Bird Construction Inc

TSX:BDT

Earnings Call Transcript 2021-Q3

[Operator]

Welcome, ladies and gentlemen, to the Bird Construction Third 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] 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 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.At this time, I would like to turn the conference over to Teri McKibbon, President and CEO of Bird Construction.

[Terrance Lloyd McKibbon, President, CEO & Director]

Thank you, operator, and good morning, everyone. Thanks for joining us on today's third quarter 2021 earnings conference call. Joining me today on the call is Wayne Gingrich, Chief Financial Officer.I'm pleased to once again report solid financial results for the third quarter of 2021. Over the past 3 years, we've made a concerted effort to grow the business profitably, all while balancing the overall risk profile of the company. A key element of this strategy was to increase collaboration internally, externally with third parties and with our clients. To this end, we have secured a number of projects using a collaborative framework, such as integrated project delivery or alliance partnerships, which create an appropriate balance of risk between a contractor and a client.With our broadened service offering, I believe the strong foundation that we have created combined with our collaborative approach is bearing considerable fruit. This is evidenced by the record securements and change orders we've booked in the quarter, as well as the record revenues, backlog and pending backlog reported this quarter.This quarter also marked the first anniversary of the acquisition of Stuart Olson. We are extremely pleased with the integration, the new team that we now have at our disposal, and how the 2 teams have come together collaboratively to secure and execute projects.Furthermore, during the third quarter, we announced the acquisition of Dagmar Construction. With an 80-plus year history, Dagmar's work program spans structures, roadwork, rail, servicing and other specialty projects. Dagmar has an established track record of long and proven stable revenues, healthy margins and profitability, which is a testament to the company's ability to manage costs and consistently deliver projects on budget. With Dagmar underpinning our infrastructure business, we expect the unified coast to coast infrastructure business with civil infrastructure capabilities to accelerate in the next phase of the company's growth. Overall, I'm excited about Dagmar joining the Bird team. And in the span of 2 months, we have a number of exciting projects in our pipeline.Lastly, on September 9, we held our first ever Investor Day, where we unveiled our new 3-year strategic plan. Our strategic plan is rooted in 3 key pillars: team, perform, and diversify. As such, the plan focuses on the further development of Bird's team, strong project execution and the geographic diversification of service offerings. We believe that the achievement of our strategic objectives in 3 years' time will position Bird as a leader across our industry with world-class safety, high employee engagement, and collaboration across our teams and divisions. If you haven't already done so, you can stream the Investor Day on our website under the Investors section.Turning to Slide 6, the culmination of our efforts resulted in strong third quarter 2021 financial results. In fact, revenues for the third quarter were at an all-time high, up 80% year-over-year. Once again, the combined Bird-Stuart Olson entity yielded top line synergies this quarter, adjusted EBITDA increased 30% and adjusted earnings were up 12%. Additionally, as I indicated previously, we reported record securements and change orders of CAD 740 million in the quarter. This drove our backlog to a new high as at September 30.As we look into the remainder of the year and into next year, our bid pipeline remains robust, giving us continued confidence in the near to medium term prospects for the company.As you can see on Slide 7, we reported an adjusted EBITDA margin of 4.6% in the third quarter 2021, and on a trailing 12-month basis, our adjusted EBITDA margin stood at 5.5%. Overall, Stuart Olson has been accretive since the date of acquisition. That said, as we have discussed on previous conference calls, the inclusion of Stuart Olson will weigh on our near-term margin profile. However, embedded within our 3-year strategic plan is our pursuit to achieve a higher margin profile over time as we leverage our combined expertise with our clients from coast to coast, which will continue to present cross-selling opportunities as well as undertaking an increased level of self-perform work.Moving to Slide 8, we announced that we negotiated a construction services contract with the international real estate firm Hines for a mixed-use project in the heart of Toronto. The project is a 17-story mixed use building that will be constructed by leveraging green building practices with sustainable solutions.Additionally, we announced that the consortium, Concert-Bird Partners, was awarded a Design, Build, Finance and Maintain contract for 5 Alberta high schools with the Alberta government under a P3 model. The project has a total combined contract value in excess of CAD 300 million and is part of Alberta's recovery plan to create jobs and diversify the economy.Additionally, we announced a number of high-profile awards subject to quarter-end that were added to pending backlog. Specifically, we were awarded the first phase of a progressive design, build with early collaborative contract involvement for OPG's Clarington Corporate Campus Project. The project is divided into 3 phases to reflect the design's progressive nature, ensure the cost estimate, schedule forecast and project planning are sufficiently advanced before construction. Construction is expected to begin in 2022 with completion in 2024.We also announced that we will participate in 3 integrated project delivery contracts or IPD contracts in Western Canada with a combined value in excess of CAD 150 million. These contracts include a substantial food and beverage facility expansion project, the Okanagan Indian Band water system upgrade and the North Okanagan Wastewater Recovery Project.Lastly, we entered into an alliance agreement with the renewable energy company, Noventa Energy Partners, to jointly pursue opportunities for waste energy transfer projects across Canada with Bird acting as the exclusive constructor. The current addressable market is estimated at over CAD 500 million. The alliance relationship between Bird and Noventa commences with a successful financial close of the recently announced Toronto Western Hospital, WET project that is valued at approximately CAD 43 million.The awards that were added depending backlog embody the philosophy that we are pursuing as part of our new 3-year strategic plan, which is to work collaboratively. Additionally, given our positioning in green building techniques, such as mass timber and stack, I am confident we will continue to win mandates where we're able to help our clients achieve their climate goals.These contract awards drove our backlog and pending backlog to an all-time high, as shown on Slide 9. At the end of Q3, our backlog stood at CAD 2.8 billion, while pending backlog amounted to CAD 1.8 billion. Overall, I am pleased with our financial and operational progress.With Stuart Olson having been part of the Bird team for a year now, we are extremely pleased with how accretive Stuart Olson has been to-date. The combined Bird-Stuart Olson entity has continued to yield revenue synergies, as evidenced by benefits from cross-selling, the combined capabilities of Stuart Olson and Bird. Additionally, with Dagmar now part of the Bird team, we expect to deliver even greater value proposition to our clients. And from a macro perspective, as we continue to emerge from the pandemic, we continue to see opportunities surface with the sustained improvement in natural resource prices, which is notably improving the business prospects in Alberta as well as the significant planned infrastructure spending announced by the federal and individual provincial governments.With that, I'd like to turn the call over to Wayne to go over our financial results.

[Wayne R. Gingrich, Chief Financial Officer]

Thanks, Terry, and good morning, everyone. Please turn to Slide 10. I'm pleased with our third quarter 2021 financial results. We reported record revenues, backlog and pending backlog for the quarter. In the third quarter, we generated construction revenues of CAD 621 million, representing an 80% increase compared to the third quarter of 2020. The year-over-year increase can be largely attributed to the inclusion of Stuart Olson. Additionally, despite the recent fourth wave of the COVID-19 pandemic, the company observed increases in revenues across all of its work programs this quarter as the market continues to recover to pre-pandemic levels.Gross profit for the third quarter was CAD 46 million or 7.5% of revenues. This compares to gross profit of CAD 27 million and a gross profit margin of 7.9% in Q3 2020. The year-over-year increase in gross profit can be primarily attributed to the inclusion of Stewart Golson, as well as the diversification of the company's work programs, particularly in the company's self-perform industrial projects. I would note that the company recorded a recovery of CAD 2.5 million of compensation expense in cost of construction for the Canadian emergency wage subsidy or CEWS program in Q3 2020. No such recovery was recorded in the cost of construction this quarter.As Terry indicated, going forward, we will be facing challenging year-over-year margin comparisons. This is a result of qualifying for the CEWS program in the back half of 2020, in the first half of 2021, which positively impacted our margin percentages. Given we no longer expect to qualify for the CEWS program, all else equal, our margin percentages will decline in comparison to prior year comparable periods.General and administrative expenses for Q3 came in at CAD 30 million or 4.8% of revenues. This was CAD 12 million higher than the CAD 18 million or 5.1% of revenues reported in Q3 2020. Again, the primary reason for the year-over-year increase is related to the addition of Stuart Olson.Q3 2021 adjusted EBITDA amounted to CAD 29 million or 4.6% of revenues. This compares to CAD 22 million or 6.4% of revenues in Q3 2020. As Terry mentioned, the inclusion of Stuart Olson will weigh on our near-term margin profile. However, we are confident we are building a business that can support a higher-margin profile over the medium to long term.Adjusted earnings was CAD 14 million or CAD 0.26 per share in the third quarter of 2021 compared to CAD 12 million or CAD 0.29 per share in Q3 2020.Turning to our year-to-date results. Construction revenues were CAD 1.6 billion year-to-date 2021. This compares to CAD 949 million for the first 9 months of 2020. The 71% year-over-year increase can be largely attributed to the acquisition of Stuart Olson. I would highlight that revenues year-to-date 2021 were unfavorably impacted by approximately CAD 116 million due to the pandemic, noting that the entire impact was felt within the first 2 quarters of 2021.Gross profit year-to-date was CAD 135 million, representing a 109% increase compared to the comparable period in 2020, while G&A expenses increased 96% to CAD 90 million. Adjusted EBITDA year-to-date 2021 was CAD 80 million, representing a 4.9% margin. Adjusted EBITDA for the comparable period in 2020 was CAD 42 million or 4.4% of revenues. Adjusted earnings year-to-date was CAD 38 million or CAD 0.71 per share. This compares to CAD 20 million or CAD 0.47 per share for the first 3 quarters of 2020.Similar to what drove our Q3 results, the year-over-year improvement in our year-to-date 2021 results was driven by the combination of additional margin for the acquisition of Stuart Olson, which includes synergies as well as progress with diversifying our work program and improving profitability margins in our operations. We have a strong and balanced work program in place across the country.Before moving on, as Terry pointed out, our backlog and pending backlog stood at an all-time high as at quarter-end. I'd like to point out that our pending backlog includes over CAD 900 million of MSA contracts as at September 30, 2021. These contracts are typically with industrial clients that spend multiple years for MRO services. We expect to convert these MSAs to backlog on a quarterly basis as purchase orders are received. Overall, these MSA contracts represent a recurring revenue stream over the next 1 to 5 years, providing us excellent revenue and profit visibility.As always, we are diligently focused on appropriately balancing the risk profile of our backlog through end market diversification and contracting methods. I believe that the current composition of our backlog and pending backlog for that matter, appropriately balances customer concentration, contract size, contracting method and end market diversification.Moving to Slide 11. I'd like to quickly touch on the progress we've made to-date with the integration of Stuart Olson. Overall, we're on-track with our previously stated objectives. This includes CAD 10 million in annualized EBITDA synergies that we expect will be realized as we finish out the year. Additionally, we expect to realize further cost savings over the next couple of years as we integrate both companies into 1 unified IT platform.On September 1, 2021, we acquired Dagmar Construction. As you can see on Slide 12, the purchase price of the transaction was CAD 32 million before working capital adjustments. The transaction was financed 80% with debt and the balance coming from Bird treasury shares issued to the 7 principal vendor shareholders.On Slide 13, you can see Dagmar clients and work programs are well diversified across work type, with no one sector making up more than 30% of overall revenues. In addition, the company boasts a well-respected and long-standing clientele list, including Canadian National Railway, Canadian Pacific Railway, Metrolinx, municipal and governmental bodies in addition to others. Overall, Dagmar will allow us to increase our self-perform capabilities in the high-growth civil infrastructure sector and drive higher margins for the consolidated company. Furthermore, with deadline in the mix, we expect to continue to see cross-selling opportunities emerge as we can leverage our broader service offerings.Moving to Slide 14. We continue to retain a strong balance sheet, which provides significant financial flexibility. During the quarter, and announced concurrent with the acquisition of Dagmar, we expanded our syndicated credit facility to CAD 235 million from CAD 200 million and retained a CAD 50 million accordion feature. We further extended the term of the credit facility to September 1, 2024. The expansion and extension of the credit facility speaks to the strength of the relationships we have with our lenders and their confidence in Bird and the strategic direction we're taking the company.Overall, as at quarter-end, accessible cash was CAD 75 million, a CAD 72 million improvement from the end of Q2 2021, while adjusted net debt stands at CAD 11 million. Our adjusted net debt to trailing 12-month adjusted EBITDA ratio is a very healthy 0.09x at September 30, 2021. All financial metrics are well within our comfort level at the end of the quarter.Turning to Slide 15. We continue to balance our capital allocation priorities between organic opportunities, dividends, M&A and debt repayments. In the first 9 months of 2021, we generated cash flow from operations before noncash working capital of approximately CAD 77 million. Our capital investment has remained modest in 2021 as we deployed CAD 6 million toward CapEx year-to-date. As always, we remain committed to returning excess capital to shareholders via our monthly dividend payment. We paid cash dividends of CAD 16 million year-to-date 2021.As it relates to our M&A strategy, as always, we will remain disciplined and opportunistic. And overall, I'm very pleased with our financial strength and our positioning within the Canadian construction industry, which will allow us to capitalize on anticipated strong economic growth, coupled with the backdrop of higher commodity prices.With that, I'll turn it back to Terry.

[Terrance Lloyd McKibbon, President, CEO & Director]

Turning to Slide 16. I continue to believe that Bird has built a strong platform for future growth and strong profitability. We've made tremendous strides over the past few years as our employees have embraced change and built a solid and stable business despite the challenges that pandemic has presented to-date. This strong foundation has allowed us to capitalize on a robust pipeline as we're seeing cross-selling opportunities to continue to emerge through the collaboration of Bird and Stuart Olson.While it is early days with the integration of Dagmar, we are excited about the growth prospects it provides in the civil infrastructure market and, to-date, we are seeing opportunities evolving. Both acquisitions are acting as catalysts for Bird to grow and diversify, all while maintaining a balanced risk profile in our work program.As we embark on our new 3-year strategic plan, which takes us to the end of 2024, we're focused on strengthening our team, delivering solid operational and financial performance and continuing to diversify our business. I believe these priorities will set us up for success for years to come, which will ultimately allow us to build shareholder value over the longer term.With that, I would like to turn the call back to the operator for questions.

[Operator]

[Operator Instructions] Our first question comes from Frederic Bastien of Raymond James.

[Frederic Bastien, MD & Equity Research Analyst]

I was wondering if you could add a bit more color on the opportunity that you see in Dagmar. Obviously, it seems like a pretty strategic move, lots of opportunities in the Ontario transit market. So is there any additional color you can provide here?

[Terrance Lloyd McKibbon, President, CEO & Director]

Well, certainly, it has 80 years of history, tremendous track record in safety and consistent performance. It's got a really exciting team that we're working with and getting to know a little better. And most importantly, it's a group of leaders that, obviously, with Bird, feel larger scale, enables them to look at projects collaboratively with the Bird infrastructure teams and grow. And that, at times, takes us beyond even the pure infrastructure side of the business where you might be doing a larger site development for a list of preferred clients that now get introduced to Bird as well with the balance of Bird services. So it's a very diversified group, and we're really excited, especially after the first couple of months, a number of really unique projects that we feel are very strategic that are in the pipeline.

[Frederic Bastien, MD & Equity Research Analyst]

Is their business -- I would anticipate that their business is a bit more seasonal than the overall Bird company. Is that a fair assessment?

[Terrance Lloyd McKibbon, President, CEO & Director]

Yes, and to a certain extent. There's a bit more seasonality to it. And again, it depends on the mix of work. Obviously, if you're doing grading and that kind of thing, you can't really do much of that with frost. But they'll do like deep underground type utilities and things like that, that you usually proceed and some of the structural work that they do would proceed if you're into a schedule that requires that. And they're obviously very adept to working in Canada's winter conditions. So -- but you're right, there is certainly -- it does come off a bit and not dissimilar to some of the other areas of business that we have.

[Frederic Bastien, MD & Equity Research Analyst]

Well, last question for me. I mean, your margins held up quite nicely during COVID, and they're on an upward trend, obviously, factoring the Stuart Olson acquisition and its own margin profile. But generally speaking, we've seen a nice upward trend. How many more levers can you pull to continue driving profitability higher?

[Terrance Lloyd McKibbon, President, CEO & Director]

Well, I think we're certainly excited about the growth of collateral platforms. And I think in comparison to other forms of contracts where you're not in that framework, A, it gives you the consistency. But most importantly, what's most exciting about collateral -- commercial platform like IPD or alliance contracts is you're working very, very closely with the client from day 1. And you break it down, any stakeholder issues, and that can give you grief in terms of delays and permit approvals and utility, relocations, things like that. So you're well, well into that long before you get to construction. So anytime a contractor can have that type of front-end development before you hit the ground, it's pretty exciting. So we got a lot of that, and we're quite excited about that because it just gives you a much more consistent performance in your business.So I think more of that platform we see evolve, and it's evolving at quite a clip right now. There's more levers there to obviously move the balance of the mix of work and the mix of backlog, and it will trend higher just because you've got a much different service offering that clients are prepared to pay more for.

[Operator]

Our next question comes from Michael Tupholme of TD Securities.

[Michael Tupholme, Research Analyst]

First question is around the backlog. Obviously, a very strong record level. Just curious, is the -- what does the duration of the backlog look like? And has that changed at all relative to what the durations historically looked like for Bird?

[Terrance Lloyd McKibbon, President, CEO & Director]

I think the duration is similar. I think we've disclosed in the next 12 months, about 62% of our backlog will be recognized in revenue and plus or minus, we've been in that 59% to 63% range, I think, in recent quarters. The 1 piece that goes out longer is, of course, those MRO, MSAs that we have, but those actually aren't recorded in our backlog. Those are in our pending backlog until we get those POs that allow us to do the work in the short term. So some of the longer-term items are actually pending backlog, not backlog.

[Michael Tupholme, Research Analyst]

Okay. That's helpful. And then next, I was going to ask you about pending backlog next. So that's also at a record level, I believe, very strong. How do we think about the conversion of that pending backlog into sort of firm or hard backlog?

[Terrance Lloyd McKibbon, President, CEO & Director]

Yes. So what we've kind of been saying is that we've got -- the CAD 1.8 billion that's there, we've got CAD 900 million, that these MSAs for MRO contracts, and those typically stand 1 to 5 years. So if you even just straight-line that, you're just under CAD 200 million a year if you kind of think of it that way and a simplistic view, I guess. And if you look at the other CAD 900 million, typically, those are projects that we would expect to convert into backlog in the next 12 months. And again, typically, if we're looking at bringing in roughly 62% of projects of backlog into revenue in the next 12 months, probably a similar way to think about it in terms of that other CAD 900 million. But those will convert like some of the ones in there are IPD projects, and you have to go through that validation phase before you can really finalize what the scope and the contractual price is going to be. So they do stay in pending backlog a little bit longer than some of the other contracting methods we have.

[Michael Tupholme, Research Analyst]

Okay. And what's the status of the nuclear project that's been -- that was in pending backlog for a period of time?

[Terrance Lloyd McKibbon, President, CEO & Director]

Yes. I think with that, we're getting very close to finalizing the validation phase with the clients. And we're pretty confident we'll see that convert in the near term.

[Michael Tupholme, Research Analyst]

Okay. And then just sort of shifting over to some of the commentary you've made about expecting -- or expecting organic growth in 2022 on a year-over-year basis. I'm wondering if you can -- if it's possible to elaborate a little bit on what your expectations are, how you see the year unfolding as far as any kind of progression in organic growth, et cetera?

[Wayne R. Gingrich, Chief Financial Officer]

Yes. I mean, we don't give specific guidance in terms of what our outlook is going to be in terms of revenue or profit, as you know. But Q3 was a very strong benchmark for us. And what we said is that CAD 116 million of pandemic impact, that really impacted the first 6 months of the year. So if you kind of take Q3 as -- that's really the first quarter with the combined Stuart Olson and only 1 month of Dagmar Construction in there, but with the combination of Stuart Olson and Bird, without a lot of impacts from the pandemic. So that can give you a good baseline for a starting point when you think about us growing organically next year.

[Michael Tupholme, Research Analyst]

Okay. And then lastly for me, can you help with how we should be thinking about changes in noncash working capital in the fourth quarter? Where that leaves you for the year? And then how we think about that for next year as well, please?

[Wayne R. Gingrich, Chief Financial Officer]

Yes. I think the seasonality that you've seen in Bird is similar to what you're going to see this year. I think Q4 will still be a strong cash generation quarter for us. So you'll see noncash working capital start to decline, particularly as you get into December. I'd say Q3, we had a really high proportion of self-perform work. And typically, those types of contracts have longer payment terms as well. So it may be a little bit different this quarter is, instead of all of that noncash working capital converting to cash in Q4, you may see some of that slip into January. But I think Q4 will still be pretty strong from that perspective. And then looking ahead to Q1, there won't be that much self-perform work performed in Q1 as it would be in the summer months, of course. So I think you'll see pretty low investment in working capital there.

[Michael Tupholme, Research Analyst]

Okay. So just on a full year basis for 2021, I get that you expect to see some of that come back in the fourth quarter. But where does that leave you, do you think, for the year? Are you -- what you have invested, notwithstanding the reversals you're expecting in the year?

[Wayne R. Gingrich, Chief Financial Officer]

Yes. I think we'll generate positive free cash flow for the year. I think year-to-date, we're probably have a negative CAD 27 million, CAD 28 million somewhere in there, but I think we'll generate positive free cash flow for the year.

[Operator]

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

[Maxim Sytchev, MD & AEC]

Terrance, maybe the first question going back to Dagmar. Do you mind maybe just providing a bit of color in terms of kind of a typical project that they can do and then the hope in terms of where you can bring it in terms of size and obviously, the risk profile kind of on a -- in a couple of years' time frame with Bird's capability?

[Terrance Lloyd McKibbon, President, CEO & Director]

Well, certainly, with a company with that kind of history in a market like Toronto, there really is a number of different sectors. They are evolving. If you think of the growth of light rail and heavy rail, that's an area that have a very strong track record and certainly a very close relationship with their larger clients for that type of work, and we're excited about that. We're excited about that growth. As you know, some of these projects are certainly increasingly complex where you're building rail, you're relocating rail, you're building, in some cases, rail stations to support that of which Bird is a good resume. And then you've also got, in some cases, you're building mixed-use facilities on top of rail platform. So when you think about that type of delivery, obviously, done the fairway for us with all the different capabilities we have.Now you go into a broader array of business, whether it's growing in commercial retail development, which typically have scale, some of the larger warehouse type facilities, whether that's the Amazon, those types of things, you just offer the client a much broader array of delivery of which these types of clients have a very high expectation in standards of being on time. So you give them that assurance with the self-performing capabilities.And then you start to get into some of the other areas that are growing in Canada, such as even things like as we acquired Dagmar, they had pretty impressive track record on larger data centers. And that's quite an interesting sector that's evolving for us. Because when you think of Bird, and just to give you a data point on a company like Bird and as it evolves, as we ran through 2021, and we certainly weren't running at peak levels. We employ in order of magnitude of 2,000 electricians. So you start to think about the capabilities and you grow and with that's renewable power, whether that's data centers, whether that's Canada is becoming a hub for Bitcoin mining. You get all these areas and all of these types of projects in an integrated fashion than Dagmar brings that resume in those projects, which is quite exciting for us. So I touched on a few. There's probably many more, but those are areas that I think are front burner in terms of exciting opportunities.

[Maxim Sytchev, MD & AEC]

Right. And I guess just to kind of separate the available kind of structure of opportunities. In terms of -- like, for example, like Dagmar would not be doing alone sort of an LRT project. I mean, that's outside of their scope. But I guess, in time --

[Terrance Lloyd McKibbon, President, CEO & Director]

Correct.

[Maxim Sytchev, MD & AEC]

-- the idea is to bring it up to that level, right?

[Terrance Lloyd McKibbon, President, CEO & Director]

Yes. That type of thing would be in a collaborative delivery. We've looked at a couple. We're seeing some of those move now to a collaborative sort of alliance model. And we've looked at a couple -- like Birds expertise in that area is on the station side. Dagmar's expertise is grading in rail and in that integration, and that's where their expertise. So it fits together quite nicely with us. So and if you roll the clock back a couple of years, like we're building stations for Kiewit, VINCI right now in Ottawa on the Phase 2 of confederation line, and that we would have a broader service offering to be part of that team with a company like Dagmar in the mix. But as well, and there's more of those that are evolving. And what we like about the model is changing on those to a certain extent. And so we've been invited on a few of those to-date. We haven't engaged in one yet, but we -- early days for us and only having a couple of months on the integration of AgMar. But there's a mix of stuff evolving. There's rail and station work for Metrolinx. It's evolving a number of projects with a collaborative type model that fit together quite well with our offering. And so early days, but we're quite excited. And mostly, the team that we've inherited with this acquisition is really impressive.

[Terrance Lloyd McKibbon, President, CEO & Director]

Super helpful. And just my second question pertains to the better commodity backdrop on oil. And I guess mining in general, was wondering how you view this as an opportunity for your kind of legacy Stuart Olson businesses and some of the heavy.

[Terrance Lloyd McKibbon, President, CEO & Director]

Yes. No, it's -- and the Bird business as well, because rising tide rises all boats in the oil side, and it strengthens the Alberta economy and the Bird civil and industrial business, opportunities are evolving because stronger cash flow for those clients means more investment in sustaining capital on their projects and stronger oil price, obviously, is a catalyst for that. So we're seeing more opportunities. And we're also seeing the approach to ESG, which anytime you've got something like the evolution of EHG for companies that need to improve their overall footprint that's disruptive and it creates opportunities for us because we have a fairly impressive service offering to present, whether that's a mass timber facility, whether you can look at a number of different areas, but mass timber, for example, is certainly accelerating in Canada with a number of opportunities and where -- that's right down the fairway for us with what we're up to.

[Maxim Sytchev, MD & AEC]

Right. Okay. And anything on the mining side, Terry?

[Terrance Lloyd McKibbon, President, CEO & Director]

Yes. Mining is -- I think there's -- we're seeing opportunities start to evolve, still a little bit early. We've been pricing budgetary interface with some of the larger guys currently. It's a little -- I'm finding a little slower to evolve, and it may just be that they're being a bit more careful and focused on strengthening their balance sheets at this point after some tough years. But we're seeing -- it's early days, but we're seeing some good signs there that there's growth opportunities and new mines getting through the permitting phase and starting to engage with us. And obviously, lots of news about BHP on the potash side. So that's another mega project for Canada. It's quite exciting, and we certainly have an impressive track record coming off of our work to date at LNG.

[Operator]

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

[Ian Brooks Gillies]

WITH respect to the goal of doing more self-perform work to help drive margins, are you able to articulate how much of you think you can do organically, i.e., either by hiring people just building out businesses yourself and what you think need to be done through acquisition?

[Terrance Lloyd McKibbon, President, CEO & Director]

Well, I think it's a mix. I would see an acquisition like Dagmar gives us an acceleration of organic growth because you're buying a construction team and a resume and that experience. So that's certainly a catalyst to help us grow. I think Bird, as a company, was historically very focused on work in Northern Alberta and predominantly in oil and gas, and we've moved that focus to become considerably more diversified in a number of different sectors.And in the same breath, on our vertical building side, we're focusing on an increased amount of self-perform in that group as well, and we're using the collaborative ability for from the industrial side to infrastructure try to complement that. So if you think of Bird, as it moves forward, very collaborative organization. And I think the geographic footprint that exists today is considerably larger than it was in terms of focal point a few years ago in that regard.And to a certain extent, we're following our clients. Our clients are obviously -- many of our clients have a national platform, and that continues to evolve. So a company like Denmark and just having that resume and having the leadership team that has experienced in some of these areas, coupled with our existing teams. It just gives you a catalyst to add and focus on areas where we're interested in finding new organic opportunities.

[Ian Brooks Gillies]

Understood. And then to follow-on on the M&A side. Stuart Olson looks to, by and large, be integrated at this point. It looks like it's been quite successful. You've also done a smaller acquisition, Dagmar. But as you move ahead, is there appetite to do another large acquisition yet? Or do you still think you have a bit more wood to chop there on -- just on the integration side, just maybe even getting people sell and all that sort of stuff?

[Terrance Lloyd McKibbon, President, CEO & Director]

I think -- and really, as these acquisitions, obviously, are centered around timing, and sometimes the timing works for and sometimes it doesn't. So I wouldn't say in that we have a focal point right now in terms of what's the next in terms of the scale of the next target, whether it's small or large, we're -- we will be opportunistic. We have tremendous support from our Board, and we like the mix of what we've got right now and something evolves that looks interesting for us to take the next step in terms of diversification and could be a nice catalyst for us. We'll be there. So we've got a very experienced team in terms of evaluating M&A opportunities. We get a ton of stuff coming through our office to think about. And so we have -- we're looking at those types of opportunities. But they have to be the right opportunity and the right timing and fit with what our strategic plan is.

[Operator]

Our next question comes from Michael Tupholme with TD Securities.

[Michael Tupholme, Research Analyst]

I just wanted to ask you about wage inflationary pressures. To what extent you're seeing those in the business and how you're managing through that?

[Terrance Lloyd McKibbon, President, CEO & Director]

So it's certainly something that is out there. Typically, we have multiyear agreements with our trades and the timing of those multiyear agreements are not sequential. They overlap in that sense at different times and whatnot across the country. And we have a mixed labor force of unionized labor and nonunion labor and black labor. So we have a multitude of things. We have our own labor association. In fact, in one of our companies where we have 1,000 people to go to work every day in their own association, which is similar to any of the other unions. So -- and I'll say this. In the past 15 years, what I found with the leaders of the larger unions is that end of the day, they're businessmen. And they enter into multiyear contracts with us, knowing that we have to be healthy and they have to be healthy. And I'll say this in the last 15 years, they've always been, I would call them quite fair.So are we anticipating some pressure there? Potentially. But it's not going to be something that has a material impact on us because there's that longer-term view, and Bird's been in business for 100 years, and I think our union leaders today, it wasn't always that way. But in the last 15 years, in my experience, I've seen them take the higher ground as business leaders and realize that we're going to go through fluctuations, and we're going to be fair. And as such, they have to be fair and they have to think of us being healthy, just like we think of them being healthy. And our relationships with those larger union leaders is very strong. So I think there is a potential for some pressure, but I honestly don't think at this point, it will be a material impact for us.

[Michael Tupholme, Research Analyst]

Okay. And that's very helpful. And labor availability, is that something that's something you're having to watch a little more closely right now as well?

[Terrance Lloyd McKibbon, President, CEO & Director]

Yes, there's pressure, no question. I think -- and some of it's an adjustment. Some of it's the late -- certainly some labor has left the workforce to focus in other areas that, quite honestly, wouldn't be as lucrative, but some of that will return as things strengthen. Some of it is when we were -- if you go back 6, 7 years, when things were really strong in oil and gas and energy, you'd be moving 100,000 people a week out of Atlantic Canada. Currently, that's not currently happening because the demand hasn't reached that point yet. And obviously, there's obviously costs involved or that type of thing. So we're not close to that at this point. But we are -- when you get these large turnarounds that go on in these large sites and some of them have been larger in scale recently than anticipated, which puts a bit of pressure there. And if they all hit at the same time and then you've got some big mega projects that are hitting peaks, there can be some tightness, but it takes a little bit of time for that to adjust. And then also you're broadening your reach a bit further. Most of the large work we've been doing to-date with where we have large labor workforces outside of Ontario have been in Alberta and BC and the labor to support that is coming from Alberta to BC, not from other parts of Canada at this point.So as things strengthen, I think there'll be a broader flow. We're also looking at -- we've got some pretty exciting programs for increasing content from indigenous communities, increasing the content of our labor force with women entering the construction industry because it's a great way to start your career, pay off some university debt, that type of thing. So we're seeing certainly good traction in those areas as well, which we're quite excited about from a diversification or a diversity perspective.

[Michael Tupholme, Research Analyst]

Okay. And then maybe somewhat related to this line of questioning. On the subject of, I guess, escalating material costs and then also supply chain issues, which many companies are facing issues on that front. It certainly didn't seem like there's any issues occurring in your business in the third quarter's results. I'm just wondering if you can comment on how you're protecting yourselves and managing through higher material costs? And then also whether or not you foresee any supply chain issues affecting any of your projects or opportunities and maybe not necessarily material is that that you use, but maybe certain, whether it's electronics or things of that nature that are coming by imports, if there's any issues kind of on that front that's having any kind of impact on project activity?

[Terrance Lloyd McKibbon, President, CEO & Director]

First of all, we have a very high percentage of our backlog in a collaborative nature. So we're able to certainly work with clients in terms of appropriate strategies to manage through that. And in some cases, you'll have a scenario where you're concerned about a future escalation in material and you're working with your client and you decide to lock that in, and you might even lock it in and have it delivered and have it stored. And that's what a collaborative contract allows you to do is that kind of really strong common sense that you've got that capability. And if you're working for some of your -- some of the clients we have, they have storage facilities because they're larger governments and things like that. So we can do that type of thing in that regard.I think the experience we have in our teams as we've been evolving through the COVID pandemic, where we've been quite careful in terms of the risk of escalation on some of our projects, and we've been careful to ensure we've got adequate contingency and address it in that regard. So I think in that regard, we're -- and we study this quite carefully as we look month-to-month, quarter-to-quarter. So we're comfortable with where we are at this point in time. The P3 can't control and some scenarios might be delivery, not so much the cost. It's just the actual delivery itself. But that seems, to me, that seems like something that will smooth out in 3 to 6 months in delivery systems and channels will improve that get through some of this -- some of these delays. We've had a few delays on a few things that we've been doing, but we find ways to work around that. Our modular business, obviously, is a business that requires considerable logistics and shipping. And so we have a pretty good sense on a day-to-day basis, what's happening in some of the Asian ports and that type of thing with shipping channels. So obviously, we're working through those types of bottlenecks and there's things we can do to either address that as well.So I think as we close and talk about our current quarter and talk about our future quarters based on our lens at this point, we're feeling reasonable about what's ahead, and I think we've done a nice job in balancing risk as we should be doing.

[Operator]

Our next question comes from Gabriel Moreau of iA Capital Markets.

[Gabriel Moreau]

In September, you announced a CAD 300 million contract for 5 Alberta high school in the PPP model. In the past, you've expressed some concern about pursuing PPP opportunity. Can you give us more detail about this one?

[Terrance Lloyd McKibbon, President, CEO & Director]

Yes. So these -- so our concern about P3 models, centers around concerns when the stakeholders that are critical to the success of P3 are not aligned with all parties. And certainly, we've had experience where we've entered into P3 and the agency that we've been working for just didn't have their alignment of the various parties that they were anticipated to control, nor did they fully understand that they were -- they were expected to get roll those areas. We're happy to work in a P3 model when the client and the various stakeholders that are involved have a track record of managing that risk and their objectives and their deliverables appropriately. So we've had considerable success. I think this is our fourth piece of 3 program, something like that, in schools, in Western Canada, and we've been very successful. We've had 2 large programs in Ontario for IO, building OPP facilities, and those have gone very well for us. So we've had a great track record but we're very selective. If it's a messy brownfield type site, where the client is trying to offload all the risk, we're going to stay on higher ground.So it's not that we're not against using P3s. We'll use P3s where they're appropriately used with an experienced delivery agency and has a track record of doing things consistently and with the right kind of project. And in some of those projects, you should be working in a more collateral model because no one can control the unknowns and the risks and the framework of that because a lot of it's unknown, especially in a brownfield site.So we're seeing clients shift now and partly because companies like us or not, we're willing to sign up for that risk transfer. And that's happening quite dramatically in the landscape from our lens. So -- and hence, the growth of appropriate -- more appropriate models. And it doesn't mean that in some of our models, it could be a progressive P3, where you're working with the client to finalize the design and then you're putting financing and other roles of maintenance and operations on top of that contract, once you finalize the design and got comfortable with all of the unknowns.So there's -- you're seeing evidence of that type of delivery evolving as well, which we would be happy to work in. I said earlier, any time a contractor can get a design to the point where it's essentially frozen, you understand all the risks and all the -- and you can properly estimate those costs, it's -- any contractors would aspire to be at that level. So it makes it easier and it reduces all those risks. So -- but we're not against P3s in any sense. We're just they need to be used appropriately. And we've had experience over the last 5 years where they weren't. And we're a lot more selective today.

[Operator]

Our next question comes from Troy Sun of Laurentian Bank Securities.

[Troy Sun, Industrials Analyst]

Maybe just a quick question. I'm wondering if Terry, you can make a quick comment on, just looking at your revenue mix today and especially on the part of the contract type exposure and how that compares to 2017. Would it be fair to say that you have achieved a better risk profile in the project portfolio that you're working on? And also, more importantly, on a going-forward basis, should we be expecting sort of a similar composition?

[Terrance Lloyd McKibbon, President, CEO & Director]

Yes, I think so. It's dramatically different from where we were in '17, as I referenced in the previous question around the mix of work we had back in '17. We had a mix of what I would call P3s that were being -- weren't appropriate for P3 delivery. And today, our backlog mix has changed dramatically. The magnitude, I was saying earlier, the magnitude of our backlog that's being delivered in a collaborative framework is very, very high in comparison to -- it's significantly if it's a completely different framework than what we -- where we were in '17. So in that regard, we like this evolution of where we're at. We like the mix of things. We like to build projects that have some complexity and in a higher level of complexity, whether you're building a weapons grade uranium laboratory or whether you're building a complex bitcoin mining facility or a complex egg, you like to use the appropriate contracting framework to do that. And we've been -- clients have been open to that because I think they want the track record, and they want that resume that we're able to provide.

[Troy Sun, Industrials Analyst]

Great. That's very helpful. And maybe just switching gears on to that very recent wastewater partnership that you formed. Obviously, lots of opportunities there. I'm just wondering if you can provide a bit more color on how the company's expertise sort of led you to that award? And more so from the fact that like given your existing headcount, are you comfortable from a headcount perspective to capture incremental market share in that vertical??

[Terrance Lloyd McKibbon, President, CEO & Director]

And I assume you're referring to the Noventa.

[Troy Sun, Industrials Analyst]

Correct.

[Terrance Lloyd McKibbon, President, CEO & Director]

Yes. So we have a team that has experience in that type of thing. And I think the Noventa entity is a company that's been or at least the leadership team there is used to delivering these types of projects in different formats. We certainly have known them, some of our team members have known them for a long time. So in that regard, I think our approach to that and the experience we have, coming out of some, in some cases, some complex, even in an oil and gas facility in Northern Alberta, you come out of some complex areas there with deep undergrounds and dealing with, in some cases, water and things like that, that make it more complex.So in that regard, strong experience, we have the model. Obviously, we've got a resume of working in that type of model. And then expanding that into the broader Canadian landscape today, a very high percentage of the wastewater type projects that are evolving are being -- evolving in IPD. I would say, I'm just thinking about this a lot in the last 18 months or so, every single water treatment project we've been awarded is in an IPD delivery. So that's a great model. And those are municipal governments. Typically, they're using those models, and they like the ability for a company like Bird that works across Canada with different clients and different types of technology solutions to be able to provide that expertise in a collaborative platform. So that's working well for us. So maybe just a quick follow-up on that. Just to capture, say, the incremental share out of that CAD 500 million, telegraph that basket. Do you believe that you have the proper tools and the headcount today to do it organically? Or is there still something that needs to be done?

[Terrance Lloyd McKibbon, President, CEO & Director]

No. We have the tools and the CAD 500 million that's referenced is a list of projects that are in various stages of evolution. So -- and you wouldn't be doing 10 at once, so you'll be doing 2 or 3, incremental at once. It's very suitable to use the teams and move from one phase of the project to the next. So -- and it's -- obviously, if that pace picks up, we're very comfortable in that regard with the -- and some of that experiences come from the acquisition of Stuart Olson as well because we've inherited this very sophisticated group that can do quite some really complex hydroelectric and complex types of project deliveries. So for us, it's getting underway as we speak, and it's an exciting tranche of opportunities.

[Operator]

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

[Terrance Lloyd McKibbon, President, CEO & Director]

Thank you, everyone, for taking the time to join our third quarter earnings conference call. We've -- a very bright future ahead of us as a premier construction and infrastructure company and the potential to create long-term value for all stakeholders. We expect the momentum that we saw in Q3 to continue to build as we remain focused on our collaborative approach and as projects in the economy return to pre-pandemic levels. Furthermore, we have a favorable backdrop with a strong infrastructure stimulated spending and a favorable commodity price environment. As such, we're ideally situated to capitalize on the significant growth opportunities ahead of us. We have a stronger team, a more resilient business model than in the past. And consequently, we have and will continue to position Bird to play a major role in the Canadian construction industry. Thank you.

[Operator]

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