Badger Infrastructure Solutions Ltd.

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Badger Infrastructure Solutions Limited 2022 First Quarter Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star, then 1 on your telephone keypad. As a reminder, this conference call is being recorded. If you require any further assistance, please press star, then 0. At this time, I would like to turn the conference over to Mr. Paul Vanderberg. Sir, please begin.

Thank you. Good morning, and welcome to Badger's Q1 2022 earnings call. On the call with me this morning is Rod Blackadar, our Chief Operating Officer, and Darren Yaworski, our CFO. Our 2022 Q1 earnings release, the MD&A, and the financial statements were released after market closed yesterday. and are available on our website, the investor section, and also on CR. We are required to note that some of the statements made today may contain forward-looking information. In fact, all statements made today, which are not statements of historical fact, are considered to be forward-looking statements. We make these statements based on certain assumptions that we consider to be reasonable. However, forward-looking statements are always subject to certain risks and uncertainties, and undue reliance should not be placed on them. as the actual results may differ materially from those expressed or implied. For more information about these assumptions, risks, and uncertainties that may be relevant to such forward-looking statements, please refer to our 2021 Annual Information Form. So as always, we'd like to start the call with health and safety. We've been pleased with the team's health and safety response to the now two-year-old COVID pandemic and the related challenges that have come along with it from an operating perspective. Under all conditions, safety of Badger employees and customers remains job number one. We are pleased with how the team has managed through this pandemic. Our COVID playbook consistently follows our Center for Disease Control guidelines. and our commitment to a strong health and safety culture led by Rob and Leon Walsh, our Vice President of HSC. This has allowed us to manage through any conditions that we've seen with COVID. We've continued to manage through those conditions in Q1. The first half of the quarter was impacted by the Omicron variant outbreak and the restrictions that went along with that. As we indicated on our Q4 2021 call, January saw about 9% of our operators in quarantine at some point during the month. This was a similar level to the August and September peak with the Delta variant. Having operators in quarantine results in lost revenue and higher direct labor costs, including more overtime and higher subsistence costs for more out-of-town work with longer travel times and overnight stays. That was the first half of the quarter. However, the second half was very different. February case counts were down about 80% from January And in March, we only saw about 16 cases. None of our Q1 cases required hospitalization. Cases in April and into early Q2 are trending at the lower levels as well. Very positive. We're also encouraged that the Centers for Disease Control in most jurisdictions have loosened operating restrictions and shortened return-to-work testing procedures. Despite all this, though, we continue to follow our COVID playbook, and some regions have seen small amounts of infections, but the general trend is down. Our business and financial results, which Rob and Darren will speak to in a few minutes, mirrored the COVID trends in the quarter. The first half of the quarter was below our expectations, and the second half exceeded our expectations. Overall, we managed to meet our initial expectations for the quarter, and we're pleased to see revenue and operating leverage improving. Revenue was up 33% from the previous year, and adjusted EBITDA was up 84%. We're also encouraged by improving trends in the broader non-residential construction market fundamentals, particularly in the U.S. After 15 months of consecutive year-over-year declines in the U.S. non-res construction put-in-place numbers, the market trends appear to be returning to year-over-year growth, albeit the growth is occurring off the lower levels we experienced in 2020 and 2021. So with that, we'll hand the call over to Rob to discuss the quarter.

Thanks, Paul. As Paul mentioned, we are pleased with the continued market and business improvement during the quarter despite the slow start due to Omicron. Revenue was up approximately 33% from last year to $114 million last which continues to reflect the market recovery that we have seen in the second half of 2021. I would like to remind everyone that we have transitioned our reporting currency to U.S. dollars from Canadian dollars effective January 1st, 2022. Higher revenue and more consistent volume in the second half of the quarter supported improved operating leverage. All operating regions experienced positive leverage from higher revenue, higher utilization, increased pricing, and cost controls. This resulted in a year-over-year improvement in adjusted EBITDA margin from 5.1% last year to 9.4% this year. Q1 revenue per truck per month, or RPT, was $31,571, which was up over 37% versus last year. a higher percentage increase year-over-year than revenue. This reflects our continued focus on fleet utilization. Better fleet utilization also translates into improved labor utilization. We ended the quarter with 1,335 excavation units compared to 1,359 at the end of Q1 2021. This also contributed to our increase in RPT. We added 16 units and retired 40 units in Q1 as well. Badger continues to target a 2022 build program of between 150 to 180 units and retirements between 40 to 60 units. The build program is sized to capitalize on our recently launched commercial strategy rolled out across our branch network. As Paul mentioned, we'll be providing updates to our commercial strategy, our operating model, and our manufacturing capabilities at the virtual annual general meeting later this afternoon, but I will provide some brief highlights now. In Q1, we realigned our operations group into four regions, Canada, U.S. East, U.S. Central, and U.S. West. Badger has historically been a very decentralized business with local and regional management in focus, and we now have evolved that decentralized structure into a standardized operating model. We resized the regions and market areas to capitalize on the growth opportunities within our strategic and core markets. This structure will maximize our ability to drive revenue, scale the business, focus our resources, and flex our operating leverage. The new region and market area structure was implemented at the beginning of 2022, and all positions were staffed and resourced before the end of the quarter. As part of these changes, we've equipped our branches with additional sales and marketing capabilities. These capabilities focus on customer opportunities within key market areas and with our national accounts, leveraging our size and scale across North America. This is a key differentiator between Badger and our local and regional competitors. Badger continues to view its vertical integration as a competitive advantage. As we have previously shared, our manufacturing team has positioned the Red Deer plant for higher production levels. We believe that we will be able to source major manufacturing components for the balance of the year despite the many supply chain challenges in the market. Market indications suggest that non-destructive excavation equipment will be in high demand and more difficult to source over the next several years, which makes Badger's vertical integration that much more valuable. Our vertical integration also allows us to innovate new products. I'm excited to share that we are field testing the new Badger AirVac, a new product in our non-destructive excavation lineup. The AirVac operates similarly to the HydroVac to perform safe excavation. The AirVac uses air versus water to loosen the cover soil before vacuuming it into a storage tank. This application eliminates the use of water and assists in materials management. This new tool further strengthens Badger's service offering and should expand customer uses for non-destructive excavation. Even though COVID has resulted in delays in projects, customer spending, and non-residential construction activity, we see pent-up customer demand, and Badger is well-positioned to capitalize on this demand for the balance of 2022 and beyond. Unless there are additional geopolitical or macroeconomic disruptions, we see conditions continuing to be favorable for continued progress in growing the business, improving our operating leverage, and returning to historical margins as the recovery continues on our commercial strategy. And now I'd like to turn things over to Darren to discuss our Q1 financial results.