Bird Construction Inc

TSX:BDT

Earnings Call Transcript 2020-Q1

[Operator]

Welcome, ladies and gentlemen, to the Bird Construction First Quarter 2020 Financial Results Conference Call. We will begin with Teri McKibbon, President and Chief Executive Officer's presentation, which will be followed by a question-and-answer session. [Operator Instructions] The conference is being recorded. [Operator Instructions] Before commencing with the conference call, the company would like to remind those participating that certain statements which are made express management's expectations or estimates of future performance and thereby constitute forward-looking statements. Forward-looking statements are 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.In particular, management's formal comments and responses to any questions may include forward-looking statements. Therefore, the company cautions today's participants that such forward-looking statements involve 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 these forward-looking statements. Forward-looking statements are not guarantees of future performance. The company expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, events or otherwise. At this time, I would like to turn the conference over to Mr. Teri McKibbon, President and CEO of Bird Construction. Please go ahead.

[Terrance Lloyd McKibbon, President, CEO & Director]

Hello, and thank you for participating in Bird Construction's First Quarter 2020 Earnings Call. Co-presenting with me today is Wayne Gingrich, Bird's CFO. We hope that all our employees and the investment community are staying safe and healthy during COVID-19 pandemic.On March 11, 2020, the World Health Organization declared a global pandemic due to the contagiousness of the novel coronavirus in severe respiratory disease, COVID-19, that could be developed after contracting the virus. The COVID-19 pandemic has added uncertainty to the industry as each provincial government has responded with different measures to address the public health threat. The duration of these measures is currently unknown and the corresponding impact to our workforce and to our project sites are key variables that have uncertainty as a result. The first quarter financial performance of the company is generally not impacted by the pandemic, but the company has seen impacts in early April -- or in April and early May, related to the temporary project shutdowns and reduced productivity on project sites as a result of physical distancing and additional health and safety measures added to our normal protocols. The situation remains very fluid, and the company is well positioned to respond to fluctuating scenarios in the near term.Our highest priority is always to protect the health and safety of our employees. The company acted quickly to implement a pandemic response plan combined with a rigorous COVID-19 health and safety program, which meets or exceeds guidance from applicable public health authorities. The response plan includes best practices for managers, self-assessment tools, enhanced cleaning protocols and hygiene measures, physical distancing practices, new COVID-19 measure audits and a complete proximity activity hazard management process, including additional personal protective equipment requirements. Strategies to reduce concentration of site workers such as staggered start times, breaks and lunchtimes have also been implemented on construction sites. The company has also created online COVID-19 information center for employees and managers to ensure all team members are kept informed as the situation evolves. Remote work practices facilitated by information technology have been implemented across all offices. The company continues to communicate on a regular basis with all employees and has highlighted the additional support offered by the provider of the employee and family assistance program to support employees and their families during this time. The company was proactive in managing its cost structure and balance sheet by implementing precautionary measures to position itself in the event of a prolonged impact to the business by instituting a temporary reduction in salary in mid-April with the Board of Directors, executives and non-project-related employees. Where our projects have been temporary slowed down or suspended by the client or by a provincial government, the company has implemented temporary layoffs. Additionally, the company has also reduced discretionary spending, deferred capital expenditures, where possible, out of an abundance of caution. All these efforts contribute to a strengthened financial position should the pandemic run longer than expected or if a second wave of COVID-19 occurs. The executives and directors want to acknowledge the efforts and sacrifices that our employees have made to ensure that the company is operating safely and effectively, delivering upon its project commitments through these unprecedented times.In the first quarter of 2020, the company continues to execute a more diverse work program and delivered significantly improved net income and adjusted EBITDA year-over-year. Adjusted EBITDA and adjusted EBITDA margin in the first quarter of 2020 were $7.6 million and 2.35%, respectively. Adjusted EBITDA increased $10.7 million from a negative $3.1 million in the first quarter of 2019. Adjusted EBITDA margin increased 355 basis points from the negative 1.2% recorded in the first quarter of 2019. The year-over-year improvement was driven by an increase in gross profit due to the revenue mix and the impact of increased costs on certain contracts incurred in 2019 that did not recur in 2020.We are pleased with the continued progress completing our challenging legacy programs and the impacts of our efforts to diversify our revenue streams across the portfolio of both geographic and balanced risk profiles. We continue to be encouraged by the growth of our pending backlog, of which many are in a delivered model that supports a more traditional portfolio risk balance of Bird in our overall work program and our earnings base has begun to reflect this. The COVID-19 pandemic did impact the timing of conversion of some of our pending backlog, pushing some expected awards after the first quarter of 2020. In 2020, the company secured $220.8 million of new contract awards and change orders and executed $321.6 million of construction revenues. The backlog of $1.43 billion for the company at March 31, 2020, increased 11.2% from the $1.28 billion in backlog a year ago. However, backlog decreased $121 million or 7.8% from the $1.55 billion of backlog recorded at December 31, 2019, and several awards expected in the first quarter of 2020 were delayed, including the Eric Hamber Secondary School Replacement Project. The company experienced 2 minor project cancellations in the quarter as a result of the COVID-19 pandemic, one from backlog and one from pending backlog. The Board has declared an eligible dividend of $0.0325 per common share for May 2020, and it is meeting monthly through the COVID-19 crisis and will communicate dividend declaration monthly on a go-forward basis.Subject to the quarter end, the company announced the award of the Eric Hamber Secondary School Replacement Project in Vancouver, British Columbia for approximately $92 million under a design-build contract.Wayne will now walk us through the financial results for the quarter compared with prior year.

[Wayne R. Gingrich, Chief Financial Officer]

Thank you, Teri. Before I discuss the financial results, I'd like to take a moment to thank all employees, including those who are working remotely and help with our financial reporting process. The COVID-19 pandemic has changed the way we work, and we appreciate the flexibility and continued dedication of our team to support and maintain the business through this crisis.During the first quarter of 2020, the company recorded net income of $1.1 million on construction revenue of $321.6 million compared with a net loss of $6.5 million and $261.8 million of construction revenue in 2019. The year-over-year increase of revenue in the first quarter of 22.9% was driven by growth in the industrial work program, while the commercial and institutional work program was effectively planned.The year-over-year increase in first quarter net income is reflective of the improvement in revenue and earnings attributable to the mix of higher-margin industrial work program. The company's 2020 first quarter gross profit of $16.9 million was $10.6 million or 167.8% higher than the $6.3 million recorded a year ago. The increase in the amount of gross profit is driven by the higher quarterly construction revenues year-over-year. In addition, the increase in gross profit is due to a higher-margin work program as revenue contribution shifted from predominantly institutional and commercial projects to a more balanced work program, including industrial. The first quarter of 2019 was also negatively impacted by a PPP project that incurred additional cost due to design-related scope growth and acceleration expenses. There were substantial changes to the scope of that project requested by the client that are still in commercial negotiation. This PPP project achieved substantial performance in the first quarter of 2020. Gross profit percentage in the first quarter of 2020 was 5.3% and 2.9% higher than the gross profit percentage of 2.4% recorded a year ago for the same reasons as gross profit. Income from equity-accounted investments in the first quarter of 2020 was $1.7 million compared with $0.7 million in the same period of 2019. Included in the first quarter of 2020 was a net gain on sale on the company's investments, an equity-accounted entity, held for sale of $400,000. The remainder of the increase in income was primarily driven by the margin earned from equity-accounted investment based in Eastern Canada. In the first quarter of 2020, general and administrative expenses of $14.8 million or 4.6% of revenue were slightly lower than the $15 million or 5.7% of revenue in the corresponding period a year ago. During the first quarter, the company had lower compensation expense of $0.4 million, third-party pursuit costs were $0.3 million lower and $0.1 million higher foreign exchange gains than the amounts recorded a year ago. Partially offsetting these reductions in expenses were $0.6 million of higher professional fees relating to information technology and consulting fees than the amounts recorded in 2019. Finance income of $0.8 million in the first quarter of 2020 is comparable to the $0.6 million recorded in the same period of 2019 due to higher cash balances being carried during the quarter compared to the prior year.Finance and other costs of $3.1 million were $1.6 million higher than the $1.5 million recorded in the first quarter of 2019. The increase was due to $0.8 million higher interest expense on nonrecourse project financing and $0.5 million higher losses on interest rate swaps. There was also a $0.4 million increase in interest expense on loans and borrowings.In the first quarter of 2020, income tax expense was $0.4 million compared to the income tax recovery of $2.4 million recorded in the first quarter of 2019. The effective tax rate of 27.1% in 2020 is comparable to the 27% in 2019.I will now turn the call back over to Teri to comment on the future operating performance for the company.

[Terrance Lloyd McKibbon, President, CEO & Director]

Thank you, Wayne. The trend for the company over the past several years towards a growing proportion of industrial project revenues is expected to continue throughout 2020. Diversification into LNG, nuclear, public transit, modular and environmental sectors will balance the risk profile and help stabilize earnings. In the third quarter of 2020, the company expects to sell 2 equity investments in PPP projects. This is consistent with the company's strategy not to hold these investments through the entire duration of the concession agreement.At March 31, 2020, the company was carrying a backlog of $1,426.6 million, which is 11.2% higher than that recorded a year ago. The company expects to recognize 66% of the remaining performance obligations over the next 12 months. This estimate reflects any short-term impact on financial results from projects that have been put on hold by clients as a result of the pandemic. This expectation is based on management's best estimate that contains uncertainty as it is subject to factors outside of management's control. Embedded margin in backlog improved throughout 2019 and improved year-over-year in the first quarter of 2020. Backlog is more diversified than in prior years across a broad range of markets and contracting methods with a more balanced risk profile. This can be seen in the disaggregation of the revenue in the company's 2020 first quarter financial statements, whereby revenue earned in higher-risk contract categories, such as PPP, alternative finance and complex design-build projects, comprised 16.1% of total revenue in the first quarter of 2020 compared to 26.1% in the same time period in 2019. The proportion of revenue earned from higher-risk contracts is expected to remain lower throughout 2020 when compared year-over-year. The company has minimal direct exposure to projects in the oil sector in its backlog.In addition, the company has $625 million of pending backlog as of the end of the first quarter of 2020. The projects are geographically diverse and span multiple sectors. This includes the addition of the Eric Hamber Secondary School Replacement Project in Vancouver, BC for approximately $92 million under a design-build contract. Subsequent to the end of the first quarter, the project was contracted and recorded in the backlog. Projecting the timing of converting the rest of these projects into contracts has become more difficult in the current market conditions as a result of the pandemic, and several have shifted beyond the second quarter into the second half of 2020, which will impact the revenue this year.The project pursuit pipeline remains healthy and falls within our targeted risk of risk tolerance. The company continues to be selective on prospective pursuits, ensuring our clients' expectations are an appropriate match for our capacity within our overall work program. Project cancellations in the pursuit pipeline have been minimal to date. However, the company is seeing projects in the pursuit phase shift further out, which will have a modest impact in the second half of 2020. At this point, the company does not expect the shift of timing of pursuits to impact 2021.In the near term, opportunities will primarily consist of smaller environmental projects, midsized social infrastructure projects and a range of projects in the LNG sector and mining sectors. The award of any of these projects will benefit the second half of 2020 and beyond.Recognizing that the longer the COVID-19 pandemic circumstances persist, the higher the risk to company's underlying assumptions. The company maintains an optimistic outlook considering the impact to date and positive indications for gradual reopening of the provincial economies in the near term. The company has experienced impacts of the pandemic in April related to temporary project shutdowns and reduced productivity on project sites as a result of physical distancing and additional health and safety measures added to our normal protocols. As it may evolve, our operational workforce have become accustomed to the new operational landscape and productivity levels are returning to normal. The company expects to benefit in 2020 from having a healthy backlog with higher margins than a year ago and more balance in terms of contractual risk profile of the work program, notwithstanding expectations that revenues will be lower year-over-year as a result of the pandemic.When the company's work program fully mobilizes, there will be a period of time in which the company will experience growth in noncash working capital as the business ramps back up until a steady state of operations is achieved.So this concludes the prepared remarks section of the conference call. I'll now turn the call over to the conference call operator, who'll take your questions in turn.

[Operator]

[Operator Instructions] Our first question comes from Yuri Lynk of Canaccord.

[Yuri Lynk]

Just wondering how the quarter turned out vis-à-vis your initial expectations. It looked like a pretty good quarter from our view point.

[Terrance Lloyd McKibbon, President, CEO & Director]

Yes. I think general year, as expected. Certainly, we put a lot of focus into our business, our forecasted budgets, and generally as expected for the business.

[Yuri Lynk]

Okay. Trying to get -- obviously trying to get a handle on the degree to which revenues might be down this year. The MD&A implies about an 8% reduction in the revenue that you expect to burn from backlog over the next 12 months compared to what you had in the Q4. Is that kind of ballpark the revenue decline you're expecting? Or can you give us any additional color on how to think about that?

[Terrance Lloyd McKibbon, President, CEO & Director]

Yes. We haven't disclosed, obviously, what we expect the revenue to be for the year. But suffice it to say, we expect Q2 will be significantly down from a year ago. We are seeing some of our project sites return to work. We're seeing some ramp-up on other sites where they had kind of previously ramped down through April. But Q2 is certainly going to be impacted. Some of the new project awards that were in our pending backlog coming into the year we thought were going to convert to awards in kind of Q1 or Q2 are starting to push to the right and that is going to have a negative impact on Q3 and Q4. But if you think back to our Q4 disclosure, we had said that 66% of our backlog would come into revenue in the next 12 months. So 66% of that would come into 2020. At the end of Q1, here the number is still 66%, but it's on a next 12 months, but it's on a $1.4 billion backlog. So that's coming down as well. So we haven't pegged a revenue number, but I don't think a 8% reduction that you're putting out there is far off from a total year perspective.

[Yuri Lynk]

Okay. Last one for me and I'll turn it over. Teri, do you have any concerns about being on the hook in any way for the additional costs that you're experiencing on covering almost all your job sites associated with dealing with COVID-19?

[Terrance Lloyd McKibbon, President, CEO & Director]

Generally, Yuri, always the contracts still have varying degree of -- types of contracts with varying degrees of contractual coverage. Obviously, our subcontractors are back-to-back on those. You always have the risk of challenges of trades, weathering this type of environment whenever you do your best to have security on the larger ones. But there's always a bit of that risk. But generally saying -- speaking, it's not something that we're worried about based on what we're seeing today. I think that generally relates to the fact that the industry really kept going. It's obviously, one way you could see how the construction industry have performed through a very uncertain time. We had some -- certainly some contracts that were paused and legislated to pause. But overall, it's -- it really is impressive to see our industry, not just within Bird's business, but generally across the industry, continue the way it has. And we have not had a worker on a site ever diagnosed with COVID-19. We've had certainly symptoms that we ran through extensive testing on, but across our whole suite of business across country, we've not had a positive test. So I think that's a testament to the efforts that we're making on hygiene and protocols, safe distance and things like that. So it really is impressive to see. And obviously, the second wave can occur, but we feel that we've gone through this first wave and can certainly handle another wave as well.

[Operator]

Our next question comes from Frederic Bastien of Raymond James.

[Frederic Bastien, MD & Equity Research Analyst]

I was hoping to get your thoughts on how the second quarter is shaping up right now relative to perhaps how you felt it might be maybe 6 weeks ago.

[Terrance Lloyd McKibbon, President, CEO & Director]

I'd say to -- we're seeing signs of certainly clients restarting projects that were paused. It's still early days, Fred, but we see -- we had certainly some absenteeism in the early part of April. Productivity, everyone getting used to the new normal. But we're seeing, I would say, in most markets, some strength. And I would say we're more optimistic about the back half of the second quarter than we would have been 6 weeks ago. But again, it's -- well, there's a higher level of confidence just because we're getting adjusted to this framework that we've worked in. And our clients are starting to get mobilized. So we're feeling better than we did 6 weeks ago, for sure.

[Frederic Bastien, MD & Equity Research Analyst]

Okay. Can you also provide an update on LNG Canada? I understand you have 3 projects -- 3 contracts on this particular site. Give us an update, please.

[Terrance Lloyd McKibbon, President, CEO & Director]

Yes, the same sort of thoughts there. Early days -- early April, certainly significant reduction in scale, but that is returning to anticipated levels sort of as we speak. And the team there and our clients have done a phenomenal job with protocols and the parameters of managing the workforce have done some really impressive things. And to this point, no positive tests within an employee from -- certainly within our landscape, and I don't think there's been one on the site within our landscape that we have on sites. It's been really impressive. So returning to our anticipated levels sort of as we speak.

[Frederic Bastien, MD & Equity Research Analyst]

Okay. Awesome. Last one for me, probably for Wayne. In respect to the 2 investments that you plan to sell shortly, are you expecting similar types of gains to the one that you enjoyed in Q1?

[Wayne R. Gingrich, Chief Financial Officer]

I think the gain on the project going forward is larger. And that gain has gotten an opportunistic item that came up in Q1. So we did monetize that asset. The 2 that will occur in Q3, I think, again, will be slightly larger than what we saw in the first half.

[Operator]

Our next question comes from Michael Tupholme of TD Securities.

[Michael Tupholme, Research Analyst]

Teri, you provided a bit of an update there on LNG Canada. So it clearly sounds like that was one of the projects where you did experience some impact from COVID-19. I'm just wondering were the impacts that you did see for COVID-19 across other parts of the business, was it pretty general and fairly large spread or was it fairly concentrated to a handful of other projects?

[Terrance Lloyd McKibbon, President, CEO & Director]

It's fairly concentrated to a handful of other projects in provinces where the governments put -- really put restrictions in place, such as Ontario. We had some impacts in Atlantic Canada on some of our educational work, but it was purely government legislation that affected that. We have activity in Northern Québec with our mining business, ArcelorMittal. So that was also affected with Québec's legislation they put in place. And I'd say that the economic demand, inventory levels, things like that on our site will certainly delay further demand in that business in the second quarter and expect that will be third quarter, fourth quarter. But it's seasonal anyway, and we've anticipated that, and it certainly doesn't have a major impact on our business per se. It's much smaller.

[Michael Tupholme, Research Analyst]

Okay. So it sounds like things are generally starting to normalize in terms of activity levels and ramping back up. So the second half of the year, to the extent that revenues are softer than you had originally expected, is that primarily a function of the -- some of the awards that you thought had -- would come through in the first half may not be at the level?

[Terrance Lloyd McKibbon, President, CEO & Director]

Yes, coupled with the softer second quarter revenue from some of the delays -- some of the restrictions.

[Michael Tupholme, Research Analyst]

Right. Okay. And then just in terms of your earnings outlook commentary, it reads consistent with the way it read in Q4 and that you do talk about continuing to expect earnings to be higher than in recent years. Not to try to pin you down to an exact number, because I'm sure you won't provide that. But when you talk about higher than the last -- than recent years, there's quite a divergence depending on how far you go back. So if you look at 2018, there was actually a small loss. And then in 2019, you earned $0.22. So just trying to get some sense, when you talk about recent years, should we be focused on more on 2019? Or kind of how far back are we looking there?

[Terrance Lloyd McKibbon, President, CEO & Director]

Yes. Obviously, our commentary relates to 2019. But although we anticipate that it will be lower than expected, our commentary is -- holds that we expect accretive performance from 2019. And we have a level of confidence of that based on the backlog and the embedded margin in that backlog and the performance that we've had to date.

[Michael Tupholme, Research Analyst]

Okay. That's helpful. And then just in terms of some of the projects being pushed to the right that were in the pursuit phase, is that in any particular end markets or sectors or is it more broad? Just any color around where you're seeing what areas of projects are going to be helpful.

[Terrance Lloyd McKibbon, President, CEO & Director]

Yes. So it's somewhat broad, but I would say more focused on private commercial institutional work and the mining side, where things are getting pushed through. Generally, our industrial program hasn't seen that to any extent other than active work that's been underway. We're not seeing that as much other than it's in the industrial program. It's more our commercial institutional side, in the private sector, private investment side of that is where is where we expect those to be.

[Michael Tupholme, Research Analyst]

Okay. And then just lastly, in terms of your -- you made some commentary around 2021 and, at this point, not expecting a shift in the timing of pursuits to impact your 2021. Just wondering what is the -- gives you the confidence to say that. Is that a function of the fact that you're now seeing activity ramp back up on some of your existing projects and maybe pursuits, even though they've been pushed, they are -- so do you expect awards in the second half? Just trying to get a sense for sort of at this point. So I'm uncertain how you've been saying that.

[Terrance Lloyd McKibbon, President, CEO & Director]

So first and foremost, it's the anchor projects that we have in our backlog, projects that are evolving, such as Canadian Nuclear Labs up in Chalk River as an example. Confederation Line Extension in Ottawa is another example. LNG, we're still in the very -- largely in the early phase of procurement of LNG. So that's significant growth opportunities in all of those projects. So really, the confidence comes from the position we have, the strength of that backlog. And just, I'd say, dialogue that we've had with some of our commercial institutional clients that are starting to reengage now and reset whether that's some of the larger pension funds that we work for. We have the pile stocking for -- in the month of April, we're starting to engage with those and move those towards fully contracted. So we're -- and I think the more important piece is we have a very clear line of sight to the risk of our backlog and the predictability of that. And so we're in a good spot. And if we can continue to evolve like we have through this -- getting through this month of April and starting to see more normal evolution of the business, I think we've got some exciting things ahead of us in the balance of the year and well into 2021 and beyond.

[Operator]

Our next question comes from Maxim Sytchev of National Bank Financial.

[Maxim Sytchev, MD & AEC]

Just wanted to circle back quickly on Q2. I mean, given the fact that revenue is obviously being impacted by some dislocations. What you're doing on the cost side? I mean, should we still expect positive EBITDA for Q2? Or this is still kind of too uncertain to call or make a comment around that?

[Terrance Lloyd McKibbon, President, CEO & Director]

At this point, we expect positive EBITDA in Q2.

[Maxim Sytchev, MD & AEC]

Okay. And I guess -- so Teri, that really comes from the cost side? Or like I mean, what are the levers there? Is that...

[Terrance Lloyd McKibbon, President, CEO & Director]

I think combination of both, Max. But I think obviously Q2 has -- had been impacted. But I think it's a combination of the margin profile of the projects that are underway, and we've been really aggressive on the cost side.

[Maxim Sytchev, MD & AEC]

Okay. That's very helpful. And then I'm -- I was wondering, if you don't mind me revisiting kind of the addressable market opportunity on LNG Canada, as you said, you were very early in terms of that site development. Speaking with sort of the main EPCs and the proponents, is there any change in terms of your ability to drive incremental revenue from that side?

[Terrance Lloyd McKibbon, President, CEO & Director]

It's -- we're continuing evolving, I'd say. We've performed extremely well, very proud of the performance of the team. From a safety perspective, obviously dealing with the pandemic. From a schedule perspective, performed extremely well. And at any time you're underneath these large global EPCs and you perform well, you certainly get a lot of opportunities that evolve. As you know, we've been very focused on the workforce accommodation. We've secured process facilities for the project. We've secured some of the larger grading. So you can sort of follow along as you see the project evolve and all the different components on something of this scale. And we've had good success securing each phase. Obviously, the trains have fabrication in Asia, components of that. There will be a lot of interconnected work and things like that, that don't provide opportunities, lots of ancillary facilities that are still evolving. Obviously, all of the foundational work, concrete, all those things are in procurement as we speak. So yes, we're excited and just couldn't be happier with the performance of the team there. There's obviously potential for Phase 2 of the project. We don't have any color on that today, but that's a future opportunity potentially as they consider that at some point in the future. But yes, it's been a nice replacement for our historical oil sands opportunities. And the team that we've got there, obviously, have extensive experience in oil sands in a major way with a major scale, and we've been able to, obviously, take that entire team and build upon our team. And yes, really pleased to see this group deliver something at this scale with complexity in what I would call a pretty remote location to do that.

[Maxim Sytchev, MD & AEC]

Yes, for sure. Do you mind maybe commenting if it's possible on the kind of the payment terms maybe on LNG Canada specifically? I don't know if you want to address those. Or just in general, if you have seen any slippage from any clients on accounts receivables and things like that? Or it's still kind of business as usual on this front?

[Terrance Lloyd McKibbon, President, CEO & Director]

So no. Clearly, we've been at LNG Canada now for some time. They've been excellent. Everything is on time. So no issues there whatsoever. Balance of clients. Obviously, we are in a economic landscape like this. You do have to put considerably more attention to receivables and whatnot. To date, we have not been impacted by anyone out of the ordinary. We have certain clients that are just generally slow and continue to be. But no change, I guess, Max, is -- to this point. And we've put appropriate measures in place to protect our performance, whether that's maturity from larger performers. So we've got the protections of the contract side. And -- but our clients have been good. We haven't -- nothing worrisome, for sure.

[Maxim Sytchev, MD & AEC]

Okay. And actually, as you touched on a good point around the subs, do you feel comfortable in terms of kind of that other side of the supply chain being relatively intact and available in terms of -- to be able to do the work that these companies, I mean, just have smaller scales that are not being impacted too much where you have to start worrying about them being able to carry out the contracts?

[Terrance Lloyd McKibbon, President, CEO & Director]

A couple of things. We've put higher standards of performance expectations in place in terms of surety. On existing -- I think if we would have had a lot longer impact 2, 3 months, maybe at the end of that third month, I think it would have been more worrisome than it is today. But -- and the fact that we've been largely able to continue -- all of our subcontractors have been able to continue. So I think at this point, we're not anticipating that there will be challenges. But there's always going to be a subcontractor out there that was in trouble in the first place and can't handle that month that they've been impacted. There's always going to be that dynamic, but we are typically well covered with performance surety.

[Maxim Sytchev, MD & AEC]

Okay. That's helpful. And then I'm just wondering in terms of your concessions monetization, I'm not sure if in the past, you have publicly stated in terms of kind of a potential expectation. I mean, is this tens of millions and millions, just so if we can think kind of what are the expectations around the cash injection into the balance sheet in Q3?

[Wayne R. Gingrich, Chief Financial Officer]

Also to add the sale of 2 assets. So in Q1, I think our inflow was $5.4 million. So in Q2, the inflow would be higher than that, but less than $10 million.

[Maxim Sytchev, MD & AEC]

Okay. That's helpful. And then just maybe last sort of bigger picture question, if it's possible. So I mean, as we're thinking, obviously, there's a lot of discussion around infrastructure spending and things like that in general to stimulate the economy. I'm just wondering if you have any kind of early indications from conversations with the governments, what you guys are hearing on the ground in terms of the potential spending in late 2020 and maybe in 2021?

[Terrance Lloyd McKibbon, President, CEO & Director]

So I think a little early in terms of the quantum, but we're certainly seeing activity getting organized in various governments municipally and provincially for some of these programs. The interest levels for Bird are probably highest in the social infrastructure side, educational facilities. We saw that in 2008. We've experienced that more recently with the SIF program in Canada from the federal government. The other area that we've grown considerably in is on the environmental side, and we expect to see environmental projects get stimulus investment. A lot of municipalities and provinces in Canada have got to do considerable upgrades to existing, and that's work you can get underway fairly quickly. And you may have caught yesterday, a pretty large bill in the U.S. designed around stimulus on water -- wastewater investment, pretty significant federal U.S. We're not in the U.S. in that sector. But you can see that some of the early stuff, U.S. is getting to market. I'm quite confident that Canada will do the same.

[Maxim Sytchev, MD & AEC]

Right. And is there anything on the health care side where you see a potential opportunity or right now just really kind of on the OpEx, not the CapEx side?

[Terrance Lloyd McKibbon, President, CEO & Director]

Yes. And I would bundle that underneath the social infrastructure side. Some of the larger health care stuff is longer in duration because it's P3 typically or depending on the province and agencies, the larger programs. But yes, the smaller, mid-size opportunities that are there. We have one that's in procurement right now in Atlantic Canada in the second quarter. So it's continuing forward, a nice fit for us, but we'll see. So there's still -- and those were not COVID related, but they haven't interrupted the procurement. They've continued forward with it. So it's a government-driven initiative. So we'll see where the dust settles in there. But yes, it's still a space. I'd say, the educational mix with university investment, high school, elementary across the country, certainly those projects I would expect are closer to being shovel ready. And on the environmental side, it will be a plus to have been shovel ready, waiting for funding. So those are the 2 areas that I'm most interested in. We're not to any extent in the horizontal landscape in terms of road building and that kind of thing, in a minor way where we are but not to take advantage of that. And the larger LRT-type work, I think, is just a longer duration. Typically, Q3 delivery takes longer.

[Operator]

Our next question is a follow-up from Michael Tupholme of TD Securities.

[Michael Tupholme, Research Analyst]

Just 2 follow-ups. Firstly, Teri, just with respect to the 2 minor project cancellations you mentioned, how do you see -- how do you assess your level of concern around the potential for any future cancellation?

[Terrance Lloyd McKibbon, President, CEO & Director]

That's pretty well, Michael. These occurred early on. So anything that -- we certainly don't have any line of sight to anything else unfolding. If anything, it's things that had some delay that you'd expect might get canceled or restarting. So I'd say lower -- it's not a worry right now.

[Michael Tupholme, Research Analyst]

Okay. And then a question for Wayne. Just there's the comment in the MD&A regarding working capital investment as the business ramps back up. So I was wondering how your expectations for working capital for the year have changed, I guess, both on a full year basis and then the cadence through the year? If you can comment on that, that will be helpful.

[Wayne R. Gingrich, Chief Financial Officer]

Yes. Really, what my comment is intended to say is that total working capital necessarily won't be impacted by this. But as we start to see the work program ramp up, again, hopefully, in June and July time frame, that's going to require investment and cash into noncash working capital, and then I'll start to release again in late September, early October. So it's kind of a timing issue that we just wanted to highlight there.

[Operator]

There are no further questions at this time. I would now like to hand the call back over to Mr. McKibbon for closing remarks.

[Terrance Lloyd McKibbon, President, CEO & Director]

So I want to thank all of our employees for their resilience and for the sacrifices they have made to ensure the company remains healthy in our 100th year of operation. Our field staff deserve a special recognition for having continued to work on our projects with utmost professionalism and dedication while quickly embracing new safety practices and procedures. Our primary concern is always the health and safety of our employees. We hope our strong safety culture also permeates into the daily lives of our employees and serves to help protect their families and communities in which we live and work. The first quarter of 2020 represents the sixth sequential quarter where our 12-month trailing adjusted EBITDA margin has improved. While it's difficult to estimate the impacts of the pandemic on our company at this time, discipline and focus of the team over the past several years on reducing the risk profile and increasing the diversification of the work program will help the company emerge from this crisis with a healthy backlog and maintain a strong balance sheet. We have sufficient cash and liquidity to support our anticipated work program while maintaining the current dividend based on current expectations of the impact of COVID-19. Despite those impacts, we will still expect 2020 to be more profitable than recent years. We look forward to profitably celebrating the century mark for our company with our clients, shareholders and employees later this year. Thank you for participating in Bird Construction's First Quarter 2020 Conference Call. As always, Wayne and I are available if additional information is required. So please do not hesitate to get in touch with us. Have a nice day, and stay safe.

[Operator]

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