Q1 2022 Badger Infrastructure Solutions Ltd Earnings Call
Speaker 2: Being record. If you require any further assistance, please press Star in zero at this time. I would like to turn the conference over to MR Paul vanderberg. Sir, Please begin.
Speaker 3: Thank you, good morning and welcome to badgger's Q1 2022 earnings call. On the call with me this morning is Rob Blackadar, our Chief Operating Officer, and Darren or R, CFO .
Speaker 4: Our 2022 Q1 earnings release. The mdna in the financial statements were released after market closed yesterday and are available on our website, the Investor section, and also on SAR.
Speaker 4: We are required to note that some of the statements made today may contain forward-looking information. In fact, all statements made today which are not statements of historical fact are considered to be forward-looking statements.
Speaker 4: We make these statements based on certain assumptions that we consider to be reasonable. However, forward-looking statements are always subject to certain risks and uncertainties, and undue reliance should not be placed on them, as actual results may differ materially from those expressed or implied.
Speaker 4: For more information about these assumptions, risks and uncertainties that may be relevant to such forward-looking statements, Please refer to our 2021 annual information form.
Speaker 4: So as always, we'd like to start the call with health and safety.
Speaker 4: We've been pleased with the team's health and safety response to the now two -year-old COVID-19 pandemic and the related challenges that have come along with it from an operating perspective.
Speaker 4: Under all conditions, safety of Badger employees and customers remains job number one.
Speaker 4: We are pleased with how the team is managed through this pandemic. Our COVID-19 playbook consistently follows our center for disease control guidelines and our commitment to a strong health and safety culture. Led by Rob and Leon Walsh, our Vice President of HC. This has allowed us to managed through any conditions that we've seen with COVID-19.
Speaker 4: We continued to manage through those conditions. In Q1, the first half of the quarter was impacted by the omniron varyian outbreak and the restrictions that went along with that. As we indicated on our Q4 2021 call, January saw about eight 9% of our operators in quarantine at some point during the month. This was a similar level to the August and September peak with Delta variant.
Speaker 4: Having operators in quarantine results in lost revenue and higher direct labor costs, including more overtime and higher subsistence costs for more out of town work with longer travel times in overnight days.
Speaker 4: That was the first half for the quarter. However, the second half was very different.
Speaker 4: February cased comps were down about 80% from January and in March we only saw about 16 cases.
Speaker 4: None of our Q1 hit cases required hospitalization.
Speaker 4: Cases in April and into early Q2 are trending at the lower levels as well. Very positive.
Speaker 4: We're also encouraged that the centers for disease control in most jurisdictions have loosened operating restrictions and shortened return to work testing procedures.
Speaker 4: Despite all of this though, we continue to follow our covert playbook, and some regions have seen small amounts of infections, but the general trend is down.
Speaker 4: Our business and financial results, which Rob and Darren will speak to in a few minutes, mirrored the COVID-19 trends in the quarter. The first half of the quarter was below our expectations and the second half exceed our expectations.
Speaker 3: Overall we managed to meet our initial expectations for the quarter and we're pleased to see revenue and operating leverage improving.
Speaker 3: Revenue was up 33% from the previous year and our adjusted EBITDA was up 84%, and.
Speaker 3: We're also encouraged by improving trends in the broader nonresidential construction market fundamentals, particularly in the U S.
Speaker 3: After 15 months of consecutive year-over-year declines in the U's nonres construction put in-place numbers, the market trends appear to be returning to year-over-year growth.
Speaker 3: Albeit the lower levels. The growth is occurring off the lower levels. We experienced in two point zero two two million and twenty-one.
Speaker 3: So with that we'll hand the call over to Rob to discuss the quarter.
Speaker 3: Thanks Paul. As Paul mentioned, we are pleased with the continued market and business improvement during the quarter, despite the slow start due to omocrron.
Speaker 3: Revenue was up approximately 33% from last year to 114 million, which continues to reflect the markket recovery that we have seen in the second half of 2021.
Speaker 3: I would like to remind everyone that we have transitioned our reporting currency to U's dollars from Canadian dollars effective January . First twent thousand and twenty-two, and.
Speaker 3: Higher revenue and more consistent volume in the second half of the quarter supported improved operating leverage.
Speaker 3: All operating regions experienced positive leverage.
Speaker 3: From higher revenue, higher utilization, increased pricing and cost controls.
Speaker 3: This resulted in a year-over-year improvement in adjusted EBITDA margin from 5% last year to 9% this year.
Speaker 3: Q1: revenue per truck per month.
Speaker 3: Or rfptt, was 31.005 thousand 71, which was up over 37% versus last year.
Speaker 3: A higher percentage increase year-over-year than revenue.
Speaker 3: This reflects our continued focus on fleet utilization.
Speaker 3: Better fleet utilization also translates into improved labor utilization.
Speaker 3: We ended the quarter with 1335 excavation units.
Speaker 3: Compared to 1359 at the end of Q1 2021. This also contributed to our increase in RPT.
Speaker 3: We added 16 units and retired 40 units in Q1 as well.
Speaker 3: Badger continues to target.
Speaker 3: A 2022 bill program of between 150 to 180 units. Our retirements between 40 to 60 units.
Speaker 3: The bill program is sied to capitalize on our recently launched commercial strategy, rolled out across our branch network.
Speaker 3: As Paul mentioned, we'll be providing updates to our commercial strategy.
Speaker 3: Our operating model and our manufacturing capabilities.
Speaker 3: At the virtual annual general meeting late this afternoon. But I will provide some some brief highlights now.
Speaker 3: In Q1 we realigned our operations group and to four regions: can, ADA U's East, U's Central and U's West.
Speaker 3: Badger has historically been a very decentralized business with local and regional management and focus.
Speaker 3: And we now evolve that decentralized structure into a standardized operating model.
Speaker 3: We resized the regions and market areas to capitalize on the growth opportunities within our strategic and core markets.
Speaker 3: This structure will maximize our ability to drive revenue, scale the business, focus our resources and flex our operating leverage.
Speaker 3: The new region and market area structure was implemented at the beginning of 2022 and all posysitions were staffed to resource before the end of the quarter.
Speaker 5: As part of these changes, we've equipped our branches with additional sales and marketing capabilities.
Speaker 3: These capabilities focus on customer opportunities within key market areas and with our national accounts, leveraging our size and scale across North America.
Speaker 3: This is a key differentiator between Badger and our local and regionable competitors.
Speaker 3: Badger continues to view its vertical integration as a competitive advantage. As we have previously shared, our manufacturing team has positioned the red Deer plant for higher production levels.
Speaker 3: We believe that we will be able to source major manufacturing components for the balance of the year, despite the many supply chain challenges in the market.
Speaker 3: Market indications suggest that nondestructive excavation equipment will be in high demand and more difficult to source over the next several years, which makes Badger's vertical integration that much more valuable.
Speaker 3: Our vertical integration also allows us to innovate new products.
Speaker 3: I'm excited to share that we are fill testing the new Badger airback, a new product in our nonddestructive excavation lineup.
Speaker 3: The airvac operates similarly to the hydrovac to form safe excavation. The airv uses air versus water to loosen the cover soil before vacuuming it into a storage tank.
Speaker 3: This application eliminates the use of water and assisted materials management.
Speaker 3: This new tool further strengthens Badger service offering and should expand customer uses for nondestructive excavation.
Speaker 3: Even though COVID-19 has resulted in delays in projects, customer spending and nonresidential construction activity, we see pent-up customer demand and badgers well positioned to capitalize on this demand for the balance of 2022 and beyond.
Speaker 3: Unless there are additional geopolitical or macroeconomic disruptions, we see conditions continuing to be favorable.
Speaker 3: For continued progress in growing the business.
Speaker 3: Improving our operating leverage and returning to historical margins as the recovery continues acute on our commercial strategy.
Speaker 3: And now I'd like to turn things over to Darren to discuss our Q1 financial results.
Speaker 6: Thanks Robin. Good morning everybody. As Rob mentioned, our revenue in the quarter was $114.1 million, up 33% from the same quarter in 2021.
Speaker 6: As gross margin. Gross margin was 18%, representing a 270 basis point improvement compared to the 16% achieved last year. As Rob mentioned, we continue to invest in key sales and operations personnel and our commercial strategy in anticipation of a market recovery.
Speaker 6: gna expenses were approximately $1 million for the quarter. These costs were modestly higher than last year's level to support the completion of the legal entity reorganization and the MP system implementation, both of which went live when January third of this year. We continue to anticipate our normalized gna run rate expense to be approximately $4 million Canadian, as we have previously shared.
Speaker 6: Adjusted EBITDA was $10.7 million for the quarter, compared with full $4 thousand last year.
Speaker 6: Adjusted EBITDA margin increased to 9% from 5%, representing a 430 basis point improvement year-over-year.
Speaker 6: These margin levels continue to reflecting investment in key sales and operations personnel and anticipation of the market recovery, and we expect- we expect this to continue over the balance of the year.
Speaker 6: Now on to the balance sheet Badger maintains a focus on ensuring the strength of its balance sheet and its financial flexibility.
Speaker 6: We have continued to make meaningful progress in working capital, in particular accounts receivable management.
Speaker 6: And the collection of our long-dated receivables. At the end of Q1, nearly 80% of our receivable portfolio was ag less than 30 days, resulting in a DSO of approximately 75 days. We believe there's still room to improve on this and we'll continue to work towards better numbers towards the end of the year.
Speaker 6: In January , we repaid the final installment on our senior secured notes with credential, resulting in all of our debt consolidated within our five -year committed credit facilities.
Speaker 6: We continue to maintain our Canadian $4 million in committed credit facilities, which provides ample liquidity and financial flexibility to fund both near-term and long-term growth and complementary capital allocation decisions.
Speaker 6: Finally I'd like to remind everyone of the somem of the changes that we made for Q1 reporting period, effective January first of this year, we changed our reporting currency from Canadian dollars to U's dollars. This change minimizes the impact of foreign currency fluctuation, as over 80% of our revenues in U's dollars.
Speaker 6: Effective with the March 31 twent thousand and 22 dividend payment, we had moved from monthly distributions to quarterly distributions. Our Q1 cash dividend of 16 and the half cents per share was paid on May fifteenth to shareholders of record on May 30, on March thirty-first.
Speaker 6: Effective January first 2022. We revised the methodology in which rptt is calculated. We're excluding finished nondestructive excavation units which have not been sold to the transportation entity from the manufacturing entity.
Speaker 6: Additionally, rptt now reflects the gross revenue earned on units which are operated by our operator partners and franchisees, versus the previous reported net revenue. We believe these changes more accurate reflect the utilization of our fleet. With those comments, I'd like to turn the call back over to Paul.
Speaker 3: Okay thanks, Darren. So before we open it up for questions, a couple of comments. The quarter continued our recovery from COVID-19.
Speaker 3: We were very pleased with the operational performance that we saw in the second half and what we've seen so far going into Q2 and.
Speaker 3: We remain focused on our markets and our customers and managing our expense levels, while ensuring we have the trucks available for our customers.
Speaker 3: Our view of the significant and? U's and Canadian long-term opportunity for non-totructive excavation and our long-term growth prospects is unchanged. We believe that the focus on infrastructure in the? U's supports demand for additional and significant additional non-totructive excavation. We stand ready to help strengthen and maintain that infrastructure and also to support adapting that infrastructure to new technologies from sustainable energy and other related technologies.
Speaker 3: Our proven business model, our operating scale, our flexibility, diversification of end-use and geographic marketscombined with our strong operating track record across the economic cycle support achieving our long-term growth aspirations.
Speaker 3: We are making the business moves required to position Badger, to take advantage of this opportunity and, as always, we manage the business for the long term.
Speaker 3: We would also encourage everyone to join our virtual AGM, which will be held later this afternoon, where Rob will share some updates on our commercial strategy, operating model and manufacturing, and Darren will share updates on our financial strategy. If you're unable to join the AGM, a link will be posted on our website. So with those comments, let's turn it back to the moderator for questions.
Speaker 2: Ladies and gentlemen, if you have a question or comment at this time, please press Star in one on your telephone key pth. If your question has been answered or you wish to remove yourself from the que, simply press the pound keyagain. If you have a question on or comment at this time, please press Star in one on your telephone key path.
Speaker 2: Our first question or comment comes from the line of eurie link from cannacocord genenuity. Your line is open he good morning everyone.
Speaker 5: Your Paul maybe just talk about staffing levels across the organization, how you feel your staffed up for what sounds like going to be a pretty busy Q2 and Q3. Do you feel like you've got the adequate operators in place and trained up, or are you still in recruiting mode?
Speaker 3: Yes well, I I don't think we'll ever not be in recruiting mode at Badger, and that's a real positive thing, but we think we're very well positioned for the summer season and, as you, when a lot of other followers are Badger or no, we paid the price for that to be ahead of the game on operator availability and recruiting. So we're looking forward to a couple of quarters with the run for that pays off. So we're pretty excited about what we see coming for the rest of the year.
Speaker 7: Yes that's a good point, I mean, and obviously you've got a lot of wood to chop between now and in the seasonally slower Q4 and Q1. But how do you, how are you going to be able to handle, in this tight labor market, having to flex your workforce?
Speaker 7: In those slower periods in order to better protect your margins than what we've seen in the last two years.
Speaker 3: Well you know, I think's there's a couple of things from my perspective very. You know, it's the disruptions and the big up and downs that have really been the challenge. So to the extent we have steadi ER demand and demand that's more reflective of traditional seasonality, you I'm very confident that the ops team will manage that. The thing that we really had the challenges with is the up and down with the, the Omni crime in the Delta variance, and you know we talked about it with Q4, with the way December ended up, in the way January started out, and you know we really had a great illustration of that with Q1, where it was almost two different quarters entirely. The first half was significant labor challenge and the second half we got some momentum back and more than made up the shortfall in January in the month of March. So you know we've seen it, we lived it and to the extent we don't have those type of disruptions, we're very confident that the operating rit will start to emerge.
Speaker 7: Okay I've got some other questions, but I'm going to hop back in the queue and maybe circlcle back. Okay thank very, Thank you. Our next question, our comment, comes from the line of Michael dumit from Scotia Bank. Your line is open. He onening guys a Michael.
Speaker 6: The first questions on margins here. We've seen coovi, des. As you commented at Paul, it looks like demand is ramping up. We talked about better utilization, pricing cost.
Speaker 6: You know the envirment and operating mentes feelield like is taken a turn. I just wonder if you can discuss how the second half performing in Q1, how far that is away from where you need to be to get back to historical margins.
Speaker 3: No that's a good question, Michael. I CAn't provide too much granularity on that, but you know it's, I would say it's, we're not satisfied with the level where we are. Yet we do have a ways to go and that's, that's just the fact. And this is a real focus for us and it will continue to be a focus for us. So, but I CAn't give a whole lot more granularity than that. But the momentum into Q2 and what we're seeing gives us quite a bit of optimism that we're going to continue to grind away back toward our historical margins and, as we have said, as we get more better demand- number one and number 2, stability of demand- that's when we have a chance for Rob in the optteam to really get the operating leverage going. The top 1, I guess said way to how you- you answer that Lo. Part of the question I guess I was significant is the interplay between utilization and price. I mean, can you go back to your customers an ospital war?
Speaker 6: Not just on deal but, you know, maybe the leader recovery, without necessarily selling out. I'm just just wondering how much utilization are pricing leverage you currently think you have? Let' let's put Rob to work a little bit here on that when, as he's leading our commercial strategies, So a great question. Yes So Michael, it we have. We see opportunities throughout the business and in most of our markets. Certainly, the demand is picked up and the phones are ring the ring pretty strong and for us, as we are capitalizing and we're filling up, all of our trucks and all of our dispatch are busy every single day, we've been training and teaching about making sure that we start to focus more on dynamic pricing rather than fixed or static pricing, especially in those higher demand markets, and we're in several of those. So because of that, we're starting to see improvement and we're we're encouraged by that butit's.
Speaker 8: Extremely tied together. So as that and I have a background in asset heavy rental businesses and all tied to utilization and pricing, and so as I've gotten to get more involved Michael, I' identify that the opportunities are really really strong here Badger, and it's really training and coaching and teaching our teams, and so far they been very receptive. It was a little harder to do in the winter time obviously, but at the spring, in the summer, demand and start ramp up. We feel very encouraged by that.
Speaker 6: That's really helpful. I guess what ur I'll stop the two in past one okay thanks, Michael.
Speaker 5: Thank you again. Ladies and gentlemen, if you have a question comment at this time, please press Star in one on your telephone ke pad. Our next question comment com from the line of Jonathan lamorsers from BMO Capital Markets. Your line is open.
Speaker 9: Good morning. He, Jonathan I call, are the fuel surcharges.
Speaker 10: That were put in place covering increased diesel costs now.
Speaker 3: ' let's turn that one over to Rob again. We've had really good success with the fuel surcharges and I think Rob can cover this. His team's done some great work in the last couple of months.
Speaker 8: He jojonathan. So as what happened over with Ukraine started to really changed the dynamics in the fuel markets and what was happening with fuel, very quickly we recognize and realize that we had this fuel recovery surcharge or fuel recovery fee that we passed along to our customers and it really is pegged to what the cost of diesel is and it's pegged both in the? U's side and the Canadian side of our business and as it started to spike up, we actually sent out communication. As diesel, the cost of diesel, started to spike up. We sent not communications to all of our local customers, we actually had one on one meetings with our national account customers and basically said: our cost is going up so dramatically on diesel we have to continue.
Speaker 8: To change our fuel recovery fee to flex up with those costs and we actually started pegging instead of monthly to what the change in cost is to weekly and so far the take rate on that has been very good across the entire organization and, just like our customers, we don't like a fuel surcharge more than no one likes that. No one is excited about taking that. But they're all realistic because almost every one of our customers is running an equipment or running trucks with diesel init and they all understand and we've actually had a few customers tell us that they were kind of waiting on us to change the peg from monthly to weekly. So so far it's worked up pretty well and it's long answer to a short question but we've actually seen pretty good success in this and last 45 to 60 days.
Speaker 1: Thank you. Our next question of comment comes from a line of Trevor rerennolds from acumen capital. Your line is open.
Speaker 11: ys snering, if you could give us a few more details on the airvac track that you guys are talking about. The press release.
Speaker 3: Yes I' have happy to Trevor, and you I, everyone knows that our vertical integration starts with truck design and that starts with feedback from our customers and our operators and that's a real advantage that Badger has. And the airvac really comes out of that whole ecosystem in the process of feedback from our folks on the trucks and in our customers. So what what airvac does is, rather than high pressure water, it uses compressed air to loossen the soil and the vacuum system is generally the same. There's a little bit difference in dust collection, but's generally the same. So it'.s it's a similar nondestructive excavation technology, just using a different way to fracture the soil, and there are a range of advantages with airvac and there's a range of disadvantages with airback, but it basically doesn't create slurry.
Speaker 3: And gives the customers options to put the soil right back in the whole and manage their materials in a different way than hydro acxlary. And it's not going to be for everybody and it's not going to be for every potential application, but it adds another arrow to our quiver and we expect to see very good uptake in site segments like the pipeline segment, inner cities where there's impacted soils, places like Boston that have been around for hundreds of years. People don't know what's in the soil, and we think there's going to be some really good opportunities that come all along with that. So this is just another one of badgger' leading technologies like we developed over the years and- and we wanted to start to talk about it this quarter because we're seeing some good response from customers and from our prototype units that are out thereand also because we're going to start to build more of them.
Speaker 12: And we are going to be reporting them along with our hydrovact truck build. So we just want to provide that transparency, but very excited about it and I'm really looking forward to how this rolls out.
Speaker 11: 's got it, So you'll just be including those with the hydrovac numbers. Yes, that will to be. Yes, okay. And then, just to be clear, did you guys say there is 40 retirements in Q1? That's correct, okay. So you're still comfortable with the 40 to 60 retirements for the yearyes, that's what. That's what we're planning on, and obviously we'll LL update that each quarter, just like we do our build rates. So, but that's the plan.
Speaker 11: Got it all top line back, Thank you okay. Thanks, roubver.
Speaker 5: Thank you and next question of comment as a follow-up from MR Jonathan lambmeers from BMO Capital Markets. Your line is open, Thank you.
Speaker 10: On the difference in margin between the first half of the quarter and the second half maybe be coming out in a different way. Darren, would you have an estimate for the?
Speaker 10: All of the covidt costs included in direct cost C you want. I wouldn't have it at the tip of my fingers, So would be a bit of a guess, maybe coming at it from a different way. The full, the full, the full quarters.
Speaker 13: 9% EBITDA margin would be an average that's probably weighted a little bit below the simple average.
Speaker 13: That's about as far as you're going to get out of me on the margin discussion: the.
Speaker 13: I'd have to leave it at that, because the it's difficult to be able to say what your cot expenses are, because there is foregone revenue and additional cost, So it's not as simple as saying that there's a cost cost increase that allowed us to actually pick up the same level of revenue. We actually had to forego revenue because we didn't have the availability of people to do to work, but we did say earlier there and that we more than made up for the January four shortfall in March. That's where that's some color. I think that might be helpful to OK, that's great, Thank you.
Speaker 5: Thank you. Our next question of coming as a follow from MR Michael do ITT, from Scotia Bank. Your line is open.
Speaker 1: mister you may. You may need the amitur phone.
Speaker 6: Here I am all right, still figure out the solid. But thanks for the followup guys.
Speaker 6: I guess I think you talked about some areas where there's a lot of activity. I was wondering how much activity.
Speaker 14: Or how much more activity you're seeing any oil and gas base and you know whether or not that's been enough to potentially tighten the rest of the market up a little bit in terms of cusdity. You up going to jump on that. So So Michael, I know the company historically had been pretty heavily invested in oil and gas and over the years, through the up and down cycles and like a lot of the industrial companies, have lightened our dependence on oil and gas. So it we have seen some of the end markets in our end customers in oil and gas pickup and certainly we've benefited somewhat from that. But it's not tightening up our entire fleet across the Board, it's only helping us in those oil and gas markets in which we operate. We are seeing a lot of just customer demand across almost all verticals and industries.
Speaker 8: And I'm trying to actually think a one callul that's. That's an exception. I mean there, there we're seeing it everywhere and I think it's because people are coming off of two years, a COVID-19 and theres they have a lot of work to catch up. onso, I wouldn't say Michael, that oil and gas is tipening up our utilization, but certainly in our markets where we operate- and you know the usual onesin those markets, certainly we've benefited but that's not driving the, the utilization across the company. It's just all across the Board demand from the broad customer base. But it is. It is headwind we've had for about four or five years. That's now not a headwind anymore. So very positive from that perspective, great question.
Speaker 2: Thank you. Our next question coming me of the follow from MR eurie, link from kindaccord Genuity: your line is openand guys, can you confirm the retirements? So you said 40 retirements and you added 16 trucks. All right.
Speaker 15: That's that's corct yes yes. We shrunk the fleet lately in Q1 okay. Maybe I'll follow up offline. But I'm getting the math kind indicates fifty one retirements based on.
Speaker 7: The ending fweet count at the area of Q4. I would talking about maybe average units during the quarter. We should probably take that offline and we could just reconcile the numbers for youyes.
Speaker 7: Okay did anybody? I dropped off the call for a minute there, did anybody? uh, follow up on the.
Speaker 7: The new rptt disclosure. No, no 1, else any questions. I'll take the opportunity just want to make sure I understand. So of you're now going to be including that 60% of operating partner revenue and I guess the thinking is that.
Speaker 7: The fleet. Even that operator fleet is all in the denominator. So you're better trying to match the numerator with the dominators that even though the economic revenue to you is going to be a bit overstated.
Speaker 13: That's correct. The economic revenue that we have is still our economic revenue. But to really compare apples to apples, of a corporate versus O peer franchise fleet, we really have to make sure that the utilization is metred off the same base. That's what we and the logic that you went through. It's absolutely correct.
Speaker 7: Okay and I guess the end result is kind of a three percentage point lift in RPT.
Speaker 13: Were first going to be higher than thatso it would be pretty materially higher than that in Canada. So the yes, it would be more than that. I don't have the percentage differential between our O calculations and our new calculations, but it would be higher than 3%.
Speaker 7: Okay So maybe just realign the guideposts. I mean, I think historically you would look to start building trucks when you saw our PT kind of get in that 30 to.
Speaker 7: 35 thousand range. I mean, what does that look like now? Just so we can get our bearings here.
Speaker 13: I don't think that's really changed. So I think the we've seen the we've seen the writing on the wall with all of the utilization work that we did last year and the when we put out our Q4 numbers in our deield guidance of 15.18 thousand trucks. That was on the visibility that we were seeing ourpt creeping up over thirty.
Speaker 7: Okay I guess my point is: if 30 is, we'll take it off the line. If I'm just trying to adjust for the, I guess it's a bit inflated now, right versus the old metrics rptt.
Speaker 13: No I think the metrics now are probably more realistic of how we're running the business. So RP is rptt, regardless of how you're trying to reconcile it back to the economic cash flow that we get from the O franchise arrangement. So the decision making that we would look at is always the the core rptt of the business, and now we're aligning the external disclosure with how we actually operate the business okay. Okay, sound's good.
Speaker 2: Thank you. Our next question of comment comesfrom from the line of crrista: freeen from CIBC. Your line is open.
Speaker 16: Hi thanks for taking my question. I just wanted to follow up on on the end markets. Are you seeing any weakness in any of your end markets, just as concerned, a recession sort of there or more, or any difficulties passing through the pricing that' you're hoping to get, just given inflation in all the other costs your customers are dealing with? Yes RIS, we we haven't seen a lot of softness. Certainly, like everyone on this call and there one in our room and here, we're very aware what's happening and we listen to the news and and here of you know a lot of discussion of what the market potentially to go to. But we haven't seen that softness yet any of our end markets and it hasn't seen to slow down our customer base yet. But the the thing that we're most optimistic and positive about on a go forward basis.
Speaker 8: Is because we have a very clear commercial strategy and it's very basic. We're not talking high science here, it's a very basic commercial strategy but it's 1, that is company-wide, that we believe that and certain certain locations and branch locases. We have that if we're really strong in one industry or one vertical, we can begin to start to grow adjacent industries and verticals and customer bases that we've never done before and that should help us offset. Even if the market starts to slow down. We can continue to grow and find new customers and introduce safe dig technology and the concept of safe dig.
Speaker 8: In the marketplace, because a lot of our marketts, even really large ones, still don't fully understand how, how valuable safety exhivation is, and that is complete upside for Badger and we like being the industry leader there, So it's a great position to be in.
Speaker 16: Great thanks. I'll jump back in the que. Thanks thanks, christhank. You again. Ladies and gentlemen, if you have a question to comment at this time, please press Star than one or your telephone keeppa.
Speaker 17: I'm show no additional questions in thequeue at this time. I'd like to turn the conference back over to management for any closing remarks.
Speaker 3: Okay Thank you for that and thank you everyone for your participation this morning. On behalf of all of us at Badger, we want to thank our customers, our employees, suppliers and, of course, our shareholders for all of your ongoing support, which really drives Badger success. So we can end the call, Thank you.
Speaker 2: Ladies and gentlemen, Thank you for participating in today's conference. This concludes the program. You may now disconnect everyone. Have a wonderful day.
Speaker 2: I.
Speaker 1: goodday, Ladies and gentlemen, and thank you for standing by. Welcome to the Badger infrastructure solutions limited 2022: first quarter results conference call. At this time, all participants are a listen only mode.
Speaker 2: After the speaker's presentation there will be a question and answer session to ask the question. During the session you need to press Star than one on your telephone. Key pad as a reminder. This conference call is being record if you require any further assistance please press Star in zero. At this time I would like to turn the conference over to MR Paul. vanderberg sir Please begin. Thank you good morning and welcome to Badger's Q1 2022 earnings call on the call with me. This morning is Rob blblackadar our Chief Operating Officer and Darren awards e R CFO .
Speaker 8: Our 2022 Q1 earnings release. The mdna and the financial statements were released after market closed yesterday and are available on our website, the Investors section, and also on SEDAR. We are required to note that some of the statements made today may contain forward-looking information. In fact, all statements made today which are not statements of historical fact are considered to be forward-looking statements.
Speaker 8: We make these statements based on uncertain assumptions that we consider to be reasonable. However, forward-looking statements are always subject to certain risks and uncertainties, and undue reliance should not be placed on them, as actual results may differ materially from those expressed or implied. For more information about these assumptions, risks and uncertainties that may be relevant to such forward-looking statements, Please refer to our 2021 annual information form.so, as always, we'd like to start the call with health and safety. We've been pleased with the team's health and safety response to the now two -year old COVID-19 pandemic and the related challenges that have come along with it from an operating perspective. Under all conditions, safety of Badger employees and customers remains job number one.
Speaker 8: We are pleased with how the team is managed through this pandemic. Our covidt playbook consistently follows our center for disease control guidelines and our commitment to a strong health and safety culture. Led by Rob and Leon Walsh, our Vice President of HSC. This has allowed us to managed through any conditions that we've seen with COVID-19.
Speaker 8: We continued to manage through those conditions. In Q1, the first half of the quarter was impacted by the omniron varyian outbreak and the restrictions that went along with that. As we indicated on our Q4 2021 call, January saw about eight 9% of our operators in quarantine at some point during the month. This was a similar level to the August and September peak with Delta variant. Having operators in quarantine results in lost revenue and higher direct labor costs, including more over time and higher subsistence costs for more out of town work with longer travel times in overnight days.
Speaker 8: That was the first half for the quarter. However, the second half was very different.
Speaker 8: February CAS comps were down about 80% from January , and in March we only saw about 16 cases.
Speaker 8: None of our Q1 hit cases required hospitalization cases in April and into early Q2 are trending at the lower levels as well- very positive.
Speaker 8: We're also encouraged that the centers for disease control in most jurisdictions have loosened operating restrictions and shortened return to work testing procedures.
Speaker 8: Despite all this though, we continue to follow our covervid playbook, and some regions have seen small amounts of infections, but the general trend is down. Our business and financial results, which Rob and Darren will speak to in a few minutes, mirrored the covervid trends in the quarter. The first half of the quarter was below our expectations and the second half exceed our expectations.
Speaker 8: Overall we managed to meet our initial expectations for the quarter and we're pleased to see revenue and operating leverage improving. Revenue was up 33% from the previous year and adjusted EBITDA was up 84%. We're also encouraged by improving trends in the broader nonresidential construction market fundamentals, particularly in the U? S.
Speaker 8: After 15 months of consecutive year-over-year declines and the new U's nonres construction put in-place numbers, the market trends appear to be returning to year-over-year growth, albeit the lower levels. The growth is occurring off the lower levels we experienced in two thousandtwo twent and 2021 .
Speaker 8: So with that, we'll hand the call over to Rob to discuss the quarter. Thanks, Paul. As Paul mentioned, we are pleased with the continued market and business improvement during the quarter, despite the slow start due to omocron. Revenue was up approximately 33% from last year to 114 million, which continues to reflect the market recovery that we have seen in the second half of 2021. I would like to remind everyone that we have transitioned our reporting currency to U's dollars, from Canadian dollars, effective January first 2020 -two.
Speaker 8: Higher revenue and more consistent volume in the second half of the quarter supported improved operating leverageall operating regions experienced positive leverage.
Speaker 8: From higher revenue, higher utilization, increased pricing and cost controls. This resulted in a year-over-year improvement in adjusted EBITDA margin from 5% last year to 9% this year.
Speaker 8: Q1, revenue per truck per month, or rptt, was 31.005 thousand 71, which was up over 37% versus last year, a higher percentage increase year-over-year than revenue.
Speaker 8: This reflects our continued focus on fleet utilization. Better fleet utilization also translates and into improved labor utilization. We ended the quarter with 1335 excavation units, compared to 1359 at the end of Q1 2021. This also contributed to our increase in RPT.
Speaker 8: We added 16 units and retired 40 units in Q1, as wellbadger continues to target a 2022 bill program of between one hundred and fifty to one hundred and eighty units. Our retirements between 40 to 60 units.
Speaker 8: The bbuild program is sied to capitalize on our recently launched commercial strategy rolled out across our branch network.
Speaker 8: As Paul mentioned, we'll be providing updates to our commercial strategy, our operating model and our manufacturing capabilities.
Speaker 8: At the virtual annual general meeting play this afternoon. But I will provide some brief highlights now. In Q1 we realigned our operations group into four regions: Canada U's East, U's Central and U's West. Badger has historically been a very decentralized business with local and regional management and focus, and we now evolved that decentralized structure into a standardized operating model.
Speaker 8: We resized the regions' and market areas to capitalize on the growth opportunities within our strategic and core markets.
Speaker 8: This structure will maximize our ability to drive revenue, scale the business, focus our resources and flex our operating leverage. The new region and market area structure was implemented at the beginning of 2022 and all posysicians were staffed and resource before the end of the quarter.
Speaker 5: As part of these changes, we've equipped our branches with additional sales and marketing capabilities.
Speaker 8: These capabilities focus on customer opportunities within key market areas and with our national accounts, leveraging our size and scale across North America.
Speaker 8: This is a key differentiator between Badger and our local and regionable competitors. Badger continues to view its vertical integration as a competitive advantage. As we have previously shared, our manufacturing team has positioned the red Deer plant for higher production levels.
Speaker 8: We believe that we will be able to source major manufacturing components for the balance of the year, despite the many supply chain challenges in the market.
Speaker 8: Market indications suggest that nondestructive excavation equipment will be in high demand and more difficult to source over the next several years, which makes Badger's vertical integration that much more valuable.
Speaker 8: Our vertical integration also allows us to innovate new products. I'm excited to share that we are field testing the new Badger airback, a new product in our nondestructive excavation lineup.
Speaker 8: The airvac operates similarly to the hydroac to form safe excavation. The airv uses air versus water to loosen the cover soil before vacuuming it into a storage tank. This application eliminates the use of water and assisted materials management.
Speaker 8: This new tool further strengthens badgger service offering and should expand customer uses for nondestructive excavationeven though COVID-19 has resulted in delays in projects, customer spending and nonresidential construction activity, we see pent-up customer demand and badgger well positioned to capitalize on this demand. For the balance of 2022 and beyond, unless there are additional geopolitical or macroeconomic disruptions, we see conditions continuing to be favorable for continued progress and growing the business.
Speaker 8: Improving our operating leverage and returning to historical margins as the recovery continues acute on our commercial strategy. And now I'd like to turn things over to Darren to discuss our Q1 financial results. Thanks, Robin. Good morning everybody. As Rob mentioned, our revenue in the quarter was one hundred and fourteen point one million dollars, up 33% from the same quarter in 2021. gross margin: gross margin was 18%, representing a 270 basis point improvement compared to the 16% achieved last year. As Rob mentioned, we continue to invest in key sales and operations personnel and our commercial strategy in anticipation of a market recovery.
Speaker 13: gna expenses were approximately $1 million for the quarter. These costs were modestly higher than last year's level to support the completion of the legal entity reorganization and the MP system implementation, both of which went live when January third of this year. We continue to anticipate our normalized gna run rate expense to be approximately $4 million. Canadian, as we have previously shared, adjusted EBITDA was $10.7 million for the quarter, compared with fourll $4 thousand last year. Adjusted EBITDA margin increased to 9% from 5%, representing a 430 basis point improvement year-over-year. These margin level continue reflecting investment in key sales and operations, personnel and anticipation of the market recovery, and we expect- we expect us to continue over the balance of the year.
Speaker 13: Now onto the balance sheet. Badger maintains a focus on ensuring the strength of its balance sheet and its financial flexibility. We have continued to make meaningful progress in working capital, in particular accounts receivable management.
Speaker 13: And the collection of our long dated receivables. At the end of Q1, nearly 80% of our receivable portfolio was aged less than 30 days, resulting in a DSO approximately 75 days. We believe there's still room to improve on this and will continue to work towards better numbers towards the end of the year. In January , we reppaid the final installment on our senior secured notes, with potential resulting in all of our debt consolidated within our five -year committed credit facilities. We continue to maintain our Canadian $4 million in committed credit facilities, which provides ample liquidity and financial flexibility to fund both near term and long-term growth and complementary capital allocation decisions. Finally, I'd like to remind everyone of the some of the changes that we made for Q1 reporting period, effective January first of this year, we changed our reporting currency from Canadian dollars to U's dollars.
Speaker 13: This change minimizes the impact of foreign currency fluctuation as over 80% of our revenues in U's dollars. Effective with the March 31, twentthousand and 22 dividend payment, we have moved from monthly distributions to quarterly distributions. Our Q1 cash dividend of 16 and the half cents per share was paid on May 15 to shareholders of record on me 30 on March thirty-first.
Speaker 13: Effective January first 2022. We revised the methodology in which rptt is calculated. We're excluding finished nondestructive excavation units which have not been sold to the transportation entity from the manufacturing entity.
Speaker 13: Additionally, RP now reflects the growth revenue earned on units which our operated by our operor partners in franchisees versus the previous reported net revenue. We believe these changes more accurate reflect the utilization of our fleet. With those comments, I'd like to turn the call back over to Paul. Okay thanks, Darren. So before we open it up for questions, a couple of comments. The quarter continued our recovery from COVID-19. We were very pleased with the operational performance that we saw in the second half. In what we've seen so far going into Q2. We remain focused on our markets and our customers and managing our expense levels while ensuring we have the trucks available for our customers. Our view of the significant and? U's and Canadian long-term opportunity for nondestructive excavation and our long-term growth prospects is unchanged. We believe that the focused on infrastructure in the? U's supports demand for additional and significant additional nondestructive excavation.
Speaker 3: We stand ready to help strengthen and maintain that infrastructure and also to support adapting that infrastructure to new technologies, from sustainable energy and other related technologies. Our proven business model, our operating scale, our flexibility, diversification of end use and geographic markets, combined with our strong operating track record across the economic cycle, support achieving our long term growth aspirations. We are making the business moves required to position Badger to take advantage of this opportunity and, as always, we manage the business for the long term. We would also encourage everyone to join our virtual AGM, which will be held later this afternoon, where Rob will share some updates on our commercial strategy, operating model and manufacturing, and Darren will share updates on our financial strategy. If you're unable to join the AGM, a link will be posted on our website. So, with those comments, let' turn it back to the moderator for questions. Ladies and gentlemen, if you have a question or comment at this time, Please.
Speaker 3: Positive thing. But re we? We think we're very well positioned for the summer season and you know, as you went, a lot of other followers are bad youor. No, we paid the price for that to be ahead of the game on operator availability and recruiting, So we're looking forward to a couple of quarters with a run for that pays off. So we're pretty excited about what we see coming for the rest of the year. Yes, that's a good point, I mean, and obviously you've got a lot of wood to chop between now and the seasonally slower Q4 and Q1. But how do you?
Speaker 7: How are you going to be able to handle, in this tight labor market, having to flex your workforce in those slower periods in order to better protect your margins than than what we've seen in the last two years? Well you, i- there's a couple of things from my perspective. Your, you know it's the disruptions and the big up and downs that have really been the challenge. So, to the extent we have steady ER demand, demand that's more reflective of traditional seasonality, I'm very confident that the opsteam will manage that. The thing that we've really had the challenges with is the up and down with the Omni crime in the Delta variance and you know we talked about it with Q4, with the way December ended up, in the way January started out, and know we really had a great illustration of that with Q1, where it was almost two different quarters, entirely the first half.
Speaker 3: Was significant labor challenge and the second half we got some momentum back and more than made up the shortfall in January in the month of March. So we've seen it, we lived it and to the extent we don't have those typees of disruptions, we're very confident that the operating leverage will start to reemerge. Okay, I've got some other questions, but I'm going to all hop back in the queue and maybe circle back. Okay thanks, ry.
Speaker 2: Thank you. Our next question of comment comes from the line of Michael. Do it from Scotia Bank? Your line is open. chang one gu a, Michael. The first question on on margins. Here you know the've seen coovides as you comment at tall. It looks like demand is ramping up. We talked about better utilization pricing, cost. You knowthe environment and operating moment feel is taking a turn. I just wonder, you know, if you can discuss how you know the second half performmance in Q on you, how far that is away from where you need to be to get back to historical margins. No, that's a good question, Michael. I CAn't provide too much granularity on that, but you know it'.s, I would say it's- we're not satisfied with the level where we are. Yet we do have a ways to go, and that's, that's just the fact, and this is a real focus for us and it will continue to be a focus for us. So, but I CAn't give a whole lot more granularity than that.
Speaker 3: But the momentum into Q2 and what we're seeing gives us quite a bit of optimism that we're going to continue to grind away back toward our historical margins and, as we have said, as we get more better demand- number one and number 2, stability of demand- that's when we have a chance for Rob in the opsteam to really get the operating leverage going can the top 1- I guess it saidgway to how you you ER that Lo part of the question, I guess how was significant- is the interplay between utilization and price. I mean, can you go back to your customers an OSP war, not just some feel, but you know, maybe a leer recovery without necessarily selling out? Just just wondering how much utilization or pricing leverage you currently think you have.
Speaker 3: Let let's put Rob to work a little bit here on that one as he's leading our commercial strategies. So a great question Yes So Michael it we have we see opportunities throughout the business and most of our markets. Certainly the demand is picked up and the phones are ring the ring pretty strong and for us as we are capitalizing and we're filling up. All of our trucks and all of our dispatch are busy every single day. We've been training and teaching about making sure that we start to focus more on dynamic pricing rather than fix or static pricing especially in those higher demand markets and we're in several of those. So because of that we're starting to see improvement and we're very encouraged by that. But it 's.
Speaker 8: Extremely tied together. So as that and I have a background in asset heavy rental businesses and all tied to utilization and pricing, and so as I've gotten to to get more involved Michael, I've identify that the opportunities are really really strong here Badger, and it's really training and coaching and teaching our teams and so far they could very receptive. It was a little harder to do in the winter time obviously, But as the spring, in the summer, demand a start ramp up, we feel veryencouraged by that.
Speaker 6: That's really helpful. I guess, like ie, I'll stop the T and past one okay thanks, Michael. Thank you again. Ladies and gentlemen, if you have a question of comment at this time, please press Star in one on your telephone key pad. Our next question, question of ment- comes from the line of Jonathan Lamers's from BMO Capital Markets. Your line is opengood morning Hey, Jonathan Paul.
Speaker 18: Are the fuel surcharges that we're put in place covering increased diesel costs. Now I let's turn that one over to Rob again. We've had really good success with the fuel surcharges and I think Rob can cover this his team's done some great great work in the last couple of months heggge joonthan. So as what happened over with Ukraine started to really change the dynamics in the fuel markets and what was happening with fuel very quickly. We recognize and realize that we had this fuel recovery surcharge or fuel recovery fee that we passed along to our customers and it really is pegged to what the cost of diesel is and it's pegged both in the U's side and the Canadian side of our business and as it started to spike up.
Speaker 8: We actually sent out communication as diesel, the cost of diesel, start to spike up. We's not communications to all of our local customers and we actually had one on one meetings with our national account customers and basically said our cost is going up so dramatically on diesel we have to continue to change our fuel recovery fee to flex up with those cost. We actually start pegging instead of monthly to what the change in cost is to weekly and so far the take rate on that has been very good across the entire organization and just like our customers, we don't like a fuel surcharge more than no one likes that. No one is excited about take King that. But they're all realistic because almost every one of our customers is running equipment or running trucks with diesel limit and they all understand and we've actually had a few customers.
Speaker 8: Tell us that they were kind of waiting on us to change the peg from monthly to weekly. So so far it's worked up pretty well. It's a long answer to a short question, but we've actually seen pretty good success in this in the last 45 to 60 daysthank you. Our next question of comment comes from a line of Trevor rentallds from acuumen capital. Your line is open.
Speaker 19: ys. So then, if you could give us a few more details on the airback truck, are the press release now? Have happy to Trevor. And you know I, everyone knows- that our vertical integration starts with truck design and that starts with feedback from our customers and our operators and that's a real advantage that Badger has and the airvac really comes out of that whole ecosystem in the process of feedback from our folks on the trucks, in our customers. So what airac does is, rather than high pressure water, it uses compressed air to loosen the soil, and the vacuum system is generally the same. There's a little bit difference in dust collection, but it's generally the same. So it's. It's a similar non destructive excavation technology, just using a different way to fracture the soil, and there there are a range of advantages.
Speaker 3: With airvac and there's a range of disadvantages with their backac, but it basically doesn't create slurry and gives the customers options to put the soil right back in the whole and manage their materials in a different way. Then hydrovacx lurry, and it's not going to be for everybody and it's not going to be for every potential application, but it adds another arrow to our quiver and we expect to see very good uptake in site segments like the pipeline segment, inner cities where there's impacted soils, places like Boston that have been around for hundreds of years and people don't know what's in the soil, and we think there's going to be some really good opportunities that come all along with that. So this is just another one of badgger' leading technologies like we developed over the years and- and we wanted to start to talk about it this quarter.
Speaker 3: Because we're seeing some good response from customers in from our prototype units that are out there and also because we're going to start to build more of them and we are going to be reporting them along with our hydrovac truck bill. So we just want to provide that transparency. But very excited about it and I'm really looking forward to how this rolls out,' got it so you'll just be including those with the hydrovac numbers.
Speaker 15: Yes that will be yes. Okay, and then, just to just be clear, did you guys say there was 40 retirements in Q1?
Speaker 3: That's correct. Okay, So you're still comfortable with the 40 to 60 retirements the year? Yes that's, that's what we're planning on and obviously we'll update that at each quarter, just like we do our build rates. So, but that's the plan. Got it all topline back. Thank you, okay. Thanks, dvor.
Speaker 2: Thank you, and next question of comment is a follow-up from MR Jonathan lambmeers from BMO Capital Markets. Your line is open, Thank you.
Speaker 18: On the difference in margin between the first half of the quarter and the second half maybe be coming out of a different way. Darren, would you have an estimate for the?
Speaker 10: All of the covidt costs included in direct costs. C Q, want. I wouldn't have it at the tip of my fingers, So would be a bit of a guess, maybe coming at it from a different way. The full, the full, the full quarters.
Speaker 13: 9% EBITDA margin would be an average that's probably weighted a little bit below the simple average. That's about as far as you're going to get out of me on the margin discussion, the yes, I'd have to leave it at that because the it's difficult to be able to say what your COVID-19 expenses are because there is foregone revenue, an additional cost, So it's not as simple as saying that there's a cost cost increase that allowed us to actually pick up the same level of revenue. We actually had to forego revenue because we didn't have the availability of people to do to work, but we did say earlier there and that we more than made up for the January four shortfall in March. That's where that's some color. I think that might be helpful to OK, that's great, Thank you, Thank you.
Speaker 2: Our next question or coming is a follow from MR Michael doummate from Scotia Bank. You'll buy is openis did do may. You may need to meute your phone all here. I am all right, still figure out the follow. But thanks for the follow up guys.
Speaker 14: I guess you know- I think you talked about you know, some areas where there's a lot of activity. You know I was wondering how much activity, how much more activity you're seeing any oil and gas base and you know whether or not that's been enough to potentially tightened the rest of the market up a little bit in terms of capacity. You want to to jump on that. So So Michael, I know the company historically had been pretty heavily invested in oil and gas and over the years, through the up and down cycles and like a lot of the industrial companies, have lightened our dependence on oil and gas. So it we have seen some of the end markets in our in customers in oil and gas pickup and certainly we've benefited somewhat from that. But it's not tightening up our entire fleet across the Board, it's only helping us in those oil and gas markets in which we operate. We are seeing a lot of just customer demand across almost all verticals and industries.
Speaker 8: And I'm trying to actually think a one fall, that that's an exception. I mean there Yeah, we're seeing it everywhere and I think it's because people are coming off of two years, a COVID-19, and there they have a lot of work to catch up. onso, I wouldn't say Michael, that oil and gas is tiping up our utilization, but certainly in our markets where we operate and the usual onesin those markets, certainly we've benefited but that's not driving the, the utilization across the company. It's just all across the Board demand from the broad customer base.
Speaker 12: But it is. It is a headwind we've had for about four or five years. That's now not a headwind anymore, So very positive from that perspective. Great question, Thank.
Speaker 2: Thank you. Our next question coming me as a follow from MR eurie, link from kindaccord Genuity. Your line is openhey guys, can you confirm the the, the retirements? So you said 40 retirements and you added 16 trucks. All right.
Speaker 15: I' that that's correct. Yeah Yeah, we shrunk the other fleet, So that slightly in Q1. Ok, maybe I'll follow up offline, but I'm getting the maths kind. Indicates fifty one retirements based on.
Speaker 7: The ending fleet count at the area of Q4 i. I would talking about maybe average units during the quarter. We should probably take that offline and we could just reconcile the numbers for you. Okay, did anybody? I dropped off the call for a minute there. Did anybody follow up on the that? The new R PT disclosure.
Speaker 13: No no 1, else any Quest. I'll take the opportunity, just want to make sure I understand. So you're now going to be including.
Speaker 7: That 60% of operating partner revenue and I guess the thinking is that.
Speaker 7: The fleet. Even that operator fleet is all in the denominator. So you're better trying to match the numerator with the dominators that even though the economic revenue to you is going to be a bit overstated.
Speaker 13: That's correct. The economic revenue that we have is still our economic revenue. But to really compare apples to apples, of a corporate versus O peer franchise fleet, we really have to make sure that the utilization is metured off the same days. That's what we and the logic that you went through is absolutely correct. Okay, and I guess the end result is kind of a three percentage point lift in RPT. We're first going to be higher than that.
Speaker 13: So it would be pretty materially higher than that in Canada. So the yes, it would be more than that. I don't have the percentage differential between our O calculations than our new calculations, but it would be higher than 3%.
Speaker 7: Okay So maybe just realign the guide posts. I mean, I think historically you would look to start building trucks when you saw our PT kind of get in that 30 to.
Speaker 7: 35 thousand range. I mean, what? What does that look like now? Just so we can get our bearings here. I don't think that's really changed. So I think the we've seen the we've seen the writing on the wall, with all of the utilization work that we did last year and the when we put out our Q4 numbers in our bbuild guidance of 150 to 180 trucks, that was on the visibility that we were seeing ourpt creeping up over thirtyokay. I guess my point is: if, if 30 years?
Speaker 7: I we LL take it offline if I'm just trying to adjust for the. I guess it's a bit inflated now, right versus the old metrics R P T. no, I think the metrics now are probably more realistic of how we're running the business. So, you know, RP T is R P T, regardless of how you're trying to recorconds il back to the, the economic cash flow that we get from the O? P franchise arrangement. So the decision making that we would look at is always the, the pore R P T of the business. And and now we we're, you know, aligning the external disclosure with how we actually operate the business. Ok OK, sounds good, Thank you. Our next question of ecomomic comes from from the line of krsta reasonion from C I B, C. your line is open Hi. Thanks for taking my question. I just wanted to follow up on on the end markets. Are you seeing any weakness in any of your end markets, just as concern a recession sort of, or more or any difficulties?
Speaker 16: Passing through the pricing that you're hoping to get, just giving inflation in all the other csts customers are dealing with. Yes RIS, we we haven't seen a lot of softness. Certainly, like everyone on this call and everyone in our room and here, we're very aware what's happening and we listen to the news and and here of you know a lot of discussion of what the market potentially to go to. But we haven't seen that softness yet any of our end markets and it hasn't seen to slow down our customer base yet. But the the thing that we're most optimistic and positive about on a go forward basis is because we have a very clear commercial strategy. It's very basic. We're not talking high science here, it's a very basic commercial strategy. But it's one that is company wide that we believe that and certain certain.
Speaker 12: Locations and branch showlocases. We have that if we're really strong in one industry or one vertical, we can begin to start to grow adjacent industry and verticals and customer bases. That we've never done before and that should help us offset even if the market starts to slowdown. We can continue to grow and find new customers and introduce safe dig technology and the concept of safe dig.
Speaker 12: In the marketplace because a lot of our markets, even really large ones, still don't fully understand how, how valuable safety exhivation is, and that is complete upside for Badger, and we like being the industry leader there, So it's a great position to be in great's. I'll jump back in the queue. Thank thanks, Chris.
Speaker 2: Thank you again. Ladies and gentlemen, if you have a question to comment at this time, please press Star and one on your telephone. keeppa'm show no additional questionions is in the queue at this. Id like to the conference back over to management for any closing remarksok. Thank you for that and thank you everyone for your participation this morning. On behalf of all of us at bad year, we want to thank our customers, our employees, suppliers and, of course, our shareholders for all of your ongoing support, which really drives bad your success. So we can end the call. Thank you, Ladies and gentlemen. Thank you for participating in today's conference. This concludes the program. You may now disconnect everyone. Have a wonderful day.