Bird Construction Inc.

Welcome, ladies and gentlemen, to the Bird Construction Fourth Quarter and Full Year 2024 Results Conference Call-In Webcast. We will begin with Perry McKibben, 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, all participants are in listen-only mode and the webcast is being recorded. Did anyone need assistance during the conference call? You may signal an operator by pressing start and 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 involve 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 meaning under IFRS and may not be comparable with similar measures presented by other companies and are therefore considered non-GAAP measures. I would like to turn the conference over to Terry McKibbin, President and CEO of Byrd Construction.

Thank you, operator. Good morning, everyone. Thank you for joining our fourth quarter and full year 2024 conference call. With me today is Wayne Gingrich, Byrd's Chief Financial Officer. Before we get started, I'd like to take a moment to commend our teams who came together to celebrate Women in Construction Week and International Women's Day. We're just proud to recognize and participate in these celebrations that remind us of the invaluable contributions that women make to our industry and the importance of driving progress towards greater equity and inclusion. While these moments of recognition are important, our commitment extends beyond a single day or week. We remain dedicated to ensuring all voices are heard, valued, and empowered. Reflecting on the past year, BERT delivered strong financial results and surpassed our internal 2022 to 2024 strategic plan targets and set a solid foundation as we enter 2025. BERT's revenue grew by almost $600 million to $3.4 billion. Our EBITDA margins improved by 1.3% to 6.3%, and our adjusted earnings and EBITDA grew at double the pace of revenues. The significant growth and margin expansion was driven by strategic choices made over the past few years to diversify our business, expand our self-perform capabilities, and risk balance our work programs with more collaborative contracting structures. These choices included the acquisition of businesses with strong performance and high growth potential, such as Dagmar, Trinity, Norcan, and most recently, Jacob Brothers, which have significantly expanded Byrd's national infrastructure presence, underground utility, overhead telecom, along with additional electrical, mechanical, and instrumentation capabilities. As we cover in greater detail in today's presentation, our combined backlog and pipeline of potential opportunities remain strong and risk-balanced. Our balance sheet is healthy and has flexibility to support BIRD's future growth, and we continue to deliver value to our shareholders. BIRD's $7.6 billion of combined backlog remains strong, diversified, and risk-balanced. Our backlog of contracted work was $3.7 billion, while pending backlog representing awarded work that has not yet been contracted was $3.9 billion and continues to include almost $900 million of master's works agreement and other recurring revenue. Similar to the company's revenue profile, BERT's combined backlog is primarily comprised of collaborative low- to medium-risk contract types. With collaborative contracts, we have the ability to negotiate items such as tariffs as flow through costs, ensuring they are treated as contractual adjustments. Other contracts, which represent less than a quarter of our work program, are typically smaller in scope, shorter in duration, and have a high proportion of subcontracted work, mitigating the impact of cost increases. Having key lessons learned from the pandemic, and as tariffs have been a common narrative throughout the U.S. election, Our teams have taken a proactive approach to de-reserve our contracts. We have ensured that risk is either passed down to subcontractors or retained by our clients, further mitigating exposure for burden. So, in summary, we are comfortable with the associated potential tariff risk in our $7.6 billion combined backlog. We continue to focus on key strategic sectors with long-term demand drivers, on winning additional work packages, on large capital investment projects, and on growing our recurring revenue base. Recent project wins highlight this focus, including project rewards in nuclear, civil infrastructure, industrial maintenance, and transportation. Looking ahead to 2025, BERT expects significant conversions pending backlog to backlog, particularly in the first half of the year, as several large collaborative projects advance to the construction phase. As these projects transition into execution, the remainder of the work program will be fully contracted and give us good visibility into revenue growth and margin improvements for 2025 and beyond. At the company's investor day this past October, we outlined Byrne's 2025 to 2027 strategic plan. The plan builds on our foundation of operational excellence and safe execution demonstrated during the 2022 to 2024 strategic plan, further enhancing our industry-leading talent and capabilities and expanding in the strategic market sectors and targeted large capital investment projects. We highlighted each of our infrastructure, buildings, and industrial operations in the key market sectors that we expect to focus on, including those that we believe are more economically resilient and supported by long-term drivers. On October Investor Day, we introduced the company's 2025 to 2027 financial targets. These targets include 10% plus or minus 2% organic revenue with compounded annual growth through 2027, with 2025 benefiting from an additional 5% from the inclusion of a full year of Jacob Brothers. This growth is expected to be driven by above-market growth in infrastructure and industrial, and in-line market growth for buildings resulted in a relatively balanced revenue across our business by 2027. 8% EBITDA margin is our target for the full year 2027. The added lift from the inclusion of a full year of Jacob Brothers in 2025, the remaining 170 basis point increase from our 2024 full year margin of 6.3% seems well within reach. Finally, in line with our discipline and balanced capital allocation strategy, we remain committed to returning 33% of that income to shareholders through a dividend retaining two-thirds to support organic growth and strategic M&A, as well as capital investments technology and equipment to support further productivity and growth. To achieve these 2025 to 2027 goals, we will continue to expand industry market sectors and participate in targeted large capital investment projects, demonstrating our operational excellence and continued commitment to a balanced capital allocation strategy. The transformation of our business over the past few years has created an economically resilient foundation, and today BERT is extremely well positioned to benefit from significant long-term demand in strategic sectors across Canada. These sectors include defense spending, transportation infrastructure, power infrastructure, including nuclear and hydro generation and refurbishment, regeneration, health care, long-term care, industrial maintenance, and oil and gas, including major investments in LNG. These sectors are expected to continue to require substantial investment from the private and public sectors over the coming years and are less susceptible to short-term volatility resulting from economic and geopolitical uncertainties. As outlined here, the annual addressable markets for our teams across infrastructure, buildings, and industrial are significant, and the demand environment remains robust. On slide 7, we highlight two key sectors, rail and defense, each of which presents significant opportunities for ERG. Bird is a key player in delivering critical transit infrastructure, and this is an important growth area. Just last week, we announced that Rail Connect Partners, our 50-50 JV with Atkins Rialis, finalized and signed a project alliance agreement with Metrolinx to deliver the East Harbor Transit Hub in Toronto. This marks the commencement of the execution phase of the project. Beyond our joint venture with Atkins Rialis, this project creates one bird's contracting opportunities for teams like Dagmar, and our committed commercial systems group. With a significant addressable market in this sector, there continues to be opportunities for growth. Defense. The current geopolitical environment, including Canada's commitment to meeting its 2% GDP NATO defense spending obligation, is driving substantial investment in this sector, and this translates to a significant demand for birds. An example of this is a recent announcement of the Arctic Security Strategy consisting of $2.7 billion over 20 years for three northern military hubs. There's also a significant focus on energy security and border security, making Canada more self-reliant and resilient, all of which would create additional opportunities. These hubs are targeted to be built in Yellowknife, Nunavut, and Iqaluit. In recent years, we've built a full-service hospital in Yellowknife. and a 75-room hotel in Iqaluit. We have current activity underway in Nunavut in oil and gas and social infrastructure, as well as other areas in the remote north for social infrastructure currently at the pre-con level. We have deep experience in the north and remote Canada with positions as well for these emerging opportunities. We have a long history of working with Defence Construction Canada, having completed $1.3 billion in activity over the past 10 years. current levels of activity across all major bases in Canada, as well as the new hubs create opportunities that dwarf previous investments. So we're excited about this sector. We have a long-standing partnership with Indigenous communities to position us as a strategic contractor of choice. Another key element of our growth strategy is our participation in large capital investment projects. We refer to these client-driven investments as projects that exceed $1 billion, They're typically divided into multiple scopes, creating opportunities for expansion on site. Bird is recognized as a Tier 1 contractor, trusted by Blue Chip Chalk clients to deliver construction services for these highly complex, high-value projects, often through collaborative contract models. Our teams are in high demand for their focus on safety and operational excellence and their self-performed capabilities. Additionally, Bird is built strong in its partnerships. and joint ventures which are important to support sustainable, positive community impacts that benefit local communities. The advantage of these large capital project investments is the ability to expand our role over time. Often begins with one or two work packages and through a strong performance, we continue securing additional scopes, significantly growing our total portfolio on site. A great example of this is our experience in LNG Canada, where our teams ultimately completed over 1.3 billion in contracts. These successive wins contribute directly to achieving our overall business targets. These projects are highly complex, often in remote regions, and are largely self-performed, aligning well with their capabilities and commitment to operational excellence. We've highlighted a selection of large capital investment projects. We are currently executing work on this slide. This is not an exhaustive list, but it showcases the scale and diversity of some projects that are driving our continued growth. I'll now hand it over to Wayne to cover our fourth quarter and full year 2024 financial performance in more detail.

Thank you, Terry. The first fourth quarter was a continuation of the strong performance we saw throughout 2024 marked by significant revenue growth, margin accretion, and earnings and operating cash flow improvements that significantly outpaced revenue growth. Construction revenue for the fourth quarter of $936.7 million represented an 18% increase compared to the same period in 2023. On a full-year basis, revenues of $3.4 billion were 21% higher than 2023. Almost half of the 18% growth from the quarter was driven by organic sources. The remainder of the revenue growth was driven by Jacob Brothers, acquired in August 2024, and Norcan, acquired earlier in the year. The company's gross margin profile in the fourth quarter of 2024 continued to improve compared to the prior year, with gross profit percentage increasing to 10.3% compared to 9.2%. On a full-year basis, gross profit percentage was 9.7%, 110 basis points higher than in 2023. All groups contributed to the increase in growth profit margins, with the majority of the margin increase driven by higher growth in industrial and infrastructure, which have favorable margin profiles and higher proportions of self-performed work. The increase in growth profit continues to reflect the improved margin profiles on newer work resulting from disciplined project selection, strong project execution, growing self-performed capabilities, and cross-selling opportunities across the company. Adjusted EBITDA in the fourth quarter was $71.9 million compared to $43.9 million reported a year ago, representing a 64% increase. Adjusted EBITDA margins continue to increase on a year-over-year basis, increasing from 5.5% to 7.7% in the fourth quarter. Adjusted EBITDA for the full year was $218.8 million, $212.8 $212.8 million, or 6.3% of revenues, compared to $138.7 million, or 5% of revenues in 2023, representing an increase of 53%. Turning to earnings, net income and earnings per share were $100.1 million and $1.84, compared to $71.5 million and $1.33 in 2023, representing increases of 40% and 38%, respectively. Adjusted earnings and adjusted earnings per share were $37.3 million and 67 cents compared to $24.9 million and 46 cents in 2023. The weighted average shares outstanding for the fourth quarter of 2024 was 1.6 million shares higher than 2023 due to the acquisitions of Jacob Brothers and Norcan in the current year. And before we move on, We wanted to call out that with the increased number and size of recent acquisitions, the company's definition of adjusted earnings was revised in the quarter to exclude the non-cash amortization of acquisition intangible assets, such as customer relationships, brand names, and backlog. Our revised definition is now more aligned with our peers in the E&C sector who already knew this and were adjustable. As we noted in the prior presentations, Burge Revenue, Adjusted EBITDA, and Adjusted EBITDA margins have experienced a period of sustained growth over the past several years, resulting in revenue growing to $3.4 billion and Adjusted EBITDA growing to $213 million at the end of 2024, representing a 6.3% Adjusted EBITDA margin. Over the past few years alone, we have seen revenue grow by over $1 billion, and our Adjusted EBITDA margin improved by 200 basis points. As we look to build on this economically resilient foundation toward the company's 2025 to 2027 growth and profitability targets, our 10% plus or minus 2% organic revenue CAGR target would see Byrd at approximately $1.4 billion of additional revenue over the next three years and continue to improve our EBITDA margin by an additional 170 basis points to 8%. This growth is supported by our focus on key Canadian market sectors, that have long-term demand drivers and accretive margins. Our existing near-term record combined, near-record combined backlog of lower risk contract profiles with accretive margins gaining additional leverage on our cost structure and our focus on driving proportionately higher growth in our industrial and infrastructure businesses through 2027. BERT's healthy balance sheet and strong operating and free cash flow generation remain a differentiator for the company. supporting our strategic growth initiatives and our balanced capital allocation approach. New for this quarter, we are presenting a calculation of free cash flow. Free cash flow conversion as a percentage of net income and free cash flow per share. We're calculating free cash flow as cash flows from operating activities, which includes the impact of changes in non-cash working capital, less capital expenditures. First, operating cash flow and free cash flow generation were strong in 2024, as expected. in line with the significant revenue and profitability growth that the company delivered in the year. Operating cash flow generation for the year was up 50% compared to last year, and free cash flow generation was up almost 80%. Free cash flow conversion of net income was just over 80%, and free cash flow per share was $1.48. The company's return and capital efficiency metrics remain strong, with return on equity over 30%. The adjusted net debt to trailing 12-month adjusted EBITDA ratio stands at 0.51 times, and long-term debt-to-equity ratio is 32%. The company ends 2024 with record total liquidity, bolstered by strong cash generation in the quarter, and a $100 million increase in credit capacity on our three-year committed revolver. Throughout our previous 2022 to 2024 strategic plan period, we emphasized a disciplined and balanced approach to capital allocation, one that fuels growth while delivering strong returns to shareholders. From 2022 to 2024, we committed approximately $300 million across capital investments, acquisitions, and dividends. Of that, 34% supported capital investments, including project-related equipment and initiatives to enhance efficiency and productivity through technology. Another 39% was allocated to acquisitions, strengthening our market position and future growth, and the remaining 27% was returned to shareholders in the form of dividends. Since 2022, we have more than doubled our monthly dividend from 3.25 cents to 7 cents per share, representing a 215% increase over our 2022 to 2024 strategic plan period. Looking ahead, we remain committed to maintaining a payout ratio of 33% of net income each year, ensuring sustainable and attractive returns for our shareholders. This balanced approach remains a core principle of our strategy and is expected to continue through 2027. With that, I'll turn the call back to Jerry for a look and closing remarks.