SNC-Lavalin Reports Strong First Quarter 2023 Results

MONTREAL, May 9, 2023 /CNW/ - SNC-Lavalin Group Inc. (TSX: SNC), a fully integrated professional services and project management company with offices around the world, today announced its financial results for the first quarter ended March 31, 2023.

The SNCL Services line of business continued to deliver on its "Pivoting to Growth" strategy with another quarter of strong revenue growth, particularly in the Engineering Services segment, and a significant increase in Segment Adjusted EBIT. SNCL Services achieved record high backlog, with another record high level in the Engineering Services segment and a strong increase in the Nuclear segment. The LSTK projects exit strategy continues to progress well. 

Q1 2023 Financial Highlights
(All results reflect comparisons to prior-year period of Q1 2022, except otherwise indicated)

• SNCL Services revenue increased 10.8% to $1.8 billion, or 10.1% on an organic revenue growth⁽¹⁾⁽²⁾ basis, outperforming the Company's 5% to 7% full year outlook range
• Engineering Services organic revenue growth⁽¹⁾⁽²⁾ of 17.5%
• SNCL Services Segment Adjusted EBIT increased by 23.4% to $156.3 million, representing an 8.5% margin, in line with Company's full year outlook range
• Engineering Services Segment Adjusted EBIT margin and Engineering Services Segment Adjusted EBITDA to segment net revenue ratio⁽¹⁾⁽³⁾ of 8.4% and 14.0%, respectively
• Nuclear Segment Adjusted EBIT margin of 13.4%
• SNCL Services backlog reached a record-high and totaled $12.1 billion as at March 31, 2023, an increase of 8.0%. Bookings in Q1 2023 totaled $2.1 billion, representing a 1.13 booking-to-revenue ratio⁽¹⁾⁽⁴⁾
• Engineering Services backlog reached a record-high and totaled $4.8 billion as at March 31, 2023, an increase of 25.3%, which includes another new record-high for the United States. Bookings in Q1 2023 totaled $1.5 billion, representing a 1.13 booking-to-revenue ratio⁽¹⁾⁽⁴⁾
• Nuclear backlog increased by 22.9% to $985.8 million as at March 31, 2023
• LSTK Projects Segment Adjusted EBIT of negative $9.2 million, in line with expectations. LSTK Projects backlog reduced by $167.6 million sequentially from December 31, 2022 to $517.9 million as at March 31, 2023
• Adjusted net income attributable to SNC-Lavalin shareholders from PS&PM⁽¹⁾ totaled $55.4 million, or $0.32 per diluted share, compared to $39.4 million, or $0.22 per diluted share in Q1 2022
• Net income from continuing operations attributable to SNC-Lavalin shareholders totaled $28.4 million, or $0.16 per diluted share, compared to $24.8 million, or $0.14 per diluted share in Q1 2022
• Net cash used for operating activities of $57.3 million
• Net cash generated from operating activities in SNCL Services⁽¹⁾⁽⁵⁾ of $94.1 million
• Net limited recourse and recourse debt to Adjusted EBITDA ratio⁽¹⁾⁽⁶⁾ of 2.9 as at March 31, 2023

"With our strong first quarter results, we believe that we are well on track to deliver the Company's 2023 outlook," said Ian L. Edwards, President and CEO of SNC-Lavalin Group Inc. "First quarter performance further emphasizes that our "Pivoting to Growth" strategy is succeeding, as we become a Professional Services and Project Management company. Our continued backlog growth in SNCL Services demonstrates the resiliency of our business amid economic pressures, and our list of prospects is strong as government and commercial clients continue to invest in infrastructure and as the world transitions to a low carbon environment."

First Quarter Financial Results

Professional Services & Project Management are collectively referred to as "PS&PM" to distinguish them from "Capital" activities. PS&PM groups together five of the Company's segments, namely Engineering Services, Nuclear, Linxon, Operation & Maintenance ("O&M"), and Lump-Sum Turnkey ("LSTK") Projects, while Capital is its own reportable segment and separate from PS&PM.

• The increase in net income from continuing operations attributable to SNC-Lavalin shareholders was mainly due to higher Segment Adjusted EBIT, partially offset by higher net financial expenses.

IFRS Financial Highlights

			Q1 2023^A	Q1 2022^A
Revenues
From PS&PM			2,006.7	1,871.7
From Capital			16.3	16.4
			2,023.1	1,888.1
Attributable to SNC-Lavalin shareholders
Net income from continuing operations:
From PS&PM			26.0	16.6
From Capital			2.4	8.2
			28.4	24.8
Diluted EPS from continuing operations:
From PS&PM ($)			0.15	0.09
From Capital ($)			0.01	0.05
			0.16	0.14

Non-IFRS Financial Highlights

			Q1 2023^A	Q1 2022^A
Attributable to SNC-Lavalin shareholders
Adjusted net income from PS&PM^(1)			55.4	39.4
Adjusted diluted EPS from PS&PM^(1)(7) ($)			0.32	0.22
Adjusted EBITDA from PS&PM^(1)			155.9	112.6

Segment Performance

			Q1 2023^A	Q1 2022^A
Segment revenues
Engineering Services			1,344.2	1,138.2
Nuclear			244.3	232.1
O&M			125.9	136.5
Linxon			121.5	150.5
SNCL Services			1,835.9	1,657.3
LSTK Projects			170.8	214.4
Capital			16.3	16.4
			2,023.1	1,888.1
Segment Adjusted EBIT
Engineering Services			113.5	85.2
Nuclear			32.7	34.3
O&M			9.4	11.7
Linxon			0.8	(4.5)
SNCL Services			156.3	126.7
LSTK Projects			(9.2)	(30.5)
Capital			11.6	12.4
			158.8	108.6
Backlog as at March 31
Engineering Services			4,837.0	3,861.1
Nuclear			985.8	802.2
O&M			5,262.2	5,598.4
Linxon			994.4	920.4
SNCL Services			12,079.3	11,182.1
LSTK Projects			517.9	956.6
Capital			29.3	35.0
			12,626.5	12,173.7

All figures in millions of dollars, except otherwise indicated

Certain totals and subtotals may not reconcile due to rounding

^A For the three-month period ended March 31

Quarterly Dividend

The Board of Directors today declared a cash dividend of $0.02 per share, unchanged from the previous quarter. The dividend is payable on June 6, 2023, to shareholders of record on May 23, 2023. This dividend is an "eligible dividend" for Canadian federal and provincial income tax purposes.

First Quarter 2023 Conference Call / Webcast

SNC-Lavalin will hold a conference call and audio webcast today at 8:30 a.m. (Eastern Time) to discuss and present its first quarter financial results. The live audio webcast of the conference call can be accessed through a link posted on the Company's website, as well as an accompanying slide presentation, at www.investors.snclavalin.com. The call will also be accessible by telephone, please dial toll free at 1 800 319 4610 in North America or dial 1 604 638 5340 outside North America. You can also use the following numbers: 416 915 3239 in Toronto, 514 375 0364 in Montreal, or 0808 101 2791 in the United Kingdom. A recording and a transcript of the conference call will be available on the Company's website within 24 hours following the call.

Annual Meeting of Shareholders

SNC-Lavalin's Annual Meeting of Shareholders (the "Meeting") will be held on Thursday, May 18, 2023, at 11:00 a.m. (Eastern Time). Registered shareholders as of the close of business on March 20, 2023 and duly appointed proxyholders of record are entitled to participate in the Meeting virtually at https://web.lumiagm.com/414721330, regardless of geographic location, and will have the opportunity to ask questions and vote, all in real time, provided they are connected to the internet and comply with all of the requirements set out in the proxy materials. Whether or not a shareholder plans to attend the Meeting, the Company urges all shareholders to vote and submit their proxy in advance of the Meeting by one of the methods described in the proxy materials provided to shareholders.

Additional information related to the Meeting can also be found in SNC-Lavalin's 2023 Management Proxy Circular which is available on SEDAR at www.sedar.com and on the Company's website at www.snclavalin.com under "Investors"/"Investor's Briefcase".

About SNC-Lavalin

Founded in 1911, SNC-Lavalin is a fully integrated professional services and project management company with offices around the world dedicated to engineering a better future for our planet and its people. We create sustainable solutions that connect people, technology and data to design, deliver and operate the most complex projects. We deploy global capabilities locally to our clients and deliver unique end-to-end services across the whole life cycle of an asset including consulting, advisory & environmental services, intelligent networks & cybersecurity, design & engineering, procurement, project & construction management, operations & maintenance, decommissioning and capital. – and delivered to clients in key strategic sectors such as Engineering Services, Nuclear, Operations & Maintenance and Capital. News and information are available at snclavalin.com or follow us on LinkedIn and Twitter.

Non-IFRS Financial Measures and Ratios, Supplementary Financial Measures and Non-Financial Information

The Company reports its financial results in accordance with IFRS. However, the following non–IFRS financial measures and ratios, supplementary financial measures and non-financial information are used by the Company in this press release: Organic revenue growth (contraction), EBITDA, Adjusted EBITDA, Adjusted net income (loss) attributable to SNC-Lavalin shareholders, Adjusted diluted EPS, Booking-to-revenue ratio, Segment Adjusted EBITDA to segment net revenue ratio, Segment net revenue, Net limited recourse and recourse debt to Adjusted EBITDA ratio, Net limited recourse and recourse debt and Net cash generated from (used for) operating activities on a line of business/segment basis. Additional details for these non-IFRS financial measures and ratios, supplementary financial measures and non-financial information can be found below and in Sections 4, 6 and 9 of the Company's MD&A for the first quarter of 2023, which sections are incorporated by reference into this press release, filed with the securities regulatory authorities in Canada, available on SEDAR at www.sedar.com and on the Company's website at www.snclavalin.com under the "Investors" section.

Non-IFRS financial measures and ratios, supplementary financial measures and non-financial information do not have any standardized meaning under IFRS and other issuers may define these measures differently and, accordingly, they may not be comparable to similar measures prepared by other issuers. Such non-IFRS financial measures and ratios, supplementary financial measures and non-financial information have limitations and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS.

However, management believes that, in addition to conventional measures prepared in accordance with IFRS, these non-IFRS financial measures and ratios and supplementary financial measures and non-financial information provide additional insight into the Company's operating performance and financial position and certain investors may use this information to evaluate the Company's performance from period to period. Furthermore, certain non-IFRS financial measures and ratios, certain additional IFRS measures and ratios, certain supplementary financial measures and other non-financial information are presented separately for PS&PM, by excluding components related to Capital, as the Company believes that such measures are useful as these PS&PM activities are usually analyzed separately by the Company. Reconciliations and calculations of non-IFRS measures and ratios to the most comparable IFRS measures and ratios are set forth below in the section "Reconciliations and Calculations" of this press release.

⁽¹⁾ Non-IFRS financial measure or ratio or supplementary financial measure.

⁽²⁾ Organic revenue growth (contraction) is a non-IFRS ratio comparing organic revenue (which excludes foreign exchange and acquisition and disposal impacts), itself a non-IFRS financial measure, between two periods.

⁽³⁾ Segment Adjusted EBITDA to segment net revenue for the Engineering Services segment is a non-IFRS ratio based on Segment Adjusted EBITDA and segment net revenue, both of which are non-IFRS financial measures.

⁽⁴⁾ Booking-to-revenue ratio is a non-IFRS ratio based on contract bookings.

⁽⁵⁾ Net cash generated from (used for) operating activities on a line of business/segment basis is a supplementary financial measure and is identical in composition to net cash generated from (used for) operating activities as reported in the financial statements, except that it is provided on a line of business/segment basis as opposed to on a consolidated basis.

⁽⁶⁾ Net limited recourse and recourse debt to Adjusted EBITDA ratio is a non-IFRS ratio based on net limited recourse and recourse debt at the end of a given period and Adjusted EBITDA of the corresponding trailing twelve-month period, both of which are non-IFRS financial measures.

⁽⁷⁾ Adjusted diluted EPS is a non-IFRS ratio based on adjusted net income (loss) attributable to SNC-Lavalin shareholders from continuing operations, itself a non-IFRS financial measure.

Reconciliations and Calculations

Reconciliation of Adjusted net income attributable to SNC-Lavalin shareholders from PS&PM to IFRS net income attributable to SNC-Lavalin shareholders from continuing operations

	Q1 2023				Q1 2022
	Before Taxes	Taxes	After Taxes	Diluted EPS (In $)	Before Taxes	Taxes	After Taxes	Diluted EPS (In $)
Net income attributable to SNC-Lavalin shareholders from continuing operations (IFRS)			28.4	0.16			24.8	0.14
Restructuring and transformation costs	14.5	(1.7)	12.8		6.7	(1.6)	5.1
Amortization of intangible assets related to business combinations	20.6	(4.0)	16.5		22.3	(4.7)	17.7
Gain on disposal of a Capital investment	-	-	-		(4.3)	(0.1)	(4.4)
Total adjustments	35.1	(5.7)	29.4	0.17	24.7	(6.4)	18.4	0.10
Adjusted net income attributable to SNC-Lavalin shareholders (non-IFRS)			57.8	0.33			43.1	0.25
Net income attributable to SNC-Lavalin shareholders from Capital			2.4	0.01			8.2	0.05
Gain on disposal of a Capital investment	-	-	-		(4.3)	(0.1)	(4.4)
Total adjustments	-	-	-	-	(4.3)	(0.1)	(4.4)	(0.03)
Adjusted net income attributable to SNC-Lavalin shareholders from Capital (non-IFRS)			2.4	0.01			3.8	0.02
Adjusted net income attributable to SNC-Lavalin shareholders from PS&PM (non-IFRS)			55.4	0.32			39.4	0.22

Note that certain totals and subtotals may not reconcile due to rounding

All figures in millions of dollars, except otherwise indicated

Reconciliation of EBITDA and Adjusted EBITDA to IFRS net income from continuing operations

	Q1 2023			Q1 2022
	From PS&PM	From Capital	Total	From PS&PM	From Capital	Total
Net income from continuing operations	26.1	2.4	28.5	13.7	8.2	21.9
Net financial expenses	45.7	1.7	47.4	24.6	1.0	25.6
Income tax expense	11.1	0.5	11.6	3.5	0.5	4.0
EBIT	82.9	4.6	87.5	41.8	9.7	51.5
Depreciation and amortization	58.6	-	58.6	64.0	-	64.0
EBITDA	141.4	4.6	146.0	105.8	9.7	115.5
Restructuring and transformation costs	14.5	-	14.5	6.7	-	6.7
Gain on disposal of a Capital investment	-	-	-	-	(4.3)	(4.3)
Adjusted EBITDA	155.9	4.6	160.5	112.6	5.3	117.9

Note that certain totals and subtotals may not reconcile due to rounding

All figures in millions of dollars

Calculation of segment net revenue and Segment Adjusted EBITDA to segment net revenue ratio for the Engineering Services segment

	Q1 2023
Revenue – Engineering Services	1,344.2
Less: Direct costs for sub-contractors and other direct expenses that are recoverable directly from clients – Engineering Services	331.3
Segment net revenue – Engineering Services	1,012.9
Segment Adjusted EBITDA – Engineering Services	141.7
Segment Adjusted EBITDA to segment net revenue ratio – Engineering Services	14.0 %

All figures in millions of dollars, except otherwise indicated

Calculation of organic revenue growth (contraction)

	Q1 2023 Revenue	Q1 2022  Revenue	Variance	Foreign exchange impact	Acquisition / Disposal impact	Organic revenue growth (contraction)
Engineering Services	1,344.2	1,138.2	206.0	5.9	-	200.0
Nuclear	244.3	232.1	12.2	0.8	0.7	10.8
O&M	125.9	136.5	(10.6)	2.3	-	(12.9)
Linxon	121.5	150.5	(29.0)	0.7	-	(29.7)
Total – SNCL Services	1,835.9	1,657.3	178.6	9.7	0.7	168.2

	Q1 2023 Revenue	Q1 2022  Revenue	Variance	Foreign exchange impact	Acquisition / Disposal impact	Organic revenue growth (contraction)
Engineering Services	1,344.2	1,138.2	18.1 %	0.6 %	-	17.5 %
Nuclear	244.3	232.1	5.3 %	0.4 %	0.3 %	4.6 %
O&M	125.9	136.5	(7.8) %	1.5 %	-	(9.3) %
Linxon	121.5	150.5	(19.2) %	0.4 %	-	(19.6) %
Total – SNCL Services	1,835.9	1,657.3	10.8 %	0.6 %	-	10.1 %

Note that certain totals and subtotals may not reconcile due to rounding

All figures in millions of dollars, except otherwise indicated

Calculation of booking-to-revenue ratio

	Q1 2023
	Engineering Services	Nuclear	O&M	Linxon	Total SNCL Services
Opening backlog	4,662.1	936.6	5,353.9	881.8	11,834.4
Plus: Contract bookings during the period	1,517.8	287.7	34.1	234.1	2,073.8
Less: Revenues from contracts with customers recognized during the period	1,342.9	238.5	125.9	121.5	1,828.9
Ending backlog	4,837.0	985.8	5,262.2	994.4	12,079.3
Booking-to-revenue ratio	1.13	1.21	0.27	1.93	1.13

Note that certain totals and subtotals may not reconcile due to rounding

All figures in millions of dollars, except otherwise indicated

Calculation of net limited recourse and recourse debt to Adjusted EBITDA ratio

				March 31, 2023
Limited recourse debt				400.0
Recourse debt				1,609.6
Less: Cash and cash equivalents				561.3
Net limited recourse and recourse debt				1,448.3
Adjusted EBITDA (trailing 12 months)				495.7
Net limited recourse and recourse debt to Adjusted EBITDA ratio				2.9

All figures in millions of dollars, except otherwise indicated

Forward-Looking Statements

Reference in this press release, and hereafter, to the "Company" or to "SNC-Lavalin" means, as the context may require, SNC-Lavalin Group Inc. and all or some of its subsidiaries or joint arrangements or associates, or SNC-Lavalin Group Inc. or one or more of its subsidiaries or joint arrangements or associates.

Statements made in this press release that describe the Company's or management's budgets, estimates, expectations, forecasts, objectives, predictions, projections of the future or strategies may be "forward-looking statements", which can be identified by the use of the conditional or forward-looking terminology such as "aims", "anticipates", "assumes", "believes", "cost savings", "estimates", "expects", "forecasts", "goal", "intends", "likely", "may", "objective", "outlook", "plans", "projects", "should", "synergies", "target", "vision", "will", or the negative thereof or other variations thereon. Forward-looking statements also include any other statements that do not refer to historical facts. Forward-looking statements also include statements relating to the following: i) future capital expenditures, revenues, expenses, earnings, economic performance, indebtedness, financial condition, losses, project- or contract-specific cost reforecasts and claims provisions, and future prospects; ii) business and management strategies and the expansion and growth of the Company's operations; and iii) the expected additional impacts of the ongoing COVID-19 pandemic on the business and its operating and reportable segments as well as elements of uncertainty related thereto. All such forward-looking statements are made pursuant to the "safe-harbour" provisions of applicable Canadian securities laws. The Company cautions that, by their nature, forward-looking statements involve risks and uncertainties, and that its actual actions and/or results could differ materially from those expressed or implied in such forward-looking statements, or could affect the extent to which a particular projection materializes. Forward-looking statements are presented for the purpose of assisting investors and others in understanding certain key elements of the Company's current objectives, strategic priorities, expectations and plans, and in obtaining a better understanding of the Company's business and anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes.

Forward-looking statements made in this press release are based on a number of assumptions believed by the Company to be reasonable as at the date hereof. The assumptions are set out throughout the Company's 2022 Annual MD&A (particularly in the sections entitled "Critical Accounting Judgements and Key Sources of Estimation Uncertainty" and "How We Analyze and Report Our Results"). If these assumptions are inaccurate, the Company's actual results could differ materially from those expressed or implied in such forward-looking statements. In addition, important risk factors could cause the Company's assumptions and estimates to be inaccurate and actual results or events to differ materially from those expressed in or implied by these forward-looking statements. These risks include, but are not limited to, matters relating to: (a) epidemics, pandemics, including COVID-19, and other global health crises; (b) execution of the Company's "Pivoting to Growth Strategy" unveiled in September 2021; (c) fixed-price contracts or the Company's failure to meet contractual schedule, performance requirements or to execute projects efficiently; (d) backlog and contracts with termination for convenience provisions; (e) contract awards and timing; (f) being a provider of services to government agencies; (g) international operations; (h) nuclear liability; (i) ownership interests in investments; (j) dependence on third parties; (k) supply chain disruptions; (l) joint ventures and partnerships; (m) information systems and data and compliance with privacy legislation; (n) qualified personnel; (o) competition; (p) professional liability or liability for faulty services; (q) monetary damages and penalties in connection with professional and engineering reports and opinions; (r) gaps in insurance coverage; (s) health and safety; (t) work stoppages, union negotiations and other labour matters; (u) global climate change, extreme weather conditions and the impact of natural or other disasters; (v) divestitures and the sale of significant assets; (w) intellectual property; * liquidity and financial position; (y) indebtedness; (z) impact of operating results and level of indebtedness on financial situation; (aa) security under the CDPQ Loan Agreement (as defined in the Company's 2022 Annual MD&A); (bb) dependence on subsidiaries to help repay indebtedness; (cc) dividends; (dd) post-employment benefit obligations, including pension-related obligations; (ee) working capital requirements; (ff) collection from customers; (gg) impairment of goodwill and other assets; (hh) the impact on the Company of legal and regulatory proceedings, investigations and dispute settlements; (ii) further regulatory developments as well as employee, agent or partner misconduct or failure to comply with anti-corruption and other government laws and regulations; (jj) reputation of the Company; (kk) inherent limitations to the Company's control framework; (ll) environmental laws and regulations; (mm) global economic conditions; (nn) inflation; (oo) fluctuations in commodity prices; and (pp) income taxes.

The Company cautions that the foregoing list of factors is not exhaustive. For more information on risks and uncertainties, and assumptions that could cause the Company's actual results to differ from current expectations, please refer to the sections "Risks and Uncertainties", "How We Analyze and Report Our Results" and "Critical Accounting Judgements and Key Sources of Estimation Uncertainty" in the Company's 2022 Annual MD&A and as updated in the first quarter 2023 MD&A filed with the securities regulatory authorities in Canada, available on SEDAR at www.sedar.com and on the Company's website at www.snclavalin.com under the "Investors" section.

The forward-looking statements herein reflect the Company's expectations as at the date of this press release and are subject to change after this date. The Company does not undertake to update publicly or to revise any written or oral forward-looking information or statements whether as a result of new information, future events or otherwise, unless required by applicable legislation or regulation. The forward-looking information and statements contained herein are expressly qualified in their entirety by this cautionary statement.

For More Information:

The Company's unaudited interim condensed consolidated financial statements for the three-month periods ended March 31, 2023 and March 31, 2022, together with its MD&A for the corresponding periods, can be accessed on the Company's website at www.snclavalin.com and on www.sedar.com.

SOURCE SNC-Lavalin