Bird Construction Inc. (BIRDF) CEO Teri McKibbon on Q1 2022 Results – Earnings Call Transcript
Bird Construction Inc. (OTC:BIRDF) Q1 2022 Earnings Conference Call May 11, 2022 10:00 AM ET
Company Participants
Teri McKibbon – President and Chief Executive Officer
Wayne Gingrich – Chief Financial Officer
Conference Call Participants
Chris Murray – ATB Capital Markets
Frederic Bastien – Raymond James
Michael Tupholme – TD Securities
Maxim Sytchev – National Bank Financial
Ian Gillies – Stifel
Gabriel Moreau – iA Capital Markets
Michael Tupholme – TD Securities
Operator
Ladies and gentlemen welcome to the Bird Construction First Quarter Financial 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]
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 meanings 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.
Teri McKibbon
Thank you, operator. And good morning everyone. Thanks for joining us on today’s first quarter of 2022 earnings conference call.
Joining me on today’s call is Wayne Gingrich, Chief Financial Officer.
I am pleased to report solid financial results for the first quarter of 2022, whereby we posted strong year-over-year revenue growth; reported a record combined backlog and continue to possess a strong balance sheet. We posted these strong results despite early headwinds from pandemic-related personnel absenteeism and supply chain challenges, as well as weather-related delays.
Our first quarter results continue to reflect our efforts to bring together the Bird, Stuart Olson and Dagmar teams to leverage our combined strengths. This effort has resulted in Bird winning projects that it would not have otherwise won on its own. As I’ve said previously, I believe that we’ve built a strong foundation, such that we can grow our top line while improving our overall EBITDA margins to accelerate growth of our bottom line.
As you will see on Slide 6, we posted first quarter construction revenues of $476 million, a 77% increase year-over-year. While revenues for both quarters were negatively impacted by the pandemic the nature of those impacts were quite different. In 2021 we’ve witnessed four project shutdowns and postponements due to COVID-19 compared to 2022, where we experienced smaller individual impacts due to absenteeism and supply chain delays, but across a broader range of projects. The [indiscernible] program helped mitigate some of the impacts to our bottom line in 2021 but was not available this year.
Net income for the quarter was $6.4 million or $0.12 per share. On an adjusted basis EBITDA was $17.8 million representing a 3.8% margin while earnings were $6.5 million or $0.12 a share. Securements in the quarter amounted to $507 million, while our backlog was at a record $3 billion at quarter end and pending backlog of $1.7 billion, which is approaching the prior record set in Q3 of 2021.
Overall, our bid pipeline remains robust as opportunities continue to present themselves, which gives us continued confidence in the near- to medium-term.
Moving to Slide 7, for the first quarter, we reported an adjusted EBITDA margin of 3.8%. On a trailing 12-month basis se reported an adjusted EBITDA margin of 4.7%. I’m encouraged by the strength of our margin this quarter, given that Q1 is a seasonally slow quarterly continued impacts of the pandemic this past quarter. One of our strategic priorities is to focus on achieving a higher overall margin profile. And our expanded capabilities will continue to present cross selling opportunities. This coupled with an increased level of self-perform work is expected to result in a higher margin profile over time.
Our strategic pursuits are paying off. As you can see on Slide 8. We announced that meaningful contracts in the first quarter subject to quarter end. In the first quarter Bird’s joint venture was selected by the City of Barrie as a General Contractor for the City’s Wastewater Treatment Facility upgrade program, and will assume primary responsibility for construction services for the duration of the project which will be delivered through an IPD model. The construction cost estimate for the project is valued at approximately $125 million.
Additionally, subsequent to quarter end, the company was awarded two, five-year master service agreements or MSA contracts for industrial maintenance services and two industrial facility turnaround contracts. The total value of the awarded contracts is an estimated $90 million. Also after quarter in Bird was awarded a multi-year mining services contract valued at approximately $70 million over the term of the contract.
Leveraging the recent acquisition of Dagmar Construction we are pleased to announce a contract for railway track, signal and station works by Metrolinx for the Kitchener GO Corridor Expansion project valued at approximately $62 million. This contract is the first step in a series of infrastructure upgrades planned as part of the Kitchener GO expansion program, which will transform the line and bring increased two-way all day service and better connectivity to the larger GO Transit network. This contract speaks to the strength of Dagmar’s capabilities, and we expect to leverage our combined pursuits with Dagmar to capture additional value-added work over time.
Lastly, we are selected as a proponent for the Port Hope Area Initiative Master Construction Contract, or MCC by Canadian Nuclear Laboratories. Under the MCC as one of two components, Bird has the opportunity to bid on work packages, covering close to $1 billion of decommissioning and remediation work over the life of the initiative. I’d like to highlight that this contract speaks to our relationship with CNL, given our expanded self-perform capabilities and stronger civil and earthworks experience, which position us to deliver substantial value to CNL and the Port Hope Area initiative over time.
The announced contracts in the first quarter of 2022 and subsequent to quarter end, build on our extensive portfolio of projects as illustrated on Slide 9. These projects span Lake City Studios and the Okanagan Indian Band Water System Upgrade in British Columbia, a bundle of schools and the University of Calgary MacKimmie Block in Alberta to working on Stage 2 of the Confederation Line and the Ontario Power Generation Clarington Campus in Ontario. In total, we are currently working on over 300 projects with a combined value of $6.7 billion as shown on Slide 10.
Taking it one step further, we have a notable portfolio of major contracts to provide good visibility over a multi-year timeframe. Our major projects are multidisciplinary, span from coast to coast and provide good visibility given the longer maturity of these contracts.
Furthermore, as I have talked about previously, over the past number of years, we have made a concerted effort to reduce the overall risk profile of the company by way of entering into collaborative contracting methods, which balances the risk transfer between Bird our clients. Ultimately, these contracting methods allow us to share the risk appropriately with our clients. To this end, currently we have 15% of our contracts under collaborative IPD alliance contracts, while we have 20% of our major contracts under these collaborative methods.
To provide a bit of color, these collaborative contracting methods bring all parties together early in the process to provide transparency and few surprises.
As such client works with the designer and contractor through all the delivery phases as one integrated collaborative team. This delivery method provides higher owner control, commitment and dedicated resources, which increases transparency and as a result provides increased project budget certainty for the client. By its very nature these collaborative integrated delivery methods allow a balance transfer risk, allow the client – allowing the client and Bird to share the risk which reduces our overall risk profile.
Additionally, we have a Mass significant capabilities to offer master service agreements to clients under long-term contracts providing excellent visibility to forward revenues. In fact, within our pending backlog we have roughly $850 million of recurring MSA work that spanned between one and five years. Our MSAs are predominantly comprised of MRO contracts with industrial clients where we have long histories of working together. While we have historically had a large presence in Alberta within the Oil & Gas sector, we have broadened our footprint moving out east to provide substantial capabilities to clients outside of the Oil & Gas sector.
Our strong construction and self-perform capabilities combined with our commercial systems group, where we employ over 1,000 electricians allow us to provide a compelling one-stop-shop offering to our clients. I believe this is a competitive advantage for us and will continue to bear few going forward. In fact, we have taken – we have taken our deep bench strength and broadened service offering in a new emerging markets, further diversifying our book-of-business. We’re working with our clients to build sustainable projects.
As you can see on Slide 12, we are leveraging our civil, structural and mechanical and electrical capabilities to execute complex major projects in the alternative energy and environmental sectors. Over the past 50 years, Bird has executed on some of the largest infrastructure projects from hydroelectric infrastructure, nuclear and renewable power to organic waste processing and waste energy recovery projects. Overall, as we are well positioned to capitalize on and contribute to new environmentally friendly solutions which provides us with significant growth for Bird in the coming years.
Additionally, as it relates to sustainability I’d also like to highlight that we just released our 2021 sustainability report. I would encourage everyone to visit our website and download the report. All told our ability to win an increased share of business for a broader service offering coupled with a significant portfolio of major contracts and MSAs under long-term contracts has allowed us to report a record combined backlog of $4.7 billion as at the end of the first quarter, which you can see on Slide 14. The record combined backlog in combination with a healthy economic backdrop and strong expected government infrastructure spending provides strong tailwinds to organic revenue in the near-term to medium-term.
Our goal over the past number of years to drive increased diversification, revenue visibility and higher margins all while reducing our risk profile since 2018 is bearing fruit as evidenced by our first quarter results. We expect our go-forward results to continue to reflect our strategic goals to continue to add value for our clients and build Canada over the next century.
With that, I’d like to turn it over to Wayne to go over our financial results.
Wayne Gingrich
Thank you, Teri.
Please turn to Slide 15. Despite the challenges of managing through the pandemic as well as weather related delays, we reported construction revenues of $475.5 million for the first quarter; this represents a 6.9% increase year-over-year. Gross profit with $41.6 million or 8.8% of revenues for Q1 2021; this compares to $39.9 million or 9% of revenues in the comparable period – in the comparable period in 2021. The year-over-year increase in gross profit was driven by higher construction volume and stable growth profit margins from discipline project execution, contracting and execution into good management of construction costs incurred. I would highlight that this increase was posted despite a meaningful year-over-year, $11 million CEWS recovery which helped to offset pandemic related costs in Q1 2021, which did not recur this year.
General and administrative expenses were $31.3 million or 6.6% of revenues this quarter compared to $29.4 million in the first quarter of 2021. Adjusted EBITDA for the first quarter of 2022 was $17.8 million or 3.8% of construction revenues. This compares to adjusted EBITDA of $21 million in Q1 2021 or 4.7% of revenues. Impacting the year-on-year comparison where the CEWS recovery in Q1 2021 totaling $11.2 million recorded in cost of construction and general and administrative expenses. As I just mentioned, no such recoveries were recorded this quarter. These CEWS subsidies will distort the year-over-year comparative reported margins until Q3 this year when the trailing 12-month impact of subsidies will lapse.
Net income for the period amounted to $6.4 million compared to $7.1 million in Q1 2021. On a per share basis earnings were $0.12 versus $0.13 in the prior year quarter. As Teri indicated, we’ve made a concerted effort to diversify our business, drive higher revenues through recurring revenue streams and increase our embedded margin and manage the overall risk profile of our business. We’ve accomplished this in a number of ways. Notably, we have maintained a diversified sectoral work program balanced across institutional, commercial and industrial contracts to drive stronger growth both on the top line and on the bottom line.
As can be seen on Slide 16, our contract portfolios comprised mainly of low to medium risk contracts. In fact, over 95% of our revenues for full year 2021 were in the lower two risk categories, meaning IPD or Alliance construction management stipulated some or unit price contracts for example.
Moving on, I’d like to quickly touch on the integrations of both Stuart Olson and Dagmar Construction. We have brought all the teams together and now believe that we have a cohesive team that is able to cross sell our capabilities across Canada. To date we’ve seen synergistic top line benefits from the Bird, Stuart Olson, Dagmar combination and we’ve won contracts that individually we would not have won on our own. From a cost standpoint, we have largely worked through acquisition and integration related expenses, and do not expect these to recur in a meaningful way on a go-forward basis. As we’ve talked about previously we expect to realize further cost savings over the next couple of years as we integrate both companies onto one unified IT platform.
Turning to our financial position on Slide 18, we continue to retain a strong balance sheet with significant financial flexibility. As at the end of the quarter we have accessible cash and cash equivalents of $73 million and approximately $140 million of available capacity under our committed syndicated credit facility. As at quarter end all of our financial metrics are well within our comfort levels and provide ample flexibility to pursue additional accretive M&A. Our adjusted net debt to trailing 12 months adjusted EBITDA ratio was 0.03 times, while our debt-to-equity ratio was 28.3%.
Turning to Slide 19, we continue to balance our capital allocation priorities between organic opportunities, dividends, M&A and debt repayments. For Q1 2022 we generated cash flow from operations before non-cash working capital of approximately $19 million, while CapEx was $5 million. We expect that as the business returns to normal capital expenditures will return to pre-pandemic levels. As always we remain committed to returning excess capital to shareholders via our monthly dividend payment. For the first quarter we returned $5 million by way of dividends. As it relates to our M&A strategy we will remain disciplined and opportunistic and overall we have made significant strides building our business profitably, while diversifying by end market and geographical exposure. As such I’m very pleased with our financial strength and are positioning within the Canadian construction industry.
With that I’ll turn it back to Teri.
Teri McKibbon
Thanks Wayne.
I think our Q1 results are a true reflection that we have built a strong platform for future growth and strong profitability. Given our longstanding experience in the Canadian construction industry we’re well positioned to capitalize on the strengths of the Canadian economy. As highlighted on Slide 20, heightened expected infrastructure spending announced by the federal and provincial governments with their recent budget announcement combined with previously announced infrastructure related spending is expected to provide a healthy pipeline of opportunities for us.
Additionally, a higher commodity price environment, which has resulted in increased capital spending in L&G, Oil & Gas, Agriculture and Mining should also act as a natural tailwind for Bird. This underpinned by our strong backlog and growing diversified present geographically as well as by product offering is expected to result in solid organic revenue growth in 2022 and in the years to come.
With that I’d like to turn it back to the operator for questions.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] Our first question comes from Chris Murray of ATB Capital Markets. Please go ahead.
Chris Murray
Thanks guys. Good morning. Can we just talk a little bit about your backlog that you’ve got at this point and how we should be thinking about embedded margins, particularly as the quality of work it looks like it’s been improving a little bit. Appreciating that, if we already account for the queues numbers, how you think that those should evolve over the year?
Teri McKibbon
Yes. I can take that one, Chris. I think overall we’re pretty happy with the margin profile embedded in our backlog and in our pending backlog for that matter. We have a nice balance of work between self-perform and general contracted work, and as we said prior quarters we generally have higher embedded margins in self perform work in the industrial business. We’re generally most of our self-perform work is that in commercial systems have a really good margin profile there. CEWS certainly that was not something that’s embedded in our backlog margins at all, that was obviously a subsidy recorded as a cost reduction in prior quarters in the comparative periods, but not something that factors into our margin profile. So what you – what you kind of see in Q1 here is just the margins we’re earning either from backlog or just through the favorable settlement of claims with contracts where every quarter we have a few of those.
Chris Murray
Okay. Alright, fair enough. And then maybe just think about M&A, when you look at the opportunities it certainly sounds like the acquisitions of Stuart Olson and Dagmar have gone well. Any thoughts around what to acquire right now, I assume most contractors at this point are pretty healthy. How are you thinking about acquisitions in terms of growth at this point? And any thoughts about maybe needing to go into the U.S. or anything like that?
Teri McKibbon
So we’re constantly – constantly looking for new opportunities, some small some larger constantly evaluating I would say that in the past six months or so we’ve had a lot of opportunities with the new diversified platform for organic growth. But we’re always – we’ve always got our eye on opportunities that are evolving and I think we’ve in the past have communicated areas that we’re interested in growth. Obviously there is an renewable power and the energy sector and increased capacity to broaden our civil infrastructure platform in Canada, leveraging off the success and the strength of Dagmar looking at expanded mechanical electrical process, and obviously with an emerging energy environment with disruption with a lot of things happening – having that internal capabilities self-perform a lot of that work, a couple of the existing teams we have is, is an area of focus.
So it’s a mix of things, but a heavier bent on self-perform I would say in terms of what we’re interested in. As far as the U.S. the opportunities in Canada right now certainly are keeping us completely consumed. But I think as we look longer term, our current strategic plan is focused on Canada. But as you look longer term, I think we have an eye on, on opportunities there, but I’d say that right now in the near-term, it’s a big focus on Canada.
Chris Murray
Thanks for that. So Wayne, you did mention that CapEx would be back to pre-pandemic levels, but well diplomatically, pre-pandemic also did include two other acquisitions and some IT spending. So do you mind maybe dialing in with that number might look like a little more in detail? And also any thoughts around working capital, anything unusual we should expect from the pattern this year?
Wayne Gingrich
Yes. Maybe I’ll take the second question first, so I’m sorry, were you talking about non-cash working capital or is working capital?
Chris Murray
Yes, non-cash working capital, exactly.
Wayne Gingrich
Non-cash working capital. So key one, we invested about $30 million in non-cash working capital, which is an improvement over a prior year, and that’s really driven by some growth year-over-year, but the project mix that we have as well. I think through Q2 and Q3, as you see the work program ramp-up you’re going to see investment in non-cash working capital, and then our usual seasonality flows subset in Q4, generally that releases to a significant degree in, at the end of the year and we expect that to continue.
Yes, I’d say in certain cases, we’re trying to be proactive in getting in front of acquiring certain materials on projects, so that we can try to manage any sort of supply chain delays. We had a little bit of that in Q1. I think you’ll see that continue in Q2 and three, and again, I think you’ll probably see that release in Q4. So nothing really unusual there other than that our business is expected to grow and we expect it to grow every quarter this year, so that drawn cash will be spread through the year, not all at one point in time.
And then in terms of CapEx, so if you – if you look at the chart we posted there, we had Bird in 2019 at $14 million and primarily just Bird in 2020, $14 million and then last year was even reduced with the combination of both as Stuart Olson and Bird at $12 million. When you look at our first quarter here for example, we had $5 million a good portion of that related to things that we wanted to acquire in 2021, but we couldn’t get delivery. So we had disclosed that as a contingent liability and then received those things in the first quarter. So you get a bit of a timing issue that way carrying into 2022 from 2021. Yes, I think you’ll see our regular cadence on project expenditures in Q2, Q3. You are going to see an increased spend as we roll out our technology platform. Yes, so in terms of order of magnitude I don’t usually give specific guidance, but I think you’re certainly going be north of $20 million for the year, maybe even in the $25 million range and then any variance from there is really just project driven variances, I suppose.
Chris Murray
Okay. That’s helpful. Thanks, Wayne. I’ll pass along and get back in queue. Thanks folks.
Wayne Gingrich
Okay. Thanks Chris.
Operator
Our next question comes from Frederic Bastien of Raymond James. Please go ahead.
Frederic Bastien
Good morning guys. Can you speak to the recent – can you speak to the recent changes at the board level and how they broadly strengthen your organization?
Teri McKibbon
Yes. So we’re certainly excited with the new directors that have come on board, obviously Jennifer Koury has got an extensive experience with large global firms more recently BHP and in today’s world having established leader with the experience in people and culture, obviously our organization is – it’s success is founded on our people and cultural strategy. And so certainly enjoying, having Jenn joined the Board.
Kim Fennell would be considered a global expert in Information Technology and certainly in recent – in a recent year, the last 12 months or so big uptick in the focus from Silicon Valley in construction. So getting a Silicon Valley executive with the experience he has from being in the inner circle C-Suite of Uber across a number of other companies, more recently serving on the Board of Ritchie. Certainly Kim gives us a real wealth of knowledge.
And lastly Gary Merasty certainly Bird has got a, I think an extensive reputation across Canada, working with various partners across a number of different sectors, There Gary comes to us with extensive experience in Western Canada, in the construction industry in Saskatchewan, and also as a Federal MP. So having Gary assist us and guide us with our indigenous relations strategy is tremendous and enjoying having him on the team.
So yes really excited about the new group, I think they’re well suited for the future of the company as the company evolves and but also sad to see two of our retiring directors who have been part of the history of the company for many years you know, 20, 30 years in our history and obviously guided us through some challenging times in the economy and so certainly want to thank Ron Munkley and Greg Doyle for those – for their contribution over such an extended period of time and so we’ll miss them.
Frederic Bastien
Great. Okay. Thanks Teri for that. Ontario’s residential construction sector is facing one of its largest strike in years currently and I guess the fear that this may spread into the ICI sector. Do you have any comment on, I mean the trend that’s happening here and it’s a tough question, but just wondering if you have any thoughts there?
Teri McKibbon
Yes. I think it does, we do expect that it’s going to affect our business here in Ontario. The timeframe is sometimes difficult to predict. In the residential side there is a term limit that there’s a six-week term limit that beyond that it moves to arbitration. So depending on how it evolves, there is a series of – there’s about 30 different agreements and trades that are in that sector. And about half them have ratified their agreements. So we are dealing with isolated areas. We do expect it will migrate to impact ICI. But again, it’s a – you’re right it’s a complicated question because it has a – it has multiple tentacles in terms of the various agreements we have. We have a lot of extra work right now. The extra agreements are not subject to agreements that would cause us this interruption of labor.
So, but yes, obviously we’d like to see these things get resolved. It’s a first time in many, many years that that this is happening. It’s not something we’re used to. So it’s a little difficult to predict the impact of it. Other than to say in the residential side, it won’t be longer than six weeks. In the ICI side it’s a little more complicated answer that as it evolves. But I’ve said before the unions in Canada I have a very strong leadership. We have a tremendous relationship with them and leadership is – their businessmen, they understand the impact of what this can cause and obviously in a very robust market right now. As Canada’s economy recovers, we just hope that there’s an semblance of fairness that is thought of as these conditions continue.
Frederic Bastien
Okay. Thanks. That’s all I have it folks. Bye.
Operator
Our next question comes from Michael Tupholme of TD Securities. Please go ahead.
Michael Tupholme
Thank you. Good morning.
Teri McKibbon
Hi Michael.
Michael Tupholme
Hey first question is just about the comment that you made regarding seeing increased employee absenteeism and intermittent supply chain challenges that affected the first quarter. So not surprised that you called those factors out, I guess what I’m wondering is, are you able to quantify what sort of an impact those factors had on revenues and margins in the quarter?
Teri McKibbon
Yes. I mean, we didn’t specifically disclose it, but if you think about it this way we did say last year in Q1 we have specific project sites that were shutdown. So it was a little bit easier to quantify and I think we had it picked somewhere in the $80 million, $90 million range. This year is probably less than that. It’s more difficult to quantify because it’s spread across a much broader range of projects, but in smaller impacts. But it’s probably not to the same degree as last year. But it’s not an insignificant number like I think you’re looking in the $50 million, $60 million, $70 million range for sure.
Michael Tupholme
Okay. And then any comment on how that would’ve impacted margins? There’s obviously less overhead absorption when you – when you experienced those factors. Just if guess the reported EBITDA margin was 3.8% can you talk at all about what sort of impact that would’ve had on the margin?
Wayne Gingrich
Yes. I think it was more like, our growth profit percentage is – take that time to impact and tax affected and you probably do have some overhead related expenses that go against that, But it’s not going to flow through at the same 3.8%. It certainly would’ve been additive to our overall EBITDA percentage because a lot of your G&A costs are fixed and you would’ve got leverage on those.
Michael Tupholme
Okay. And then looking forward, I mean, the supply chain challenges likely persist, I think, you sort of talked about that. I mean, the omicron impact, I suspect you called it that was more in the early part of the quarter. So I guess as we look forward to Q2 and I guess the rest of the year, I don’t know are you able to kind of talk about the extent to which these kinds of factors and maybe it’s again more on the supply chain side are likely to continue to be a headwind. And I guess you did call out the prospect or the expectation of improving rates of year-over-year growth in revenues. And on that point, I guess I’m just trying to understand is this sort of a step up in Q2 the year-over-year rate of growth in Q2 steps up versus what it was in Q1, and then it kind of runs at some sort of more consistent level? Or are you looking for that to ratchet up every quarter as you move through the year?
Teri McKibbon
I think plus or minus, you’re going to see the growth rate year-over-year in the high-single digit levels. And that obviously includes the addition of Dagmar in there when – when I say that. So somewhere between where we were in Q1, which is probably 7% and maybe in the 8%, 9%, when things recover from the pandemic a little bit, they are with the absenteeism we had there in Q1. Yes, I think certainly there’s always factors that that can have an impact on that. Right now we’re seeing less impact from the pandemic going into Q2 here. But supply chain issues we think will still persist throughout the year and we’re trying to manage those as best we can. The situation with the strikes that we talked about before, I mean, that can be a bit of a wild cartoon too depending on, on what turn that takes.
Michael Tupholme
Okay. No, that’s – that’s helpful. Maybe just two follow ups on all of that. I guess, first off can you talk a little bit about on the supply chain side, where is it that or what areas are you seeing the greatest challenges in? And then secondly, with respect to – that’s very helpful, your commentary about the rate of organic, or so the rate of rate of revenue growth, just trying to get a sense for the strike. I realize it’s – there’s a lot of unknowns there at this point, but could that be a situation that could materially change what you’re thinking about at this point for the kinds of rates of revenue growth you just called out Wayne or is this sort of more at the margin in terms of changes that that could have?
Wayne Gingrich
So, and I’ll answer this second one first on the strike is, ballpark 20% of our revenues in Ontario. So you can sort of look at it that way, but currently we have some slowdowns on sites because of the strengths that are underway currently so that these sites are not shutdown. They’re just – there’s some slowdowns, difficult to predict. What’s ahead over the next – on the residential side like I said, there’s a term that allows us to at least predict where that ends. On the supply chain side, it’s a combination of obviously escalation on certain materials. Shipping is not to be underestimated that shipping delays and shipping challenges throughout the world. And then lastly, the impact in of war in Europe obviously is creating on some of the specialized components that we would have on more complex mechanical, electrical equipment, things like that that might be sourced from European countries. There’s certainly some impacts there.
So, it’s a mix and it’s from one week to the next it ebbs and flows. And we work with our clients to find alternative products. And so, it’s more difficult to really in both the supply chain escalation and labor unrest gets it’s a moving target every week. So, it is difficult to put any kind of forecast to it. I wish we could, but it’s really difficult to do that.
Michael Tupholme
Okay. That’s helpful. Thank you. And then just last one in talking about the bidding prospect pipeline you highlighted the improvement in commodity prices is one of the reasons to be optimistic about the outlook. I appreciate the fact that in many areas, commodity prices have increased quite substantially. And so, like I take your point on the suggestion that this could be positive for the outlook.
I guess what I’m wondering is if you can comment a little bit more on some of the discussions you’re having with your customers, have you actually seen sort of a step up in the number of opportunities in the commodity and resources sector? I mean, obviously there is a big focus on capital discipline by a lot of commodity producers. So just wondering if you’ve actually seen and can talk about the kind of increase in opportunities, if there has been one so far, or if this is sort of more perspective, you’re thinking at this point.
Teri McKibbon
We you certainly see obviously speaking to oil and gas, when commodity prices are higher, they will do more, there will be more activity. It’s just generally the way it ebbs and flows. You’ll see more of the longer term work that they sometimes will not do when commodity prices are tighter. So you’ll see more of that type of activity. Then you look across, we’re really seeing obviously a higher demand now is mining. And you start thinking about the future electrification. Some of it is just driven by that. Some of it is related to higher commodity prices. So you get more metals that are utilized in electrification being mined and produced.
And you start looking at things like potash, obviously some big investments going into like, companies in Saskatchewan, such as Jansen with BHP. So big commitments there. That project is moving along.
You look at the new mining announcement we announced in Ontario. It’s the first big mining announcement we’ve had in Ontario for a while. So, you start to see some of those areas. And then you start seeing some of the diversification of energy with things like hydrogen, obviously pretty exciting with what’s happening and the commitments being made by governments and major producers too. And you start looking at the infrastructure that’s needed to fuel rail systems with hydrogens. A fair amount of, infrastructure is got to be built to be able to whether you’re using it for rail or whatever you’re using for it’s just a – so there’s some really exciting opportunities we feel that are evolving. So you go across all those sectors.
And then extending upon the potash idea of thinking of it as mining, but extending to ag a lot of agricultural efforts being made right now, big investments coming into food manufacturing. So we’re seeing a lot of – we have a tremendous resume in that area for delivering projects, complex scale food manufacturing facilities. We’re certainly a go-to for that type of thing. So we’re seeing a lot of opportunities there, and dairy and feed processing all that type of thing.
So, it’s pretty exciting. Unfortunately we have some impacts with supply chains and labor unrest, things like that, but we’ll get through that. And we expect to see some pretty robust activity as we get through those, I would call them, shorter term challenges.
Michael Tupholme
Okay. That’s very helpful. Thank you.
Operator
Our next question comes from Maxim Sytchev of National Bank Financial. Please go ahead.
Maxim Sytchev
Hi, good morning, gentlemen.
Teri McKibbon
Hi Max.
Maxim Sytchev
Teri, just maybe the first question for you. I mean, given generally speaking a pretty robust backdrop on, in for an industrial type work, do you think you’re going to be able to keep that 95% kind of low to medium risk contract composition from a backlog perspective on a perspective basis?
Teri McKibbon
Yes, I think so, Max, because what we’re seeing now is the larger projects in that space are all really moving towards an alliance water treatment are predominantly moving the IPDs. So, we’re seeing it now being used extensive progressive design build, we’re seeing a lot of those evolving. So yes, I think that’s what we’re really focused on and it’s one of the differentiators with us. We’ve been very focused on this now for three years and it’s certainly helping to bring better predictability to our performance.
Maxim Sytchev
Right. And in terms of Dagmar’s contract sort of risk profile how would you sort of qualify there?
Teri McKibbon
You are referencing the recent announcement or just…
Maxim Sytchev
Yes just in general, yes.
Teri McKibbon
Yes, so they’re a company that typically has had a tremendous, consistent track record working on what I would call predominantly unit priced projects that you see in the types of things they target. So we would quantify unit price type work in that sort of medium risk sort of profile. They’re not focusing in design bills, things like that, or the P3 type thing. So yes, it’s really impressive to work with that team and the depth of that team. And we really feel that team can be leveraged into other projects with the balance of the Bird team. And we’ve got a pretty extensive capabilities in Western Canada. So we’re coupling those together to look at opportunities that are evolving and extra-exciting in seven, eight months of that acquisition to be performing and heading with so many opportunities in front of us.
Maxim Sytchev
Okay, good to hear. And my last question pertains to the LNG Canada project. I think in the past, we’re thinking about sort of instrumentation, electrical pick up and activity on that site. Sort of circuit 2023, do you mind maybe just providing a bit of an update in terms of where you are in terms of the bidding process there? Yes, so I guess any color there, thanks.
Teri McKibbon
Yes, we’re very focused on the work remaining 2022 into 2023. A lot of it is just extension and remaining components of what we were currently doing. And we’ve had great success there. Our team on that side has performed at tremendous levels, given all the pandemic pressures and our clients on that side have been very pleased with performance. So we’re seeing all the gaps that project is going well overall at [indiscernible]. And we’re seeing just a number of opportunities to fill some of the gaps in the interface between the modules, and the foundations and scope of work on site.
So I’d say early days on some of the future works, a lot of this has been modularized, so it’s more that interconnection. There will be opportunities and we’ll see where that involves. But early days on that, I would say right now, Max.
Maxim Sytchev
Okay. But it should be still, I guess, in 2023, 2024, just so that we get kind of something like…
Teri McKibbon
Yes, probably more like, I would say more 2024, probably those types of more specialized areas in the funnel. Maybe mid-2023 into 2024.
Maxim Sytchev
Okay.
Teri McKibbon
But I would say right now, we’re very focused on the core assignments and the expansion of those as they continue to roll out. The big, some of the bulk work has been done now, there’s still a lot of work to do there, that’s not contracted yet.
Maxim Sytchev
Okay. Okay, that’s good to hear. And then in terms of potentially thinking about the second train, is this still a 2025 kind of like FID timeline or I mean, given LNG pricing right now, is there sort of any shadow on the ground in terms of potential accelerating this or is there even the ability to do some or not?
Teri McKibbon
Yes, so just to clarify the two trains, we’re building first two trains, and then phase two is two further trains. So, the first two trains are, like I said, proceeding extremely well, clients pleased, I think, the project is proceeding well. Obviously we’re not privy to the framework of where they are at relative to FID. There was an announcement, or there was a recent discussion around it was public in the in the press around studying whether Phase 2 could start earlier than 2025. I don’t have any color on that other than what I read that they were looking at could some of that start earlier. It’s not something we can really comment on because we’re not controlling some of that sequencing, but I would say that if I was – based on the success and the markets as you referenced, I would be highly confident that Phase 3 Train 3 and 4 is well underway in 2025.
Maxim Sytchev
Okay. Okay, that’s great. That’s it for me. Thank you very much.
Operator
Our next question comes from Ian Gillies of Stifel. Please go ahead.
Ian Gillies
Good morning, everyone.
Teri McKibbon
Good morning, Ian.
Ian Gillies
With respect to some of the government work you may be pursuing, are you seeing any change in behavior in that they may be looking to slow down just given what’s happening with inflation and so on and so forth, or there have been no change there?
Teri McKibbon
So far no change at our lens Ian. And there is such a multitude of things that are happening across the country with $350 billion in spending opportunities. So I would say so far no indications that there is any changes that are evolving.
Ian Gillies
Okay. With respect to the oil sands, once again, are you seeing any changes in customer behavior, either maybe adding in a bit more work or maintenance given the strength of oil prices or even potentially delaying because they want keep production as high as possible, where prices are robust to just anything interesting happening there?
Teri McKibbon
Yes it’s an interesting way to look at it. We typically see a higher demand when pricing is higher and more of the things that they should do are done versus just the minimal things are done in lower commodity price environment. So, I think, generally speaking, we would see a higher demand. We are seeing a higher demand and, I think, our resume and reputation continues to grow, and it continues to be new opportunities every quarter. I think we referenced, we signed $90 million of new opportunities in the first quarter in our MRO business. So, we’re continuing to see a pretty strong pace and we’re looking at opportunities outside of that core.
We had a very successful year in 2021 with a new non-oil sands client, which was TransAlta that’s expanding into further work. So, great performance there by our MRO team. And that was predominantly mechanical, which was also is unique in the sense that historically we were more predominantly electrical with the historical layered entity which was in oil sands since oil stands started.
In fact, we just spent three days in Fort Murray and [indiscernible] last week. So, we were able to with our senior leadership team spend a bit of time and get a good update from our teams. So it was time well spent and really impressive to see the scale of some of the things we’re doing.
Ian Gillies
Got it. Last one for me on the NTIB front, I know you guys have not been particularly interested in that path historically. Does it become any more interesting now, given what’s transpired with the share price and the outlook, which quite frankly doesn’t seem like it’s changed a whole lot?
Teri McKibbon
Yes, it’s certainly something that with our board on a quarterly basis, we talk about obviously opportunities, and options and framework relative to the various options that are available to us. But it’s not something that I would say is on the radar currently.
Ian Gillies
That’s helpful. Thanks very much. I’ll turn it back over.
Operator
Our next question comes from Gabriel Moreau of iA Capital Markets. Please go ahead.
Gabriel Moreau
Hi, good morning.
Teri McKibbon
Good morning.
Gabriel Moreau
About this Port Hope Area Initiative what exactly is the kind of work and contract that you think you’ll be able to bid on?
Teri McKibbon
So CNL is managing the remediation of a broad area that many years ago got contaminated with low level radiation. So part of that scope is it’s obviously we’re on an MSA with two other companies to work on various assignments. Some of them are related to landfill sort of management of this contaminated material. Some of them are broader where you’re going into areas in communities where there is contamination in the soil, and removing that soil and replacing it. I would say when you think about just remediating an area the various things that you’d need to do as part of that predominantly centered on contamination that’s in the soil.
Gabriel Moreau
Thank you. That’s it from me.
Teri McKibbon
Thank you.
Operator
[Operator Instructions] Our next question comes from Michael Tupholme of TD Securities. Please go ahead.
Michael Tupholme
Thank you. Just a further clarification on the Port Hope Area Initiative contract, over what time period would you be looking at doing this work Teri?
Teri McKibbon
10 years, Mike, right now it’s set at, I think, $1 billion but it’s a 10-year framework, 10-year program.
Michael Tupholme
Okay. And do you have a sense for how many other groups are sort of eligible? Like have a group of companies been selected and therefore are all sort of eligible to bid and how large you expect to?
Teri McKibbon
Yes three groups. So we’re one of three groups. And we’re all invited to bid on, I think, every assignment that comes out. I think that’s how it works. We bid on the assignments and move along.
Michael Tupholme
Okay. That’s great. Thank you.
Operator
This concludes the question-and-answer session. I will hand the call back over to Mr. McKibbon for closing remarks.
Teri McKibbon
Thank you everyone for taking the time to join our first quarter earnings conference call. I’d like to thank the entire Bird team for their efforts, dedication, and commitment to build safely, to build together and to build value for our company, our clients, our communities, and our shareholders. I look forward to updating you with our second quarter results.
Operator
This concludes today’s conference call. You may disconnect your lines. Thank you for participating. And have a pleasant day.
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