Badger Infrastructure Solutions Q3 2026 Earnings Results & Report

Badger Infrastructure Solutions EPS Results

• Actual EPS: C$1.37
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Badger Infrastructure Solutions Revenue Results

• Actual Revenue: C$407.92 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Badger Infrastructure Solutions (TSE:BDGI) Ltd is North America's provider of non-destructive excavating services. Its key technology is the Badger Hydrovac, which is used primarily for safe excavation around critical infrastructure and in congested underground conditions. The Badger Hydrovac uses a pressurized water stream to liquefy the soil cover, which is then removed with a powerful vacuum system and deposited into a storage tank. The company manufactures and designs its truck-mounted hydrovac units, giving an opportunity to incorporate feedback from its hydrovac operators into its existing and future design and manufacturing processes.

Badger Infrastructure Solutions Q3 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Badger reported record third-quarter results: revenue rose 21% year over year to $287 million, adjusted EBITDA increased 25% to $83.4 million, and adjusted EBITDA margin expanded 90 basis points to 29.1%. Revenue per truck per month was up 8% to $51,895.
• Positive Sentiment: Management sees demand supported by multi-year utility and infrastructure projects, including power transmission, grid upgrades, water and gas networks, and airport work. It said all end-market segments contributed to organic growth above 20%; data centers remained 15% of revenue, a share management expects to continue into Q4.
• Positive Sentiment: Badger expects 2026 fleet growth to finish slightly above its 7%–10% target and plans to produce at the top end of its 300–310-unit range. Management raised expected 2026 capital spending to CAD 203–222 million, citing fleet investment, new service lines, and plans for a second U.S. manufacturing facility; it said the facility could begin building trucks in 2028.
• Neutral Sentiment: Management expects margins to keep improving, but said reaching the midpoint of its 25%–30% adjusted EBITDA margin target within the next year would be unrealistic; it expects to move toward the bottom of the range over 12–18 months. New service lines and the Operational Excellence rollout reduced Q3 adjusted EBITDA margin by about 60–80 basis points.
• Negative Sentiment: Management expects normal seasonal softness after U.S. Thanksgiving to continue in Q4, with activity typically picking up in March or April. The elevated 2026 effective tax rate is expected to persist through Q4, though management anticipates a return to about 26% in 2027.

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by. Welcome to the Badger Infrastructure Solutions third quarter 2026 results call. During the presentation, all participants will be in the listen-only mode. For those that have dialed into the audio portion of this call, to ask a question during the live question-and-answer session, please press star one to raise your hand. Please wait for the operator to say your name and company before asking your question. For those listening through the webcast, attendees will be in a listen-only mode, and if you need technical assistance, please submit your request under the Tech tab in the window on the right-hand side of your computer screen. Now, as a reminder, this event is being recorded today, November 6, 2026, and will be made available on the Investor section of Badger's website.

[Operator]

I would now like to turn the call over to Anne Plasterer, Director of Investor Relations. Welcome.

[Anne Plasterer, Director of Investor Relations at Badger Infrastructure Solutions]

Thank you, Monica. Good morning, everyone, and welcome to our third quarter 2026 earnings call. Joining me on the call this morning are Badger's President and CEO, Rob Blackadar, and our CFO, Rob Dawson. Badger's 2026 third quarter earnings release, MD&A, and financial statements were released after market close Thursday and are available on the Investor section of Badger's website and on SEDAR+. We are required to note that some of the statements made today may contain forward-looking information. In fact, all statements made today which are not statements of historical fact are considered to be forward-looking statements. We make these forward-looking statements based on certain assumptions that we consider to be reasonable. However, forward-looking statements are always subject to certain risks and uncertainties, and undue reliance should not be placed on them, as actual results may differ materially from those expressed or implied.

[Anne Plasterer, Director of Investor Relations at Badger Infrastructure Solutions]

For more information about material assumptions, risks, and uncertainties that may be relevant to such forward-looking statements, please refer to Badger's 2025 MD&A along with the 2025 AIF. I will now turn the call over to Rob Blackadar.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

Thank you, Anne. Good morning, everyone, and thank you for joining our 2026 third quarter earnings call. Before we get into the results, I would like to take a moment to talk about safety, which is how we start all of our meetings here at Badger. As winter approaches, conditions can change quickly, both on the road and at our job sites. Being ready for those changes, whether it is severe weather, an equipment issue, or an unexpected situation, is important. Safety is a shared responsibility, and preparedness is a key part of our culture here at Badger. Here at the company, that means knowing what to do in an emergency, making sure our vehicles and safety gear are winter-ready, keeping an eye on local conditions, and staying connected with our teams. We all have a role to play in keeping each other safe and being prepared.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

That role is an important part of how we make safety personal. I want to personally thank all of our Badger team members and customers for their continued commitment to working safely together. Now, on to the quarter's results. The Badger team delivered another record quarter of double-digit organic growth in revenue and adjusted EBITDA. Building on our positive momentum from Q2, third quarter revenue came in at $287 million, representing 21% growth over the prior year. Adjusted EBITDA grew at a faster pace than revenue, up 25% year-over-year to $83.4 million. Accordingly, our adjusted EBITDA margin increased 90 basis points to 29.1%. This represents the second quarter in a row of margin expansion. These results reflect our focus on hiring and training quality operators, effective management and deployment of our growing fleet, and our ongoing focus on pricing discipline.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

Last quarter, I shared all of the various project types we are involved in. Many of these projects are multi-year, non-discretionary, fully funded, with regulatory approval, and are either underway or starting in the near term. Our project subscription services highlight that there continues to be record amounts of upcoming work through the year 2030. All of our end-market segments are contributing equally to our organic growth rate of over 20%. Of note, data center revenue was a consistent flat 15% of our total revenue throughout the entire third quarter, and that trend is continuing on into the fourth quarter. Our growth was also supported by continued investments in our fleet and our successful pricing initiatives. The Badger team's focused pursuit of delivering top-tier customer service and operational performance positions the company for long-term success as the industry leader across North America.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

We achieved RPT, or revenue per truck per month, of $51,895 in Q3, up 8% compared to last year. Badger ended the quarter with 1,822 hydrovacs, which represents an 11% increase in our average fleet from the prior year. Given the strength in our end-market demand, we anticipate that 2026 fleet growth will remain slightly above the 7%-10% growth target previously provided in our outlook. Our Red Deer plant delivered 83 hydrovacs this quarter, compared to 57 units in the same quarter last year. We also retired 23 units and refurbished nine units in the quarter. Our full-year fleet strategy remains on track. We continue to expect refurbishments of between 30-50 hydrovacs and to retire between 130-150 units. We continue to advance our efforts around launching a second manufacturing facility to be located in the U.S.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

We look forward to providing more information regarding our progress on this front in the near future. Before I pass the call over to Rob Dawson, I would like to share one last thought. As we look to the remainder of the year and into 2027, we remain positive about our end-market demand. Many of our projects are well-funded, multi-year in duration, and are already underway, which gives us confidence. Or sorry, what gives us confidence is not only the strength of the demand environment, but our ability to capitalize on it. Over the past several years, we have demonstrated that Badger has the scale, the capabilities, and the team to deliver results as opportunities present themselves. We believe that Badger's commercial and operational strategies will continue to create long-term value for our shareholders.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

With that, I will turn it over to Rob to give our financial update, and then we will go straight into Q&A. Rob?

[Rob Dawson, CFO at Badger Infrastructure Solutions]

Thanks, Rob. As Rob noted, revenue and adjusted EBITDA both rose by over 20% for the second consecutive quarter. As we have discussed for some time now, we remain focused on building scalability at every level of the organization while continuing to invest for growth. During the quarter, the rate of hiring and training of both new operators and our field operations team remained steady with the rate of fleet growth. We continue to benefit from the increased rate of hiring through the earlier part of the year. We are also starting to see the benefits of our focus on the efficient deployment and maintenance of our fleet. Combined with steady execution on pricing, we are pleased with the progress of these efforts and their impact on branch and operations efficiency, leading to flow-through to gross profit margin.

[Rob Dawson, CFO at Badger Infrastructure Solutions]

We have also continued investing in our long-term initiatives to add to shareholder value. The rollout of our Operational Excellence program is expected to continue through the remainder of 2026 and 2027. As well, the launch of the two new service lines is proceeding in line with our original business case. We are pleased with the progress on these initiatives to date. In the third quarter, these initiatives reduced our ongoing adjusted EBITDA margins by about 60 to 80 basis points, in line with the impact on margins in the first two quarters of 2026. General and administrative expenses were $11.5 million in the quarter, or 4% of revenue, compared to the $10.6 million, unchanged at 4% of revenue in the prior year. Finally, adjusted earnings per share was $0.96 per share, up 5% compared to last year.

[Rob Dawson, CFO at Badger Infrastructure Solutions]

Of note, during 2026, our effective tax rate has been elevated due to the impact of what is essentially a minimum tax in the U.S. We anticipate that effective tax rates will normalize in 2027. Year-to-date, with revenue up 21%, adjusted EBITDA up 22%, and adjusted EBITDA margin up 30 basis points, and adjusted EPS up 10%, we are encouraged by the continued scalability and growth in margins, all while investing for growth. Turning to the balance sheet. Badger has, for a very long time, maintained a strong balance sheet combined with conservative financial objectives, including relative leverage, available liquidity, and debt maturity profiles. This has served us well, allowing us to fund our growth largely from cash flows while continuing to return capital to shareholders through the dividend and our NCIB.

[Rob Dawson, CFO at Badger Infrastructure Solutions]

Given the growth wave we have seen and expect to continue to see into 2027, as noted by Rob, we are planning to produce at the top end of our narrowed 300 to 310 hydrovac production range this year. Combined with the spending on our new service lines, 2026 capital spending is now anticipated to be about $203 million-$222 million at the upper end of our initial range. With the undrawn capacity on our five year credit facility and our compliance leverage at 1.5x EBITDA, the midpoint of our 1x-2x targeted range, we have plenty of flexibility to continue investing in our organic growth strategy, to support initial investments in new service lines, and to fund the second manufacturing facility in the U.S.

[Rob Dawson, CFO at Badger Infrastructure Solutions]

Further, we successfully renewed our NCIB in the third quarter, maintaining our ability to make opportunistic share purchases in addition to returning capital to our shareholders through dividends. During the third quarter, we did not purchase any shares under the NCIB. With those comments, let's turn it back to the operator for questions.

[Operator]

Thank you so much. We do have our first question that has come in. It is from Yuri Lynk at Canaccord Genuity. Please go ahead with your question. Welcome.

[Yuri Lynk, Analyst at Canaccord Genuity]

Hi, good morning.

[Rob Dawson, CFO at Badger Infrastructure Solutions]

Hey, good morning, Yuri.

[Yuri Lynk, Analyst at Canaccord Genuity]

Guys, lots of puts and takes on the margin front, and that was good color, Rob, on the 60-80 basis points. As we think about 2027, how do we think about these puts and takes in terms of your ability to get into the midpoint of that 25%-30% target EBITDA margin range?

[Rob Dawson, CFO at Badger Infrastructure Solutions]

Thanks for the question, Yuri. It's Rob Dawson here. As we noted in the last few quarters, our expectation or anticipation was that we'd be pretty flat on margins in the second half of 2026 and start to see a return to growing margins in 2027. You can see now that for two consecutive quarters, we've exceeded that anticipation by showing some bottom line growth in margins, mainly due to the level of growth being what it's been, as well as, I guess, some better execution on our team's part, particularly on that labor and our maintenance and repair expense, as well as continued work on the pricing. What does that mean for next year? We do anticipate moving towards the bottom end of that range over the next 12-18 months.

[Rob Dawson, CFO at Badger Infrastructure Solutions]

Into the midpoint of the range, I think that would be unrealistic to expect that we would get to the midpoint of the range within the next year, as you suggested in the question. But we do continue to see a steady march into that range, for sure.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

Right, progressing.

[Rob Dawson, CFO at Badger Infrastructure Solutions]

Progressing, yeah.

[Yuri Lynk, Analyst at Canaccord Genuity]

Okay, that is great. On the tax rate, just to be clear, it sounds like another quarter in the mid-30s, then you think we go back to, what, 20%-27%, something like that in next year? Because it has been a pretty big drag on the bottom line.

[Rob Dawson, CFO at Badger Infrastructure Solutions]

I'm sorry, Yuri, can you say that again? I missed the first part of your question.

[Yuri Lynk, Analyst at Canaccord Genuity]

Just on the tax rate, for Q4 and for 2027.

[Rob Dawson, CFO at Badger Infrastructure Solutions]

For 2026, and we apply an annualized methodology to determine taxes, so I think the effective tax rate you're seeing for the first three quarters of the year is expected to remain relatively stable Q4. We're anticipating a move back to statutory rates in 2027, about 26%.

[Yuri Lynk, Analyst at Canaccord Genuity]

Okay. Okay, that's all for me, guys. I'll jump back in the queue. Thanks.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

Thanks, Yuri.

[Operator]

Thank you so much. Our next question is from Jess Root Baines, TD Cowen. Welcome.

[Jess Root Baines, Analyst at TD Cowen]

Thanks for taking my question. Speaking on behalf of Tim James. I just have one question. In the press release, you mentioned the multi-year expansion of utility and infrastructure networks as demand drivers. Could you guys expand on that a bit more? What are you guys seeing in those end markets today, and what gives you guys confidence that the strength is multi-year in nature? Thanks.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

Yeah, no problem. A lot of that is tied to our end market customers that we are working directly for. They're bidding and winning projects that are really large in nature. Think in terms of transmission and distribution projects that are going across the U.S. So, from the Midwest and South Central areas of the U.S. to the coast, as well as a lot of conversions of some of the existing power plants. You can look at what's happening with a lot of the electrical rates that are happening to a lot of the U.S. customers, that the rates are really, really high. There needs to be more power and more grid production, and more power being brought into the grid. Those are the projects we're referencing.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

There happens to also be, in the U.S. and also in Canada, a lot of work happening on the nuclear front as well, where they're refurbishing certain nuclear plants and spending more time on some of those nuclear plants. Lastly, if you think in terms of grid hardening, a lot of the investments that have been made to the grid are greater than 35, 40 years old. It's now getting to a time where there has to be additional investment happening. The rates are high, and there continues to be more and more power demand. A lot of people think that's only in terms of data centers or AI, but it's actually excluding data centers and AI. There's a tremendous amount of power demand happening on the electrical front, and those are the projects we're on.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

But like I started off with, a lot of transmission and distribution projects, a lot of transmission, a lot of transfer stations. We're just seeing it all over the country. It's not in one single pocket. We're definitely putting a really strong focus going forward on our utility business. We also view that as more of a recurring-type business rather than one-off construction-type projects.

[Rob Dawson, CFO at Badger Infrastructure Solutions]

Yeah. It's not only power. If you think about water supply and water treatment, and then sewage and sewage treatment, and if you think about gas, both transmission and distribution.

[Rob Dawson, CFO at Badger Infrastructure Solutions]

We're seeing that across all of our markets, long sustained spending occurring from all of our utilities and infrastructure customers in those areas. Finally, like airport infrastructure and a lot of those other things, those are longer-term trends, and many of those projects are multi-year, multi-billion dollar projects.

[Jess Root Baines, Analyst at TD Cowen]

Perfect. Thank you for the help. Thanks, guys.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

Thank you.

[Operator]

Thank you so much. Our next call is, a question is from Ian Gillies. Welcome.

[Ian Gillies, Analyst at Stifel]

Morning, everyone.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

Good morning, Ian.

[Rob Dawson, CFO at Badger Infrastructure Solutions]

Morning, Ian.

[Ian Gillies, Analyst at Stifel]

I wanted to dive into the second manufacturing facility that you're considering in the U.S. I mean, there's the obvious benefits of new trucks, more trucks, tariff relief potentially. But the press release noted there seems to be some sort of tax benefits, if you build a facility there. Is there anything else perhaps operationally you'd want to highlight in and around that facility?

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

Yeah. I think you're on the right track with how you're thinking about it. A lot of people think that Badger's interest in having a second plant is either solely tariff-related or is only tax-related, but there's really a lot of benefits for having a second plant. We've been contemplating a second plant a lot longer than the last year or two. We start looking at saying, does it make sense to have our main manufacturing plant, where there's only one single manufacturing plant, and if there were ever to have any kind of a situation or problem there, that's a lot of risk to the business. This actually starts to de-risk the business by having a second plant online. It gives us additional capacity.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

As the business scales and grows, Ian, we're starting to realize that the adoption of hydrovac and non-destructive excavation is only accelerating. It has not even gotten near full capacity here in the U.S. And so, for us to be able to feed and support that makes a lot of sense. Third, the reason we're not focusing only on tariffs is because tariffs came in very quickly, and they could leave very quickly. That's not our core issue, but it would give us some tariff relief on units that we build in the U.S. and keep in the U.S.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

Then probably the last part, and Rob can add if I'm missing anything here, but the last part I would probably share is, right now, in a lot of states that we're contemplating putting the manufacturing plant in, there are a lot of incentives for people to come to various states. When coupled all those things together, it just makes a lot of sense. But the one thing for us is it gives us a lot of optionality on how we can continue to scale the business, because the business is not slowing down here for the next several years. I don't know if you want to add anything to that, Rob.

[Rob Dawson, CFO at Badger Infrastructure Solutions]

Yeah, I mean, there was a mention of some impact on income taxes, and I'll just reiterate what Rob said is that while there are some obvious benefits on taxes and tariffs to moving or to adding a manufacturing facility in the U.S., definitely not the core purpose. It's just an outcome of that strategy. Really, it's just if your supply chain and your capital spend is in the same market that your majority of your operations and growth is in, then everything else is just simplified, your organization structure and the way that you raise money and fund growth. So that's all simplified by that. It just makes a lot of sense.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

I think I'm going to add one more thing, to give Ian even more color. We have found, over the last four or five years, as the business has matured, Ian, out in the field, think in terms of our operations and our commercial strategy, but also our manufacturing strategy has really matured. I believe you and a few investors have been on tours of the manufacturing plant the last few years. But it is a completely different facility than it was even as recently as five, six years ago. It is extremely well run, very efficient. You've noticed the cost of our trucks, excluding tariffs, have really We've done a really good job of keeping those costs in line in spite of all these inflationary pressures.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

We are very proud of the manufacturing facility and how it has performed, and we believe we can continue to get that benefit by a second plant. So, thought that might give you even more color there, Ian.

[Ian Gillies, Analyst at Stifel]

No, that is all very helpful. So thanks for that. Switching gears, to RPT, it obviously showed pretty good growth year-over-year. Obviously, some of that is pricing. You mentioned in the prepared remarks. Are you able to share at all whether it is a few regions that are helping drag up overall pricing or whether it is kind of broad-based across the U.S. and Canada right now?

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

Yeah. So we are actually seeing it being more broad-based, Ian. So, including in Canada, we are seeing pricing. The strategy we use in the business is really leveraging that pricing engine we built back in 2023. And it is super helpful that we are starting to leverage some of the technology and data that we have been capturing for the last three or four years on our customer trends, and our project trends on how we should be pricing, and then capturing the price and getting the pricing closed. Our commercial sales teams are working really, really hard, and they are incentivized to capture the most amount of pricing, but still being competitive in the market. And that is how you are seeing that RPT moving, because if you think about it, we are adding trucks at the higher end of our fleet adds.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

Our utilization is solid, and then the pricing is additive on top of that. That is where you start to see that operating leverage starting to get more and more into effect, and that is what Rob was talking about. We started noticing two quarters ago improvement on our margins, and it continues today, and so very pleased with that. I do not know if you want to add anything to that.

[Rob Dawson, CFO at Badger Infrastructure Solutions]

Yeah. I think the heterogeneity of pricing in various markets earlier this year was a much bigger factor. I think now it is more across the board.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

Yeah.

[Rob Dawson, CFO at Badger Infrastructure Solutions]

By that heterogeneity, I mean, like, growth rates in markets with higher prices being higher than growth rates in markets with lower prices. So that would impact RPT, not necessarily impact profitability.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

Yeah.

[Rob Dawson, CFO at Badger Infrastructure Solutions]

We are starting to see that be a lot more broad-based now.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

What is interesting, Ian, I think our competitors, obviously we do not talk pricing with our competitors, but we obviously know, like, "Hey, we are winning deals or we are losing deals to competitors." Our competitors are following suit on some of their pricing as well as what we are seeing in the marketplace, because I think us leading on pricing in the industry, as we are the industry leader, I think some of our competitors were looking for us to start making some moves as well.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

So it has allowed them to move on pricing as well. So it is good and it is healthy for the industry to get solid pricing. It has got to be fair, and we are not looking to do outsized pricing moves, but obviously there is inflationary costs in every business in North America, and we want to make sure our pricing reflects that.

[Ian Gillies, Analyst at Stifel]

Understood.

[Rob Dawson, CFO at Badger Infrastructure Solutions]

Last point is, diesel costs are up quite a bit, and we do charge a fuel recovery fee. We don't earn a lot of margin on that, if any. But it has had a very modest impact on the rise in our RPT. I only mention that because when the inevitable decrease in diesel costs come, that will be a minor reduction in RPT or an offsetting factor.

[Ian Gillies, Analyst at Stifel]

Got it. If I could sneak one last one in, you may choose to pass on it. Can you maybe give some goalposts on how we should think about the new service offerings going into next year and capital spend, and maybe based on the success you've had this year, if you want to spend more, maybe you want to spend less? Just curious on that.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

We're not because we're just getting underway with those new service line, service offerings, we're not giving a lot of color on those yet, because they're just getting underway. We are coming up on the first year of one of them and about six to eight months on the other. Very, very pleased with initial results that we're seeing, but it's, again, very, very new. As far as our investment, it's actually going to plan of what we were anticipating investing. As you know, we work closely with our board of directors, who's very supportive on the additional service offerings. It makes Badger less focused on only one line of business. It starts to diversify our revenue base. But we're very pleased with initial results.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

As we go into next year, we do not really start talking about next year's kind of investments and capital and stuff until the fourth quarter results. We will certainly be doing that next year, Ian. But again, if the results are good, you can anticipate us continuing on. I think that is probably a fair kind of a general way to characterize that.

[Ian Gillies, Analyst at Stifel]

Well, had to try. Thanks very much. I will turn the call back over.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

Yep. No problem, Ian.

[Operator]

Thank you so much. Our next caller is with a question, is Krista Friesen, CIBC. Welcome.

[Krista Friesen, Analyst at CIBC]

Hi. Thanks for taking my question. I was just wondering if you could speak to what sort of margin variance you're seeing across your branches at this point in time, and if they're starting to narrow a bit, or if there's still quite a difference there?

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

I don't. Yeah. I can. Yeah, I'll give some color, but you go ahead.

[Rob Dawson, CFO at Badger Infrastructure Solutions]

The data platform and the use of AI, Krista, is starting to allow us to see on an almost a real-time basis, not only revenue, pricing, utilization, but we're moving towards margins. I think we're still early on in our journey to try to tighten, reduce the standard deviation of margins amongst all our branches. But it is becoming more and more standardized. I think there's a great deal of awareness of where each branch manager and their branch sits within the my bottom quartile, second, third, or fourth quartile, or top quartile. They're naturally quite competitive, so we see a lot of very positive changes. It's not so much just the operating margin.

[Rob Dawson, CFO at Badger Infrastructure Solutions]

We deconstruct it into various different things like maintenance, planned maintenance, repairs, direct labor, indirect labor, unbilled, billed, and we try to zero in on initiatives to drive efficiency in those areas, and it's coming to great effect. But I still think there's a fair bit of heterogeneity in operating margins across our fleet and lots of continuing opportunity.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

Yeah, Rob and I, when we look at the business, Krista, we think about it as on a regional basis, and our COO and RVPs are thinking about it really on a market area, like a district-type basis and a branch basis. As we look at the regions, when Rob and I are looking at it, you see a lot of parity. I would tell you a phenomena that we've been watching, and it's pretty fun to watch, especially because they're good results coming out, is you're starting to see the tail of some of the businesses, the lower end of some of the business units really improving and starting to rise up. A lot of that is because of our FP&A team is leveraging our, we have something called a Badger Analytics Platform, or BAP, B-A-P.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

What that does is it allows, just as Rob was suggesting, everyone to see how they're ranking versus their peer groups. We have a very competitive workforce, very competitive operational leaders and sales leaders, and no one wants to be at the bottom. We're watching those tails come up, the tail of some of these areas, and so all the areas are lifting. It doesn't matter if you are in the U.S. or Canada, there's just a heightened awareness because of that data and the analytics that we're putting in front of our teams. So it's so far pretty good. There's no pockets of, like, I would call them, like an air pocket of poor performance that we're seeing.

[Krista Friesen, Analyst at CIBC]

Thanks. I appreciate all of that color. Maybe just, if I can ask one more on Canada and what you're hearing from your customers here. Feels like it should be pretty optimistic given the major projects underway and the Productivity Mega Deduction, and just, yeah, what you're hearing would be great. Thank you.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

Yeah. No problem, Krista. As far as Canada, obviously, we still have a handful of our franchises, we call them OPs, as well as our corporate stores, and they work side by side together. We're seeing the eastern part of Canada to really start to become the beneficiary. A lot of those projects that you're referencing are underway, and there's pretty robust business happening on the eastern part. Then in the central part and the western part, it's just now starting to see some activity and improvement for us. We've had a pretty good summer in some of the more central provinces, but we think there's a lot more to come. Just like you guys follow all the awards and the projects- some of the larger construction firms. Those are the customers we work for, and we are seeing the same thing.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

As they get started with some of their projects, they are getting a lot of awards. We are watching backlogs. We are the biggest cheerleaders of a lot of those firms. I am not going to name them, but we are their biggest cheerleaders on them winning those projects because we are fortunate enough to do a lot of work for them. As they get underway with those projects, we expect to continue to partner with them, but we are pretty excited about it. I understand that there are some new changes or political changes happening out west. For us, we are kind of enthusiastically hopeful that that will turn into more business on the construction front as well. But that is more of a wait and see as things get underway.

[Krista Friesen, Analyst at CIBC]

Thanks. I appreciate the details. Congrats on the quarter.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

Thanks, Krista.

[Operator]

Thank you so much. Our next question is from Sean Jack from Raymond James Ltd. Please welcome to the call.

[Sean Jack, Analyst at Raymond James Ltd]

Morning, guys. I appreciate it's still early days and a site hasn't even been selected, but for the U.S. manufacturing expansion, how are you guys thinking about optimal capacity right now relative to Red Deer? Or can you give us any sort of direction on what we could possibly expect?

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

Yeah. So, we think it's going to give us a solid amount of capacity that right now Red Deer is running at a pretty high amount of performance and output and still continues to operate extremely well. Our teams are doing a great job up there. The U.S., we are obviously, because we're able to build it and design it to our needs, it's going to allow us to have even more capacity and allow us to scale even more capacity than what we have in Red Deer. If you remember, and Sean, I think you've been to the Red Deer plant relatively recently, we are somewhat landlocked with businesses all around us. And because we're able to build what we want and choose what we want now on our facility, we're building it to where it can continue to scale if needed.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

We're not going to start off obviously at too high a capacity, but we are making the decision on how we're structuring the transaction and the facility and the footprint, so it will be able to scale in the future, and we're pretty excited about that. But I would kind of view the capacity nature as when we get started as that of similar to Red Deer, with the ability to get larger and grow into it to an even larger manufacturing or output. The other thing I would share is this gives us a lot of optionality. As certain pockets of North America, whether it be the northern part or the western part of North America starts to shift or have more demand, we can flex up more in Red Deer.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

If there is more demand or continued strong demand in the southern part of the U.S., we could flex up the U.S. It just gives us a lot more optionality than we had before. So, super excited about that. That's how we're thinking about it. As far as timing, we are getting closer to being able to make an announcement. We're not quite there yet, but we expect that coming here soon. And then once we make the announcement and we make our final selection, we expect to be building trucks and starting

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

or beginning of 2028, sometime in 2028. It could happen faster, but we're trying to be very realistic with our expectations. That's how we're viewing it, Sean, but it just gives us a lot more optionality for the future.

[Sean Jack, Analyst at Raymond James Ltd]

Okay, awesome. Appreciate the color, guys. Last one from me. Just thinking about Operational Excellence, do you mind kind of commenting on what phase or what any of you guys are in the rollout of the program? Should we be expecting any sort of step change in spending into 2027?

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

Yeah. There's not going to be a step change in the investment we're making. It's more of a continuation. By the time we end the year, we will have rolled out Operational Excellence to about half of our branches, and then the balance of 2027 will be to every branch in the company. We'll have them all rolled out. Rob was just having some discussions on this topic yesterday that we'll start to see the benefit of the 2026 rollout- more and more of that reflected in our margin improvements in 2027, and then the full-year, as we're rolling out next year, the other half of the company, you'll start to see that toward the end of 2027 into 2028, and then it will just be a continuous process. One thing I want to remind everyone on Operational Excellence, it's a continuous process.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

This isn't a you roll it out and then you're done with it. You're continuously improving and driving more efficiency in the business, and it becomes more a part of your culture. We're pretty excited about that and starting to see the results. The early on results, the original branches that we started with, Sean, we're very pleased with the numbers we're starting to see out of them. As they get more and more months under their belt, we'll start to see that reflecting greater into the company-wide margins. Hopefully that gives you the color you're looking for.

[Sean Jack, Analyst at Raymond James Ltd]

Yep. Yeah, no, that's great. Helpful. Okay. Thanks, guys.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

Thanks.

[Operator]

Thank you so much. Our next question is from Maxim Sytchev, NBCM. Welcome to the call.

[Maxim Sytchev, Analyst at NBCM]

Hi. Good morning, gentlemen.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

Good morning.

[Maxim Sytchev, Analyst at NBCM]

I had a quick question about pricing sustainability. I am wondering if you can comment on the fact that we went from 14% year-on-year increase right now to 8% in the quarter. How should we think, I guess, about Q4 and into early 2027 from that momentum? I guess the follow-up would be also just in terms of the diesel pass-through contribution. For example, if diesel were to be fully neutralized, would we be closer to, like, 6% or 7%? Any color you can give, that would be great. Thanks.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

Yeah. I could not hear the very first part of your question. What were the numbers you were giving? I apologize. The very first part.

[Maxim Sytchev, Analyst at NBCM]

Sorry. Yeah. It was just the pricing year-on-year. It was 14% increase in Q2, and right now we are seeing 8%. So, slight deceleration in terms of RPT momentum. I am just wondering, if we are staying at these levels, and to which extent and for how long?

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

Okay. I think you are referencing our revenue per truck per month, our RPT?

[Maxim Sytchev, Analyst at NBCM]

Yeah.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

Yeah. That is not our pricing metric. That is our revenue per truck. Just a quick reminder, the RPT is like a three-legged stool. It is made up of our truck volume, the number of trucks we have in the fleet, the utilization, and the pricing. It is all three of those things. While a lot of folks will say, "Oh, well, that is just a direct reflection of your pricing," keep in mind, and Rob talked about it in his comments, and I talked about it in mine, we are growing and adding a large amount of trucks to the fleet, and so that is increasing the truck volume as well as the utilization is solid. It is very strong. In addition to that, the pricing is very solid as well.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

The way we view our pricing, though, is, and I think you are thinking about it correctly, we get a certain amount of profitability from adding trucks to the business. We get a greater amount of profitability by driving utilization. Obviously, the best operating leverage we get into the business is when we get additional pricing. All three right now are performing, and we are adding, and that is why you are seeing that margin improvement that we were talking about a couple of questions ago. You are starting to see that it turned a few quarters ago, and now it is continuing on that journey, and it should continue.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

The way we view our pricing, though, we view that as a consistent journey, not trying to drive pricing to hit a month, a quarter, or even a year, but rather pricing should be consistent, because if you move on your pricing too, our perspective, you move on your pricing too aggressively, you run the risk of really driving down your utilization, or we are not going to need as many trucks to be added to the fleet. We are trying to grow the business and become more foundational in how we grow and be more consistent, rather than just trying to push pricing really aggressively for a quarter or two and then give up a bunch of margin, or market share. For us, it is more of a consistent process.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

We are pleased with our pricing so far, but we view it as an ongoing journey, and I do not see it slowing down. I know I went a little deep there, Rob.

[Rob Dawson, CFO at Badger Infrastructure Solutions]

Yeah. We have talked about this the last few quarters, because we were seeing above 10% growth in RPT for a few quarters there, and that is very good increase in RPT. I think longer term, our expectation, if you think about a neutral RPT, it would be inflationary, so say 3% or so, and to the extent that RPT exceeds that means that we are driving more efficiencies in the business in addition to just inflation.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

Yeah.

[Rob Dawson, CFO at Badger Infrastructure Solutions]

Our last four quarter trailing, so an annualized number that takes out the seasonality, we had guided to reaching $45,000+ at our investor day in March of 2024. Q3 2026 is now above that $45,000 level. We are very pleased with all of the improvements we have made. I would say the first half of this year, we were continuing to get great results from utilization improvements, largely related to the way we are deploying and managing our fleet using that BAP tool that Rob mentioned, as well as targeting areas with greater profitability and already high utilization and growing markets. Pricing is also an element to that, but just also remaining focused on adding trucks in the areas where they are going to get utilized right away, so there is less of a drag on RPT in the way we are deploying our growing trucks.

[Rob Dawson, CFO at Badger Infrastructure Solutions]

To grow our fleet at 10%, 11% and to be growing our RPT, we think we are very proud of the way that is being handled, and we continue to think that we can get those lower rates. But it would be unlikely that we get back into those double-digit growth rates.

[Maxim Sytchev, Analyst at NBCM]

That is super helpful. Thanks so much. Just one quick one. The tariff guidance was compressed a little bit from the top end. Are you doing anything differently in terms of sourcing components, change kind of like in a build mix or some supplier concession? Just wondering where that compression is coming from, which is nice to see, obviously.

[Rob Dawson, CFO at Badger Infrastructure Solutions]

When we initially issued that guidance, there was still a great deal of uncertainty. There is a great deal of uncertainty today, but even more uncertainty about what our total tariff for truck was going to be. The top end of range just assumed a 25% tariff on the entire truck. We are paying about a $70,000 tariff per truck now, which is quite a bit below what the top end of that range was initially. We narrowed the range due to that. We have increased the number of trucks we are building, so that reduction in tariffs is with a higher truck count as well. It is just more that the tariff per truck is coming in.

[Rob Dawson, CFO at Badger Infrastructure Solutions]

We continue to see plenty of opportunities to try to implement systems that help us to get to ultimate source of our entire supply chain, and there are small opportunities to try to optimize tariffs as a result of that. But for the most part, that $70,000 a truck is a good number to think about.

[Maxim Sytchev, Analyst at NBCM]

Okay. Super helpful. Thank you so much.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

Thank you.

[Operator]

Thank you so much. Our next question is from Trevor Reynolds, Acumen Capital. Welcome to the call.

[Trevor Reynolds, Analyst at Acumen Capital]

Hey, guys. Just a quick question. Just given your highlighting of the unprecedented demand that you are seeing, just wondering how we should look at seasonality here in Q4, if you think there is going to be any changes to that, and obviously into Q1 as well.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

Thanks for the question, Trevor. I am always hesitant to use the term unprecedented. It is solid, strong demand. We will always have seasonality. We will always have seasonality when we are in markets with seasons, because there are certain areas that will slow down because of weather. There are certain areas that slow down for various reasons regarding seasonality, and so we will continue with that. The one thing that is very interesting is, as we have grown the business, grown the fleet, we have become more urban dense, and it was part of our original strategy that Rob and I started with three, four years ago, is let us get more and more dense in some of these strategic markets with a lot of demand. We are seeing less seasonality in some of those markets. Overall, we run a large business across Canada.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

We run a large business across the northern part of the U.S., and there will always be seasonality in there. I think, though, it is almost this concept we introduced, I think it was three or four years ago, Rob, but this concept of lifting the shoulders. You are going to continue to see us doing that. I think you are going to see that in the results going forward for Q4 and Q1 of this concept of lifting the shoulders. We never want to misrepresent that there is not seasonality in the business. That is my perspective.

[Rob Dawson, CFO at Badger Infrastructure Solutions]

Yeah, I think if you look at the percentage of revenue across each quarter for the last two or three years by that profile to this year and going forward, while there are some larger projects, and we will continue to work on those projects, the impact of that, we do not think is going to have a major material impact on the seasonality our business faces. Once the American Thanksgiving happens, you tend to see a pretty good fall-off for the remainder of the year in Q4, and that does not start to pick up again until March or April in the following year. That seasonality is not going to change. It is the seasonality of the construction industry, as well as a lot of our utilities and infrastructure customers, and we are going to continue to see that.

[Rob Dawson, CFO at Badger Infrastructure Solutions]

If anything, we see the equity analyst community understate the level of seasonality and stretch us a bit on the Q4 estimates, but we do not see there being a major change in that regard.

[Trevor Reynolds, Analyst at Acumen Capital]

Perfect. Thanks.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

Thank you, Trevor.

[Operator]

Thank you so much. There are no further questions, so I'd like to turn it back to our speakers.

[Rob Blackadar, President and CEO at Badger Infrastructure Solutions]

Thank you, operator. I'll close with, on behalf of all of us here at Badger, I want to say thank you to all of our customers, employees, suppliers, and shareholders for your ongoing support that helps to drive Badger's success. Operator, you may now end the call.

[Operator]

Thank you. This concludes today's event. Thank you for your time and participation.

Participants

Executives

• Anne Plasterer, Director of Investor Relations
• Rob Blackadar, President and CEO
• Rob Dawson, CFO

Analysts

• Yuri Lynk, Analyst at Canaccord Genuity
• Jess Root Baines, Analyst at TD Cowen
• Ian Gillies, Analyst at Stifel
• Krista Friesen, Analyst at CIBC
• Sean Jack, Analyst at Raymond James Ltd
• Maxim Sytchev, Analyst at NBCM
• Trevor Reynolds, Analyst at Acumen Capital