CA - Bird Construction Inc. (BIRDF) Q4 2022 Earnings Call Transcript

2023-03-08 16:00:04 ET

Bird Construction Inc. (BIRDF)

Q4 2022 Earnings Conference Call

March 08, 2023, 10:00 AM ET

Company Participants

Teri McKibbon - President & CEO

Wayne Gingrich - CFO

Conference Call Participants

Chris Murray - ATB Capital Markets

Yuri Lynk - Cannacord Genuity

Bryan Fast - Raymond James

Jonathan Lamers - Laurentian Bank

Naji Baydoun - IA Capital Markets

Ian Gillies - Stifel

Presentation

Operator

Welcome, ladies and gentlemen, to the Bird Construction Fourth Quarter and Full Year 2022 Results Conference Call and Webcast. We will begin with Teri McKibbon, President and Chief Executive Officer's presentation, which will be followed by a question-and-answer session. [Operator Instructions] As a reminder, all participants are in listen-only mode, and the webcast is being recorded. [Operator Instructions]

Before commencing with the conference call, the company reminds those present that certain statements which are made express management's expectations or estimates of future performance and thereby constitute forward-looking information. Forward-looking information is necessarily based on a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies.

Management's formal comments and responses to any questions you might ask may include forward-looking information. Therefore, the company cautions today's participants that such forward-looking information involves known and unknown risks, uncertainties and other factors that may cause the actual financial results, performance or achievements of the company to be materially different from the company's estimated future results, performance or achievements expressed or implied by the forward-looking information. Forward-looking information does not guarantee future performance. The company expressly disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, events or otherwise.

In addition, our presentation today includes references to a number of financial measures which do not have standardized meanings under IFRS and may not be comparable with similar measures presented by other companies and are, therefore, considered non-GAAP measures.

I would now like to turn the call over to Teri McKibbon, President and CEO of Bird Construction. Please go ahead.

Teri McKibbon

Thank you operator. Good morning everyone, and welcome to our fourth quarter and year-end 2022 conference call. Joining me on today's call is Wayne Gingrich, Chief Financial Officer.

Before we get started, I want to bring attention to International Women’s Day and recognize and celebrate the inspiring women within Bird. It is also important to acknowledge the on-going struggles in the pursuit of gender equity. Bird promotes the importance of diversity and allied ship [ph] in the workspace through our women at Bird, employee resource group and partnerships with organizations such as women building futures.

Together there is still work to do and we are dedicated to enhancing inclusion and creating a more equitable and inclusive industry. We are pleased with a strong finish to 2022 demonstrating the results of the company’s strategy to reposition itself over the past several years. Fourth quarter and full year performance reflect our teams’ effort embracing a collaborative approach and driving our diversified risk balance model forward.

During 2022, our performance was supported by larger scopes on self-perform work, greater depth of cross selling opportunities and a vast majority of revenues generated from lower risk contract types. The diligent focus of our One Bird team ensured we maintained a strong financial position ending the year with significant financial flexibility and liquidity to support the company’s future growth and disciplined capital allocation approach.

Turning to Slide 6, our team delivered a significant organic revenue growth of just under 10% for the fourth quarter in which revenues of $657.2 million. We generated and adjusted EBITDA of $30.6 million or 4.7% of revenues compared to $28.4 million or 4% of revenues in Q4 2021 while adjusted earnings and adjusted earnings per share were $15.5 million and $0.29 respectively which equates to 19% increase to adjusted earnings year-over-year.

Along with this significant revenue growth, we generated increased cash flows from operations before changes in non-cash working capital in the quarter of $33.5 million up almost 30% from 2021. On a full year basis, the record 2022 revenue of $2.4 billion was driven by both acquisitive and organic growth representing a 7% increase year-over-year. The growth was balanced across the company’s work program with organic growth accounting for approximately 5% of the increase which included Dagmar growth in the last four months of the year.

In 2022, we delivered an adjusted EBTIDA of $101.2 million or 4.3% of revenues compared to $108.1 million recorded in 2021. Adjusted earnings and adjusted earnings per share were $46 million and $0.86 in 2022 compared to $51 million and $0.96 per share in the prior year.

One of our key strategic priorities is to achieve a higher overall margin profile. Our business model allows for it to better manage and share inflationary impacts on cost of construction and this has and will continue to support enhanced margins, increase our perform activity, strategic growth in key markets, acquisitions, performance, and disciplined cost management also support margin expansion.

The solid 2022 performance was achieved despite pandemic related impacts and the challenges in the first half of 2022 with labor disputes permitting delays and supply chain challenges. This eased throughout the year and had limited impact in the fourth quarter of 2022. No CEWS recoveries were recorded in the current year to offset pandemic related impacts compared to $21.9 million of CEWS recoveries recorded in 2021.

We continue to see high demand for our services and self-perform scopes leaving the company to set a record for combined back-log and pending backlog at December 31. The record combined backlog and pending backlog of risk balanced contracts and warrants with over 70% in a collaborative delivery contract shift structure uphold our confidence for the upcoming year.

This type of shift does not happen overnight, however, our concerted efforts and discipline over the past few years have positioned the company with a strong foundation that we are leveraging today to achieve continued growth and enhance profitability. These efforts have solidified to keep fundamentals that set Bird apart in our sector outlined on slide 7.

We are confident in our revenue growth and expectations for 2023 underpinned by our diverse active work programs operating in a high demand and high growth sector. The record combined backlog and pending backlog comprises the diverse mix of collaborative risk balanced contracts and awards.

Margin improvements will be driven by our disciplined project selection which has generated highly collaborative and low risk platform today allowing us to better manage inflationary impacts on our cost of construction.

Cross selling our integrated solutions, large scopes of self-perform work and strategic diversification in key sectors further support margin expansion. Our annual business planning process provide a good feasibility for our outlook for 2023 and combined with a positive momentum of 2022 let our board to approve an increase to our monthly dividend of 10% commencing with the March 2023 dividend payable in April.

Bird is delivering a top quartile return profile on such metrics as return on equity and return on invested capital. These have long standing importance and are tied to executive performance in addition to the robust return profile on our strong balance sheet and compelling growth like enhancing our shareholder value.

We have the financial flexibility, low leverage and low net debt to invest in operations and acquisitions, and maintain our balanced approach to capital allocation. The acquisition of Trinity Communications completed subsequent to year-end was funded 90% through cash with the balance from common shares. It is in line with our strategies to seek our tuck-ins, specialized or high margin potential offerings, additional self-perform capabilities and sound organic growth potential post acquisition.

Bird’s environmental social and governance program continues to mature in response to business, plant and industry demands. Bird’s robust self-perform capabilities have repositioned us to deliver energy transition projects such as renewables, nuclear, wasted heat projects as well as sustainable new bills and retrofits. Overall, these factors position us to deliver steady growth and an expanded and margin profile.

Business continues to evolve in the right direction building our revenue and EBITDA trends on slide 8. We are positioned with the appropriate balance of contracts in place, diversified across sectors and clients both public and private. Our balance work between institutional, commercial and industrial remains relatively consistent and inline to drive more robust growth. The company is well positioned in the current economic plan with a risk balanced work program where the majority of contracts are considered low to medium risk.

At December 31, 2022 the company carried a record combined backlog and pending backlog at risk balanced contracts and awards bolstering our confidence in revenue and earnings growth for the upcoming year. Pending backlog was $2.48 -- 9.9 billion [ph] compared to $1.624.7 billion [ph] at December 31, 2021, an increase of $865.2 million or 53.3%. The company’s backlog was $2.636.5 [ph] billion down slightly from its record level in the first quarter of 2022 due to timing of project conversions from pending backlog.

Our backlog and pending backlog provide good visibility in the future of revenue and growth. The collective demand for Bird specialized self-perform capabilities in infrastructure renewables, nuclear environmental, telecommunications as well as our institutional construction capabilities is expected to drive steady growth in 2023. In addition, we have fully offset the revenue and margin contributions from the company’s LNG Canada Phase 1 work program.

Over 70% of contracts in our backlog and pending backlog have a collaborative delivery model and Bird has developed a strong reputation for delivering sophisticated projects in these types of frameworks. As the company has awarded more of these project and participation in early stages of the project development cycle can result in significant amount of works of awarded project value being reflected in pending backlog for longer periods of time before transitioning to backlog, however, once transitioned to backlog collaborative contracts provide more predictable cost and price pressure due to less downside risk due to the mutual alignment of desired outcomes.

Growth in recurring revenue streams further supports our overall outlook providing visibility to future revenues. As we have highlighted in the past, we have significant portfolio of master service agreements and other multiyear service contracts valued at over $900 million at December 31, 2022.

Our high performance maintenance repair and operation team executes much of this work, however in 2022 we received notice to proceed on our first multiyear task order for environmental remediation of nuclear science. This expands our recruiting revenue stream within the energy sector and positions us for future work on one of Canada’s largest remediation projects. The company remains focussed on pursuing the right opportunities and projects, projects that reflect and appropriate risk balance and align with Bird’s combined capabilities across the country.

Bird’s 2022 to 2024 strategic plan focuses on the further development of Bird’s team, strong project execution and performance and the diversification of service offerings across Canada. We are executing well on our strategy and see key focus areas such as growing self-perform, expanding cross selling opportunities for M&A and internal partnership and disciplined project selection contributing to the enhanced fundamentals and our positive outlook.

A highlight in 2022 was Bird becoming a founding member of the Canadian Construction Safety Council with James to raise safety standards and performance across the industry with likeminded partners and aligns with the safety first mind-set.

In 2022, we continue to elevate our culture of learning and essential driver in engagement and performance. Bird’s learning culture is a growth culture that seeks collaboration and new ideas, methods and opportunities to engage and innovate together attracting retaining top qualified personnel remains an important differentiator.

We announced several meaningful contract wins during the year and subsequent to year end representing diverse range of sectors and geographies. Subsequent to year end, Bird was awarded a progressive design built contract for a net zero processing facility in Ontario with a total project value of over $200. The steady growth expected in 2023 is supported by the healthy backlog and our ability to acquire new work in competitive markets.

Slide 11 demonstrates Bird’s expanded self-perform capabilities and comprehensive service offerings. Bird can maximize across the line potential through this nationwide platform and leverage our integrated, innovative client solution to pursue and deliver projects across many standards.

The recent strategic M&A has further enhanced our ability to secure and execute projects of increased scale and complexity. Subsequent to year end, Bird acquired Trinity Communication Services Limited, a diversified telecommunications and utility infrastructure contractor based in Ontario that specializes underground, aerial, commercial in-site plant and multi dwelling unit installations. These self-perform capabilities enable cross selling opportunities at Birds’ sizeable national client base and serve as a growth catalyst for the company’s utilities portfolio.

Bird’s growing power and sustainable energy portfolio is leveraging Bird’s collaborative innovative and solutions focussed approach to help our clients to meet the sustainability goals. The pivot cleaner energy is largely dependent on enhanced electrification, but Bird has well established capabilities and is positioned to capture opportunities for our business. In addition, we are not new to the future energy and sustainable project environment having still performed the significant number of projects in each sectors over the past years.

Bird’s mechanical electrical instrumentation and civil and structural capabilities are delivering sustainability projects ranging from hydroelectric infrastructure and other large utility scale renewables to work programs on all of Ontario’s nuclear sites from waste heat recovery at Toronto -- hospital to enhance able to various waste water and organic waste processing facilities across the country. Bird is also executing net serial agro food processing facilities.

The growing civil infrastructure team catalysed by Dagmar is developing real projects and supporting the development of public transportation networks. For our buildings teams the transition to a lower carbon feature presents many opportunities to apply a role developed sustainable building solutions including mass timber and modular deep energy retrofits, net zero buildings, innovative special projects and smart building technology.

Overall, Bird is competitive with position in this sector which is expected to gain more of significance in the future. The company’s existing culture and robust governance structure combined with dedicated work over the past few years to build our long-term ESV strategy ensure internal readiness for forthcoming disclosure requirements. We look forward to sharing more about the sustainability journey in the upcoming 2022 sustainability overview.

With that, I’ll turn it over to Wayne to go over our financial results.

Wayne Gingrich

Thank you Teri. Despite the challenges that we faced in the first half of the year, we wrapped up 2022 with a strong fourth quarter of revenue growth, profitability and capital generation making for a solid year overall. For the fourth quarter, we reported a 9.9% increase in construction revenue to $657.2 million compared to $597.8 million in 2021.

Gross profit for the quarter was $58.1 million, or 8.8% of revenues. This compares to $51.3 million, or 8.6% of revenues in Q4 2021. General and administration expenses in the quarter were $34.5 million, or 5.3% of revenues, compared to $37.1 million, or 6.2% of revenues, in the fourth quarter of 2021.

Adjusted EBITDA in Q4 2022 amounted to $30.6 million, or 4.7% of revenues compared to $28.4 million, or 4.8% of revenues in 2021. Adjusted earnings and adjusted earnings per share for the quarter were $15.5 million, or $0.29 respectively compared to $13 million and $0.24 in Q4 2021.

Turning to our full year results. We reported construction revenues of $2.4 billion, for 2022. This represents a 7.1% increase year-over-year compared to $2.2 billion for the full year 2021. The year-over-year growth was driven by [Indiscernible] in organic growth with strong performance by Dagmar throughout the year.

Gross profit for the full year 2022 was $201.8 million reflecting an 8.5% margin up from 8.4% in 2021. Our increase in gross profit margin was complemented by decrease in general and administrative expenses as a percentage of revenue representing 5.6% of revenues as opposed to 5.7% in 2021.

Adjusted EBITDA for 2022 was $101.2 million representing a 4.3% margin as compared to adjusted EBITDA of $108.1 million, or 4.9% margin for full year 2021.

Adjusted earnings for the full year 2022 was $46 million, or $0.86 per share, compared to $51 million, or $0.96 per share in 2021. In the second quarter of 2022, Bird received a onetime $7.6 million gain related to the settlement of historic construction buildings and related interest charges with the customer.

This was excluded from adjusted earnings due to the onetime nature. however, it was a positive outcome for shareholders. As a reminder, 2021 included the impact of $21.9 million of CEWS recoveries that help offset the impacts of pandemic related project delays and additional costs. No similar recoveries were recorded in 2022 resulting in pandemic related impacts being absorbed in current year results.

CEWS impact will no longer impact year-over-year comparisons on a go-forward basis. Bird remains committed to maintaining a strong balance sheet with significant financial flexibility and liquidity. In December, the company successfully amended its syndicated credit facility, extending the maturity of the facility to December 15, 2025 and increasing amount available under the committed revolving facility by $35 million to $220 million.

The fourth quarter generated significant cash flow as non-cash working capital was released, resulting in a year-end cash balance of $175 million. In addition, we had $172 million of available capacity under our committed syndicated credit facility.

At December 31, 2022 the company had working capital of $184.6 million or an increase of $32.8 million or 20% year-over-year improvement, driven by the company's performance. The company's current ratio at year end further improved to 1.23 times compared to 1.21 times at year-end 2021.

Bird’s balance sheet and available liquidity creates a strong foundation to support continued growth and drive robust return metrics. Our capital management measures are well within our comfort level at year end.

Bird’s capital allocation priorities remain balanced between capital investment in the business, dividends, M&A and debt repayments. For the fourth quarter, we generated cash flow from operations before non-cash working capital of $32.4 million. We reinvested $7.7 million by way of CapEx in the quarter, bringing us to $27.8 million per year. The increase in capital expenditures was reflective of projected requirements and greater availability of equipment to purchase in the current year. We also distributed $20.9 million in dividends to shareholders throughout the year.

The strength of the company's balance sheet in access to financing supports our disciplined approach to investing in Bird’s future growth, both organically and through opportunistic tuck in acquisitions. We are well positioned to pursue accretive tuck-ins and key sectors, and remain open to larger opportunities where it makes sense.

In December 2022 the company announced a 10% dividend increase, raising the monthly dividend to $3.58 per share commencing with the March 2023 to be paid in April. The Company anticipate significant growth in earnings per share and adjusted EBITDA in 2023 sufficient to achieve an expected dividend payment ratio below 40% of net income for the year.

Overall, I'm pleased with our financial strength, ability to capitalize on organic and inorganic opportunities in our respective position within the Canadian construction industry.

With that, I'll turn it back to Teri.

Teri McKibbon

Thanks Wayne. We're pleased to finish 2022 on a high note closing in the year with strong revenue growth, profitability and cash flow generation. We have a diversified and risk bound business model with the extensive stuff, perform scopes, cross selling opportunities and a highly collaborative portfolio of contracts. Increasing levels of self-perform work, accretive acquisitions and cross selling opportunities in the robust and bidding environment that allows us to be selective on pursuing new opportunities, our drivers of future margin improvement.

Additionally, we expect to leverage the current cost structure further to improve margin as the company grows. Bird made strategic investments in construction technologies leading to optimized productivity, safety and collaboration, enables us the delivery of innovative solutions for clients.

As we move through 2023, we expect to maintain our mid-to-high scale single digit revenue growth for the year, capitalizing on the company's record combined backlog and growing recurring revenue streams. We expect the seasonality revenues and earnings return to more normalized patterns in 2023 with modest revenue growth in the first and second quarter and more robust performance in the third and fourth.

We were excited to welcome Trinity Communications to our team in February. Now our focus is on integration and working together on future growth potential through cost selling and new services to our national client base. Our foundation is set, it is strong and we are well positioned to achieve profitable growth and enhance shareholder value in 2023.

With that, I'll turn it back to the operator for questions.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-answer-session. [Operator Instructions] The first question is from Chris Murray from ATB Capital Markets. Please go ahead.

Chris Murray

Yes, thanks, folks. Good Morning. Just maybe turning to some of the disclosure around the backlog and Teri I love your perspective on some of these things. Book-to-bill in the quarter [Indiscernible] was actually probably a little bit weaker than we would have expected given where you're at, but I guess a couple pieces of this.

If I look at the disclosure around recurring revenues, that certainly seems to be growing, but how should we be thinking about backlog in the coming quarters as you take on more of these collaborative design projects and maybe if you want to maybe address there was a project, I think you guys were doing for OPG. There was a mass timber building that perhaps got changed or cancelled. If you could maybe address how that would play through backlog maybe as an example, that would be helpful.

Teri McKibbon

Certainly, we with the collaborative nature of the projects that we are currently heavily focused on, there are at times, it can be a bit heavy, more heavily weighted in pending, as a project evolves in that regard. So I think you're seeing, a bit of that and if you look at it quarter-to-quarter at times, there can be some variability from a quarter to a quarter if we were simply booking fixed lump sum design build projects, it would be a more definitive, less pending. But the pending side certainly is affected by projects like that. We're just pointed, obviously that OPG didn't proceed with their mass timber assignment, and we were pleased to win obviously against the toughest competition in the country. But sometimes that those things happen and things have been slow, and that's why those types of projects are impending. So…

Wayne Gingrich

And I just say Chris that OPG project is not in any of our year-end reported numbers. It's removed from those figures.

Chris Murray

Okay, so I guess along those lines is it fair to think that we'll probably see like historically pendings always been sort of MSA contract inside the next five years, but it's fair to think that the pending bucket will be more about your interpretation of where you think some of these progressive design build projects will end up over time. Is that maybe the right way to think about it?

Teri McKibbon

Yes, like we're finding that as you win some of these collaborative contracts, it just takes longer to finalize the design and get the owner to sign off on everything. So while we've been awarded on it, we have been given limited notices to proceed to maybe start some early works or those types of things. the final scope of the project, it takes a little longer to finalize. And once that is finalized, that's when you contract it, and when we bring it in.

From a -- you'll see a nice increase in our pending backlog in Q4, and we were awarded some of the projects. But the -- part about collaborative contracts is now when it comes to doing a press release, there's a lot more aggressive people to collaborate with, and it takes longer to get it out, but -- we did some nice wins.

Wayne Gingrich

I think the other part of it is when you're -- when you're in an inflationary environment you're sometimes going back to the drawing board to redesign to offset those inflationary impacts. If we were sitting in a lump sum environment, we'd be wearing that, and we'd be working feverishly to try and offset that. So one of the benefits of working in a cloudware environment as a client's got that risk and it downsizes that sometimes you -- it takes your longer to fully contract because you're working through alternative materials and alternative designs to get FID. But certainly a lot of activity, the OPG assignments pretty rare that we have something that gets to a point of being announced in our pending backlog and then doesn't proceed, but was logical when the GM building became available right around the corner it made a lot of sense that they should consider that as opposed to building something new, but would have been nice to build a state of the art mass timber building at Darlington.

Chris Murray

Yes okay. And so and so I guess what I'm trying to get at or try to make sure I understand correctly, so even though firm backlog is down you still feel comfortable about that, that single digit type growth number in 2023 because your sources of revenue are going to be coming from areas other than just out of your fixed backlog that you're burned down over the next year is the best way to think about it.

Teri McKibbon

Yes, and I think the pace of business right now, the activity level is higher than we've seen. So we're very confident at the current pace that we'll have a very strong year in 2023.

Chris Murray

Okay, great. And then maybe just moving on to maybe that recurring bucket and thank you for the disclosure. It is interesting to see how it's grown over time. Can you talk a little bit about the Trinity acquisition, exactly what that brings to you and how that will work across a number of the different areas that you're working in, and how does that, dovetail perhaps with what you've got in [Indiscernible] West?

Teri McKibbon

Yes, so it's a really nice fit for us because it's a high performing business. First of all on a standalone basis without further integration within Bird. Obviously, the business is specialized in communications and in today's world, most homes are striving for more data, so there's a high demand to create faster data, more sources of data. And in many things we build today, we're putting increasingly putting fiber optic sensors and things like that, whether that's on an industrial site or on a vertical building. So there's a lot of demand for that type of capability in the specialized capabilities of slicers and things like that.

We have some of those capabilities in Northern Alberta where we service our energy clients, so it does fit together. And then on the campsite, obviously we are typically more in our lane on the electrical side, if we're doing a project for a client and obviously having this now in our wheelhouse will increase our capabilities on projects to also offer communication solution in many of the projects we built today are typically for sophisticated clients that have a lot of -- a lot of sensors, a lot of opponents inside the facility that are wired and communicating on a 24/7 kind of basis, whether it's an energy facility or a monitor of everything from security to monitoring systems and things like that.

So it's a very nice fit. And as you know, we're also working in the U.S. predominantly in communications with another facet of our utility business work across the 11 states over the last couple of years installing communication and hydro distribution for some of our current clients, both in renewable projects and also in communications, transmission in various states. And obviously, the Trinity capabilities don’t fill nicely into that as well. And there's some overlap opportunity has provided certainly solutions for some of our clients on an independent basis. Now being, a sort of a total solution within Bird, it's a much broader offering for many of our clients. So we're really pleased, good team, great culture and we continue, we expect to leverage that similar to what we've done with Dagmar.

Chris Murray

Alright. Thanks, I'll leave it there. Thanks folks.

Teri McKibbon

Thanks Chris.

Operator

The next question is from Yuri Lynk of Cannacord Genuity. Please go ahead.

Yuri Lynk

Good morning, guys and congrats on a really nice quarter.

Teri McKibbon

Thanks Yuri.

Yuri Lynk

Teri, it’s been the key part of the success of the last few years is that collaborative contracts. I mean, at this point, with inflation where it is, I mean, there's more price risk than ever. I mean, if I was a client, I'd be -- I'd want the contractor to continue to wear as much risk as possible. So what's in it for the client to go along with these collaborative contracts and does the fact that they're becoming more prevalent, speak to perhaps a shift in pricing power for lack of a better term towards the contractors?

Teri McKibbon

Yes, for sure. I think that's been shifting. And also think it -- it is a facet of some challenging P3s, and we obviously read about in the paper. I think clients have realized that the justice in a good ending is despite the fact you think you've transferred all the risk to the contractor. You end up in extensive litigation, and there's no happy ending to it, so there has to be a balance. And I think, but they're definitely with the demand in Canada for our services. We can be very disciplined and just hold our ground in negotiations, and we've been very successful in doing that. But you obviously have to be very disciplined and you have to have an approach that you've got to be prepared to walk away, and we've got pretty good at that. So the demand for sophisticated services still very, very high. So clients, obviously have been receptive to collaborative framework because ultimately, market like this they're going to pay for it one way or another, right. So in that sense, I think it's inappropriate.

Like any time you can build a mega project that's got scale, and you can start more collaboratively with the team and create the design and value engine in the design and work all your way through it and work through a budget transparently and then agree to that framework. It's a really smart way to do business. And I think over the years some pretty smart into these out there that are our clients have looked at it and said, this may be a better way. It's a much, more productive and a much more accurate way to contract.

So for many, many years I've always believed this is a better way to contract on really sophisticated work, and we tend to do really sophisticated work. So as such those types of clients are willing to find balance, and they're also willing to accept that when the projects over you have to be, the contractors got to be healthy. So we seek out those types of clients, and we've been lucky to build a big portfolio of that type of interface.

Yuri Lynk

I guess it wasn't that long ago, though, that -- there were there were other companies out there, international or otherwise that would come in with an attractive fixed price offered to these clients, and are, are you seeing, are you seeing less of that now? Like because we've all read about the number of companies that have left the space and I'm just trying to draw a line towards if that really happened or they really gone, and is that what's allowing you to take less risk and yet print some of the highest gross margins we've seen in years, like usually those two are inconsistent with one another?

Teri McKibbon

I think there's a bit of that, Yuri. There's certainly less new international entities entering the market. The ones that are still in Canada are very mature, and I think generally have an approach not dissimilar to our approach. You still see the odd company come in that's, that's here for the first time. Ultimately there's enough of a I'd say a, a track record where some of these entities have failed. And I think clients have got wiser to signing up for an unproven entity enter in Canada.

It’s not easy to work in Canada when you're coming in for the first time, and you're starting to manage through the seasons and manage through the various labor platforms and manage through. And also think some contractors have become a lot smarter to that as well. So most of the big guys that come in don't really bring any resources they've got to rely on the local resources. And their local resources are pretty tight. So in that sense it's pretty hard to get established here in the current environment just because the demand is pretty high. That will swing, that pendulum swings sometimes and it will swing some day, but there's just -- it feels like a perfect storm of demand across many different industries and we were -- we've been lucky to very well, lucky and smartest to be focused on a diversified platform. So we're getting taking advantage of those industries, such as the various new energy sort of markets that are evolving in such an increased focus on renewables and mining is obviously got a lot of activity.

So you start adding those into the mix and you add in Ag with potash, evolving in other Ag processing facilities and just generally a real uptick in Canadian manufacturing industrial manufacturing, this really seems to be gaining a lot of momentum.

When you look at all those areas and then coupled out with the infrastructure projects, which is where you sort of see the internationals coming in. It's a tighter, tighter capacity. So we're enjoying it.

Yuri Lynk

Sure. That’s helpful. Before I hop in the queue, I just wanted to ask a quick one on make sure I understand the guidance, modest revenue growth in Q1 and Q2 I get that. Does that hold true for EBITDA is particularly in Q1, and I'm asking because Q1 of last year looks like a bit of a top tough comp from a margin perspective. So could we see revenue slightly up, but maybe fall a little short of last year's EBITDA, at least in the first quarter?

Teri McKibbon

I think that's exactly what you're going to see Yuri and the reason for that is. In Q1 last year we had our work program at LNG Canada in full swing, and we're kind of working through some of the winter months and had good contribution of that self-performed work and those margins flowing into the quarter, which certainly helps certainly helped our overall margin percent. This year those projects have kind of -- early wrapped up. We still certainly have some things on the go, but not to the same extent.

And we have announced that we have replaced the contribution and revenues from the LNG Canada with other things. It's just I think you're going to see more seasonality of that, where you're going to see that, that pick up for the year is going to be, busier in the summer months, so the key one is going to have a software contribution from this outperform, but it really is just going to be a timing issue through the quarterly flows this year.

Yuri Lynk

Hey, thanks guys.

Operator

The next question is from Bryan Fast of Raymond James. Please go ahead.

Bryan Fast

Yes, good morning.

Teri McKibbon

Hi, Bryan.

Bryan Fast

And I was just hoping to get some comments, maybe on labor availability and just labor rates. How is this trended of late and do you feel some of those pressures that you endured over the last few years have somewhat normalized or alleviated?

Teri McKibbon

Yes, I don't -- we don't feel any alleviation right now. The pressure is still there. I think we have, as we've spoken previously, we have the benefit of such a collaborative focus with our various districts that are close to coast that we can ebb and flow and take some of the peaks and valleys out of some of that those demands. And we've had good success in doing that. A collaborative effort, we've made at Bird to work harmoniously across all our divisions is really, really paying off, and that's worked well. But I'd say that the labor demand especially in bigger urban centers like Toronto and Vancouver are very high. And there's there's definitely a tight labor market there.

The Ontario labor agreements are essentially locked in now for the next three to five years, depending on the end of the year you're contracted with. So there's no pressure on price. It's more a function of availability. And other markets have different timing, but we're not so concerned about price on term cost of labor. It's more availability of labor depending on the type of work and where you're operating, but we're in so many centers. We just have a real advantage to draw from communities that might not have that same demand profile.

Bryan Fast

Okay thanks. And maybe just to follow on your comments on the U.S. Could you frame just how much revenue is generated south of the border and maybe just broader comments on your strategy and positioning for that market?

Teri McKibbon

Yes, to be honest with you it's been a -- it's been an effort to really really break, break trail or break ground in the U.S. just to get a sense of various states. So we've had a -- we've had a three years in regaining a lot of experience. Typically working for clients that we worked for, already in Canada and some of the specialized services we have. It's not significant for us in the fifteen million probably range on a normal year but growing and most importantly, giving us a really good lens of the attractiveness and the demands in those states and what are some of the challenges with labor and unions and things like that. And we poured some in some of the tougher states in the U.S. and some of those states that are more reasonable to come in and grow in. So we've got a really good framework evolving, and we expect to continue to see growth over the medium term in the U.S.

Bryan Fast

Okay, that's it for me. Thanks.

Teri McKibbon

Thanks.

Operator

The next question is from Maxim Sytchev of National Bank Financial. Please go ahead.

Unidentified Analyst

Hey, guys, this is Kasem [Ph] speaking in for Maxim today. How are you gentlemen?

Teri McKibbon

Hey good morning.

Unidentified Analyst

Good morning. I just -- my first question is regarding what future accretive tuck-in that you mentioned in your MD&A in your outlook section. Is that the strategy that you're going forward or larger deals not out of the question, given your net cash position on your balance sheet.

Teri McKibbon

Yes, certainly. We were continuously working on smaller tuck-ins. We’re only because there's a number of them out there, and it just seems like a good environment right now. So we're constantly evaluating the smaller ones. The larger ones don't ebb and flow very often. So it really has to do with finding things that fit for us, but you typically don't see the larger transformational deals very frequently. So I think it's the way we characterize it as a small to medium sized tuck-ins are what we're focused on predominantly because that's what's out there. But if something comes along with it’s -- our interests and obviously is accretive and we've got a comfort level with our balance sheet relative to that, obviously we will transact, and we have shown that in the past.

So in that regard we're excited about the M&A markets much stronger than it was a year ago. It seems to be, a number of companies looking for succession and a lot of these are. fit nicely into our real house. So...

Unidentified Analyst

Thank you. That's good color. In terms of the seasonality I know someone asked before as well. Do you, could you like split it up between like the first half and second half, what do you expect the split to be because we are expecting like software revenue in the first half, and the same for EBITDA?

Teri McKibbon

Yes, so for the year, we said mid to high single digit revenue growth. I think you're going to see more muted growth in certainly in the first quarter and starting to ramp up second quarter and then the average out in that range. You're going to be high single digits and maybe a little double digits, and in the summer months. I think you're going to see a flow of EPS such that you might have 70% in the second half of the year, and you're going to see ramp up in Q2 towards that level, so you can read into what Q1 might look like, but it certainly will be less than the $0.12 we delivered last year. And it's really just a timing issue for us.

Unidentified Analyst

Great, thank you. That's great color. Lastly, how should we think about CapEx for this year and the next? I know this year we saw an uptick versus last. Was that mostly maintenance, or are you focusing more on growth this year?

Teri McKibbon

Yes, I think it's a blend of both in that number. I think the number that you saw in 2022 reflects a more normalized environment and availability of equipment. Through the pandemic, we probably had more cautious approach to CapEx and really focused on maintenance. This year, we returned back to some of the growth CapEx and obviously maintenance as well. We're also doing some work with our IT systems and capitalizing some of the intangible assets there, and that's going to continue this year. So I think when you look at 2023 I don't think that the $28 million that we spent in 2022, but I think it will be similar to that in 2023.

Unidentified Analyst

Great, thank you. Just the last one final one for me is, are you guys seeing any accelerated award wins for your electrical infrastructure business on the commercial side? I know there is like a lot of trends going on towards electrifications. Are you seeing that convert in terms of awards wins?

Teri McKibbon

Well, certainly we're not seeing yet. Yes, it's probably a bit early days on some of that. Although we're certainly in that space but obviously, there's -- it's a multifaceted environment with generation and transmission and distribution, and all of the various facets that tied together. So a very exciting future for us, and as we spoke previously, we employ at times over two thousand electricians, so we've got a big army ready for that type of work. It’s probably early days. We are busy with their normal course of business currently.

Unidentified Analyst

Okay, sounds good. Great. Thank -- that's it for me. Thank you, guys.

Teri McKibbon

Thank you.

Operator

The next question is from Jonathan Lamers of Laurentian Bank. Please go ahead.

Jonathan Lamers

Good morning.

Teri McKibbon

Hi, Jon.

Jonathan Lamers

Morning. Following up on the seasonality comments, Wayne, are you able to speak to the new industrial contracts that are ramping up and just provide us a little bit of color on how you expect those to launch maybe which months they might start in?

Wayne Gingrich

Yes, I mean, certainly if we haven't press released it by now, it means we can't, and some of those are in pending backlog and further along in that preconstruction fees, and we'd hope that we'd be coming up with some press releases here in the coming months that would show on. So hard to give exact color on it. But we do have the work in hand, and then we did have a couple of nice press releases in Q4. We talked a little bit about some of the port hope, area initiative work and also the one industrial plant is well recently.

Jonathan Lamers

Okay, got it. Thank you.

Operator

The next question is from Naji Baydoun of IA Capital Markets. Please go ahead.

Naji Baydoun

Hi, good morning. I just wanted to ask you sort of a longer term question. At the pace that you're going, it's kind of look to maybe hit that $3 billion a year run rate revenue within maybe a four or five year time frame. Can you just help us maybe what could help accelerate that pace when you've upside the credits, you upsize the credit facility. Do you need to do that? But is that just the more sort of more sign of more M&A or how could you accelerate growth and what's in the M&A pipeline today?

Teri McKibbon

Yes, so we certainly expect to get to the $3 billion faster than your time frame just because of the pace of business and the amount of activity. And we've been somewhat stunted with pandemic and COVID related impacts. So if you'd strip those away and you move forward, we move forward notionally, even in 2023.

So I think the platform that we're on, the resume that we've built coming out of over a billion dollars at LNG Canada has given us an outstanding resume to, to be a partner of choice on a lot of the new energy growth, mining growth, Ag growth in Canada. And those are longer term in that sense, multiyear assignments, multibillion dollar projects evolving, whether that's in new assignments in hydrogen or LNG or future phases of LNG programs, whether it's in large mining and potash mining like opportunities of PHP and things like that.

And then just generally in the Ag sector. So those are, those are exciting and I think all of that coupled together I'm really, really pleased with the efforts our team has made to collaborate internally and diversify into new areas. And so all of that combined is giving us lots of momentum.

Naji Baydoun

And I guess just on the second part of the question, what kind of M&A are you targeting or thinking about to help you get the number faster?

Teri McKibbon

So I think it's a mix of things in the industrial mechanical electrical capabilities that enhance the existing work we're doing. We're certainly really excited about the [Indiscernible] business we acquired, in the MRO side, and there seems to be a lot of growth opportunities there. Consolidation to a certain scent in some markets, we focus on. So there's opportunities in that regard. We're very excited about our growth and infrastructure and looking for opportunities for further growth in that sector of the company. But obviously, there's such a candidates get such a diverse energy resource base that it certainly gives us a lot of opportunities to grow in energy capacity and capabilities in that regard. And then, just in the whole communication data in those areas with telecommunications, which we're growing in now and obviously, that's a big growth area where we need to sell perform a large data center very successfully here in Ontario for Microsoft.

So we got things like that are evolving and in that sense, we continue to look for agencies that can complement the focus we have in these various markets. And so far the effort we've made is really paid dividends. Dagmar has been a great acquisition. Trinity, we expect it'll be a great acquisition for us. The [Indiscernible] gave us a whole series of new offerings. So continuing to augment areas that we're diversifying in is really what we're, what we're seeking and there's certainly a lot of demand for our services, and as such, puts lot of confidence in the continued acquisition growth in those areas.

Naji Baydoun

Okay, that's helpful. Thank you. And just any investor that you highlighted sort of several energy transition sort of growth avenues? Can you just maybe talk about which ones that you see the most opportunity in today? How does it look like when you think about renewables versus Nuclear or LNG or Storage, just thinking about positioning in those markets.

Teri McKibbon

Well, Nuclear is certainly exciting. We're working on all of large nuclear sites in Ontario. And there's just such a big market and such a broad demand of things that are required, and we've got a really strong resume after shifting our focus away from new capital investment in oil and gas into nuclear, and it's really paid off for us.

If you look across the other energy markets, obviously there's an emerging demand for the capacity to build hydrogen facilities. There continues to be evolution in LNG. So things like that are happening. We would expect to see more growth in existing LNG facilities in the future, which we have a very strong resume. The renewable platform is high. We're building renewable programs today for in wind and we've got an extensive platform of business in Ontario in hydro. So there's those types of opportunities evolving, and there's certainly more and more hydro than it's expected to be built in Canada. It will be well positioned for.

So it is the energy side is more dynamic, probably more dynamic and we've seen since the big oil booms and it's all non-oil which is really interesting. So there's a lot happening and we expect that that'll be a strong demand for us for the next five to ten years.

Naji Baydoun

Okay. That also helps kind of thinking about where you you'd be looking to expand into. And just the last question, not so much about 2023, but just kind of a when you think about margins, is there a north star that you're aiming for? Where do you kind of see that full potential of the business sort of overtime?

Teri McKibbon

Well certainly, we want to continue on a yearly basis to grow and have accretion of our EBITDA margin profile, and we are well on our way towards that in 2023 and we anticipate that growing in 2024. So that's the focus. It's a little early days to provide any kind of longer-term targets extremely, but we're very, very focused on discipline of ensuring and refocusing on opportunities that we can gain accretion from.

Naji Baydoun

Understood, thank you.

Operator

[Operator Instructions] The next question comes from Ian Gillies of Stifel. Please go ahead.

Ian Gillies

Good morning everyone.

Teri McKibbon

Good morning, Ian.

Ian Gillies

With respect, the balance sheets obviously in good shape. You've talked a lot about bolt-on M&A here, but there's also going to be a pretty decent amount of free cash flow generation this year. Has there been any additional discussion at the board level that you'd be willing to share with us on the thoughts of brown [Ph] putting in and then CIP given where the stock sits today and the performance of the business?

Teri McKibbon

Not at this point. Obviously, on a quarter-over-quarter basis, our board is -- it certainly is it's a topic that is discussed. I’d say that we've tended to focus on a dividend platform. And in that sense whether at NCIB becomes part of the discussion, we'll see. But at this point our focus has been has been more around the dividend.

Ian Gillies

Okay, that that's fair enough. With respect to the progressive contracts that Metro legs rolled out a little while ago. You've seen some contracts towards there. I assume you've taken a closer look at them. Has it changed your view at all or your desire to pursue some of the larger, I guess, transit related infrastructure projects in Ontario, or how are you thinking about that specific part of your business, right now?

Teri McKibbon

Yes, we're active in those where we can be complementary and have this service capacity for if Dagmar has made a huge difference for us and gives us, a Toronto based heavy civil rail contractors. So we've been sought after as a partner because of that. I think our resume on building large maintenance facilities like we built for metro links out of the east rail. A number of years ago we've got certainly a very strong resume in area, and we're building stations certainly currently successfully in Ottawa for our client there which is the Phase II team that are building -- so that's going well for us. So I'd say that we have a number of areas where we have capacity in offering to those projects and as such, we're interested in those and are pursuing those that fit our capacity.

Ian Gillies

Yes, that's that's helpful. And then last one for me, if you look at smaller medium sized businesses today, they're generally characterized as having succession issues. Sale processes are going to become the norm. Would -- is that how you characterize some of the smaller, medium sized construction businesses that you see in Noelle [Ph] in Canada at this point. I know you can't paint them all the same way, but I'm just curious.

Teri McKibbon

I think, and it may be just coming out of COVID. There's accelerated that succession. It feels like there's a real uptick in that space, and it could be just that, they're coming out of COVID and there is a bit longer line of sight to performance. So, it's an easier transaction. We've been focused on companies that first and foremost feed our culture. We don't like to participate in in a sale process that relates to an auction. Periodically do, but we just we're not that interested in those. We're interested in targets that want to become part of our team, part -- and obviously unlock the potential of the business with all the skills and service offerings we have. So we're seeing that type of thing in many areas and our such have a team full time focusing in that area, and so we expect to continue to see that over the over the near term.

Ian Gillies

Okay. That's helpful as well. Thank you very much. I appreciate the detail today.

Teri McKibbon

Thank you.

Operator

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

Teri McKibbon

Thank you everyone for taking the time to join our earnings call this morning. And thank you to the entire Bird team. We are proud of the work executed every day, working safely, working together and building value for our company, our clients, our communities and our shareholders.

Operator

This concludes today's conference call and webcast. And you may disconnect your lines. Thank you for participating. And have a pleasant day.

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Bird Construction Inc. (BIRDF) Q4 2022 Earnings Call Transcript