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.

Thank you, Wayne. BERT has built a strong and economically resilient business as well diversified by market and geography. We have a near record combined backlog of margin accretive projects with lower risk contract profiles and a healthy balance sheet that has the financial flexibility for the company to execute its growth plans as well as pursue accretive acquisitions if and when they arise. We finished 2024 with a quarter of significant revenue growth and margin accretion, a trend we expect to continue throughout 2025. The majority of the 2025 revenue growth is expected to be realized in the second half of the year, with significant conversions pending backlog to backlog occurring in the first half as a number of large collaborative projects reach their construction phase. all positioned to manage the uncertainty created by recent trade tensions across North America and remain committed to the longer-term and profitability targets announced as part of the 2025 to 2027 strategic plan. With that, I'll turn the call over to the operator for questions.

Thank you. We will now begin the question and answer session. Analysts who wish to ask a question may press star then 1 on their telephone keypad to join the question queue. You will hear a tone acknowledging your request. If you are 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 and then 2. Anyone who has a question may press star then 1 at this time. Our first question today will come from Chris Murray of ATB Capital Markets Inc. Please go ahead.

Good morning. Maybe just turning to the guidance very quickly. sort of just trying to gauge kind of the drivers in the first half versus second half split. Can you maybe walk us through why you're seeing what you're seeing in terms of delays? I know you mentioned that permitting is less of a problem than it was in Q3, but I was wondering if that's playing into it and how we think about kind of margin progression through the year on top of the revenue progression.

Yeah, I can feel that, Chris. So a couple things. So, you know, we stated that for Q4, the impact of the permitting issues that we saw in Q3, the impact was less in Q4 than it was. So that started to unwind, actually. So that's not really a driver for us. That's kind of impacting where we said we're going to back end, you know, shift some of the growth. You know, the drivers really there are a couple things we called out in our outlook is, In the first half of the year, we're going to see significant conversions of pending backlog to backlog, meaning we're contracting these projects. And order of magnitude, like it could be $1.5 billion moving into backlog. So that sets up the second half really, really well. And on top of those conversions, we're still going to have our normal kind of winds that we get that don't flow through pending backlog and go straight to securements into backlog. So, you know, we still feel very confident in our total year outlook. It's just, you know, part of it because of the timing of those conversions pushes it to the second half. And the second thing that we called out was in the first half, Uh, 2024, uh, we had a really strong, uh, you know, 1st half, uh, we had very favorable weather conditions. Uh, you know, we got to do something that we don't often get to do in the 1st half, which is accelerate process on a number of, uh, of, uh, projects. And we called this out last year. So we just wanted to kind of highlight that. When we say 10% growth plus 5% for Zika brothers in the year, it's not linear. We don't apply 15% to every single quarter. There's still project mix factors and those types of things that impact the quarter. But we really wanted to make sure that we're confirming the total year outlook.

All right. That's helpful. Thank you. And then I'm not sure who wants to take this one, but Terry, just some interesting comments about you know, birds history in Northern Canada. Um, and there's lots of discussion about, you know, as you said, military, uh, minerals, that kind of development. Can you talk a little bit about, um, your capabilities to be able to work in the North and does this, um, you know, lend itself to very much like Jacobs brothers was a way to move, uh, to East or to move into different verticals. Are there, are there other opportunities around MNA to maybe bulk up for, for Northern Canada?

I think, to be perfectly honest, I think we've got all the pieces and the tools we need for Northern Canada. We have a rich history of working in the North. We often think of our markets as coast to coast to coast, and we think about building a modern hospital in Yellowknife. With weather conditions, it can be in the minus 40 or 50 for many months at a time. We're just used to that. If you think of the work we've done with, you know, employing 1,500 to 2,000 people on a job like Energy Canada, you know, we're used to mobilizing, you know, large workforce, you know, providers to work in remote locations. So, you know, the history is there. We've worked. We've built a hotel in Iqaluit. It was 75 rooms. We've done, and we're working right now in Nunavut. on pre-con, on a number of things. So, historically, we have the resume, we have the indigenous partnerships established, and we have the teams that are set up for that. Our business, our mining business, referred to as Bird Heavy Civil, has worked extensively through northeastern Canada and the remote north, as far north as Mary River, which is about as north as you can be. So, yeah, I think the depth is there and the history is there and the teams, you know, so it's an exciting market. And not discounting that, yes, there's a lot of northern base work that's evolving, but there's a lot of existing base expenditures going on across the major defense bases in Canada, which we, you know, continuously service, which would have been part of that $1.3 billion over the last 10 years.

Okay. Just maybe following on to that, we haven't talked about stack in a while, but does stack kind of fit well into kind of that northern construction model?

Yes, yes. And some of the social infrastructures that we're modeling right now and pre-conon would include modules that would be supplied by stack. Okay. Thanks. That's helpful. Thank you. The hotel, for example, the hotel, for example, that we built in Calawet, We erected that hotel in eight days, 75 rooms, you know, obviously on top of a platform that we stick built, but those units came in and, yeah, it's an impressive hotel in the remote north that we constructed. So, yeah, I'm really confident in our resume. Sure, if there's something comes along that enhances us that we like from an M&A perspective, we do that, but it's certainly not needed with the resources we have today. Okay, I'll leave it there. Thank you.

Thank you. And our next question today will come from Christa Friesen of CIBC. Please go ahead.

Hi, thanks for taking my question. I was just wondering if you could maybe give us a little bit more color on what you're seeing in terms of M&A right now and what the pipeline looks like for you.

You know, it's been busy. I don't think our pipeline has softened at all. You know, we do put, we have a team full-time that works in the space, and we are continuously entertaining opportunities and looking at things that we think would be, you know, would be important for us to consider. You know, I'm really proud of our track record of integrating companies over the last number of years and I think that in itself creates new opportunities because someone thinking about divesting their business looks at what's been happening and makes some phone calls and they find out that we've done a nice job with a number of companies and our record is impeccable. So I'd say that the activity levels is high. It continues to be high. It's been high for probably 18 to 24 months, and we're excited about some of the opportunities that we're considering.

Great. Thanks. And then maybe just one more on the tariff front and all the uncertainty there. I appreciate you had some verbiage in your MD&A about that, but have you had any conversations with some of your customers who are – they are now delaying their projects just as it relates to uncertainty, or is this all still kind of just up in the air at this point?

No, and that's the beauty of the types of, you know, of programs, types of projects that we target. You know, it's across a multitude of sectors that have, you know, long-term horizons. They know that things are going to ebb and flow within the economy. But that's the beauty of the focus we have. And we've also, you know, in the past month, I've had projects that, you know, that we're closing some of them with very definitive procurement rules that we've had to you know, we need relief from tariffs in this regime, or we just are not prepared to take that risk. And the clients have adjusted those, and those primarily in government, you know, where there's been, you know, very rigid procurement sort of framework and usually not easy to make adjustments. But we've made that very clear that we wouldn't proceed unless there was a you know, a relief for that, and they've been accommodating. So, but no, our core program of what we've outlined in today's presentation is solid, and we're highly confident we won't see macroeconomic pressures on that program.

Okay, great. Thank you. I will jump back in the queue.

Thanks, Christine.

Our next question today will come from Michael Topham of TD Cowen. Please go ahead.

Good morning. Thank you. Last quarter, you talked about expecting your 2025 adjusted EBITDA margin to approach 7%. Can you provide an update on your expectations for the year at this point?

I think we still feel confident in our ability to hit that. We came in strong through fourth quarter and obviously finished a bit higher in 2024 at 6.3. So we still have 70 basis points to get there instead of 100. We're going to see an additional lift as we have a full year of Jacob Brothers consolidated in our 2025 results. But we also have a great mix of projects in our backlog, in our pending backlog, in our pipeline. And we do say in our outlook, I just want to call that out, that, you know, we're still seeing the embedded margins in backlog, in our pending backlog, be higher than the program we just put in place. So that also gives us confidence that the margins are going to continue to drive up.

That's helpful. Thank you. And then maybe, Wayne, how do we think about margin progression then as you move through the year, particularly in view of the commentary about, you know, more of the growth coming in the second half of the year?

I think the margin progression is less about the kind of the growth story between first half and second half, and it's just the normal seasonal trend that we have, right? So in quarter, for example, you know, obviously we have winter weather and we do a little bit less self-reformed work in that sector, have a little less equipment, you know, revenue. So, you know, even the margins are a bit muted compared to, you know, the busy summer months in Q3 and, you know, the close of the year in Q4. So I think normal seasonality is what you'll see in terms of the flow to the total year going by.

Okay, that's helpful. Thank you. And then just to be clear, I mean, you've got the contribution from Jacob Brothers in the first half of the year and a little bit into the beginning of the third quarter. But when you talk about this sort of back half waiting for the revenue growth, should we still expect there to be positive organic growth in the first half of the year, just at a reduced rate? Or how do we think about the organic growth specifically?

Yeah, that's right. You know, there's still going to be positive organic growth compared to the first half of last year, and then there's going to be Jacob Brothers layered on that. It's just not going to be, you know, like 15% every single quarter. It's going to be, you know, two-thirds kind of weighted to the back half.

Got it. Perfect. And then maybe just to pick up on one of the earlier questions, you were asked about the uncertainty that exists right now in view of, trade and geopolitical issues. Terry, I take your point that it doesn't sound like you believe there's really any impact or risk to your current work program. Can you maybe shed some light on any conversations you're having with customers about projects that haven't yet been haven't yet been approved or, or, you know, are they rethinking anything as far as projects that are sort of on the horizon at this point or, or looking at those any differently? Just curious, uh, around the sort of the future opportunity.

Yeah, we haven't had, we haven't had any customers in the core sectors that were focused on, um, you know, raising concerns or raising, um, raising that in the sense of a pause. Um, Like I said, the high majority of the areas we're focused are long-term. They have very well-organized platforms, and they're moving along. And a lot of the things we're doing are expansions of current programs we're already on. So they're just continuing. So I think it's the way we've diversified into so many areas and a blend of work and a blend of, you know, private work in, you know, in key growth areas for Canada. And then obviously the new opportunities evolving in defense, I think it just positions us really well. So we're very confident that we're positioned, you know, as well as we could be. I honestly can't even think of a sector that I wish we were positioned in. I think we're really well positioned to have a very balanced program.

Okay, that's helpful. Maybe just a quick follow-on there. When you talk about defense, can you maybe give us a little bit of a sense for sort of the types of opportunities you're most likely to see in the defense sector?

Well, I think it's public. In addition to these three areas, new hubs that they're building in Yellowknife, Nunavut, and Iqaluit, the major bases are getting major expansions. So whether that's Coal Lake, you know, to house their future program, whether it's the Army bases in the country, you know, obviously for Canada to reach the 2% of GDP, It's a lift to get there, and they're taking a pretty big swing at it. So, yeah, it's exciting. It's, you know, the programs that are coming through across the bases, the majority of which we've worked at is, like I said, it's kind of daunting, actually.

All right. Thank you for the time. I'll leave it there.

Our next question today will come from Frederick Best, team of Raymond James Limited. Please go ahead.

Good morning. Guys, with Canada potentially looking at additional export markets for its natural resources, does that potentially accelerate projects like the Phase 2 of LNG Canada, and just curious as to your views on that. Obviously, you did really well on the initial phase of LNG Canada, so how would you position yourself for that work, if you were to go ahead?

It certainly seems to be government. um you know in the public forum you know governments raising that topic um that they would like to see in phase two accelerated and moving along so i'm sure those discussions are underway and and we're highly confident with our performance on phase one that we participate strongly in phase two i'd say the one that's um is emerging and might have emerged regardless of of um you know, the interface or the tensions is, is Prince Rupert. Um, lots of activity, you know, related to Prince Rupert and, uh, that creates exciting opportunities for us. Um, you know, we're, we're very active obviously in Squamish on fiber. So on the LG side, we're, we're, we're nicely positioned and our reputation is, is giving us a lot of new opportunities to, um, to expand and, um, From that perspective, we also expect considerable expansion of ports and facilities on both coasts. And as you said, Canada is redirecting and focused on rebalancing their export markets. And to do that, they've got to build infrastructure to facilitate that.

Thanks for that color. And then I apologize if it's been asked or brought up in the last 40 minutes, but nuclear has been a new market for you the last several years. You've done extremely well. Can you comment on, you know, maybe additional opportunities you're seeing in that space? And if you have already answered that question, feel free to ignore me.

No, it hasn't come up, but it's certainly – A major growth area for us, you know, as you know, the two largest nuclear facilities in Canada, and our clients, Bruce Power and OPG, have got major programs that they're developing, and obviously we are participating, you know, quite significantly in those programs. We are doing a lot of, you know, decontamination work with, you know, ultimately for atomic energy, but through CNL, and that program continues to develop. We've got a large program underway up at Shark River, which is the programs that are talked about with a large campus that's getting completely renewed and refurbished, and those programs are underway. So I think across the nuclear space, our teams continue to grow and expand and it's become a major, you know, major business front for us. OPG has announced the refurbishment of Pickering and, you know, we're doing a lot of support work and are excited about, you know, those opportunities that really support, you know, and create the appropriate infrastructure to support that refurbishment and, as we've been doing it at Darlington. But there's just a number of programs that are underway in various markets that put us in a great spot with the evolving resume we have.

Thanks, Terry. I appreciate it.

Our next question today will come from Ian Gillies of Stiefel. Please go ahead.

Good morning, everyone. Good morning. First question is operational in nature. As best I can tell, East Harbour Contract is the first collaborative contract for it's done on the transit side. You've now moved to construction phase. Can you maybe talk about what were some of the positives moving through that first phase and what some of the negatives have been and maybe how you would tie that out to some of your broader strategies.

Yeah. You know, I think it's the Eastern Canada's second transit project of significant scale or any scale, I think that's been procured. Um, and I would say this, um, The alliance model that we're using there is a fully integrated partnership model with the client. And anytime you can use a model like that, you've got all the decision makers that are fully integrated in the team. You can break down any kind of barriers that you would not normally be able to break down if you're just contracted and you're carrying all the risk. You've got motivated members from your client that are focused on meeting the targets and meeting the budget and doing whatever it takes to break down any kind of hurdles. So it's been a tremendous experience to date, and we've been on this for a few years now as the design has been evolving, and the feedback I'm getting from the client is very positive about the excitement of that model. That model is also being used extensively in BC, and the same kind of feedback that, you know, BC Partnerships is getting where they're seeing what a powerful model that is because the predictability of the ultimate, you know, of the ultimate budget, you know, is highly likely when you have the whole team working collaboratively to get it done. So the negatives, I can't think of a negative. I'd say that these projects take a little longer to get into construction, so that's probably the only thing. But honestly, if you start to position your backlog with a series of these, it starts to become more of a steady run rate. But the front end, when you've got a few of them, evolving it does take longer to get you know to get revenue flowing but it's you know it's clearly worth it in the end based on the experience we've had to date it's also a model that you know is supportive of self-performing the work because it is just the the partnership and accelerating the work because you've got that self-perform ability to turn up the you know the you know, the crew sizes and, you know, and hours of work, you know, to be able to meet milestone targets. So, yeah, overall, very pleased, very few negatives.

That's helpful. Maybe moving to a capital allocation question that I've asked before, but I'll ask again because the valuation is looking a little discounted at this juncture. Has there been any additional thought towards putting in an NCIB on top of the dividend, you know, fully acknowledging the M&A strategy is strong? I mean, buying your own stock and around these levels would seem to be a pretty attractive use of capital from our perspective.

Yeah, I mean, it's always an option that's out there, but, you know, we try to be very clear in our communications from our investor day in October. Our cap allocation priorities remain unchanged. You know, we're targeting us. 33% payout ratio on net income. And, you know, the everyday market is still very active, you know, for us. So we want to make sure we're retaining enough capital in the business to invest in that growth. And the work program is also growing, right? And, you know, when you see growth in industrial and infrastructure that's outpacing the market, there's going to be equipment needs, you know, with that as well. So we're making sure that we've got the capacity to support that growth, right? So I'd say at this time, no, there hasn't.

We remain committed to the priorities we outlined previously. Understood. Thanks very much. I'll turn it back over.

And, again, if you have a question, please press star and then 1. Our next question today will come from Maxim Sidchev of National Bank Financial. Please go ahead.

Hi. Good morning, gentlemen. Terry, I was wondering if it's possible maybe to get a sense if you're seeing any change in customer behavior when you kind of look at it between public and private clients, if there's any differentiation or you're getting sort of the same feedback and kind of vibe from both cohorts.

You know, we haven't seen, you know, concerns with those clients yet. There's been no behavioral differences the way they think about, you know, the programs are long-term initiatives, whether that's, you know, in the government side, you know, across infrastructure, you know, whether that's transportation or healthcare, long-term care. You know, you start looking at that, other types of transportation, things on the private side. You know, the large majority of things that we're focused on are, you know, these large blue-chip, Type clients that, you know, have a 50 year horizon, uh. Any of the of the of the of the projects, so they're, you know, they're thinking longer term and, um. And obviously, you know, we're well equipped with our various supply channels to redirect supply. many of these large clients that we're working with, you know, we'll have, you know, free issue equipment even that comes in where they're procuring things are coming from all over the world. So, yeah, in that regard, I think there's a fair bit of consistency, you know, but certainly uncertainty as to where it's also going to settle out as everyone is fully aware.

Yeah, for sure. And I guess, is it possible to get a bit of a ballpark on your, commodity exposure across the companies of like 20, 30%. How should we think about that?

Well, it's so variable. And like I said, so many of our clients are procuring some of those commodities. But I will say this. We have did a deep forensic analysis of our existing backlog, and we haven't found – risk in that, you know, that would cause us any concerns. So, you know, we have the flexibility to, you know, have that risk transferred to a subcontractor. Or in the case where we're self-performing, you know, obviously we've conditioned our clients for that risk, so.

Well, sorry, I just meant, you know, commodities when it comes to, like, I don't know, like iron ore, gold, you know, natural gas, et cetera, if you were to look across.

Oh, I see. You're talking about, okay, I was thinking in return.

I was thinking, of course, you're talking about the sectors. So, so far, no. You know, obviously, there may be sectors like we're in, you know, in iron ore, for example. So, so far, no indication from those clients, but I think it's a wait and see. You probably... you know steel tariffs continue you probably see some tightening there but our mining group is is fairly diversified again you know across different different sectors and our money group is also the the group that um you know is our our point on hydroelectric and other heavy civil type initiatives so we've got that evolving now which we wouldn't have had a year ago um the large hydro project we have up in northwestern ontario is getting green lighted to get under construction now. So, you know, it gives us some flexibility, but so far, no, no indications. And we're, you know, we're in close contact with our major clients and on the iron ore side.

Okay. Okay. That's great. Thank you. And then a quick question for Wayne, if I may, in terms of the working capital kind of like intensity, how should we think for 2025, if there's like any kind of puts and takes versus 2024 or anything to tell us of the growth?

I think the flows between non-cash working capital and cash, I think you'll see the usual seasonality there. Some of the organic revenue growth is moving into the second half that we talked about with some of the pending backlog conversions. You know, the investment in non-cash working capital, you know, might be a little more muted in the first half, a little more of a spike in Q3, but we would still expect to see the unwind that we usually get in fourth quarter again this year. Okay, so nothing unusual.

Okay, that's great. That's it for me. Thank you. Thank you.

This concludes the question and answer session. I will hand the call back over to Mr. McKibbin for closing remarks.

Thank you. BERT's exceptional revenue and profitability growth in 2024 was driven by strategic changes that we made over the past several years that saw BERT risk balance our work programs, expand our self-performed capabilities, and geographical reach and focus on key market sectors that have long-term demand drivers. We enter 2025 in a position of strength with almost $8 billion in our combined backlog, a robust bidding environment with margin and creative opportunities, and a strategic plan that we'll see us continue to grow, become more profitable, and deliver long-term value to our shareholders. Before we close, I want to take a moment to thank our incredible teams from coast to coast to coast who are the foundation of our success. It's the dedication, expertise, and hard work of our people that drives BIRD forward every day. I'm proud of what we have accomplished together over the past year and excited for what's to come. Thank you to all for joining us this morning on our earnings call.

This brings to a close today's conference call and webcast. You may disconnect your lines. Thank you for participating and have a pleasant day.