Welcome, ladies and gentlemen, to the Bird Construction Second Quarter twenty twenty Financial 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 and institutional investors who wish to ask questions should have their webcast muted when dialing into the conference number provided. At any time during the presentation today, you may press the star and one on your telephone 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. As a reminder, all participants are in listen only mode and the webcast is being recorded. 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. At this time, I would like to turn the conference over to Mr. Terry McKibbin, President and CEO of Bird Construction.
Please go ahead, Mr. Terry McKibbin.
Hello, everyone, and thank you for participating in Bird Construction's second quarter twenty twenty earnings call. Co presenting with me today is Wayne Gingrich, CFO. We hope that all of our employees, clients and the investment community are continuing to stay safe and healthy during the COVID-nineteen pandemic. I'd also like to take a moment to thank all the frontline workers for keeping our communities together and protected. As you would have noted in the news release, we've decided to update the format of our earnings calls and will utilize a webcast and a supplementary presentation for this and future earnings calls.
The BuildBird strategy was established in 2016 as a five year strategy based on three pillars: build the business, build relationships and build the team. 2020 marks the conclusion of the Build Bird strategy and great progress has been made over the past five years, culminating with the transaction announced subsequent to Q2 twenty twenty quarter end on 07/29/2020, where Bird will join forces with Stuart Olson, another 100 plus year year old Canadian construction company. This transaction has a targeted close in October 2020, and I will provide an update on the status of the arrangement agreement later in this call. The COVID-nineteen pandemic has added uncertainty to the construction industry as each provincial government has responded with different measures to address the threat to public health. While there has been positive progress to slow spread, prevention measures remain in varying degrees across the country.
The duration continues to be an unknown and the corresponding impacts to our workforce, supply chain and product sites are key variables that continue to have uncertainty as a result. The financial results of second quarter twenty twenty were impacted by the COVID-nineteen pandemic in April and early May when the company experienced temporary project shutdowns and reduced productivity on project sites. The health and safety of employees is always paramount. And as a result of the pandemic, we're increased health and safety initiatives and implemented measures such as physical distancing, enhanced site hygiene and additional PPE on top of standard safety protocols. In July 2020, we launched a pulse survey to obtain feedback from our employees on areas that the company and management can improve upon.
The feedback was generally very positive, and we continue to address and respond to the evolving landscape to ensure our employees are informed and supported by the company's pandemic response. The situation remains extremely fluid. However, company remained resilient to the challenges presented in the 2020 and is well positioned to respond to fluctuating scenarios in the near term. On behalf of the executives and the Board of Directors of Bird, I want to acknowledge the efforts and dedication that our employees have made to ensure that the company continues to operate safely and effectively, especially our field workforces who continue delivering upon project commitments through these unprecedented times. I will walk through the quarterly highlights slide before turning the call over to Wayne to go through the financial results in more detail.
In the second quarter of twenty twenty, the company continued to execute a more diverse work program and delivered significantly improved net income, adjusted earnings and adjusted EBITDA year over year. Net income for the 2020 was $5,600,000 on construction revenue of $282,800,000 compared with a net income of $1,000,000 on $315,400,000 of revenue in 2019. Basic and diluted earnings per share in Q2 twenty twenty was $0.13 compared with $02 in 2019. Adjusted earnings and adjusted earnings per share in the 2020 were $6,600,000 and $0.15 per share, respectively, compared with an adjusted earnings and adjusted earnings per share in the 2019 of $1,000,000 and $02 respectively. The year over year increase in second quarter adjusted earnings is primarily attributable to a mix of higher margin industrial work program.
The earnings improvement is particularly noteworthy in light of the pandemic that has had global impacts removed through the second quarter of twenty twenty. Adjusted EBITDA and adjusted EBITDA margin in the 2020 were $12,300,000 and 4.36%, respectively. Adjusted EBITDA increased $6,900,000 from an adjusted EBITDA of $5,400,000 in the second quarter of twenty nineteen. Adjusted EBITDA margin increased two sixty three basis points from the adjusted EBITDA margin of 1.73% recorded in the second quarter of twenty nineteen. The year over year improvement was driven by an increase in gross profit due to the revenue mix and the impact of increased costs on a certain contract incurred in 2019 that did not recur in 2020.
We're very pleased with the continued progress completing our challenging legacy projects and the impacts of our efforts to diversify our revenue stream across the portfolio of both geographic and balanced risk profiles. We continue to be encouraged by the growth of our pending backlog. Although pending backlog at $575,000,000 was lower year over year in the second quarter, we're seeing the natural conversion of pending backlog into backlog and a growth overall in both combined. Pending backlog at the 2020 was comprised of delivery models that support a solid portfolio with balanced risk in Bird's overall work program, and our earnings base has begun to reflect this. The COVID-nineteen pandemic did impact the timing of conversion of some of our pending backlog, pushing the number of expected awards into 2020.
In 2020, the company secured $702,400,000 of new contract awards and change orders and executed $604,400,000 of construction revenues. The backlog of $1,645,000,000 at 06/30/2020, increased 19.3% from the $1,380,000,000 backlog year over year. Backlog increased by $98,000,000 or 6.3% from the $1,547,000,000 of backlog recorded at December 3039, despite some awards expected in the 2020 being delayed as a result of the COVID-nineteen pandemic. The Board has declared an eligible dividend of $0.03 $25 per share for August, September and October 2020. As announced with the declaration of the July 2020 dividend, the company has returned to its traditional practice of declaring monthly dividends on a quarterly basis given its financial performance and ability to maintain the health of its balance sheet through the peak of a pandemic in Canada.
Subsequent to quarter end, the company announced the sale of Bird Capital's 20% interest in the P3 concessions responsible for 18 schools and nine childcare facilities in Saskatchewan to its project partner, Concert Infrastructure. Developed as a Saskatchewan joint use school, Project one and two, the projects made up the largest school construction project in the history of the province at the time of construction. Wayne will now walk us through the financial results for the second quarter year to date and trailing twelve months compared with the prior year.
Thank you, Terry. Before I get into the details of the financial results of the second quarter of twenty twenty, I will briefly discuss Slide eight, which shows the trailing twelve months, or TPM for short, revenue and adjusted EBITDA for historical periods back to 2017. You will see that thanks to the seventh sequential quarter of improving TTM adjusted EBITDA, TTM adjusted EBITDA margin has increased to 3.55% on $1,400,000,000 of TTM revenue. Turning to Slide nine. During the second quarter of twenty twenty, the company recorded net income of $5,600,000 on construction revenue of $282,800,000 compared with net income of $1,000,000 and $315,400,000 of construction revenue, respectively, in 2019.
The year over year decrease of revenue in the second quarter of 10.4% was driven by projects that have been temporarily slowed down or suspended by clients or by certain provincial governments as a result of the COVID-nineteen pandemic despite a year over year increase in the industrial work program. The year over year increase in second quarter net income is primarily attributable to the mix of the higher margin industrial work program. The company's twenty twenty second quarter gross profit of $20,500,000 was $6,000,000 higher than the $14,500,000 recorded a year ago. The increase in gross profit is due to a higher margin work program as revenue continues to shift from institutional and commercial projects to a more balanced work program, including industrial, and the gross profit profile of the industrial work program is higher. The 2019 was negatively impacted by a PPP project that had performance issues and incurred additional cost due to design related scope growth and acceleration expenses.
Gross profit percentage in the 2020 was seven point two percent and two sixty basis points higher than the gross profit percentage of 4.6% recorded a year ago for the same reasons as gross profit. Income from equity accounted investments in the 2020 was $2,100,000 compared with $1,000,000 in the same period of 2019. The increase represents additional equity income earned from several equity accounted investments across Canada. In the second quarter of twenty twenty, general and administrative expenses of $13,500,000 or 4.8% of revenue were slightly higher than the $13,200,000 or 4.2% of revenue in the corresponding period a year ago. During the second quarter, the company had lower compensation and stock based compensation expense of 1,000,000 lower travel and other discretionary costs of $1,000,000 and the gain on sale of property and equipment was $1,000,000 higher than the amounts recorded a year ago.
Offsetting these reductions in expenses were $1,300,000 of acquisition related professional fees, dollars 300,000.0 higher professional fees relating to information technology and consulting fees, higher pursuit costs of $800,000 and higher foreign exchange costs of $900,000 than the amounts recorded in 2019. Six months ended 06/30/2020, compared with six months ended June 3039. During the first half of twenty twenty, the company recorded net income of $6,700,000 on construction revenue of $604,400,000 compared with a net loss of $5,500,000 and $577,200,000 of construction revenue, respectively, in 2019. The year over year increase in revenue was driven by growth in the industrial work program, partially offset by a slight decline in the commercial and institutional work program. The year over year increase in net income is reflective of the improvement in revenue and earnings attributable to the mix of higher margin industrial work program.
The company's twenty twenty first half gross profit of $37,400,000 was $16,600,000 higher than the 20,800,000 recorded a year ago. The increase in gross profit is partially the result of higher construction revenues year over year. In addition, the increase is due to a higher margin work program as revenue continues to shift from institutional and commercial projects to a more balanced work program, including industrial. And the gross profit profile of the industrial work program is higher. The 2019 was negatively impacted by a PPP project that incurred additional costs due to design related scope growth and acceleration expenses.
Gross profit percentage in the 2020 was six point two percent and two sixty basis points higher than the gross profit percentage of 3.6% recorded a year ago for the same reason as gross profit. Income from equity accounted investments in the 2020 was $3,800,000 compared with $1,700,000 in the same period of 2019. The increase represents additional equity income earned from several equity accounted investments across Canada. Included in the 2020 was a net gain on the sale of one of the company's investments in equity accounted entities of $400,000 In the first half of twenty twenty, general and administrative expenses of $28,300,000 or 4.7% of revenue were comparable to the $28,200,000 or 4.9% of revenue in the corresponding period a year ago. During the first half, the company had lower compensation expense of $1,100,000 and gains on sale of property and equipment was $1,100,000 higher than the amounts recorded a year ago.
Travel, conference and other discretionary spend were also lower by $1,100,000 as a result of the cost management initiatives implemented in response to COVID-nineteen. Offsetting these reductions in expenses were acquisition related professional fees of $1300000.0900000.0 dollars higher professional fees relating to information technology and consulting fees and $500,000 higher per sheet costs and higher foreign exchange costs of $800,000 than the amounts recorded in 2019. As seen on Page 10, throughout the pandemic, the executive management team and our Board have been laser focused on maintaining the strength of the balance sheet. The company's long term debt to equity at 26.1% and current ratio of 1.12x are within our target range. Through strong execution and management, operating cash flow has improved for the six months year to date to $16,000,000 compared with the $800,000 for the comparable period in 2019.
This has helped preserve cash on the balance sheet with only a decline of $8,900,000 at 06/30/2020, from the December 3139 balance, whereas we typically experience a larger decline in cash in the first half of the year. The strength of our balance sheet enables the company to invest in long term growth opportunities for both organic and inorganic means. It also allows us to continue to invest in technology to support enhanced service delivery to our clients and to support safety, productivity and efficiency for our project teams. Moving to Page 11. Non restricted cash is the cash we have available for general operating purposes.
Restricted cash includes cash held in trust as required by the Construction Act of Ontario as well as cash pledged for letters of credit and commitment letters. Cash held in joint operation accounts is used as working capital for this specific project and not available for general operating purposes. However, it can be made available through distribution when agreed to by the joint venture partners. On this chart, you'll see that nonrestricted cash at 06/30/2020, was $56,100,000 which is an improvement from both December 3139, and year over year from June 3039, a balance of $37,000,000 Looking at the bottom table on this slide, the company's loans and borrowings, which represents draws on secured credit or equipment facilities, totaled $37,700,000 at 06/30/2020. Excluding nonrestricted cash, the adjusted net debt was negative 18,400,000.0 The negative adjusted net debt produces a not meaningful adjusted net debt to TTM adjusted EBITDA leverage ratio.
At 12/31/2020, the company had an adjusted net debt to TTM adjusted EBITDA ratio of 0.14x, which remains one of the lowest in the engineering and construction industry. The low leverage provides us with the flexibility to profitably grow the business organically or with accretive acquisitions and mergers. On the cash flow Slide 12, we have highlighted operating cash flow, cash utilized for CapEx and dividends and the ratio of CapEx plus dividends as a percentage of operating cash flow. Operating cash flow, as I discussed previously, improved significantly in the 2020 compared to the first half of twenty nineteen. CapEx of $5,600,000 in the 2020 is lower year over year as we have delayed some spending as a result of the pandemic.
The monthly dividend has been maintained year to date in 2020. And as a result of the strong cash generation year to date in 2020, the ratio of CapEx plus dividends as a percentage of operating cash flow has improved to 87% from nineteen thirty eight percent in 2019. I will now turn the call back over to Terry to comment on the future operating performance for the company.
Thank you, Wayne. On Slide 13, over the past several quarters, we've been very conscious and selective on the opportunities we pursue. The P3 contract method being the highest risk and design build finance and complex design build being the next highest risk type. Stipulated sum, unit price and specified design build being medium risk and construction management, cost plus and integrated project delivery being the lowest risk contract types. As a result of our forecast focused efforts to lower the contribution from higher risk contract types, the mix of revenue from P3 has declined to 2.1% in the 2020 compared to 7.4% in the second quarter of twenty nineteen.
Our revenue base has shifted from the higher risk contract types to 14.2% in the 2020 compared to 23.9% in the first half of twenty nineteen. The trend for the company over the past several years towards a growing proportion of industrial project revenues is expected to continue throughout 2020. Diversification into the LNG, nuclear, public transit, modular and environmental sectors with lower risk contract types will help stabilize earnings with a more balanced in the work program. Subsequent to the close of the second quarter of twenty twenty, the company sold two equity investments in PPP projects. This is consistent with the company's strategy to not hold these investments for the entire duration of the concession agreement.
At 06/30/2020, the company was carrying backlog of 1,645,000.000 which is 19.3% higher than recorded a year ago. The company expects to recognize 58% of the remaining core performance obligations over the next twelve months, with the remaining balance being recognized beyond twelve months. This estimate reflects any short term impacts on financial results from projects that have been delayed as a result of the pandemic. This expectation is based on management's best estimate that contains uncertainty as it is subject to factors outside of management's control. The embedded margin and backlog improved throughout 2019 and improved year over year in the second quarter of twenty twenty.
Backlog is more diversified than in prior years across a broad range of markets and contracting methods and a more balanced risk profile. As I mentioned, revenue earned in higher risk contract categories such as PPP, alternative finance and complex design build projects comprised 14.2% of total revenue to date in 2020 compared to 23.9% in 2019. The proportion of revenue earned from higher risk contract types is expected to remain lower throughout 2020 when compared year over year. The company has minimal direct exposure to projects in the oil sector in its backlog. In addition, the company has more than $575,000,000 in pending backlog as of the end of the second quarter of twenty twenty.
These projects are geographically diverse and span multiple sectors. Included in pending backlog is the Advanced Nuclear Materials Research Center for the Canadian Nuclear Laboratories located in Chalk River. The validation phase of the CML project, which is being executed under an IPD delivery model, is expected to extend into the fall of this year before converting into backlog. Subsequent to June 30, the company received a limited notice to proceed to start early works on-site. Projecting the timing of converting the rest of these projects into contracts has become more difficult in the current market conditions as a result of the pandemic, and several have shifted beyond the second quarter into the second half of twenty twenty, which is expected to negatively impact revenue this year.
The company continues to be selective on prospective pursuits, ensuring that available talent matches the risk profile of the project and overall work program. Project cancellations in the pursuit pipeline have been minimal to date. However, the company did see projects in the pursuit phase shift further out, which will have a modest impact on revenue in the second half of twenty twenty. New projects in the Pursuit pipeline have slowed somewhat coming into the third quarter, which may impact 2021. In the near term, opportunities will primarily consist of smaller environmental projects, midsized social infrastructure projects and a range of projects in the LNG and mining sectors.
The award of any of these project opportunities will primarily benefit 2021 and beyond. The company's underlying future assumptions will have a higher risk the longer the COVID-nineteen pandemic persists. The company experienced disruptive impacts in April and early May in some parts of the business more than others. These impacts related to temporary project shutdowns in certain sectors and provinces and reduced productivity on project sites as a result of physical distancing and additional health and safety measures added to our normal protocols. The company is evaluating whether it qualifies to receive the Canadian emergency wage subsidy to offset the impacts experienced in certain portions of the business.
Total projected revenue has been recognized to date as the company is not yet reasonably assured that it will qualify due to the strength of the company's backlog entering the pandemic, which is much stronger overall when compared to the same time period in 2019. As the company's work program fully remobilizes, the company will experience growth in noncash working capital as the business ramps back up until a steady state of operations is achieved. The company believes it has adequate cash and liquidity to absorb this increase. The company expects to benefit in 2020 from having a healthy backlog with higher margins than a year ago and more balanced in terms of the contractual risk profile of the work program, notwithstanding expectations that revenues will be lower year over year in the second half as a result of the pandemic. Based on the information known at this time, coupled with impacts from the pandemic already experienced, the company anticipates it will achieve higher levels of profitability for fiscal twenty twenty than seen in recent years despite the contraction in revenue year over year.
The higher levels of profitability are a result of the company's near record backlog and improved margin profile. As we announced on June 29, Bird has entered into a definitive agreement under which Bird will acquire Stuart Olson. The next steps of the arrangement agreement and plan of arrangement are progressing as expected. The information circular for Stuart Olson's shareholders is expected to be mailed out in mid to late August with the intention for Stuart Olson to hold a shareholder meeting mid to late September to vote on the transaction. Upon receipt of the Competition Bureau's approval of the transaction as proposed and with greater than twothree of Stuart Olson shareholders voting in favor of the sale to Bird, and the transaction will close near the target date of October 2020.
Transaction summary on Slide 16 was discussed during the investor call Wayne and I hosted on 07/29/2020. So So we'll not cover this slide in much detail, but we're happy to answer questions on the transaction rationale. So this concludes the prepared remarks section of the conference call. I'll now turn the call over to the conference call operator, who will take your questions in turn.
Thank you. We will now begin the question and answer Our first question comes from Frederic Bastien with Raymond James. Please go ahead.
Good morning, guys.
Good morning.
Good morning, Frederic.
Good quarter. Nice to see that business almost felt like business as usual. A couple of questions. My first one is actually related to the proposed transaction with Stuart Olson. You announced that a couple of weeks ago already.
What sort of feedback have you been receiving from staff and other stakeholders since?
So there's a few things. First of all, I think staff at Stuart Olsen are very excited that it's a Canadian, you know, merger. You know, obviously, two companies with a hundred years of history in Canada coming together with a Canadian solution.
Think
it's very timely, and I think it's that we've we've heard very strong reception in that respect. The clients, I would say you can build off that with the clients. I think the large clients in Canada enjoy doing business with Canadian companies. And so we've also had some very strong response from some of the larger entities that we both currently work for or, you know, one of the individual entities works for. But the combined strength of two entities, you know, provides a much broader much broader solution for those clients.
And and as such, the reception has been very positive. Great.
I've been asking this to one of my executives during the the q two calls. But, Terry, I was wondering if you could tell us what the biggest single lesson you were you are taking away from this pandemic.
Well, I'd say that there's some surprising outcomes that I I really think are are great for our industry. And and the one that I would say that really has a a strength in this is safety performance. We're seeing the safety performance on our sites significantly improving. And and these are the you know, obviously, we we we have a very good safety record, and we have very good attention to that. But these are the little things that you you track to that are leading indicators, and we're seeing you know, I think with the additional planning, the additional, additional measures that we're taking, and increased awareness, we're, you know, we're certainly seeing a, a much higher, performance than and it's significant.
So, you know, you're not seeing the little things you sometimes see. And we're talking about first aid type stuff, things like that. So, yeah, that's the biggest thing that we've seen. I think that and and that bodes well for the future that extra planning, extra effort, extra protocols makes a difference.
Thanks for that. It's a clean quarter. I don't have any more questions, so I'll turn the floor over. Thank you. Thanks, Freddie.
There are no further questions at this time. I will now hand the call back over to Mr. McKibbin for closing remarks.
So I want to thank all of our employees for their resilience and for the sacrifices they have made to ensure the company remains healthy in our one hundredth year of operation. Our field staff deserve a special recognition for having continued to work on our projects with the utmost professionalism and dedication while quickly embracing new safety practices and procedures. Our primary concern is always the health and safety of our employees. We hope our strong safety culture also permeates into the daily lives of our employees and serves to help protect their families and the communities in which we live and work. The 2020 represents the seventh sequential quarter where our trailing twelve month adjusted EBITDA has improved.
While it is difficult to estimate the future impacts of the pandemic on our company at this time, the discipline and focus of the team over the past several years on reducing the risk profile and increasing the diversification of the work program will help the company emerge from this crisis with a healthy backlog and maintaining a strong balance sheet. We have sufficient cash and liquidity to support our anticipated work program while maintaining the current dividend based on our current expectations of the impact of COVID-nineteen. Despite those impacts, we still expect 2020 adjusted earnings to be more profitable than recent years. We look forward to our future, the great potential in joining forces with Stuart Olson to create a premier construction and infrastructure company and to continue to service Canadians for the next one hundred years, delivering exciting, innovative and challenging new projects. Thank you for participating in Bird Construction's second quarter twenty twenty earnings conference call.
As always, Wayne and I are available if any additional information is required, so please do not hesitate to get in touch with us. Have a nice day and stay safe.
This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.