CIBC BDGI: Touring Toronto Facility
We had the pleasure of hosting BDGI for dinner, and visiting one of BDGI’s Toronto, Ontario
facilities. With us from BDGI was Rob Blackadar, President & CEO; Rob Dawson, CFO; Lisa
Olarte, Director, Investor Relations & Financial Planning and Analysis; and Paul Ayotte,
Regional VP. Having seen a demonstration of hydro excavation, we come away from the tour with a better understanding of BDGI’s competitive edge and the strong culture the company has created.
• Continuing To Grow Sales: We heard a clear message of growth from BDGI
management when we were touring the facility, which shouldn’t come as a surprise as
the company is targeting a revenue CAGR of 12% - 14% from 2023 through 2027. BDGI
already has a network which spans Canada and the U.S., and is focused on increasing
penetration in its markets. Non-destructive excavation continues to be in the early stages
of adoption, particularly in the U.S. BDGI noted that there is still significant need for
education on the benefits of non-destructive excavation, though there has been a
significant increase in safety and legal trends supporting the rise and adoption of hydro
excavation. In addition to market share gains BDGI is keenly focused on building out its
National Accounts program which we discuss below.
• Addressing Concern Regarding Canadian Market Q1 Weakness: Perhaps the
biggest concern for investors, following Q1 earnings, was the weakness BDGI
experienced in Canada. The company attributed the slowdown in Canada to the delay of
several projects. Though it represents only a small portion of the business (~15% of 2023
revenue and ~12% of 2023 adj. EBITDA), some worried that weakness in Canada was a
sign of future softness in the U.S. To address this, BDGI noted that due to the much
smaller scale of the Canadian market, it relies on fewer projects to derive revenue,
meaning a project delay has a much larger influence on performance in Canada versus in
the U.S. We would note that we do not see a contagion risk, and we view the large
projects in Canada as likely pushed out rather than lost.
• Benefitting From National Accounts Group: BDGI’s size and National Account group
is what sets the company apart from its competitors. BDGI’s National Accounts
significantly simplifies the excavation process for its customers. Badger makes itself the
one-stop shop for providing non-destructive excavation and infrastructure solutions for
large, more complex customers that have operations across North America. By doing so,
Badger positions itself as a strategic partner for its customers and often achieves
preferred vendor status, which provides Badger with early access to future workflow and
project planning across the customer’s North American network. While this helps drive
revenue and is one of the reasons the National Account’s group growth is outpacing that
of the broader company, these large multi-year projects also provide BDGI with
consistent workflow and volume throughout the year, regardless of seasonality. BDGI’s
National Accounts is a key differentiator for the company. No other non-destructive
excavation company has a footprint as far reaching as BDGI, nor the ability to provide
consistent service across North America.
• Working To Improve Margins: BDGI continues to make changes aimed at improving
margins and strengthening the business. At its 2024 Investor Day, the company
highlighted its goal of achieving RPT of US$45,000+. While touring the facility we
received an in-depth overview of the company’s trucks. What sets BDGI apart from its
competitors is the fact it manufacturers its own trucks, which allows the company to also
incorporate new technology much faster. For example, the company is working towards
implementing a technology that warns BDGI, in advance, if it senses a problem arising
with the truck. This gives Badger the option to fix an issue before it becomes a major
repair, which maximizes the truck’s utilization time. When possible, Badger also now fixes
some issues electronically. Another cost effective decision made by Badger was to
implement Lytx technology, which tracks driver responsiveness while driving, and
enforces safe practices. Not only does this technology save the company money on
insurance, but it also keeps drivers safe, a fundamental principle of BDGI. The company
also noted better retention rates, as it benefits from internal hiring and using surveys to
implement employee suggestions