North American Construction Group Ltd

Good morning, ladies and gentlemen. Welcome to the North American Construction Group conference call regarding the fourth quarter ended December 31, 2025. 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 CDAR and EDGAR, as well as the company's website at nacg.ca. I will now turn the conference over to Jason Beanstra, CFO. Please go ahead.

Thanks, Joanna, and good morning, everyone. We've shortened the deck this quarter, and I'll start off with brief commentary on the financials and pass the call to Barry for his operational and forward-looking remarks. Starting on slide four, the headline EBITDA number of $78 million was significantly impacted by a $13 million retroactive life-to-date adjustment for the Fargo project, which we'll discuss on the next slide. Australia revenue for the quarter of $176 million was a Q4 record for the region, despite the wet weather, and the oil sands region also posted solid top line numbers for the quarter. In looking at the $344 million of combined revenue and when factoring out the volatility of Fargo in the quarter, we are trending in a positive way and on our way to the $1.6 billion midpoint for 2026, which will be another company record. When looking at the $1.5 billion generated in 2025 of combined revenue, we can see that Australia and Canada are up on a combined net basis 10%, with Australia up an impressive 17% and Canada up a modest 4%. When looking at our employee exposure hours, we can see that the 6.3 million hours in 2024 was eclipsed in 2025 by a correlated 15% and reached 7.1 million hours, representing a steadily growing workforce of 3,300 employees. These metrics showcase the base load momentum we're currently experiencing and give us the historical context and confidence in the 2026 outlook, which Barry will close our prepared remarks with. Moving to slide five, I've already touched on the revenue momentum, but we'll add that 2025 Q4 was impacted by the strategic divestiture we made of our ultra-class fleet, which was effective December 1, 2025. Regarding gross profit, we were impacted by two significant factors in the quarter, with the Fargo cost adjustment being a major factor. Based on an updated full project forecast, the Fargo team increased the estimated cost to complete of the structures, railroads, and aqueducts. On a gross basis, the increase to cost was approximately $50 million, and on a net basis to us, was a $13 million light-to-date adjustment given the late stage the project is at. With approximately 85% of the project complete, management is confident in the updated cost estimate and is looking forward to completing the project here in 2026 at the forecasted level. The second impact in the quarter was the above average rainfall in very late Q4 in Queensland and the financial effect it had on the results primarily at the Carmichael Mine. Excluding these isolated items, gross profit of approximately 15% is a reasonable run rate metric of where our combined business is currently operating and consistent with the more routine third quarter of 2025. Moving to slide six, Q4 EBITDA and EBIT were down from their 2024 comparables as already discussed with the 23% EBITDA margin being approximately 7% lower than the run rate metric of around 30% based on the two factors mentioned. Included in EBITDA is direct general administrative expenses of $15 million in the quarter and equivalent to 4.9% of reported revenue. Going from EBITDA to EBIT, we expense depreciation equivalent to 18% of combined revenue, which is higher than the 14 to 16% run rate of the business based on the unique conditions in the quarter. Adjusted earnings per share was a loss for the quarter of 14 cents and reflects the even generated by the business net of interest and taxes. The average cash interest rate for Q4 remained consistent at 6.4%. Moving to slide seven, I'll briefly summarize our cash flow. Net cash provided by operations prior to working capital of $56 million was generated by the business, reflecting EBITDA performance net of cash interest. Free cash flow of $57 million was a highlight for the quarter, based on EBITDA generation and disciplined sustaining capital maintenance. The $57 million in Q4 and $46 million in Q3 compiled to $103 million of free cash flow generated in the second half of 2025. Moving to slide eight, Net debt levels ended the quarter at $878 million, a decrease of $26 million in the quarter as free cash flow generation was used to pay down debt, but was also used on growth capital, share purchases, and dividends. Net debt and senior secured debt leverage ended at 2.4 times and 1.4 times, respectively. As mentioned last quarter, senior unsecured debt or high-yield debt, now accounts for approximately 40% of our overall net debt, and we've been pleased with the demand for that source of financing as it provides the ability to confidently grow our Australian and infrastructure businesses. As shown on the slide, the $422 million of cash liquidity, up from $334 million at the end of September, has positioned us for success. We expect to pay out the convertible debentures at the end of the month with this capacity, which will bring the credit facility net of cash up to around 15% of our overall debt. With those comments on the financials, I'll pass the call to Barry. Thank you, Jason, and good morning, everyone. This is my first earnings call as President and CEO, and after 44 years with North American Construction Group, my focus is on execution and operating disciplines. I'll start with some remarks on slide 10 regarding our previously announced acquisition of Ironmine Contracting, or for short, IMC. We expect that transaction to close early in the second quarter of 2026, subject to customary closing conditions, including approval by the Australian Competition and Consumer Commission. Strategically, IMC is a strong fit. Their culture, core values, and maintenance capabilities align well with their existing platform in Australia. and across the globe. IMC brings roughly 120 heavy assets and about 1 billion of contractual backlog, which increases our overall backlog by roughly 30% and Australian backlog by roughly 35%. Most importantly, IMC and McKellar together will create a national tier one contractor platform in Australia capable of executing large comprehensive scopes in both eastern and western Australia. This also accelerates our objective to expand lower capital unit rate work across Australia, where in times of geopolitical restrictions, the western world is increasingly looking for critical mineral supply. Having overseen our operations in Australia over the last two years, I'm incredibly excited about our opportunities on the continent and what it will mean to North American Construction Group overall. Before walking through the next couple slides, I want to separate two things. First, our 2026 operational priorities, which are the actions we're focused on executing this year. Second, the structural growth drivers that expand our earnings power over time. Moving to slide 11, my operational priorities as new CEO are straightforward, operational and aimed at sustainable growth that compounds long-term shareholder value. First and always, safety. Everybody gets home safe everywhere we operate. Second, in Australia, we're further optimizing our workforce mix based on the improvements we have already implemented in the second half of 2025, driving even stronger consistency, productivity, and execution. Third, after the major growth in Queensland over the last two years, we will review and optimize operating costs while fully maintaining customer requirements. Fourth, we'll integrate and commission the expanded IMC fleet following the transaction closed in Western Australia to support growth and scale. Fifth, we will deliver the successful completion of Fargo Moorhead Diversion Project, reinforcing our civil execution credentials. Lastly, we will continue improving mechanical availability and reliability in the oil sands through right-sizing the fleet, discipline maintenance, and operating fundamentals. Moving to slide 12, with that operational focus in mind, the next slide, step back and look at the bigger picture, the structural growth drivers we have put in place over the past several years that will translate into visible traction in the back half of 2026 and beyond. At a high level, first, scaling into Tier 1 contractor platform in Australia. Second, expanding mining services across Canada and the U.S. And third, securing infrastructure awards across North America. Diversified in scope, these are building blocks for an even stronger and more resilient operating profile and a deeper pipeline of opportunities across end markets. Let's dive into the first one. On slide 13, Australia is our primary growth engine. We are operating across 18 sites with favorable, consistent operating conditions that support year-round equipment utilization. Our platform is diversified across key commodities, including gold, coal, iron ore, lithium, copper, and mining-related infrastructure. With IMC, we will expand to a national Tier 1 scale, and we become even better positioned in Western Australia, particularly in rare earth and critical minerals, whereas Australia is increasingly a strategic hub for the West's critical mineral supply chains. Moving to slide 14, in North American infrastructure, we are seeing nation-building projects across Canada and the U.S. now advancing from announcement to the bid stage and into execution. Fargo-Moorhead is a key proof point that sets us up to win more work. Our Earthworks scopes representing approximately $600 million in total project volume for the company have been completed as planned. The execution record strengthens our credibility and expands the set of opportunities we are able to pursue. We're looking – tracking a strong pipeline across northern Canadian infrastructure, defense-related scopes, and critical mineral infrastructure work with our partner NUNA and mass civil earthworks and opportunities in the U.S. as a subcontractor. We're focused on winning work where we have a clear competitive advantage, such as mine site civil scopes and subcontracted earthwork roles on large programs. Moving to slide 15, mining services remain a core strength of North American built on decades of operating experience and a large specialized fleet. We operate across a broad geography from north of the Arctic Circle to the heart of Texas. And our track record, safety culture, and equipment base support expansion and mining activity grows across this continent. We see tailwinds from increased focus on critical minerals and energy infrastructure and a reduction in regulatory hurdles. And we intend to earn that work by executing our fundamentals of safe operations, high equipment availability, and discipline maintenance. Moving on to slide 16, let me start with how I see execution priorities and strategic growth drivers translate to our financials. We enter the year with strong visibility supported by our contractual backlog and bidding activity. Currently, our backlog is approximately 3.9 billion, with 1.2 billion already secured for 2026. Beyond that backlog, we are tracking a total bid pipeline of approximately $12.6 billion, including roughly $4.6 billion currently in active tender and procurement processes. Taken together, this provides strong visibility into the year ahead and supports our expectation for another year of growth for NACG. At the midpoint, we expect combined revenue of $1.6 billion, adjusted EBITDA of $400 million and free cash flow of $120 million. And an important point on the cadence for our adjusted EBITDA, our outlook reflects the stable first half performance broadly in line with the current Q4 run rate, excluding the Fargo impacts, with meaningful improvements expected in the second half of 2026 as IMC synergies and opportunities are realized, new acquired equipment is commissioned, and seasonal activity strengthens. Historically, from 2022 to 2025, second half revenues consistently exceeded the first half, averaging approximately 20% higher contribution. So this profile is consistent with how our business typically builds through the year. We also ended 2025 with strong momentum and free cash flow, included $57 million in Q4 2025, which supports our confidence entering 2026. That ends the Q4 presentation, and we would be happy to take any questions you have. I'll now turn it back over to the operator.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touch-tone phone. You will hear a prompt that your hand has been raised. If you wish to decline from the polling process, please press star followed by the two. And if you are using a speakerphone, please lift the handset before pressing any keys. The first question comes from Adam Thalheimer at Thompson Davis. Please go ahead.