Badger Infrastructure Solutions Ltd.

and thank you for standing by. Welcome to the Badger Infrastructure Solutions Limited 2022 Second 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 11 on your telephone. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Paul Vanderburg. Please go ahead.

Good morning, everyone, and welcome to Badger's second quarter 2022 earnings call. On the call with me this morning are Rob Lacadar, Badger's COO, and Darren Yaworski, our CFO. Badger's second quarter earnings release and financial statements were released after the market closed yesterday and are available on the investor section of our website and CDAC. We're 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 forward-looking statements based on certain assumptions 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 actual results may differ materially from those expressed or implied. For more information about material assumptions, risks, and uncertainties that may be relevant to such forward-looking statements, please refer to VAGGR's 2022 Annual Information Form. As always, we'd like to start today's call with health and safety. Q2 was the first quarter in almost two years without a significant number of employee quarantines due to COVID. It was great to get back to business, and we're optimistic that, by and large, the pandemic-related issues we've been dealing with look to be largely behind us. We continue to be very pleased with the Badger team's focus on health and safety, our job number one, and very proud of how the team has managed through COVID these past two years. Now on to the quarter. As you may recall, the first half of the 2022 first quarter started out with quite a few COVID quarantines, and that really hurt us. But as we worked through Q1, we put it behind us. The positive trends we experienced in March very nicely continued into the second quarter, which we believe represents our performance going forward. We were pleased in the quarter by the 31% year-over-year revenue growth. Our investment in sales and marketing is allowing us to engage more with customers and provides more visibility into market trends and helps us with asset allocation decisions. The execution on Badger's commercial strategy, which Rob will talk about shortly, is a very exciting initiative. We are also pleased with the adjusted EBITDA margins improving by 68% year-over-year on that same 31% revenue increase. demonstrating our focus on improving operating leverage. As previously discussed, in May we took possession of an adjacent manufacturing property in Red Gear to expand our capabilities and improve our efficiencies. And integration is now underway, and we expect that new configuration will be in place in Q4. The improved results in the recorder were driven by revenue expansion and our business initiatives. And to expand more on that further, I'll now hand the call over to Rob to discuss our operations. Thanks, Paul. We are pleased with the continued improvements in market activity and customer demands that we experienced late in the first quarter as these trends continue to the second quarter. Coupled with disciplined operational and cost management efforts, Badger experienced meaningful year-over-year improvements in its operating leverage and margins. Overall, the second quarter was in line with our expectations. As Paul mentioned, year-over-year revenue grew by 31%, supported by balanced revenue growth across all of Badger's operating regions. Similarly, all operating regions experienced positive operating performance. As a result of increased pricing, improved fuel recovery and cost controls. This resulted in better operating leverage as adjusted EBITDA margin improved by 68% year over year. We anticipate that improving market conditions and customer demand trends will continue for the remainder of the year. These trends are supported by improved macroeconomic conditions across the broader non-residential construction activity in the U.S. and in previously weak sectors such as oil and gas. Even though Badger has managed well in the recent inflationary environment through better realized pricing, cost management efforts, and its fuel recovery program, we are still very focused on improving our operational performance. Let's dig a little deeper into the revenue trends. Revenue was up approximately 31% from last year to $144.2 million, which continues to reflect the market recovery that we have seen since October of 2021. Higher revenue and more consistent volume supported operating leverage. All operating regions experienced year-over-year and sequential revenue growth in improving margins from higher revenue, higher truck utilization, better pricing, and cost controls. This resulted in a year-over-year improvement in adjusted EBITDA margin from 10.7 percent last year to 18 percent this year. The 18 percent adjusted understates our true performance as we have pre-invested in operational and strategic priorities to support future revenue growth and operating leverage, which will help us achieve our five-year long-term strategy results. These investments have largely been completed. Darren will provide more details on this in a few moments. Regarding our pre-investments, we have hired, onboarded, and trained our new sales and marketing teams who are building momentum daily in the field. Their primary focus, and by extension, our initial measure of success, will be to drive new customer opportunities in the fourth quarter to help lift the seasonal shoulders and drive more consistent volume over the course of the full year. This will have the added benefits of stabilizing margins and addressing some of our operator retention and turnover headwinds in the colder, more seasonal months. COVID had resulted in delays in projects, customer spending, and non-residential construction activity. We now see pent-up demand or customer demand, and Badger is well-positioned to capitalize on this demand for the balance of 2022 and beyond. We are also pleased with our continued asset utilization improvements. Q2 revenue per truck per month, or RPT, was north of $40,000, which was up 35% versus last year and 28% sequentially from Q1. We ended the quarter with 1,353 non-destructive excavation units compared to 1,335 at the end of Q1, reflecting a net increase of 18 units. Our ability to manage our available fleet in real time is a significant competitive advantage for Badger. As we position the fleet, while constraining availability in some regions, we can drive utilization and higher pricing where we have good opportunity. Trucks are being added in markets that demonstrate strong revenue growth, high RPT, and strong asset utilization. As we've said in the past, improving our utilization has a material impact on how we manage retirements, how we think about the number of units needed to achieve our growth targets, and the appropriate level of invested capital. Our continued focus on translates into improved labor utilization. We have sufficient operators to support our current fleet size and continue to recruit new operators to support anticipated additions to our fleet over the remainder of the year. Now let's speak about our fleet size. Badger manufactured 21 non-destructive excavation units in the second quarter and 37 units year-to-date for the first half of 2022 versus 5 and 13 units respectively for the same period in 21. We are pulling forward a small number of retirements to balance our M&R or maintenance and repair spend against useful life improvements. We now expect to retire 65 to 85 units this year compared to the 40 to 60 units previously disclosed. As everyone knows, a retirement decision is individual to each unit and is typically driven by a large maintenance expense or when a unit nears the end of its useful life or both. We are now forecasting to build between 130 and 150 non-destructive excavation units, now modestly from 150 to 180 units. The 2022 build forecast has been reduced due to second quarter production levels being lower than our initial forecast. Badger experienced production challenges during the second quarter related to training new employees and full adoption of our new MRP system. As Badger exited the quarter, production levels have increased and are reflected in the updated 2022 build forecast. Badger continues to be comfortable with chassis and key component availability and does not expect to be impacted materially by supply chain disruptions based on the company's supplier relationships and inventory planning that we completed earlier in 2022. 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 market position and vertical integration that much more valuable. Unless there are additional geopolitical or macroeconomic disruptions, we see conditions to be favorable for continued progress in growing the business, improving our operating leverage, and returning to historical margins as the recovery continues and we execute on our commercial strategy. I'll now turn the call over to Darren to discuss our financial results.

Thanks, Rob, and good morning, everyone.