Bird Construction Inc.

Welcome, ladies and gentlemen, to the Bird Construction second quarter 2024 results conference call and webcast. We will begin with Terry McKibbin, 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 when dialing into the conference number provided. At any time during the presentation today, you may press the Star then 1 on your telephone keypad to be placed into the question queue. You will hear a tone acknowledging your request. When we are 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, today all participants are in a listen-only mode and the webcast is being recorded. Should anyone need assistance during the conference call, they may signal for an operator by pressing star, then zero. Before commencing the conference call today, 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. At this time, I would now like to turn the conference over to Terry McKibbin, President and CEO of Byrd Construction. Please proceed, sir.

Thank you, operator. Good morning, everyone. Thank you for joining our second quarter 2024 conference call. With me today is Wayne Gingrich, Byrd's Chief Financial Officer. Before we proceed with today's call, I'd like to take a moment to honor the memory of Karen A. Brooks, our esteemed board member and chair of our audit committee who recently passed away. Karen joined us in 2017 and was a pillar of integrity and dedication. Her leadership and insight profoundly impacted Byrd. Our thoughts are with her family during this difficult time and we will commemorate her legacy with a donation to a charity chosen by her loved ones. Karen will be deeply missed and her contributions to Byrd over her tenure will continue to deliver benefits to the company going forward. Turning to today's presentation, Byrd continues to execute on our discipline growth strategy and reinforce our proven track record of operational excellence. The company's strategic focus on being a leading collaborative construction company continues to drive growth and better outcomes for all parties, and the strength of our balance sheet positions us to invest in profitable organic growth and pursue attractive acquisitions in today's active market. Turning to our second quarter financial highlights, BERT had another quarter of significant growth in revenue and profitability. Revenue was up 27% over a year ago to $874 million, and adjusted EBITDA increased 58% to $47 million. Adjusted EBITDA margin continued to improve, reaching 5.3% for the quarter, a full 1% better than a year ago. The company's operating cash flow before investments in non-cash working capital also grew significantly compared to last year. Our sustained financial performance reflects the progress we've made to date on our 2022 to 2024 strategic plan, setting a solid foundation as we head into the next phase of planning. The company's diverse and well-balanced combined backlog of work reached record levels in the quarter and remains over 90% low to medium risk contract types, with over 75% of the work being collaborative in nature. The demand environment is robust, and there remains a healthy pipeline of opportunities we are pursuing at accretive margins. BERT added almost $825 million in securements to its backlog in the second quarter, maintaining a backlog of contracted work totaling $3.4 billion at quarter end. The company's pending backlog of awarded work grew by over $300 million in the second quarter to $3.7 billion and includes almost $900 million of MSAs and other recurring revenue contracts. For its combined backlog continues to reflect increased embedded margins driven by the company's strategic focus on higher margin sectors and disciplined pursuit of new work, which gives us confidence that we will continue to improve margins through the second half of 2024 and beyond. Bird remains committed to profitability, discipline, diversification, and growth through our focus on margin accretion, organic growth, and accretive M&A opportunities. We continue to improve margins in our core business through discipline project selection, a risk balance mix of projects, collaborative contracts, and increasing our self-performed capabilities to cross-sell our scopes and services. We keep our sights set on productivity and efficiency enhancements as we grow to further leverage our cost structure, as well as targeting M&A sectors with specialized capabilities with higher margin potential. In line with this strategy, we're pleased to announce the successful completion of our acquisition of Jacob Brothers last week, which I will touch on more later in the presentation. Centered on driving growth across key markets and sectors that present robust opportunities over the longer term, our strategy includes expansion in our nuclear, mechanical, electrical, civil infrastructure, utilities, with an emphasis on energy transition and data-related infrastructure. BIRD continues to be a go-to partner for collaborative delivery of sophisticated, complex projects. During the second quarter of 2024, the company announced the award of five projects with a combined total of over $625 million. These projects include multi-year mine infrastructure in eastern Canada, three long-term care projects, and a multi-building institutional project in western Canada. Overall, we continue to be intentional in our project selection as we increase our self-performed capabilities and cross-selling opportunities throughout the organization, and we remain focused on long-term value creation. The electrification market continues to experience significant growth and transformation. In Canada, several key trends are shaping the market, including expansion of clean energy infrastructure, investment in renewable energy, regulatory support, and positive market projections. Our successful track record of serving top-tier energy and power clients across the country has set us up as the preferred partner in key markets, including wind, hydroelectric, nuclear, critical uranium mining, battery manufacturing, and other EV supply chain support infrastructure. BERT is well positioned for future opportunities in the energy transition landscape through our strong commercial systems and utilities, civil infrastructure, industrial construction, and industrial maintenance teams. Recently, we announced our collaboration in the Canadians for Can Do campaign. This initiative aims to promote the use and deployment of Can Do nuclear technology at home and abroad not only help Canada achieve net zero emissions, but maintain a strong domestic nuclear industry. BERT is proud to champion expansion of our domestic technology for a cleaner, more prosperous future for Canadians and contribute to global efforts towards a net zero future. BERT is well positioned to capitalize on the significant tailwinds presented in both the public and private sectors. Driven by global population growth, urbanization, aging infrastructure, and energy transition investments, we are seeing elevated spending across our key industrial buildings and infrastructure markets. As we look ahead, we expect these positive conditions to propel our business forward over the medium to long term. Our transformed business model continues to create value through a collaborative framework, allowing us to leverage our self-perform and cross-selling abilities to capitalize on future opportunities. We remain focused on higher margin market sectors for continued bottom and top-line growth. Public sector continues to present a robust market for opportunities with growth, innovation and sustainable development. The recently announced launch of the Canada Public Transit Fund, $30 billion investment that represents the largest public transit investment in Canadian history, will invest an average of $3 billion per year to help cities and communities across the country to deliver better, more accessible public transit systems for Canadians. As mentioned in the previous slide, the energy transition continues to grow the renewable energy market in response to Canada's need to roughly double its electrical supply. Investments into energy generation projects continue to climb in the 2024 federal budget, reiterating commitments to invest in nuclear as clean energy technology, including Canada's infrastructure bank's $970 million investment into our power generation's grid-scale SMR project, and a proposed $3.1 billion investment over 11 years in support of Canadian nuclear laboratories work. In the province of Ontario, the government is investing $155 million to fast start construction of the next tranche of long-term care homes, as well as an additional $1 billion investment in core infrastructure projects and $50 billion over the next 10 years in health infrastructure. Currently, BC represents the largest infrastructure market in Western Canada with a robust pipeline of opportunities through longer term across transportation, utilities, power, housing, institutional, and public facility sectors. Both the provincial and municipal governments of BC have committed substantial funds to various infrastructure projects, including significant modernization and expansion efforts across transportation and power sectors. Examples of these efforts include Vancouver International Airport's $9 billion expansion plan that is underway until 2037, report of Vancouver's $3 billion expansion to enhance capacity and efficiency over the next six years. BC Hydro's $1 billion plan to upgrade the electrical grid in 2024 with a 10-year plan indicating over $36 billion in investments. Additionally, BC Mining Association has reported a near-term investment of $36 billion to help 16 proposed critical mineral mines. Last week we're happy to officially welcome Jacob brothers to the bird team, supporting our capability to capitalize on the significant opportunities available in BC. This acquisition allows us to pursue projects of varying size complexity and scope, allowing us to cross sell or combine self performed services and offer more comprehensive solutions to our clients. Jacob Brothers was a privately owned civil infrastructure construction business headquartered in Surrey, B.C., with a highly skilled workforce of approximately 350 salary and craft personnel who will continue to deliver their services under the Jacob Brothers brand. Jacob Brothers brings significant self-performed capabilities that complement Bird's already extensive scopes and services, specializing in infrastructure projects including airports, seaports, rail, bridges, structures, earthwork, energy projects, and utilities. Jacob Brothers also brings expertise in specialized projects that require innovative purpose-built custom solutions and leverage their suite of comprehensive services. These projects range across multiple sectors, including healthcare, education, and light industrial. The leadership team has built a strong people-first culture and, like Bird, provides their employees with the tools they need to execute successful projects and build long-term construction careers. The company has a strong cultural safety and proven track record of safe operations. The current leaders, Scott and Tom Jacob, bring extensive experience and leadership to Byrd. Both leaders will continue as part of the Byrd executive team, and as previously announced, will lead our Western infrastructure business, including Jacob Brothers. The acquisition of Jacob Brothers was compelling for several key strategic, operational, and financial reasons. The transaction advances Byrd's strategy to build out a national full-service infrastructure vertical. Over the past few years, we have strategically diversified our revenue sources through organic growth and strategic M&A, while at the same time, we have significantly enhanced our profitability. On a full-year basis, Jacob is expected to generate approximately $300 million in revenue, $37 million of adjusted EBITDA, adding significant growth to Byrd's infrastructure vertical. The company also brings a robust project backlog of approximately $350 million, including significant infrastructure projects across multiple sectors. Jacob Brothers Self-Performed Services, along with their special projects expertise, is expected to accelerate Byrd's adjusted EBITDA margin accretion and support further shareholder value creation with an anticipated 10% increase to adjusted EPS on a full-year basis. As with past acquisitions, we're heavily focused on post-acquisition growth, and we see significant upside potential from cross-selling opportunities and other synergies in the combined business. Wayne will now cover the financial highlights for the quarter.

Thank you, Terry. Burt's second quarter continued to deliver substantial revenue and earnings growth, executing record high volumes of work in the quarter and delivering earnings growth that significantly outpaced revenue growth. Construction revenue for the second quarter of $873.5 million represented a 27% increase compared to the same period in 2023. On a year-to-date basis, revenues of $1.56 billion for the first half of 2024 were $339 million, or 28% higher than 2023. The growth for both the quarter and first half of 2024 was over 90% organic. The company's gross profit margin improved in the quarter compared to 2023, increasing to 8.6% from 7.9%. The improvement continues to be driven by the company's highly collaborative work program with higher embedded margins and backlog and pending backlog, resulting from BIRD's strategic focus on higher margin sectors, disciplined project selection, and the benefits of leveraging BIRD's self-performed capabilities and cross-selling opportunities across our business units. On a year-to-date basis, gross profit margin was up 60 basis points to 8.3% compared to last year. General and administrative expenses were 43.6 million, or 5% of revenue for the quarter, and include 1.3 million of transaction costs related to our recently completed acquisition of Jacob Brothers. This compares to 36.2 million, or 5.3% of revenue in the second quarter of last year. The company continues to gain leverage on its cost base, gaining efficiencies as the company continues to grow. Adjusted EBITDA in the second quarter is 46.6 million, a 58% increase over the $29.5 million reported a year ago. Adjusted EBITDA margins continue to increase on a year-over-year basis, reaching 5.3% for the quarter and 1% better than last year. Turning to earnings, net income and earnings per share were $21.4 million and 40 cents, respectively, compared to $13.7 million and 26 cents in 2023, Adjusted earnings and earnings per share were $22.7 million and $0.42 compared to $15.7 million and $0.29 in 2023. The weighted average shares outstanding for the second quarter of 2024 was 117,000 shares higher than 2023 due to the acquisition of NORCAN in the first quarter. BIRD's healthy balance sheet and strong operating cash flow generation are differentiator for the company and support our strategic growth initiatives, including the ability to pursue attractive M&A opportunities, such as the Jacob Brothers acquisition we announced in June and completed in August. In connection with the acquisition, BIRD took the opportunity to amend its syndicated credit facility, extending the maturity of one additional year to 2027 and expanding the revolving facility to 300 million to support the larger combined company The company also increased its term loan facilities to $125 million, allowing for the repayment of existing term loans and funding a portion of the Jacob Brothers acquisition. Burt closed the second quarter with $102 million in cash and cash equivalents and an additional $197 million available under our revolving credit facility, allowing the company to continue 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. We expect Byrd's operating cash generation will remain strong for the year, commensurate with the significant revenue and profitability growth being delivered. Excluding seasonal and growth-related investments in non-cash working capital, operating cash flow generation was up 65% for the quarter and 69% year-to-date compared to last year. With the seasonal increases in non-cash working capital unwinding over the second half of 2024, we continue to expect positive operating cash flows for the full year. The company's working capital of over $244 million at the end of the second quarter, supported by liquidity available under a syndicated credit facility, are more than sufficient for the company to execute its backlog and to accommodate expected growth in our diversified work program. The company has a current ratio of 1.25 times, and our adjusted net debt to trailing 12-month adjusted EBITDA ratio stands at 0.86 times. BIRD's long-term debt-to-equity ratio is 20% at the end of the quarter. Over the past four years, BIRD's revenue, adjusted EBITDA, and adjusted EBITDA margins have experienced a period of sustained growth. Trailing 12-month revenue has grown at a compounded annual growth rate of 22%, over doubling the company's annual revenues. Adjusted EBITDA has grown at a compounded annual growth rate of 35% over the same period. Trailing 12-month adjusted EBITDA margins increased from 3.6% to 5.2%, reflecting management's strategic focus on margin accretion, with further opportunity to expand through 2024 and beyond. As Terry mentioned earlier in today's presentation, the company's margins have been continually improving in our backlog and pending backlog. These improvements have been driven by efforts over the past several years to diversify into higher margin sectors with a disciplined focus on project selection and an appropriately risk-balanced work program with greater use of collaborative contracting methods, which Byrd believes delivers better outcomes for all stakeholders. Margins have also benefited from leveraging Byrd's expanding self-perform capabilities and increased cross-selling opportunities between our business units and newly acquired assets, This can be seen in the results for the second quarter of this year, where we took another big step up in our margins leading into the second half of the year. BERT continues to follow a balanced capital allocation strategy, supporting the company's business growth, profitability, and enhanced long-term shareholder value through a combination of M&A, smart capital investments, and returning capital to shareholders through dividends. The company continued to invest in equipment to support our growing work programs in the second quarter, and returned over $13 million to shareholders through our monthly dividends in the first half of 2024. Byrd completed the acquisition of Norcan in the first quarter and announced the acquisition of Jacob Brothers in the second quarter, which was completed on August 1st. For full year 2024, the company expects to retain greater than two-thirds of net income to support growth. I will now turn the call back to Terry to comment on the outlook for the company.