Q2 2020 Aecon Group Inc Earnings Call
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Thank you to Ken Good morning, everyone. Thanks for participating in our second quarter 2020 results Conference call. This is Adam burglary SPP corporate development Investor Relations speaking presenting to you. This morning are showing that we serve rungs, president and CEO and David Smiles Executive Vice President and CFO.
Our earnings announcement was released yesterday evening, and we have posted a slide presentation on the investing section of our website, which we will refer to during this call. Following our comments, we will be glad to take questions from analysts we ask the analysts limit questions to one or two each to give us a chance and that they re queue should they have any follow up questions.
As noted on slide to the presentation listeners I reminded that the information we are sharing with you. Today includes forward looking statements. These statements are based on assumptions that are subject to significant risks and uncertainties. Although econ believes that the expectations reflected in these statements are reasonable we can give no assurance that these expectation.
This will prove to be correct.
With that I'll turn the call over to Dave.
Thanks, Robin and good morning, everyone I'll touch briefly on East Coast Consolidated results. I'll, then review results by segment and then of course it comes financial position before turning the call over to John Lewis.
Turning to slide three disruption say coms business as a result, Cobiz 19 impacted a number of sectors in operations in the second quarter.
Revenue for the three months ended June 30, 2020, $779 million was 88 million or 10% lower compared to the same period last year.
Adjusted EBITDA for the second quarter, 24 million lodging, and 3.1% decreased by 33 million or 57% compared to adjusted EBITDA or 57 million.
Arching of 6.6% in Q2 last year.
Second quarter operating loss of $1 million was 29 million lower compared to an upgrade profit 28 million in the same occurred in 2019.
Diluted loss per share 10 cents in this in the quarter compared to diluted earnings per share two to one cents in the same period last year.
Overall, we estimate the koby 19 impacts in the quarter reduced revenue by approximately $860 billion adjusted EBITDA by approximately 40 million an operating profit by approximately 2 million.
Reported backlog of $7.3 billion represents the highest backlog position today comes history.
Composed to backlog of 6.8 billion a year earlier, representing an increase of 7%.
Now turning to results by segment as noted on slide four construction revenue of 778 million in the second quarter was 69 million or 8% lower than the same period last year.
Revenue was lower in civil operations, and it'd been transportation systems, driven by decreases in major projects in both eastern and Western Canada due to the impact to slowdowns in suspensions really to covert 19, partially offset by an increase the road building projects in both regions.
Revenues also lower in nuclear operations driven by work on the next unit the main react to refurbishment the dial into nuclear facilities, Ontario being delayed from the second quarter until later in the year again related to Kobin 19.
Partially offsetting these decreases was higher revenue from utilities operations due in large part to the acquisition of voltage power announced in February.
The entire revenue in industrial operations, primarily due to increased activity on mainline pipeline projects in Western Canada.
Adjusted EBITDA in the construction segment of 28 million margin of 3.6%.
Decreased by 16 million compared to 44 million.
Did you to 5.2% in Q2 2019.
This was primarily due to lower revenue as discussed.
You contract awards of 1.1 billion in the second quarter Twentytwenty with 226 million higher than the same period last year, driven primarily by New awards in industrial and utilities operations.
Construction backlog at the end of the core to 7.2 billion, which is 483 million higher than same time in 2019.
Turning to slide five.
Concession revenue for the second quarter was $9 million, a decrease of 52 million or 86% compared to the same period last year.
This was the result of this slow down and then suspension of commercial flight operations on March 20 year throughout the second quarter, Bermuda International Airport due to covert 19 pandemic as well as it really decreasing constriction activity relate to the project.
Adjusted EBITDA in the concession segment of 5 million was 18 million lower compared to 23 million in the same period last year, primarily relate to the Cobiz 19 impact on <unk> corporations.
Turning to slide six eight comes financial position liquidity and kept to resources remains strong.
Expected to be sufficient to finance operations of working capital requirements for the foreseeable future.
At June Thirtyth eight on her $20 million of cash on hand, excluding cash enjoys operations unrestricted cash and it committed revolving credit facility of 600 million of which 30 million withdrawn and 5 million utilized for letters of credit.
When combined with an additional 700 million dollar performance security guaranteed facility to support letters of credit provided by EDI see acorns committed credit facilities for working capital letter of credit requirements totaled 1.3 billion.
Econ has no debt or working capital credit facility maturities until the second topic, twentytwenty, three except equipment loans and leases in the normal course.
Finally as referenced in our outlook is a Canadian employees, whose business is being affected by Cobiz 19, econ expects to submit formal applications for the Canada emergency, which subsidy in the third quarter Twentytwenty eligible entities.
At this time the company isn't table two reasonably estimate the entitlement event for the subsidy Q2 soon clarification is required as well as proposed further changes to the legislation governing its program.
As such knowing there has been included in the consolidated results of operations for the three and six month periods ended June 30 Twentytwenty.
At this point I'll turn the call over to John Lewis.
Thank you Dave.
Turning now to slide seven despite the impact of could be 19 on a cone second quarter results.
Our ability to respond we've enjoyed it keeps was even in challenging times to deleverage all with services effective elite white, ensuring the health and safety of our dedicated employees.
Demonstrates the resilience of our business.
We remain confident that E com diversified portfolio strong financial position and safety first culture.
We'll be able to great benefit as we continue to navigate it was evolving market conditions.
The construction segment is aligned to the significant infrastructure investment commitments by all levels of government across Canada.
As well as by the private sector.
The concession segment is pursuing a number of large scale infrastructure project.
That's required private finance solutions.
Participating as a concession now on the five piece we projects identified on the slide.
The majority of governments across the jurisdictions in which econ operates.
Deemed the types of construction projects that constitutes the majority of a cons contract to be essential services.
And therefore operations are broadly continuing.
Although in many cases on a 45 basis.
As the situation may continue to evolve for some time shifting Directv and policies from clients and government I expect it to continue.
Turning now to slide eight the current backlog at 11 of newer Walt year to date have remained robust as evidenced by the record backlog of 7.3 billion at the end of the second quarter.
The timing of work to be performed for projects in backlog at June Thirtyth 2020.
Based on current projects could you.
Taking into account the current impacts of Corbett 19 and related slowdown.
Rescheduling and in some case either suspension of work and agreed to cherries topic.
It's possible that you can you just quick changes the future as a company 19 pandemic and vote.
In addition, certain project, that's one expected to be available to a come to beat on securing new revenue have been delayed.
Any such delays are currently expected to be temporary.
Today, there are no project that we have profusely recorded in eight homes backlog that I've been canceled due to coffee 19.
Trailing 12 month recurring revenue was down 11% compared to last year, primarily as a result of a slow down and then suspension of combustion flight operation on March 27, 20, and throughout the remainder of the second quarter I'd to Bermuda International Apple.
Turning to our outlook on slide nine or why is the impact of covered 19 on a core operating environment that that'd be <unk> during the second quarter.
Operations continued to be impacted I said by client decisions related to schedule operating policies at.
All you to brought a government directives to 45 practices to meet health and safety standards relating to the coffee 19th and then.
During the second quarters in Montreal, <unk>, and <unk> and psyche project.
Where construction and being suspended restarts either by gradually particularly with respect to site C. N. We modified work practices.
In the second off of the year. The main impacts are expected to be from the slow ramp up starting in early July of commercial operations of the Bermuda International Airport.
And we'll have in FY operation well ramp up on the next phase of work on a number of projects.
He has been delayed until late in the third quarter and into the fourth quarter.
While the impact to this project I went out all those will be to reduce revenue and a normal operation resume.
There is no warranty that old related costs will be recovered and therefore, it's possible that future project margin could be impacted.
Acorn expects that demand for Exurbia fees would remain strong for rigs a copy of 19 pandemic.
As the federal government on prohibition governments across Canada have identified investment in infrastructure as a key source of economic stimulus one of the country reaches the recovery phase.
In closing I want to personally thank all else equal until either in particular, our frontline workers.
Well that indication commitment and professionalism.
During this challenging time.
Thank you be safe and we'll now turn on the call over to at least for questions.
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Your first question comes from the line also you're running off Kinda coaching meeting. Please go ahead your line.
Hi, good morning.
Good morning.
Given the obviously lot of uncertainty out there in terms of a your ability to recover.
One of these excess costs right. Your incurring on projects that are that are delayed one way or another due to cold and.
You should we see you know in light of that should we still expect <unk> core margins in construction.
Able to grind higher.
Or do you think I'm more measured more costs would be appropriate them.
Anyway, you can kind of quantify.
What we might be looking out in terms of.
Okay. That's cost you might ask them so.
Okay, maybe I will make the first part of the on so you'll recall that David when a complementary.
And.
We have to kind of operation I mean, one where the clients.
I've been spending our works.
Onto is one that we I've no real issues about negotiating.
Compensation in time or in cost.
The second one.
When our clients I've not officially suspended.
But the pace of our works I've been added to the productivity of our works has been modified.
So full fulton's one first of all what we haven't been.
Assessing it.
From March to continue that.
We have put in place a little stringent and sent safety measures.
When it was measures all followed with disciplined itworks means that.
We have very few probably teach casey's.
During the last monkey from the beginning of this spending.
It gives confidence to our workers and that of course, the way of working.
I changes.
In terms of not having tool not gathering on that front of work preparing probably better.
The jobs.
But all that was works out essentially the Soviets either are progressing.
Now she is being feta, hey, it's not evident and quick to assess exactly the impact on productivity. It means that the negotiation about timing and cost compensation with our client, but just takes a little longer they see the where we are at the moment maybe David.
You want to add to something.
Yeah, I mean in terms of specific numbers, we obviously don't get margin guidance, but.
On a consolidated basis obviously.
The continued or impact in Bermuda will be a drag on margins at a consolidated level, but as you same kind of the key comparison will be constriction segment like for like I think clearly we back to something approaching more normal operation.
I didn't see in Q3 relative to where we were in Q2.
I think the impacts young Louise refer to particularly material in the most cases, we are getting.
Cooperation from clients, who oversee understand the issues. So I don't think there's a major impact in Q3, certainly nowhere near the extent we saw in Q2, there will be a mix impact.
Obviously nuclear continues to be a very little run rate through the third quarter before we ramp up on the next to react to refurbishment and there's a few of the mix impacts but generally.
Q3 will be stronger than Q2, and we'll start to look a bit more like a normal quarter in the construction segment with with a couple of exceptions are.
Nuclear being the main ones.
Okay.
Can you give us any.
Any update on how Krasik is trending.
Now for quite a good day.
I mean, it's it's very slow at this point in time, there's a few.
Airlines are starting to fleiss again, so a delta British Airways and that kind of the but as of June July 1st to our second when we reopened I mean effectively yeah Paul opened.
Roughly.
5% to 10% of normal capacity, so that's kind of the starting point and it was slowly ramp up from there.
We're anticipating new fleiss being added.
In August and and kind of ongoing from there. So at this point he said it very low level and it will run gradually over the next few months and beyond I I guess, it really depends how are things play out more broadly in terms of or the development the virus.
And.
People's comfort level were traveling and things like that but it's a it will certainly be a an ongoing impact through Q3, we're not expecting things to bounce back quickly during Q3.
Okay.
I will turn it over there thanks.
Your next question comes from the line all Frederic Bastien of Raymond James Your line is open.
[noise] good morning.
And wanting to respect with respect to the.
Billion dollars of contract Awards, you, you announced and being added to backlog to my knowledge I haven't seen any big press releases.
Apart from the coastal Gaslink, one with respect to some compressor and metering work.
Can you discuss a bit more in detail. These these contracts and what they mean ER and the Grand scheme of things.
Ah, Yes, predicating, it's a very interesting question because also impacted by called me during.
You too what you upped LTC that the work program continues to grow and it's 1.1 billion.
In the Codell pure water is extremely interesting.
Activity you I've not seen big announcement, because most of these jawbone meet your jobs.
Industrial jobs, the utilities job, but pipeline jobs.
And as you see what makes it a interesting and you know I mean at.
Always saying that what.
Reagent transcends the resilience of eight called.
Hey, easy balancing TV T. I mean, a balance between concession in construction, we didn't construction balances between the different sectors.
And balance between east and West and we have seen more jobs coming out then being awarded in a in.
Yes.
Part of Canada, and balance between a small medium big job unit price target cost or a lump sum and man. He sees what he's what is interesting medium job a industry and utilities. If he is what makes the 1.1 billion.
Okay. Thanks for that.
Color.
Just a follow up this coastal gaslink contract isn't two locations, but obviously the.
One of them isn't kitimat.
Which positions you and a very tight territory and there's not a lot contractors there and with.
Obviously, a lot of Mount a lot of dollars you spent a through the LNG Canada project how.
How are you positioning yourselves for follow on work and cannot.
So.
We are working on costs totaled.
Got flying that we.
We haven't been acquiring and being awarded a set a number off a compressor station.
In addition, and pumping station.
Nicotine I'd put on 14 White Lake.
Yeah, Paul and she sees what we do at the moment and it's our core competency.
Okay for the rest of the programmable or LNG, Canada, we shall see.
All the way when something or new works, Oh, beating books would be really either what could be our position and we think we have a competitive advantage position I wasn't though.
Okay. Thanks for that color. Thank you.
Your next question comes on the line off crease Murray off it TB capital markets. Your line is open.
Yes. Thank you good morning.
My first question really is maybe for David and just going back and maybe some of the mechanics around the changes you guys made around the airport in the financials. So can you just walk us through a little bit you know your changes it looks like you mean rejig depreciation and.
I'm also trying to understand you know exactly what's left in backlog for the construction of the new terminal.
Yeah, Hi, Chris So I'll talk to the amortization piece first the amortization in Bermuda is really to the concession rights that we have on the balance sheet that really reflects.
The fact that we have ER the concession to operate the existing terminal before we then trends so transfer over to the new terminal when we'll start to amortize the construction cost as a new terminal over the remaining life for the concession so.
Obviously, because Ah Ah that's been no operations at the airport the amortization related to that Dick the way. The accounting works. There is a amortization goes hand in hand with Ah the operations and so while operations. The suspended there's there's no amortization of the concession right.
Because.
That takes him he gets pushed out into the future. So that's that's about an eight or 9 million dollar reduction in amortization cost as a result with that.
In terms of.
Uh huh.
I forget the second part of the question.
He just running construction backlog yeah. They remain construction backlog is a is pretty small I mean, we're really down to.
The final fail at the terminal.
And commissioning of the systems I'm really getting the whole thing ready to open. So it's it's it's a very small them and I mean immaterial in the in the Grand scheme of things through the balance of the.
Okay. So it's still fair to think that construction should be considered by year end is that still the thought.
That's the that's the goal obviously that will be driven by the availability of being able to bring people back to the island, but obviously now the airport is open again, we're able to do that so barring any future waves or changes in the current landscape then yes, that's a that's.
Intention.
Okay, and then just along those lines.
If I look at Q2 of the concessions business is it fair to think that what we actually saw reported in both revenue and earnings that would be you know would that be reflective of kind of the patient you're actually moving in terms of concessions upside from you guys I thought.
Maybe to think about it.
To some extent, although don't forget we have so much DNA in that group as well.
So it's not just the contribution from Canadian concessions is that contribution less the normalized today that we have which is the concessions team the bidding new concessions, including the P series in Canada.
As well as managing all our current concession portfolio. So it's it's not just pure contribution. It's a it's also less the the ongoing as today that we have in that group okay great.
A question just I don't know who wants to take this one but.
Comment about you know some some delays in project bidding you know we talked about this actually on the last call in part of that was some uncertainty around funding. Some of that was just folks trying to kind of determine where things are going.
Very healthy book to Bill number in the quarter.
Which was surprising and.
Sounds like good quality of contract just any thoughts around how we should be thinking about bookings through the through the second half a year and and any other thoughts around you know if there are potential delays.
Okay I will take this one so and.
What I, what I can say that he said the bidding pipeline is extremely robust.
That being at the beginning on the pandemic some pushback.
But everything is coming back to normal.
This is primarily driven by by often Gideon you called arriving in Canada, and we get some people need to transport they need energy they need to clean water they need a highways.
And this will not stop so we are not that much worried about this and we are very happy about this 1.1 billion during the during the second quarter and there. We also very happy about the quality of what we have been acquiring it and the diversity of what he is being.
Quite so we don't have that Mitchell for of worries about what he's coming out about the funding you all understand that infrastructure favored by by our government.
We will go on and bidding with a lot of discipline at you have seen I mean, do we have a record backlog of 7.3 billion as of today, we are not stopping at all we can choose exactly where do we want to fight where do we have competitive advantage and how do we organize our estimation and then our off.
Operation, where the where are we going to both our best team and lighting going on.
Okay.
So so fair to think that that you know you're not seen any major delays or push outs and on any project.
No we're not seeing this at the moment okay. Thank you.
[noise]. Your next question comes on the line those mugs AMC chance of National banks on my side the mining.
Hi, good morning, gentlemen.
Next thing.
I just want to pull it back on on Bermuda, I mean, well, obviously, you know Q2 versus there's no traffic at all so I can appreciate that you have the ability to sort of match the costs to to the revenue opportunity, but as things are slowly opening up I'm just trying to think about.
But the embedded margin profile or where is there anything incrementally going to promote from a cost.
Management perspective for Q3 Q4, I guess my point is that you know kinda profitability actually get worse as you don't have enough traffic and that goes through the airport I just just fine too.
But I understand kind of the corporate sure off you know the Nathan recovery from from a profit perspective.
Yeah. Good question much snow any incremental traffic is a effectively drops straight to the bottom line I mean, the way the fee structure works, it's really fees for traffic.
Coming in a nail and passengers so.
There's not really a change to the cost structure, obviously, the the management the airport because there's still even when the commercial flight operations were shut down we still need to keep.
The workforce there because there were still freight planes coming in and I know, there's still a regulation. So you have to me and things like that so very little change in the cost structure going forward and any incremental volume will will drop straight to the bottom line. So so no we shouldn't see.
He said that that we should see things slowly start to recover.
From a profitability perspective.
Okay. That's very helpful and demand just reminding us in terms of how the debt a attached to the concession sort of works are there any automatic repayments kind of over the next six nine months worth of 12 months out Justin if you can provide a bit more color.
No nothing.
Next in in the short term the debt repayment schedule is over.
Many years in starts to kick in in a few years into the future. So there's really no change in the schedule nothing or.
There's no mechanism to kind of change that snow accelerated its not delayed but it's it's a few years yeah.
Right and I guess a couple of.
What does it go you were discussing potentially attracting.
You know when outside party.
To provide a bit of a mark to market on Bermuda.
It's a fair to assume that well. These things are on hold right now or maybe do you mind, commenting on you know some potential additional business development opportunities on construction site specifically.
Yeah, so with respect to Bermuda, I mean that was a.
Theoretical answer to a question of what might we do read that concession in the future. We certainly would indicating that we are.
In the process or were in the process of are doing any kind of marketing of that or looking for an investor. It was a theoretical answer to that something.
Exploring what the future auctions could be.
ER and all those options are still on the table.
We options.
Sure.
We have raised where would you sell it would you keep it or we raised the food auction, which was potentially sell a minority stake in it.
No active on any of those front right now we're just focused on completing the airport ramping operations backer and we'll look at you know what our options down the road so I wouldn't expect.
To see any developments on that front.
Time soon in terms of other business development opportunities obviously.
We're still active bidding P series in Canada.
The P. creep pipeline remains strong that model remains or something that the government's.
A committee to at this stage internationally, yeah, obviously.
Governments are kind of pausing to figure out what the longer term impacts might be a the current situation, but generally.
We're still interested in international concessions and moving those dialogues forward.
As we can but again, there's nothing imminent on that front at this stage.
Okay Fair enough that's it for me thanks very much.
Your next question comes from GE Cobalt all CBC your line is open.
Good morning.
When it might help or how prepared do you think.
Yeah, the construction industry or econ is for a second potential wave of cover 19.
So evidently much better prepared that for the first wave it and what I've been saying is that we.
We we have just realized that to one well that will work for <unk>.
Well not what jumps heights.
Works.
It's about 10 washing it's about social these 10 thing it's about wearing masks, it's about not sharing common areas.
And not only each works, but we are just discovering now that the.
May improve our way off executing the work we prefabricate more we prepare more and we don't lose the.
Time discussing and I mean, everybody is very much focused on these cosco.
And Ah and this is good.
We also knows that we haven't been able.
Work remote three for all our support function very quickly.
Diesel to fill out as being efficient. So are we are much more ready I mean, now that will not be any a learning curve or ramping up and even the reserve a a second phases and a I would say old old is always well not wishing the second phase I mean, we are we are ready for it.
And then I wanted to go back to.
The project bidding activity. So you talked about certain projects that have been a delayed as far as the ability to bid order of magnitude. How much work are we talking about and then maybe if you can also talk a bit about.
Is there any evidence of fast tracking of government projects.
Okay, and frankly speaking or what has been delayed.
Most of the time, it's about negotiating with our future events when clients <unk> to cover us.
Right in front of a second wave or in front of any pending yeah, you probably remember that.
The way we were covered in the in the fall Macoms Fox with diverse.
Hey, maybe changing Lowi, maybe fourth Missouri may be compensation event, we partially tied relief of possible cost relief, we all know extremely careful and our clients on flight extremely careful so on each of the project you'd have taken a few weeks to recalibrate, our contractual close here in order to cover risk.
Better.
No big deal that no project.
I'd been canceled so we we all steel with in front of US a pipeline or something like 40 billion.
All of major project can infrastructures plus all the medium and small projects you have Nazis that we think the 1.1 billion.
Most of them all median projects and more one. So this is where we are they see the where we are at the moment.
In terms of that.
Check I mean since the second piece of the question in terms of any potential acceleration that we've seen certainly in in within that $1.1 billion that you.
So in Q2, New awards is a decent amount of road building working both eastern and Western Canada, and as we said a quarter ago that is the area where governments can.
Most quickly get dollars flowing and we've certainly seen.
In two major markets, Oh, virtue, and Ontario, the trespass transportation authorities, if those in those areas increase their budgets and get dollars flowing. So so yes, we're seeing it in the sectors, we expected to see in terms of.
Major projects, they oversee take or take a little longer the.
There is certainly a willingness by by governments to.
Ensure that the pipeline is a is active and that's what's coming behind it.
Thank you I'll leave it there.
Your next question comes on the line of my Kilter form of TD Securities. Your line is open.
Thank you good morning.
Good morning.
The the detail you provided in terms of your assessment or around what impact covert 19 had on your revenues and EBITDA.
I'm just wondering if it's possible to break that those two numbers down between the two segments.
Yes so.
From an EBITDA perspective, it was Ah.
Roughly 50 50 between constriction and concessions.
But then the operating profit level. It was more two thirds constriction, one third concessions because of the amortization difference on the on the concession side.
So that's kind of split profitability level or the revenue level.
The lions share of his constriction.
Ah you know kind of 80, 90% of it was a was constriction related revenue.
Okay. That's helpful. Thanks, Dave.
Second question last quarter, you suggested that you had eliminated all non essential spending a reduced discretionary capex and we're evaluating various cost savings opportunities and in light of the.
Pandemic or with some stabilization in the operating environment now.
Have any of those expenses started to come back up or do you expect that they'll remain.
The savings and expense reduction initiatives were made in place for for the foreseeable future.
Yeah, I mean, obviously.
Because you said most of the operations a pill running so because there are limits to have a deep we couldn't go on on those initiatives, but certainly.
Where we can continue to.
Reduce discretionary or non essential spend or defer things, while we still have impacts from Bermuda for example, a nuclear delays and things like that but that's that's an ongoing effort a I wouldn't expect.
Further cuts over and above but in terms of maintaining some of the reductions that certainly would go.
As we go through the second half.
And just a follow up on that as far as Capex.
Looks like it sort of running flat with where it was last year is would you give a full year number in mind or does that look lower by the time, we get to the end of year.
Yes overall by the end of year in terms of a typical capex spend which is mainly a critical driven it will be lower we did have higher capex in Q1.
Before the pandemic kit, which was in large part you to purchase or they are facility. A proxy. The has is all our equipment maintenance facilities in Ontario, So that that for the full year kind of has an impact on the overall comparison, but if you.
Exclude Q1 through the end and just look at a battle city yeah.
We do expect Capex overall to be a fair bit lower than Ah Ah 2019.
Okay, and then lastly can you comment on the voltage power acquisition.
How that's going at it looks like a generated $23 million of revenue in the second quarter, which on a run rate basis seems to be trending well above the $60 million of annual revenue.
That data generated over the last three years before you've acquired it.
Is that step up reflective of a revenue synergies or is there some seasonality we need to think about or just trying to understand if you can comment on what's driving a seemingly very strong performance there.
So yeah, you you're right like in terms of the run rate relative to kind of historic having said that the room rate would have been strongest still without cobot. There were some projects in the.
Voltage business that were pushed out to the right it little bit in terms of some delays through the second quarter.
So we're still.
I'm happy with that business and who are how it's developing.
But there were some impacts on the revenue through Q2, and there is a fed the seasonality in that business as well.
It looks like the pipeline businesses.
He can be kind of open damn between quarters. It's no. Its all business is very smoothly over time.
Yeah, so far so good in terms of or how that business is developing but still very early days obviously.
Okay. Thank you very much.
Your next question comes from moving on to you. Your line is open.
Good morning, and thank you for taking my question.
Hi, I'm just looking at the quarter I'm, just telling your comments today, who made a tuck in acquisition. Although it was smaller than the telecom side revenue was a home backlog was up 4% sequentially in some years now we open I'm just wondering I do you have greater clarity on Cobiz impact do you think they got.
Going to be giving yourself, some more breathing room or perhaps more optimistic you're more optimistic in your outlook given perhaps the worst period is likely in the rear view mirror.
I mean are ask on tractors I mean, we are always optimistic and we try to cope with the condition, but it shows that that Q2 has been a heavily impacted AG new I've seen it as I I've been saying I mean that business is going.
On a pipeline is stronger.
Eight Connie that you're getting stronger and stronger due to we've said balance activity due to all the efforts we do about operational excellence.
About a.
Training, our people about tower Acorn University.
Yes, we have optimism and we try to go on our path to complement our existing activities with the with all the one that make us more resilient and and stronger.
Okay. Thank you.
Secondly, I appreciate your comments surrounding them Bermuda airport and possible a long term outcomes scenarios I'm. Just wondering have you received any external interest in the airport over the last few years.
We have I mean, we're we're active in the concessions business, we were talking to people time to Optune twos about different things, but but no. There's been no serious inquiries there's been no serious.
Discussions around.
A few to the airport was an internal so no nothing there any no no.
That's great. Thank you.
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Your next question comes from the about how kind of RBC capital. Your line is open.
Thanks, and good morning, just on the DNA side I think in the past you made some comments about kind of the flip between what the new terminal opens at the end is expected to moderate but interest goes up but in light of you know some of the push out on the construction side.
Maybe help us think about when we expect to get that flip between sort of DNA and interest and how you expect the and it evolved maybe over the next few quarters.
Yeah, so that that will that transfer should happen early in the new youthful goes according to a schedule. So that's when you would see that that change happen.
Actively will you should see through the second half of this year is amortization.
Starting to increase.
Relative to where it was in Q2 or not necessarily back to where it was in Q3 in Q4 last year.
And then or a that transition happening early in Q1 should see a amortization lower run rate than we've had historically.
Going forward.
Offset to some extent by the fact that we will that point stop expensing interest through construction has been capitalize so so that should all happen or.
Early in Q1.
Okay. Thanks for that and then I think though the comment in the M. DNA psychotic correctly that some higher DNA was attributable to some construction equipment being rolled out well just finding that up what kind of a directional impact on construction revenue being lower year over year I'm just trying to figure out was that additional equipment, just newcomer being rolled out.
Or should we read that as you know there's more equipment out on the site versus last year.
It's really driven by Capex last year. The is obviously depreciate going forward. We it's a business is growing and is a.
Capex keeps pace with that then obviously depreciation would would increase commensurate. So this was in new Capex being purchased in Q2 that was depreciated in Q2, it's more the ongoing impact to revenue growth over time and equipment, we'd be purchasing through the last a 12 to 18 months.
A lot of that growth coming in the civil sector, where there's a high a equipment components and things like that so.
It's really based on historic.
Thanks.
Okay. That's helpful and then I just a follow up on the earlier discussion about the Bermuda Airport.
As you start to ramp up are you able to share, perhaps what percent utilization or number of flavor.
Do you need to how about that airport for you to kind of breakeven at least on EBITDA basis, and they've indicated or maybe you had about 5% to 10%, but what sort of level, you're looking ahead to get to breakeven maybe.
Yeah, I mean to get to breakeven. This you could operate reasonably.
Low level versus kind of normal capacity to hit breakeven the.
The cost to the overall fixed costs are not that significant.
Relative to the size of the operation So.
We expect a.
We've been operating a relatively low level kind of 10% to 20% we would be a leased a breakeven at that point.
And then just last I guess based on current levels or current trajectory is that something could have maybe you know exiting Q3 at some point or too early to tell.
Yeah, I think I said earlier, we're currently operating at.
5% to 10% and we expect to see that slowly ramp up through Q3, how quickly that ramps up.
It really comes down to individual airlines and how quickly they add flights and how quickly passengers or.
Come back onto those flights. So it's very hard for us to predict at this point in time its is something that.
We see a.
We see going past those numbers through Q3, but it's very uncertain at this point in time.
Great. Thank you.
Your next question comes from sometimes one of them for your line is open.
Yes, good morning.
Wanting me to just coming back on the tuck in acquisition you didn't yet they communication space I was just wondering if you could provide an update on all the a recurring portion of your business is performing so far in Q2, and maybe what are your expectation for necessary now thanks.
I mean, the biggest piece a the biggest impact on recurring revenue in the quarter was commuter operations that revenue goes through recurring revenue.
So obviously that had a a an outsized impact in the quarter.
Outside of that with our utilities business, which is you. The major component overall, you know kind of business as usual generally in that space utilities business continues to.
Perform well.
Obviously is Bermuda ramps up again, and we expect to see that come back into that recurring revenue.
And utilities, we continue to see good growth opportunities so.
Obviously, the voltage business is called our utilities group Chris. This small acquisition in mid October is just another example is it's very small in of itself, but it allows us to a growing into the market similar to a small acquisition. We made in the same space Inc.
Good day and.
The Maritimes last year.
We continue to build out and that footprint and ER, we see good dynamics in that market.
Is there any other spaces or geographies, where you would like to that to to make some tuck ins that condition to too so the fire position.
I mean, what do you have seen is that that that any communication is a tough important for us.
Also expanding in territories, where we had an upset much credit benches. The is important for us and which is where we are at the moment.
Okay, and maybe one last for me on the anti be side and I know that the in backup Kogan 19 operation that started to stabilize do you and start to do you intend to restart you're at your program in time soon or you prefer to wait maybe if you see a alcobra Dan.
Turns out into next quarter.
Yeah, I would say, there's still obviously uncertainty around how this a virus will develop through the balance of the year, where obviously know experts on that so what kind of in wait and see mode or just like everybody else and while we have the flexibility under the N C I'd be.
To be opportunistic or I would say a general approach right now, it's very much wait and see.
Perfect. Thank you very much for everything.
Thanks.
There are no further questions at this time I would turn the call buckles much the presenters.
Thanks, very much share we appreciate everyone's interest and attention today as always feel free to follow up with a investor relations. If you have questions are we encourage everybody to be safe enjoy the balance of your summer and we will speak to again in the third quarter take care.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
Okay. Thank you operator will a sign off as well.
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