Bird Construction Inc

TSX:BDT

Earnings Call Transcript 2022-Q2

[Operator]

Welcome, ladies, and gentlemen, to the Bird Construction Second Quarter Financial 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. [Operator Instructions] As a reminder, the webcast is being recorded. [Operator Instructions]

Before commencing with the conference call, the company reminds those present that certain statements, which are made, express management's expectations or estimates of future performance and thereby constitute forward-looking information. Forward-looking information is necessarily based on a number of estimates and assumptions that while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties, and contingencies.

Management's formal comments and responses to any questions you might ask may include forward-looking information. Therefore, the company cautions today's participants as 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 like to turn the call over to Teri McKibbon, President, and CEO of Bird Construction.

[Terrance McKibbon, executive]

Thank you, operator, and good morning, everyone. Thanks for joining us on today's second quarter of 2022 Earnings Conference Call. Joining me on today's call is Wayne Gingrich, Chief Financial Officer. Overall, I'm very pleased with our second quarter financial results, given by all measures a challenging operating backdrop. Lingering pandemic-related challenges in the form of permitting delays from issuing agencies and supply chain challenges combined with inflationary pressures and multiple trade labor disruptions in Ontario and British Columbia presented a complex and very fluid operating environment in the second quarter.

Despite the aforementioned challenges, which impacted our top line in the second quarter, we still reported 4% year-over-year revenue growth in Q2. As you can see on slide 6, revenues came in at approximately $577 million in Q2 of 2022, a record for the second quarter, while net income for the period was $14.1 million. In the second quarter, we achieved a favorable settlement on a legacy claim, which amounted to a $7.6 million gain in the quarter. Given this settlement is one-time in nature, we've excluded this from our adjusted financials. As such, on an adjusted basis, we reported adjusted EBITDA of $21.5 million, representing a 3.7% margin, and adjusted earnings of $8.5 million or $0.16 on a per share basis.

Additionally, we reported securements and change orders in the quarter of $421 million. Consequently, our combined backlog remained strong at quarter end with backlog sitting at $2.19 billion and pending backlog at $1.8 billion. Furthermore, our bidding pipeline remains strong across the country.

Turning to slide 7. We reported an adjusted EBITDA margin of 3.7% in the second quarter of '22 and on a trailing 12-month basis, our adjusted margin stood at 4.2%. I'd point out that the SUS recovery impacts of our trailing 12-month EBITDA margin was negligible and that SUS recoveries will no longer impact our trailing 12-month margins on a go-forward basis. Overall, I am pleased with the margin we reported this quarter in light of the significant headwinds we faced over the course of the second quarter. As we have talked about previously, one of our strategic priorities is to achieve a higher overall margin profile, and I believe that the capabilities we've assembled over the past 2 years, particularly with the acquisition of Stuart Olson and Dagmar combined with our focus to undertake an increased level of self-perform work should result in a higher margin profile over time.

As you can see on slide 8, we announced a number of meaningful contract wins during the quarter. During the second quarter, we were awarded 2 5-year MSA contracts for industrial maintenance services and 2 industrial facility turnaround contracts. The total value of the awarded contracts is estimated at approximately $90 million. Furthermore, we were awarded multi-year mining services contract based that the contracted value at approximately $70 million over the term of the contract. As well, we secured a contract for a railway track, signal and station works with Metrolinx for the Kitchener GO corridor expansion project. This contract is valued at approximately $62 million. Building on our nuclear portfolio, we were selected as a proponent for the Port Hope area initiative master construction contract or MCC by Canadian Nuclear oratories. Under the MCC, Bird has the opportunity to bid on work packages covering close to $1 billion of remediation work over the life of this initiative.

Lastly, we were selected to lead the design and construction of a state-of-the-art net zero plant protein processing facility in Alberta. The Progressive design-build contract is valued at approximately $125 million. These contracts build on our extensive portfolio of projects as can be seen on slide 9. Some of these projects include the Okanagan Indian band water system upgrade and Lake City Studios in British Columbia, a bundle of schools and the University of Calgary's MacKimmie Block in Alberta and stage 2 of the confederation line, and a number of multi-residential projects well underway in Ontario. [indiscernible] first project portfolio also leverages our sustainable building solutions for clients, which is apparent in the MacKimmie Block project, which is an innovative and sustainable building and incorporates cutting-edge technology and building analytics to deliver one of the most energy-efficient buildings on a Canadian post-secondary campus. Combined, we are working on over 380 projects with a combined value of $7.3 billion.

Additionally, as shown on slide 10, we have a significant portfolio of master service agreements. These MSAs are with clients under long-term contracts, which provide very good visibility to future revenues. These MSA contracts are within pending backlog and are currently valued at $800 million. We expect to deliver on these contracts over the next 1 to 5 years, which would reduce the $800 million balance within pending backlog over this time frame. Upon renewal of these contracts, our MSA backlog will be replenished, although most of these contracts are not up for renewal for over 3 years. That said, given our long-standing relationship with these clients and strong operational track record, we are well positioned to renew and grow our work program with these clients over time.

Furthermore, we are leveraging our construction, self-perform, and commercial systems capabilities to provide a compelling one-stop-shop offering to clients. Consequently, we are looking to provide existing clients with additional services and new clients with an expanded service offering. As well, we are taking these broadened capabilities to clients to build sustainable projects. We are taking our expertise across Canada to complete major complex projects in the alternative energy and environmental sectors as highlighted on slide 11.

I would point out that we're not new to the alternative energy and environmental sectors as Birds executed a significant number of projects in these sectors over the past number of years. Overall, we are well positioned to deliver innovative and sustainable solutions to plants. Overall, we're striving to position Bird as a leader in sustainable construction, and I encourage everyone to visit our website and download our recently released sustainability report.

Turning to slide 13, we've amassed a solid combined backlog, which sits at almost $4.7 billion at the end of the second quarter. This compared to a combined backlog of $4.6 billion at the end of 2021 and up 7.5% from the same period last year. In all, our backlog and pending backlog provide good visibility over time. I believe that our disciplined project selection, our balanced overall risk profile, and improved visibility to future revenues through recurring revenue contracts has positioned us well in the current high inflationary and post-recessionary economic environment. With that said, we are more cautious for the back half of the year. However, we expect conditions to improve moving into Q4 compared to the first 3 quarters of 2022.

Permitting delays that we've experienced to date may continue for the balance of the year. This would result in certain projects in backlog being deferred until necessary permits are granted and work programs can commence. Furthermore, given our limited exposure to lump sum fixed price contracts a number of clients under collaborative contracts are pausing reviewing and potentially rescoping the projects to fit within existing budgets given the rapid growth in inflation. This has led to additional design and validation work being performed prior to construction commencing.

I believe that Bird is well positioned in the current market environment, given our geographic and end market diversification. Our focus on increased contracting with clients, which has reduced our contractual risk profile, healthy combined backlog, continued focus on cost control, and a strong balance sheet which provides significant financial flexibility. With that, I'll turn it over to Wayne to go over our financial results.

[Wayne Gingrich, executive]

Thank you, Teri, and good morning, everyone. Please turn to slide 14. Despite the challenging economic backdrop, coupled with multiple trade labor disruptions in Ontario and British Columbia during May and June, we reported Q2 2022 revenues of $577 million, reflecting a 3.7% increase year-over-year. The year-over-year increase can primarily be attributed to the acquisition of Dagmar Construction in September of last year.

Additionally, once the permitting challenges and collaborative contracts, and backlog move into construction, revenue growth is expected to accelerate. Gross profit was $43.4 million or 7.5% of revenues. This compares to $49 million or an 8.8% margin in the second quarter of last year. Revenue and gross profits in both quarters were impacted by the pandemic, but in Q2 2021, the company qualified for $7.8 million in SUS recovery to help partially offset the costs incurred by the pandemic.

Although the company's revenues were impacted in the second quarter of 2022 from the pandemic, there was no such cost recovery this quarter. General and administration expenses were $31 million or 5.4% of revenues compared to $30.5 million or 5.5% of revenues in the second quarter of 2021. Adjusted EBITDA for the second quarter 2022 was $21.5 million or 3.7% of construction revenues. This compares to adjusted EBITDA of $30.1 million or 5.4% of revenues in Q2 2021. Adjusted earnings was $8.5 million or $0.16 per share in Q2 2022 versus $15 million or $0.28 per share in the same period last year.

On an unadjusted basis, we reported net income of $14.1 million or $0.26 per share, respectively, compared to $13.6 million or $0.26 per share in Q2 2021. I'd like to highlight that excluded from adjusted earnings is a one-time $7.6 million gain related to a settlement of historical construction billings with the customer. Turning to our year-to-date results. For the 6 months ended June 30, 2022, we reported revenues of $1.1 billion compared to $1 billion for the 6 months ended June 30, 2021. This represents a 5.1% increase year-over-year.

Gross profit was $85.1 million compared to $88.9 million for the comparable period in 2021. General and administrative expenses were $62.3 million for the first half of 2022 versus $60 million in the first half of 2021. I would note that no SUS recoveries were recorded in the current year compared to $18.8 million in SUS recoveries in cost of construction and $1.4 million in compensation costs and G&A in 2021.

Adjusted EBITDA and adjusted earnings were $39.3 million or 3.7% of construction revenues and $15 million or $0.28 per share, respectively, in the first half of 2022. This compares to adjusted EBITDA and adjusted earnings of $51.2 million or 5.1% of construction revenues and $24.1 million or $0.45 per share, respectively, in the first half of last year. Net income and earnings per share were $20.5 million and $0.38 per share, respectively, for the first 6 months of 2022 compared to $23.3 million and $0.39 per share, respectively, in the first half of 2021.

Moving to slide 15. As Teri mentioned earlier, Bird's risk-balanced work program positions the company well in the current economic climate. The bulk of our contracts are comprised of low to medium-risk contracts with roughly 95% of our revenues for the quarter and for full year 2021 in the lower 2 risk categories. These categories, for example, encompass IPD or alliance contracts, stipulated sum or unit price and construction management contracts. Given one of our key priorities has been to reduce the overall risk profile of the company, we have increasingly entered into collaborative contracting methods with our clients to balance the risk transfer between parties. Our diversified and well-balanced contract mix allows us to largely mitigate our exposure to cost increases.

Turning to our financial position on slide 16. We continue to retain a strong balance sheet with significant financial flexibility. During the second quarter, we invested in working capital to support seasonal growth in the business and the company's work program. As a result, we drew down $20 million on a revolving credit facility to fund temporary increases in noncash working capital in excess of available operating cash. Given the seasonality of our business, we fully expect non-cash working capital to reverse later this year, particularly in the fourth quarter, and as a result, expect to repay our revolver and return to an indebtedness position similar to recent quarters.

Owing to our investment in non-cash working capital, we ended the second quarter of 2022 with accessible cash and cash equivalents of $3 million and approximately $116.5 million of available capacity under our committed syndicated credit facility. Our liquidity measures remain well within our comfort levels as at the quarter end. Our adjusted net debt to trailing 12-month EBITDA ratio was 0.95x while our long-term debt-to-equity ratio was 26.7%.

On Slide 17, you can see our capital allocation priorities, which remain the same. We continue to balance our priorities between capital investment in the business, dividends, M&A, and debt repayments. For the second quarter, we generated cash flow from operations before noncash working capital of approximately $29.2 million. We reinvested $8.1 million by way of CapEx in the quarter, while we distributed $5.2 million in dividends to shareholders under our monthly dividend program. As we've talked about previously, M&A will remain a key strategic priority. That said, quantum and timing are hard to predict. However, I believe that we have built a strong foundation that will allow us to opportunistically acquire businesses to further broaden and diversify our capabilities. Overall, I'm very pleased with our financial strength and our ability to capitalize on opportunities, both organic and inorganic as well as our positioning within the Canadian construction industry. With that, I'll turn it back to Teri.

[Terrance McKibbon, executive]

Thanks, Wayne. Overall, I'm very pleased with our Q2 results, all things considered, and I believe we've built a strong business that is able to thrive in all economic environments. Given our long-standing experience in the Canadian construction industry, we're operationally aligned to capitalize on new and emerging opportunities. I believe that the positive backdrop of previously announced federal and provincial infrastructure spending, combined with healthy commodity prices, particularly oil and gas, mining, agriculture, and renewables should provide natural opportunities for Bird over time. As always, we remain disciplined to drive profitable growth and increase long-term shareholder value over time. With that, I'll turn it back to the operator for questions.

[Operator]

[Operator Instructions] The first question comes from Jacob Bout of CIBC World Markets.

[Jacob Bout, analyst]

So in your outlook, you talked about permitting delays and project rescoping. Can you comment on the magnitude of these delays and how long you expect this process to continue for?

[Terrance McKibbon, executive]

Well, certainly, it's difficult because it has a different effect across 350 projects, so the framework of it is projects that are in backlog, we're in a collaborative framework, which is a large part of what we do. Those projects we're working with clients to find solutions because the risk is largely on the client relative to inflation and things like that or it could be supplied shortages or delays, things like that, so we're in a constant interface in this current environment we're in. Then some of the pending backlog that's evolving, where we're faced with this unique marketplace. We're going back and redesigning and projects are still continuing forward, it's just there's some top-line pressure on our revenue because we're getting a delay. It's difficult to put a percentage to that because it's death by 1,000 [indiscernible]. There's a lot of variables that are in play, whether it's a supply challenge or whether it's an inflationary issue, or whether it's a permitting issue type of thing.

[Jacob Bout, analyst]

Okay. And then the net effect here is what? That revenue growth will slow for the back half of the year, even though negative.

[Terrance McKibbon, executive]

I think we're expecting to see still pressure on top line revenue through the third quarter. Obviously, we've been working through a number of deliverables on projects and permits and many of those are getting closer to be in the ground, so we have some confidence that by fourth quarter, we'll be through some of this, and we'll have stronger performance in the fourth quarter. It's really what we're thinking at this point based on certainly the near-term lens we have on the environment we're in.

[Jacob Bout, analyst]

Have you seen any projects in backlog canceled?

[Terrance McKibbon, executive]

We're seeing some small projects more in the retail. In some of our smaller markets, we do some retail work and that kind of thing and some of those have been canceled. They don't really move the needle in terms of top-line or bottom-line performance. Is there anything that's been canceled? There isn't anything to my knowledge. We had one of a couple of quarters ago that got canceled and they got -- we're back talking to that client again, so there really isn't anything that comes to mind that at this point, where our client has canceled it. It's just taking a little longer to come up with different materials, different solutions because of -- and it is the volatile market from one week to the next, it could be one commodity this week, and we get through that and then we got a new one to deal with. It's a difficult environment overall, but yes, nothing that's of any significance that's been canceled.

[Jacob Bout, analyst]

Then just finally, organic growth in revenue and backlog, once you strip out the impact of M&A, say, like Dagmar?

[Wayne Gingrich, executive]

Yes, so year-to-date, I think we grew 5.1% in total. Probably half of that is attributable to Dagmar half would be organic and most of that would have been driven in the second quarter. Most of the 3.7% growth would be Dagmar in the second quarter. In the second half, we still expect total revenues, if you compare second half of this year to say second half 2021. We still expect to see mid-single-digit total growth, and that would be inclusive of Dagmar.

[Terrance McKibbon, executive]

We are really excited about Dagmar and the potential for that business as that business evolves, especially in horizontal infrastructure and you see the densification of urban markets and you see the scale of projects that are evolving in rail and most of those projects today are now in underline or NPD or a progressive design-build framework, so they fit within our framework of risk tolerance, so there's some really exciting things happening there that will be more medium to longer term.

[Operator]

The next question comes from Yuri Lynk of Canaccord Genuity.

[Yuri Lynk, analyst]

Teri, I understand it's a pretty fluid macro situation, but do you think backlog ends the year lower than where we sit today?

[Terrance McKibbon, executive]

I don't think so. Yuri, based on the opportunities that are evolving, there's no sign that these opportunities that we're working on, they may not be into backlog and then maybe intending backlog, but combined, I don't see that at this point.

[Wayne Gingrich, executive]

Yes. I think that's right on contracted backlog for sure and I just point out our pending backlog is really made up of 2 things, right? We've got about $800 million of MSAs in there. Those will decline over time because they have multi-year agreements, and we only move them into contracted backlog as we get POs for those. So over time, that $800 million is going to decline until we renew some of those large contracts again in a couple of years, but then the other half of what's in pending backlog are just contracts that have taken a little longer to convert to contracted backlog for some of the reasons we've already talked about, but we do expect a large number of those to come into contracted backlog this year. That's what gives us some confidence on that.

[Yuri Lynk, analyst]

Okay. Just asking because outside of the announced contracts in the quarter, the smaller stuff that you usually book quite a bit of goes on announced, that was as low as I've seen it in a long time, so just wondering if that was just a quarterly thing or if that harkens back just some of your comments on permitting...

[Terrance McKibbon, executive]

Yes, I think it's just a quarterly thing, Yuri. Generally, I think it's just the evolution at times. There is some fluidity to it, so I think it's a quarterly -- it certainly doesn't feel like that way with our various districts and divisions.

[Yuri Lynk, analyst]

Okay. Last one for me. You talked about improving your margins over time. I'm assuming you're talking about EBITDA margins and if so, is it just getting better leverage on your overhead? Or is it also some gross margin improvement as well? Just maybe break that down a little bit further for us.

[Terrance McKibbon, executive]

Yes. It's two things. Certainly, the diversification of the business and the collaboration that we're getting from the business is really impressive to this point. We've been very focused on these areas over the last 3 years, and we're really making some impressive traction, and we've got a multitude of service offerings now where we can go into work with a client on a broad array, and it's not so isolated where we would on medium to larger-size project, we have a very defined discipline. Today, the business has the ability to provide a much broader offering and clients are certainly looking for that solution, and we're seeing good traction. I'd say that the improvement really is coming in those areas. Obviously, discipline to target those markets and not get drawn into some of the lower margin markets that we've historically had has been a big focus and as we grow, obviously, we'll gain on that SG&A overhead levels as our business grows and we get stronger revenue performance.

[Operator]

The next question comes from Frederic Bastien of Raymond James.

[Frederic Bastien, analyst]

I was wondering if you're seeing any green shoes coming out of the traditional oil and gas sector. We've had now a number of consecutive quarters of very healthy WTI price crude prices, so anything that's coming out of that, whether it's new capital growth expectations or where there is increased MRO work?

[Terrance McKibbon, executive]

Yes, I'd say that we're not seeing a lot right now. It's more in the diversified markets of LNG and obviously, longer-term with hydrogen. Stable demand, I think the service offering we provide in MRO is continuing to be an attraction to larger oil and gas clients. I'd say new growth in oil and gas, like obviously, sustainable capital where we could be building a large overpass which we actually just completed for a client in oil sands, and as a component of that, we had extensive hydro transmission lines that our teams from Stuart Olson built and combined with Bird's extensive oil and gas experience and added a significant transportation structure that we self-perform. We're seeing more of that. I think the service offering we provide is much more diversified now for clients and in that regard, you're getting that opportunity, but it's more sustaining capital as opposed to new growth.

[Frederic Bastien, analyst]

You did bring up LNG. Anything that would point you to believe there might be increased activity in the next several years?

[Terrance McKibbon, executive]

Certainly, both coasts, a lot of activity and I think based on where we see that evolving, we see some exciting new opportunities with new projects on both the Atlantic and Pacific Coast of Canada. Those markets continue to seem to forecast long-term demand and we have an outstanding track record working in Kitimat with LG so that is attracting a lot of attention.

[Operator]

The next question comes from Naji Baydoun of iA Capital Markets.

[Naji Baydoun, analyst]

In your disclosures, you quantify how much of your local you expect to convert into revenues for the next year or so. Can you also maybe just help us quantify the better what the non-MSA work programs in pending Backlog could convert into contracted by fall in the next 6 to 12 months?

[Wayne Gingrich, executive]

Yes. I think of the $800 million, probably $160 million, $180 million of that would convert to contracted backlog and be earned in the next 12 months and that would be executed from the figure that's reported in the financial statement.

[Naji Baydoun, analyst]

I was just wondering about the non-MRO work that's intending backlog.

[Wayne Gingrich, executive]

Sorry, the non-MRO. Just doing some quick math in my head. I think in the next 12 months, I think we'll start to see those projects convert more towards the fourth quarter. You're not going to get much this year out of that, but you could easily pick up 150 to 200 next year out of the 900.

[Naji Baydoun, analyst]

Okay. So you're expecting some conversion before year-end and then I will start to really hit the top line next year?

[Wayne Gingrich, executive]

Yes, I think that's fair.

[Naji Baydoun, analyst]

Okay. And just want to go back on the topic of margins. If you strip out the SUS recoveries, margins have increased over time, and they seem to be stabilizing now. Just wondering if you can comment on your run rate expectations going forward of not necessarily where the level of margins will be, but how you can improve them in the coming months or years.

[Wayne Gingrich, executive]

Yes. A couple of thoughts, some things we've been talking about for a while now is just doing more self-perform work and we're starting to see that with our ability to cross-sell some of our services across our businesses and bring more value to our clients if you will. I think when you look at the projects that are in pending backlog, we're pretty happy with the margins that we have in there as well and the contract types that we have, so I think those projects will be accretive to our margin profile today. Some of the projects that we've had permitting delays on, for example, that are in the contracted backlog that we just really haven't been able to make a lot of progress on yet. Those also have very attractive margin profile, so we like the margin profile that's in our contracted and impending backlog.

I also think as you start to see some of these projects come online after permitting delays and those types of things resolve, the cost structure that we have in place in terms of G&A I think it's kind of normalized, so we're going to get some leverage on that because we're carrying the cost structure to be able to deliver those higher revenue streams, so we'll get some leverage there, too. That's certainly going to contribute to improved EBITDA margins as well.

[Naji Baydoun, analyst]

It sounds like just the existing work can get you a little bit higher on where margins are today, but then potential to take on more projects and more revenues could really help accelerate that?

[Wayne Gingrich, executive]

Yes, I think that's fair.

[Operator]

[Operator Instructions] The next question comes from Ian Gillies of Stifel GMP.

[Ian Gillies, analyst]

On the labor side with respect to the unions, it would appear that most of those issues have resolved themselves at that point, but as you look ahead, is there anything notable worth mentioning there that you feel you may need to work through? Or is that a path issue at this point?

[Terrance McKibbon, executive]

Yes, it's a past issue as far as labor, labor, or upcoming labor negotiations really nothing in the near-term horizon. Still a healthy demand for labor, and we expected that to continue for some time, so it's really more of an availability of labor versus a pressure on labor rates.

[Ian Gillies, analyst]

Okay. That's helpful. With respect to G&A costs, I was a bit surprised with where they came in at this quarter given that the integration and restructuring costs have largely moved away from the statement at this point in time. If I look at the last few quarters, is that a reasonable run rate as we look into the back half of the year, or is there any cost savings to be had there?

[Wayne Gingrich, executive]

Yes, we're always looking to get some productivity on our cost structure. I think the run rate we have right now is probably a good indicator going forward as well.

[Operator]

The next question comes from Chris Murray of ATB Capital Markets.

[Chris Murray, analyst]

One of the margin pressures, I guess, was the work stoppage in the quarter. I guess a couple of things to think about here. One, if you think about the next maybe year or so, lots of talk around inflation, I'm sure maybe you want to -- if you could update us a little bit on any other labor negotiations you might keep coming, but in terms of your contracts, if some of those agreements end up with fairly significant cost of living adjustments, can you explain maybe how your contracts are set up to absorb some of those?

[Terrance McKibbon, executive]

Well, certainly, over the last 3 years, but it's really accelerated in the last 18 to 12 months, we've been very focused on collaborative contracts and as we've built a very strong resume in that area, the market has evolved in the sense that the lump sum turnkey kind of delivery in the P3 environment has really moved to more into a collaborative framework, whether it's a progressive design-build, progressive P3s are starting to evolve all of these designed to better balance the risk and alliances and things like that, so we're seeing the market really open up.

But you need to resume for it, and we've been the timing of us and our company focusing on this over the last 3 years has built up a tremendous resume in Canada. So these projects now as they evolve, we have a really nice entry point because we've been largely staying on the fence and not engaging in some of the larger higher risk transfer type projects when you're adding financing to the project delivery. In the collaborative side, obviously, there's cost of living type issues that we would deal with, but most of those are in the rearview mirror with labor negotiations that have been completed and any of the impacts that occur in projects, most of that is absorbed by the client with the framework of the backlog that we have.

[Chris Murray, analyst]

Okay. That's helpful. Then just following on some of the pressures that you felt over the quarter, especially things like permitting delays, things are generally beyond your control, is there any recourse back to some of the project owners for some of these costs, or is there any other way that you can offset them?

[Terrance McKibbon, executive]

It's difficult because you're trying to get underway in construction. Obviously, in the collaborative framework, your owners are compensating you for those delays because you're part of an overall project delivery and if it's taking on or to get permits in a plant, but we also have projects that are small to medium-sized that we're waiting on permitting, and that's putting some pressure on our SG&A and overhead, and you can see it in the quarter.

[Operator]

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

[Terrance McKibbon, executive]

Thank you, everyone, for taking the time to join our second-quarter earnings conference call. I'd like to thank the entire Bird team for their efforts, dedication, and commitment to build safely to build together and to build value for our company, our clients, our communities, and our shareholders. I look forward to updating you with our third quarter results.

[Operator]

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