North American Construction Group Ltd

third quarter ended September 30, 2024. At this time, all participants are in a listen-only mode. Following management's prepared remarks, there will be an opportunity for analysts, shareholders, and bondholders to ask questions. The media may monitor this call in listen-only mode. They are free to quote any member of management, but they are asked not to quote remarks from any other participant without that participant's permission. The company wishes to confirm that today's comments contain forward-looking information and that actual results could differ materially from a conclusion, forecast, or projection contained in that forward-looking information. Certain material factors or assumptions were applied in drawing conclusions or in making forecasts or projections that are reflected in the forward-looking information. Additional information about those material factors is contained in the company's most recent management discussion and analysis. which is available on Cedar and Edgar, as well as on the company's website at nacg.ca. I will now turn the conference over to Joe Lambert, President and CEO.

Thanks, Laura. Good morning, everyone, and thanks for joining our call today. I'm going to start with our Q3 2024 operational performance before handing over to Jason for the financial overview, and then I'll conclude with the operational priorities, bid pipeline, outlook for the remainder of 2024, and expectations for upcoming winter works in 2025 before taking your questions. On slide three, our Q3 trailing 12-month total recordable rate of 0.39 improves upon our Q2 results and remains below our industry-leading target frequency of 0.5. We continue to advance and improve our health and safety management systems, with recent focus on hazard analysis, frontline supervision effectiveness, and automatic testing. Naturally, at this time of year, we ramp up our winter preparedness in Alberta. Oddly enough, we'll also be commencing preparation for our summer programs in Australia with heat, hydration, and cyclone weather as recurring topics. On slide four, we continue to be recognized with industry awards in both safety innovations and leadership. Nothing makes me prouder than seeing our employees being recognized by our industry peers as being safety leaders. Across our business, we consistently see employees dedicated in living our core value of getting everyone home safe. On slide five, we highlight some of our major achievements of Q3. Although having a record quarter for practically every financial metric we measure is a fantastic achievement, It was likewise pleasing to see all areas of the business performing at or above expectations. Our Fargo and Nuna joint ventures finished off their busy summer season as expected. Our oil sands business continued as planned, and our Australia business continues to outperform. Australia also commenced the ERP rollout, received the final equipment ship from Canada, with expectations to have them all put to work by the end of the year, and achieved record quarterly fleet utilizations. Our contracts and procurement team were also busy finalizing a parts and component supply agreement with Finning in Q3. The new agreement reestablishes a strong vendor partnering structure, which we believe will improve fleet reliability and lower costs while supporting our in-house maintenance program and growth plans. We see Finning as a strategic partner and look forward to increasing our work together going forward. Moving on to slide six. You can see that the aforementioned Q3 record utilization of 84% in Australia was just a hair below our 85% target utilization. Our Canadian fleet improved to 51% off the Q2 low of 42%, and we expect the Canadian fleet to be back in the 60s at year end and remain there through our busy winter season. We remain on trend and confident in our ability to hit our target of 85% in Australia early in the next few months. In Canada, we expect to achieve our target range of 75% by the end of next year. With that, I'll hand over to Jason for the Q3 financials.

Thanks, Joe. Good morning, everyone. Starting with slide eight, the headline EBITDA numbers of $106 million and 29% margin were driven by another successful quarter from Australia. We have now posted four successful quarters in a row with growing quarter-over-quarter results. Combined gross profit margin of 22% illustrates strong operational performance. We included a comment here about our oil sands business, which, although down from last year's top line revenue, is posting more consistent quarter-to-quarter results than in the past and generated an 8% increase from the second quarter on improved site conditions and steady usage of the equipment. The improved consistency is due to the nature of the contracts in the oil sands which are now focused on more steady time and material and rental arrangements. Moving to slide nine and our combined revenue and gross profit. As we will have for this last quarter now, McKellar provides step changes in quarter over quarter variances. Our wholly owned businesses were up $90 million quarter over quarter, an improved variance from the second quarter when we were up $81 million. McKellar and DGI, which we combine as Australia in our results, were up $134 million on a steady, consistent quarter, during which McKellar posted an impressive 84% equipment utilization, peaking in July at 88%. This top-line positive variance was offset by lower equipment utilization quarter over quarter in the oil sands regions. Our share of revenue generated in Q3 2024 by joint ventures was consistent with Q3 2023. The Fargo-Moorhead project had a strong operational quarter, was up $12 million quarter over quarter, and achieved the progress metrics and milestones required of the schedule. Offsetting this positive variance was the variance impact of the completion of the construction project at the gold mine in Northern Ontario in Q3 2023 which led to lower quarter over quarter revenues within the NUNA group of companies. Combined gross profit margin of 21.9% reflects strong operational excellence across our business. Gross profit margins benefited both from the operations in Australia, which were higher than 20% in the quarter, which is normal course, and the Canadian operational personnel and fleet posting solid margins as they benefited from consistent and stable operating conditions. Moving to slide 10, Q3 EBITDA beat the previous Q3 record by 75% as a result of the McKellar acquisition. As mentioned, the 29% margin we achieved reflects an effective operating quarter and is indicative of where we see our business operating at, with our trailing 12-month EBITDA margin now at 27% which covers a very eventful 12-month timeframe. Included in EBITDA is direct general and administrative expenses, which were $9.6 million in the quarter and equivalent to 3.4% of reported revenue, which is below the 4% threshold we set for ourselves. G&A costs in Canada in particular have been decreased in light of lower revenue being generated in the oil sands region. Going from EBITDA to EBIT, we expense depreciation equivalent to 12.1% of combined revenue, which is exactly the same as the second quarter and reflects the depreciation rate of our entire business, including the equipment fleet at the Fargo-Moorhead project. Adjusted earnings per share for the quarter of $1.17 reflects all the positive factors mentioned, but was offset by the impact of higher revenue acquisition-related interest, which reduced earnings by 54 cents compared to 22 cents in the prior quarter. The average cash interest rate for Q3 was 6.5%. Moving to slide 11, net cash provided by operations prior to working capital was $80 million and generated by the business reflecting EBITDA net of cash interest paid. Free cash flow of $11 million was driven by another $32 million draw on working capital accounts and $12 million spent on capital work in progress. Moving to slide 12, net debt levels ended the quarter at $883 million, an increase of $50 million in the quarter due to growth assets purchased as well as the change in the Australian exchange rate. Of the $883 million, 470 million, or roughly half, is denominated in Australian dollars, but is naturally hedged with the heavy equipment assets we own in Australia. Net debt and senior secured debt leverage ended at 2.3 times and 1.8 times, respectively, and are expected to decrease in Q4 on free cash flow generated in the quarter. With that, I'll pass the call back to Joe.