Bird Construction Inc
TSX:BDT

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Bird Construction Inc
TSX:BDT
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Price: 30.8 CAD -0.87% Market Closed
Market Cap: 1.7B CAD
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Earnings Call Transcript

Earnings Call Transcript
2024-Q1

from 0
Operator

Welcome, ladies and gentlemen, to the Bird Construction First Quarter 2024 Results Conference Call and Webcast. We will begin with Teri McKibbon, President and Chief Executive Officer's presentation, which will be followed by a question-and-answer session. Analysts who wish to ask a question should have their webcast muted when they dial into the conference number provided. [Operator Instructions]. As a reminder, all path webcast is being recorded. [Operator Instructions]. Before commencing the conference call, the company reminds those present that certain statements, which are made express management's expectations or estimates of future performance and therefore constitute forward-looking information. Forward-looking information is necessarily based on a number of estimates and assumptions that, who are considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Management's formal comments and responses to any questions you might ask may include forward-looking information. Therefore, the company cautions today's participants that such forward-looking information 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 the forward-looking information. Forward-looking information does not guarantee future performance. The company expressly disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, events or otherwise. In addition, our presentation today includes references to a number of financial measures, which do not have standardized meanings under IFRS and may not be comparable with similar measures presented by other companies and are therefore, considered non-GAAP measures. I would now like to turn the call over to Mr. Teri McKibbon, President and CEO of Bird Construction.

T
Terrance McKibbon
executive

Thank you, operator. Good morning, everyone. Thank you for joining our first quarter 2024 conference call. With me today is Wayne Gingrich, Bird's Chief Financial Officer. Before we begin, I'd like to take a moment to recognize the collective effort of our team to commemorate Safety Week across the country last week. -- at Bird, our most important corporate value as we put safety first. Our commitment to safety builds a culture that prioritizes the wellbeing of all personnel involved in our projects while supporting our leadership in the construction industry. Through our rigorous health and safety systems, we ensure the health of our teams as we drive excellence and innovation across all aspects of our operations. Turning to today's presentation. The past year was a period of significant achievement for Bird marked by robust revenue growth and further margin improvement. These results reflect the strength of our strategic plan and the dedication of our teams across the country. This momentum continued into 2024, bolstered by favorable weather that reduced the seasonal downtime and allowed work to commence earlier than previously signed and in some cases, through the winter, the first quarter delivered impressive year-over-year growth in earnings and revenue. This shift to work to earlier in the year is not expected to impact our volumes for the remainder of the year with more than sufficient work available to execute the company's record backlog and pending backlog. In the first quarter, we delivered 28% revenue growth with almost $700 million of work executed, bringing our trailing 12 month revenue to almost $3 billion. Adjusted EBITDA improved year-over-year to $24 million or 3.5% of revenue, up 3% from the first quarter of 2023. The company reported $10 million of net income and earnings per share of $0.19. And -- we grew our cash flow from operations and our backlog with a positive book-to-bill, both reflecting significant increases on a year-over-year basis. Our diverse and well-balanced combined backlog and work remains over 90% low to medium risk with over 75% being collaborative in nature. Overall, we are pleased with the quarter, marking a strong start to 2024. We continue to expect considerable overall revenue growth for the remainder of the year with significant improvements in earnings and cash flow when compared to the 2023 as our margin profile continues to improve. A $700 million in securements to its backlog in the first quarter, closing the quarter was $3.5 billion in backlog. Pending backlog of awarded but not yet contracted work increased to $3.4 billion at quarter end and continues to include almost $1 billion of master service agreements and other recurring revenue. Our portfolio of MSA spans the energy, mining and nuclear sectors. Pending backlog was further bolstered through our acquisition of NorCan in January, one of Alberta's leading electrical service providers. Our combined backlog remains highly collaborative and diversifying across many sectors. This robust foundation of work provides significant visibility into 2024 and beyond, both for revenue growth and further margin improvements. It underscores our confidence in the continued demand for our services, particularly in sectors critical to the energy transition, population growth, and infrastructure modernization. The company is committed to enhancing profitability through our focus on disciplined project selection, collaborative contracts, improving margins in our core business and expanding self-perform and cross-selling opportunities. Margin improvement will also be supported through our M&A strategy, focusing on sectors with higher margin profiles and adding self-performed capabilities. Opportunities to further leverage our cost structure remain as we continue to grow and invest in productivity and efficiency enhancements. We continue to diversify and grow by capitalizing on our strong reputation for delivery of complex projects growing across key sectors and pursuing accretive M&A opportunities. Our strategy is driving growth across multiple sectors, including nuclear, mechanical, electrical, civil infrastructure and utilities with an emphasis on energy transition and data-related infrastructure. Supporting our focus on growth is our intention to retain over 2/3 of net income for continued growth post '24, ensuring sustainable financial strength and expansion while maintaining a healthy return to shareholders. The current strong demand environment further boosts our bottom and top-line growth expectations -- the fundamental changes to our business strategy over the past 3 or 4 years have established a resilient foundation for the future, supporting stronger performance even in periods of more normalized industry activity. Bird remains well positioned to capitalize on the sustained demand and robust bidding environment in our core markets. Our strong reputation for collaborative delivery of complex work, combined with a strong suite of self-performed capabilities ensures we can pursue the right opportunities. We remain focused on key sectors that have longer-term cycles, such as electrification, increasing power generation to renewables, hydro nuclear multiyear industrial and mining projects, infrastructure developments for growing population and building upgrades for decarbonization. Having a strong presence across these markets, we are competitively positioned to meet this positive long-term outlook. Bird continues to pursue new work selectively, ensuring strategic alignment between capabilities, project type and delivery model. Most recently, we're pleased to enter into an alliance agreement develop alliance development agreement to work collaboratively with Metrolinx to deliver the East Harbour Transit Hub in Toronto. Under our 50-50 joint venture with AtkinsRealis will be one first major projects in Canada to be procured using an alliance model. Project is a testament to our leading reputation and experience as a collaborative contractor. The outlook for investments in clean power generation, power distribution and electrification remain exceptional, while electricity demand is projected to increase 2 to the fold by 2050. Bird has a strong competitive advantage to capitalize on these opportunities through our commercial systems and utilities or civil infrastructure, industrial construction and industrial maintenance teams. We have extensive experience in Canada's power generation sectors, including hydro, renewables and nuclear. Our team possesses substantial self-perform expertise in civil mechanical, electrical, telecommunication and data systems contributing to significant projects across the country. We continue to engage in key markets such as wind, hydroelectric, nuclear, critical mineral and uranium mining essential for nuclear production as well as battery manufacturing and other EV supply chain support infrastructure. Given Bird's reputation and our history of serving top-tier energy and power clients across Canada, we are sought after partner across the energy landscape. The company's demand outlook remains robust. Contributing factors include a renewed interest in Canadian LNG as a greener fuel source, the rise of modular solutions and addressing Canada's affordable housing crisis and Canada's commitment to carbon neutrality by 2050 with $160 billion investment in a net 0 economic plan, including $93 billion in incentives by 2035. -- requirements to increase Canada's centricity supply for electrification, along with an infrastructure deficit ranging from $110 million to $270 billion underscores the need for investments in clean energy, power distribution and efficiency improvements. Additionally, public transport is an area of substantial investment across the provinces, along with other public infrastructure to support growing communities driven by immigration and population growth. Opportunities in the nuclear sector alongside robust commodities market, further enhance our positive outlook, including multiyear opportunities in critical minerals and uranium. In the province of Ontario, the government's 10-year capital plan of $190 billion is set to support investments in various sectors, including highways, transit, hospitals and education. The region is enhancing its electric vehicle and battery supply chain with over $28 billion in investments as well as adding support for critical minerals in the mining sectors. Looking ahead, these significant tailwinds are poised to propel our business forward over the medium to long term. In addition, Bird's transformed business model is creating value through collaborative frameworks, enhancing our increased self-performance and cross-selling abilities. Our disciplined project selection and strategic focus on higher-margin market sectors, coupled with further leverage on our cost structure, are contributing to our sustained business performance and to our positive outlook for continued bottom- and top-line growth. Along with our financial results today, Bird released its fourth annual sustainability overview. It provides an overview Bird's ESG initiatives underway across the country and information on how we are striving to maximize our positive social and environmental impact, utilizing a strong corporate governance framework. The report can be found on our website. With that, I'll hand it over to Wayne, who will provide more detailed insights into our financial performance.

W
Wayne Gingrich
executive

Thank you, Teri. Building on strong momentum from 2023, Bird achieved significant year-over-year growth in earnings and revenue in the first quarter with operating cash flows proportional to this growth. In the first quarter, Bird reported construction revenue of $688.2 million compared to $536.5 million in the prior year quarter, representing a 28.3% increase year-over-year. The growth was over 90% organic with NOR -- can joining the team in mid-January. The company's margin profile improved from the prior year with gross profit percentage increasing to 8% from 7.4%. The increase in gross profit margin continues to be driven by higher embedded margins on newer work resulting from disciplined project selection and cost control, growing self-perform capabilities and cross-selling opportunities as well as higher proportion of industrial construction executed in the quarter compared to the prior year. General and administrative expenses were $40.1 million or 5.8% of revenue compared to $31.6 million or 5.9% of revenue in the first quarter of 2023. G&A included compensation costs that reflected the significant appreciation of Bird's common share and total shareholder return during the quarter resulting in an additional $3.9 million of share-based compensation costs being recognized in Q1 that are nonrecurring in nature. Net income and earnings per share were $10 million and $0.19 per share compared to $5.1 million and $0.10 per share in 2023, representing an increase of 94%. Adjusted earnings and adjusted earnings per share were $10.6 million and $0.20 per share compared to $5.3 million and $0.10 per share in 2023. The weighted average shares outstanding for the first quarter of 2024 was also higher by approximately 121,000 shares, primarily related to the NorCan acquisition. Adjusted EBITDA in the first quarter was $24.2 million compared to $16.1 million in the prior year, reflecting a 50% improvement year-over-year. The adjusted EBITDA margin increased to 3.5% for the quarter. The year-over-year increase was consistent with higher gross profit, partially offset by growth-related increases in general and administrative expenses, including compensation costs and the higher share-based compensation I referenced earlier. The additional share-based compensation impacted the adjusted EBITDA margin in the first quarter by approximately 60 basis points. While delivering sustained margin accretion and revenue growth, Bird remains focused on maintaining a strong balance sheet with significant liquidity and strong operating cash flow generation, Bird is positioned to support strategic growth initiatives, including flexibility to pursue attractive M&A opportunities that exist in the current environment. Our liquidity position remained strong at the end of the quarter with $133.6 million of cash and cash equivalents and an additional $205.5 million available under the company's syndicated credit facility. The seasonal decrease in accessible cash during the quarter was primarily due to investments in working capital to support the company's work programs and investments in equipment, productivity and technology enhancements. We expect Bird's cash performance to be a continued differentiator as we deliver operating cash flows commensurate with our growth. Even factoring in further investments in noncash working capital to support the company's growth for the year, we expect to deliver positive operating cash flows. At quarter end, the company had working capital of $218.6 million compared with $224.0 million at December 31, 2023. The company's acquisition of NorCan had minimal impact on working capital as the $9.4 million cash proceeds was financed through new long-term debt. Even after closing NorCan, which is off to a great start, we have significant optionality to pursue further M&A opportunities should they arise. -- supported by the strength of the balance sheet and syndicated credit facility. The company has sufficient working capital and liquidity to execute its backlog and to accommodate expected growth in its diversified work program. Overall, our liquidity and leverage ratios and our very positive return metrics remain aligned with expectations. The company's current ratio is 1.26. Our adjusted net debt to trailing 12-month adjusted EBITDA ratio stood at 0.46x and our long-term debt-to-equity ratio was 22%. The company's capital allocation strategy aims to drive business growth, robust profitability and enhance long-term shareholder value through a blend of M&A, smart capital investments and returning capital to shareholders through dividends. Through this balanced approach, the company expects to invest in excess of 2/3 of net income to support growth initiatives. Bird invested $8 million in equipment in the first quarter of 2024. So, it support the company's rapidly growing industrial and mining work programs for the year, while also returning $5.8 million to shareholders through our monthly dividends. Bird also completed the acquisition of NorCan in the first quarter and continued to experience robust performance from earlier acquisitions, upholding our reputation as a strong integrator and delivering accretive transactions for shareholders. M&A remains a key element of Bird's capital allocation and growth strategy. Our M&A strategy is targeted, seeking to integrate firms with specialized offerings that complement our existing services, expand our geographic footprint, and focus on strategic sectors like civil infrastructure, process mechanical, electrical, MR services, utilities and renewables. With significant investments in the business over the past few years, supporting both the shift to higher-margin sectors and organic margin improvements, we are positioned for continued strong performance and expect the momentum to carry through the year. I'll now turn the call back to Gerry to comment on the outlook for the company.

U
Unknown Executive

First focus on higher-margin sectors, disciplined project selection and collaborative contracting continues to drive higher embedded margins in the company's backlog. We continue to expect considerable overall revenue growth for the remainder of the year, with significant improvements to earnings and cash flow compared to 2023. Our expectations for longer-term earnings accretion are supported by the robust demand across Bird's target sectors and by macro trends and critical areas aligned to longer-term investment cycles, including energy transition, population growth and infrastructure modernization. Bird's highly valued team was delivering on clients' expectations safely, reinforcing the company's reputation for collaborative delivery of sophisticated complex projects. With that, I'll turn the call back to the operator for questions.

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question is from Jacob Bout with CIBC.

J
Jacob Bout
analyst

So very strong revenue growth to start the year. Just wanted to touch on the impact from favorable weather to the first quarter and the early start of the program. Is it possible to quantify how much of the 28% revenue growth you saw in the quarter was a factor of that?

T
Terrance McKibbon
executive

It's not significant. It could be something like 5%. But it's just a factor of some of the things that we experienced in the quarter was reasonable. So, for us, it wasn't a significant impact.

J
Jacob Bout
analyst

Right. Great. Okay. That's helpful. And you've mentioned that you don't believe that, that impact should impact volumes for the balance of 2024. So how should we be thinking of growth for the balance of the year? And should it be still somewhat similar to your prior expectation of approaching that low double-digit type growth?

W
Wayne Gingrich
executive

Correct... Yes, I think that's right for kind of the remaining 9 months of the year. And then when you at 28% in Q1, probably raise the average for the year to mid-teens, and that would be organic and acquisitive growth kind of factored in there with NorCan.

J
Jacob Bout
analyst

Okay. Great. I'll pass it over.

T
Terrance McKibbon
executive

Thank you.

Operator

The next question is from Ian Gillis with Stifel.

I
Ian Gillies
analyst

Good morning everyone, it's probably a bit early, but as we start thinking about 2025 and the backlog of work we have Bird has looking into next year, do you think another year of double-digit revenue growth is possible in '25 at this juncture just given the work scopes you're seeing today?

U
Unknown Executive

It feels that way. I'd tell you also why I think the scale of the projects that we're interested in is getting larger and they're maintaining that collaborative sort of framework, which gets us interested. So, I think that alone gives you some confidence to more longevity of future opportunities that are evolving and certainly takes out some of the cyclicity and economic ebbs and flows, which we're obviously interested in STEMI.

I
Ian Gillies
analyst

And as we think about potential headwinds, are you seeing any initial signs of private capital slowdowns due to interest rates, cap gains taxes, any of those items that seem to be catching a lot of headline news today?

T
Terrance McKibbon
executive

No. We've been focused on sectors that are long term that don't have that pressure, and it's really paying off for us because those sectors just had so much momentum. So, despite some headwinds in certain areas, we've been able to pivot -- we pivoted a couple of years ago away from some of those sectors just because we -- first of all, there were some of the sectors had a lower margin profile. So, we've pivoted away from those, and that's really paid off for us.

I
Ian Gillies
analyst

Okay. And then obviously, with the improvement in the share price, obviously, valuation gets a bit better. You've been very disciplined around M&A. But does it change the way you approach that part of the business now? Like do you have a bit more capacity to go after larger assets? Or do you continue on the path you're on, just given that it's been working well over the last number of years.

T
Terrance McKibbon
executive

I think for us with M&A, we look at opportunities as they evolve. And there's going to be the smaller tuck-in opportunities. Every once in a while, there's larger opportunity larger opportunities don't come around very often. So, I think we're open for business when it comes to the right opportunity if it fits our focus and fits our areas that we think we can enhance our current offering and most importantly, it's considerably accretive to the performance of the business. So, I think the tuck-ins are -- you've seen those more frequently, and we have obviously had a really good track record, which is increasing the interest in companies looking for a longer-term partner with Bird. -- every once in a while something comes along that we look at more seriously, this kind of more scale, if it fits the profile that we're interested in, obviously, we'll engage...

I
Ian Gillies
analyst

No, that's helpful. I'll turn the call back over...

T
Terrance McKibbon
executive

Thank you.

Operator

Once again, any analyst who has a -- the next question is from Fredric Bastien with Raymond James.

F
Frederic Bastien
analyst

All right. Sorry for that. Sorry about the interruption. Your margins are tracking nicely higher. I think if I go back many, many years in my model, your margins peaked at 9% back in the late 2009, 2008. I appreciate we're in different times, but what do you expect or what do you think the upside potential in the margin is given where you stand today with respect to end market conditions? Your better risk profiles and the projects you're bidding on and also the fact that you're self-performing a lot more work.

U
Unknown Executive

Yes, I think we've been reasonably open about this. Obviously, we're focused on a rolling improvement in our strategic plan, trying to find that annual accretion and where that lands. Again, it's conducive to the demands that are out there and the specialized types of work. Is that achievable to get back to those margins over time?

T
Terrance McKibbon
executive

Yes, absolutely. So that's our focus. And obviously, most impressively, we're growing top line revenue while increasing the accretion of the bottom line, and that's not easy. So, the team is doing a tremendous job as we move the business forward.

F
Frederic Bastien
analyst

And the -- I guess, the margin expansion that you're forecasting for 2024, do you think that can be replicated next year as well?

T
Terrance McKibbon
executive

I believe so, yes. Just with the nature of the opportunities that are out there and the focus we have.

F
Frederic Bastien
analyst

Okay. So where is you? What worries you right now? -- if anything?

T
Terrance McKibbon
executive

What are I couldn't hear what you were saying. What were you I think, obviously, our #1 focus in the company is always safety. And safety is something that you continuously put a tremendous effort into. And each year, you improve and our teams are doing a tremendous job with that. But all it takes us a mistake and someone in incident occurs. So, I'd say that, that's probably always the thing that's in your back of your mind, hoping that we've done everything we possibly can to make sure nobody gets hurt. And I think our teams do a tremendous job with that, but it's still something that's even behavior sometimes mistakes can happen.So that's probably one area. But I think right now, we're focused in all the right areas. The opportunities that are in front of us are long term and have a lot of legs. And so, we're pretty excited about all that. And so yes, I'd say my worries are more around probably safety and just making sure that we keep raising the bar and making sure nobody gets one.

F
Frederic Bastien
analyst

Thank you, I appreciate it.

Operator

The next question is from Maxim Sytchev with National Bank.

M
Maxim Sytchev
analyst

I was wondering if it's possible to get a bit of an update on the mining one of the land and maybe LNG. Just in terms of what you're hearing from the clients sort of the bidding pipeline and that sort of stuff? And then if last, we can potentially quantify your exposure to these to growing verticals.

T
Terrance McKibbon
executive

So mining, certainly very robust cycles that we're in right now and across many areas. We've been -- we've maintained our mining expertise and our teams predominantly in iron ore over the last number of years and maintained our fleet. And those were -- we had some tougher years through that period of time, and I'm glad we state patients stuck with it because we're entering into a cycle now that's very robust and it expands well beyond iron ore. So, we're seeing a number of new opportunities evolving across a number of different mineral types that Canada has access to. So, in that regard, I think in the mining side, whether it's potash or whether it's gold or continuing further expansion in the iron ores, those areas involving opportunities in lithium. And we have the teams that can essentially take a project like that from cradle to gray. So, the teams are -- have been very, very busy with proposals and early contractor involvement on a number of opportunities. We also have a large project getting underway in Squamish that I was just visiting last week. And obviously, there's a considerable amount of scale with that project for us, and the team is doing a tremendous job, a little bit different than our project up in Kitimat in terms of the uniqueness of it and water access, which is obviously something that you don't do every day. So -- but really, really impressed with our team and the progress we've made and hearing we have good feedback from our clients.

M
Maxim Sytchev
analyst

Okay. Excellent. That's great. And I guess in terms of overall sort of exposure right now, Terry, how would you quantify that if it's possible.

T
Terrance McKibbon
executive

Overall exposure to LNG?

M
Maxim Sytchev
analyst

Mining and LNG.

T
Terrance McKibbon
executive

Mining Yes, it's 15% probably Max, would be where we're at. It's a nice balance with everything else we're doing. And as you know, there are cycles in mining that occur. I think we -- it feels like we're in a long cycle right now. It will be at least 3 to 5 years just based on the scale of the commitments that our potential clients are making.

M
Maxim Sytchev
analyst

So yes, agreed. Okay there's no more question for me.

Operator

This concludes the question-and-answer session. I'll hand the call back over to Mr. McKibbon for closing remarks...

T
Terrance McKibbon
executive

Okay. I'd like to thank all of you for joining us this morning on our earnings call and a special thanks to the Bird team for their unwavering commitment to safety and excellence. Have... Thank you.

Operator

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