North American Construction Group Ltd

prepared remarks, there will be an opportunity for analysts and 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 the participant's permission. The company wishes to confirm that today's comments contain forward-looking information and the actual resource could differ materially from a conclusion forecasts or projections 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 CDAR and EDGAR as well as on the company's website at nacg.ca. I'll now turn the conference over to Joe Lambert, President and CEO. Please go ahead.

Thanks, Jennifer. Good morning, everyone, and thanks for joining our call today. I'm going to start with a brief overview of our Q1 2025 operational performance. Before I hand it over to Jason for the financials, and then I'll conclude with the operational priorities, a review of our growth opportunities in Australia and the infrastructure markets, our expanding bid pipeline, our backlogs, and our outlook for the remainder of 2025 before taking your questions. On slide three, our Q1 trailing 12-month total recordable rate of 0.34 improves upon our Q4 results and remains better than our industry-leading target frequency of 0.5. We continue to advance our systems and training with key focus on human and organizational performance principles, commonly called HOP, and look to continue the trend with our ultimate goal of getting everyone home safe. On slide four, we highlight some of the major achievements of Q1. While we struggled to overcome the weather impacts to our business, we were able to achieve some meaningful accomplishments. We expanded our heavy equipment fleet in Australia by over 10%, boosting capacity to meet growing demand. In Canada's oil sands, we achieved an impressive 60% equipment utilization rate in the quarter, with February peaking at 70%, reflecting our focus on operational efficiency. Early stage development and heavy civil infrastructure work began at a major copper mine in New South Wales, positioning us for long-term value in the critical minerals sector. The Fargo project continued to advance, surpassing 65% completion, with final construction now underway in Q2. Financially, we reached a new milestone with trailing 12-month combined revenue hitting a record $1.5 billion. Our discipline management approach kept administrative costs at 3.9%, meeting our internal targets. Additionally, our parts and components supply and services agreement with Finning delivered a full quarter of impact, effectively combining our in-house capabilities with their expertise to drive improving cost and equipment utilization. Moving on to slide five, You can see that the Q1 utilization of 68% was the same in both Canada and Australia. Our Canadian fleet improved our best quarterly utilization since the winter of 2022-2023, and while we expect Canadian utilization to drop modestly in Q2, we also fully expect it to then trend back up, approaching our 75% target by year-end. Australia took a major hit in Q1 due to rain impacts, but we remain confident in our ability to hit our target range of 85% in late Q2 to early Q3. With that, I'll hand it over to Jason for the Q1 finances.

Thanks, Joe, and good morning, everyone. Starting on slide seven, the headline EBITDA number of $100 million and the correlated 25.5% margin were both negatively impacted by the weather, in Australia and Canada, which Joe mentioned and will be reviewed in the next slide. We included a comment here about our steady growth since the second quarter of 2024, which was our weakest revenue quarter post the McKellar acquisition. We generated $330 million of combined revenue in that quarter after absorbing a 25% reduction in Canada from the first quarter. Since that time, Our combined revenue has been steadily climbing, and the $392 million of revenue this quarter represents an overall increase of 18%. But importantly, when just looking at Australia and Canada, it represents a 25% increase in just three quarters. And when looking one level further, the Canadian operations posted an encouraging top line of $178 million this quarter, which is impressively 45% higher than the second quarter of 2024. Moving to slide eight and our combined revenue and gross profit. McKellar Group and DJI Trading, which we combine as Heavy Equipment Australia in our results, were up $24 million on a quarter which was impacted by heavy rains in February and March, and during which McKellar posted equipment utilization of 68%, their lowest mark since acquisition. The reason for the quarter-over-quarter increase is due to the 25% increase in fleet capacity since March of last year, with 10% of that increase coming since year end. This top line positive variance was further bolstered by higher revenue in the oil sands region, and as previously mentioned, was importantly and significantly up from the fourth quarter. Our share of revenue generated in the first quarter by joint ventures was consistent with last year as higher scopes in the Fargo Mori project were mostly offset by lower scopes within the Nuna Group of companies, as well as the discontinuation of the brake supply joint venture. Before getting into the weather, our reported combined gross profit margin of 13.2% was impacted by unusually high early component failures in Canada, which we have adjusted for in the adjusted EBITDA margins. Excluding these abnormally high component failures, which we have addressed through the reorganization of our component supply approach, overall combined gross profit was approximately 14%, and Canada's gross profit margin was approximately 8%. As mentioned, the weather significantly impacted gross margins, with the dual impacts of lower top-line revenue not covering overheads and the increased costs incurred during idle time. In Australia, the consistent rain resulted in poor utilization as equipment remained parked for significant amounts of time, particularly at the Carmichael Mine, and this was compounded by increased costs incurred for site cleanup and dewatering activities. In Canada, February was the month that had the most serious impact on operations, with the extreme cold requiring both equipment to be idled for extended periods of time, as well as the incurrence of costs to keep personnel and equipment warm. All told, it is estimated, based on historical precedent, that the weather impacted gross margins by between 5% and 7% in the quarter. Moving to slide 9, Q1 EBITDA essentially matched last year as the revenue increase was fully offset by operational challenges. As mentioned, the 25.5% margin we achieved reflected the weather we were required to operate through. This margin level is not indicative of where we see our business operating at, with cumulative EBITDA margins since the McKellar acquisition at 29%, which covers over $2 billion in revenue and an eventful 18-month timeframe. Included in EBITDA is general administrative expenses of $11.1 million in the quarter, and equivalent to 3.3% of reported revenue, which is below the 4% target we've set for ourselves. Going from EBITDA to EBIT, we expense depreciation equivalent to 16% of combined revenue, which is much higher than the 14% posted in 2024 Q4, and reflects the high idle hours incurred in Canada, particularly in February. Again, This 16% is much higher than our expected run rate moving forward, given we've been at approximately 14% since the McKellar acquisition in 2023 Q4. And we fully expect 2025 to finish in that range. Adjusted earnings per share for the quarter of 52 cents reflects the steady EBITDA performance, but was significantly impacted by the $11 million of increased depreciation. which is equivalent to 30 cents per share. Interest and taxes were generally consistent with last year, and the average cash interest rate for Q4 was 6%. Moving to slide 10, I'll briefly summarize our cash flow. Net cash provided by operations prior to working capital of $76 million was generated by the business, reflecting EBITDA performance net of cash interest paid. free cash flow usage was impacted by our front-loaded capital maintenance programs, as well as a $25 million draw on working capital accounts. Moving to slide 11, net debt levels ended the quarter at $867 million, an increase of $11 million in the quarter as the free cash flow usage and growth spending required debt financing, but was mostly offset by the $73 million of debentures that were converted into shares during the quarter. Net debt and senior secured debt leverage ended at 2.2 times and 1.8 times. Of note, and subsequent to quarter end, we issued $225 million of 7.75% senior unsecured notes which had no impact on net debt leverage ratio, but decreases pro forma senior debt leverage to 1.3 times. ROIC of 10.6% as at March 31st decreased more than a percentage point in the quarter as the high depreciation and capital spending in the quarter with normalized levels having resulted in an approximate 12% ROIC. As we get the full trailing 12 benefit of the increased Australian fleet and with the Fargo project achieving certain financial milestones, we expect to see a trend back to our company target of 15%. With that, I'll pass the call back to Joe.