Bird Construction Inc

TSX:BDT

Earnings Call Transcript

[Operator]

Welcome, ladies and gentlemen, to the Bird Construction Fourth Quarter and Full Year 2024 Results Conference Call and Webcast. We will begin with Teri McKibbon, President and Chief Executive Officer's presentation, which will be followed by a question-and-answer session. [Operator Instructions] As a reminder, the webcast is being recorded. [Operator Instructions] Before commencing with the conference call, the company reminds those present that certain statements which are made express management's expectations or estimates of future performance and thereby constitute forward-looking information.

Forward-looking information is necessarily based on a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Management's formal comments and responses to any questions you might ask may include forward-looking information. Therefore, the company cautions today's participants that such forward-looking information involve known and unknown risks, uncertainties and other factors that may cause the actual financial results, performance or achievements of the company to be materially different from the company's estimated future results, performance or achievements expressed or implied by the forward-looking information.

Forward-looking information does not guarantee future performance. The company expressly disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, events or otherwise. In addition, our presentation today includes references to a number of financial measures, which do not have standardized meaning under IFRS and may not be comparable with similar measures presented by other companies and are, therefore, considered non-GAAP measures.

I would like to turn the conference over to Teri McKibbon, President and CEO of Bird Construction.

[Terrance McKibbon, executive]

Thank you, operator. Good morning, everyone. Thank you for joining our fourth quarter and full year 2024 conference call. With me today is Wayne Gingrich, Bird's Chief Financial Officer.

Before we get started, I'd like to take a moment to commend our teams who came together to celebrate Women in Construction Week and International Women's Day. Bird is proud to recognize and participate in these celebrations that remind us of the invaluable contributions that women made to our industry and the importance of driving progress towards greater equity and inclusion.

While these moments of recognition are important, our commitment extends beyond a single day or week. We remain dedicated to ensuring all voices are heard, valued and empowered. Reflecting on the past year, Bird delivered strong financial results as we passed our internal 2022 to 2024 strategic plan targets and set a solid foundation as we enter 2025. Bird's revenue grew by almost $600 million to $3.4 billion. Our EBITDA margins have improved by 1.3% to 6.3%, and our adjusted earnings and EBITDA grew at double the pace of revenue.

The significant growth in margin expansion was driven by strategic choices made over the past few years to diversify our business, expand our self-perform capabilities and risk balance our work programs with more collaborative contracting structures. These choices include the acquisition of business with strong performance and high growth potential such as Dagmar, Trinity, and NorCan and most recently, Jacob Bros, which has significantly expanded for its national infrastructure presence, underground utility, overhead Telecom, along with additional electrical mechanical and instrumentation capabilities.

As we cover in greater detail in today's presentation, our combined backlog and pipeline of potential opportunities remain strong and risk balance. Our balance sheet is healthy and has flexibility to support Bird's future growth, and we continue to deliver value to our shareholders. Bird's $7.6 billion of combined backlog remains strong, diversified and risk balance. Our backlog of contracted work was $3.7 billion, while pending backlog representing awarded work that has not yet been contracted was $3.9 billion and continues to include almost $900 million of master service agreement and other recurring revenue.

Similar to the company's revenue profile versus combined backlog is primarily felt comprised of collaborative low to medium risk contract types. With collaborative contracts, we have the ability to negotiate items such as tariffs as flow-through costs ensuring they are treated as contractual adjustments. Other contracts which represent less than a quarter of our work program are typically smaller in scope, shorter in duration and have a high proportion of subcontracted work mitigating the impact of cost increases. Having key lessons learned from the pandemic, and this tariffs have been a common area throughout the U.S. election, our teams have taken a proactive approach to derisk our contracts.

We have ensured that risk is either pass down to subcontractors or retained by our clients, further mitigating exposure for Bird. So in summary, we are comfortable with the associated potential tariff risk in our $7.6 billion of combined backlog.

We continue to focus on key strategic sectors with long-term demand levers, winning additional work packages on large capital investment projects and on growing our recurring revenue base. Recent project wins highlight this focus, including project awards in nuclear, civil infrastructure, industrial maintenance and transportation.

Looking ahead to 2025, Bird expects significant conversions of pending backlog to backlog, particularly in the first half of the year as several large labor collaborative projects advance to the construction phase. As these projects transition into execution, the remainder of the work program will be fully contracted and give us good visibility into revenue growth and margin improvements for 2025 and beyond.

At the company's Investor Day this past October, we outlined for 2025 to 2027 strategic plan. Plan bills under foundation of operational excellence and safe execution demonstrated during the 2022, 2024 strategic plan, further enhancing our industry-leading talent and capabilities and expanding in the strategic market sectors and target large capital investment projects.

We highlighted each of our infrastructure buildings and industrial operations and the key market sectors that we expect to focus on, including those that we believe are more economically resilient and supported by long-term drivers. At our October Investor Day, we introduced the company's 2025 to 2027 financial targets. These targets include 10% plus or minus 2% organic revenue with compounded annual growth through 2027 with 2025 benefiting from an additional 5% from the inclusion of a full year of Jacob Bros. This growth is expected to be driven by above-market growth in Infrastructure and Industrial and in-line market growth for buildings resulted in a relatively balanced revenue across our business by 2027. 8% EBITDA margin is our target for the full year 2027. The added lift from the inclusion of a full year of Jacob Bros in 2025, the remaining 170 basis point increase from our 2024 full year margin of 6.3% seems well within reach.

Finally, in line with our discipline and balanced capital allocation strategy, we remain committed to returning to 33% of net income to shareholders through our dividend, retaining 2/3 to support organic growth and strategic M&A as well as capital investments in technology and equipment to support further productivity and growth.

To achieve these 2025 to 2027 goals, we'll continue to expand into strategic market sectors and participate in targeted large capital investment projects, demonstrating our operational excellence and continued commitment to a balanced capital allocation strategy.

Transformation of our business over the past few years has created an economically resilient foundation. And today, Bird is extremely well positioned to benefit from significant long-term demand in strategic sectors across Canada. These sectors include defense spending, transportation, infrastructure, power infrastructure, including nuclear and hydro generation and refurbishment, regeneration, health care, long-term care, structural maintenance, and oil and gas including major investments in LNG.

These sectors are expected to continue to require substantial investment from the private and public sectors over the coming years that are less susceptible to short-term volatility resulting from economic and geopolitical uncertainties. As outlined here, the annual addressable market for our teams across infrastructure, buildings and industrial is significant, and the demand environment remains robust.

On Slide 7, we highlight 2 key sectors: rail and defense, each of which presents significant opportunities for Bird. Bird is a key player in delivering critical trends infrastructure and this is an important growth area. Just last week, we announced the Rail Connect Partners, our 50-50 JV with AtkinsRéalis, finalized and signed a Project Alliance Agreement with Metrolinx to deliver the East Transit -- the East Harbour Transit Hub in Toronto. This marks the commencement of the execution phase of the project beyond our joint venture with AtkinsRéalis, this project creates one Bird's contracting opportunities for teams like Dagmar and our committed Commercial Systems Group. With the significant addressable market in this sector, there continues to be opportunities for growth.

Defense. The current geopolitical environment, including Canada's commitment to meeting its 2% of GDP, NATO defense spending obligation is driving substantial investment in this sector, and this translates to a significant demand for Bird. Example of this is the recent announcement of the Arctic Security Strategy consisting of $2.7 billion over 20 years for 3 Northern military hubs. Also a significant focus on energy security and Bird Security making Canada more self-reliant and resilient, all of which would create additional opportunities.

These hubs are targeted to be built in Yellowknife, Nunavut and Iqaluit. In recent years, we've built a full-service hospital in Yellowknife and a 75-room hotel in Iqaluit with currently -- with current activity underway in Nunavut in oil and gas and social infrastructure as well as other areas in the remote North for social infrastructure currently at the precon level. Bird has deep experience in the North and Canada positions us well for these emerging opportunities through a long history of working with defense construction to Canada, having completed $12.3 billion in activity over the past 10 years.

Current levels of activity across all major bases in Canada as well as the new hubs create opportunities that dwarf previous investments. So we're excited about this sector, and we have a long-standing partnership with indigenous communities to position as a strategic contractor of choice.

Another key element of our growth strategy is our participation in large capital investment projects refer to these client-driven investments. This project exceed $1 billion that are typically divided in the multiple scopes creating opportunities for expansion on site. Bird is recognized as a Tier 1 contractor trusted by blue-chip joint clients to deliver construction services for these highly complex, high-value projects often through the collaborative contract models. Our teams are in high demand for their focus on safety and operational excellence and the self-perform capabilities.

Additionally, Bird has built strong indigenous partnerships and joint ventures, which are important to support sustainable positive community impact that benefit local communities. Key advantage of these large capital project investments is the ability to expand our role over time. Bird often begins with 1 or 2 work packages and through our strong performance, we continue securing additional scopes, significantly growing our total portfolio on site.

A great example of this is our experience in LNG Canada where our teams ultimately completed over $1.3 billion in contracts. These successive wins contribute directly to achieving our overall business targets. These projects are highly complex, often in remote regions and are largely self-performed, aligning well with our capabilities and commitment to operational excellence. We've highlighted the selection of large capital investment projects. We are currently executing on this slide. This is not an exhaustive list, but it showcases the scale and diversity of selling projects that are driving our continued growth.

I'll now hand it over to Wayne to cover our fourth quarter and full year 2024 financial performance in more detail.

[Wayne Gingrich, executive]

Thank you, Teri. Bird's fourth quarter was a continuation of the strong performance we saw throughout 2024 marked by significant revenue growth, margin accretion and earnings and operating cash flow improvements that significantly outpaced revenue growth. Construction revenue for the fourth quarter of $936.7 million represented an 18% increase compared to the same period in 2023. On a full year basis, revenues of $3.4 billion were 21% higher than 2023. Almost half of the 18% growth in the quarter was driven by organic sources.

The remainder of the revenue growth was driven by Jacob Bros acquired in August 2024 and NorCan acquired earlier in the year. The company's gross margin profile in the fourth quarter of 2024 continued to improve compared to the prior year, with gross profit percentage increasing to 10.3% compared to [indiscernible] full year basis, gross profit percentage was 9.7%, 110 basis points higher than 2023.

All groups contributed to the increase in profit margins with the majority of the margin increase driven by higher growth in industrial and infrastructure, which have favorable margin profiles and higher proportions of self-performed work. The increase in gross profit continues to reflect the improved margin profile on newer work resulting from disciplined project selection, strong project execution, growing self-perform capabilities and cross-selling opportunities across the company.

Adjusted EBITDA in the fourth quarter was $71.9 million compared to $43.9 million reported a year ago, representing a 64% increase. Adjusted EBITDA margins continued to increase on a year-over-year basis, increasing from 5.5% to 7.7% in the fourth quarter. Adjusted EBITDA for the full year was $218.8 million to $212.8 million or 6.3% of revenues compared to $138.7 million or 5% of revenues in 2023, representing an increase of 53%.

Turning to earnings. Net income and earnings per share were $100.1 million and $1.84 compared to $71.5 million and $1.33 in 2023, representing increases of 40% and 38%, respectively. Adjusted earnings and adjusted earnings per share were $37.3 million, and $0.67 compared to $24.9 million and $0.46 in 2023. The weighted average shares outstanding for the fourth quarter of 2024 was 1.6 million shares higher than 2023 due to the acquisitions of Jacob Brothers and NorCan in the current year.

And before we move on, we wanted to call out that with the increased number and size of recent acquisitions, the company's definition of adjusted earnings was revised in the quarter to exclude the noncash amortization of acquisition intangible assets, such as customer relationships, brand names and backlog, our revised definition is now more aligned with our peers in the E&C sector, who already made a similar adjustment.

As we noted in the prior presentations, Bird's revenue, adjusted EBITDA and adjusted EBITDA margins have experienced a period of sustained growth over the past several years resulting in revenue growing to $3.4 billion and adjusted EBITDA growing to $213 million at the end of 2024, representing a 6.3% adjusted EBITDA margin. Over the past few years alone, we have seen revenue grow by over $1 billion, and our adjusted EBITDA margin improved by 200 basis points.

As we look to build on this economically resilient foundation towards the company's 2025 to 2027 growth and profitability targets are 10% plus or minus 2% organic revenue CAGR target, we see Bird at approximately $1.4 billion of additional revenue over the next 3 years and continue to improve our EBITDA margin by an additional 170 basis points to 8%.

This growth is supported by our focus on key Canadian market sectors that have long-term demand drivers and accretive margins. Our existing near-term record combined -- near-record backlog of lower-risk contract profiles with accretive margins, gaining additional leverage on our cost structure and our focus on driving proportionately higher growth in our industrial and infrastructure businesses through 2027.

Bird's healthy balance sheet and strong operating and free cash flow generation remains a differentiator for the company, supporting our strategic growth initiatives and our balanced capital allocation approach.

New for this quarter, we are presenting a calculation of free cash flow. Free cash flow conversion as a percentage of net income and free cash flow per share. We're calculating free cash flow as cash flows from operating activities, which includes the impact of changes in noncash working capital less capital expenditures.

Bird's operating cash flow and free cash flow generation were strong in 2024 as expected, in line with the significant revenue and profitability growth that the company delivered in the year. Operating cash flow generation for the year was up 50% compared to last year, and free cash flow generation was up almost 80%. Free cash flow conversion of net income was just over 80%, and free cash flow per share was $1.48.

The company's return and capital efficiency metrics remain strong with return on equity over 30%, the adjusted net debt to trailing 12-month adjusted EBITDA ratio stands at 0.51x and long-term debt-to-equity ratio was 32%. Company ends 2024 with record total liquidity, bolstered by strong cash generation in the quarter and a $100 million increase in credit capacity in our 3-year committed revolver. Throughout our previous 2022 to 2024 strategic plan period, we emphasized a disciplined and balanced approach to capital allocation while that fuels growth while delivering strong returns to shareholders.

From 2022 to 2024, we committed approximately $300 million across capital investments, acquisitions and dividends. Of that, 34% supported capital investments, including project-related equipment and initiatives to enhance efficiency and productivity through technology, another 39% was allocated to acquisitions, strengthening our market position and future growth and the remaining 27% was returned to shareholders in the form of dividends. Since 2022, we have more than doubled our monthly dividend from $0.0325 to $0.07 per share, representing a 215% increase over 2022 to 2024 strategic time period.

Looking again, we remain committed to maintaining a payout ratio of 33% of net income each year, ensuring sustainable and attractive returns for our shareholders. This balanced approach remains the core principle of our strategy and is expected to continue through 2027.

With that, I'll turn the call back to Teri for our outlook and closing remarks.

[Terrance McKibbon, executive]

Thank you, Wayne. Bird's built a strong and economically resilient business that is well diversified by market and geography. We have a near record combined backlog of margin-accretive projects with lower risk contract profiles and a healthy balance sheet that has the financial flexibility for the company to execute its growth plans as well as pursue accretive acquisitions if and when they arise.

We finished 2024 with a quarter of significant revenue growth and margin accretion and a trend we expect to continue throughout 2025. Majority of the 2025 revenue growth is expected to be realized in the second half of the year with significant conversions of pending backlog to backlog occurring in the first half as a number of large collaborative projects reach their construction phase.

We believe the company is well positioned to manage the uncertainty created by recent trade tensions across North America and remain committed to the longer term and profitability targets announced as part of the 2025 to 2027 strategic plan.

With that, I'll turn the call over to the operator for questions.

[Operator]

[Operator Instructions] Our first question today comes from Chris Murray of ATB Capital Markets Inc.

[Chris Murray, analyst]

Maybe just turning to the guidance very quickly. Just sort of -- just trying to gauge kind of the drivers in the first half versus second half split. Can you maybe walk us through why you're seeing what you're seeing in terms of delays? I know you mentioned the permitting is less of a problem than it was in Q3, but I'm just wondering if that's playing into it and how we think about kind of margin progression through the year on top of revenue progression?

[Wayne Gingrich, executive]

Yes, I can fill it, Chris. So a couple of things. So we stated that for Q4, the impact of the permitting issues that we saw in Q3, the impact was less in Q4 than it was. So it's starting to unwind actually. So it's not really a driver for us that's kind of impacting where we said we're going to back end shift some of the growth. The drivers really there are a couple of things that we called out in our outlook is, in the first half of the year, we're going to see significant conversions of pending backlog to backlog, meaning we're contracting these projects.

And our order of magnitude, like it could be $1.5 billion moving into backlog. So that sets out the second half really, really well. And on top of those conversions, we're still going to have our normal kind of wins that we get that don't flow through pending backlog and go straight to securement into backlog. So we still feel very confident in our total year outlook. It's just part because of the timing of those conversions pushing to the second half. And the second thing that we called out was in the first half of 2024, we had a really strong first half. We had very favorable weather conditions.

We've got to do something that we don't often get to do in the first half, which is accelerate process on a number of projects and we had called this out last year. So we just wanted to kind of highlight that when we say 10% unit growth plus 5% for Jacob Bros in the year. It's not linear. Like we don't apply 15% every single quarter. There's still project mix factors and those types of things that impact the quarter. But I really wanted to make sure that we're confirming the total year outlook.

[Chris Murray, analyst]

All right. That's helpful. And then I'm not sure who wants to take this one, but Teri, just some interesting comments about Bird's history in Northern Canada. And there's lots of discussion about as you said, military, minerals that kind of development. Can you talk a little bit about your capabilities to be able to work in the north? And does this lend itself to very much like Jacob Bros was a way to move to East or to move into different verticals. Are there other opportunities around M&A that maybe bulk up for Northern Canada?

[Terrance McKibbon, executive]

I think to be pretty honest, I think we've got all the pieces and the tools we need for Northern Canada. We have a rich history of working in the north. We often think of our markets as coast to coast to coast. And when you think about building a modern hospital in Yellowknife with weather conditions, it can be minus 40 or 50 for many months at the time. Like we're just used to that. And if you think of the work we've done with employing 1,500 to 2,000 people on a job like LNG Canada, we're used to mobilizing large workforce providers to work in remote locations.

The history is there. We've worked. We built a hotel in Iqaluit with 75 rooms we've done. And we're working right now in Nunavut on precon on a number of things. So historically, we have the resume. We have the indigenous partnerships established, and we have the teams that are set up for that, our business -- our mining business. We refer to as Bird Heavy Civil has worked extensively through Northeastern Canada and remote [indiscernible] River, which is about as north as you can be.

So yes, I think the depth is there and the history is there and the teams so it's an exciting market and not discounting that, yes, there's a lot of northern-based work fits evolving, but there's a lot of existing base, expenditures going on across the major defense bases in Canada, which we continuously service, which will be part of that $1.3 billion over the last 10 years.

[Chris Murray, analyst]

Okay. Just maybe following on to that. We haven't talked about Stack in a while, but does Stack kind of fit well into kind of that northern construction model?

[Terrance McKibbon, executive]

Yes, yes. And some of the social infrastructure that we're modeling right now in precon would include modules that would be supplied by Stack. Hotels for example -- the hotel, for example, that we built in Iqaluit, we erected that hotel in 8 days , 75 rooms, and obviously, on top of a platform that we stick built, but those units came in. And yes, it's an impressive hotel in the remote North that we constructed.

So yes, I'm really confident in our resume. Sure if there's something comes along that enhance us that we like from an M&A perspective. We do that, but it's certainly not need with the resources we have today.

[Operator]

Our next question today will come from Krista Friesen of CIBC.

[Krista Friesen, analyst]

I was just wondering if you could maybe give us a little bit more color on what you're seeing in terms of M&A right now and what the pipeline looks like for you?

[Terrance McKibbon, executive]

Yes, it's been -- it's been busy. I don't think our pipeline has softened at all. We co put -- we have a team full time that works in the space. And we are continuously maintaining opportunities and looking at things that we think would be important for us to consider. We -- I'm really proud of our track record of integrating companies over the last number of years.

And I think that in itself creates new opportunities because someone thinking about investing business is -- looks at what's been having and make some phone calls, and they find out that we've done a nice job with a number of companies and our record is impeccable. So I'd say that the activity level is high -- continues to be high. It's been high for probably 18 to 24 months. And we're excited about some of the opportunities that we're considering.

[Krista Friesen, analyst]

Great. And then -- maybe just 1 more on the tariff front and all the uncertainty there. I appreciate you had some verbiage in your MD&A about that. But have you had any conversations with some of your customers who are -- they are now delaying their projects just as it relates to uncertainty? Or is this all still kind of just up in the air at this point?

[Terrance McKibbon, executive]

No. And that's the beauty of the types of programs, types of projects that we target. It's across a multitude of sectors that have long-term horizons. They know that things are going to ebb and flow within the economy, but that's the beauty of the focus we have. And we've also -- in the past months, I've had projects that we're closing, some of them with very definitive procurement rules that we've had to intervene as they look, we need relief from tariffs in this regime or we just are not prepared to take that risk and the clients have adjusted those.

And that's primarily government, where there's been a very rigid procurement sort of framework and usually not easy to make adjustments, but we've made that very clear that we wouldn't proceed unless there was a relief for that, and they've been accommodating. So -- but no, our core program of what we've outlined in today's presentation is solid, and we're highly confident we won't see macroeconomic pressures on that program.

[Operator]

Our next question today will come from Michael Tupholme of TD Cowen.

[Michael Tupholme, analyst]

Last quarter, you talked about expecting your 2025 adjusted EBITDA margin to approach 7%. Can you provide an update on your expectations for the year at this point?

[Wayne Gingrich, executive]

I think we feel confident in our ability to hit that. We came in strong through the fourth quarter and obviously finished a bit higher in 2024 at 6.3%. So we still have the 70 basis points to get there instead of 100. We're going to see an additional lift as we have a full year of Jacob Bros consolidated in our 2025 results, but we also have a great mix of projects in our backlog, in our pending backlog in our pipeline.

And we do say in our outlook, I just want to call that out that we're still seeing the embedded margins in backlog -- in our pending backlog be higher than the work program we just put in place. So that also gives us confidence that the margins are going to continue to drive up.

[Michael Tupholme, analyst]

That's helpful. And then maybe, Wayne, how do we think about margin progression then as you move through the year, particularly in view of the commentary about more of the growth coming in the second half of the year?

[Wayne Gingrich, executive]

I think the margin progression is less about the kind of the growth story between first half and second half, and it's just the normal seasonal trend that we have, right? So in first quarter, for example, obviously, we have winter weather, and we do a little bit less self-perform work in that sector. We have a little less equipment revenue. So our EBITDA margins are a bit muted compared to the busy summer months in Q3 and the closing of the year in Q4. So I think normal seasonality is what you'll see in terms of the flow to the total year '25.

[Michael Tupholme, analyst]

Okay. That's helpful. And then just to be clear, I mean, you've got the contribution from Jacob Bros in the first half of the year and a little bit into the beginning of the third quarter. But like when you talk about this sort of back half waiting for the revenue growth, should we still expect there to be positive organic growth in the first half of the year, just at a reduced rate? Or how do we think about the organic growth specifically?

[Wayne Gingrich, executive]

Yes, that's right. They're still going to be positive organic growth compared to the first half of last year. And then there's going to be Jacob Bros layered on that. It is not going to be like 15% every single quarter. It's going to be 2/3 kind of weighted to the back half.

[Michael Tupholme, analyst]

Got it. Perfect. And then maybe just to pick up on one of the earlier questions you were asked about the uncertainty that exists right now in view of trade and geopolitical issues. Teri, I take your point that it doesn't sound like you believe there's really any impact or risk to your current work program. Can you may be shed some light on any conversations you're having with customers about projects that haven't yet been approved? Or are they rethinking anything as far as projects that are sort of on the horizon at this point or looking at those any differently? Just curious around the sort of the future opportunity...

[Terrance McKibbon, executive]

Yes, we haven't had any customers in the core sectors that we're focused on raising concerns or raising that in the sense of a pause. Like I said, the high majority of the areas we're focused are long term. They have very well organized platforms and they're moving along. And a lot of the things we're doing are expansions of current programs we're already on. So they're just continuing. So I think it's the way we've diversified in the so many areas and a blend of government work and a blend of private work in key growth areas for Canada.

And then obviously, the new opportunities evolving in defense. I think it just positions us really well. So I -- we're very confident that we're positioned -- as well as we could be. I honestly can't even think of a sector that I wish we were positioned to be perfectly candid, I think we're really well positioned to have a very balanced program.

[Michael Tupholme, analyst]

Okay. That's helpful. Maybe just a quick follow-on there. When you talk about defense, can you maybe give us a little bit of a sense for sort of the types of opportunities you're most likely to see in the defense sector?

[Terrance McKibbon, executive]

Well, I think it's public. In addition to these 3 new hubs that they're building in Iqaluit, the major bases are getting major expansions. So whether that's Cold Lake to house their future program, whether it's the Army bases in the country. Obviously, for Canada to reach the 2% of GDP, it's a lift to get there, and they're taking a pretty big swing at. So yes, it's exciting. It's -- the programs that are coming through across the basis, the majority of which we've worked at is, like you said, it's kind of daunting actually.

[Operator]

Our next question today will come from Frederic Bastien of Raymond James Limited. Please go ahead.

[Frederic Bastien, analyst]

Guys with Canada potentially looking at additional export markets for its natural resources. Does that potentially accelerate projects like the Phase 2 of LNG Canada. And just curious as to your views on that? And obviously, you did really well on initial phase of LNG Canada. So how would you position yourself for that work, if you were to go ahead?

[Terrance McKibbon, executive]

Well, certainly seems to be government in the public forum, governments raising that topic that they would like to see in Phase 2 accelerated and moving along. So I'm sure those discussions are underway, and we're highly confident with our performance on Phase 1 and we participate strongly in Phase 2. I'd say the one that is emerging, and it might have emerged regardless of the interface, the tensions is Prince Rupert. Lots of activity related to Prince Rupert, and that creates exciting opportunities for us.

We're very active, obviously, in Squamish on fiber. So on the LNG side, we're nicely positioned and our reputation is giving us a lot of new opportunities to expand and -- from that perspective. We also expect considerable expansion of ports and facilities on both coasts. And as you said, Canada is redirecting and focused on rebalancing their export markets. And to do that, they've got to build infrastructure to facilitate that.

[Frederic Bastien, analyst]

And I apologize if it's been asked or brought up in the last 40 minutes, but nuclear has been a new market for you. In the last 2 years, you've done extremely well. Can you comment on maybe additional opportunities you're seeing in that space? And if you have already answered that question, you feel free to ignore me.

[Terrance McKibbon, executive]

No, it has come up, but it's certainly a major growth area for us. As you know, the 2 largest nuclear facilities in Canada and our clients Bruce Power and OPG, have got major programs that they're developing. And obviously, we are participating quite significantly in those programs. We are doing a lot of decontamination work with -- ultimately for atomic energy, but through CNL. And that program continues to develop. We've got a large program underway of the Truck River, which is the programs that are -- have been talked about with a large campus that's getting completely renewed and refurbished and those programs are underway.

So I think across the nuclear space, our teams continue to grow and expand and has become a major business front for us. OPG has announced the refurbishment of [indiscernible] and we're doing a lot of support work and are excited about those opportunities that really support and create appropriate infrastructure to support that refurbishment and as we're doing at Darlington. There's just a number of programs that are underway in various markets that put us in a great spot with the evolving resume we have.

[Operator]

Our next question today will come to Ian Gillies of Stifel.

[Ian Gillies, analyst]

Good morning, everyone. First question is operational in nature. As best I can tell, East Harbor contract is the first collaborative contract or it's done on the transit side. You're now -- you've now moved to construction phase. Can you maybe talk about what were some of the positives moving through that first phase and what some of the negatives have been and maybe how you would tie that out to some of your broader strategies?

[Terrance McKibbon, executive]

Yes. And I think it's the Eastern Canada is the second trend project of significant scale of any scale, I think, that's been procured. And I would say this, the alliance model that we're using there is a fully integrated partnership model with your client. And any time you can use a model like that, you've got all the decision-makers that are fully integrated in the team.

You can break down any kind of barriers that you would not normally be able to break down if you're just contracted and you're carrying all the risk, you've got motivated members from your clients that are focused on meeting the targets and meeting the budget and doing whatever it takes to break down any kind of hurdles. So it's been a tremendous experience to date, and we've been on this for a few years now, as it's the design has been evolving and the feedback I'm getting from the client is very positive about the excitement of that model.

That model is also being used extensively in BC and the same kind of feedback that BC partnerships is getting where they're seeing what a powerful model that is because the predictability of the ultimate budget is highly likely when you have the whole team working collaboratively to get it done. So the negatives, I don't -- I can't think of a negative. I'd say that these projects take a little longer to get into construction. And so that's probably we think. But honestly, if you start to position your backlog with a series of these, it starts to become more of a steady run rate.

So -- but the front end, when you've got a few of them evolving, it does take longer to get revenue flowing, but it's clearly worth it in the end based on the experience we've had to date. It's also a model that is supportive of self-performing the work because it is just the partnership and accelerating the work because you've got that self-perform ability to turn up the crew sizes and hours of work to be able to meet milestone targets. So, yes, overall, very pleased, very few negatives.

[Ian Gillies, analyst]

That's helpful. Maybe moving to capital allocation question that I've asked before, but I'll ask again because the valuation is looking a little discount into this juncture. Has there been any additional thought towards putting in an NCIB on top of the dividend? I -- fully acknowledging the M&A strategy is strong, I mean, buying your own stock and around these levels would seem to be a pretty attractive use of capital from our perspective.

[Wayne Gingrich, executive]

Yes. I mean it's always an option that's out there, but we've tried to be very clear in our communications from our Investor Day in October. Our capital allocation priorities remain unchanged. We're targeting a 33% payout ratio on net income. And the M&A market is still very active for us. So we want to make sure we're retaining enough capital in the business to invest in that growth. And the work program is also growing, right? And when you see growth in industrial and infrastructure that's in the market, there's going to be equipment needs with them as well. So we're making sure that we got the need to support that growth. So I'd say at this time, no, there hasn't. We remain committed to the priorities we outlined previously.

[Operator]

[Operator Instructions] Our next question today will come from Maxim Sytchev of National Bank Financial.

[Maxim Sytchev, analyst]

Teri, I was wondering if it's possible maybe to get a sense if you're seeing any change in customer behavior when you kind of look at it between public and private clients, if there's any differentiation or you're getting sort of the same feedback and kind of live from both cohorts?

[Terrance McKibbon, executive]

We haven't seen concerns with those clients. There's been no behavioral differences the way they think about the programs are long term initiatives, whether that's in the government side across infrastructure, whether that's transportation or health care, on-term care, you start looking at the other types of transportation type things. And then on the private side, the large majority of things that we're focused on are these large, blue-chip type clients that have a 50-year horizon any of the projects. So there, they're thinking longer term.

And obviously, we're well equipped with our various supply channels to redirect supply. Many of these large clients that we're working with, we'll have [indiscernible] equipment even that comes in where they're procuring things, coming from all over the world. So yes, in that regard, I think there's a fair bit of consistency, but certainly uncertainty as to where it's also going to settle out as everyone is fully aware.

[Maxim Sytchev, analyst]

Yes, sure. And I guess is it possible to get a bit of a ballpark on your commodity exposure across the company at like 20%, 30%? So how should we think about that?

[Terrance McKibbon, executive]

Well, it's so variable. And like I said, so many of our clients are procuring some of those commodities. But I will say this, we did a deep forensic analysis of our existing backlog, and we haven't found, risk in that to -- that would cause us any concern. So we have the flexibility to have a risk transfer to a subcontractor or in the case where we're self-performing. Obviously, we've conditioned our clients for that risk so...

[Maxim Sytchev, analyst]

I just meant commodities when it comes to like, I don't know, like iron ore, gold, natural gas, et cetera, if you want to look across [indiscernible].

[Terrance McKibbon, executive]

So far, no, obviously, there may be sectors like we're in iron ore, for example. So far, no indications from those clients, but I think it's a wait-and-see. You -- steel tariffs continue, you probably see some tightening there. But our mining group is fairly diversified across different sectors, our mining group is also the group that is our point on hydroelectric and other heavy civil type initiatives.

So we've got that evolving now, which we wouldn't have had a year ago. The large hydro project we have up in Northwestern Ontario is getting greenlighted to get under construction now. So it gives us some flexibility. But so far, no indications and we're in close contact with our major clients on the iron ore side.

[Maxim Sytchev, analyst]

Okay. Okay. That's great. And then a quick question for Wayne, if I may. In terms of the word capital kind of like intensity, how should we think for 2025 interest like any kind of puts and takes versus 2024? Or anything you can tell us that would be great.

[Wayne Gingrich, executive]

Yes. Look, I think the flows between noncash working capital and cap, I think you'll see the usual seasonality there. If some of the organic revenue growth is moving into the second half that we talked about with some of the pending backlog conversions. We'll then the investment in noncash working capital might be a little more muted in the first half, a little more of a spike in Q3, but we would still expect to see the unwind that we usually get in the fourth quarter again this year..

[Maxim Sytchev, analyst]

So nothing unusual. Okay. That's great. That's it for me.

[Operator]

This concludes the question-and-answer session. I will hand the call back over to Mr. McKibbon for closing remarks.

[Terrance McKibbon, executive]

Thank you. It's exceptional revenue and profitability growth in 2024 was driven by strategic changes that we made over the past several years. It's our Bird risk balance our work programs, expand our self-perform capabilities, and geographical reach and focus on key market sectors that have long-term demand drivers. We entered 2025 in a position of strength almost $8 billion in our combined backlog, a robust bidding environment with margin accretive opportunities and a strategic plan that we'll see us continue to grow, become more profitable and deliver long-term value to our shareholders.

Before we close, I want to take a moment to thank our incredible teams from coast to coast to coast who are the foundation of our success. It's the dedication, expertise and hard work of our people, the drives Bird forward every day. I'm proud of what we have accomplished together over the past year and excited for what's to come. Thank you for -- thank you to all for joining us this morning on our earnings call.

[Operator]

This brings to close today's conference call webcast. You may disconnect your lines. Thank you for participating, and have a pleasant day.