Badger Infrastructure Solutions Ltd.

Thank you, Debbie. Good morning, everyone.

And welcome to our fourth quarter 2024 earnings call. My name is Anne Foster, Badger’s Interim Director of Investor Relations.

Joining me on the call this morning are Badger’s President and CEO, Rob Blackadar, and our CFO, Rob Dawson. Badger’s 2024 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+.

We are 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 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 material assumptions, risks and uncertainties that may be relevant to such forward-looking statements, please refer to Badger’s 2024 MD&A along with the 2024 AIF. I will now turn the call over to Rob Blackadar.

Thank you, Anne. Good morning, everyone.

And thank you for joining our 2024 fourth quarter and full year earnings call. As we always do here at Badger, I want to start off with a safety moment.

In 2024, our 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.

This achievement is a testament to the hard work and vigilance of every team member. It underscores our belief that a safe work environment is essential for the well-being of our employees and critical to our overall success.

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. Now on to our annual results.

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 grew 9% over the prior year, reflecting the results of our commercial and pricing strategies and growth in customer demand.

We realized 42% flow-through on this additional revenue driven by customer pricing and stability in our G&A functions. Accordingly, our full year adjusted EBITDA margin improved to 23.6%, up from 22% in 2023.

Our U.S. revenue grew 13% compared to last year as we saw consistent growth in activity and pricing gains.

The deceleration of growth we experienced in the middle part of 2024 in our U.S. markets stabilized in the fourth quarter.

We continued to experience sustained growth broadly in the U.S., both through local, customer and project-based work. In our Canadian markets, revenue was down 15% compared to 2023.

In the first three quarters, we experienced a slowdown in large project work, 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. Badger ended the year with 1,625 hydrovacs, growing the fleet by 7% overall in 2024, and RPT remained relatively stable.

As we head into 2025, we have ample fleet available to support our customer growth initiatives through improved utilization. The Red Deer plant manufactured 190 hydrovacs, refurbished 35 and we retired 90 units during the year, all within our original build and retirement guidance.

We continue to plan for stable manufacturing and stable retirement activity. As we look ahead to 2025, our fleet plan includes manufacturing between 180 and 210 hydrovacs, refurbishing between 50 to 60 hydrovacs, and retiring between 90 to 130 units.

This allows us to grow our fleet by 4% to 7% and spend between $95 million to $115 million in capital. Included in this capital range is our hydrovac production, our refurbishments, ancillary equipment purchases and other capital projects.

In my closing remarks, I will cover our outlook for 2025 and also some comments on the current uncertainty regarding tariffs. I’ll now turn the call over to Rob Dawson to discuss our Q4 financial results in more detail.

Thanks, Rob. As you saw in our fourth quarter release, the team delivered another quarter of solid results.

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. Our gross profit margins increased to 29.5%, compared with 26.2% last year with continued execution of our commercial and pricing strategies.

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 2024 full year adjusted EBITDA margins of 23.6%. We are realizing the value in the efficiency and scalability changes we are making to our support and G&A functions.

Overall, over 60% of our growth in revenues in the fourth quarter fell to the bottomline. G&A expenses were $11.3 million or 6% of revenue consistent with the $10.9 million or 6.3% of revenue in the prior year.

With revenue up 8%, adjusted EBITDA up 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. Now onto the balance sheet.

We continue to maintain a strong flexible balance sheet. Our compliance leverage ended the year at 1.1 times EBITDA, compared to 1.3 times a year ago.

As well, during the quarter we closed on a three-year $100 million bank term loan, leaving us with ample available liquidity. 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 NCIB.

We were pleased to announce that the Board of Directors has approved a 4.2% increase to the quarterly cash dividend. This will be effective for the first quarter of 2025 with payment to be made on or about April 15th to all shareholders of record at the close of business on March 31, 2025.

Regarding the NCIB, during the fourth quarter we repurchased 196,000 shares at an average price per share of $36.88. For the year, we repurchased 240,400 common shares for about the same price.

Since the program started in late August, we have purchased $6 million of Badger stock and we have continued to remain active on the NCIB in early 2025, purchasing a further $6 million so far this year. I will now turn things back over to Rob Blackadar for some final comments.

Thanks, Rob. So, before we open it up for questions, I would like to share a few last comments regarding 2025 and the current tariff environment.

While we are pleased with our Q4 performance, we are continuing to drive improvements to set Badger up for success in 2025 and beyond. 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. We have the largest fleet of hydrovacs across North America, with one of the youngest fleets in the industry.

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. We are the only vertically integrated hydrovac service provider that builds our own dedicated trucks and operates those trucks in our end markets.

All of these capabilities allow Badger to capitalize on various projects, including data center construction builds, the supporting power distribution and several other infrastructure projects across North America. We continue to bid and win light rail transit, wastewater treatment plant facilities and airport construction projects, just to name a few recent examples of work we are doing across North America.

I’ll close with a comment regarding the current tariff environment in the U.S. and Canada.

Badger has been preparing for where we are today with enacted tariffs from both the U.S. and Canada.

The tariff environment is unfolding real-time and rapidly evolving. We feel Badger is well prepared for the short-term with pre-positioned 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.

As there is more clarity with the long-term impacts of the tariffs, Badger will be prepared to react. So, with those question, let’s turn it back to the Operator for questions.

With those comments, I will turn it back to the Operator for questions. Operator?

Thanks and good morning.

Good morning, Yuri.

Good morning, Rob. Can you give us a little more detail on what exactly you’ve done with positioning your trucks ahead of the tariffs?

It sounds like you might have moved a few into the U.S. Just confirm that and what kind of numbers are we talking about?

So, you can look at what the new build rate has been for the last three months or four months of 2024, and it’s safe to assume that almost every single one of those trucks was being shifted into the U.S. In addition to the first few months of this year, when it looked like tariffs were imminent, certainly, the manufacturing plant has been up and running and we put a lot of trucks into the U.S., obviously, to get in front of tariffs if they were to be enacted and now they are.

In addition to that, Yuri, we pre-positioned some chassis that come -- that are built in the U.S. We pre-positioned those into our facility over at the Red Deer, Alberta plant, so we have some chassis already there that would not be subject to tariff that we’ve already lined out there for our manufacturing for the next few months.

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. Like, every hour we get a tweet, and this is on, this is off.

The automotive industry, for example, yesterday, it was on two days ago, now it’s off for some of the automotive, the main manufacturers out of the U.S., so it’s kind of back and forth, real-time happening. We’re not sure if it’s going to be long-term or short-term, Yuri, but we’re thinking about it along those lines, from a short-term and long-term perspective, and Rob, if you want to add anything.

Yeah. I would only add, Yuri, that we have a lot of time to be patient to see how this plays out, and in addition to the repositioning of our fleet that Rob just described, we’re at a seasonally low period for our business, and I think, as many as we tried to make clear in our disclosures that were released yesterday, we do have ample 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 adding to our fleet.

That doesn’t mean that we’re not going to continue to produce, it just means we have a lot of flexibility to hold back on delivering new units for definitely two months to three months. So we feel we’re very well-positioned.

I would also point out that we’re really only talking about our capital expenditures when it comes to tariffs, and so if you think about even if you apply a full cost of 25%, the current rate on our entire cost of a truck, you’re only talking about a depreciation add of maybe between $0.01 and $0.03 a year, and really 90% of our business or more is in the United States, and the United States is significantly less impacted by the tariffs than our Canadian operations would be. And then finally, we are looking at activity in the United States and projects starts, and we feel that a lot of the other changes that this administration is making 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, we feel that overall the business is pretty well-positioned on a relative basis, certainly, but on an absolute basis as well to be able to manage through this.

Okay. Can you clarify the comment you made on securing chassis ahead of the tariffs?

What exactly that means and why they wouldn’t be subject to...

Because originally, when there were talks of the U.S. administration enacting tariffs, it was going to be originally, this is back before the turn of the year, the talk was that it, it might just be anything coming into the U.S.

and from outside and the U.S. built chassis would not have been subject to a tariff from the United States.

Now that Canada said, well, in 21 days, we are going to do retaliatory tariffs, we believe, as it stands today, Yuri, and again, it’s a moving target, and we’re 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. But we believe with a retaliatory tariffs from Canada, that the trucks coming into Canada have potential to get tariffed from the U.S.

coming into Canada, and then the Canadian part going back into the U.S. And so that’s why Rob is kind of our worst case model is a tariff on the entire truck.

That’s what we’re modeling. And then if we got some relief, there are some potential models that you know in structure that you could do to mitigate some of the tariffs.

But we’re running all that to ground. And last thing, probably, Yuri, I’ll share with you.

Because it’s happening in a vacuum at the moment, there’s just not a lot of clarity on are there going to be additional carve outs. There’s a lot of suggestions, even this morning on the business news channels in the U.S.

There’s a lot of chatter that there could be additional carve outs for additional industries and additional adjacent things to the automotive, of which we definitely would be considered adjacent automotive. So, there’s just not a lot of clarity to go beyond what we’re saying.

But we feel very comfortable, as Rob suggested, he said two months to three months, I don’t know, maybe I’m closer to three months to four, but somewhere in between there, that we have plenty 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 2025, so.

Last quick one for me, just your build rate guidance, 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?

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, if you think in terms of how we look at the business, we look at the utilization, the pricing and then the volume of the units.

And when -- and then how many units do we need to hit the revenue targets and meet customer demand. And we feel pretty comfortable with the fleet we have.

And if you notice, we are actually taking up the refurbs. We -- I read through my script at 35 refurbs and we took that guidance up to 50 to 60 for 2025.

So that helps offset some of it as well, Yuri. So you have to almost look at all the moving parts, but there’s not much to read like there’s no -- we don’t believe there’s softening demand or anything like that.

I would add, Yuri, 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 growth in 2025, and we’ve mentioned this quite a few times over 2024, where our utilization was perhaps a little light. So we do have the option to let a utilization absorb some growth.

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.

Thanks, guys.

Thank you, Yuri.

Hi. Good morning.

Thanks for taking my question and congrats on the good quarter. So can you just give us a color on Canadian market and some of the larger contracts that had been put on hold.

What -- is there any update on that? How are the overall things moving around in the Canadian market?

Yes. So like I suggested, we started to see some movement in Q4 in Ontario specifically on some of the larger projects and some of them had been being delayed, some of the light rail projects and a few other projects started to get underway in Q4 for the team there and they continue into Q1 here.

The -- some of the Western markets we saw in Q4 pretty good activity in pockets of Alberta and BC seemed to be continued softness for us and Winnipeg was softer for us, good strength in Montreal and that for us we view as a growth market because even though Montreal is 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.

We are cautious on Canada if you think about Canada for 2025 on there’s actually two things happening, obviously, we have the tariff impacts and we’ve talked about that a lot and we’ve shared some comments there with Yuri previously, but also you have the changeover on the election. And so just like there was a little bit of uncertainty in the U.S.

prior to the Presidential Election we feel like once there is some certainty as to whoever is the final leader in Canada in 2025 we’ll probably get some certainty on some of these projects and the funding. And Rob I don’t know if you want to add anything on that.

Yeah. I’d say a little caution in 2025 certainly so far this year.

Longer term if Canada starts to seriously move towards interlinking the provincial trade and all of the longer term infrastructure projects that 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.

So one another question from me, so now there are lots of talks around data centers recently. So what are you hearing from your customers and like how much work are you doing on the data centers?

So we’re doing a fair amount of work on data centers. Actually I was meeting with some of our largest customers in the last seven days to 10 days and actually had some meetings with their executive teams, and they’re marching forward with a lot of their projects.

And I know there’s a lot of questioning sometimes you hear large data projects such as the, I think, it’s called Stargate in Abilene, Texas and you have Apple saying they want to do a significant investment down in Houston and all these large, large projects $500 billion in larger projects. Some of those are more announcements but they have not come to break ground, but there are several that are underway right now and they are -- they’ll have no problem with funding and the construction is underway and we have trucks on those projects.

Our customers who to me are the biggest barometer of the projects, they feel very confident that most of those projects are going to go forward. There’s every day it feels like the news changes regarding some of the AI and the data center build outs.

For example, Microsoft I think is an outflow of the DeepSeek phenomena that happened roughly three weeks a month ago. Microsoft is getting more cautious but others are actually leaning in such as Meta and a few others.

And so over overall though I suspect that the majority of these projects are going to go and we’re definitely positioned to capture those.

I would only add that while we have great exposure to that build out, it’s not so out sized 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 imply that we do have exposure to a lot of the other buildouts.

Yeah. Oh!

Yeah. This is -- when you look at all of our customer base, while we are probably the largest hydrovac provider, I suspect we definitely are the largest hydrovac provider on all these data center projects, we have -- I mean, that’s a small portion of all the company’s business.

So we’re not dependent on, if the data center projects were to get canceled or something, we’re pretty diversified with our customer base.

Hey. Good morning, guys.

I just wanted to…

Good morning, Sean.

… go in a little bit further. Hey.

Great to see you guys. Just wanted to drill in a little bit further.

With the preemptive truck movements that happened, wondering if you had already have or if you guys already have precise locations in mind for these trucks to drive utilization right off the bat, or is it going to take some time to find large amounts of work for them?

So great question. 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.

So, Sean, I’m not going to give like the exact markets of where the trucks are going, but we largely have -- on our fleet plan and our business plans, we largely have about 80% of our buildout and our spend, the capital numbers that Rob Dawson always talks about, and he’s very, very good at helping us manage our capital spend. 80% of that spend, Sean, is already predetermined before the year even starts.

And so we know, we actually have ability to look at which projects are coming, which markets are growing and the start dates. We work with our sales leaders and our operations leaders and we’ve identified where those assets need to go.

We start to move those assets into those markets and so we feel comfortable on about 80% of the year spend right now. We always keep about 20%, the term I would use, kind of dry powder.

So if a 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, which are down, our borrowing capacity, which is up, we have the ability to flex up even more, if needed, and 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 give it directly on this call.

You can just look at where the largest growth markets are for the U.S. construction and industrial markets, and that’s where we’re feeding the trucks.

And yeah, if you want to add something, Rob.

Something that Rob’s talked a lot about over the past several quarters is our focus on getting, I think, more intentional with data. We stood up a new data platform last year in 2024 and one of the better tools we’ve already have live is we’ve integrated Google Maps, our CRM, all of our historical customer and revenue data, as well as Dodge, Peck, and all these forecast betting sites.

And then, with a map, you can see where all of the past activity and all the forecast activity is on a map of like all of North America and drill in. So it’s a lot more 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 those sorts of things.

And new locations, new locations 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 and the engine is really starting to drive some value.

Okay. Perfect.

That’s a good color for that one. One follow-up from me, read through the release and saw that there was some volumes from disaster work in the United States in the quarter.

Just wanted to know if you could give any sort of quantification of how big of an impact that was?

Sure. So it was pretty limited.

The last -- I think we had one day or two days in Q3, like at the very end, I think we had one day or two days of Q3 for some hurricane response work. And about, we were actually looking at this the other day, about 10 days or 11 days, business days in Q4 and it was purely Sean at the very beginning of the quarter, like 10 days or 11 days of hurricane response.

But it was, while we always thrive on doing emergency response work, and normally it’s pretty good business for the company, it did not, it wasn’t like the big needle mover for the quarter for us. And again, it’s not -- for any other reason other than, it was about a 10-day event for us, 10 business day event.

I will share, though, with all the fires and everything that’s happened in Southern California, Badger 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.

It’s -- so far, it’s 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 will probably call out in a big way for Q1, but it has potential to ramp up.

It really depends on how quickly the State of California and some of those specific markets want to invest in the recovery, but we stand ready to support them. And I would actually say that’s probably our theme, really, this quarter is Badger’s ready to go to work and do whatever we can to support our customers, and we feel very comfortable with that, as well.

I’ll only add again, and it’s similar to my add-in on the data centers, is we’re at the size and scale geographically and end market diversity, where disaster work is something that we definitely get from time-to-time. 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 volatility in our revenue stream.

We’re exposed to all those positive trends and all of them are helping to grow the business, and in this case, this disaster work, unfortunately, is one of those things, but it’s not a make or break for Badger.

Perfect. Appreciate it, guys.

All right. Thanks, Sean.

Appreciate it, buddy.

Good morning, everyone.

Hey. Good morning, Ian.

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 you and Robert both flagged as problem areas in 2024. Would you agree with the fact that those areas are starting to get a bit better and some have been a bit of a thaw on the utility spend and the like, and that’s probably going to be a bit of a tailwind through this year?

I didn’t hear the markets you referenced. Could you, like, I think the phone beeped or something.

Oh! Apologies.

I specifically mentioned the Midwest and California.

Okay. Yeah.

So, California is -- California last year, and we mentioned this a few times on last year’s quarterly earnings calls, but California was really in the Midwest, but both of those markets were really tied to hesitation on what was going to happen as a result of the Presidential Election. And the frame-up that we gave last year, which actually turned out to be the case, as some of our customers were telling us they were hesitant, are renewable energies and some of those projects, renewables going to be more in favor or oil and gas, depending on who was to win the presidency in the U.S.

And so a lot of those projects started getting on hold late April, May, June, and then kind of through the end of the year. Now Southern California, not a little bit, just slightly with the fires, but in our emergency response there, but more along the lines of what’s happening.

There’s some light rail projects happening in Southern California, as well as the LA Olympics for 2028. All of those projects, 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 in Southern California.

So yes, those are turning around. Midwest, surprisingly, has been very strong coming out of the election.

Some of the 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 there in the Midwest, Ian. The only hesitation I would say before we say, like, it’s off to the races is, the month of February had around 15 days, 16 days that were very, very hard on the weather and it definitely affected us in the southern half of the U.S., which is our more temperate climate.

But we were having snow in Houston, Texas and the Panhandle, and it was sticking around for two days, three days, four days, and it never does that and so that slowed down the business. But up in the upper Midwest, there were some very, really harsh conditions.

And while our teams work in the cold weather, this is even colder than normal, and a lot of our customers just shut down for a couple of weeks. And we can only work if the customers are willing to let us work there.

So, but generally speaking, both those markets are definitely coming back there, Ian, so.

Understood. The EBITDA margins in the quarter were obviously a standout.

I think they, quite frankly, almost matched the second quarter. Just want to reconfirm, even though you’ve talked about it a little bit, that there’s nothing unusual in there.

And maybe you can talk about some of the success you’ve had on leveraging the fixed cost base, right, through the fourth quarter and why that maybe carries on through 2025?

Ian, Rob’s asked me to take that one. We are really happy with the progress we’ve seen on building stability and scalability and our support functional costs.

Q4 is a clean quarter. There’s nothing -- there’s no adjustments.

You might recall there were a few one-timers we called out in Q4 of the previous year. This year, I think, you’re looking at a clean quarter and what we feel Badger can deliver when it’s firing pretty well on its costs.

We do have a very well-laid out multiyear project list for us to continue to build the scalability in those functions. 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 costs rateably with revenue.

That’s helpful. And maybe the last one on capital allocation.

The balance sheet’s obviously in very good shape. Can you maybe outline what might prevent you from being active on the NCIB this year?

Like, is it solely if the share price moves or do you just expect to continue to be active and prudent using it just given the free cash flow?

It’s Rob Dawson here again. I think on our capital allocation you’ve seen us be moderately active in the NCIB.

We feel there’s certainly opportunity to continue doing that. Our all-in covenant leverage is at the very low end of our range, so we certainly have capacity 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. I think, as you point out, the share price moving to within what we view is a more reasonable valuation based on both the historical and our own views of intrinsic value might be something that we would start to reconsider our NCIB, but in the meantime, I think, you’re more likely to see what you’ve seen so far since we started it.

Understood. Thanks very much.

I’ll turn the call back over.

Thanks, Ian.

Thank you, Operator. 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.