Welcome, ladies and gentlemen, to the Bird Construction first quarter 2023 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, you may press star then one on your telephone keypad to be placed into the question queue. You will hear a tone acknowledging your request. When we're ready for your questions, you will be introduced into the conference in the order that you received. If you wish to remove yourself from the question queue, you may press star then two. As a reminder, all participants are in listen-only mode and the webcast is being recorded.
Should anyone need assistance during the conference call, they 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 the future performance and thereby constitute forward-looking information. Forward-looking information is necessarily based on a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic, and competitive uncertainties and contingencies. Management's formal comments and responses to any questions you might ask may include forward-looking information. Therefore, the company cautions today's participants that such forward-looking information involve known and unknown risks, uncertainties, and other factors that may cause the actual financial results, performance, or achievements of the company to be materially different from the company's estimated future results, performance or achievements expressed or implied by the forward-looking information.
Forward-looking information does not guarantee future performance. The company expressly disclaims any intentions or obligations 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 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.
Thank you, operator. Good morning, everyone, welcome to our first quarter 2023 conference call. Joining me on today's call is Wayne Gingrich, Chief Financial Officer. We are pleased with our first quarter results, building off a strong 2022 and driven by our diversified and risk-balanced business model. Bird delivered solid revenue growth with healthy seasonal margins, reflecting strong execution across our work programs. As expected, the seasonality of earnings returned to more normalized path patterns on a year-over-year basis due to the completion of a large year-round work program that was active in the first quarter of 2022. We continue to capitalize on the numerous demand drivers for Bird's services, including a substantial infrastructure pipeline across all provinces with significant awards in the energy and mining sectors.
This demand resulted in a record combined backlog and pending backlog of CAD 5.7 billion, including recurring revenue MSAs exceeding CAD 1.1 billion at quarter end. The company's significant and highly collaborative backlog continues to grow through the selective pursuit of projects. With minimal exposure to lump sum turnkey projects or to the more economically sensitive residential construction market, our diverse backlog reinforces Bird's resilient foundation. Coupled with expected further leverage on our cost structure, we are confident in our 2023 outlook for revenue and earnings growth. The diligent focus of our One Bird team ensured we maintained our strong financial position while leveraging our significant liquidity to fund growth, pursue opportunistic M&A, and maintain returns to shareholders through the monthly dividend.
Turning to our first quarter financial highlights, our team delivered revenue growth of almost 13%, with revenues of CAD 536.5 million. Net income for the period was CAD 5.1 million and on an adjusted basis, we reported EBITDA of CAD 16.1 million, representing a 3% margin. Adjusted earnings and adjusted EPS were CAD 5.3 million and CAD 0.10 per share, respectively. Bird achieved a record combined backlog at March 31st, consisting of CAD 2.7 billion in backlog and CAD 3 billion in pending backlog. With our pending backlog, our recurring revenue MSAs grew to over CAD 1.1 billion. The company added almost CAD 595 million in securements to backlog during the quarter, compared to CAD 507 million in 2022, or a 17% year-over-year growth.
With CAD 536.5 million in revenues recorded in the quarter, the company had a favorable book-to-bill ratio of 111%. Pending backlog also grew quarter-over-quarter and year-over-year. Bird added over CAD 500 million of new awards to pending backlogs since year-end, including substantial recurring revenue awards representing 20% growth from year-end and a 75% improvement over Q1 of 2022. Overall, our bidding pipeline remains robust and opportunities continue to present themselves, supporting our continued confidence in our near to medium term outlook. The company's continued efforts to drive forward our business supported our key fundamentals as outlined on slide seven. We remain confident in our full year outlook for improved earnings and with our strong first quarter revenue growth, we now expect full year revenue growth in the high single digits.
Driven by improving margins, earnings per share and adjusted EBIT growth are expected to outpace revenue growth. Our outlook is underpinned by our diverse active work programs operating in high demand and high growth sectors and our record combined backlog. We have the financial flexibility, low leverage and low net debt to invest in operations as well as enable acquisitions and maintain our balanced approach to capital allocation. The strong financial position facilitated by the acquisition of Trinity Communication Services during the quarter, an Ontario-based diversified telecommunication and utility infrastructure contract with specialized service, self-perform capabilities that we plan to leverage across company's sizable national client base. The acquisition exemplifies Bird's approach to accretive tuck-ins as well as the benefits of the company's strong financial position with the acquisition funded 90% through cash and 10% in common shares.
On slide eight, we see Bird's consistent revenue growth and healthy adjusted EBITDA margin, which on a trailing 12-month basis was 4.1% at the end of the quarter. Improving our margin profile remains a key focus of management. We have an appropriate balance of contracts in place, diversified across sectors and clients, both public and private. Our balance of work between institutional, commercial and industrial remains relatively consistent and in line to drive growth. Bird's risk-balanced portfolio of projects in a very active bidding environment allows the company to be selective when pursuing new work, focusing on pursuing the right opportunities and projects that reflect an appropriate risk balance and align with Bird's combined capabilities across the country.
Economic factors such as labor and material cost escalation driven by inflation are largely reflected in Collaborative delivery model, and Bird has developed a strong reputation for delivering sophisticated projects in these types of frameworks. At quarter end, Bird's recurring revenue MSAs and pending backlog exceeded CAD 1.1 billion, providing additional visibility to future revenues. Included in the CAD 1.1 billion is a recently announced CAD 300 million in new recurring revenue agreements and scope for clients in the energy and mining sectors. It's important to note that this announcement represents a key priority to focus on growth with strategic clients, and this is not an extension or renewal of to existing MSAs. It's additional scope and new agreements.
We continue to execute well on our strategy and see key focus areas such as growing self-perform work, expanding cross-selling opportunities through M&A and internal partnerships, and disciplined project selection, contributing to enhanced fundamentals and our positive outlook. Another significant announcement in the first quarter was the contracts awarded to Two Nations Bird, a partnership with two local indigenous communities. The partnership was awarded development works and multi-year site services at BHP's Jansen Potash project, marking the company as a long-term partner on this major project site. Bird's reputation as a key partner for multi-year mega projects positions us well in the current active commodities market, where there is a range of large industrial projects planned for the near future. This morning, we also announced a smaller but strategically important award for heavy civil work at the Bloom Lake Iron Ore mine in Quebec.
This award positions us with a new client and opens the door for potential multi-year opportunities in the coming year. Bird continues to be ideally positioned to provide our full project lifestyle offering and self-perform capabilities to resource sector clients. Subsequent quarter end, we also announced the award of Canada's tallest modular construction building. Our Stack Modular business, together with our BC Bird team, played a significant role in the design of this 14-story permanent modular tower. I'm pleased we were selected for the construction. Being the first high-rise modular tower in Canada, this project is a key catalyst for growth in modular. It will provide a visible example of how we can deliver comparable quality and similar look and feel to traditional builds. Modular allows for significant cost savings and cost predictability, and the shortened construction schedule allows for a quicker occupancy.
The off-site nature also provides advantages with a tight labor market. There are major opportunities for modular, especially when it comes to buildings with a repeatable design style, such as purpose-built apartments and long-term care. With the market becoming more and more aware of the benefits of modular, Bird is one of the few Canadian firms with the experience and capacity to deliver this efficient solution to Canada's housing crisis and long-term care capacity challenges. The transition to a lower carbon future remains a key focus area where Bird's robust self-perform capabilities have positioned us to deliver energy transition projects as well as sustainable new builds and retrofits. We have a significant portfolio of projects, including utility scale renewables, waste-to-heat recovery, wastewater and organic waste processing facilities. Bird's team has work programs on all of Ontario's nuclear sites, where there's significant spending planned well into the future.
The growing civil infrastructure team, catalyzed by Dagmar, is delivering rail projects and supporting the development of public transportation networks, also a notable area for government funding, especially in the Ontario market. For our buildings team, the transition to a lower carbon future presents many opportunities to apply our well-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 competitively positioned to help clients reduce their carbon footprint, which is expected to continue to gain momentum in the future. Along with our financial results released yesterday, Bird released its third annual sustainability overview. It provides an overview of Bird's ESG initiatives, across the country and information on how we are striving to maximize our positive social and environmental impact utilizing strong corporate governance framework. The report can be found on our website.
With that, I'll turn it over to Wayne to go over our financial results.
Thank you, Terry. For the first quarter of 2023, Bird reported construction revenue of CAD 536.5 million, compared to CAD 475.5 million in 2022, representing a 12.8% increase year-over-year. The year-over-year growth was primarily organic, with Trinity joining the team in February 2023. Gross profit was CAD 39.8 million, or 7.4% of revenues, compared to CAD 41.6 million in the same period in 2022. The project mix in 2023 had lower proportions of self-perform work, which typically generate higher margins. This was driven by the completion of a large, mostly self-performed year-round industrial work program that was completed in 2022.
While the work volume and earnings of this program have been fully replaced for 2023, the new work is expected to follow more seasonal trends, ramping up in Q2 and further in the second half of 2023. General and administrative expenses were $31.6 million, or 5.9% of revenues, up very slightly from the $31.3 million recorded in the first quarter of 2022. Notably, and notwithstanding cost escalations driven by inflation, our G&A as a percentage of revenue dropped from 6.6% in Q1 2022 to 5.9% in the current quarter. We continue to expect to gain leverage on our cost structure as our business grows, which supports expectations for overall improved earnings.
Adjusted EBITDA for the quarter was CAD 16.1 million or 3% of revenues, compared to CAD 17.8 million or 3.8% of revenues in Q1 2022. Net income and earnings per share were CAD 5.1 million and CAD 0.10, respectively, compared to CAD 6.4 million and CAD 0.12 in Q1 2022. Adjusted earnings and adjusted earnings per share were CAD 5.3 million and CAD 0.10, respectively, compared to CAD 6.5 million and CAD 0.12 in the same period in the prior year. The year-over-year decrease in first quarter adjusted EBITDA, net income and adjusted earnings were consistent with the lower growth profit. Bird remains committed to maintaining a strong balance sheet with significant financial flexibility and liquidity.
We closed off the first quarter of 2023 with a strong liquidity position, including CAD 110.7 million of cash and cash equivalents, and an additional CAD 172 million available under the company's syndicated credit facility. This supports ongoing investments in growth-related working capital, private driven capital expenditures and potential tuck-in acquisitions to further diversify service offerings and self-perform capabilities. At the end of the first quarter, the company had significant working capital of CAD 173.2 million, compared to CAD 144.9 million at the end of Q1 2022. Our financial metrics are well within our comfort levels, we maintain a resilient and flexible foundation. The company's current ratio at March 31st, 2023 was 1.22 compared to 1.23 at December 31st, 2022.
Our adjusted net debt to trailing twelve-month EBITDA ratio was 0.24 times, while our long-term debt to equity ratio was 23.8%. We continue to maintain our balanced approach to capital allocation, ensuring Bird is positioned to successfully capitalize on productivity advancements, organic growth, capital investments, debt repayments, and tuck-in merger and acquisition opportunities while maintaining a regular cash return to shareholders through our monthly dividend. In the first quarter, Bird generated cash flow from operations before non-cash working capital of CAD 17.6 million. We reinvested CAD 7.7 million by way of CapEx in the quarter. We also distributed CAD 5.2 million in dividends to shareholders. The company anticipates significant growth in earnings per share and adjusted EBITDA in 2023, sufficient to achieve an expected dividend payout ratio below 40% of net income for the year.
I will now turn the call back, over to Terry to comment on the outlook for the company.
We're pleased with the company's performance this quarter, which was consistent with our expectations. We foresee broad-based, sustained demand backed by significant government funding for infrastructure and institutional projects and active commodity markets and strong demand for sustainable and energy transition-related projects. Overall, Bird expects to continue to deliver strong financial results underpinned by the significant changes made to the business over the past several years, which have resulted in today's resilient business model. Our growing revenue and record combined backlog set the tone for the year, where we expect to deliver stronger margins and high single-digit revenue growth. With that, I'll turn the call back to the operator for questions.
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're using a speakerphone, please pick up your handset before pressing any keys. If you wish to remove yourself from the question queue, you may press star then two. Anyone who has a question may press star then one at this time. The first question comes from Jacob Bout with CIBC. Please go ahead.
Hi. Good morning, Teri and Wayne. This is Rahul on for Jacob.
Good morning.
Morning.
Morning. Combined backlog is up nicely and you're now guiding for high single-digit revenue growth for the year. There are some concerns that tightening bank lending conditions could slow small to mid-size commercial building projects. Are you seeing any impact from that or caution from your customers yet in the market so far in Q2, or not so much in the Canadian market?
Well, I guess, first of all, it's not a market that we're that focused on. It's a smaller percentage, you know, that sort of smaller, you know, obviously, economically sensitive, you know, sort of areas. It's, you know, majority of the business that we're focused on, you know, has a high support from government or a high support from, you know, cycles of energy, you know, obviously high commodity run right now. It's, you know, we're not really in that market to any extent other than a few smaller projects for blue-chip clients, and those blue-chip clients are proceeding.
Right. Okay. Maybe just a question on seasonality. I believe on the last call, you had highlighted that H2 of the year could generate about 70% of EPS for the full year. Based on what you're seeing so far in the second quarter, is that still the expectation?
I think you had mentioned-.
I think you mentioned in your prepared comments that, the self-performed work program ramps up this quarter going into the back half of the year.
Correct.
Yeah. Yeah.
That is correct. You know, in 2022, we had a large work program that was, you know, obviously not as seasonal in nature, and it accelerated through the, you know, the first half of the year. That made certainly a difference. This is, you know, more of a normalized first quarter for the profile of the business that we have.
Right. Maybe just last one from me. You're now guiding for high single-digit revenue growth, versus mid to high previously. Would you say this is just a factor for the strong revenue growth in Q1, or would you say you're a bit more optimistic, today for the balance of.
I think it's just the demand. The demand that we've got and the pace of activities that we're, you know, we're focused on, you know, first quarter, you know, just to give you sort of order of metrics, the projects that I review on a quarterly basis are up over 100%, you know, year-over-year. Those are projects that meet a threshold that, you know, that needs my final sign-off. You know, obviously you can see the growth in backlog, in pending backlog, which is, you know, it's quite significant year-over-year. We're really excited about the model of businesses that we've built and the framework and the strategy that we, you know, we released, you know, in the fall of 2021 for the 2022-2024 strategic plan.
We're hitting our marks, and we're, you know, we're pleased with, you know, with the overall performance. The areas that we focused on are really bearing fruit. Yeah, the business is hitting a really nice stride right now.
Great. Thank you very much. I'll pass it over.
Thank you.
The next question comes from Chris Murray with ATB Capital Markets. Please go ahead.
Yeah, thanks, folks. Just coming back to the bookings in the quarter. Terry, you were talking about, you know, the plan as you go into 2023 and 2024 and what you're seeing. Kind of interesting to see, like, your workload's almost doubled in terms of review. That's probably a nice problem to have. When we look at a book-to-bill though at about 1.1, certainly I think that may be skewed by the type of projects you may be doing. You may be doing more kind of development work in advance of booking stuff. How do we think about growth, you know, considering you're starting to see some acceleration in 2023 into 2024?
Well, I think we're gonna see fairly consistent growth just because. Couple things are happening, Chris. Certainly, the, you know, the evolution of collaborative models. You know, clients are realizing that a collaborative model is a more effective model. It de-risks the project for all parties, all stakeholders. It creates a more predictable outcome. Because you're spending so much time on the front end with design, you know, and getting design correct. I think in that regard, you know, we're seeing a real acceleration of these models into many new markets. The other thing that's happening is the scale of the projects is increasing.
When you start to think about larger projects now, using the types of models that we've developed a tremendous resume for, you know, you're starting to see the impact of a much bigger bridge of revenue over multi years, which, you know, is exciting obviously, because it creates more resiliency in terms of year-over-year revenues and revenue growth. Yeah, the pace of business is as high as we've ever seen in terms of, you know, demand for our services. It's pretty exciting for our team right now.
Okay. Yeah. I mean, I guess what I'm thinking about is if your backlog duration stays about the same at a 1.1 times bill, you got to be thinking that, you know, you're probably at least growing at high single- to low double-digits.
Yes.
-as we go past this year. Is that maybe the right way to think about it?
Right.
Is there something I'm missing?
No, that's a good way to think about it.
Okay, cool.
You're seeing an increase in recurring revenues as well, Chris, with the CAD 300 million of MRO work. It was all scoped expansion at existing clients. I mean, that's gonna add nice growth for us too, as that all comes online, and you get a full year worth of that in 2024 as well.
Okay. No, that's helpful. And all that stuff, as you said, kind of goes into that whole self-performed type of bucket where you have a little more control over the scope and the scale of the projects.
Correct.
Yeah, cool. One of the interesting announcements you made was on the new award around the modular buildings. There's been a lot of discussion around modular in commercial buildings and the height that they can do and the, and the scale they can do. A couple of questions on this. One, you know, obviously, you guys are doing modular, but you're doing it out of steel, which, you know, facilitates a larger buildings, taller buildings. Thoughts around, you know, other projects in the pipeline for modular because it seems to have been, you know, a little lumpy, would be nice way to characterize it.
Any concerns around supply out of China or anything like that, where the boxes are built, and how that maybe fits into your plans, as you do this project and others?
Maybe just, you know, high level on the modular side. Yeah, certainly this is a real key award. It's a catalyst for us to be able to demonstrate, you know, our capabilities and the quality of our products. We're really excited about this. There's more of these to come, is our expectation. Right now, like, modular as a, you know, in a general sense, is a very disruptive business, and disruptive businesses, as we've seen in many of the startups that exist in the world, certainly take time to evolve and because of the disruption. In the construction industry, which has been bricks and mortar, you know, for 100 years, this is very disruptive, very disruptive to architects and engineers. You know, the financial model is different.
It does take some patience. I think we've been working on sort of selective projects in Canada and have developed, you know, a really good learning curve of, you know, how we improve and how we create reductions in cost and speed and efficiency and quality and things like that. We've done a nice job. You know, with 3 projects under our belt, four projects under our belt now in the last few years, but it has been spotty, like you said. One of the areas that I think is most impressive from my lens is there are 17 modular buildings right now underway in Los Angeles at various stages, and that is a really good leading indicator of what's coming and what's happening.
I think for us, you know, it certainly gives us a lot of confidence. There wasn't 17 buildings underway a year ago. As things start to develop and evolve and we're active in the California market on some of these projects in terms of, you know, being considered. You know, our major focus is Canada, as you know. We've built some projects pretty successfully here in Ontario and obviously in BC with our work up at Kitimat on the workforce accommodation facility. This is our first tower, but there have been other towers that have been built, and we keep a close eye on those as they evolve. In that regard, you know, we're expecting to see more.
As I said, there's five more BC Housing projects alone that are evolving, we expect to see more activity here in Ontario, where we've built detention centers. Obviously long-term care, you know, is a great, you know, solution. We also expect had it not been for COVID, we would have built at least two hotels in Canada with our modules. COVID certainly put the hotel industry on their heels a little bit. As that industry recovers, our solutions are very effective for hotels as well, we expect to see that return as the hotel industry, you know, returns to a more predictable future. As far as the flow out of China, most of the buildings we build, a very high percentage of the raw materials and products come from China.
The difference here is we're just assembling in the plethora of facilities that exist, you know, millions and millions of square feet of facilities over there that allow us to have more of an accordion-like expansion and contraction versus trying to do it with large fixed facilities in North America. It's tougher to do that than the way we've structured ourselves. We really think we've got the right model. Now, you know, we don't anticipate that. You know, any market in the world could cut off that massive supply channel that comes out of China without major ramifications. If we had to do something different, we have the flexibility to do that and have that in place.
It doesn't seem practical from an economic perspective for any government to try and disrupt the flow of materials because it's such a high percentage of a lot of the buildings we build.
Okay. There's no issues with, like, having to do domestic sourcing or anything like that with some of these government-
No.
social contracts?
No.
Okay.
The governments have been pretty clear about that, and we've been upfront and said, you know, anything we are doing in Canada, it's very clear, so there's no issues. Governments, I think, are well educated relative to the impacts of what that would mean if, you know, there was any sort of restrictions. Yeah, pretty clear, so.
Okay.
You know, we have options in the case if something developed, but we don't anticipate anything will.
All right. That's helpful. Thanks, folks. I'll turn the line over.
Thanks.
The next question comes from Ian Gillies with Stifel. Please go ahead.
Morning, everyone.
Good morning.
Morning.
Terry, over the last, call it six months, there's been a few additional mining contract wins, including this morning. I was just hoping to get an updated view from you on, I mean, what the competitive strategy is to continue to pursue that business. I.e., do you want it to mirror something like your MRO business in Alberta, or do you wanna tie yourself to a little bit more to the growth CapEx side of it? Because there's obviously a lot going on there between all the various different commodities. Just curious on that front.
We're really excited about the overall, the mining cycle. We've stayed patient with our, you know, our focus on mining and kept ourselves, you know, with a fleet and a team, you know, that can service, you know, that specialized area through the past 10 years, where there's been times in the cycle where it's been tougher conditions. We've stayed in it and kept our fleet refurbished. You know, it's really, it's really paying off with the demand right now. You go across some of the major areas, you know, obviously Potash with our various announcements at BHP, we're seeing a lot of demand. We're active on sites early days in considering proposals in gold.
The iron ore, this, announcement this morning, with Champion Iron at Bloom Lake mine, it's pretty exciting for us because that's another major front. If you think of where we're situated with some of our large facilities in Western Labrador, we've got Champion Iron obviously to the north. We've got Rio Tinto or IOC to the east and ArcelorMittal to the west in northern Quebec, all in a very, very close proximity. It makes our whole organization more efficient to see that kind of demand. You start to look at, obviously, we just finished a large assignment with Detour Gold here in Ontario, and more to come in that sense and more demand.
We're excited about, you know, some of the opportunities, obviously with Canada's Critical Minerals Strategy. You know, that's important. You see the, you know, the support from government to develop battery production in St. Thomas. You know, you obviously have to conclude that Canada's gonna accelerate lithium and get lithium production to support that facility. Those are all exciting areas. We're also seeing demand on the aluminum side, you know, in terms of additional expanding production of aluminum. You know, copper is out there, obviously, as a critical mineral. There's just a number of areas. It's a, it's a rising tide of demand in mining, and we're well-positioned with our various teams.
The acquisition of Stuart Olson brought us, you know, mining, you know, capabilities in the Sudbury area. We're expanding, you know, and with some additional services that the Sudbury folks didn't have, but we had in Quebec and Newfoundland. That's expanding, you know, in the Sudbury area with new assignments. It's. Yeah, we're well positioned, and we're excited about what that profile, you know, looks like. It's, like I said, a rising tide of demand across the country.
That's helpful. Wayne, you get asked this every quarter. I guess it's my turn this quarter. How are you thinking about working capital demands or releases for the full year?
Yeah. Yeah. In Q1, I think we put about CAD 48 million into the working capital in Q1. Last year, you know, we had CAD 34 million go into Q1. To me, the increase, it really just represents the growth that we have. In Q2, you know, we expect our work program to be ramping up, you know, as well. We had a bit of an easy comp in Q2 last year and the pandemic and there was a strike last year. We do expect to have strong growth in Q2, which will require investment in working capital. Then, you know, same seasonality as normal.
You know, probably Q3 will be relatively flat as we get some releases and new investments with a strong work program and in Q4, we expect to see, you know, pretty large releases from working capital. We expect to be free cash flow positive for the year.
Okay, thank you. I'll turn the call back over. Thanks very much.
Thanks, Ian.
The next question comes from Michael Tupholme with TD Securities. Please go ahead.
Thank you. Good morning.
Morning.
In your outlook, you're calling for an improved margin profile for full year 2023, which I think is understandable. Given the return to more normal seasonal patterns in the first quarter, the margins were down year-over-year, which again, the reason for that is clear. Wondering, as we look out over the balance of the year, how we should think about the cadence of the margin improvement you expect as you move through the next three quarters.
Yeah. I think you're gonna certainly see our margin profile improve in Q2 and probably see an increase again in Q3 and remain strong in Q4. I think Q3, Q4 will be your highest points of the year, and you'll have a nice increase in Q2. Year-over-year, you know, I think we're 4.3% for all of 2022 on our EBITDA, adjusted EBITDA margins. You know, we expect to see a nice increase year-over-year.
Starting in the second quarter, just to be clear.
Yeah, yeah. Like we did, you know, have a bit of a reduction there, I think from 3.8%- 3% in Q1 this year. You know, we talked about that with that industrial work program we had last year. We're, we're also confident we've replaced the contributions from that industrial work program. It's just, they're gonna kick in more in Q2 and through the rest of the year. For the year, we'll certainly have margin expansion in our EBITDA year-over-year.
Yeah. Okay, perfect. Yeah, just to be clear on the on that large industrial work program that that was benefiting you in Q1 2022, and I know that work wrapped up last year, but when did that actually finish up? At what point in the year last year? When does it actually drop out of the prior year comp period as we move through this year?
Yeah, probably by the end of Q3, most of the work program was finished up on that. You know, again, when you think about it from a comparison perspective, we have replaced that work and it's gonna kick in Q2 and 3. You know, we don't think we're gonna see that kind of trend you saw in Q1 with it, where we hadn't replaced the contribution from it.
Okay, got it. That makes sense. Then again, just sort of back on this subject of kind of cadence as you move through the year. Again, you're calling for strong earnings growth on a full year basis, you know, up a little bit year-over-year, or pardon me, but sort of flat-ish in the first quarter. Again, should we expect to see that earnings growth show up starting in the second quarter when we look year-over-year? Is that, is that how to think about this, and then it kind of builds from there further as you move into the back half?
Yeah. I think that's right.
Okay, perfect. When we look at the combined record backlog and pending backlog, obviously the pending backlog has been increasing, you know, at a very, very strong pace. How should we think about the work from pending backlog feeding into hard backlog and being converted into revenue in 2023?
Yeah. I think in our pending backlog, we really have the two kind of categories of work, right? We have the CAD 1.1 billion of MSA work and those contracts, you know, kind of average 3-5 years would be the timeframe, right? You can kind of do the math on what would come into revenue on an annual basis. With that CAD 300 million we just added, you know, we talked about that being additions to the scope that we have with those existing clients, and that'll be additive to our growth, particularly in 2024. You know, the other CAD 1.9 billion, you know, that's that's in there, you know, a lot of that is kind of the collaborative contracting models that we have.
What we're finding is with those, they do take a little bit longer to bring into backlog. You know, we did see, you know, a bunch convert in Q1, and that's why we had the nice book-to-bill ratio that we did. You are getting some, you know, limited notices to proceed to do early site works in some cases. You know, locking in that design, you know, upfront is kind of a key piece. You know, depending on the client, you know, can take 9 months to 1 year in some cases. We do expect the majority of that 1.9 to flow into backlog over the next 12 months.
You know, it's sometimes, client driven there.
That's helpful. Thank you. I guess just lastly, over the last number of years, there's been a lot of talk about some of the challenges, inflationary pressures, supply chain and labor availability. I realize there's been an easing, certainly that relates to inflationary pressures and supply chain issues. On the labor availability front, can you provide a bit of an update? I mean, you have obviously a very strong, you know, strong work program here and you're expecting growth. I guess what are your staffing levels like now in terms of, you know, being prepared to address that growth? Secondly, you know, how tight are labor markets now compared to what they had been previously? Just to get a sense for what the picture looks like right now.
I think, you know, first of all, we won't secure work, you know, or pursue a project that we don't have the capacity for. You know, it's sort of a step one of our evaluation of, you know, how we look at projects. You know, the bases we have across country and the growth that we have in the country in various areas gives us a certainly a large base and to draw from. We're drawing from different markets on a regular basis to support the various demands. I'd say that the labor availability, it hasn't changed a lot in the last year.
It's tight, and I think you have to, you know, I think we have a benefit of more of a continuous flow of demand. You know, our employees like that consistency and you tend to have a much more stable workforce, a loyal workforce, where you have a continuous block of opportunities continuously flowing. We tend to have a much more, you know, consistent evolution. It ebbs and flows when we're doing. You know, we do a large turnaround for one of our clients and usually in energy, you know, that will create more spotty demands. Certain employees in Canada's labor force focus on those kinds of opportunities and enjoy that kind of cycle.
You know, obviously we have, you know, major recruiting capability when we need to do a turnaround for a client. Again, we don't, we don't sign up for those turnarounds if we don't have a, you know, certainly a strong level of confidence in terms of the availability of labor and whatnot. We're not feeling a lot differently about labor as we enter, continue through 2023 than we did a year ago. It's tight, but we seem to be navigating it extremely well.
All right. That's all for me. Thank you.
Thanks.
Thank you.
The next question comes from Maxim Sytchev with National Bank Financial. Please go ahead.
Hi. Good morning, gentlemen.
Good morning.
Morning, Max. Teri, I wanted to ask you about the oil market specifically. I mean, as the pricing has come down, you know, over BOIL over the last couple of months, at the same time, you seem to be winning work. I'm just curious what you're hearing from the clients kind of on the ground in terms of their priorities. Thanks.
Yeah, it seems, Max, it feels that the offering we have, you know, is continues to gain momentum. The types of things that we bring to the table. You know, our safety record is impeccable. As you know, that's a major focus in some of the large oil and gas players. I think in that regard, there's certainly more momentum today to streamline, you know, contractual interfaces than there ever was. You know, large organizations saying, "I can't manage multiple contracting interfaces. I'm more interested in moving to you know, to narrow that so that I have a higher degree of confidence in safety," and we're benefiting tremendously from that.
In that regard, you know, in terms of why we're being awarded work, that's the reason. As far as the, you know, the investment they're making, it's, you know, it's sustaining capital. The majority of work we do in oil today revolves around, you know, their sustaining capital program and keeping their facilities running at high levels of efficiency. That's the majority of what we do. There's not as much new capital flowing into growth, but there is some, and some of our clients are doing larger projects, which involves bringing in our construction teams for, you know, for new expansionary growth. The majority is sustaining capital.
That's super helpful. Just thinking a bit more sort of broader based when it comes to the risk profile. Is your sense right now that whatever's coming out from, you know, the government on the institutional side of things, it's really much more focused on collaborative, you know, contractual structure? Like, do you have, like, maybe a sense like, I don't know, if it's like 60% or 70%? Like what's, what's your sense there?
Yeah. It'd probably be a little north of that too, because, especially brownfield. Like complex brownfield sites, where you just can't possibly predict the, you know, the cost because of numerous stakeholder interfaces. Those projects, if they don't deliver them, governments don't deliver in a collaborative framework, they don't get anyone interested to even, you know, participate. They're, you know, it's that kind of dynamic. It's largely because of the, you know, the unpredictability of what you can, you know, be faced with. So, you know, obviously, that's changed quite dramatically. I would say it's probably as high as 80% on, you know, on the brownfield side.
There's still a few that evolve in a P3 deal, but on the greenfield side, we're more than happy to do a P3 on a greenfield site. There's some new projects that have been announced in Canada that are greenfield, things like schools. You know, there's opportunities evolving in, you know, in new provinces as well that haven't traditionally had P3. We're happy, you know, to look at some of that in the greenfield space with the brownfield, and I think most contractors that are of the scale that can handle these larger assignments are just-- You just can't predict the cost. That's the issue. You just can't. You can't get your level of confidence very high on what the cost is gonna be.
It's not about the margin profile or how you look at it. It's just the lack of confidence in the ability to predict the cost.
Yeah. No, that's super helpful. Maybe just lastly, in terms of kind of Dagmar and how that, you know, asset has been performing and what are your thoughts in terms of, you know, potentially cross-selling or doing kind of, you know, bigger projects? That kind of dovetails into my previous questions. Maybe just any update there. Thanks.
Yeah. It's really, it's Dagmar's been a catalyst for us to expand our services. Like in traditional rail transportation, heavy rail, light rail, we would be limited to more, you know, stations and things like that. Dagmar is, you know, has been a catalyst to allow us to be, you know, on projects that involve complex, you know, rail systems and they have a tremendous track record, and, you know, has worked extensively here in Ontario for the transportation agencies. That's really been strategic for us. And what we're, you know, doing that business is leveraging it into much larger programs because of, you know, obviously our scale and our systems and our, you know, our quality programs and our teams and the availability of moving teams.
Yeah, it's really exciting and the team that we've inherited in the acquisition of Dagmar, you know, certainly are capable of running a much larger business than they are. We're busy, you know, with that growth and adding some of our, you know, team from various parts of Canada to that group. It's been pretty exciting in seeing the opportunities, you know, evolve for them. It's gonna have a very exciting future, and it's taking us a long way to building that sort of third stool, third leg of the stool with an infrastructure, you know, vertical combined with the industrial and the building, you know, verticals we currently have. That's a big part of our growth as we outlined in our current strategic plan.
We've done a nice job with that. The team's worked hard to see that, you know, continue to evolve.
Okay. Excellent. That's super helpful. That's it for me.
Thanks, man.
Thank you.
The next question comes from Gabriel Moreau with iA Capital Markets. Please go ahead.
Hi. Good morning.
Good morning.
First, can you give us an update on your M&A outlook for the rest of the year?
we're strategic with our M&A focus. There's been a number of opportunities over the last six months. You know, I particularly noticed the pace pick up last fall and continues to be very high paced. I think our profile, as it grows and we become more diversified, we're getting approached on things that we might not have been approached on before, 'cause there probably was a thought we wouldn't necessarily be interested. we've constantly got, you know, a series of opportunities that we're evaluating that are sort of at various stages. Some of them develop into, you know, real, you know, real entities that we, you know, we secure or, you know, acquire, and some of them don't. It just depends.
You know, at any one given time, we have always got things that are evolving in various stages and it's not our primary focus. Obviously, it's a balanced approach. We're looking for strategic assets that can accelerate our growth in some of our core markets, along with the focus we have organically growing in those markets. We keep a pretty good balance, but we've done an impeccable job of integrating the businesses we've acquired. The recent team we acquired at Trinity has had great success in the first couple of months in terms of integration and excited about the opportunities that are ahead for our Trinity team.
We've had Dagmar now for 20 or so months and that's been, you know, certainly a real jewel of an acquisition as we're growing and integrating nicely.
Thank you. As you continue to deliver sustainable growth, and if you keep delivering good results, what are your thought about a dividend policies, either growth or payout related?
Yeah. Well, we review the dividend every quarter with our board. You know, it's a constant topic of discussion. Yeah, we provided guidance in December last year that we said for the year we expect the payout ratio on net income, you know, to be below 40% or below, which certainly we have that language in this quarter as well. I think, well, the March dividend paid out in April 20th there, was the first dividend at the higher rate. You know, I don't think you're gonna see anything in the next, you know, quarter or something like that. Certainly it's a topic of discussion.
As the company continues to do well and grow, you know, who knows what happens down the road.
That's all for me. Thank you.
Thank you.
Once again, if any analysts have a question, please press star then one. The next question comes from Frederic Bastien with Raymond James. Please go ahead.
Good morning.
Morning.
Good morning.
I was wondering if you could talk a little bit more about the contract award that you announced this morning. A new relationship with Champion Iron, a big player. Specifically just curious how this opportunity came about. And if you wouldn't mind just discussing the potential for follow-on opportunities as a result of your new relationship. Thank you.
Yes. It's, they're certainly a very impressive organization. Had an opportunity with our COO, Gilles Royer, and our district leader, Dominic Jolicœur, to meet their CEO and COO in Montreal about three months ago to chat about what we were doing. I was really impressed with the their organization and the direction they're going and their, you know, their footprint and the, you know, evolution of, you know, the asset that they have is certainly a very high grade product. You know, they're very focused on developing, you know, their site in a very, you know, environmentally focused way. Obviously it fits nicely into things that we're focused on. They have a very bright future, in my opinion.
Mainly because the grade of their ore is higher than others. It's got, you know, more sustainability in my opinion over the longer term. You know, a really strategic award. I think it'll grow over time to be, you know, similar to our other assignments and in that region. It just makes our overall business more efficient when you've got multiple key, you know, areas of focus.
Thanks. Just to follow on on this, you mentioned that this project was smaller in scale than a previous one. I can't remember exactly which projects you were referring to, perhaps the MSA assignments you'd secure. Can you give us a sense of the, not the magnitude of the project size, the, some qualitative, goal policy to provide?
Yeah. This assignment, you know, is sort of a first, you know, assignment for us. It's not of a scale that, you know, you'd normally press release even other than it was a very strategic award and it gave us a very longer term, you know, opportunity to grow. The potential to grow is huge. I'm very confident with the team that we have that this business, this opportunity and this new client alignment will be very strategic for us. Again, as I said earlier on the call, we're just seeing a bit of a tidal wave of demand on the mining side. There's a number of new assignments in just about every province evolving. It's exciting.
Then you've got the real big ones with lithium and that whole dynamic ring of fire eventually, you know, will evolve. Those are all certainly exciting to see.
Thank you, Terry.
Thanks, man. Or thanks, Fred.
This concludes the question and answer session. I will hand the call back over to Mr. McKibbon for any closing remarks. Please go ahead.
Thank you everyone for taking the time to join our earnings call this morning and thank you to the entire Bird team. We're proud of the work executed every day, working safely, working together and building value for our company, our clients, our communities, and our shareholders.