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North American Construction Group Ltd. Announces Results for the First Quarter Ended March 31, 2024

ACHESON, Alberta, May 01, 2024 (GLOBE NEWSWIRE) -- North American Construction Group Ltd. (“NACG”) (TSX:NOA/NYSE:NOA) today announced results for the first quarter ended March 31, 2024. Unless otherwise indicated, financial figures are expressed in Canadian dollars, and comparisons are to the prior period ended March 31, 2023.

First Quarter 2024 Highlights:

  • Combined revenue of $345.7 million compared favorably to $322.3 million in the same period last year, is a first quarter record and reflected a second consecutive strong operational quarter from the Australian fleet of the MacKellar Group which was acquired on October 1, 2023.
  • Reported revenue of $297.0 million, compared to $244.3 million in the same period last year, was primarily generated by strong equipment utilization in Australia but was offset by lower equipment operating hours in the oil sands region due to remobilizing and repositioning of the heavy equipment fleet.
  • Our net share of revenue from equity consolidated joint ventures was $48.7 million in Q1 2024 and compared to $78.0 million in the same period last year as the prior period included significant project scopes related to the gold mine in Northern Ontario which was completed in Q3 2023.
  • Adjusted EBITDA of $93.3 million and margin of 27.0% compared favorably to the prior period operating metrics of $84.6 million and 26.3%, respectively, as revenue increases drove higher gross EBITDA with margin improvements driven by operating performances in Australia.
  • Combined gross profit of $62.2 million and margin of 18.0% compared favorably to the $55.9 million and 17.3% metrics posted in the same period last year. The margin increases reflect strategic diversification efforts as all growth segments contributed to posting a higher overall combined margin in the quarter.
  • Cash flows generated from operating activities of $11.9 million was lower than the $31.8 million posted in the prior period as higher cash generation from the strong EBITDA was more than offset by the temporary impact of changes to working capital in the quarter.
  • Free cash flow used in the quarter was $36.4 million. Free cash flow prior to working capital changes and joint venture cash management was over $20 million, resulting from strong revenues and margins offset by our front-loaded annual capital maintenance program.
  • Net debt was $781.4 million at March 31, 2024, an increase of $58.0 million from December 31, 2023, as free cash flow usage required debt financing. The cash-related interest rate during the quarter on our debt was 9.1% due to Bank of Canada posted rates and the correlated impact on equipment financing rates.
  • Additional highlights during the quarter: i) contractual backlog increased $294 million to over $3.0 billion for the first time in company history; ii) based on contractual volumes in Australia, transport of approximately 20 haul trucks commenced with commissioning expected in late Q3; ii) steady progress on the ERP implementation in Australia with a targeted go-live of September 1; and iii) the telematics project implemented operational tracking, which supplements maintenance monitoring, and began work on installations in Australia.

"Our first quarter performance was in line with our EBITDA guidance, slightly exceeding 20% of our annual estimate. Our operations teams continue working diligently to optimize the utilization of and returns on our heavy equipment assets through an increased bid pipeline overall and, more specifically, some fantastic Australian opportunities with long-term commitments and blue-chip customers,” said Joe Lambert, President and CEO.

"This year's quarterly results will vary significantly from historical averages with a ramp up from now to Q3 peak EBITDA and an expected approximate 45/55 split between first and second half of the year, but we remain confident and committed in delivering into our guidance range and setting ourselves up for improving utilization and return on our assets for many years to come.”

Consolidated Financial Highlights

  Three months ended  
  March 31,  
(dollars in thousands, except per share amounts)  2024   2023(iii)   Change 
Revenue $297,026  $244,329  $52,697 
Cost of sales  199,795   166,844   32,951 
Depreciation  43,941   36,385   7,556 
Gross profit $53,290  $41,100  $12,190 
Gross profit margin(i)  17.9%  16.8%  1.1%
General and administrative expenses (excluding stock-based compensation)(i)  11,145   8,243   2,902 
Stock-based compensation expense  3,608   5,936   (2,328)
Operating income  38,276   25,708   12,568 
Interest expense, net  15,597   7,311   8,286 
Net income  11,369   21,846   (10,477)
Adjusted EBITDA(i)  93,251   84,622   8,629 
Adjusted EBITDA margin(i)(iii)  27.0%  26.3%  0.7%
Per share information      
Basic net income per share $0.43  $0.83  $(0.40)
Diluted net income per share $0.39  $0.71  $(0.32)
Adjusted EPS(i) $0.78  $0.96  $(0.18)

(i)See "Non-GAAP Financial Measures".
(ii)Adjusted EBITDA margin is calculated using adjusted EBITDA over total combined revenue.
(iii)The prior year amounts are adjusted to reflect a change in accounting policy. See "Accounting Estimates, Pronouncements and Measures".

  Three months ended
  March 31,
(dollars in thousands)  2024   2023 
Consolidated Statements of Cash Flows    
Cash provided by operating activities $11,866  $31,824 
Cash used in investing activities  (56,733)  (40,917)
Effect of exchange rate on changes in cash  (2,368)  55 
Add back of growth and non-cash items included in the above figures:    
Growth capital additions(i)  19,607    
Non-cash changes in fair value of contingent obligations  5,393    
Capital additions financed by leases(i)  (14,156)  (17,020)
Free cash flow(i) $(36,391) $(26,058)

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

Declaration of Quarterly Dividend

On April 30th, 2024, 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 May 31, 2024. The Dividend will be paid on July 5, 2024, and is an eligible dividend for Canadian income tax purposes.

2024 Sustainability Report

On May 1, 2024, we have released our 2024 Sustainability Report. This annual report provides our structured framework for environmental, social, and governance initiatives moving forward. This report allows stakeholders to measure progress in a variety of business areas with increasing rigor and metrics. The 2024 Sustainability Report is available for download on the company’s website at

Results for the Three Months Ended March 31, 2024

Revenue of $297.0 million represented a $52.7 million (or 22%) increase from Q1 2023 as a result of the acquisition of the MacKellar Group ("MacKellar"). Following the October 1, 2023 acquisition, MacKellar completed its second full quarter of revenue since the change in control and posted another strong quarter with top-line results in the first quarter of 2024 similar to that of the fourth quarter of 2023. Significant rainfall carried into January and early February and impacted MacKellar's top-line but, in general and like Q4 2023, the revenue achieved was consistent with acquisition expectations. The most significant mine sites for the MacKellar fleet remain the Carmichael and Middlemount mines, located in the Queensland region, which both provided strong contributions in the quarter.

Equipment utilization in the oil sands region, within the Heavy Equipment - Canada segment, of 53% drove a 30% quarter-over-quarter reduction in equipment related revenue from that region's heavy equipment fleet. Fleet remobilization and repositioning, primarily from the Fort Hills mine to the Millennium mine, in February and early March reduced productive operating hours and associated revenues. Offsetting these decreases, revenues generated in the quarter by DGI Trading Pty Ltd. ("DGI"), within the Heavy Equipment - Australia Segment, were higher than Q1 2023 reflecting strong international demand for used components and major parts required by heavy equipment fleets.

Combined revenue of $345.7 million represented a $23.4 million (or 7%) increase from Q1 2023. Our share of revenue generated in the quarter by joint ventures and affiliates was $48.7 million, compared to $78.0 million in Q1 2023 (a decrease of 38%) as the completion of the gold mine project in Northern Ontario was only partially offset by increases within the Fargo joint venture. The Fargo project progressed on schedule during the quarter with modest top-line revenue reflecting the expected impact of winter conditions on civil earth-moving scopes.

Adjusted EBITDA of $93.3 million was an increase of $8.6 million, or 10%, from the Q1 2023 result of $84.6 million, slightly better than the aforementioned combined revenue increase of 7% due to quarter-over-quarter margin improvements. Adjusted EBITDA margin of 27% was higher than Q1 2023 primarily due to margins posted by the MacKellar fleets which again exceeded 30% in the quarter. Continued rainfall in Queensland, Australia into January and February impacted margins in those months due to reduced operating hours but steady, effective operations in March provided for a strong overall quarter.

Margins in the Heavy Equipment - Canada segment were notably impacted by fixed and indirect costs incurred during remobilization efforts but benefited from a strong March as equipment was commissioned and usage stabilized. For the installed and mobilized heavy equipment fleet, favourable operating and haul road conditions, typical for the winter season, allowed for effective operation at the Millennium, Kearl and Fort Hills mines under primarily time and material and rental based contract structures.

Restructuring efforts within the Nuna Group of Companies were fully completed during the quarter. Newly installed leadership has brought an operational focus and redirected resources as required. The projects in Northern BC and the Northwest Territories were finalized and debrief sessions held with operational personnel to ensure lessons learned. Adjusted EBITDA margin of less than 10% illustrates project execution challenges with one-time charges removed to reflect operational performance in the quarter. Restructuring expenses incurred in the quarter relate primarily to severance costs and one-time expenses required to complete legacy projects.

Depreciation of our equipment fleet was 14.8% of revenue in the quarter, compared to 14.9% in Q1 2023. The Heavy Equipment - Canada fleet averaged approximately 19.5% of revenue due to remobilization efforts. This is offset by depreciation on the Heavy Equipment - Australia fleet, which averaged approximately 9.8% of revenue, largely driven by MacKellar depreciation of 10.5% of revenue in the quarter reflecting both productive operations in the quarter as well as the depreciation of fair market values allocated upon purchase. On a combined basis, depreciation averaged 13.9% of combined revenue in the quarter as the lower capital intensity in Fargo and Nuna joint ventures modestly reduced the ratio based on the MacKellar fleet's increasing prominence.

General and administrative expenses (excluding stock-based compensation) were $11.1 million, or 3.8% of revenue compared to $8.2 million, or 3.4% of revenue in Q1 2023. The acquisition of MacKellar did not impact the run rate expectation of administrative expenses being less than 4% of revenue.

Cash related interest expense incurred on our debt for the quarter was $13.5 million at an average cost of debt of 9.1%, compared to 6.7% in Q1 2023, 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.

Adjusted earnings per share ("EPS") of $0.78 and adjusted net earnings of $20.9 million were down 19% and 17% from the prior year figures of $0.96 and $25.3 million, respectively. The $4.4 million decrease in adjusted net earnings is due to the higher EBITDA and lower incomes taxes being more than offset by the higher interest and depreciation expenses associated with the debt assumed and fleet acquired upon acquisition of MacKellar.

Weighted-average common shares outstanding for the first quarters of 2024 and 2023 are comparable at 26,733,473 and 26,415,004, respectively, and were not a factor in the earnings per share variance.

Free cash flow was a use of cash of $36.4 million in the quarter primarily due to the consumption of $62.0 million by our working capital accounts. This working capital draw on cash is higher than Q1 2023 primarily due to the increased size of our business. Adjusted EBITDA generated $93.3 million and when factoring in sustaining capital additions ($59.9 million) and cash interest paid ($12.4 million), positive cash of $21.0 million was generated by the overall business in the quarter.

Business Updates

2024 Strategic Focus Areas

  • Safety - now on an international basis, maintain our uncompromising commitment to health and safety while elevating the standard of excellence in the field;
  • Execution - enhance equipment availability in Canada and Australia through in-house fleet maintenance, reliability programs, technical improvements, and management systems;
  • Operational excellence - with a specific focus on Nuna Group of Companies, put into action practical and experienced-based protocols to ensure predictable high-quality project execution;
  • Integration - implement ERP and best practices at MacKellar, including identification of opportunities to better utilize our capital and equipment in Australia;
  • Diversification - pursue diversification of customers and resources through strategic partnerships, industry expertise and investment in Indigenous joint ventures; and
  • Sustainability - further develop and deliver into our environmental, social, and governance targets as disclosed and committed to in our annual reporting.


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 $236.3 million includes total liquidity of $158.1 million and $62.1 million of unused finance lease borrowing availability as at March 31, 2024. Liquidity is primarily provided by the terms of our $474.3 million credit facility which allows for funds availability based on a trailing twelve-month EBITDA as defined in the agreement, and is now scheduled to expire in October, 2025.

   March 31,
   December 31,
Cash $80,095  $88,614 
Credit Facility borrowing limit  474,260   478,022 
Credit Facility drawn  (364,260)  (317,488)
Letters of credit outstanding  (32,045)  (31,272)
Cash liquidity(i) $158,050  $217,876 
Finance lease borrowing limit  350,000   350,000 
Other debt borrowing limit  20,000   20,000 
Equipment financing drawn  (220,187)  (220,466)
Guarantees provided to joint ventures  (71,600)  (74,831)
Total capital liquidity(i) $236,263  $292,579 

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

NACG’s outlook for 2024

The following table provides projected key measures for 2024. These measures are predicated on contracts currently in place, including expected renewals, and the heavy equipment fleet that we own and operate.

Key measures 2024
Combined revenue(i) $1.5 - $1.7B
Adjusted EBITDA(i) $430 - $470M
Sustaining capital(i) $170 - $190M
Adjusted EPS(i) $4.25 - $4.75
Free cash flow(i) $160 - $185M
Capital allocation  
Growth spending(i) $55 - $70M
Net debt leverage(i) Targeting 1.5x

(i)See “Non-GAAP Financial Measures”.

Conference Call and Webcast

Management will hold a conference call and webcast to discuss our financial results for the quarter ended March 31, 2024, tomorrow, Thursday, May 2, 2024, at 7:00 am Mountain Time (9:00 am Eastern Time).

The call can be accessed by dialing:

Toll free: 1-800-717-1738
Conference ID: 92465

A replay will be available through June 3, 2024, by dialing:

Toll Free: 1-888-660-6264
Conference ID: 92465
Playback Passcode: 92465

The Q1 2024 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:
North American Construction Group Ltd. First Quarter Results Conference Call Registration (
A replay will be available until June 3, 2024, 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 March 31, 2024, for further detail on the matters discussed in this release. In addition to the MD&A, please reference the dedicated Q1 2024 Results Presentation for more information on our results and projections which can be found on our website under Investors - Presentations.

Change in significant accounting policy - Basis of presentation

During the first quarter of 2024, we changed our accounting policy for the elimination of our proportionate share of profit from downstream sales to affiliates and joint ventures to record through equity earnings in affiliates and joint ventures on the Consolidated Statements of Operations and Comprehensive Income. Prior to this change, we eliminated our proportionate share of profit on downstream sales to affiliates and joint ventures through revenue and cost of sales. The change in accounting policy simplifies the presentation for downstream profit eliminations and has no cumulative impact on retained earnings. We have accounted for the change retrospectively in accordance with the requirements of US GAAP Accounting Standards Codification ("ASC") 250 by restating the comparative period. For details of retrospective changes, refer to note 16 in the Financial Statements.

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.

The material factors or assumptions used to develop the above forward-looking statements include, and the risks and uncertainties to which such forward-looking statements are subject, are highlighted in the MD&A for the three months ended March 31, 2024. 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 EBITDA margin", "adjusted EPS", "adjusted net earnings", "capital additions", "capital work in progress", "cash provided by operating activities prior to change in working capital", "combined gross profit", "combined gross profit margin", "equity investment EBIT", "free cash flow", "general and administrative expenses (excluding stock-based compensation)", "gross profit margin", "growth capital", "margin", "net debt", "sustaining capital", "total capital liquidity", "total combined revenue", and "total debt". 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
  March 31,
(dollars in thousands)  2024   2023(ii) 
Revenue from wholly-owned entities per financial statements $297,026  $244,329 
Share of revenue from investments in affiliates and joint ventures  125,838   189,485 
Elimination of joint venture subcontract revenue  (77,151)  (111,473)
Total combined revenue(i) $345,713  $322,341 

(i)See "Non-GAAP Financial Measures".
(ii)The prior year amounts are adjusted to reflect a change in accounting policy. See "Accounting Estimates, Pronouncements and Measures".

Reconciliation of reported gross profit to combined gross profit

  Three months ended
  March 31,
(dollars in thousands)  2024   2023(ii) 
Gross profit from wholly-owned entities per financial statements $53,290  $41,100 
Share of gross profit from investments in affiliates and joint ventures  8,935   14,819 
Combined gross profit(i) $62,225  $55,919 

(i)See "Non-GAAP Financial Measures".
(ii)The prior year amounts are adjusted to reflect a change in accounting policy. See "Accounting Estimates, Pronouncements and Measures".

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

  Three months ended
  March 31,
(dollars in thousands)  2024   2023 
Net income $11,369  $21,846 
Loss on disposal of property, plant and equipment  261   1,213 
Stock-based compensation expense  3,608   5,936 
Change in fair value of contingent obligations  1,438    
Restructuring costs  4,517    
Gain on derivative financial instruments     (2,509)
Net unrealized loss on derivative financial instruments
included in equity earnings in affiliates and joint ventures
  1,954   434 
Tax effect of the above items  (2,260)  (1,644)
Adjusted net earnings(i)  20,887   25,276 
Tax effect of the above items  2,260   1,644 
Amortization of fair value of contingent obligations  3,955    
Interest expense, net  15,597   7,311 
Income tax expense  4,405   8,402 
Equity loss (earnings) in affiliates and joint ventures(i)(iii)  1,512   (9,342)
Equity investment EBIT(i)(iii)  (3,768)  9,783 
Adjusted EBIT(i)  44,848   43,074 
Depreciation and amortization  44,241   36,691 
Equity investment depreciation and amortization  4,162   4,857 
Adjusted EBITDA(i) $93,251  $84,622 
Adjusted EBITDA margin(ii)  27.0%  26.3%

(i)See "Non-GAAP Financial Measures".
(ii)Adjusted EBITDA margin is calculated using adjusted EBITDA over total combined revenue.
(iii)The prior year amounts are adjusted to reflect a change in accounting policy. See "Accounting Estimates, Pronouncements and Measures".

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

  Three months ended
  March 31,
(dollars in thousands)  2024   2023(ii) 
Equity (loss) earnings in affiliates and joint ventures $(1,512) $9,342 
Interest (income) expense, net  (573)  357 
Income tax (benefit) expense  (1,508)  124 
Gain on disposal of property, plant and equipment  (175)  (40)
Equity investment EBIT(i) $(3,768) $9,783 

(i)See "Non-GAAP Financial Measures".
(ii)The prior year amounts are adjusted to reflect a change in accounting policy. See "Accounting Estimates, Pronouncements and 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.

For further information contact:

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

Interim Consolidated Balance Sheets

(Expressed in thousands of Canadian Dollars)

   March 31,
   December 31,
Current assets    
Cash $80,095  $88,614 
Accounts receivable  138,451   97,855 
Contract assets  15,874   35,027 
Inventories  68,876   64,962 
Prepaid expenses and deposits  7,946   7,402 
Assets held for sale  1,257   1,340 
   312,499   295,200 
Property, plant and equipment, net of accumulated depreciation of $442,247 (December 31, 2023 – $423,345)  1,165,183   1,142,946 
Operating lease right-of-use assets  14,402   12,782 
Intangible assets  7,614   6,971 
Investments in affiliates and joint ventures  74,498   81,435 
Other assets  6,015   7,144 
Total assets $1,580,211  $1,546,478 
Liabilities and shareholders’ equity    
Current liabilities    
Accounts payable $124,017  $146,190 
Accrued liabilities  61,502   72,225 
Contract liabilities  1,366   59 
Current portion of long-term debt  84,178   81,306 
Current portion of contingent obligations  27,258   22,501 
Current portion of operating lease liabilities  1,891   1,742 
   300,212   324,023 
Long-term debt  654,953   611,313 
Long-term portion of contingent obligations  91,834   93,356 
Operating lease liabilities  12,868   11,307 
Other long-term obligations  45,738   41,001 
Deferred tax liabilities  108,661   108,824 
   1,214,266   1,189,824 
Shareholders' equity    
Common shares (authorized – unlimited number of voting common shares; issued and outstanding – March 31, 2024 - 27,827,282 (December 31, 2023 – 27,827,282))  229,455   229,455 
Treasury shares (March 31, 2024 - 1,094,163 (December 31, 2023 - 1,090,187))  (16,277)  (16,165)
Additional paid-in capital  22,140   20,739 
Retained earnings  131,727   123,032 
Accumulated other comprehensive income  (1,100)  (407)
Shareholders' equity  365,945   356,654 
Total liabilities and shareholders’ equity $1,580,211  $1,546,478 

Interim Consolidated Statements of Operations and Comprehensive Income

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

  Three months ended
  March 31,
   2024   2023(i) 
Revenue $297,026  $244,329 
Cost of sales  199,795   166,844 
Depreciation  43,941   36,385 
Gross profit  53,290   41,100 
General and administrative expenses  14,753   14,179 
Loss on disposal of property, plant and equipment  261   1,213 
Operating income  38,276   25,708 
Equity loss (earnings) in affiliates and joint ventures  1,512   (9,342)
Interest expense, net  15,597   7,311 
Change in fair value of contingent obligations  5,393    
Gain on derivative financial instruments     (2,509)
Income before income taxes  15,774   30,248 
Current income tax expense  4,234   1,136 
Deferred income tax expense  171   7,266 
Net income $11,369  $21,846 
Other comprehensive income    
Unrealized foreign currency translation loss (gain)  693   (55)
Comprehensive income $10,676  $21,901 
Per share information    
Basic net income per share $0.43  $0.83 
Diluted net income per share $0.39  $0.71 

(i)The prior year amounts are adjusted to reflect a change in accounting policy. See "Accounting Estimates, Pronouncements and Measures".