Release Date: October 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Badger Infrastructure Solutions Ltd (BADFF, Financial) reported a 7% increase in company-wide revenue, with a notable 10% growth in the United States.
- Adjusted EBITDA grew by 11% year over year, indicating strong operational efficiency and effective pricing strategies.
- The company maintained a strong adjusted EBITDA margin of 27.8%, up from 26.9% in the previous year.
- Badger successfully manufactured 159 hydrovacs year-to-date, demonstrating robust production capabilities.
- The company has a strong balance sheet with a compliance leverage of 1.5 times debt to EBITDA, providing flexibility for future growth.
Negative Points
- Revenue in Canadian markets declined by 12% compared to the previous year, impacting overall performance.
- The slowdown in growth in California, the Southwest market, and parts of the Upper Midwest and Mid-Atlantic markets continued in Q3.
- Revenue per truck per month decreased slightly due to the slowdown in the Canadian market.
- The company is guiding to the lower end of its truck build for the year, indicating potential constraints in fleet expansion.
- Certain projects in the US are delayed due to political uncertainties, affecting potential revenue growth.
Q & A Highlights
Q: Can you elaborate on the demand trends in the US markets and how they might be affected by the upcoming election results?
A: Robert Blackadar, President and CEO, explained that certain markets, like Southern California, have renewable energy projects on hold pending election outcomes. If Democrats win, renewable projects like solar and wind could accelerate, benefiting Badger. Conversely, a Republican win might boost oil and gas projects. Regardless of the outcome, Badger is positioned to succeed under either administration.
Q: With guidance towards the lower end of truck builds, is there consideration for using manufacturing capacity to lease trucks?
A: Robert Blackadar noted internal discussions about leveraging manufacturing capacity for additional opportunities, including leasing trucks. While no specific plans are announced, the company is evaluating strategic initiatives to monetize this capacity.
Q: How are you considering transferring trucks from Canada to the US, and what impact might this have on CapEx for 2025?
A: Robert Blackadar mentioned that while moving trucks south is considered, the federal excise tax in the US makes it less attractive. The company has started moving some trucks but doesn't expect it to significantly alter the truck build schedule for next year. Rob Dawson added that Canada is slightly over-fleeted, and the company is evaluating truck quality for potential transfers.
Q: Are you seeing any impact on pricing due to pockets of weakness in the US, or is it primarily a utilization issue?
A: Robert Blackadar stated that pricing has held steady, with utilization being the primary issue. Pricing adjustments wouldn't necessarily trigger project starts, as delays are more related to awaiting clarity on energy policies.
Q: Do you anticipate returning to defined revenue growth ranges next year, given current infrastructure spending trends in the US?
A: Robert Blackadar expressed optimism about the second half of next year, expecting a return to strong market conditions. The company's 2025 plan, reviewed with the Board, suggests a return to growth ranges in the latter half of the year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
