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North American Construction Group Ltd. Announces Results for the First Quarter Ended March 31, 2023

Press Release

ACHESON, Alberta, April 26, 2023 – North American Construction Group Ltd. (“NACG”) (TSX:NOA/NYSE:NOA) today announced results for the first quarter ended March 31, 2023. Unless otherwise indicated, financial figures are expressed in Canadian dollars, and comparisons are to the prior period ended March 31, 2022.

First Quarter 2023 Highlights:

  • Equipment utilization of 79% from strong demand, stable maintenance headcount and consistent operating conditions through the end of the quarter resulted in the Company posting a quarterly record for combined revenue.
  • Combined revenue of $320.6 million compared to $236.6 million in the same period last year reflected record revenue from our wholly-owned business and another strong quarter from our joint ventures.
  • Reported revenue of $242.6 million compared to $176.7 million in the same period last year was primarily generated by strong equipment performance in the oil sands region. When comparing to Q1 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 was $78.0 million in Q1 2023 and compared favourably to $59.9 million in the same period last year. This quarter was primarily generated by our Indigenous joint ventures, but the Fargo-Moorhead project completed another full quarter of project scope as well.
  • Adjusted EBITDA of $84.6 million and margin of 26.4% compared favorably to the prior period operating metrics of $57.7 million and 24.4%, respectively, as revenue increases drove higher gross EBITDA while margin improvement was due to the operating leverage experienced from higher equipment utilization.
  • Cash flows generated from operating activities of $31.8 million compared to $24.2 million resulting from higher earnings offset by working capital balances when comparing to the same period in the prior year.
  • Free cash flow used in the quarter was $26.1 million. Free cash flow prior to working capital changes and joint venture cash management was over $20 million and the resultant of strong revenues and margins offset by our front-loaded annual capital maintenance program.
  • Net debt was $384.0 million at March 31, 2023, an increase of $28.3 million from December 31, 2022, as the aforementioned negative free cash flow required debt financing.
  • Additional operational highlights: i) telematics packages continue to be installed with our target being 440 of our key heavy equipment assets equipped by the end of the year; ii) another full quarter of earthworks in Fargo, North Dakota with the overall project approaching the 10% completion mark; iii) stabilized maintenance headcount and iv) continued equipment rebuilding with the commissioning of another ultra-class haul truck.

“For the NACG team, Q1 was an especially gratifying quarter as it reflected not only the culmination of years of steady progress but also a return to historical operating norms. The start of 2023 was similar to how 2022 ended – plenty of client demand, consistent cool weather with typical safe performance – and our ability to execute in routine fashion at these elevated levels is something we are very proud of,” said Joseph Lambert, President and CEO.

“Capital allocation based on our new free cash flow range of $100 to $115 million will, as always, be prudent and directed in a way that maximizes value. At this point in time, we still see debt repayment, dividends, and potential share repurchases similar to previous guidance with the anticipated increases allocated to growth for the expansion of external maintenance services through ML Northern and our Mikisew partnership.”

Consolidated Financial Highlights

Three months ended
March 31,
(dollars in thousands, except per share amounts) 2023 2022 Change
Revenue $ 242,605 $ 176,711 $ 65,894
Cost of sales(i) 165,301 124,068 41,233
Depreciation 36,385 30,692 5,693
Gross profit $ 40,919 $ 21,951 $ 18,968
Gross profit margin(i) 16.9 % 12.4 % 4.5 %
General and administrative expenses (excluding stock-based compensation) 8,243 4,955 3,288
Stock-based compensation expense 5,936 1,277 4,659
Operating income 25,527 15,642 9,885
Interest expense, net 7,311 4,682 2,629
Net income 21,846 13,557 8,289
Adjusted EBITDA(i) 84,622 57,740 26,882
Adjusted EBITDA margin(i)(iii) 26.4 % 24.4 % 2.0 %
Per share information
Basic net income per share $ 0.83 $ 0.48 $ 0.35
Diluted net income per share $ 0.71 $ 0.43 $ 0.28
Adjusted EPS(i) $ 0.96 $ 0.51 $ 0.45

(i)See “Non-GAAP Financial Measures”.
(ii)Adjusted EBITDA margin is calculated using adjusted EBITDA over total combined revenue.

Three months ended
March 31,
(dollars in thousands) 2023 2022
Cash provided by operating activities $ 31,824 $ 24,185
Cash used in investing activities (40,917 ) (26,811 )
Capital additions financed by leases (17,020 ) (8,695 )
Free cash flow(i) $ (26,113 ) $ (11,321 )

(i)See “Non-GAAP Financial Measures”.

Declaration of Quarterly Dividend

On April 25th, 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 May 26, 2023. The Dividend will be paid on July 7, 2023, and is an eligible dividend for Canadian income tax purposes.

Results for the Three Months Ended March 31, 2023

Combined revenue of $320.6 million compared to $236.6 million in the same period last year reflected strong utilization and a record quarter from our joint ventures. Revenue from wholly-owned entities was $242.6 million, up from $176.7 million in the same period last year. The majority of this quarter-over-quarter positive variance was generated by the equipment fleets at the mines in the oil sands region. Revenue increases were driven by year-over-year increases in equipment hours and with the quarter utilization rate increasing by 10% (or 15% on a percentage basis) over the same period in 2022. Revenue growth also reflects updated equipment and unit rates and the acquisition of ML Northern both which were made effective in the latter half of 2022.

Combined gross profit margin of 17.4% was up from 13.7% in the prior year. The improvement in combined gross profit in the current period was driven by increases in equipment utilization and the correlated operating leverage that comes from increased equipment hours. Our joint ventures completed their assigned scopes of work efficiently during the quarter which also bolstered overall margins.

General and administrative expenses (excluding stock-based compensation expense) were $8.2 million, or 3.4% of revenue for the three months ended March 31, 2023, up from $5.0 million, or 2.8% of revenue in the same period last year. The increase in the current period expense compared to prior year was due to expenses related to the acquisition of ML Northern in Q4 2022, generally higher business activity levels, and the prior year recognition of reimbursable bid costs received from the Fargo-Moorhead project which were in excess of amounts capitalized.

Cash related interest expense of $7.0 million represents an average cost of debt of 6.7% (compared to $4.5 million and 4.5%, respectively, for the three months ended March 31, 2022). The increase in interest expense in both periods can be primarily attributed to the higher balance on the Credit Facility and increases in the variable rate during 2022 on the credit facility leading to increased interest expense incurred.

Net income of $21.8 million in Q1 2023 compared to $13.6 million in the same period last year was a result of higher revenue and gross profit margin, and higher equity earnings in affiliates and joint ventures.

Free cash flow was a use of $26.1 million in the quarter, primarily driven by strong operating results which were more than offset by temporary investments in working capital, capital work in progress and joint ventures. Primary elements of free cash flow are adjusted EBITDA of $84.6 million less sustaining capital spending of $47.2 million and cash interest paid of $6.9 million. Our annual capital maintenance program is front-loaded and Q1 2023 is similar in proportion to the 35% to 40% of annual sustaining capital we typically spend in the first quarter.

Business Updates

2023 Strategic Focus Areas

  • Safety – focus on people and relationships as we maintain an uncompromising commitment to health and safety while elevating the standard of excellence in the field.
  • Sustainability – commitment to the continued development of sustainability targets and consistent measurement of progress to those targets.
  • Execution – enhance our record of operational excellence with respect to fleet maintenance, availability and utilization through leverage of our reliability programs, technical improvements and management systems.
  • Diversification – continue to pursue further diversification of customers, resources and geography through strategic partnerships, industry expertise and/or investment in Indigenous joint ventures.


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 $172.2 million includes total liquidity of $133.7 million and $28.3 million of unused finance lease borrowing availability as at March 31, 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, and is now scheduled to expire in October, 2025.

March 31,
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) (240,916 ) (265,931 )
Letters of credit (32,017 ) (32,030 )
Joint venture guarantee (65,558 ) (53,744 )
Cash 15,659 69,144
Total capital liquidity $ 172,168 $ 212,439

(i)See “Non-GAAP Financial Measures”.

NACG’s outlook for 2023

Management has provided stakeholders with updated guidance through 2023 which is predicated on contracts currently in place and the heavy equipment fleet that we own and operate.

Key measures 2023
Adjusted EBITDA(i) $255 – $275M
Sustaining capital(i) $120 – $130M
Adjusted EPS(i) $2.40 – $2.60
Free cash flow(i) $100 – $115M
Capital allocation
Deleverage $70 – $80M
Shareholder activity(ii) $15 – $25M
Growth spending(i) $5 – $10M
Leverage ratios
Senior debt(i) 1.0x – 1.2x
Net debt(i) 1.1x – 1.3x

(i)See “Non-GAAP Financial Measures”.
(ii)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 March 31, 2023, tomorrow, Thursday, April 27, 2023, at 7:00 am Mountain Time (9:00 am Eastern Time).

The call can be accessed by dialing:
Toll free: 1-888-396-8049
Conference ID: 75191345

A replay will be available through June 1, 2023, by dialing:
Toll Free: 1-877-674-7070
Conference ID: 75191345
Playback Passcode: 191345

The Q1 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 June 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 March 31, 2023, for further detail on the matters discussed in this release. In addition to the MD&A, please reference the dedicated Q1 2023 Results Presentation for more information on our results and projections which can be found on our website under Investors – Presentations.

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