Bird Construction Inc

TSX:BDT

Earnings Call Transcript 2022-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 involves 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. Please go ahead.

[Terrance McKibbon, executive]

Thank you, Operator. Good morning, everyone, and welcome to our third quarter 2022 conference call. Joining me on today's call is Wayne Gingrich, Chief Financial Officer.

Bird's strategy of diversification, disciplined project selection and strong execution, combined with our low leverage and significant liquidity, clearly differentiates the company in today's market. These factors, plus the resiliency of our risk-balanced business model, are reflected in our third quarter results.

Despite the challenging conditions experienced throughout the pandemic, in the first half of 2022, Bird has been able to grow its revenue, deliver improved gross profit and adjusted EBITDA margins and expand its profitable recurring revenue streams. Our efforts to date to diversify and increase our self-performed portfolio of work resulted in strong third quarter 2022 financial results.

Our One Bird team delivered solid revenue growth of 7.6% for the third quarter, with revenues of CAD 668.2 million, a record for the third quarter.

Net income and earnings per share for the period were CAD 14.5 million and CAD 0.27 per share, respectively.

We reported adjusted EBITDA of CAD 31.2 million and adjusted earnings of CAD 15.5 million, or CAD 0.29 on a per share basis.

In the third quarter, we reported securements and change orders of CAD 731.1 million, leading the company to set a new record for our combined backlog and pending backlog as at September 30. Furthermore, the bidding pipeline remains very healthy across the country, and the value of our cross-selling abilities and diverse national service offering is quite apparent.

I am pleased with our third quarter financial results. While we still have some lingering pandemic-related challenges in the form of regional permitting and supply chain delays, we have a renewed sense of optimism that market conditions are beginning to return to prepandemic levels.

We reported an adjusted EBITDA margin of 4.7% for the third quarter of 2022, and on a trailing 12-month basis our adjusted EBITDA margin increased to 4.3%.

Overall, while we are content with this performance as we recover from pandemic conditions, one of our strategic priorities is to achieve a higher overall margin profile, and we expect higher earnings performance over the medium to longer term as we continue to grow the business in our diversified platform. I am confident that the capabilities we have assembled over the past 2 years, particularly with the acquisitions of Stuart Olson and Dagmar, which continue to deliver accretive results, combined with our focus on increased diversification and self-perform work, should result in a higher margin profile over time.

Over the past 5 years, Bird has made a concerted effort to diversify our business by end market and geography, derisk our backlog and build and maintain a strong balance sheet with significant financial flexibility. We are well positioned to achieve continued revenue growth, with active work programs in high-demand sectors and expanding recurring revenue streams, as was announced recently with our multiyear environmental remediation contract. We have minimal exposure to lump-sum turnkey projects, and our revenue and record combined backlog and pending backlog are made up of a diverse mix of collaborative risk-balanced contracts and awards.

Our business model has allowed us to better manage inflationary impacts on our costs of construction, resulting in the steady margins we see today, noting that they do remain a strategic priority to further improve over the coming years. We continue to exercise diligence in our management of G&A costs and expect to get leverage on overhead as volumes increase. The company's focus on higher-margin potential work, disciplined project selection and well-executed work programs is set to bolster our profit margin and bottom line growth to deliver steadily improving results in the future.

Bird is ideally positioned to invest in operations and acquisitions, enabled by our significant financial flexibility and liquidity and notably low leverage and low net debt. Our disciplined approach to capital allocation, including opportunistic and accretive tuck-in acquisitions, and smart investments in technology and productivity measures set the stage for future performance.

Our results today are supported by cross-selling opportunities across the company's diversified service offerings and the accretive performance from recent acquisitions. Bird remains focused on continuing to diversify and grow through M&A. And while the quantum and timing are hard to predict, the goals remain clear: pursuit of tuck-in, specialized or high-margin potential offerings; additional self-perform capabilities; and sound organic growth potential post acquisition.

Bird's environmental, social and governance programs continues to mature in response to business, client and industry demands. Our combined suite of services is strategically aligned to help our clients meet their sustainability goals and serve their energy transition projects. The company's existing culture and internal governance, combined with the work over the past few years to build our long-term ESG strategy, ensures internal readiness for forthcoming disclosure requirements.

We announced a number of meaningful contract wins during the quarter and subsequent to the quarter-end. During the third quarter, we announced key additions to our sustainable energy program, with the award of engineering, procurement and construction contracts for 2 wind farms located in Alberta, which have a combined rated capacity of over 200 megawatts of renewable energy. This work will largely be self-performed by Bird.

We also announced an award of an approximate 200,000-square foot community health center for Covenant Health. This is the first phase of an innovative wellness community planned by the client. The award is valued at approximately CAD 95 million.

Subsequent to quarter-end, we shared 2 announcements for future work with Canadian Nuclear Laboratories. We have received limited notice to proceed on our first multiyear task order for the environmental remediation under the Port Hope Area Initiative. This award expands our recurring revenue streams in the energy sector and positions Bird well for additional long-term work from the approximately CAD 1 billion in remediation work required in and around Port Hope.

We are also very pleased to announce Bird formalized a strategic delivery partnership agreement with the same client. Part of this agreement includes work underway such as the Advanced Nuclear Materials Research Center IPD project Bird was awarded in a joint venture in 2018. In addition to the work outlined today, the strategic partners are in place to manage future opportunities for the client over the longer term.

Overall, our very healthy backlog and ability to acquire new work in competitive markets is positioning us for continued success.

This snapshot of projects showcases Bird's diverse and extensive portfolio of projects across the country as well in a variety of sectors. These projects include the recently completed and primarily self-performed Relay Building for Bruce Power as well as the rapid-build expansions at Kenora Jail and Thunder Bay Correctional Centre in partnership with Stack Modular. We have a growing number of collaborative projects underway, including the Okanagan Indian Band IPD water system upgrade project and the Lloydminster wastewater treatment plant. Lake City Studios in British Columbia and Richmond Yards mixed-use tower in Halifax as well as the York University Campus in Ontario and a bundle of schools in Alberta demonstrate our well-established building capabilities.

Utilities work with our one-pass trenching technology is underway in both Canada and the U.S., and we have recently begun work on 2 wind projects in Alberta.

Our Commercial Systems group provides specialized mechanical, electrical and data system contracting services across Canada and makes up some of Bird's over 200 electricians. We continue to see significant investment in expansion in electrical infrastructure across North America as well in general infrastructure spending.

Overall, we are confident in our sustained pipeline of work from coast to coast, where we're working on over 417 projects with a combined value of over CAD 7.9 billion.

As we have highlighted in the past, we have a significant portfolio of master service agreements and other multiyear service contracts. These MSAs are with clients under long-term contracts which provide very good visibility to future revenues. The recurring contracts are with pending backlog and are currently valued at over CAD 800 million. We expect to deliver on these contracts over the next 1 to 5 years. This may reduce pending backlog over time as work is performed and as increases are dependent on the timing and extent of renewals and new awards.

We recently received notice to proceed on our first multiyear task order for environmental remediation work of nuclear sites, which expands our recurring revenue stream within the energy sector and positions us for future work on one of Canada's largest remediation projects. Bird's power and sustainable energy teams are focused on leveraging Bird's collaborative, innovative and solutions-focused approach to help our clients meet their sustainability goals and deliver their energy transition projects.

I would point out that we are not new to the alternative energy and environmental sectors, as Bird has self-performed a significant number of projects in these sectors over the past number of years and our expertise in major complex projects spans across Canada.

For our buildings teams, the transition to a lower-carbon future presents many opportunities to lever sustainable building solutions, including mass timber and modular, as well as deliver deep energy retrofits, innovative special projects and smart building technology. Overall, Bird is competitively positioned to deliver innovative and sustainable solutions to our clients.

Overall, we're striving to position Bird as a leader in sustainable construction, and I'd encourage everyone to visit our website to learn more in our 2021 sustainability report.

Significant contract awards in the quarter have resulted in a record combined backlog and pending backlog. As of September 30, Bird's backlog and pending backlog was CAD 2.9 billion and CAD 2.1 billion. This compares to its backlog and pending backlog of CAD 3 billion and CAD 1.6 billion at the end of 2021.

In all, our backlog and pending backlog provides good visibility into future revenue and growth. The collective demand for Bird's specialized self-performed capabilities in infrastructure, renewables, agrifood production, nuclear and water/environmental as well as for an institutional construction capability is expected to drive steady growth in 2023 and offset the revenue contributions from the company's LNG Canada Phase 1 work as that phase nears completion.

The company remains focused on pursuing the right opportunities and projects that reflect an appropriate risk balance and align with Bird's combined capabilities across the country.

Regional permitting delays that we've experienced of late may persist. However, we did receive important project permits for a major project in British Columbia to move ahead in Q3, which was promising, and the company has permits for the majority of its near-term work program. Should impacts persist, this could result in certain projects in backlog being deferred until necessary permits are granted and work programs can commence.

Overall, we expect this substantial pipeline of work with a risk profile that largely mimics current revenue and our increasing number of collaborative contracts to uphold the company's strong performance.

With that, I'll turn it over to Wayne to go over our financial results.

[Wayne Gingrich, executive]

Thank you, Teri. Good morning, everyone.

For Q3 2022, we reported revenues of CAD 668.2 million, reflecting a 7.6% increase year-over-year. The increase was driven primarily by organic growth across multiple sectors, which represents over 5% of revenue growth. The remaining increase was driven by the acquisition of Dagmar in September of last year. As Teri mentioned, revenues have been impacted somewhat in Q3 from supply chain and permitting delays, but we're starting to see those issues ease.

Gross profit in the third quarter was CAD 58.6 million, or 8.8% of revenues. This compares to CAD 46.4 million, or a 7.5% margin, in the third quarter of last year. The increased gross profit margin was driven by strong execution across work programs as well as disciplined project selection and contributions from Dagmar for the full quarter.

General and administration expenses were CAD 35.5 million, or 5.3% of revenues, compared to CAD 29.9 million, or 4.8% of revenues, in the third quarter of 2021. This included slightly higher compensation costs, with no CEWS recoveries recorded in the current year, and increases in travel, advertising and pursuit costs as activity increased to more normal levels. Dagmar costs were also included for the full quarter, as opposed to 1 month in 2021. As Q3 2021 was the last period where the company received CEWS recoveries, year-over-year comparisons will become simpler on a go-forward basis.

Adjusted EBITDA for the third quarter 2022 was CAD 31.2 million, or 4.7% of construction revenues, compared to CAD 28.6 million, or 4.6% of revenues, in the same period of 2021.

Adjusted earnings for the quarter was CAD 15.5 million, or CAD 0.29 per share, compared to CAD 13.8 million, or CAD 0.26 per share, in the same period last year.

On an unadjusted basis, we reported net income of CAD 14.5 million, or CAD 0.27 per share, compared to CAD 12.1 million, or CAD 0.23 per share, in Q3 2021.

Turning to our year-to-date results. For the 9 months ended September 30, 2022, we reported revenues of CAD 1.7 billion, compared to CAD 1.6 billion for the same period in 2021. This represents a 6% increase year-over-year.

Gross profit was CAD 143.7 million, compared to CAD 135.4 million in 2021. Year-to-date gross profit margin was 8.4% in 2022, compared to 8.3% in 2021. It's worth noting that 2022 gross profit absorbed impact from the pandemic earlier in the year, whereas, in 2021, Bird received CAD 18.8 million of CEWS recoveries of costs of construction.

General and administrative expenses were CAD 97.9 million, or 5.7% of revenue, for the first 9 months of 2022, versus CAD 89.9 million, or 5.5% of revenue, in the same period in 2021. Similar to gross profit, pandemic impacts have been absorbed in G&A year-to-date, whereas, in 2021, the company received CAD 3.1 million in CEWS recoveries of compensation costs.

Adjusted EBITDA and adjusted earnings were CAD 70.5 million, or 4.1% of construction revenues, and CAD 30.5 million, or CAD 0.57 per share, in the first 9 months of 2022. This compares to adjusted EBITDA and adjusted earnings of CAD 79.7 million, or 4.9% of construction revenues, and CAD 37.9 million, or CAD 0.71 per share, in the comparable period of last year. No recoveries were recorded under CEWS in 2022, versus the aggregate CAD 21.9 million of recoveries recorded between cost of construction and G&A expenses in 2021.

Net income and earnings per share were CAD 34.9 million and CAD 0.65, respectively, for the first 9 months of 2022, compared to CAD 32.9 million and CAD 0.62 per share, respectively, in 2021.

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 93% of our year-to-date revenues in the lower 2 risk categories. These categories encompass IPD, stipulated sum or unit price and construction management contracts.

Given that one of our key priorities over the past few years was to reduce the overall risk profile of the company, we are now keenly focused on maintaining an appropriate balance. While there will be fluctuations based on the mix of work over time, we have increasingly entered into collaborative contracts with our clients to balance the risk transfer between parties. Our diversified and well-balanced contract mix allows us to better manage inflationary impacts on our costs of construction.

Turning to our financial position. Consistent with our strategic priorities, we continue to maintain our strong balance sheet with a significant financial flexibility and liquidity. During the third quarter, we invested in working capital to support seasonal growth in the business and the company's work program. Operations generated sufficient cash to support growth in working capital for the quarter and leave us with accessible cash of CAD 19.1 million at the end of the quarter.

At the end of the quarter, we had CAD 20 million drawn on our revolving credit facility, funding temporary increases in noncash working capital, which we expect to repay by the end of the year. We finished the quarter with approximately CAD 117 million of available capacity under our committed syndicated credit facility.

Our liquidity measures remain well within our comfort levels at quarter-end. Our adjusted net debt-to-trailing 12-month EBITDA ratio was 0.78x, while our long-term debt-to-equity ratio was 26.5%.

Bird's capital allocation priorities remain the same. We continue to balance our priorities between capital invested in the business, dividends, M&A and debt repayments.

For the third quarter, we generated cash flow from operations before noncash working capital of CAD 32.4 million, we reinvested CAD 7.7 million by way of CapEx in the quarter and distributed CAD 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. We've built a stable and resilient 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 respected position within the Canadian construction industry.

With that, I'll turn it back to Teri.

[Terrance McKibbon, executive]

Thanks, Wayne. We expect a solid finish to 2022, with considerable demand for Bird's services and our focus on strong execution and diligent cost containment. Our strategy of diversification puts us at the heart of important sectors in the Canadian construction industry.

Consistent with our strategic priorities, we are focused on maintaining and leveraging our strong balance sheet with significant financial flexibility and liquidity and a disciplined approach to capital allocation. Despite some of the challenges that have emerged this year, we have maintained solid performance and are on track to deliver the priorities outlined in our strategic plan.

We have a sizable pipeline of work and a trusted position with our clients and within our end markets. We will build upon our strong and resilient foundation and propel the company forward to grow profitably, to improve overall margin profile and to increase long-term shareholder value.

With that, I'll turn the call back to the operator for questions.

[Operator]

[Operator Instructions] The first question is from Jacob Bout from CIBC.

[Jacob Bout, analyst]

Maybe the first question here, just on some of the drivers of the uptick in gross margin. I know you talked about the greater proportion of the collaborative contract work. What percentage of overall revenue and backlog would be this type of work today? And this higher gross margin, is this kind of a new normal that we should be thinking about?

[Wayne Gingrich, executive]

I can take that one, Jacob. So I think if you look at the percentage of our backlog, probably 15% to 20% is going to be of a collaborative nature in terms of contract size.

And then in terms of drivers of the gross profit, like, it was a very balanced quarter for us. There wasn't one big uptick on a project or something that drove the results. Like, it was pretty broad-based, strong performance across the country in all of our business units. So when you think about the gross profit percentage, like, these are certainly the gross profits that we have in our backlog. And with the new work that we have in pending backlog in the pipeline we see, we certainly see a healthy margin profile. So we certainly expect that to continue or improve.

And from a volume perspective, so in terms of the total dollars of gross profit, Q3 is usually our best or second-best quarter between Q3 and Q4. So we expect a strong Q4 here as well, just given all the things that are happening in the business.

[Jacob Bout, analyst]

And then maybe just more of a macro-type question. Can you just comment on the mood of your clients? Does it differ across industrial-, commercial-, institutional-type clients? And are you seeing much in the way of reworking your projects due to inflationary pressure?

[Terrance McKibbon, executive]

We certainly have seen that, Jacob. But I'd say that as you move your business into more of a collaborative framework, you have more of a partnership with your clients so you work through, and that affected us certainly in the first half, where we're going back and redesigning and coming up with alternative concepts if we had significant escalations in certain materials.

But I'd say the mood is -- the types of things we're doing are a little more resilient to the nuclear program we've got underway that's a little more resilient to some of the shorter-term pressures. So we're tending to focus a lot on long-term healthy clients that are blue chip, and we don't face some of the pressures you might face from a smaller client that obviously is pressured.

[Jacob Bout, analyst]

And so if I'm reading you correctly, the reworking of some of these projects, more of an issue in the first half than what you saw in the third quarter and what you see in the fourth quarter?

[Terrance McKibbon, executive]

Yes. We've worked through some of that. And generally, we're seeing construction material prices soften and return in the direction of normal levels. We're seeing shipping channels ease up. So shipping is opening up, which really helps our modular business. So where we were really constrained for a while, not just in the availability of shipping, but the price of shipping. So a lot of that is normalizing now. And it doesn't appear that, that direction it's heading is going to go in a different direction anytime soon. So that's good news for us and it's good news for our clients.

[Operator]

The next question is from Chris Murray, of ATB Capital Markets.

[Chris Murray, analyst]

Just turning back to the margin question a little bit, you made some comments about the fact that we're kind of moving back to maybe a new normal now and we're also, I guess, moving beyond some of the mechanical issues around calculating margins with the CEWS payments in prior quarters. Just thinking about where gross margin and EBITDA margins are going to go from this point forward, what's the -- when you think about the backlog, what is the magnitude of improvement? And should we kind of be thinking this as an incremental type of move? Or is there a reason to believe that there could be kind of a step-function into '23?

[Terrance McKibbon, executive]

I think there's a bit of a step-function into '23 and continuing to strengthen into '24. We're really pleased with the team that we've assembled, and that team certainly has the capacity to handle higher revenue than we're currently contracting. So I think we'll get leverage in that sense, because the projects that are in our wheelhouse now are evolving and growing. And like I said, there will be leverage off certainly overheads in that regard.

But our strategic goal is to continue to grow organically, and we've made significant strides in that direction with increased self-perform capabilities. And as that continues to grow, in these types of contracts that we're in, we're expecting higher-margin returns.

And so it's going to be a mix.

And then lastly, the M&A side. There certainly has been an uptick in activity recently from much higher levels of opportunities in the third quarter than what we've seen in the first half of 2022. So there's lots happening there as well, which is exciting, and we'll see what makes sense for us.

So there's just a mix of things, I guess, to answer your question, Chris, but we expect improvements in '23 and continued improvements in '24.

[Chris Murray, analyst]

Okay. Fair enough. And then going back to the CNL contract, so trying to maybe understand a little bit about what the nature of this is going to be. Should we be thinking about this as kind of a larger bucket of recurring revenue, almost like an MSA, where you'll be just kind of doing remediation work with just different call-offs and then maybe separate contracts to construct certain assets and those will be a little lumpier? So I mean, I think in the MD&A you talked about the fact that this could be a 10-year program-plus type of thing. There's billions of dollars, I think you indicated in the project budgets in aggregate. Just some thoughts around how do we think about this longer term? And is there any risk about concentration? Energy has been notoriously cyclical. So how do you think about all that?

[Terrance McKibbon, executive]

So there's a significant scale to this. It's early days. And obviously, as we're evolving -- we've been working with CNL now since 2018. As you know, we secured the 12 hot cell and laboratory up in Chalk River and announced that, and that entered into backlog in Q4 of 2021. So that relationship and that partnership has evolved.

And we've been working on the Port Hope remediation and recently announced, as you know, that they've struck this broader overriding sort of partnership for all of their work, of which we're one of their key contractors. And you look at the number of sites. The Port Hope work that we announced this week is 400 sites that we've been assigned to begin to work on and design and work through the logistics on those sites. That's 400 sites of over 4,000 sites, just to give you order of magnitude, and it's part of this CAD 1 billion program, of which there are 3 MSA contractors, and we're one of those.

But there's other sites as well that we're in the middle of in discussions and in procurement on. Obviously, Douglas Point up at Bruce is another site that's part of this program. The Pinawa site in Manitoba, we are working on the framework of that project with some advanced electronics robotics that's underway, and we'll be in that work evolving in '23.

If you go back to Chalk River, there's billions of dollars being spent on facilities up there. A very large campus.

So this kind of thing just goes with a lot of resilience. There's not much of a cycle that affects this kind of thing. I think this will be bigger than the MSA-type work we have over time. It will just take some time for this to evolve, but there's a significant scale to this and will go on for at least 10 years.

[Operator]

The next question is from Mark Stuebing, with TD Securities.

[Mark Stuebing, analyst]

It's Mark on line here for Michael. Your outlook commentary this quarter appears much more encouraging than what was communicated last quarter. I was wondering if you could discuss some of the main drivers to sort of your renewed optimism and confidence in the outlook relative to sort of what you were seeing 3 months ago.

[Terrance McKibbon, executive]

Well, certainly, as we came through the second quarter, the labor disruptions that were occurring in Ontario and in BC, when you think about it, there's a duration of the labor disruption that occurs when the workforce is physically on strike, and then there's another duration that can take weeks to get things remobilized. So we had a larger impact than we anticipated certainly in the second quarter with a lot of that. And sometimes that obviously is difficult to define exactly what that impact is, and it takes some time to fully understand that. So it took us some time to fully understand, into the third quarter, the impact that, that created.

And we had a series of projects that had delays in permitting, and the permitting aspect of Canadian construction is a little bit like the airlines, where the workforce that is in the permitting side of the business works in government and, not dissimilar to permits and security clearances for airline workers, things like that, there's a significant backlog, and it got -- it wasn't keeping up to the demand. So it took a while for those agencies to work through that backlog because of the disruption of their world where they were trying to work remote and that kind of thing.

So that has created -- so we started in the third quarter to see those backlogs ease. There's still some isolated markets where we're still seeing some impacts that it's flowing through, but we're seeing more easing, and that gives us confidence that we're going in a good direction with some of this. So that's improving.

I'd say that in any quarter at any period of time you're working on a lot of initiatives, and the ebb and flow and the timing ebbs and flows and some of the projects we were developing were experiencing escalations or back to the drawing board, redesigning. So when you start to see material costs start to soften, it certainly gives you -- again, it gives you that light at the end of the tunnel that, okay, we're getting through this and we'll be able to contract and get moving, get in the ground and clients are moving forward.

So it's a series of things. Certainly, it was a perfect storm at the end of the second quarter as we we're reporting those results. And as such, we weren't clear whether we were going to continue to have that lagging effect into Q3, and we didn't see a real clear line of sight to that until well into the end of August. So hence, the strength and our work platforms are getting in the ground, revenues growing.

And it's been a lot of hard work. Our team has worked tremendously hard to get to where we are, and we're very pleased with the direction we're going and continue to improve our performance.

[Mark Stuebing, analyst]

That's great color. I wanted to touch on your Western Canada operations quickly here, your energy business in particular. So we've seen energy prices sort of remain elevated here for somewhat of an extended period of time now. I was wondering if you could discuss any impacts you're seeing on your oil and gas operations and as we enter 2023 here what your outlook for that part of the business would be.

[Terrance McKibbon, executive]

We've had really strong demand from our clients in the oil and gas side. And the majority of that activity is on the oil side, is on the maintenance side with all of our electrical activities and mechanical activities.

We've had very strong demand. I think the offering we have, the complexity, our safety performance. As you know, in Canada, construction safety is a major focal point, and we've had really strong performance and the teams have worked hard to deliver that performance. So our demand has been quite high. In fact, we haven't had much capacity to do new things outside of oil and gas, and we've had to be careful what we've been targeting because the demand has been high.

But generally speaking, LNG has been a great program for us. We've had really good success there. Continue to have some opportunities evolving. But we're on the back end of that first phase and getting close to moving through that. And I'm really pleased with the way we've diversified the platform into other projects and other markets, and the activity is pretty high in the West. And I think part of that is the strength of oil and gas, but government coffers are obviously strong, with royalty revenues and whatnot.

But we're also seeing ag, a lot of agricultural activity. A lot of renewable activity. Alberta has done a really nice job with diversifying their economies in renewables and ag.

And so lots going on. Lots of support from government. Lots of support from the Infrastructure Bank on some of these initiatives. So some exciting things. Hydrogen is around the corner. So yes, I think we're feeling blessed with our opportunities in the West.

[Operator]

[Operator Instructions] The next question is from Frederic Bastien, with Raymond James.

[Frederic Bastien, analyst]

You discussed wanting to do more tuck-in acquisitions down the road. What do these targets look like? And what would they bring to Bird?

[Terrance McKibbon, executive]

Well, the big thing is to increase that self-perform capability, that's a big key, and to allow us to -- as you work with clients that are looking for collaborative ways to do business, they obviously have a very strong focus on the execution of the project, safety, performance, the schedule, the cost. And having a larger self-perform capability gives that client more comfort to do business with us. So we're very much focused in those areas.

And in the same breath, we're growing organically on many of our existing platforms. And I think we've really made some tremendous progress around the One Bird collaborative initiative across the company. So our different entities are working together. If one of our groups has a specialized skill set of self-performing mass timber erection, that group has evolved, if we're in a market that doesn't have that experience. So we're doing a lot of that kind of thing.

So all of the focus we have in M&A is really to augment that and add new areas where we don't have that capability internally, but also to grow in areas that have exciting market opportunities. We have 2,000 electricians go to work for us every day and predominantly focus on commercial institutional buildings and also focus on oil and gas and that side of the business and the maintenance side. So we're very focused on expanding our capabilities on electrification in that sort of space in between where there's a lot of projects that are evolving and there's lots going on. So very focused there.

The whole area of communications and utilities. We're working in 10 states in the U.S. on underground utilities. A lot of that's in renewable, but a lot of it is also in communications and technology, where we're working in various states, putting fiber optic product in the ground for clients and things like that. So it's also an area we'd like to add more capacity.

So I think if you look at the kinds of things we're doing, it's really just to grow and expand that capability both with M&A and organically. We've added some real strength in leadership with the Dagmar team coming on board. We've really leveraged that business. Many new things. We've added new leaders with our overall civil horizontal infrastructure team.

So yes, some really good things happening.

[Frederic Bastien, analyst]

I mean, it's obvious you're seeing good momentum across the board here. Perhaps the exception that I noted was with Stack Modular. Can you speak to how that business is progressing and what sort of opportunities it's contemplating, going forward?

[Terrance McKibbon, executive]

So we've been developing projects. Stack has always been kind of a start-up almost, where you're really changing the narrative in terms of how a project gets built, because you've got to lock that design down a year in advance and move things through the system, which is not normal. We've been building construction for hundreds of years with bricks and mortar. And so if you're going to do something now in a plant and ship it, it's a big change.

So that's hurt us. It's taken us a little longer. I think the dynamics of complex shipping logistics has hurt us because the pricing of that shipping has hurt us, but a lot of that is coming down now and returning to normal. So that's opening up the opportunities.

Projects we've completed, we had successful completion in Ontario, with infrastructure in Ontario, on the correctional facilities up in northwestern Ontario. That's been -- the client is very pleased with that. The premier is very pleased with that build. So we've had good success there.

But we're not quite at a level where we're getting enough revenue, but we are optimistic. We're doing some things internationally and working in more of a supply arrangement in various countries to supplying units. So that's picking up steam.

So it's still going to take a few years, I think, for the business to become more commonplace in the market because it's currently more of a specialized sort of option, and it's going to take longer for the education to settle into clients that this is a great way to build because it fits your schedule, it's got a different profile, it's got a different cash profile in terms of how it's structured. So all those things take time to get in the marketplace.

It's small enough that it doesn't hurt us a whole lot as it evolves. But I think in 2022, the shipping challenges and the shipping costs were certainly a detriment to us.

[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 third 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. Thank you.

[Operator]

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