North American Construction Group Ltd

Good morning, ladies and gentlemen. Welcome to the North American Construction Group conference call regarding the second quarter ended June 30, 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 or test or projection contained in the 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 call over to Jason Veenstra.

Thanks, Jenny, 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 comments, and we'll conclude, as per usual, with Q&A. Starting on slide four, we delivered $93 million of EBITDA in the first quarter, translating into year-over-year improvements in both adjusted earnings and margin performance. Combined revenue was up $86 million from last year, with IMC contributing $91 million of revenue in the quarter. Excluding IMC, Australia was up organically 15% in the quarter on commission growth assets and strong execution. Offsetting these increases was the year-over-year impact of the divestiture of the ultra-class haul trucks in Canada. The $456 million of total combined revenue finished off a strong first half foundation of over $875 million, supporting our 2026 combined revenue midpoint of $1.7 billion. Moving to slide five, Australia posted 13.6% gross profit margin and Canada delivered a combined adjusted margin of approximately 7%, despite difficult seasonal conditions early in the quarter in both regions. These results reflected disciplined project execution, improved internal maintenance capability, lower repair costs, and the implementation of continued fleet efficiency initiatives. And importantly, are trending in the right direction heading into the second half of 2026. Moving to slide six, Q2 EBITDA and EBIT were both up meaningfully from the prior year quarter on the acquisition of IMC and a more typical quarter from the Fargo Joint Ventures. Direct adjusted G&A was $15 million, or 3.8% of reported revenue, well below our 5% targeted threshold, demonstrating operating leverage on stronger revenue. Depreciation as a percent of combined revenue dropped to 13% from 16% last year, as IMC's lower capital intensity resulted in the combined number being lower than our expected range midpoint of 15%. All told, adjusted EPS of 32 cents was generated by solid operational performance. Interest expense increased to $18.9 million from $14.1 million last year, reflecting the financing of our strategic expansions in Australia. Our average cost of debt for the quarter remained consistent at 6.4%. Moving to slide 7, the business produced $78 million of operating cash flow before working capital, generated by EBITDA performance net of cash interest. Free cash flow generation was $23 million after a $13 million positive working capital change in the quarter. Moving to slide 8, Net debt increased $191 million to $1.1 billion, reflecting the acquisition of IMC and growth capital equipment purchased during the quarter. Trailing 12 net debt leverage is reported at 2.9 times, but importantly is not yet benefiting from 12 months of IMC EBITDA. Based on our second half run rate, we are operating at a 2.6 times leverage ratio with the plan to decrease that moving forward. Senior secured debt remains steady at 1.7 times based on the $200 million of senior unsecured notes we raised in the quarter and the impact of unsecured debt that partially funded the IMC acquisition. With those comments on the financials, I'll pass the call to Barry.

Thanks Jason and good morning everyone. As Jason just outlined, our first half performance was stronger than expected entering the year and gives us the confidence to raise our full-year revenue outlook. More importantly, the quarter reinforced that North American Construction Group is in an inflection point. The strategic groundwork we have put in place is increasingly translating to measurable growth, stronger earning visibility and more resilient operating profiles. Our operating platform continues to evolve and there is even more opportunity ahead of us. We are now seeing clear evidence that our broader geographic reach, expanded capabilities, and operating discipline are working together. Our focus is to convert that opportunity into quality earnings and free cash flow through consistent execution across all operations. On slide 11 summarizes the three strategic building blocks supporting our growth. First, scaling toward a national tier one contractor platform in Australia. Secondly, Securing Infrastructure Awards across North America, and third, Expanding Mining Services in Canada and the United States. These are distinct markets, but the underlying model is consistent. We establish a position where our equipment, people, and execution capabilities create the right to win. We then deepen our customer relationship, expand the scope of work, and allocate capital where we can earn attractive returns. The regional updates that follow are proof that this strategy is gaining further traction. On slide 12, Australia remains our primary growth engine. Revenue has increased approximately 31% compound annual rate from the first half of 2024 through the first half of 2026. And first half 2026 revenue was 14% above the second half of 2025. This momentum reflects the scale we have added through McKellar and IMC supported by favorable operating conditions and strong market demand. Together, McKellar and IMC give us a broader national presence and the capability to pursue larger, more comprehensive scopes across all of Australia. IMC's new eight-bay Machia workshop is another important step. It expands our maintenance capacity and supports our equipment rebuild program as well as the larger projects we expect to pursue over time. The strategic value extends beyond scale. We are increasing our exposure to lower capital unit rate work and diversifying across gold, lithium, iron ore, nickel, and other critical minerals. This combination will support more consistent utilization and a better balance of growth and returns. This integration is also benefiting from a close alignment in safety, culture, core values, and maintenance capabilities, which is critical to sustaining performance as business expands. As of June 30th, our Australian operations had approximately $3.4 billion of contractual backlog and a further $3.9 billion bid pipeline. Supported by approximately $278 billion of public infrastructure spending and a $242 billion major project pipeline, this gives us meaningful runway as we continue building the platform. Turning to slide 13, in Northern Canada where I want to focus on our infrastructure discussion for today's call. Our strategy is to position capital and capabilities where our operating experience provides a clear advantage. Nunavut is a strong example with a fleet of approximately 230 heavy equipment assets. New equipment is arriving in Nunavut during the third quarter, increasing capacity and mechanical availability at an established mine site. We expect that expansion to drive approximately 20% Site Level Revenue Growth, with our ownership state providing NECG exposure to NUNA's growing earnings contribution. At the same time, we are executing the Land and Expand Strategy across priority mining regions. The Yukon Infrastructure Award and three initial projects in Ontario establish footholds from which we can pursue larger follow-on scopes. Our ability to safely deliver on time, on budget, with zero deficiencies is how we earn the opportunity to do more for these customers. NUNA's deep remote operating expertise, established infrastructure, and indigenous partnerships are difficult to replicate. Those capabilities position us well as critical minerals, defense, and nation building investment advances across Northern Canada. With approximately 5 billion of opportunities in the regional pipeline, we see a significant pathway to long-term growth while remaining disciplined in how we pursue it. Turning to slide 14, in the oil sands, customer demand is shifting towards more equipment-intensive work as haul distances lengthen and operating requirements broaden. This creates an attractive opportunity for North America that can provide reliable fleet Thank you for joining us today. This is not simply about increasing activity. It's about improving the quality of earnings. We are concentrating on investment for assets and scopes that meet our return thresholds with incremental investments targeting IRRs above 40% and a clear line of sight towards gross profit margins in the 15% range. Better fleet performance, selective capital allocation, and operating discipline are the levers that we will translate strong customer demand into resilient margins. Turning to slide 15, this shows the depth of our diversity in the opportunity set. Our total bid pipeline exceeds $12 billion with approximately 3.6 billion currently in active tenure and procurement. The active pipeline is balanced geographically with approximately $1.8 billion in Australia and $1.8 billion in North America. It is also balanced by type with 54% in mining services and 46% in infrastructure across 14 resource categories. Expected award timing is weighted across the second half of 2026 and into 2027 with additional opportunities beyond that period. We do not need every project to move forward to create meaningful growth. Our priority is to convert the opportunities where our capabilities provide a clear advantage and where the risk adjusted returns meet our standards. Turning to slide 16, our outlook, record contractual backlog of approximately 3.8 billion as of June 30th underpins our full year expectations. Based on stronger than expected revenue in the first half, including a quarterly revenue record for Q2, We are raising our combined revenue guidance to a range of $1.6 billion to $1.8 billion. The new midpoint of $1.7 billion is $100 million above our prior midpoint and approximately 14% above our full year 2025 result. We are growing. We continue to expect adjusted EBITDA of $380 million to $420 million and free cash flow of $110 million to $130 million. At the midpoint, that represents $400 million of adjusted EBITDA and $120 million of free cash flow. In Australia, we expect optimal dry seasonal conditions in clean plants to support with color, while IMC activity ramps up in Western Australia. In the oil sands, utilization should improve following the spring breakup, supported by fleet optimization and incremental project skills. At UNI, we expect a seasonally strong third quarter to be followed by a fourth quarter uplift from the Nunavut fleet expansion. Taken together, our first half performance, record backlog, and identifiable second half operating drivers support the raised revenue outlook and our continued confidence in the adjusted EBITDA and free cash flow ranges. Our job is now straightforward. safely execute with discipline, improve the quality of earnings, and convert the opportunity embedded across the platform into sustainable shareholder value. Lastly, I'm extremely pleased to announce that our chairman, Martin Farron, has confirmed that our CEO search is going very well, and we plan to announce our new CEO in the coming weeks. That concludes the Q2 presentation, and we would be happy to take any questions you may have.