Bird Construction Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
March 6, 2024

There are 9 speakers on the call.

Operator

Welcome, ladies and gentlemen, to the Bird Construction 4th 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. 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 hereby 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 responses to any questions you might ask may include forward looking information.

Operator

Therefore, the company cautions today's participants that such forward looking information involves known and unknown risks, uncertainties and other factors that may cause the 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. 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 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.

Operator

Please go ahead.

Speaker 1

Thank you, operator. Good morning, everyone. Thank you for joining our Q4 and full year 2023 conference call. With me today is Wayne Gingrich, Burge's Chief Financial Officer. Before we begin, I'd like to take a moment to acknowledge that this week we celebrate Women in Construction and International Women's Day on Friday.

Speaker 1

It's an opportunity for us to recognize the remarkable women at Bird who inspire us daily. Today, we also reflect on the ongoing journey towards gender equity, path that we are committed to pursuing. At Bird, we understand the value of diversity in Allyship, which we actively foster through initiatives like our Women at Bird Employee Resource Group and meaningful external partnerships. While we have made progress, there's still more work to do, and we are dedicated to fostering a more inclusive industry. Turning to today's presentation.

Speaker 1

This past year has been a period of significant achievement for Bird, underscored by robust revenue growth, further margin improvement reflecting the strength of our strategic plan, the strong reputation we have built with our clients and the dedication of our teams across the country. Our diverse capabilities to deliver sophisticated work and are positioned as a leading collaborative construction and maintenance company remain competitive advantages, which we intend to leverage in 2024 and beyond as we continue to focus on growth and margin expansion. 3rd's 4th quarter and full year results delivered substantial organic revenue growth and continued gross profit and EBITDA margin accretion aligned with our core priorities. Our 2023 results provide good momentum for the company as we enter 2024 in the final year of our current strategic plan. In 2023, we delivered 18% revenue growth with full revenue full year revenue of CAD 2,800,000,000 Adjusted EBITDA improved 37% year over year to $139,000,000 or 5% of revenue.

Speaker 1

The company reported $72,000,000 of net income and earnings per share of $1.33 We grew our cash flow from operations and significantly grew our backlog reflected in the 1.29x book to bill ratio. We continue to see considerable opportunities for profitable improvements, including additional leverage on our cost structure in the coming years. BRID was awarded over $3,600,000,000 in securements for the year and at year end our combined backlog was up 26% over last year, closing the quarter with $3,400,000,000 in backlog and $3,000,000,000 in pending backlog. Our pending backlog included almost $1,100,000,000 of master service agreements and recurring revenue work, which will be performed over the next 7 years. Our portfolio of master service agreements spans the energy, mining and nuclear sectors.

Speaker 1

It was further bolstered through the acquisition of Norkan subsequent to the year end, which was one of Alberta's leading electrical service providers. The robust foundation of contracted and ordered work provides significant visibility into 2024, both for revenue growth and further margin improvements. It underscores our confidence in the continued demand for our services, particularly in sectors critical to the energy transition, population growth and infrastructure modernization. Our backlog is highly collaborative and diversified across many sectors, and Bird is a leader in collaborative contracting in Canada. In collaborative contracts, we work closely with clients and partners to advance the design before determining the project's price.

Speaker 1

Given the increasing complexity of projects, a key area of expertise for Bird, a collaborative approach is a better way to build. There are significant benefits for all parties involved, including decreased risk, increased stakeholder engagement, added value for the client and the delivery of an enhanced final product. First, growth and profitability improvements to date are a testament to our team's ability to leverage self perform capabilities and effectively cross sell our services and solutions. 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 the delivery model. Our emphasis on collaborative project delivery and strategic investments in technology continue to enhance safety, productivity and partnerships across all projects.

Speaker 1

Over the past few years, Bird has strategically diversified its revenue sources through organic growth and strategic M and A. Throughout this transition, Bird has significantly enhanced profitability. As part of our 2023 reporting, we have realigned the annual revenue breakdown to better align with Bird's focus areas and position in the industry. Previously, Bird referred to its revenue breakdown as institutional, commercial and industrial. Today, Bird is known for delivering sophisticated projects in the industrial, buildings and infrastructure markets.

Speaker 1

Due to this shift and aligned with our messaging over the past few years, the figures have been restated for 2021, 2022 and 2023. More information on what each segment includes can be found in the Nature of Business section of our MD and A. While great progress has been made to date advancing Bird's strategy, there's still a significant runway of expansion and diversification opportunities that will continue to support margin accretion and drive forward Bird's growth strategy over the coming years, especially in the underweighted infrastructure market. In 2023, Bird announced many significant project awards that underscore our expanding presence across key sectors, including energy power, education, modular construction as well as infrastructure projects across Canada. These awards not only reflect our strategic positioning, but also the enhanced capabilities we've gained through strategic acquisitions, establishing us as a sought after partner for sophisticated projects.

Speaker 1

Throughout the year, we were awarded several projects in the post secondary education sector across BC, Alberta, Ontario and the East Coast. These projects capitalize on Bird's expertise in creating sustainable smart environments, while highlighting our strength in lower carbon building solutions like mass timber. Our clients are increasingly committed to sustainable construction and retrofits to minimize their carbon footprint, a space where Bird's offering align with market needs. We were pleased to be awarded early works at a new LNG facility in BC as well as multiple mining contracts showing the current strength of the commodities market, but also the strong leadership and dedication of our Heavysil team. Byrd was awarded multiple hydroelectric related projects that aim to enhance the longevity and efficiency of existing facilities and essential component of Canada's clean energy future.

Speaker 1

We previously highlighted Bird's role and current project portfolio in supporting the energy transition and shift to a lower carbon future. The industry's overall strong demand is complemented by this exceptional outlook for investments in clean power generation, power distribution and preparations for further electrification, including battery and EV infrastructure. There is also a considerable focus on enhancing the energy efficiency of existing infrastructure and expanding public transportation. Bird's capabilities, especially our self perform electrical expertise, uniquely position us to meet this significant long term demand. Currently, projects underway range from hydroelectric infrastructure and large scale utility scale renewables to work on Ontario's nuclear sites, waste to heat recovery at Toronto Western Hospital and various wastewater and organic waste processing facilities across the country.

Speaker 1

Our commercial systems and utilities team and our industrial maintenance, repair and operations team, along with their specialized mechanical electrical, telecommunication and data systems expertise make up over 2,500 electrical personnel. These teams are and will continue to be critical to meet the demand for electric infrastructure across Canada. With our buildings expertise, Bird employs sustainable building solutions such as mass timber, modular construction, deep energy retrofits, net zero buildings, innovative special projects, smart building technology, just to name a few. Our growing civil infrastructure team recently secured the East Harbour Transit Hub Alliance Development Agreement in partnership with Atkins Realis. With Bird's strong reputation developed by supporting many of Canada's leading energy and power clients over the years, we're well positioned as a partner of choice throughout the energy ecosystem.

Speaker 1

There's currently strong demand for Burt's services across the industry and a significant backlog of projects required for the longer cycle investment horizons in both public and private sectors. Government programs are supporting investments in transportation, energy, water and telecommunications. This includes funding through the Investing in Canada Plan, the Canadian Infrastructure Bank, Canada Growth Fund and other federal initiatives aiming to modernize critical aspects of our daily lives and enhance economic growth. Specifically, the shift towards a greener economy requires substantial investment with an estimated $125,000,000,000 to $140,000,000,000 required to achieve the federal goal of net zero emissions by 2,050. This is a significant opportunity for our industry.

Speaker 1

Canada's energy sector is facing an estimate of doubling our energy electrical electricity supply to keep up with increasing demand as well as achieving net 0 in 2,050. Projected investments range from $110,000,000,000 to $270,000,000,000 to expand clean energy and improve power distribution and transmission systems. Public transportation continues to be a significant area of growth with over $70,000,000,000 in funding recently committed in Ontario as well as additional demands across the balance of provinces reflecting the commitment to enhance our public infrastructure. Lastly, the nuclear sector holds over $40,000,000,000 in new potential projects, not including general annual spending. High profile initiatives like the Bruce nuclear expansion, the Pickering refurbishment and the Small Modular Reactor Infrastructure Program highlight the sector's positive outlook.

Speaker 1

Together, these investments reflect a robust long term demand for our services positioning us at the forefront of this transformative era in Canadian infrastructure development. Looking ahead to 2024 and beyond our ops, optimism is fueled by our strong backlog, diversified service offerings and strong commitment to our strategic priorities. As we head into the last year of Bird's current strategic plan, we remain firmly focused on profitability, discipline, diversification and growth. We expect to retain in excess of twothree of net income to support our growth in 2024 and beyond, while continuing to provide healthy returns to shareholders. With that, I'll hand it over to Wayne, who will provide more detailed insights into our financial performance.

Speaker 2

Thank you, Terry. We're very pleased with our strong performance in 2023. The company has safely advanced our strategic priorities and we delivered significant organic growth, continued accretion of adjusted EBITDA margins and strong operational cash flows. In the Q4, the company delivered 22% year over year revenue growth with revenue for the quarter of $792,100,000 The company's margin profile improved in the quarter compared to the prior year with gross profit percentage increasing to 9.2% from 8.8%. The increase in gross profit margins continued to be driven by improved margin profiles on newer work, resulting from disciplined project selection and cost control, growing self perform capabilities and cross selling opportunities across the company and a higher proportion of industrial construction compared to Q4 2022.

Speaker 2

General and administrative expenses were $40,500,000 or 5.1 percent of revenue compared to $34,500,000 or 5.3 percent of revenue in 2022. 1 of the primary drivers of the $6,000,000 increase in the quarter was $3,200,000 in higher compensation costs, which includes the impact of increased accrued compensation costs, share based compensation costs and related derivatives. Compensation costs in the quarter were higher compared to the prior year due in part to the significantly higher volume of work and profitability as well as the 44% increase in the company's share price for the quarter. Net income and earnings per share were $23,900,000 or $0.44 compared to $14,900,000 or $0.28 in 2022. Adjusted earnings and adjusted earnings per share were $24,300,000 or $0.45 compared to $15,500,000 or $0.29 in 2022.

Speaker 2

Adjusted EBITDA in the Q4 was $43,900,000 compared to $30,600,000 earned in the Q4 of 2022, increasing to 5.5 percent of revenue from 4.7% last year. The increase was consistent with higher gross profit and an increase in income from equity accounted investments as well as leverage gained in our cost structure. Results for the full year reflect our team's strong project execution with significant revenue growth and profitability improvements. We reported revenues of almost $2,800,000,000 reflecting an 18.1 percent or $429,000,000 increase compared to $2,370,000,000 of construction revenue recorded in 2022. Revenue growth was predominantly organic with additional contributions from Trinity acquired on February 1, 2023.

Speaker 2

Gross profit for full year 2023 was $240,500,000 reflecting an 8.6% margin, up from 8.5% in 2022. The company's highly collaborative work program, growing backlog with enhanced margin profiles and expanded self perform capabilities continue to drive strong gross profits on significant revenue growth. General and administrative expenses were $142,800,000 or 5.1 percent of revenue for the year compared to $132,400,000 or 5.6 percent of revenue in 2022. The primary drivers for the $10,400,000 year over year increase were acquisition and integration costs and asset impairments from the rationalization of some leased office base during the Q2. Other drivers included higher compensation costs and higher aggregate growth related increase to other costs such as travel, business development, recruitment and pursuit costs.

Speaker 2

Full year net income and earnings per share were $71,500,000 or 1.3 $3 per share compared to $49,900,000 or $0.93 per share in 20 22. Adjusted in 2023 also increased significantly to $74,200,000 or $1.38 per share compared to $46,000,000 or $0.86 dollars per share in 2022. Adjusted EBITDA increased 37 percent to $138,700,000 or 5 percent of revenue from $101,200,000 or 4.3 percent in the prior year. The increase was consistent with increases in gross profit and income from equity accounted investments. We continue to focus on profitability drivers, including our disciplined project selection and risk balance mix of work.

Speaker 2

We're growing in higher margin sectors with more complex work, increasing self perform work and expanding cross selling initiatives, all of which contribute to higher margin potential on projects. We're also focused on growing our portfolio of recurring revenue MSAs. To support our continued growth, Bird's highly valued team grew in 2023 to meet the needs of Bird's expanding work programs, with Bird being successful in attracting, retaining and developing talent throughout the year. Our financial position remains robust with a strong balance sheet characterized the the flexibility to invest in growth opportunities, both organic and through strategic acquisitions. We ended the year with $178,000,000 in total cash and cash equivalents and an additional $215,000,000 available under the company's syndicated credit facility.

Speaker 2

When including total cash, our net debt position is negative $104,600,000 Bird recorded positive cash flows from operations while funding the working capital required to support the significant growth of our work program. At the end of the year, working capital stood at $234,000,000 an increase of $49,400,000 over December 31, 2022. The primary driver of the increase was net income of $71,500,000 exceeding dividends paid. Ferd's working capital ensures support for current and future contractual requirements. Our liquidity and leverage ratios and very positive return metrics remain aligned with expectations.

Speaker 2

The company's current ratio is 1.26. Our adjusted net debt to trailing 12 month adjusted EBITDA ratio stood negative 0.05 times and our long term debt to equity ratio was 20%. The company's return on equity for the year was 27%, together demonstrating our commitment to maintaining a healthy and sustainable capital structure. Throughout 2023, we invested $31,000,000 in capital expenditures to support our operational needs and growth initiatives. Our dividend policy reflects our strong financial performance and confidence in the business' future with over $22,000,000 returned to shareholders as dividends in 2023.

Speaker 2

Our dividend remains well covered by our earnings and cash flows and remains an important component of our total shareholder return strategy. In December 2023, based on the strong outlook for 2024, we announced a 30% increase to the dividend, bringing it to $0.467 per share per month or $0.56 per share on an annualized basis. Bird continued to pursue accretive tuck in acquisitions with high growth potential, notably with the acquisition of Trinity in February 2023 and Norkan, which was announced subsequent to year end. The company has continued to experience robust performance from earlier acquisitions upholding our reputation as a strong integrator in delivering accretive transactions for shareholders. M and A remains a key element of Bird's capital allocation and growth strategy.

Speaker 2

Our M and A strategy is targeted seeking to integrate firms with specialized offerings that complement our existing services, focusing on strategic sectors like civil infrastructure, process mechanical, electrical, MRO services, utilities and renewables. The strength of the company's balance sheet and access to financing supports our disciplined approach to investing in Bird's future growth, both organically and through opportunistic tuck in acquisitions. We are well positioned to pursue accretive tuck ins in key sectors and remain open to larger opportunities where it makes sense. I will now turn the call back over to Terry to comment on the outlook for the company.

Speaker 1

Thanks, Wayne. We're pleased with the company's performance in 2023. As we move into 20 24, Bird remains positioned to capitalize on the opportunities presented by a robust construction market and the ongoing need for sustainable infrastructure development. Our strategic focus areas, including growing recurring revenue streams, enhancing our self perform capabilities and expanding our service offerings through strategic acquisitions, will continue to drive our growth. We were excited to welcome Norkan to our team in January.

Speaker 1

Now our focus is working together on future growth potential through cross selling and new services for our client base and working in collaboration with our indigenous partner, Infinity Metis Corporation. Top line organic growth is expected to continue in 2024 with seasonal patterns favoring the second half of the year as usual. The company remains focused on EBITDA margin accretion and expects adjusted EBITDA and earnings per share growth to outpace organic revenue in 2024, with the company continuing to drive strong and improving operational cash flow. We're excited about the future and confident in our ability to deliver on our strategic priorities, creating value for our clients, our employees and our shareholders. With that, I'll turn the call back to the operator for questions.

Operator

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

Speaker 3

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

Speaker 1

Good morning. Good morning. Good morning.

Speaker 3

So very strong revenue growth in 2023, high double digit. Given you're sitting on record backlog and the visibility you have today, what sort of revenue quotes do you see coming in 2024? I believe on the last Q3 call, you had said that a high single digit growth rate was reasonable.

Speaker 1

Yes, I think that continues to be our view and that would be edging towards low double digit growth. And again, early days yet as we're early in the year, couple of months behind us. But I think the demand certainly is unrelenting. So I think that pressure is going to continue to move that top line revenue up.

Speaker 3

Right. Okay. And maybe just a question on the overall risk profile of your business today. So collaborative framework type projects are now about 75% of combined backlog. Are you happy with this level and are you happy with the risk profile for the remaining 25% or so of backlog?

Speaker 1

Yes, anytime you can get to a level like that, in our industry is a pretty we targeted to try to get to a level like this and we've achieved it and we continue to balance that. The remaining 25% that we have are all projects that are well within our level of risk tolerance and risk adjusted. But and I think it's a good spot that we're in. I don't think you could ever get to 100%. I think it's good to have this framework we have and it seems to be optimized right now.

Speaker 1

So I'm quite content with the balance that we have today and if it continues to ebb and flow between 70, 80, that's a good spot.

Operator

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

Speaker 4

Good morning. Thanks for taking my question.

Speaker 1

Good morning.

Speaker 4

Under the progressive design build model, as you acquire tuck ins like Norkan, do you see opportunities to increase the scope of work for projects that you're already in discussions with the customer on?

Speaker 1

Definitely. I think whether those projects evolve in a progressive design build model or not, there's certainly a lot of traction with our combined MRO team, which Norkan fits into. A good example of that is Norkan has an existing customer and it has forces on the ground in the U. S. And Denver.

Speaker 1

And that's a very strategic position for us to leverage on the energy side in those markets and grow as a well established client there. So it's a good example of some of the benefits of Norco. I also think there the Infinity partnership that we've inherited with the Norco acquisition has got room to grow. We see tremendous traction in Canada on indigenous related projects, investments. It's just tremendous pace of growth in that area and obviously having this existing partnership as well as many other partnerships we have, but this one specifically gives us a nice foundation to grow.

Speaker 1

But Norkan is a very well run company. It's got it's had an excellent safety record and it's really fitting in nicely in the 1st month or so of its existence or 1.5 months with us at Bird, and integration has gone very smoothly.

Speaker 4

And it's interesting to see the major award packages to the mining sector. There seems to be increased awareness of the importance of developing some of the sources of critical metals minerals and metals in Canada's North. When was the last time that you would have seen work packages with multiyear commitments of this type of size for herd? And what are you seeing in this market looking forward and how significant could it be?

Speaker 1

Yes, this is pretty exciting. I don't even know of 10 years ago when we were in a better commodity cycle whether there was this kind of demand. There's certainly I haven't seen this before with the demand that we've currently seen coming in many different areas throughout the country. And these are long term commitments that these potential clients are looking for. And there's not a long list companies that are set up for this type of thing with the kinds of assets that you need, equipment assets and experience forces to be able to move into these sites, which are often quite remote.

Speaker 1

So that's a really exciting area for us.

Speaker 4

And if I could ask one more just on the operating margin. A number of positive comments in your outlook regarding margins continuing to trend upward and margins in the backlog and pending backlog being higher than the existing business. I know that you're still working on your next leg of strategic plan, but are you able to provide us with any comments on targets that we should be thinking of for the organic business over the next couple of years or just the inappropriate cadence of margin expansion from here?

Speaker 1

Yes, I think you're going to see consistent cadence moving forward. Certainly, we're still a few months away from finalizing our strategic plan. We've been meeting monthly with our Board of Directors. Our Board is very involved in this initiative and we've been going through the various pieces that we assemble and that's gone very smoothly. I'd say, we're pretty excited about this next iteration of the plan and what it will mean for the company and but I think you'll see consistent accretion with the opportunities that we're targeting.

Speaker 4

Okay. I'll pass the line. Thank you.

Speaker 1

Thanks, John.

Operator

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

Speaker 5

Thank you. Good morning.

Speaker 2

Good morning.

Speaker 5

In the outlook commentary, you talked about acceleration, I think, in revenue growth here. Just trying to understand, I guess, as we look at the revenue growth opportunity for 2024, I understand there's sort of the regular seasonality, but is the idea that you'd expect the rate of growth to accelerate as the year moves on? Or are you simply commenting on the fact that typically the second half is stronger than the first half?

Speaker 1

Yes, I think it's more that typically the second half is stronger and the quantum of revenue as opposed to the percentage will be obviously a significant factor in 2024.

Speaker 5

Okay, perfect. Just to clarify. And then you've talked about strategic project selection and I think that's been a part of the story for a while now. I guess with the backlog as strong as it is, strategic project selection has important. But how does that evolve or change as you kind of go forward given the strength of the backlog?

Speaker 5

Are you more focused on certain kinds of projects given where things stand right now as far as the business? And are you trying to look at projects that will add work that extends further out in time because you do have such a large backlog? Just any comments on how Yes, I

Speaker 1

think you've hit some of the highlights of what we're certainly as you've as we've grown, become more diversified, we've become more attractive for companies to engage on a longer term solution, a longer term framework. So certainly longer term opportunities are important to us. But I think we continue to build out the foundation of the business into these 3 verticals that we've talked about today kind of for the first time. And there are lots of room for those to continue to expand with the foundation we built. We've been investing significantly in our team and whether we're in developing training and whatnot, the existing team, but also we've been adding.

Speaker 1

When you have momentum like we have it, it's certainly a bit easier to recruit because some really talented folks out there that are looking for a company with a lot of momentum with the kind of profile that we have. So that's exciting. We get a lot of interest that's unsolicited and we continue to build out the organization on that basis.

Speaker 5

That's helpful. And maybe just picking up on that last point there. I mean, you mentioned the ability to recruit. But if we think about labor availability, again, the backlog is so strong. How are you finding it in terms of the ability to find the labor you need for the work program you have kind of across the board, not just not just recruiting, more generally speaking on the labor pool?

Speaker 1

Yes, I think, certainly it's a question we see a lot. And I think it's no question in have a project that we're concerned about staffing. And I think that comes from we've really driven into the DNA of the organization, the importance of collaboration. So we move very large teams of people around the country. And if we've got project that's got a higher labor content in certain region, we'll move labor in from other regions to help offset that.

Speaker 1

And obviously, the opportunities that we're focused on allow that and are in a position to accommodate the additional cost for that. I think that's been a real key to our overall framework of how we've been moving forward. We also acquire labor through these larger acquisitions. Norkan peaks out at 500 people. So when you acquire a company like Norkan, you add a considerable number of long term employees to the company and gives us more flexibility to steer in different directions in that regard.

Speaker 1

So I think it's a combination of things, but I think, again, it's earlier the momentum we have. The and I think the other really important part of all this is, we're getting to a point where we're 50% of our revenue is self perform. So we control a lot of the projects that we're entering. And that's a huge advantage when you're talking about some of the opportunities that are evolving in things like data centers and things like mining long term mining assignments and things like that, so.

Operator

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

Speaker 6

Good morning, everyone.

Speaker 1

Good morning, Ian.

Speaker 2

Good morning, Ian.

Speaker 6

Just going back to the revenue growth in 2024, maybe coming at it from a bit of a different angle. If we think about low double digit growth for 'twenty four, that will be round numbers, call it, dollars 330 ish million. You grew revenue by $420,000,000 in 2023 on a year over year basis. I guess, what's precluding you or why wouldn't revenue be growing at the same absolute level in 2024, say, given the strength of the backlog?

Speaker 1

I think we have a sometimes what's difficult to predict is we are working when you are working in a collaborative framework, you are doing a lot of advanced design and development and then you're heading into FID with the company's Board of Directors for approval to proceed with the project. And that's sometimes difficult to predict in terms of the timing of that. And we've had projects where we've been at FID and the client comes back to us and says our Board has decided to double the size of this project and we've got to go and redevelop design and whatnot. So things like that happen, sometimes difficult to predict. We've got a lot of really exciting opportunities across the platform and because there's so much that's in advanced development, it's harder to put your finger because you don't completely control that.

Speaker 1

So it's harder to put your finger on that. So there are times where things move to the right of it, but it's more to do with the unpredictability of getting to FID with some of our larger clients that are building some of these large private and also public as well. Governments, obviously, are very focused on budgets and we're doing collaborative work in the front end and we get to the evaluation of a project and look at where we're at, there are times where it's cresting above their budgets and we got to go back and work on redesign, which extends the timeframe of before you're in the ground.

Speaker 6

No, that's helpful. I appreciate that color, Terry. With respect to some of these specialty services that you've added in prior years, such as electric Cullors. Is there anything out there today that you don't have that you find yourself interested in adding to your suite of services?

Speaker 1

There isn't anything that really rings the bell. I think we'd like to build out the capabilities of our existing offering. We've got certainly new growth in infrastructure, which is an emerging area for us. It's new for Bird. We'd like to continue to build that out on we do a considerable amount of electrical.

Speaker 1

We also offer mechanical solutions both in industrial and commercial. So we'd like to continue to see that growth on the mechanical side, whether that's organic or through M and A. So, some areas like that. But there isn't anything that's ringing the bell necessarily that we're just missing. I think we've done a nice job to have a platform that's exciting and giving us a nice base.

Speaker 1

The recent utility acquisition we did positions us extremely well, especially in the case of a I think it's so much growth evolving in North America and data centers. It's a huge component of a data center, just utilities and communications, let alone all the electrical mechanical that's inside these data warehouses. So those have all been very timely and they've worked out well for us.

Speaker 6

And last one for me. You mentioned in your prior comment, but you've obviously been involved in some large project pursuits on the infrastructure side. Is there still other projects out there that are worth pursuing that you think would be of interest to Bert or are they they all been awarded at this juncture?

Speaker 1

Oh, no. There's just a pipeline that's massive, that's evolving and the good thing is they're all evolving in a collaborative framework almost extensively, especially in the provinces that have a lot of experience like Ontario and BC. Some of the other provinces are still dabbling with using P3s, but I think that's going to eventually fade that interest for again depending on the project. If it's a clean greenfield, everything is controlled, it works. But if it's brownfield, it's going to have to be collaborative, but they won't get anybody bidding in.

Speaker 1

This is the way it is. So, yes, lots of growth there, lots of demands. I think we're increasing our resume with a portfolio of work we're doing in healthcare, for example. A lot of demand there where previously we wouldn't have looked at that closely because the risk transfer was too high, but now that's changing. So, yes, there's just some really exciting areas.

Speaker 1

We've developed a strong resume in horizontal rail, whether that's heavy rail or light rail. So that's a lot of opportunities there that are daunting almost.

Operator

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

Speaker 7

Hi. Good morning, gentlemen.

Speaker 1

Hi, Max.

Speaker 7

When I look at some of the data that you published in MD and A that deals with hours worked overall and it feels like overall it's up 6% in 2023, whereas revenue is up 18%. I'm just wondering if you don't mind maybe commenting around whether it's the efficiency on kind of a per employee basis, which is driving up greater revenue cadence or different sort of project scopes. Maybe if you can comment on that would be helpful. Thanks.

Speaker 1

Yes. I think difference in project scopes would be part of it, Max. For example, a large mining assignment, where you got a heavy equipment component, your hours would be lower relative a building site where you've got a lot of labor on the site combined our internal our hours plus our subcontractors. So I think it's a mix. It's driving a lot of it.

Speaker 1

We are though investing heavily in improving technology and we are seeing considerable gains already in the investment we are making in terms of our labor efficiencies and we continue we are really excited about that. We're spending a lot of time on that and that's going to be transformational for the company. As we continue to move forward, we've made very good selections of the solutions that we're are using and other proven solutions. And yes, we're excited to see that evolve because we're seeing some really good signs. So it's a mix of both, but I'd say the project mix would be a big contributor there.

Speaker 7

Right. And how, I guess, would that trickle down to the margin line from your perspective, do you think?

Speaker 1

Well, certainly, the mining side margins, obviously with the equipment investment is certainly higher profile, higher returns in terms of EBITDA percentages. So I'd say that again it's a tricky question because of the mix and it depends on the sector. Sometimes we'll have a sector that's got a very high margin profile that also has a high labor component. We have we deploy a lot of labor in our maintenance services, which obviously we're quite impressed with the margin profile there, but that margin profile would not be the same as margin profile on a large mining assignment that also will go 7 days a week, 24 hours a day. And the other thing we're finding now with these larger mining assignments, those are 12 month assignments where they just run around the clock, which is not what we've experienced in past years because they were shorter, smaller assignments that had a different framework.

Speaker 7

That's helpful. And last question, do you mind providing a bit of color in terms of the margin differential between your recurring and more sort of ad hoc construction work, if there's any or have those buckets fully converged? Thanks.

Speaker 1

It's pretty similar in terms of some of our core business areas. It's become quite similar. It was higher some of the recurring side was higher than some of our base business, but our base business has really improved in the way we've strategically moved it in new areas and those are kind of converging to be similar. But in that recurring, you've got nuclear work. So it's not just some of the energy or the oil and gas maintenance work we're doing.

Speaker 1

So that's helping and that's changing things. They're very specialized, obviously. So that's improving it.

Operator

The next question comes from Sean Jack with Raymond James. Please go ahead.

Speaker 8

Hey, good morning, guys.

Speaker 6

Good morning.

Speaker 8

I wanted to touch quickly, margin expansion has been seen over these past couple of quarters, along with a pretty substantial increase in growth, obviously. Just wondering where do you believe margins can stretch to? And then also if you could give us any color on timing around that would be great.

Speaker 1

So it's difficult to pin that with the revenue and the mix of revenue that we have. But obviously, we're very focused on consistent accretion on an annual basis. We'd like to see accretion year over year be similar to what it's been between 2022 and 2023. But we're and that's just our ultimate goal. Long term, obviously, there'll be a settling at some point, but that's a number of years down the road with the types of things we're doing and the way we're moving the business forward.

Speaker 1

So it's always a balancing act, but we're really pleased with the profile of the backlog. And that gives us a really good, certainly, forward looking guidance of where we're going to be. And yes, we're pleased with the overall balance we've got today.

Speaker 8

Okay, perfect. That's helpful. And one more from me. We touched a couple of times on data centers and the opportunity around there in the call. There's a lot of information pertaining to the opportunity in the States.

Speaker 8

I just wanted to see if you guys had any sort of numbers or colors or figures around the opportunity in Canada and sort of how you guys are seeing that layout and how that's going to merge into your revenue outlook here for the next couple of years?

Speaker 1

Well, certainly Canada has got so much green power. It's a very attractive location. It's also got a climate that is very conducive to cooling and things that you need for data centers, that kind of thing. So I think we will be we will exhaust our capacity in Canada, but we have had requests to look at projects in the U. S.

Speaker 1

But at this point, we're focused on Canada. There's just the opportunities are well beyond our capacity. So if that changes, I think U. S. Growth for us would be centered on acquisitional growth to be able to launch that in local markets.

Speaker 1

But we have been we're increasing our position there. It's just it's not a big focus for us right now.

Speaker 8

Right. Okay, fair enough. All right. Thanks, guys.

Speaker 1

Thank you.

Operator

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

Speaker 5

Thank you. Two follow ups on the margins. I guess the first question is, as we think about margin improvement in 2024 and potentially beyond, are the drivers to that improvement largely the same as they've been in recent years? Or do you see certain factors playing a greater role in the potential improvement going forward?

Speaker 1

I think a lot of it's similar, but we're also seeing an acceleration of opportunities in mining. The energy side is got a lot of growth, but a lot of it is building off the platform that we've built. And like I said, it's centered in the backlog that we've got. And Okay. And then, I guess, the second one, it ties into some of the

Speaker 5

Okay. And then, I guess, the second one, it ties into something that was asked earlier. Just you asked about timing and margin improvement and I guess maybe magnitude as well. But it sounds like you see certainly an opportunity in 2024 and it sounds like potentially beyond that. You said maybe at some point it levels off, which is a reasonable expectation.

Speaker 5

But I mean, do you have a view that there's room for continued improvement in 2025 beyond 2024 or is that potentially when this level off could happen?

Speaker 1

No. So I see improvement well through this next iteration of our strategic plan, which will crest in 'twenty seven. So that's what we're focused on, and we're highly confident that we'll achieve that.

Speaker 5

Got it. Thank you.

Operator

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

Speaker 1

Thank you all for joining us this morning on our earnings call and a special thanks to the Byrd team for their unwavering commitment to safety and excellence. We look forward to the opportunities that 2024 presents with a solid foundation, our position as a trusted partner with clients, our dedicated and collaborative team and culture of inclusivity are well prepared to navigate and grow in this dynamic landscape. Thank you for joining us.

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Key Takeaways

  • In full-year 2023, Bird Construction delivered 18% revenue growth to CAD 2.8 billion and a 37% increase in adjusted EBITDA to CAD 139 million (5% margin), with net income of CAD 72 million (EPS $1.33).
  • Backlog surged 26% year-over-year to CAD 3.4 billion, with an additional CAD 3.0 billion pending, including CAD 1.1 billion in long-term master service agreements, providing strong visibility for 2024.
  • About 75% of Bird’s backlog is under collaborative contracting, reducing risk through early design engagement and enhancing margins by aligning project scope and price.
  • The company continues to execute its strategic plan by leveraging self-perform capabilities, disciplined project selection, cross-selling, technology investments and tuck-in acquisitions (e.g., Trinity and Norkan).
  • Looking to 2024, Bird targets low double-digit organic revenue growth, expects EBITDA margin accretion to outpace top-line gains, plans to retain two-thirds of net income for growth and has raised its dividend by 30%.
AI Generated. May Contain Errors.
Earnings Conference Call
Bird Construction Q4 2023
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