Ian Boyd – President and Chief Executive Officer

Frederic Bastien – Raymond James Michael Tupholme – TD Newcrest Yuri Lynk – Canaccord Genuity

Thank you. Good morning everyone, thank you for taking the time to participate in our second quarter 2016 conference call.

With me today is Wayne Gingrich, our new CFO as of the start of July following the retirement of Steve Entwistle. Company was carrying some positive momentum into the second quarter following a strong first quarter result.

Unfortunately, the current quarter results were negatively impacted by the Fort McMurray wildfires by two projects that experience delays which resulted an increased the estimated cost to complete. At the end of June, the Company reported net income of $13.2 million on construction revenue of $751.5 million compared with $15.5 million and $641.5 million, respectively in 2015.

Net income realized in the second quarter was $3.9 million, a significant decline from the $9.3 million recorded in the first quarter of the year, and from the $10.8 million recorded in the second quarter of 2015. Construction revenue grew by 17.1% in the first half and 23.2% in the second quarter year-over-year.

Despite strong revenue growth in the second quarter, the primary reasons for the decline in net income is a more pronounced shift in the Company's work program from higher margin industrial work to lower margin institutional and commercial work. During the first half of 2016, the Company secured $634.7 million in new construction contracts, including change orders to existing contracts and put in place $751.5 million of work resulting in a backlog at June 30, 2016, of $1.546 billion.

Six months ended June 30, 2016 compared with six months ended June 30, of rather 2015. During first half of 2016 the Company generated net income of $13.2 million, construction revenue of $751.5 million compared with $15.5 million and $641.5 million, respectively in 2015.

Year-over-year revenues derived from the industrial work program has declined, however this decline has been more than offset by an increase in the construction revenue earned from the execution of the Company's institutional and commercial work program. The decrease in the amount of 2016 earnings is primarily due to the realization of lower gross profit percentage inherent in our institutional and commercial projects, offset to a lesser extent with the effect of lower general, administrative expenses.

In the first half ended June 30, 2016, the Company's gross profit of $44.9 million compares with $52.3 million recorded year ago. $7.4 million or 14% decrease in the amount of gross profit is the result of lower realizable gross profit percentage on institutional and commercial, that are projects, which are becoming a larger portion of total revenues.

To-date, in 2016 the Company's gross profit percentage of 6% compares to 8.2% recorded a year ago. First half results were impacted negatively by the wildfires in Fort McMurray area, which caused delays in additional costs to be incurred in both industrial and institutional projects.

As of June 30, 2016, not all project sites have remobilized. The second quarter impact to gross profit was negative $3.1 million, and the expectation is a total year impact of approximately $4 million.

Second quarter results were also further negatively impacted by two projects, where the estimated cost to complete increased by $3.2 million in the aggregate. The Company has put the owner of each project on notice of our intention to file a claim related to design deficiencies and other issues and costs associated with schedule delays.

Due to the complexity of the issues and a dispute resolution process inherent in the contracts, we expect the resolution of the claim for each project to extend beyond the end of 2016. In the first half of 2016, general and administrative expenses of $27.6 million or 3.7% of revenue compares with $29.9 million or 4.7% of revenue in 2015.

The decrease in 2016 expenses is primarily driven by a reduction in pursuit costs last year as compared to – sorry, current year as compared to year ago. Finance income in the first half of 2016 of $3.1 million was $1.7 million higher than the $0.5 million recorded in the comparable period of 2015.

The primary reason for the increase in 2016 finance income is due to the fact that the Company incurred of $1.4 million net loss from the disposal of a significant portion of the Company's investment in preferred shares in 2015. Finance costs of $1.7 million, $0.6 million higher than the $1.1 million reported in the same period of 2015 due to interest expense on additional non-recourse project financing.

In the first half of 2016, income tax expense of $4.6 million was $1.7 million lower than 2015, consistent with lower current period pre-tax earnings. Three months ended June 30, 2016 compared with three months ended June 30, 2015.

During the second quarter of 2016, the Company generated net income of $3.9 million on construction revenue of $413.2 million compared with $10.8 million and $335.3 million, respectively in 2015. The decrease in the amount of 2016 earnings is primarily the realization of a lower gross profit percentage inherent in our institutional and commercial projects, offset to a lesser extent with the effect of lower general and administrative expenses.

Construction revenue of $413.2 million was $77.9 million or 23.2% higher than the $335.3 million recorded in the second quarter of 2015. The increase in construction revenue is largely due to the execution of the Company's significant institutional work program, including many PPP and alternative finance projects.

As expected, the Company's industrial revenues declined relatively to those recorded in 2015, primarily due to the reduction in the capital spending programs as many of our industrial clients in response to low commodity prices. In the second quarter of 2016, the Company's gross profit of $18.9 million was $12.2 million or 39.3% lower and $31.1 million recorded a year ago.

The decrease in the amount of gross profit is primarily the result of the project mix shifting to a greater proportion of institutional and commercial projects as the industrial work program ramps down. Despite strong organic revenue gross margin profile of the institutional and commercial work program is not as high as the industrial program.

The second quarter was further impacted negatively by the wildfires in Fort McMurray in both industrial and institutional project sites. The negative impact to gross profit was $3.1 million.

The second quarter results was also further negatively impacted by two projects where the estimated costs to complete increased by $3.2 million in the aggregate. The Company has put an owner of each project on notice of our intention to file a claim related to design deficiencies and other issues and costs associated with schedule delays.

Due to the complexity of issues and the dispute resolution process inherent in the contracts, we expect the resolution of the claim for each project to extend beyond the end of 2016. In the second quarter of 2016, general and administrative expenses of $14 million or 3.4% of revenue compared with $15.6 million or 4.7% of revenue in 2015.

The decrease in 2016 expenses is primarily driven by a reduction in pursuit costs related to PPP and alternative finance projects and to a lesser degree by lower compensation expense. Finance income in the second quarter of 2016 $1.1 million was $0.7 million higher than the $0.4 million recorded in the comparable period of 2015.

The amount of 2016 finance income does not include the negative impact of a $0.2 million market-to-market loss recorded on the Company's investment in a portfolio preferred shares, which was reported in the second quarter of 2015. These preferred shares were sold in 2015 in order to limit the Company's exposure to fluctuations in the market value.

Finance costs of $0.9 million were $0.3 million higher than the $0.6 million reported in the comparable period of 2015. The increase is primarily due to the interest expense on non-recourse debt used to finance two alternative finance projects secured in 2015.

In the second quarter of 2016 income tax expense of $1.2 million was $3.3 million lower than 2015 consistent with lower current period pre-tax earnings. The outlook, to the end of June, the Company is carrying a backlog of almost $1.55 billion, representing a small reduction from the $1.66 billion carry at the end of 2015.

The consistency in the level of backlog to the first six months of the year is a positive result in the persistent weak market conditions in the industrial sector and further demonstrates the ability of the Company to leverage our geographic and market sector diversification to secure new contract awards and maintain a strong work program. Approximately one-half of the backlog is expected to be put in place in the remainder of 2016, which will result in higher total projected revenues in 2016 and $1.46 billion realized one year ago.

The current work program is characterized by higher composition of institutional work compared with the last several years, a result of the success in securing a significant number of contract awards in this sector in 2015 and early 2016. As anticipated, the backlog attributable to the industrial work program continues to decline as clients limit capital investment, a condition not expected to change in the near-term.

While we remain confident in our ability to generate reasonable revenues in 2016, this change in the composition of the work program will not allow come to replicate the level of earnings recorded in 2015, adjusted for the after-tax H.J. O'Connell impairment loss reported last year.

Looking towards 2017, the weak market conditions in the industrial and resource sectors are expected to persist which will only serve to reduce the contribution from this sector even further on a year-over-year basis. Well, the Company will continue to perform the perform the design and engineering work for the Cedar Valley Lodge, the workforce accommodation center required during construction of the proposed LNG liquefaction and an export facility in Kitimat, British Columbia.

The recent announcement by LNG Canada to delay its final investment decision for the project will place further pressure on 2017 results. The potential offset to a further decline in the contribution from the industrial sector is the high level of backlog in the intuitional sector and the expectations of a robust pipeline of new project opportunities in 2017.

The Company is positioning itself to actively pursue a number of these projects as they become available. However, successful award of these projects would primarily benefit years subsequent to 2017.

Consequently, with industrial opportunities weighing on the timing of institutional opportunities, 2017 will be a transition year in rebuilding the Company during its base. The industrial market sector contributed 51% of 2015 revenues.

The uncertainty in the energy sector in Western Canada which has resulted in a reduction in the number and size of new construction opportunities is similar in Eastern Canada where lower iron ore and commodity prices in general have limited mining-related opportunities for H.J. O'Connell.

The challenging economic environment related to the energy and resource development that has persisted since 2014 is not expected to change to any significant extent in 2016, and there are indications that clients in this sector are taking spending even further in the remainder of the year in an effort to preserve cash. Although, we continue to receive new contract awards in the industrial sector, projects are smaller and shorter-cycle in nature and that has been secured at lower margins due to the increased level of competition.

Accordingly, we do not expect to generate the revenue and gross profits in this sector that were achieved in 2015. The institutional market sector contributed 34% of 2015 revenues, and the institutional sector spending is anticipated to increase in the balance of 2016 and beyond to address the infrastructure deficit in Canada, and to stimulate slow economic growth.

The Company is actively pursuing a number of these opportunities and is well positioned to secure and deliver these projects as they become available New contract awards for institutional projects secured in the first half of the year have added to an already significant level of backlog in this market sector. The revenue and earnings contribution in 2016 derived from this market sector is expected to exceed the revenue and earnings performance achieved last year.

The retail and commercial market sector contributed 15% of 2015 revenues. Although, this market will continue to offer opportunities to the Company, we believe that slow growth and uncertain economic conditions will limit activity in this market sector in 2016.

Consequently, we expect revenues and earnings in the sector to decline marginally relative to those recorded last year. Thank you.

And we're ready for Q&A.

Good morning. Thanks for taking my call.

Ian, three very successful stretch of contract win at the start of 2015, your bookings have been slipping for the past three quarter. Is this simply a function of timing or as the pipeline of infrastructure-related opportunities change for Bird, so far this year?

No. I think it is a function of timing.

I think we've been relatively consistent message, meaning there's couple of things that have happened. One is, we were so successful last year in terms of securement of those PPP and alternative finance projects that pursuit resources and the sort of timing, economic focus on so many opportunities at once.

So, essentially, we do that through 2015 and then 2016 presented itself as more of a year to execute that work and then be able to position ourselves to then go and secure additional opportunities later in 2016 and 2017. And that's how it's played out.

We're actually quite pleased with the PPP and alternative finance pipeline of opportunities that we're seeing, I would argue at the end of 2016, being most of the ones that we're positioning ourselves at this point now or expected to come to market in terms of RFQs, Request for Qualifications, and hopefully pre-qualifying full pursuit what happened in 2017. So, we're happy with the pipeline, but I think that we expect is that through the course of 2016, we would have some degree of backlog decline, well, it was more of a timing issue than anything else.

But how would I reconcile the decrease in pursuit cost that you experienced this quarter, which actually lowered your SG&A?

It really comes down to the number of opportunities that we're actually in pursuit in the current year. So, in Q1 we had Seneca College, which we subsequently understand, we were not successful in securing.

And then now we only have one project, I guess an additional project more recently added to pursuit. So we have two projects that area in pursuit right now, one that has just started, so it really amounts to timing and that's where you see the difference in pursuit cost relative to the year ago where, a year ago we would have had multiple projects still under pursuit in the second quarter.

The amortization line also was quite off relative to expectations, and also the quarterly run rates, anything unusual to report here?

No. I don't think there is anything really.

But it's standard course in terms of the amortization that you were expecting and it's relative to the acquisition of H.J. O'Connell.

No, I don't think, there shouldn't be anything out of ordinary there, Frederic.

Okay. I'll check the numbers again.

My last question more of a broader one, but how do you expect the -- we talked, a lot has been said about this incremental infrastructure spend that's plan for -- from the federal and provincial government. How do you expect that to impact Bird, and how much of -- probably hard question for you to answer, but how much of these sort of basket of opportunities would you say fall within your strike zone?

I would say that we haven't seen a significant degree of the strategic infrastructure fund that those have set up at this point has not been a tremendous amount of activity where we've seen activity has been more so in the university and college, suppose secondary educational facilities. And to be honest with you, most of those calls at this point have been very generic.

So, there hasn't necessarily being shovel-ready projects. What we're seeing is actually more generic calls for request for qualification at this point.

And so there hasn't been a tremendous amount of activity. I think most of the other, we call pipeline of our opportunities, so I don't think much has changed with respect to PPP and alternative finance.

I don't know that they are necessarily -- the pipeline that we have today isn't necessarily being influenced by that strategic infrastructure fund. And the only other area I would say we've seen some degree of uptick has been with respect to shovel-ready projects that we may have had on the books where we've done the design, but we haven't necessarily perceived with construction.

Several of those projects across the country are now in a position where we've actually either started them or expect to start them maybe later in 2016. But there hasn't been a tremendous amount of activity in the strategic infrastructure fund.

If it actually plays out the way we anticipate which is in the post-secondary, we're very well positioned for that. I would even argue as they start to target more environmental type projects, it's something that we're very well versed with in water and wastewater as well as you look at current example of the Calgary compost facility provides us an opportunity in the environmental side of things, which we think the strategic infrastructure fund will also address.

So, overall, I think we're well positioned to be able to take advantage of it when we see additional activity and right now it's been pretty muted so far.

Great. Thanks.

I appreciate the response.

Okay. Thank you.

Ian, the comment you made in your prepared remarks with respect to the industrial market sector and see indications of clients tightening spending even further. Is that sort of a -- is that specific to any particular part of the industrial market or is that a fairly general statement you're seeing in many areas and maybe just a little bit more color on that if you could?

I think what we're seeing, you are obviously seeing the capital spend program and that's been apparent for a little bit of time now. So, not that there is anything necessarily new in terms of new project opportunities, they have not been available in the current environments, and so I don't think anything has changed necessarily over the course of the year, say the first six months of 2016.

What we are seeing is that, our opportunities with the smaller projects are seeing capital, maintenance-related projects which are Edmonton, as well as nascent business unit work-in. We're seeing that there is less opportunities there than we would have anticipated and we're seeing that, and even hearing from some of clients [ph] that in fact, they are more concerned about cash preservation at this point in time, and so they are being very, very strategic and I would say very, very controlled in terms of their spend.

And so, I think that has evolved even over the course at last. I'll say three to four months where we've seen just a little bit more constraint from clients in that industrial sector.

And so I think you referenced the Edmonton group, so this is specifically within the oil and gas arena?

Yes. I would say.

Yeah.

And…

And I should say that Michael, just to sort of correct myself just a little bit there. We're also seeing in Eastern Canada.

So when we have our H.J. O'Connell, our mining opportunities, it's a very similar circumstance.

So, it's not solely localized, but certainly we are gaining the sense from our oil and gas even more so. I would say that the constraint on spending and the interest in cash preservation in the mining sector has been maybe more prolonged, so that's not necessarily new.

I would say, our sense is that, in the oil and gas sector, it's become even more important to our clients to limit spending going forward. That's the sense we're getting.

And just as a sort of a follow-on to that, part and parcel of some of these clients becoming a little more cautious in terms of the spending? Where they are still spending?

Are you seeing additional margin pressures or seeking from you some concessions, over and above what may have already been happening in the last sort year, year and half?

For existing contracts, we're not seeing -- I don't see them seeking any further concessions. I think that when initially you saw the downtime in 2014, that certainly dictates fire.

Most of the work that's been tendered or offered at this point is just more competitive, simply because it's not necessarily because there is necessarily more competitors and new competitors entering the market space. It's simply that more competitors have capacity now and therefore more were looking for work, and therefore you get that margin pressure.

So, I think the margin pressure is simply coming from -- is a more competitive market, because there is less opportunities and capacity over there.

Okay. I know it's helpful.

Thank you. And then just one other one, shifting over to institutional, you know it sounds like we know you have a fairly healthy work program in that area right now, and then it sounds like you've got some opportunities in the pipeline maybe more into next year, but given that there is an emphasis from a number of the provincial and the federal government as well on transportation related work, which hasn't historically been an area of focus for Bird.

Are you looking at trying to position yourself to be able to participate in more of those kinds of opportunities?

Yes. I think we've positioned ourselves, like the PPP for us is important and I would say that despite the fact we aren't horizontal and we don't have horizontal capacity specifically or expertise, we are taking the opportunity to participate in these transportation projects as partners to and joint ventures that we will actually be the vertical elements of that.

And so that's provided some opportunity, or we still see a significant amount. You hear a lot about the transportation side of things, because I think that quite frankly when you are in the Toronto and GTA region that traffic is just such an issue that when you start stock load, the opportunities and the ability to alleviate some of that and some of the master planning associated with transportation, you hear a significant amount of vote.

Reality is, the social infrastructure side of the business is still very, very active and still offering good opportunities for us and so we're excited about that. And as I said, the transportation side of things, we are still very much participating in, and will be through the course of the end of 2016 where we're going through pre-qualifications and hopefully getting short-listed and we'll be active in pursuing, some of these be able to opportunities in joint ventures through the course of 2017.

Perfect, and then sorry, just one follow-on to discussion around the institutional segment or sector. With respect to the opportunities that are -- that you are pursuing in that area, again it sounds like it's more sort of 2017, but when would you have to expect to start seeing some of those awarded, like what's the timing for some of those opportunities?

I believe you are going to be mid-to-late 2017.

Okay. Alright.

Perfect, that's helpful. Thank you.

Thanks Michael.

Hi. Good Morning.

Just looking at the two projects that experienced delays, I'm assuming these are fixed price jobs. Can you provide any color in terms of, were you happy in hindsight with how you bid these jobs?

What's -- were the project miss-bid? It sounds like it was more execution.

And more importantly, when do they wrap up? When are they finished?

Sure. To start, we are happy with the bid and securing where they are there, fixed price contracts.

So, to that end -- and we are happy with the bid. I don't think necessarily this is estimating and then we can always experience some degree of estimating issues.

The primary cause of impact to these projects, the negative impacts to these projects certainly is not from the estimating standpoint. In our view the -- it's clear, you are in one of these situations where you are relying on an owner to provide the design in a timely fashion in order you'd execute as you had -- wanted to execute and that planned on executing and prepared your bid on executing.

And ultimately, the design hasn't been delivered. And so, that extends.

And with our projects and the way that they operate, contractually we're required to continue to execute and you are required to have -- provide notice to the owners, and ultimately it's a discrete resolution procedure that's actual contractually you are obligated to follow. And it just takes time to do.

So, this is a situation where you get into a contract where things just haven't gone as planned, largely out of our control, and so we'll follow the processes within the contract and start to get them resolved. And we're hopeful.

Now as to where they are at in terms of actual completion, I believe of these two projects, one is complete now or will be shortly. It's a very eminent, if it didn't already.

The other project will move into the early part of 2017 based on currency schedule. But when you look at the overall schedule, they are relatively far advanced.

Yeah. I know, and just with these things, you know they are never finished till they are finished.

Agreed, and we've experienced that in the past. But these are not of a size that are necessarily as risky that the individual projects we're talking about.

I would say they're at an advanced stage at this point that hopefully becomes more just about execution and design and time-related delay is just last, because we've advanced enough on the overall project. The delays we've experienced have been early during the project for the most part.

And are they industrial or institutional?

I'd rather not say. They are in a work program, and for us, I just do not want to compromise our ability to get this resolved with our client.

I guess just bigger picture. I guess when you look at 2017 being a transition year in terms earnings, it sounds like it's going to be a bit of a tougher go.

How do you think about the payout ratio, the dividend, maybe -- what kind of discussions going around the board table in terms of willingness to maybe use your strong balance sheet to support the dividend through perhaps a below trend earnings year like 2017.

Right. I think we've been relatively consistent in the past to say that, we really do evaluate the dividend on a quarterly basis with the Board, and it's always based on our future earnings potential and ultimately running a healthy

I'm sorry. How far did we get, and my apologies for getting cut off.

No problem. I didn't hear much of your answer on the dividend.

Okay. So, I'll start it over.

I would say our approach didn't change in the dividend. So, I think we've been consistently -- review it on a quarterly basis, we review it based on future earnings.

Obviously, when we have a situation where we believe that our earnings may be less than what was traditionally used to in the coming year, you evaluate it, you also evaluate relative to the projects that we are trying to pursue and certainly in the PPP and the alternative finance projects we require that strong balance sheet to be able to pursue them and letters of credit, another security that were required for them. And ultimately, what it is about to increase your earnings and what we think we can do.

So, I am glad we are in a good position with respect to our balance sheet. What we are going to take into consideration, where we believe future earnings are and ultimately what's best for the business.

And again, I believe we're pretty consistent in that on a quarterly basis and we'll continue to do that.

Okay. That's it for me, guys.

I'll turn it over.

Thanks, Yuri.

Thank you. I'd like to thank everybody for participating in our second quarter 2016 conference call.

Hopefully we've been able to provide you a little bit of elaboration on our 2016 results and our expectations for the remainder of the year and 2017 allowing you to further evaluate your interest in Bird. As always, we are available, if additional information is required.

So please do not hesitate to get in contact with us at the office. Thank you and have a good day.