Aecon Group Inc. (OTCPK:AEGXF) Q1 2024 Earnings Conference Call April 25, 2024 9:00 AM ET
Company Participants
Adam Borgatti - Senior Vice President, Corporate Development & Investor Relations
Jerome Julier - Executive Vice President & Chief Financial Officer
Jean-Louis Servranckx - President & Chief Executive Officer
Alistair MacCallum - Senior Vice President, Finance
Conference Call Participants
Yuri Lynk - Canaccord Genuity
Jacob Bout - CIBC
Frederic Bastien - Raymond James
Jonathan Lamers - Laurentian Bank
Mike Tupholme - TD Securities
Ian Gillies - Stifel
Operator
Good day, and thank you for standing by. Welcome to the Q1 2024 Aecon Group Incorporated Earnings Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded.
I would now like to hand this over to our first speaker today, Adam Borgatti. Adam, please go ahead.
Adam Borgatti
Thank you, Mark. Good morning, everyone, and thanks for participating in our first quarter results conference call. With me today are Jean-Louis Servranckx, President and CEO; Jerome Julier, Executive Vice President and CFO; and Alistair MacCallum, Senior Vice President of Finance.
Our earnings announcement was released yesterday evening, and we posted a slide presentation on the Investing section of our website, which we'll refer to during the call. Following our comments, we'll be glad to take questions from analysts. And we ask that analysts keep to one question and a follow-up before getting back into the queue to ensure others have a chance to contribute.
As noted on slide 2 of the presentation, listeners are reminded that the information we are sharing with you today includes forward-looking statements. These statements are based on assumptions that are subject to significant risks and uncertainties. Although Aecon believes the expectations reflected in these statements are reasonable, we can give no assurance that these expectations will prove to be correct.
Now, before I turn over the call, I'm pleased to welcome Jerome Julier as Aecon's Executive Vice President and Chief Financial Officer, effective April 8, 2024. With nearly 20 years of finance, strategy and capital markets experience, particularly in construction, engineering and utility services, Jerome has been a trusted adviser to us and many of our clients and partners. Notably, he played key advisory roles in some of Aecon's Mall's transformative transactions, including the divestiture of Aecon transportations and the strategic investment by Oaktree Capital Management in Aecon Utilities last year.
With that, I'll hand the call over to Jerome.
Jerome Julier
Thanks, Adam, and good morning, everyone. I'm excited to have joined Aecon. This is day 14 for me, and I've already found the passion, dedication and innovative spirit that defines this business. A huge thank you to the team for their warm welcome and strong support in my on-boarding. It's been critical for me. I needed to collaborate with the leadership team and the balance of the business to develop and exceeds our strategies that are going to optimize our financial performance and create value for shareholders.
With that, I'll now touch briefly on Aecon consolidated results, review results by segment and then address Aecon's financial position before turning the call over to Jean-Louis.
Turning to slide 4. Revenue for the three months ended March 31, 2024, of $847 million was $261 million or 24% lower compared to the same period in 2023. The table has been included on slide 16 of the conference call presentation to help contextualize our Q1 revenue performance.
Adjusted EBITDA of $33 million, a margin of 3.9% compared to $25 million or a margin of 2.2% last year and operating loss of $4 million in the quarter compared to an operating profit of $6 million last year.
Lower operating profit was attributed primarily to gain on sale of property plant equipment of $11 million recognized in the same period 2023. Diluted loss per share in the quarter of $0.10 compared to diluted loss per share of $0.15 in the same period last year. Reported backlog of $6.3 billion at the end of our quarter compared to backlog of $6 billion at the end of the first quarter in 2023. New contract awards of $963 million were booked in the quarter compared to $812 million in the prior period.
We now look at the results by segment. Turning to slide 5. Construction revenue of $844 million in the first quarter was $247 million or 23% lower than the same period last year. Revenue with lower in industrial operations, primarily due to decreased activity on mainline pipeline work following the achievement of substantial completion on the project in the third quarter of 2023. And Urban Transportation Solutions from a lower volume of white real plans at work and civil operations from a lower volume from building construction work as a result of the sale of Aecon [indiscernible] in the second quarter of 2023, and utilities operations from a decreased volume in telecommunications and oil and gas distribution work, partially offset by an increased volume of high-voltage electrical transmission and battery storage system work.
Partially offsetting these decreases was higher revenue in our nuclear operations, driven by more volume of refurbishment work and nuclear generation in Ontario and the United States. New contract awards of $960 million in the first quarter of 2024 compared to $795 million in the same period last year. Backlog at the end of the first quarter was $6.2 billion compared to $5.9 billion at the end of the first quarter of 2023.
Turning now to slide 6. Adjusted EBITDA of $28 million, a margin of 2.3% compared to $22 million or a margin of 2% last year. Adjusted EBITDA increased by $6 million due to higher volume and gross profit margin in nuclear operations and higher gross profit margins urban transportation solutions and utilities. These increases were offset by a decrease in gross profit in industrial operations.
Higher operating profit in civil operations was primarily due to a lower seasonal operating loss contribution from our road building, construction work following the sale of the Transportation East in the second quarter of last year and partially offset by lower gross profit margin from major projects in Western Canada.
Now over to slide 7. Concessions revenue for the first quarter was $3 million compared to $17 million in the same period last year. The decrease in revenue was largely driven by the sale of 49.9% adjusted Skywork the Bermuda International Airport Conduction Air and use of equity method of accounting on a prospected basis for APA's retained to 50.1% interest in Skyboard. Adjusted EBITDA in the excess segment of $18 million compared to $50 million last year, primarily due to improved results from the Bermuda airport and an increase in management and development fees.
Passenger traffic Bermuda continues to improve, with an average of 81% in the first quarter of 2024 versus the pre-pandemic level in the first quarter of 2019, and compared to an average traffic in the first quarter of 2023 of 72% of the pre-pandemic level.
Turning now to slide 8. At the end of the first quarter, Aecon held cash and cash equivalents of $123 million excluding cash in joint operations. In addition, at March 31, 2024, Aecon had committed revolving credit facilities of $850 million, of which $76 million was drawn and $7 million was utilized for letters of credit. Aecon has no debt or working capital credit facility maturities until 2027, except equipment loans and leases in the normal course.
At this point, I'll turn the call over to Jean-Louis.
Jean-Louis Servranckx
Thank you, Jerome. I speak first to the four legacy projects before addressing our business performance and outlook. Aecon and its joint venture partners remain focused on driving those legacy projects to completion, while pursuing fair and honorable settlement agreements in each case. The most recent interim settlement reached between the relevant joint ventures and the respective clients on each of the four projects and the cumulative adjustments made to forecast to-date reflect the progress we are making toward completion.
Every day, we are getting closer to the end. However, we acknowledge that despite the progress made today, risk remains if assumptions, estimates or circumstances change. At March 31, 2024, the remaining backlog to be worked off on this project was $330 million compared to backlog of €420 million at December 31, 2023, and $801 million at March 31, 2023.
The four legacy projects comprised 9% of consolidated revenue in the first quarter of 2024 and 5% of backlog at March 31, 2024 compared to 16% of consolidated revenue in the full year 2023 and 7% of backlog at December 31, 2023.
Turning to slide 10. Aecon's goal is to build a resilient company through a balanced and diversified work portfolio, while enhancing critical execution capabilities and project selection to play to our strengths. We continue to leverage our self-perform capabilities and one Aecon approach to maximize value for clients through improved cost certainty and schedule, while offering a broad range of services from development, engineering, investment, and construction to longer term operations and maintenance to cover the full infrastructure value chain.
While we pursue and deliver the majority of our work in established markets, we are embracing new opportunities to grow in areas linked to decarbonization and the energy transition, and in the US 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.
Turning now to slide 11, demand for Aecon services across Canada continues to be strong with backlog of 6.3 billion at March 31, 2024. Recurring revenue programs continuing to see robust demand and a strong bid pipeline, Aecon believes it’s positioned to achieve further revenue growth over the next few years and is focused on achieving improved profitability and margin predictability.
We are 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.
Trailing 12 months recurring revenue of $1.1 billion was up 30% versus the prior year period and 54% versus two years ago. Contributions from the Go Expansion OnCorr Works at Scarborough subway expansion projects during the respective development phases were the primary drivers of this growth.
Turning to slide 12. Development phase work is underweight in high consortium, in which Aecon is a participant to deliver the Go Expansion OnCorr Works project, the Scarborough Subway Extension Stations, Rail and Systems project, the Darlington New Nuclear project, the Contrecoeur Terminal Expansion in-water works project and most recently, the US Virgin Islands Airport redevelopment project, which is under a collaborative design, build, finance, operate and maintain model.
These projects are being delivered using progressive design build models, and each project is expected to move into the construction phase in 2025. The Go Expansion project also includes an operations and maintenance component over a 23-year term commencing January 1, 2025. Loan of the anticipated work from those five progressive design build project is yet reflected in backlog.
Turning to slide 13. This week, Aecon released its fifth Sustainability Report, Advancing the Energy Transition, showcasing our unwavering commitment on sustainability in our projects and the innovative methods we use. This report highlights Aecon's initiatives to embed sustainable innovations and work towards net-zero construction throughout its operations.
Aecon is pleased to report continued progress towards its target to achieve a 30% reduction in direct CO2 emissions by 2030 with a reduction of 20% to-date in Scope 1 and 2 emissions since 2020 based on revenue intensity. Sustainability is part of our DNA at Aecon and a key consideration in every decision we make as we continue to focus on building what matters to enable future generations to strive and transition to a net-zero economy.
Turning now to slide 14. With strong demand, growing recurring revenue programs and diverse backlog in hand, Aecon is focused on achieving solid execution on its projects and selectively adding to backlog through a disciplined bidding approach that supports a long-term margin improvement in the Construction segment.
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.
Our revenue in 2024 will be impacted by the three strategic transactions completed in 2023, the substantial completion of several large projects in 2023, and the five 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 the strong demand environment for Aecon’s services, including recurring revenue programs.
Thank you. We'll now turn the call over to analysts for questions.
Question-and-Answer Session
Operator
Thank you. At this time, we will conduct the question-and-answer session. [Operator Instructions] And now our first question will come from Yuri Lynk of Canaccord Genuity. Please go ahead, Yuri.
Yuri Lynk
Good morning gentlemen. Nice clean quarter. And I'd love to not lead off on an LSTK question, but I have to. When I look at your DSOs and your WIP days materially higher year-on-year despite the lower revenue. In fact that I don't think I've seen your WIP this high. So you're not billing and I'm just wondering what's behind the rise in WIP and DSOs in the quarter?
Alistair MacCallum -
So Yuri, it's Alastair. So as you see, we have a negative working capital in Q1. It's very similar to what we had in Q1 2023. I think part of that was we had a very strong Q4 in terms of bringing in our AR and collections. And so I think that had a negative impact on where we're sitting at the end of Q1. But I mean, overall, like our liquidity is at $890 million. This time last year, we were at $372 million. So we're in a much stronger place than we were last year. And certainly, unbilled is always a critical focus for us, and it's something that we continue to work on every day.
Yuri Lynk
Okay. Second one for me. Just on the backlog, like you've got a bunch of these progressive design builds I personally haven't been through a cycle with these type of contracts. So just what should we expect backlog? How does it evolve over the next couple of years here as these projects move into the construction phase? Specifically, the on corridor works project, I think that the two-year development phase ends in Q3. So does that go into backlog? And does the whole thing go in at once? Or is backlog kind of phased in over time?
Jerome Julier
Yes. I'm going to take this one, Yuri. We have now five projects under progressive design build mode. We are very happy about it. I mean, we have been working on it for the last three years to modify the contractual mode and prevalent, I mean, in the industry.
Encore, Samro [ph], Darlington SMR, Contractor, and now U.S. Virgin Islands. So there are differences. I mean, the two first ones are with Metrolinx. The third one, I mean, we are in charge of all construction services. It's an alliance between OPG, [indiscernible] for the engineering, and ourselves. The fourth one is a joint venture with [indiscernible], I mean, in contractor, for the in-water works. And the fifth one, I mean, you heard about it a few weeks ago, is the refurbishment, rehabilitation, and a design-build progressive finance operation maintenance, which is a very innovative model, and we are quite happy. I mean, we have been working on it during the last one year with a client to set this model. So, what can we expect in terms of backlog? So some of all these projects is something, let's say, in preparation phase. It may be even more. I mean, it will depend on the development phase.
If we come back to the first one, which is the on core, our development phase will go up to the end of the year 2024. At this moment, we will most probably have setup with the client, the target price and the condition of execution of the two, first bundle of the works. So you -- we could expect in terms of backlog for those, two first bundle around $2 billion.
Those works will happen during a period of three to four years, more or less. You probably remember, you have noted that in parallel, we are entered into a preparation phase for the operation during 23 years from the 1st of January 2025. We are very well advanced. So we are -- at the moment, we are quite happy with the development and the quality of the collaboration with Metrolinx on this very big and very important project.
Yuri Lynk
That's helpful, Jean. So it sounds like you book these in stages. And am I right in assuming that you're taking some fixed price risk on these smaller phases. And then, you renegotiate on each phase, as it progresses. And thereby reducing the risks you're not on the hook for the entire scope of the project that one?
Jean-Louis Servranckx
Two questions here. The first one, about the phasing, so, Go Train and Umicore is a huge program of electrification. It just means that we have decided to go for bundles, rather than for the totality and to fix everything now for the totality of a program that may last more than eight years in terms of construction.
Scarborough, for example, will not have any bundle. It will be the full project. The SMR will not have neither, any bundle I mean, from the moment before the end of the year that we will get in the construction phase no bundle totality of the job
Contrecoeur same thing, U.S. Virgin Islands, they may be a phasing because those are two airports. There may be a phasing, but we most probably will not do any better. So the bundling effect is for the moment only Umicore, because of the complexity and because of the time.
Second question, how do you unlock a development phase? We have a few -- I mean there are a few ways of the un-located at the end on Umicore. In addition to the fact that we bundle and we both decided, I've been with Metrolinx and our consortium to bundle it.
I mean it's not going to be a lump-sum. It's going to be a target price with a gain share, pain share. And we will finalize the negotiation of this target price and the gain share, pain share before the end of the year.
Some of them, for example, at the moment, Contrecoeur is on a scheme where at the end of the development phase, you're going to a lump-sum price, but you probably know that the in-water work of contractor in terms of scope and magnitude have nothing to do with Oncor. So it depends on the project and we stay firm on our strategy to be extremely cautious on any lump-sum pricing period to 1 billion.
Yuri Lynk
Okay. That's very helpful I'll turn it over, guys. Thanks.
Operator
Thank you for the question. Please stand by one moment while we bring up our next question. And our next question will come from Jacob Bout with CIBC. Go ahead, Jacob.
Jacob Bout
Good morning. I had a question just on revenue growth. And I know you're saying recurring revenue is up year-on-year for the quarter. But when we take a look on a consolidated basis, it's down 24%. And I know the divestment of ATE and CGL was a big contributor last year. But when do you expect to see that consolidated revenue returning to top line growth, also looking at your backlog here and the potential additions with these 5 development projects, I mean that's -- I'm assuming primarily kind of a 2025 thing, but...
Jerome Julier
Yes. Hey, Jacob, it's Jerome. So you're right, current quarter, if you wish on a like-for-like basis, effectively flat to last year, a little bit down, a positive book-to-bill in the quarter. 2024, we've been consistent saying is there's no expectation for a big growth here. It's really a repositioning year. And so I think the way to think about it would be relatively flattish or low growth in 2024 and then 2025 is only just mentioned, as these projects kind of move into execution, we'd expect to see a reengagement on the growth front.
Jacob Bout
So kind of back into my follow-up question here. But so how are you planning for this growth in 2025? Are there going to be any labor availability issues? Or how should we be thinking about that?
Adam Borgatti
No, I think, Jacob, the way we look at it is you have a lot of these projects that we've been working on in this progressive phase. So take the two transit projects like the Gold program in Ontario and the Scarborough. You've got a lot of availability of people coming off the former projects, for example, Eglinton and Finch. So we're able to kind of effectively transition a lot of the labor and project management resources among them. Similar with our international work coming off of Bermuda and elsewhere, we've been able to build a presence in the Caribbean to adequately staff these projects. So we think we've got the right amount of people kind of moving to the next phase of projects. And as I said, as Jerome said, it's a little bit of a transition timing between '23 and '24.
Another big contributor to revenue last year would have been the site see project where we've got lots of those people coming off moving to John Hart Hydro in BC. So I think we're adequately staffed. It's always top of mind for sure on the labor side, but we don't feel any real main pressure points that are giving us more concern than normal.
Jean-Louis Servranckx
Yeah. Maybe I'll jump in at this moment. I mean, we have finalized our strategic plan for 2024 and 2027. The focus is on profitability and margin predictability over hypergrowth, I mean of revenue. As I've been saying during the last quarter, we were extremely disciplined in terms of first site and in terms of bidding. And we are very happy to see that those efforts are just beginning to bear fruit. So we -- the revenue stabilization in 2024 is it's pure math, and then there's nothing special about it. And we have a lot, I mean, in our back, as you have noted that will drive growth -- profitable growth in the year to go.
Jacob Bout
Thank you.
Operator
Thank you. One moment for our next question. And our next question will come from Frederic Bastien with Raymond James. Go ahead, Frederic.
Q – Frederic Bastien
Good morning, and welcome, Jean-Louis. There are a couple of items below the EBITDA line that I'd let you guys to shed some light on it possible. The first one relates to construction amortization, which rose year-over-year despite the sale of ATE and the lower volumes. So that's the first one. I'm wondering if you could provide a bit more color there.
And then second one relates to the interest expense overall was lower. You did include the accrued interest from Oaktree's preferred shares, but there was also a fair value gain reported. So if you could provide a bit of color there, that would also be appreciated. Thank you.
Alistair MacCallum
Hi, Frederic, it's Alistair. So the first one -- I'll answer the second one first on the preferred shares. So every quarter, we fair value the preferred share. And basically, there's about four or five different factors such as volatility, credit risk – risk fee rates. And so when we do that, this quarter, there was a $4.9 million gain on the preferred share. So that's really the answer to the first question. Part of that went to -- $4.3 million went to the P&L and the remainder went to OCI.
On your first question around depreciation. So I think when you look at concessions, you'll see depreciation went down because of the equity accounting through the sale of 49.9% of Bermuda. And then on the construction side, yes, we had the positive impact from the sale of ATE. And then we have additional amortization and depreciation on the rest of the construction business, which offset that. So those are -- that's the reason.
Jerome Julier
And Fred, it's Jerome here. Maybe I'll just put an extra layer of context on the preferred shares. We really -- accounting side, we really do just think about them on the basis of their terms, right? So 22.5% of the equity value of the utilities business or effectively the 12% accrual. The rest of it, I just do is accounting...
Q – Frederic Bastien
Okay. I'm still not clear on the construction and amortization because I would have expected it would have gone lower, would come in lower, but it actually crept up year-over-year despite the sale of ATE. And also you had recorded lots lower volumes. I don't know if it's impacted amortization -- should be impacted by volumes, but anyway something that I found was interesting, but we can take that offline. I appreciate that. I recognize I ask you questions, so I'll just pass it over. Thank you.
Operator
Thank you. Thank you for your question. Please stand-by for our next question. Our next question comes from Jonathan Lamers with Laurentian Bank. Please go ahead, Jonathan.
Jonathan Lamers
Good morning. Thank you. Just another question on revenue. So Slide 16 in the package showing that pro forma revenue was down 1% year-over-year. That's very helpful. Yes, demand is clearly very strong, with new awards up 21% year-over-year. So my question is, as more of the overall business shifts to progressive design build contracting models that have longer development phases, would you say it's taking longer for new project awards to translate into revenue?
Jean-Louis Servranckx
Okay. One of the key element of our strategy is balancing our activities. I mean we are balanced with the sectors. We could -- for example, I think between sectors, we could push nuclear and utilities. But we -- what we have decided that our five sectors have to be balanced. Same thing for contractual mode. I mean we can do MSA, we can do unit price, we can do target price. We can do lump sum job. Not such a world where we can say every lump sum is bad, and we will only go for a progressive or time and material.
I mean I gave -- I mean, an example, for example, kicking off, it was a job under lump sum, a very complex job that we won in front of the two best companies in North America and in Europe. It was a lump sum job. We were perfectly on time, perfectly on budget and our [indiscernible] happy between tomorrow 10 o’ clock. We are -- our TBM machine on Eglinton West is getting out of the first tunnel perfectly on time, perfectly on budget.
It means that it was an lump sum job. So we don't say we don't want to do any more lump sum job, but we are extremely cautious and so some – I would say some kind of work in terms of size. And in terms of complexity, for example, when the system is separation, we don't go anymore for lump sum and we go for progressive design win. On those ones, there is the development phase. But you don't have to forget either that a progressive design building scheme is just a five months preparation period when before it was between one year and maybe 15 months old. All in all, yes, there may be a little push down the line, but it's a real difference in terms of margin predictability...
Jonathan Lamers
Yes. Okay. Thank you. And on the legacy project backlog that's remaining the 330 million. Can you provide a sense of how much of that relates to Gordie Howe Bridge and maybe the cadence of how you see that being worked off over the next two years?
Jean-Louis Servranckx
So on the 330, the majority now is on Gordie Howe. It means around two-third of the backlog is on Gordie Howe is forecasting to be substantially completed in September 2025. In terms of execution, it goes quite right. Just to give you an example, this bridge, which is the longest span in North America, 851 meters across the river North to South, 53 segments of 15 meters each, remaining 3 segments. Then we have the [indiscernible] entry, I mean, Canadian side and the American side and the interchange I-35 -- the Michigan site. Everything is on time. So I would say I'm rather happy with the execution of this project.
Whilst, I mean, CGL, from our perspective, the project is now substantially complete. Our team is focused on preparing for the upcoming arbitration, which you have noted. It starts immediately, I mean, Q3 2024. Given the proximity to the start of the arbitration, we just prefer to let the arbitration profit play out rather than commenting I mean any further.
The two other ones are Eglinton Finch, I mean, LRT job in Toronto. Construction is complete. We are now testing and commissioning and what, I would say, the issue remaining are the interfaces with Metrolinx and TTC with the operator. I just remind you that we are the maintainer, but we are not the operator. And we are just under testing and commissioning with those two jobs pushing toward what we call revenue service demonstration that should happen before the end of the year 2024.
Jonathan Lamers
Thank you. That's very helpful. I have one other question on sustainability, if I can. I noticed that you highlighted in the slides, the benefits to carbon reduction from the sustainability projects you're undertaking. With 75% of the backlog now tied to sustainability projects, will the benefits from those show up in the reduction to emissions that you report, including the 20% reduction year-to-date at some point?
Jean-Louis Servranckx
Yes, for sure. We're on a pretty good path to achieve our targets and feel very confident in our ability to do so. A lot of that is being done through renewable and more sustainable fuels, electrifying our fleet, adding more electrification and alternative generation type assets on our project sites.
So certainly on the path, we're very proud of the fact that we're working with some of the largest providers of equipment and fleet in the world on testing their newest equipment in Canada being the moment first to procure them and try to get as much as we can, and that includes even our staff and fleet vehicles here trying to electrify those. So well the path to achieve our goals and hopefully sooner than anticipated.
Jonathan Lamers
Okay. Thanks for your comments.
Jean-Louis Servranckx
Thanks.
Operator
Thank you for the question. Please stand by for our next question. Our next question will come from Michael at TD Securities. Go ahead, Michael.
Mike Tupholme
Thank you. Good morning. My question is related to the Aecon Utilities business. I know earlier in the call, you talked about this being a transition year, and the focus is really around margin improvement and earnings predictability. But just as it relates to the revenues, it looks like the utilities business, who I think has been described as a fairly important growth area.
It looks like you were sort of flattish year-over-year on a revenue basis. Wondering if you can just kind of talk a little bit about what you're seeing to start the year in that business and how we should also think about the year unfolding as it relates to Aecon utilities and the revenues?
Jerome Julier
Hey Mike, it's Jerome. Good question. So, Q1 is the seasonally least significant quarter for the utilities business, given the amount of outdoor work that they tend to perform in the Canadian market.
And the story there is just simply a little bit slower work programs on the telecom and oil and gas distribution side of the business, partially offset by more high-voltage transmission distribution work and as well doing some work on kind of large battery storage projects.
So, we're not concerned with the year-over-year performance quarter kind of quarter-to-quarter performance on this one. We're still very pleased with the overall development of the business, and we're still expecting growth kind of coming through the back end of the year, right? Like this is a business where Q2, Q3, Q4 are where they really demonstrate their metal. And so I think our expectations continue to be aligned with that.
Mike Tupholme
Okay. That's helpful. Thanks for that. Maybe just a follow-on related but different part of the growth strategy. Can you talk a little bit about what's happening with respect to the inorganic opportunities to grow that business?
Adam Borgatti
Yes. So, Mike, it's Adam here. We've got quite a good pipeline ahead of us working through that with our partner in Oaktree focused on U.S., Canada, areas that we think we can still plug in geographically and also in new territories where we're trying to establish initial presence with certain small midsized businesses we've talked before in that $50 million to $150 million range.
We're not trying to get this thing to outsized right out of the gate, but really use these as platforms to grow and what we describe as land and expand our strategy. That's often in companies that have one or two verticals among the four that we participate in and then we try and really apply Aecon's opportunities across our business -- into those businesses and really help them grow. So, I think we've got a good, as I said, pipeline ahead. We expect this to be a year of lots of activity and so stay tuned.
Mike Tupholme
Okay. Perfect. And then maybe just one more quick one here to follow-up on. I think it was the earlier question you had about working capital investment in the first quarter. Can you talk about how you'd expect that to evolve over coming quarters and maybe where you think you'll land on a full year basis in terms of changes in non-cash working capital?
Alistair MacCallum
Yes. So, it's Alastair, Mike. As we talked about, working capital is weakest in Q1 and Q2 and then improve in Q3 and Q4 is really a strong quarter for working capital. So, I think overall, we're -- as I said, Q4 was very strong Q4 of 2023. So, that's had an impact on Q1, but expect to be flat, kind of about a year. And then obviously, it's subject to some of the settlements and arbitration discussions and results that come from the legacy projects as well.
Mike Tupholme
All right. Thank you for the detail.
Operator
Thank you for that question. Our next question will come from Ian Gillies with Stifel. Go ahead, Ian.
Ian Gillies
Good morning everyone. This one is directed to Jerome. I mean, the messaging from Aecon as a whole has been pretty consistent around derisking the backlog, EBITDA margin improvement over the last, call it, year to two years. I know, it's early days for you, but is there anything else at the margin or anything else you'd like to see rounded out for targets you'd like to hit or metrics you intend to focus on that may be a bit different?
Jerome Julier
Yes, it's a good question. As I mentioned, it's the 14th business day here. Look, it's -- maybe I'll take a step back and just comment on what my initial observations coming into it. I think what I'll say Ian is, the strength and performance and sophistication of the team, I witnessed it over working as an adviser with them in 2023. And then kind of coming in and kind of seeing behind the curtain, it's actually exceeded my expectations even more, right? So, this is a business where both, I'd say, the corporate group, but also certainly the operating teams and the men and women are executing the work, do extraordinary jobs to make sure that they're very focused on kind of executing the projects, managing cash flow. So, at the moment, like I'd love to say that it would be a magical item out there that was kind of really weekly done that I could just kind of swoop in and claim is my own. But I think this is largely going to be blocking and tackling and then just moving forward thoughtfully position capital, managing returns and then outing that capital in a kind of judicious manner. We do have the benefit of -- as we think about things on a go-forward basis, Alistair. mentioned, we've got lots of liquidity. And then also, we've got a very strong partner in overview of the utilities business with its own balance sheet to kind of pursue a slightly differentiated growth approach matter into the business. So I'd say like I said, early days, no concerns or issues, and it's really kind of probably pleasantly surprised across the board.
Ian Gillies
Okay. Well, I'm going to save that question, we ask it in a year's time. But maybe switching to my second question. There's been a significant amount of announcements regarding EV plants and related activity in that area, specifically in Ontario. Can you maybe talk about your competitive position in that market or how you're thinking about pursuing it, just given it seems to be going -- it's likely going to be a high-growth area for the next, call it, a decade?
Jerome Julier
Yes, I can. Evidently, energy transition, I mean, is a game changer for Aecon, and we are focused on it. We are at the moment in the bidding phase, I mean, of the Unicorn plant and the natural tool. And we are discussing with the client. I mean, there is competition, but we are keen with this job. The rest will come. I mean, there are other plants that are coming. We just want to put a foot on it. I mean it has been the same strategy for battery storage with [indiscernible], which is quite an important one. The first one of its kind, and we are extremely happy with the way this job is being executed. We are perfectly on time, and we learned a lot, and that's going to be key. I mean, for the next phases with ISO or in the United States or in other provinces of Canada.
Ian Gillies
Okay. Thanks very much. I'll turn it back over.
Operator
Thank you for that question. I believe that is our last question for today. We will go ahead and turn this back over to Adam Borgatti for closing remarks. Oh, sorry, we just had one more question come up. Please hang on one moment. That's right. So our final question will come from Benet Poirier [ph]. Please go ahead.
Unidentified Analyst
Hey, good morning, gentlemen, and congrats for the solid start. Could you maybe provide more colors? You've been able to book two airport wins in the quarter. What should we expect in terms of potential contribution going forward in terms of revenue and maybe timing also? Probably more of a 2025 story, I would believe.
Jean-Louis Servranckx
Yeah. Thanks, Benoit. Yeah, you quoted the two airports booked in the quarter. One is a smaller construction-focused project, so there's no concessions related to the Anguilla Airport. But again, it does sort of solidify our presence and demonstrate the commitment to that area and the geography and the type of work that we do starting to bear more fruit in different types of projects and hopefully more to come there. As it relates to the bigger one that we've discussed, which is US Virgin Islands development and rehabilitation of two airports there, it's still in the progressive phase, so tricky to talk about revenue contributions and or cadence at this point. But safer to say that it will be booked into probably the first half of 2025.
And again, it'll follow a similar pattern that we've used in the past, which is taking over the operations of the existing airports while we use that to partially fund construction, take on leverage and reinfence the capital structures associated with those from what we know now. But again, the benefit of the progressive sort of approach to these is you've got some time now to really work with the clients to determine best scheduling what the optimal construction program looks like, any additions or areas that they'd like to tweak in the initial areas. So I think more to come on those, but we do expect more revenue contribution from those, as you said, in 2025 versus 2024 as they start to scale up a bit.
Unidentified Analyst
Okay. And with respect to the recent REM delay that we've seen, are there any implications for you or is it something that you've seen coming?
Jerome Julier
So Benoit, good morning. No special implications. I mean, for us, those works are going perfectly as per the program. So yes, we have heard that there are some discussions about the fading between REM and GPMM, which is a group on which we are not in charge of operation and maintenance and rolling stock. But as per our contract is concerned, there is no change.
Unidentified Analyst
Okay, perfect. Thanks for the time and congrats again.
Jean-Louis Servranckx
Thanks, Benoit.
Operator
Thank you for your question. At this time, we have no further questions, excuse me. And I'd like to turn it back over to Adam Borgatti for closing remarks.
Adam Borgatti
Great. Thanks, Mark. And thank you all for joining us today. As always, feel free to follow up with the team here with any further questions that you have. I appreciate your interest and consideration and have a great rest of the day. We will stick with you on the next quarter.
Operator
Thank you. this does end our conference for today. It concludes our program and you may now disconnect.