Welcome, ladies and gentlemen, to the Bird Construction Fourth Quarter and Full Year 2024 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. 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 one 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 two. As a reminder, all participants are on listen-only mode, and the webcast is being recorded.
Should anyone need assistance during the conference call, you may signal an operator by pressing star then zero. Before commencing with the conference call, the company reminds those present that certain statements which are made express management's expectations or estimates of future performance and thereby constitute forward-looking information. Forward-looking information is necessarily based on a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic, and competitive uncertainties and contingencies. Management's formal comments and responses to any questions you might ask may include 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 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 Teri McKibbon, President and CEO of Bird 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, Bird'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. Bird is 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, Bird delivered strong financial results that surpassed our internal 2022 to 2024 strategic plan targets and set a solid foundation as we enter 2025.
Bird's revenue grew by almost CAD 600 million to CAD 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 revenue. The significant growth in 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 Bird's national infrastructure presence, underground utility, and 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 CAD 7.6 billion of combined backlog remains strong, diversified, and risk-balanced. Our backlog of contracted work was CAD 3.7 billion, while pending backlog representing awarded work that has not yet been contracted was CAD 3.9 billion and continues to include almost CAD 900 million of master service agreement and other recurring revenue.
Similar to the company's revenue profile, Bird'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 that 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-risk our contracts. We have ensured that risk is either passed down to subcontractors or retained by our clients, further mitigating exposure for Bird. In summary, we are comfortable with the associated potential tariff risk in our CAD 7.6 billion of 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 awards in nuclear, civil infrastructure, industrial maintenance, and transportation. Looking ahead to 2025, Bird expects significant conversions of 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 Bird'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 into strategic market sectors and targeting 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. At our 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 inline market growth for buildings, resulting in a relatively balanced revenue across our business by 2027. An 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% net income to shareholders through our dividend, retaining two-thirds to support organic growth and strategic M&A, as well as capital investments in technology and equipment to support further productivity and growth. To achieve these 2025 to 2027 goals, we'll continue to expand into strategic 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, Bird 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 hydrogeneration and refurbishment, co-generation, healthcare, 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 seven, we highlight two key sectors: rail and defense, each of which presents significant opportunities for Bird. 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 AtkinsRéalis, finalized and signed a project alliance agreement with Metrolinx to deliver East Harbour Transit Hub in Toronto. This marks the commencement of the execution phase of the project.
Beyond our joint venture with AtkinsRéalis, this project creates one-Bird subcontracting opportunities for teams like Dagmar and our committed commercial systems group. With the significant addressable market in this sector, there continues to be opportunities for growth. Defense, t he current geopolitical environment, including Canada's commitment to meeting its 2% of GDP NATO defense spending obligation, is driving substantial investment in this sector, and this translates to a significant demand for Bird. An example of this is the recent announcement of the Arctic Security Strategy, consisting of CAD 2.7 billion over 20 years for three northern military hubs. There is 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 in 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. Bird has deep experience in the north and remote Canada, which positions us well for these emerging opportunities. We have a long history of working with Defence Construction Canada, having completed CAD 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 great opportunities that dwarf previous investments. We are excited about this sector, and we have a longstanding 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 CAD 1 billion. They're typically divided into multiple scopes, creating opportunities for expansion on site. Bird is recognized as a tier-one contractor, trusted by blue chip 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-perform capabilities. Additionally, Bird has built strong Indigenous partnerships and joint ventures, which are important to support sustainable, positive community impacts that benefit local communities. Key advantage of these large capital project investments is the ability to expand our role over time. Bird often begins with one or two work packages, and through our strong performance, we continue securing additional scopes, significantly growing our total portfolio on site.
A great example of this is our experience at LNG Canada, where our teams ultimately completed over CAD 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-perform, aligning well with our capabilities and commitment to operational excellence. We've highlighted our selection of large capital investment projects. We're 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, Teri. Bird's 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 revenues for the fourth quarter of CAD 936.7 million represented an 18% increase compared to the same period in 2023. On a full-year basis, revenues of CAD 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 gross 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-perform work.
The increase in gross profit continues to reflect the improved margin profiles on newer work resulting from disciplined project selection, strong project execution, growing self-perform capabilities, and cross-selling opportunities across the company. Adjusted EBITDA in the fourth quarter was CAD 71.9 million compared to CAD 43.9 million reported a year ago, representing a 64% increase. Adjusted EBITDA margins continued 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 CAD 218.8 million, CAD 212.8 million, or 6.3% of revenues, compared to CAD 138.7 million, or 5% of revenues in 2023, representing an increase of 53%. Turning to earnings, net income and earnings per share were CAD 100.1 million and CAD 1.84, compared to CAD 71.5 million and CAD 1.33 in 2023, representing increases of 40% and 38%, respectively.
Adjusted earnings and adjusted earnings per share were CAD 37.3 million and CAD 0.67, compared to CAD 24.9 million and CAD 0.46 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. 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 made this and were adjusted.
As we noted in the prior presentations, Bird's revenue, adjusted EBITDA, and adjusted EBITDA margins have experienced a period of sustained growth over the past several years, resulting in revenue growing to CAD 3.4 billion and adjusted EBITDA growing to CAD 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 a billion dollars, and our adjusted EBITDA margin improved by 200 basis points. As we look to build on this economically resilient foundation towards the company's 2025 to 2027 growth and profitability targets, our 10% plus or minus 2% organic revenue CAGR target would see Bird at approximately CAD 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. Bird'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 is 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.
Bird's 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 CAD 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 CAD 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 CAD 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 CAD 0.0325 to CAD 0.07 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 Teri for our outlook and closing remarks.
Thank you, Wayne. Bird has built a strong and economically resilient business that is 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 of pending backlog to backlog occurring in the first half as a number of large collaborative projects reach their construction phase. We believe the company is well 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 one 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 two. Anyone who has a question may press star then one at this time. Our first question today will come from Chris Murray of ATB Capital Markets. Please go ahead.
Good morning. Maybe just turning to the guidance very quickly, just 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 the permitting is less of a problem than it was in Q3, but I'm just 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. A couple of things.
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. That is starting to unwind, actually. That is not really a driver for us that is kind of impacting where we said we are going to back-end shift some of the growth. The drivers really, there are a couple of things that we called out in our outlook, is in the first half of the year, we are going to see significant conversions of pending backlog to backlog, meaning we are contracting these projects in order of magnitude. It could be CAD 1.5 billion moving into backlog. That sets up the second half really, really well.
On top of those conversions, I mean, we're still going to have our normal kind of wins that we get that don't flow through pending backlog and go straight to securities into backlog. We still feel very confident in our total year outlook. It's just part of it because of the timing of those conversions pushing it to the second half. The second thing that we called out was in the first half of 2024, we had a really strong first half. We had very favorable weather conditions. We got to do something that we don't often get to do in the first half, which is accelerate process on a number of projects. We had called this out last year.
We just wanted to kind of highlight that when we say 10% for unit growth plus 5% for Jacob Brothers in the year, it's not linear. We don't apply 15% to every single quarter. There are still project mix factors and those types of things that impact the quarter. Really wanted to make sure that we're confirming the total year outlook.
All right. That's helpful. Thank you. I'm not sure who wants to take this one, but Teri, just some interesting comments about Bird's history in Northern Canada. There is lots of discussion about, as you said, military, minerals, that kind of development. Can you talk a little bit about your capabilities to be able to work in the north? Does this lend itself to very much like Jacob Brothers was a way to move to east or to move into different verticals?
Are there other opportunities around M&A to maybe bulk up 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. We think about building a modern hospital in Yellowknife with weather conditions that can be in the minus 40 or 50 degrees Celsius t for many months at a time. We're just used to that. If you think of the work we've done with employing 1,500 to 2,000 people on a job like LNG Canada, we're used to mobilizing large workforce providers to work in remote locations. The history is there. We've worked. We built a hotel in Iqaluit. It was 75 rooms.
We're working right now in Nunavut on pre-con on a number of things. Historically, we have the resume. We have the Indigenous partnerships established. We have the teams that are set up for that. Our business, our mining business, we refer to as Bird Heavy Civil, has worked extensively through Northeastern Canada in the remote north as far north as Mary River, which is about as north as you can be. I think the depth is there and the history is there and the teams. It's an exciting market. Not discounting that, yes, there's a lot of northern-based work that's evolving, but there's a lot of existing base expenditures going on across the major defense bases in Canada, which we continuously service, which would have been part of that CAD 1.3 billion over the last 10 years.
Okay. Just maybe following on to that, we have not 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 infrastructure that we are modeling right now and in pre-con on would include modules that would be supplied by Stack .
Okay. Thanks. That is helpful. Thank you.
The hotel, for example. The hotel, for example, that we built in Iqaluit, we erected that hotel in eight days, 75 rooms, obviously on top of a platform that we stick built. But those units came in, and yeah, it is an impressive hotel in the remote north that we constructed. Yeah, I am really confident in our resume.
Sure, if there's something that comes along that enhances us, that we would 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.
Our next question today will come from Krista 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.
It's been busy. I don't think our pipeline has softened at all. 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 important for us to consider.
We're really proud of our track record of integrating companies over the last number of years. I think that in itself creates new opportunities because someone thinking about investing in 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 track record is impeccable. I'd say that the activity levels is high, continues to be high, and it's been high for probably 18 to 24 months. We're excited about some of the opportunities that we're considering.
Great. Thanks. 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. Have you had any conversations with some of your customers who 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. That is the beauty of the types of programs, types of projects that we target. It is across a multitude of sectors that have long-term horizons. They know that things are going to ebb and flow within the economy. That is the beauty of the focus we have. We have also, in the past month, had projects that we are closing some of them with. They are very definitive procurement rules that we have had to intervene and say, "Look, we need relief from tariffs in this regime," or, "We just are not prepared to take that risk." The clients have adjusted those.
That's primarily government, where there's been a very rigid procurement sort of framework and usually not easy to make adjustments. We made that very clear that we wouldn't proceed unless there was a relief for that. They've been accommodating. 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, Krista.
Our next question today will come from Michael Tupholme 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 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. Yeah, we still have 70 basis points to get there instead of 100. We are going to see an additional lift as we have a full year of Jacob Brothers consolidated in our 2025 results. We also have a great mix of projects in our backlog, in our pending backlog, and in our pipeline. We do say in our outlook, I just want to call that out, that we are still seeing the embedded margins in backlog and in our pending backlog be higher than the work program we just put in place. That also gives us confidence that the margins are going to continue to drive up.
That's helpful. Thank you. Maybe, Wayne, how do we think about margin progression then as you move through the year, particularly in view of the commentary about more of the growth coming in the second half of the year?
I think the margin progression is less about kind of the growth story between first half and second half. It is just the normal seasonal trend that we have, right? In first quarter, for example, obviously we have winter weather, and we do a little bit less self-perform work in that sector, have a little less equipment revenue. Even our margins are a bit muted compared to the busy summer months in Q3 and the closeout of the year in Q4. I think normal seasonality is what you'll see in terms of the flow to the total year 2025.
Okay. That's helpful. Thank you. 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. 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. There's still going to be positive organic growth compared to the first half of last year. Then there's going to be Jacob Brothers layered on that. It's just not going to be the 15% every single quarter. It's going to be two-thirds kind of weighted to the back half.
Got it. Perfect. 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. Teri, I take your point that it does not sound like you believe there is really any impact or risk to your current work program. Can you maybe shed some light on any conversations you are having with customers about projects that have not yet been approved, or are they rethinking anything as far as projects that are sort of on the horizon at this point or looking at those any differently? Just curious around the sort of the future opportunity and what you are doing.
Yeah. We have not had any customers in the core sectors that we are focused on raising concerns or raising that in the sense of a pause. Like I said, the high majority of the areas we are focused on are long-term.
They have very well-organized platforms, and they're moving along. A lot of the things we're doing are expansions of current programs we're already on. They're just continuing. I think it's the way we've diversified into so many areas and a blend of government work and a blend of private work in key growth areas for Canada. Obviously the new opportunities evolving in defense, I think it just positions us really well. We're very confident that we're positioned as well as we could be. I honestly can't even think of a sector that I wish we were positioned in. To be perfectly candid, 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?
I think it's public. In addition to these three new hubs that they're building in Yellowknife, Nunavut, and in Iqaluit, the major bases are getting major expansions. Whether that's Cold Lake to house their future fighter program, or the army bases in the country. 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. It's exciting. The programs that are coming through across the bases, the majority of which we've worked at, 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 Frederic Bastien of Raymond James Ltd. Please go ahead.
Good morning.
Hi, Fred. Morning.
Guys, with Canada potentially looking at additional export markets for its natural resources, does that potentially accelerate projects like the phase two of LNG Canada? Just curious as to your views on that. Obviously, you did really well on the initial phase of LNG Canada. How would you position yourself for that work if it were to go ahead?
Certainly, it seems to be government in the public forum, governments raising that topic that they would like to see phase two accelerated and moving along. I am sure those discussions are underway, and we are highly confident with our performance on phase one that we participate strongly in phase two.
I'd say the one that is emerging, and it might have emerged regardless of the interface or the tensions, is Prince Rupert. Lots of activity related to Prince Rupert, and that creates exciting opportunities for us. We're very active, obviously, in Squamish on Woodfibre. On the LNG side, we're nicely positioned, and our reputation is giving us a lot of new opportunities to expand from that perspective. We also expect considerable expansion of ports and facilities on both coasts. As you said, Canada is redirecting and focused on rebalancing their export markets. To do that, they've got to build infrastructure to facilitate that.
Thanks for that color . I apologize if it's been asked or brought up in the last 40 minutes, but nuclear has been a new market for you in the last several years. You've done extremely well. Can you comment on maybe additional opportunities you're seeing in that space? And if you have already answered that question, feel free to ignore me.
No, it has come up, but it's certainly a major growth area for us. 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. Obviously, we are participating quite significantly in those programs. We are doing a lot of decontamination work ultimately for Atomic Energy of Canada Limited, but through CNL. That program continues to develop. We've got a large program underway up at Chalk River, which is the programs that have been talked about with a large campus that's getting completely renewed and refurbished, and those programs are underway. I think across the nuclear space, our teams continue to grow and expand.
It has become a major business front for us. OPG has announced the refurbishment of Pickering, and we're doing a lot of support work and are excited about those opportunities that really support and create appropriate infrastructure to support that refurbishment. As we've been doing at Darlington, 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, Teri. Appreciate it.
Thank you.
Our next question today will come from Ian Gillies of Stifel. Please go ahead.
Morning, everyone.
Good morning.
First question is operational in nature. As best I can tell, East Harbour contract is the first collaborative contract where 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. To be honest, I think it's the Eastern Canada's second transit project of significant scale, of any scale, I think, that's been procured. I would say this: the alliance model that we're using there is a fully integrated partnership model with the client. 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 barrier that you would not normally be able to break down if you 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. It has been a tremendous experience to date, and we've been on this for a few years now as the design has been evolving. 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 in the same kind of feedback that BC Partnerships is getting where they're seeing what a powerful model that is because the predictability of the ultimate budget is highly likely when you have the whole team working collaboratively to get it done. The negatives, I can't think of a negative. I'd say that these projects take a little longer to get into construction.
That's probably the only thing. Honestly, if you start to position your backlog with a series of these, it starts to become more of a steady run rate. The front end, when you've got a few of them evolving, does take longer to get revenue flowing, but it's clearly worth it in the end based on the experience we've had to date. It's also a model that is supportive of self-performing the work because it assists the partnership in accelerating the work because you've got that self-perform ability to turn up the crew sizes and hours of work to be able to meet milestone targets. 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? Fully acknowledging the M&A strategy is strong. I mean, buying your own stock in 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 we've tried to be very clear in our communications from our investor day in October. Our capital allocation priorities remain unchanged. We're targeting a 33% payout ratio on net income. Yeah, the M&A market is still very active for us. We want to make sure we're retaining enough capital in the business to invest in that growth. The work program is also growing, right? When you see growth in industrial and infrastructure that's outpacing the market, there's going to be equipment needs within as well.
We're making sure that we've got the capacity to support that growth. 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.
Again, if you have a question, please press star and then one. Our next question today will come from Maxim Sytchev of National Bank Financial. Please go ahead.
Hi. Good morning, gentlemen.
Good morning.
Teri, 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.
Yeah. We haven't seen concerns with those clients.
There's been no behavioral differences the way they think about the programs or long-term initiatives, whether that's in the government side across infrastructure, whether that's transportation or healthcare, long-term care. You start looking at that, other types of transportation type things. On the private side, the large majority of things that we're focused on are these large blue chip type clients that have a 50-year horizon, many of the projects. They're thinking longer term.
Obviously, we're well equipped with our various supply channels to redirect supply. Many of these large clients that we're working with will have free-issue equipment even that comes in where they're procuring things that are coming from all over the world. In that regard, I think there's a fair bit of consistency, but certainly uncertainty as to where it's also going to settle out, as everyone is fully aware.
Yeah, for sure. 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?
It is so variable. Like I said, so many of our clients are procuring some of those commodities. I will say this: we have done a deep forensic analysis of our existing backlog, and we have not found risk in that that would cause us any concern. We have the flexibility to have that risk transferred to a subcontractor. In the case where we are self-performing, obviously, we have conditioned our clients for that risk.
Sorry, I just meant commodities when it comes to, I do not know, like iron ore, gold, natural gas, etc., if you were to look across.
I see what you are talking about.
Entire companies. Yeah.
I was thinking for sure you're talking across sectors. So far, no. Obviously, there may be sectors like we're in iron ore, for example. So far, no indication from those clients, but I think it's a wait and see. You probably see steel tariffs continue. You probably see some tightening there. Our mining group is fairly diversified across different sectors. Our mining group is also the group that is our point on hydroelectric and other heavy civil type initiatives. We've got that evolving now, which we wouldn't have had a year ago. The large hydro project we have up in northwestern Ontario is getting greenlighted to get under construction now. It gives us some flexibility. So far, no indications. We're in close contact with our major clients on the iron ore side.
Okay. Okay. That's great. Thank you. A quick question for Wayne, if I may. In terms of the working capital kind of intensity, how should we think for 2025? If there's any kind of puts and takes versus 2024 or anything you can tell us off the grid?
Yeah. I think the flows between non-cash working capital and cash, I think you'll see the usual seasonality there. If some of the organic revenue growth is moving into the second half that we talked about with some of the pending backlog conversions, then the investment in non-cash working capital might be a little more muted in the first half, a little more of a spike in Q3. We would still expect to see the unwind that we usually get in the fourth quarter again this year.
That's probably the only-
Okay. Nothing unusual.
Okay. Yeah. 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. McKibbon for closing remarks.
Thank you. Bird's exceptional revenue and profitability growth in 2024 was driven by strategic changes that we made over the past several years that saw Bird risk balance our work programs expand our self-perform 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 CAD 8 billion in our combined backlog, a robust bidding environment with margin-accretive opportunities, and a strategic plan that will 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.