Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue grew by 9% year-over-year, driven by a 14% increase in US operations.
- Adjusted EBITDA increased by 14%, reflecting improved operating leverage.
- Gross profit margins remained stable at 29.2%, with adjusted EBITDA margins improving to 23.9%.
- The company added a net 114 trucks to its fleet year-over-year, growing the fleet by 8%.
- Badger announced the launch of a new data analytics platform aimed at driving revenue growth and margin improvement.
Negative Points
- Canadian revenues declined by 19% due to delayed project starts and lower market activity.
- Revenue per truck per month (RPT) decreased slightly to $43,161, impacted by the slowdown in the Canadian market.
- Moderation in the rate of truck builds is expected, potentially affecting future growth.
- Gross margin improvements stalled in Q2 despite price increases, due to elevated labor and maintenance costs.
- The company retired 71 units year-to-date, which may indicate higher-than-expected fleet turnover.
Q & A Highlights
Q: What were some of the offsets in the gross margin line, and how do you plan to improve it going forward?
A: Our utilization was a bit lighter in Q2, leading to slightly elevated labor and maintenance costs as a percentage of revenue. We believe we can return to growth in gross margins with higher utilization and other ongoing initiatives. (Rob Dawson, CFO)
Q: Should we anticipate any disaster recovery work in the third quarter?
A: We had some response to Hurricane Beryl, but it was a normal course storm response. We anticipate an active season but do not forecast this into our numbers. Any such work is considered an upside. (Robert Blackadar, CEO)
Q: How relevant are the slowing markets in California and the Upper Midwest for Badger, and are you seeing signs of potential slowdown ahead of the presidential elections?
A: These markets are good for Badger, but the slowdown is tied to potential changes in administration. We support both renewable energy and oil and gas projects, and we believe these projects will proceed once there is more certainty in the administration. (Robert Blackadar, CEO)
Q: With the new truck builds guided down slightly, can we expect a bigger ramp of the refurbishment program?
A: We believe we can drive more utilization into the fleet without ramping up refurbishments. Our new Gen 5 trucks are the most efficient we've built, and we can achieve our revenue targets with better utilization. (Robert Blackadar, CEO)
Q: Are the delayed Canadian projects still just delayed, or have any been canceled?
A: The projects are still delayed, not canceled. We expect them to start later in 2024 or early 2025. There are also positive signs for further large CapEx and infrastructure projects in Canada. (Robert Blackadar, CEO; Rob Dawson, CFO)
Q: How are you thinking about the toggle between usage of the NCIB and building trucks?
A: The two can coexist. Our leverage is trending downwards, giving us capacity to do both. The NCIB is a regular return of capital to shareholders, and we have ample flexibility to execute our plans. (Rob Dawson, CFO)
Q: What is your target debt metric, and are you willing to let net debt to EBITDA trend up to use the NCIB?
A: We guide to a one to two times debt to EBITDA range. We are currently at 1.5 times, giving us flexibility. We are not pegging ourselves to a specific target but have ample capacity to manage both debt and NCIB. (Rob Dawson, CFO)
Q: Can you provide commentary on the 71 retirements already for the year?
A: We accelerated retirements in Q1 due to project delays. We feel comfortable with our original range of 70 to 90 retirements for the year and do not see a need to exceed this range. (Robert Blackadar, CEO)
Q: Is there any more cost associated with the new data analytics platform, and when do you expect it to start having a positive impact?
A: The costs are relatively nominal, around $1 million. The platform will go live in the next several weeks and will drive efficiencies and margin improvements. (Rob Dawson, CFO; Robert Blackadar, CEO)
Q: How do you plan to achieve 12% to 14% revenue growth next year with a slower truck build program?
A: We are pleased with our pricing improvements and believe we have upside in truck utilization. We feel confident in hitting our growth targets next year through better utilization and pricing strategies. (Robert Blackadar, CEO; Rob Dawson, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
