Good day and thank you for standing by. Welcome to the Q1 2026 Aecon Group Inc. Earnings Call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded I would now like to hand the conference over to your first speaker today, Mr. Adam Borgatti, Senior Vice President of Corporate Development and IR. Please go ahead.
Thank you, Shannon. Good morning, everyone, and thanks for participating in our Q1 2026 results conference call. Joining me are Jean-Louis Servranckx, President and CEO, Jerome Julier, Executive Vice President and CFO, and Alistair MacCallum, Senior Vice President, Finance. Our earnings announcement was released yesterday evening, and we have posted a slide presentation on our website, which we will refer to during this call. Following our comments, we'll be glad to take questions from analysts, and we ask that you keep to one question and a follow-up if necessary, before getting back into the queue. As noted on slide two of the presentation, listeners are reminded that the information we are sharing with you today includes forward-looking statements based on assumptions that are subject to significant risks and uncertainties.
Although Aecon believes the expectations reflected in these statements are reasonable, we can give no assurance that these expectations will prove to be correct. Turning to slide three, Aecon continued to advance its growth initiatives in the first quarter of 2026 and achieved significant milestones across our operations. A record backlog of CAD 10.9 billion was recorded at March 31st, 2026, and is underpinned by a diversified mix of long-term projects with appropriate risk balance. The quarter featured the addition of the Howard Hanson Dam facility project to backlog following an 18-month integrated design phase. Record first quarter revenue of CAD 1.3 billion increased 18% over the same period last year, with revenue increasing across all of Aecon's operating sectors.
Adjusted EBITDA improved significantly in the quarter to CAD 32 million on a reported basis versus CAD 4 million last year, driven by improved year-over-year margin performance in the Construction segment. We expanded strategically through the acquisitions of K.P.C. Power Electrical and Energy Metering Solutions in Ontario and Arc American and C.A. Advanced under Duna Services in Indiana. These acquisitions strengthen our utility services capabilities in Canada and the U.S. in markets supported by required investments in power and critical infrastructure delivery. We ended the quarter with a strong liquidity position and capacity to invest in additional growth following the successful offering of common shares for gross proceeds to Aecon of CAD 172.5 million. Aecon maintains a positive outlook supported by expectation for further growth based on our strategic positioning in sectors with attractive demand profiles consistent with our prior disclosure. With that, I'll hand the call over to Jerome.
Thanks, Adam, and good morning, everyone. I'll speak to Aecon's consolidated results, review results by segment, and address Aecon's financial position. Turning to slide four, revenue for the three months ended March 31, 2026, of CAD 1.3 billion was up CAD 195 million or 18% compared to the same period in 2025. Adjusted EBITDA of CAD 32 million compared to CAD 4 million last year. An operating loss of CAD 8 million compared to an operating loss of CAD 41 million in the same period last year. The improvement in the period was driven by higher gross profit of CAD 59 million. Adjusted diluted loss per share in the quarter was CAD 0.21 compared to an adjusted diluted loss per share of CAD 0.55 in the first quarter of last year. Financial results in this quarter were impacted by negative gross profit of CAD 4 million from the legacy projects.
Reported backlog of CAD 10.9 billion at the end of the first quarter was the highest reported backlog in Aecon's history, surpassing the previous record of CAD 10.8 billion set in the third quarter of 2025. New contract awards of CAD 1.4 billion were booked in the quarter compared to CAD 4.1 billion in the prior period. Looking at results by segment. Turning to slide five. Construction revenue of CAD 1.3 billion in the first quarter was CAD 197 million or 19% higher than the same period last year. Revenue was higher in all sectors. The largest increase in nuclear operations driven by higher volume of refurbishment, new build, and engineering services work in Ontario and the United States.
Higher revenue in the Utilities sector was primarily driven by an increase in electrical transmission and distribution work in Canada and the United States, and contributions from acquisitions in the first quarter of 2026 and from higher telecom and gas distribution work. In civil operations, higher revenue was mainly from an increase in the civil component of power and rail projects and from work performed internationally, partially offset by a lower volume of foundations work and highway, road, and bridge-building activity. Higher revenue in industrial was driven by an increase in field construction work and industrial manufacturing and wastewater treatment facilities driven by operations in the United States, with most of the revenue growth from the Bodell Construction and Trinity Industrial Services businesses acquired in the third quarter of 2025 and from an increase in power generation projects.
Revenue was also higher in urban transportation solutions, largely from an increase in subway and commuter rail system projects, partially offset by a lower volume of work from LRT projects in Ontario and Quebec that achieved substantial completion in 2025 or are approaching substantial completion. Turning to slide six, Adjusted EBITDA of CAD 42 million was compared to a loss of CAD 1 million last year. The increase was primarily driven by a volume-driven increase in gross profit in nuclear operations and from an improvement in gross profit margin in civil operations and urban transportation solutions. Turning to slide seven, concessions Adjusted EBITDA for the quarter was CAD 6 million compared to CAD 13 million in the same period last year, driven by lower management and development fees on LRT projects that achieved substantial completion in 2025, partially offset by improved operating results at Skyport in Bermuda.
The book value of equity of our concessions portfolio at quarter end was over CAD 250 million . Turning to slide eight. At March 31, 2026, Aecon held core cash and cash equivalents of CAD 81 million, which excludes an additional CAD 425 million of cash representing Aecon's proportionate share of cash held in joint operations. In addition, at March 31, 2026, Aecon had committed revolving credit facilities of CAD 1 billion, of which CAD 294 million was drawn and CAD 4 million was utilized for letters of credit.
Aecon has no debt or working capital credit facility maturities until 2029, except equipment loans and leases. Aecon generated free cash flow of CAD 212 million in the trailing 12-month period ended March 31st, 2026, compared to CAD 2 million in free cash flow in the same period in the prior year. At this point, I'll turn the call over to Jean-Louis to address our business performance and outlook.
Thank you, Jerome. Turning to slide nine, Aecon continues to build resiliency and drive growth through a balanced and diversified work portfolio. Over the trailing 12 months period, approximately 55% of Construction revenue was related to Power and Utility Services across the Nuclear, Civil, Utilities, and Industrial sectors, with Nuclear representing the largest share. During the first quarter of 2026, the Eglinton Crosstown LRT project in Toronto opened to the public, bringing an additional project into the maintenance and concession phase within Aecon's diverse and growing portfolio of concession assets. Aecon holds a 25% interest in the project's equity, development, construction, and 30-year maintenance term. Turning to slide 10, demand for Aecon's services remains strong.
With a record backlog of CAD 10.9 billion, growth in recurring revenue programs in utility services, and a strong bid pipeline, Aecon is focused on achieving improved profitability and margin predictability while continuing to improve the risk profile of our business. Trailing 12 months recurring revenue was CAD 944 million at March 31, 2026. Recurring revenue from utility services increased to CAD 763 million from CAD 620 million, an increase of 23% over last year. Recurring revenues are typically executed on a non-fixed price basis, with the majority being over and above our reported backlog figures.
Turning to slide 11, Aecon expects 2026 revenue to exceed 2025 levels on the strength of its record backlog, strategic positioning in sectors with attractive demand profiles, robust recurring revenue programs, and a healthy pipeline of project opportunities tied to Power Generation, Critical Resource Development, Mass Transit Infrastructure, Water, and Defence. In the quarter, an Aecon partnership executed an agreement with Defence Construction Canada to deliver the Arctic Over-the-Horizon Radar program stage one project in Ontario under a collaborative Integrated Project Delivery model. Aecon owns a 50% interest and is the lead partner in the JV responsible for project delivery. A validation phase commenced in the first quarter of 2026, with construction expected to begin upon completion of this validation phase.
An Aecon joint venture also finalized a $691 million contract with the U.S. Army Corps of Engineers for the Howard Hanson Dam facility project in Washington State. Commencement of construction is expected shortly. Demand for Aecon services in the Construction segment across Canada and in select U.S. and international markets continues to be strong with opportunities across all sectors. We have a clear line of sight on some very significant and well-balanced work programs ahead. In the concessions segment, there are several opportunities to add to the existing portfolio of Canadian and international concessions in the next six to 12 months to support trends in aging infrastructure, mobility, connectivity, energy, and population growth.
Beyond the legacy projects, Aecon's ongoing shift towards a greater weighting of improved risk-adjusted programs, in combination with a strong focus on operational excellence, is anticipated to support a stabilization and gradual improvement of Adjusted EBITDA margin in the Construction segment in 2026. Aecon maintains a disciplined capital allocation approach focused on long-term shareholder value through acquisitions and divestitures, organic growth, dividends, capital and operational investments, and share repurchases on an opportunistic basis. We are focused on making strategic investments in our operations and systems to provide greater access to attractive markets, increase operational effectiveness, and support the growth of our concession portfolio. Our overall outlook for 2026 continues to be very positive. We are extremely excited about the momentum we have built and remain focused on executing our strategy to drive long-term shareholder value.
Finally, turning to slide 12, I would like to welcome our new team members from the two acquisitions completed by Aecon in the first quarter of 2026. On January 6, Aecon Utilities completed the acquisition of K.P.C. Power Electrical and K.P.C. Energy Metering Solutions, enhancing our presence in Ontario across high voltage testing and commissioning services, including Substation Technical Services and Energy Metering Solutions capabilities.
On March 9, Aecon Utilities acquired ARC American and C.A. Advanced and Duna Services, and a 49% interest in KNX Utility Services, strengthening our underground and overhead electrical distribution, transmission, substation maintenance, and emergency restoration construction services across the Midwest and Eastern United States. In closing, I want to thank our growing team across all our operating sectors for their safety always mindset. Next week, teams across Aecon's platform will proudly reinforce our safety culture through our 22nd annual Safety Week. Thank you. We will now turn the call over to analysts for questions.
Thank you. At this time, we will conduct the question-and-answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by. Our first question comes from Michael Tupholme from TD Cowen. Please go ahead.
Yes, thank you. Good morning.
Hi, Mike.
First question, wanted to ask you a couple of questions about the defense sector. Last month, Aecon announced an agreement to deliver stage one of the Government of Canada Arctic Over-the-Horizon Radar project. I know that's in the validation phase right now. I guess I'm just looking for a little bit of detail on how long you expect that validation phase to run and any indication as to when we could see that added to backlog and if possible, any sense for what the value of that opportunity looks like.
Yes, I will take this one. We are extremely happy having been awarded this job. I mean, for Aecon, it's very important we come back to the defense business in terms of infrastructure, and this job is extremely interesting. We have a first validation period which will last up to the end of 2026. Today, in our secure offices for this project, we have more than 60 person working around the table collaboratively between our client, our engineer, and our construction team. Once this validation phase is over, in parallel, there will be further development phase for further part of the works and most probably early works commencement on some of the places of construction. I would tend to say that we will see the first element of construction in our activity and revenue around mid 2027.
Helpful. Thank you. Then maybe to build on that, obviously with this award, and then there's a lot of other discussion occurring about opportunities in the defense sector in Canada, which has not historically in recent years been as certainly as prolific as it is now. The question is, can you just comment on what sort of other opportunities you're seeing the landscape, the opportunity set? Should we be expecting news on other opportunities in the near term, or is this more of a medium to longer term opportunity in the defense sector in Canada?
Yes. What we have called sovereignty projects, you probably remember, sometime like one year ago, we refined our strategic plan for the year 2025 to 2027. Being a sovereignty project champion was very important for Aecon. This Arctic Over- the- Horizon is the first part of the implementation of the strategy. There are a lot of other sovereignty projects. We consider that the activity to come may be of the order of CAD 125 billion during the next 10 years, among which more than half should be related with defense. What can come in the next defense project? I mean, there's a lot coming with the airbases rehabilitation in the North. Four to eight projects on those ones.
There's a lot also coming with the submarine program on the east of Canada at Halifax and on the west Vancouver Island at Esquimalt. We are also having a look at those at those projects. I mean, what is important is obviously the trend and the federal strategy on this project. I imagine you have all gone quickly to the spring budget that was delivered yesterday. I mean, it's very interesting news for Aecon. I mean, we now know where are the priorities. We now know the real will to fast-track this project. I mean, when we hear about one project, one review, I mean, it's extremely good for us. We have been suffering during years of too much hurdles.
I mean, from the moment a project appears on the table and the moment the first cubic of concrete, I mean, is just on site. You have also noticed yesterday that and during the last few days that financing is getting organized now and everything is converging rather quickly. It's about defense, but it's also about mining, it's about ports and other infrastructure project. In addition, you probably have noticed the investment in the trades, not only to attract, but to educate our young apprentices so that there should not be problem of execution on those projects. All this goes into the right direction, and we have teams at Aecon truly focused on those sovereignty projects.
Thank you for that, Jean-Louis. I'll get back in the queue.
Thank you. Our next question comes from Sabahat Khan from RBC Capital Markets. Please go ahead.
Great. Thanks. Good morning. Just maybe starting with the nuclear side. Just wanted to get a little bit of perspective on the outlook in that business. You know, looking at the results here, a good contributor to revenue, but understanding backlog builds can be lumpy there, so not much there. Just trying to understand, as you look ahead over the next 12, 24 months or two to three years out, maybe just frame the nuclear opportunity and maybe some of the backlog dollars that could maybe get added or the projects you're keeping an eye on. Maybe even just beyond that, over the next sort of three to five years, what are some of the opportunities that Aecon could participate in? Thanks.
I will take the first part of the answer. I mean, Aecon is exceptionally well-positioned on the short term, midterm, and long term, I mean, for nuclear. I will remind you more or less where we are working, and maybe Jerome can add a few figures on this. I mean, in Canada, we are working on all major component replacement programs for nuclear power plant. I mean, we have just finalized Darlington, and next week OPG will celebrate, I mean, the success of Darlington, a project that has finalized in advance in terms of time and within budget in terms of money. It had been decades all over the world without a real success in those big nuclear projects. We are extremely happy to have been the leader on this Darlington refurbishment.
We are also working at Bruce, I mean, on the second and third reactor of a program of six, and we have begun to work at Pickering at the same time on definition and early procurement, and we should begin execution in the course of the year 2026. In parallel, we are progressing the construction of the first SMR in Darlington. In the U.S., we work on nuclear on different activities. I mean, major component replacements, of course. That is a little late in front of Canada, but now it's coming and is going to be powerful. We work also with the Department of Energy on the National Laboratory. We also work on development phase, on budget setting for new build.
I mean, the Cascade with Energy Northwest is part of it. You have to know that our activity, I mean, our nuclear activity in the U.S. that was around CAD 300 billion equivalent Canadian dollar last year is going to grow something like CAD 600 billion equivalent Canadian dollar during the year 2026. In addition, you probably remember that we are quite united in terms of engineering. We are also extremely active in nuclear. For example, United is engineer of record for a few of the main utilities in the U.S. with a nuclear fleet. In addition to this, for the new build, we are technology agnostic.
I mean, we perfectly know the CANDU system, but we have also worked for Westinghouse on the AP1000. We have produced a few models in our Cambridge facility. We are building the BWRX-300 from GE Hitachi and the Cascade. It's an X-energy new generation reactor. All this just makes that short term, midterm, and long term is perfectly covered at Aecon. Maybe, Jerome, you want to add a few figures?
Yeah. I mean, it's sometimes helpful to put a little bit of context around it. If you look over the last two years, so from 2023 to the end of 2025, our Nuclear segment added roughly CAD 800 million of revenue. You know, call it 35% of that was in the United States. It's a broad platform. It's diversified across customers.
You know, when we, when we think about the overall backlog opportunity associated with the nuclear, it's, you know, one of the top one or two sectors within our CAD 10.9 billion backlog bigger today. You know, that number moving up or down by, you know, a few million CAD dollars causes exactly zero concern from an Aecon perspective. The amount of work ahead of us is very meaningful. As you mentioned, Sabahat, additions can be quite lumpy, but we feel very, very good about the positioning of that business, within Aecon's overall portfolio.
Great. Thanks. Maybe just back to the Construction business and sort of the U.S. side. You know, hearing more and more about the opportunities you're pursuing there. Can you maybe just frame sort of the U.S. opportunity? One, just on the, you know, how big can that business get over the coming years? Secondly, how do you go about developing a workforce to be able to sort of deliver on the projects south of the border? Do you know you have the infrastructure? Sort of what are the ambitions there on the Construction side in terms of mix over the next years? Especially given sort of a CAD 11 billion overall backlog that you already have to deliver on. Thanks. I'll pass the line .
Okay. We are working in the U.S. with determination, but prudence. It means that I've not set up in terms of revenue or activity an absolute figure for Aecon. What is sure is that we are going to activities that can be reliable in terms of profitability and safe, I mean, for Aecon. We can select our client. We can select the part of the business where we have the best team. We can select our partners. Our issue in the U.S. is not a market share. First of all, because every state is a different story. It's much more to be positioned at the best places at the best moment, and this is what we have been doing, I mean, for the last two to three years.
You have to imagine how agile has been Aecon in terms of its U.S. activity. I mean, in three to four years ago, we only had these walks, small welding, specialized welding activities. Last year, we were doing 12% of our activity in the U.S. Obviously we are growing. I mean, in nuclear today, we have something like 1,500 people working. When you add those nuclear teams, I mean, all the team working for utilities, either alone on some fiber or telecommunication work or through the subsidiaries that we have been acquiring during the last three years, we are summing up something like 2,000 people in the U.S. with those transmission, distribution, storm activities, and engineering activity.
Because the budget coming from the federal government is important and fits perfectly well with our core competency, we have created a dedicated structure for our federal works in the U.S. We have been extremely agile. More broadly, I mean, what I just want to say, you know, sometime when I'm walking in the streets of Toronto or other city where there is a lot of work, I mean, with utility or rehabilitation and stuff like this, you can see some signs on the wall in front of some shops that say, "During the works, we are still open." What I just wanted to tell you, and you have noticed it, is that we had our issue during the last years with our legacy project.
Never, ever, we have stopped thinking every day about where are we going to be within five years from now? Where are we going to be within 10 years from now? How are we going to beat our competition? How are we going to win? Where are we going to play? The result today is the Aecon that you have in front of you.
Thank you. Our next question comes from Chris Murray from ATB Cormark Capital Markets. Please go ahead.
Yeah, thanks, folks. Good morning. Maybe turning back just to some of the guidance on 2026. You know, you made the comment that, you know, you expect revenue to be higher in 2026 than 2025. If we look at Q1 revenue growth, certainly pretty impressive, just at the magnitude of it. I just wondered to kind of frame or try to think about how that cadence is going to gonna play out through the year. You know, you would think from the guide, if it's, like, above, you wouldn't think it would be 20% above for the rest of the year. Just any color, if you can help us kind of shape the opinions on how we should think about the balance of the year in terms of the revenue stack.
Yeah. Q1's a little bit of an exceptional quarter, 'cause candidly we're lapping pretty easy comps. Last year, Q1 was roughly CAD 1 billion of revenue. You know, the year before that in 2024, it was CAD 844. I mean, look, obviously the stacked growth here is pretty meaningful. One of the big contributors is in 2025, in Q1, we secured the Scarborough Subway Expansion project, as well as the Darlington New Nuclear Project Small Modular Reactor Project. You know, those weren't in the comparative period last year. They're now in full swing and full production.
I would say if you're thinking about the overall shape of revenue growth, you know, our expectation is not to be able to put that type of, you know, high-teen number on the board, because, you know, the comps, so to speak, get a little bit more challenging as we progress through the year. That being said, you know, the way we set up the outlook is, you know, remind our investor base is, you know, roughly CAD 11 billion of backlog. We provide detail on how much of that's executable within the next 12 months. Our recurring revenue program, you know, particularly in the Utilities business, is, you know, roughly CAD 750 million . That effectively doesn't touch anything in our backlog at all, so that's an over and above.
Then we have, you know, additional work that we usually kind of book and bill within the year. We feel pretty confident that our outlook, you know, of revenue growth is valid. We put it in the overall context of a relatively difficult environment with regards to Construction overall, right? When you think about where, you know, Construction put in place is across North America, the figures that we're putting up as far as growth is really a function of the strategic perspective and lens that Aecon has taken and the sectors that we address. We feel happy about the position. As Jean-Louis mentioned, right, the team wasn't asleep at the switch while they were dealing with the legacy projects. We feel like we're really driving forward.
Okay, that's great. The other kind of question for you is, you know, you've raised some capital, some additional capital through the equity raise. You also seem to be pretty active in, you know, acquisitions. You know, appreciated the fact that, you know, when we, when you did the raise, it was for, you know, kind of labeled as general corporate purposes and some debt reduction. You know, kind of moving forward and thinking about that, does that raise in sort of your posture towards acquisitions, should we be thinking about a change in kind of capital strategy in terms of being more growth-focused? If so, you know, is it still gonna be tuck-ins or do we start looking at kind of larger organizations that'll give you some additional capacity to kinda work through some of this growing backlog that you've got?
Yeah. Very consistent approach to capital allocation. Operations first mindset at Aecon, very focused on, you know, supporting our operation teams for the growth that they have in front of them. That means investments in systems, in resiliency, in people. That kind of general support for the organic side of the business. Again, in the quarter, roughly 85% of the growth that we had was organic. You know, really important to note that we need to support that with investment. Our CapEx program has actually been quite measured. If you look at the comparative period, like trailing 12 months, you know, from March 31 to trailing 12 months, March 31, 2025, our CapEx number is effectively been the same.
You know, whether or not you include the finance lease, which is obviously another form of CapEx. We've been pretty measured, we think we need to make more investments from that standpoint. You know, to your just specific question around M&A, over the last two years, Aecon's executed seven, you know, acquisitions. Those teams have been welcomed into the fold. They've been integrated. They're all performing, you know, at or above expectation. Five of those acquisitions were in the U.S. to expand our platform. Total dollars represent something in the order of CAD 300 million. When you say, you know, what do we use the money for? It was to pay down debt, right? Which is why we ended up in the strong position we had at quarter end.
That does afford us capacity to support further growth. We're not gonna kind of, you know, tilt whether we're gonna go actually bigger or smaller. We've got a very specified buy box with regards to capability, accretion. It's a very disciplined approach. You know, one thing we'll say is there are certain areas that we really like and businesses that we understand and that we think have undeniable growth trends. Where we, where we see opportunities to increase Aecon's exposure to those end markets, we won't be shy about taking it because we think we've got a pretty good growth algorithm associated with that.
Okay, thanks. That's a great answer. Leave it there.
Thanks.
Thank you. Our next question comes from Maxim Sytchev from NBCM. Please go ahead.
Hi, good morning, gentlemen. The first question is around M&A multiples. When we look at the disclosure around kind of the purchase price and backward contribution, et cetera, I'm just wondering if we're seeing a bit of an uplift there or how should we think about sort of the seller's expectations in this market, especially like in the utility space? Thank you.
Yeah, Adam and I were just looking at each other to see who wants to take it. Do you wanna start, Adam?
Yeah, happy to. Yeah, Max, you know, we've been fortunate enough over the last number of years to be able to really select the deals that we've been pursuing, which helps to keep a little more rational, you know, approach and valuation in the mix for the companies that we've been buying. That's been helpful. We've also been able to try and align the entrepreneurs that we're, you know, acquiring and bringing into Aecon through mechanisms that have earn-outs and everything to try and continue their opportunity to maximize value through their growth plan.
While we have seen a little bit of multiples coming up over the last number of years, similar to what you're seeing in the sector overall, it's been pretty much measured for within what we can manage and within our cost of capital. We've been, you know, pretty diligent on trying to make sure we're being reasonable in valuation, and I think that's been successful. Yes, they've come up, but still, quite within our parameters.
Okay. That's, that's great to hear. Thank you. Jerome, maybe a follow-up question for you in terms of how should we be thinking about the cadence for concessions EBITDA this year and maybe sort of the expected inflection point there? Is that sort of, I guess, a 2027 event? Just trying to get the timing right there. Thank you.
The EBITDA contribution for the concessions business is gonna be down year-over-year as we saw in the first quarter. The inflection point's gonna be likely tied to advancing new projects, whether that's some of the items we have in the offer today or the, you know, U.S. Virgin Island airport projects that we've been talking about for a while. Like, those are pretty advanced development dates. It's probably a Q4 event or a next year event. The teams are working pretty feverishly on it. We think about it internally more as an equity value business. It's, you know, the book value of equity associated with the concessions portfolio. You've got roughly CAD 250,000 on balance sheet.
Then additionally, the United investment that we carry in long-term investments. The total is, call it CAD 255, CAD 260. Clearly it's more valuable than that. EBITDA is, yeah, it's an accounting term for that business. For that business overall, the daily flow of up and down on EBITDA, we're a little bit less concerned with. We're more focused on the value creation. We think we've got a really good team, really good opportunities in front of us. It's clearly a business that we wanna allocate more capital to because we see opportunity.
Yeah, no, 100% agreed. Thank you so much.
Bye.
Thank you. Our next question comes from Ian Gillies from Stifel. Please go ahead.
Morning, everyone.
Hey.
Morning.
Over the last five or six years, I mean, even through COVID, you've done a great job in and around staffing. It appears we're getting close to another demand inflection for Construction in Canada in particular. Can you just talk about where you think you're at with staffing, some of the staffing strategies, and whether it's a perceived risk at this point or not?
Construction is about people. It's about people and processes, the relative weight of people capacity is probably higher in Construction than in other industries. If we go bottom up, first of all, the trades, and I spoke about it at the beginning, I mean, of this meeting. The whole country has understood that it's an important issue. This being said, we have excellent relation with all our partners, we have always been able to forecast the needs and the capacity for the next five years with our trade partners. We go higher, we have the middle staff and the top staff.
This is important. We have created at Aecon what we call our Project Management Academy. We have a few other programs for coordinators, for technical manager, just to train and arm the quality of our staff. This being said, when you see the projects coming, I mean, the war is still going to be on the top executive of the company and on the top executive for construction, the project director, technical director, construction manager on our job, also project control. We are extremely focused on attracting, training, and keeping the best people in the market. I mean, it's not a real bottleneck or a red flag. It's just that it's our work. We have always done this, I mean, to be able to look ahead and to define exactly what we are going to need and to create this capacity.
Maybe I'll add just an additional perspective just 'cause, you know, I joined the business roughly two years ago. Other things are, one is like the amount of care and attention put towards the safety culture is just critical to ensure we can maintain, you know, our skill trade and skilled labor pools because everyone knows who's good at it and who's not good at it. We've got our safety week next week across all of our sites in North America. Our, our safety record in 2025 was one of the best ones, despite, you know, not despite reflecting also that we had, you know, some of the most hours worked in the company's history. Additionally, the team environment's really important. Like I can say it's a great place to work.
We're excited about that. Obviously, there's a big demand, we're hiring. One of the things that I kind of think about when, you know, what's a unique aspect of Aecon is this ability to attract and deploy that level of skilled labor is relatively unique. There's not a lot of folks who can marshal these types of forces. To give a little bit of context, in 2025, Aecon issued roughly 17,000 T4 and W-2 forms, right? That, you know, obviously doesn't reflect a peak labor number. That's kind of throughout the entire year, just shows that that's the labor pool that we had access to in 2025, and we expect that number to go up in 2026. It's a, it's a unique attribute. It's, human capacity, and it's something we're really proud of.
Understood. That's helpful context. Jerome, on the recurring revenue side, there was a little bit of a downdraft year-over-year. Utilities was really good, but the other bucket was probably what I would define as weak. Can you maybe just talk a little bit about what's happening there and kind of how you're thinking about how that trends through the remainder of the year?
Yeah. Yeah, I see where you're coming from. The background on the kind of light blue bar on that page is really a function of in the comparative period, we had what I'd just call a progressive or development work and, you know, particularly associated with a project that was, you know, that did move forward. That was largely in the UTS side of the business. The reality is, you know, that component has dropped off the recurring revenue side, but, you know, a much bigger component has shown up in the true revenue side, so to speak, as those projects, you know, are in execution, particularly the Scarborough subway.
You know, we're not particularly fussed about the shape of like that block coming down because the revenue really just flipped over into, you know, more normal, backlog-based revenue, and we don't double report. Look, the utility side, like that's a, it's a positive development, right? There's a big focus on securing additional MSA work across all the different areas where we execute. The electrical side of the business is performing relatively well. There's been a lot of headwind on the telecom and, you know, natural gas distribution side due to the re-regulatory environment. Like we just think the teams on the utility side have just been, you know, performing just exceptionally well, given a pretty tough, a pretty tough time dynamic there.
Understood. That's really helpful. I'll turn the call back over.
Thank you. Our next question comes from Sean Jack from Raymond James. Please go ahead.
Morning, guys. Just thinking about these new defense projects on the horizon in Canada, you know, there was mention of submarines and Arctic bases, other forms of work earlier. Do you see any opportunities for strategic adds, you know, through M&A that you'd be willing to make that could bring you closer to this growing pipeline? Or do you feel like you're well-positioned as it is?
On a first basis, we think we are well-positioned. We can always partner, that most probably will be the way to proceed forward rather than acquiring company for this. I mean, all these are core competencies that we have within the company at this moment. It doesn't mean that we would not do something a little different when we have a better understanding of all those program, but so far, this is the way we are envisaging our strategy for those projects.
Appreciate it. That's all for me, guys. Thanks.
Thank you. Our next question comes from Krista Friesen from CIBC. Please go ahead.
Hi. Thanks for taking my question. Maybe just to follow up on the defense topic there. It seems like from the outside, a pretty seamless pivot to reentering this defense work. Were there any investments that you needed to do on your end in maybe putting up secure facilities or anything like that to be able to bid on the defense work or were you able to just use what you already have?
I mean, we had not been working with defense for the last 10 years because, first of all, there was very little work, and it was a lot of rehabilitation of hangar, of workshops, of some administrative buildings. I mean, that is a reason. Earlier, I mean, we had been working with defense. As I've answered, I mean, the question just before you, we have those core competencies within the company. We have this capacity to develop and also to project our strengths rather far from our bases. We consider we have within our company the capacities to deal perfectly with those projects.
Yeah. Maybe just put one small point on it, Krista. Yes, there were investments involved around, you know, facility, cyber infrastructure, et cetera. That being said, the work programs that we carry on, you know, outside of, you know, that particular sector also have pretty stringent requirements. You know, I'd say the transition, it requires a lift, but not a huge one 'cause I'd say we were probably already at the 85% mark given the other work that we do within the business.
Okay. Perfect. Thank you. Maybe just more of a housekeeping question. On the MG&A expense this quarter, a little bit higher as a percentage of revenue, how should we think about that moving forward?
A little bit higher in the quarter. You know, in the context of obviously big revenue growth. Current levels are probably appropriate, right. Most of it is tied to, you know, compensation, staffing costs, you know, supporting resiliency and supporting growth. You know, given just the amount of, you know, the amount of additional dollars that we're putting to work as far as revenue recognition, and how lean the organization has been through what described as the rearview mirror legacy era, it's just kind of a play, probably appropriate catch up and, you know, some level of normalization from here.
Okay. Perfect. Thank you. Congrats on the quarter.
Thanks for that.
Thank you. This concludes the question-and-answer session. I would now like to turn it back to Adam Borgatti for closing remarks.
Thank you very much, Shannon, and we appreciate everyone's interest and attention. Happy to take any follow-up questions and have a great rest of your day.
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.