Aecon Group Inc. (AEGXF) CEO Jean-Louis Servranckx on Q4 2019 Results - Earnings Call Transcript

Aecon Group Inc. (OTCPK:AEGXF) Q4 2019 Earnings Conference Call March 4, 2020 10:00 AM ET

Company Participants

Adam Borgatti - Investor Relations

Jean-Louis Servranckx - President and CEO

David Smales - Executive Vice President and CFO

Conference Call Participants

Yuri Lynk - Canaccord Genuity

Jacob Bout - CIBC

Ben Jekic - GMP

Frederic Bastien - Raymond James

Michael Tupholme - TD Securities

Chris Murray - AltaCorp Capital

Jean-Francois Lavoie - Desjardins Capital Markets

Operator

Ladies and gentlemen, thank you for standing by, and welcome to Aecon's Q4 and Full Year 2019 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded [Operator Instructions].

I would now like to hand the conference over to your speaker today, Adam Borgatti, Senior Vice President of Corporate Development and Investor Relations. Please go ahead, sir

Adam Borgatti

Thank you, Julian. Good morning, everyone, and thanks for participating in our year-end 2019 results conference call. This is Adam Borgatti speaking. Presenting to you this morning, are Jean-Louis Servranckx, President and CEO and David Smales, Executive Vice President and CFO.

Our earnings announcement was released yesterday evening and we have posted a slide presentation on the Investing section of our Web site, which we will refer to during this call. Following our comments we will be glad to take questions from analysts.

As noted on Slide 2 of the presentation, listeners are reminded that 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 that the expectations reflected in these statements are reasonable, we can give no assurance that these expectations will prove to be correct.

I will now turn the call over to Dave.

David Smales

Thanks, Adam, and good morning, everyone. I'll touch briefly on Aecon's consolidated results and then review results by segment before turning the call over to Jean-Louis.

Turning to key highlights on Slide 3 of the presentation. Aecon's 2019 results saw revenue and adjusted EBITDA with record levels once again, while maintaining new record backlog of $6.8 billion as of year-end. Adjusted EBITDA margin also improved on a like-for-like basis by 50 basis points to 6.6% for the year. As announced yesterday, Aecon's Board of Directors approved an increase to the quarterly dividend on the basis of continuous financial strength, strong cash flow generation and positive outlook. The quarterly dividend will increase to $0.16 per share from $0.145 previously with the first increased quarterly dividends to be paid on April 2, 2020.

Turning to Slide 4. Record annual revenue for the year of $3.5 billion was $194 million or 6% higher compared to 2018. On a like-for-like basis, excluding the contract mining business sold in November 2018, growth in revenue was $403 million or 13% compared to 2018, as shown on Slide 5. Record annual adjusted EBITDA of $222 million and margin of 6.4% improved by 15 million compared to adjusted EBITDA of $207 million and margin of 6.3% in 2018. On a like-for-like basis, excluding contract mining in 2018 and a onetime executive transition charge in 2019, adjusted EBITDA for the year of $229 million and margin of 6.6% compared $286 million, the margin of 6.1% last year and overall increase of 23%.

Slide 5 outlines the full impact on results of both the sale of the contract mining business in 2018 and the one time executive transition charge in 2019. Reported operating profit of $107 million, net profit of $73 million and diluted earnings per share of $1.12, all showed considerable growth compared to 2018 on the back of higher volume and improved margins. As I mentioned earlier, reported backlog at December 31st was $6.8 billion in line with record year-end backlog at the end of last year.

Now turning to results by segment. As noted on Slide 6, construction revenue of $3.4 billion in 2019 was $206 million or 6% higher than the same period last year. This increase was driven by higher revenue in civil operations and urban transportation systems in both Eastern and Western Canada. Revenue is also higher from nuclear operations related to refurbishment work in Ontario. These increases were partially offset by lower volume in a conventional industrial sector following the sale of the contract mining business in November last year, and in the utility sector from reduced mainline pipeline volume. Adjusted EBITDA in the construction segment of $185 million and margin of 5.5% increased by $17 million compared to $168 million and margin of 5.3% in 2019. This was primarily due to increased revenue and margin from civil operations and urban transportation systems.

New contract awards in 2019 totaled $3.4 billion compared to $5.8 billion in 2018 due mainly to the high number of large project awards in 2018, including the Site C generating station and spillway civil works, the REM Montreal LRT, the Finch West LRT and the Gordie Howe International Bridge. Construction backlog at the end of December was $6.7 billion in line with backlog at the end of 2018.

Turning to Slide 7, constructions revenue for the year was $218 million, a decrease of $5 million or 2% compared to the same period last year, primarily as a result of slightly lower management and development fees for Canadian constructions. Adjusted EBITDA in the construction segment of $83 million was up by $3 million compared to $80 million in the same period last year. The increase was primarily driven by increased revenue from the Bermuda International Airport redevelopment project.

At this point, I'll turn the call over to Jean-Louis.

Jean-Louis Servranckx

Thank you, Dave. Before addressing the slide presentation, I would like to formally welcome our new employees from Voltage Power, which we acquired in February for a base purchase price of $30 million. Voltage Power is an electrical transmission and substation contractor headquartered in Winnipeg that brings key medium to high voltage power transmission and distribution capabilities to Aecon. We are very excited to have the team join Aecon, and we look forward to building on their strong entrepreneurial spirit across the Aecon organization. Electrical transmission and distribution is a key strategic business development for Aecon.

Now turning to Slide 8, as Dave mentioned earlier, Aecon produced record revenue and adjusted EBITDA in 2019 and our diverse and resilient business model is positioned to deliver continued strong results. The capabilities of our construction segment are well-aligned to the record level of infrastructure investment underway and committed by all levels of government across Canada, as well by the private sector. The Concessions segment activity pursuing a number of large-scale infrastructure projects and thus, require private finance solutions and participating as a concessionaire of the five P3 projects identified on this slide.

Turning to Slide 9, Aecon ended 2019 with near record year-end backlog of $6.8 billion. Backlog to be worked off in the next 12 months of $2.8 billion increased over 40% versus last year and around 60% of this backlog is for work off beyond the next 12 months, providing significant visibility to Aecon's longer term outlook. Of note, this backlog does not include the Pattullo Bridge Replacement Project in BC awarded to an Aecon 50-50 joint venture in February 2020, Aecon's share of the almost 1 billion contract value will be added to its construction segment backlog in the first quarter.

Annual recurring revenue grew by 4% on a like for like basis over last year, reflecting the significant ongoing revenue from recurring work and their long term agreements and concession arrangements. We do remain very focused on the strong execution of our backlog, while ensuring we continue to build capacity and flexibility for further growth.

Turning now to Slide 10. Aecon's cash flow generation, balance sheet and financial capacity remain key advantages in our ability to grow in the coming years, both in Canada and on select international projects. This financial strength is also enabling us to continue to invest in our business, including potential new concessions, increase our dividend again in addition to buying back shares and our program and make strategic tuck-in acquisitions to further strengthen our capabilities.

Now turning to Slide 11, our overall outlook for 2020 remains strong as Aecon's current backlog and recurring revenue contract, robust pipeline of opportunities and ongoing concessions are expected to lead to another year of revenue and adjusted EBITDA growth in 2020. In the construction segment, bidding activity continues to be solid with a number of Aecon's larger proceeds expected to be awarded in 2020 or 2021 in addition to the recent Pattullo Bridge award. We have strong and diverse backlog in hand.

Aecon is focused on ensuring solid execution on its projects and selectively adding backlog to an extremely disciplined bidding approach that supports continued margin improvement in this segment. The Concessions segment continues to partner with Aecon construction segment to focus on the significant number of P3 opportunities in Canada and on a selected basis internationally, as well as preparations for a smooth transition from the existing to the new terminal in Bermuda this year.

Before turning the call over to analyst for questions, I would like to take a moment to address John Beck's transition to the role of Non-Executive Chairman. Having served Aecon for over 50 years as Founder, Former CEO and Executive Chairman, John has been an extraordinary leader, mentor and a true industrial icon. John's guidance has been invaluable to me since joining Aecon in September 2018, and I look forward to continuing to benefit from his trusted counsel and experience as Chair of the Board. I'm really honored to have assumed full executive responsibility for Aecon, and I look forward to working with our teams to successfully complete our impressive portfolio of projects, while executing our ongoing growth strategy. Thank you. And we will now turn the call over to analysts for questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from Yuri Lynk from Canaccord Genuity. Your line is open.

Yuri Lynk

Just on the outlook, calling for better revenue and margin in 2020. Your backlog over the next 12 months is up 40%. So in light of that, can you just help us better frame what our revenue expectations should be for 2020? What are some of the puts and takes that that's going to in the outlook?

David Smales

So there's really three elements to think about in terms of thinking about 2020. The first obviously is what you pointed out is that growth in backlog to be executed in the next 12 months. The second piece is our recurring revenue, which we expect to be fairly stable to low growth similar to this year. And then the third piece is more seasonal work or projects we win during the year, and have some execution on in the same year.

I would suspect that that will be lower than it is historically being just because of the amount work we already have on hands, so there will be some offset there. But if we were to do, I don't know, 50% of what we normally do in terms of seasonal type work book and burn work in the same year, that's probably something more appropriate given where we are coming into the year.

Jean-Louis Servranckx

And Yuri, if I may add something about this is backlog. What I see, I mean very interesting and what I feel is the strength of Aecon is the fact that our activity is extremely well-balanced and it's even more now as you can see. I mean, we are very much balanced between the Concessions segment and the Construction segment. Within our construction segment, you can see in the graph that you we have put on our Internet site that we are very well-balanced now between our six operating sectors, highway and bridges, heavy civil, urban transportation system, nuclear, industrial and utilities. We are very well-balanced now and Pattullo have added to this between the east and the west much better than before, and we’re also extremely well balanced for me between the kind of contracts between unit price, target cost, fixed price, which give us a real balance in terms of duration of our backlog. And I think this is really a very strong capacity of Aecon.

Yuri Lynk

Certainly, it's nice to see the diversity. I guess just back to the expectations for the revenue growth. I mean, Dave, are we talking single-digit, double-digit, just trying to narrow it down into at least a range?

David Smales

Yes, I mean we don't get specific guidance obviously. But I think if you take that 12 month backlog fairly stable recurring revenue and the kind of normal book and burn assumptions, you get to something in the single digits but still relatively strong.

Yuri Lynk

Last one from me, I guess. Have you have you seen any disruptions to your first quarter on the Coastal GasLink project or corona virus, or any of these other externalities that are quite active at the moment? Can you just give us an update on how those are impacting U. S. at all?

Jean-Louis Servranckx

Yes, I mean I can do it. On our pipeline activities, you know that we have begun one spread on the Trans Mountain and we have been awarded also to spread on Coastal where we are prepared to work. All of those are on undisputed land so that we are absolutely at the moment no interferences and no issues. Regarding the corona virus, I mean of course we are actively monitoring the situation. I mean our priority is health and safety of our people, and we have not seen any interruptions, I mean, to our work or our supply chain. So far what it shows that we have been working during last weeks on it, our stepped mitigation plan is ready and this is where we are.

Operator

Your next question comes from Jacob Bout from CIBC. Your line is open.

Jacob Bout

My first question here is just on the construction margins that we saw in the quarter quite strong. You just talk about the -- so what happened in the quarter and then can we expect further margin expansion in 2020?

David Smales

So Jacob, you’re right in terms of construction margin in Q4 but more importantly for the year as well, so the trend continues to be positive overtime, which is what our goal is. We always say don't look at one quarter in isolation. There's always a mix of work and different things going on in each specific quarter. But over the course of the year, our margins continue to move in the right direction. I think as we look forward, we expect continued progress. We continue to be very selective about the type of projects we bid, our margin expectations on what we're bidding and that should all combined with good execution to see margins continue to improve. So that's the objective.

Jacob Bout

And then on the concessions, in the past, you talked about expecting the earnings contribution be fairly stable over the next year, year and half. Is that still the expectation? And then can you just remind us again as we think about corona virus and the likelihood of airline volumes to decline. What that impact would look like for Bermuda?

David Smales

So the answer to the first part of that question, yes, we expect things to be to be relatively stable over the next 12 to 24 months in concessions business. It will only start to change in terms of profile once the logic Canadian concessions move into the operations phase, but that's still a couple years away at this point. In terms of traffic, obviously at this point, we haven't seen any impact. But as Jean-Louis said, we're continuing to monitor that.

We do have various, I guess protections in place in the commercial structure of our arrangement there that would protect us to some extent in a worst case scenario around two thirds of our revenue would be protected. But obviously, it would be a negative impact to some extent if we saw widespread reductions in capacity or travel into Bermuda as a result of corona virus but at this stage, no indications of that.

Jacob Bout

And then just last question, how active have you been in your NCIB year-to-date?

David Smales

So we just released the latest through to the end of February and so it's all probably record. We’ve purchased about 850,000 shares give or take, which we spent about $15 million. We come out of blackout period shortly and you know at current share price levels, expect to continue to be active on that program going forward.

Operator

Your next question comes from Ben Jekic from GMP. Your line is open.

Ben Jekic

Just two quick questions, I wanted to just confirm. So Pattullo Bridge is $1 billion, it's a 50-50 joint venture and the win will hit the backlog in the first quarter?

Jean-Louis Servranckx

Yes. To be a little more precise, it's $970 million, it’s a 50-50 joint venture. It will be added to the backlog on the fourth quarter of -- first quarter of 2020. And we have a limited notice to proceed and then we are now ramping up our activities on the bridge.

Ben Jekic

And my second question is if I look at your -- the composition of your backlog in terms of contract type, the fixed price portion is 66%, which is quite a bit higher than revenues in 2019. Can you just refresh our memory on what -- or do you have any targets around that composition? Or is there any specific sort of risk management? I mean, your execution has been quite strong. Can you just elaborate on that?

Jean-Louis Servranckx

We don't have a specific target about the mix. We have a specific target on building efficiency and this is where I believe our focus. What you say about backlog and revenue depends on -- I mean, just come from the fact that our record revenue not in the backlog and this is what created this kind of discrepancy, but it has always been the case for Aecon. It;s very important as I say to Yuri a few minutes ago, I mean to know the balanced capacities that we have now at Aecon, for example, I mean we had new award for $3.5 billion during 2019. Our revenue is $3.5 billion and you've probably noticed that we just entered one big lump-sum turnkey job that was 401 lane on which we have a share of approximately $300 million.

David Smales

And I would add to that Ben is as we look forward we don't expect to see that mix change significantly either. So we still expect revenue to be pretty well balanced between the two components just as 2019 was. So the backlog profile is one thing but the revenue profile is typically in balance and we don't see that changing moving forward.

Operator

Your next question comes from Frederic Bastien from Raymond James. Your line is open.

Frederic Bastien

Can you provide some tidbits on the two additional tuck-in acquisitions you made and how they complement your business? Thank you.

David Smales

So we've got Voltage, obviously, which Jean-Louis referenced in his remarks, which is medium to high voltage electrical transmission, and just see that market being good growth area for us. It's an area that has synergy for us, because we did a lot work around medium high voltage transmission, but not actually the high voltage stuff itself. So we do a lot of civil work around it. We do more local distribution it plugs into but that was the piece that was missing for us.

What we how happens -- a way for us to growing that space and we expect demand in the areas we grow significantly. The other one was the other recent one with SCI Telecom, which is a small utility business, which basically expands capabilities in telecom further east, so into Quebec and through to the East Coast. I think with all the activity going on in that space, particularly the next phase of 5G, SCI is well positioned to help us capitalize on that and increase our presence with existing clients into other geographies.

Frederic Bastien

It's been nearly four months I guess since the last call, since you last commented on the competitive landscape, particularly in respect to the guys you're going against on large scale projects. Could you provide a bit of an update there, is the environment, is it unchanged, has it gotten better or has it become more competitive?

Jean-Louis Servranckx

Yes, I can do it. I mean the trend is the same that what we’ve been expecting four months in a row. We just can see that there is more discipline against our competitors. We have just checked it, I mean with Pattullo. This being said, I mean as I already told you, we are comfortable and really comfortable with the backlog between $6.5 billion and $7.5 billion where we are now. We are not starting at all so we are extremely disciplined in our bidding activity. We have our target. We put our best team on our targets to be sure that our estimates are perfectly accurate, and we evaluate the risk on each project solely. So this is where we are at the moment.

Operator

Your next question comes from Michael Tupholme from TD Securities. Your line is open.

Michael Tupholme

Can you provide a status update on some of your larger ongoing infrastructure projects, in particular the REM project and the Eglinton LRT project?

Jean-Louis Servranckx

Okay, all are progressing well for project of this size and duration. I mean obviously, there is a learning curve between Eglinton and then REM and Finch. And your first question was about REM, it's progressing quite well. We have a very strong team and we are on time of this job, and I'm very happy about it.

Michael Tupholme

And anything further on Eglinton in terms of specifics?

Jean-Louis Servranckx

Eglinton is $5 billion job across Toronto. I mean, first of all, we will come and we're extremely happy about the provincial government announcement about this Building Transit Faster Act. It's very important. It will help expedite planning, design and construction process on those big LRT. And you remember that efficient utility relocation, efficient land access and timely access to municipal services rights of way, all those are extremely important for us. So we continue to work with Metrolinx and IO, Infrastructure Ontario, to deliver this transit system on timeline that does not compromise, neither quality nor safety. Obviously, we are currently in discussions on resolutions on two key issues and we cannot provide further details at this time.

Michael Tupholme

Just a question about the project pursuit pipeline in your commentary and in the outlook, you sound fairly positive on the outlook as it relates to pursuits, probably pursuits in 2020. Based on an assumption of the historical normal win rates if that's a reasonable way to think about it, based on the project pursuit pipeline that you have today. Would you expect to potentially see new wins in 2020 exceed what you did in 2019? Is that the sort of situation we could be looking at?

David Smales

It's obviously hard to predict exactly, because you don't know which projects you don't know the exact timing. What we would say is if you look at 2019, we really [announced] any so-called mega projects but still managed to maintain backlog exactly where it was at the end of 2018. So I think sometimes people get fix date on these very large projects. They do create kind of a one-time step up and then you work it down again overtime. But we're confident with the mix of work that we’re pursuing, largest, medium sized, smaller projects, that we'll continue to maintain backlog in the range that Jean-Louis referenced, which is more or less where we are today.

Obviously, if we were to add a couple of larger projects similar time then we'd see a step up. But it's very hard to predict exactly when those are going to be awarded, which ones we're going to win. So I don't want to make any firm predictions, but we certainly expect to continue forward with a strong backlog. We saw a step change in 2018 and we now come to operating at that higher level of close to $7 billion.

Michael Tupholme

Just a question about the Voltage Power acquisition and the move into that transmission distribution area. With that acquisition, does that provide you what you need now to be active in that part of the market nationally? Or is the idea here that you may need to look at other acquisitions in that area to further build out that presence, if you want to do that work sort of across the country?

Jean-Louis Servranckx

It definitely gives us a very good base and we are very comfortable with this company. I mean, of course we will leverage the acquisition of this company to broaden our activity and this is what we call tuck-in acquisitions.

David Smales

They do have a track record of operating nationally. The nature of the industry is very mobile and so they've operated coast to coast. And no, we don't expect to have to make any other kind of acquisitions to add to that. We bring our own capabilities in addition to the expertise that Voltage has, and the combination of the two allows us to go wherever the work is in that space.

Michael Tupholme

And then just lastly, Dave, can you help us in terms of how we should be thinking about changes in noncash working capital in 2020, both full year basis and if there's anything unusual or different this year about the seasonality?

David Smales

No, nothing particularly unusual from a seasonality perspective, so just for everyone's benefit that usually seizes start to build working capital in Q2 and Q3 and then it kind of aligns in Q4 and through Q1, which is what we saw this year and don't expect that general trend to be any different in 2020. The one thing, again, coming back to large projects and unpredictability of the timing of some of those awards, that's the only thing that could really move the timing a little bit.

As you saw in 2018 when you get awarded, one or two of these major projects there’s usually very large advanced payments associated with those that lead to a big influx of cash at the start of the project and take those aside and the timing of those. We don't really expect any kind of material working capital impacting 2020 kind of positive or negative, we do expect the top line to grow but we don't expect to see a huge impact on working capital. It should be relatively stable year-over-year with the caveat of those large projects and the timing of those.

Operator

[Operator instructions] Your next question comes from Chris Murray from AltaCorp Capital. Your line is open.

Chris Murray

Just turning to Bermuda and just maybe a couple questions about this. So I guess the thought is that the new terminal be ready, I would assume we talked about Q3 or before the end of the year type contract. A couple things, you gave us some indications in your outlook about some changes around interest and amortization, and thank you for that. I'm just wondering how the revenue might transition as you move to operating the new terminals from the old terminal. Should there be anything that we would expect to see different in that?

David Smales

Well, the only impact really Chris is because the construction will end. Right now, we have some revenue flowing through Concessions, which is really the Construction revenue that flows through Concessions, which all get eliminated on consolidation anyway. So the total consolidated Aecon level, it won't have an impact from a Concessions perspective but obviously, we'll see less revenue on the Construction side from Bermuda.

But in terms of operating revenues from the airport itself, we don't expect any significant change. There is some upside to moving to the new terminal in the short-term, because of all sub Concessions, so things like retail and other commercial opportunities within the airport that will lead to some higher revenue but it's not like a step change. Overtime, obviously the new terminal has increased capacity and ability to add additional flights but that doesn't happen overnight, that’s the kind of thing we will work on as we go forward.

Chris Murray

And the margin profile, if we sort of back out that intercompany revenue, margin profile seems pretty healthy, expected that keeps in the same kind of ballpark of where you’d spend last few quarters?

David Smales

Yes, we expect overall earnings from Concessions to be pretty stable.

Chris Murray

And then just housekeeping one for me, just taxes last year the effective rate seemed to be a little bit lower than your statutory rate. How do we think about taxes with the mix of revenue that you guys are expecting this year?

David Smales

So overall, we expect the effective rate to increase in 2020, purely as a function of lesser our earnings overall and this is again mid-year onwards coming from Bermuda because construction will come to an end. So there is a portion of our construction revenue and profits today coming construction in Bermuda [Technical Difficulty] and that will go away. So the effective rate will creep up a bit but again not a huge impact and only really kicks in later in the year.

Chris Murray

So you still think it will be below the Canadian statutory rate then for 2020. Is that fair?

David Smales

Yes.

Operator

Your next question comes from Jean-Francois Lavoie from Desjardins Capital Markets. Your line is open.

Jean-Francois Lavoie

So just coming back to the potential for margin improvement within the Construction business, in the MD&A you talked about the creation of the urban transportation system team. I was just wondering if you could provide additional details or example of the benefit that this team brings to the operational execution of those projects. Thanks.

Jean-Louis Servranckx

It's about our operational sectors within the Construction segment. My idea is that you don't expect and you don't need the same quantities for our teams when they have to do lot of treatment plans, or where they have to do bridge or a dam, or when they have to do an LRT that we call urban transportation system. I mean those jobs aren’t any difference, they are usually bigger and they are within the scope of work an important part of our system and system integration.

So we have just been building during the last 12 months very strong team to take care of the project. At the moment, we have three in our backpack they are Eginton, REM and Finch, and we just want to have the best team in Canada to take care of those project. I’ll remind you that a big part of the pipeline infrastructure is about those LRT projects and this is why we have specialized division of the scope.

Jean-Francois Lavoie

And maybe if we come back on the M&A strategy, you talk about the acquisition of Voltage Power. But is there any other white space in your service offering where would you like to expand in the short term, because I think you mentioned in the past your desire to expand in the mining sector.

Jean-Louis Servranckx

Our desire to expand in the mining sector, I don't remember that I said this, and I don't know who have said this but not really. I mean we took a decision in 2018 and I can tell you that we are extremely at the about having divested our mining division and oil sand in the north of Canada so -- and the time, I mean we are constantly looking at the market and any tuck-in opportunities that give us a capacity to set perform better, to enter in a special niche of the market where we are not present. I mean we will be ready and we have the financial strength to do it without any problem.

Jean-Francois Lavoie

And maybe one last for me, you mentioned earlier the pipeline of opportunities that is very robust. I've seen yesterday that you were shortlisted for the Union Station enhancement project that will be procured through the alliance contracting model. So I was wondering if you could talk a little bit about your strategy for those type of project in the future as they become more and more present in the competitive landscape? Thank you.

Jean-Louis Servranckx

Yes, we are very happy of having being qualified for this Union Station under the alliance model. It has been, I mean, it is through a number of discussions and market sounding with our clients. We have been able to explain to them that in the case of Union Station, it was much too much complex and much too much depending on preferences from third parties to be dealt with a fixed price or with a P3 scheme.

So our client Metrolinx from evolution and this job has now gone out on the market as an alliance contract with probably a mix of target cost of unit price contract management, so the model is not totally fixed. And once now that we are prequalified, we know a little more. I mean, it's important for us if this trend is going to develop in Canada to be within the companies recognized to do it.

Operator

We have no further questions. I would now like to turn the call back over to Mr. Adam Borgatti for closing remarks.

Adam Borgatti

Thanks Julian and thank you all joining us. Once again, if you do have any questions, always feel free to follow up. Have a great rest of your day. Thank you.

Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.