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North American Construction Group Ltd. Announces Record Results for the Third Quarter Ended September 30, 2023

ACHESON, Alberta, Nov. 01, 2023 (GLOBE NEWSWIRE) -- North American Construction Group Ltd. ("NACG") today announced results for the third quarter ended September 30, 2023. Unless otherwise indicated, financial figures are expressed in Canadian dollars, and comparisons are to the prior period ended September 30, 2022.

Third Quarter 2023 Highlights:

  • Reported revenue of $194.7 million, compared to $191.4 million in the same period last year, was generated primarily by the heavy equipment fleet in the oil sands region. Equipment utilization of 56%, compared to 62% in Q3 2022, was impacted by changes in work scope and the time required to move heavy equipment into the Fort Hills mine ahead of the winter season. When comparing to Q3 2022, revenue included full quarter impacts of updated equipment rates and the acquisition of ML Northern Services Ltd.
  • Our net share of revenue from equity consolidated joint ventures of $168.7 million compared favourably to $161.8 million in the same period last year. The Fargo-Moorhead project posted its strongest quarter to date but was offset by Nuna which experienced permitting delays and the impacts of wildfires in northern Canada.
  • Combined revenue of $272.6 million compared consistently to $269.6 million in the same period last year reflecting both consistent demand for our heavy equipment fleet and a strong quarter from the Fargo-Moorhead project offset by Nuna's top-line performance.
  • Adjusted EBITDA of $59.4 million and margin of 21.8% compared consistently to the prior period metrics of $60.1 million and 22.3%, respectively, on similar revenue levels as cost effective operation of the heavy equipment was more than fully offset by costs impacts incurred by Nuna.
  • Cash flows generated from operating activities of $37.5 million, compared to $31.4 million in the same period last year due to lower distributions received from joint ventures in Q3 2022.
  • Free cash flow generated in the quarter was $10.0 million, compared to $3.4 million in the same period last year, as adjusted EBITDA was primarily used for sustaining capital maintenance and cash interest.
  • Net debt was $395.3 million at September 30, 2023, an increase of $1.0 million from June 30, 2023, as free cash flow generation funded growth spending, dividends and trust activity during the quarter.
  • Effective October 1, 2023, we closed our acquisition of MacKellar Group ("MacKellar"), a privately-owned heavy earthworks company based in Australia. As disclosed on July 26, 2023, total expected consideration remains $395 million and the transaction was fully funded by bank secured and vendor provided financing. MacKellar adds approximately 450 mobile heavy equipment assets; 1,000 employees, including over 375 maintenance personnel; and 15 operating projects across a variety of service offerings including contract mining, civil earthworks, dry and maintained equipment rentals and component rebuilds.

Joseph Lambert, President and CEO commented: "The third quarter generally came in line with overall expectation as our traditional heavy equipment fleet and the Fargo-Moorhead project exceeded targets while Nuna posted low operating margins due to the impacts of permitting delays and wildfires in northern Canada."

"Closing the MacKellar transaction was a major milestone for our Company and we are pleased to report that their current operating run-rate exceeds our acquisition model and allowed us to increase expectations for 2024. Onboarding sessions went very well and we couldn't be more excited about the opportunities in Australia."

Consolidated Financial Highlights

  Three months ended Nine months ended
  September 30, September 30,
(dollars in thousands, except per share amounts)  2023  2022  2023  2022
Revenue $194,744  $191,383  $630,922  $536,122 
Total combined revenue(i)  272,620   269,617   870,190   734,157 
Gross profit  26,312   24,567   88,762   58,958 
Gross profit margin(i)  13.5%  12.8%  14.1%  11.0%
Combined gross profit(i)  37,798   39,651   129,730   93,998 
Combined gross profit margin(i)(ii)  13.9%  14.7%  14.9%  12.8%
Operating income  14,138   17,649   49,935   39,592 
Adjusted EBITDA(i)(iii)  59,371   60,110   195,827   159,499 
Adjusted EBITDA margin(i)(iii)  21.8%  22.3%  22.5%  21.7%
Net income  11,387   20,220   45,495   41,291 
Adjusted net earnings(i)  14,295   17,558   52,060   36,875 
Cash provided by operating activities  37,512   31,432   109,521   91,102 
Cash provided by operating activities prior to change in working capital(i)  41,666   39,810   134,646   118,037 
Free cash flow(i)  10,040   3,390   (20,355)  2,462 
Purchase of PPE  39,295   31,205   114,210   83,591 
Sustaining capital additions(i)  42,290   30,578   127,792   87,158 
Growth capital additions(i)  1,727      4,475    
Basic net income per share $0.43  $0.75  $1.72  $1.49 
Adjusted EPS(i) $0.54  $0.65  $1.96  $1.33 

(i)See "Non-GAAP Financial Measures".
(ii)Combined gross profit margin is calculated using combined gross profit over total combined revenue.
(iii)Adjusted EBITDA margin is calculated using adjusted EBITDA over total combined revenue.

  Three months ended Nine months ended
  September 30, September 30,
(dollars in thousands)  2023  2022  2023  2022
Cash provided by operating activities $37,512  $31,432  $109,521  $91,102 
Cash used in investing activities  (26,970)  (28,042)  (107,123)  (79,945)
Capital additions financed by leases  (2,229)     (27,228)  (8,695)
Add back:        
Growth capital additions(i)  1,727      4,475    
Free cash flow(i) $10,040  $3,390  $(20,355) $2,462 

(i)See "Non-GAAP Financial Measures".

Declaration of Quarterly Dividend

On October 31, 2023, the NACG Board of Directors declared a regular quarterly dividend (the "Dividend") of ten Canadian cents ($0.10) per common share, payable to common shareholders of record at the close of business on November 30, 2023. The Dividend will be paid on January 5, 2024, and is an eligible dividend for Canadian income tax purposes.

Financial Results for the Three Months Ended September 30, 2023

Revenue of $194.7 million represented a $3.4 million (or 2%) increase from Q3 2022. Consistent year-over-year revenue was led by the heavy equipment fleet at Fort Hills. Equipment utilization of 56% was negatively impacted by a change in work scopes and the time required to move heavy equipment into the Fort Hills mine ahead of the winter season. In addition, wet weather in July and project completion in late August at the gold mine in Northern Ontario impacted utilization. The purchase of ML Northern Services Ltd.'s ("ML Northern") fuel and lube fleet, which occurred on October 1, 2022, and DGI Trading had modest impacts on revenue with services and sales provided to external customers. Lastly, another ultra-class haul truck was rebuilt, commissioned and sold to the Mikisew North American Limited Partnership ("MNALP"), bringing its haul truck fleet to seventeen.

Combined revenue of $272.6 million represented a $3.0 million (or 1%) increase from Q3 2022. Our share of revenue generated in Q3 2023 by joint ventures and affiliates was $77.9 million, compared to $78.2 million in Q3 2022. The Nuna Group of Companies suffered the revenue impacts of two project permitting delays and the ripple effects of a month-long evacuation of Yellowknife, NWT. Supply chain disruptions from the evacuation and the pervasive impacts of the record-setting wildfires in northern Canada hampered Nuna's ability to complete scopes it normally completes during the third quarter. The completion of the gold mine project in northern Ontario at the end of August contributed to the quarter over quarter variance. Offsetting these variances was the Fargo-Moorhead flood diversion project which completed its largest operational quarter to date and is on track to reach the one-quarter mark of completed scopes during the fourth quarter.

Adjusted EBITDA and the associated margin of $59.4 million and 21.8% were generally consistent with the Q3 2022 results of $60.1 million and 22.3%, respectively. Cost effective operation of the heavy equipment fleet within our wholly-owned business generated increased EBITDA quarter over quarter. This was fully offset by margin impacts experienced within the Nuna Group of Companies from the aforementioned wildfire conditions in northern Canada and completion of the gold mine project in northern Ontario. EBITDA generated by the Fargo joint ventures tracked the aforementioned strong revenue quarter as construction costs are being incurred according to plan.

Depreciation of our equipment fleet was 14.7% of revenue in the quarter, compared relatively consistently to the 13.8% in Q3 2022. Our internal maintenance programs continue to produce low-cost and longer life components allowing for depreciation rates to remain in this range.

General and administrative expenses (excluding stock-based compensation) were $6.9 million, or 3.5% of revenue, compared to $6.6 million, or 3.4% of revenue in Q3 2022. Consistent costs were incurred as increases from ML Northern and cost items impacted by inflation were offset by cost discipline in discretionary areas and associated cost recoveries from our joint ventures.

Cash related interest expense (See "Non-GAAP Financial Measures") for the quarter was $7.8 million at an average cost of debt of 7.1%, compared to 5.8% in Q3 2022, as rate increases posted by the Bank of Canada directly impact our Credit Facility and have a delayed impact on the rates for secured equipment-backed financing. Total interest expense was $8.1 million in the quarter, compared to $6.5 million in Q3 2022.

Adjusted EPS of $0.54 on adjusted net earnings of $14.3 million is down 17% from the prior year figure of $0.65 and is consistent with adjusted EBIT performance. Weighted-average common shares levels for the third quarters of 2023 and 2022 were stable at 26,700,303 and 26,836,133, respectively, net of shares classified as treasury shares.

Free cash flow was $10.0 million in the quarter and was primarily the result of adjusted EBITDA of $59.4 million, as detailed above, offset by sustaining capital additions ($42.3 million) and cash interest paid ($6.4 million).


2024 Strategic Focus Areas

  • Safety - maintaining our uncompromising commitment to health and safety while elevating the standard of excellence in the field.
  • Integration - focus on integration of MacKellar Group, including identification of opportunities to better utilize our capital and equipment on Australian opportunities.
  • Execution - enhance our equipment availability through operational excellence with respect to fleet maintenance, reliability programs, technical improvements and management systems.
  • Diversification - continue to pursue further diversification of customers and resources through strategic partnerships, industry expertise and/or investment in Indigenous joint ventures.
  • Sustainability - commitment to the continued development of sustainability targets and consistent measurement of progress to those targets.


Our current liquidity positions us well moving forward to fund organic growth and the required correlated working capital investments. Including equipment financing availability and factoring in the amended Credit Facility agreement, total available capital liquidity of $154.2 million includes total liquidity of $108.4 million and $32.6 million of unused finance lease borrowing availability as at September 30, 2023. Liquidity is primarily provided by the terms of our $300.0 million credit facility which allows for funds availability based on a trailing twelve-month EBITDA as defined in the agreement.

  September 30,
 December 31,
Credit Facility limit $300,000  $300,000 
Finance lease borrowing limit  175,000   175,000 
Other debt borrowing limit  20,000   20,000 
Total borrowing limit $495,000  $495,000 
Senior debt(i)  (277,356)  (265,931)
Letters of credit  (32,037)  (32,030)
Joint venture guarantees  (71,887)  (53,744)
Cash  40,441   69,144 
Total capital liquidity(i) $154,161  $212,439 

(i)See "Non-GAAP Financial Measures".

Subsequent to September 30, 2023 and concurrent with closing of the MacKellar acquisition, we entered into an amended and restated Credit Facility. The lending capacity provided by the amended Credit Facility includes a Canadian dollar tranche of $280 million and an Australian dollar tranche of $220 million, totaling $470 million of lending capacity using the exchange rate in effect as at October 3, 2023. The Credit Facility permits incurrence of $350 million of secured equipment financing from third party providers resulting in a total borrowing limit of $820 million. Based on the upfront payments made and senior secured debt assumed at closing, total liquidity and total capital liquidity is estimated to be approximately $105 million and $205 million upon transaction close (as compared to $108.4 million and $154.2 million, respectively as at September 30, 2023).

NACG’s Outlook

Our expectation that our projected free cash flows for the full year 2023, in the range of $90 to $110 million, updated from previous reporting to reflect the acquisition of MacKellar and expected timing of cash received from joint ventures, and full year 2024, in the range of $160 to $185 million, will improve our liquidity position. We maintain our belief that we have the contracted work to provide sufficient free cash flow to both de-lever our balance sheet and pursue opportunities to continue our diversification and growth objectives.

Key measures 2023 2024
Combined revenue(i) $1.2 - $1.3B $1.5 - $1.7B
Adjusted EBITDA(i) $295 - $310M $430 - $470M
Sustaining capital(i) $150 - $170M $220 - $240M
Adjusted EPS(i)(ii) $2.80 - $3.00 $4.25 - $4.75
Free cash flow(i) $90 - $110M $160 - $185M
Net debt leverage(i)(ii)(iii) Less than 1.8x Less than 1.4x
Capital allocation    
Deleverage $50 - $80M  
Shareholder activity(iv) $15 - $20M  
Growth spending(i) $35 - $40M  

(i)See "Non-GAAP Financial Measures".
(ii)For clarity, the outlook for adjusted EPS and net debt leverage excludes the potential conversion of debentures.
(iii) Leverage ratio is based on the amended and restated Credit Facility effective as of October 3, 2023.
(iv)Shareholder activity includes common shares purchased under a NCIB, dividends paid and the purchase of treasury shares.

Conference Call and Webcast

Management will hold a conference call and webcast to discuss our financial results for the quarter ended September 30, 2023, tomorrow, Thursday, November 2, 2023, at 7:00 am Mountain Time (9:00 am Eastern Time).

The call can be accessed by dialing:
 Toll free: 1-888-886-7786
 Conference ID: 81053277
A replay will be available through December 1, 2023, by dialing:
 Toll Free: 1-877-674-7070
 Conference ID: 81053277
 Playback Passcode: 053277

The Q3 2023 earnings presentation for the webcast will be available for download on the company’s website at

The live presentation and webcast can be accessed at:

A replay will be available until December 1, 2023, using the link provided.

Basis of Presentation

We have prepared our consolidated financial statements in conformity with accounting principles generally accepted in the United States ("US GAAP"). Unless otherwise specified, all dollar amounts discussed are in Canadian dollars. Please see the Management’s Discussion and Analysis ("MD&A") for the quarter ended September 30, 2023, for further detail on the matters discussed in this release. In addition to the MD&A, please reference the dedicated Q3 2023 Results Presentation for more information on our results and projections which can be found on our website under Investors - Presentations.

Forward-Looking Information

The information provided in this release contains forward-looking statements. Forward-looking statements include statements preceded by, followed by or that include the words "anticipate", "believe", "expect", "should" or similar expressions and include all information provided under the above heading "NACG's Outlook".

The material factors or assumptions used to develop the above forward-looking statements and the risks and uncertainties to which such forward-looking statements are subject, are highlighted in the MD&A for the three and nine months ended September 30, 2023. Actual results could differ materially from those contemplated by such forward-looking statements because of any number of factors and uncertainties, many of which are beyond NACG’s control. Undue reliance should not be placed upon forward-looking statements and NACG undertakes no obligation, other than those required by applicable law, to update or revise those statements. For more complete information about NACG, please read our disclosure documents filed with the SEC and the CSA. These free documents can be obtained by visiting EDGAR on the SEC website at or on the CSA website at

Non-GAAP Financial Measures

This press release presents certain non-GAAP financial measures because management believes that they may be useful to investors in analyzing our business performance, leverage and liquidity. The non-GAAP financial measures we present include "adjusted EBIT", "adjusted EBITDA", "adjusted EPS", "adjusted net earnings", "cash provided by operating activities prior to change in working capital", "combined gross profit", "equity investment depreciation and amortization", "equity investment EBIT", "free cash flow", "growth capital", "margin", "net debt", "senior debt", "sustaining capital", "total capital liquidity", and "total combined revenue". A non-GAAP financial measure is defined by relevant regulatory authorities as a numerical measure of an issuer's historical or future financial performance, financial position or cash flow that is not specified, defined or determined under the issuer’s GAAP and that is not presented in an issuer’s financial statements. These non-GAAP measures do not have any standardized meaning and therefore are unlikely to be comparable to similar measures presented by other companies. They should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. Each non-GAAP financial measure used in this press release is defined and reconciled to its most directly comparable GAAP measure in the "Non-GAAP Financial Measures" section of our Management’s Discussion and Analysis filed concurrently with this press release.

Reconciliation of total reported revenue to total combined revenue

  Three months ended Nine months ended
  September 30, September 30,
(dollars in thousands)  2023   2022   2023   2022 
Revenue from wholly-owned entities per financial statements $194,744  $191,383  $630,922  $536,122 
Share of revenue from investments in affiliates and joint ventures  168,667   161,823   516,637   413,027 
Elimination of joint venture subcontract revenue  (90,791)  (83,589)  (277,369)  (214,992)
Total combined revenue(i) $272,620  $269,617  $870,190  $734,157 

(i)See "Non-GAAP Financial Measures".

Reconciliation of reported gross profit to combined gross profit

  Three months ended Nine months ended
  September 30, September 30,
(dollars in thousands)  2023  2022  2023  2022
Gross profit from wholly-owned entities per financial statements $26,312 $24,567 $88,762 $58,958
Share of gross profit from investments in affiliates and joint ventures  11,486  15,084  40,968  35,040
Combined gross profit(i) $37,798 $39,651 $129,730 $93,998

(i)See "Non-GAAP Financial Measures".

Reconciliation of net income to adjusted net earnings, adjusted EBIT, and adjusted EBITDA

  Three months ended Nine months ended
  September 30, September 30,
(dollars in thousands)  2023   2022   2023   2022 
Net income $11,387  $20,220  $45,495  $41,291 
(Gain) loss on disposal of property, plant and equipment  (311)  (95)  189   1,069 
Stock-based compensation expense (benefit)  5,583   437   16,324   (129)
Acquisition costs  1,161      1,161    
Loss on equity investment customer bankruptcy claim settlement        759    
Net realized and unrealized gain on derivative financial instruments  (2,618)     (6,979)   
Equity investment net realized and unrealized loss (gain) on derivative financial instruments  572   (2,925)  (649)  (5,140)
Tax effect of the above items  (1,479)  (79)  (4,240)  (216)
Adjusted net earnings(i)  14,295   17,558   52,060   36,875 
Tax effect of the above items  1,479   79   4,240   216 
Interest expense, net  8,119   6,522   22,941   16,769 
Income tax expense  1,733   4,983   11,892   10,184 
Equity earnings in affiliates and joint ventures  (4,483)  (14,076)  (23,414)  (28,652)
Equity investment EBIT(i)  4,189   15,676   23,758   32,785 
Adjusted EBIT(i)  25,332   30,742   91,477   68,177 
Depreciation and amortization  28,884   26,592   90,239   84,051 
Equity investment depreciation and amortization(i)  5,155   2,776   14,111   7,271 
Adjusted EBITDA(i) $59,371  $60,110  $195,827  $159,499 

(i) See "Non-GAAP Financial Measures".

Reconciliation of equity earnings in affiliates and joint ventures to equity investment EBIT

  Three months ended Nine months ended
  September 30, September 30,
(dollars in thousands)  2023   2022  2023   2022
Equity earnings in affiliates and joint ventures $4,483  $14,076 $23,414  $28,652
Interest (income) expense, net  (742)  589  (915)  1,901
Income tax expense  448   997  1,294   2,167
Loss (gain) on disposal of property, plant and equipment     14  (35)  65
Equity investment EBIT(i) $4,189  $15,676 $23,758  $32,785
Depreciation $4,976  $2,600 $13,572  $6,743
Amortization of intangible assets  179   176  539   528
Equity investment depreciation and amortization(i) $5,155  $2,776 $14,111  $7,271

(i)See "Non-GAAP Financial Measures".

About the Company

North American Construction Group Ltd. is a premier provider of heavy civil construction and mining services in Canada, the U.S. and Australia. For 70 years, NACG has provided services to the mining, resource and infrastructure construction markets.

About MacKellar Group

Established in 1966 based on humble family values MacKellar has earned an enviable reputation in the industry for performance and reliability. MacKellar specializes in heavy earthmoving equipment solutions and has a proud history of working on both mining and civil earthwork projects around Australia.

For further information contact:

Jason Veenstra
Chief Financial Officer
North American Construction Group Ltd.
(780) 960-7171

Interim Consolidated Balance Sheets

(Expressed in thousands of Canadian Dollars)

   September 30,
 December 31,
Current assets     
Cash  $40,441  $69,144 
Accounts receivable   78,570   83,811 
Contract assets   13,482   15,802 
Inventories   57,086   49,898 
Prepaid expenses and deposits   7,582   10,587 
Assets held for sale   501   1,117 
    197,662   230,359 
Property, plant and equipment, net of accumulated depreciation of $413,933 (December 31, 2022 – $387,358)   695,176   645,810 
Operating lease right-of-use assets   13,151   14,739 
Investments in affiliates and joint ventures   85,713   75,637 
Other assets   11,198   5,808 
Intangible assets   5,881   6,773 
Deferred tax assets   284   387 
Total assets  $1,009,065  $979,513 
Liabilities and shareholders’ equity     
Current liabilities     
Accounts payable  $76,173  $102,549 
Accrued liabilities   41,017   43,784 
Contract liabilities   69   1,411 
Current portion of long-term debt   39,357   42,089 
Current portion of operating lease liabilities   1,767   2,470 
    158,383   192,303 
Long-term debt   392,648   378,452 
Operating lease liabilities   11,761   12,376 
Other long-term obligations   25,924   18,576 
Deferred tax liabilities   80,713   71,887 
    669,429   673,594 
Shareholders' equity     
Common shares (authorized – unlimited number of voting common shares; issued and outstanding – September 30, 2023 - 27,827,282 (December 31, 2022 – 27,827,282))   229,455   229,455 
Treasury shares (September 30, 2023 - 1,086,714 (December 31, 2022 - 1,406,461))   (16,052)  (16,438)
Additional paid-in capital   19,329   22,095 
Retained earnings   108,060   70,501 
Accumulated other comprehensive (loss) income   (1,156)  306 
Shareholders' equity   339,636   305,919 
Total liabilities and shareholders’ equity  $1,009,065  $979,513 

See accompanying notes to interim consolidated financial statements.

Interim Consolidated Statements of Operations and
Comprehensive Income

(Expressed in thousands of Canadian Dollars, except per share amounts)

   Three months ended Nine months ended
   September 30, September 30,
    2023   2022   2023   2022 
Revenue  $194,744  $191,383  $630,922  $536,122 
Cost of sales   139,840   140,440   452,831   393,756 
Depreciation   28,592   26,376   89,329   83,408 
Gross profit   26,312   24,567   88,762   58,958 
General and administrative expenses   12,485   7,013   38,638   18,297 
(Gain) loss on disposal of property, plant and equipment   (311)  (95)  189   1,069 
Operating income   14,138   17,649   49,935   39,592 
Interest expense, net   8,119   6,522   22,941   16,769 
Equity earnings in affiliates and joint ventures   (4,483)  (14,076)  (23,414)  (28,652)
Net realized and unrealized gain on derivative financial instruments   (2,618)     (6,979)   
Income before income taxes   13,120   25,203   57,387   51,475 
Current income tax expense   1,495   701   3,198   1,198 
Deferred income tax expense   238   4,282   8,694   8,986 
Net income  $11,387  $20,220  $45,495  $41,291 
Other comprehensive income         
Unrealized foreign currency translation loss (gain)   1,100   (382)  1,462   (398)
Comprehensive income  $10,287  $20,602  $44,033  $41,689 
Per share information         
Basic net income per share  $0.43  $0.75  $1.72  $1.49 
Diluted net income per share  $0.39  $0.65  $1.51  $1.33 

See accompanying notes to interim consolidated financial statements.