Bird Construction Inc.

Welcome, ladies and gentlemen, to the Bird Construction fourth quarter 2023 results conference call and webcast. We will begin with Terry McGibbon, 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 in to the conference number provided. At any time during the presentation today, you may press star, then 1 on your telephone keypad to be placed into the question queue. You will hear a tone acknowledging your request. When you'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 2. 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 overlooking information. Therefore, the company cautions today's participants that such overlooking 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 McKibbin, President and CEO of Bird Construction. Please go ahead.

Thank you, Operator. Good morning, everyone. Thank you for joining our fourth quarter and full year 2023 conference call. With me today is Wayne Gingrich, BIRD's Chief Financial Officer. Before we begin, I'd like to take a moment to acknowledge that this week we celebrate Women in Construction and International Women's Day on Friday. It's an opportunity for us to recognize the remarkable women at BIRD who inspire us daily. Today we also reflect on the ongoing journey towards gender equity, a path that we are committed to pursuing. At Byrd, we understand the value of diversity and allyship, which we actively foster through initiatives like our Women at Byrd Employee Resource Group and meaningful external partnerships. While we have made progress, there's still more work to do, and we are dedicated to fostering a more inclusive industry. Turning to today's presentation, this past year has been a period of significant achievement for Byrd, underscored by robust revenue growth, further margin improvement reflecting the strength of our strategic plan, the strong reputation we have built with our clients, and the dedication of our teams across the country. Our diverse capabilities to deliver sophisticated work and our position as a leading collaborative construction and maintenance company remain competitive advantages which we intend to leverage in 2024 and beyond as we continue to focus on growth and margin expansion. For its fourth quarter and full year results delivered substantial organic revenue growth and continued gross profit and EBITDA margin accretion aligned with our corporate priorities. Our 2023 results provide good momentum for the company as we enter 2024 in the final year of our current strategic plan. In 2023, we delivered 18% revenue growth with full year revenue of $2.8 billion. Adjusted EBITDA improved 37% year-over-year to $139 million, or 5% of revenue. The company reported $72 million of net income and earnings per share of $1.33. We grew our cash flow from operations and significantly grew our backlog reflected in the 1.29 times book-to-bill ratio. We continue to see considerable opportunities for profitable improvements, including additional leverage on our cost structure in the coming years. BIRD was awarded over $3.6 billion in securements for the year, and at year end, our combined backlog was up 26% over last year, closing the quarter with $3.4 billion in backlog and $3 billion in pending backlog. Our pending backlog included almost $1.1 billion of master service agreements and recurring revenue work, which will be performed over the next seven years. Our portfolio of master service agreements spans the energy, mining, and nuclear sectors. It was further bolstered through the acquisition of Norcan subsequent to the year end, which was one of Alberta's leading electrical service providers. The robust foundation of contracted and ordered work provides significant visibility into 2024, both for revenue growth and further margin improvements. It underscores our confidence in the continued demand for our services, particularly in sectors critical to the energy transition population growth, and infrastructure modernization. Our backlog is highly collaborative and diversified across many sectors, and Bird is a leader in collaborative contracting in Canada. In collaborative contracts, we work closely with clients and partners to advance the design before determining the project's price. Given the increasing complexity of projects, a key area of expertise for Bird, a collaborative approach is a better way to build. There are significant benefits for all parties involved, including decreased risk, increased stakeholder engagement, added value for the client, and the delivery of an enhanced final product. First, growth and profitability improvements to date are a testament to our team's ability to leverage self-performed capabilities and effectively cross-sell our services and solutions. 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 the delivery model. Our emphasis on collaborative project delivery and strategic investments in technology continue to enhance safety, productivity, and partnerships across all projects. Over the past few years, BERT has strategically diversified its revenue sources through organic growth and strategic M&A. Throughout this transition, BERT has significantly enhanced profitability. As part of our 2023 reporting, we have realigned the annual revenue breakdown to better align with BERT's focus areas and position in the industry. Previously, Byrd referred to its revenue breakdown as institutional, commercial, and industrial. Today, Byrd is known for delivering sophisticated projects in the industrial, buildings, and infrastructure markets. Due to this shift and aligned with our messaging over the past few years, the figures have been restated for 2021, 2022, and 2023. More information on what each segment includes can be found in the Nature of Business section of our MD&A. While great progress has been made, to date advancing BIRD's strategy, there's still a significant runway of expansion and diversification opportunities that will continue to support margin accretion and drive forward BIRD's growth strategy over the coming years, especially in the underweighted infrastructure market. In 2023, BIRD announced many significant project awards that underscore our expanding presence across key sectors, including energy, power, education, modular construction, as well as infrastructure projects across Canada. These awards not only reflect our strategic positioning, but also the enhanced capabilities we've gained through strategic acquisitions, establishing us as a sought-after partner for sophisticated projects. Throughout the year, we were awarded several projects in the post-secondary education sector across BC, Alberta, Ontario, and the East Coast. These projects capitalized on BIRD's expertise in creating sustainable, smart environments while highlighting our strength in lower-carbon building solutions like mass timber. Our clients are increasingly committed to sustainable construction and retrofits to minimize their carbon footprint, a space where Byrd's offering aligned with market needs. We were pleased to be awarded early works at a new LNG facility in BC, as well as multiple mining contracts showing the current strength of the commodities market, but also the strong leadership and dedication of our heavy civil team. Byrd was awarded multiple hydroelectric-related projects, that aim to enhance the longevity and efficiency of existing facilities, an essential component of Canada's clean energy future. We previously highlighted Bird's role and current project portfolio in supporting the energy transition and shift to a lower carbon future. The industry's overall strong demand is complemented by this exceptional outlook for investments in clean power generation, power distribution, and preparations for further electrification, including battery and EV infrastructure. There is also a considerable focus on enhancing the energy efficiency of existing infrastructure and expanding public transportation. For its capabilities, especially our self-performed electrical expertise uniquely position us to meet this significant long-term demand. Currently, projects underway range from hydroelectric infrastructure and large-scale utility-scale renewables to work on Ontario's nuclear sites, waste-to-heat recovery at Toronto Western Hospital, and various wastewater and organic waste processing facilities across the country. Our commercial systems and utilities team and our industrial maintenance, repair, and operations team, along with their specialized mechanical, electrical, telecommunication, and data systems expertise, make up over 2,500 electrical personnel. These teams are and will continue to be critical to meet the demand for electric infrastructure across Canada. With our buildings expertise, BIRD employs sustainable building solutions such as mass timber, modular construction, deep energy retrofits, net zero buildings, innovative special projects, smart building technology, just to name a few. A growing civil infrastructure team recently secured the East Harbour Transit Hub Alliance Development Agreement in partnership with Atkins Realis. With BIRD's strong reputation developed by supporting many of Canada's leading energy and power clients over the years, We're well positioned as a partner of choice throughout the energy ecosystem. There's currently strong demand for bird services across the industry and a significant backlog of projects required for the longer cycle investment horizons in both public and private sectors. Government programs are supporting investments in transportation, energy, water, and telecommunications. This includes funding through the Investing in Canada Plan, the Canadian Infrastructure Bank, Canada Growth Fund, and other federal initiatives aiming to modernize critical aspects of our daily lives and enhance economic growth. Specifically, the shift towards a greener economy requires substantial investment with an estimated $125 to $140 billion required to achieve the federal goal of net zero emissions by 2050. This is a significant opportunity for our industry. Canada's energy sector is facing an estimate of doubling our electricity supply to keep up with increasing demand as well as achieving net zero in 2050. Projected investments range from 110 to 270 billion to expand clean energy and improve power distribution and transmission systems. Public transportation continues to be a significant area of growth. with over $70 billion in funding recently committed in Ontario, as well as additional demands across the balance of provinces, reflecting the commitment to enhance our public infrastructure. Lastly, the nuclear sector holds over $40 billion in new potential projects, not including general annual spending. High-profile initiatives like the Bruce nuclear expansion, the Pickering refurbishment, and the small modular reactor infrastructure program highlight the sector's positive outlook. Together, these investments reflect a robust long-term demand for our services, positioning us at the forefront of this transformative era in Canadian infrastructure development. Looking ahead to 2024 and beyond, our optimism is fueled by our strong backlog, diversified service offerings, and strong commitment to our strategic priorities. As we head into the last year of BIRD's current strategic plan, we remain firmly focused on profitability, discipline, diversification, and growth. We expect to retain in excess of two-thirds of net income to support our growth in 2024 and beyond while continuing to provide healthy returns to shareholders. With that, I'll hand it over to Wayne, who will provide more detailed insights into our financial performance.

Thank you, Terry. We're very pleased with our strong performance in 2023. The company has safely advanced our strategic priorities, and we delivered significant organic growth, continued accretion of adjusted EBITDA margins, and strong operational cash flows. In the fourth quarter, the company delivered 22% year-over-year revenue growth, with revenue for the quarter of $792.1 million. The company's margin profile improved in the quarter compared to the prior year, with growth profit percentage increasing to 9.2% from 8.8%. The increase in growth profit margins continued to be driven by improved margin profiles on newer work resulting from disciplined project selection and cost control, growing self-performed capabilities, and cross-selling opportunities across the company, and a higher proportion of industrial construction compared to Q4 2022. General and administrative expenses were 40.5 million, or 5.1% of revenue, compared to 34.5 million, or 5.3% of revenue in 2022. One of the primary drivers of the $6 million increase in the quarter with 3.2 million in higher compensation costs, which includes the impact of increased accrued compensation costs, share-based compensation costs, and related derivatives. Compensation costs in the quarter were higher compared to the prior year, due in part to the significantly higher volume of work and profitability, as well as the 44% increase in the company share price for the quarter. Net income and earnings per share were 23.9 million, or 44 cents, compared to $14.9 million or $0.28 in 2022. Adjusted earnings and adjusted earnings per share were $24.3 million or $0.45 compared to $15.5 million or $0.29 in 2022. Adjusted EBITDA in the fourth quarter was $43.9 million compared to $30.6 million earned in the fourth quarter of 2022, increasing to 5.5% of revenue from 4.7% last year. The increase was consistent with higher growth profit and an increase in income from equity-accounted investments, as well as leverage gained on our cost structure. Results for the full year reflect our team's strong project execution with significant revenue growth and profitability improvements. We reported revenues of almost $2.8 billion, reflecting an 18.1% or $429 million increase compared to $2.37 billion of construction revenue recorded in 2022. Revenue growth was predominantly organic, with additional contributions from Trinity acquired on February 1, 2023. Gross profit for full year 2023 was $240.5 million, reflecting an 8.6% margin, up from 8.5% in 2022. The company's highly collaborative work program, growing backlog with enhanced margin profiles, and expanded self-perform capabilities continue to drive strong growth profits on significant revenue growth. General and administrative expenses were $142.8 million, or 5.1% of revenue for the year, compared to $132.4 million, or 5.6% of revenue in 2022. The primary drivers for the $10.4 million year-over-year increase were acquisition and integration costs and asset impairments from the rationalization of some leased office space during the second quarter. Other drivers included higher compensation costs and higher aggregate growth-related increase to other costs such as travel, business development, recruitment, and pursuit costs. Full year net income and earnings per share were $71.5 million, or $1.33 per share, compared to $49.9 million, or $0.93 per share in 2022. Adjusted earnings in 2023 also increased significantly to $74.2 million, or $1.38 per share, compared to $46 million or $0.86 per share in 2022. Adjusted EBITDA increased 37% to $138.7 million or 5% of revenue from $101.2 million or 4.3% in the prior year. The increase was consistent with increases in growth profit and income from equity-accounted investments. We continue to focus on profitability drivers, including our disciplined project selection and risk balance mix of work. We're growing in higher margin sectors with more complex work, increasing self-perform work, and expanding cross-selling initiatives, all of which contribute to higher margin potential on projects. We're also focused on growing our portfolio of recurring revenue MSAs. To support our continued growth, Byrd's highly valued team grew in 2023 to meet the needs of Byrd's expanding work programs, with Byrd being successful in attracting, retaining, and developing talent throughout the year. Our financial position remains robust, with a strong balance sheet characterized by significant liquidity and a net cash position when considering just our accessible cash. This financial strength provides the flexibility to invest in growth opportunities, both organic and through strategic acquisitions. We ended the year with $178 million in total cash and cash equivalents and an additional $215 million available under the company's syndicated credit facility. When including total cash, Our net deposition is negative $104.6 million. Byrd recorded positive cash flows from operations while funding the working capital required to support the significant growth of our work program. At the end of the year, working capital stood at $234 million, an increase of $49.4 million over December 31, 2022. The primary driver of the increase was net income of $71.5 million exceeding dividends paid. Verge working capital ensures support for current and future contractual requirements. Our liquidity and leverage ratios and very positive return metrics remain aligned with expectations. The company's current ratio is 1.26. Our adjusted net debt to trailing 12-month adjusted EBITDA ratio stood at negative 0.05 times. And our long-term debt-to-equity ratio was 20%. The company's return on equity for the year was 27%. together demonstrating our commitment to maintaining a healthy and sustainable capital structure. BIRD's capital allocation strategy remains focused on balancing growth with healthy dividend returns, with the company investing in excess of two-thirds of net income to support growth. Throughout 2023, we invested $31 million in capital expenditures to support our operational needs and growth initiatives. Our dividend policy reflects our strong financial performance and confidence in the business's future, with over $22 million returned to shareholders as dividends in 2023. Our dividend remains well covered by our earnings and cash flows and remains an important component of our total shareholder return strategy. In December 2023, based on the strong outlook for 2024, we announced a 30% increase to the dividend, bringing it to 4.67 cents per share per month, or $0.56 per share on an annualized basis. Byrd continued to pursue accretive tuck-in acquisitions with high growth potential, notably with the acquisition of Trinity in February 2023 and Norcan, which was announced subsequent to year end. The company has continued to experience robust performance from earlier acquisitions, upholding our reputation as a strong integrator in delivering accretive transactions for shareholders. M&A remains a key element of Byrd's capital allocation and growth strategy. Our M&A strategy is targeted seeking to integrate firms with specialized offerings that complement our existing services, focusing on strategic sectors like civil infrastructure, process mechanical, electrical, MRO services, utilities, and renewables. The strength of the company's balance sheet and access to financing supports our disciplined approach to investing in Byrd's future growth, both organically and through opportunistic tuck-in acquisitions. We are well positioned to pursue accretive tuck-ins in key sectors and remain open to larger opportunities where it makes sense. I will now turn the call back over to Terry to comment on the outlook for the company.