Initial take – Overall, Q3 results were ahead of RBC/consensus forecasts and the company reiterated its 2024 guide. AtkinsRealis Services (comprising the main go-forward segments of the company) posted another strong quarter of organic growth at +13.5% YoY (the highest among our coverage group), which included +8.4% organic growth for Engineering Services Regions (the Design/ Engineering/O&M business, primarily driven by +11% and +33% YoY organic growth in the USLA and AMEA regions, respectively) and +34.7% for Nuclear (vs. the company's 2024 guidance ranges for the two segments at +8%-10% and +30%-35%, respectively). The only shortfalls this quarter were Infrastructure LSTK and Capital segment EBIT, which were only modestly below consensus expectations (LSTK segment EBIT was -$17.7MM vs. consensus of -$14.0MM, which was more than offset by the larger core segments; consolidated Adjusted EBIT of $220.8MM was ahead of consensus at $205.0MM).
Additionally, the AtkinsRealis Services backlog reached a new record high of $16.8B (+34.7% YoY, with Nuclear at a record high of $3.2B; see our note here for the company's Nuclear contract win announced yesterday). Consolidated Adjusted EBITDA was $251.3MM vs. RBC/consensus of $227.5MM/$238.0MM while OCF was $267.1MM. Net Debt/LTM Adjusted EBITDA ratio (which factors in Net Recourse and Net Limited Recourse debt) was 1.4x exiting Q3 (vs. 1.9x exiting Q2 and 2.7x exiting Q3/23).
AtkinsRealis Services results ahead of RBC/consensus – AtkinsRealis Services revenue was $2,350MM vs. RBC/consensus forecasts of $2,213MM/$2,316MM, while EBIT was $238.5MM vs. RBC/consensus estimates of $216.6MM/$219.0MM. Within AtkinsRealis Services, Engineering Services Regions (segment largely comparable to Engineering peers) reported EBIT of $186.3MM, ahead of RBC/consensus forecasts of $171.1MM/$170.0MM. Nuclear EBIT was $45.7MM vs. RBC/consensus of $45.0MM/$47.0MM. Linxon EBIT was $6.5MM vs. RBC/consensus forecasts of $0.4MM/$2.0MM (recall AtkinsRealis has been looking to exit the Linxon business since Q4/23, with the support of its JV partner).
2024 guidance reiterated – Guidance for AtkinsRealis Services includes: 1) Engineering Services Regions organic revenue growth of +8% to +10% (vs. +23.9% and -6.5% YoY in 2023 for Engineering Services and O&M, respectively; combined business would have generated organic growth of ~21% on a pro-forma basis) and a segment Adjusted EBITDA margin of 15%-17% (vs. 15.0% in 2023); 2) Nuclear organic revenue growth of +30% to +35% (vs. +14.3% in 2023) and a segment Adjusted EBIT margin of 12%-14% (vs. 13.9% in 2023); and, 3) OCF of $400MM+, driven by cash inflows from AtkinsRealis Services and Capital more than offsetting declining outflows related to ongoing LSTK Projects work. The guidance also includes the outlook for $140MM-$160MM of capex (implying FCF of at least $240MM) and for 2024 PS&PM corporate SG&A of $130MM.