ATCO Ltd.

Thank you, and good morning, everyone. We're pleased you could join us for ATCO's first quarter 2025 conference call.

On the line today, we have Katie Patrick, Executive Vice President Chief Financial and Investment Officer; and Adam Beattie, President of ATCO Structures. Before we move into today's remarks, I would like to take a moment to acknowledge the numerous traditional territories and homelands on which our global facilities are located.

Today, I am speaking to you from our ATCO Park head office in Calgary, which is located in the Treaty 7 region. This is the ancestral territory of the Blackfoot Confederacy comprised of the Siksika, the Kainai and the Pikani Nations; the Tsuut’ina Nation and the Stoney Nakoda Nations, which include the Chiniki, Bearspaw and Goodstoney First Nations.

I also want to recognize the City of Calgary is home to the Metis Nation of Alberta, Districts 5 & 6. We honor and respect the diverse history, languages, ceremonies and culture of the indigenous peoples who call these areas homes.

Today, we'll hear from Katie, who will deliver opening comments on our financial results and recent company developments followed by an update from Adam on ATCO Structures. Following today's remarks, the ATCO team will take questions from the investment community.

Please note a replay of the conference call, a copy of the presentation and today's transcript will be available on our website at atco.com following the call. The materials can be found in the Investors section under Events & Presentations.

Today's remarks will include forward-looking statements that are subject to important risks and uncertainties. For more information on these risks and uncertainties, please refer to our filings with the Canadian securities regulators.

During today's presentation, we may refer to certain non-GAAP and other financial measures including adjusted earnings, adjusted EBITDA and capital investment. These measures do not have any standardized meaning under IFRS.

And as a result, they may not be comparable to similar measures presented by other entities. And now I'm pleased to turn the call over to Katie for her opening remarks.

Thanks, Colin and good morning, everyone. Thank you all for joining us today.

ATCO had a strong start to 2025 achieving adjusted earnings of $160 million in the first quarter. This is $12 million and 8% higher than the previous year.

Higher adjusted earnings in the first quarter of 2025 were mainly due to increased activity at ATCO Structures, growth in rate base and cost efficiencies at ATCO Energy Systems, stronger seasonal spreads in the natural gas storage services at ATCO EnPower, and growth within our newly created ATCO Investments segment largely driven by the inclusion of ATCO Energy after its purchase mid-last year. In our results this quarter, you would have seen a simplification of our operating segments with the inclusion of ATCO Investments.

Going forward, our 40% equity investment in Neltume Ports will also be reported in our ATCO Investments segment, alongside our wholly owned subsidiaries ATCO Land and Development, Ashcor, ATCO Energy and Fresh Bites or BFK. Diving further into our results.

Canadian Utilities saw earnings growth in Q1 2025, driven primarily by rate base growth within our regulated utilities. As a reminder, our Alberta Utilities allowable ROE was reset from 9.28% in 2024 to 8.97% for 2025.

Additionally, the 50 basis point efficiency carryover mechanism, we were awarded in 2023 and 2024 for achieving efficiencies during PBR2 came to an end. Despite these headwinds, we saw an increase in rate base growth and cost savings, which more than fully offset this.

At Structures & Logistics, adjusted earnings for Q1 2025 were $2 million higher compared to the prior year. ATCO Structures delivered growth through the first quarter with adjusted earnings of $26 million, which was strongly tied to an increase in workforce housing sale activity in Australia.

Adam will discuss our Structures business further in his update. Moving to ATCO Investments.

Our Neltume Ports investment delivered adjusted earnings growth of $3 million compared to last year. Higher earnings were mainly due to improved cargo mix and improved margin across the operations, within our portfolio of ports.

Neltume remains focused on generating earnings growth and continues to be a stable contributor to earnings and dividends for ATCO. Our ATCO Investments segment also benefited from additional earnings from ATCO Energy, which was acquired in the third quarter of 2024.

Looking at our cash flows. Our stand-alone ATCO businesses, which exclude Canadian Utilities reported cash flow from operating activities of $120 million in the first quarter, up from $52 million in the prior year.

This growth was driven by timing and our strong focus on finding efficiencies within our business. This growth supported our operations, capital program and normal course financial commitments.

Further, our organic capital investment plan over the medium term at the ATCO level is expected to be funded, by our internally generated cash flow. With that, I will now pass it over to Adam to further discuss our ATCO Structures business.

Thank you, Katie and good morning, everyone. As Katie alluded to, ATCO Structures delivered another strong quarter with adjusted earnings of $26 million, $2 million higher than the same period in 2024, representing our 11th quarter in a row of delivering year-over-year adjusted earnings growth.

In quarter one, Structures delivered adjusted EBITDA of $62 million, an increase of $7 million compared to the previous year. This quarter we saw an increase in revenue from workforce housing activity and site installation work in Australia, which primarily relates to two workforce housing contracts that commenced in late 2024.

Despite this shift with additional activity from workforce housing projects in quarter one this year, we have concurrently continued to focus on our space rentals business as a consistent and stable contributor, to our base business performance. We continue to develop our ability to deliver and grow performance in our base business, execute major workforce housing projects and expand into new lines of modular building applications such as single and multifamily housing.

Consistent with our strategy and in a continued commitment to execute our future growth plans to move our core business model into new markets, we were pleased to formally open our newest manufacturing and commercial operations located in Adelaide, South Australia. This new addition to our global footprint allows us to meet growing customer needs and connects our national footprint to provide modular solutions across all of Australia.

ATCO Structures continues to invest capital in Canada, the US and Australia to capture market share and execute its expansion strategy for our sustainable base business. Over the last five years, our global space rentals business has seen growth of nine branch locations, five of which were added over the last year; an increase in our total fleet size by 53% to over 25,000 units that are well diversified geographically across the five countries we operate; and growth in our average rental rate of 46% all while maintaining an average utilization rate of 74%.

This performance demonstrates the effectiveness of our strategy, which is to increase our customer base and market share by effectively moving new fleet onto contracts, while maintaining sufficient available stock to quickly respond to the needs of existing and new customers. As I've discussed previously, 2024 was a year marked by an important acquisition NRB Modular Solutions.

This followed our acquisition of Triple M Housing at the end of 2022. NRB and Triple M are market leaders in modular multifamily housing and single-family housing respectively within Canada.

Recent government commitments to prefabricated housing solutions and investment in delivering housing solutions via off-site modular methods of construction provide encouraging future prospects to these strategic additions to our portfolio of products and capabilities. In 2024, our focus was on fully integrating NRB into our existing operations.

As we move into 2025, we expect NRB to begin to positively contribute to revenue growth, as we utilize our new capabilities to service demand for modular and prefabricated housing solutions across Canada. Beyond housing, the NRB acquisition also plays a key role in our base business growth strategy, by providing critical manufacturing and supply capabilities to self-perform the expansion of our fleet and by increasing our expertise and capacity to provide world-class modular products and services to our nonresidential customers across Canada.

With the integration of this acquisition, ATCO Structures is now the only national modular company that offers multiple forms of advanced modular products, rental fleet, diverse manufacturing capabilities and locations and world-class site construction and project management capabilities across all of Canada. Q1 was a positive start to the year for Structures.

As we look ahead, we remain focused on sustainable earnings growth. There continues to be a solid pipeline of project opportunities to secure, execute and capitalize on and I look forward to sharing our performance as we continue to position ourselves as the leader in modular products and solutions globally.

I'll now pass the call back over to Katie.

Thank you, Adam. I want to briefly touch on our newly created ATCO Investments segment.

As I mentioned earlier, we simplified our operating segment structure with the inclusion of ATCO Investments, which provides our stakeholders additional disclosure across our portfolio of investments. Our investments held within this segment include: our 40% equity investment in Neltume Ports, a port operator and developer with a diversified portfolio of multipurpose bulk cargo and container terminals; Ashcor, who for over 25 years has supplied premium and reliable fly ash for concrete and cementing applications; ATCO Land & Development, which has a portfolio of commercial real estate properties and recently announced its new venture Viva Homes by ATCO.

Viva Homes is focused on the attainable housing space with a strategy of bringing high-quality cost-competitive housing to the market through the utilization of advanced modular construction processes. And ATCO Energy, an acquired business in Q3 2024, which provides retail electricity and natural gas services along with the full range of home services and home protection plans; and finally Fresh Bites, a foodservice company that also includes, our retail food services brand, Blue Flame Kitchen.

Our portfolio of investments at ATCO continues to be tied to our strategy of investing in the businesses in the essential services space. Although smaller in scale compared to our core businesses, namely Structures and Canadian Utilities, these businesses within our ATCO Investments segment, have significant growth aspirations and we expect them to generate meaningful growth for our portfolio over time.

Overall, our first quarter was a very strong start to the year. We will use this momentum to continue executing our strategy, expanding our earnings and finding efficiencies.

Despite the very uncertain macroeconomic environment, we are confident in the resiliency of the ATCO portfolio and potential opportunities ahead. As I've mentioned in past calls, on a relative basis, our companies have far less exposure to the ongoing trade war that most other public Canadian companies do.

Further, we have robust optionality to benefit from a myriad of potential federal policy outcomes with our diverse exposure and experience in stable utilities, energy transition projects, traditional generation, natural gas infrastructure, affordable housing and as a trusted services supplier to the North and the defense sector. We remain focused on capitalizing on this broad expertise to expand and support our growth objectives in the year ahead.

That concludes our prepared remarks. I will now turn the call back to Colin.

Thank you, Katie. In the interest of time, we ask that you limit yourself to two questions.

If you have additional questions, you are welcome to rejoin the queue. I will now turn it over to the conference coordinator for questions.

Good morning everyone. First question is on modular housing.

So, during the election here in Canada, there was a relatively ambitious platform the create and build Canada homes platform which could give $25 billion of debt financing and $1 billion of equity financing to prefab homebuilders. Do you have a strategy to engage with the government to help facilitate an expansion of this business?

Thanks, Rob. It's Adam here.

Yes, certainly. Look it's early days with the -- at the moment all the government has released is their two-page report.

So I think more will come to light over the next probably two months in terms of how that funding is planned to be released. But certainly, I think engagement with government, engagement with developers and customers, we're well positioned in multiple jurisdictions across Canada for a multitude of housing forms from social housing or affordable housing to high-end single-family homes as well.

So certainly we will be engaged by bodies like CMHC to obviously have discussions around what that -- how to unlock that opportunity or potential to provide some greater housing solutions to Canada.

All right. I appreciate that.

And then continuing on in Structures. For your North American operations, have you seen any impact on margins or cost of goods just given the tariffs?

And how are you dealing with those?

Yes, certainly. I would say not significant at this point impacts.

Certainly, when you look at in our housing components appliances, a large portion of our house fit-out appliances are coming from the US. That's quite common.

So that's an impacted area. So there's a slight impact to margin relative to items like that.

But overall, not significant at this point. I would think it would be a very slight margin impact.

All right. I appreciate the color.

Thank you.

Thanks and good morning everyone. Just keeping with that same theme about maybe not just tariffs, but trade and macro uncertainty.

As you think about your customers in this business, I recognize that your customers have diversified in terms of types of customers that you now have. But can you speak to their willingness to sign new contracts?

How have you seen the backlog? And whether or not you think that the momentum carries on recognizing that you're now in your 11th consecutive quarter of year-over-year growth in earnings.

Yes, certainly. Thanks Maurice.

I would say that there was definitely a bit of a short pause in decision-making during election transition, so -- or election period. So it hasn't been majorly impactful at all.

We've seen some good project decisions being made even during that phase as well. And we've also seen probably an increase in activity in terms of reinitiating some of the project discussions that we've been having post-election decisions.

So, I'm actually quite confident now we have some stability within probably three of our major jurisdictions, the US, Australia and Canada in terms of political certainty with leadership. That's a positive sign, and hopefully we'll see the good tailwinds that we've had continue.

Understood. If I could just finish off with the other side of S&L.

More broadly, when you look at the new federal government, and also given the push by certain NATO countries, it feels like we will be having an elevated level of spending for defense in this country. So, for ATCO, I assume this means more opportunities for ATCO Frontec, which has been obviously experiencing a little bit of a muted growth, over recent quarters.

So, wondering what your outlook is for that business.

Yeah. Thanks Maurice for that question.

It's Katie. I think we're definitely optimistic about -- and we have long been advocating that there has been a lower defense spending than what we think is necessary for this country.

And I think that has been recognized by many of the leaders right now. We do expect there to be increased investment in the Defense sector.

And I would just say that we are incredibly well positioned. We have a long history of great partnerships in the North, with our Indigenous partners there.

And our operating experience, I think, positions us very well. You'll see that we did announce a smaller contract win, and I think that's indicative of the recognition that we are getting for that strength in operating in the North and in serving the Defense sector.

So we are hopeful that we'll see more coming from that as we move forward.

Perfect. Thank you very much.

Yeah. Thanks everyone.

Katie, you made a comment about ATCO Investments, and you've carved that out as a segment and believe it could be meaningful growth -- obviously off a low base. How do you see that growth kind of manifesting itself?

Is it M&A driven? Is it more organic?

And any sort of timelines? Is it a little bit of a time to ramp some of those businesses, incubate them before the growth starts to kind of come through the earnings results?

Yeah. Thanks Mark.

No, I mean, I think a big -- one of the big drivers for the creation of that segment, as I've alluded to, was a simplification of the presentation of our results. I think it provides a clearer focus on our major business as well as showing that there is some growth within ATCO Investments.

I think overall the growth within that segment could come from a combination of both -- which is, that would be where we would put, depending on the size, potential new M&A investments in there, as well as the individual growth of those companies. You are right that overall, some of those businesses, namely ASHCOR and potentially Land and Development, may have a ramp-up period here while we get our feet underneath us and before we would see some growth.

But we're focused on trying to scale those quickly and particularly the Land and Development, where we have the Viva Homes. We're obviously going to look to act in line with the current policy incentives to move quickly to build new affordable housing.

And I don't know if you guys have like internal targets. Or would you be in a position at some point to kind of define like the buckets of earnings growth between what happens in Canadian Utilities, Structures & Logistics, and then ATCO Investments?

Is that something where you think you'd be in a position in the coming quarters to kind of frame where the earnings growth comes from?

I think that we will certainly look to do that over time. But I think right now, as I said, part of the nature of having an investment portfolio is to give that some of those businesses sometime to start to realize their ambitions.

And then just a question on Structures & Logistic, in prior calls, you talked about arguably some -- a lot of white space in the U.S. market.

You have low market share. Customers seem to want some alternatives out there.

How is that progressing? How' is the team sort of sourcing deals working?

Do you have to find sort of more aligned strategic partners to drive growth in the US? Just wondering sort of the path forward for sales growth and growth of Structures in the US market.

Hi, Mark, it's Adam. To be honest most of our -- so our strategic plan there is primarily organic like it's been based on an organic strategy.

And we've really been able to access both existing customers that we've had in other geographies that we've expanded into that market via, but also just direct competing. Like we have a new fleet asset competing with a new fleet assets that are coming into the market, that are designed to be competitive against existing fleet assets that have been around for a very long time.

So that's given us a really good strategic impulse into accessing particular projects and customers, as that product mix sort of moves to a higher quality of fleet demand. So that's been a good strategic position for us to capitalize on our growth plans in that market and that's been very well received.

And we've been able to build assets and get them contracted very quickly using some of those propositions.

So no impediments in terms of brand awareness or opportunities to make sure clients are aware of your offering versus competitors?

Correct. I wouldn't see at the scale we're at certainly not at the moment.

So certainly, the brand and a new brand in that market because there was a lot of previous consolidation in it has actually been extremely well received to have another competitor there. And that's actually been -- the introduction of the brand has been very strongly received by the market.

Good to hear. Okay.

Thank you.

Hi. I had a question -- another question on ATCO Investments and Neltume.

Was the ramp-up in earnings for the quarter is that -- I know you mentioned a mix of cargo. Was that mostly due to the trade war escalation?

Or it's something more specific in terms of projects or more specific to your ports?

Yeah. Thanks, Ben.

No specifically with Neltume, the increase in earnings in the quarter was not directly related to anything around the trade war tariff situation. As you know most of our ports are in South America and a large portion of the cargo is related to trade between South America and the Asian markets, so relatively less impacted from some of the tariffs.

The majority of that uptick is related to specific changes in cargo within specific ports. So for example, we can see some higher margins associated with special project cargo such as wind turbines, which we do unload in Northern Chile and some places.

So that's one specific example. But it's sort of across the board a number of different factors leading to that higher margins.

Okay. Got it.

Thanks for that. And I know there was some commentary too around Structures, Alabama data centers and your second contract.

Can you comment maybe on the outlook there just in that pocket of that industry? Is that -- do all data centers need work or structures?

Or is it more just specific to the state or the area that that data center is being built out?

Yes. So the construction of data centers needs -- like they're large and they're long-term construction projects.

And what we're seeing in parts around the world is that there's multiple -- like there's regions or there's areas where multiple -- there's a large development plan for multiple data centers. So the reality is that's good long-term contracts for construction officers to support the build of these facilities for the future.

And certainly, as data center construction is occurring in basically all of our geographies, we're seeing a demand for site officers and construction officers to support the workforce that are building those centers.

All right. Thank you very much.

Thank you, Danielle. Thank you all for participating today.

We appreciate your interest in ATCO and we look forward to speaking with you again soon.