Badger Infrastructure Solutions Ltd.

Good day and thank you for standing by. Welcome to the Badger Infrastructure Solutions LTD 2022 fourth 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'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Trevor Carson, Vice President, Investor Relations and Corporate Development.

Thank you, Josh, and good morning, everybody. Welcome to our fourth quarter 2022 earnings call. On the call with me this morning are Badgers President and CEO Rob Blackadar and Promote the TF, Badgers VP Finance and Interim CFO. Badgers 2022 fourth quarter earnings release, MD&A, and financial statements were released after close yesterday and are available on the investor section of our website, as well as on CNAR. 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 forward-looking 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 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 Badger's 2022 MD&A along with our 2022 AIM. Further, such statements speak only as of today's date, and Badger does not undertake to update any such forward-looking information. I will now turn the call over to Robin.

Thanks, Trevor, and good morning, everyone, and thank you for joining our fourth quarter earnings call. As always, we would like to start the call with a health and safety update. We have managed through some extraordinary operating conditions over the past several years, but under all conditions, our operating practices have remained the same. focused on Badger's objective of putting our employees and customer safety first. It is our mission to be the industry's most efficient, safe, and reliable non-destructive excavation service provider. We have introduced many new safety measures and programs over the past year, as well as made significant investments in AI-enhanced tools to help our operators out of harm's way, tools such as Lytics. We look forward to sharing more about these exciting initiatives in our ESG report that we posted to our website and to CDAR yesterday. Now on to the company's performance. We are pleased with our fourth quarter and annual results for 2022. We ended the year with strong utilization and operational performance across our businesses, which reflects the resiliency of our business model. Our focus on pricing and fuel recovery, coupled with our operating and cost management efforts, resulted in meaningful year-over-year improvements in our operating leverage and margins. All of our operating regions contributed to year-over-year annual revenue growth of 26%. This resulted in better operating leverage, as highlighted in our year-over-year EBITDA margins. Now let's talk more about our revenue trends. Revenue for the quarter and full year were up 23% and 26% respectively from 2021. This gives us confidence that our sales strategy implemented in early 2022 is building momentum. While we are pleased with our fourth quarter revenue contribution, it is important to note that revenue was negatively impacted during the last two weeks of December due to winter storms that shut down a significant portion of our operation. Most of these jobs were pushed forward to a solid start for 2023. During investor day we shared our strategy to raise the shoulders in our most seasonal quarters. Early indications suggest the strategy is working. All operating regions experienced strong EBITDA growth or strong revenue growth due to improved pricing and utilization which resulted in and adjusted EBITDA margins for the quarter and the year, improving to 18.8% and 17.5% respectively, compared with 11.1% and 12.8% last year. As a reminder, in 2022, we established a focused sales and marketing function, including a national accounts team. The objective of this function is to leverage Badger's broad operating footprint, business scale, and customer relationships to facilitate growth and add operating leverage. This focused commercial strategy helps the company target the significant market opportunity that we see for non-destructive excavation and related services. Our investment in our sales and marketing teams have helped us drive more consistent volume over the course of the full year with the intention of improving margins and shoring up our operator retention and turnover headwinds that we typically see in the colder months in Q4 and Q1. We continue to be excited about our asset utilization improvements. Annual revenue per truck per month or RPT was just shy of $40,000, which was up 22% versus last year. RFET and Q4 was approximately $42,000 or up 25% compared with last year, highlighting our continued asset utilization improvements. We added trucks and markets that demonstrate strong revenue growth and high return on invested capital. Our ability to manage our available fleet in real time is a significant competitive advantage. As we position the fleet strategically, we can drive utilization and higher pricing where we have good opportunity. As we have 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. Now speaking about our fleet size, we ended the year with $1,387. excavation units compared with 1,371 at the end of 2021, reflecting a net increase of 16 units. We manufactured 115 non-destructive excavation units in 2022 versus 32 in 2021. For 2023, we are forecasting to build between 200 and 230 units and retire between 80 and 100 units. Our manufacturing team has positioned the plant well for higher production levels and volume efficiencies. We are also well positioned for supply chain components. We built up our inventory stock in 2022 and remain comfortable with chassis and key component availability and do not expect to be impacted materially by supply chain disruption. This positioning is a plus for Badger's ability to place new equipment into service versus competitive manufacturers as truck chassis are still in tight supply. Market indications are that equipment will be difficult to source in the short term, which makes Badger's manufacturing and vertical integration that much more valuable. Additionally, we are implementing proactive programs that we expect will enable us to extend the useful life of our existing assets. We believe these incremental investments will yield positive contributions to ROIIC as we continue to optimize our capital investments. As I've shared previously, our units spend the majority of the time digging on customer sites as opposed to racking up significant mileage. Conversely, we run at high RPMs to perform our excavation services. With this in mind, we may choose to selectively replace critical components, namely the engines, transmissions, transfer cases, or blowers, to extend the life of a well-maintained chassis. Unless there are 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 will now turn the call over to Pramod to discuss our financial results.