Q4 2024 Badger Infrastructure Solutions Ltd Earnings Call
Yeah.
Ladies and gentlemen, thank you for standing by.
Welcome to the Badger infrastructure Solutions Ltd fourth quarter 2024 results call.
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Ann Plaster: I would now like to turn the call over to Ann plaster director of Investor Relations.
Ann Plaster: Thank you Debbie good morning, everyone and welcome to our fourth quarter 2024 earnings call. My name is Anne cluster of Badger's interim director of Investor Relations. Joining me on the call. This morning are badger's, President and CEO, Rob <unk> and our CFO Rob Dawson.
Ann Plaster: 2020 for fourth quarter earnings release, MD&A and financial statements were released after market closed yesterday and are available on the Investor Relations section of Badger's website and on SEDAR plus.
Ann Plaster: We're required to note that some of the statements 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. We make these forward looking statements based on certain assumptions that we consider to be reasonable. However forward looking statements are always sub.
Ann Plaster: <unk> 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 material assumptions risks and uncertainties that may be relevant to such forward looking statements. Please refer to badger's 2024 M DNA along with.
Rob: The 2024, Aif I will now turn the call over to Rob <unk>.
Rob: Thank you Anne.
Rob: Morning, everyone and thank you for joining our 2020 for fourth quarter and full year earnings call.
Rob: As we always do here a badger I wanted to start off with a safety moment.
Rob: In 2024 hour make safety personal campaign empowered the team to keep the focus on safety driving record results for the year. This accomplishment reaffirms our safety commitment to our employees our customers and our key stakeholders.
Rob: This achievement is a testament to the hard work and vigilance of every team member.
Rob: It underscores our belief that a safe work environment is essential for the wellbeing of our employees and critical to our overall success.
Rob: As we move forward, we remain committed to maintaining and improving this performance ensuring that safety continues to be a personal and collective value for all of us.
Rob: Now onto our annual results.
Rob: Badger finished the year on a strong note with continued growth in revenue gross profit and adjusted EBITDA.
Our record topline revenue of $745 million.
Rob: Grew 9% over the prior year.
Rob: Reflecting the results of our commercial and pricing strategies and growth in customer demand.
Rob: We realized 42% flow through on this additional revenue driven by customer pricing and stability in our G&A functions.
Rob: Accordingly.
Rob: Our full year adjusted EBITDA margin improved to 23, 6% up from 22% in 2023.
Rob: Our U S revenue grew 13% compared to last year as we saw consistent growth in activity and pricing gains.
Rob: The deceleration of growth we experienced in the middle part of 2024, and our U S markets stabilized in the fourth quarter.
Rob: We continue to experience sustained growth broadly in the U S.
Rob: Both through local customer and project based work.
Rob: And our Canadian markets revenue was down 15% compared to 2023.
Rob: And the first three quarters, we experienced a slowdown in large project work.
Rob: Softness in some of our western provinces as well as lower activity from our operating partners.
Canadian operations began to recover in the fourth quarter, particularly in Ontario.
As a reminder, Canada represents only about 10% of the company's revenue overall.
Rob: Badger ended the year with 1625 hydro vacs growing the fleet by 7% overall in 2024 and RPT remained relatively stable.
Rob: As we head into 2025, we have ample fleet available to support our customer growth initiatives through improved utilization.
Rob: The Red Deer plant manufactured 190, <unk> refurbished 35, and we retired 90 units during the year all within our original build in retirement guidance.
Rob: We continue to plan for stable manufacturing and stable retirement activity.
Rob: As we look ahead to 2025, our fleet plan includes manufacturing between 180 and 210.
Rob: <unk> refurbishing between $50 to 60 hydro vacs and retiring between 90 to 130 units.
Rob: This allows us to grow our fleet by 4% to 7% and spend between 95 million to $115 million in capital.
Rob: Included in this capital range is our hydro production our refurbishments.
Rob: Ancillary equipment purchases and other capital projects.
Rob: In my closing remarks, I will cover our outlook for 2025 and also some comments on the current uncertainty regarding tariffs.
Rob: I'll now turn the call over to Rob Dawson to discuss our Q4 financial results in more detail.
Rob: Thanks, Rob.
Rob: As you saw in our fourth quarter release, the team delivered another quarter of solid results.
Rob: Fourth quarter revenue grew 8% continuing to be driven by our U S operations, which was up 11%.
Our Canadian operations were down 11% from last year as activity in Central Canada began to improve in the late fall relative to the first three quarters of the year.
Rob: Our gross profit margins increased to 29, 5% compared with 26, 2% last year with continued execution of our commercial and pricing strategies.
Rob: The trend in our adjusted EBITDA margins continues to improve at 23, 5% for the quarter compared with 19, 9% the previous year and almost in line with our 2020 for full year adjusted EBITDA margins of $23 six.
Rob: We are realizing the value and the efficiency and scalability changes, we are making to our support and G&A functions.
Rob: Overall over 60% of our growth in revenues in the fourth quarter fell to the bottom line.
Rob: G&A expenses were $11 3 million or 6% of revenue consistent with the $10 9 million or six 3% of revenue in the prior year.
Rob: With revenue up 8% adjusted EBITDA of 28% and adjusted earnings per share up 131%. We are definitely encouraged by the continued scalability and growth in margins, we saw in the fourth quarter.
Rob: Now onto the balance sheet, we continue to maintain a strong flexible balance sheet. Our compliance leverage ended the year at one one times EBITDA compared to one three times a year ago.
Rob: As well during the quarter, we closed on a three year $100 million bank term loan, leaving us with ample available liquidity.
Rob: With the balance sheet capacity, we have plenty of flexibility to continue investing in our organic growth strategy and returning capital to our shareholders through dividends and the execution of our NCI.
Rob: We were pleased to announce that the board of directors has approved a $4 two increase to the quarterly cash dividend.
Rob: This will be effective for the first quarter of 2025 with payment to be made on or about April 15th.
Rob: All shareholders of record at the close of business on March 31 2025.
Rob: Regarding the NCI b during the fourth quarter, we repurchased 196000 shares at an average price per share of $36 88.
Rob: For the year, we repurchased 240400 common shares for about the same price.
Rob: Since the program started in late August we have purchased $6 million of Badger stock.
Rob: And we have continued to remain active on the NCI be in early 2025 purchasing a further $6 million so far this year.
Rob market: I will now turn things back over to Rob market or for some final comments.
Rob: Thanks, Rob.
Rob: Before we open it up for questions I would like to share a few last comments regarding 2025 and the current tariff environment.
Rob: While we are pleased with our Q4 performance, we are continuing to and drive we are continuing to drive improvements to set badger up for success in 2025 and beyond.
Rob: Our branch market coverage is the best by far in the industry and growing we are able to support our customers in 44 states and six Canadian provinces today.
Rob: We have the largest fleet of hydro vacs across North America with one of the youngest fleets in the industry.
Rob: Badger's dedicated National accounts program is an industry first and an industry, leading service offering to serve north America's largest contractors public utilities and infrastructure customers.
Rob: We are the only vertically integrated hydro <unk> service provider that builds our own dedicated trucks and operates those trucks in our end markets.
Rob: All of these capabilities allow badger to capitalize on various projects, including data center construction builds to supporting power distribution and several other infrastructure projects across North America.
Rob: We continue to bid and win light rail transit wastewater treatment plant facilities in airport construction construction projects just to name a few recent examples of work we're doing across North America.
Rob: I'll close with a comment regarding the current tariff environment in the U S and Canada.
Rob: Badger has been preparing for where we are today with enacted tariffs from both the U S and Canada.
Rob: Tariff environment is unfolding real time and rapidly evolving.
Rob: We feel badger is well prepared for the short term with preposition manufacturing inventory at our Red deer plant as well as our fleet levels in the field from the end of last year and the first few months of 2025.
Rob: As there is more clarity with the long term impacts of the tariffs badger will be prepared to react.
Rob: So with those questions, let's turn it back to the operator for questions.
Rob: With those comments I'll turn it back for questions operator.
Speaker Change: Thank you Rob.
Speaker Change: We will now begin our question and answer session for those that have dialed into the audio portion of this call to ask a question. During the live question and answer session. Please press star one to raise your hand, please wait for me to say your name and company before asking your question.
Speaker Change: And with that.
Speaker Change: Color is Yuri Lynk from Canaccord Genuity go ahead Gary.
Gary: Thanks, and good morning.
Good morning, Eric.
Gary: Good morning, Rob can you.
Gary: Give us a little more detail on what exactly.
Gary: You've you've done with <unk> with positioning your trucks.
Gary: Ahead of ahead of the tariffs it sounds like you might have moved a few into into the U S. Just confirm that and what kind of numbers are we are we talking about.
Gary: So you can look at what the new build rate has been for the last three or four months of 2024 and.
Gary: Is it safe to assume that almost every single one of those trucks was being shifted into the U S. In addition.
Gary: Two.
Gary: The first few months of this year.
Gary: When it looked like tariffs were eminent certainly the manufacturing plant has been up and running.
Gary: We put a lot of trucks into the U S.
Gary: Obviously to get in front of tariffs.
Gary: If they were to be enacted and now they are.
Gary: In addition to that Yuri we preposition some chassis that come they are built in the U S. We preposition those.
Gary: Two are.
Gary: Facility over the Red Deer, Alberta plant, so we have.
Gary: Some chassis is already there that would not be subject to tariff.
Gary: <unk> that we've already lined up there.
Gary: For our manufacturing for the next few months.
Gary: We don't know nor do I believe anyone knows what's going to happen with the tariffs and they seem to be rapidly changing every hour, we get a tweet and this is on this is off.
Gary: The automotive industry for example, yesterday what it was on two days ago now offer some of the automotive the main manufacturers out of the U S.
Gary: So it's kind of back and forth real time happening.
Yuri Lynk: Not sure if it's going to be long term or short term Yuri but we're thinking about it.
Speaker Change: Along those lines from a short term and long term perspective, and Rob if you want to add anything.
Yuri Lynk: I would only add here that.
Speaker Change: We have a lot of time to be patient to see how this plays out.
Yuri Lynk: And.
In addition to the repositioning of our fleet that Rob just described were at a seasonally low period for our business.
Yuri Lynk: And I think as many as we tried to make clear in our in our disclosures that were released yesterday, we do have ample.
Yuri Lynk: Consolidated capacity to absorb a lot of the growth here in the early part of 2025 before any new production would be required to start.
Yuri Lynk: Adding to our fleet.
Yuri Lynk: That doesn't mean that we're not going to continue to produce it just means we have a lot of flexibility.
Yuri Lynk: To hold back on delivering new units.
Yuri Lynk: Sure definitely two to three months, so we feel we're very well positioned.
Yuri Lynk: We would also point out that we're really only talking about our capital expenditures when it comes to tariffs.
Yuri Lynk: And so if you think about even if you apply a full full cost of 25% the current rate on our entire.
Yuri Lynk: Cost of a truck.
Yuri Lynk: Talking about the depreciation add.
Yuri Lynk: Maybe between one and three a year.
Yuri Lynk: And really 90% of our business or more is in the United States and the United States is significantly less impacted.
Yuri Lynk: By the tariffs that our Canadian operations would be and then finally, we are we are looking at active.
Yuri Lynk: Activity in the United States and project starts and we feel that a lot of the other changes that this administration is making.
Yuri Lynk: We are actually positive for our business. So overall, while the tariff is something we're obviously looking at very closely and we've made a lot of mitigation steps.
Yuri Lynk: We feel that overall the business is pretty well positioned on a relative basis, certainly, but in an absolute basis as well to be able to manage through this.
Yuri Lynk: Okay.
Yuri Lynk: Can you clarify the comment you made on securing chassis is ahead of the tariffs.
Yuri Lynk: What.
Yuri Lynk: Exactly that means and why they wouldn't be subject.
Yuri Lynk: Because.
Yuri Lynk: Originally when there were talks of.
Yuri Lynk: The U S administration enacting tariffs.
Yuri Lynk: It was going to be originally this is.
Yuri Lynk: Back before the turn of the year.
Yuri Lynk: The talk was that it it might.
Yuri Lynk: Just be anything coming into the U S.
Yuri Lynk: And.
Yuri Lynk: From outside the U S. Bill chassis would not have been subject to.
Yuri Lynk: A tariff from the United States.
Yuri Lynk: Now that Canada said, well in 21 days, we're going to do retaliatory tariffs.
Yuri Lynk: We believe as it stands today, Yuri and again, it's a moving target and we are still working with several.
Groups to make sure that there's a clear understanding of what the true tariffs are and it's not very clear at the moment.
Yuri Lynk: But we believe with the retaliatory tariffs from Canada that.
Yuri Lynk: The trucks coming into Canada have potential to get tariffs from the U S coming into Canada, and then the Canadian part going back into the U S and so.
Yuri Lynk: That's why Rob is kind of our worst case model has a tariff on the entire truck. That's what we're modeling and then if we got some relief there are some potential.
Yuri Lynk: Models that.
Yuri Lynk: And structure that you could do.
Yuri Lynk: Mitigate some of the tariffs.
Yuri Lynk: But we're running all of that to ground and last thing probably Yuri I'll share with you.
Yuri Lynk: Because it's happening in a vacuum at the moment, there's just not a lot of clarity.
Yuri Lynk: Are there going to be additional carve outs. There is a lot of suggestions even this morning on the business news channels in the U S. There's a lot of chatter that there can be additional carve outs for additional industries and additional adjacent things to the automotive of which we definitely would be considered adjacent to automotive. So theres just not a lot of clarity.
Speaker Change: To go beyond what we're saying, but we feel very comfortable as Rob suggested.
Speaker Change: Two to three months I don't know, maybe I'm closer to three to four but somewhere in between there.
Speaker Change: That we have plenty.
Speaker Change: Of work to do to keep on building the trucks and then over time, even if we just brought them in with the tariffs. It would not have a significant impact and definitely would have minimal impact for the full year of 2005. So.
Speaker Change: Last quick one from me just just your build rate guidance.
Speaker Change: 4% to 7% is below last year and below your long term targets is that a reflection of what you have to do to kind of stick handle the tariffs or is it more a reflection of end market demand.
Speaker Change: It's actually more it's a little bit on the tariffs again, because we feel we could actually drive more utilization within the business and remember.
Speaker Change: If you think in terms of how we look at the business, we look at the utilization the pricing and the volume of the units.
Speaker Change: And when and then how many units do we need to hit the revenue targets and meet customer demand.
Speaker Change: And we feel pretty comfortable with the fleet, we have and if you notice.
Speaker Change: We are actually taking up the refurb.
Speaker Change: I read through my script at 35, refurbish and we took that guidance up to 50 to 64 25, so that helps offset some of it as well here. So you have to almost look at all the moving parts.
Speaker Change: But theres not much to read like Theres no.
Speaker Change: We don't believe the softening demand or anything like that.
Gary: I would add Gary.
Gary: For the same reason that we have ample capacity to manage through this tariffs in the short term we have ample current capacity to absorb a good proportion of our growth in 2025.
Gary: And we've mentioned this quite a few times over 2024, where our utilization risk perhaps.
Gary: A little light. So we do have the option to let a utilization absorb some growth.
Gary: And of course, we do have the continuing impact of our ongoing commercial and pricing program. So that lower build rate is more an indication of just trying to manage our capital with some discipline as opposed to any indication of what we feel about the overall growth rate of the business.
Gary: Thanks, guys.
Yuri Lynk: Thank you Yuri.
And the next question is from <unk> <unk>.
Speaker Change: Go ahead from CIBC go ahead Enzo.
Speaker Change: Hi, Good morning, Thanks for taking my question and congrats on a great quarter. So.
Can you.
Speaker Change:
Speaker Change: Sure.
Speaker Change: Give us color on kind of the end market.
Speaker Change: Some of the larger banks.
Had been put on hold what triggered any update on that.
Speaker Change: Morgan that aren't independent of end market.
Speaker Change: Yes so.
Speaker Change: I suggest that we started to see some movement in Q4 in Ontario, specifically.
Speaker Change: On some of the larger projects and some of them had had been being delayed some of the light rail projects.
Speaker Change: And a few other projects started to get underway in Q4 for the team.
Speaker Change: There and they continue into Q1 here.
Speaker Change: Some of the Western markets, we saw in Q4 pretty good activity and pockets of Alberta.
Speaker Change: <unk>.
Speaker Change: Sure.
Speaker Change: BC seem to be continued softness for us.
Speaker Change: And Winnipeg.
Speaker Change: Was soft softer for us.
Speaker Change: Good strength in Montreal, and that for US, we view as a growth market, because even though Montreal.
Speaker Change: As one of the larger markets across Canada Badger until just.
I'd say about 18 months ago really didn't have much of a presence there. So we view that as a growth market and we've certainly been chasing some opportunity and demand there.
Speaker Change: We are cautious on Canada, if you think about Canada for 25 on.
Speaker Change: There is actually two things happening obviously.
Speaker Change: We have the tariff impacts.
Speaker Change: We've talked about that a lot sure.
Speaker Change: Shared some commentary Yuri previously, but also you have the changeover on the election.
Speaker Change: And so just like there was a little bit of uncertainty in the U S. Prior to the presidential election.
Speaker Change: We feel like once there is some certainty as to whoever is.
Speaker Change: The final leader in Canada in 2025, we will probably have some certainty on some of these projects and the funding and Rob I don't know if you want to add anything on that.
Speaker Change: A little caution in 2025, certainly so far this year longer term, if Canada starts too seriously move towards Interlinking, the provincial trade and all of the longer term.
Speaker Change: Infrastructure projects at that might involve there may be some longer term.
Optimism that may come out of the current environment, but right now I think lots of caution.
Speaker Change: One another question from me.
Speaker Change: Now there are lots of.
Speaker Change: Total credit one day contract are you thinking.
Speaker Change: What are you hearing from your customers.
<unk>.
Speaker Change: Okay.
Speaker Change: So we're doing a fair amount of work on data centers actually I was meeting with some of our largest customers.
Speaker Change: The last seven to 10 days.
Speaker Change: And actually had some meetings with their executive teams and they're marching forward with a lot of their projects.
Speaker Change: No theres a lot of questioning sometimes you hear large data projects.
Speaker Change: Such as.
Speaker Change: I think it's called Star Gate in Abilene, Texas.
Speaker Change: You have.
Speaker Change: <unk>, saying they wanted to significant investment on Houston and all of these large large projects $500 billion in larger projects.
Speaker Change: Some of those are more announcements, but they have not come come to break ground.
Speaker Change: But there are several that are underway right now.
Speaker Change: And they are.
Speaker Change: Now we will have no problem with funding and the construction is underway and we have trucks on those projects or customers, who to me are the biggest barometer of the projects they feel very confident that <unk>.
Speaker Change: Are those projects that on a go forward.
Speaker Change: There is every day it feels like the news changes regarding some of the AI in the data center build outs for example, Microsoft.
Because of that.
Speaker Change: Outflow of the deep sea deep seek.
Speaker Change: Phenomena that happened roughly three weeks a month ago, Microsoft is getting more cautious, but others are actually leaning in.
Speaker Change: Such as meta and a few others and so.
Speaker Change: Overall, though I suspect that.
Speaker Change: A majority of these projects they're going to go.
Speaker Change: And we are definitely positioned to capture those.
Speaker Change: I would only add that while we have great exposure to that build out.
It's not so size that we're depending on that to continue to meet our expectations. We have broad exposure to a lot of positive trends and this is just one of them and I think rob's opening comments tried to apply that we do have exposure to a lot of the other build outs.
Speaker Change: Oh, yes. This is.
Speaker Change: When you look at all of our customer base.
Speaker Change: While we are probably the largest hydro vac provider.
Speaker Change: I suspect we definitely are the largest <unk> provider on all these data center projects.
Speaker Change: We have I mean, thats, a small portion of all of the company's business. So we're not dependent on.
Speaker Change: The data center projects, where we get canceled or something.
Speaker Change: We're pretty diversified our customer base.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Our next caller is Sean Zhang from Raymond James.
Speaker Change: Go ahead Sean.
Sean Zhang: Hey, good morning, guys.
Sean Zhang: I just wanted to drill in the more strongly but alright.
Sean Zhang: Alright, great. Thanks, guys.
Sean Zhang: Just wanted to drill in a little bit further.
Sean Zhang: With the preemptive truck movements.
Sean Zhang: That happened just wondering if you had already had.
Sean Zhang: You guys already have like precise locations in mind for these trucks to drive utilization right off the bat or is it going to take some time to find.
Sean Zhang: <unk> mentioned work for them.
Sean Zhang: So great question.
Sean Zhang: We we know for a fact that we have competitors, who listen to the calls and sometimes are actually on the calls real time or listen to them afterwards.
Speaker Change: So John I'm, not going to give the exact markets of.
Speaker Change: Where the trucks are going but we largely have on our fleet plan.
Speaker Change: And our business plans, we largely have about 80% of our build out in our spend the capital numbers that Rob Dawson always talks about and he is very very good at.
Speaker Change: Helping us manage our capital spend 80% of that spend Sean is already predetermined before the year even starts and so we know we.
Speaker Change: We actually have ability to look at which projects are coming which markets are growing.
Speaker Change: And the start dates we worked with our sales leaders and our operations leaders.
Speaker Change: And we've identified where those assets need to go we start to move those assets into those markets.
Speaker Change: And so we feel comfortable on about 80% of the year spent right now we always keep about 20%. The term I would use kind of dry powder. So large project stands up and they need an extra 20 trucks 30 trucks 50 trucks, we have the ability to flex up and obviously you look at our debt levels.
Speaker Change: Which were down our borrowing capacity, which is up.
Speaker Change: We have the ability to flex up even more if needed.
Speaker Change: Support that so we feel comfortable with it if you want to kind of figure out where those trucks are going Sean and again, it's not rocket science I'm, just not going to I'm not going to give a directly on this call you can just look at.
Speaker Change: We're the largest growth markets are for the U S construction and industrial markets.
Speaker Change: We're repeating the trucks, if you want to add something wrong, something that Rob has talked a lot about over the past several quarters as our focus on getting.
Speaker Change: I think more intentional with data we stood up a new data platform last year in 2024.
Speaker Change: And one of the better tools, we've already have live as we've integrated Google maps or CRM, all of our historical customer and revenue data as well as Dodge pack and all of these forecast betting sites.
Speaker Change: And then with the map you can see where all of the past activity and all the forecast activity is on a map of all of North America and drill in so it's a lot more.
Speaker Change: Quick and easy for people looking to know where we should be looking to one focus our marketing efforts, but also where we should be putting our assets hiring for new operators and all of those services and new location location as well if we're getting big in a certain market and we want to split that market. So we have very very good data in the engine is really starting to I D.
Speaker Change: Drive some value.
Speaker Change: Okay perfect.
Speaker Change: The color for that one.
Speaker Change: One follow up for me.
Speaker Change: Read through the release and saw that there was.
Speaker Change: Some volumes from disaster work in the United States in the quarter. Just wanted to know if you can give any sort of quantification of how big of an impact that was.
Speaker Change: Sure so.
Speaker Change: It was pretty limited.
Speaker Change: The last I.
Speaker Change: We had one or two days in Q3 like at the very end I think we had one or two days of Q3 for some hurricane response work and about.
Speaker Change: We were actually looking at this as a day about 10 or 11 days business days in Q4.
Speaker Change: As purely Sean at the very beginning of the quarter.
Speaker Change: Like 10, or 11 days of Hurricane response, but it was while we we always.
Speaker Change: And thrive on doing emergency response work in and normally is pretty good business for the company.
Speaker Change: It did not it wasn't like the big needle mover for the quarter for us and again.
Speaker Change: It's not for any other reason other than it was about a 10 day event for us and 10 business day event.
Speaker Change: Well sure though.
With all of the fires and everything that's happened in southern California.
Speaker Change: <unk> is very very active on those projects. Our team has done a phenomenal job of supporting first responders as well as some of the Army Corps of engineers and all the utility companies in Southern California.
Speaker Change: So far it is not a big needle mover at all regarding the revenue we've done some work out there, but I wouldn't say, it's even something that we would probably call out.
Speaker Change: In a big way for Q1.
Speaker Change: It has potential to ramp up it really depends on how quickly the state of California, and some of those specific markets.
Speaker Change: Want to invest in that recovery.
Speaker Change: But we stand ready to support them and I would actually say, that's probably our theme really this quarter is badger is ready to go to work and do whatever we can to support our customers.
Speaker Change: And we feel very comfortable with that as well.
Speaker Change: I'll only add again and it's similar to my add in on the data centers as we are at the size and scale geographically and end market diversity, where disaster work is something that we definitely get from time to time.
Speaker Change: It's the same with the data centers, but no. One end market is so big now for Badger that it's going to create a lot of ability volatility in our in our in our revenue stream. We're exposed to all of those positive trends in all of them are helping to grow the business.
Speaker Change: And in this case.
Speaker Change: Disaster work. Unfortunately is one of those things.
Speaker Change: It is not a make or break for badger.
Speaker Change: Perfect appreciate it guys.
Speaker Change: Alright, Thanks, John I appreciate it.
Speaker Change: Our next caller is Ian Gillies from Stifel.
Speaker Change: Go ahead Ian.
Speaker Change: Good morning, everyone.
Speaker Change: Hey, good morning, Ian.
Okay.
Speaker Change: [laughter].
Speaker Change: Some of our survey work has suggested that activity in California, and the Midwest is starting to pick up I mean, I think both of which.
Speaker Change: You and Robert will flagged as problem areas.
Speaker Change: In 'twenty four.
Speaker Change: Yeah.
Speaker Change: Would you agree with the fact that those areas are starting to get a bit better than some of us had been a bit of a toll on the utility spend and the like and that's probably going to be a bit of a tailwind through this year.
Speaker Change: I didn't hear the market's you referenced could you like I think the phone beeped or something.
Speaker Change: Apologies I, specifically mentioned, the Midwest and California.
Speaker Change: Okay.
Speaker Change: Yes so.
California is.
Speaker Change: California last year.
Speaker Change: We mentioned this a few times on.
Speaker Change: On last.
Speaker Change: Last year's quarterly earnings calls, but California was really.
Speaker Change: In the Midwest, but both of those markets were really tied to hesitation on what was going to happen happen as a.
Result of the presidential election in the frame up that we gave last year, which actually turned out to be the case.
Speaker Change: Some of our customers were telling us they were hesitant.
Speaker Change: Our renewable energies.
Speaker Change: Some of those projects renewable is going to be more in favor or will oil and gas depending on who was to win the presidency and the U S and so a lot of those projects started getting on hold.
Speaker Change: Late April May June and then kind of through the end of the year.
Speaker Change: Now southern California, not a.
Speaker Change: A little bit to slightly with the fires but.
Speaker Change: In our Mercury slump there.
Speaker Change: But more along the lines of what's happening there is some light rail projects happening in southern California, as well as the L. A Olympics for 28.
Speaker Change: All of those.
Speaker Change: Projects.
Speaker Change: They require a lot of power and they require a lot of construction and so those have been some of the drivers for our business Southern California. So yes those are turnaround.
Speaker Change: The Midwest surprisingly.
Speaker Change: <unk> has been very strong.
Speaker Change: Coming out of the election some of the.
Speaker Change: Gas line work that we do in the Midwest as well as some oil and gas investments that are just starting to get underway have really started to carry the day. They are in the Midwest Ian.
Speaker Change: The.
Speaker Change: The only hesitation I would say before we say like it's off to the races. As the month of February had around 15 16 days that were very very hard on the weather.
Speaker Change: And.
Speaker Change: It definitely affected us in the southern half of the U S, which are more temporary climate, but we are having snow in Houston, Texas in the Panhandle sticking around for two three or four days and it never does that and so that slowed down the business put up in the upper Midwest there were some very really harsh.
Speaker Change: And while our team has worked in the cold weather.
Speaker Change: As even colder than normal in our cut a lot of our customers just shut down for a couple of weeks.
Speaker Change: And we can only work if the customers are willing to let us work there so.
Speaker Change: But generally speaking both those markets are definitely coming back there Ian.
Speaker Change: Understood.
Speaker Change: At the EBITDA margins in the quarter, where obviously the standout I think quite frankly, almost matched the second quarter.
Speaker Change: Just want to reconfirm, even though you've talked about a little bit that there is nothing unusual in there and maybe you can talk about some of the success you've had on leveraging the fixed cost base through the fourth quarter and why maybe carries on through 2025.
Speaker Change: Ian Rob SaaS me to take that one we are really happy with the progress we've seen on building.
Speaker Change: Stability and scalability in our support functional costs Q4 is a clean quarter Theres nothing Theres no adjustments you might recall there were a few one timers, we called out in Q4 of the previous year.
Speaker Change: This year I think youre looking at a clean quarter in what we feel.
Speaker Change: Badger can deliver when when it's firing pretty well on its costs. There we do have a very.
Speaker Change: Sure.
Speaker Change: Well laid out multi year.
Speaker Change: Project project less for us to continue to build the scale of Italy in those functions.
Speaker Change: And we're going to continue to execute on those but we're just starting to see I think a good result of just understanding what our needs are planning for them. Accordingly, and then working to get our systems and our people and processes together. So that we can scale the business and not have to add those those costs ratably with revenue.
That's helpful.
Speaker Change: Maybe the last one on capital allocation.
Speaker Change: Balance sheet is obviously in very good shape.
Speaker Change: Can you maybe outline what might prevent you from.
Speaker Change: Being active on the NCI B this year.
Speaker Change:
Speaker Change: Is it only if the share price moves or do you just expect to continue to be active and prudent using H given the free cash flow.
It's Rob Dawson here again, I think on our capital allocation.
Speaker Change: <unk> seen us be moderately active in the CIB we feel.
Speaker Change: There is certainly opportunity to continue doing that are all in covenant leverage is at the very low end of our range. So we certainly have capacity.
Speaker Change: Two to help to get us back into the midpoint of that range, we're not going to move there. So aggressively that we would have to make that a volatile program.
Speaker Change: Think as you point out the share price moving to within what we view as a more reasonable valuation based on both the historical and our own and our own views of intrinsic value might be something that we would start to reconsider in CIB, but in the meantime, I think you're more likely to see.
Speaker Change: What you've seen so far since we started it.
Speaker Change: Understood. Thanks, very much I'll turn the call back over.
Ian: Thanks Ian.
Speaker Change: And that appears to be the end of our question collars at the moment, So I will turn the floor back over to you.
Ian: Thank you operator.
Speaker Change: On behalf of all of US here at Badger, we want to thank our customers our employees suppliers and shareholders for your ongoing support that helps to drive Badger's success. Operator, you may end the call.
Thank you Rob This concludes the webinar and thanks.
Speaker Change: Time and participation today.