North American Construction Group Ltd

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Good morning, ladies and gentlemen. Welcome to the North American Construction Group conference call regarding the first quarter ended March 31st, 2026. 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's discussion and analysis. which is available on CDAR and EDGAR, as well as on the company's website at nacg.ca. I will now turn the conference over to Jason Beanstra, CFO.

Thanks, Joanna, and good morning, everyone. I'll start today's call with brief commentary on the financials, then pass the call to Barry for his operational and forward-looking remarks, and we'll conclude, as per usual, with Q&A. Starting on slide 4... We delivered $99 million of EBITDA in the first quarter, demonstrating sequential improvement in both earnings and margin performance. Australia produced a Q1 regional revenue record excluding IMC, including an all-time monthly record in March. And IMC contributed $65 million of revenue as expected. Canada also grew sequentially despite the full quarter impact of the 797 divestiture. This $423 million start provides a solid foundation for our reaffirmed 2026 combined revenue midpoint of $1.6 billion. Moving to slide five, the quarter's margin performance is an important indicator of operating execution. Australia delivered a 16.7% gross profit margin, and Canada delivered 9.5%, despite seasonal conditions in both regions. These results reflect discipline, project execution, improved internal maintenance capability, lower repair costs, and the implementation of continued fleet efficiency initiatives. Moving to slide six, Q1 EBITDA and EBIT were in line with the prior year quarter, but improved meaningfully on a sequential basis over Q4 2025, up 27% and 119% respectively. Direct G&A was $14 million, or 4.3% of reported revenue, below our 5% target, demonstrating operating leverage on stronger revenue. Depreciation remained within our expected range at approximately 15% of combined revenue. Adjusted EPS was 37 cents. Interest expense, in particular, increased to $19.1 million, from $17.8 million last year, reflecting the financing of our strategic expansion in Australia. Moving to slide seven, the business generated $63 million of operating cash flow before working capital, supported by EBITDA performance net of cash interest. Free cash flow was $4 million after a $34 million working capital investment in the quarter. Moving to slide eight, Net debt increased $18 million to $196 million, reflecting growth capital, share purchases, and dividends. Net debt leverage remained consistent at 2.5 times, while senior secured debt increased to 1.7 times based on the payout of the convertible to ventures. While IMC added $125 million of debt on April 7th, its EBITDA contribution and financing structure are expected to keep the presented leverage ratios broadly consistent. Since commencement of our normal course issuer bid in November, we have returned approximately $30 million to our shareholders through the combination of share repurchases and dividends, demonstrating our commitment to shareholder returns while simultaneously growing our business and expanding our global presence. With those comments on the financials, I'll pass the call to Barry. Thanks, Jason, and good morning, everyone. As you're seeing in our Q1 report, our operations team on both sides of the Pacific performed ahead of expectations we had set entering the year. I'm encouraged by this performance, particularly in light of cautious outlook we communicated back in Q4 update, as the quarter reflects disciplined execution, improved operating focus, and with that, early progress against the priorities we established in 2026 in both our core regions of Australia and Canada. As heavy equipment and civil construction company at our core, consistent, disciplined execution is what drives our business. And from my vantage point, that is what our teams delivered in the first quarter. With that, let's dive into slide 10. I'll start with some exciting updates regarding our previously announced acquisition of Iron Mine Contracting, or IMC for short, We successfully closed on IMC on April 7th, 2026, shortly after our Q1 wrapped up. This shifts our focus now on the integration of IMC into our Australian operations to establish a nationwide tier one platform capable of executing large comprehensive scopes in both Eastern and Western Australia. Strategically, IMC is a strong fit Culture, core values, and maintenance capabilities align well with our existing platform in Australia and worldwide. To remind everybody, IMC brings approximately 120 heavy equipment assets and roughly $840 million of contractual backlogs. This also accelerates our objectives to expand lower capital unit rate work across Australia where in times of geopolitical uncertainty, the Western world is increasingly looking for stable and predictable critical mineral supplies. Having overseen our operations in Australia over the past couple of years, I'm incredibly excited about our opportunities on the continent and what that will mean for North American Construction Group overall. Moving to slide 11, as outlined in March, I want to share an update on our operational priorities and how we've been tracking since our last earnings call. I've been particularly encouraged by the increase of internal maintenance headcount during the quarter at McKellar, which is a key driver in reducing the use of external subcontract labor and more efficient operations through improved equipment availability translating to improved utilization. Moving to slide 12, with my operational focus in mind, the next slide step back and look at the bigger picture and structural growth drivers we 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, firstly, scaling into a tier one contractor platform in Australia. Secondly, securing infrastructure awards across North America. And third, expanding our mining services in Canada and the U.S. Diversified in scope, these are building blocks for an even stronger, more resilient operating profile and a deeper pipeline of opportunities across end markets. Moving to slide 13, Australia is our primary growth engine with operations across 18 sites with reasonably consistent conditions that support year-round equipment utilization. Our commodity exposure spans coal, gold, iron ore, lithium, copper, and mining-related infrastructure. IMC strengthens our Western Australia position and accelerates our move towards nationwide Tier 1 scale, particularly on rare earth and critical minerals markets. And this is all in the context of a contractor market that is over $19 billion in size and of which our market share remains less than 10%. The support of 2026-27 Australian federal budget, including major investments in critical minerals, fuel security, and streamlined project approvals, further reinforces our strong long-term outlook for mining activity and contract mining demand across that country. Moving to slide 14, Fargo-Moorhead advanced 5% in the quarter and has now moved beyond the 90% completion, further demonstrating our execution capability in large-scale civil earthworks. That track record supports our pursuit of major infrastructure opportunities and projects across Canada and the US move from announcement towards execution. Our infrastructure bid pipeline is approximately $5 billion, including roughly $1.3 billion tied to the Ring of Fire, northern access, and northern basing opportunities. Moving to slide 15, we operate across a broad geography from north of the Arctic Circle to the heart of Texas, and being one of the most experienced operators in the Canadian oil sands with one of the largest fleets of haul trucks, shovels, and mining equipment in North America in the Canadian oil sands, we have identified our primary heavy equipment fleet and are focused on improving the mechanical availability of those units to best support our clients. And while last year the main theme was budget constraints, this year the focus is increased production and is our responsibility to meet that demand in a cost effective and efficient manner. Moving to slide 16. We are reintroducing an overview of our bid pipeline this quarter. Our global pipeline remains strong and we are well positioned to convert some of these opportunities into meaningful growth. Operating throughout the regions, bid pipeline totals approximately $14.5 billion, of which $4.6 billion are in active tender and procurement phase. While Australia has approximately $3.3 billion in its active pipeline, we continue to see strong opportunities for nation-building projects, defense contracting, and critical mineral mining in Canada. I'd like to highlight that these opportunities are based on strong demand for our heavy assets, low obsolescence offerings. While other industries may face downward pressure to their business due to the threat of AI, our pipeline opportunities are going nowhere as mining services and infrastructure demand continues to ramp without alternatives. Turning to our 2026 financial outlook and guidance on slide 17, let me start with how I see our execution priorities and strategic growth drivers translate to our financials. We started with strong visibility supported by our contractual backlog and bidding activities. Currently, our contractual backlog sits at $3.9 billion, with $1.5 billion of estimated annual revenue already secured for 2026, which is up $1.2 billion during our last earnings call. Beyond our backlog, our total bid pipeline and bids currently in active tender, both of these again up from last quarter's call. Taken together, this provides improved visibility into the year ahead and supports our expectation for another year of growth for NACG. At the midpoint, we continue to expect combined revenue of $1.6 billion, adjusted EBITDA of $400 million, and free cash flow of $120 million. An important point on the cadence and contour of our adjusted EBITDA. While we were pleased with our strong start of the year, our guidance continues to reflect our original outlook for Q2 performance due to the seasonal extended spring breakup in the oil sands, which historically corresponds to 15% revenue impact between Q1 and Q2. Our clear focus under my leadership is to deliver to expectations, and I will make certain we remain focused on this objective. We, however, continue to expect meaningful improvements in the second half of 2026 as IMC synergies and opportunities are realized, newly acquired equipment is commissioned, and seasonal activity strengthens. Historically, from 2022 to 2025, second half revenue consistently exceeded the first half, averaging approximately 20% higher contribution. So this profile is consistent with how our business typically builds through the year. That ends my prepared remarks, and we're happy to take any questions you have.