Bird Construction Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 10, 2023

There are 10 speakers on the call.

Operator

Ladies and gentlemen to the Bird Construction First Quarter 2023 Results Conference Call and Webcast. We will begin with Terry MacKibben, President and Chief Executive Officer's presentation, which will be followed by a question and answer session. You will hear a tone acknowledging your request. When we are ready for your questions, you will be introduced into the conference in the order that you were received. As a reminder, all participants are in listen only mode The webcast is being recorded.

Operator

Before commencing with the conference call, the company reminds those present that certain statements which are made express management's expectations or estimates of the future performance and thereby constitute forward looking information. Forward looking information is necessarily based on a number of estimates 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 Therefore, the company cautions today's participants that such Forward looking information involve 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 intentions or obligations 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 meaning under IFRS and may be comparable with similar measures presented by other companies and are therefore considered non GAAP measures. I would now like to turn the call over to Terry McKibbin, President and CEO of Bird Construction. Please go ahead.

Speaker 1

Thank you, operator. Good morning, everyone, and welcome to our Q1 2023 conference call. Joining me on today's call is Wayne Gingrich, Chief Financial Officer. We are pleased with our Q1 results building off a strong 2022 and driven by our diversified and risk balanced business model. We delivered solid revenue growth with healthy seasonal margins reflecting strong execution across our work programs.

Speaker 1

As expected, the seasonality of earnings returned to more normalized patterns on a year over year basis due to the completion of a large year program that was active in the Q1 of 2022. We continue to capitalize on the numerous demand drivers for bird services, including In a record combined backlog and pending backlog of $5,700,000,000 including recurring revenue MSAs exceeding $1,100,000,000 at quarter end. The company's significant and highly collaborative backlog continues to grow through the selective pursuit of projects With minimal exposure to lump sum turnkey projects or to the more economically sensitive residential construction market, Our diverse backlog reinforces Bird's resilient foundation. Coupled with expected further leverage on our cost structure, We are confident in our 2023 outlook for revenue and earnings growth. The diligent focus of our OneBird Our team ensured we maintained our strong financial position while leveraging our significant liquidity to fund growth, Turning to our Q1 financial highlights, our team delivered revenue growth of almost 13% with revenues of $536,500,000 Net income for the period was $5,100,000 and on an adjusted basis, we reported EBITDA of $16,100,000 representing a 3% margin.

Speaker 1

Adjusted earnings and adjusted EPS were $5,300,000 and $0.10 per share respectively. Bird Almost $595,000,000 in securements to backlog during the quarter compared to $507,000,000 in 2022 or 17% year over year growth With $536,500,000 in revenues recorded in the quarter, the company had a favorable book to bill ratio of 111%. Pending backlog also grew quarter over quarter and year over year. Bird added over $500,000,000 of new awards to pending backlog since year end, including substantial Overall, our bidding pipeline remains robust and opportunities continue to present themselves supporting our continued confidence in our near to medium term outlook. The company's continued efforts to drive forward our business supported our key fundamentals as outlined on Slide 7.

Speaker 1

We remain confident in our full year outlook for improved earnings and with our strong first quarter revenue growth, we now Full year revenue growth in the high single digits. Driven by improving margins, earnings per share and adjusted EBITDA growth, our expected to outpace revenue growth. Our outlook is underpinned by our diverse active work programs operating in high demand and high growth sectors and our record combined backlog. We have the financial flexibility, low leverage and low net debt to invest in operations as well as enable acquisitions and maintain our balanced approach to capital allocation. The strong financial position facilitated by the acquisition of Trinity Communications Services during the quarter and Based diversified telecommunication and utility infrastructure contract with specialized service self perform capabilities that we plan to leverage across the company's sizable national client base.

Speaker 1

The acquisition exemplifies Bird's approach to accretive tuck ins as well as the benefits of the company's strong financial position with the acquisition funded 90% through cash and 10% in common shares. On Slide 8, we see Bird's consistent revenue growth and healthy adjusted EBITDA margin, which on a trailing 12 month basis This was 4.1% at the end of the quarter. Improving our margin profile remains a key focus of management. We have an appropriate balance of contracts in place, diversified across sectors and clients, both public and private. Our balance of work between institutional, commercial and industrial Remains relatively consistent and in line to drive growth.

Speaker 1

Byrd's risk balanced portfolio projects in the very active bidding environment Economic factors such as labor and material cost exhalation, driven by inflation are largely reflected in strong reputation for delivering sophisticated projects in these types of frameworks. At quarter end, Bird's recurring revenue MSAs and pending backlog $1,100,000,000 providing additional visibility to future revenues. Included in the $1,100,000,000 is the recently announced $300,000,000 in new This is not an extension or renewal to existing M and As, it's additional scope and new agreements. We continue to execute well on our strategy into key focus areas such as growing self perform work, expanding cross selling opportunities through M and A and internal partnerships and disciplined project selection contributing to enhanced fundamentals and our positive outlook. Another significant announcement in the Q1 was the contracts Awarded to 2 Nations Bird, a partnership with 2 local indigenous communities.

Speaker 1

Partnership was awarded Development Works and multi site multi year site services at BHP's Janssen Potash project, marking the company as a long term partner on this major project site. Bird's reputation as a key partner for multiyear mega projects positions us well in the current active Commodities market where there is a range of large industrial projects planned for the near future. This morning, we also announced a smaller but strategically important award for heavy civil work at the Blum Lake Iron Ore Mine in Quebec. This award positions us with a new client and opens the door for potential multi year opportunities in the coming year. Byrd continues to be ideally positioned to provide our full project lifestyle offering and self perform capabilities to resource sector clients.

Speaker 1

Subsequent to quarter end, we also announced the award of Canada's tallest modular construction building. Our Sac Modular Together with our BC Bird team played a significant role in the design of this 14 storey permanent modular tower and I'm pleased we were selected for the construction. Our first question comes from the line of John Franzrebrenberg. Hi, good morning, everyone. I'm And cost predictability in the shortened construction schedule allows for a quicker occupancy.

Speaker 1

The off-site nature also provides advantages with a tight labor market. There are major opportunities for modular, especially when it comes to buildings with a repeatable design style such as purpose built apartments and long term care. With the market becoming more and more aware of the benefits of modular Bird as one of the few Canadian firms with the experience and capacity to deliver this efficient solution to Canada's housing crisis and long term care capacity challenges. The transition to a lower carbon future remains a key focus area where Bird's robust self perform capabilities Position us to deliver energy transition projects as well as sustainable new builds and retrofits. We have a significant portfolio of projects including utility scale renewables, Waste to heat recovery, wastewater and organic waste processing facilities.

Speaker 1

Bert's team has worked programs on all of Ontario's nuclear sites where there is The growing civil infrastructure team catalyzed by Dagmar Is delivering rail projects and supporting the development of public transportation networks also a notable area for government funding, especially in the Ontario market. For our buildings team, the transition to a lower carbon future presents many opportunities to apply our well developed sustainable building solutions, including Mass Timber and Modular, deep energy retrofits, net zero buildings, innovative special projects and smart building technology. Overall, Bird is competitively positioned to help clients reduce their carbon footprint, which is expected to continue to gain momentum in the future. Along with our financial results released yesterday, Bird released its 3rd annual sustainability overview. It provides an Overview of Burt's CSG initiatives across the country and information on how we are striving to maximize our positive social and environmental impact utilizing strong corporate governance framework.

Speaker 1

The report can be found on our website. With that, I'll turn it over to Wayne to go over our financial results.

Speaker 2

Thank you, Terry. For the Q1 of 2023, Berg reported construction revenue of $536,500,000 compared to $475,500,000 in 2022, representing a 12.8% increase year over year. The year over year growth was primarily organic with Trinity joining the team in February 2023. Gross profit was $39,800,000 or 7.4 percent of revenues compared to $41,600,000 in the same period in 2022. By the completion of a large, mostly self performed year round industrial work program that was completed in 2022.

Speaker 2

And while the work volume and earnings of this program have been fully replaced for 2023, the new work is expected to follow more seasonal $31,600,000 or 5.9 percent of revenues, up very slightly from the $31,300,000 recorded in the Q1 of 2022. Notably and notwithstanding cost escalations driven by inflation, our G and A as a percentage of revenue dropped from 6.6% in Q1 2022 to 5.9 percent in

Speaker 1

the current

Speaker 2

quarter. We continue to expect to gain leverage on our was $16,100,000 or 3 percent of revenues compared to $17,800,000 or 3.8 percent of revenues in Q1 2022. Net income and earnings per share were $5,100,000 $0.10 respectively, compared to $6,400,000 and $0.12 in Q1 2022. Adjusted earnings and adjusted earnings per share were $5,300,000 $0.10 respectively compared to $6,500,000 $0.12 in the same period in the prior year. The year over year decrease in Q1 adjusted EBITDA, net income and adjusted earnings were consistent with the lower gross profit.

Speaker 2

Ferd remains committed to maintaining a strong balance sheet with significant financial flexibility and liquidity. We closed off the Q1 of 2023 with a strong liquidity position, including $110,700,000 of cash and cash equivalents At the end of the Q1, the company had significant working capital of $173,200,000 compared to $144,900,000 at the end of Q1 of 2022. Our financial metrics are well within our comfort levels and we maintain a resilient and flexible foundation. The company's current ratio at March 31, 2023 was 1.22 compared to 1.23 at December 31, 2022. Our adjusted net debt to trailing 12 month EBITDA ratio was 0.24 times, while our long term debt to equity ratio was We continue to maintain our balanced approach to capital allocation, ensuring Bird is positioned to successfully on productivity advancements, organic growth, capital investments, debt repayments and tuck in merger and acquisition opportunities, while maintaining a regular cash return to shareholders through our monthly dividend.

Speaker 2

In the Q1, Bird generated cash flow from operations before non cash working We also distributed $5,200,000 in dividends to shareholders. The company anticipates significant growth in earnings per share and adjusted EBITDA in 2023, sufficient to achieve an expected dividend payout ratio below 40% of net income for the year. I will now turn the call back over to Terry to

Speaker 1

We are pleased with the company's performance this quarter, which was consistent with our expectations. We foresee broad based demand backed by significant government funding for infrastructure and institutional projects and active commodity markets and strong demand for sustainable and energy Overall, Bird expects to continue to deliver strong financial results underpinned by the significant changes made to the business over the past Several years, which have resulted in today's resilient business model. Our revenue growth our growing revenue and record combined backlog has set the tone for the year, where we

Operator

We will now begin the question and answer session. To join the question The first question comes from Jacob Bout with CIBC. Please go ahead.

Speaker 3

Hi, good morning, Terry and Wayne. This is Rahul on for Jacob.

Speaker 1

Good morning. Good morning.

Speaker 3

Good morning. So combined backlog is up nicely and you're now guiding for high single digit revenue growth for the year. There are some concerns at tightening bank lending conditions, control small to midsized commercial building projects. Are you seeing any impact from that or caution from your customers yet in the market so far in Q2 or not so much in the Canadian market?

Speaker 1

Well, I guess, first of all, it's not a market that we're that focused on. It's a smaller percentage. That sort of smaller, Obviously economically sensitive sort of areas. So it's majority of the business that we're focused Has a high support from government or high support from cycles of energy, Obviously high commodity run right now. So it's we're not really in that market to any extent other than the few smaller projects for blue chip clients and those blue chip

Speaker 3

And maybe just a question on seasonality. I believe on the last Paul, you had highlighted that H2 of the year could generate about 70% of EPS for the full year. Based on what you're seeing so far in the Q2, is that still the expectation? I think you had mentioned in your prepared comments that The self performed work program ramps up this quarter going into the back half of the year.

Speaker 1

Correct.

Speaker 3

Yes.

Speaker 1

That is correct. In 2022, we had a large work program that was obviously not as seasonal Seasonal in nature and it accelerated through the first half of the year. So that made certainly a difference. But this is More of a normalized Q1 for the profile of the business that we have.

Speaker 3

Right. And maybe just last one for me. So you're now guiding for high single digit revenue growth versus mid to high previous Lee, would you say this is just a factor for the strong revenue growth in Q1 or would you say you're a bit more optimistic Today for the balance of it.

Speaker 1

I think it's just the demand. The demand that we've got and the pace of activities that we're focused on. Q1 just to give you sort of order metrics of projects that I review On a quarterly basis, they are up over 100% year over year and those are projects that meet a threshold that needs my final sign off. I'll sign off. Obviously, you can see the growth in backlog and pending backlog, It's quite significant year over year.

Speaker 1

So we're really excited about the model of businesses that we've built and the framework and the We're hitting our marks and we're pleased with the overall performance and the areas that we focused on are really Bearing fruit. So, yes, the business is hitting a really nice stride right now.

Operator

The next question comes from Chris Murray with ATB Capital Markets. Please go ahead.

Speaker 4

Yes. Thanks, folks. So just coming back to the bookings in the quarter and Terry, you were talking about the plan as you go into 'twenty three, 'twenty four and what you're seeing. Kind of interesting to see your workloads almost doubled in terms of review. That's probably a nice problem to have.

Speaker 4

When we look at the book to bill though at about 1.1 And certainly, I think that may be skewed by the type of projects you may be doing. You may be doing more kind of development work in advance of booking stuff. How do we think about growth considering you're starting to see some acceleration in 2023 into 2024?

Speaker 1

Well, I think we're going to see fairly consistent growth just because the couple of things are happening, Chris. Certainly, The evolution of collaborative models, clients are realizing that a collaborative model It's a more effective model. It derisks project for all parties, all stakeholders. It creates a more predictable outcome because you're spending so much time on the front end with design and getting design correct. So I think in that regard, we're seeing a real acceleration of these models into many new markets.

Speaker 1

And the other thing that's happening is the

Speaker 4

The scale of the projects is increasing.

Speaker 1

So when you start to think about larger projects now, using the types of models that we Developed a tremendous resume for. You're starting to see the impact of a much bigger bridge of revenue over multi years, which is exciting obviously because it creates more resiliency in terms of Year over year revenues and revenue growth and so yes, the pace of business is as high as we've ever seen in terms of Demand for our services and it's pretty exciting for our team right now.

Speaker 3

Okay. Yes. I mean,

Speaker 4

I guess what I'm thinking about is if your backlog duration stays about the same at a 1.1x bill, you got to be thinking that You're probably at least growing at high single to low double digits as we go past this year. Is that maybe the right way to think about it

Speaker 1

No, that's a good way to think about it.

Speaker 5

Okay, cool. And you're seeing

Speaker 2

that increase in recurring revenues as well, Chris, with the $300,000,000 of MRO work, it was all scope expansion at existing clients. I mean, that's going to add nice growth for us too as that It comes online and you get a full year worth of that in 2024 as well.

Speaker 4

Okay. No, that's helpful. And all that stuff, as you said, kind of Goes into that whole self perform type of bucket where you have a little more control over the scope and the scale of the projects.

Speaker 1

Correct.

Speaker 4

Yes, cool.

Speaker 6

One of the interesting announcements you made

Speaker 4

was on the new award around the modular buildings and there's been a lot of discussion around modular In commercial buildings and the height that they can do and the scale they can do. So a couple of questions on this. Obviously, you guys are doing modular, but you're doing it at a steel, which facilitates larger buildings, taller buildings. So Thoughts around other projects in the pipeline for modular because it seems to have been a little lumpy, would be nice Nice way to characterize it. And then any concerns around supply out of China or anything like that where the boxes are built?

Speaker 4

And how will that maybe fits into your plans as you do this project and others?

Speaker 1

So maybe just high level on the modular side, certainly this is a real key award, it's a catalyst for us to be able to demonstrate Our capabilities and the quality of our products, so we're really excited about this. There's more of these is our expectation. Right now, like modular as a in a general sense It's a very disruptive business and it disruptive businesses as we've seen in many of the startups that exist in the world certainly take time To evolve and because of the disruption and in the construction industry, which has been bricks and mortar for 100 years, This is very disruptive, very disruptive to architects and engineers and the financial model is different. So it does take some patience and I think we've been Working on sort of selective projects in Canada and have developed a really good learning curve of how we improve and how we create reductions in cost and speed and efficiency and quality and things like that. And we've done a nice job and With 3 projects under our belt, 4 projects under our belt now in the last few years, but it has been spotty like you said.

Speaker 1

One of the areas that I think It's most impressive from my lens is there are 17 modular buildings right now underway in Los Angeles at various stages. And that is a really good leading indicator of what's coming and what's happening. And I think for us, It certainly gives us a lot of confidence that it wasn't 17 buildings underway a year ago. So as things start to develop and evolve and we're in the California market on some of these projects in terms of being considered, but our major focus is Canada as you know. And we've built some projects pretty successfully here in Ontario and obviously in BC with our work up at Kitimat On the workforce accommodation facility.

Speaker 1

So this is our first tower, but there have been other towers that have been built and we keep a close eye On those as they evolve and in that regard, we're expecting to see more. As I said, there's 5 more BC housing projects alone that are evolving and we expect to see more activity here in Ontario where we've built detention centers, Obviously, Long Term Care is a great solution. We also expect had it not been for COVID, we would have built at least 2 hotels in With our modules, but COVID certainly put the hotel industry on their heels a little bit, but as that industry recovers, Our solutions are very effective for hotels as well and we expect to see that return as the Hotel industry returns to a more predictable future. As far as the flow out of China, most of the buildings we build, A very high percentage of the raw materials and products come from China. So the difference here is we're just assembling in the Plethora of facilities that exist, millions and millions of square feet of facilities over there that allow us to have more of an accordion like Expansion and contraction versus trying to do it with large fixed facilities in North America.

Speaker 1

It's tougher to do that than The way we've structured ourselves, so we really think we've got the right model. Now we don't anticipate that Any market in the world could cut off that massive supply channel that comes out of China without major ramifications. But If we had to do something different, we have the flexibility to do that and have that in place, but It doesn't seem practical from an economic perspective for any government to try and disrupt The flow of materials because it's such a high percentage of a lot of the buildings we build.

Speaker 4

Okay. And there's no issues with Like having to do domestic sourcing or anything like that for some of these government or social contracts?

Speaker 1

No. The governments have been pretty clear about that and we've been upfront and Anything we're doing in Canada is very clear. So there's no issues. Governments I think are well Educated relative to the impacts of what that would mean if there was any sort of restriction. So But yes, pretty clear.

Speaker 1

So but we have options in the case of Something developed, but we don't anticipate anything will.

Speaker 4

All right. That's helpful. Thanks folks. I'll turn the line over.

Speaker 1

Thanks, Jim.

Operator

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

Speaker 7

Good morning, everyone.

Speaker 2

Good morning.

Speaker 7

Terry, over the Last, call it, 6 months, there's been a few additional mining contract wins, including this morning. I was just hoping to get an updated view I mean, what the competitive strategy is to Continue to pursue that business, Saiid, do you want it to mirror something like your MRO business in Alberta? Or do you want to tie yourself a little bit more to the growth CapEx Because there's obviously a lot going on there between all the various different commodities. So just curious on that front.

Speaker 1

We're really excited about Overall, the mining cycle and we've stayed patient with our focus on mining and kept ourselves With the fleet and a team that can service that specialized area through the past 10 years where there's been times in the cycle where there's been it's been tougher conditions, but we've stayed in it and kept our fleet refurbished and we're really paying It's really paying off with the demand right now. So if you think if you go across some of the major areas, obviously potash With our various announcements at BHP, we're seeing a lot of demand and we're active on sites, Early days in considering proposals in gold. The iron ore announcement this morning with Champion At Blue Mike, it was pretty exciting for us because that's another major front. So if you think of where we're situated with some of our large facilities In Western Labrador, we've got Champion obviously to the north, we've got Rio Tinto or IOC to the east and To see that kind of demand and then you start to look at obviously we just finished a large assignment with Detrick Gold here in Ontario And more to come in that sense and more demand.

Speaker 1

We're excited about Some of the opportunities obviously with Canada's critical mineral strategy, that's important And you see the support from government to develop battery production in St. Thomas. You obviously have to conclude that Canada is going to accelerate lithium and get lithium production to support That facility, so those are all exciting areas and we're also seeing demand on aluminum side in terms of additional Expanding production of aluminum, copper is out there, obviously is a critical mineral. So there's just a number of areas. So it's A rising tide of demand in mining and we're well positioned with our various teams.

Speaker 1

The acquisition of Stuart Olson brought us Mining capabilities in the Sudbury area, so we're And with some additional services that the Sudbury folks didn't have, but we had in Quebec and Newfoundland. So That's expanding in the Sudbury area with new assignments and so it's we're well positioned and we're excited about what that Profile looks like it's like I said a rising tide of demand across the country.

Speaker 7

That's helpful. Wayne, you get asked this every quarter, I guess it's my turn this quarter. How are you thinking about working capital demands or releases

Speaker 2

To the working capital, in Q1 last year, we had $34,000,000 go into Q1. So to me, the increase really just represents So in Q2, we expect our work program to be ramping up. As well, we had a bit Easy comp in Q2 last year and that we still had some trailing impacts from the pandemic and there was a strike last year. So we do expect to have strong growth In Q2, which will require investment in working capital and then same seasonality as normal. Probably Q3 will be relatively flat You get some releases and new investments with a strong work program.

Speaker 2

And in Q4, we expect to see pretty large Releases from working capital. So we expect to be free cash flow positive for the year.

Operator

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

Speaker 5

Thank you. Good morning.

Speaker 4

Good morning. Good morning.

Speaker 5

In your outlook, you're calling for an improved margin profile For full year 2023, which I think is understandable, Given the return to more normal seasonal patterns in the Q1, the margins were down year over year, Which again, the reason for that is clear. But wondering as we look out over the balance of the year, how we should think about the cadence of the margin improvement you expect as you move through the next three quarters.

Speaker 2

Yes, I think you're going to certainly see our margin profile improve In Q2 and probably see an increase again in Q3 and remain strong in Q4. So I think Q3, Q4 will be your highest points of the year and you'll have a nice increase in Q2. And year over year, I think we're 4.3% For all of 2022 on our EBITDA, adjusted EBITDA margins, we expect to see a nice increase year over year.

Speaker 5

Starting in the Q2, just to be clear.

Speaker 2

Yes, yes. Like we did have a bit of a reduction there, I think from 3 8% to 3% in Q1 this year, but we talked about that with that industrial work program we had last year. But we're also confident we've replaced the contributions from that industrial work program. It's just they're going to kick in more in Q2 and through the rest of the year. So for the year, we'll certainly have margin expansion in our EBITDA year over year.

Speaker 5

Yes. Okay, perfect. And then, yes, just to be clear on that large industrial work program that was benefiting you In Q1 2022, and I know that work wrapped up last year, but when does that actually finish up? What point in the year last year? And so when does it actually drop out of the prior year comp period as we move through this year?

Speaker 2

Probably by the end of Q3, most of the work program was finished up on that. But Again, when you think about it from a comparison perspective, we have replaced that work and it's going to kick in Q2 and Q3. We don't think we're going to see that kind of trend you saw in Q1 with it where we hadn't replaced the contribution from it.

Speaker 5

Okay, got it. That makes sense. And then again, just sort of back on this Subject of kind of cadence as you move through the year. So again, you're calling for strong earnings growth on a full year basis, Up a little bit year over year or pardon me, but sort of flattish in the Q1. But again, should we expect to see that earnings growth Show up starting in the Q2 when we look year over year.

Speaker 5

Is that how to think about this and then it kind of builds from there further as you move into the back half?

Speaker 2

Yes, I think that's right.

Speaker 5

Okay, perfect. And then when

Speaker 4

we look

Speaker 5

at the combined record Backlog and pending backlog, obviously, the pending backlog has been increasing At a very, very strong pace. How should we think about the work from pending backlog feeding in Hard backlog and being converted into revenue in 2023.

Speaker 1

Yes. So I think in

Speaker 2

our pending backlog, we really have Two kind of categories of work, right? We have the $1,100,000,000 of MSA work and And those contracts kind of average 3 to 5 years would be the timeframe, right? So you can kind of do the math And what would come into revenue on an annual basis, but with that $300,000,000 we just added, we talked about that being Additions to the scope that we have with those existing clients and that will be additive to our growth, particularly in 2024. Yes, the other $1,900,000,000 that's in there, a lot of that is kind of the collaborative contracting And what we're finding is with those, they do take a little bit longer to bring into backlog. We did see a bunch convert in Q1 and that's why we had the nice book to bill ratio that we did.

Speaker 2

But you are getting some limited notices to proceed to do early site works in some cases. But locking in that design up front is kind of a key piece and depending on the client can take 9 months to a year in some cases. So We do expect the majority of that $1,900,000 to flow into backlog over the next 12 months, but it's sometimes client driven there.

Speaker 5

That's helpful. Thank you. And then I guess just lastly, over the last number of years, there's been a lot of talk about Some of the challenges, inflationary pressures, supply chain and labor availability, I realize there's been an Certainly, that relates to inflationary pressures and supply chain issues. But on the labor availability front, Can you provide a bit of an update? I mean, you have obviously a very strong work program here and you're expecting growth.

Speaker 5

I guess, what are your staffing levels like now in terms of being prepared to address that growth? And secondly, how tight are labor markets now compared to what they had been previously? Just to get a sense For what the picture looks like right now.

Speaker 1

So I think, first of all, we won't secure work or Pursue a project that we don't have the capacity for, it's sort of a step 1 of our evaluation of how we The basis we have across country and the growth that we have in the country And Derek, various areas gives us a certainly a large base and to draw from. So we're drawing from different markets On a regular basis to support the various demands, I'd say that the labor availability, It hasn't changed a lot in the last year. It's tight and I think you have to I think we have a benefit of a more of a Continuous flow of demand, so our employees like that consistency and you tend to have A much more stable workforce, a loyal workforce where you have a continuous Block of opportunities continuously flowing. So we tend to have a much more consistent evolution. It ebbs and flows We're doing we do a large turnaround for one of our clients and usually in energy, that will create More spotty demands, but certain employees in Canada's labor force focus on those kinds of opportunities and Enjoy that kind of cycle.

Speaker 1

So obviously we have major Capability when we need to do a turnaround for a client and again we don't sign up for those turnarounds. We don't have Certainly a strong level of confidence in terms of the availability of labor and whatnot. So So we're not feeling a lot differently about labor as we enter continue through 2023 than we did a year ago. It's tight, but We seem to be navigating it extremely well.

Speaker 5

All right. That's all for me. Thank you. Thanks. Thank you.

Operator

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

Speaker 6

Terry, I wanted to ask you about the oil market Specifically, I mean, as the pricing has come down over the boil over the last couple of months and then at the same time you seem to be winning work. So I'm just curious What you're hearing from the clients kind of on the ground in terms of their priorities? Thanks.

Speaker 1

Yes, it seems Max it feels that the offering we have This continues to gain momentum, the types of things that we bring to the table. Our safety record It's impeccable. As you know, that's a major focus in some of the large oil players, oil and gas players. So I think in that regard, we seem to be there's certainly more momentum today to streamline Contractual interfaces than there ever was. So large organization is saying, I Can't manage multiple contracting interfaces.

Speaker 1

I'm more interested in moving to narrow that So that I have a higher degree of confidence in safety and we're benefiting tremendously from that. So in that regard, In terms of why we're being awarded work, that's the reason. As far as The investment they're making, it's sustaining capital. So the majority of work we do in oil today revolves around their Sustaining capital program, keeping their facilities running at high levels of efficiency and so that's the majority of what we do. There's not as much new capital flowing into Growth, there is some and some of our clients are doing larger projects, which involves bringing in our construction teams For new expansionary growth, but the majority is sustaining capital.

Speaker 6

Okay. That's super helpful. And then just thinking a bit more sort of broader based when it comes to the risk profile. So as you sense right now that whatever is coming out from the government on the institutional side of things, It's really much more focused on collaborative contractual structure. Do you have like maybe a sense, like I don't know, it's like 60% or 70% like What's your sense there?

Speaker 1

Yes, it'd probably

Speaker 6

be a little north

Speaker 1

of that too because especially brownfield, like complex brownfield sites Where you just can't possibly predict the cost because of Numerous stakeholder interfaces, those projects if they don't deliver them, governments don't deliver in a collaborative framework, they don't get anyone interested to Even participate. So it's that kind of dynamic. And it's largely because of The unpredictability of what you can be faced with and So obviously that's changed quite dramatically. But I would say it's probably as high as 80% On the brownfield side, there's still a few that evolve in a P3 drilling. But on the greenfield side, we're more than happy to do a P3 in a greenfield site.

Speaker 1

There's some new projects have been announced in Canada that are greenfield, things like schools. There's opportunities evolving In new provinces as well that haven't traditionally had P3. So but we're happy to look Some of that in the greenfield space with the brownfield and I think most contractors that are of the scale that can handle these larger assignments We just can't predict the cost. That's the issue. You just can't get your level of confidence very high in what the cost is going to be.

Speaker 1

It's not about the margin profile or how you look at it, it's just the lack of confidence and the ability to predict the cost.

Speaker 6

Then maybe just lastly in terms of kind of Doug Mar and how that asset has been performing and what are your thoughts in terms of Potentially cross selling or doing kind of bigger projects that kind of dovetails into my previous questions. Maybe just any update there. Thanks.

Speaker 1

Yes. So it's really Degroof has been a catalyst for us to expand our services. Like in traditional Rail transportation, heavy rail and light rail, we would be limited to more stations and things like that. But Degmar has been a catalyst to allow us to be On projects that involve complex rail systems and they have a tremendous track record and has worked extensively here in Ontario for the transportation agencies. So that's really been strategic for us and what we Doing that business is leveraging in into much larger programs because of obviously our scale and Our systems and our quarterly programs and our teams and the availability of moving teams.

Speaker 1

So yes, it's really exciting and The team that we've inherited in the acquisition of Dagmar certainly are capable of running a much larger Business in the AR and we're busy with that growth and adding some of our team From various parts of Canada to that group and it's been pretty exciting and seeing The opportunities evolve for them, it's going to have a very exciting future and it's taking us a long way to building that Sort of 3rd stool, 3rd leg of the stool with an infrastructure vertical combined with the industrial and the building verticals we currently have and that's a big Our growth as we outlined in our current strategic plan. So we've done a nice job with that. The team has worked hard To see that continue to evolve.

Speaker 6

Okay. Excellent. That's super helpful. That's it for me.

Speaker 1

Thanks, Vince. Thank you.

Operator

The next question comes from Gabriel Moreau with IA Capital Markets. Please go ahead.

Speaker 8

Hi, good morning. First, Can you give us an update on your M and A outlook for the rest of the year?

Speaker 1

So we're Strategic with our M and A focus, there's been a number of opportunities over the last 6 months, particularly notice the Pickup last fall and continues to be very high pace. I think our profile as it grows and we become more diversified, we're getting approached on things that we might not have been I approached on before because there probably was a thought we wouldn't necessarily be interested. So we've constantly got A series of opportunities that we're evaluating that are sort of at various stages and some of them develop into Real entities that we secure or acquire and some of them don't. It Just depends. So at any one given time, we have always got things that are evolving in various stages And it is not our primary focus.

Speaker 1

Obviously, it's a balanced approach. We're looking for strategic assets that can accelerate Our growth in some of our core markets along with the focus we have organically growing in those markets. So we keep a pretty good balance, We've done an impeccable job of integrating the businesses we've acquired and the recent team we acquired at Trinity We had great success in the 1st couple of months in terms of integration and excited about the opportunities that are ahead For our Trinity team and we've had Dagmar now for 20 or so months and that's Certainly a real jewel of an acquisition, it's growing and integrating nicely.

Speaker 8

Thank you. As you continue to deliver sustainable growth and if you keep delivering good results, what are your thoughts about dividend Is there growth or payout related?

Speaker 2

Yes. We review The dividend every quarter with our Board. So it's a constant topic of discussion. Yes, we provided guidance in December last year that we said for the year, we expect the payout ratio on net income To be below 40% or below, which certainly we have that language in this quarter as well. Yes, we I think the March dividend paid out in April 20th there was the first dividend at the higher rate.

Speaker 2

I don't think you're going to see anything in the next quarter or something like that, but certainly it's a topic of discussion and as The company continues to do well and grow. Who knows what happens down the road?

Speaker 8

That's all for me. Thank you.

Speaker 1

Thank you,

Operator

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

Speaker 9

Good morning.

Speaker 4

Good morning. Good morning.

Speaker 9

I was wondering if you could talk a little bit more about the contract award that you announced this morning, a new relationship with Champion Iron, a big player. Specifically, just curious how this opportunity came about? And if

Speaker 1

Yes. So it's they're certainly a very impressive organization. We had an opportunity with Our COO, Joe Royer and our District Leader, Dominic Jollisert to meet their CEO and COO in Montreal about 3 months ago to chat about what we were doing and I was really impressed with their organization and the direction they're going and Their footprint and the evolution of The asset that they have is certainly a very high grade product. So they're very Focused on developing their site in a very In an environmentally focused way and so obviously it fits nicely into things that we're focused on And they have a very bright future in my opinion and mainly because the grade of their ore is higher than others. So It's got more sustainability in my opinion over the longer term.

Speaker 1

So a really strategic Award, I think it will grow over time to be similar to our other assignments In that region and this makes our overall business more efficient when you've got multiple key areas of focus.

Speaker 9

Thanks. And just a follow on on this. You mentioned that this project was Smaller in scale than previous one. I can't remember exactly which projects you were referring to, perhaps the MSA Assignments, you'd secure, but can you give us a sense of the magnitude of the project size,

Speaker 1

Yes. So this It's sort of a first assignment for us. It's not of a scale that You'd normally press release even other than it was a very strategic award and it gave us a very Longer term opportunity to grow and the potential to grow is huge. So I'm very confident with the team that we have that this business or this opportunity and this new client Alignment will be very, very strategic for us. And again, as I said earlier on the call, we're just seeing a A bit of a tidal wave of demand on the mining side.

Speaker 1

There's a number of new assignments in just about every province Evolving. So it's exciting and then you've got the real big ones with lithium and that whole dynamic ring of fire eventually We'll evolve and so those are all certainly exciting to see.

Speaker 9

Thank you, Terry.

Speaker 1

Thanks, Mike. Thanks, Rick.

Operator

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

Speaker 1

Thank you everyone for taking the time to join our earnings call this morning and thank you to the entire Bird team. We're proud of the work

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Earnings Conference Call
Bird Construction Q1 2023
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