ATS Corp (ATS) 2014 Q1 法說會逐字稿

Good morning, ladies and gentlemen. Welcome to the ATS Automation first-quarter conference call. I would like to remind you that this conference call is being recorded on August 14, 2013 at 10 AM Eastern Time. Following the presentation we'll conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions.

(Operator Instructions)

I'd now like to turn the call over to Stewart McCuaig, Vice President and General Counsel of ATS. Please go ahead, sir.

Thanks, operator, and good morning, everyone. Your main hosts today are Anthony Caputo, Chief Executive Officer of ATS; and Maria Perrella, Chief Financial Officer. Before we begin, I'm required to provide the following statement respecting forward-looking information, which is made on behalf of ATS and all of its representatives on this call.

The oral statements made on this call will contain forward-looking information. The actual results could differ materially from a conclusion, forecast or projection in the forward-looking information. Certain material factors or assumptions were applied in drawing a conclusion, or making a forecast or projection as reflected in the forward-looking information. Additional information about the material factors that could cause actual results to differ materially from the conclusion, forecast or projection in the forward-looking information and the material factors or assumptions that were applied in drawing a conclusion, or making a forecast or projection as reflected in the forward-looking information are contained in ATS's filings with Canadian Provincial Securities Regulators. Now it's my pleasure to turn the call over to Anthony.

Good morning, ladies and gentlemen. I'm assuming you've seen our press release. Maria will review financial highlights in a few minutes. In the first quarter we continued to make progress with our value creation plan. Our financial results were solid. We achieved strong order bookings and continued to build our backlog. Today I'll update you on our Q1 performance, conditions in the market and our outlook. I will then make some summary comments.

Q1 revenues were CAD150 million. Life Sciences accounted for 44% of our revenues, giving us a nice balance relative to recent quarters. Our Q1 EBIT margin normalized for restructuring was 10%, an improvement over Q4. EBIT was driven by strong gross margins on improved program execution. On bookings we secured CAD165 million of new orders. Life Sciences accounted for almost half of our bookings, including cash payments of about EUR15 million on our Nigerian program.

Approximately 30% of our bookings came from the Energy market driven largely by Nuclear. You may recall I have spoken about our strategy to pursue opportunities in this market for a few quarters. Transportation was lower than usual but the market remains robust with significant opportunities. In the long-term our goal is to achieve backlog balance across our markets. Overall, our approach to market contributed to achieving a record backlog of CAD415 million.

On our EUR65 million Nigeria enterprise program work is progressing. Our subcontractors are working through the design and have completed some manufacturing. We are now entering the assembly phase of the program where materials hit the shop floor and integration will begin. Although the program has still not reached financial close, our customer has been obtaining bridge financing, and as I noted, ATS received milestone payments of EUR15 million during the quarter. On our CAD40 million enterprise program for North American Life Sciences customer, we're also on track. As in the case of Nigeria, we have essentially completed design work and have kicked off assembly. Activity will ramp up during the next few quarters and we are engaged with the customer on further opportunities.

As I noted last quarter, the separation of Solar along with the strength of our core business, has provided us with an opportunity to better utilize the Cambridge campus and re-balance global capacity. During the quarter we de-commissioned and shipped our module assembly line, reallocated former Solar manufacturing space to our core ASG business, re-balanced some of our global capacity and improved our cost structure. As a result of these actions, we incurred restructuring charges of CAD2 million in the quarter. I expect these actions will have a payback period of less than one year. Also as I indicated last quarter, we expect to offset these costs through the divestiture of a vacant Cambridge facility.

Turning to our markets, funnel and proposal activity remain healthy. By market, Energy has gained strength with good activity in both Nuclear and Oil and Gas. Transportation is strong and we continue to see a number of opportunities in both traditional and new technologies related to Automotive and Heavy Equipment. Life Sciences also remains strong with opportunities in both Pharma and Medical Devices. Consumer and parts of Electronics still remain weak. We are successfully transitioning the quality of our backlog which results in increased predictability, more strategic customer relationships, better program control and less sensitivity to macroeconomic forces. Our goal is to continue to provide value-based enterprise programs where ATS delivers enabling plant solutions to our customers. We are now well-positioned for revenue growth.

In terms of outlook, the health of the global economy remains somewhat uncertain. In North America the recovery is slow but encouraging, while Europe and Asia still remain weak. Our competitive position is strong. We are seeing significant opportunities and some of our customers continue to exercise caution with respect to their capital investments. We have a strong balance sheet that improved during the quarter. We generated CAD16 million of operating cash and received almost CAD20 million from the sale of our Solar projects and assets. Over the course of the year we expect to further increase our cash available to fund growth.

On acquisitions, we have dedicated considerable resources to corporate development. We have several targets at various stages of discussion and are generating more. As a reminder, we are targeting companies based on their ability to bring market and technology leadership, scale or opportunity in segments we currently operate in or in new segments that have characteristics that are attractive to ATS. I'm as confident in this element of our strategy as I was about fixing ATS, separating Solar and improving our approach to market.

In summary, our first quarter operating performance was solid and we have record backlog. Strategically we are focused on growing our core ASG business. Organically we are successfully transitioning to include enterprise programs. Accordingly the magnitude, quality and predictability of our backlog and prospects for growth have improved. We have made progress in penetrating the Nuclear market and we see continued strength in Transportation and Life Sciences. From an acquisition point of view, we are applying significant resources with a view to making this a more meaningful part of our strategy. At this point I'd like to turn the call over to Maria.

Thank you, Anthony. Overall our first quarter performance was a positive start to fiscal 2014. Our business continues to perform with good bookings and revenue, strong normalized EBIT and cash generation and a healthy balance sheet. This morning I will focus primarily on ASG and our balance sheet. I will comment on Ontario Solar as it relates to our cash position and expected future cash inflows.

I'll start with results from continuing operations. Q1 revenues of CAD150 million were similar to prior year's revenues of CAD152 million and Q4 revenues of CAD153 million. Over the last year, revenues have been relatively stable, in the range of CAD141 million to CAD153 million. Q1 bookings were CAD165 million as compared to last year Q1 bookings of CAD168 million. Over the last four quarters, bookings have averaged CAD155 million.

We are pleased with our progress in the Nuclear market, with Energy bookings accounting for approximately 30% of Q1 bookings. Transportation bookings were softer, reflecting normal quarter-to-quarter volatility that can occur from time to time, due to our approach to market and larger dollar opportunities. Q1 closing backlog was CAD415 million. Recall last quarter I explained how we improved the quality of our backlog, with the profile evolving to where 35% of backlog is now revenued in the next quarter, as compared to approximately 50% a few years ago. The profile of Q1 bookings is the same. Therefore backlog is expected to be revenued over eight to nine months.

As I said in Q4, the revenue profile of the Nigerian program is changing. Today we have booked EUR25 million of the original EUR65 million order, which has been funded through an initial deposit and then bridge financing. If financial close is achieved in this quarter, we then expect a revenue ramp over approximately three quarters commencing Q3. If funding continues through bridge financing, then project revenue ramp will not be as significant and it will take longer to revenue the program.

Looking at margins, gross margins showed a positive improvement. At 26.2% in Q1, gross margins were better than the 24% range of the last two quarters. Programs which reduced Q4 and Q3 margins are behind us and we continue to work to improve our performance. As I said last quarter, we expected to incur restructuring charges in Q1 of CAD2 million to CAD3 million. In the first quarter we incurred restructuring charges of CAD2.2 million. Rebalancing of workload by facility and segment following Solar separation was carried out. Expected payback is less than 12 months. We will continue to look at our cost structure and make adjustments when and where appropriate.

Excluding restructuring, Q1 SG&A costs were CAD23 million. This represents an increase from Q4 and Q3 spend, which was in the CAD21 million range, and reflects higher spending on M&A activity and employee performance compensation costs. We have said that we expect SG&A spend to be approximately CAD23 million to CAD24 million per quarter, excluding deal-specific acquisition costs. Over the last four quarters stock compensation expense as a percentage of revenue has fluctuated by approximately 0.5%, impacting EBIT margins.

In Q1 stock-based compensation was CAD1.3 million as compared to CAD962,000 last year Q1, or an increase of 0.2% of revenue. As a reminder, our stock compensation expense will be affected by our stock price, the revaluation of deferred stock units or early vesting of performance-based options. Earnings from operations, normalized for unusual or nonrecurring items and excluding stock compensation expense, was 10.8% this quarter. This represents an improvement from 10% in Q4 and 10.6% in Q1 last year.

Moving to the balance sheet, I'll review cash and working capital as a percentage of revenue. We had a very strong cash quarter with our total cash position and continuing operations increasing to CAD131 million from CAD105 million in Q4. Cash net of debts was CAD129 million. We generated cash from operations of approximately CAD16 million. An additional CAD8 million was received from Ontario Solar as repayment of inter-Company accounts and inter-Company loans. The Ontario Solar payments were funded from the proceeds of approximately CAD20 million received from the sale of the Ontario Solar projects and manufacturing assets. Additional future proceeds of approximately CAD15 million are expected from the Ontario Solar divestiture.

ASG working capital as a percentage of revenue of 15.7% at period-end was higher than the range of 11% to 14% last year. The increase is a result of investment in Transportation-related projects. We expect to continue to operate within the 10% to 15% range for the time being. With cash on hand of approximately CAD131 million, and unutilized borrowing room of CAD200 million under our existing credit facilities, comprised of the CAD250 million credit facility, less CAD53 million used for letters of credit, we have considerable resources to support our organic and acquisition growth strategies.

Turning to net earnings, in Q1 we generated earnings per share of CAD0.10 from continuing operations. Normalized for restructuring costs, EPS was CAD0.12 compared to CAD0.11 last quarter and CAD0.13 in Q1 last year. Discontinued Operations EPS was CAD0.12, reflecting gains recorded on the sale of Solar assets compared to a loss of CAD0.02 in Q1 last year. The effective tax rate for the quarter was 29%. The Canadian effective tax rate is approximately 26% and we expect to average in the 25% to 30% range in fiscal 2014. There will be variability when there are higher earnings and jurisdictions with higher or lower tax rates and where unrecognized deferred tax assets can be utilized to lower tax expense.

In summary, ASG's Q1 performance was strong. We are focused on our growth strategy both organically and through acquisition. We have both the foundation and resources to grow. Now we'd like to open the call to your questions. Operator, could you please provide instructions to our listeners? Thank you.

Ladies and gentlemen, we will now conduct a question and answer session. To allow as many voices to be heard as possible, please limit yourself to two questions per turn.

(Operator Instructions)

Otto Cheung, GMP Securities.

My first question relates to the Transportation segment. This quarter we saw revenue down slightly year over year and backlog was also down, but it appears like in your commentary you guys are pretty positive on the segments. Can you provide a little more color there and where you see the strongest opportunities there?

We haven't seen anything structurally different than this quarter than we've seen in quarters before. So I'm talking in terms of bid activity in terms of the nature of the opportunities, whether they be Automotive or whether they be Heavy Equipment. The funnel is strong. We're bidding work. We're not winning or losing any more than normal. So it's just what Maria said, which is normal course bigger programs. Sometimes they hit, sometimes they don't.

Okay. That's helpful. And then with respect to my second question, on the Energy segment, backlog was up as you mentioned, due mainly to the Nuclear contract. And you mentioned that this is a good growth opportunity. Can you provide a little more color on the potential growth opportunity that we can see here? And any indication of the bidding activity that you're seeing?

The scope of the opportunity is pretty significant. So what we're participating in is activities that boost power is undertaking on a number of reactors where they have refurbished some reactors. And there are six more reactors that require life extension between 2016 and '28. And so the magnitude of the opportunities is measured in billions overall for us. What we're currently doing is we are providing tools for a re-tube of the Darlington Nuclear Generating Station which is four units. It's a fairly significant construction project, which involves a number of participants. And our scope is to provide the tools/automation, if you will, for the re-tubing portion. It's 20 tools in various packages.

Okay. Great. That's very helpful. I'll jump back in queue for now.

Daniel Kim, Paradigm Capital.

Maria, wondering if you can clarify please, with regards to the amount of revenue recognized from the Nigerian contract, I believe you said CAD25 million to date. How much was in fact booked in the quarter?

The Nigerian contract, so we booked CAD25 million to date. And in the quarter, we've recognized bookings of -- Sorry, Daniel, bookings that you asked about or revenue?

Revenues, please.

Revenues. Revenues recognized to date are about EUR10 million, but that's from the start of the program until now.

Right. And do you have the number for the quarter as well?

The quarter, yes. We don't disclose. What I said in prior quarters is that we are in the beginning stages of the program where we spend time and dollars on engineering and design. So it's lower revenue recognition. And we recognized the first booking, the first part of the booking I believe, two or three quarters ago. So I'll provide that information.

Right. Okay. And sorry, to clarify then, I believe you suggested with financing plans underway, Q3 might see a revenue recognition dip in Q2 and then resume in Q3?

Yes. So what I've said is if we do get, or if the customer does get to financial close, there's about EUR40 million left to recognize on the program. And that would mean that starting Q3 we could see a revenue ramp, because we would be able to get the materials and do the assembly part of the program. If we don't get that and we just continue to get bridge financing, so that's smaller amounts over longer periods of time, then we won't see that significant increase in revenues happen.

Right. Okay. And sticking with the Life Sciences portion, I believe it was about a quarter or two ago when you were referencing a North American win. I believe it was in the neighborhood of CAD40 million, two lines to be installed. Delivery, I believe, over roughly 1 year, 1.5 years, beginning in the back half of this year. Is that still on track?

Yes. That's still on track. And whatever I would have said -- I think I said about 60% or 70% of those revenues would be recognized in fiscal '14. And it would be Q2, Q3, Q4 and that's still on track. That's happening and that's in our backlog.

Great. Okay. Thank you for that. One last question perhaps for Anthony. On the transport side, clearly what we've been seeing is some very strong Auto numbers particularly out of North America. And the question I have for you is, when we look at the numbers in the backlog in terms of what ATA is seeing and you juxtapose that against the opportunity, is it more a question of current auto manufacturers filling their current capacity so there's not a lot of retooling required? But what you're seeing going forward is significant more retooling opportunities there for greater revenue opportunities for yourself?

Traditionally, ATS participates on new program launches or retooling as opposed to capacity expansion. In our Automotive segment, we have a good balance between retooling and capacity expansion. And as we sit today, we are participating still in both. So we haven't seen the end of capacity expansion as far as our participation is involved.

Terrific. Thank you very much.

David Tyerman, Canaccord Genuity.

First question, overall, Anthony, I got the impression rightly or wrongly that you were seeing better opportunities on the growth front now than perhaps in the last little while. Is that correct? And what would be driving that?

What we're seeing is success with the transitioning or transforming of our backlog from programs that the customer had a great degree of control, and we had little foresight and predictability. And a normal amount of control to programs where we are much, much more strategic to the customer. We are the prime contractor as well as the subcontractor. We have a higher opportunity to control the traditional components of a program, including supply chain and the prevention of red programs if you will.

And at the same time, we are seeing a positive market. We're not seeing an explosive market, but we're certainly seeing stability and growth of opportunities in the segments that we participate in. So those two things combined are different than what we had several quarters ago where it was the customers coming to us on a piecemeal basis, and we had a different relationship with our customers. I think that's the difference.

Okay. That's helpful. And my second question is on the whole M&A opportunity. Obviously you have a large amount of resources available. You've been working on this quite a while, although you did have the destruction of getting out of Solar. Can you give us any sense of when you hope to see something actually come out of all of the opportunities that you seem to have identified?

All I can give you there is just perspective as opposed to a date. From the day we got here, we were working on all the elements of our strategy, which were to fix things and separate Solar and then grow. But initially, we were more focused on fix. So we kind of ticked that box. Then we were focused on separate Solar. It took us a couple of different attempts but we succeeded in that.

And then grow. So grow has two components, which is this transitioning of the backlog into more enterprise-type projects. And I think we're making progress in that regard. We bought two companies while we were working on other things specifically Sortimat and ATW. As I said, I'm pretty confident that we're going to be successful with our acquisition strategy. So like you said and I said, we have significant resources applied. There is no structural reason or other reason that I would have to believe that that element of the strategy won't happen.

Okay. Thank you. I'll get back in queue.

Mark Neville, Scotiabank.

I want to go back to the Nigerian contract to make sure I understand it correctly. So there's EUR15 million that you've booked that hasn't been revenued to date. And I guess the ramp will depend on financial close, whether that's Q3 or Q4. But the EUR15 million difference, does that get revenued over Q2, Q3, and then the ramp depending on financial close? Am I thinking about that correct?

Yes. And it could be that the EUR15 million that we just received, it might be over two to three quarters, 2.5 quarters, not just quite the two quarters. And then depending on when financial close happens, then we can start to see that EUR40 million come through as well over and above.

Okay. On the financial close, is there any reason to think why it may or may not happen this quarter? I think it was this quarter you were expecting it. Just trying to get an idea of how you're thinking about it.

The financial close is, first of all, outside of our control. Based on what we know today, with the customer and the banks involved, we would expect it to happen, I think -- I'm not holding my breath, but within the next three or four months, we expect financial close. It's been delayed up until now, but we see the end. And hopefully it happens. And as I think we've said as well, if it doesn't happen then the customer will continue to fund us through bridge financing. It's not as smooth a program execution and revenue generation, but it will get us to the same point.

Right. Okay. I think before you were thinking it's most it's over three quarters, if it does reach financial close. How long does it take? I guess it depends on the bridge financing.

Exactly. It depends on the bridge financing. And if we have to start and stop.

All right. And looking at your backlog, ignoring that, how are you thinking about revenues in the upcoming quarters? How that plays out? Looking at the level of your backlog, we would think that we should see a fairly sizable ramp even excluding that. Can you comment on that at all or how to think about that?

Yes. So I would look at it, or comment on it based on what we've said. Our backlog now, or what we have in backlog, is revenued in the next quarter at the rate of about 35%. And we see that going forward as well, and we've also said that our backlog takes about eight to nine months to revenue. So that hasn't changed. With the addition of some of the programs that we've won in Q1 for example Nuclear, that's also has a long revenue cycle. It's not something that would be revenued in two or three quarters. It's over almost two years. And that continues to add to the lengthening of our backlog into revenues.

Okay. Thanks a lot. I'll get back in queue.

Cherilyn Radbourne, TD Securities.

A lot has been asked already so maybe I'll just start by trying to ask something a bit more big picture. As you continue with this new approach to market, and you now have a goal of re-balancing your backlog by segment, can you give us a bit of perspective on the breadth and depth of your sales force now versus when you joined the Company? And what else you think you need to do on that front?

Sure. So I think there's a couple of components. First one is to be able to formulate the offering. And so rather than thinking about 10 machines and in a plant -- which by the way we may have built each of those 10 machines from time to time in our history -- it's really connecting all of those 10 or 15 or 20 things together and packaging it up as an offering. In order to conceive and formulate that, that is a scale and capability which traditionally was not core to ATS, which we have developed and we continue to develop.

In terms of the sales force and how we actually deploy the sales force, there's two pieces to that puzzle. The first one is the quality of our people, which is high. And the second one is the sales process that we use. And so we use a gated process where we look at an opportunity, we formulate capture teams and we put people on the capture teams that can contribute to taking an egg and maybe turning it into a chicken, so to speak. So we call it incubation of the opportunity.

Then the third component is the delivery of it. In order to deliver it, it's necessary to have a prime contractor-subcontractor relationship amongst our companies. And we fixed that a long time ago. One of the reasons why we went to divisions that have flavor and character as opposed to each one of our divisions trying to do everything, was in anticipation of -- that was a couple years ago, in anticipation of where we are today. So a very significant percentage of what we deliver now involves a prime contractor division and a subcontractor division. Our divisions already know how to do that.

The next part is scaling it, and we scale it in two ways. The first way is to increase the size of our aspiration, because as a Company we can take on a lot. The second way is, as we buy companies that have capabilities that we don't have, we can easily integrate them because of our business process and organization. But the companies that we buy will have flavor and capability that we currently don't have, which de facto increases the size of what an enterprise program could be.

Okay. And so from a sales perspective are you still looking to add talent or are you happy with what you got?

We're never happy with what we have. Anywhere. So we're looking to add, yes.

Okay. I apologize. I've got to ask one on Nigeria. Is there any reason why that project would be able to get bridge financing and not financial close? I'm struggling with how come it can get bridge financing unless financial close has been delayed?

So maybe I'll start and then Maria, if you want to answer? From our point of view, sorry, from a program point of view, Maria can talk to bookings and revenue. Just from a pure program point of view, whether we get to financial close or whether we get bridge financed all the way, the program is the same. As long as those bridge financings are connected in a way that the program doesn't come to a halt, which so far it hasn't. So as Maria said, the bridge financing issue is a customer issue.

And in order for him to get the bridge financing, he had to have a business plan, which he does. He had to have a take-off agreement, which he has. He has to bring banks online. Even banks here have normal course processors. And the processors in Nigeria are a little bit slower, as you might imagine. The customer tells us that he's confident he's going to get there. We believe that he's going to get there. But in the meantime, his problem was not funding the program, his problem was getting the bridge financing.

Okay. I think that's my cue. Thank you.

Do you want to add anything?

Just on the question of bridge financing versus achieving financial close, it's somewhat of a complicated structure and deal because there's many pieces and its International, so we have Nigerians involved with the customer. And we have the Austrian and German banks. [Ecquart] development agencies that are involved that are trying to fund this. And everyone just has to come together, come on site and also I think it's just a difference in the cultures, and the way everyone is looking at things. I believe everyone is at a point now where they want to get this done. And a lot of the heavy lifting has been done, but it seems that things take a little longer than what we're used to.

And hypothetically, we could finish the program through bridge financing before the customer got to financial close.

Yes.

Hypothetically.

Yes.

Okay, that's helpful. Thank you.

(Operator Instructions)

David Tyerman, Canaccord Genuity.

Couple questions further, then. On the backlog to revenue turnover. Maria, you said 35% backlog is revenued in the next quarter and all of the program over eight to nine months on average. Is that correct?

That's correct. Yes.

So basically should we be thinking of programs now essentially being done over three quarters, even revenue in each of those quarters? 35% is about a third?

That's what it averages out to. There's some programs that are two quarters, some programs that are four quarters.

Sure.

And it depends what phase of the program we're in. So as I mentioned in the case of the two enterprise programs, we're at the end of engineering and the beginning of assembly.

Right. Okay. Fair enough. Which brings me to my second question. There's so many puts and takes. It gets a bit hard to sort out but if we use 35% as the baseline as a regular basis, it sounds like it's going to be somewhat higher over the next one to three or four quarters. Is that fair? And should we be thinking more like 40%? Or 45%? Or could you give us any sense on that?

What we've said is for the next quarter, based on the backlog that we have, the profile is the 35%.

Okay.

So that's for Q2. And then going forward, Q3, Q4 it depends on what happens with the Nigerian program. But based on what we have in our backlog today, I would say the same profile.

So just staying at the 35% for the foreseeable future?

Yes.

Okay.

Yes.

That's very helpful. Thank you. Another question I had, do you have any kind of rule of thumb on the stock comp, like dollar per share, change in the price changes your stock comp by a certain million dollars? Many of my companies have that. I don't know if you can do that or not.

I did have that. And I don't remember. I can get back to you on that.

That would be wonderful.

Yes. Just for planning purposes, based on where stock prices today, we use CAD1 million a quarter.

Okay. CAD1 million a quarter? So that is your normal run rate? And then any stock comp change, like any share price change would be over and above that CAD1 million?

That's correct. Yes.

Okay. Thank you. And then the last question, Anthony, you've mentioned about the Darlington opportunity. Can you, for ATS, give us any idea of -- it sounds like it's very big, but what are we looking at here roughly? Any idea? It sounds like it's very extended also.

What is our addressable market out of the CAD6 billion to CAD9 billion? Is that the question?

Yes.

It's in the hundreds of millions. It's not billions.

And that would be over 12 years, would it?

We get involved at the beginning, right? So it would be over the next few years, as opposed to at the end.

So hundreds -- Sorry.

If we're successful we are going to be successful in the front end of the 20 years as opposed to the back end of 20 years.

Okay. So hundreds of millions, could be like from fiscal '14 through, I don't know, fiscal '16, '17? Is that what you're roughly driving that?

Don't put that as a booking but --

(laughter) No, No, I understand I was trying to get an idea roughly of what the opportunity is.

Yes. It's a few hundred million in the next few years.

Okay. Thank you.

It's significant.

Yes. Thank you.

Mac Whale, Cormark Securities.

Sorry about asking about Nigeria gain, but I was wondering, as it keeps getting extended in terms of financial close, and the customer is bearing, I would imagine, higher interest expense because of the bridge loan, the nature of the financing. Is there any impact that you as a supplier bear, in terms of the customer's costs going higher? And then that reflecting in some sort of pressure on you guys to make a system that can bring in his per-unit costs in line with what he originally thought?

No.

And in terms of providing enterprise solutions, that element of the -- you've talked in the past about providing a solution to a customer to help them in their business plan. Have you -- is financial risk an element to that at all? Has that changed from the normal types of projects versus the enterprise type?

Our financial risk on the Nigeria program is significantly lower than any financial risk that we have on any other program in the Company. So we're booking the work as we get the cash. We're performing the work as we get the cash. And we are not performing work that we don't have cash to cover for ourselves or for our subcontractors. And a very, very, very significant amount of the total cash on the program will be collected by us before anything is delivered out of North America or Europe.

Okay.

No other program has such a profile.

Okay. It sounds as even if that you've got an absolute stop, like the thing is dead, then everything you booked and all the work you've done you'll see revenue for everything. It would really have no difference to the backlog, to bookings or to your revenue outlook? Over what you've been talking about?

100% correct.

Thank you.

(Operator Instructions)

Mark Neville, Scotiabank.

I just wanted to follow-up on David's question as it relates to Nuclear. You've talked about a CAD200 million opportunity. Do you have what you need in-house to address that addressable market? Will you need to go out and acquire new capabilities to capture that?

That's a good question. Hello. About a year ago or so, we acquired, developed, I mean not purchased, capability where -- we always had capability in terms of necessary certifications, because in 2006 or so, we had supplied tools on Candu 6, so we have that lineage history. We, about a year and a bit ago, augmented it from an engineering and other componency capability, leadership, people that had relationships and so on and so forth, in anticipation of participating, at quality, all of that stuff. So we have what we need to get to that CAD200 million. Now, is there a possibility to set our sights higher? Would a potential acquisition in the Nuclear space give us capability that we currently don't have? So that is certainly part of what we're considering when we think about acquisitions.

Okay. That's helpful. Thanks a lot.

And there are no further questions at this time. Please continue.

Just to get back to David, on your question about the stock comp expense, and these are just rough numbers, for every CAD1 increase in stock price, we are estimating about CAD0.5 million increase per quarter in stock comp expense.

And there are no further questions at this time. I will turn it over to management for closing remarks.

Thank you, everybody. And have a good day. Goodbye.

Ladies and gentlemen, that does conclude your conference call for today. Thanks for participating. You may now disconnect your lines.