Badger Infrastructure Solutions Q3 Earnings Call Highlights

Key Points

• Strong Q3 growth: Revenue rose 21% to $287 million and adjusted EBITDA increased 25% to $83.4 million, with margins expanding 90 basis points to 29.1%. Growth was supported by demand across end markets, fleet expansion and pricing initiatives.
• Fleet investment and infrastructure demand: Badger expects 2026 fleet growth to exceed its prior 7%–10% target and plans capital spending of $203 million to $222 million. Management cited funded, multiyear utility and energy projects as demand drivers, while noting the business remains seasonal.
• Margin progress may take time: Operational Excellence and new service lines weighed on Q3 margins by an estimated 60–80 basis points, with benefits expected to build next year. Management said reaching the midpoint of its margin target within a year is unrealistic and expects progress toward the lower end over the next 12–18 months.

Badger Infrastructure Solutions TSE: BDGI reported a 21% increase in third-quarter revenue as demand for hydrovac services, fleet growth and pricing initiatives helped lift profitability.

Revenue rose to $287 million, while adjusted EBITDA increased 25% from a year earlier to $83.4 million. The adjusted EBITDA margin expanded 90 basis points to 29.1%, marking the company’s second consecutive quarter of margin improvement. Adjusted earnings per share rose 5% to $0.96.

President and CEO Rob Blackadar said all of Badger’s end-market segments contributed to organic growth. Data centers accounted for a consistent 15% of total revenue throughout the third quarter, a trend he said continued into the fourth quarter.

Fleet Growth and Pricing Support Results

Revenue per truck per month, or RPT, rose 8% year over year to $51,895. Badger ended the quarter with 1,822 hydrovacs, and its average fleet was 11% larger than a year earlier.

Blackadar said pricing gains were broad-based, including in Canada. He cautioned that RPT is not a direct measure of pricing alone, because it also reflects fleet size and utilization. CFO Rob Dawson said higher diesel costs and a fuel recovery fee had a modest effect on RPT.

Dawson said the company would be unlikely to return to the double-digit RPT growth rates seen in earlier quarters. Over the longer term, he said, a neutral rate of growth would be approximately in line with inflation, or about 3%.

Badger’s Red Deer plant delivered 83 hydrovacs during the quarter, compared with 57 a year earlier. The company retired 23 units and refurbished nine. Management expects 2026 fleet growth to be slightly above its previous target of 7% to 10%, with production at the top end of a narrowed range of 300 to 310 hydrovacs.

Capital spending for 2026 is expected to be approximately $203 million to $222 million, at the upper end of the company’s initial range. The forecast includes spending on new service lines.

Utility Projects Bolster Outlook

Blackadar said many projects in Badger’s markets are fully funded, span multiple years and are either underway or expected to begin in the near term. He cited electricity transmission and distribution, power-plant conversions, nuclear-plant refurbishment and grid-hardening projects as sources of demand.

Dawson added that customers are spending on water, wastewater, natural gas and airport infrastructure. Blackadar said the company is placing a strong focus on utility work, which it views as more recurring than one-off construction projects.

In Canada, Blackadar said eastern provinces were already benefiting from project activity, while central and western regions were beginning to show improvement.

Management nevertheless expects the business to remain seasonal. Dawson said activity typically falls after U.S. Thanksgiving and does not begin to pick up again until March or April. Larger projects are not expected to materially change that pattern, he said.

U.S. Plant and Margin Initiatives

Badger is advancing plans for a second manufacturing facility in the United States. Blackadar said the plant would reduce the risk of relying on a single facility, add capacity and provide flexibility to serve regional demand. Tax and tariff benefits would be additional outcomes rather than the core purpose of the investment, management said.

Blackadar said initial capacity could be similar to Red Deer’s, with room to expand. The company expects to begin building trucks at the U.S. facility sometime in 2028 and plans to provide more information once a final site selection is made.

Dawson said Badger is currently paying about $70,000 in tariffs per truck, below the upper end of its earlier assumptions. The company continues to look for ways to optimize tariffs through its supply chain, he said.

Badger’s Operational Excellence program and two new service lines reduced the third-quarter adjusted EBITDA margin by approximately 60 to 80 basis points, Dawson said. Blackadar expects the program to reach about half of the company’s branches by year-end and the remainder during 2027, with benefits from the initial rollout increasingly reflected in margins next year.

Asked about the company’s margin target, Dawson said management expects to move toward the bottom end of the range over the next 12 to 18 months, but that reaching its midpoint within the next year would be unrealistic.

Dawson also expects the effective tax rate to remain relatively stable in the fourth quarter before returning to approximately 26% in 2027. Badger’s compliance leverage was 1.5 times EBITDA, and the company did not repurchase shares under its renewed buyback program during the third quarter.

About Badger Infrastructure Solutions (TSE:BDGI)

Badger Infrastructure Solutions 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.

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