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spk00: Welcome, ladies and gentlemen, to the Bird Construction third quarter 2023 results conference call and webcast. We will begin with Terry McGivin, President and Chief Executive Officer's presentation, which will be followed by a question and answer session. Analysts who wish to ask a question should have their webcast muted while dialing into the conference number provided. At any time during the presentation today, you may press star then one on your telephone keypad to be placed into the question queue. You will hear a tone acknowledging your request. When we're ready for questions, you will be introduced into the conference in the order that you were received. If you wish to remove yourself from the question queue, you may press star, then two. As a reminder, all participants are in listen-only mode and the webcast is being recorded. Should anyone need assistance during the conference call, they may signal an operator by pressing star, then zero. 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 now like to turn the call over to Terry McGibbon, President and CEO of Bird Construction. Please go ahead.
spk01: Thank you, operator. Good morning, everyone, and thank you for joining our third quarter 2023 conference call. Presenting with me today is Wayne Gingrich, Bird's Chief Financial Officer. Our results in the third quarter continued to demonstrate the outcomes of the strategic shift in the business over the past few years. The momentum from the first half of the year has continued, and we delivered another quarter with significant revenue and adjusted it even at margin growth. Our teams have worked diligently to safely deliver on our clients' expectations, leading the company to another record quarter of revenue and delivering 17% revenue growth year-to-date. We have a significant combined backlog and an active bidding environment supporting a strong finish to 2023 and our positive outlook through 2024. Turning to our third quarter highlights, we delivered 17% revenue growth, closing the quarter with $784 million in revenue. We continued to see considerable growth in earnings and additional leverage on our cost structure. The company's adjusted EBITDA grew an impressive 60% year-over-year to $49 million, representing 6.3% of revenue compared to 4.7% in 2022. Our combined backlog grew by $40 million, up almost 20% year-to-date, closing the quarter with $2.8 billion in backlog and $3.3 billion in pending backlog. Our pending backlog includes almost $1.1 billion of master service agreements and recurring revenue work which will be performed over the next three to seven years. The company's diverse and highly collaborative combined backlog with significant self-performed scopes provides good visibility into 2024 organic revenue growth and further margin improvements. With a very active bidding environment and robust demand for our comprehensive services, we remain disciplined with our project selection, ensuring strategic alignment between capabilities, project type, and delivery model. Supported by the combination of higher embedded margins in the combined backlog and achieving additional leverage on our cost structure, we expect adjusted EBITDA and earnings per share growth that will outpace revenue growth in 2024. The company's key fundamentals outlined on slide seven remain at the forefront of our efforts to drive forward our business and further improve the company's results in 2024. Bird has experienced significant growth across virtually all markets with both public and private clients, which is reflected in our revenue and earnings growth and our growing combined backlog. Our institutional buildings, enhanced infrastructure platform catalyzed by Dagmar, decade-high mining backlog, and our expanding role in the nuclear sector are key strengths. Recent industry announcements, including the approval of BHP's Janssen-Pottage Project Stage 2, which indicated a desire to leverage existing contractors, the completion of the pipeline connecting LNG's export terminal, which bodes well for subsequent phases, the $3 billion in funding for Ontario's new infrastructure bank aimed at creating opportunities in key sectors for Byrd, such as long-term care, energy infrastructure, affordable housing, and transportation, and the generalization but generational opportunities in the energy transition and infrastructure modernization all contribute to a robust, longer-term outlook for Byrd and the wider industry. While continuing to drive sustained margin accretion and revenue growth, Byrd remains focused on maintaining a healthy balance sheet with a low net debt position. Our disciplined capital allocation aims to drive business growth while enhancing shareholder value with additional tuck-in acquisitions, smart capital investments, and returning capital to shareholders through dividends. Our dividend is well covered and an important part of Byrd's total shareholder return strategy. We're actively pursuing our ESG initiatives, diligently preparing for upcoming reporting requirements. At the end of the third quarter, the company recorded $2.8 billion in backlog and $3.3 billion in pending backlog, representing a 20% increase in combined backlog from year-end 2022. Backlog was bolstered with $2.2 billion in securements year-to-date. This significant combined backlog provides visibility to organic revenue in the coming year and to further margin improvements driven by the higher embedded margins. BERT is well established as a collaborative contractor and the combined backlog includes over 75% of contracts being executed through collaborative delivery models. Within these types of contracts, BERT works collaboratively with the client and other partners to ensure the cost estimates, schedule forecasts, project planning, and design are sufficiently advanced before the construction phases. These collaborative models, which include IPD, Alliance, Progressive Design Build, Construction Management, and MSAs, improve project delivery and outcomes for all parties, especially on complex builds. We've recently completed, or are nearing completion, on a number of projects in the water and wastewater sector that have demonstrated the value of collaborative delivery. Notably, one of the projects was the first project of its kind to be performed using the IPD model in Canada. In the third quarter, BERT added additional recurring revenue through our environmental remediation portfolio for Canadian nuclear laboratories at Port Hope, as well as through a new MSA agreement for civil works on sites in Alberta's heartland region for an important client. At quarter end, BERT's recurring revenue, MSAs, and pending backlog was almost $1.1 billion, providing additional visibility to future revenues at accretive EBITDA margins. BERT had significant project awards across a range of end markets in the quarter and subsequent to quarter end. Last week, we announced a particularly exciting contract valued at over $150 million for an early works at a new LNG export facility in Western Canada. This project further shapes our outlook with the potential to add to our scope as we mobilize on site. Hurd's contract for this large multi-year project site demonstrates our reputation for strong safety and quality programs, our collaborative approach, and the exemplary delivery of our full project lifecycle services. These are also key factors for adding additional work packages in the future. We are committed to building our relationships with the client and other stakeholders, positioning our team as a long-term partner on this major industrial site. Additionally, we announced post-secondary project awards in BC, Alberta, and on the East Coast, all leveraging Byrd's experience building sustainable and smart environments and emphasizing Byrd's lower-carbon building solutions, such as mass timber. Clients are increasingly seeking ways to build better to achieve more sustainable buildings and retrofit existing properties to reduce their carbon footprint, all of which Byrd is well positioned to deliver. Byrd was also awarded considerable work in the mining sector, including work at Blackwater Gold, ArcelorMittal, and BHP's Jensen Project, contributing to a decade-high of mining backlog. Overall, we continue to execute our strategy in key focus areas, including fostering increased self-performed work, expanding cross-selling opportunities through business units, and leveraging strategic internal and external partnerships and collaborative contracting methods. Our teams are also kicking off our 2025 to 2027 strategic planning over the coming months, catalyzed by our solar foundation, our engaged collaborative team, and our inclusive workplace, we are committed to adapting and growing to chart the best path forward in the evolving world. We've shared in the past highlights around Byrd's positioning and current portfolio of projects supporting the energy transition. There's a tremendous outlook for investment in electrification, public transportation, energy efficient projects, and building retrofits. For its capabilities, particularly in our self-perform expertise, it's strategically positioned to deliver the necessary skills required for the significant investment in infrastructure. Our expanding portfolio encompasses wind energy, hydroelectric, waste to heat, and nuclear projects, among others. The nuclear sector plays a critical role in the transition, and we have spotlighted the sector in the presentation today. Over the past five years, Byrd has built up a significant portfolio of projects in the sector, and today our teams are currently working with all of Ontario's active nuclear operators. Our current projects can be thought of in three areas, site buildings and infrastructure, plant process and auxiliary systems, and decommissioning and demolition. Additionally, our teams are pursuing long-term growth and future opportunities in waste storage and decontamination facilities, SMR infrastructure, new large nuclear plants, and other site facilities and infrastructure. With that, I'll turn it over to Wayne to go through our financial performance in more detail.
spk02: Thank you, Terry. Turning to slide 11, our first half momentum continued into the third quarter as the company delivered another quarter of double-digit revenue growth and margin accretion. Revenue for the quarter of $783.8 million represented a 17.3% increase compared to the same period in 2022. The company's margin profile improved in the quarter compared to the prior year, with growth profit percentage increasing to 9.3% and adjusted EBITDA margin increasing to 6.3%, from 8.8% and 4.7% respectively. The increase in growth profit was primarily driven by project mix, with the improving margin profiles on newer work and a higher proportion of industrial construction. General and administrative expenses were $34.5 million or 4.4% of revenue compared to $35.5 million or 5.3% of revenue in 2022 revenue. The primary driver of the $1 million decrease was $1.1 million lower acquisition and integration costs in the current year with all other costs being comparable. The third quarter had significant earnings growth as the company continued to show tangible benefits from executing our strategy. Net income and earnings per share were $28.8 million and $0.54 per share compared to $14.5 million and $0.27 per share in 2022. Adjusted earnings and adjusted earnings per share were $29 million and $0.54 per share, respectively, compared to $15.5 million and $0.29 per share in 2022. This reflected the higher growth profit and increased income from equity-accounted investments in the quarter. For the nine months ended September 30, the company saw similar trends with significant year-over-year growth. We reported revenues of just over $2 billion, reflecting a 16.6% increase from the $1.7 billion recorded in the same period of 2022. Growth profit increased 16.5% to $167.3 million, representing 8.3% of revenue. This reflects the company's highly collaborative work program, growing backlog with enhanced margin profiles, and expanding self-performed capabilities. Adjusted EBITDA increased 34.5% to $94.9 million or 4.7% of revenue from $70.5 million or 4.2% in the prior year. General and administrative expenses were $102.3 million or 5.1% of revenue compared to $97.9 million or 5.7% of revenue in 2022. Net income and earnings per share were $47.7 million and $0.89 per share for the first nine months of 2023 compared to $34.9 million and $0.65 per share in 2022. Noting that during the comparable period in 2022, the company received a one-time gain of $7.6 million and another $1.7 million of interest income related to the settlement of historical construction billings and related interest charges with a customer. Adjusted earnings year-to-date increased significantly to $49.9 million and $0.93 per share compared to $30.5 million and $0.57 per share in 2022, where the one-time gain of $7.6 million was excluded from adjusted earnings in the prior year. Turning to our financial position, BERT continues to maintain its healthy balance sheet with significant financial flexibility and liquidity. We closed the third quarter with $104.1 million of cash and cash equivalents and an additional $157 million available under the company's syndicated credit facility. BIRD recorded positive operating cash flows while funding the working capital required to support the significant growth of the work program. We remain well positioned to invest in growth-related working capital, project-driven capital expenditures, and potential tuck-in acquisitions to further enhance our service offerings and self-perform capabilities. At the end of the quarter, working capital stood at $196.9 million, an increase of $12.3 million over December 2022, ensuring support for current and future contractual requirements. Our liquidity and leverage ratios remain aligned with expectations. The company's current ratio was 1.22 times. Our adjusted net debt to trailing 12-month adjusted EBITDA ratio stood at 0.24 times. And our long-term debt to equity ratio was 21.1%. all demonstrating our commitment to maintaining a healthy and sustainable capital structure. In line with our commitment to capital allocation, we continue to uphold a balanced approach. We generated positive cash flows from operating activities while growing the business 17% and investing $52 million in non-cash working capital in the third quarter. Our dividend remains well covered by our earnings and cash flows, and our dividend remains an important component of our total shareholder return. I will now turn the call back over to Terry to comment on the outlook for the company.
spk01: We are confident in our business' strategic shifts over the past few years, including our position as a leading collaborative contractor and the appropriate risk balancing of our work program, our strong year-to-date revenue growth and margin accretion, and the positive momentum that continues to build as a positioning bird for a strong finish to 2023 and a foundation for even stronger performance in 2024. With that, I'll now turn the call back to the operator for questions.
spk00: Thank you. We will now begin the question and answer session. Analysts who wish to ask a question may press star, then 1 on the telephone keypad to join the question queue. You will hear a tone acknowledging your request. If you're using a speakerphone, please ensure you lift the handset before pressing any keys. If you wish to remove yourself from the question queue, you may press star, then 2. Anyone who has a question may press star, then 1 at this time. The first question comes from Chris Murray with ATB Capital Markets. Please go ahead.
spk08: Yeah, good morning, folks. You know, just looking at the very strong revenue growth in the quarter, I think that Cameron's would have surprised many of us. So a couple pieces of this. You know, first of all, your ST&A costs didn't move very much based on that level of work. So I just wondered if there's any thoughts around, you know, if you're currently now kind of stable in your SG&A costs and what we're seeing now is what we should be looking forward. And then I guess the second part of this question, you know, you talked about, call it, you know, high single digit, low teams growth rates into 2024. But, you know, if we rebase 2023 off the Q3 results, You know, you've got a much higher starting point. So just any thoughts around, you know, 24 versus 23 with the higher jump-off point and SG&A costs would be great.
spk01: Yeah, I think, Chris, like we've worked really hard to position ourselves with a really talented leadership team, you know, to – to build that foundation to have the strength with the opportunities that we're focused on. And we've had really good success with that. We had really strong engagement. So I think from that lens, I think our team certainly has the foundation and the framework to grow top-line revenue without equivalent growth on the SG&A side. But as you know, many other factors flow into that. with growth. So in my mind, we're gonna see some leverage on SG&A in 2024, given that the team that we've assembled certainly has a lot of bandwidth to handle the growth that we're expecting.
spk02: I can take the second part. So in terms of the revenue outlook for 2024, if you look at the baseline year for 23, we've talked about low double digit revenue growth in a prior quarter. So if you take year-to-date revenues, and we kind of said for Q4, we like where the consensus estimates are. So if you take that into account, you're looking at 13% to 14% year-over-year growth in 2023. So looking forward to 2024, we still expect to see growth. You know, in next year, I think high single digits is probably a better target at this point in time until a few things play out for us early in the next year. But we're pretty confident in being able to see strong organic growth next year as well.
spk08: Okay. And then kind of putting that together, you did mention that you think you'll see, as you said, operating leverage on earnings going forward, I guess, in your outlook. I guess the other question I have, and Terry and Wayne, I don't know who wants to take this one, but for the last few quarters, things have been going right. And so the worry we always have with construction companies is the stuff that's going to go wrong. And certainly that shows up in the multiple. When we think about what's in the backlog, your customer mix, and even the conversion of pending backlog to backlog, You know, how are you feeling about the risk profile today for Byrd versus where it's been historically? And, you know, your comfort level on, you know, the unforeseen, if you will, as we go into the next couple of years?
spk01: Yeah, I think it's a really good question, Chris. I think we approach it as, first of all, with a high degree of discipline in terms of, you know, our evaluation of projects that we pursue, you know, and that starts with the appropriate maturity of a client, you know, relative to the complexity of the project they're trying to deliver, you know, sort of a first gate. And then, you know, as we referenced in our script, we, you know, 75% of our backlog right now is in a collaborative framework. So that does significantly de-risk the, you know, the programs. And so in that regard, I think the organization is in a really good place. The backlog and pending backlog continues to evolve. We're pretty confident in the pending backlog converting to backlog, and we also track opportunities that are not quite pending yet, and there's a significant pipeline sitting there as well. Most importantly, we're continuing to see accretion of margins in that flow of business. So it's pretty exciting for us, the team we have, the opportunities that we're seeing. We work really hard on diversification, and that's really paying dividends for the performance of the business.
spk08: Okay. I'll leave it there. Thanks, folks.
spk01: Thanks, Chris.
spk08: Thanks, Chris.
spk00: The next question comes from Ian Gillies with Stifel. Please go ahead.
spk05: Good morning, everyone. Good morning. Good morning. With respect to EBITDA margins and expansion moving forward, I mean, you really have three tailwinds working in your favor. You have backlog, operational leverage, and more self-perform work. Can you maybe force rank which of those components you think has the biggest impact on how margin expands over the next, call it, 12 to 24 months?
spk02: Yeah, I think certainly the mix of self-reform work in some of the new sectors that we're growing in, particularly in infrastructure, I think that certainly helps. The fact that we're on a couple large industrial projects right now, and we had the press release about the LNG facility, I think that bodes well for our margin profile. Yeah, I think there's a general strong dynamics too, like in the mining sector that, you know, certainly when we have equipment generated or projects with heavy equipment, you know, components, that bodes well on margins. And then, yeah, to boot with the higher revenue we're seeing through, you know, we are getting leverage on our cost structures. We're really benefiting from all three. But I think the industrial, the infrastructure, and the industry tailwinds are probably helping the most.
spk01: Just to add another piece to that, Ian, you know, we've shifted our building business to do more collaborative projects in the light industrial space. setting and a lot of activity in that regard. So that's also really helping our building businesses you know, it's changed quite dramatically over the last few years to shift to higher margin opportunities, you know, and leveraging off, in some cases, the expertise that we have available on the industrial side to meet, you know, more complex, you know, sort of interfaces with, I would call them industrial light clients, but in a collaborative framework. So that's also certainly has some tailwinds.
spk05: Maybe following on, as we think about margins as we head into 24, is there any reason to think you couldn't get a similar amount of margin expansion in 24 relative to 23? Or based on what we think 23 may be, I guess I should say.
spk01: Yeah, I think that's, you know, that's ultimately how we're thinking about 24 at this point. And, you know, we're just looking for that steady creation quarter over quarter, year over year, you know, in the business. And that's how we look at the new opportunities. And as we look at, you know, the framework of new business flowing into pending, you know, that business certainly has margin profiles that would allow us to achieve that goal.
spk05: That's helpful. And maybe last one for me, because the tuck-in strategy seems to be working well. Are you able to quantify or talk a little bit about maybe what you've done with Dagmar with respect to growing the backlog or growing the top line in that business since you've bought it, just given Bird's got a bigger balance sheet, et cetera? Because I think that'll help illustrate why that strategy is so important.
spk01: Yeah, I think, you know, that's been a huge success for us, you know, both in Agmar's current book of business, but also you know as a catalyst to allow us to um engage on on some of the larger infrastructure programs that are evolving in a collaborative framework there's been quite a dramatic shift in the environment that um that we work in you know especially in in brownfield transportation where it you know it's moving quite dramatically to more of a collaborative contracting framework which we have a tremendous resume for and with the catalyst being Dagmar and Dagmar's extensive experience in that space, it allows us to participate in partnerships to pursue some of that work, and we're very active pursuing those opportunities where they're in an appropriate framework with an appropriate client within Canada. So yeah, the key for us as we move forward as a business is finding an appropriate tuck-in that we can use as a catalyst to add BIRD's capabilities on larger projects. and move us in new areas where traditionally we wouldn't have had the resume to be able to participate in that area.
spk05: Great. Thanks very much. I'll turn the call back over.
spk01: Thank you.
spk00: The next question comes from Jonathan Lammers with Laurentian Bank Securities. Please go ahead.
spk05: Morning.
spk04: Morning.
spk07: I noticed that over the last two quarters, the amount of securements that you're reporting, your quarterly results have been much greater than total awards that you've been press releasing. I know part of that's related to the collaborative contracting methodology. Could you just explain for us how it is that that makes it more difficult to press release the new awards? you're still confident in the backlog and the securements going into the backlog? Thank you.
spk02: Yeah, I can certainly take that. So in terms of what we press release, generally we only press release projects that are larger in size. So maybe on an individual basis, they could be 100, 150 million, or if we think they're kind of strategically important to highlight, we might bundle them with a few other projects. But the company also wins a lot of other projects that just don't meet that type of dollar threshold that we don't disclose, and I think that probably makes up a lot of the difference. You know, I think one trend that has happened with the business when you think about the shift to collaborative contracting, you know, has been As we get an award, and, you know, for example, say it's an IPD, you know, project, for example, we get the award, you know, we've, you know, submitted designs, we've submitted indicative pricing, these types of things. But now you have to go through the validation phase where you're inviting other related parties, the clients. Your subcontractors, architects, engineers, other people are getting involved in the discussions about what's going to be the best way to build this project, the best way to construct it, the best way to design it, what are really the client's needs. That can take, you know, sometimes 12 months, sometimes, you know, longer. We've certainly seen that as well. So you're getting these awards, but they stay in our pending backlog. until the client signs off on the final design and the final price. And sometimes, you know, the client may have, you know, things that they want added in the project. And then when they see the final price, then we go back to value engineering because maybe that project has grown higher than they'd like. So you kind of value engineer and then you agree on the price. But it takes longer to move. into backlog, but anything that we're putting into our pending backlog, we're highly confident that that is going to convert. It's just going to take the time to follow the process. So I think that's why you're seeing this growth in the pending backlog. And backlog over the last few quarters has plus or minus 100 or 200 million, kind of been fairly steady, but you're seeing the growth in the pending backlog. So that gives us a nice kind of pipeline or funnel of projects that will convert to backlog here in the future.
spk07: Right. And I know you touched on this earlier, but just to be clear, when you look at the backlog, what is it about it that gives you confidence in margins improving into next year? Is it the higher mix of self-perform work? Is it a higher mix of, you know, industrial type work and infrastructure work with just, you know, more favourable
spk01: operating margins could you just I think it's a mixed Jonathan in any entry level right so the entry level you know the service offering we have today we can we can expect a higher a higher level of return on it and you know in that regard that's you know that the market is very strong for for the complexity of of the services we have. The other big piece that also enhances the overall performance and enhances our confidence is, you know, we're working collaboratively within our business unit, so oftentimes on a project you'll have multiple divisions, all with embedded margins, you know, in their delivery. So it, you know, that gives us a high degree of confidence, like I said earlier, in our Our building business is certainly involved in a number of the projects we have underway, so that's helping enhance their performance. So the collaboration is really paying dividends. It's sort of rising tide, rises all boats kind of framework.
spk07: I'd like to just touch on the LNG site early works award that was recently won. Can you share with anything about anything with us in terms of how large the total project might be, whether getting in on the early works would typically position Byrd to win more work. How are you thinking about the lifecycle of that project?
spk01: Well, certainly, you know, I think the project's budget is something like $7 billion. So this is early works getting underway. You know, any of these large projects of this kind of scale obviously involve very high standards in quality and execution and safety. We've just developed a reputation for being certainly a go-to for this type of thing, no different than the activity we have at BHP's Janssen site. So it's really exciting for the company to have multiple Mega projects that were very active in, you know, because over the past few years, other than LNG Canada and Kitimat, that's kind of been the main mega project in the country that we would be interested in. So now you've got multiple sites, multiple projects, and this one, like I said, being probably more so than others because of the site's uniqueness, it certainly is a huge opportunity for us to grow into a major program on this project. And again, it's early days getting underway with early works, but very exciting and we're really pleased to be working on this project.
spk07: Thanks for your comments.
spk01: Thanks, Sean.
spk07: Thank you.
spk00: The next question comes from Maxim Sychev with National Bank Financial. Please go ahead.
spk06: Hi. Good morning, gentlemen. Hi, Max. A couple of quick questions, as most of them already asked. Terry, I was wondering if you have any preliminary thoughts around the infrastructure bank. that is being contemplated for Ontario and maybe when we could potentially see some projects being funded via that vehicle. Thanks.
spk01: Yeah, I'm honestly really excited about the Infrastructure Bank because it gives us an interface between, you know, the larger pension funds in Canada and Ontario, you know, into infrastructure investments. And as you know, over the years, you know, the prior vehicle was really P3s and oftentimes the, you know, the equity check wasn't significant enough for them really to get involved. So it's really exciting for me and for Ontario, for our company, to have this facility. It kind of reminds me of, to a certain extent, what happened in Quebec with the case. So I think this is great. I think it's a very smart strategic move for Ontario and allows, you know, in many of these projects that are evolving, they're collaborative now. So it's, you know, it's more complex to add the financing into a collaborative interface because more difficult for lenders to, you know, obviously engage in that type of thing. So with an infrastructure bank as the interface, it just takes, it solves that, you know, that framework. So I think it's a really smart step for the government. I think it's going to be a real catalyst for more more activity and in many cases I'm sure you'll see the Canadian Infrastructure Bank and the Ontario Infrastructure Bank funding new projects and their focus areas and areas that we're very focused on as well and we have a tremendous resume in. So I think it's a great step and It kind of solves somewhat some of the funding and creates a more efficient flow of larger pension funds into Ontario infrastructure where their pensioners are based. So I think it's great.
spk06: Yeah, yeah, for sure. And I guess, again, no concerns from your perspective around the contract structure. It's still kind of like in the wheelhouse in terms of the risk-reward profile from your perspective.
spk01: Yeah, it's really highly collaborative now. Most of the projects, there's the odd one that it's a P3, but it's pretty rare that you see the P3s now. It's all, especially brownfields, Messy, you know, sort of, um, projects that, you know, you, you, you just can't control all the stakeholders and all the. The risk, you know, and a complete risk transfer and, uh. We'll still do a P3 of it's, you know, the appropriate agency and a greenfield environment and we've had great success and. You know multiple projects and school bundles and OPP bundles here in Ontario and so we'll still look at one once in a while but you see less and less of that vehicle because a lot of this investment that's happening in very dense urban areas and it's the risks are that risk transfers just too high and there is an interest from the contracting community to pursue those projects so they have no choice but flip them to something that's a better balance between the client and the contractor.
spk06: Yeah, that's great to hear. And then maybe just one question for Wayne. In terms of kind of the working capital fluctuations, should we expect sort of a typical free-up for the upcoming Q4? Any changes from the pacing there, Wayne?
spk02: I think you'll see Q4 follow similar trends in recent years. We usually have a pretty large unwind of non-cash working capital into cash, and we expect that again. I think the revenue that we had in Q3 at $784 million, certainly higher than what the Q4 estimate is, kind of looking at consensus estimates. So, yeah, we'll see that flow probably historically similar.
spk06: That's a great call. Thank you very much.
spk01: Thanks, man.
spk00: The next question comes from Frederick Bastien with Raymond James. Please go ahead.
spk04: Good morning, guys.
spk02: Good morning.
spk04: Hi, Fred. We often see your ability to price in some better terms in your contracts is often a reflection of Basically, economics 101, there's limited supply, big demand for your services, so it allows you to tack in some better margins. What would you highlight as the biggest fan trader this year or the last several years in your ability to do that? Is it really a lack of competition or is the demand that much more significant?
spk01: I think I would best articulate it as it's the complexity of the projects, and there's a limited number of companies that can deliver projects with that kind of complexity and that type of safety performance and quality and delivery performance. I think it has a lot to do with that. We obviously over many years have developed that expertise coming out of oil and gas and oil sands with large, complex owners from around the world. So we have a deep bench of talent that can then move into emerging opportunities across Canada, such as nuclear. The team's worked very hard to transition to nuclear, and it's really impressive to see the growth in that space in three, four years' time since we started to focus on it coming off of... the backlog we had in oil and gas, and then coupled with the growth of the business at LMG Cannon and Kitimat, you know, rarely in the world do you see a megaproject be developed, you know, $18 billion on schedule and on budget. It's pretty rare. So when you're part of something like that, you have a resume that others are looking for because there's obviously a major team aspect to delivering a project with that success, and With that, obviously our phone has been ringing for more and more of that type of thing. I think when you boil it all down, you obviously need a return that justifies that capability and if you've got the resume. I think it has more to do with our resume than it really has to do with the market.
spk04: Super.
spk01: That's helpful.
spk04: Look at the work you've been winning. It seems like there's a fairly high percentage that is industrial-related work. Would you say that most of the options you're looking at right now are indeed industrial-focused?
spk01: Yeah, I would say a higher percentage is more of industrial, whether it's heavy industrial, whether it's light industrial. You know, there's a lot of activity, obviously, with the evolution of electrification and all the downstream impacts of that. A very exciting mining sector right now, which is obviously industrial-oriented. And we've got a big focus on the infrastructure side with the opportunities that are evolving. So, yeah, I'd say, you know, A high percentage is there, but there are many facets to that in terms of many different markets and markets and geographical markets that touch that, but that's clearly where our our strength is, and it's clearly where the margin profile suits the demand type thing. Yeah, it's a good way to kind of look at it as just saying projects with industrial orientation.
spk04: Just one last one for me. Investors are... I'm quite worried about the higher interest rates we're facing. Historically, it's really impacted construction activity. Obviously, you're less exposed to some of the most sensitive areas of the economy, but I just wanted to get your thoughts there. Have you seen any slowdown with any particular projects or any particular sectors?
spk01: Yeah, I think with so much momentum around the energy transition sector, I think, and you look across the types of projects that we're on, for example, Potash in Saskatchewan, those are long-term investments. Nuclear is a long-term investment. So they really cut through any short-term or medium-term economic pressure because these things, they take many years to get to FID. And then once they're at FID, they're moving and they And the types of companies that we obviously target are obviously the large blue-chip companies organization. So they're thinking longer term, put a lot of time and effort into it. So in that regard, there's more stability. I'd say that there's only a small percentage of the revenue that we do, probably less than 5%, that today has sensitivity to pressure on interest rates. And those would be projects that would touch the public, whether that's an apartment building or a commercial commercial projects where interest rates have an impact on. So it's a very small percentage of our current business. And it's also historically a percentage of our business that has lower margins. So at the end of the day, doing less of that is really our strategy to improve our margin profile and improve the accretion.
spk04: Thank you. Good luck keeping the momentum.
spk01: Thanks.
spk00: Once again, if you have a question, please press star, then one. The next question comes from Michael Tipome with TD Securities. Please go ahead.
spk03: Thanks. Good morning. First question is just around the fourth quarter. I think, Wayne, earlier you mentioned that you're comfortable with consensus. I think that was a comment on revenue, so perhaps you can just clarify that. But I guess the question is on the margin side of things. Historically, we've seen a lot of similarities between the margin performance in the third and fourth quarters. It sounds like there was a little bit of acceleration of some revenues in the third quarter that maybe helped things a bit in the third quarter. Just in your commentary, you're talking about kind of a more sort of normal performance, if you will, in the fourth quarter. So I'm just trying to get a sense for the fourth quarter margins. I mean, can we see some kind of a performance that's similar to what we saw in the third quarter, or should we be thinking more about a bit of a step back sequentially?
spk02: Yeah, so I guess a couple of things. So with the fourth quarter, you know, We're pretty comfortable with all of the consensus estimates that are out there, so revenue, EBITDA, EPS, and those things. I think in the margin in the fourth quarter, I don't know that we'll sustain the 6.3% that we had in Q3. I think through December, you'll probably start to see some of the equipment-related projects start to tail off a little bit and those types of things. So I think it's still gonna be really strong. but I don't think it's going to be at 6.3% for the quarter.
spk03: Okay, that's helpful. Thank you. And then, I mean, it's clear from your commentary that you do see an opportunity for margin improvement in 2024 versus 2023 on a full-year basis. I guess this is a little bit specific, but just looking specifically, again, at the third quarter of this year and thinking about modeling next year, I mean, is there room to continue to improve even off of – you know, even off the third quarter level you did this year when we look at next year's third quarter? Or is this sort of a high watermark that you did in the third quarter given some of the factors at play and we're really looking more at a full year improvement, not necessarily kind of every quarter of the year?
spk02: I think there is actually, like thinking about 2024 by quarter, I think there is opportunity to improve or even a margin in every quarter next year. I mean, some quarters might have a larger improvement than others, but I think Q3 2024 could see higher than 6.3. you know, percent EBITDA, but it might not be as large of an increase as what you might see in Q1 or Q2, you know, for example. But for the total year, I think you'll see a pretty significant improvement in EBITDA margins year over year. Yeah, and looking ahead, I mean, the company's been very focused on trying to improve our margin, you know, profile with the mix of work. You know, we have the sectors, the diversification, the companies that we're looking to do tuck-in acquisitions with are all margin accretive. So we think there's a good runway ahead of us to continue to improve margins going forward.
spk03: You're perfect. Thank you. And then maybe just, you just mentioned there tuck in acquisitions. Can you just comment on, I guess, sort of the pipeline, but also, I mean, is 2024 a year when we could see potentially additional acquisition activity, or are you still in the process of integrating and digesting what you've done in the last several years?
spk01: I think we have a team today, Michael, that's very experienced and have 20 plus years of focus on the M&A side. I think we're highly confident we'll be transacting over the next few quarters on opportunities that make sense. We constantly have a pipeline that obviously we're not setting any kind of targets on a year-over-year, but a lot of activity in that sector right now, obviously with our momentum and what outside companies are seeing that we do when we integrate an acquisition, You know it's very evident the success we've had so yeah, I think it's it's a nice fit for you know for For us right now, and you know our phone certainly has been ringing with opportunities, and we evaluate those carefully and You know regular discussions with our board about what we're doing but I It's certainly a robust pipeline, which would give you a high degree of confidence that you'll continue to see our business grow on the M&A side, coupled with all the organic growth we've got.
spk03: All right. That's all very helpful. Thank you.
spk01: Thank you.
spk00: This concludes the question and answer session. I will hand the call back over to Mr. McGibbon for any closing remarks. Please go ahead.
spk01: Thank you, everyone, for joining our earnings call this morning. And thank you to the entire BERT team for their safe delivery and dedication to excellence. With Remembrance Day approaching, I hope you have an opportunity to observe this important day and to take a moment to remember the brave individuals who have served and continue to serve our country. Thank you.
spk00: This concludes today's conference call and webcast. You may disconnect your lines. Thank you for participating and have a pleasant day.
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