and income tax expense (recovery) (refer to the “Reconciliations and Calculations” section of this press release for a quantitative reconciliation to the most comparable financial measure).

Management uses the above non-GAAP financial measures to analyze and evaluate operating performance. Aecon also believes the above financial measures are commonly used by the investment community for valuation purposes, and are useful complementary measures of profitability, and provide metrics useful in the construction industry. The most directly comparable measures calculated in accordance with GAAP are operating profit and profit (loss) attributable to shareholders.

Primary Financial Statements

Primary financial statement means any of the following: the consolidated balance sheets, the consolidated statements of income, the consolidated statements of comprehensive income, the consolidated statements of changes in equity, and the consolidated statements of cash flows.

Key financial measures presented in the primary financial statements of the Company and discussed in this press release are as follows:

• “Gross profit” represents revenue less direct costs and expenses. Not included in the calculation of gross profit are marketing, general and administrative expense (“MG&A”), depreciation and amortization, income (loss) from projects accounted for using the equity method, other income (loss), finance income, finance cost, income tax expense (recovery), and non-controlling interests.
• “Operating profit (loss)” represents the profit (loss) from operations, before finance income, finance cost, income tax expense (recovery), and non-controlling interests.

The above measures are presented in the Company’s consolidated statements of income and are not meant to be a substitute for other subtotals or totals presented in accordance with GAAP, but rather should be evaluated in conjunction with such GAAP measures.

• “Backlog” (Remaining Performance Obligations) means the total value of work that has not yet been completed that: (a) has a high certainty of being performed as a result of the existence of an executed contract or work order specifying job scope, value and timing; or (b) has been awarded to Aecon, as evidenced by an executed binding letter of intent or agreement, describing the general job scope, value and timing of such work, and where the finalization of a formal contract in respect of such work is reasonably assured. Operations and maintenance (“O&M”) activities are provided under contracts that can cover a period of up to 30 years. In order to provide information that is comparable to the backlog of other categories of activity, Aecon limits backlog for O&M activities to the earlier of the contract term and the next five years.

Remaining Performance Obligations, i.e. Backlog, is presented in the notes to the Company’s annual consolidated financial statements and is not meant to be a substitute for other amounts presented in accordance with GAAP, but rather should be evaluated in conjunction with such GAAP measures.

Non-GAAP Ratios

A non-GAAP ratio is a financial measure presented in the form of a ratio, fraction, percentage or similar representation, and that has a non-GAAP financial measure as one of its components and is not disclosed in the financial statements of the Company.

A non-GAAP ratio presented and discussed in this press release is as follows:

• “Adjusted EBITDA margin” represents Adjusted EBITDA as a percentage of revenue.

Management uses the above non-GAAP ratio to analyze and evaluate operating performance. The most directly comparable measures calculated in accordance with GAAP are gross profit margin and operating margin.

Supplementary Financial Measures

A supplementary financial measure: (a) is, or is intended to be, disclosed on a periodic basis to depict the historical or expected future financial performance, financial position or cash flow of the Company; (b) is not presented in the financial statements of the Company; (c) is not a non-GAAP financial measure; and (d) is not a non-GAAP ratio.

Key supplementary financial measures presented in this press release are as follows:

• “Gross profit margin” represents gross profit as a percentage of revenue.
• “Operating margin” represents operating profit (loss) as a percentage of revenue.
• “MG&A as a percent of revenue” represents marketing, general and administrative expense as a percentage of revenue.

RECONCILIATIONS AND CALCULATIONS

Set out below is the calculation of Adjusted EBITDA by segment for the three months and years ended December 31, 2023 and 2022:

$ millions
		Three months ended December 31, 2023												Year ended December 31, 2023
		Construction			Concessions			Other costs and eliminations			Consolidated			Construction			Concessions			Other costs and eliminations			Consolidated
	Operating profit (loss)	$	49.1		$	4.6		$	(14.1	)	$	39.6		$	59.0		$	174.1		$	7.8		$	240.9
	Depreciation and amortization		14.9			0.1			(0.4	)		14.6			61.1			17.0			1.0			79.1
	(Gain) loss on sale of assets		(1.8	)		-			(0.1	)		(1.9	)		(28.8	)		(139.0	)		(54.5	)		(222.3	)
	(Income) from projects accounted for using the equity method		(2.9	)		(2.6	)		-			(5.5	)		(2.9	)		(15.8	)		-			(18.7	)
	Equity Project EBITDA(1)		5.7			17.7			-			23.4			10.9			53.6			-			64.5
	Adjusted EBITDA(1)	$	65.0		$	19.7		$	(14.5	)	$	70.2		$	99.4		$	89.8		$	(45.8	)	$	143.4
$ millions
		Three months ended December 31, 2022												Year ended December 31, 2022
		Construction			Concessions			Other costs and eliminations			Consolidated			Construction			Concessions			Other costs and eliminations			Consolidated
	Operating profit (loss)	$	43.6		$	7.1		$	(9.9	)	$	40.7		$	120.9		$	22.1		$	(45.9	)	$	97.2
	Depreciation and amortization		17.7			5.6			0.5			23.9			70.9			21.7			1.5			94.2
	(Gain) on sale of assets		(7.6	)		-			-			(7.6	)		(12.6	)		-			-			(12.6	)
	(Income) from projects accounted for using the equity method		(1.8	)		(4.1	)		-			(5.9	)		(3.5	)		(14.2	)		-			(17.7	)
	Equity Project EBITDA(1)		5.7			10.7			-			16.4			16.7			41.4			-			58.1
	Adjusted EBITDA(1)	$	57.5		$	19.3		$	(9.4	)	$	67.5		$	192.5		$	71.0		$	(44.3	)	$	219.2

(1) This is a non-GAAP financial measure. Refer to the “Non-GAAP and Supplementary Financial Measures” section in this press release for more information on each non-GAAP financial measure.

Set out below is the calculation of Equity Project EBITDA by segment for the three months and years ended December 31, 2023 and 2022:

$ millions
			Three months ended December 31, 2023								Year ended December 31, 2023
	Aecon's proportionate share of projects accounted for using the equity method(1)	Construction		Concessions		Other costs and eliminations		Consolidated		Construction		Concessions		Other costs and eliminations		Consolidated
	Operating profit	$	5.7	$	13.9	$	-	$	19.6	$	10.7	$	49.8	$	-	$	60.5
	Depreciation and amortization		-		3.8		-		3.8		0.2		3.8		-		4.0
	Equity Project EBITDA(2)	$	5.7	$	17.7	$	-	$	23.4	$	10.9	$	53.6	$	-	$	64.5

$ millions
			Three months ended December 31, 2022								Year ended December 31, 2022
	Aecon's proportionate share of projects accounted for using the equity method(1)	Construction		Concessions		Other costs and eliminations		Consolidated		Construction		Concessions		Other costs and eliminations		Consolidated
	Operating profit	$	5.5	$	10.7	$	-	$	16.2	$	16.0	$	41.4	$	-	$	57.4
	Depreciation and amortization		0.2		-		-		0.2		0.7		-		-		0.7
	Equity Project EBITDA(2)	$	5.7	$	10.7	$	-	$	16.4	$	16.7	$	41.4	$	-	$	58.1

(1) Refer to Note 12 “Projects Accounted for Using the Equity Method” in the Company’s audited consolidated financial statements for the year ended December 31, 2023.(2) This is a non-GAAP financial measure. Refer to the “Non-GAAP and Supplementary Financial Measures” section in this press release for more information on each non-GAAP financial measure.

STATEMENT ON FORWARD-LOOKING INFORMATION

The information in this press release includes certain forward-looking statements which may constitute forward-looking information under applicable securities laws. These forward-looking statements are based on currently available competitive, financial, and economic data and operating plans but are subject to risks and uncertainties. Forward-looking statements may include, without limitation, statements regarding the operations, business, financial condition, expected financial results, performance, prospects, ongoing objectives, strategies and outlook for Aecon, including statements regarding: expectations regarding the impact of the four fixed price legacy projects and expected timelines of such projects;; backlog and estimated duration; the impact of certain contingencies on Aecon (see: Section 10.2 “Contingencies” in the Company’s December 31, 2023 MD&A); the uncertainties related to the unpredictability of global economic conditions; its belief regarding the sufficiency of its current liquidity position including sufficiency of its cash position, unused credit capacity, and cash generated from its operations; its strategy of seeking to differentiate its service offering and execution capability and the expected results therefrom; its efforts to maintain a conservative capital position; expectations regarding the pipeline of opportunities available to Aecon; statements regarding the various phases of projects for Aecon; its strategic focus on projects linked to decarbonization, energy transition and sustainability and the opportunities arising therefrom; expectations regarding ongoing recovery in travel through Bermuda International Airport in 2024 and opportunities to add to the existing portfolio of Canadian and international concessions in the next 12 to 24 months; Oaktree’s  minority investment in Aecon Utilities, the expected benefits thereof and results therefrom, including the acceleration of growth of Aecon Utilities in Canada and the U.S.; the anticipated use of proceeds from the investment; and the expansion of Aecon Utilities’ geographic reach and range of services in the U.S. Forward-looking statements may in some cases be identified by words such as “will,” “plans,” “schedule,” “forecast,” “outlook,” “potential,” “seek,” “strategy,” “may,” “could,” “might,” “can,” "believes," "expects," "anticipates," "estimates," "projects," "intends," “prospects,” “targets,” “occur,” “continue,” "should" or the negative of these terms, or similar expressions. In addition to events beyond Aecon's control, there are factors which could cause actual or future results, performance or achievements to differ materially from those expressed or inferred herein including, but not limited to: the risk of not being able to drive a higher margin mix of business by participating in more complex projects, achieving operational efficiencies and synergies, and improving margins; the risk of not being able to meet contractual schedules and other performance requirements on large, fixed priced contracts; the risk of not being able to meet its labour needs at reasonable costs; the risk of not being able to address any supply chain issues which may arise and pass on costs of supply increases to customers; the risk of not being able, through its joint ventures, to enter into implementation phases of certain projects following the successful completion of the relevant development phase; the risk of not being able to execute its strategy of building strong partnerships and alliances; the risk of not being able to execute its risk management strategy; the risk of not being able to grow backlog across the organization by winning major projects; the risk of not being able to maintain a number of open, recurring and repeat contracts; the risk of not being able to accurately assess the risks and opportunities related to its industry’s transition to a lower-carbon economy; the risk of not being able to oversee, and where appropriate, respond to known and unknown environmental and climate change-related risks, including the ability to recognize and adequately respond to climate change concerns or public, governmental and other stakeholders’ expectations on climate matters; the risk of not being able to meet its commitment to meeting its greenhouse gas emissions reduction targets; the risks associated with the strategy of differentiating its service offerings in key end markets; the risks associated with undertaking initiatives to train employees; the risks associated with the seasonal nature of its business; the risks associated with being able to participate in large projects; the risks associated with legal proceedings to which it is a party; the ability to successfully respond to shareholder activism; the risk that Aecon will not realize the anticipated balance sheet strength while preserving capital for other long-term growth and concession opportunities in connection with the sale of ATE  and a 49.9% equity interest in Skyport; the risk that Aecon will not realize the opportunities presented by a transition to a net-zero economy; risks associated with future pandemics and Aecon’s ability to respond to and implement measures to mitigate the impact of such pandemics; the risk that the strategic partnership with Oaktree will not realize the expected results and may negatively impact the existing business of Aecon Utilities; the risk that Aecon Utilities will not realize the anticipated balance sheet flexibility with the completion of the investment; and the risk that Aecon Utilities will not realize opportunities to expand its geographic reach and range of services in the U.S.

These forward-looking statements are based on a variety of factors and assumptions including, but not limited to that: none of the risks identified above materialize, there are no unforeseen changes to economic and market conditions and no significant events occur outside the ordinary course of business. These assumptions are based on information currently available to Aecon, including information obtained from third-party sources. While the Company believes that such third-party sources are reliable sources of information, the Company has not independently verified the information. The Company has not ascertained the validity or accuracy of the underlying economic assumptions contained in such information from third-party sources and hereby disclaims any responsibility or liability whatsoever in respect of any information obtained from third-party sources.

Risk factors are discussed in greater detail in the Section 13 - “Risk Factors” in the Company’s December 31, 2023 Management’s Discussion and Analysis filed on SEDAR+ (www.sedarplus.com) on March 5, 2024. Except as required by applicable securities laws, forward-looking statements speak only as of the date on which they are made and Aecon undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS AND YEARS ENDED DECEMBER 31, 2023 AND 2022(in thousands of Canadian dollars, except per share amounts)
	For the three months ended							For the year ended
	December 31				December 31			December 31				December 31
	2023				2022			2023				2022
Revenue	$	1,130,185			$	1,266,784		$	4,643,842			$	4,696,450
Direct costs and expenses		(1,032,235	)			(1,168,080	)		(4,388,216	)			(4,340,493	)
Gross profit		97,950				98,704			255,626				355,957
Marketing, general and administrative expense		(51,811	)			(48,134	)		(177,839	)			(196,439	)
Depreciation and amortization		(14,648	)			(23,909	)		(79,087	)			(94,153	)
Income from projects accounted for using the equity method		5,496				5,904			18,747				17,703
Other income		2,584				8,123			223,467				14,086
Operating profit		39,571				40,688			240,914				97,154
Finance income		2,202				2,019			7,665				2,899
Finance cost		(21,427	)			(16,946	)		(71,034	)			(57,065	)
Profit before income taxes		20,346				25,761			177,545				42,988
Income tax expense		(10,651	)			(6,075	)		(15,655	)			(12,607	)
Profit for the period	$	9,695				19,686		$	161,890			$	30,381
Basic earnings per share	$	0.16			$	0.32		$	2.62			$	0.50
Diluted earnings per share	$	0.15			$	0.26		$	2.10			$	0.47