Bird Construction Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 8, 2023

There are 9 speakers on the call.

Operator

Welcome, ladies and gentlemen, to the Bird Construction Third Quarter 2023 Results Conference Call and Webcast. We will begin with Terry McGibbon, President and Chief Executive Officer's presentation, which will be followed by a question and answer session. Analysts who wish to ask a question should have their webcast muted while dialing into the conference number provided. As a reminder, all participants are in listen only mode and the webcast is being recorded. Before commencing with the conference call, the company reminds those present that certain statements which are made express management's expectations or estimates of future performance and thereby constitute forward looking information.

Operator

Forward looking information is necessarily based on a number of The myths and assumptions that, while considered reasonable by management, are inherently subject to significant Business, Economic and Competitive Uncertainties and Contingencies. Management's formal comments and responses to any questions you might ask may include forward looking information. Therefore, the company cautions today's participants that such forward looking information involves known and unknown risks, uncertainties and other factors that may cause actual financial results, performance or achievements of the company to be materially different from the company's estimated future results, performance or achievements expressed or implied by the forward looking information. Forward looking information does not guarantee future performance. The company expressly disclaims any intention or obligation to update or revise any forward looking information whether as a result of new information, events or otherwise.

Operator

In addition, our presentation today includes references to a number of financial measures, which do not have standardized meanings under IFRS and may not be comparable with similar measures presented by other companies are therefore considered non GAAP measures. I would now like to turn the call over to Terry McGibbon, President and CEO of Boyd Construction. Please go ahead.

Speaker 1

Thank you, operator. Good morning, everyone, and thank you for joining our Q3 2023 conference call. Presenting with me today is Wayne Gingrich, Bird's Chief Financial Officer. Our results in the 3rd quarter continue to the outcomes of the strategic shift in the business over the past few years. The momentum from the first half of the year has continued and we delivered another quarter with significant revenue and adjusted EBITDA margin growth.

Speaker 1

Our teams have worked diligently to safely deliver on our clients' expectations, leading the company to another record quarter of revenue and delivering 17% revenue growth year to date. We have a significant combined backlog and an Active bidding environment supporting a strong finish to 2023 and our positive outlook through 2024. Turning to our Q3 highlights, we delivered 17% revenue growth, closing the quarter with $784,000,000 in revenue. We continued to see considerable growth in earnings and additional leverage on our cost structure. The company's adjusted EBITDA Grew an impressive 60% year over year to $49,000,000 representing 6.3% of revenue compared to 4.7% in 2022.

Speaker 1

First, combined backlog grew by $40,000,000 up almost 20% year to date, closing the The company's diverse and highly collaborative combined backlog with significant self perform scopes provides good visibility into 2024 organic revenue growth and further margin improvements. With a very active bidding environment and robust demand for our comprehensive services, we remain disciplined With our project selection, ensuring strategic alignment between capabilities, project type and delivery model. Supported by the combination of higher embedded margins in the combined backlog and achieving additional leverage on our cost structure, We expect adjusted EBITDA and earnings per share growth that will outpace revenue growth in 2024. The company's key fundamentals outlined on Slide 7 remain at the forefront of our efforts to drive forward our business and further improve the company's results in 2024. Bird has experienced significant growth across virtually all markets With both public and private clients, which is reflected in our revenue and earnings growth and our growing combined backlog.

Speaker 1

Our institutional buildings, enhanced infrastructure platform catalyzed by Dagmar, decade high mining backlog and our expanding role in the nuclear sector are key strengths. Recent industry announcements, including the approval of BHP's Janssen Potash Project Stage 2, which indicated a desire to leverage existing contractors the completion of the pipeline connecting LNG's export which bodes well for subsequent phases, the $3,000,000,000 in funding for Ontario's new infrastructure bank aimed at creating opportunities in key sectors for Bird such as long term Energy Infrastructure, Affordable Housing and Transportation and the generalization of generational opportunities In the energy transition and infrastructure modernization, all contribute to a robust longer term outlook for Bird and the wider industry. While continuing to drive sustained margin accretion and revenue growth, Berg remains focused on maintaining a healthy balance sheet with a low net debt position. Our disciplined capital allocation aims to drive business growth while enhancing shareholder value with additional tuck in acquisitions, Smart Capital Investments and returning capital to shareholders through dividends. Our dividend is well covered and an important part of Bird's Total shareholder return strategy.

Speaker 1

We're actively pursuing our ESG initiatives, diligently preparing for uptime reporting requirements. At the end of the Q3, the company recorded $2,800,000,000 in backlog $3,300,000,000 in pending backlog, representing a 20% increase in combined backlog from year end 2022. Backlog was bolstered with $2,200,000,000 in securements year to date. This significant combined backlog provides visibility to organic revenue in the coming year and to further margin improvements driven by the higher embedded margins. Bird is well established as a collaborative contractor and the combined backlog includes over 75% of contracts being executed through Collaborative delivery models.

Speaker 1

Within these types of contracts, Bert works collaboratively with the client and other partners to ensure the cost estimates, schedule forecast, Project planning and design are sufficiently advanced before the construction phases. These collaborative models which include IPD, Alliance, Progressive Design Build, We've recently completed or are nearing completion on a number of projects in the water and wastewater sector that have demonstrated the value of collaborative delivery. Notably, one of the projects was the first project of its kind to be performed using the IPD model in Canada. In the Q3, Bert added additional recurring revenue through our environmental remediation portfolio for Canadian Nuclear Laboratories at Fort Hope as well as through a new MSA agreement for Civil Works on sites in Alberta's Heartland region for an important client. At quarter end, Bird's recurring revenue, MSAs and pending backlog was almost $1,100,000,000 providing additional visibility to future revenues at accretive EBITDA margins.

Speaker 1

Byrd had significant project awards across a range of end markets in the quarter and subsequent to quarter end. Last week, we announced a particularly exciting contract value that over $150,000,000 for an early works at a new LNG export facility in Western Canada. This project further shapes our outlook with the potential to add to our scope as we mobilize on-site. Our Life cycle services. These are also key factors for adding additional work packages in the future.

Speaker 1

We are committed to building our relationships with the client and other stakeholders positioning our team as a long term partner on this major industrial site. Additionally, we announced post secondary project awards in BC, Alberta and on the East Coast, all leveraging Bird's experience building sustainable and smart environments And emphasizing Bird's lower carbon building solutions such as Mass Timber. Clients are increasingly seeking ways to build better To achieve more sustainable buildings and retrofit existing properties to reduce their carbon footprint, all of which Byrd is well positioned to deliver. Gordon was also awarded considerable work in the mining sector including work at Blackwater Gold, ArcelorMittal and BHP's Jensen project contributing to a decade high of mining backlog. Overall, we continue to execute our strategy in key focus areas, including fostering increased outperform work, expanding cross selling opportunities through business units and leveraging strategic internal and external partnerships and collaborative contracting methods.

Speaker 1

Our teams are also kicking off our 2025 to 2027 strategic planning over the coming months Catalyzed by our Solar Foundation, our engaged collaborative team and our inclusive workplace, we are committed to adapting and growing to chart the best path forward in the evolving world. We've shared in the past highlights around Bird's positioning and current portfolio of projects supporting the energy transition. There's a tremendous outlook for investment in electrification, public transportation, energy efficient projects and building retrofits. For its capabilities, particularly in our self perform expertise, is strategically positioned to deliver the necessary skills required for the significant investment in infrastructure. Our expanding portfolio encompasses wind injury, wind energy, hydroelectric, waste to heat and nuclear projects among others.

Speaker 1

The nuclear sector plays a critical role in the transition and we have spotlighted the sector in the presentation today. Over the past 5 years, Byrd has built up a significant portfolio of projects in the sector and today our teams are currently working with all of Ontario's active nuclear operators. Our current projects can be thought In 3 areas, site buildings and infrastructure, plant process and auxiliary systems and decommissioning and demolition. Additionally, our teams are pursuing long term growth and future opportunities in waste storage and decontamination facilities, SMR infrastructure, new large nuclear plants and other site facilities and infrastructure. With that, I'll turn it over to Wayne to go through our financial performance in more detail.

Speaker 2

Thank you, Teri. Turning to Slide 11, our first half momentum continued into the Q3 as the company delivered another quarter of double digit revenue growth And margin accretion, revenue for the quarter of $783,800,000 represented a 17.3% increase compared to the same The company's margin profile improved in the quarter compared to the prior year with gross profit percentage increasing to 9.3% And adjusted EBITDA margin increasing to 6.3% from 8.8% and 4.7% respectively. The increase in gross profit was primarily driven by project mix with the improving margin profiles on newer work and a higher proportion of industrial construction. General and administrative expenses were $34,500,000 or 4.4 percent of revenue compared to $35,500,000 or 5.3 The primary driver of the $1,000,000 decrease was $1,100,000 lower acquisition compared to $14,500,000 and $0.27 per share in 2022. Adjusted earnings and adjusted earnings per share were $29,000,000 $0.54 per share respectively compared to $15,250,000,000 $0.29 per share in 2022.

Speaker 2

This reflected the higher gross profit and increased income from equity accounted investments in the quarter. For the 9 months ended September 30, The company saw similar trends with significant year over year growth. We reported revenues of just over $2,000,000,000 reflecting Increased 16.5 percent to $167,300,000 representing 8.3 percent of revenue. This reflects the company's highly collaborative work program, growing backlog with enhanced margin profiles and expanding self perform capabilities. Adjusted EBITDA increased 34.5 percent to $94,900,000 or 4.7 percent of revenue From $70,500,000 or 4.2 percent in the prior year, general and administrative expenses were 102,300,000 5.1 percent of revenue compared to $97,900,000 or 5.7 percent of revenue in 2022.

Speaker 2

Net income and earnings per share were $47,700,000 $0.89 per share for the 1st 9 months of 2023 compared to $34,900,000 $0.65 per share in 20 22. Noting that during the comparable period in 20 The company received a one time gain of $7,600,000 and another $1,700,000 of interest income related to the settlement of historical construction billings and related interest charges with a customer. Adjusted earnings year to date increased significantly to $49,900,000 $0.93 per share Turning to our financial position, Bert continues to maintain its healthy balance sheet with significant Financial flexibility and liquidity. We closed the Q3 with $104,100,000 of cash and cash equivalents And an additional $157,000,000 available under the company's syndicated credit facility. GERD recorded positive operating cash flows while funding the working capital required $196,900,000 an increase of $12,300,000 over December 2022 ensuring support for current and future contractual Our liquidity and leverage ratios remain aligned with expectations.

Speaker 2

The company's current ratio was 1.22 times. Our adjusted net debt to trailing 12 month adjusted EBITDA ratio stood at 0.24 times and our long term debt to equity ratio was 21.1%, all demonstrating our commitment to maintaining a healthy and sustainable capital structure. In line with our commitment The capital allocation, we continue to uphold a balanced approach. We generated positive cash flows from operating activities while growing the business 17% and investing $52,000,000 in non cash working capital in the Q3. Our dividend remains well covered by our earnings and cash flows Our dividend remains an important component of our total shareholder return.

Speaker 2

I will now turn the call back over to Terry to comment on the outlook for the company.

Speaker 1

We are confident in our business' strategic shifts over the past few years, including our position as a leading collaborative contractor and the appropriate Risk balancing of our work program, our strong year to date revenue growth and margin accretion and the positive momentum that continues to build us positioning Bird for a strong finish

Operator

Thank you. We will now begin the question and answer session. The first question comes from Chris Murray with ATB Capital Markets. Please go

Speaker 3

ahead. Yes. Good morning, folks. Hi, Chris. Just looking at the very strong revenue growth in the quarter, I think that Cameron's would have So a couple of pieces of this.

Speaker 3

First of all, your SG and A costs didn't move Very much based on that level of work. So I just wondered if there's any thoughts around if you're Currently now kind of stable in your SG and A costs and what we're seeing now is what we should be looking forward. And then I guess the second part of this question, You talked about, call it, high single digit, low teens growth rates into 2024. But if we rebase 2023 off the Q3 results, you've got a much Higher starting points. So just any thoughts around 2024 versus 23 with the higher jump off point in SG and A cost would be great.

Speaker 1

Yes, I think Chris, we like we've worked really hard to position ourselves with a really talented leadership team To build that foundation to have the strength with the opportunities that we're focused on and we've had really good success with that It's really strong engagement. So I think from that lens, I think our team certainly has the foundation and the framework To grow top line revenue without equivalent growth on the SG and A side, but As you know, many other factors flow into that with growth. So in my mind, we're going to see some leverage on SG and A in 2024 Given that the team that we've assembled certainly has a lot of bandwidth to handle the growth that we're expecting.

Speaker 2

I can take the second part. So on the in terms of the revenue outlook for 2024, If you look at the baseline year for 2023, we've talked about low double digit revenue growth in the prior quarter. So If you take year to date revenues and we kind of said for Q4, we like where the consensus estimates are. So if you take that into account, You're looking at 13% to 14% year over year growth in 2023. So looking forward to 2024, We still expect to see growth in next year.

Speaker 2

I think high single digits is probably a Better target at this point in time until a few things play out for us early in the next year, but we're pretty confident on being able to see strong organic growth next year as well.

Speaker 3

Okay. And then kind of putting that together, you did mention that you think you'll see, as you said, operating leverage on earnings going forward, I guess, in your outlook. I guess the other question I have, and Terri and Wayne, I don't know who wants to take this one, but The last few quarters things have been going right. And so the worry we always have with construction companies is The stuff that's going to go wrong, and certainly that shows up in the multiple. When we think about what's in the backlog, Your customer mix and even the conversion of pending backlog to backlog, how are you feeling about the risk profile Today for burn versus where it's been historically and your comfort level The unforeseen, if you will, as we go into

Speaker 4

the next couple of years.

Speaker 1

Yes, I think it's a really good I think we approach it is, 1st of all, with a high degree of discipline in terms of our valuation of projects That we pursue, and that starts with the appropriate maturity of a client relative to the complex The project they're trying to deliver, sort of a first gate. And then as we referenced in our script, we 75% of our backlog right now is in a collaborative framework. So that does significantly derisk The programs and so in that regard, I think the organization is in a really good place. The backlog and pending backlog Continues to evolve. We're pretty confident in the pending backlog converting to backlog and we also track Opportunities that are not quite pending yet and there's a significant pipeline sitting there as well and most importantly we're continuing to see accretion You know of margins in that flow of business.

Speaker 1

So it's pretty exciting for us. The team we have, the opportunities that we're seeing, we work really hard on diversification and that's really paying dividends for the performance of the business.

Speaker 3

Okay. I'll leave it there. Thanks, folks.

Speaker 1

Thanks, Chris. Thanks, Chris.

Operator

The next question comes from Ian Gillies with Stifel. Please go ahead.

Speaker 4

Good morning, everyone.

Speaker 3

Good morning. Good morning.

Speaker 4

With respect to EBITDA margins and expansion moving forward, I mean, you really have 3 tailwinds working in your favor. You have backlog, operational leverage and more self Can you maybe force rank which of those components you think has the biggest impact on how margin expands over the next call it 12 to 24 months?

Speaker 2

Yes, I think certainly the mix of self perform work in some of the new Sectors that we're growing in, particularly in infrastructure, I think that certainly helps. The fact that we're On a couple of large industrial projects right now, we had the press release about the LNG facility. I think that bodes well for our margin Profile, yes, I think there's a general strong dynamics too like in the mining sector that certainly when we have equipment generated Projects with heavy equipment components that bodes well on margins. And then, yes, to beat with the higher revenue we're seeing through, We are getting leverage on our cost structures. We're really benefiting from all three, but I think the industrial, the infrastructure And the industry tailwinds are probably helping them out.

Speaker 1

Just to add another piece to that, Ian, we shifted our building business To do more collaborative projects in the light industrial setting and a lot of activity in that regard. So That's also really helping our building businesses. It's changed quite dramatically over the last few years to shift to higher margin opportunities And leveraging off in some cases the expertise that we have available on the industrial side to We more complex sort of interfaces with, I would call them industrial light clients, but in a collaborative framework. So That's also certainly has some tailwind.

Speaker 4

And maybe following on, as we think about margins as we head into 24, is there any reason to think you couldn't get a similar amount of margin expansion in 2024 relative to 2023 or based what we think 23 maybe I guess

Speaker 1

Yes, I think that's ultimately where how we're thinking about 2024 at this point. And we're just looking for that steady accretion quarter over quarter, year over year in the business and that's how we look at the new opportunities. And As we look at the framework of new business flowing into pending, that business has certainly has margin profiles that Would allow us to achieve that goal.

Speaker 4

That's helpful. And maybe last one for me because the tuck in strategy seems to be working well. Are you able to quantify or talk a little bit about maybe what you've done with Dagmar with respect to growing the backlog or growing the top line in that business since you bought it, Just given Bird's got a bigger balance sheet etcetera because I think that will help illustrate why that strategy is so important.

Speaker 1

Yes, I think that's been a huge success for us both in the EDGAR's current book of business, but also As a catalyst to allow us to engage on some of the larger infrastructure programs that are evolving in a There's been quite a dramatic shift in the environment that we work in, especially in Brownfield Transportation where it's moving quite dramatically to more of a collaborative contracting framework which we have a tremendous resume And with the catalyst being Dagmar and Dagmar's extensive experience in that space, it allows us to Participate in partnerships to pursue some of that work and we're very active pursuing those opportunities where they're in a An appropriate framework with an appropriate client within Canada. So, yes, the key for As we move forward as the business is finding an appropriate tuck in that we can use as a catalyst To add Bird's capabilities on larger projects and move us in new areas where traditionally we wouldn't have had The resume to be able to participate in that area.

Speaker 4

Great. Thanks very much. I'll turn the call back over.

Speaker 3

Thank you.

Operator

The next question comes from Jonathan Lamers with Laurentian Bank Securities. Please go ahead.

Speaker 5

Good morning. Good morning. I noticed that over the last two quarters, the amount of securements that you're reporting Your quarterly results have been much greater than total awards that you've been press releasing. I know part of that's related to The collaborative contracting methodology, could you just explain for us You know how it is that makes it more difficult to press release the new awards. You're still confident in the Backlog and the sharements going into the backlog?

Speaker 5

Thank you.

Speaker 2

Yes, I can certainly take that. So In terms of what we press release, generally, we only press release projects that are larger in size. So maybe on an individual basis, it could $100,000,000 $150,000,000 or if we think they're kind of strategically important to highlight, we might bundle them with a few other projects. But the company also wins a lot of other projects that just don't meet that type of dollar threshold that we don't disclose and I think that probably makes up Lot of the difference. I think one trend that has happened with the business when you think about the shift to collaborative contracting It has been as we get an award and for example, say it's an IPD project, For example, we get the award, we've submitted designs, we submitted indicative pricing, these types of things, but Now you have to go through the validation phase where you're inviting other related parties, the client, your subcontractors, Engineers, other people are getting involved in the discussions about what's going to be the best way to build this project, the best way to construct it, the best way to design it, what are really the clients' needs.

Speaker 2

That can take sometimes 12 months, sometimes longer. We've certainly seen that as well. So you're getting these awards, but they stay in our pending backlog Until the client signs off on the final design and the final price and sometimes the client may have things that they I added in the project and then when you see the final price and we go back to value engineering because maybe that project has grown higher than they'd like. So you kind of Value engineered and then you agree on the price. So it takes longer to move into backlog, but anything that we're putting into our pending backlog, We're highly confident that that is going to convert.

Speaker 2

It's just going to take the time to follow the process. So I think that's why you're seeing This growth in the pending backlog and backlog over the last few quarters has plus or minus 100 $100,000,000 kind of been fairly steady, but you're seeing the growth in the pending backlog. So that gives us a nice kind of pipeline or

Speaker 5

And I know you touched on this earlier. So just to be clear, when you look at the backlog, what is it about it that gives you confidence in margins improving into next Is it the higher mix of self perform work? Is it a higher mix of industrial type work and infrastructure work with just More favorable operating margins, could you just

Speaker 1

I think it's a mix, Jonathan. In the entry level, Right. So the entry level, the service offering we have today, We can expect a higher level of return on it. And in that regard, that's the market is very strong for the Complexity of the services we have. The other big piece that also enhances the overall Performance enhances our confidence is we're working collaboratively within our business units.

Speaker 1

So when often times on a project you'll have divisions all with embedded margins in their delivery. So it gives us a high degree of confidence like I Earlier in our building business is certainly involved in a number of the projects we have underway. So that's helping enhance their performance. So The collaboration is really paying dividends. It is sort of rising tide, rises all boats kind of framework.

Speaker 5

I'd like to just touch on the LNG Site Early Works award that was recently won. Can Can you share with anything with us in terms of how large the total project might be, whether getting in on the early works would Typically position Byrd to win more work. How are you thinking about the lifecycle of that project?

Speaker 1

Well, certainly, I think the project's budget is something like $7,000,000,000 So This is early works getting underway. Any of these large projects of this kind of scale Obviously involve very high standards in quality and execution and safety and We've just developed a reputation for being certainly a go to for this type of thing, no different than the activity we have at BHP So it's exciting, really exciting for the company to have multiple mega projects that we're very active in because over the past few years Other than LNG Canada and Kitimat, that's kind of been the main mega project in the country that we would be interested in. So So now you got multiple sites, multiple projects and this one, like I said, being probably more so than others because of the site's uniqueness. It certainly is a huge opportunity for us to grow into a major program On this project and again it's early days getting underway with early works. But very exciting and we're really Pleased to be working on this project.

Speaker 1

Thanks for

Speaker 5

your comments.

Speaker 1

Thanks, Sean.

Speaker 3

Thank you.

Operator

The next question comes from Maxim Sytchev with National Bank Financial. Please go ahead.

Speaker 3

Hi, good morning gentlemen.

Speaker 1

Hi, Nick.

Speaker 6

A couple of quick questions as most of them already asked. Sorry, I was wondering if you have any preliminary thoughts around the infrastructure bank that is being contemplated for Ontario And maybe when we could potentially see some projects being funded via that vehicle? Thanks.

Speaker 1

Yes, I'm honestly really excited about the Infrastructure Bank because it gives us an interface between the larger pension funds in Canada and Ontario Into infrastructure investments and as you know over the years the prior vehicle was really P3s and oftentimes The equity check wasn't significant enough for them really to get involved. So it's really exciting for me and for Antero, for a company To have this facility, it kind of reminds me of to a certain extent what happened in Quebec with the case. So I think this is great. I think it's a very smart strategic Move or Ontario and allows in many of these projects that are evolving, they're collaborative now. So It's more complex to add the financing into a collaborative interface because more difficult for lenders to Obviously engaged in that type of thing.

Speaker 1

So it's an infrastructure bank as the interface. It just takes it solves that framework. So I I think it's a really smart step for the government. I think it's going to be a real catalyst for More activity and in many cases I'm sure you'll see the Canadian Infrastructure Bank and the Ontario Infrastructure Bank funding new projects There are focus areas and areas that we are very focused on as well and we have a tremendous resume in. So I think it's a great step and It kind of solves somewhat some of the funding and creates a more efficient flow of Larger pension funds into Ontario infrastructure where their pensioners are based.

Speaker 1

So I think it's great.

Speaker 6

Yes, yes, for sure. And I guess again, like no concerns from your perspective around the contract structure. It's still kind of like in the wheelhouse in terms

Speaker 7

of the risk reward profile

Speaker 1

Yes, it's really highly collaborative now like most of the projects that like There's the odd one that is a P3, but it's pretty rare that you see the P3s now it's all especially brownfield Messy sort of projects that you just can't control all the stakeholders and all the risk And a complete risk transfer and we'll still do a P3 of its the appropriate agency in a greenfield environment and we've had great That's in multiple projects and school bundles and OPP bundles here in Ontario. And so we'll So look at one once in a while, but you see less and less of that vehicle because a lot of this investment that's happening in very dense urban areas and The risks are the risk transfer is just too high and there is an interest from the contracting community to pursue those projects So they have no choice but flip them to something that's a better balance between the client and the contractor.

Speaker 6

Yes, yes, yes. No, that's great to hear. And then maybe just one question for Wayne. In terms of kind of the working capital Fluctuations, should we expect sort of a typical free up for the upcoming Q4? Any changes from the pacing

Speaker 2

I think you'll see Q4 follow similar trends in recent years. We usually have A pretty large unwind of non cash working capital into cash and we expect that again. I think the revenue that we had In Q3, it's $784,000,000 certainly higher than what the Q4 estimate is, kind of looking at consensus estimates. So, yes, We'll see that flow probably historically similar.

Speaker 6

Okay. That's it for me. That's great color. Thank you very much.

Speaker 1

Thanks, man.

Operator

The next question comes from Frederic Bastien with Raymond James. Please go ahead.

Speaker 7

Good morning, guys.

Speaker 2

Good morning.

Speaker 1

Hi, Fred.

Speaker 3

We often see

Speaker 7

Your ability to price in some better terms in your contracts is often a reflection of basic Basically Economics 101, there's a limited supply, big demand for your services, so it allows To tack in some better margins. What would you Highlight as the biggest differentiator this year or the last several years and your ability to do that, is it really a lack Is the demand that much more significant?

Speaker 1

I think it's I think I would That's articulated as it's a complexity of the projects and there's a limited number of companies that can deliver Projects with that kind of complexity and that type of safety performance and quality And delivery performance, I think it has a lot to do with that. We obviously over Many years have developed that expertise coming out of oil and gas and oil sands with large Complex owners from around the world. So we have a deep bench of talent that can then move into emerging Opportunities across Canada such as nuclear. The team has worked very hard to transition to nuclear and it's really impressive to see the growth In that space in 3, 4 years time since we started to focus on it coming off of The backlog we had in oil and gas and then coupled with the growth of the business at LNG Canada and Kitimat, Rarely in the world do you see a mega project redeveloped $18,000,000,000 on schedule and on budget, it's pretty rare. So So when you're part of something like that, you have a resume that others are looking for because there's obviously A major team aspect to delivering a project with that success and with that, obviously our phone has been ringing for more and more of that type of thing.

Speaker 1

So I think when you boil it all down, you obviously Need a return that justifies that capability and if you're you've got the resume. So I think it has more to do with our resume than it really has to do with the market.

Speaker 7

Super. That's helpful. And as you look at the work you've been winning, it seems like there's a Fairly high percentage that is industrial related work. Would you say that most of the options you're looking at right now are Indeed, industrial focused?

Speaker 8

I would

Speaker 1

say that yes, I would say a higher percentage is more Of industrial where it's heavy industrial, whether it's light industrial, there are a lot of activity obviously with the Evolution of electrification and all the downstream impacts of that, very exciting mining Sector right now which is obviously industrial oriented and we've got a big focus on the infrastructure side with the opportunities that are evolving. So Yes, I'd say a high percentage is there, but there are many facets to In terms of many different markets and end markets and geographical markets that touch That, but it's that's clearly where our strength is and it's clearly where the margin profile Suits the demand type of thing and yes, it's a good way to kind of look at it just saying

Speaker 7

Just one last one for me. Investors are quite worried about the higher interest rates we're facing and it's really historically it's really impacted Construction activity. So obviously, you're less exposed to some of the most sensitive Areas of the economy, but just wanted to get your thoughts there. Have you seen any slowdown with any particular projects or any particular sectors?

Speaker 1

Yes, I think with so much momentum around the energy transition sector, I think and you look across The types of projects that we're on for example potash in Saskatchewan, those are Long term investments, nuclear is a long term investment. So they really cut through any short term or medium term Economic pressure because these things they take many years to get to FID and then once They're at FAD, they're moving in the types of companies that we obviously target are obviously the large blue chip Organizations, so they're thinking longer term, put a lot of time and effort into it. So in that regard there's more stability. I'd say that there's only a small percentage of the revenue that we do probably less than 5% that today has Sensitivity to pressure on interest rates and those would be projects that would touch the public Whether that's an apartment building or commercial projects where interest rates have And impact on, so it's a very small percentage of our current business. And it's also historically a percentage of our business that has lower margin.

Speaker 1

So At the end of the day, doing less of that is really our strategy to improve our margin profile and improve the accretion.

Speaker 7

Thank you. Good luck keeping the momentum.

Speaker 1

Thanks,

Operator

The next question comes from Michael Tupholme with TD Securities. Please go ahead.

Speaker 8

Thanks. Good morning. First question is just around the Q4. I think Wayne earlier you mentioned that You're comfortable with consensus. I think that was a comment on revenue.

Speaker 8

So perhaps you can just clarify that. But I guess the question is on the margin side of things. Historically, we've seen sort of a lot of similarities between the margin performance in the 3rd and 4th quarters. It sounds like there was a little bit of Acceleration of some revenues in the Q3 that maybe helped things a bit in the Q3. And then just in your commentary, you're talking about kind of

Speaker 2

a more

Speaker 8

So the normal performance, if you will, in the Q4. So I'm just trying to get a sense for the Q4 margins. I mean, can we see some kind of a performance that's similar to what we saw in the 3rd Quarter or should we be thinking more about a bit of a step back sequentially?

Speaker 2

Yes. So I guess a couple of things. So with the We're pretty comfortable with all of the consensus estimates that are out there, so revenue, EBITDA EPS and other things. I think in the margin in the 4th quarter, I don't know that we'll sustain the 6 point to tail off a little bit in those types of things. So I think it's still going to be really strong, but I don't think it's going to be at 6.3% for the quarter.

Speaker 8

Okay. That's helpful. Thank you. And then, I mean, it's clear from your commentary that you do see an opportunity for margin improvement In 2024 versus 2023 on a full year basis. I guess this is a little bit specific, but just looking specifically again Q3 of this year and thinking about modeling next year, I mean, is there room to continue to improve Even off the Q3 level you did this year when we look at next year's Q3?

Speaker 8

Or is this sort of a high watermark that you did in the Q3 given Some of the factors at play and we're really looking more at a full year improvement, not necessarily kind of every quarter of the year.

Speaker 2

I think there is actually like thinking about 2024 by quarter, I think there is opportunity to improve our EBITDA margin in every quarter Next year, I mean, some quarters might have a larger improvement than others, but I think Q3 2024 Could see higher than 6.3 percent EBITDA, but it might not be as large of an increase as what you might See in Q1 or Q2, for example, but for the total year, I think you'll see a pretty significant improvement in EBITDA margins year over year. Yes. And looking ahead, I mean, the company has been very focused on trying to improve our margin profile with the mix of work. We have the sectors, the diversification, the companies that we're looking to do tuck in acquisitions with are all margin accretive. We think there's a good runway ahead of us to continue to improve margins going forward.

Speaker 8

Okay, perfect. Thank you. And then maybe just you just mentioned there tuck in acquisitions. Can you just comment on, I guess sort of the pipeline, but also I mean is 2024 a year when we could see potentially additional acquisition activity or are you still in the process of Integrating and digest what you've done in the last several years?

Speaker 1

I think we have a team today, Michael, Some very experienced and have 20 plus years of focus on the M and I think we're highly confident we'll be transacting Over the next few quarters on opportunities that make sense, we constantly have a pipeline that obviously we're not Setting any kind of targets on a year over year, but a lot of activity in that sector right now, obviously with our momentum and the What outside companies are seeing that we do when we integrate an acquisition which is very evident, the success we've had. So Yes, I think it's a nice fit for us right now and our phone certainly has been ringing with opportunities and we evaluate those Carefully and have regular discussions with our Board about what we're doing, but it's certainly a robust pipeline which would give you a I do have confidence that you'll continue to see our business grow on the M and A side coupled with all the organic growth we've got.

Speaker 8

All right. That's all very helpful. Thank you.

Speaker 1

Thank you.

Operator

This concludes the question and answer session. I will hand the call back over to Mr. McGibbon for any closing remarks. Please go ahead.

Speaker 1

Thank you, everyone, for joining our earnings call this morning, Thank you to the entire Byrd team for their safe delivery and dedication to excellence. With Remembrance Day approaching, I hope you have an opportunity to observe this important day And to take a moment to remember the brave individuals who have served and continue to serve our country. Thank you.

Operator

This concludes today's conference call and webcast. You may disconnect your lines. Thank you for participating and have a pleasant day.

Powered by Quartr
Earnings Conference Call
Bird Construction Q3 2023
00:00 / 00:00