Ladies and gentlemen, thank you for standing by, and welcome to the Badger Infrastructure Solutions Ltd. 2021 fourth quarter results. At this time, all participants are in listen-only mode. Following the speakers' presentation, there'll be a question and answer session. To ask a question during the session, you need to press star one on your telephone. If you require any further assistance, please press star zero. I would now turn the call over to your host, Trevor Carson. Morning, everyone, and thank you for joining our fourth quarter earnings call. On the call this morning are Badger's President and CEO, Paul Vanderberg, and Darren Yaworsky, Badger's CFO. Badger's 2021 fourth quarter earnings release, MD&A, and financial statements were released after market close yesterday and are available on the investor section of Badger's website and on SEDAR. We are required to note that some of the statements made today may contain forward-looking information. In fact, all statements made today, which are not statements of historical fact, are considered to be forward-looking statements. We make these forward-looking statements based on certain assumptions that we consider to be reasonable. However, forward-looking statements are always subject to certain risks and uncertainties, and undue reliance should not be placed on them, as actual results may differ materially from those expressed or implied. For more information about material assumptions, risks, uncertainties that may be relevant to such forward-looking statements, please refer to Badger's 2021 MD&A, along with the 2021 AIF. Further, such statements speak only as of today's date, and Badger does not undertake to update any such forward-looking statements. I'll now turn the call over to Paul. Thanks, Trevor. As always, we would like to start the call talking about health and safety. We've been pleased with the team's health and safety response during this two-year-old COVID pandemic and all the related operating challenges that have come with it. The safety of our employees and customers is Badger's job number one. Q4 saw another spike in monthly employee COVID cases, with 5% of our operators in quarantine during the month of December due to the Omicron variant. This was slightly below the 6% level of quarantines we saw in August and September with the Delta variant. The Omicron surge continued into January, but February cases were down by 80% from January, and in March, we've just seen a handful. This is good news. It is also good news that the Centers for Disease Control and Prevention and most jurisdictions have loosened operating restrictions and return-to-work testing procedures, which have contributed to shorter quarantine times. Since Omicron hit us in Q4 and Q1, and not during the peak construction season like Delta did last year, combined with the way that cases have fallen off, Badger and our customers are in a good position for the 2022 construction season. If we think back through the past two years, Badger's COVID playbook of consistently following the Centers for Disease Control and Prevention guidelines has kept our people safe and met our customers' needs. We will continue with that approach, which has been led by Leon Walsh, our VP of Health and Safety, and his strong team, who have very successfully partnered with our operations team. We've managed through some extraordinary operating conditions over the past several years, but under all conditions, our operating practices remain the same, focused on Badger's objective of putting employee and customer safety first. On to the quarter. First, some comments on revenue. We were pleased with the continuing year-over-year market improvement during the quarter, despite improvement being uneven due to Omicron. Revenue of CAD 153 million in the quarter was up 17.7% from last year, continuing to reflect the market recovery that began in the second half of 2021. We also continued to see indications of improved energy market demand as companies reset their capital budgets early in 2021 and started getting back to work. This is a welcome change after several years of energy segment headwinds. Our revenue growth has also continued to outperform the year-over-year U.S. non-residential construction trends. This outperformance has been the case since April 2021. Q4 was a turning point for the U.S. non-res market after 16 months of a negative year-over-year trend versus prior year. Activity bottomed in October in U.S. non-res and has been growing versus prior year ever since. Regarding operating costs, with the uneven 2021 recovery, we experienced higher levels of direct labor costs than our historical trend has been, driven by the fact that it's more difficult to send employees home when activity levels are uneven in our strong labor market and also by the challenges due to COVID. The team continues to work hard to recruit and retain operators, which is a challenge, but achievable in the current labor market. We have seen some labor cost inflation, and as we discussed last quarter, have been implementing price increases to offset. Direct labor will be less of a challenge as our activity levels continue to improve and demand becomes more steady. Our Q4 revenue per truck per month, or RPT, of $29,600 was up 23.7% last year, growing more than our 17.7% revenue increase. Based on Badger history, we will see improved labor efficiencies as fleet utilization improves. The recent oil spike is a short-term operating challenge that Rob Blackadar and the operations team are focused on. Both procurement and pricing actions have been implemented. The reality with this challenge, though, is that every business faces it and that fuel recovery fees will be with us for the foreseeable future. It's manageable. We continued to manage our costs in all areas during the quarter. With markets shifting to a recovery mode, we reviewed all aspects of Badger's operations for efficiencies. This review resulted in a series of cost-cutting moves and a CAD 40.2 million charge in the quarter. These moves have good paybacks and will reduce our costs going forward. On the manufacturing side, given the continued year-over-year revenue and utilization improvements in Q4, and as we mentioned last quarter, we had been evaluating the need for a ramp-up of the manufacturing build rate. For 2022, we are currently planning to add between 150 and 180 units and retire between 40 and 60 units. This compares to 2021 addition of 32 units and retirement of 53. Our manufacturing team has positioned the plant well for higher production levels and more volume efficiency. We are also very well positioned for our supply chain components. This positioning is a plus for Badger's ability to place new equipment into service versus competitive manufacturers who are experiencing tight supply in truck chassis. Market indications are that equipment will be difficult to source over the next several years, which makes Badger's manufacturing and vertical integration more valuable. We also implemented a new manufacturing requirements planning or MRP system during the second half of last year. It went live at year-end. Our Badger manufacturing operation is now up and running on a modern MRP system integrated into our overall Oracle ERP platform. In January, we entered into a long-term lease for seven acres adjacent to the Red Deer plant. We're in the process of working through the facility and integration plans, but we expect that this addition will enable Badger to expand capacity beyond our previously stated level of 350 units per year on a single shift basis. More to come over the next several quarters as we firm up our plans, but we were very pleased to be able to take advantage of this opportunity, which really positions Badger for longer-term and future growth. Some additional comments on the 2022 outlook. We are well positioned for a busier year in 2022. We see pent-up demand across many markets, and the year-over-year trends are favorable. Labor and truck availability will make existing fleets, and especially fleets that are staffed with trained employees, in demand and more valuable. We incurred the cost of recruiting and training operators during the uneven recovery year of 2021, and we expect that this effort will pay off as demand continues to expand and activity is steadier. Fleet utilization and labor utilization go hand-in-hand, and both drive operating leverage. Another change that we made in the second half of 2021 that will impact 2022 and beyond was the strengthening of our operations team and addition of sales and marketing leadership. This is part of executing on a focused commercial strategy that targets the significant market opportunity that we see for non-destructive excavation and related services. Rob has strengthened the team with experienced Badger operations and sales leaders stepping up to broader responsibilities and new leaders with extensive industry experience joining the team. We are establishing a focused sales and marketing organization, including a national accounts function. This is exciting. The objective here is to aggressively leverage Badger's broad operating footprint, business scale, and extensive customer relationships more than we've ever been able to do historically. This is an advantage Badger has that none of our smaller competitors have. We expect that these initiatives will benefit growth and add operating leverage as they gain momentum during the rest of the year. Unless there are geopolitical or major macroeconomic disruptions, we see 2022 conditions to support continued progress in expanding revenue, increasing our operating leverage, and driving margin. As we said in past quarters, we expect that margins will return toward historical levels as the recovery continues. Now I'd like to turn things over to Darren for our Q4 results. Thanks, Paul, and good morning, everybody. Our revenue in the quarter, as Paul mentioned, was approximately CAD 153 million, and for the year was CAD 569 million, up over 17% and approximately 2% respectively. Gross margin was 19% and approximately 21% respectively for the fourth quarter and full year 2021. As Paul mentioned, we continue to invest in operators and key sales and operations personnel in anticipation of a market recovery. G&A expenses were approximately CAD 47 million for the full year. These costs were modestly elevated over last year's level to support the completion of the legal entity reorganization and the MRP system implementation that Paul mentioned earlier. Both the legal entity and the MRP system went live on January third of this year, and we continue to anticipate our normalized G&A run rate to be approximately $40 million annually. Adjusted EBITDA was approximately $70 million and $72 million respectively for the quarter and full year. As Paul mentioned, adjusted EBITDA reflects the approximate $4 million in cost-cutting actions completed in the fourth quarter. Adjusted EBITDA margins were 11% and approximately 13% for the fourth quarter and full year respectively. Again, these margin levels reflected the challenging conditions in 2021, the uneven business recovery, our continued investment in operators and strengthening our operations and sales teams. Now on to the balance sheet. Badger maintains a focus on ensuring the strength of its balance sheet and its financial flexibility. We've continued to make meaningful progress in accounts receivable management, particularly in the collection of long-aged receivables. As of March 14, 2022, approximately 70% of our receivable portfolio is aged less than 30 days, resulting in a DSO of less than 70 days. We're very proud of what we've done. In January, we repaid the final installment on our senior secured notes with Prudential, resulting in our debt being consolidated within our five-year committed credit facilities with our syndicate of banks. We continue to maintain over $40 million in committed credit facilities, which provides us ample liquidity and financial flexibility to fund both near term and long-term growth and the complementary capital allocation decisions. On the capital allocation front, we will be focusing our capital resources to support our planned new truck build program for 2022. Additionally, the board has approved an approximate 5% increase in our quarterly dividend to 16.5 cents per share or about 66 cents annually. The dividend increase will be included in the March 2022 dividend, which is payable on April 15. I'd like to remind everybody about a couple of changes coming in 2022, which we mentioned previously. First, effective with Q1 2022 reporting, we'll begin to report our results in US dollars to improve the comparability of our year-over-year results and to minimize the foreign exchange fluctuations, given approximately 80% of our revenues are generated in US dollars. Second, we'll also be changing the frequency of our dividend payments from monthly to quarterly, effective with the March dividend that I just mentioned previously. I'd like to turn the call back to you. Over to you, Paul. Okay, thanks, Darren. Just before we open it up for questions, our view of the significant U.S. and Canadian long-term opportunity for non-destructive excavation and related services and Badger's growth prospects is strong. The required focus on infrastructure that we all are well aware of in North America supports demand for our services. We stand ready to help strengthen and maintain that critical infrastructure and adapt it to the new sustainable technologies that are rapidly coming on. Badger's recovery from COVID continued in Q4. Activity levels picked up, and the year-over-year growth we saw in Q4 has continued into early Q1. We made the investments to hire and train operators, to strengthen our operations organization, to build our sales and marketing team, and to position our manufacturing for higher levels of demand. Badger's ready. Kevin, back to you for questions. Ladies and gentlemen, if you have a question or comment at this time, please star, then one key on your touchtone telephone. If your question has been answered, please remove yourself from the que, please press the pound key. Our first question comes from Yuri Lynk with Canaccord Genuity. Hi, guys. It's Yuri. Hi, Yuri. Hi, Paul. So I mean, not the quarter I was expecting anyway. I thought you guys would do a little bit better given the revenue lift. Paul, can you just talk about the sense of urgency that's at Badger to improve the margin situation? I understand there's a lot of difficulty on gross margin, but just your overhead, I mean, it continues to increase year after year. You know, I'm just wondering if you can reevaluate some of the investments you're making and maybe put them off to a better time when the revenue's there to better absorb it. Just how do you think about that, and what do you expect in terms of cost savings given the moves you did make in the fourth quarter? Yep. Well, I'll answer the last question first. We expect very good paybacks on those. You know, less than two-year paybacks, a lot of them less than one-year payback. Those were good moves for us. Regarding the overall cost management focus and the focus that we have and the prioritization we have, we have put some things in place for the longer term. This is a program we've been working on for several years. Things like the MRP system, you know, building up the operations team and the sales and marketing organization are actions that are gonna benefit us, seeing a lot of benefit, we think, as we get into the second half and beyond of 2022. These are actions that we really need to take to position Badger for the long term, to match up with the long-term market opportunity. Timing, you know, had we known we had two Delta variants during the year, one during our two busiest months in Q3, when we also had a major emergency response, you know, perfect hindsight is something we didn't have. Your question on timing is a good one. I can tell everyone on the call that it is all hands on deck on driving margin. It's not only cost management, but it's also revenue realization and pricing. You know, that is an aspect of the strengthening of our sales and marketing team with the type of professionals that have come in under Rob's leadership that are skills and experience that Badger has not had historically. You know, I view this as a pretty significant reset of our operations team and the leadership skills, and the marrying up of some strong historical experienced Badger operators with some new talent that comes in with a different way of thinking and, quite frankly, a very serious modernization of both our go-to-market strategy and things like pricing, national accounts, the whole suite of sales and marketing that can really drive the opportunity that Badger has. You know, the timing's not the greatest, Yuri. You know, we've had that discussion the last several quarters with the board. The moves are the right moves for the company longer term. You know, the only thing I can say is we're just gonna have to prove it each quarter, not only to ourselves, but to all the analysts and investor community, and that's something we talked about yesterday with the board actually. Okay. My second one is on the build. I mean, why do you want to build 165 odd trucks in 2022? I mean, your the RPT annualized is still well below an optimal level. Do you still have a lot of slack in the fleet? It looks like you're struggling to staff the fleet that you have, and your stock price is at or near a 52-week low. It might be better to buy back stock here. Just your thoughts on that, and if you could tie in the current truck economics given the substantial increase in manufacturing costs you experienced last year. Yeah. Well, we wanna make sure we have the trucks there, and the demand there, as some of our sales and marketing programs kick in. You know, I can't comment too much on the current trends we're seeing, but it's been a very solid start to the year. As I said, our year-over-year trends in early Q1 have been very positive, and we're seeing a very positive year-over-year growth going forward for 2022. The RPT and the utilization dynamics we expect are gonna change as we get into the summer season and beyond. We wanna make sure the trucks are available and that's the purpose behind the increased build. You know, I think you've seen Badger for a number of years. This is a similar scenario that we had in Q1 of 2017 coming out of the oil and gas downturn, where we announced a higher truck build where the RPTs were still climbing their way back up. Very, very similar type of recovery scenario from that perspective. Regarding back then, Paul, it cost CAD 400,000 to build a truck, and now it costs CAD 550,000 to build a truck. Yeah. Well, if you take a look at the cost last year, we're at a very low volume rate. There's about a 10% swing just in volume impact from the rate we had last year to a more normalized build rate. Inflation is there on truck components, that is a fact, and that's one of the reasons we brought in a new ops leader with Rob and are building up the ops organization that, you know, the value of these units need to be realized. That's a big focus from the team. Revenue realization is a real focus along with pricing. I think the good part of what we see coming the next couple of years is that trucks are gonna be in quite short supply in the industry and that they're gonna be hard to get. We think there's gonna be a lot of value for having more iron on the road staffed up with operators, in the next year or two than a lot of people realize. That's the thought behind the increased build. Okay. I'll turn it over. Thanks, Paul. Okay. Thanks, Yuri. Our next question comes from Michael Doumet with Scotiabank. Hey, good morning, gentlemen. Good morning. I wanted to dig into the gross margins here. You know, as you discussed, for margins to normalize, it seems like there's an element of operating leverage, of pricing, and of cost control. Any way you can break that down for us so we can better understand, you know, which of the three, you know, are expected to be the biggest driver for the margin recovery? I guess what I'm trying to get at here is really, you know, as we think about 2022, you know, how much of the margin recovery will be higher RPT versus lower cost? Yeah. No, but thanks for the question, Michael. You're right. It is a combination of all three of those things. The aspect of the truck utilization and labor utilization is one that is not well understood broadly about Badger's business. Those two do go hand in hand. When you take a look at RPT and gross margin, there's a very high correlation between those two historically. The other part of our business model is that we are a very heavily labor-intensive business model. When you're not leveraging your labor effectively, you lose operating leverage. That's been the case for the last several years with the uneven levels of activity. We see a very significant potential as our volumes recover, but more importantly, as our volumes become more stable and we don't have the variability to not only see improved truck utilization, but significantly improved labor utilization. That is a major factor in our focus from the operations side, and especially given how tight the labor markets are. You know, in the last year and I talked about it a little bit in my comments, but when you have the labor market as tight as it is, if you don't provide your operators with steady hours, they have alternatives. That's been a real challenge, and that's part of why our labor cost, which is the direct labor cost on the trucks, which is our highest operating cost, has been higher than it has been historically. Our folks in the field tend to keep folks on the payroll rather than sending them home just because they know folks have alternatives. As we get busier, that factor will fall away. There's a significant amount of direct labor cost operating leverage that's very closely tied to our fleet utilization rates. Then the other one. Okay. That makes it. That makes it. Oh, sorry. Go ahead. No, no, I'll let you finish. It's a call. No, it's okay. I started with that one because direct labor is by far our biggest operating cost, 35%-40% of our total revenue, so huge focus area for us. Then the other one is revenue realization and pricing. Badger historically, you know, Yuri asked a question, you know, "Why have you put the cost in to build up operations in the sales and marketing organization?" Badger historically was run as a very decentralized business, and each individual branch basically drove their sales and marketing strategy and also their pricing strategy. You know, that was a very successful model for many years. Because we've gotten so big, you know, we have significant opportunities to drive our operating scale, with, you know, deals with national accounts that we overlap with in many, many states and provinces. That has significant opportunity to help us on smoothing out the volumes. That is an initiative I'm very excited about, and I just talked about the linkage with operating leverage on direct labor there. Pricing is another area that we're really digging into in earnest, and there's not only the opportunity to plug revenue leakage, which is 100% price realization, but also to be much more strategic about how we price and think about the strategies in each of our regional markets. This is something that was devolved to each individual branch manager historically in Badger, and we're now taking an approach to be driving that much more strategically. We think there is significant opportunity for revenue and profit improvement in that side of Badger too. Those are the two real major levers. You know, both of them are targets of the strengthening of our ops team and especially bringing in very highly experienced proven sales and marketing leaders. Got it. I mean, they seem like solvable issues, again, if the macro continues to move in your favor. Maybe to ask a follow-up, I mean, what are some of the obstacles to getting higher pricing, just in terms of thinking about the competitive dynamics? Yeah. Well, I mean, in the hydrovac business, there's always competitors. I mean, we've always had competitors. The dynamics are local in each and every local market, and that's part of why we're looking to raise the bar and take a more of a national account approach, you know, with our top 100 customers. There is huge value in this top 100 customer base of having the ability to make one call and have service provided. No one else can even come close to Badger on this. So it's really the value that we provide. As I talked earlier, that can really help us on the utilization side. No, go ahead. Oh, I was just- The other- Acknowledging your response. Sorry. The other part of it is just making sure we're plugging any revenue leaks and administratively making sure we are billing everything that the customer's already agreed to pay. Rob Blackadar and Darren have taken a real focused approach together with our field back office and focused that under a very talented head of our IT to make sure that we're driving all the IT system capabilities and making sure our admin is very efficient, making sure that all those revenue leaks are plugged in. That's low-hanging fruit. There's a theme here in everything we're talking about in your questions, which is improving our operational implementation and our operational execution. That is a major focus for us. That's understood. I don't want to go on here for too long, but I did have another question. You know, based on some of your disclosures, I think you had about 130 trucks that were becoming, you know, of age, I think that's 10 years, in 2022. Instead, you're retiring 40-60 this year. Can you comment, you know, at a high level as to whether, you know, what you're looking to do here is flatten out the retirement schedule for the next couple of years and, you know, how much flexibility you have? And then, you know, what are the implications for margins as, you know, you're thinking about running an older fleet? Yeah. No, that's a great question. A couple of comments on that. You know, we continue to look at the retirement profile and, you know, we've also strengthened our fleet operations. You know, we're really looking to sweat the assets a little harder and get more economic life out of them. As you say, maintenance and repair expense in the life of the truck is a trade-off. We're looking at that much closer than we ever have in the past. If you recall, we started talking about a more focus on utilization and squeezing more utilization out of the trucks. That goes hand in hand with incremental expenses and repair expense decisions. We're looking to sweat the assets harder because that's our biggest chunk of invested capital at Badger. The other side, I think all of us on the call are gonna be hearing more and more about this in the coming months, but there's a real pinch in availability of trucks in North America. A fleet is gonna be worth a lot. We wanna make sure we have enough fleet to meet demand with markets recovering. The fact that we have trucks available are gonna make Badger first call, versus other companies that are gonna have trouble putting trucks on the road. That's why we're so pleased about our supply chain position with chassis. That's why we're increasing the build to have the trucks available. We see this as a several year opportunity. You know, with a lack of ability to get as many trucks on the road that many industries are gonna see, trucks are gonna be more valuable, and that should translate into price. Thank you for the comprehensive answers, Paul. Okay. Thanks, Michael. Our next question comes from Maggie MacDougall with Stifel. Good morning. How are you doing? Hey, Maggie. I wanted to just touch on the restructuring activities of Q4 and talk a bit about any cost savings or efficiencies that are gonna come from those in the upcoming year that we would not have seen in the past. Yeah. Darren, do you wanna jump in on this one? Give my voice a rest for a minute. Yeah, certainly. Good morning, Maggie. The restructuring costs were around $4.2 million, and it was broken down into three broad buckets. One was branch operations, where we look to consolidate branches to cover a geographic area more efficiently, and those costs will be sustaining. We also were developing some technology on the soil management side of things that you know, we're looking at different alternatives. That was another piece of the business that we had decided to focus our efforts elsewhere. The final piece was looking at our real estate portfolio and just understanding the best way to be able to save those costs, and those costs are sustaining as well. Of the roughly $4.2 million in expenses, we anticipate an annual savings of about 60%-75% of that, going forward. Okay. You know, you've always sort of guided to a long-term goal of getting to 20%-29% EBITDA margin. I think the goalpost kind of keeps moving just because COVID's hung around for longer, and there's been little things internally that you've been doing to better improve the operating profile of the business. Is that margin target still intact for the long term? Yeah. We don't see any change in that, Maggie. You know, especially when we take a look at the sales and marketing opportunities that we talked about a few minutes ago, that really were not part of Badger's business model before, I am confident that those opportunities are very reachable. Okay. With regards to 2022, we're mostly finished Q1 at this point, and I imagine you have some indication on Q2 and how things are gonna shape up for the spring. Has there been a significant year-over-year change in activity levels in your key markets? Can you speak to the impact of more activity in the energy patch versus what we've seen in the past several years? Yeah. Well, I mean, it's nice to see energy turning around. It took a long time. It was about a four or five-year headwind. You know, the bottom really got in in Q2 last year when the companies really reset their capital budgets after having them mostly in abeyance during COVID. It takes a while for that work to get going. We're seeing a very robust portfolio in the pipeline segment and in field work and facility work that we haven't seen in the last several years. You know, it's about 20% of our revenue these days, not as much as historically, but very welcome. That one's very good. You know, the year-over-year monthly revenue trends, as I talked about in our prepared comments, are very favorable. That's continued from Q4 into Q1. That's part of why we're looking at the truck build the way we are. That's part of why we've continued to hire and train operators. You know, we paid the price for that in Q4. We paid the price for hiring and training operators in Q3, quite frankly, too. We are in a better position operator-wise by far this year than we were last year. We're ready. You know, I mean, I don't wanna exude too much optimism, but unless we have some major dislocation that's broad geopolitical or macroeconomic, we're looking forward to a much better opportunity to drive revenue and also drive operating leverage as the year progresses. We think it's gonna be better in the second half than the first half, but the opportunity is coming. Okay. Thanks, Paul. Yeah, thank you. Our next question comes from Jonathan Lamers with BMO Capital Markets. Thank you. Hey, Jonathan. Paul and Darren, revenue was up CAD 10 million last year. Direct costs were up CAD 55 million. My question is there any way to estimate the portion of the direct costs that could be unusual, by looking at metrics like operator hours paid while the trucks were idle, or operator hours spent in quarantine, or overtime hours, you know, versus normal levels of overtime hours? Do you have any pieces you can give us there as we think about a, you know, more fair gross margin for this business? Yeah. Well, we track a whole lot of things like that, and I can say that, you know, with the uneven recovery in COVID, you know, the things that really hurt with COVID, you know, when you have 5% or 6% of your operator base in a particular month in quarantine, you know, you do have higher overtime to cover the work, because you don't have someone in the truck. You're driving further to cover work for other branches. You have more overnight work and subsistence meals, hotels, things like that to cover work. So, you know, months like that hurt, and there's no two ways about it. You know, December was one of those months. We had two of those right during the peak of our construction season in August and September. The other thing is that when we have that type of a COVID hit, all of our customers are having one too. You have a lot of disruption just with job sites and customer activity too. That's why we're so cautiously optimistic about what we see coming into this spring, given that the Omicron variant's dropped off so far. We track an awful lot of things, not statistics that, you know, we would like to start publishing or are able to start publishing. You know, we track non-billable hours, so hours that, you know, are paid but not billed. Major focus for us and a major pricing opportunity in an internal improvement, one of those price leakage things I talked about earlier. You know, when you get past that, you got overtime management, non-billable hours. You have mobilization, so how much time are you mobilizing and driving to get to a job site? Is that billable or not? You know, those are all things that we track. Direct labor is the big bucket we focus on because, as you say, it is our biggest cost. Okay, thanks. As the company sets its incentive plans for this year and what's required for target payouts, would 15% EBITDA growth from 2021 be adequate, or are you also requiring some margin improvement to get targeted payouts? Yeah. Yeah, Jonathan. You know, we have a real focus internally on operating leverage and margin for 2022, and I think that's gonna continue to be our focus just because we have a number of execution and business improvement opportunities. You know, we don't have 2023 internal incentives in place yet, but 2022 is gonna be a year of focus on business improvement and execution improvement. That's why I'm so pleased with Rob's activities his first 7 months. You know, we gotta keep in mind that he just got his regional organization and his new sales and marketing organization actually announced and in place at the beginning of January. Early days, but we're pretty pleased with what we're seeing so far. Just on pricing, usually in the MD&A, there's a comment about average hydrovac rates. I didn't see that. How did pricing in Q4 compare to prior year? Yeah. Pricing would have been slightly higher and we've actually continued to focus very closely on that. My view is that we're gonna have progress on pricing as 2022 continues. I think that longer term, as we get later into the year and into next year, given how tight we're seeing the truck chassis market and the ability of companies across many industries to add equipment, there's gonna be more value in fleet, and there's gonna be more pricing opportunities. As we sit here today, the lead times for our heavy-duty chassis are at a year. Yeah, those are really long. What kind of That's long, Jonathan. What operator wage inflation would Badger be experiencing relative to that slight increase in pricing? Yeah. Well, we have seen some wage increases. We tried some retention bonuses in the third and fourth quarter last year, and you know, we continue to look at all that. You know, we are very focused on pricing to offset direct labor cost increases. Then the other thing that we think's going in the right direction this year, based on what we had with our two COVID flare-ups last year, is the labor utilization. That one, we see as a very significant opportunity. As truck utilization increases, the utilization of labor will really help our margin. Last question for me, just on the new sales office that Rob has set up, are there any early wins that you'd like to share with us at this stage, or is it too early to say? Yeah. It's pretty early to tell, but my personal view and I you know Rob can speak for himself maybe next quarter is that you know if you look at some things that are unique to Badger national accounts is probably top of the list in my opinion. We have the scale and the scope of operations with a lot of major companies but historically we've dealt with them on a branch-by-branch basis. You know the focus that Rob's put in place there I think particularly is gonna really make Badger different and differentiate us in many ways from smaller competitors. That's a part of my optimism and that's also why I wanna have enough trucks for Rob's team. Thanks for your comments. Yeah. Thanks, Jonathan. Our next question comes from Krista Friesen with CIBC. Hi. Thanks for taking my call. I was just wondering, like, is there a level of inflation, whether it be in fuel or in labor costs that could result in structurally lower margins for Badger and maybe not hitting that 20%-29% target? Yeah. The way we look at it is, it's not really so much the level of inflation, it's how we manage it or pass it through. I'll give you an example, Krista. You know, we've had a recent oil price shock, and you know, we've had a fuel recovery fee in place now for several years. We have a mechanism that auto adjusts. Obviously, we're looking to update that and make sure it's really tight, and lots of opportunity there. Because we've had that mechanism in place, the price shock is not as big. You know, you get a lag because we've been adjusting it historically once each month, but once you get through that month, the mechanism works. You know, that's one that you get a lot of press on, but that's one we're very much on top of. Then, you know, the key, and it's part of Jonathan's questions earlier on labor, is it's really incumbent on us to make sure that we're staying ahead of cost increases and factor in cost increases from inflation on labor. That is our biggest expense. You know, quite frankly, that's an execution opportunity, and we just need to execute on that. With fleet being in shorter supply the next couple of years, I think that's gonna be a tailwind for us in our ability to execute. But we can improve our execution there, and that's something we're very focused on. Okay, great. That makes sense. Just as we see a bit of a rebound here in the oil and gas industry, is there a different margin profile with that sort of work, or would it be similar to what we're seeing from the other industries that you operate in? Yeah. Well, there's a different margin profile in different types of work, and it's part of it's industry to industry, but part of it's also how much utilization you can drive. For example, if you have a truck that's out, or four trucks that's out on a pipeline, and it's every day for 10 hours, and the same operators go to the same place every day and get dispatched, that's really efficient. If you have a truck that is chasing around an urban area and you're doing you know two jobs in a day, and we're trying to stack jobs and you know keep the utilization up, that's a whole different margin dynamic there. You know, it's not only segment different, but it's also the type of work. You know, that's the other reason I'm so excited about national accounts because you know, those are accounts that need hydrovacs every day. As those relationships grow, that's gonna help us on the fleet and labor utilization. Okay, great. Just, can you comment on how you're looking at top line growth for this year and the growth that you're seeing or the initiatives that you're working on to grow in your core markets and your strategic markets? Well, I can't really comment specifically on the top line growth we're forecasting for this year, but we have been pleased with the year-over-year growth we've seen so far in Q1. We're ramping up the fleet and making sure we have the operators to be able to take care of that. You know, regarding the initiatives and what we're doing to drive revenue, you know, there's an awful lot on the way and underway. You know, but it's still early days, as I said a few minutes ago, on our new sales and marketing initiatives. The important thing is a lot of these initiatives are activities that Badger has not done historically, with our decentralized, go-to-market model. Perfect. Thanks. That's it for me. Okay, thanks, Krista. Our next question comes from Trevor Reynolds with Acumen Capital. Morning, guys. Hey, Trevor. Just curious a little bit on the MRP and what the potential savings and on that front. You mentioned 10% on volume for decrease in the cost to build trucks. Just wondering what the impact the MRP will have. Yeah. We're actually really excited about how the MRP system is working and pleased with how the implementation went. Just to unpack some of the numbers that were mentioned before. For 2021, our cost fully loaded with overhead absorption for a truck was around CAD 550,000. That compares to 2019 levels of around CAD 450,000. To Paul's earlier point, once you start getting manufacturing volumes back up into the numbers that we're talking about for our build program, that takes the number down about 10%, so the high 400s. We also believe that the sequencing, supply chain, and componentry management that we'll get out of the automation of the MRP system could conceivably get us another 10%. We're optimistic that, despite some of the inflation that we're seeing, we could potentially get manufacturing costs back down to the 2019 levels. Great. Then are there any, you know, choke points in terms of the supply chain? You guys mentioned you're well positioned in terms of chassis, but any other potential supply chain issues in terms of the manufacturing build? Well, Trevor, chassis are really the big one. You know, we really made our commitments early on. You know, as I mentioned earlier, with lead times out to a year, everyone is making commitments earlier. That is a major focus for us. We did make commitments early on. If you think back historically what was going on in Q3 with Delta and all sorts of disruptions, you know, we made the moves we had to make, and we're very pleased with those moves. We're in a very good position. You know, we're hearing about competitive hydrovac manufacturing plants that you know, have to find a chassis before they build one. We have our supply chain working quite nicely there. We are very pleased with the positioning we have, and, you know, I'm personally delighted that that's coming together at a time when the sales and marketing team is getting up and running and building momentum. When Rob first joined Badger, one of his first questions to me is, you know, as we get things cranking here, are we gonna have enough trucks? We wanna make sure we have enough trucks for this team. Got it. With the cost restructuring that you undertook in Q4, do you see any more coming down the pipe here in 2023? Don't see it. We, you know, took a hard look at midyear, and we said, "You know what? With Delta, you know, another kick in the gut during 2021, so let's sweep out all the corners and uncover everything." We're pretty well positioned for a good couple of year run here from a, you know, a whole system network perspective. You know, we dropped out 12 locations, and with our sales and marketing strategy, we are looking to really drive more volume, broader customers, and deeper with our existing customer accounts through our existing network. That's a different commercial market focus than we've done historically, which is adding dots on the map. You know, if you think about that change in focus that we couldn't do previously because we didn't have the sales and marketing leadership, this leverages our cost structure differently than adding dots on the map. You know, you think about operating leverage and you know we need to be obviously successful with those sales and marketing plans, but it flows through the system of existing fixed and semi-fixed cost structure very differently than starting up new branches that has a lot of greenfield expense. This is a different focus and a different approach. The good news is, you know, when you look at our core and strategic markets, the good news is our analysis indicates that the opportunities to broaden the customer base are real, and they're there. It's all about execution. Got it. With the fleet movement that you did in closing those offices, you know, maybe just, is there any early, you know, changes in utilization that you can speak to? Or is there any change in industry exposure that you can touch on? Yeah. A number of the branch consolidations were historical locations in some of the oil and gas markets. You know, we're not backing out of servicing any territories. It's just the way we're doing it. We're very well positioned, and we may be driving farther to meet some jobs. You know, some customers may not wanna pay mobilization, so we may lose some work to some smaller local competitors, but you know, we have other places to move that equipment to, and it benefits our overall operating leverage and our overall margin to do that. You know, those are decisions we took very intentionally. Thanks very much. Have a good day. Thanks, Trevor. Next question comes from Yuri Lynk with Canaccord Genuity. Paul, can you just clarify your expectations for the first quarter? You mentioned we're off to a strong start to the year, but you also talked about Omicron running into the first quarter. How do we think about that? Yeah. Omicron in January was about like December, where we had 5% of the operators in quarantine for a period. Very similar to December. We've been very pleasantly surprised with how fast the cases have fallen off. Like in March, I think we have under 10 in the entire employee base. That's a real positive. You know, the good news, I guess, if you could say there's good news is we had Omicron in December and January, which is our slow season. You know, we're looking forward to the things going pretty solid from here. As I said in the prepared remarks, Yuri, our year-over-year growth in early Q1 has been very good. Okay. We shouldn't expect any kind of meaningful inflection in gross margin given the quarantine and stuff like that. Is that how we should read that? Yeah. Well, the whole quarter's not written yet. You know, when you see that type of a COVID impact in a month, it makes for a very challenging month. I mean, that's just a fact. We've been living that now for a couple of years. You know, tough start to the quarter, but you know, it's turning around very quickly. Okay. Just conscious of time here, but any details on the Red Deer expansion, like what kind of timeline, cost, pro forma capacity? Yeah. Well, as I said in my prepared remarks, first off, to give a little more background, this was an opportunity that did not exist. It came up with an adjacent property, became available, so it was truly a needle in a haystack, and we jumped on it. The team is working through facility layout and integration as we speak. You know, we're looking at a pretty significant expansion above our current stated 350 truck per year capacity on a single shift basis. I can say that the capital requirements are modest, and I would stress the word modest. That's the other part of this that's pretty exciting. There are buildings there, and we're also consolidating. There's actually cost savings to it. We're actually consolidating three remote shops that were scattered around Red Deer into this one integrated facility, which gives you all kinds of operating efficiencies. We were hauling parts around town on flatbeds back and forth, and we're eliminating all of that. Cost savings, safety improvement, efficiency improvement, all of the above. It really was a needle in a haystack, and that's why we jumped on it. Capital, the capital is very modest. That's part of why it's so exciting. Got it. Sounds good. Okay, thanks, Paul. Yeah. Thanks, Yuri. I'm not showing any further questions at this time. I turn the call back over to our host for any closing remarks. Okay. Thanks, Kevin. We appreciate everyone's participation this morning. On behalf of all of us at Badger, we wanna thank our customers, employees, suppliers, and our shareholders for everyone's ongoing support and working with us to drive Badger's success. Thank you. Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.